1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 4)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
EVI WEATHERFORD, INC.
AND CHRISTIANA COMPANIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrants as Specified In Their Charters)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies: Common
Stock, $1.00 par value, of Christiana Companies, Inc.
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies: 5,202,664
shares of Common Stock of Christiana Companies, Inc.
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined): $36 3/4
The proposed per unit price is based on the average of the high and low
sale prices of the common stock, $1.00 par value, of Christiana Companies, Inc.
as reported by The New York Stock Exchange on February 13, 1998.
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of the transaction: $191,197,902.
- --------------------------------------------------------------------------------
(5) Total fee paid: $38,240.
- --------------------------------------------------------------------------------
[X] Fee previously paid with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: N/A.
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.: N/A.
- --------------------------------------------------------------------------------
(3) Filing Party: N/A.
- --------------------------------------------------------------------------------
(4) Date Filed: N/A.
- --------------------------------------------------------------------------------
2
[EVI, INC. LOGO]
EVI WEATHERFORD, INC.
5 POST OAK PARK, SUITE 1760
HOUSTON, TEXAS 77027
August , 1998
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders (the
"Special Meeting") of EVI Weatherford, Inc. ("EVI") to be held at 9:00 a.m.,
Houston time, on , , 1998, at The Luxury Collection Hotel
of Houston, 1919 Briar Oaks, Houston, Texas.
At the Special Meeting, you will be asked to consider and vote upon a
proposal (the "Merger Proposal") to approve the acquisition by EVI of Christiana
Companies, Inc. ("Christiana") through a merger of Christiana Acquisition, Inc.,
a wholly owned subsidiary of EVI ("Sub"), with and into Christiana (the
"Merger") pursuant to an Agreement and Plan of Merger dated December 12, 1997,
as amended (the "Merger Agreement"), among EVI, Sub, Christiana and C2, Inc., a
Wisconsin corporation ("C2"). Under the Merger Agreement, EVI will provide to
the Christiana shareholders in exchange for their shares of Christiana common
stock, $1.00 par value, (i) 3,897,462 shares of EVI common stock, $1.00 par
value ("EVI Common Stock"), (ii) cash in an amount equal to the cash of
Christiana as of the effective time of the Merger less the sum of (x)
Christiana's accrued taxes (without giving effect to the value of certain tax
deductions to be retained by Christiana) and other liabilities as of such time
that are not assumed by C2 pursuant to an agreement under which C2 is proposing
to acquire from Christiana a two-thirds interest in Total Logistic Control LLC,
a Delaware limited liability company ("Logistic"), and (y) $10.0 million, and
(iii) a contingent cash payment of up to $10.0 million payable five years after
the effective date of the Merger, subject to earlier payment under certain
circumstances, to the extent such funds are not required to satisfy contingent
claims against Christiana and various indemnity obligations. THE NUMBER OF
SHARES OF EVI COMMON STOCK ISSUABLE IN THE MERGER IS EQUAL TO THE NUMBER OF
SHARES OF EVI COMMON STOCK CURRENTLY HELD BY CHRISTIANA AND, THEREFORE, THE
MERGER WILL RESULT IN NO CHANGE IN THE OUTSTANDING SHARES OF EVI COMMON STOCK
AFTER THE MERGER.
Under the terms of the Merger Agreement, prior to EVI's obligation to
acquire Christiana, the following events are required to occur:
- All of Christiana's assets, other than the EVI Common Stock, cash in the
amount of at least $ million, a one-third interest in Logistic, and
rights to various tax benefits, will be transferred to Logistic.
- Christiana will sell a two-thirds interest in Logistic to C2 for
consideration of $10.67 million and C2 and Logistic will be required to
assume all the current and historical liabilities of Christiana and its
current and historical subsidiaries and predecessors for which funds are
not retained by Christiana to fully pay.
As a result of the Merger, the assets of Christiana immediately after the
effective time of the Merger will consist solely of its shares of EVI Common
Stock, a one-third interest in Logistic having a pro forma net book value in
excess of $7.0 million, the benefit of certain tax deductions and credits having
an estimated value in excess of $1.0 million and cash equal to the total amount
of cash consideration to be paid to the Christiana shareholders in the Merger
(including the contingent $10.0 million payment) and the amount of Christiana's
unassumed liabilities and taxes as of the effective date of Merger. EVI also
will have a right, through its
3
ownership of Christiana, to sell Christiana's one-third interest in Logistic to
either C2 or Logistic for $7.0 million at any time on or after five years after
the effective date of the Merger.
A summary of the basic terms and conditions of the Merger, certain
financial and other information relating to EVI and Christiana and copies of the
Merger Agreement are set forth in the enclosed Joint Proxy Statement/Prospectus.
Please review and consider the enclosed materials carefully. In connection with
its approval of the Merger, the Board of Directors received and took into
account the opinion of Morgan Stanley & Co. Incorporated, an investment banking
firm retained by EVI, that the consideration to be paid by EVI in the Merger was
fair to EVI from a financial point of view. A copy of the opinion of Morgan
Stanley & Co. Incorporated is included in the accompanying Joint Proxy
Statement/Prospectus.
The Board of Directors has approved the Merger Proposal. THE BOARD OF
DIRECTORS RECOMMENDS THAT YOU VOTE FOR ITS APPROVAL.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED AND VOTED. ACCORDINGLY, WE ASK THAT YOU MARK, DATE,
SIGN AND RETURN YOUR PROXY AT YOUR EARLIEST CONVENIENCE IN THE ENVELOPE
PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU HAVE
MULTIPLE STOCKHOLDER ACCOUNTS AND RECEIVE MORE THAN ONE SET OF THESE MATERIALS,
PLEASE BE SURE TO VOTE EACH PROXY AND RETURN IT IN THE RESPECTIVE POSTAGE-PAID
ENVELOPE PROVIDED.
Very truly yours,
/s/ BERNARD J. DUROC-DANNER
BERNARD J. DUROC-DANNER
President and Chief Executive
Officer
4
[CHRISTIANA COMPANIES, INC. LETTERHEAD]
August , 1998
Dear Shareholder:
This letter and the accompanying materials contain information regarding
three aspects of the Merger (the "Merger") between Christiana Companies, Inc.
("Christiana") and a wholly-owned subsidiary ("Sub") of EVI Weatherford, Inc.
("EVI"), specifically: (1) information regarding a Special Meeting of Christiana
shareholders to vote on the Merger, (2) a separate prospectus regarding the
opportunity of each Christiana shareholder to purchase common stock ("C2 Stock")
of C2, Inc., a newly formed Wisconsin corporation ("C2"), that will acquire a
two-thirds interest in Total Logistic Control, LLC, a Delaware limited liability
company and wholly owned subsidiary of Christiana ("Logistic"), and (3)
information regarding the enclosed "Letter of Transmittal," which is the means
by which Christiana shareholders obtain EVI stock and cash in connection with
the Merger and exercise their opportunity to purchase C2 Stock.
1. Special Meeting Regarding Merger. You are cordially invited to attend
the Special Meeting of Christiana Shareholders to be held at 9:00 a.m.
(Milwaukee time) on , , 1998, at the Galleria
Conference Room, Firstar Center, 777 East Wisconsin Avenue, Milwaukee,
Wisconsin. At this Special Meeting, you will be asked to consider and vote upon
the Merger pursuant to an Agreement and Plan of Merger dated December 12, 1997,
as amended (the "Merger Agreement"), by and among Christiana, EVI, Sub, and C2.
Under the Merger Agreement, EVI will provide to the Christiana shareholders
in exchange for their shares of Christiana common stock, $1.00 par value
("Christiana Common Stock"):
- 3,897,462 shares of EVI common stock, $1.00 par value ("EVI Common
Stock") (approximately 0.74913 shares of EVI Common Stock for each share
of Christiana Common Stock);
- Cash in an amount equal to the cash of Christiana as of the effective
time of the Merger less the sum of (i) Christiana's accrued taxes
(without giving effect to the value of certain tax deductions to be
retained by Christiana) and other liabilities as of such time that are
not assumed by C2 and (ii) $10.0 million (approximately $3.60 for each
share of Christiana Common Stock) (the "Cash Consideration"); and
- A contingent cash payment of up to $10.0 million payable five years after
the effective date of the Merger, subject to earlier payment under
certain circumstances, to the extent such funds are not required to
satisfy contingent claims against Christiana and various indemnity
obligations (approximately $1.92 for each share of Christiana Common
Stock) (the "Contingent Cash Consideration").
Arthur Andersen LLP, Christiana's independent public accountants, has
opined that Christiana shareholders will not recognize any income, gain or loss
as a result of the receipt of EVI Common Stock in the Merger. However,
Christiana shareholders will recognize gain to the extent of the Cash
Consideration and the fair market value of the Contingent Cash Consideration to
be received in the Merger.
As part of the transactions contemplated by the Merger Agreement,
Christiana will sell two-thirds of its interest in Logistic to C2 for $10.67
million (the "Logistic Sale"). The Logistic Sale is a condition to the
consummation of the Merger and, if the Merger Agreement is approved by
Christiana shareholders at the Special Meeting, the Logistic Sale will occur
immediately prior to the Merger.
A summary of the basic terms and conditions of the Merger, certain
financial and other information relating to EVI and Christiana and copies of the
Merger Agreement are set forth in the enclosed Joint Proxy Statement/Prospectus.
Please review and consider the enclosed materials carefully. In connection with
its approval of the Merger, the Board of Directors received and took into
account the opinion of Prudential Securities Incorporated, an investment banking
firm retained by Christiana, that the transactions described herein are fair to
the shareholders of Christiana from a financial point of view. A copy of the
opinion of Prudential Securities Incorporated is included in the accompanying
Joint Proxy Statement/Prospectus.
5
Shareholders are urged to review carefully the attached Joint Proxy
Statement/Prospectus which contains a detailed description of the Merger
Agreement and the respective terms and conditions thereof.
AFTER CAREFUL CONSIDERATION, THE CHRISTIANA BOARD OF DIRECTORS HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT (WHICH INCLUDES AS A PART THEREOF THE
AGREEMENT PROVIDING FOR THE LOGISTIC SALE) AS BEING IN THE BEST INTERESTS OF
CHRISTIANA AND ITS SHAREHOLDERS AND RECOMMENDS THAT YOU VOTE FOR THE MERGER.
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU HOLD. EVEN IF YOU PLAN
TO ATTEND THE SPECIAL MEETING, WE URGE YOU TO MARK, SIGN AND DATE THE ENCLOSED
PROXY AND ELECTION FORM AND RETURN IT PROMPTLY. IF YOU HAVE MULTIPLE SHAREHOLDER
ACCOUNTS AND RECEIVE MORE THAN ONE SET OF THESE MATERIALS, PLEASE BE SURE TO
VOTE EACH PROXY AND RETURN IT IN THE RESPECTIVE POSTAGE-PAID ENVELOPE PROVIDED.
2. C2 Prospectus Regarding Purchase of C2 Stock. Pursuant to a separate
prospectus being provided to Christiana shareholders simultaneously herewith, C2
is offering each Christiana shareholder the ability to purchase one share of C2
Stock (at $4.00 per share) for each share of Christiana held immediately prior
to the Merger, with the objective of raising $20.8 million, $10.67 million of
which will be utilized to fund the acquisition of the two-thirds ownership
interest in Logistic. Each Christiana shareholder may purchase more shares of C2
if they are available.
As described in the Joint Proxy Statement/Prospectus the $10.67 million
price for the two-thirds interest in Logistic was fixed at a price that the
Board of Directors and I believe are fair to Christiana and its shareholders.
Please note that this price is $4.54 million below the current book value of the
two-thirds interest being purchased by C2 and reflects the various restrictions
and obligations that will apply to C2 and Logistic following the Merger.
C2 is a newly-formed entity which I currently control. Certain members of
my family (including my son, David J. Lubar, a director of Christiana and the
President and a director of C2) and I will purchase enough shares of C2 to raise
at least $10.67 million. This will ensure that C2 has sufficient funds to
complete the Logistic purchase.
You are encouraged to read carefully the C2 Prospectus enclosed herewith in
connection with your decision to purchase shares of C2 Stock. Your election to
purchase C2 Stock may be made pursuant to the "Letter of Transmittal" enclosed
herewith and discussed in the next section.
3. Letter of Transmittal. The enclosed Letter of Transmittal serves two
purposes. First, it enables Christiana shareholders to receive EVI stock and
cash in connection with the Merger. As described in more detail in the Letter of
Transmittal, Christiana shareholders should complete the form, attach their
Christiana certificates to it, then return it to Firstar Trust Company at the
address indicated. The address of the registered owner set forth on the Letter
of Transmittal will be the address to which the Contingent Cash Consideration of
approximately $1.92 (payable five (5) years after the effective date of the
Merger or earlier if Christiana receives $20.0 million for its one-third
interest in Logistic) will be sent, so it is very important that you complete
the form properly.
Second, the Letter of Transmittal is the form to be used to elect to
purchase C2 Stock. As indicated in the Letter of Transmittal, Christiana
shareholders may use the cash received from EVI in the Merger to purchase C2
shares.
On behalf of the Board of Directors and the management of Christiana, we
look forward to your participation, either in person or by proxy, at the special
meeting. In any event, we look forward to receiving your Letter of Transmittal.
Sincerely,
SHELDON B. LUBAR
Chairman
6
EVI WEATHERFORD, INC.
5 POST OAK PARK, SUITE 1760
HOUSTON, TEXAS 77027
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD , 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of EVI
Weatherford, Inc. ("EVI") will be held at The Luxury Collection Hotel of
Houston, 1919 Briar Oaks, Houston, Texas, on , , 1998, at
9:00 a.m., Houston time, for the following purposes:
1. To consider and vote upon a proposal to acquire Christiana
Companies, Inc. ("Christiana") pursuant to an Agreement and Plan of Merger
dated December 12, 1997, as amended (the "Merger Agreement"), among EVI,
Christiana, C2, Inc. ("C2") and Christiana Acquisition, Inc. for (i)
3,897,462 shares of EVI common stock, $1.00 par value ("EVI Common Stock"),
(ii) cash in an amount equal to the amount of cash of Christiana as of the
effective time of the merger less the sum of (x) Christiana's accrued taxes
(without giving effect to the value of certain tax deductions to be
retained by Christiana) and other liabilities as of such time that are not
assumed by C2 and (y) $10.0 million, and (iii) a contingent cash payment of
up to $10.0 million payable five years after the effective date or earlier
under certain circumstances of the merger to the extent such funds are not
required to satisfy contingent claims against Christiana and various
indemnity obligations, all more specifically described in the accompanying
Joint Proxy Statement/Prospectus; and
2. To approve a postponement or adjournment of the meeting to solicit
additional votes in the event that there are not sufficient votes to
approve the foregoing proposal.
3. To transact such other business as may properly come before the
Special Meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on ,
1998, as the record date for the determination of stockholders entitled to
receive notice of and to vote at the Special Meeting or any adjournment or
postponement thereof. Only stockholders of record at the close of business on
such record date are entitled to notice of and to vote at such meeting. A
complete list of such stockholders will be available for examination at the
Special Meeting and at EVI's offices at 5 Post Oak Park, Suite 1760, Houston,
Texas, during ordinary business hours, after , 1998, for the
examination of any such stockholder for any purpose germane to the Special
Meeting.
By order of the Board of Directors,
/s/ JAMES G. KILEY
JAMES G. KILEY,
Corporate Secretary
, 1998
IMPORTANT
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING IN PERSON. EVEN IF
YOU PLAN TO BE PRESENT, YOU ARE URGED TO MARK, DATE, SIGN AND RETURN THE
ENCLOSED PROXY AT YOUR EARLIEST CONVENIENCE IN THE ENVELOPE PROVIDED, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE SPECIAL
MEETING, YOU MAY VOTE EITHER IN PERSON OR BY YOUR PROXY.
7
[Christiana Companies, Inc. Letterhead]
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD , 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of Christiana
Companies, Inc., a Wisconsin corporation ("Christiana") will be held on
, 1998, at 9:00 a.m. (Milwaukee time), at the Galleria Conference Room,
Firstar Center, 777 East Wisconsin Avenue, Milwaukee, Wisconsin for the
following purposes:
(1) To consider and vote upon a proposal to approve the Agreement and
Plan of Merger, dated December 12, 1997, as amended (the "Merger
Agreement"), by and among Christiana, EVI Weatherford, Inc., a Delaware
corporation ("EVI"), Christiana Acquisition, Inc., a Wisconsin corporation
and wholly-owned subsidiary of EVI ("Sub"), and C2, Inc., a Wisconsin
corporation ("C2"), the terms and conditions of which include an agreement
by and among Christiana, C2, Total Logistic Control, LLC, a Delaware
limited liability company and wholly-owned subsidiary of Christiana
("Logistic"), and EVI, pursuant to which Christiana will sell two-thirds of
its interest in Logistic for $10.67 million. The transactions contemplated
by the Merger Agreement are more fully described in the attached Joint
Proxy Statement/Prospectus.
(2) To approve an adjournment of the Meeting to solicit additional
proxies in the event that there are not sufficient votes to approve the
foregoing proposal.
(3) To consider and act upon such other business as may properly come
before the meeting or any adjournment thereof.
The close of business on , 1998 has been fixed as a record date
for the determination of shareholders entitled to notice of, and to vote at, the
Special Meeting and any adjournment or postponement thereof.
If the transactions contemplated by the Merger Agreement are consummated,
holders of Christiana Common Stock who have complied with the requirements of
the Wisconsin Business Corporation Law will have certain dissenters' rights
under Wisconsin law, if they wish to assert such rights, as described in more
detail in the accompanying Joint Proxy Statement/Prospectus, which includes, as
Appendix H, a copy of the dissenters' rights provisions of the Wisconsin
Business Corporation Law. Christiana will provide a copy of Appendix H to any
shareholder entitled to vote at the Special Meeting upon request of that
shareholder.
By Order of the Board of Directors
David E. Beckwith
Secretary
, 1998
YOUR VOTE IS IMPORTANT NO MATTER HOW LARGE OR SMALL YOUR HOLDINGS MAY BE.
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE DATE THE ENCLOSED PROXY AND
ELECTION FORM WHICH IS SOLICITED BY THE BOARD OF DIRECTORS OF CHRISTIANA, SIGN
EXACTLY AS YOUR NAME APPEARS THEREON AND RETURN IMMEDIATELY.
8
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
EVI WEATHERFORD, INC. CHRISTIANA COMPANIES, INC.
JOINT PROXY STATEMENT/PROSPECTUS
SPECIAL MEETINGS OF STOCKHOLDERS TO BE HELD , 1998
---------------------
EVI WEATHERFORD, INC.
(COMMON STOCK, $1.00 PAR VALUE)
---------------------
This Joint Proxy Statement/Prospectus is being furnished to stockholders of
EVI Weatherford, Inc. ("EVI"), a Delaware corporation formerly known as EVI,
Inc., in connection with the solicitation of proxies by its Board of Directors
for use at the Special Meeting of Stockholders of EVI (the "EVI Special
Meeting") scheduled to be held on , 1998, at 9:00 a.m., Houston time,
at The Luxury Collection Hotel of Houston, 1919 Briar Oaks, Houston, Texas, and
any adjournment or postponement thereof, and to shareholders of Christiana
Companies, Inc., a Wisconsin corporation ("Christiana"), in connection with the
solicitation of proxies by its Board of Directors for use at the Special Meeting
of Shareholders of Christiana (the "Christiana Special Meeting") scheduled to be
held on , 1998, at 9:00 a.m., Milwaukee time, at Galleria Conference
Room, Firstar Center, 777 East Wisconsin Avenue, Milwaukee, Wisconsin and any
adjournment or postponement thereof. See "General Information about the
Meetings".
At the EVI Special Meeting and the Christiana Special Meeting, the holders
of the EVI common stock, $1.00 par value, ("EVI Common Stock"), and the holders
of the Christiana common stock, $1.00 par value, ("Christiana Common Stock"),
respectively, will be asked to consider and vote on a proposal ("Merger
Proposal") to approve and adopt the Agreement and Plan of Merger dated December
12, 1997, as amended (the "Merger Agreement"), among EVI, Christiana
Acquisition, Inc., a wholly owned Wisconsin subsidiary of EVI ("Sub"), and C2,
Inc., a Wisconsin corporation ("C2"), pursuant to which Sub will merge with and
into Christiana (the "Merger") and the holders of the issued and outstanding
shares of Christiana Common Stock will, subject to adjustment, be entitled to
receive in respect of each share of Christiana Common Stock held as of the
effective time of the Merger (the "Effective Time") (i) the EVI Share
Consideration (as defined below), (ii) the Cash Consideration (as defined below)
and (iii) the Contingent Cash Consideration (as defined below). Both EVI and
Christiana have fixed , 1998 as the record date (the "Record Date")
for the determination of stockholders entitled to notice of, and to vote at,
their respective Special Meetings and any adjournments or postponements thereof.
Based on the current capitalization of Christiana and the assets and
liabilities of Christiana as of March 31, 1998, and after giving effect to the
estimated expenses of the Merger payable by Christiana, the EVI Share
Consideration would be .74913 of a share of EVI Common Stock, the Cash
Consideration would be $3.60 and the Contingent Cash Consideration, assuming no
reductions for indemnity payments during the Hold Back Period (as defined
below), would be $1.92. The specific number of shares of EVI Common Stock and
Cash Consideration payable in the Merger will be determined as of the Effective
Time and could vary from that which would be payable had the Merger been
effective on December 31, 1997. The Contingent Cash Consideration will not be
known until the expiration of the Hold Back Period (as defined below) and will
be dependent on whether EVI and Christiana will be required to make any payments
in respect of certain historical obligations and liabilities of Christiana and
its current and historical subsidiaries and predecessors during that period.
Accordingly, there can be no assurance as to the amount, if any, of the
Contingent Cash Consideration. See "The Merger -- Terms of the Merger -- General
Description of the Merger".
(Cover continued on next page)
AN INVESTMENT IN EVI COMMON STOCK AFTER THE MERGER INVOLVES CERTAIN RISKS.
SEE "RISK FACTORS" ON PAGE 51.
NEITHER THIS TRANSACTION NOR THE SHARES OF EVI COMMON STOCK TO BE ISSUED IN
CONNECTION WITH THE TRANSACTION HAVE BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE FAIRNESS OR MERITS OF THE TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY
OF THE INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT/ PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Date Of This Joint Proxy Statement/Prospectus Is , 1998.
9
(Continued from cover page)
As part of the transactions contemplated by the Merger Agreement,
Christiana will sell two-thirds of its interest (the "Logistic Sale") in Total
Logistic Control, LLC, a Delaware limited liability company and wholly owned
subsidiary of Christiana ("Logistic"), to C2 for $10.67 million. The Logistic
Sale will be effected pursuant to the terms of the Merger Agreement and an
Agreement dated December 12, 1997, as amended (the "Logistic Purchase
Agreement"), by and among Christiana, C2, Logistic and EVI. C2 is currently
controlled by Sheldon B. Lubar, Chairman of Christiana. C2 is currently offering
(the "C2 Offering") pursuant to a separate prospectus, up to 5,202,664 shares of
its common stock, $0.01 par value per share (the "C2 Common Stock"), with the
objective of raising approximately $21.0 million. Approximately $10.67 million
of the net proceeds from the C2 Offering is expected to be utilized to fund the
acquisition of Logistic. Christiana shareholders will have the ability to
purchase their pro rata interest in C2. Sheldon B. Lubar and certain members of
his immediate family (the "Lubar Family") have agreed pursuant to an agreement
dated December 24, 1997, as amended, (the "Lubar/C2 Agreement") to purchase
enough shares of C2 as are necessary to raise at least $10.67 million. The
Lubar/C2 Agreement will insure that C2 has sufficient funds to complete the
Logistic Sale. Under the terms of the Merger Agreement, Christiana is required
to pay all printing and proxy solicitation costs, as well as EVI's filing fees
with the Commission and under the HSR Act and all costs and expenses for blue
sky and state securities law filings. EVI is required to pay its own legal and
financial advisory fees. See "The Merger -- Terms of The Merger -- Expenses" and
"Ancillary Transactions".
Because the amount of cash required to be paid by EVI in the Merger as part
of the Cash Consideration and the Contingent Cash Consideration will not exceed
the amount of cash required to be retained by Christiana at the time of the
Merger and because the number of shares of EVI Common Stock issuable in the
Merger is essentially the same number of shares of EVI Common Stock held by
Christiana, the consideration payable in the Merger by EVI will in essence come
from Christiana's existing assets and EVI will not be required to pay any
consideration other than its agreement to engage in the Merger for the assets
being acquired by it through the Merger.
For purposes of this Joint Proxy Statement/Prospectus, the terms "EVI Share
Consideration", "Cash Consideration", "Contingent Cash Consideration" and "Hold
Back Period" have the following respective meanings:
- The EVI Share Consideration will be equal to a fraction of a share of EVI
Common Stock for each share of Christiana Common Stock held, calculated
by dividing the number of shares of EVI Common Stock held by Christiana
by the total number of shares of Christiana Common Stock issued and
outstanding as of the Effective Time.
- The Cash Consideration will be equal to the total amount of cash of
Christiana as of the Effective Time (including the $10.67 million payable
by C2 for the acquisition of a two-thirds interest in Logistic) minus the
sum of (i) an amount of cash necessary to pay all Christiana Liabilities
(as defined in the Merger Agreement), other than the C2/Logistic Assumed
Liabilities (as defined below), in full without giving effect to the use
or application of any tax deductions relating to the exercise,
acquisition or cancellation of options or any tax benefits that may be
realized as a result of amendments to any tax returns of Christiana and
(ii) $10.0 million (the "Christiana Net Cash") divided by the total
number of shares of Christiana Common Stock outstanding as of the
Effective Time. For purposes of this Joint Proxy Statement/Prospectus,
the "C2/Logistic Assumed Liabilities" means all the liabilities and
obligations of Christiana and its current and past subsidiaries and
affiliates for which cash is not retained by Christiana as of the
Effective Time to fully pay such liabilities.
- The Contingent Cash Consideration will be equal to (i) $10.0 million less
all C2/Logistic Assumed Liabilities and any other liability for which
indemnification is required to be provided to EVI or Christiana under the
Logistic Purchase Agreement that may be paid by Christiana, EVI or their
respective successors and assigns during the five year period following
the Effective Time divided by (ii) the number of shares of Christiana
Common Stock issued and outstanding immediately prior to the Effective
Time.
2
10
The Hold Back Period shall mean the period from the Effective Time through
the earlier of: (i) the fifth anniversary of the Effective Date or (ii) the date
that Christiana receives consideration with a fair market value of $20.0 million
or more for its one-third interest in Logistic; provided, however, that if there
is any pending or threatened claim, demand or suit or existing matter for which
EVI has determined it will be subject to indemnification under the Logistic
Purchase Agreement, the Hold Back Period shall be extended until such time that
such claim, demand, suit or matter is wholly resolved, paid and not subject to
appeal or further claims.
As of the Record Date, the total number of outstanding shares of Christiana
Common Stock and EVI Common Stock were and , respectively. As of the
Record Date, Christiana owned approximately 8% of the outstanding shares of EVI
Common Stock and after giving effect to the Merger, the former shareholders of
Christiana, as a group, will continue to hold approximately 8% of the
outstanding shares of EVI Common Stock prior to giving effect to EVI's proposed
merger with Weatherford Enterra, Inc. All Christiana shareholders will be given
a right to purchase on a pro rata basis shares in C2. If each Christiana
shareholder exercises such right in full, Christiana shareholders will own all
of the outstanding shares of C2. To the extent each Christiana shareholder does
not exercise this right in full, members of the management of Logistic and the
general public, in that order of preference, will have the opportunity to
acquire the remaining unsold shares of C2 Common Stock.
All information in this Joint Proxy Statement/Prospectus relating to EVI
and Sub (other than tax consequences, which has been supplied by Christiana) has
been supplied by EVI and all information relating to Christiana and C2 has been
supplied by Christiana and C2, respectively. This Joint Proxy Statement/
Prospectus is not being used in connection with the C2 Offering.
This Joint Proxy Statement/Prospectus, the attached Notices of Special
Meetings of Stockholders of EVI and Christiana and the enclosed forms of proxy
are first being mailed to stockholders of EVI and Christiana on or about
, 1998.
The obligations of EVI, Sub, Christiana, Logistic and C2 to consummate the
Merger (including the Logistic Sale) and the transactions contemplated thereby
are subject to the satisfaction or waiver of certain conditions. For a
description of such conditions, see "The Merger -- Terms of the
Merger -- Conditions to the Merger".
A copy of the Merger Agreement and the Logistic Purchase Agreement, as
amended, are attached as Appendices A and B, respectively. It is anticipated
that the Logistic Sale and the Merger will be effected as soon as practicable
following the Special Meetings.
If the Merger Proposal is approved and the other conditions to the
consummation of the Logistic Sale and the Merger are satisfied or waived, the
Merger and the Logistic Sale will be consummated and Logistic and C2 will assume
the C2/Logistic Assumed Liabilities. See "Ancillary Transactions".
This Joint Proxy Statement/Prospectus constitutes the prospectus of EVI
pursuant to the Securities Act of 1933 (the "Securities Act") with respect to
the issuance of the shares of EVI Common Stock in connection with the Merger.
Application has been or will be made to list the shares of EVI Common Stock to
be issued in the Merger on the New York Stock Exchange (the "NYSE").
On December 12, 1998, the last trading date before the announcement by EVI
and Christiana that they had reached an agreement concerning the Merger, the
closing sale price of the EVI Common Stock and the Christiana Common Stock as
reported by the NYSE were $46 3/8 and $40 3/4 per share, respectively.
On , 1998, the closing prices of EVI Common Stock and
Christiana Common Stock, as reported on the NYSE were $ and
$ , respectively.
3
11
TABLE OF CONTENTS
PAGE
----
AVAILABLE INFORMATION............................ 6
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE...................................... 7
FORWARD-LOOKING STATEMENTS....................... 8
MATERIAL FEDERAL INCOME TAX CONSEQUENCES......... 9
SUMMARY.......................................... 10
The Companies.................................. 13
Recent Developments............................ 14
The Special Meetings........................... 14
Ancillary Transactions......................... 15
The Merger..................................... 16
Material Federal Income Tax Considerations..... 20
Christiana Stock Option Plans.................. 20
Comparative Rights of Stockholders of EVI and
Christiana................................... 20
Price Range of Common Stock and Dividend
Policy....................................... 21
EVI Unaudited Pro Forma Condensed Consolidated
Financial Data............................... 22
EVI Summary Historical Financial Data.......... 23
Christiana Summary Historical Financial Data... 24
Comparative Per Share Information.............. 25
GENERAL INFORMATION ABOUT THE MEETINGS........... 26
Date, Time and Place of Special Meetings....... 26
Record Date and Outstanding Shares............. 26
Purposes of the Special Meetings............... 26
EVI.......................................... 26
Christiana................................... 26
Vote Required.................................. 26
EVI.......................................... 26
Christiana................................... 26
Voting and Revocation of Proxies............... 27
Solicitation of Proxies........................ 27
Dissenters' Rights............................. 27
Other Matters.................................. 27
BACKGROUND OF THE TRANSACTION.................... 28
EVI'S REASONS FOR THE TRANSACTION................ 36
CHRISTIANA'S REASONS FOR THE TRANSACTION......... 37
OPINIONS OF FINANCIAL ADVISORS................... 42
Morgan Stanley Opinion......................... 42
Prudential Securities Opinion.................. 45
American Appraisal Opinion..................... 49
RISK FACTORS..................................... 51
ORGANIZATION OF EVI AND CHRISTIANA BEFORE AND
AFTER THE TRANSACTION.......................... 54
ANCILLARY TRANSACTIONS........................... 55
The Logistic Sale and Operating Agreement...... 55
Terms of the Logistic Sale..................... 55
General...................................... 55
Indemnification.............................. 55
Certain Definitions.......................... 57
Terms of the Operating Agreement............... 57
General...................................... 57
Capital Contributions........................ 58
Allocations.................................. 58
Distributions................................ 58
Management................................... 58
Assignment, Transfer and Repurchase of a
Member's Units............................. 59
Dissolution and Winding Up................... 59
THE MERGER....................................... 60
Terms of the Merger............................ 60
General Description of the Merger............ 60
Effective Time of the Merger................. 60
PAGE
----
Manner and Basis of Converting Shares........ 60
Conditions to the Merger..................... 61
Representations and Warranties of the Parties
to the Merger Agreement.................... 63
Conduct of Business of Christiana and EVI
Prior to Merger............................ 63
Expenses..................................... 64
Management Following Merger.................. 64
Termination or Amendment of Merger
Agreement.................................. 64
Governmental and Regulatory Approvals.......... 65
Accounting Treatment........................... 66
NYSE Listing of EVI Common Stock............... 66
Federal Securities Law Consequences............ 66
Dissenters' Rights............................. 66
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS....... 67
Federal Income Tax Consequences of the
Merger....................................... 68
Backup Withholding............................. 68
INTERESTS OF CERTAIN PERSONS IN THE
TRANSACTION.................................... 69
Christiana Ownership........................... 69
Indemnity...................................... 70
EVI SELECTED CONSOLIDATED FINANCIAL DATA......... 71
CHRISTIANA SELECTED CONSOLIDATED FINANCIAL
DATA........................................... 72
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS..................................... 73
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS........................... 77
DESCRIPTION OF EVI............................... 79
Recent Developments............................ 79
DESCRIPTION OF CHRISTIANA........................ 79
Business....................................... 79
General...................................... 79
Logistic..................................... 80
Properties..................................... 82
Description of Properties...................... 83
Illinois Properties.......................... 83
Indiana Properties........................... 84
Michigan Properties.......................... 84
New Jersey Properties........................ 85
Wisconsin Properties......................... 85
Other Assets................................... 85
Legal Proceedings.............................. 85
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 86
Financial Condition, Liquidity and Capital
Resources.................................... 87
Directors and Executive Officers............... 89
Executive Compensation......................... 90
Certain Relationships and Related
Transactions................................. 92
DESCRIPTION OF C2................................ 93
General........................................ 93
Management..................................... 93
Description of Logistic Credit Agreement....... 94
DESCRIPTION OF EVI AND CHRISTIANA CAPITAL
STOCK.......................................... 97
EVI............................................ 97
Christiana..................................... 98
COMPARATIVE RIGHTS OF STOCKHOLDERS OF EVI AND
CHRISTIANA..................................... 100
Special Vote Required for Certain
Combinations................................. 100
Vote Required for Corporate Transactions and
Other Matters................................ 100
Disposition of Assets.......................... 101
4
12
PAGE
----
Power to Amend By-laws......................... 101
Quorum Requirements for Directors' Meetings.... 101
Removal of Directors........................... 101
Director Elections, Qualifications and
Number....................................... 102
PRICE RANGE OF COMMON STOCK AND DIVIDEND
POLICY......................................... 102
STOCK OWNERSHIP AND CERTAIN BENEFICIAL OWNERS.... 104
EVI............................................ 104
Christiana..................................... 105
RELATIONSHIPS WITH INDEPENDENT PUBLIC
ACCOUNTANTS.................................... 105
LEGAL MATTERS.................................... 105
EXPERTS.......................................... 106
STOCKHOLDERS' PROPOSALS.......................... 106
INDEX TO FINANCIAL STATEMENTS.................... F-1
PAGE
----
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS......... F-2
CHRISTIANA CONSOLIDATED FINANCIAL STATEMENTS..... F-3
APPENDIX A: AGREEMENT AND PLAN OF MERGER.........
APPENDIX B: LOGISTIC SALE AGREEMENT..............
APPENDIX C: AMENDED AND RESTATED OPERATING
AGREEMENT......................................
APPENDIX D: MORGAN STANLEY OPINION...............
APPENDIX E: PRUDENTIAL SECURITIES OPINION........
APPENDIX G: AMERICAN APPRAISAL OPINION...........
APPENDIX H: DISSENTERS' RIGHTS PROVISIONS OF THE
WISCONSIN BUSINESS CORPORATION LAW.............
5
13
AVAILABLE INFORMATION
EVI and Christiana are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by EVI and Christiana with the Commission
can be inspected at the Public Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and the
Regional Offices of the Commission at Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511, and 7 World Trade Center, New York,
New York 10048. Copies of such material can also be obtained from the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a World Wide Web site on the Internet at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. Such
reports, proxy and information statements and other information concerning EVI
and Christiana can also be inspected and copied at the offices of the NYSE, 20
Broad Street, New York, New York 10005, on which the EVI Common Stock and
Christiana Common Stock are listed.
EVI has filed with the Commission a registration statement on Form S-4
under the Securities Act with respect to the EVI Common Stock offered hereby
(the "Registration Statement"). For further information with respect to EVI and
the EVI Common Stock offered hereby, reference is made to the Registration
Statement, including the exhibits thereto. The Registration Statement may be
inspected without charge at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Regional
Offices of the Commission, and copies of which may be obtained from the
Commission at prescribed rates. Statements made in this Joint Proxy
Statement/Prospectus concerning the contents of any document referred to herein
are not necessarily complete. With respect to each such document filed with the
Commission as an exhibit to the registration statement, reference is made to the
exhibit for a more complete description of the matter involved, and each such
statement shall be deemed qualified in its entirety by such reference. All
information herein with respect to EVI and its affiliates, including Sub (other
than tax consequences which have been supplied by Christiana), has been
furnished by EVI, and all information herein with respect to Christiana and its
affiliates, has been furnished by Christiana.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION WITH RESPECT TO THE MATTERS DESCRIBED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS OTHER THAN THOSE CONTAINED HEREIN OR IN THE DOCUMENTS
INCORPORATED BY REFERENCE HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS JOINT
PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY SECURITIES, NOR DOES IT CONSTITUTE THE
SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO OR FROM
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS NOR ANY
DISTRIBUTION OF SHARES OF EVI COMMON STOCK MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF EVI OR CHRISTIANA SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
6
14
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by EVI with the Commission (File No. 1-13086)
are incorporated by reference into this Joint Proxy Statement/Prospectus:
(a) EVI's Annual Report on Form 10-K for the year ended December 31,
1997 as amended by Amendment No. 1 and Amendment No. 2 to the Annual Report
on Form 10-K and Forms 10-K/A;
(b) EVI's Current Report on Form 8-K dated May 1, 1997, as amended by
Amendment No. 1 to the Current Report on Form 8-K on Form 8-K/A dated
January 14, 1998;
(c) EVI's Current Report on Form 8-K dated November 5, 1997, as
amended by Amendment No. 1 to the Current Report on Form 8-K on Form 8-K/A
dated March 26, 1998;
(d) EVI's Current Report on Form 8-K dated December 2, 1997, as
amended by Amendment No. 1 to the Current Report on Form 8-K on Form 8-K/A
dated February 13, 1998;
(e) EVI's Current Report on Form 8-K dated January 28, 1998;
(f) EVI's Current Report on Form 8-K dated February 3, 1998;
(g)The Company's Current Report on Form 8-K dated February 19, 1998,
as amended by Amendment No. 1 to the Current Report on Form 8-K on Form
8-K/A dated April 21, 1998;
(h) EVI's Current Report on Form 8-K dated March 2, 1998;
(i) EVI's Current Report on Form 8-K dated March 5, 1998, as amended
by Amendment No. 1 to the Current Report on Form 8-K on Form 8-K/A dated
March 9, 1998;
(j) EVI's Current Report on Form 8-K dated April 20, 1998;
(k) EVI's Current Report on Form 8-K dated April 22, 1998, as amended
by Amendment No. 1 to the Current Report on Form 8-K on Form 8-K/A dated
April 24, 1998;
(l) EVI's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998;
(m) EVI's Current Report on Form 8-K dated May 15, 1998, as amended by
Amendment No. 1 to the Current Report on Form 8-K and Form 8-K/A dated May
22, 1998; and
(n) EVI's Current Report on Form 8-K dated May 27, 1998;
(o) EVI's Current Report on Form 8-K dated June 15, 1998; and
(p) The description of EVI Common Stock contained in EVI's
Registration Statement on Form 8-A (filed May 19, 1994) and as amended by
EVI's Registration Statement on Form S-3 (Registration No. 333-12367),
including any amendment or report filed for the purpose of updating such
description.
The following documents filed by Christiana with the Commission (File No.
1-3846) are incorporated by reference into this Joint Proxy
Statement/Prospectus:
(a) Christiana's Annual Report on Form 10-K for the fiscal year ended
June 30, 1997 as amended by Amendment No. 1 on Form 10-K/A for the same
period;
(b) Christiana's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997;
(c) Christiana's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1997; and
(d) Christiana's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998.
All documents filed by EVI and Christiana pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Joint Proxy
Statement/Prospectus and prior to the date of the Special Meetings shall be
deemed to be incorporated herein by reference and shall be a part hereof from
the date of the filing of such document. Any statement contained in a document
incorporated or deemed to be
7
15
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Joint Proxy Statement/Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes that statement. Any such statement so modified or superseded shall
not constitute a part of this Joint Proxy Statement/Prospectus, except as so
modified or superseded.
EVI undertakes to provide without charge to each person to whom a copy of
this Joint Proxy Statement/Prospectus has been delivered, upon the written or
oral request of any such person, a copy of any or all of the documents
incorporated by reference herein, other than the exhibits to such documents,
unless such exhibits are specifically incorporated by reference into the
information that this Joint Proxy Statement/Prospectus incorporates. Written or
oral requests for such copies should be directed to EVI at 5 Post Oak Park,
Suite 1760, Houston, Texas 77027-3415, Attention: Secretary (Telephone number:
(713) 297-8400).
Christiana undertakes to provide without charge to each person to whom a
copy of this Joint Proxy Statement/Prospectus has been delivered, upon the
written or oral request of any such person, a copy of any or all of the
documents incorporated by reference herein, other than the exhibits to such
documents, unless such exhibits are specifically incorporated by reference into
the information that this Joint Proxy Statement/Prospectus incorporates. Written
or oral requests for such copies should be directed to Christiana at 700 North
Water Street, Suite 1200, Milwaukee, Wisconsin 53202, Attention: Secretary
(Telephone number: (414) 291-9000).
FORWARD-LOOKING STATEMENTS
Certain statements made herein and in public filings and releases by EVI
contain "forward-looking" information (as defined in the Private Securities
Litigation Reform Act of 1995) that involve risk and uncertainty. These
forward-looking statements may include, but are not limited to, future sales,
earnings, margins, production levels and costs, expected savings from
acquisitions, demand for products, product deliveries, market trends in the oil
and gas industry and the oilfield service sector thereof, research and
development, environmental and other expenditures, currency fluctuations and
various business trends. Forward-looking statements may be made by management
orally or in writing including, but not limited to, the Management's Discussion
and Analysis of Financial Condition and Results of Operations section and other
sections of EVI's filings with the Commission under the Exchange Act and the
Securities Act of 1933 (the "Securities Act").
Actual results and trends in the future may differ materially depending on
a variety of factors including, but not limited to, changes in the price of oil
and gas, changes in the domestic and international rig count, global trade
policies, domestic and international drilling activities world-wide political
stability and economic growth, including currency fluctuations, government
export and import policies, technological advances involving EVI's products,
EVI's successful execution of internal operating plans and manufacturing
consolidations and restructurings, changes in the market for EVI's drilling
tools and other products, performance issues with key suppliers and
subcontractors, the ability of EVI to maintain price increases and market
shares, raw material costs changes, collective bargaining labor disputes,
regulatory uncertainties and legal proceedings. Future results will also be
dependent upon the ability of EVI to continue to identify and complete
successful acquisitions at acceptable prices, integrate those acquisitions with
EVI's other operations and penetrate existing and new markets. Many of these
factors are described in greater detail in EVI's filings with the Commission
under the Exchange Act and the Securities Act referenced herein under
"Incorporation of Certain Documents by Reference".
8
16
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
Consummation of the Merger is conditioned on the receipt of opinions of
Arthur Andersen LLP that the Merger qualifies as a "reorganization" under
Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended, (the
"Code") by reason of Section 368(a)(2)(E) of the Code. The opinion of Arthur
Andersen LLP is not binding on the Internal Revenue Service ("IRS") or the
courts. See "Material Federal Income Tax Considerations". If the Merger fails to
qualify as a "reorganization", each Christiana shareholder who receives shares
of EVI Common Stock would, in addition to the recognition of gain with respect
to the Cash Consideration and Contingent Cash Consideration being received in
the Merger, recognize gain or loss equal to the difference between the fair
market value of the EVI Common Stock received and such shareholder's basis in
the shares of Christiana Common Stock surrendered in exchange therefor. Under
the terms of the Logistic Purchase Agreement, Logistic and C2 will be required
to indemnify EVI and Christiana for any adverse tax consequences to EVI or
Christiana arising out of the Merger. See "Ancillary Transactions -- The
Logistic Sale and Operating Agreement -- Indemnification" and "The
Merger -- Terms of the Merger -- Conditions to the Merger".
9
17
SUMMARY
The following is a summary of certain information contained or incorporated
by reference in this Joint Proxy Statement/Prospectus. This summary is not
intended to be complete and is qualified in its entirety by reference to the
more detailed information and financial statements contained or incorporated by
reference in this Joint Proxy Statement/Prospectus and the appendices attached
hereto, all of which should be reviewed carefully. As used in this Joint Proxy
Statement/Prospectus, unless the context otherwise requires, the term "EVI"
means EVI Weatherford, Inc. and its consolidated subsidiaries and the term
"Christiana" means Christiana Companies, Inc. and its consolidated subsidiaries.
Certain capitalized terms used in this summary are defined elsewhere in this
Joint Proxy Statement/Prospectus.
The Merger Proposal is being proposed as a means for EVI to acquire, (i)
the 3,897,462 shares of EVI Common Stock currently held by Christiana, (ii) a
one-third interest in Logistic having a pro forma net book value as of March 31,
1998, in excess of $7.0 million and (iii) cash of Christiana equal to the amount
of cash (fixed and contingent) to be paid to the Christiana shareholders in the
Merger. In addition, under the terms of the Merger, $10.0 million of the cash
consideration payable to the Christiana shareholders in the Merger will be in
the form of a contingent payment and will not be required to be paid until the
expiration of the Hold Back Period, subject to reduction as provided below. The
retained cash may be freely utilized by EVI without any obligation to pay
interest thereon, can be used to cover unpaid indemnification obligations
relating to Christiana's and its subsidiaries' historical operations and, to the
extent so used, will not be required to be distributed to the Christiana
shareholders. EVI will also be entitled to the benefit of various tax deductions
and benefits accruing to Christiana having an estimated value to EVI in excess
of $1.0 million. The shares of EVI Common Stock, the one-third interest in
Logistic, the cash to be retained by Christiana as of the Effective Time and the
benefit of various tax deductions and benefits of Christiana and its
subsidiaries, together with certain immaterial assets, are referred to in this
Joint Proxy Statement/Prospectus as the "Christiana Retained Assets".
If the Merger Proposal is approved and the other conditions to the
consummation of the Merger are satisfied or waived, (i) Christiana will sell to
C2 a two-thirds interest in Logistic and Logistic and C2 will assume and agree
to hold Christiana harmless from all of the liabilities and obligations of
Christiana with respect to the transferred assets and certain liabilities of
Christiana and its current and historical subsidiaries and predecessors and (ii)
the Merger pursuant to which Christiana (the assets of which will consist only
of the Christiana Retained Assets) will become a subsidiary of EVI will be
consummated. The following diagrams set forth the stock ownership and
organizational structure of EVI, Christiana and Logistic before and after the
transaction:
10
18
[BEFORE AND AFTER TRANSACTION CHARTS]
11
19
The consideration being paid by EVI in the Merger was negotiated and
determined based on an acquisition of Christiana as a whole following the
disposition of various assets and liabilities by Christiana. The following table
sets forth the general allocation among the various assets considered by EVI to
be required by virtue of the Merger:
CHRISTIANA ASSETS (AFTER THE LOGISTIC SALE, BUT
IMMEDIATELY PRIOR TO THE EFFECTIVE TIME OF THE MERGER) CONSIDERATION ALLOCATED TO ASSETS BY EVI(1)
- ------------------------------------------------------- -------------------------------------------
(i) 3,897,462 shares of EVI Common Stock (i) 3,897,462 shares of EVI Common
Stock(1)
(ii) Christiana cash less (i) $10.0 million, (ii) Cash Consideration (estimated to be
(ii) an amount equal to accrued and unpaid $3.60 per share of Christiana Common
taxes of Christiana through the Effective Stock)
Date and (iii) an amount equal to the
other liabilities of Christiana not
assumed by C2 and Logistic (cash includes
$10.67 million to be received by
Christiana from C2 in the Logistic Sale)
(iii) $10.0 million cash (iii) Contingent Cash Consideration(3)
(iv) One-third interest in Logistic and certain (iv) Agreement to engage in the Merger
Tax Benefits(2) and bear certain costs of the
transaction such as legal, banking,
and other professional fees
- ---------------
(1) Although EVI is issuing 3,897,462 shares of EVI Common Stock for the shares
of EVI Common Stock held by Christiana, the parties would not have agreed to
the terms of the Merger unless it were to be structured as a tax-free
reorganization.
(2) Christiana will sell two-thirds of its interest in Logistic to C2
immediately prior to the Effective Time of the Merger.
(3) The Contingent Cash Consideration is an amount of cash equal to $10.0
million less the amount of indemnification claims that may be paid by EVI
from such amount during the first five years following the Closing. As a
result, the Contingent Cash Consideration will not be paid at the time of
the Closing and is not available to the Christiana shareholders for use in
the payment of their investment in shares of C2 if they elect to do so.
Under the terms of the Merger Agreement, EVI will issue and pay in respect
of each share of Christiana Common Stock as of the Effective Time:
- the EVI Share Consideration, (estimated to be .74913 of a share of EVI
Common Stock);
- the Cash Consideration (estimated to be approximately $3.60); and
- the Contingent Cash Consideration of up to $1.92 payable upon the
expiration of the Hold Back Period.
Christiana shareholders may use the Cash Consideration to purchase shares
of C2. The Lubar Family has indicated that they intend to use the Cash
Consideration they receive for such purpose.
Estimates are based on the current capitalization of Christiana and the
assets and liabilities of Christiana as of March 31, 1998 after giving effect to
the estimated expenses of the Merger payable by Christiana. Under the terms of
the Merger Agreement, Christiana is required to bear significant transaction
costs, which costs and the estimates thereof are as follows: Prudential
Securities Opinion ($415,000), legal fees and expenses ($350,000), accounting
and tax services ($250,000), fees for the American Appraisal Opinion ($75,000),
lease cancellation ($327,000), EVI's filing fees with the Commission ($75,000),
filing fees under the HSR Act as hereinafter defined ($90,000), reimbursement
for certain costs incurred by EVI ($200,000), including all printing and proxy
solicitation costs and expenses for Blue Sky and state securities law filings,
and miscellaneous ($250,000). EVI is required to pay its own legal and financial
advisory fees. Such costs are
12
20
estimated as of the date of this Joint Proxy Statement/Prospectus and may be
higher. If higher, the Cash Consideration available for distribution may be
lower. See "The Merger -- Terms of the Merger -- Expenses" and "Ancillary
Transactions".
The specific number of shares of EVI Common Stock and Cash Consideration
payable in the Merger will be determined as of the Effective Time and is
expected to vary from that which would be payable had the Merger been effective
on March 31, 1998. The Merger (including the Logistic Sale) and the transactions
related thereto and described herein are hereinafter referred to as the
"Transaction". The proposed Merger is expected to be nontaxable to the holders
of Christiana Common Stock to the extent of the shares of EVI Common Stock
received in the Merger. The Cash Consideration and the fair market value of the
Contingent Cash Consideration will be taxable to the Christiana shareholders.
The Contingent Cash Consideration will have an imputed interest component
determined under the Code and regulations thereunder.
The Cash Consideration is estimated to be $18,730,000, based on the
following items: (a) cash and accrued interest through closing ($2,500,000); (b)
cash received from the anticipated exercise of outstanding Christiana stock
options ($1,400,000); (c) the dividend from Logistic ($20,000,000); (d) the
repayment of the Wiscold Note ($3,000,000); and (e) the proceeds from the sale
of two-thirds interest in Logistic ($10,667,000) minus (i) $7,070,000 for
anticipated taxes due, (ii) $1,500,000 for anticipated transaction expenses,
(iii) $2,067,000 of negative cash flow at the Christiana corporate level, and
(iv) the retention of $10,000,000 payable on expiration of the Hold Back Period
(to the extent such funds are not required to satisfy contingent claims against
Christiana and various indemnity obligations). As a result, the total
anticipated cash available for distribution is $18,730,000 or an anticipated
distribution of $3.60 per share of Christiana Common Stock on a fully-diluted
basis.
Due to their ownership of 2,718,000 shares of Christiana Common Stock, the
Lubar Family expects to receive $9,784,800 (2,718,000 shares multiplied by
$3.60) in connection with the Merger. The Lubar Family will use all or a portion
of such proceeds pursuant to the C2/Lubar Agreement to acquire stock in C2. If
additional funds are needed to fulfill their $10.67 million obligation under the
C2/Lubar Agreement, the Lubar Family will provide such funds from other sources,
including cash on hand. C2 will use $10.67 million to acquire a two-thirds
interest in Logistic.
Based on the current market price of the EVI Common Stock, the total
consideration that is expected to be provided to the Christiana shareholders in
the Merger, excluding the Contingent Cash Consideration, would be approximately
$32.95 per share of Christiana Common Stock, which is in excess of the closing
price of the Christiana Common Stock on June 24, 1998. Assuming the payment of
$1.92 per share for the Contingent Cash Consideration and an 8% discount rate,
the holders of the Christiana Common Stock would receive a contingent cash
payment having a net present value of approximately $1.30 per share, which when
added to the value of the EVI Share Consideration and the Cash Consideration
would be $34.25, which is in excess of the market price of the Christiana Common
Stock on June 24, 1998. The Contingent Cash Consideration is to be held by EVI
for its protection. Although Christiana is not currently aware of any facts or
circumstances that would result in any material claims that would have the
effect of reducing the Contingent Cash Consideration, there is no assurance that
the Contingent Cash Consideration as described in this paragraph will ever be
paid. If one or more contingent liabilities unrelated to historical business and
operations of Logistic were to occur or if a contingent liability relating to
Logistic were to occur that Logistic and C2 were unable to fully satisfy, the
Contingent Cash Consideration would be reduced by the amount of the liability,
together with costs and expenses relating thereto, that are paid by Christiana
or EVI. Depending upon the nature and size of any such contingent claims, the
Contingent Cash Consideration could be reduced to zero. In that circumstance, it
is possible that the total consideration that would be provided to the
Christiana Shareholders in the Merger would be less than the market price of the
Christiana Common Stock at the time of the Merger.
Although the Hold Back Period may expire earlier than five years after the
Effective Time under certain circumstances, there can be no assurance that such
early expiration will ever occur.
13
21
THE COMPANIES
EVI and Sub. EVI is an international manufacturer and supplier of
engineered oilfield tools and equipment. EVI's products are used both for the
drilling and production phases of oil and natural gas wells. EVI has achieved
significant growth in recent years through a consistent strategy of synergistic
acquisitions and internal development. EVI's acquisitions have focused on
consolidation and vertical integration, development of complete product lines
and technology. EVI's internal growth has focused on technology, product
development, manufacturing efficiencies and productivity enhancements. See
"Description of EVI".
EVI's principal products consist of drill pipe and other drilling tools,
premium connectors and associated high grade tubulars, marine connectors,
artificial lift systems, packers and completion tools. EVI's growth strategy has
resulted in EVI becoming the largest manufacturer of drill pipe, drill collars
and heavyweight drill pipe in the world, the largest provider of premium tubular
connectors in North America and one of the largest providers of artificial lift
equipment in the world. EVI's product lines are divided into a drilling products
segment consisting of drill pipe, premium tubulars and marine connectors, and a
production equipment segment consisting of completion and artificial lift
equipment.
EVI was incorporated in 1972 as a Massachusetts corporation and was
reincorporated in Delaware in 1980. Sub is a wholly owned subsidiary of EVI that
was incorporated in Wisconsin in December 1997 for the purpose of effecting the
Merger. EVI's and Sub's corporate office is located at 5 Post Oak Park, Suite
1760, Houston, Texas 77027-3415, and their telephone number is (713) 297-8400.
Christiana. Christiana, through Logistic, is engaged in providing public
refrigerated and non-refrigerated warehousing and logistic services. Operations
in the warehousing and logistic businesses were historically conducted through
two wholly owned subsidiaries of Christiana, Wiscold, Inc. and Total Logistic
Control, Inc. Christiana acquired Wiscold Inc. in September of 1992 and Total
Logistic Control, Inc. in January of 1994. On June 30, 1997, as part of an
internal restructuring, the operations and corporate structures of Wiscold, Inc.
and Total Logistic Control, Inc. were merged to form Logistic.
Logistic provides full service public and contract warehousing and logistic
services in all ranges of refrigerated and ambient temperatures and believes it
is the nation's seventh largest provider of public refrigerated warehouse
services. Logistic's refrigerated warehousing operations include temperature
sensitive storage services, blast freezing, individual quick freeze services,
vegetable blanching and processing, and automated poly bag and bulk packaging
services. Logistic's transportation and distribution services include full
service truckload, less-than-truckload and pooled consolidation in both
temperature controlled and dry freight equipment, dedicated fleet services and
specialized store-door delivery formats. Transportation and logistic services
are provided utilizing company-owned equipment as well as through carrier
management services utilizing third party common and contract carriers.
Integrated logistic services generally combine transportation, warehousing and
information services to manage the distribution channel for a customer's
products from the point of manufacturer to the point of consumption. Logistic
also provides a full range of international freight management services, fully
computerized inventory management, kitting, repackaging and just-in-time
production supply services. As of March 31, 1998, the book value of Christiana
and pro forma book value of Logistic was approximately $76.6 million and $24.2
million, respectively. See "Description of Christiana".
Christiana was incorporated in 1954 as a Delaware corporation and was
reincorporated in 1992 as a Wisconsin corporation.
The principal executive offices of Christiana are located at 700 North
Water Street, Suite 1200, Milwaukee, Wisconsin 53202, and their telephone number
is (414) 291-9000.
RECENT DEVELOPMENTS; WEATHERFORD MERGER
On May 27, 1998, EVI completed the merger of Weatherford Enterra, Inc.
("Weatherford") with and into EVI pursuant to a tax free merger (the
"Weatherford Merger") in which the stockholders of Weatherford received 0.95 of
a share of EVI Common Stock in exchange for each outstanding share of
Weatherford common stock, $0.10 par value ("Weatherford Common Stock"). Based on
51,402,963 shares of Weatherford Common Stock outstanding as of April 22, 1998
(excluding 1,437,259 shares of Weatherford
14
22
Common Stock reserved for issuance pursuant to outstanding Weatherford employee
benefit awards), EVI issued 48,832,815 shares of EVI Common Stock in connection
with the Weatherford Merger. EVI was the surviving corporation and has been
renamed EVI Weatherford, Inc.
THE SPECIAL MEETINGS
Time, Date, Place and Purpose. The EVI Special Meeting will be held at 9:00
a.m., Houston time, on , , 1998, at The Luxury Collection
Hotel of Houston, 1919 Briar Oaks, Houston, Texas, for the purpose of approving
and adopting the Merger Proposal. The Christiana Special Meeting will be held at
9:00 a.m., Milwaukee time, on , , 1998, at Galleria
Conference Room, Firstar Center, 777 East Wisconsin Avenue, Milwaukee,
Wisconsin, for the purpose of approving and adopting the Merger Proposal. See
"General Information about the Meetings".
Record Date and Vote Required. The Boards of Directors of EVI and
Christiana have fixed the close of business on , 1998, as the Record Date
for the determination of stockholders entitled to notice of, and to vote at, the
Special Meetings and any adjournments thereof. Only holders of record of EVI
Common Stock and holders of record of Christiana Common Stock at the close of
business on the Record Date are entitled to notice of, and to vote at, the EVI
Special Meeting and the Christiana Special Meeting, respectively.
Under EVI's listing agreement with the NYSE, approval and adoption of the
Merger Proposal requires the affirmative vote of the holders of a majority of
the shares of the EVI Common Stock represented, in person or by proxy, and
entitled to vote thereon at the EVI Special Meeting.
Under Wisconsin law, approval and adoption of the Merger requires the
affirmative vote of the holders of at least 80% of the votes entitled to be cast
at the Special Meeting and two-thirds of the votes entitled to be cast at the
Special Meeting other than 2,718,000 shares (52.8% of the issued and outstanding
Christiana Common Stock) that may be deemed under Wisconsin law to be
beneficially owned by Sheldon B. Lubar (the "Lubar Shares"). See "General
Information About the Meetings -- Vote Required -- Christiana" and "Description
of EVI and Christiana Capital Stock -- Christiana -- Certain Statutory
Provisions".
At the close of business on the Record Date, there were shares of
EVI Common Stock outstanding and entitled to vote at the EVI Special Meeting. As
of the Record Date, Christiana held 3,897,462 shares of EVI Common Stock,
representing an aggregate of approximately 4.0% of the outstanding shares of EVI
Common Stock. In addition, directors and officers of EVI and their affiliates,
excluding Christiana, held shares of EVI Common Stock, representing
approximately % of the outstanding shares. Such persons have indicated that
they intend to vote their shares in favor of the approval of the Merger
Proposal. Christiana intends to vote its 3,897,462 shares of EVI Common Stock in
favor of the Merger.
At the close of business on the Record Date, there were shares of
Christiana Common Stock outstanding and entitled to vote at the Christiana
Special Meeting. At the close of business on the Record Date, the directors and
officers of Christiana and their affiliates, held 3,447,507 shares of Christiana
Common Stock, representing approximately 66.3% of the outstanding shares. Such
persons have indicated that they intend to vote their shares in favor of the
approval and adoption of the Merger Proposal.
ANCILLARY TRANSACTIONS
The Logistic Sale. Under the terms of the Logistic Purchase Agreement, C2
will acquire a two-thirds interest in Logistic and C2 and Logistic will assume
all of the obligations and liabilities of Christiana and its current and
historical subsidiaries and predecessors other than those specifically relating
to the assets and liabilities to be retained by Christiana. The purpose of the
Logistic Sale is to transfer a two-thirds interest in Logistic to C2, which will
be responsible for the management of Logistic and leave Christiana with only the
Christiana Retained Assets. Further, the Logistic Purchase Agreement will result
in all fixed, contingent and known and unknown liabilities and obligations of
Christiana and current and historical subsidiaries, predecessors and affiliates
of Christiana, including Logistic, being assumed by Logistic and C2, other than
those liabilities and obligations for which funds shall have been retained by
Christiana to fully satisfy the payment
15
23
thereof (the "Christiana Retained Liabilities"). The purchase price for the
two-thirds interest in Logistic will be approximately $10.67 million. See
"Ancillary Transactions -- The Logistic Sale and Operating Agreement -- Terms of
the Logistic Sale".
Indemnification. Pursuant to the Logistic Purchase Agreement, Logistic and
C2 have agreed to indemnify EVI, Christiana and their various affiliates and
representatives from and against various liabilities relating to the historical
operations of Christiana, Logistic and their current and historical subsidiaries
and predecessors as well as matters relating to the Transaction. Among the
matters for which Logistic and C2 are required to indemnify Christiana and EVI
are (i) any liability relating to any claim or damage by any stockholder of
Christiana or EVI with respect to the Merger, the Logistic Sale or the
transactions relating thereto and (ii) any taxes as a result of the Merger
subsequently being determined to be a taxable transaction for foreign, federal,
state or local law purposes regardless of the theory or reason for the Merger
being subject to tax. This indemnity includes claims and liabilities arising
under the securities laws and claims with respect to this Joint Proxy
Statement/Prospectus. See "Ancillary Transactions -- The Logistic Sale and
Operating Agreement -- Indemnification".
Logistic Operating Agreement. Pursuant to the Logistic Purchase Agreement,
C2 and Christiana will enter into an amended and restated operating agreement
(the "Operating Agreement") relating to the rights of Christiana and C2 with
respect to Logistic following the Logistic Sale. Under the terms of the
Operating Agreement, additional interests in Logistic may be issued only with
the unanimous approval of C2 and Christiana. C2 and Christiana will at all times
be entitled to elect a number of managers to Logistic's Board of Managers that
is proportionate to the percentage interest in Logistic held by C2 and
Christiana. In addition, Logistic may not take certain specific actions without
the prior approval of C2 and Christiana. Subject to certain exceptions,
Christiana generally may not sell, give, or assign its interest in Logistic
without the consent of Logistic's Board of Managers for a period of five years.
As a result, Christiana's interest in Logistic may not be sold during this
period without the prior consent of C2's representatives on Logistic's Board of
Managers. Christiana, however, will have a right to dispose of its interest in
Logistic in the event of certain changes in control of C2. See "Ancillary
Transactions -- The Logistic Sale and Operating Agreement -- Terms of the
Operating Agreement".
C2 Offering. To finance its acquisition of Logistic, C2 intends to offer
5,202,664 shares of its common stock pursuant to a separate prospectus (the "C2
Prospectus"). Christiana shareholders will have an ability to subscribe for
their pro rata share of C2 Common Stock. The Lubar Family has committed,
pursuant to the Lubar/C2 Agreement, to purchase such shares of C2 Common Stock
as are necessary for the net proceeds of the C2 Offering to C2, after deducting
the expenses of the Offering, to equal at least $10.67 million. The Lubar/C2
Agreement will insure that C2 has sufficient funds to complete the Logistic
Sale. This Joint Proxy Statement/Prospectus is not being provided in connection
with that offering. The shareholders of Christiana should look solely to the C2
Prospectus to be received by them in connection with that offering in evaluating
whether to purchase shares of C2.
THE MERGER
Terms of the Merger. At the Effective Time, EVI will acquire Christiana
through a merger of Sub with and into Christiana. As of the Effective Time, the
only assets of Christiana will consist of the Christiana Retained Assets and the
only liabilities of Christiana not assumed by Logistic and C2 will consist of
the Christiana Retained Liabilities.
Each outstanding share of Christiana Common Stock will be converted in the
Merger into a right to receive (i) the EVI Share Consideration, (ii) the Cash
Consideration and (iii) the Contingent Cash Consideration.
After the Merger, Christiana will be a wholly owned subsidiary of EVI.
Because the EVI Share Consideration in the Merger is intended to provide to the
shareholders of Christiana an aggregate number of shares approximating the
number of shares of EVI Common Stock held by Christiana, the number of shares of
EVI Common Stock outstanding following the Merger is expected to be
approximately the same as before the Merger. See "The Merger -- Terms of the
Merger".
16
24
Each Christiana shareholder will receive the same consideration per share
of Christiana Common Stock in the Merger. The Lubar Family, as well as directors
and officers of Christiana and their affiliates, beneficially owned 3,445,932
shares of Christiana Common Stock as of the Record Date, representing
approximately 67% of outstanding Christiana Common Stock. Following the
Transaction, the Lubar Family will own 2.1% of the total outstanding shares of
EVI Common Stock and receive aggregate Cash Consideration of approximately
$9,784,800, as well as a right to aggregate Contingent Cash Consideration of
approximately $5,219,000. The directors and officers of Christiana (excluding
Sheldon B. Lubar and David J. Lubar who are included among the Lubar Family)
will own 0.6% of total outstanding shares of EVI Common Stock after the Merger
and receive aggregate Cash Consideration of $2,706,500, as well as a right to
aggregate Contingent Cash Consideration of approximately $1,443,500. See
"Interests of Certain Persons in the Transaction".
The Transaction provides Christiana shareholders with (i) EVI Common Stock
on a tax-free basis; (ii) Cash Consideration which can either be retained or
applied to the purchase of C2 Common Stock or both; and (iii) the right to
Contingent Cash Consideration in the future. See "The Merger -- Terms of the
Merger". Accordingly, as a result of the Transaction, each Christiana
shareholder will have the flexibility to determine whether to retain or dispose
of the shares of EVI Common Stock received in the Merger, invest in Logistic
through C2, or both. This will allow Christiana shareholders the opportunity to
realize directly the benefit of EVI Common Stock without incurring a substantial
corporate level tax (as would be the case if Christiana disposed of its EVI
Common Stock). In addition, if Christiana shareholders wish to continue an
investment in Logistic, they may do so through C2.
The Transaction involves potential disadvantages. The Transaction will
result in the increased exposure of Christiana shareholders to fluctuations in
the price of EVI Common Stock. While an ownership of Christiana Common Stock
provided balance between Christiana's holdings in EVI and Logistic, the Merger
will result in Christiana shareholders owning EVI Common Stock directly, thereby
increasing reliance on the performance of EVI and on the oil and gas industry
and the level of domestic and international drilling activities generally.
Additionally, as part of, and as an inducement to EVI to enter into, the Merger,
EVI through Christiana will receive a one-third ownership interest in Logistic
for no cash consideration. Christiana will have the ability to "put" this
interest to C2 or Logistic for cash consideration of $7.0 million after five
years from the effective date of the Merger. Christiana shareholders will
benefit from this part of the Transaction only indirectly through their
ownership of EVI Common Stock received in the Merger. Otherwise, Christiana
shareholders will receive no direct benefit from this aspect of the Transaction.
EVI has advised Christiana that its indirect ownership interest in Logistic will
be viewed as a passive investment and that any decision to cause Christiana to
exercise this put right will be based on the returns and perceived value of
Logistic at the time the put becomes exercisable. As a result, the greater the
perceived value of Logistic, the less likely the put will be exercised.
Conversely, if Logistic is not highly profitable and Christiana's one-third
interest is perceived to have a value substantially less than the $7.0 million
put price, it is likely that EVI will cause Christiana to exercise the put. Such
an exercise could have an adverse effect on those Christiana shareholders who
elect to purchase shares of C2.
Recommendations of the Boards of Directors.
THE EVI BOARD OF DIRECTORS BELIEVES THAT THE TERMS OF THE MERGER ARE FAIR
TO, AND IN THE INTERESTS OF, EVI AND THE HOLDERS OF EVI COMMON STOCK AND
UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF EVI COMMON STOCK APPROVE THE MERGER
PROPOSAL. The Merger is being proposed by EVI primarily for the following
reasons: First, the Merger will provide EVI with a one-third interest in
Logistic, having a pro forma book value in excess of $7.0 million, certain tax
benefits having an estimated value to EVI in excess of $1.0 million, and the use
of $10.0 million cash for a period of five years without interest, all without
additional consideration other than the exposure to certain contingent
liabilities for which indemnity is being provided by C2 and Logistic. Second,
the Merger is expected to improve the liquidity of EVI by placing the equivalent
number of shares of EVI Common Stock currently held by Christiana directly in
the hands of the Christiana shareholders. EVI believes that the only potential
detriment of effecting the Transaction to EVI is the exposure to the contingent
liabilities for which indemnity is being provided by C2 and Logistic and for
which $10.0 million cash is being retained by EVI until the expiration of the
Hold Back Period to cover such
17
25
contingent liabilities. Accordingly, the Board of Directors of EVI believes that
the Transaction is beneficial to EVI because of the favorable financial terms
provided to EVI for effecting the Transaction. See "Background of the
Transaction" and "EVI's Reasons for the Transaction".
THE CHRISTIANA BOARD OF DIRECTORS BELIEVES THAT THE TERMS OF THE MERGER ARE
FAIR TO, AND IN THE INTERESTS OF, CHRISTIANA AND THE HOLDERS OF CHRISTIANA
COMMON STOCK AND UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF CHRISTIANA COMMON
STOCK APPROVE THE MERGER PROPOSAL. In recommending the Transaction to Christiana
shareholders, the Christiana Board of Directors considered the benefits of
separating Christiana's two principal assets, its 3,897,462 shares of EVI Common
Stock and Logistic. The Transaction allows Christiana shareholders to exchange
their shares of Christiana Common Stock for shares of EVI Common Stock without
any taxable gain or loss (except for taxes on the Cash Consideration and the
fair market value of Contingent Cash Consideration as discussed above), while,
at the same time, providing an opportunity to Christiana shareholders to acquire
an interest in Logistic through an investment in C2. See "Background of the
Transaction" and "Christiana's Reasons for the Transaction".
Opinions of Financial Advisors. The EVI Board of Directors has received a
written opinion from Morgan Stanley & Co. Incorporated ("Morgan Stanley") to the
effect that the consideration to be paid in the Merger to the holders of the
Christiana Common Stock is fair from a financial point of view to EVI. The
Christiana Board of Directors has received a written opinion from Prudential
Securities Incorporated ("Prudential Securities") to the effect that the
Transaction (which for purposes of the Prudential Securities opinion is defined
as the Merger, the Logistic Sale, and the option to participate in the C2
Offering pursuant to the Lubar/C2 Agreement (the "C2 Optional Purchase")) is
fair from a financial point of view to the holders of Christiana Common Stock
(the "Prudential Securities Opinion"). Christiana and EVI have also received an
opinion from American Appraisal Associates, Inc. ("American Appraisal") that,
after giving effect to the Transaction, Logistic would be solvent and able to
pay its debts and obligations as they become due. In addition, as a condition to
closing the Transaction, American Appraisal is required to deliver a similar
opinion, dated as of the closing date of the Merger, that covers C2 and
Christiana in addition to Logistic. See "The Merger -- Terms of the
Merger -- Conditions to the Merger".
The stockholders of EVI and Christiana are urged to read the full texts of
the opinions of Morgan Stanley, Prudential Securities and American Appraisal,
respectively, for descriptions of the procedures followed, assumptions made and
matters considered by Morgan Stanley, Prudential Securities and American
Appraisal in connection with rendering such opinions. See "Opinions of Financial
Advisors -- Morgan Stanley Opinion", "-- Prudential Securities Opinion" and
"-- American Appraisal Opinion". The full text of the Morgan Stanley, Prudential
Securities and American Appraisal opinions are attached to this Joint Proxy
Statement/Prospectus as Appendices D, E and G, respectively.
Governmental and Regulatory Approvals. Consummation of the Merger is
conditioned upon the expiration or termination of the waiting period applicable
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"). EVI and Christiana have filed notification reports under the HSR Act
with the Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice (the "Department of Justice") and the applicable waiting
period has expired. See "The Merger -- Governmental and Regulatory Approvals".
EVI and Christiana are aware of no other governmental or regulatory approvals
required for the consummation of the Merger, other than compliance with
applicable securities laws of the various states.
Effective Time of the Merger. The Merger will become effective at the
effective time set forth in the certified copy of the Certificate of Merger to
be issued by the Department of Financial Institutions of the State of Wisconsin
with respect to the Merger (the "Effective Time"). Assuming all conditions to
the Merger contained in the Merger Agreement are satisfied or waived prior
thereto, it is anticipated that the Effective Time will occur as soon as
practicable following the EVI Special Meeting and the Christiana Special
Meeting. See "The Merger -- Terms of the Merger -- Effective Time of the
Merger".
As soon as practicable after the Effective Time, American Stock Transfer &
Trust Company (the "Exchange Agent") will mail a letter of transmittal and other
information to each holder of record of Christiana Common Stock immediately
before the Effective Time for use in exchanging certificates formerly
representing shares of Christiana Common Stock for certificates representing
shares of EVI Common Stock.
18
26
CHRISTIANA COMMON STOCK CERTIFICATES SHOULD NOT BE SURRENDERED FOR EXCHANGE BY
SHAREHOLDERS OF CHRISTIANA PRIOR TO THE APPROVAL OF THE MERGER PROPOSAL AND THE
RECEIPT OF A LETTER OF TRANSMITTAL FROM THE EXCHANGE AGENT. SEE "THE
MERGER -- TERMS OF THE MERGER -- MANNER AND BASIS OF CONVERTING SHARES".
Conditions to the Merger. In addition to the approval and adoption of the
Merger Proposal by the requisite votes of EVI and Christiana stockholders and
the receipt of regulatory approvals, the respective obligations of EVI and
Christiana to effect the Merger are subject to the satisfaction or waiver, where
permissible, of certain other conditions, including (i) confirmation of the tax
opinion regarding the Merger, (ii) the receipt by each party of various legal
opinions, certificates and consents, (iii) the opinions of the financial
advisors shall not have been withdrawn, (iv) the Logistic Sale shall have
occurred, (v) Christiana shall have delivered to EVI a pro forma balance sheet
after giving effect to the Logistic Sale reflecting Christiana Net Cash in an
amount of not less than $20.0 million, (vi) the accuracy as of the date of the
Merger Agreement and as of the date on which the closing of the transactions
contemplated by the Merger Agreement occurs (the "Closing Date") of the
representations and warranties of EVI, Sub and Christiana and compliance in all
material respects with all agreements and covenants by each party to be
performed on or before the Closing Date and (vii) no material adverse change
shall have occurred with respect to Christiana since the date of the Merger
Agreement. There can be no assurance that all of the conditions set forth in the
Merger Agreement will be satisfied.
The various conditions to the obligations of EVI and Christiana to
consummate the Merger may be waived by the party to which such conditions are
applicable, subject to such restrictions as may exist under law that would
prohibit the consummation of the Merger notwithstanding such waiver. Such
conditions that could not be waived by law or without a material violation of
law are (i) the requirements of stockholder approval by EVI and Christiana, (ii)
the expiration or termination of the waiting period under the HSR Act and (iii)
the effectiveness of the Registration Statement on the day of Closing Date. In
addition, neither EVI nor Christiana contemplates waiving any of the conditions
relating to (i) the receipt of legal or tax opinions, (ii) the receipt of a
letter from Arthur Andersen LLP to the effect that the Merger would not
adversely affect the ability of EVI to account for any prior or future business
combination as a pooling of interest, (iii) the absence of any revocation or
modification in any material manner of the fairness opinions of Morgan Stanley
and Prudential Securities, or (iv) the consummation of the Logistic Sale and the
existence at Christiana of certain minimum amounts of cash as of the Closing
Date. See "The Merger -- Terms of the Merger -- Conditions to the Merger". If
any of such conditions were to be waived, subject to the nature and materiality
of the effect of such waiver, EVI and Christiana would provide their respective
stockholders supplemental disclosure of such waiver and a reasonable opportunity
to change their votes in light of the waiver.
Management After the Transactions. No changes in the management of EVI are
contemplated to be effected following the Merger. See "The Merger -- Terms of
the Merger -- Management Following Merger".
Termination or Amendment of Merger Agreement. The Merger Agreement may be
terminated: (i) by mutual consent of EVI and Christiana, (ii) by either party if
the stockholders of either Christiana or EVI fail to approve the Merger
Proposal, (iii) by either party if the Merger is not effected on or before
October 31, 1998, (iv) by either party if there has been a breach by the other
party of any representation or warranty that could reasonably be expected to
have a material adverse effect or a failure by the other party to perform in any
material respect any of its covenants, agreements or obligations set forth in
the Merger Agreement, (v) by either party if a court of competent jurisdiction,
or other governmental body or regulatory authority shall have issued an order,
decree or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Merger or (vi) by the affected party if in the exercise of its
good faith judgment as to its fiduciary duties to its stockholders imposed by
law, as advised by counsel, the Board of Directors of EVI or Christiana
determines that such termination is appropriate in complying with its fiduciary
obligations. EVI and Christiana may also terminate the Merger Agreement if the
Board of Directors of the other company withdraws, modifies or changes its
recommendation with respect to the Merger in a manner adverse to it or shall
have resolved to do any of the foregoing. The Merger Agreement may be amended or
supplemented by an instrument in writing signed on behalf of each party,
provided that after the Merger Agreement has been approved and adopted by the
stockholders of EVI and Christiana, it may be amended only as may be permitted
under applicable law. See "The Merger -- Terms of the Merger -- Termination or
Amendment of Merger Agreement".
19
27
Interests of Certain Persons. Christiana currently owns 3,897,462 shares of
EVI Common Stock, or approximately 4.0% of the outstanding shares of EVI Common
Stock. The Lubar Family owns a total of 2,718,000 shares of Christiana Common
Stock or 52.8% of the issued and outstanding stock of Christiana. Following the
Transaction, the Lubar Family will own a total of 2,036,135 shares of EVI Common
Stock or approximately 2.1% of the total outstanding shares of EVI Common Stock
after the Merger. Certain officers and directors of Christiana also own shares
of Christiana Common Stock and, as a result of the Transaction, will own shares
of EVI Common Stock following the Merger. See "Interests of Certain Persons in
the Transaction".
Certain executive officers and directors of Christiana will be executive
officers and directors of C2, and to the extent such officers and directors are
Christiana shareholders, they will have the ability to purchase their pro rata
interest in C2 pursuant to C2's offering of up to 5,202,664 shares of its common
stock under a separate prospectus. Assuming all shareholders of Christiana
exercise their ability to purchase their pro rata interest in C2 pursuant to the
C2 Offering, the Lubar Family and the other officers and directors of C2 would
beneficially own approximately 66% of the outstanding shares of C2 Common Stock.
To the extent Christiana shareholders do not exercise their ability to purchase
their pro rata interest in C2, the beneficial ownership interest in C2 of the
Lubar Family and the other directors and officers of C2 will increase, and such
persons could potentially own up to 100% of C2 Common Stock. See "Interests of
Certain Persons in the Transaction".
Accounting Treatment. The Merger will be accounted for as a purchase under
generally accepted accounting principles. See "The Merger -- Accounting
Treatment".
Dissenters' Rights. Under Delaware law, the holders of EVI Common Stock who
object to the Merger Proposal or abstain from voting in favor of the Merger
Proposal will not have any appraisal rights or right to receive cash for their
shares of EVI Common Stock and EVI does not intend to make any such rights
available to its stockholders.
Under the provisions of Wisconsin law, any Christiana shareholder who
dissents from the Merger will have a statutory right to demand the "fair value"
of such shareholder's Christiana Common Stock in cash. To exercise this right,
such shareholder must not vote its shares in favor of the Merger and must take
certain other actions required by the provisions of Subchapter XIII of the
Wisconsin Business Corporation Law. See "The Merger -- Dissenters' Rights".
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
The Merger is intended to qualify as a "reorganization" under Section
368(a)(1)(A) of the Code by reason of Section 368 (a)(2)(E) of the Code and the
Merger is not expected to be taxable to the shareholders of Christiana except to
the extent of the Cash Consideration to be received by them and the fair market
value of the Continent Cash Consideration to be received by them. Consummation
of the Merger is conditioned on the receipt of an opinion of Arthur Andersen LLP
to the effect that (i) the Merger will be treated for Federal income tax
purposes as a reorganization within the meaning of Section 368(a)(1)(A) of the
Code by reason of Section 368(A)(2)(E) of the Code, (ii) no gain or loss for
Federal income tax purposes will be recognized by EVI, Sub or Christiana as a
result of the Merger, (iii) EVI and Christiana are parties to a reorganization
within the meaning of Section 368(b) of the Code and (iv) no gain or loss will
be recognized by the shareholders of Christiana upon the receipt by them of
shares of EVI Common Stock in exchange for their shares of Christiana Common
Stock pursuant to the Merger, except with respect to the Cash Consideration and
the fair market value of the Contingent Cash Consideration. Arthur Andersen LLP
has rendered such opinion for purposes of this Joint Proxy Statement/Prospectus.
Such opinion is required to be redelivered at closing. The condition that the
opinion be redelivered at closing may be waived by EVI and Christiana. If the
opinion is waived or if there are modifications to such opinion that would
conclude that, except as described in the opinion described herein, the Merger
would be taxable in whole or in part to EVI, Christiana or the stockholders of
EVI or Christiana, EVI and Christiana will provide additional disclosure to
their respective stockholders and provide them with an opportunity to change
their vote on the Transaction. See "Material Federal Income Tax Considerations".
20
28
CHRISTIANA STOCK OPTION PLANS
Under the terms of the Merger Agreement, all employee stock options of
Christiana are required to be exercised or cancelled prior to the Merger.
Options to purchase a total of 201,050 shares will be cancelled in exchange for
a total of $2,485,883. Options to purchase 53,334 shares are expected to be
exercised prior to the Effective Time. See "Interests of Certain Persons in the
Transaction", for information concerning executive officers and directors of
Christiana.
COMPARATIVE RIGHTS OF STOCKHOLDERS OF EVI AND CHRISTIANA
The rights of holders of Christiana Common Stock are currently governed by
Wisconsin law, Christiana's Articles of Incorporation, as amended, and
Christiana's By-laws, as amended. Upon consummation of the Merger, holders of
Christiana Common Stock will become holders of EVI Common Stock, and their
rights as holders of EVI Common Stock will be governed by Delaware law, EVI's
Restated Certificate of Incorporation and EVI's By-laws. There exist various
differences between Wisconsin law, Christiana's Articles of Incorporation and
Christiana's By-laws and Delaware law, EVI's Restated Certificate of
Incorporation and EVI's By-laws. See "Description of EVI and Christiana Capital
Stock" and "Comparative Rights of Stockholders of EVI and Christiana".
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
EVI Common Stock is traded on the NYSE under the symbol "EVI", and
Christiana Common Stock is traded on the NYSE under the symbol "CST". The
following table sets forth the range of high and low sale prices for EVI Common
Stock and Christiana Common Stock for the periods indicated, as reported on the
NYSE. The prices for EVI Common Stock have been adjusted to reflect a
two-for-one stock split effected in May 1997.
EVI CHRISTIANA
---------------------- ----------------------
HIGH LOW HIGH LOW
---- --- ---- ---
Twelve Months Ended December 31, 1996
Quarter ended March 31, 1996............................. $14 7/16 $11 1/8 $24 3/4 $22 1/4
Quarter ended June 30, 1996.............................. 17 1/2 12 7/8 24 1/4 20 1/8
Quarter ended September 30, 1996......................... 20 1/4 14 22 3/4 20 5/8
Quarter ended December 31, 1996.......................... 25 3/4 19 1/2 25 3/4 23 1/2
Twelve Months Ended December 31, 1997
Quarter ended March 31, 1997............................. $31 7/8 $23 7/8 $33 3/4 $26 1/2
Quarter ended June 30, 1997.............................. 45 1/2 28 39 7/8 31 1/2
Quarter ended September 30, 1997......................... 64 42 1/16 42 5/8 37 5/8
Quarter ended December 31, 1997.......................... 73 40 1/4 46 9/16 36 5/8
Twelve Months Ended December 31, 1998
Quarter ended March 31, 1998............................. $53 7/8 $37 1/2 $41 1/2 $33 15/16
Quarter ended June 30, 1998 (through June 24, 1998)...... 58 7/16 34 3/4 43 5/8 31 11/16
EVI has not paid any dividends on the EVI Common Stock since 1984 and
currently anticipates that, for the foreseeable future, any earnings will be
retained for the development of EVI's business. See "Price Range of Common Stock
and Dividend Policy".
On December 12, 1997, the last trading date prior to the announcement by
EVI and Christiana that they had reached an agreement concerning the Merger, the
closing sale prices of EVI Common Stock and of Christiana Common Stock as
reported by the NYSE were $46 3/8 and $40 3/4 per share, respectively.
On , 1998, the closing sale prices of EVI Common Stock and of
Christiana Common Stock as reported by the NYSE were $ and $ per share,
respectively.
Following the Merger, EVI Common Stock will continue to be traded on the
NYSE under the symbol "EVI" and Christiana Common Stock will cease to be traded
and there will be no further market for such stock.
21
29
EVI UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following tables set forth certain summary pro forma condensed
consolidated financial data of EVI. The Unaudited Pro Forma Condensed
Consolidated Statements of Income give effect to the proposed Merger of
Christiana as if the transaction had occurred on January 1, 1997. Because the
fiscal years of EVI and Christiana differ, Christiana's December 31, 1997
historical operating results are based on Christiana's last two fiscal quarters
of its fiscal year ended June 30, 1997, combined with the results for the six
months ended December 31, 1997. The Unaudited Pro Forma Condensed Consolidated
Balance Sheet gives effect to the Merger as if this transaction had occurred on
March 31, 1998.
The unaudited pro forma information set forth below is not necessarily
indicative of the results that actually would have been achieved had such
transactions been consummated as of the dates reflected, or that may be achieved
in the future. This information should be read in conjunction with EVI's
Management's Discussion and Analysis of Financial Condition and Results of
Operations and its financial statements and related notes thereto contained in
its Annual Report on Form 10-K for the year ended December 31, 1997, Quarterly
Report on Form 10-Q for the period ended March 31, 1998 and Current Report on
Form 8-K dated June 15, 1998, the EVI Selected Financial Data, the Pro Forma
Condensed Consolidated Financial Statements and related notes thereto, and
Christiana's financial statements and related notes thereto, which are included
herein or incorporated herein by reference in this Joint Proxy
Statement/Prospectus.
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, 1998 DECEMBER 31, 1997
-------------- -----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Operating Data:
Revenues.................................................. $573,460 $1,969,089
Income from continuing operations......................... 61,233 196,816
Earnings per share from continuing operations:
Basic.................................................. $ 0.63 $ 2.05
Diluted................................................ 0.63 2.02
Weighted average shares outstanding
Basic.................................................. 96,761 96,052
Diluted................................................ 97,625 97,562
MARCH 31, 1998
--------------
(IN THOUSANDS)
Balance Sheet Data:
Total assets.............................................. $2,931,494
Long-term debt............................................ 252,527
5% Convertible Subordinated Preferred Equivalent
Debentures............................................. 402,500
Stockholders' equity...................................... 1,512,342
22
30
EVI SUMMARY HISTORICAL FINANCIAL DATA
The following table sets forth certain summary historical condensed
consolidated financial data of EVI. This information should be read in
conjunction with EVI's Management's Discussion and Analysis of Financial
Condition and Results of Operations and its financial statements and related
notes thereto contained in its Annual Report on Form 10-K for the year ended
December 31, 1997, Quarterly Report on Form 10-Q for the period ended March 31,
1998 and the Current Report on Form 8-K dated June 15, 1998, the EVI Selected
Financial Data, and Christiana's financial statements and related notes thereto,
which are included herein or incorporated herein by reference in this Joint
Proxy Statement/Prospectus.
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- ---------- ---------- ---------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
OPERATING DATA:
Revenues...................... $573,460 $431,253 $1,969,089 $1,467,270 $1,125,803 $858,993 $671,470
Cost of sales................. 382,172 306,991 1,371,126 1,090,814 831,231 630,850 482,878
Selling, general and
administrative expenses..... 81,468 57,783 264,553 209,433 195,747 155,860 127,966
Equity in Earnings of
Unconsolidated Affiliates... (780) (509) (2,582) (2,078) (1,477) (1,169) (2,716)
Acquisition-related and other
charges..................... -- -- -- -- 88,182 2,500 4,000
-------- -------- ---------- ---------- ---------- -------- --------
Operating income.............. 110,600 66,988 335,992 169,101 12,120 70,952 59,342
Interest expense.............. (12,011) (10,545) (43,273) (39,368) (33,504) (22,384) (11,601)
Other income (expense), net... (627) 2,178 12,242 2,941 8,409 615 2,231
Income tax (provision)
benefit..................... (36,819) (20,718) (108,188) (40,513) 4,707 (13,137) (14,741)
-------- -------- ---------- ---------- ---------- -------- --------
Income (loss) from continuing
operations.................. $ 61,143 $ 37,903 $ 196,773 $ 92,161 $ (8,268) $ 36,046 $ 35,231
======== ======== ========== ========== ========== ======== ========
Earnings per share from
continuing operations:
Basic....................... $ 0.63 $ 0.40 $ 2.04 $ 1.03 $ (0.10) $ 0.53 $ 0.58
Diluted..................... $ 0.63 $ 0.39 $ 2.01 $ 1.01 $ (0.10) $ 0.53 $ 0.58
Weighted average shares
outstanding:
Basic....................... 96,761 95,302 96,052 89,842 77,595 67,672 60,628
Diluted..................... 97,625 96,704 97,562 90,981 77,595 68,032 60,894
DECEMBER 31,
MARCH 31, ------------------------------------------------------------
1998 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
BALANCE SHEET DATA:
Total assets........................ $2,909,445 $2,737,910 $2,243,633 $1,710,568 $1,464,804 $885,981
Long-term debt...................... 252,527 252,322 417,976 416,473 303,854 56,580
5% Convertible Subordinated
Preferred Equivalent Debentures... 402,500 402,500 -- -- -- --
Stockholders' equity................ 1,512,342 1,458,549 1,292,704 958,337 845,287 582,187
23
31
CHRISTIANA SUMMARY HISTORICAL FINANCIAL DATA
The following table sets forth certain summary historical financial data
for Christiana as of and for each of the five years ended June 30, 1997 and as
of March 31, 1998 and for the nine month periods ended March 31, 1998 and 1997.
The historical financial data as of and for each of the five years in the period
ended June 30, 1997 was derived from the consolidated financial statements of
Christiana, which were audited by Arthur Andersen LLP, independent public
accountants. The historical financial data as of March 31, 1998 and for the nine
month periods ended March 31, 1998 and 1997 have not been audited. In the
opinion of Christiana, the historical financial data as of March 31, 1998 and
for the nine months ended March 31, 1998 and 1997 include all adjusting entries
necessary to present fairly the information set forth therein. The operating
data for the nine months ended March 31, 1998 is not necessarily indicative of
results that may be expected for the year ending June 30, 1998. The following
selected historical consolidated financial data should be read in conjunction
with Christiana's "Management's Discussion and Analysis of Results of Operations
and Financial Condition", Christiana's "Selected Consolidated Financial Data"
and Christiana's "Consolidated Financial Statements" and related notes appearing
elsewhere in this Prospectus.
NINE MONTHS ENDED
MARCH 31, FISCAL YEAR ENDED JUNE 30,
------------------- ----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Operating Data:
Revenues................ $ 68,579 $ 63,271 $ 84,208 $ 77,170 $126,881 $ 90,153 $ 46,763
Direct operating
expense.............. 57,843 53,051 70,973 65,418 104,818 74,976 36,658
Selling, general and
administrative
expenses............. 6,615 6,114 8,656 7,531 11,739 8,755 8,653
-------- -------- -------- -------- -------- -------- --------
Operating income........ 4,121 4,106 4,579 4,221 10,324 6,422 1,452
Interest expense........ (2,150) (2,437) (3,166) (3,096) (4,842) (3,710) (3,283)
Equity in earnings
of EVI............... 6,011 8,855 10,479 1,745 -- -- --
Other income (expense),
net.................. (1,102) (962) (923) 3,141 3,658 3,195 6,176
Income tax expenses..... 2,704 3,731 4,306 2,408 3,394 2,256 1,812
Minority interest....... -- -- -- -- (684) (530) 408
-------- -------- -------- -------- -------- -------- --------
Net income.............. $ 4,176 $ 5,831 $ 6,663 $ 3,603 $ 5,062 $ 3,121 $ 2,941
======== ======== ======== ======== ======== ======== ========
Earnings per share(1):
Basic................ $ .081 $ 1.14 $ 1.30 $ 0.69 $ 0.96 $ 0.59 $ 0.57
Diluted.............. 0.80 1.13 1.29 0.69 0.96 0.59 0.57
Weighted average shares
outstanding.......... 5,143 5,137 5,137 5,187 5,276 5,321 5,203
JUNE 30,
MARCH 31, --------------------------------------------------------
1998 1997 1996 1995 1994 1993
--------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Balance Sheet Data:
Total assets........... $142,764 $142,356 $131,018 $121,742 $147,565 $122,832
Long-term debt......... 31,167 36,149 44,013 38,256 53,458 49,973
Stockholder's equity... 76,598 72,085 61,077 58,710 60,088 51,461
Cash dividends per
share............... -- -- -- -- -- --
- ---------------
(1) All earnings per share amounts have been restated to reflect the adoption of
Statement of Accounting Standards No. 128, "Earnings Per Share", effective
December 15, 1997. For further discussion of the change in accounting, refer
to Note 5 to the Christiana Consolidated Financial Statements for the
quarter ended March 31, 1998 included herein.
24
32
COMPARATIVE PER SHARE INFORMATION
The following table sets forth certain historical and pro forma earnings
per share and book value per share for the EVI Common Stock and the Christiana
Common Stock. The table also reflects the equivalent per share earnings and book
value with respect to one share of Christiana Common Stock on a pro forma basis
for the Merger. The information presented in the table should be read in
conjunction with the unaudited Pro Forma Condensed Consolidated Financial
Statements and the separate historical consolidated financial statements of EVI
and Christiana and the related notes included or incorporated by reference in
this Joint Proxy Statement/Prospectus.
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 1998 DECEMBER 31, 1997
------------------ -----------------
Basic Earnings Per Share:
EVI Historical Earnings Per Share from Continuing
Operations............................................ $0.63 $ 2.04
Christiana Historical Earnings Per Share(1).............. 0.36 0.82
EVI Pro Forma Earnings Per Share from Continuing
Operations
for the Merger(2)..................................... 0.63 2.05
Christiana Equivalent Pro Forma Earnings Per Share(3).... 0.47 1.54
Diluted Earnings Per Share:
EVI Historical Earnings Per Share from Continuing
Operations............................................ $0.63 $ 2.01
Christiana Historical Earnings Per Share(1).............. 0.35 0.81
EVI Pro Forma Earnings Per Share from Continuing
Operations for the Merger(2).......................... 0.63 2.02
Christiana Equivalent Pro Forma Earnings Per Share(3).... 0.47 1.51
MARCH 31, 1998
--------------
Book Value Per Share:
EVI Historical Book Value Per Share....................... $15.64
Christiana Historical Book Value Per Share................ 14.88
EVI Pro Forma Book Value Per Share for the Merger......... 15.64
Christiana Equivalent Pro Forma Book Value Per Share(3)... 11.71
- ---------------
(1) Christiana's historical and pro forma earnings per share for the year ended
December 31, 1997 are based on Christiana's earnings for the six months
ended December 31, 1997, combined with Christiana's earnings for the last
two fiscal quarters of Christiana's fiscal year ended June 30, 1997.
(2) Gives pro forma effect to the Merger.
(3) Represents the pro forma earnings per share and book value per share of
.74913 of one share of EVI Common Stock issuable in the Merger. In addition,
the Christiana shareholders will be entitled to receive in the Merger (i)
cash estimated to be in an amount per share of Christiana Common Stock of
between $3.60 and $3.71 and (ii) the Contingent Cash Consideration of up to
$1.92 per share of Christiana Common Stock.
25
33
GENERAL INFORMATION ABOUT THE MEETINGS
DATE, TIME AND PLACE OF SPECIAL MEETINGS
The EVI Special Meeting will be held at 9:00 a.m., Houston time, on
, , 1998, at The Luxury Collection Hotel of Houston, 1919
Briar Oaks, Houston, Texas. The Christiana Special Meeting will be held at 9:00
a.m., Milwaukee time, on , , 1998, at Galleria Conference
Room, Firstar Center, 777 East Wisconsin Avenue, Milwaukee, Wisconsin.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of EVI Common Stock and holders of record of
Christiana Common Stock at the close of business on , 1998, are
entitled to notice of, and to vote at, the EVI Special Meeting and the
Christiana Special Meeting, respectively.
At the close of business on the Record Date, there were holders of
record of EVI Common Stock with shares issued and outstanding and
holders of record of Christiana Common Stock with shares issued and
outstanding. Each share of EVI Common Stock and Christiana Common Stock entitles
the holder thereof to one vote on each matter submitted for stockholder
approval.
PURPOSES OF THE SPECIAL MEETINGS
EVI. At the EVI Special Meeting, the holders of EVI Common Stock will be
asked to consider and vote upon the Merger Proposal and to transact such other
business as may properly come before the EVI Special Meeting.
Christiana. At the Christiana Special Meeting, Christiana's stockholders
will be asked to consider and vote upon the Merger Proposal and to transact such
other business as may properly come before the Special Meeting.
If the Merger Proposal is approved by the stockholders of both EVI and
Christiana, and the other conditions to the consummation of the Merger are
satisfied or waived, Logistic and C2 will assume the C2/Logistic Assumed
Liabilities, which generally include all the debts, liabilities and other
obligations of Christiana, Logistic and their current and historical
subsidiaries and predecessors other than liabilities arising out of the
Christiana Retained Assets after the Effective Time. See "Ancillary
Transactions".
VOTE REQUIRED
EVI. EVI's By-laws provide that the presence at the EVI Special Meeting, in
person or by proxy, of the holders of a majority of the outstanding shares of
EVI Common Stock entitled to vote at the meeting will constitute a quorum for
the transaction of business. Under EVI's listing agreement with the NYSE,
approval of the Merger Proposal requires the affirmative vote of the holders of
a majority of the shares of EVI Common Stock present, in person or by proxy, and
entitled to vote at the EVI Special Meeting.
At the close of business on the Record Date, there were shares of EVI
Common Stock outstanding and entitled to vote at the EVI Special Meeting. As of
the Record Date, Christiana held 3,897,462 shares of EVI Common Stock,
representing an aggregate of approximately % of the outstanding shares. In
addition, directors and officers of EVI and their affiliates, excluding
Christiana, held shares of EVI Common Stock, representing
approximately % of the outstanding shares. Such persons have indicated that
they intend to vote their shares in favor of the approval and adoption of the
Merger Proposal. In addition, Christiana intends to vote its 3,897,462 shares of
EVI Common Stock in favor of the Merger.
Christiana. Under Wisconsin law, approval and adoption of the Merger
Proposal requires the affirmative vote of the holders of 80% of the votes
entitled to be cast at the Special Meeting and two-thirds of the votes entitled
to be cast at the Special Meeting other than the Lubar Shares or 31.4% of the
outstanding shares of Christiana Common Stock excluding the Lubar Shares.
26
34
At the close of business on the Record Date, there were shares of
Christiana Common Stock outstanding and entitled to vote at the Christiana
Special Meeting. At the close of business on the Record Date, the directors and
officers of Christiana and their affiliates held 3,445,932 shares of Christiana
Common Stock, representing approximately 67% of the outstanding shares. Such
directors and officers have indicated that they intend to vote their shares in
favor of the approval and adoption of the Merger Proposal.
VOTING AND REVOCATION OF PROXIES
All properly executed proxies that are not revoked will be voted at the EVI
Special Meeting and the Christiana Special Meeting, as applicable, in accordance
with the instructions contained therein. If a holder of EVI Common Stock or a
holder of Christiana Common Stock executes and returns a proxy and does not
specify otherwise, the shares represented by such proxy will be voted "FOR"
approval and adoption of the Merger Proposal in accordance with the
recommendation of the EVI Board of Directors and the Christiana Board of
Directors, respectively. Checking the abstention box on the proxy card or
failing to return the proxy card has the same effect as voting against the
Proposals. A stockholder of EVI or shareholder of Christiana who has executed
and returned a proxy may revoke it at any time before it is voted at the
respective Special Meeting by executing and returning a proxy bearing a later
date, by filing written notice of such revocation with the Secretary of EVI or
Christiana, as appropriate, stating that the proxy is revoked or by attending
the Special Meeting and voting in person.
Under applicable stock exchange rules, brokers will not be permitted to
submit proxies authorizing a vote on the Merger Proposal in the absence of
specific instructions from beneficial owners. An abstention will have the effect
of a vote against the Merger Proposal. A broker nonvote will have the effect of
a vote against the Merger Proposal. Under Delaware law and Wisconsin law, both
abstentions and broker nonvotes contained on a returned proxy card will be
considered present for purposes of determining the existence of a quorum at the
EVI Special Meeting or the Christiana Special Meeting, as applicable.
SOLICITATION OF PROXIES
In addition to solicitation by mail, the directors, officers and employees
of each of EVI and Christiana may solicit proxies from their respective
stockholders by personal interview, telephone, facsimile or otherwise.
Christiana will bear the costs of the solicitation of proxies from the
stockholders of both EVI and Christiana. Arrangements also will be made with
brokerage firms and other custodians, nominees and fiduciaries who hold the
voting securities of record for the forwarding of solicitation materials to the
beneficial owners thereof. EVI and Christiana will reimburse such brokers,
custodians, nominees and fiduciaries for the reasonable out-of-pocket expenses
incurred by them in connection therewith.
DISSENTERS' RIGHTS
Under Delaware law, the holders of EVI Common Stock who object to the
Merger Proposal or abstain from voting in favor of the Merger Proposal will not
have any appraisal rights or right to receive cash for their shares of EVI
Common Stock and EVI does not intend to make any such rights available to its
stockholders.
Under the provisions of Wisconsin law, any Christiana shareholder who
dissents from the Merger will have a statutory right to demand the "fair value"
of such shareholder's Christiana Common Stock in cash. To exercise this right,
such shareholder must not vote its shares in favor of the Merger and must take
certain other actions required by the provisions of Subchapter XIII of the
Wisconsin Business Corporation Law. See "The Merger -- Dissenters' Rights".
OTHER MATTERS
As of the date of this Joint Proxy Statement/Prospectus, the EVI Board of
Directors and the Christiana Board of Directors do not know of any business to
be presented at their respective Special Meetings other than as set forth in the
notices accompanying this Joint Proxy Statement/Prospectus. If any other matters
should properly come before the respective Special Meetings, including a
proposal to adjourn such Special Meetings, it is intended that the shares
represented by proxies will be voted with respect to such matters in accordance
with the judgment of the persons voting such proxies.
27
35
BACKGROUND OF THE TRANSACTION
On June 30, 1995, EVI acquired Prideco, Inc. ("Prideco") from Christiana
and other stockholders of Prideco in consideration for the issuance of
approximately 4.5 million shares of EVI Common Stock. As part of this
acquisition, Christiana received 3,897,462 shares of EVI Common Stock and
Sheldon Lubar, Chairman of the Board of Christiana, was appointed to the Board
of Directors of EVI. Christiana also was given the right to name a nominee for
election to the Board of Directors of EVI as long as its interest in EVI was
equal to at least 8% of the outstanding shares of EVI Common Stock.
In earlier years, Christiana developed commercial and residential
properties, including projects in California, Nevada, Georgia and Texas. In
1987, the Christiana Board of Directors decided that the Company should be
involved in other businesses, because of the opportunity for more favorable
returns. Consequently, Christiana began a program of disposing of its real
estate properties and reinvesting its available cash into other businesses,
including Logistic's warehousing and logistics businesses. As a result of this
internal restructuring, Christiana consisted primarily of two unrelated assets:
(a) its warehousing and logistics businesses on the one hand and (b) its EVI
shareholdings on the other. Christiana's Board of Directors considered it
desirable to separate the two operations in order that Christiana be viewed as
either a warehousing and logistic business or a company involved in the
engineered oilfield tools and equipment business by virtue of its EVI
shareholdings. In recent months, the value of Christiana stock in the market
reflected primarily the underlying asset value of its EVI shareholdings and did
not adequately reflect the value of its warehousing and logistics business. The
Christiana Board was aware that a sale of the warehousing and logistics business
would likely result in Christiana becoming a single business holding company and
subject to investment company regulations which was not an objective of the
Board. Further, if the EVI shares were sold or distributed to the Christiana
shareholders, significant taxes would be incurred at the corporate level and
further at the shareholder level. The Christiana Board considered, but rejected,
an outright sale of Christiana, because this would transfer ownership, but not
separate the two businesses. The Board considered, but rejected, a sale of
Logistic's warehousing and logistics business, because the result would leave
Christiana as a nonoperating holding company. The Christiana Board also
considered, but rejected, a sale of the EVI shareholdings, because of
Christiana's view as to the future potential for increase in the value of the
asset and the substantial corporate-level tax that would result from such a
sale. The Christiana Board ultimately determined that a tax-free merger would
accomplish many of the objectives described above.
In early June 1997, Mr. Lubar informally advised Christiana Board members
that he intended to approach EVI to inquire as to EVI's interest in acquiring
Christiana. The Board members informally concurred that this was appropriate and
requested that Mr. Lubar keep them advised and schedule a formal meeting at an
appropriate date to discuss such matter. At this time there was no intention on
the part of Mr. Lubar or any other officer or director of Christiana or Logistic
to purchase Logistic. Christiana, however, was not certain that EVI would be
willing to acquire Christiana with a controlling management interest in
Logistic. In considering a possible acquisition of Christiana by EVI, the
Christiana Board of Directors took into account that if EVI were not willing to
acquire a controlling management interest in Logistic, Christiana would be
required to dispose of a controlling interest in Logistic prior to the
acquisition. In such case, the Lubar Family and members of Christiana and
Logistic management were willing to consider purchasing such portion if that
became necessary to complete a merger with EVI. Mr. Lubar routinely advised
Christiana directors regarding discussions. Informal Board communications
consisted primarily of individual telephone calls between Mr. Sheldon Lubar and
Messrs. Nicholas F. Brady and Albert O. Nicholas, Christiana directors. Messrs.
Sheldon Lubar, David Lubar, a Christiana director, and William T. Donovan,
Christiana's President and a director, had extensive discussions on a daily
basis during these periods. Mr. Donovan had telephone conversations with the
other Christiana directors, Messrs. Brady, Raymond F. Logan, Nicholas, John R.
Patterson and Gary R. Sarner to discuss progress and solicit input in the
evaluation process and to update the Board on negotiations. Specifically, on
June 19, 1997, Messrs. Lubar and Donovan sent a memorandum to Messrs. Brady,
Nicholas and David Lubar describing in more detail the restructuring of
Christiana focusing on providing shareholders with enhanced value in a tax
efficient manner. The valuation of the components of Christiana as well as tax
liabilities and the basis of Christiana's assets were considered. Messrs. Brady,
Nicholas, D. Lubar, S. Lubar and Donovan conferred by telephone on June 20, 1997
and
28
36
concurred that a tax-free merger with EVI was desirable. Messrs. S. Lubar and
Donovan advised the other directors that a meeting was scheduled with Mr.
Bernard Duroc-Danner on June 23, 1997, in Milwaukee, and discussed with them the
basis upon which a merger with EVI would be most beneficial to Christiana
shareholders. Although members of the Christiana Board were consulted during
this process, Christiana did not hold any meetings of the Board in person or
telephonic meetings of the Board relating to the Merger at this time.
In early June 1997, Mr. Lubar approached Bernard J. Duroc-Danner, President
of EVI, to inquire as to EVI's interest in acquiring Christiana in a tax free
merger. At a meeting held in Milwaukee, Wisconsin, on June 23, 1997, at which
Messrs. Lubar, Donovan and Mr. Duroc-Danner were present, the parties discussed
the possible acquisition. Messrs. Lubar and Donovan expressed flexibility from
Christiana's standpoint as to the structure of the transaction and the mix of
the consideration between stock and cash that would be received by the
Christiana stockholders. Following that meeting, EVI and Christiana directed
their legal and tax advisors to review the possibility of an acquisition of
Christiana by EVI and any issues relating thereto.
Following a review of issues involved in an acquisition by EVI of
Christiana, in July 1997, Mr. Duroc-Danner advised Mr. Lubar of EVI's
management's interest in EVI pursuing a possible acquisition of Christiana on
appropriate terms, including, specifically, an acquisition that would not be
dilutive to EVI's per share earnings or cash flow and that would not involve
EVI's full ownership and management of Christiana's warehouse and logistics
business and that the ownership and management of such a business would be
inconsistent with the operations of EVI and EVI's focus on the oilfield
manufacturing and service business. EVI also advised Christiana that EVI would
need to receive confirmation that an acquisition of Christiana by EVI would not
adversely affect EVI's ability to consummate any future acquisition that would
be accounted for as a pooling of interests, in particular EVI's then pending
acquisition of XLS Holding, Inc. ("XL").
Following these discussions, Messrs. Duroc-Danner and Lubar agreed that the
most appropriate structure for an acquisition by EVI of Christiana would involve
a transaction in which a controlling interest in Logistic's business would be
sold to another entity for cash prior to EVI's acquisition and the consideration
that would be paid to the Christiana shareholders in the acquisition would
consist solely of a number of shares of EVI Common Stock equal to the number of
shares of EVI Common Stock held by Christiana and an amount of cash not greater
than the amount of cash held by Christiana in excess of its existing
obligations.
During the course of the negotiations, EVI imposed additional requirements
in connection with any proposed transaction, specifically, that the entity that
would acquire a controlling interest in Logistic must be a creditworthy entity
acceptable to EVI, because such an entity must assume significant liability in
connection with Christiana's and Logistic's present and prior businesses, that
such an entity must agree to certain operational restraints in order to increase
the likelihood that such an entity would be able to satisfy all assumed
liabilities and that a substantial holdback be available as security for such
assumption of liabilities. The imposition of each of the foregoing decreased the
desirability of the transaction to Christiana. In periodic telephone
conversations with Messrs. Nicholas and Brady and in frequent conversations with
Messrs. Patterson and Sarner, Messrs. Lubar and Donovan advised them of the
increasing requirements of EVI. On numerous occasions the directors were asked
their opinion of whether the conditions imposed by EVI were decreasing the
desirability of Christiana's completing a proposed transaction. The impact of
the discussions with the directors was that Messrs. Lubar and Donovan should
continue the negotiations, making as few concessions as possible.
During this interaction with Board Members, Messrs. Lubar and Donovan gave
special attention to the views of Messrs. Nicholas and Brady, because each owned
a significant interest in Christiana, but were not employees. While neither
Director was directly involved in negotiations with EVI, the directors,
including, specifically Messrs. Nicholas and Brady, were advised as to the
increasing conditions required by EVI as the basis for a contemplated
transaction. The impact of Messrs. Nicholas and Brady on the negotiations was
important, because, without their concurrence, Messrs. Lubar and Donovan decided
that they would not proceed with a transaction with EVI.
In conversations with the other directors, Messrs. Lubar and Donovan
specifically discussed the appropriateness of a payment of $10.67 million to be
paid to Christiana for a two-thirds interest in Logistic. In
29
37
particular, Messrs. Donovan, Sarner and Patterson considered the operations of
Logistic and the impact on its liabilities, including the liabilities that it
would have to assume in order to satisfy EVI's requirements and the operational
restrictions under which it would have to operate in order to satisfy EVI.
Messrs. Lubar and Donovan concluded that it was highly unlikely that any outside
party would be willing to enter into a transaction on a basis acceptable to EVI.
For these reasons they concluded that $10.67 million cash for a two-thirds
interest in Logistic was appropriate. The appropriateness of the $10.67 million
payment by C2 for a two-thirds interest in Logistic and the adequacy and
fairness of that payment was discussed and approved by the full Christiana Board
of Directors at its meeting held on November 21, 1997.
No alternative acquisition structures were discussed or considered in that
the above form of transaction was the only form of transaction which would meet
the objectives of EVI in the transaction. The specific amount of cash that would
be provided to the Christiana shareholders in such a transaction was not agreed
to at that time. Because of Mr. Lubar's interest in both Christiana and EVI, as
well as Christiana's ownership interest in EVI, Mr. Duroc-Danner advised Mr.
Lubar that he believed that the review of the Transaction and the determination
of the consideration to be received should be approved and considered by a
special committee of EVI.
The Christiana Board of Directors did not consider a sale of all of
Logistic to facilitate EVI's desire not to acquire a controlling interest in
Logistic because (i) such a sale could have impacted the ability to effect the
Merger as a partially tax-free reorganization and (ii) EVI required Christiana
to have assets other than EVI Common Stock at the time of the Merger in order to
proceed with the transaction. The Christiana Board also did not consider an
auction of the two-thirds interest in Logistic that EVI did not wish to acquire
because of the perceived difficulty that would be involved in selling only a
portion of the ownership interest in Logistic. In particular, the Christiana
Board of Directors believed that the indemnification requirements, the
distribution, operation and management restrictions and the tag-along, change in
control provisions and EVI put rights would materially reduce the desire of a
third party to acquire an interest in Logistic and would affect materially the
considerations that would be received. Accordingly, the Christiana Board of
Directors concluded that a sale of a two-thirds interest in Logistic to Mr.
Lubar or one or more of his affiliates at a fair price reflecting these
restrictions would be in the best interest of Christiana in that it would allow
Christiana to effect the Merger with EVI and receive a fair value for the
interest in Logistic that EVI was not willing to acquire. Mr. Lubar, in his
capacity both as a director of Christiana and a potential interested party
through his agreement to assist in the funding of C2, took part in these
discussions with the Board.
To facilitate the consideration of a possible acquisition of Christiana by
EVI, Messrs. Lubar and Donovan on behalf of Christiana proposed that the
consideration to be paid by EVI in the acquisition would consist of (i) a number
of shares equal to the number of shares of EVI Common Stock held by Christiana
and (ii) an amount of cash equal to the amount of cash of Christiana in excess
of Christiana's fixed liabilities, including $20.0 million from a cash dividend
that would be paid by Logistic to Christiana prior to the sale of a two-thirds
interest in Logistic and approximately $10.67 million cash to be paid to
Christiana for such two-thirds interest in Logistic. This proposal also
contemplated that, following the acquisition, Christiana's only assets would
consist of the shares of EVI Common Stock then currently held by Christiana, a
one-third interest in Logistic following the $20.0 million distribution and cash
equal to the amount of cash payable by EVI to the Christiana shareholders in the
Merger. Mr. Lubar also advised EVI and Christiana that to facilitate the
transaction, he and his affiliates would be willing to acquire the two-thirds
interest in Logistic (and cause the acquiring entity and Logistic to assume
certain obligations of Christiana) at the $10.67 million price.
Mr. Lubar decided that $10.67 million for a two-thirds interest in Logistic
was a fair price. This price for a two-thirds interest would correspond to a
price for 100% of the equity interest in Logistic of $16.0 million. Christiana's
management and Board determined the $16.0 million equity value principally by
employing a multiple of "operating cash flow" produced by the business of
Logistic. "Operating cash flow" was generally considered to be earnings before
interest, taxes, depreciation and amortization. In fiscal 1997, Logistic
produced $13.1 million in "operating cash flow". The multiple employed to
determine the total enterprise value was six, which was based on their
assessment of the various components of Logistic's earnings, i.e.,
transportation, dry public warehousing, public refrigerated warehousing and
international services. No financial analysts were consulted in determining such
price. This produced an enterprise value for Logistic of
30
38
$78.6 million from which the anticipated level of debt of $63.0 million was
subtracted, giving an equity value of Logistic of $15.8 million (rounded up to
$16.0 million). Two-thirds of this value is $10.67 million. The consideration as
to the appropriate cash flow multiple of six for purposes of the calculation of
the purchase price for a two-thirds interest in Logistic and the anticipated
level of debt, which is currently expected to be approximately $3 million
greater than the level originally anticipated due primarily to the proposed
acquisition of the Hudsonville Facility described under "Description of
Christiana -- Business", was determined by Mr. Donovan on behalf of Christiana
and C2 and conveyed to the full Christiana Board of Directors. Afterward the
Christiana Board of Directors took into account the advice of Mr. Donovan with
respect to such cash flow multiple when it approved the transaction at the
meeting held on November 21, 1997. The Board of Directors of Christiana
concluded that a higher price for Logistic would not be warranted for the
following reasons: First, Logistic would be required to assume debt of
approximately $63.0 million (in part to pay a cash dividend of $20.0 million to
Christiana). Second, while the proposed sale price of the two-thirds interest in
Logistic was approximately $4.54 million less than its book value, the
Christiana Board of Directors believed that the liability assumption obligations
and restrictions imposed by EVI supported a sale below book value. The
Christiana Board of Directors, however, also believed that the cost to
Christiana for disposing of such interest at that price represented a fair
discount for the assumption obligations and restrictions imposed by EVI. The
Christiana Board of Directors further believed that any lower amount of
consideration that would be received by the Christiana shareholders from the
proposed sale of the two-thirds interest in Logistic in the manner contemplated
was more than offset by the benefits to be realized by the Christiana
shareholders in the Merger and their receipt of EVI Common Stock in a tax free
manner. Third, the purchasing entity and Logistic would be required to assume
various contingent and unquantifiable liabilities, including liabilities related
to the historical operations of Christiana, Logistic and other companies
formerly owned by Christiana. Fourth, Logistic would be required to restrict its
operational activities for the benefit of EVI and consequently would not have
complete freedom in connection with its business operations. Such restrictions
were expected to include prohibitions on any of the following without approval
by EVI: cash distributions, noncash distributions, acquisitions, liquidation and
compensation. These restrictions were eventually agreed upon in the Operating
Agreement to govern Logistic following the Transaction. See "Ancillary
Transaction -- Terms of the Operating Agreement". Fifth, no right was available
to acquire the remaining one-third interest in Logistic. Sixth, it was
contemplated that EVI would have the ability to put its one-third interest to
Logistic, thereby decreasing the value of Logistic.
The Christiana Board of Directors did not believe that it was necessary to
engage an independent third party to conduct an analysis as to the appropriate
valuation for a two-thirds interest in Logistic in the proposed sale of that
interest to C2 on the basis that the board was familiar with the business of
Logistic and itself had historical expertise and knowledge as to financial
matters. In addition, the Board of Directors believed that by providing the
Christiana shareholders with the right to invest in C2, the need and expense of
obtaining a third party independent valuation of Logistic was not in the
interest of the Christiana shareholders and would not have provided any
additional meaningful basis for determining the fairness of the transaction to
Christiana.
To assure the fairness of the proposed sale of Logistic to C2 at the price
contemplated by the Logistic Purchase Agreement and upon the recommendation of
Prudential Securities, Christiana required C2 to offer to the Christiana
shareholders the right to participate and invest in C2 on the same terms and
conditions as the Lubar Family. Christiana also required EVI to agree to
procedural terms relating to the payment of the Cash Consideration that would
allow the Christiana shareholders to apply the Cash Consideration payable to
them directly toward the purchase of shares of stock of C2. The Christiana Board
of Directors believes that this right to participate provides substantial
procedural fairness to the proposed sale of Logistic and allows the Christiana
shareholders to continue to participate in the ownership of Logistic if they so
desire.
Weighing the above factors, the price of $10.67 million for a two-thirds
interest in Logistic was the highest price Mr. Lubar thought appropriate.
Furthermore, considering that the purchasing entity would have to be acceptable
to EVI, Mr. Lubar felt it highly unlikely that a transaction could be concluded
with any other entity paying the same or higher price for the two-thirds
interest in Logistic. Mr. Lubar reached this conclusion because, in order to
conclude a transaction on such a basis, any acquirer would have to be (i)
acceptable to EVI (primarily because EVI would want to assure that TLC was
operated appropriately and because EVI would want a creditworthy entity to be
able to accept a put of the interest in Logistic and satisfy
31
39
the indemnities, if any, relating to the current and historical operations of
Logistic and Christiana), (ii) willing to assume indemnity obligations to EVI
relating to the historical operations of Logistic and Christiana, (iii) willing
to acquire less than a 100% interest in Logistic (without the right to acquire
the remaining minority interest), (iv) willing to accept a put on the one-third
interest retained by Christiana and (v) willing to accept restricted operational
activities. He considered the chances of fulfilling all such conditions remote.
As a result, no consideration was given by the Christiana Board of Directors to
a sale of Logistic to a bidder other than EVI.
The Christiana Board of Directors also determined that a discount of $4.5
million off the then existing book value for a two-thirds interest in Logistic
was an appropriate discount for a sale of a two-thirds interest in Logistic to
C2 (and Mr. Lubar through his proposed interest in C2) due to the fact that a
two-thirds interest in Logistic would be generally illiquid and the factors
considered by Mr. Lubar described in clauses (ii) through (v) in the above
paragraph. Although the impact of these factors was not subject to precise
quantification, the Christiana Board of Directors believed that the discount,
which was in large part reflective of the six times cash flow multiple discussed
and suggested by Mr. Donovan as described above, was fair to the Christiana
shareholders.
On October 1, 1997, Mr. Donovan was approached by another entity inquiring
about a potential interest in Logistic. This entity was an entity known to Mr.
Donovan to have recently acquired a majority interest of a company involved in
the public refrigerated warehouse and logistics industry. Mr. Donovan discussed
with representatives of this entity the key elements of the contemplated
transactions with EVI. Such potential purchaser indicated that it was not
interested in considering such a transaction, primarily because of the
indemnification provisions, the lack of a right to acquire the minority interest
to be held by EVI and the operating restrictions imposed on Logistic.
In July, 1997, Mr. Donovan commenced discussions with investment bankers
regarding potential financial advisory roles. These discussions culminated on
November 19, 1997, in discussions with Prudential Securities, which was
eventually retained to deliver the fairness opinion to Christiana shareholders.
On August 14, 1997, Mr. Lubar advised the Christiana Board of Directors of
the potential for a merger with EVI. The Christiana Board determined that it was
not necessary to appoint a special committee, even though Mr. Lubar was expected
to own a significant interest in an entity that would purchase Logistic in
connection with the Merger. The Board noted that the outside directors, Messrs.
Nicholas and Brady, were in favor of the Transaction and that the Transaction
would not be approved without their concurrence. The views of Messrs. Nicholas
and Brady were especially important for two reasons. First, unlike the other
directors, they were not employed by Christiana or Logistic. Second, each held
significant interest in Christiana (9.9% in the aggregate) and therefore their
interests would be aligned with other shareholders. The directors decided that
it was important for all shareholders to know how each director voted on this
issue. Each voted in favor of continuing the negotiations. Because the two
unaffiliated directors, Messrs. Nicholas and Brady, voted in favor of continuing
the negotiations, Messrs. Lubar and Donovan had sufficient authority under
applicable Wisconsin law to proceed even though the "affiliated" directors
voted. The Board approved continuation of discussions. During this period and
until the November 21, 1997 Board meeting at which the Board of Directors of
Christiana approved the Merger, Messrs. Lubar and Donovan kept the Board advised
of the progress of negotiations, including, specifically, the outside directors,
Messrs. Nicholas and Brady.
After having been advised by EVI that EVI would be interested in owning
only a one-third interest in Logistic, Christiana and its Board of Directors
began to consider what entity would own the remaining two-thirds interest in
Logistic.
On August 21, 1997, at the recommendation of Mr. Duroc-Danner, the Board of
Directors of EVI appointed a special committee of the Board of Directors of EVI
consisting of Sheldon S. Gordon and Robert A. Rayne (the "EVI Special
Committee") to review the Christiana proposal. Following that meeting, the EVI
Special Committee directed Fulbright & Jaworski L.L.P., EVI's outside counsel
("Fulbright & Jaworski"), to begin negotiations with Christiana of an
acquisition on terms satisfactory to EVI.
32
40
In early September, Fulbright & Jaworski and Foley & Lardner, outside
counsel to Christiana, began negotiations for the acquisition. In late
September, EVI advised Christiana that in light of a number of transactions that
EVI was then pursuing, in particular, its proposed acquisitions of BMW Monarch
(Lloydminster) Ltd. and BMW Pump, Inc. (collectively, "BMW") and Trico
Industries, Inc. ("Trico"), EVI was not in a position at that time to devote the
time and resources necessary to pursue the acquisition of Christiana and that
further negotiations would need to be delayed until a later date.
On October 8, 1997, following the execution of definitive agreements for
the acquisitions of Trico and BMW, Mr. Duroc-Danner met in Milwaukee with
Messrs. Lubar and Donovan to discuss the status and expected timing of EVI's
review of the Christiana acquisition. Mr. Duroc-Danner subsequently contacted
the members of the EVI Special Committee and suggested a November 11, 1997,
meeting to review and discuss the terms and structure of the Transaction. EVI
and Christiana then directed their advisors to resume negotiations of
documentation.
On November 7, 1997, EVI engaged Morgan Stanley to provide EVI with a
fairness opinion on the Transaction.
On November 11, 1997, the EVI Special Committee met in London with Mr.
Duroc-Danner, James G. Kiley, Vice President and Chief Financial Officer of EVI,
and representatives of Fulbright & Jaworski and Morgan Stanley to review the
status and structure of the Transaction. At this meeting, the EVI Special
Committee reviewed the outstanding issues with respect to the Transaction and
the financial impact to EVI thereof as well as drafts of documents for the
proposed acquisition. The EVI Special Committee also reviewed various due
diligence matters relating to Christiana and Logistic, including the historical
businesses of Christiana, various matters relating to the prior ownership of
real property by Christiana in California, the status of various lawsuits then
pending against Christiana, including a class action lawsuit involving a prior
real estate development in California that has since been settled, and other
customary matters involving the historical business and operations of Christiana
and its subsidiaries.
Following the conclusion of the November 11, 1997 meeting of the EVI
Special Committee, the members of the EVI Special Committee contacted Mr. Lubar
to discuss proposed changes in the terms of the Transaction. EVI and Christiana
advisers then continued negotiation of the terms of the transactions, including
the following: (i) that $10.0 million cash be retained by Christiana to be
available to pay any unpaid indemnity claims under the Logistic Purchase
Agreement, (ii) that $10.0 million of the cash consideration proposed by
Christiana to be paid in the Merger be deferred for five years without interest
and be subject to reduction for any liabilities or unpaid indemnity claims that
may be paid by EVI or Christiana, (iii) that Christiana pay all printing and
proxy solicitation costs as well as EVI's filing fees with the Commission and
under the HSR Act and all costs and expenses for blue sky and state securities
law filings, (iv) that the value of various tax benefits associated with the
exercises and termination of options by Christiana prior to the Merger be
provided to EVI without offset for other income by Christiana, (v) that
Christiana obtain a solvency opinion with respect to the Transaction, (vi) that
various protections be incorporated in the Operating Agreement to protect
Christiana's minority interest in Logistic following the Merger and (vii) that
C2 be responsible for the indemnification of the historical liabilities and
obligations of Christiana and its current and historical subsidiaries and
predecessors under the Logistic Purchase Agreement as well as be responsible to
purchase Christiana's one-third interest in Logistic if Christiana were to elect
to sell its one-third interest in Logistic five years after the closing. The EVI
Special Committee requested a solvency opinion because of the various loans that
were anticipated to be made to Logistic to fund a portion of the cash dividend
to be made by Logistic to Christiana as a condition to the Merger and given that
the Logistic Sale involved a transaction among affiliated parties, an
independent third-party solvency opinion would provide support that the Logistic
Sale would not constitute a fraudulent transfer. EVI also conducted various
additional due diligence regarding the litigation described above. Except for
the class action lawsuit, which was subsequently settled, no known material
liabilities or contingencies were identified during the due diligence process.
Further negotiations between the representatives of EVI and Christiana with
respect to open points under the agreements continued through the month of
November.
33
41
On November 21, 1997, the Board of Directors of Christiana met to consider
the Transaction. At this meeting, representatives of Foley & Lardner and
Christiana management provided presentations to the full Board of Directors
describing the Transaction and the financial, legal and other effects of the
Transaction on Christiana. The Board considered the advantages of (i) a
separation of Christiana's two principal assets, its 3,897,462 shares of EVI
Common Stock and Logistic, including permitting Christiana shareholders to make
more focused investment decisions based on the specific attributes of EVI and
Christiana, as discussed more fully under "Christiana's Reasons For the
Transaction", (ii) the fair value Christiana shareholders would receive in the
Merger in the form of the EVI Share Consideration, the Cash Consideration and
the Contingent Cash Consideration; (iii) the tax-free nature of the EVI Share
Consideration to Christiana shareholders; and (iv) the right of each Christiana
shareholder to purchase his or her pro rata interest in C2 and thereby maintain
an ownership interest in Logistic. The Board especially considered the fact that
Prudential Securities was prepared to deliver its fairness opinion if the
Transaction was to be effected on the terms described at the meeting. The
Christiana Board also considered the cost to the Christiana shareholders in
connection with the Merger, including, specifically, that the Merger would
preclude other alternatives in the future, that the Contingent Cash
Consideration would not bear interest, that Christiana (which following the
Merger will be a wholly-owned subsidiary of EVI) would retain a one-third
interest in Logistic and the cost associated with converting the Logistic
business to the business of C2. The Christiana Board also considered that the
Transaction will increase the exposure of Christiana shareholders to
fluctuations in the price of EVI Common Stock, as described more fully in
"Christiana Reasons For the Transaction". The Christiana Board, nevertheless,
considered that the advantages outweighed such disadvantages. In considering the
proposed transaction, the Christiana Board of Directors also noted that the
potential tax benefits that could be realized by Christiana (and therefore
accruing to the benefit of Christiana's shareholders through the elimination of
double taxation) through the Merger (versus other alternatives) ranged from
$57.8 million on August 14, 1997, the date of the Christiana Board's first
meeting to consider the potential for a merger with EVI to $72 million on
November 21, 1997, the date the Christiana Board approved the Merger, and, based
on its favorable outlook on EVI Common Stock, the Christiana Board expected
these tax benefits to increase. Except for the quantification of these tax
benefits and its analysis of the potential value of Logistic as described above,
the Christiana Board of Directors did not assign values or quantify further its
analysis of the transaction. Following these presentations and discussions at
the November 21, 1997 Board meeting, the Board of Directors of Christiana
unanimously approved the Merger (including, specifically, the sale of two-
thirds of Logistic to C2) and determined that the Merger was in the best
interest of Christiana and fair to the Christiana shareholders including the
unaffiliated shareholders. A special committee of the Board was not established
because the Board noted that the two outside directors, Messrs. Nicholas and
Brady, who were present and voting, approved the Merger and concluded that the
Merger was in the best interest of Christiana. The views of Messrs. Nicholas and
Brady were especially important for two reasons. First, unlike the other
directors, they were not employed by Christiana or Logistic. Second, each held
significant interest in Christiana (9.9% in the aggregate) and therefore their
interests would be aligned with other shareholders. The directors unanimously
voted in favor of the Merger. Because the two unaffiliated directors, Messrs.
Nicholas and Brady, voted in favor of the Merger, Messrs. Lubar and Donovan had
sufficient authority under applicable Wisconsin law to proceed even though the
"affiliated" directors voted. This approval was subject to the finalization of
the documentation relating to the Transaction, the receipt of the Prudential
Securities Opinion, satisfaction of other closing conditions and approval of the
final documentation for the Merger by the President of Christiana.
On December 1, 1997, the EVI Special Committee met to review the
Transaction. At this meeting, representatives of Fulbright & Jaworski and Morgan
Stanley provided to the EVI Special Committee an updated summary of the
financial, legal and other effects of the Transaction. The terms of the
documentation were also reviewed. Morgan Stanley further advised the EVI Special
Committee that it was prepared to deliver its fairness opinion if the
Transaction were to be effected on the terms described at the meeting. A draft
of the fairness opinion was provided and reviewed by the EVI Special Committee.
After discussion, the EVI Special Committee determined that the proposed
Transaction was desirable for EVI and that it would recommend to the full Board
of Directors of EVI that the Merger be approved.
34
42
Later on December 1, 1997, the Board of Directors of EVI met to consider
the Transaction. At this meeting, representatives of Fulbright & Jaworski and
Morgan Stanley provided presentations to the full Board of Directors describing
the Transaction and the financial, legal and other effects of the Transaction on
EVI. The EVI Special Committee also provided a report to the EVI Board of
Directors outlining its findings and recommendations. Morgan Stanley further
advised the EVI Board of Directors that it was prepared to deliver its fairness
opinion if the Transaction was to be effected on the terms described at the
meeting. A draft of that opinion was provided to the Board of Directors.
Following these presentations, the Board of Directors of EVI, with Mr. Lubar
abstaining from voting, unanimously approved the Merger and determined that the
Merger was in the interest of EVI. This approval was subject to the finalization
of the documentation relating to the Transaction, the receipt of the Morgan
Stanley opinion, satisfaction of certain other conditions and approval of the
final documentation for the Merger by the EVI Special Committee.
From December 1, 1997, through December 12, 1997, the final terms of the
Transaction were negotiated between EVI and Christiana.
On or about December 11, 1997, C2 was formed for the purpose of acquiring
the two-thirds interest in Logistic and it was determined that each Christiana
shareholder would have a pro rata allocation preference to purchase shares in
C2.
On December 12, 1997, the EVI Special Committee approved the final terms of
the Transaction and Morgan Stanley delivered its oral opinion to the EVI Special
Committee with respect to the Merger, which was subsequently confirmed in
writing.
On December 12, 1997, the President of Christiana approved the final terms
of the Transaction and Prudential Securities advised the President that it was
in a position to deliver its opinion to the effect that the Transaction (which
for the purposes of the Prudential Securities Opinion is defined as the Merger,
the Logistic Sale and the C2 Optional Purchase) was fair, from a financial point
of view, to the shareholders of Christiana.
On December 15, 1997, EVI and Christiana executed the Merger Agreement and
Logistic Purchase Agreement.
On April 9, 1998, Mr. Duroc-Danner advised Mr. Sheldon Lubar that EVI would
be unable to consummate the Merger until mid July 1998 because of an accounting
requirement that would not allow EVI to account for the Weatherford Merger as a
"pooling of interests" if the Merger were to close prior to EVI's publication of
30 days of combined results with Weatherford Enterra, Inc. This delay would have
allowed both Christiana and Weatherford to have terminated the Merger Agreement
after June 30, 1998. Messrs. Duroc-Danner and Lubar agreed that it would be
desirable to amend the Merger Agreement to extend the termination date. In
connection with such amendment, Christiana requested that other modifications be
made to the Merger Agreement and the Logistic Purchase Agreement to provide for
the payment of the Contingent Cash Consideration for four years, greater
operational flexibility and certain clarifying changes.
On April 29, 1998, the EVI Special Committee considered the requests by
Christiana and approved an amendment to the Merger Agreement and the Logistic
Purchase Agreement that (i) extended the termination date of the Merger
Agreement to October 31, 1998 and (ii) allowed for the payment of the Contingent
Cash Consideration on the earlier of (a) the fifth anniversary of the Effective
Date of the Merger and (b) the date that Christiana received consideration of a
fair market value of $20.0 million or more in connection with a sale of its
one-third interest in Logistic. The inclusion of the early Contingent Cash
Consideration payment provision was agreed to in order to allow the Christiana
shareholders to receive such funds if EVI has received sufficient funds in
respect of Christiana's interest in Logistic that is substantially in excess of
the $10.0 million cash required to be retained by Christiana after the Merger.
The amendment also clarified certain provisions of the Logistic Purchase
Agreement, in particular Christiana's "participation rights" in the event of a
"change of control" of C2. The principal change was that no "change in control"
would be deemed to occur if the "Lubar Family," as defined in Amendment No. 1,
retains at least a 25% voting and ownership interest in C2 or the resulting
entity.
On May 12, Mr. William Donovan telephoned the Christiana directors to
advise them of the proposed amendment. On May 13, Mr. Donovan substantively
described in writing the proposed amendment to the
35
43
Christiana Board of Directors. Directors approving the amendment were requested
to sign and return a consent action. The directors unanimously approved the
amendment, which approval was effective on May 15, 1998.
The amendment to the Merger Agreement and the Logistic Purchase Agreement
was approved by the EVI Board of Directors upon the recommendation of the EVI
Special Committee by written consent, with Mr. Lubar executing the consent only
to comply with the requirements of Delaware law, but effectively abstaining from
voting. On May 25, 1998, the amendment to the Merger Agreement and the Logistic
Sale Agreement was executed.
EVI'S REASONS FOR THE TRANSACTION
The Board of Directors of EVI, with Mr. Lubar abstaining, has approved the
Merger Proposal and recommends that the stockholders of EVI approve the Merger
Proposal. The EVI Board of Directors believes that the Merger is in the interest
of EVI and its stockholders for the following reasons. First, the Merger will
provide EVI a one-third interest in Logistic with a pro forma book value in
excess of $7.0 million, certain tax benefits having an estimated value to EVI in
excess of $1.0 million and the use of $10.0 million cash for a period of five
years without interest, all without any additional consideration other than the
exposure to certain contingent liabilities for which indemnity is being provided
by C2 and Logistic. Second, the Merger is expected to further improve the
liquidity of the EVI Common Stock by placing the equivalent number of shares of
EVI Common Stock currently held by Christiana directly in the hands of the
Christiana shareholders. The Board of Directors believes that such a transaction
is beneficial to EVI because of the favorable financial terms provided to EVI
for effecting the Transaction. Except for the exposure to certain contingent
liabilities for which indemnity is being provided by C2 and Logistic and for
which $10.0 million cash is being retained for five years by EVI to be used for
the payment of such liabilities in the event C2 or Logistic are unable to pay
such contingent liabilities, the Board of Directors of EVI does not believe that
there exists any material negative aspects of the Transaction to the
stockholders of EVI. Such a transaction would not be available to EVI other than
pursuant to the terms of the Merger.
In considering the approval of the Merger, the EVI Special Committee and
the Board of Directors of EVI noted that EVI, through its ownership in
Christiana, would be provided with an option to dispose of Christiana's
one-third interest in Logistic five years from the date of the Merger for a cash
consideration of $7.0 million. The EVI Special Committee and EVI Board of
Directors also noted that pursuant to the Transaction, EVI would be entitled to
various tax benefits and the financial benefit of the retention of $10.0 million
cash for five years without interest.
The EVI Special Committee and the EVI Board of Directors also considered a
number of other factors in approving the Merger. Principal among these
additional factors was the fact that under the terms of the Merger Agreement and
the Logistic Purchase Agreement, Logistic and C2 are required to indemnify EVI
and Christiana for all liabilities relating to Christiana's, Logistic's and
their respective subsidiaries', and predecessors', prior businesses and all
historical contingent liabilities relating to the businesses of Christiana,
Logistic and their respective current and historical subsidiaries and
predecessors. In addition, the Board of Directors of EVI considered the fact
that Christiana, C2 and EVI would receive an opinion from American Appraisal to
the effect that the Transaction would not render Christiana, Logistic or C2
insolvent and that the value of the assets of C2 and Logistic would be
sufficient to satisfy the liabilities of Christiana, C2 and Logistic after
giving effect to the Transaction. See "Opinions of Financial
Advisors -- American Appraisal Opinion". The Board of Directors of EVI further
considered the fact that an updated fairness opinion would not be provided in
the Transaction and that the other conditions to the closing of the Transaction
provided appropriate protection to EVI for changes in circumstances between the
date of the opinion and the consummation of Merger. The EVI Board of Directors
also placed considerable weight on the opinion of Arthur Andersen LLP to the
effect that the Merger would be tax-free to EVI and Christiana and on the fact
that even if the Merger were subsequently found not to be tax free, the Merger
would only be considered to be a taxable purchase of stock of Christiana from
the shareholders of Christiana and therefore not trigger any material tax
liabilities to EVI or Christiana. The Board of Directors of EVI also noted that,
under the terms of the Logistic Purchase Agreement, Logistic and C2 will be
fully responsible for, and indemnify Christiana and EVI against, any and all tax
liabilities that
36
44
may arise in connection with the Merger. In this regard, the Board of Directors
of EVI and the EVI Special Committee gave particular weight to the fact that EVI
would be entitled to reduce the $10.0 million contingent cash consideration
component in the Merger for any liabilities of Christiana and its subsidiaries,
including Logistic, to the extent EVI or Christiana is required to pay such
liabilities. Finally, the EVI Special Committee and the EVI Board of Directors
considered the opinion of Morgan Stanley that the consideration to be paid by
EVI in the Merger was fair to EVI from a financial point of view.
Although no specific weight was given to any one of the above described
reasons or factors by the EVI Board in approving the Merger, the ability of EVI
to realize the potential benefits of the Merger without any significant cost to
EVI other than transactional costs and with a complete indemnity from Logistic
and C2 for prior liabilities of Christiana and its current and historical
subsidiaries and predecessors was considered to be the most important factor by
both the EVI Special Committee and the EVI Board of Directors. The foregoing
factors were all the material factors considered by EVI's Board of Directors.
CHRISTIANA'S REASONS FOR THE TRANSACTION
The Board of Directors of Christiana has approved the Merger Proposal and
recommends that the shareholders of Christiana approve the Merger Proposal. The
Christiana Board of Directors believes that the Merger is in the interest of
Christiana and its shareholders. Christiana's Board of Directors has had for
some time a strategic interest to separate the company's large EVI shareholdings
from its operating business, Logistic, in order to achieve a more representative
company valuation today and into the future. The Board has not been interested
in liquidating the EVI shareholdings given Christiana's view as to the future
potential for increase in the value of this asset and the substantial corporate
level tax that would result from such a liquidation. Various alternative
transactions were considered in order to accomplish these objectives, as
described more fully under "Background of the Transaction". In addition, as
described under "Background of the Transaction", EVI had advised Christiana that
EVI was not interested in pursuing an acquisition of Christiana if the
Transaction would be dilutive to EVI's per share earnings or cash flow or would
involve EVI's full ownership and management of Christiana's warehouse and
logistics business. Accordingly, no alternative transaction was believed by the
Christiana Board of Directors to be feasible. The proposed structure allows
Christiana shareholders to exchange their shares of Christiana Common Stock for
newly issued EVI shares in a tax efficient manner. Specifically, the Christiana
Board noted that the proposed structure would avoid the substantial
corporate-level tax that would result if Christiana sold the EVI shareholdings.
This will give maximum flexibility to each shareholder to determine whether
retention of EVI shares is desirable.
The Christiana Board of Directors also considered the advantages of a
separation of Christiana's two principal assets, its 3,897,462 shares of EVI
Common Stock and Logistic. These advantages include permitting Christiana
shareholders to make more focused investment decisions based on the specific
attributes of EVI and Logistic. Specifically, a Christiana shareholder may,
after the Merger, elect to (i) retain the EVI Share Consideration and acquire
stock in C2 (thereby owning an interest in EVI and a warehousing and logistics
business), (ii) sell the EVI holdings and acquire an interest in C2, (iii)
retain the EVI Share Consideration and not acquire an interest in C2 or (iv)
sell the EVI Share Consideration and not acquire an interest in C2. Christiana's
Board believes that the Merger will also enable the financial markets to better
understand and recognize the merits of Logistic as a stand-alone entity. Prior
to the Merger, investors interested in Christiana's warehousing and logistics
business could only participate in such business by purchasing Christiana Common
Stock, but a significant value of the Christiana Common Stock was based upon its
EVI shareholdings. After the Merger, investors interested in the logistics and
warehousing business can acquire stock in C2, whose only principal asset
immediately after the Merger will be its interest in Logistic.
The Christiana Board concluded that the Transaction would permit Christiana
shareholders to receive fair value for Christiana's EVI shareholdings.
Specifically, each shareholder would receive a pro rata portion of the EVI
shareholdings represented by each share of Christiana Common Stock. The
Christiana Board also concluded that the Transaction would permit Christiana
shareholders to receive fair value for Christiana's ownership of Logistic. C2
will acquire a two-thirds interest in Logistic. Each Christiana shareholder will
have a right to acquire his or her pro rata interest in C2, so that a Christiana
shareholder, if deemed desirable, could continue to own an interest in Logistic
through C2.
37
45
The Christiana Board noted that EVI Common Stock closed at $49 per share on
August 13, 1997 (the EVI Common Stock closed at $51 per share on April 23, 1998)
and the Christiana Board expected such stock to increase in value. The
Christiana Board also considered the substantial corporate-level tax that would
result from a sale of its EVI holdings. On August 14, 1997, the date of the
Christiana Board approval, Christiana's gain on the EVI holdings if it had sold
such holdings would have been approximately $165.0 million. A sale of such stock
would have incurred a corporate-level general income tax of approximately $57.8
million. The Christiana Board also noted that the Cash Consideration and the
Contingent Cash Consideration would be determined based on the amount of cash of
Christiana as of the effective time of the Merger, less Christiana's accrued
taxes and other liabilities not otherwise assumed by C2. Effectively, this
represented a distribution of Christiana's net cash.
The Christiana Board considered the costs to the shareholders in connection
with the Merger, including, specifically, that the Merger would preclude other
alternatives in the future, that the Contingent Cash Consideration would not
bear interest and that Christiana (which following the Merger will be a
wholly-owned subsidiary of EVI) would retain one-third of an interest in
Logistic. The Christiana Board also considered potential disadvantages to the
Transaction. The Transaction will result in the increased exposure of Christiana
shareholders to fluctuations in the price of EVI Common Stock. While an
ownership of Christiana Common Stock provided balance between Christiana's
holdings in EVI and Logistic, the Merger will result in Christiana shareholders
owning EVI Common Stock directly, thereby increasing reliance on the performance
of EVI and on the oil and gas industry and the level of domestic and
international drilling activities generally. Additionally, as part of, and as an
inducement to EVI to enter into the Merger, EVI through Christiana will receive
a one-third ownership interest in Logistic for no cash consideration. Christiana
will have the ability to "put" this interest to Logistic for cash consideration
of $7.0 million after five years from the date of Merger. Christiana
shareholders will benefit from this part of the Transaction only indirectly
through their ownership of approximately 8% of outstanding EVI Common Stock
received in connection with the Merger. Otherwise, Christiana shareholders will
receive no direct benefit from this aspect of the Transaction. The Christiana
Board nevertheless considered that the advantages outweighed such disadvantages.
In considering the approval of the Merger, the Christiana Board of
Directors noted that Prudential Securities had advised the Christiana Board of
Directors that it was prepared to deliver its opinion that the Transaction
(which for the purposes of the Prudential Securities Opinion is defined as the
Merger, the Logistic Sale and the C2 Optional Purchase) is fair to Christiana
shareholders from a financial point of view. The Prudential Securities Opinion
as to the fairness of the Transaction to Christiana shareholders will not be
updated as of the closing of the Transaction. The Christiana Board believed that
receipt of the Prudential Securities Opinion prior to the execution of the
Merger Agreement was sufficient for its approval of the Transaction. The
Christiana Board understood that a change in circumstances between the date of
the Prudential Securities Opinion and the consummation of the Transaction could
impact the fairness of the Transaction, but the Christiana Board believed that
the protections afforded in the Merger Agreement and its familiarity with EVI
rendered an update of the Prudential Securities Opinion unnecessary. The
Christiana Board also considered that the only item of consideration to be
received in the Merger that would be subject to material change in value between
the date of the execution of the Merger Agreement and the Effective Time was the
EVI Share Consideration and that Christiana was already subject to this risk
because it already owned an equivalent number of shares of EVI Common Stock.
Prudential Securities was not requested to, nor did it deliver any written
materials to the Christiana Board; however, prior to the delivery of the
Prudential Securities Opinion on December 24, 1997, Mr. Donovan had numerous
telephone conferences with representatives of Prudential Securities regarding
the review and analysis performed by Prudential Securities. Such telephone
conferences occurred during the period of November 28-30, 1997, between Mr.
Donovan and representatives of Prudential Securities. As a result of such
telephone conferences, Mr. Donovan concluded that (a) if Christiana shareholders
were given the opportunity to acquire an interest in the entity acquiring
Logistic on the same basis as the Lubar Family, the price for Logistic would not
be a significant factor in determining the fairness of the Transaction and (b)
the Christiana shareholders would be assured of such an opportunity (which
commitment was eventually incorporated into the C2/Lubar Agreement). Prudential
Securities confirmed to Mr. Donovan that, in their
38
46
view these conclusions were reasonable. Mr. Donovan advised the Christiana Board
of those conferences. Having ascertained that Christiana Shareholders would be
able to maintain their interest in Logistic by being able to acquire shares in
C2, the Christiana Board considered the necessity of being presented with an
analysis by Prudential Securities to be less significant than might be the case
otherwise.
The Christiana Board of Directors also placed considerable weight on the
opinion of Arthur Andersen LLP to the effect that the Merger would be tax free
to EVI and Christiana.
The Christiana Board of Directors also considered the potential adverse
implications of continuing to be subject to the costly regulatory requirements
relating to Christiana's status as a public company. Total expenses associated
with Christiana being a public company in fiscal 1997 were approximately
$157,000. A Christiana shareholder interested in EVI could, after the Merger,
hold its interest in EVI directly without having to hold its interest in one
public entity, Christiana, which in turn held a significant interest in another
public entity, EVI.
Although the book value of Logistic was approximately $22.8 million at
December 31, 1997 and $24.2 million at March 31, 1998, the Christiana Board
believes that the sale of two-thirds of Logistic to C2 for approximately $10.67
million is fair to Christiana shareholders, based on Christiana's view as to the
value of such interest after giving effect to restrictions and obligations
applicable to Logistic and C2 after the sale and on the opinion of Prudential
Securities that the Transaction (which includes the Logistic Sale) was fair from
a financial point of view to Christiana shareholders, and the fact that any
Christiana shareholder who wishes to retain an interest in Logistic may do so by
electing to purchase his or her pro rata interest in C2 Common Stock at a price
of $4.00 per share, the same price offered to all Christiana shareholders
including the Lubar Family and all directors and officers of Christiana.
The Christiana Board acknowledged that the value of EVI shareholdings for
Christiana was the major determinant in Christiana's share price in the market.
Hence, if EVI's share price increased, Christiana's share price increased too.
Accordingly, if EVI's share price declined, Christiana's share price declined as
well. Christiana's Board, however, did not and does not control EVI and for this
reason decided that it was better to manage operations that it could control,
rather than have the Christiana stock price dependent upon an entity (EVI) that
it did not control. The Christiana Board did not favor selling the EVI shares,
but rather wanted to provide the investment decision directly to the Christiana
shareholders through the Merger.
As previously stated, the price to be paid by the purchasing entity,
ultimately determined to be C2, was determined unilaterally by Mr. Lubar in
connection with his negotiations with EVI. The Board believes this to be
procedurally fair for the following reasons. First, Mr. Lubar did not think it
appropriate to pay more than $10.67 million for the two-thirds interest in
Logistic, because Logistic, at the insistence of EVI, would be assuming
significant liabilities. Logistic, at EVI's insistence, would also be required
to restrict its operational activities, in order to assure, to EVI's
satisfaction, that Logistic would be able to satisfy its obligations. Finally,
the Christiana Board concluded that if a Christiana shareholder concurred that
the price was appropriate, the Christiana shareholder could continue his
indirect ownership in Logistic by acquiring stock in C2, along with the Lubar
family. If the Christiana shareholder concluded that the price was too low, the
Christiana shareholder could vote against the merger and elect dissenters
rights. If the Christiana shareholder concluded that the price for Logistic was
too high, the Christiana shareholder could vote in favor of the merger and not
elect to purchase stock in C2.
The Christiana Board believes it to be fair to pay $10.67 million for a
two-thirds interests in Logistic and pay EVI $7.0 million for its one-third
interest (if EVI elects to put its interest in Logistic at such price), because
of the difference in the time value of money. The $10.67 million for the
two-thirds interest in Logistic will be paid to the Christiana shareholders at
the Effective Time of the Merger, whereas EVI will not receive its $7.0 million
until it exercises its put, which may not be for at least five years. The
Christiana Board determined the $7.0 million put value by allocating $5.34
million to a one-third interest in Logistic (equivalent to a two-thirds interest
for $10.67 million), then increasing such amount by a modest compound rate of
return on such amount at approximately 5 1/2% for five years, resulting in a put
price of $7.0 million.
39
47
The Christiana Board noted that the price of the Christiana Common Stock
immediately prior to the amendment of the Merger was $40 3/4 and recognized
that, depending upon the price of EVI stock at the Effective Date relative to
the price of the Christiana stock at such time, the consideration to be received
could be less than the then current market price of the Christiana Common Stock.
The Board considered whether to recommend the Merger, even though the total
consideration could be less than the current market price of Christiana stock.
(As set forth under "Summary", the consideration to be received by Christiana
shareholders as of the date hereof is $40.86.) The Board noted the significant
appreciation in the EVI Common Stock and, based upon its assessment of favorable
long-term appreciation of the EVI Common Stock, felt it advisable that each
Christiana shareholder have the opportunity to decide whether such stock should
be held or sold. As long as Christiana held the EVI Common Stock, the Christiana
shareholders could not individually make such a decision. Consequently, even
though it was possible that the total consideration to be received by the
Christiana shareholders was less than the current price of the Christiana Common
Stock, the Christiana Board determined that the Merger was in the best interest
of all of its shareholders.
Christiana recognized that costs would be incurred to establish C2. While
such costs will not be paid by Christiana, they will be paid by C2 from funds
raised in connection with C2's public offering. The costs incurred in connection
with establishing C2 are expected to be as follows: legal fees and expenses
($70,000), accounting and tax services ($45,000), filing fees with the
Commission ($6,140), printing costs, expenses for state securities laws filings
and transfer agent fees and expenses ($36,000), Nasdaq listing fee ($10,000) and
miscellaneous ($4,000).
Christiana Common Stock traded at $40.75 immediately prior to the
announcement of the Merger. On the day after announcement of the Merger, the
price closed at $37.375, but as of May 26, 1998, it closed at 39 3/8. The
Christiana Board does not consider the decline in its stock price to be relevant
for two reasons. First, the EVI stock held by Christiana is a significant
Christiana asset, so Christiana's stock price is substantially dependent on
EVI's Common Stock price. Second, the Christiana Board believes it important
that each Christiana shareholder make an independent decision to retain or sell
the EVI stock. Such independent decision can only be made if the EVI Common
Stock is distributed to Christiana shareholders. Consequently, even if the total
consideration to be received by Christiana shareholders is less than its price
prior to the Merger, the Christiana Board considers the transaction still to be
in the best interest of all Christiana shareholders.
The Christiana Board (including Mr. Lubar) and the board of directors and
management of C2 believe the Transaction is fair to the unaffiliated
shareholders of Christiana. In arriving at this conclusion, these entities
considered the structure of the Transaction and how such structure rendered
immaterial traditional valuation analysis such as current and historical market
prices, net book value, going concern value, liquidation value and discounted
cash flow value. While the Christiana Board took into account its view of the
value of Logistic and Christiana in approving the Transaction, the Christiana
Board believed that the combination of the benefits to be derived from the
Transaction combined with the right of the Christiana shareholders to
participate in Logistic through EVI and C2 rendered in their view the need to
perform traditional valuation analyses immaterial. In this regard, the
Christiana Board noted that Christiana had two principal assets, its holdings in
EVI Common Stock and its ownership of Logistic. The Transaction essentially
results in each Christiana shareholder receiving his or her pro rata share of
EVI Common Stock held by Christiana on a tax-free basis and a right to purchase
such Christiana shareholder's pro rata interest in C2, the entity which will
acquire Logistic as part of the Transaction. Finally, the cost to Christiana in
allowing EVI to receive a one-third interest in Logistic in the Transaction was
more than offset by the expected economic benefits to be realized by Christiana
in the Transaction.
The Christiana Board also considered the fact that each unaffiliated
shareholder of Christiana will be able to participate in the purchase of
Logistic through C2 on the same basis as Mr. Lubar and all other affiliates of
Christiana. The Christiana Board of Directors believes that treating
unaffiliated shareholders of Christiana in a similar way to Mr. Lubar supports
the fairness of the consideration to the unaffiliated shareholders in that it
provides the unaffiliated shareholders with the same rights as any affiliated
shareholder, including family members of Mr. Lubar.
40
48
The Merger has been structured to require approval of at least 80% of the
votes entitled to be cast at the Special Meeting of Christiana shareholders and
two-thirds of the votes entitled to be cast at the Special Meeting other than
the Lubar Shares (shares beneficially owned by the Lubar Family) both as a
result of a desire by the Christiana Board to assure fairness and as required by
Wisconsin law. Because of this supermajority vote requirement, the Christiana
Board did not believe that a separate vote of a majority of the unaffiliated
shareholders of Christiana would be necessary to insure fairness.
Although no specific weight was given to any one of the above-described
reasons or factors by the Christiana Board in approving the Merger, the
placement of the EVI Common Stock currently held by Christiana directly in the
hands of the Christiana shareholders, thereby giving each shareholder maximum
flexibility with regard to such shares without any significant cost, was
considered to be the most important factor by the Christiana Board of Directors.
The foregoing factors were all the material factors considered by Christiana's
Board of Directors.
41
49
OPINIONS OF FINANCIAL ADVISORS
MORGAN STANLEY OPINION
In a letter agreement effective November 7, 1997 (the "Engagement Letter"),
EVI engaged Morgan Stanley to provide a financial fairness opinion (the "Morgan
Stanley Opinion") in connection with the Merger. Morgan Stanley was selected by
the EVI Board of Directors to provide the Morgan Stanley Opinion based on Morgan
Stanley's qualifications, expertise and reputation, as well as Morgan Stanley's
investment banking relationship and familiarity with EVI. Morgan Stanley has
delivered the written Morgan Stanley Opinion dated December 15, 1997, to the EVI
Board of Directors, to the effect that, on and as of the date of such Morgan
Stanley Opinion, and based on assumptions made, matters considered, and limits
of review, as set forth in the Morgan Stanley Opinion, the consideration paid by
EVI pursuant to the Merger Agreement is fair from a financial point of view to
EVI.
The full text of the Morgan Stanley Opinion, dated December 15, 1997, which
sets forth, among other things, the assumptions made, procedures followed,
matters considered and limitations on the scope of the review undertaken by
Morgan Stanley in rendering its opinion, is attached as Appendix D to this Joint
Proxy Statement/Prospectus and incorporated herein by reference. EVI
stockholders are urged to, and should, read the Morgan Stanley Opinion carefully
and in its entirety. The Morgan Stanley Opinion is directed to the EVI Board of
Directors, addresses only the fairness of the consideration paid by EVI pursuant
to the Merger Agreement from a financial point of view to EVI and does not
address any other aspect of the Merger or constitute a recommendation to any
holder of EVI common stock as to how to vote at the EVI Special Meeting. The
following summary of the Morgan Stanley Opinion, dated December 15, 1997, is
qualified in its entirety by reference to the full text of the Morgan Stanley
Opinion attached as Appendix D to this Joint Proxy Statement/Prospectus. Morgan
Stanley has consented to the use of the Morgan Stanley Opinion as an appendix to
this Joint Proxy Statement/Prospectus.
In rendering the Morgan Stanley Opinion, Morgan Stanley, among other
things: (i) reviewed certain publicly available financial statements and other
information of EVI and Christiana; (ii) reviewed certain internal financial
statements and other financial and operating data concerning EVI, Christiana and
Logistic prepared by the managements of EVI, Christiana and Logistic,
respectively; (iii) analyzed certain financial projections concerning EVI,
Christiana and Logistic prepared by the management of EVI, Christiana and
Logistic, respectively; (iv) discussed the past and current operations and
financial condition and the prospects of EVI, Christiana and Logistic with
senior executives of EVI, Christiana and Logistic, respectively; (v) analyzed
the pro forma impact of the Merger on EVI's earnings per share; (vi) reviewed
the reported prices and trading activity for the EVI Common Stock and Christiana
Common Stock; (vii) reviewed the Merger Agreement, the Logistic Purchase
Agreement and certain related documents; (viii) reviewed a certain draft letter
provided to Logistic by Arthur Andersen LLP, regarding the tax treatment of the
Merger; (ix) discussed and reviewed with Fulbright & Jaworski the results of
their legal and environmental due diligence; and (x) performed such other
analyses and considered such other factors as Morgan Stanley has deemed
appropriate.
In rendering the Morgan Stanley Opinion, Morgan Stanley assumed and relied
upon, without independent verification, the accuracy and completeness of the
information reviewed by it for the purposes of the Morgan Stanley Opinion. In
addition, Morgan Stanley assumed that the financial projections were reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the future financial performances of EVI, Christiana and Logistic.
Morgan Stanley did not make any independent valuation or appraisal of the assets
or liabilities of EVI, Christiana and Logistic, except, that Morgan Stanley
received the draft letter of Arthur Andersen LLP referred to as item (viii)
above and the verbal report concerning legal and environmental due diligence
analyses performed by Fulbright & Jaworski referred to as item (ix) above and
Morgan Stanley relied, without independent verification, upon such items for
purposes of the Morgan Stanley Opinion. In addition, Morgan Stanley has assumed
the Logistic Sale will be consummated prior to or simultaneously with the Merger
and that the Merger will be consummated in accordance with the terms set forth
in the Merger Agreement including that all material conditions to closing have
been satisfied and not waived. Morgan Stanley has also assumed that the Merger
shall qualify as a reorganization within the meaning
42
50
of Section 368(a) of the Code. In arriving at the Morgan Stanley Opinion, Morgan
Stanley was not authorized to consider, and did not consider, any alternative
transaction or transaction structure. Morgan Stanley's opinion was necessarily
based on economic, market and other conditions as in effect on, and the
information made available to Morgan Stanley as of, the date thereof.
The following is a brief summary of certain analyses performed by Morgan
Stanley in connection with the Morgan Stanley Opinion dated December 15, 1997:
Discounted Cash Flow Analysis. Morgan Stanley analyzed certain financial
projections prepared by the management of Logistic for the fiscal years 1998
through 2002 (the "Projections") and performed a discounted cash flow analysis
of Logistic based on the Projections. Morgan Stanley discounted the unlevered
free cash flows of Logistic at a range of discount rates from 10.0% to 12.0%,
representing an estimated weighted average cost of capital range for Logistic,
and terminal values based on a range of multiples of 5 to 7 times estimated 2002
earnings before interest, taxes, depreciation and amortization ("EBITDA") to
arrive at a range of present values for Logistic. Such present values were then
adjusted for Logistic's debt, net of cash and mortgage note receivable, all pro
forma for the Logistic Sale as of September 30, 1997, to arrive at a net asset
value. Based on this analysis, Morgan Stanley calculated values representing
one-third of Logistic's equity value ranging from approximately $10.9 million to
$21.4 million.
Morgan Stanley also performed certain sensitivity analyses on the
Projections (the "Adjusted Projections"). Specifically, Morgan Stanley assumed
that Logistic projected sales revenue from 1999 through 2002, with the exception
of sales revenue related to government contracts, remained the same as 1998
sales revenue forecasted in the Projections. Morgan Stanley also assumed that
Logistic's gross margin from 1999 through 2002 remained the same as 1998 gross
margin forecasted in the Projections. The Adjusted Projections assume that
Logistic would have more long-term debt in 2002 than the Projections show.
Morgan Stanley performed a discounted cash flow analysis of Logistic based on
the Adjusted Projections. Morgan Stanley discounted the unlevered free cash
flows of Logistic at a range of discount rates from 10.0% to 12.0%, representing
an estimated weighted average cost of capital range for Logistic, and terminal
values based on a range of multiples of 5 to 7 times estimated 2002 EBITDA to
arrive at a range of present values for Logistic. Such present values were then
adjusted for Logistic's debt, net of cash and mortgage note receivable, all pro
forma for the Logistic Sale as of September 30, 1997, to arrive at a net asset
value. Based on this analysis, Morgan Stanley calculated values representing
one-third of Logistic's equity value arranging from approximately $3.4 million
to $10.6 million.
Projected Credit Statistics Analysis. Based on the Projections, Morgan
Stanley calculated financial ratios including EBITDA/Interest, (EBITDA-Capital
Expenditures)/Interest and Total Debt/EBITDA (collectively, the "Ratios") for
every year from 1998 through 2002. Morgan Stanley calculated a range for
EBITDA/Interest of 2.6 times in fiscal 1998 to 7.0 times in fiscal 2002, a range
for (EBITDA-Capital Expenditures)/Interest of 2.1 times in fiscal 1998 to 5.3
times in fiscal 2002 and, a range for Total Debt/EBITDA of 4.6 times in fiscal
1998 to 1.5 times in fiscal 2002. Morgan Stanley also calculated the Ratios
assuming that Logistic borrows an additional $7.0 million in 2002 in order to
meet its obligation pursuant to the purchase obligation of Logistic of
Christiana's one-third interest in Logistic under the Logistic Purchase
Agreement. Based on this assumption, Morgan Stanley calculated values for
EBITDA/Interest of 6.3 times, (EBITDA-Capital Expenditures)/Interest of 4.8
times and Total Debt/EBITDA of 1.9 times, all in fiscal 2002.
Based on the Adjusted Projections, Morgan Stanley calculated a range for
EBITDA/Interest of 2.6 times in fiscal 1998 to 4.1 times in fiscal 2002, a range
for (EBITDA-Capital Expenditures)/Interest of 2.1 times in fiscal 1998 to 3.0
times in fiscal 2002 and, a range for Total Debt/EBITDA of 4.6 times in fiscal
1998 to 2.7 times in fiscal 2002. Morgan Stanley also calculated the Ratios
assuming that Logistic borrows an additional $7.0 million in 2002 in order to
meet its obligation pursuant to the purchase obligation of Logistic of
Christiana's one-third interest in Logistic under the Logistic Purchase
Agreement. Based on this assumption, Morgan Stanley calculated values for
EBITDA/Interest of 3.8 times, (EBITDA-Capital Expenditures)/Interest of 2.8
times and Total Debt/EBITDA of 3.2 times, all in fiscal 2002.
43
51
Selected Precedent Logistic/Warehousing Acquisitions Analysis. Using
publicly available information, Morgan Stanley reviewed recent precedent
transactions involving companies which provide services comparable to those of
Logistic such as refrigerated warehousing, logistic services and transportation.
The companies which were selected for inclusion in Morgan Stanley's analysis
provide services which Morgan Stanley believes are comparable to those provided
by Logistic.
Morgan Stanley analyzed the purchase prices and implied transaction
multiples paid in the following publicly announced logistic/warehousing
transactions: the acquisition of Heijden Logistics and France Distribution
System from Mayne Nickless Limited by Hayes plc, the acquisition of Caliber
System, Inc. by Federal Express Corporation, the acquisition of Americold
Corporation and URS Logistics, Inc. by Vornado Realty Trust and Crescent Real
Estate Equities Company, and the acquisition of Intertrans Corporation by Fritz
Companies, Inc. (collectively, the "Precedent Transactions"). Morgan Stanley
reviewed publicly available financial information including the aggregate value
to latest twelve month ("LTM") EBITDA. Morgan Stanley observed an aggregate
value to LTM EBITDA range of 6.4 to 14.0 times for the Precedent Transactions.
Pro Forma Analysis of the Merger. Morgan Stanley analyzed the pro forma
impact of the Merger on EVI's earnings per share for the fiscal years 1998 and
1999. Such analysis was based on earnings projections for EVI prepared by the
management of EVI and on the Projections. Morgan Stanley noted that the Merger
would be slightly accretive to EVI stockholders in 1998 and in 1999.
In connection with the review of the Merger by the EVI Board, Morgan
Stanley performed a variety of financial and comparative analyses for purposes
of the Morgan Stanley Opinion given in connection herewith. While the foregoing
summary describes the analyses and factors reviewed by Morgan Stanley in
connection with the Morgan Stanley Opinion, it does not purport to be a complete
description of all the analyses performed by Morgan Stanley in arriving at its
opinion. The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. In arriving
at the Morgan Stanley Opinion, Morgan Stanley considered the results of all of
its analyses as a whole and did not attribute any particular weight to any
analysis or factor considered by it. Furthermore, selecting any portion of its
analyses, without considering all analyses, would create an incomplete view of
the process underlying the Morgan Stanley Opinion. In addition, Morgan Stanley
may have given various analyses and factors more or less weight than other
analyses and factors, and may have deemed various assumptions more or less
probable than other assumptions, so that the ranges of valuations resulting from
any particular analysis described above should not be taken to be Morgan
Stanley's view of the actual value of Christiana or Logistic. In performing its
analyses, Morgan Stanley made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond the control of EVI, Christiana or Logistic. Any estimates,
contained herein are not necessarily indicative of future results or actual
values, which may be significantly more or less favorable than those suggested
by such estimates. The analyses performed were prepared solely as part of Morgan
Stanley's analysis of the fairness of the consideration to be paid by EVI
pursuant to the Merger Agreement from a financial point of view to EVI and were
conducted in connection with the delivery of the Morgan Stanley Opinion. The
analyses do not purport to be appraisals or to reflect the prices at which
Christiana or Logistic might actually be sold. Morgan Stanley did not recommend
the consideration to be paid by EVI or that any consideration to be paid by EVI
constituted the only appropriate consideration for the Merger.
In addition, Morgan Stanley's opinion and presentation to the EVI Board of
Directors and the EVI Special Committee was one of the many factors taken into
consideration by the EVI Board of Directors and EVI Special Committee in making
their determination to recommend approval of the Merger. Consequently, the
Morgan Stanley analyses described above should not be viewed as determinative of
the opinion of the EVI Board of Directors and the EVI Special Committee with
respect to the consideration paid in connection with the Merger. The
consideration to be paid by EVI pursuant to the Merger Agreement was determined
through arm's-length negotiations between EVI and Christiana and was approved by
the EVI Board of Directors.
EVI engaged Morgan Stanley to provide the Morgan Stanley Opinion because of
its experience and expertise. Morgan Stanley is an internationally recognized
investment banking and advisory firm. Morgan
44
52
Stanley, as part of its investment banking business, is regularly engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. In the course of its market-making
and other trading activities, Morgan Stanley may, from time to time, have a long
or short position in, and buy and sell, securities of EVI or Christiana. In the
past, Morgan Stanley and its affiliates have provided financial advisory
services to EVI and have received customary fees in connection with these
services.
EVI has agreed to pay Morgan Stanley a fee of $250,000 in connection with
the delivery of the Morgan Stanley Opinion. In addition, EVI has agreed to
indemnify Morgan Stanley and its affiliates, their respective directors,
officers, agents and employees and each person, if any, controlling Morgan
Stanley, or any of its affiliates against certain liabilities and expenses,
including liabilities under federal securities laws, in connection with Morgan
Stanley's engagement.
Morgan Stanley has provided investment banking services for EVI in the
past, including serving as joint lead manager in EVI's private placement of its
5% Convertible Subordinated Preferred Equivalent Debentures due 2027 (the
"Debentures"), and may provide such services in the future. In addition,
Prudential Securities has provided investment banking services to EVI in the
past, including serving as a co-manager of EVI's private placement of the
Debentures, and may provide such services in the future.
PRUDENTIAL SECURITIES OPINION
On December 24, 1997, Prudential Securities delivered the Prudential
Securities Opinion to the Christiana Board that, as of such date, the
Transaction (which for purposes of the Prudential Securities Opinion is defined
as the Merger, the Logistic Sale and the C2 Optional Purchase) was fair, from a
financial point of view, to the shareholders of Christiana. In requesting the
Prudential Securities Opinion, the Christiana Board did not give any special
instructions to Prudential Securities or impose any limitation upon the scope of
the investigation that Prudential Securities deemed necessary to enable it to
deliver its opinion. Prudential Securities was not requested by Christiana to,
and did not, restate the Prudential Securities Opinion for any date subsequent
to December 24, 1997.
The full text of the Prudential Securities Opinion, which sets forth the
assumptions made, the matters considered and the limitations on the review
undertaken, is set forth as Appendix E to this Joint Proxy Statement/Prospectus
and is incorporated herein by reference and should be read in its entirety in
connection with this Joint Proxy Statement/Prospectus. The Prudential Securities
Opinion is directed only to the fairness of the Transaction to the shareholders
of Christiana from a financial point of view and does not address any other
terms of the Transaction or the Christiana Board of Directors' underlying
business decision to effect the Transaction. The Prudential Securities Opinion
was delivered for the information of Christiana's Board of Directors and does
not constitute a recommendation to any shareholder of Christiana as to how such
shareholder should vote such shareholder's shares at the Christiana Special
Meeting. The summary of the Prudential Securities Opinion set forth in this
Joint Proxy Statement/Prospectus is qualified in its entirety by reference to
the full text of the Prudential Securities Opinion attached as Appendix E.
Prudential Securities has consented to the use of the Prudential Securities
Opinion as an appendix to this Joint Proxy Statement/ Prospectus.
In conducting its analysis and arriving at its opinion dated December 24,
1997, Prudential Securities reviewed such information and considered such
financial data and other factors as Prudential Securities deemed relevant under
the circumstances, including, among others, the following: (i) The Merger
Agreement, the C2/Lubar Agreement and a draft of the Logistic Purchase Agreement
dated December 12, 1997; (ii) certain publicly available historical financial
and operating data concerning Christiana, including, but not limited to, (a) the
Annual Report to Shareholders and Annual Report on Form 10-K for the fiscal year
ended June 30, 1997, (b) the Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997, and (c) the Proxy Statement for the Annual Meeting of
Shareholders held on October 29, 1996; and certain pro-forma financial data
prepared by Christiana management; (iii) certain publicly-available historical
financial and operating data for EVI including, but not limited to, (a) the
Annual Report on Form 10-K for the fiscal year ended December 31, 1996, (b) the
Quarterly Report on Form 10-Q for the quarter ended September 30,
45
53
1997, and (c) the Proxy Statement for the Meeting of Stockholders held on May 6,
1997; (iv) certain information relating to Logistic, including historical
financial data for the fiscal years ended June 30, 1993 through June 30, 1997,
and the quarters ended September 30, 1997 and September 30, 1996, provided by
the management of Logistic; (v) certain information relating to Logistic,
including financial forecasts for the fiscal years ending June 30, 1998 through
June 30, 2002, prepared by the management of Logistic; (vi) publicly available
financial, operating and stock market data concerning certain companies engaged
in businesses Prudential Securities deemed comparable to Logistic or otherwise
relevant to Prudential Securities' inquiry; (vii) the financial terms of certain
recent transactions Prudential Securities deemed relevant to Prudential
Securities' inquiry; (viii) the historical stock prices and trading volumes of
Christiana Common Stock and EVI Common Stock; and (ix) an analysis of the
present value of the Contingent Cash Consideration. Prudential Securities
assumed, with Christiana's consent, that the draft of the Logistic Purchase
Agreement which Prudential Securities reviewed (as referred to above) will be
conformed in all material respects to such document in final form.
While Prudential Securities reviewed certain publicly available historical
and projected financial results for a company (Versacold Corporation) involved
in a business comparable to that engaged in by Christiana, Prudential Securities
did not identify any companies that it deemed to be relevant for purposes of its
analysis, and, accordingly, did not undertake any analysis comparing the
financial results of any such companies with Christiana. Versacold Corporation
was not considered by Prudential Securities to be comparable to Logistic because
of Logistic's lower margin transportation and dry warehousing revenues when
compared to Versacold Corporation's higher margin refrigerated warehousing
revenues.
Prudential Securities met with the senior management of Christiana and
Logistic to discuss (i) the prospects for Christiana's business, (ii) their
estimates of the future financial performance of Christiana, (iii) the financial
impact of the Merger on Christiana and (iv) such other matters that Prudential
Securities deemed relevant. Prudential Securities also visited selected
Christiana and Logistic facilities.
In connection with its review and analysis and in arriving at its opinion,
Prudential Securities assumed and relied upon the accuracy and completeness of
the financial and other information provided to it by Christiana and Logistic
and did not undertake any independent verification of such information or any
independent valuation or appraisal of any of the assets or liabilities of
Christiana or Logistic. With respect to the financial forecasts provided to
Prudential Securities by Christiana for Christiana and by Logistic for Logistic,
Prudential Securities assumed that such forecasts (and the assumptions and bases
therefor) were reasonably prepared and represent the respective management's
best currently available estimate as to the future financial performance of
Christiana and Logistic. In addition, the Prudential Securities Opinion assumes
that: (i) the Merger will qualify as a reorganization within the meaning of
Section 368(a) of the Code; (ii) neither Christiana nor Sub will recognize any
gain or loss for federal income tax purposes as a result of the receipt by EVI
of Christiana Common Stock in exchange for EVI Common Stock in the Merger; (iii)
the holders of Christiana Common Stock will not recognize any gain or loss for
federal income tax purposes as a result of the receipt of EVI Common Stock as
partial consideration for their Christiana Common Stock in the Merger and
Prudential Securities has assumed that such taxes are the only relevant taxes
for purposes of the Prudential Securities Opinion other than taxes that may be
applicable to the Cash Consideration and the Contingent Cash Consideration as
set forth in such opinion. Furthermore, for purposes of the Prudential
Securities Opinion, Prudential Securities has assumed that C2 will perform its
obligations under the Lubar/C2 Agreement in accordance with its terms.
Prudential Securities further assumed that at the time the Prudential Securities
Opinion was issued, the Lubar/C2 Agreement would not be amended or modified.
On January 30, 1998, the Lubar/C2 Agreement was modified to permit C2 to
raise $20.8 million in its offering of common stock, rather than $18.0 million
(the "C2 Amendment"). On March 31, 1998, Prudential Securities delivered a
letter to the Christiana Board of Directors advising the Christiana Board of
Directors that Prudential Securities was of the view that the C2 Amendment, had
it been adopted prior to December 24, 1997, would not have caused Prudential
Securities to change its view expressed in the Prudential Securities Opinion
that the Transaction was fair, as of December 24, 1997, from a financial point
of view to the shareholders of Christiana.
46
54
In reaching that conclusion, Prudential Securities reviewed the C2
Amendment and conducted such other review and analysis as it deemed necessary
for the purposes of its March 31, 1998 letter. At the direction of Christiana,
Prudential Securities has not performed the review and analysis that it would
consider necessary to pass on the fairness, from a financial point of view, to
the shareholders of Christiana of the Transaction as of any date subsequent to
December 24, 1997. Accordingly, Prudential Securities has not addressed in any
manner any developments since December 24, 1997 relating to either Christiana,
EVI or Logistic specifically or market and economic conditions generally.
Prudential Securities' engagement by Christiana was limited to reviewing
the financial terms of the Transaction, and accordingly, the Prudential
Securities Opinion does not address nor should it be construed to address the
relative merits of the Transaction or alternative business strategies that may
be available to Christiana. In addition, the Prudential Securities Opinion does
not in any manner address the prices at which EVI Common Stock or C2 Common
Stock will trade following consummation of the Merger.
In addition, Prudential Securities' Opinion was one of the many factors
taken into consideration by the Christiana Board in making their determination
to recommend approval of the Transaction. Consequently, the Prudential
Securities Opinion should not be viewed as determinative of the opinion of the
Christiana Board with respect to the fairness, from a financial point of view,
of the Transaction to the shareholders of Christiana. The consideration to be
received by the shareholders of Christiana was determined through negotiations
between Christiana and EVI and was approved by the Christiana Board.
In arriving at the Prudential Securities Opinion, Prudential Securities
performed a variety of financial analyses, including those summarized herein.
These analyses were prepared solely for internal use by Prudential Securities
and were not prepared with a view toward dissemination to the Christiana Board
or any other party. Prudential Securities was not requested to and did not
present these analyses to the Christiana Board. The summary set forth below does
not purport to be a complete description of the analyses performed. The
preparation of a fairness opinion is a complex process that involves various
determinations as to the most appropriate and relevant methods of financial
analyses and the application of these methods to the particular circumstance
and, therefore, such an opinion is not necessarily susceptible to partial
analysis or summary description. Prudential Securities believes that its
analyses must be considered as a whole and that selecting portions thereof or
portions of the factors considered by it, without considering all analyses and
factors, could create an incomplete view of the evaluation process underlying
the Prudential Securities Opinion. Prudential Securities made numerous
assumptions with respect to industry performance, general business, economic,
market and financial conditions and other matters, many of which are beyond the
control of Christiana and EVI. Estimates of the values of businesses and
securities do not purport to be appraisals or necessarily reflect the prices at
which businesses or securities may be sold. In addition, Prudential Securities
reviewed the following operating projections for Logistic in connection with its
overall analysis of the Transaction: for the years ended 1998, 1999, 2000, 2001
and 2002, Logistic stand-alone revenues of $97.4 million, $106.7 million, $112.6
million, $118.2 million and $124.3 million, respectively, Logistic stand-alone
EBITDA (as defined below) of $14.5 million, $15.5 million, $17.3 million, $18.0
million and $18.8 million, respectively, and Logistic stand-alone net income of
$1.4 million, $2.2 million, $3.8 million, $4.8 million and $5.8 million,
respectively.
As a matter of policy, Christiana does not publicly disclose internal
management forecasts, projections or estimates of the type furnished to
Prudential Securities in connection with its analysis of the Transaction. Such
forecasts, projections and estimates were not prepared with a view towards
public disclosure. These forecasts, projections and estimates were based on
numerous variables and assumptions which are inherently uncertain and which may
not be within the control of management of Christiana, including without
limitation, general economic, regulatory and competitive conditions.
Accordingly, actual results could vary materially from those set forth in such
forecasts, projections and estimates.
Any estimates contained in Prudential Securities' analyses are not
necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by such analyses.
Additionally, estimates of the values of businesses and securities do not
purport to be appraisals or necessarily reflect the prices at which businesses
or securities may be sold. Accordingly, such analyses and estimates are
47
55
inherently subject to substantial uncertainty. Subject to the foregoing, the
following is a summary of the material financial analyses conducted by
Prudential Securities in arriving at the Prudential Securities Opinion.
Comparable Transactions Analysis. Prudential Securities analyzed the
consideration paid in several recent merger and acquisition transactions deemed
by Prudential Securities to be reasonably similar to the Merger and considered
the ratios of the unlevered purchase price ("UPP") to the acquired entities'
latest twelve months ("LTM") revenues, LTM earnings before interest and taxes
("EBIT") and LTM earnings before interest, taxes, depreciation and amortization
("EBITDA"), based upon publicly-available information and information supplied
by Christiana management for such transactions. The transactions considered were
the combinations of: (i) Americold Corp. and JV-Vornado Realty Trust, Crescent
Real Estate Equities Co. ("JV-Vornado"), (ii) URS Logistics Inc. and JV-Vornado
and (iii) Christian Salvensen Inc. and CS Integrated LLC (the "Comparable
Transactions"). The Comparable Transactions analysis resulted in a range of
ratios of UPP to LTM revenues of 2.4 to 1.7, a range of ratios of UPP to LTM
EBIT of 17.1 to 11.0 and a range of ratios of UPP to LTM EBITDA of 9.9 to 6.8.
Applying such ratios to Logistic's LTM revenues ($86.8 million), LTM EBIT ($5.7
million) and LTM EBITDA ($13.1 million) resulted in a mean range of implied
unlevered market values of $144.9 million to $98.8 million. Prudential
Securities noted that Logistic's revenues include a large component of lower
margin transportation and dry-warehousing revenues and that the revenues of the
entities in the Comparable Transactions consist of higher margin refrigerated
warehousing revenues. Prudential Securities believes that implied unlevered
market values derived from multiples of LTM revenues (which resulted in a range
of $208.3 million to $147.6 million for the Comparable Transactions) do not
constitute meaningful criteria for performing valuation analyses because of
Logistic's lower margin revenues. Prudential Securities analyzed implied
unlevered market values derived from multiples of EBIT and EBITDA for purposes
of valuation. Applying the ratios of LTM EBIT and LTM EBITDA for the Comparable
Transactions to Logistic's LTM EBIT and LTM EBITDA resulted in a range of
implied unlevered market values of $97.5 million to $62.7 million and $129.7
million to $89.1 million, respectively, or a combined range of implied unlevered
market value based on the Comparable Transactions of $62.7 to $129.7 million.
The assumed unlevered market value of Logistic used by Prudential Securities was
$76.7 million (based upon estimated debt as of September 30, 1997, of $40.7
million, estimated additional debt of $20.0 million to be incurred immediately
prior to the Effective Time, and $16.0 million, the implied aggregated equity
value of Logistic, based upon a purchase price of $10.7 million for a two-thirds
interest in Logistic). Prudential Securities observed that the assumed $76.6
million unlevered market value of Logistic falls within the combined range of
implied unlevered market values based on the Comparable Transactions, which
Prudential Securities believes supports its opinion.
None of the acquired entities utilized in the above analysis for
comparative purposes is, of course identical to Logistic. Accordingly, a
complete analysis of the results of the foregoing calculations cannot be limited
to a quantitative review of such results and involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the acquired entities and other factors that could affect the consideration paid
for each of the acquired entities as well as that of Logistic.
Projected financial and other information concerning Christiana, Logistic
and EVI and the impact of the Merger upon the holders of Christiana Common Stock
are not necessarily indicative of future results. All projected financial
information is subject to numerous contingencies, many of which are beyond the
control of management of Christiana, Logistic and EVI.
Transaction Consideration Analysis. Prudential Securities calculated a
total "up front" value (i.e., total consideration payable at closing excluding
the Contingent Cash Consideration) of $43.78 per share of Christiana Common
Stock and a total value (i.e., the "up-front" value plus the discounted present
value of the Contingent Cash Consideration) of $44.89 per share of Christiana
Common Stock for the total consideration offered in the Transaction,
representing a premium to Christiana's closing price as of December 5, 1997 of
9.6% and 12.4%, respectively. Prudential Securities did not perform any analysis
with respect to premium/discount paid in comparable transactions. The present
value of the total consideration offered per share of Christiana Common Stock
was based on (i) 0.72 of a share of EVI Common Stock having a closing price of
$53.56 as of December 5, 1997, (ii) an anticipated $5.14 per share cash
distribution, net of taxes and anticipated transaction-related expenses, and
(iii) an anticipated $1.11 per share contingent cash payment,
48
56
calculated based on 5.4 million shares of Christiana Common Stock outstanding on
a fully-diluted basis as of December 5, 1997 and an assumed discount rate of
10.7%.
The exchange ratio of .72 of a share of EVI Common Stock per share of
Christiana Common Stock and the anticipated $5.14 cash distribution number
utilized by Prudential Securities were based on financial calculations performed
by Christiana as of October 31, 1997 and provided to Prudential Securities. The
exchange ratio was derived by dividing the amount of shares of EVI Common Stock
held by Christiana (3,897,462) by the total outstanding shares of Christiana on
a fully-diluted basis (5,403,714). The anticipated $5.14 cash distribution
amount (net of taxes and expenses) was derived by subtracting estimated cash
expenses to be paid on or prior to the Effective Time ("Estimated Cash
Expenses") from the anticipated amount of cash held by Christiana as of the
Effective Time ("Estimated Aggregate Cash"). The Estimated Aggregate Cash was
based on the following items: (a) cash and accrued interest ($6,655,000); (b)
cash received from the anticipated exercise of outstanding Christiana stock
options ($7,331,500); (c) the dividend from Logistic ($20,000,000); (d) the
repayment of the Wiscold Note ($3,000,000) and (e) the proceeds from the sale of
two-thirds interest in Logistic ($10,667,000), which items yielded a total
amount of Estimated Aggregate Cash of $47,653,500. Estimated Cash Expenses
consisted of (i) $7,070,000 for anticipated taxes due, (ii) $1,500,000 for
anticipated transaction expenses, (iii) $1,307,000 of negative cash flow at the
Christiana corporate level, and (iv) the retention of $10,000,000 payable upon
the expiration of the Hold Back Period (to the extent such funds are not
required to satisfy contingent claims against Christiana and various indemnity
obligations). Total anticipated cash available for distribution equaled
$27,776,500 or an anticipated distribution of $5.14 per share of Christiana
Common Stock on a fully-diluted basis.
Stock Trading History. Prudential Securities also analyzed the history of
the volume and trading prices for the Christiana Common Stock and the EVI Common
Stock. Prudential Securities observed that between December 5, 1996 and December
5, 1997, Christiana Common Stock had an average daily trading volume of 3,001
shares, with trading prices in the range of $23.50 and $46.38 per share. Between
December 5, 1996, and December 5, 1997, EVI Common Stock had an average daily
trading volume of 257,111 shares, with trading prices in the range of $23.25 and
$71.25 per share. Prudential noted that the receipt of EVI stock in the Merger
provides Christiana shareholders with a security of substantially greater
liquidity. Prudential Securities also noted that, as described above under
"-- Transaction Consideration Analysis", based on the market prices of the EVI
Common Stock and the Christiana Common Stock and the assumed Cash Consideration
and Contingent Cash Consideration, the implied "up front" and "total" value to
be received by the holders of the Christiana Common Stock in the Merger as of
December 5, 1997, exceeded the closing price of the Christiana Common Stock on
that date by 9.6% and 12.4%, respectively. The combination of the increased
liquidity and market premium as of December 5, 1997, supported its opinion.
Christiana selected Prudential Securities to provide a fairness opinion
because it is a nationally recognized investment banking firm engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions and for other purposes and has substantial experience in
transactions similar to the merger. The engagement letter with Prudential
Securities provides that Christiana will pay Prudential Securities an advisory
fee equal to (i) a retainer of $50,000, plus (ii) $100,000 upon delivery of the
Prudential Securities Opinion and (iii) $250,000 upon consummation of the
Transaction. In addition, the engagement letter with Prudential Securities
provides that Christiana will reimburse Prudential Securities for its out-of-
pocket expenses and will indemnify Prudential Securities and certain related
persons against certain liabilities, including liabilities under securities
laws, arising out of the Transaction or its engagement. In the ordinary course
of business, Prudential Securities may actively trade the shares of Christiana
Common Stock and EVI Common Stock for its own account and for the accounts of
customers, and accordingly, may at any time hold a long or short position in
such securities.
AMERICAN APPRAISAL OPINION
In connection with the Merger, which includes as a part thereof the
Logistic Sale, American Appraisal Associates, Inc. ("American Appraisal")
delivered a written opinion to the Board of Directors of each of Christiana and
EVI and the Board of Directors of C2, dated December 1, 1997, that given certain
assumptions
49
57
and assuming further that the Merger and Logistic Sale have been consummated as
proposed, immediately after giving effect to consummation of the Logistic Sale:
(a) the fair value of the aggregate assets of Logistic will exceed its
respective total liabilities, including, without limitation, subordinated,
unmatured, unliquidated, disputed and contingent liabilities;
(b) the present fair saleable value of the aggregate assets of
Logistic will be greater than its respective probable liabilities on its
debts as such debts become absolute and mature;
(c) Logistic will be able to pay its respective debts and other
liabilities, including contingent liabilities and other commitments, as
they mature; and
(d) Logistic does not have unreasonably small capital for the business
in which it is engaged, as managements of Logistic and Christiana have
indicated such business is now conducted and proposed to be conducted
following the consummation of the Merger and the Logistic Sale.
The full text of the American Appraisal Opinion which sets forth the
assumptions made, the matters considered and the limitations on the review
undertaken, is set forth as Appendix G to this Joint Proxy Statement/Prospectus
and is incorporated herein by reference and should be read in its entirety in
connection with this Joint Proxy Statement/Prospectus. The American Appraisal
Opinion is directed only to the solvency of Logistic and does not address any
other terms of the Merger, the Logistic Sale or the underlying business decision
of Christiana's Board of Directors or EVI's Board of Directors to effect the
Merger. The American Appraisal Opinion does not constitute a recommendation to
any stockholder of Christiana or EVI as to how any such stockholder should vote
such stockholder's shares of Christiana or EVI, as the case may be. The summary
of the American Appraisal Opinion set forth in the Joint Proxy
Statement/Prospectus is qualified in its entirety by reference to the full text
of the American Appraisal Opinion attached as Appendix G. American Appraisal has
consented to the use of the American Appraisal Opinion as an appendix to this
Joint Proxy Statement/Prospectus.
As a condition to closing the Transaction, American Appraisal is required
to deliver a similar opinion, dated as of the closing date of the Merger, that
covers C2 and Christiana in addition to Logistic. See "The Merger -- Terms of
the Merger -- Conditions to the Merger".
50
58
RISK FACTORS
An investment in the EVI Common Stock offered hereby involves a high degree
of risk. The following factors should be carefully considered, together with the
information contained or incorporated by reference in this Joint Proxy
Statement/Prospectus, in evaluating an investment in the EVI Common Stock
offered hereby.
GENERAL
Cautionary Statements
This Joint Proxy Statement/Prospectus contains statements relating to
future results of EVI and Christiana (including certain projections and business
trends) that are "forward-looking statements" as defined in the Private
Securities Litigation Reform Act of 1995. Actual results may differ materially
from those projected as a result of certain risks and uncertainties, including
but not limited to (i) changes in the oil and gas industry and domestic and
international drilling activity, (ii) changes in domestic and international
economic conditions, (iii) technological advances involving EVI's products, (iv)
the ability of EVI to integrate its recent acquisitions and effect anticipated
cost savings, (v) environmental regulations and remediation expenditures, (vi)
legal proceedings, (vii) employee and labor relations, (viii) domestic and
international trade restrictions and tariffs, (ix) EVI's successful execution of
internal operating plans, (x) regulatory uncertainties, (xi) performance issues
with key suppliers and subcontractors, (xii) international currency
fluctuations, and (xiii) world-wide political stability, as well as other risks
and uncertainties, including but not limited to those detailed from time to time
in the filings of EVI and Christiana with the Commission. For additional
information regarding risks and uncertainties relating to EVI and Christiana,
see EVI's and Christiana's filings with the Commission under the Exchange Act
and the Securities Act referenced herein under "Incorporation of Certain
Documents by Reference".
Material Federal Income Tax Consequences
Consummation of the Transaction is conditioned on the receipt of an opinion
of Arthur Andersen LLP that the Merger qualifies as a "reorganization" under
Section 368(a)(1)(A) of the Code by reason of Section 368(a)(2)(E). The opinion
of Arthur Andersen LLP is not binding on the Internal Revenue Service ("IRS") or
the courts. See "Material Federal Income Tax Considerations". If the Merger
fails to qualify as a "reorganization", each Christiana shareholder who receives
shares of EVI Common Stock would, in addition to the recognition of gain with
respect to the Cash Consideration and the fair market value of the Contingent
Cash Consideration being received in the Merger, recognize gain or loss equal to
the difference between the sum of the fair market value of the EVI Common Stock
received and such shareholder's basis in the shares of Christiana Common Stock
surrendered in exchange therefor. Under the terms of the Logistic Purchase
Agreement, Logistic and C2 will be required to indemnify EVI and Christiana for
adverse tax consequences to EVI or Christiana arising out of the Merger. See
"Ancillary Transactions -- The Logistic Sale and Operating
Agreement -- Indemnification" and "The Merger -- Terms of the
Merger -- Conditions to the Merger".
EVI
Market Trends
The demand for EVI's drilling products is particularly affected by the
price of natural gas and the level of oil and gas exploration activity, while
the demand for EVI's production equipment is directly dependent on oil
production activity. Exploration and production activities are also affected by
worldwide economic conditions, supply and demand for oil and natural gas,
seasonal trends and the political stability of oil producing countries. The oil
and gas industry has been substantially volatile over the years, due in large
part to volatility in the prevailing prices of oil and natural gas.
In recent months, the worldwide price of oil has declined, with prices
having dropped as much as 40% to under $13 per barrel for spot deliveries and
prices for natural gas have weakened slightly on a year to year basis. These
declines have been attributed to, among other things, an excess supply of oil in
the world markets, reduced domestic demand associated with an unseasonably warm
winter and the potential for lower worldwide demand due to the impact of the
economic downturn in Southeast Asia. As prices for oil have continued to
51
59
decline, EVI and others in the industry have begun to experience a softening in
demand for their products and services, in particular products associated with
exploration activity and oil production. Although EVI's backlog for drill pipe
remains strong and the softening of the market has mainly impacted demand for
products associated with the production of heavy oil and oil from marginal
wells, a prolonged period of low price oil can be expected to adversely affect
the demand throughout the industry, including those products manufactured by
EVI. In such a case, EVI's revenues and income could be expected to be similarly
affected.
Foreign Operations
EVI's equipment and services are used in approximately 61 countries by U.S.
customers operating abroad and by foreign customers. Sales of equipment and
services outside the U.S. accounted for approximately 51%, 51% and 46% of total
revenues for 1997, 1996 and 1995, respectively, based upon the ultimate
destination in which equipment or services were sold, shipped or provided to the
customer by EVI.
Operations and sales in foreign markets are subject to substantial
competition from large multinational corporations and government-owned entities
and to a variety of local laws and regulations requiring qualifications, use of
local labor, the provision of financial assurances or other restrictions and
conditions on operations. Foreign operations are also subject to risks
associated with doing business outside the U.S., including risk of war, civil
disturbances and governmental activities that may limit or disrupt markets,
restrict the movement of funds or result in the deprivation of contract rights
or the taking of property without fair compensation. Foreign operations may also
subject EVI to risks relating to fluctuations in currency exchange rates.
However, to date, currency fluctuations have not had a material adverse impact
on EVI.
EVI has drill pipe and other products manufactured for it by Oil Country
Tubular Limited ("OCTL") in India under a long-term exclusive manufacturing
arrangement with OCTL. Although EVI has sought to minimize the risks of this
operation through its manufacturing arrangement and insurance, EVI is providing
OCTL with a substantial amount of raw materials and inventory for the products
manufactured by it. Operations in India are subject to various political and
economic risks as well as financial risks with respect to OCTL.
EVI's operations in Singapore, Mexico, Brazil, Venezuela and Argentina are
subject to various political and economic conditions existing in them which
could disrupt operations. EVI generally seeks to obtain, where economical,
insurance against certain political risks and attempts to structure its
contracts and arrangements in the foreign countries in which it operates in a
manner that would minimize the exposure of its assets to losses in those
countries. Such efforts include structuring its sales and service contracts to
be in U.S. dollars where practical and where feasible or desirable utilizing
lease arrangements, manufacturing and distribution alliances and joint ventures
for foreign manufacturing facilities. Although EVI believes that its exposure to
foreign risks is not materially greater than that of its competitors, there can
be no assurance that disruptions will not occur in EVI's foreign operations or
that any losses that do occur will be covered by insurance.
Operating Risks and Insurance
EVI's products are used for the exploration and production of oil and
natural gas. Such operations are subject to hazards inherent in the oil and gas
industry, such as fires, explosions, craterings, blowouts and oil spills, that
can cause personal injury or loss of life, damage to or destruction of property,
equipment, the environment and marine life, and suspension of operations.
Litigation arising from an occurrence at a location where EVI's products or
services are used or provided may in the future result in EVI being named as a
defendant in lawsuits asserting potentially large claims.
EVI maintains insurance coverage that it believes to be customary in the
industry against these hazards and, whenever possible, obtains agreements from
customers providing for indemnification against liability to others. However,
insurance and indemnification agreements may not provide complete protection
against casualty losses. There can be no assurance that EVI will be able to
maintain adequate insurance in the future at rates it considers reasonable.
Further, there can be no assurance that insurance will continue to be available
on terms as favorable as those for its existing arrangements. The occurrence of
an adverse claim in excess of
52
60
the coverage limits maintained by EVI could have a material adverse effect on
EVI's financial condition and results of operations.
Risks of Environmental Costs and Liabilities
EVI's operations are subject to governmental laws and regulations relating
to the protection of the environment and to public health and safety. The
regulations applicable to EVI's operations include certain regulations
controlling the discharge of materials into the environment, requiring removal
or remediation of pollutants and imposing civil and criminal penalties for
violations. Some of the statutory and regulatory programs that apply to EVI's
operations also authorize private suits, the recovery of natural resource
damages by the government, injunctive relief and cease and desist orders.
Laws and regulations protecting the environment have generally become more
stringent in recent years and could become more stringent in the future. Some
environmental statutes impose strict liability, rendering a person or entity
liable for environmental damage without regard to negligence or fault, on the
part of such person or entity. As a result, EVI could be liable, under certain
circumstances, for environmental damage caused by others or for acts of EVI that
were in compliance with all applicable laws at the time such acts were
performed.
Substantial Competition
Competition in the oilfield service and equipment segments of the oil and
gas industry is intense and, in certain markets, is dominated by a small number
of large competitors, many of which have greater financial and other resources
than EVI.
Contingent Cash Consideration
Christiana shareholders will also receive a right to the Contingent Cash
Consideration of $10.0 million (approximately $1.92 per each share of Christiana
Common Stock) payable by Christiana upon the expiration of the Hold Back Period.
This $10.0 million, however, may be used by EVI to satisfy all C2/Logistic
Assumed Liabilities and any other liability for which indemnification is
required to be provided to EVI or Christiana under the Logistic Purchase
Agreement. To the extent such funds are used to satisfy any C2/Logistic Assumed
Liabilities or any other liability for which indemnification of EVI is required,
such funds will not be available for payment to Christiana shareholders.
C2
Christiana shareholders may use their Cash Consideration to invest in C2, a
newly-formed entity which will acquire a two-thirds interest in Logistic. An
investment in C2 involves a high degree of risk as described under "Risk
Factors" in the C2 Prospectus provided to Christiana shareholders simultaneously
herewith.
53
61
ORGANIZATION OF EVI, CHRISTIANA AND LOGISTIC
BEFORE AND AFTER THE TRANSACTION
The following diagrams set forth the stock ownership and organizational
structure of EVI, Christiana and Logistic before and after the Transaction:
[BEFORE AND AFTER TRANSACTIONS]
54
62
ANCILLARY TRANSACTIONS
The detailed terms and conditions to the consummation of the Logistic Sale
are contained in the Logistic Purchase Agreement and the Operating Agreement,
both of which are attached as Appendix B and Appendix C, respectively, to this
Joint Proxy Statement/Prospectus and incorporated herein by reference. The
following discussion sets forth a description of the material terms and
conditions of the Logistic Purchase Agreement, and the Operating Agreement. THE
DESCRIPTION IN THIS JOINT PROXY STATEMENT/PROSPECTUS OF THE TERMS AND CONDITIONS
TO THE CONSUMMATION OF THE LOGISTIC SALE IS QUALIFIED BY, AND MADE SUBJECT TO,
THE MORE COMPLETE INFORMATION SET FORTH IN THE LOGISTIC PURCHASE AGREEMENT AND
THE OPERATING AGREEMENT.
LOGISTIC SALE AND OPERATING AGREEMENT
Under the terms of the Merger Agreement, Christiana is required to a sell a
two-thirds interest in Logistic to C2 as a condition to EVI's obligations to
consummate the Merger. In addition, upon the disposition of the two-thirds
interest in Logistic to C2, Christiana and C2 are required to enter into the
Operating Agreement defining their respective rights and obligations with
respect to Logistic following the Logistic Sale. The following sets forth the
general terms of the Logistic Purchase, Agreement and the Operating Agreement.
TERMS OF THE LOGISTIC SALE
General. The Logistic Purchase Agreement provides that, immediately prior
to the Effective Time, C2 will purchase 666.667 membership units of Logistic for
an aggregate purchase price of $10.67 million. As an inducement of Sub to merge
with Christiana, C2 and Logistic agreed to assume the Assumed Liabilities (as
defined in the Logistic Purchase Agreement). The Logistic Purchase Agreement
also provides that at any time after the fifth anniversary of the Effective
Time, Christiana has the option to sell to C2 or Logistic the Logistic Interest
for $7.0 million. In addition, if there is a proposed merger, consolidation or
share exchange involving C2 or if the Lubar Family, as defined therein, proposes
to sell its interest in C2 and as a result the Lubar Family holds less than a
25% interest in C2 or the resulting entity or if C2 proposes to sell its
interest in Logistic to an unrelated third party, Christiana will have the right
to participate in such sale with respect to its interest in Logistic for the
same equivalent consideration per equivalent unit in Logistic. See "-- Terms of
the Operating Agreement". It is currently anticipated that the Logistic Sale
will take place prior to the Effective Time.
Concurrently with the Transaction, C2 will offer 5,202,664 shares of its
common stock pursuant a registration statement on Form S-1. Christiana
shareholders immediately prior to the Effective Time will have the ability to
purchase C2 Common Stock in an amount up to their pro rata share of Christiana
Common Stock. The Lubar Family committed pursuant to the Lubar/C2 Agreement to
purchase such number of shares of C2 Common Stock as is necessary for the net
proceeds of the C2 Offering to C2, after deducting the expenses of the C2
Offering, to equal $10.67 million. The Lubar/C2 Agreement will insure that C2
has sufficient funds to complete the Logistic Sale. For a complete description
of C2, its management team and other related considerations, Christiana
stockholders should review the C2 Prospectus.
Indemnification. Logistic and C2 agreed under the Logistic Purchase
Agreement, to indemnify, defend and hold Christiana, EVI and their respective
officers, directors, employees, agents and assigns harmless from and against any
and all liabilities or environmental liabilities (including, without limitation,
reasonable fees and expenses of attorneys, accountants, consultants and experts)
that such parties incur, are subject to a claim for, or are subject to, that are
based upon, arising out of, relating to or otherwise in respect of the following
matters:
(i) any breach of any covenant or agreement of Logistic or C2
contained in the Logistic Purchase Agreement or any other agreement
contemplated thereby;
55
63
(ii) the acts or omissions of Christiana or any of its current or past
subsidiaries or affiliated companies (a "Christiana Company") on or before
the Effective Time;
(iii) the acts or omissions of any Christiana Company, Logistic, C2 or
Logistic's or C2's affiliates or the conduct of any business by them on or
after the Effective Time;
(iv) the Assumed Liabilities (as defined below) and including, without
limitation, any and all liabilities and environmental liabilities other
than the Christiana Retained Liabilities to which Christiana or C2's
interest in Logistic may now or at any time in the future become subject
resulting from, arising out of or relating to (A) the business, operations
of Christiana or any Christiana Company on or prior to the Effective Time,
(B) the Merger, the Logistic Sale or any other transactions contemplated
thereby and (C) any taxes to which Christiana or any Christiana Company may
be obligated for periods ending on or before the Effective Time (except for
Christiana taxes expressly retained by Christiana pursuant to the Merger
Agreement);
(v) any taxes as a result of the Merger subsequently being determined
to be a taxable transaction for foreign, Federal, state or local law
purposes regardless of the theory or reason for the transactions being
subject to tax;
(vi) any and all amounts for which Christiana or EVI may be liable on
account of any claims, administrative charges, self-insured retentions,
deductibles, retrospective premiums or fronting provisions in insurance
policies, including as the result of any uninsured period, insolvent
insurance carriers or exhausted policies, arising from claims by
Christiana's or any Christiana Company's affiliates, or the employees of
any of the foregoing, or claims by insurance carriers of Christiana or any
Christiana Company for indemnity arising from or out of claims by or
against Christiana or any Christiana Company for acts or omissions of
Christiana or any Christiana Company, or related to any current or past
business of Christiana or any Christiana Company or any product or service
provided by Christiana or any Christiana Company in whole or part prior to
the Effective Time;
(vii) any liability under the Consolidated Omnibus Budget
Reconciliation Act of 1986 with respect to any employees of Christiana or
any Christiana Company who become employees of Logistic or C2 after the
Logistic Sale;
(viii) any settlements or judgments in any litigation commenced by one
or more insurance carriers against Christiana or EVI on account of claims
by Logistic or C2 or any Christiana Company or employees of Logistic or C2
or any Christiana Company;
(ix) any and all liabilities incurred by Christiana or EVI pursuant to
its obligations hereunder in seeking to obtain or obtaining any consent or
approval to assign, transfer or lease any interest in any asset or
instrument, contract, lease, permit or benefit arising thereunder or
resulting therefrom;
(x) the on-site or off-site handling, storage, treatment or disposal
of any Waste Materials (as hereinafter defined) generated by Christiana or
any Christiana Company on or prior to the Effective Time or any Christiana
Company at any time;
(xi) any and all Environmental Conditions (as hereinafter defined) on
or prior to the Effective Time, known or unknown, existing on, at or
underlying any of the properties owned, leased or operated by Christiana on
or after the Effective Time;
(xii) any acts or omissions on or prior to the Effective Time of
Christiana or any Christiana Company relating to the ownership or operation
of the business of Christiana or any Christiana Company or the properties
currently or previously owned or operated by Christiana or any Christiana
Company;
(xiii) any liability relating to any claim or demand by any
stockholder of Christiana or EVI with respect to the Merger, the Logistic
Sale or the transactions relating thereto; and
(xiv) any liability relating to the Christiana 401(k) Plan and the
other employee benefit or welfare plans of Christiana or any Christiana
Company arising out of circumstances occurring on or prior to the Effective
Time.
56
64
Certain Definitions. For purposes of the Logistic Purchase Agreement, the
following terms have the following meanings:
"Assumed Liabilities" means any and all liabilities and environmental
liabilities other than the Christiana Retained Liabilities and to which
Christiana or C2's interest in Logistic may now or at any time in the future
become subject (whether directly or indirectly, including by reason of
Christiana or any Christiana Company, owning, controlling or operating any
business or assets of any person (including any current or past affiliate)),
resulting from, arising out of or relating to (i) any Christiana Company (other
than Logistic), (ii) the business, operations or assets of Christiana or any
Christiana Company on or prior to the Effective Time, (iii) any taxes to which
Christiana or any Christiana Company may be obligated for periods ending on or
before the Effective Time (except for Christiana taxes expressly retained by
Christiana pursuant to the Merger Agreement), (iv) any obligation, matter, fact,
circumstance or action or omission by any person in any way relating to or
arising from the business, operations or assets of Christiana or a Christiana
Company that existed on or prior to the Effective Time, (v) any product or
service provided by Christiana or any Christiana Company prior to the Effective
Time, (vi) the Merger, the Logistic Sale or any of the other transactions
contemplated thereby, (vii) previously conducted operations of Christiana or any
Christiana Company and (viii) C2's interest in Logistic.
"Environmental Conditions" means any pollution, contamination, degradation,
damage or injury caused by, related to, arising from or in connection with the
generation, handling, use, treatment, storage, transportation, disposal,
discharge, release or emission of any Waste Materials (as hereinafter defined).
"Environmental Laws" means all laws, rules, regulations, statutes,
ordinances, decrees or orders of any governmental entity now or at any time in
the future in effect relating to (i) the control of any potential pollutant or
protection of the air, water or land, (ii) solid, gaseous or liquid waste
generation, handling, treatment, storage, disposal or transportation and (iii)
exposure to hazardous, toxic or other substances alleged to be harmful. The term
"Environmental Laws" includes, without limitation, (1) the terms and conditions
of any license, permit, approval or other authorization by any governmental
entity and (2) judicial, administrative or other regulatory decrees, judgments
and orders of any governmental entity. The term "Environmental Laws" includes,
but is not limited to the following statutes and the regulations promulgated
thereunder: the Clean Air Act, 42 U.S.C. sec. 7401 et seq., The Clean Water Act,
33 U.S.C. sec. 1251 et seq., the Resource Conservation Recovery Act, 42 U.S.C.
sec. 6901 et seq., the Superfund Amendments and Reauthorization Act, 42 U.S.C.
sec. 11011 et seq., the Toxic Substances Control Act, 15 U.S.C. sec. 2601 et
seq., the Water Pollution Control Act, 33 U.S.C. sec. 1251, et seq., the Safe
Drinking Water Act, 42 U.S.C. sec. 300f et seq., the Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. sec. 9601, et seq., and any
state, county or local regulations similar thereto.
"Retained Liabilities" means, and are limited solely to, (i) accounts
payable relating to Christiana that are reflected on the balance sheet of
Christiana at the Effective Time, (ii) accounts payable reflected on the balance
sheet of Christiana at the Effective Time and agreed to by EVI prior to the
Effective Time, (iii) the obligations of Christiana that arise after the
Effective Time (other than obligations relating to matters existing or occurring
on or prior to the Effective Time and indemnification, warranty and product
liability, wrongful death or property claims associated with actions or
omissions prior to the Effective Time or any business conducted prior to the
Effective Time) and (iv) tax liability for income of EVI attributable to
Christiana under the equity method of accounting either before or after the
Effective Date (the "EVI Related Taxes").
"Waste Materials" means any (i) toxic or hazardous materials or substances,
(ii) solid wastes, including asbestos, polychlorinated biphenyls, mercury,
buried contaminants, chemicals, flammable or explosive materials, (iii)
radioactive materials, (iv) petroleum wastes and spills or releases of petroleum
products and (v) any other chemical, pollutant, contaminant, substance or waste
that is regulated by any governmental entity under any Environmental Law.
TERMS OF THE OPERATING AGREEMENT
General. Christiana's and C2's interests in Logistic will be governed by
the Operating Agreement. Logistic was formed as a Delaware limited liability
company and its only members (collectively, the
57
65
"Members" or individually, a "Member") are C2 and Christiana. Additional members
may be admitted to Logistic only with the unanimous vote or written consent of
the Members.
Capital Contributions. Christiana initially capitalized Logistic in
exchange for 1,000 membership units (the "Membership Units") of Logistic
representing 100 percent of the issued and outstanding membership units of
Logistic. Pursuant to the terms of the Logistic Purchase Agreement, C2 will
acquire 666.667 membership units of Logistic representing a two-thirds interest
in Logistic from Christiana. The Membership Units will have identical
preferences, limitations and other relative rights. The Members will not be
required to make additional capital contributions and the issuance of any
additional membership units will require the approval of both C2 and Christiana.
A separate capital account will be maintained for each member on the books and
records of Logistic in accordance with the requirements of Section 704(b) of the
Code and the Treasury Regulations promulgated thereunder.
Allocations. All items of income, gain, loss or deduction of Logistic
determined in accordance with the Code will be allocated among the Members in
proportion to the number of Membership Units held by each Member. The allocation
of items of income, gain, loss or deduction will be interpreted so as to comply
with the Treasury Regulations promulgated under the Code.
Distributions. In order to permit the Members to make their required
estimated income tax payments on items of income, gain, loss or deduction
allocated to the Members, Logistic will make mandatory distributions to the
Members in an amount equal to Logistic's estimated federal taxable income for
each calendar quarter, multiplied by the sum of (i) the highest corporate
federal and Wisconsin income tax rates minus (ii) the product of such tax rates.
The mandatory distributions will be made to the Members in proportion to the
number of Membership Units held by each Member. Logistic may make additional
distributions to the Members in proportion to the number of Membership Units
held by each Member at such times as C2 and Christiania determine by vote or
written consent.
Management. The Management of Logistic is vested in a Board of Managers.
The initial Board of Managers consists of six Managers consisting of William T.
Donovan, Bernard J. Duroc-Danner, Curtis W. Huff, an officer of EVI, Sheldon B.
Lubar, John Patterson and Gary Sarner. Each Manager is elected by the vote or
written consent of the Members holding at least a majority of the Membership
Units in Logistic; provided, however, that Christiana and C2 will at all times
each be entitled to elect, without the consent of any other Member, a number of
Managers that is proportionate to the number of Membership Units held by
Christiana and C2, respectively. The Operating Agreement provides that the Board
of Managers may not cause Logistic to take certain specified actions without the
prior approval of the Members by unanimous vote or written consent. Such matters
include (i) the authorization or issuance of additional Membership Units, (ii)
the authorization or payment of any distribution with respect to Membership
Units, except for the payment of any distribution that is necessary for C2 to
fulfill its purchase obligation with respect to Christiana's interest in
Logistic, (iii) any direct or indirect purchase or acquisition by Logistic or
any subsidiary of Logistic of Membership Units, (iv) approval of any merger,
consolidation or similar transaction or sale of all or substantially all of the
operating assets of Logistic in one or more transactions, (v) the creation of
any new direct or indirect subsidiary of Logistic, (vi) the making of any tax
election, (vii) the liquidation or dissolution of Logistic or any subsidiary of
Logistic, (vii) any transaction between Logistic or subsidiary of Logistic and
any affiliate of a Member (other than a transaction between Logistic and a
subsidiary of Logistic), (viii) the payment of any compensation to any Member or
any affiliate of a Member or entering into any employee benefit plan or
compensatory arrangement with or for the benefit of any Member or affiliate of
any Member, (ix) any amendment to the Operating Agreement or the Certificate of
Organization and (x) any other matter for which approval of Members is required
under the Delaware Limited Liability Company Act.
Logistic will generally indemnify the Managers to the fullest extent
permitted under the Delaware Limited Liability Company Act against any losses
incurred by reason of any act or omission in connection with the business of
Logistic. The Board of Managers may appoint officers of Logistic to perform such
duties as are set forth in the Operating Agreement or as specified by the Board
of Managers. The Board of Managers may authorize Logistic to pay the officers
any reasonable fees for their services. Neither the Members nor the
58
66
Managers are required to devote their full time and efforts to Logistic.
Logistic will pay C2 an annual management fee of $250,000.
Assignment, Transfer and Repurchase of a Member's Units. Except as
specifically set forth in the Operating Agreement, a Member may not voluntarily
sell, give, assign, bequeath or pledge (each a "Transfer") any Membership Unit
without the prior written consent of the Board of Managers; provided, however,
that C2 may pledge and assign its Membership Units to Christiana. Christiana may
effect a Transfer of C2's Membership Units pursuant to any action taken with
respect to any security interest granted to Christiana by C2. Christiana may
also Transfer its Membership Units if the transferee is an affiliate of
Christiana or C2 and the transferee agrees to be bound by the provisions of the
Operating Agreement. At any time after the fifth anniversary of the date of the
Operating Agreement, Christiana may Transfer any or all of its Membership Units
to any person; provided, however, that C2 shall have a right of first refusal to
purchase such Membership Units for the same price and at the same terms as such
Membership Units were offered to the transferee. In the event of any attempted
involuntary Transfer of a Unit, Logistic will have the option to purchase the
Membership Units subject to the involuntary Transfer at an amount equal to the
book value of such Membership Units. An involuntary transferee receiving
Membership Units will not be considered a member of Logistic unless all of the
Members consent in writing to treat the involuntary transferee as a member. In
addition, if there is a proposed merger, consolidation or share exchange
involving C2 or if the Lubar Family proposes to sell their interest in C2 or if
C2 proposes to sell its interest in Logistic to an unrelated third party,
Christiana will have the right to participate in such sale with respect to its
interest in Logistic for the same equivalent consideration per equivalent unit
in Logistic.
Dissolution and Winding Up. Logistic will be dissolved upon (i) the
unanimous vote or written consent of the Members to dissolve Logistic; (ii)
Logistic being adjudicated insolvent or bankrupt; or (iii) an entry of a decree
of judicial dissolution relating to Logistic. Upon a dissolution of Logistic,
the Members will select a liquidator to liquidate Logistic, pay and discharge
all of Logistic's debts and liabilities, and distribute all remaining assets of
Logistic to the Members in accordance with their respective capital accounts.
59
67
THE MERGER
The following description does not purport to be complete and is qualified
in its entirety by reference to the Merger Agreement, a copy of which is
attached as Appendix A to this Joint Proxy Statement/Prospectus which is
incorporated herein by reference.
TERMS OF THE MERGER
The detailed terms and conditions to the consummation of the Merger are
contained in the Merger Agreement, which is attached as Appendix A to this Joint
Proxy Statement/Prospectus which is incorporated herein by reference. The
following discussion sets forth a description of certain material terms and
conditions of the Merger Agreement. THE DESCRIPTION IN THIS JOINT PROXY
STATEMENT/PROSPECTUS OF THE TERMS AND CONDITIONS TO THE CONSUMMATION OF THE
MERGER IS QUALIFIED BY, AND MADE SUBJECT TO, THE MORE COMPLETE INFORMATION SET
FORTH IN THE MERGER AGREEMENT.
General Description of the Merger. The Merger Agreement provides that, at
the Effective Time, Sub will merge with and into Christiana, with Christiana
becoming the surviving corporation. Pursuant to the Merger, each outstanding
share of Christiana Common Stock will be converted into the right to receive the
EVI Share Consideration, the Cash Consideration and the Contingent Cash
Consideration. Based on the current capitalization of Christiana and the assets
and liabilities of Christiana as of March 31, 1998, and after giving effect to
the estimated expenses of the Merger payable by Christiana, each holder of a
share of Christiana Common Stock as of the Effective Time would be entitled to
receive from EVI with respect to each share of Christiana Common Stock then held
(i) .74913 of a share of EVI Common Stock, (ii) cash of approximately $3.60 and
(iii) a contingent cash payment of up to $1.92 payable following the expiration
of the Hold Back Period. The specific number of shares of EVI Common Stock and
Cash Consideration and Contingent Cash Consideration per share of Christiana
Common Stock payable in the Merger will be determined as of the Effective Time
and could vary from that which would be payable had the Merger been effective on
March 31, 1998. In addition, the Cash Consideration will not be determined until
following the Effective Time based on a 30-day post closing review by EVI of the
assets and liabilities of Christiana as of the Effective Time. EVI will
distribute such cash consideration to the Christiana shareholders promptly
following the calculation of such amount.
As of the Record Date, there were shares of EVI Common Stock
outstanding, including the 3,897,462 shares of EVI Common Stock held by
Christiana. Based upon the number of shares of Christiana Common Stock
outstanding as of the Record Date, and after giving effect to the conversion of
the 3,897,462 shares of EVI Common Stock held by Christiana into treasury
shares, the number of shares of EVI Common Stock outstanding after the Merger
will be approximately the same as prior to the Merger.
Effective Time of the Merger. Under the terms of the Merger Agreement, the
Merger will become effective when the Certificate of Merger is duly filed with
the Secretary of State of Wisconsin or at such later time (not to exceed 90 days
from the date the Certificate of Merger is filed) as is specified in the
Certificate of Merger pursuant to mutual agreement of EVI and Christiana. It is
anticipated that, if the Merger Proposal is approved at the EVI Special Meeting
and the Christiana Special Meeting and all other conditions to the Merger have
been satisfied or waived, the Effective Time will occur as soon as practicable
thereafter.
Manner and Basis of Converting Shares. The Merger Agreement provides that,
at the Effective Time, each share of Christiana Common Stock issued and
outstanding immediately prior to the Effective Time not owned directly or
indirectly by Christiana shall be converted into a right to receive the EVI
Share Consideration, the Cash Consideration and the Contingent Cash
Consideration.
As soon as practicable following the Effective Time, EVI will cause the
Exchange Agent to mail to each record holder of Christiana Common Stock
immediately prior to the Effective Time a letter of transmittal and other
information advising such holder of the consummation of the Merger and for use
in exchanging Christiana Common Stock certificates for EVI Common Stock
certificates and the Cash Consideration. No fractional shares of EVI Common
Stock will be issued and, in lieu thereof, all fractional shares of EVI Common
Stock that would otherwise be issuable in the Merger will be rounded to the
nearest whole share of
60
68
EVI Common Stock. Letters of transmittal also will be available following the
Effective Time at the offices of the Exchange Agent. SHARE CERTIFICATES SHOULD
NOT BE SURRENDERED FOR EXCHANGE BY SHAREHOLDERS OF CHRISTIANA PRIOR TO APPROVAL
OF THE MERGER AND THE RECEIPT OF A LETTER OF TRANSMITTAL.
As soon as possible after the Effective Time, but no later than 30 days
thereafter (the "Payment Date"), the parties to the Merger Agreement shall
calculate and agree upon the Cash Consideration (anticipated to be approximately
$3.60 per share of Christiana Common Stock, based upon the terms of the Merger
Agreement as described more fully on the cover page of this Joint Proxy
Statement/Prospectus) and the Contingent Cash Consideration (approximately $1.92
per share of Christiana Common Stock, based upon the terms of the Merger
Agreement as described more fully on the cover page of this Joint Proxy
Statement/Prospectus). On the Payment Date, EVI will pay the Cash Consideration
due each Christiana Shareholder to Firstar Trust Company, Milwaukee, Wisconsin
(the "Escrow Agent") who shall promptly distribute such cash to each Christiana
Shareholder; provided, however that if the Escrow Agent advises the Exchange
Agent that it has authorization from the Christiana Shareholders to apply all or
a portion of the Cash Consideration to the purchase of C2 stock as described in
the C2 Prospectus, such cash shall be so applied. The Escrow Agent shall,
following instructions from the Christiana Shareholders, either transmit such
funds to C2 to purchase C2 shares or transmit such funds to the Christiana
Shareholders.
Contemporaneously with this Joint Proxy Statement/Prospectus, C2 will
deliver to each Christiana shareholder the C2 Prospectus regarding the proposed
issuance of C2 Common Stock. If the Merger is approved, each Christiana
shareholder is entitled to purchase shares in C2 and may use the Cash
Consideration for such purpose by following the procedures described in the C2
Prospectus.
The rights of the Christiana shareholders regarding the purchase of C2
Common Stock and the terms upon which the Cash Consideration may be used to
purchase such shares are governed by the C2 Prospectus. Christiana shareholders
shall rely solely upon such document with regard to the purchase of such shares.
The Contingent Cash Consideration will be retained by EVI until the
expiration of the Hold Back Period. EVI will pay the Contingent Cash
Consideration as determined as of such future date and issue the payment to the
Christiana shareholders of record as of the Record Date.
No fraction of a share of EVI Common Stock will be issued in the Merger. In
lieu thereof, all fractional shares of EVI Common Stock that would otherwise be
issuable in the Merger will be rounded to the nearest whole share of EVI Common
Stock.
Until such time as a holder of Christiana Common Stock surrenders such
shareholder's outstanding stock certificate to the Exchange Agent, together with
an appropriately completed and executed letter of transmittal, such shareholder
will have no rights as a stockholder of EVI. Such certificate shall represent
only the right to receive upon surrender thereof the number of shares of EVI
Common Stock, the Cash Consideration and the Contingent Cash Contribution, into
which the shares of Christiana Common Stock theretofore represented by such
certificate shall be converted pursuant to the Merger Agreement. Unless and
until such outstanding certificates are surrendered, no dividends or other
distributions payable to the holders of EVI Common Stock, as of any time on or
after the Effective Time, will be paid to the holders of such outstanding
certificates. Upon surrender of the certificate previously representing
Christiana Common Stock, the holder thereof will receive certificates
representing the number of shares of EVI Common Stock to which such shareholder
is entitled, the Cash Consideration to which such shareholder is entitled and
will receive the amount of any dividends or other distributions, if any, payable
to holders of EVI Common Stock on or after the Effective Time with respect to
such shares, without interest thereon. In addition, upon surrender of the
certificate previously representing Christiana Common Stock, following five
years after the effective date of the Merger the holder thereof will receive the
Contingent Cash Consideration to which such shareholder is entitled, if any.
Conditions to the Merger. EVI's and Christiana's obligations to effect the
Merger are subject to the fulfillment of, at or prior to the closing date of the
Merger (the "Closing Date"), the following conditions:
(i) the Merger Proposal shall have been approved and adopted by the
requisite vote of the stockholders of Christiana and EVI; (ii) the waiting
period (and any extension thereof) applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated; (iii) no
order
61
69
shall have been entered and remain in effect in any action or proceeding
before any foreign, federal or state court or governmental agency that
would prevent or make illegal the consummation of the Logistic Sale and the
Merger; (iv) the registration statement of which this Joint Proxy
Statement/Prospectus forms a part and the registration statement under the
Securities Act to be filed by C2 in connection with the Merger shall be
effective on the Closing Date, and all post-effective amendments filed
shall have been declared effective or shall have been withdrawn and no stop
order suspending the effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been initiated or, to the knowledge
of the parties, threatened by the Commission; (v) there shall have been
obtained any and all material permits, approvals and consents of any
governmental body or agency, that reasonably may be deemed necessary so
that the consummation of the Merger and the transactions contemplated
thereby will be in compliance with applicable laws, the failure to comply
with which would have (a) a material adverse effect on the financial
condition of Christiana after giving effect to the Logistic Sale or prevent
or adversely affect the ability of Christiana, Logistic or C2 to perform
and comply with their respective obligations under the Merger Agreement and
the Logistic Sale or any other agreement to be executed and delivered in
connection with the transactions contemplated thereby (collectively, a
"Christiana MAE") or (b) a material adverse effect on the financial
condition of EVI and its subsidiaries, taken as a whole (an "EVI MAE");
(vi) the shares of EVI Common Stock issuable upon consummation of the
Merger shall have been approved for listing on the NYSE, subject to
official notice of issuance; (vii) EVI and Christiana shall have received a
solvency opinion from American Appraisal Associates, Inc. in form and
substance satisfactory to them, and (viii) the receipt of material third
party consents.
EVI's obligation to effect the Merger is, at the option of EVI, also
subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(i) the representations and warranties of Christiana contained in the
Merger Agreement shall be accurate as of the date of the Merger Agreement
and (except to the extent such representations and warranties speak
specifically as of an earlier date) as of the Closing Date as though such
representations and warranties had been made at and as of that time, all of
the terms, covenants and conditions of the Merger Agreement to be complied
with and performed by Christiana on or before the Closing Date shall have
been duly complied with and performed in all material respects, (ii) there
shall not have occurred or exist any fact or condition that would
reasonably result in a Christiana MAE or would constitute a material fixed
or contingent liability to Christiana, (iii) the Morgan Stanley Opinion
shall not have been withdrawn; (iv) all stock options of Christiana under
its various stock option plans shall have been terminated or such option
shall have been exercised; (v) Christiana shall have received, and
furnished written copies to EVI of, the Christiana affiliates' agreements
required by the Merger Agreement; (vi) EVI shall have received from Foley &
Lardner, counsel to Christiana, an opinion dated the Closing Date covering
customary matters relating to the Merger Agreement, the Merger and other
corporate and securities law matters related to Christiana; (vii) EVI shall
have received a written opinion from Arthur Andersen LLP, in form and
substance satisfactory to EVI, covering the matters described under
"Material Federal Income Tax Considerations -- Federal Income Tax
Consequences of the Merger". (viii) C2 shall have executed and delivered to
Christiana and EVI the Logistic Purchase Agreement and agreement among
members in form and substance, including schedules, acceptable to EVI;
(ix) the Logistic Sale shall have been consummated; (x) EVI shall have
received from Arthur Anderson LLP an opinion, in form and substance
satisfactory to EVI, dated as of the Closing Date, to the effect that the
Merger would not adversely effect the ability of EVI to account for any
prior or future business combination as a pooling of interest;
(xi) Christiana shall have delivered to EVI a pro forma balance sheet after
giving effect to the Logistic Sale, including a full accrual for Taxes
thereon without regard to any tax credits or tax deductions that Christiana
may have in connection with the exercise of any stock options, reflecting
Christiana Net Cash in an amount not less than $20.0 million; (xii) except
for certain liabilities agreed to by EVI, all outstanding Indebtedness
(including guarantees thereof) of Christiana and its Subsidiaries (other
than Logistic) shall have been paid in full or Christiana shall have been
released therefrom; (xiii) the assets of Christiana shall consist only of
cash of at least $30.0 million, 3,897,462 shares of EVI common stock and
333.333 units of Logistic representing one-third of the
62
70
outstanding interests of Logistic; and (xiv) there shall not be any pending
litigation involving Christiana or any of its subsidiaries, that EVI, in
its sole discretion, considers to be a material liability for which
adequate security has not been provided EVI. See "Description of
Christiana -- Legal Proceedings".
Christiana's obligations to effect the Merger is, at the option of
Christiana, also subject to the fulfillment at or prior to the Closing Date of
the following conditions:
(i) the representations and warranties of EVI and Sub contained in the
Merger Agreement shall be accurate as of the date of the Merger Agreement
and (except to the extent such representations and warranties speak
specifically as of an earlier date) as of the Closing Date as though such
representations and warranties had been made at and as of that time, all
the terms, covenants and conditions of the Merger Agreement to be complied
with and performed by EVI on or before the Closing Date shall have been
duly complied with and performed in all material respects, (ii) the
Prudential Securities Opinion shall not have been withdrawn;
(iii) Christiana and C2 shall have received from Fulbright & Jaworski,
counsel to EVI, an opinion dated the Closing Date covering customary
matters relating to the Merger Agreement and the Merger; (iv) Christiana
and C2 shall have received, a written opinion from Arthur Andersen LLP, in
form and substance satisfactory to Christiana, covering the matters
described under "Material Federal Income Tax Consequences of the Merger";
and (v) the Logistic Sale shall have occurred.
Representations and Warranties of the Parties to the Merger Agreement. EVI,
Sub, Christiana and C2 have made various representations and warranties in the
Merger Agreement relating to, among other things, their respective businesses
and financial conditions, the accuracy of their various filings with the
Commission and their financial statements contained therein, the status of
various employee benefit plans and environmental matters, the satisfaction of
certain legal requirements for the Merger and the existence of certain
litigation. The representations and warranties of each of the parties to the
Merger Agreement other than C2 will expire upon consummation of the Merger. The
representations and warranties of C2 will survive the Merger Agreement without
limitation.
Conduct of Business of Christiana and EVI Prior to Merger. Under the Merger
Agreement, Christiana is prohibited from taking various actions prior to the
Merger without the prior consent of EVI. In this regard, Christiana has agreed
that, unless otherwise expressly contemplated by the Merger Agreement or the
Logistic Purchase Agreement,
(i) its business and its subsidiaries would be conducted only in, and
it and its subsidiaries would not take any action except in, the ordinary
course of business and consistent with past practice; (ii) it would not
directly or indirectly do any of the following: (a) issue, sell, pledge,
dispose of or encumber any capital stock of Christiana except upon the
exercise of Christiana Stock Options; (b) split, combine, or reclassify any
outstanding capital stock, or declare, set aside, or pay any dividend
payable in cash, stock, property, or otherwise with respect to its capital
stock outstanding at any time; (c) redeem, purchase or acquire or offer to
acquire any of its capital stock; (d) acquire, agree to acquire or make any
offer to acquire for cash or other consideration, any equity interest in or
assets of any corporation, partnership, joint venture, or other entity in
an amount greater than $500,000; or (e) enter into any contract, agreement,
commitment, or arrangement with respect to any of the matters set forth in
this clause (ii); (iii) it would not transfer, dispose or otherwise convey
any of the shares of EVI Common Stock held by it or grant or permit there
to exist any lien or other encumbrance on such shares; (iv) subject to
certain procedures relating to approvals of new contracts, it would not
enter into any contract regarding its business having a term greater than
120 days or involving an amount in excess of $50,000 or commit to do the
same; (v) it would not become bound by any agreement or obligation in an
amount in excess of $500,000 in the aggregate for all such agreements and
obligations; (vi) it would not pledge or encumber any of the assets to be
held by it following the Logistic Sale; (vii) neither it nor its
subsidiaries would enter into any employment or consulting contracts;
(viii) neither it nor its subsidiaries would enter into any contract or
agreement that if effective on the date of the Merger Agreement would be
required to be identified to EVI under the terms of the Merger Agreement;
(ix) it would not sell, lease, mortgage,
63
71
pledge, grant a lien or other encumbrance on or otherwise encumber or
otherwise dispose of any of its subsidiaries' properties or assets, except
sales of inventory in the ordinary course of business consistent with past
practice and Christiana may liquidate (in a manner acceptable to EVI) CST
Financial, Inc., Martinique Holdings, Inc. and Christiana Community
Builders, Inc.; (x) subject to certain exceptions, neither it nor its
subsidiaries would directly or indirectly incur any indebtedness for
borrowed money or guarantee any such indebtedness of another person, issue
or sell any debt securities or warrants or other rights to acquire any debt
securities of Christiana or its subsidiaries, guarantee any debt securities
of another person; (xi) it nor any of its subsidiaries would not make any
election relating to taxes except for those elections to be made in
connection with its 1997 tax returns that are consistent with the 1996 tax
returns; (xii) neither it nor any of its subsidiaries would change any
accounting principle used by it; (xiii) it would use its reasonable efforts
to preserve intact the business organization and goodwill of Christiana and
Logistic; (xiv) it would cause there to exist, immediately prior to the
Effective Time, Christiana Net Cash (as defined in the Merger Agreement) of
not less than $20.0 million (including $10.67 million to be paid by C2
under the Logistic Purchase Agreement); (xv) subject to certain exceptions
neither Christiana nor any of its subsidiaries would settle or compromise
any litigation; (xvi) it would cause the Logistic Sale to be effected prior
to the Merger; (xvii) it would not authorize any of, or commit or agree to
take any of, or permit any of its subsidiaries to take any of the foregoing
actions to the extent prohibited by the foregoing; (xviii) Christiana shall
cause Logistic to pay to Christiana a distribution in the amount of $20.0
million cash prior to the Effective Time; (xix) Christiana shall cause
Logistic to pay in full the entire principal amount of the Wiscold Note (as
defined in the Merger Agreement) dated September 1, 1992 in the principal
amount of $3.0 million together with all accrued interest thereon; and (xx)
except as set forth in the disclosure schedule to the Merger Agreement, or
agreed to in writing by EVI prior to the Closing, Christiana shall cause
all of its obligations (a) relating to Logistic or any other historical
business of Christiana or its subsidiaries and (b) under any and all
agreements relating to the borrowing of funds, including all guarantees and
other similar arrangements relating thereto, to be fully released or
otherwise satisfied in a manner acceptable to EVI.
Pursuant to the Merger Agreement, EVI agreed that, from the date of the
Merger Agreement until the Effective Time, unless Christiana otherwise agrees in
writing or as otherwise expressly contemplated by the Merger Agreement, it would
not take any action that would, or that reasonably could be expected to, result
in any of the representations and warranties set forth in the Merger Agreement
becoming untrue or any of the conditions to the Merger set forth above not
applicable to it being satisfied.
Expenses. Under the terms of the Merger Agreement, Christiana is required
to bear significant transaction costs, which costs and the estimates thereof are
as follows: Prudential Securities Opinion ($415,000), legal fees and expenses
($350,000), accounting and tax services ($250,000), fees for the American
Appraisal Opinion ($75,000), lease cancellation ($327,000), EVI's filing fees
with the Commission ($75,000), filing fees under the HSR Act ($90,000),
reimbursement for certain costs incurred by EVI ($200,000), including all
printing and proxy solicitation costs and expenses for Blue Sky and state
securities law filings, and miscellaneous ($250,000). EVI is required to pay its
own legal and financial advisory fees. Such costs are estimated as of the date
of this Joint Proxy Statement/Prospectus and may be higher. If higher, the Cash
Consideration available for distribution may be lower. See "The Merger -- Terms
of the Merger -- Expenses" and "Ancillary Transactions".
Management Following Merger. No changes in the directors or officers of EVI
will be effected as a result of the Merger. As of the Effective Time, the
directors and officers of Sub will become the directors and officers of
Christiana.
Termination or Amendment of Merger Agreement. The Merger Agreement provides
that it may be terminated and the Merger and the other transactions contemplated
therein may be abandoned at any time prior to the Effective Time, whether prior
to or after approval by the stockholders of EVI or the shareholders of
Christiana by mutual written consent of EVI and Christiana.
EVI or Christiana may also terminate the Merger Agreement if: (i) the
Merger has not been consummated on or before October 31, 1998 (provided that the
right to terminate the Merger Agreement
64
72
under this provision is not available to any party whose breach of any
representation or warranty or failure to fulfill any covenant or agreement under
the Merger Agreement is the cause of or resulted in the failure of the Merger to
occur on or before such date); (ii) any court of competent jurisdiction, or some
other governmental body or regulatory authority shall have issued an order,
decree or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Merger; (iii) the shareholders of Christiana do not approve the
Merger Proposal at the Christiana Special Meeting or at any adjournment thereof;
(iv) the stockholders of EVI do not approve the Merger Proposal at the EVI
Special Meeting or any adjournment thereof; or (v) in the exercise of its good
faith judgment as to its fiduciary duties to its stockholders imposed by law, as
advised by outside counsel, the Board of Directors of Christiana or EVI
determines that such termination is appropriate in complying with its fiduciary
obligations.
Christiana may terminate the Merger Agreement if: (i) EVI fails to comply
in any material respect with any of the covenants or agreements contained in the
Merger Agreement to be complied with or performed by EVI or Sub at or prior to
such date of termination (provided such breach is not cured within 30 days
following receipt by EVI of written notice from Christiana of such breach and is
existing at the time of termination of the Merger Agreement); (ii) any
representation or warranty of EVI contained in the Merger Agreement shall not
have been true in all respects when made (provided such breach has not been
cured within 30 days following receipt by EVI of written notice from Christiana
of such breach and is existing at the time of termination of the Merger
Agreement) or on and as of the Effective Time as if made on and as of the
Effective Time (except to the extent it relates to a particular date), except
for such failures to be so true and correct which would not, individually or in
the aggregate, reasonably be expected to have an EVI MAE, assuming the
effectiveness of the Merger; or (iii) the Board of Directors of EVI withdraws,
modifies or changes its recommendation of the Merger Proposal in a manner
adverse to Christiana or shall have resolved to do any of the foregoing.
EVI may terminate the Merger Agreement if: (i) Christiana fails to comply
in any material respect with any of the covenants or agreements contained in the
Merger Agreement to be complied with or performed by it at or prior to such date
of termination (provided such breach is not cured within 30 days following
receipt by Christiana of written notice from EVI of such breach and is existing
at the time of termination of the Merger Agreement); (ii) any representation or
warranty of Christiana contained in the Merger Agreement shall not have been
true in all respects when made (provided such breach has not been cured within
30 days following receipt by Christiana of written notice from EVI of such
breach and is existing at the time of termination of the Merger Agreement) or on
and as of the Effective Time as if made on and as of the Effective Time (except
to the extent it relates to a particular date), except for such failures to be
so true and correct which would not, individually or in the aggregate,
reasonably be expected to have a Christiana MAE, assuming the effectiveness of
the Merger or (iii) the Board of Directors of Christiana withdraws, modifies or
changes its recommendation of the Merger Proposal in a manner adverse to EVI or
shall have resolved to do any of the foregoing.
GOVERNMENTAL AND REGULATORY APPROVALS
Under the provisions of the HSR Act, the Merger may not be consummated
until such time as the specified waiting period requirements of the HSR Act have
been satisfied. EVI and Christiana have filed notification reports, together
with requests for early termination of the waiting period, with the Department
of Justice and the FTC and the applicable waiting period has expired. At any
time before or after the Effective Time, the Department of Justice, the FTC or a
private person or entity could seek under the antitrust laws, among other
things, to enjoin the Merger or to cause EVI to divest itself, in whole or in
part, of Christiana or of other businesses conducted by EVI. Although neither
EVI nor Christiana knows of any reason that a challenge to the Merger would be
made under the antitrust laws, there can be no assurance that a challenge to the
Merger will not be made.
EVI and Christiana are aware of no other governmental or regulatory
approvals required for consummation of the Merger, other than compliance with
applicable securities laws of the various states.
65
73
ACCOUNTING TREATMENT
The Merger will be accounted for as a purchase under generally accepted
accounting principles.
NYSE LISTING OF EVI COMMON STOCK
Pursuant to the Merger Agreement, EVI is required to use reasonable efforts
to obtain listing on the NYSE of the shares of EVI Common Stock to be issued in
connection with the Merger. An application for a listing of such shares on the
NYSE, subject to the approval of the Merger by the stockholders of EVI, is
expected to be filed and approved prior to the closing of the Merger. Approval
of the listing on the NYSE of the shares of EVI Common Stock to be issued in the
Merger is a condition to the respective obligations of EVI, Christiana and Sub
to consummate the Merger.
FEDERAL SECURITIES LAW CONSEQUENCES
All shares of EVI Common Stock issued in connection with the Merger will be
freely transferable, except that any share of EVI Common Stock received by
persons who are deemed to be "affiliates" (as that term is defined under the
Securities Act) of Christiana prior to the Merger may be resold by them only in
transactions registered under the Securities Act, permitted by the resale
provisions of Rule 145 promulgated under the Securities Act (or Rule 144 if such
persons are or become affiliates of EVI) or otherwise permitted under the
Securities Act. Persons who may be deemed to be affiliates of EVI generally
include individuals or entities that control, are controlled by, or are in
common control with such party, and may include certain officers and directors
of such party, as well as principal stockholders of such party.
DISSENTERS' RIGHTS
Under Delaware law, the holders of EVI Common Stock who object to the
Merger Proposal or abstain from voting in favor of the Merger Proposal will not
have any appraisal rights or right to receive cash for their shares of EVI
Common Stock and EVI does not intend to make any such rights available to its
stockholders.
The following discussion of dissenters' rights under the Wisconsin Business
Corporation Law (the "WBCL") does not purport to be complete and is qualified in
its entirety by reference to the provisions of Section 180.1301 to 180.1331 (the
"Dissenters' Rights Provisions") of the WBCL. Christiana hereby undertakes to
supply a complete copy of the Dissenters' Rights Provisions upon written request
of its respective shareholders to Christiana Companies, Inc., William T.
Donovan, President and Chief Financial Officer, 700 North Water Street, Suite
1200, Milwaukee, Wisconsin 53202.
Any holder of Christiana Common Stock who is entitled to vote at the
Special Meeting and who objects to the Merger may demand payment of his or her
shares of Christiana Common Stock. Any such shareholder who elects to exercise
such Dissenters' Rights and wishes to do so must (i) before the vote is taken at
the Special Meeting regarding approval of the Merger, deliver to Christiana
written notice of such shareholder's intent to demand payment for such
shareholder's shares and (ii) not vote such shares in favor of approval of the
Merger. A shareholder may assert Dissenters' Rights as to fewer than all the
shares registered in such shareholder's name only if such shareholder dissents
with respect to all shares beneficially owned by any one person and notifies
Christiana in writing of the name and address of each person on whose behalf
such record shareholder asserts Dissenters' Rights. Similarly, a beneficial
owner of Christiana Common Stock may assert Dissenters' Rights as to shares held
on the beneficial owner's behalf if the beneficial owner submits to Christiana
the record shareholder's written consent to the dissent not later than the time
the beneficial shareholder asserts Dissenters' Rights and the beneficial owner
does so with respect to all shares of which it is the beneficial owner or over
which it has power to direct the vote. All notices to Christiana should be sent
or delivered to its address at the end of the immediately preceding paragraph.
Not more than ten days after approval of the Merger by shareholders,
Christiana must send to each person who has satisfied the foregoing requirements
for asserting Dissenters' Rights a notice (the "Dissenters' Notice") which must,
among other things: (i) state where the payment demand (described below) must be
sent, (ii) state where and when share certificates must be deposited, (iii)
supply a form for demanding
66
74
payment that includes the date of the first public announcement of the proposed
Merger (which date was December 15, 1997) and requires that the shareholder
asserting Dissenters' Rights certify whether the shareholder acquired beneficial
ownership of its shares before that date, (iv) set a date (which must be at
least 30 but not more than 60 days after the date the Dissenters' Notice is
delivered) by which Christiana must receive the payment demand; and (v) be
accompanied by a copy of the Dissenters' Rights Provisions of the WBCL.
A shareholder who receives a Dissenters' Notice and wishes to exercise
Dissenters' Rights must submit a demand for payment (a "Payment Demand"), must
certify whether beneficial ownership was acquired prior to December 15, 1997,
and must deposit the applicable share certificate in accordance with the terms
of the Dissenters' Notice. Upon receipt of such Payment Demand and the share
certificates from a dissenting shareholder who certified that beneficial
ownership was acquired before December 15, 1997, Christiana will pay the
dissenting shareholder Christiana's estimate of the fair value of the dissenting
shareholder's shares plus interest, if any, from the date the Merger is
consummated. Upon receipt of such Payment Demand and the share certificate from
a dissenting shareholder who did not certify that beneficial ownership was
acquired prior to December 15, 1997, Christiana may choose (in lieu of paying)
to offer to purchase the dissenting shareholder's shares at a price based upon
Christiana's estimate of the fair value of the dissenting shareholder's shares
plus accrued interest, if any.
Within 30 days after receipt of such payment or offer, the dissenting
shareholder either: (i) must accept the payment or offer or (ii) must notify
Christiana in writing of the shareholder's estimate of the fair value of the
shares (and accrued interest) and demand payment of the estimate (less any
payment previously received). In the event Christiana fails to make payment to a
person within 60 days after the date set for demanding payment, such person may
notify Christiana in writing of his or her own estimate of the fair value of his
or her shares (and accrued interest) and demand payment of such estimate. If a
dissenting shareholder and Christiana cannot agree as to the fair value of such
dissenter's shares, Christiana must, within 60 days after receiving the Payment
Demand, commence a proceeding in the Circuit Court of Milwaukee County,
Wisconsin to determine the fair value of such shares. If Christiana fails to
commence such a proceeding within such 60-day time period, Christiana must pay
to each dissenting shareholder whose demand remains unsettled the amount each
such dissenting shareholder demands as fair value.
Shareholders contemplating exercising Dissenters' Rights under Wisconsin
law are urged to read carefully the Dissenters' Rights Provisions of the WBCL.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
The following discussion of the material United States Federal income tax
consequences of the Merger is based in part on an opinion of Arthur Andersen LLP
dated February 3, 1998, and on the Code, Treasury regulations promulgated
thereunder, and judicial and administrative interpretations thereof, all as in
effect on the date hereof. No rulings have been requested from the IRS with
respect to these matters. Additionally, the opinion of Arthur Andersen LLP is
based on various representations and assumptions described therein, including
representations by EVI and Christiana regarding the reasons for the Transaction
described in "EVI's Reasons for the Transaction" and "Christiana's Reasons for
the Transaction", and is not binding on the IRS or the courts. The conclusions
set forth in the discussion may change as a result of changes in applicable laws
or interpretations thereof occurring after the date hereof. The discussion does
not address the effects of any state, local or foreign tax laws on the Merger.
THE OPINION OF ARTHUR ANDERSEN LLP IS ALSO REQUIRED TO BE DELIVERED TO EVI
AND CHRISTIANA AS A CONDITION TO THE CLOSING OF THE MERGER. THIS CONDITION MAY
BE WAIVED BY EVI AND CHRISTIANA AS TO THE OPINION TO BE RECEIVED BY IT. EXCEPT
FOR MODIFICATIONS TO THE OPINIONS WHICH WOULD NOT CHANGE THE CONCLUSIONS OF THE
OPINIONS DESCRIBED BELOW OR WHICH EVI AND CHRISTIANA DO NOT BELIEVE WILL
MATERIALLY CHANGE THE SUBSTANCE OF SUCH OPINIONS, NO WAIVER OF THE REQUIRED
OPINIONS OF ARTHUR ANDERSEN LLP WILL BE EFFECTED BY EVI OR CHRISTIANA WITHOUT
DISCLOSURE TO THEIR RESPECTIVE STOCKHOLDERS OF SUCH WAIVER, INCLUDING THE RISKS
THEREOF, AND PROVIDING STOCKHOLDERS WITH AN OPPORTUNITY TO CHANGE THEIR VOTE ON
THE TRANSACTION.
67
75
The tax treatment of a shareholder may vary depending upon his or her
particular situation, and certain shareholders that have a special status
(including individuals who hold restricted Christiana Common Stock, individuals
who acquired Christiana Common Stock as a result of the exercise of an employee
stock option, pursuant to an employee stock purchase plan or otherwise as
compensation, insurance companies, tax-exempt organizations, financial
institutions or broker-dealers, persons who do not hold Christiana Common Stock
as capital assets and persons who are neither citizens nor residents of the
United States, or who are foreign corporations, foreign partnerships or foreign
estates or trusts not subject to United States Federal income tax on income
regardless of source) may be subject to special rules not discussed below.
EACH SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES TO HIM OR HER OF THE TRANSACTIONS DESCRIBED HEREIN,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS,
AND OF CHANGES IN APPLICABLE TAX LAWS.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
In the opinion of Arthur Andersen LLP:
(i) The Merger of Sub will constitute a reorganization pursuant to
Section 368(a)(2)(E) of the Code and Christiana, EVI and Sub will be
parties to the reorganization.
(ii) Neither EVI nor Sub will recognize any gain or loss as a result
of the Merger.
(iii) No gain or loss will be recognized by Christiana on the
consummation of the Merger.
(iv) Except for the Cash Consideration and the fair market value of
the Contingent Cash Consideration received, a holder of Christiana Common
Stock will not recognize any income, gain or loss as a result of the
receipt of EVI Common Stock in the Merger.
(v) A holder's tax basis in his or her shares of EVI Common Stock
received in the Merger will equal such holder's basis in his or her
Christiana Common Stock surrendered in exchange therefor (as determined
immediately following the Merger) less the Cash Consideration and the fair
market value of the Contingent Cash Consideration received in respect of
such holders of Christiana Common Stock and increased by the gain
recognized in the Merger by such holder.
(vi) A holder's holding period for his or her shares of EVI Common
Stock received in the Merger will include the period for which the shares
of Christiana Common Stock were held, provided such shares were held as
capital assets at the time of the Merger.
(vii) Holders of Christiana Common Stock will recognize gain to the
extent of the Cash Consideration and the fair market value of the
Contingent Cash Consideration to be received in the Merger. The gain
recognized by the holders of Christiana Common Stock in the Merger will be
a capital gain provided the Christiana Common Stock exchanged is a capital
asset in the hands of the shareholder and provided it is not essentially
equivalent to a dividend.
(viii) The Contingent Cash Consideration should be a deferred payment
under the Code and have an imputed interest component determined under the
Code and regulations thereunder. As such, upon receipt of the Contingent
Cash Consideration, gain or loss attributable to the Contingent Cash
Consideration will be computed as the difference between (i) the amount of
the Contingent Cash Consideration received and (ii) the sum of the fair
market value of the Contingent Cash Consideration at the Effective Time and
the amount of imputed interest. The resulting gain or loss will be capital
gain or loss provided the Christiana Common Stock exchanged constitutes a
capital asset in the hands of the shareholder. The imputed interest
component will be ordinary income.
BACKUP WITHHOLDING
Under the backup withholding rules, a holder of EVI Common Stock may be
subject to backup withholding at the rate of 31% with respect to dividends and
proceeds of redemption, unless such holder (a) is
68
76
a corporation or comes within certain other exempt categories and, when
required, demonstrates this fact or (b) provides a correct taxpayer
identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with applicable requirements of the backup
withholding rules. Any amount withheld under these rules will be credited
against the holder's Federal income tax liability. EVI may require holders of
EVI Common Stock to establish an exemption from backup withholding or to make
arrangements satisfactory to EVI with respect to the payment of backup
withholding. A holder who does not provide EVI with his or her current taxpayer
identification number may be subject to penalties imposed by the IRS.
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION
CHRISTIANA OWNERSHIP
Christiana currently owns 3,897,462 shares of EVI Common Stock, which in
aggregate represents approximately 4.0% of the total outstanding shares of EVI
Common Stock. Sheldon B. Lubar, is a Member of the Board of Directors of EVI.
Mr. Lubar is also the Chairman of Christiana. Mr. Lubar also holds, together
with his wife and as trustee of certain trusts for the benefit of his
grandchildren 968,615 shares of Christiana Common Stock and options to purchase
an aggregate of 30,000 shares of EVI Common Stock.
Sheldon B. Lubar is a member of the EVI Board of Directors. Mr. Lubar in
his capacity as a director of EVI did not participate in any business of the EVI
Board of Directors relating to the Merger or any transactions ancillary thereto.
Mr. Lubar beneficially owns, as of the date hereof, 968,615 shares of Christiana
Common Stock or 18.8% of the issued and outstanding Common Stock of Christiana
(including 433,705 shares owned by his wife). In addition, certain members of
Mr. Lubar's immediate family own shares of Christiana Common Stock in the
following amounts: David J. Lubar, his son, 427,403 shares (8.2% of Christiana's
outstanding stock); Joan P. Lubar, his daughter, 448,551 shares (8.6% of
Christiana's outstanding stock); Kristine L. Thomson, his daughter, 430,478
shares (8.3% of Christiana's outstanding stock); and Susan Solvang, his
daughter, 442,953 shares (8.5% of Christiana's outstanding stock). As a result
of the Transaction, Sheldon B. Lubar, David J. Lubar, Joan P. Lubar, Kristine L.
Thomson and Susan Solvang, will own 725,619, 320,180, 336,023, 322,484 and
331,829 shares of EVI Common Stock, respectively.
In addition, other directors and executive officers beneficially own shares
of Christiana Common Stock in the following amounts: Albert O. Nicholas, a
director, 310,700 shares (5.9% of Christiana's outstanding stock); Nicholas F.
Brady, director, 200,000 shares (3.8% of Christiana's outstanding stock);
William T. Donovan, President, Chief Financial Officer and a director, 178,532
shares (3.4% of Christiana's outstanding stock); Gary R. Sarner, Chairman of
Logistic, 26,000 shares (less than 1% of Christiana's outstanding stock); and
John R. Patterson, President and Chief Executive Officer of Logistic, 12,700
shares (less than 1% of Christiana's outstanding stock). The amounts reflected
for Messrs. Donovan and Sarner include options to purchase 25,000 and 20,000
shares, respectively. As a result of the Transaction, Messrs. Nicholas, Brady,
Donovan, Sarner and Patterson will own 232,755, 149,826, 133,744, 19,477 and
7,058 shares of EVI Common Stock, respectively.
Shareholders of Christiana immediately prior to the Effective Time,
including Christiana executive officers and directors, will be entitled to
purchase one share of C2 Common Stock for each share of Christiana Common Stock
held immediately prior to the Effective Time. In addition, in connection with
the Merger and the Logistic Sale, the Lubar Family entered into the Lubar/C2
Agreement wherein they agreed to purchase enough shares of C2 as are necessary
to raise $10.67 million. The Lubar/C2 Agreement will insure that C2 has
sufficient funds to complete the Logistic Sale.
Certain executive officers and directors of Christiana will be executive
officers and directors of C2, and to the extent such officers and directors are
Christiana shareholders, they will have the ability to purchase their pro rata
interest in C2 pursuant to C2's offering of up to 5,202,664 shares of its common
stock under a separate prospectus. Assuming all shareholders of Christiana
exercise their ability to purchase their pro rata interest in C2 pursuant to the
C2 Offering, the Lubar Family and the other officers and directors of C2 would
beneficially own approximately 66% of the outstanding shares of C2 Common Stock.
To the extent Christiana shareholders do not exercise their ability to purchase
their pro rata interest in C2, the beneficial ownership
69
77
interest in C2 of the Lubar Family and the other directors and officers of C2
will increase, and such persons could potentially own up to 100% of C2 Common
Stock. See "Interests of Certain Persons in the Transaction".
Under the terms of the Merger Agreement, all employee stock options of
Christiana are required to be exercised or cancelled prior to the Merger. As a
result, the executive officers and other individuals who hold options to
purchase shares of Christiana were given a choice to (i) either cancel, in whole
or in part, their options in exchange for an amount equal to the (A) difference
between $40 and the option exercise price, multiplied by (B) the number of
shares subject to the cancelled option or (ii) exercise their options prior to
the Effective Time. Mr. Donovan has elected to exercise all of his options to
purchase Christiana Common Stock prior to the Effective Time. Mr. Sarner has
exercised options to purchase 5,000 shares of Christiana Common Stock, has
elected to exercise options and purchase 20,000 shares of Christiana Common
Stock prior to the Effective Time and has elected to cancel options to purchase
65,150 shares of Christiana Common Stock in exchange for $641,727. Mr. Patterson
has exercised options to purchase 7,700 shares of Christiana Common Stock and
elected to cancel options to purchase 92,300 shares of Christiana Common Stock
in exchange for $1,453,725.
INDEMNITY
Pursuant to the Logistic Purchase Agreement, Logistic and C2 are obligated
to indemnify Christiana, EVI and their respective affiliates and agents for
various liabilities relating to historical operations of Christiana, Logistic
and their current and historic subsidiaries and predecessors. Among the matters
for which Logistic and C2 are required to indemnify Christiana and EVI are (i)
any liability relating to any claim or damage by any stockholder of Christiana
or EVI with respect to the Merger, the Logistic Sale or the transactions
relating thereto and (ii) any taxes as a result of the Merger subsequently being
determined to be a taxable transaction for foreign, federal, state or local law
purposes regardless of the theory or reason for the Merger being subject to tax
and any taxes as a result of the Logistic Sale. This indemnity includes claims
and liabilities arising under the securities laws and claims with respect to
this Joint Proxy Statement/Prospectus.
70
78
EVI SELECTED CONDENSED CONSOLIDATED FINANCIAL DATA
The following table sets forth certain summary historical condensed
consolidated financial data of EVI. This information should be read in
conjunction with EVI's Management's Discussion and Analysis of Financial
Condition and Results of Operations and its financial statements and related
notes thereto contained in its Annual Report on Form 10-K for the year ended
December 31, 1997, Quarterly Report on Form 10-Q for the period ended March 31,
1998 and the Current Report on Form 8-K dated June 15, 1998, and Christiana's
financial statements and related notes thereto, which are included herein or
incorporated herein by reference in this Joint Proxy Statement/Prospectus.
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- ---------- ---------- ---------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
OPERATING DATA:
Revenues...................... $573,460 $431,253 $1,969,089 $1,467,270 $1,125,803 $858,993 $671,470
Cost of sales................. 382,172 306,991 1,371,126 1,090,814 831,231 630,850 482,878
Selling, general and
administrative expenses..... 81,468 57,783 264,553 209,433 195,747 155,860 127,966
Equity in Earnings of
Unconsolidated Affiliates... (780) (509) (2,582) (2,078) (1,477) (1,169) (2,716)
Acquisition-related and other
charges..................... -- -- -- -- 88,182 2,500 4,000
-------- -------- ---------- ---------- ---------- -------- --------
Operating income.............. 110,600 66,988 335,992 169,101 12,120 70,952 59,342
Interest expense.............. (12,011) (10,545) (43,273) (39,368) (33,504) (22,384) (11,601)
Other income (expense), net... (627) 2,178 12,242 2,941 8,409 615 2,231
Income tax (provision)
benefit..................... (36,819) (20,718) (108,188) (40,513) 4,707 (13,137) (14,741)
-------- -------- ---------- ---------- ---------- -------- --------
Income (loss) from continuing
operations.................. $ 61,143 $ 37,903 $ 196,773 $ 92,161 $ (8,268) $ 36,046 $ 35,231
======== ======== ========== ========== ========== ======== ========
Earnings per share from
continuing operations:
Basic....................... $ 0.63 $ 0.40 $ 2.04 $ 1.03 $ (0.10) $ 0.53 $ 0.58
Diluted..................... $ 0.63 $ 0.39 $ 2.01 $ 1.01 $ (0.10) $ 0.53 $ 0.58
Weighted average shares
outstanding:
Basic....................... 96,761 95,302 96,052 89,842 77,595 67,672 60,628
Diluted..................... 97,625 96,704 97,562 90,981 77,595 68,032 60,894
DECEMBER 31,
MARCH 31, ------------------------------------------------------------
1998 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
BALANCE SHEET DATA:
Total assets........................ $2,909,445 $2,737,910 $2,243,633 $1,710,568 $1,464,804 $885,981
Long-term debt...................... 252,527 252,322 417,976 416,473 303,854 56,580
5% Convertible Subordinated
Preferred Equivalent Debentures... 402,500 402,500 -- -- -- --
Stockholders' equity................ 1,512,342 1,458,549 1,292,704 958,337 845,287 582,187
71
79
CHRISTIANA SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth certain selected historical financial data
for Christiana as of and for each of the five years ended June 30, 1997 and as
of March 31, 1998 and for the nine month periods ended March 31, 1998 and 1997.
The historical financial data as of and for each of the five years in the period
ended June 30, 1997 was derived from the consolidated financial statements of
Christiana, which were audited by Arthur Andersen LLP, independent public
accountants. The historical financial data as of March 31, 1998 and for the nine
month periods ended March 31, 1998 and 1997 have not been audited. In the
opinion of Christiana, the historical financial data as of March 31, 1998 and
for the nine months ended March 31, 1998 and 1997 include all adjusting entries
necessary to present fairly the information set forth therein. The operating
data for the nine months ended March 31, 1998 is not necessarily indicative of
results that may be expected for the year ending June 30, 1998. The following
selected historical consolidated financial data should be read in conjunction
with Christiana's "Management's Discussion and Analysis of Results of Operations
and Financial Condition" and Christiana's Consolidated Financial Statements and
related notes appearing elsewhere in this Prospectus.
NINE MONTHS ENDED
MARCH 31, FISCAL YEAR ENDED JUNE 30,
----------------- ------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------- ------- ------- ------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Operating Data:
Revenues........................... $68,579 $63,271 $84,208 $77,170 $126,881 $90,153 $46,763
Direct operating expenses.......... 57,843 53,051 70,973 65,418 104,818 74,976 36,658
Selling, general and administrative
expenses........................ 6,615 6,114 8,656 7,531 11,739 8,755 8,653
------- ------- ------- ------- -------- ------- -------
Operating income................... 4,121 4,106 4,579 4,221 10,324 6,422 1,452
Interest expense................... (2,150) (2,437) (3,166) (3,096) (4,842) (3,710) (3,283)
Equity in earnings of EVI.......... 6,011 8,855 10,479 1,745 -- -- --
Other income (expense), net........ (1,102) (962) (923) 3,141 3,658 3,195 6,176
Income tax expenses................ 2,704 3,731 4,306 2,408 3,394 2,256 1,812
Minority interest.................. -- -- -- -- (684) (530) 408
------- ------- ------- ------- -------- ------- -------
Net income......................... $ 4,176 $ 5,831 $ 6,663 $ 3,603 $ 5,062 $ 3,121 $ 2,941
======= ======= ======= ======= ======== ======= =======
Earnings per share(1):
Basic........................... $ 0.81 $ 1.14 $ 1.30 $ 0.69 $ 0.96 $ 0.59 $ 0.57
Diluted......................... 0.80 1.13 1.29 0.69 0.96 0.59 0.57
Weighted average shares
outstanding..................... 5,143 5,137 5,137 5,187 5,276 5,321 5,203
JUNE 30,
MARCH 31, ------------------------------------------------
1998 1997 1996 1995 1994 1993
--------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Balance Sheet Data:
Total assets.......................... $142,764 $142,356 $131,018 $121,742 $147,565 $122,832
Long-term debt........................ 31,167 36,149 44,013 38,256 53,458 49,973
Stockholders' equity.................. 76,598 72,085 61,077 58,710 60,088 51,461
Cash dividends per share.............. -- -- -- -- -- --
- ---------------
(1) All earnings per share amounts have been restated to reflect the adoption of
Statement of Accounting Standards No. 128, "Earnings Per Share", effective
December 15, 1997. For further discussion of the change in accounting, refer
to Note 5 to the Christiana Consolidated Financial Statements for the
quarter ended March 31, 1998 included herein.
72
80
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following tables set forth certain summary unaudited pro forma
condensed consolidated financial data of EVI, and is based on the supplemental
historical financial data of EVI and the historical financial data of
Christiana. The Unaudited Pro Forma Condensed Consolidated Statements of Income
for the twelve months ended December 31, 1997, and the three months ended March
31, 1998, give effect to the proposed Merger and the sale by Christiana, prior
to the proposed Christiana Merger, of two-thirds of its interest in Logistic to
C2 for approximately $10.7 million, as if these transactions had occurred
January 1, 1997. The Unaudited Pro Forma Condensed Consolidated Balance Sheet
gives effect to the Merger as if this transaction had occurred on March 31,
1998.
The pro forma information set forth below is not necessarily indicative of
the results that actually would have been achieved had such transactions been
consummated as of the aforementioned dates, or that may be achieved in the
future. All other acquisitions by EVI are not material individually or in the
aggregate; therefore, pro forma information is not reflected. This information
should be read in conjunction with EVI's Management's Discussion and Analysis of
Financial Condition and Results of Operations and its financial statements and
related notes thereto contained in its Annual Reports on Form 10-K for the year
ended December 31, 1997, Quarterly Reports on Form 10-Q for the period ended
March 31, 1998 and EVI's Current Report on Form 8-K dated June 15, 1998 and
Christiana's financial statements and related notes thereto, which are included
herein or are incorporated herein by reference.
73
81
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
(IN THOUSANDS)
ASSETS
PRO FORMA
ADJUSTMENTS
EVI --------------------------
SUPPLEMENTAL CHRISTIANA SALE OF MERGER EVI
HISTORICAL HISTORICAL LOGISTIC(A) ENTRIES PRO FORMA
------------ ---------- ----------- --------- ----------
Current assets:
Cash and cash equivalents.... $ 42,500 $ 5,290 $ 33,303(b) $ (20,357)(c)(d) $ 60,736
Accounts receivable, net..... 536,816 8,169 (8,169) -- 536,816
Inventories.................. 499,387 -- -- -- 499,387
Other current assets......... 101,199 1,734 (1,734) -- 101,199
---------- -------- -------- --------- ----------
Total current
assets............. 1,179,902 15,193 23,400 (20,357) 1,198,138
---------- -------- -------- --------- ----------
Property, plant and equipment,
net.......................... 886,351 72,301 (72,301) -- 886,351
Goodwill, net.................. 755,962 5,475 (5,475) -- 755,962
Investment in EVI.............. -- 47,268 -- (47,268)(e) --
Investment in Logistic......... -- -- 7,976(f) (4,163)(g) 3,813
Other assets................... 87,230 2,527 (2,527) -- 87,230
---------- -------- -------- --------- ----------
$2,909,445 $142,764 $(48,927) $ (71,788) $2,931,494
========== ======== ======== ========= ==========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and
current portion of
long-term debt............ $ 148,043 $ 1,404 $ (1,404) $ -- $ 148,043
Accounts payable............. 201,948 4,081 (4,081) -- 201,948
Other accrued liabilities.... 254,050 4,815 1,921(h) 1,373(d)(i) 262,159
---------- -------- -------- --------- ----------
Total current
liabilities........ 604,041 10,300 (3,564) 1,373 612,150
---------- -------- -------- --------- ----------
Long-term debt................. 252,527 31,167 (31,167) -- 252,527
Deferred income taxes and
other........................ 138,035 24,699 (10,797)(h) 38(e)(j) 151,975
5% Convertible Subordinated
Preferred Equivalent
Debentures................ 402,500 -- -- -- 402,500
Shareholders' equity:
Common stock................. 101,507 5,209 -- (1,312)(d)(k)(l) 105,404
Capital in excess of par..... 1,052,109 12,346 -- 144,527(d)(k)(l) 1,208,982
Retained earnings............ 603,491 60,279 (3,399) (56,880)(d)(l) 603,491
Cumulative foreign currency
translation adjustment.... (41,635) -- -- -- (41,635)
Treasury stock, at cost...... (203,130) (1,236) -- (159,534)(k)(l) (363,900)
---------- -------- -------- --------- ----------
Total stockholders'
equity............. 1,512,342 76,598 (3,399) (73,199) 1,512,342
---------- -------- -------- --------- ----------
$2,909,445 $142,764 $(48,927) $ (71,788) $2,931,494
========== ======== ======== ========= ==========
74
82
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
PRO FORMA
EVI ADJUSTMENTS
SUPPLEMENTAL CHRISTIANA ------------- EVI
HISTORICAL HISTORICAL CHRISTIANA(M) PRO FORMA
------------ ---------- ------------- ----------
Revenues:
Products................................ $1,097,823 $ -- $ - $1,097,823
Services and rentals.................... 871,266 90,101 (90,101) 871,266
---------- ------- -------- ----------
1,969,089 90,101 (90,101) 1,969,089
---------- ------- -------- ----------
Costs and expenses:
Cost of sales:
Products............................. 790,314 -- -- 790,314
Services and rentals................. 580,812 76,377 (76,377) 580,812
Selling, general and administrative..... 264,553 9,103 (9,103) 264,553
Equity in earnings in unconsolidated
affiliates........................... (2,582) -- -- (2,582)
---------- ------- -------- ----------
1,633,097 85,480 (85,480) 1,633,097
---------- ------- -------- ----------
Operating income.......................... 335,992 4,621 (4,621) 335,992
---------- ------- -------- ----------
Other income (expense):
Interest expense........................ (43,273) (2,991) 2,991 (43,273)
Interest income......................... 8,329 507 (507) 8,329
Equity in earnings in EVI............... -- 6,290 (6,290)(n) --
Equity in earnings in Logistic.......... -- -- 130 130
Other income (expense), net............. 3,913 (1,470) 1,470 3,913
---------- ------- -------- ----------
(31,031) 2,336 (2,206) (30,901)
---------- ------- -------- ----------
Income (loss) before income taxes......... 304,961 6,957 (6,827) 305,091
Provision (benefit) for income taxes...... 108,188 2,763 (2,676)(o) 108,275
---------- ------- -------- ----------
Income (loss) from continuing
operations.............................. $ 196,773 $ 4,194 $ (4,151) $ 196,816
========== ======= ======== ==========
Earnings per share from continuing
operations:
Basic................................... $ 2.04 $ 2.05
========== ==========
Diluted................................. $ 2.01 $ 2.02
========== ==========
Weighted average shares outstanding:
Basic................................... 96,052 96,052(p)
========== ==========
Diluted................................. 97,562 97,562
========== ==========
75
83
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
PRO FORMA
EVI ADJUSTMENTS
SUPPLEMENTAL CHRISTIANA -------------- EVI
HISTORICAL HISTORICAL CHRISTIANA (M) PRO FORMA
------------ ---------- -------------- ---------
Revenues:
Products.................................. $363,396 $ -- $ -- $363,396
Services and rentals...................... 210,064 21,865 (21,865) 210,064
-------- ------- -------- --------
573,460 21,865 (21,865) 573,460
-------- ------- -------- --------
Costs and expenses:
Cost of sales:
Products............................... 249,066 -- -- 249,066
Services and rentals................... 133,106 18,526 (18,526) 133,106
Selling, general and administrative....... 81,468 2,273 (2,273) 81,468
Equity in earnings in unconsolidated
affiliates............................. (780) -- -- (780)
-------- ------- -------- --------
462,860 20,799 (20,799) 462,860
-------- ------- -------- --------
Operating income............................ 110,600 1,066 (1,066) 110,600
-------- ------- -------- --------
Other income (expense):
Interest expense.......................... (12,011) (658) 658 (12,011)
Interest income........................... 648 101 (101) 648
Equity in earnings in EVI................. -- 2,564 (2,564)(n) --
Equity in earnings in Logistics........... -- -- 94 94
Other income (expense), net............... (1,275) (72) 72 (1,275)
-------- ------- -------- --------
(12,638) 1,935 (1,841) (12,544)
-------- ------- -------- --------
Income (loss) before income taxes........... 97,962 3,001 (2,907) 98,056
Provision (benefit) for income taxes........ 36,819 1,168 (1,164)(o) 36,823
-------- ------- -------- --------
Income (loss) from continuing operations.... $ 61,143 $ 1,833 $ (1,743) $ 61,233
======== ======= ======== ========
Earning per share from continuing
operations:
Basic..................................... $ 0.63 $ 0.63
======== ========
Diluted................................... $ 0.63 $ 0.63
======== ========
Weighted average shares outstanding:
Basic..................................... 96,761 96,761(p)
======== ========
Diluted................................... 97,625 97,625
======== ========
76
84
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
GENERAL
The following notes set forth the assumptions used in preparing the
unaudited pro forma financial statements. The pro forma adjustments are based on
estimates made by EVI's management using information currently available.
PRO FORMA ADJUSTMENTS
The adjustments to the accompanying Unaudited Pro Forma Condensed
Consolidated Balance Sheet are described below:
(a) To reflect the sale of a two thirds interest in Logistic by
Christiana to C2 for cash of $10.67 million and to reflect a $3.4 million
loss, net of taxes, due to the purchase price being less than the $16.2
million carrying value of the interest in Logistic. Such sale is in
accordance with the Merger Agreement as (i) Logistic is required to
distribute $23.4 million to Christiana, funded from borrowings of Logistic
to permit Christiana to have sufficient cash to allow EVI to pay the cash
consideration contemplated by the Transaction, (ii) Christiana is to sell
its two-thirds interest in Logistic to C2 for $10.67 million and (iii) EVI
is required to pay to the Christiana shareholders an amount of cash equal
to the cash of Christiana at the closing of the Transaction less $10.0
million and the amount of certain liabilities and tax benefits to be
maintained by Christiana for the benefit of EVI.
(b) To reflect an increase in Christiana's cash of $23.0 million from
a dividend from Logistic funded through Logistic's borrowings to meet the
required minimum cash levels per the Merger Agreement, and to reflect the
cash to Christiana of $10.67 million from its sale of the two-thirds
interest in Logistic less $0.4 million of cash held by Logistic.
(c) To reflect the cash payment by EVI of $19.3 million or $3.71 per
share to the holders of common stock of Christiana pursuant to the Merger
Agreement. The pro forma cash payment by EVI of $3.71 per share is based on
pro forma data for the period presented herein; however, Christiana
currently expects that such payment will be approximately $3.60 per share.
The difference of $0.11 per share relates to timing differences for cash
expenditures, including taxes, for the period from April 1, 1998, to
closing, not reflected in the historical financial information of
Christiana presented herein.
(d) To reflect the exercise of Christiana employee stock options
relating to 53,334 shares of Christiana Common Stock for $1.4 million in
cash and the cancellation of Christiana employee stock options for $2.5
million in cash. The exercise and cancellation of Christiana employee stock
options generated a tax benefit of $1.1 million. Cash in this amount is
required to be retained by Christiana for the benefit of EVI.
(e) To eliminate Christiana's investment in EVI and related deferred
taxes of $10.0 million.
(f) To reflect the remaining one-third interest in Logistic held by
Christiana. The investment represents a one-third interest of the net book
value of Logistic.
(g) Prior to Christiana's sale of its two-thirds interest in Logistic,
the pro forma net book value of Logistic was $24.2 million at March 31,
1998. After the sale of Christiana's two-thirds interest in Logistic, the
remaining net book value of Logistic is $8.0 million. EVI reflects a
reduction of $4.2 million in the carrying value of Christiana's remaining
one-third interest in Logistic reflecting the excess fair value of the net
tangible post merger assets of Christiana over the cash and stock
consideration being paid to the Christiana shareholders.
(h) To reclassify certain deferred tax liabilities of $8.9 million to
current federal taxes payable as a result of the sale by Christiana of its
two-thirds interest in Logistic.
(i) To record a $2.5 million liability for transaction costs related
to the Transaction.
77
85
NOTES TO PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(j) To record a $10.0 million EVI liability to the Christiana
shareholders payable in five years pursuant to the Merger Agreement.
(k) To reflect the issuance of 3,897,462 shares of EVI Common Stock in
the Transaction at a price of $41.25 per share, the market price of the EVI
Common Stock on December 15, 1997, and the acquisition of 3,897,462 shares
of EVI Common Stock held by Christiana as a result of the Transaction. The
shares of EVI Common Stock held by Christiana have been classified as
treasury shares.
(l) To eliminate the remaining Christiana Common Stock of $5.3
million, capital in excess of par of $14.9 million, retained earnings of
$52.9 million and treasury stock of $1.2 million.
The adjustments to the accompanying Unaudited Pro Forma Condensed
Consolidated Statement of Income are described below:
(m) To eliminate Logistic's historical operating results, to reflect a
one-third equity interest in Logistic and to record the income tax
provision related to the one-third equity interest at the statutory rate.
(n) To eliminate Christiana's equity in earnings of EVI.
(o) To record the income tax benefit related to the effect of the pro
forma adjustments at the statutory rate.
(p) EVI's historical shares outstanding and basic weighted average pro
forma post-merger shares outstanding as of March 31, 1998, were 96,710,361
and 96,761,171, respectively.
78
86
DESCRIPTION OF EVI
EVI is an international manufacturer and supplier of engineered oilfield
tools and equipment. EVI's products are used both for the drilling and
production phases of oil and natural gas wells. EVI has achieved significant
growth in recent years through a consistent strategy of synergistic acquisitions
and internal development. EVI's acquisitions have focused on consolidation and
vertical integration, development of complete product lines and technology.
EVI's internal growth has focused on technology, product development,
manufacturing efficiencies and productivity enhancements.
EVI's principal products consist of drill pipe and other drilling tools,
premium connectors and associated high grade tubulars, marine connectors,
artificial lift systems, packers and completion tools. EVI's growth strategy has
resulted in EVI becoming the largest manufacturer of drill pipe, drill collars
and heavyweight drill pipe in the world, the largest provider of premium tubular
connectors in North America and one of the largest providers of artificial lift
equipment in the world. EVI's product lines are divided into the drilling
products segment consisting of drill pipe, premium tubulars and marine
connectors, and the production equipment segment consisting of artificial lift
and completion equipment.
EVI was incorporated in 1972 as a Massachusetts corporation and was
reincorporated in Delaware in 1980. Sub is a wholly owned subsidiary of EVI that
was incorporated in Wisconsin in December 1997 for the purpose of effecting the
Merger. EVI's and Sub's corporate office is located at 5 Post Oak Park, Suite
1760, Houston, Texas 77027-3415, and their telephone number is (713) 297-8400.
RECENT DEVELOPMENTS
On May 27, 1998, EVI completed the merger of Weatherford with and into EVI
pursuant to a tax free merger in which the stockholders of Weatherford received
0.95 of a share of EVI Common Stock, in exchange for each outstanding share of
Weatherford Common Stock. EVI was the surviving corporation and has been renamed
EVI Weatherford, Inc.
Weatherford is a diversified international energy service and manufacturing
company that provides a variety of services and equipment to the exploration,
production and transmission sectors of the oil and gas industry. Weatherford
operates in virtually every oil and gas exploration and production region in the
world. Weatherford's principal business segments include (i) the oilfield
services segment, which consists of renting specialized oilfield equipment,
providing fishing, milling, whipstock installation and retrieval, well control
assistance and other downhole services and related tools, and providing tubular
running services and related tools, (ii) the oilfield products segment, which
consists of manufacturing, selling and servicing a variety of products,
including cementation products, liner hangers, gas lift equipment and equipment
used to provide oilfield services and (iii) the gas compression segment, which
consists of manufacturing, packaging, renting, selling and providing parts and
services for gas compressor units over a broad horsepower range.
The Weatherford Merger was effected to further EVI's strategy of taking
advantage of opportunities in the oilfield service industry, more particularly
the well construction and production life cycle segments. EVI believes that the
combination of EVI's broad range of completion and artificial lift products with
Weatherford's worldwide oilfield services infrastructure and reputation should
provide the combined company with a firm foundation for growth. The Weatherford
Merger was also effected to (i) provide EVI with a greater and more diversified
line of products and services to serve its customers' needs, (ii) expand EVI's
international presence and (iii) provide EVI with benefits through product
leveraging and consolidation savings.
79
87
EXECUTIVE COMPENSATION
The following table sets forth as of the Record Date the beneficial
ownership of the outstanding EVI Common Stock by each current director and each
current executive officer of EVI and all directors and executive officers of EVI
as a group.
BEFORE THE MERGER AFTER THE MERGER
------------------------ ------------------------
NUMBER OF NUMBER OF
SHARES PERCENT SHARES PERCENT
BENEFICIALLY OF BENEFICIALLY OF
NAME OWNED(1) CLASS(%) OWNED(1) CLASS(%)
---- ------------ -------- ------------ --------
Bernard J. Duroc-Danner........................... 830,000 * 830,000 *
Curtis W. Huff.................................... 75,000 * 75,000 *
James G. Kiley.................................... 155,000 * 155,000 *
Frances R. Powell................................. 41,668 * 41,668 *
Ghazi J. Hashem................................... -- * -- *
John C. Coble..................................... 80,400 * 80,400 *
Robert F. Stiles.................................. 60,200 * 60,200 *
David J. Butters.................................. 56,612 * 56,612 *
Sheldon B. Lubar(2)............................... 30,000 * 30,000 *
Robert B. Millard................................. 118,960 * 118,960 *
Robert A. Rayne(3)................................ 20,000 * 20,000 *
Philip Burguieres(4).............................. 233,722 * 233,722 *
William E. Macaulay(5)............................ 6,250,655 6.4% 6,250,655 6.4%
Robert K. Moses, Jr.(6) .......................... 425,228 * 425,228 *
All Directors and Executive Officers as a Group
(14 persons).................................... 8,302,445 8.6% 8,302,445 8.6%
- ---------------
* Less than 1%.
(1) Beneficial ownership by a person includes both outstanding shares of EVI
Common Stock owned and shares of EVI Common Stock which such person has a
right to acquire within 60 days upon the exercise of outstanding options.
Directors and executive officers have sole voting and investment power with
respect to the shares they own.
(2) Does not include 3,897,462 shares of EVI Common Stock owned directly by
Christiana. Mr. Lubar currently beneficially owns approximately 18.8% of the
outstanding shares of common stock of Christiana. Pursuant to the Merger,
Mr. Lubar will be entitled to receive 725,618 shares of EVI Common Stock or
approximately 0.8% of the outstanding shares of EVI Common Stock after the
Merger.
(3) Excludes 400,000 shares beneficially owned by London Merchant Securities
plc, of which Mr. Rayne serves as Executive Director. Mr. Rayne disclaims
beneficial ownership of all of such shares.
(4) Includes (a) 950 shares of EVI Common Stock held by Mr. Burguieres' wife,
with respect to which he has no voting or dispositive power, and (b) 475
shares of EVI Common Stock held by Mr. Burguieres' adult son supported by
him, with respect to which he has sole voting and dispositive power; Mr.
Burguieres disclaims beneficial ownership of all such shares. Also includes
(a) 8,312 shares of EVI Common Stock granted to Mr. Burguieres pursuant to
the EVI Restricted Stock Plan, with respect to which he has sole voting and
no dispositive power, and (b) 97,375 shares of EVI Common Stock subject to
acquisition by Mr. Burguieres within 60 days pursuant to a EVI stock option
plan. Also includes 409 shares of EVI Common Stock held under EVI's Employee
Stock Purchase Plan (the "ESPP") in the account of Mr. Burguieres, as to
which he has sole voting and no dispositive power prior to withdrawal of
such shares from the ESPP. Shares may be withdrawn from the ESPP by a
participant on March 31 of each year upon written notice by such
participant. Also includes 175 shares of EVI Common Stock held under EVI's
401(k) Savings Plan (the "401(k) Plan") in Mr. Burguieres' account, as to
which shares Mr. Burguieres has sole voting and no dispositive power.
80
88
(5) Includes 6,618 shares of EVI Common Stock held by Mr. Macaulay's wife, with
respect to which he has no voting or dispositive power; Mr. Macaulay
disclaims beneficial ownership of such shares. Includes 5,623,341 shares of
EVI Common Stock owned beneficially by First Reserve and the First Reserve
Funds; Messr. Macaulay disclaims beneficial ownership of such shares.
Includes 1,295 shares of EVI Common Stock granted to Messr. Macaulay
pursuant to the EVI Restricted Stock Plan, with respect to which he has sole
voting and no dispositive power.
(6) Includes an aggregate of 42,750 shares of EVI Common Stock held in various
trusts for Mr. Moses' children, his brother and his sister, of which Mr.
Moses is the trustee, with respect to which Mr. Moses has sole voting and
dispositive power; Mr. Moses disclaims beneficial ownership of all such
shares. Does not include (a) an aggregate of 49,875 shares of EVI Common
Stock held in various trusts for Mr. Moses children, with respect to which
Mr. Moses has no voting or dispositive power, (b) 1,758 shares of EVI Common
Stock held in a trust for Mr. Moses' son, with respect to which he has no
voting or dispositive power, since Mr. Moses is not a trustee of such trusts
and has no voting or dispositive power, he disclaims beneficial ownership of
all such shares or (a) 593 shares of EVI Common Stock held by Mr. Moses'
adult son supported by him, with respect to which Mr. Moses has no voting or
dispositive power. Includes 1,295 shares of EVI Common Stock granted to Mr.
Moses pursuant to the EVI Restricted Stock Plan, with respect to which he
has sole voting and no dispositive power.
81
89
DESCRIPTION OF CHRISTIANA
BUSINESS
General. Christiana's only operating entity is Logistic. Logistic provides
refrigerated and non-refrigerated warehousing and logistic services. Christiana
also owns 3,897,462 shares of EVI Common Stock, which represents approximately
4.0% of the outstanding shares of EVI Common Stock. Christiana also holds,
through a wholly-owned subsidiary, mortgage notes receivable, derived from
certain condominium sales, which as of December 31, 1997, had an aggregate
principal amount outstanding of $1,273,000 (accruing interest at rates ranging
from 6.875% to 9%).
Logistic. The operations of Logistic were historically conducted through
two of Christiana's wholly owned subsidiaries, Wiscold, Inc., a Wisconsin
corporation ("Wiscold"), and Total Logistic Control, Inc., a Michigan
corporation ("Total Logistic"). On June 30, 1997, the operations and corporate
structures of Wiscold and Total Logistic were merged to form Logistic.
Christiana acquired Wiscold in September of 1992 and Total Logistic in January
of 1994.
Logistic provides refrigerated and dry (non-refrigerated) third-party
logistic services including warehousing, transportation, distribution and
international freight forwarding. The third-party logistics industry is
comprised generally of entities which provide either asset-based or non-asset
based services. Asset-based entities provide services through their warehousing
and fleet operations, while non-asset based entities provide strategic solutions
to, and arrange for, the distribution and warehousing needs of their customers.
Logistic believes that its ability to offer customers "one-stop shopping"
through its complement of services which include both asset and non-asset based
solutions provides it with a competitive advantage. Christiana's integrated
logistic services generally combine transportation, warehousing and information
services to manage the distribution channel for a customer's products from the
point of manufacturing to the point of consumption and allows it to capitalize
on the growing trend of corporations toward seeking to reduce costs by
outsourcing large components of their logistics function.
Logistic's operations are conducted through a network of 13 distribution
warehouses, comprised of an aggregate of 33 million cubic feet of refrigerated
and frozen storage capacity in eight locations and five dry distribution centers
in key markets, primarily in the upper Midwest. Logistic's refrigerated
warehousing operations include temperature sensitive storage services, blast
freezing, individual quick freeze services, vegetable blanching and processing
and automated poly bag and bulk packaging services. Logistic's transportation
and distribution services include full service truckload, less-than-truckload
and pooled consolidation in both temperature controlled and dry freight
equipment, dedicated fleet services and specialized store-door delivery formats.
Transportation and logistic services are provided utilizing Christiana-owned
equipment as well as through carrier management services utilizing third party
common and contract carriers. Logistic also provides a full range of
international freight management services, fully computerized inventory
management, assembling, repackaging and just-in-time production supply services.
Logistic assists companies in managing the logistics of the physical
movement of product and materials. Logistic offers refrigerated and frozen
warehousing, dry warehousing, transportation, information systems, and
international freight forwarding services. These services can be applied to
customers' needs individually, as a single service or in combination as a
unified set of services.
Logistic provides various solutions that address a wide range of customer
needs. A few examples of the types of services Logistic provides to its
customers follow.
Logistic provides an international food manufacturer a combination of
transportation solutions, which includes the use of Logistic's transportation
fleet and carrier-managed equipment and refrigerated storage. Logistic provides
a national food manufacturer with a consolidation and distribution center and
with outbound transportation. Logistic provides a national food distributor with
refrigerated warehousing, including high volume order selection and shipping to
facilitate rapid inventory turnover. Logistic serves as the distributor for the
Michigan Department of Education school lunch program, which involves a
combination of warehousing, order selection, store door delivery and related
customer billings. Logistic has a strategic alliance with a
82
90
furniture manufacturer to provide warehousing services for the consolidation of
products and order selection for international shipments on a global basis.
Logistic's revenue for each of the basic service lines are detailed below
for fiscal years ended June 30, 1997, 1996, and 1995.
REVENUES
(DOLLARS IN MILLIONS)
--------------------------------------------------
1997 1996 1995
-------------- -------------- --------------
AMOUNT % AMOUNT % AMOUNT %
------ ---- ------ ---- ------ ----
Refrigerated Warehousing........ $38 45% $35 45% $34 48%
Dry Warehousing................. 12 14% 14 18% 11 15%
Transportation.................. 33 39% 28 36% 25 35%
International................... 3 4% 3 4% 2 3%
Eliminations.................... (2) (2%) (3) (3%) (1) (1%)
--- ---- --- ---- --- ----
Total Revenues........ $84 100% $77 100% $71 100%
=== ==== === ==== === ====
As of March 31, 1998, the pro forma book value of Logistic was
approximately $24.2 million.
Logistic's services target the consumer goods industries; industries in
which logistics performance is important to success. Nearly 75% of Logistic's
revenues come from food manufacturers, food wholesalers and food retailers.
Because of its unique storage and distribution needs, the food industry has
launched broad industry-wide initiatives, such as Efficient Consumer Response
(ECR) and Efficient Foodservice Response (EFR), that are formulated on high
quality logistic services. The basis of ECR is to reduce the cost of delivering
products from the place of manufacture to the point of sale.
While Logistic's top 15 customers, all of which participate in the food
industry, account for 60% of revenues, no one customer represents more than 10%
of the business. Beyond the food industry, the balance of Logistic's customer
base is spread across a broad base of industries including pharmaceuticals,
automotive suppliers, building supplies and office furniture.
Competition in the logistic services industry is very fragmented. Leonard's
Guide, a leading industry publication, lists more than 1500 companies competing
in the United States marketplace. Logistic believes that competitors can be
characterized as either asset or non-asset based providers and single or
integrated service providers. Asset-based companies, such as Exel, Americold
Corporation, GATX Logistics, Inc., or Ryder Integrated Logistics, Inc. own and
operate warehouses and/or transportation equipment. These companies utilize
their asset base and the expertise with which to operate them to provide
services. Non-asset based competitors, such as Hub Group Logistics Services,
Menlo Logistics, and C.H. Robinson Logistics offer logistics management
expertise and information systems and sub-contract warehousing and
transportation services to asset-based providers.
Logistic experiences competition for logistic services on a national basis
and in its warehousing and transportation business Logistic competes generally
on a regional and local basis. Other than the high capital requirements of
building a refrigerated warehouse facility, there are no significant barriers to
entry into the transportation, warehousing and non-asset based logistic service
markets in which Logistic operates, permitting a relatively large number of
smaller competitors to enter the various markets.
In addition, Logistic's customers, many of which have substantially greater
resources than Logistic, may divert business from Logistic's warehousing and
transportation operations by building their own warehouse facilities and/or
operating their own transportation fleet.
Logistic's operations are headquartered in Zeeland, Michigan, and Logistic
also maintains an office in Milwaukee, Wisconsin. Logistic is organized into
three main operating units: refrigerated warehousing, dry warehousing and
transportation. Each operating unit is headed up by a group vice
president/general manager. Sales and marketing for Logistic are principally
performed at the corporate level, with support from the group vice presidents as
well as local warehouse facility managers. Logistic also maintains a business
development group which is responsible for pricing, logistics engineering, and
transporting large logistic accounts over from sales to operations during start
up.
83
91
Sales and marketing are principally performed at the corporate level, with
support from the group vice presidents and facility managers. The sales
organization is comprised of seven individuals and is divided into the following
teams: refrigerated warehousing team; dry warehousing team; transportation team;
and logistics sales team. Each of these teams has primary responsibility for
selling their specific services. The goal is to develop the sales team to
effectively present the fullest extent of Logistic's services suited for each
customer.
Marketing and advertising is done centrally for the entire company and uses
a combination of media advertising and direct mail. The marketing organization
also has responsibility for maintaining and gathering information on market
intelligence related to competition, customers and the logistic industry in
general.
Business development supports both sales and operations by providing
logistics engineering capabilities, pricing and costing services, and assists in
the startup of complex logistic projects.
The only employees of Christiana are the executive officers described under
"Executive Officers and Directors of Christiana". Logistic had approximately 735
employees as of March 31, 1998. A breakdown of the employees by functional area
is set forth below:
EMPLOYEE BREAKDOWN BY FUNCTION
------------------------------------------
FUNCTION NUMBER OF EMPLOYEES PERCENTAGE OF TOTAL
-------- ------------------- -------------------
Operations......................................... 472 64.2%
Transportation..................................... 207 28.2%
Administration..................................... 46 6.2%
Sales and Marketing................................ 10 1.4%
--- ----
Total.............................................. 735 100%
No Logistic employees are covered by union contracts.
Logistic's operations are not dependent on any particular patent, license,
franchises, or trademarks. Logistic has registered a trademark and the name
"Total Logistic Control" with the United States Patent and Trademark office.
Logistic does not operate in an environment which has a strong need or
reliance on research and development. Logistic has not made material
expenditures with regard to research or development in the past and does not see
it as a material issue in the future.
EVI. Christiana owned 3,897,462 shares of EVI, representing an approximate
4.0% ownership interest as of May 27, 1998. Christiana's holdings in EVI
resulted from the June 30, 1995 merger of Prideco, a former majority owned
subsidiary of Christiana, with a subsidiary of EVI and a $13.2 million cash
investment to purchase additional EVI shares in connection with the merger
transaction. Christiana accounts for its investment in EVI using the equity
method.
PROPERTIES
As of March 31, 1997, Logistic owned or leased thirteen facilities in five
states. Of this total, eight are refrigerated/frozen with the balance being dry
facilities. The refrigerated facilities are operated through eight public
refrigerated warehouses located in Wisconsin (3), Michigan (3), and Illinois
(2). Other than Wisconsin Cold Storage, located in downtown Milwaukee,
Logistic's refrigerated facilities are large single-story buildings constructed
at dock height with full insulation and vapor barrier protection. The
refrigeration is provided by screw-type compressors in ammonia-based cooling
systems. These facilities are strategically located and well served by rail and
truck.
On May 20, 1998, Logistic entered into a preliminary agreement to purchase
a refrigerated warehouse facility in Hudsonville, Michigan, with 4.6 million
cubic feet of storage capacity. The purchase price for this facility is
approximately $12.3 million and the transaction is expected by Christiana to
close in July 1998, subject to the satisfaction of customary conditions.
The Wisconsin Cold Storage facility was closed in March 1998. The property
is currently offered for sale.
84
92
In addition to the refrigerated facilities discussed above, there are five
public non-refrigerated (or dry) warehouse distribution facilities, three of
which are located in Michigan and one in each of Indiana and New Jersey. Zeeland
Distribution Center II, located in Zeeland, Michigan is a company-owned
facility. All other dry facilities are held under lease. Lease terms generally
match the underlying contracts with major customers served at each facility.
These facilities are single-story block or metal construction buildings. All dry
facilities are approved as food grade storage facilities.
The following tables list the thirteen facilities by location, size, type,
and if owned or leased.
REFRIGERATED WAREHOUSE FACILITIES
TOTAL STORAGE SPACE
(CUBIC FEET TYPE OF
FACILITY LOCATION IN MILLIONS) FACILITY
-------- -------- ------------------- -------------
Rochelle Logistic Center I..... Rochelle, Illinois #1 10.6 Distribution
Rochelle Logistic Center II.... Rochelle, Illinois #2 3.5 Distribution
Beaver Dam Logistic Center..... Beaver Dam, Wisconsin 7.2 Distribution/
Production
Milwaukee Logistic Center...... Wauwatosa, Wisconsin 4.3 Distribution
Holland Logistic Center........ Holland, Michigan* 2.1 Distribution/
Production
Kalamazoo Logistic Center I.... Kalamazoo Logistic #1** 3.3 Distribution
Kalamazoo Logistic Center II... Kalamazoo Logistic #2 2.8 Distribution
Wisconsin Logistic Center...... Milwaukee, Wisconsin 1.0 Distribution
----
Total................................................... 34.8
====
DRY WAREHOUSE FACILITIES
TOTAL STORAGE TYPE
SPACE (SQ. FT. OF
FACILITY LOCATION IN THOUSANDS) FACILITY
-------- -------- -------------- --------
Zeeland Logistic Center I*........................... Zeeland, MI 202 Public
Zeeland Logistic Center II........................... Zeeland, MI 220 Public
Michigan Distr. Center I*............................ Kalamazoo, MI 88 Public
Munster Logistic Center*............................. Munster, IN 125 Public
South Brunswick Logistic Center*..................... South Brunswick, NJ 200 Public
---
Total..................................................................... 835
===
- ---------------
*Leased facility
**Includes 1.8 million cubic feet of dry storage capacity.
DESCRIPTION OF PROPERTIES
A brief description of each of the properties described above follows,
listed alphabetically by state and city.
Illinois Properties.
Rochelle Logistic Center I Rochelle Logistic Center II
975 South Caron Road 600 Wiscold Drive
Rochelle, IL 61068 Rochelle, IL 61068
Rochelle Cold Storage campus is Logistic's newest and largest refrigerated
facility, initially constructed in 1986. Logistic believes that Rochelle Cold
Storage is one of the largest and most modern cold storage warehouse facilities
in the United States. Currently this facility is comprised of 14,100,000 cubic
feet of capacity after undergoing four capacity expansions in 1988, 1990, 1993,
and 1996. All space is capable of
85
93
temperatures of -20 degreesF to ambient. Rochelle Cold Storage is strategically
located at the intersection of two main line East-West railroads, the Burlington
Northern and the Chicago Northwestern, and the cross roads of interstate
highways I 39 and I 88. Rochelle Cold Storage serves primarily distribution
customers in the Midwest.
Indiana Properties.
Munster Logistic Center
9200 Calumet Avenue
Munster, IN 46321
Munster Logistic Center is located just south of the Chicago market with
access to major north-south and east-west highways. The facility has access to
rail through Conrail and is a food grade warehouse. The total facility has
available 125,000 square feet of dry storage. The warehouse operates as a public
warehouse with most of the customer base on short term contracts.
Michigan Properties.
Holland Logistic Center
449 Howard Avenue
Holland, MI 49424
Holland Logistic Center has undergone a number of expansions over the
years, with a major reconstruction in 1983 after a fire destroyed approximately
50% of the facility. Today, this refrigerated facility comprises 2,100,000 cubic
feet of storage capacity of which 1,300,000 cubic feet is freezer capacity,
400,000 cubic feet is cooler capacity and 400,000 cubic feet is convertible
capacity between freezer and cooler. Holland services both distribution
customers as well as blueberry growers in the West Michigan area. This location
is situated on a CSX rail spur with two refrigerated rail docks. This facility
is held under a lease which expires December 31, 2000.
Kalamazoo Logistic Center I Kalamazoo Logistic Center II
6677 Beatrice Drive 6805 Beatrice Drive
Kalamazoo, MI 49009 Kalamazoo, MI 49009
Kalamazoo Logistic Center campus has two distribution centers at this
location. Facility #1 is a 3,300,000 cubic foot facility with 1,100,000 cubic
feet of freezer capacity, 400,000 cubic feet of cooler capacity and 1,800,000
cubic feet of dry storage capacity. This location services a number of
distribution customers in the Midwest and is strategically located at the I 94
and U.S. 31 crossroads in Michigan, equal distance between Chicago and Detroit.
Facility #2 is located adjacent to Facility #1 and is comprised of
2,800,000 cubic feet of capacity. This facility contains 1,500,000 cubic feet of
cooler capacity and 1,300,000 cubic feet of freezer capacity. Two large
distribution customers utilize 75% of this space. These facilities are held
under long term leases.
Also located at the Kalamazoo Logistic Center is a company owned 10,000
square foot transportation equipment maintenance center. Approximately 50% of
Logistic's fleet of over-the-road transportation units is domiciled in
Kalamazoo, Michigan.
Zeeland Logistic Center I Zeeland Logistic Center II
8250 Logistic Drive 8363 Logistic Drive
Zeeland, MI 49464 Zeeland, MI 49464
Zeeland Logistic Center campus has two facilities each of which provide dry
warehousing storage as public warehouses. Each of these facilities are Foreign
Trade Zones and food grade warehouses, that provide both racked and bulk
storage. Capacity is utilized by both long term contractual customers and as
short term public warehouses. Zeeland Logistic Center I has 201,600 square feet
of storage and Zeeland Logistic Center II has 220,000 square feet.
86
94
On May 20, 1998, Logistic entered into a preliminary agreement to purchase
a refrigerated warehouse facility in Hudsonville, Michigan. The purchase price
for this facility is approximately $12.3 million and the transaction is expected
to close in July 1998, subject to the satisfaction of customary conditions. The
Hudsonville Logistic Center, initially constructed in 1987 and then expanded in
1990, has 4.6 million cubic feet of storage capacity and is capable of
maintaining temperatures of -20 degreesF.
New Jersey Properties.
South Brunswick Logistic Center
308 Herrod Blvd.
South Brunswick, NJ 08852
South Brunswick provides warehousing and distribution services for
customers to the Northeast region of the country. The facility has both
contractual and short term customers and operates as a public warehouse. In
total, the facility has 200,000 square feet of dry storage capacity.
Wisconsin Properties.
Beaver Dam Logistic Center
1201 Green Valley Road
Beaver Dam, WI 53916
Beaver Dam Logistic Center was originally constructed in 1975. Since 1975,
this facility has undergone three freezer additions, the most recent in 1991,
and today is comprised of 7,200,000 cubic feet of freezer storage space. Beaver
Dam Logistic Center serves distribution related customers as well as vegetable
and cranberry processors. This facility's unique capabilities involve value
added services for vegetable processors including IQF, blanching, slicing,
dicing and food service and retail poly bag packaging operations. Badger's IQF
tunnels have the capacity to freeze 30,000 pounds of product per hour.
Milwaukee Logistic Center
11400 West Burleigh Street
Milwaukee, WI 53222
Milwaukee Logistic Center was originally constructed in 1954. There have
been six expansions of this facility and today the Milwaukee Logistic Center
facility comprises 4,300,000 cubic feet of which 3,754,000 cubic feet is freezer
capacity and 546,000 cubic feet is cooler space. This facility has
multi-temperature refrigerated storage ranging from -20 degreesF to +40 degreesF
and daily blast freezing capacity of 750,000 pounds. This location has a 7-car
private rail siding. An additional 3,000,000 cubic feet of company owned
refrigerated and processing space adjacent to the Milwaukee Logistic Center
facility is leased on a long term basis to a third party retail grocery company.
OTHER ASSETS
Christiana also holds mortgage notes receivable derived from certain
condominium sales which, as of December 31, 1997, had an aggregate principal
amount outstanding of $1,273,000 (accruing interest at rates ranging from 6.875%
to 9%). In addition, Logistic holds approximately 1.9 acres of undeveloped,
partially submerged land in Huntington Beach, California with a current book
value of zero. This property is currently subject to an easement granted in the
favor of the City of Huntington Beach. Logistic is currently pursuing a change
in zoning applicable to the property in order to conduct residential development
on the property. The outcome of these efforts, and the value of the property if
such efforts are successful, are unable to be predicted at this time.
LEGAL PROCEEDINGS
From time to time, Christiana is named as a defendant in actions arising
out of the normal course of business. As of December 31, 1997, Christiana was
not a party to any pending legal proceeding that it believes to be material.
87
95
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Nine Months Ended March 31, 1998 compared to Nine Months Ended March 31, 1997.
For the nine months of fiscal 1998 Christiana's consolidated revenues were
$68,579,000 versus $63,271,000 for the comparable period last year, an increase
of $5,308,000 or 8.4%. Volume increases in transportation and refrigerated
warehousing, offset by a decline in dry warehousing operations, were the main
factors in the year to year revenue increase.
Selling, general and administrative expense for the nine months of fiscal
1998 increased $501,000 due to higher business development and information
services activities.
Earnings from operations for the nine months ended March 31, 1998 increased
$15,000 from the same period in the prior fiscal year to $4,121,000. The decline
in operating margin is primarily attributable to increased revenues from
transportation operations which are inherently lower margin and lower volume in
dry warehousing operations as previously noted.
Consolidated net earnings reported for the nine months ended March 31, 1998
were $4,176,000 or $0.81 ($0.80 diluted) per share versus $5,831,000 or $1.14
per share ($1.13 per diluted share) reported for the comparable period last
year. Net earnings were lower this period due to the decrease in Equity in
Earnings of EVI related to the one-time gain realized in the sale of Mallard Bay
Drilling, Inc. ("Mallard") last year. Net earnings attributable to Christiana's
warehousing and logistic operations were $1,588,000 for the nine months ended
March 31, 1998 compared to $766,000 for the comparable period last year.
Net earnings in both the nine months of fiscal 1998 and 1997 were impacted
by one-time events. In the first nine months of fiscal 1997, Christiana reported
an after-tax gain of $3,475,000 attributable to EVI's sale of Mallard.
Additionally, Christiana reported an after-tax charge of $769,000 resulting from
the disposal of excess vegetable processing equipment. In the first nine months
of fiscal 1998, the Company incurred after-tax charges of $588,000 related to
the settlement of litigation.
Net earnings adjusted for the one-time events described above for the first
nine months of fiscal 1998 were $4,764,000 representing an increase of 52.4%,
compared to $3,125,000 of adjusted net earnings for the comparable period last
year.
Fiscal 1997 compared to Fiscal 1996.
Christiana's consolidated revenues for fiscal 1997 were $84,208,000
compared to $77,170,000 reported for fiscal 1996, an increase of 9.1%. Revenue
growth was primarily attributable to increased volume in transportation and
refrigerated warehousing services. The most significant improvement was in
transportation revenues which increased 20.6% over the previous year. During
fiscal 1997, Logistic secured a large multi-year contract to provide logistic
services to a major frozen food producer. This contract, as well as certain
management changes, enabled Christiana to significantly improve the operating
performance in transportation related logistic services during fiscal 1997.
Refrigerated warehousing services revenues increased 14.7% over last year's
level due primarily to increased utilization of the expanded capacity at the
Rochelle Logistic Center and higher utilization at all the Michigan based
refrigerated facilities during fiscal 1997.
Revenue growth combined with aggressive cost management resulted in a 1%
increase in gross margin. During fiscal 1997, Logistic closed two dry public
warehouses which were leased facilities, Atlanta, Georgia and Sparks, Nevada.
The closure of these facilities resulted from Christiana's inability to secure
longer term value-added logistic services contracts in line with Christiana's
strategic focus on dry warehousing operations. Warehousing and Logistic expenses
were negatively impacted by $358,000 of charges related to warehouse closures
and corporate restructuring. Selling, general and administrative expenses
increased $1,125,000 or 14.9% due mainly to increased marketing and sales
activities. Earnings from operations increased $358,000 or 8.5% to $4,579,000 in
fiscal 1997 from $4,221,000 in fiscal 1996.
Loss on disposal of assets of $765,000 was primarily related to a
$1,085,000 charge incurred in the disposal of special freezing equipment in
connection with securing a long term contract for vegetable processing, IQF
freezing, and warehouse services with a major customer of the Beaver Dam
Logistic Center.
88
96
In addition, in fiscal 1997 gains on the sales of real estate totaled $271,000
which included the final sales of the 366 condominium home project in San Diego.
In fiscal 1996, gains on sales of real estate were $2,818,000.
Consolidated net earnings for fiscal 1997 were $6,663,000, or $1.30 per
share, up 85% from last year's level of $3,603,000, or $.69 per share. The
principal factors impacting net earnings in fiscal 1997 was the growth in equity
earnings in EVI and improved operating performance at Logistic.
Fiscal 1996 compared to Fiscal 1995.
Christiana's consolidated revenues for fiscal 1996 were $77,170,000
compared to $126,881,000 reported for fiscal 1995. Consolidated revenues in
fiscal 1996 all of which were derived from the Refrigerated Warehousing and
Logistics segment were lower due entirely to the June 30, 1995 merger of
Prideco. Prior to the merger, Prideco's operations were included in Christiana's
financial statements. In fiscal 1995, Prideco contributed $55,239,000 or 43.5%
of Christiana's consolidated revenues. In fiscal 1996, revenues of Christiana's
operating business, Logistic grew 8% to $77,170,000 compared to revenues of
$71,642,000 for the previous year. The gain is primarily attributable to
increased warehouse capacity and integrated logistic services.
Selling, general and administrative expenses were lower by $4,208,000
compared to the previous year, of which approximately $3,800,000 was
attributable to the deconsolidation of Prideco.
Operating income for fiscal 1996 was $4,221,000 compared to $10,324,000 in
fiscal 1995. The prior year included $4,225,000 from Prideco. Excluding Prideco
and before non-recurring expenses of $310,000 associated with consolidating the
operations of Wiscold and Total Logistic, operating income for fiscal 1996 was
down $1,568,000 from the prior year to $4,531,000. The decline was the result
primarily of lower vegetable processing and freezing volume distribution
accounts and high operating costs in transportation stemming from less than
optimal utilization of equipment due to lower demand, high maintenance expense
and price pressures related to general market conditions. In addition, during
the year Logistic incurred expenses associated with the construction and initial
occupancy of two new distribution centers without the benefit of concurrent
revenues.
Interest income in fiscal 1996 was $531,000, down from $942,000 the prior
year due primarily to the use of $13,291,000 of cash to purchase additional EVI
common stock in connection with the Prideco merger on June 30, 1995.
The decline in interest expense of $1,746,000 in fiscal 1996 compared to
the previous year is mainly related to the deconsolidation of Prideco which had
$1,577,000 of interest expense in fiscal 1995.
Christiana's effective tax rate in fiscal 1996 increased to 40% from 37%
primarily because of the absence of tax exempt interest and increased state
taxes due to year to year changes in the relative state components of
Christiana's earnings.
Consolidated net earnings for fiscal 1996 were $3,603,000 or $.69 per
share, down $1,459,000 from net earnings in fiscal 1995 of $5,062,000 or $.96
per share. Before the effects of the consolidation charges, net income was
$3,789,000 or $.73 per share, a decline of 25% compared to fiscal 1995. Equity
in earnings of EVI totaled $1,096,000 after providing for deferred taxes. In
fiscal 1995, Prideco's operations contributed net earnings of $971,000. Real
estate sales in fiscal 1996 totaled 71 condominium homes contributing net
earnings of $1,712,000, compared to sales of 48 homes last year which generated
earnings of $1,850,000. In fiscal 1996, 30 homes were sold to a single buyer in
an as-is condition without Christiana incurring refurbishment expense. At June
30, 1996, Christiana had 12 condominium homes available for sale.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash equivalents and short term investments totaled $5,290,000 as of March
31, 1998 compared with $7,499,000 at June 30, 1997, a decrease of $2,209,000.
Christiana's working capital at March 31, 1998 was $4,893,000 compared to
$4,258,000 at June 30, 1997.
89
97
Cash provided by operating activities for the nine months ended March 31,
1998 of $5,656,000 was attributable primarily to net earnings, depreciation,
amortization and deferred taxes. Cash provided by investing activities of
$3,518,000 for the nine months ended March 31, 1998 resulted from a decrease in
short-term investments of $4,611,000, capital expenditures of $1,919,000
primarily attributable to warehousing and logistics operation, proceeds from the
asset sales of $308,000 and the payment of mortgage notes receivable in the
amount of $518,000.
In the nine month period ended March 31, 1998, total funded debt was
reduced by $7,268,000, all of which was generated by internal cash flow from its
operations. In addition, the exercise of stock options resulted in cash flow of
$337,000.
Christiana's balance sheet at March 31, 1998 reflects $47,268,000 as its
carrying value for 3,897,462 shares of EVI common stock. At March 31, 1998,
these shares had a market value of $180,501,209 or $35.05 per Christiana share.
At March 31, 1998, Christiana has no commitments for any material capital
projects.
At March 31, 1998, Christiana had in place a $15.0 million unsecured line
of credit for general corporate purposes. Borrowings under this line of credit
bear interest at a floating rate of LIBOR plus 125 basis points or prime, at
Christiana's option. At March 31, 1998, there were $159,000 of borrowings under
this facility.
Through March 31, 1998, Logistic had a loan commitment of $40.0 million
under an amended revolving credit agreement. At March 31, 1998, $29.6 million
was outstanding. After April 1, 1998, the loan commitment reduced to $35.0
million for a period which extends beyond fiscal 1998 year end. In addition, at
March 31, 1998, Logistic has a bank line of credit, which permits borrowings up
to $5.0 million. At March 31, 1998, there were no borrowings under this credit
facility.
Logistic has arranged a new $65.0 million revolving credit facility, which
will replace the aforementioned amended revolving credit agreement. This new
facility will be utilized in connection with the Merger Agreement to fund a
$20.0 million dividend and repayment of a $3.0 million note to Christiana.
Christiana's current sources of capital include: cash generated from
operations, sale of existing mortgage portfolio, borrowing under its revolving
credit agreement and line of credit. Christiana believes that current reserves
of cash and short-term investments, access to existing credit facilities and
internally generated cash from operations are sufficient to fund the projected
cash requirements of its current operations.
Year 2000 Disclosure.
During fiscal 1997, Christiana evaluated and developed a plan to address
the impact of the Year 2000 on its computer systems. The impact of this plan is
not expected to be significant to Christiana's financial position or its ongoing
results of operations.
90
98
DIRECTORS AND EXECUTIVE OFFICERS
The following table provides certain information, as of the date hereof,
about the members of the Board of Directors of Christiana and also provides
information about the beneficial ownership of Christiana's capital stock by all
of the directors and executive officers as a group. The persons shown in the
table as officers of Christiana comprise all of Christiana's executive officers.
Directors of Christiana are elected annually by a plurality of the votes cast by
shareholders. Executive officers are appointed annually by the Board of
Directors.
SERVED AS NO. OF SHARES
PRINCIPAL OCCUPATION DIRECTOR BENEFICIALLY
NAME (AND AGE) DURING LAST FIVE YEARS SINCE OWNED
-------------- ---------------------- --------- -------------
Nicholas F. Brady(67).......... Chairman and President (since 2/93) 10/93 200,000(1)
of Darby Advisors, Inc., a private (3.9%)
investment company, Easton,
Maryland(1)
William T. Donovan(45)......... President and Chief Financial Officer 10/90 163,532(2)
of Christiana(2) (3.2%)
Raymond F. Logan(74)........... Former Vice President (Real Estate) of 10/90 1,575*
Christiana
David J. Lubar(43)............. President of Lubar & Co. Incorporated 10/90 427,403
("Lubar & Co."), venture capital (8.3%)
and investments, Milwaukee, Wisconsin
Sheldon B. Lubar(68)........... Chairman and Chief Executive 1/87 968,615(3)
Officer of Christiana(3) 18.8%
Albert O. Nicholas(66)......... Owner and President of Nicholas 1/90 310,700(4)
Company, Inc., a registered (6.0%)
investment adviser, Milwaukee,
Wisconsin(4)
John R. Patterson(50).......... President and Chief Executive Officer 10/96 25,000(5)*
of Logistic(5)
Gary R. Sarner(51)............. Chairman of Logistic(6) 10/92 51,000(6)*
All directors and executive officers as a group................................... 2,147,825(7)
(41.7%)
- ---------------
* Less than 1%.
(1) Previously, Secretary of the United States Department of the Treasury for
over four years, and before that, Chairman of Dillon, Read & Co., Inc. He is
also a director of Amerada Hess Corporation and H.J. Heinz Company, as well
as a director (or trustee) of 27 Templeton Funds, which are registered
investment companies. The shares listed are owned by a trust of which Mr.
Brady is the beneficiary and a co-trustee.
(2) Donovan has served in the capacity listed or in another capacity as an
executive officer of Christiana for more than the last five years. He has
also been a principal of Lubar & Co. for more than the last five years. Mr.
Donovan is also a director of Grey Wolf, Inc. The shares listed include
10,000 shares subject to acquisition upon exercise of employee stock options
currently exercisable or exercisable within 60 days from the date hereof.
(3) Mr. Lubar has also been a principal of Lubar & Co. for more than the last
five years. Mr. Lubar is also a director of Ameritech Corporation, EVI,
Firstar Corporation, Massachusetts Mutual Life Insurance Co., Jefferies &
Company, Inc. and MGIC Investment Corporation. Includes 433,705 shares held
by Mr. Lubar's wife.
(4) Nicholas Company is the adviser to six registered investment companies:
Nicholas Fund, Inc., Nicholas II, Inc., Nicholas Income Fund, Inc., Nicholas
Limited Edition, Inc., Nicholas Money Market Fund, Inc. and Nicholas Equity
Income Fund. Mr. Nicholas is the president and a director of each of those
companies. Mr. Nicholas is also a director of Bando McGlocklin Capital
Corporation.
(5) Mr. Patterson has served in the capacity listed since February 1996. Before
joining Total Logistic Control, LLC, Mr. Patterson served as Vice
President-Operations for Schneider Logistics, Inc., Green Bay, Wisconsin (a
provider of transportation and logistics services). For six years prior
thereto, Mr. Patterson was the President and principal owner of Pro Drive,
Inc., Green Bay, Wisconsin (a truck
91
99
driver recruiting and training firm). The shares listed include 12,300
shares subject to acquisition upon exercise of employee stock options
currently exercisable or exercisable within 60 days from the date hereof.
(6) Chairman of Logistic since January 1994. Before that, Mr. Sarner was the
President of Wiscold, Inc., the business of which was acquired by Christiana
in September 1992. The shares listed include 45,000 shares subject to
acquisition upon exercise of employee stock options currently exercisable or
exercisable within 60 days from the date hereof.
(7) Does not include shares for which Messrs. Donovan, Sarner and Patterson hold
options that are not currently exercisable or exercisable within 60 days of
the date hereof.
Sheldon B. Lubar is the father of David J. Lubar.
During fiscal 1997, the Board of Directors met four times. Each director
attended at least 75% of the aggregate of (i) the total number of all Board
meetings and (ii) the total number of meetings of committees of which he was a
member. The Board has two standing committees: audit and compensation. It has no
standing nominating committee or any committee performing similar functions.
EXECUTIVE COMPENSATION
Summary Compensation Table. This table gives information about the
compensation of the four persons who were executive officers of Christiana
during fiscal 1997.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION -----------------
FISCAL ------------------- SHARES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (#)(1) COMPENSATION(2)
--------------------------- ------ -------- -------- ----------------- ---------------
Sheldon B. Lubar, 1997 $ 66,000 -- -- $ 750
Chairman and Chief 1996 66,000 -- -- 750
Executive Officer 1995 80,000 -- -- 750
William T. Donovan, 1997 $150,000 $100,000 15,000 $ 750
President and Chief 1996 150,000 -- -- 750
Financial Officer 1995 127,500 75,000 -- 750
Raymond F. Logan, 1997 $149,700 -- -- --
Vice President 1996 149,700 -- -- --
1995 149,700 $ 17,500 -- --
Gary R. Sarner, 1997 $167,500 $ 15,000 -- $ 750
Chairman of TLC 1996 167,500 -- -- 750
1995 150,000 35,000 -- 750
John R. Patterson(3) 1997 $175,000 $ 40,000 -- $2,900(3)
President and Chief 1996 55,000 25,000 100,000 2,150(3)
Executive Officer of TLC 1995 -- -- -- --
- ---------------
(1) Christiana's only long-term compensation plan or program is the 1995 Stock
Option Plan. The amounts shown are the number of shares underlying options
granted during the fiscal year.
(2) Except as set forth in footnote 3, this column consists solely of amounts
contributed by Christiana to a Section 401(k) retirement plan.
(3) Mr. Patterson joined Logistic in February 1996. In fiscal 1997 and 1996,
Christiana paid life insurance premiums in the amount of $2,150 on a term
life policy maintained by Christiana for Mr. Patterson's benefit. In fiscal
1997, Christiana contributed $750 to a Section 401(k) retirement plan for
the benefit of Mr. Patterson.
92
100
Options Granted in Fiscal 1997. The table below sets forth information
regarding Incentive Stock Options granted in Fiscal 1997 to William T. Donovan.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
PERCENTAGE OF RATES OF STOCK PRICE
SHARES TOTAL OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO ALL EXERCISE TERM(3)
OPTIONS EMPLOYEES IN PRICE(2) -----------------------
NAME GRANTED(1) 1997 FISCAL YEAR (PER SHARE) EXPIRATION DATE 5% 10%
---- ---------- ---------------- ----------- --------------- ---------- ----------
William T. Donovan... 15,000 37.5% $21.50 August 15, 2006 $188,000 $514,000
- ---------------
(1) The options reflected in the table are incentive stock options under the
Code and were granted on August 15, 1996. The exercise price of the options
were equal to 100% of the fair market value of the Christiana Common Stock
on the date of grant. The options granted to Mr. Donovan vest in five equal
consecutive annual installments.
(2) The exercise price of options may be paid in cash, by delivering previously
issued Christiana Common Stock or any combination thereof.
(3) The potential realizable values set forth under the columns represent the
difference between the stated option exercise price and the market value of
the Christiana Common Stock based on certain assumed rates of stock price
appreciation and assuming that the options are exercised on their stated
expiration date; the potential realizable values set forth do not take into
account applicable tax and expense payments which may be associated with
such option exercises. Actual realizable value, if any, will be dependent on
the future stock price of the Christiana Common Stock on the actual date of
exercise, which may be earlier than the stated expiration date. The 5% and
10% assumed rates of stock price appreciation over the ten-year exercise
period of the options used in the table above are mandated by rules of the
Commission and do not represent Christiana's estimate or projection of the
future price of the Christiana Common Stock on any date. There can be no
assurance that the stock price appreciation rates for the Christiana Common
Stock assumed for purposes of this table will actually be achieved.
Fiscal Year-End Option Value Table. The table below gives information about
the number and value of unexercised options for Christiana's stock held by
William T. Donovan, Gary R. Sarner and John R. Patterson at June 30, 1997.
Christiana's other executive officers, Sheldon B. Lubar and Raymond F. Logan, do
not hold any options on Christiana's stock. The closing price as reported by the
NYSE on that date was $39.875 per share. At June 30, 1997 only options whose
exercise price was below $39.875 were in-the-money. For these options, the value
shown is the difference between $39.875 and the exercise price for the number of
options held. The value of options which were not-in-the-money is shown as zero.
JUNE 30, 1997
----------------------------------------------------------
NO. OF SHARES
UNDERLYING OPTIONS VALUE OF IN-THE-MONEY OPTIONS
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------------------- -----------------------------
William T. Donovan.................... 10,000/15,000 $165,750/$248,625
Gary R. Sarner........................ 45,000/50,000 $387,626/$436,250
John R. Patterson..................... 12,300/80,000 $192,188/$1,250,000
Pensions. Christiana has no pension plans or programs. Raymond F. Logan,
who retired after 34 years of service with Christiana, receives a lifetime
annuity (10-years) of $75,000 per year; after those ten years the annual payment
changes to $37,500 upon the death of Mr. Logan or his wife and that payment
continues until the death of the survivor.
Compensation of Directors. Non-employee directors (Nicholas F. Brady, David
J. Lubar and Albert O. Nicholas) are each paid an annual retainer of $15,000 for
attendance at Board and committee meetings and other consultations.
Employment Contracts. No officer of Christiana has an employment contract.
93
101
Compensation Committee Interlocks and Insider Participation. The members of
the Compensation Committee are Nicholas F. Brady, Sheldon B. Lubar and Albert O.
Nicholas. This Committee, which also administers Christiana's stock option
program, met twice during fiscal 1997. Mr. Lubar is Christiana's principal
officer and its principal shareholder.
William T. Donovan, David J. Lubar and Sheldon B. Lubar are officers and
directors of Lubar & Co., and own 25%, 37.5% and 37.5% of its stock,
respectively. Christiana's headquarters are in part of the premises occupied by
Lubar & Co., 700 North Water Street, Suite 1200, Milwaukee, Wisconsin.
Christiana reimburses Lubar & Co. for its pro rata share ($5,400 per month for
fiscal 1997) of the rent, utilities and other expenses of those premises. This
amount is offset by Lubar & Co. reimbursing Christiana for its partial
utilization of Christiana staff time at a rate of $7,200 per month.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to the Merger, each share of Christiana Common Stock as of the
Effective Time will be converted into the right to receive (i) the EVI Share
Consideration, (ii) the Cash Consideration and (iii) the Contingent Cash
Consideration.
The directors and officers of Christiana beneficially own shares of
Christiana Common Stock (including shares of Christiana Common Stock subject to
options) in the amounts set forth under "-- Management -- Directors and
Executive Officers".
Sheldon B. Lubar's three daughters, Joan P. Lubar, Kristine L. Thomson and
Susan Solvang (the wife of Oyvind Solvang, the Vice President of C2), each own
448,551, 430,478 and 442,953 shares of Christiana Common Stock, respectively.
In connection with the Merger, the Lubar/C2 Agreement was entered into
providing (i) that all Christiana shareholders would have the right to purchase
at least the same percentage ownership in C2 as such Christiana shareholder has
in Christiana immediately prior to the Effective Time and at the same price per
share as each member of the Lubar Family and (ii) that Mr. Lubar and the
remainder of the Lubar Family agreed to purchase shares of Common Stock of C2 in
the C2 Offering to raise at least $10.67 million. This agreement will insure
that C2 has sufficient funds to complete the Logistic Sale.
The Lubar Family, Lubar & Co. and Venture Capital Fund, L.P., a fund
managed by Lubar & Co., and William T. Donovan own 5.3%, 0.8%, 6.0% and 0.7%,
respectively, of Emmpak Foods, Inc. ("Emmpak"), a customer of Logistic. During
fiscal 1997, Emmpak accounted for approximately $2.1 million in gross revenue
for Logistic. David J. Lubar serves on the board of directors of Emmpak.
94
102
DESCRIPTION OF C2
GENERAL
C2 was formed on December 11, 1997 for the purpose of acquiring a
two-thirds interest in Logistic. C2 is a Wisconsin corporation with its
executive offices located at 700 North Water Street, Suite 1200, Milwaukee,
Wisconsin 53202, and its telephone number is (414) 291-9000.
Simultaneously herewith, C2 is offering, pursuant to a separate prospectus,
5,202,664 shares of C2 Common Stock for $4.00 per share, with the objective of
raising approximately $21.0 million. Approximately $10.67 million of the
proceeds from the C2 Offering will be utilized to fund the acquisition of a two-
thirds interest in Logistic. C2 intends to utilize any additional funds raised
in the C2 Offering for general corporate purposes, including future
acquisitions. The Lubar Family has committed, pursuant to the Lubar/C2
Agreement, to purchase such number of shares of C2 Common Stock as is necessary
for the net proceeds of the C2 Offering, after deducting expenses of the C2
Offering, to equal $10.67 million.
C2 will bear expenses associated with the C2 Offering. These expenses are
estimated as follows: (i) Securities and Exchange Commission filing fee, $6,140;
(ii) Nasdaq listing fee, $10,000; (iii) Blue Sky fees and expenses, $2,000; (iv)
Transfer Agent expenses and fees, $3,000; (v) printing and engraving expenses,
$30,000; (vi) accounting fees, $45,000; and (vii) legal fees, $70,000. Mr. Lubar
will not personally bear any expenses relating to the Merger, the Logistic Sale
or the C2 Offering.
MANAGEMENT
The following table contains the name, age and position with C2 of each
executive officer and director as of January 1, 1998. Each person's respective
background is described following the table.
NAME AGE POSITION
---- --- ---------------------
William T. Donovan............................... 45 Chairman and Director
President and
David J. Lubar................................... 43 Director
Oyvind Solvang................................... 38 Vice President
David E. Beckwith................................ 69 Secretary
Nicholas F. Brady................................ 67 Director
Sheldon B. Lubar................................. 68 Director
Albert O. Nicholas............................... 66 Director
William T. Donovan was named Chairman of C2 in December 1997. Mr. Donovan
is also the President, Chief Financial Officer and a director of Christiana,
positions he will vacate on the Effective Time. Mr. Donovan has held various
executive positions with Christiana since June 1988. Mr. Donovan has also been a
principal of Lubar & Co., a venture capital and investments firm located in
Milwaukee, Wisconsin since January 1980. Mr. Donovan is also a Director of Grey
Wolf, Inc.
David J. Lubar has been President of C2 since December 1997, Mr. Lubar also
serves as President of Lubar & Co., a position he has held since January 1991.
Mr. Lubar is a Director of Christiana, a position he will vacate as of the
Effective Time. Mr. Lubar is the son of Sheldon B. Lubar.
Oyvind Solvang has been Vice President of C2 since December 1997. Mr.
Solvang is also the Vice President of Christiana, a position he will vacate on
the Effective Time. Mr. Solvang has served as President of Cleary Gull Reiland &
McDevitt, Inc., an investment banking firm located in Milwaukee, Wisconsin from
January 1996 to October 1996 and Chief Operating Officer of Cleary Gull Reiland
& McDevitt, Inc., from October 1995 to January 1996. Prior thereto, from May
1994 to September 1995, Mr. Solvang served as President of Scinticor,
Incorporated, a manufacturer of cardiac imaging devices, located in Milwaukee,
Wisconsin, and from August 1990 to April 1994 as Vice President and General
Manager of Applied Power, Inc., a supplier of hydraulic systems, located in
Butler, Wisconsin.
95
103
David E. Beckwith has been Secretary of C2 since December 1997. Since May
1995, he served as Secretary of Christiana, a position he will vacate as of the
Effective Time. Mr. Beckwith has been associated with the law firm of Foley &
Lardner since 1952 and has been a Partner at Foley & Lardner since 1960.
Nicholas F. Brady has been a Director of C2 since December 1997. Since
February 1993, Mr. Brady has been Chairman and President of Darby Advisors,
Inc., a private investment company located in Easton, Maryland. Prior thereto,
Mr. Brady served as Secretary of the United States Department of the Treasury
for over four years, and before that, Chairman of Dillon, Reed & Co., Inc. Mr.
Brady is a Director of Amerada Hess Corporation and H.J. Heinz Company, as well
as a Director (or trustee) of 27 Templeton funds, which are registered
investment companies. Mr. Brady is also a Director of Christiana, a position he
will vacate as of the Effective Time.
Sheldon B. Lubar has been a Director of C2 since December 1997. Mr. Lubar
has also been a principal of Lubar & Co. since its inception in 1977. Mr. Lubar
is a Director of Ameritech Corporation, EVI, Firstar Corporation, Massachusetts
Mutual Life Insurance Co. and MGIC Investment Corporation. Mr. Lubar currently
serves as Chairman, Chief Executive Officer and a Director of Christiana, all of
which positions he will vacate as of the Effective Time. Mr. Lubar is the father
of David J. Lubar.
Albert O. Nicholas has been a Director of C2 since December 1997. Mr.
Nicholas has been owner and President of Nicholas Company, Inc., a registered
investment advisor located in Milwaukee, Wisconsin since December, 1967.
Nicholas Company, Inc. is the advisor to six registered investment companies:
Nicholas Fund, Inc., Nicholas Two, Inc., Nicholas Income Fund, Inc., Nicholas
Limited Addition, Inc., Nicholas Money Market Fund, Inc. and Nicholas Equity
Income Fund. Mr. Nicholas is the President and a Director of each of these
investment companies. Mr. Nicholas is also a Director of Bando McGlocklin
Capital Corporation. In addition, Mr. Nicholas serves as a Director of
Christiana, a position he will vacate as of the Effective Time.
DESCRIPTION OF LOGISTIC CREDIT AGREEMENT
In connection with the Transaction, Logistic intends to enter into a credit
agreement (the "Credit Agreement") with Firstar Bank Milwaukee, N.A., as agent,
and certain other banks which will be parties thereto (together, the "Banks") on
or before the Effective Time of the Merger, Pursuant to the Credit Agreement,
Logistic will, subject to the achievement of certain financial ratios and
compliance with certain conditions, have the right to obtain revolving loans in
the following outstanding principal amounts:
MAXIMUM AMOUNT OF
TIME PERIOD REVOLVING LOANS OUTSTANDING
- ----------- ---------------------------
Closing date through April 15, 1999................... $ 65 million
April 16, 1999 through April 15, 2000................. $ 61 million
April 16, 2000 through April 15, 2001................. $ 56 million
April 16, 2001 through April 15, 2002................. $50.5 million
April 16, 2002 through April 15, 2003................. $ 43 million
The entire unpaid principal balance of loans made under the Credit
Agreement will be due and payable on April 15, 2003. There are currently no
plans or arrangements to repay such unpaid principal balance prior to such time.
The proceeds of the initial loans under the Credit Agreement will be used
to refinance existing indebtedness of Logistic to the Banks in the amount of
approximately $36,000,000; finance the payment of a distribution to Christiana
of $20.0 million cash prior to the Effective Time; finance the repayment of the
Wiscold Note prior to the Effective Time; and pay related fees and expenses. The
available balance of the facility, estimated to be $1 million after completion
of the C2 Offering and the purchase of a refrigerated warehouse facility in
Hudsonville, Michigan, will be available for working capital and general
corporate purposes.
96
104
The Credit Agreement will be secured by liens or security interests on all
or substantially all of the assets of Logistic, other than certain
transportation equipment, and mortgages on its real estate.
The initial interest rate on borrowings under the Credit Agreement is
expected to be, at the option of Logistic, LIBOR plus 225 basis points or the
prime rate. These rates will vary over the term of the Credit Agreement pursuant
to a pricing grid based on the ratio of Consolidated Funded Debt to Consolidated
EBITDA (the "Consolidated Funded Debt Ratio"), all as defined in the Credit
Agreement, in accordance with the following table:
APPLICABLE PERCENTAGES
APPLICABLE
PERCENTAGE APPLICABLE APPLICABLE
FOR PERCENTAGE PERCENTAGE
EURODOLLAR FOR PRIME FOR LETTER
PRICING CONSOLIDATED FUNDED REVOLVING RATE OF CREDIT
LEVEL DEBT RATIO LOANS LOANS FEE
------- ----------------------- ---------- ---------- ----------
7............................ >4.5:1.0 2.25 0.00 1.25
6............................ <4.5:1.0 but >4.0:1.0 2.00 (0.25) 1.25
5............................ <4.0:1.0 but >3.5:1.0 1.75 (0.25) 1.25
4............................ <3.5:1.0 but >3.0:1.0 1.50 (0.50) 1.25
3............................ <3.0:1.0 but >2.5:1.0 1.25 (0.50) 1.25
2............................ <2.5:1.0 but >2.0:1.0 1.00 (0.50) 1.25
1............................ <2.0:1.0 0.75 (1.00) 1.25
The Credit Agreement also contains provisions requiring Logistic to reimburse
the Banks for increases in certain taxes, revenue requirements and other costs
incurred by the Banks.
Loans made under the Credit Agreement may be prepaid in whole or in part
without premium or penalty, except for reimbursement of the Banks for any losses
the Banks suffer as a result of repayment of LIBOR-based loan prices to the last
day of that applicable interest period.
The Credit Agreement contains representations and warranties, including
without limitation those relating to financial statements, ownership of
properties, liens and encumbrances, corporate existence, compliance with law,
legal authorization and enforceability, absence of default, litigation, ERISA,
environmental and tax matters, use of proceeds, solvency, accuracy of
information and the matters set forth in the merger and divestiture documents.
The Credit Agreement also contains conditions precedent (or in certain
instances concurrent) to the initial funding at the Closing, which will include,
without limitation, those relating to the following: (i) satisfactory financing
documentation; (ii) the obtaining of certain approvals and agreements; (iii)
consummation of the Merger; (iv) satisfactory proforma and other financial
statements; (v) environmental reports; (vi) certain appraisals and business
valuations; (vii) the absence of a material adverse change; and (viii) the
delivery of customary closing documents. The conditions to all borrowings
include requirements relating to prior notice of borrowing, the accuracy of
representations and warranties, the absence of any default or potential event of
default and the absence of a material adverse change in Logistic's business.
The Credit Agreement also contains affirmative and negative covenants
(including, where appropriate, certain exceptions and baskets mutually agreed
upon), including but not limited to furnishing financial and other information
payment of obligations, conduct of business, maintenance of existence,
maintenance of property, insurance, inspection of property, books and records,
notices, environmental laws, additional subsidiary guarantors, bank accounts,
indebtedness, liens, nature of business, consolidation, merger, sale or purchase
of assets, advances, investments and loan guarantee obligations, transactions
with affiliates, ownership of subsidiaries, fiscal year, prepayment of
indebtedness and dividends. The Credit Agreement also
97
105
contains the following financial covenants; minimum consolidated tangible net
worth; maximum consolidated funded debt ratio; minimum cash flow ratio; and
positive annual earnings.
Events of default under the Credit Agreement, include without limitation,
those relating to: (i) non-payment of interest, principal or fees payable under
the Credit Agreement; (ii) inaccuracy of representations or warranties in the
loan documents; (iii) non-performance of covenants; (iv) cross-default to other
material debt of the Company and its subsidiaries; (v) bankruptcy or insolvency;
(vi) judgments in excess of specified amounts; (vii) certain ERISA events;
(viii) impairment of security interests in collateral; (ix) invalidity of
guarantees; (x) materially inaccurate or false representations or warranties;
and (xi) a change in control.
As a result of the borrowings under the Credit Agreement, Logistic, as well
as C2 on a pro forma basis, will be highly leveraged. C2's pro forma total
funded debt to total capitalization including minority interest at March 31,
1998 was 64% assuming 5,202,664 shares are sold in the C2 Offering. In addition,
Logistic may, subject to certain restrictions in its debt agreements, incur
further indebtedness from time to time to finance expansion, either through
acquisitions or capital leases, or for other purposes.
Due to Logistic's substantial indebtedness, a significant portion of its
cash flow from operations will be required for debt service. On a pro forma
basis, for the fiscal year ended June 30, 1997, this results in C2's earnings
being insufficient to cover fixed charges by approximately $79,000, principally
as a result of significant interest charges on the debt to be incurred in
connection with the financing of the $20.0 million distribution to Christiana.
In addition, C2's Pro Forma Income Statement reflects a net loss of $738,000 for
the year ended June 30, 1997 and a net loss of $15,000 for the nine months ended
March 31, 1998.
The extent to which Logistic is leveraged could have the following
consequences: (a) impairment of Logistic's ability to obtain additional
financing in the future for working capital, capital expenditures, acquisitions
or other purposes; (b) dedication of a substantial portion of Logistic's cash
flow from operations to the payment of debt service requirements (principal and
interest) on its indebtedness; (c) vulnerability of Logistic to changes in
general economic conditions; and (d) limitations on Logistic's ability to
capitalize on significant business opportunities and to respond to competition.
In addition, if Logistic experiences losses, C2 may decide to contribute some or
all of the excess proceeds of the C2 Offering to Logistic to fund such operating
losses. To the extent of such a contribution, the proceeds of the C2 Offering in
excess of the amount necessary to finance the acquisition of two-thirds of
Logistic would be unavailable for future acquisitions.
98
106
DESCRIPTION OF EVI AND CHRISTIANA CAPITAL STOCK
EVI
EVI's authorized capital stock consists of 250,000,000 shares of EVI Common
Stock, par value $1.00 per share, and 3,000,000 shares of Preferred Stock, par
value $1.00 per share ("EVI Preferred Stock"). At June 22, 1998, 96,966,877
shares of EVI Common Stock were outstanding, including (i) 50,228 shares of EVI
Common Stock remaining to be exchanged for shares of common stock of GulfMark
International, Inc. ("GulfMark") in connection with EVI's prior acquisition of
GulfMark, (ii) 7,381 shares of EVI Common Stock remaining to be exchanged for
common shares of Taro Industries Limited ("Taro") in connection with EVI's prior
acquisition of Taro and (iii) 1,990,095 shares of EVI Common Stock remaining to
be exchanged for shares of common stock of Weatherford in connection with the
Weatherford Merger. In addition, at April 22, 1998, there were (i) 5,031,250
shares of EVI Common Stock reserved for issuance upon the conversion of EVI's 5%
Convertible Subordinated Preferred Equivalent Debentures due 2027, (ii)
3,900,000 shares of EVI Common Stock reserved for issuance pursuant to the
proposed Merger and (iii) 3,673,484 shares of EVI Common Stock reserved for
issuance pursuant to various employee benefit plans of EVI and its subsidiaries,
of which 2,013,252 shares of EVI Common Stock were reserved for issuance upon
the exercise of outstanding options and awards. At May 26, 1998, there were no
shares of EVI Preferred Stock issued or outstanding. The holders of shares of
EVI Common Stock are not liable to further calls or assessments by EVI. The
description below is a summary of and is qualified in its entirety by the
provisions of EVI's Restated Certificate of Incorporation as currently in
effect.
Subject to the rights of the holders of any outstanding shares of EVI
Preferred Stock and those rights provided by law, (i) dividends may be declared
and paid or set apart for payment upon the EVI Common Stock out of any assets or
funds of EVI legally available for the payment of dividends and may be payable
in cash, stock or otherwise, (ii) the holders of EVI stock have the exclusive
right to vote for the election of directors and, except as provided below, on
all other matters requiring stockholder action generally, with each share being
entitled to one vote and (iii) upon the voluntary or involuntary liquidation,
dissolution or winding up of EVI, the net assets of EVI will be distributed pro
rata to the holders of the EVI Common Stock in accordance with their respective
rights and interests to the exclusion of the holders of any outstanding shares
of EVI Preferred Stock.
Although the holders of the EVI Common Stock are generally entitled to vote
for the approval of amendments to EVI's Restated Certificate of Incorporation,
the voting rights of the holders of the EVI Common Stock are limited with
respect to certain amendments to EVI's Restated Certificate of Incorporation
that affect only the holders of the EVI Preferred Stock. Specifically, subject
to the rights of any outstanding shares of any series of EVI Preferred Stock,
EVI's Restated Certificate of Incorporation provides that it may be amended from
time to time in any manner that would solely modify or change the relative
powers, preferences and rights and the qualifications or restrictions of any
issued shares of any series of EVI Preferred Stock then outstanding with the
only required vote or consent for approval of such amendment being the
affirmative vote or consent of the holders of a majority of the outstanding
shares of the series of EVI Preferred Stock so affected, provided that the
powers, preferences and rights and the qualifications and limitations or
restrictions of such series after giving effect to such amendment are no greater
than the powers, preferences and rights and qualifications and limitations or
restrictions permitted to be fixed and determined by the Board of Directors with
respect to the establishment of any new series of shares of EVI Preferred Stock
pursuant to the authority vested in the Board of Directors as to such matters.
Holders of the EVI Common Stock do not have any cumulative voting,
redemptive or conversion rights and have no preemptive rights to subscribe for,
purchase or receive any class of shares or securities of EVI. Holders of the EVI
Common Stock have no fixed dividend rights. Dividends may be declared by the
Board of Directors at its discretion depending on various factors, although no
dividends are anticipated for the foreseeable future.
The EVI Preferred Stock may be issued from time to time in one or more
series, with each such series having such powers, preferences and rights and
qualifications and limitations or restrictions as may be fixed by EVI's Board of
Directors pursuant to the resolution or resolutions providing for the issuance
of such series.
99
107
Under Delaware law, a corporation may include provisions in its certificate
of incorporation that will relieve its directors of monetary liability for
breaches of their fiduciary duty to the corporation, except under certain
circumstances, including a breach of the director's duty of loyalty, acts or
omissions of the director not in good faith or which involve intentional
misconduct or a knowing violation of law, the approval of an improper payment of
a dividend or an improper purchase by EVI of stock or any transaction from which
the director derived an improper personal benefit. EVI's Restated Certificate of
Incorporation provides that EVI's directors are not liable to EVI or its
stockholders for monetary damages for breach of their fiduciary duty, subject to
the above described exceptions specified by Delaware law.
As a Delaware corporation, EVI is subject to Section 203 of the Delaware
General Corporation Law (the "DGCL"). In general, Section 203 prevents an
"interested stockholder" (defined generally as a person owning 15% or more of a
corporation's outstanding voting stock) from engaging in a "business
combination" (as defined) with a Delaware corporation for three years following
the time such person became an interested stockholder unless (i) before such
person became an interested stockholder, the board of directors of the
corporation approved the transaction in which the interested stockholder became
an interested stockholder or approved the business combination; (ii) upon
consummation of the transaction that resulted in the stockholder becoming an
interested stockholder, the interested stockholder owns at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding stock held by directors who are also officers of the
corporation and by employee stock plans that do not provide employees with the
rights to determine confidentially whether shares held subject to the plan will
be tendered in a tender or exchange offer); or (iii) following the transaction
in which such person became an interested stockholder, the business combination
is approved by the board of directors of the corporation and authorized at a
meeting of stockholders by the affirmative vote of the holders of two-thirds of
the outstanding voting stock of the corporation not owned by the interested
stockholder. Under Section 203, the restrictions described above also do not
apply to certain business combinations proposed by an interested stockholder
following the announcement or notification of one of certain extraordinary
transactions involving the corporation and a person who had not been an
interested stockholder during the previous three years or who became an
interested stockholder with the approval of a majority of the corporation's
directors, if such extraordinary transaction is approved or not opposed by a
majority of the directors who were directors prior to any person becoming an
interested stockholder during the previous three years or were recommended for
election or elected to succeed such directors by a majority of such directors.
EVI has approved the acquisition by Christiana of the shares of EVI Common Stock
owned by them under Section 203 and Christiana are therefore not subject to the
restrictions under Section 203.
The Registrar and Transfer Agent for the EVI Common Stock is American Stock
Transfer and Trust Company, New York, New York.
CHRISTIANA
Authorized Capital Stock. The aggregate number of shares of Christiana
capital stock which Christiana has authority to issue is 13,000,000, consisting
of one class, designated as "Common Stock", with a par value of $1.00 per share
and 1,000,000 shares of a class designated as Preferred Stock, with a par value
of $10.00 per share. As of the date hereof there were shares of
Christiana Common Stock issued and shares outstanding. Based on
certain commitments by officers of Christiana to exercise options and purchase
shares of Christiana Common Stock, as of the Effective Time, Christiana expects
that there will be 5,202,664 shares of Christiana Common Stock issued and
outstanding. There are no shares of Preferred Stock outstanding and the Board of
Directors of Christiana has not fixed any powers, preferences or rights with
respect to any Preferred Stock.
Dividend and Liquidation Rights. All shares of Christiana Common Stock will
participate equally with respect to dividends and rank equally upon liquidation
subject to the rights of holders of any prior ranking stock which may be
subsequently authorized and issued. In the event of liquidation, dissolution or
winding up of Christiana, the owners of Christiana Common Stock are entitled to
receive pro rata the assets and funds of Christiana remaining after satisfaction
of all creditors of Christiana and payment of all amounts to which owners of
prior ranking stock, if any, then outstanding may be entitled.
100
108
Voting Rights. Except as hereinafter set forth, every holder of Christiana
Common Stock has one vote for each share.
No shareholder of Christiana has cumulative voting rights which means that
the holders of shares entitled to exercise more than 50% of the voting power of
shares entitled to vote, represented in person or by proxy at a meeting at which
a quorum (a majority of the shares entitled to vote) is represented, are
entitled to elect all of the directors to be elected. Under Christiana's Bylaws,
each member of the Board of Directors is elected each year at Christiana's
annual meeting.
Certain Statutory Provisions. Section 180.1150 of the WBCL provides that
the voting power of shares of an "issuing public corporation", which includes
Christiana, which are held by any person holding in excess of 20% of the voting
power in the election of directors of the issuing public corporation's shares
shall be limited to 10% of the full voting power of such excess shares. This
statutory voting restriction will not be applicable to shares acquired directly
from Christiana, to shares acquired in a transaction incident to which
shareholders of Christiana vote to restore the full voting power of such shares
(either before or after the acquisition of the shares) and under certain other
circumstances.
Except as may otherwise be provided by law, the requisite affirmative vote
of shareholders for certain significant corporate actions, including a merger or
share exchange with another corporation, sale of all or substantially all of the
corporate property and assets, or voluntary liquidation, is a majority of all
the votes entitled to be cast on the transaction by each voting group of
outstanding shares entitled to vote thereon. Sections 180.1130 through 180.1134
of the WBCL provide generally that, in addition to the vote otherwise required
by law or the articles of incorporation of an "issuing public corporation",
certain business combinations not meeting certain adequacy-of-price standards
specified in the statute must be approved by (a) the holders of at least 80% of
the votes entitled to be case and (b) two-thirds of the votes entitled to be
cast by the corporation's outstanding voting shares owned by persons other than
a "significant shareholder" who is a party to the transaction or an affiliate or
associate thereof. Section 180.1130 defines "business combination" to include,
subject to certain exceptions, a merger or share exchange of the issuing public
corporation (or any subsidiary thereof) with, or the sale or other disposition
of substantially all assets of the issuing public corporation to, any
significant shareholder or affiliate thereof. "Significant shareholder" is
defined generally to mean a person that is the beneficial owner of 10% or more
of the voting power of the outstanding voting shares of the issuing public
corporation.
Pursuant to the requirements of Sections 180.1130 through 180.1134 of the
WBCL, the Lubar Shares will not be counted for purposes of obtaining the 80%
affirmative vote of Christiana shareholders required to approve the Merger.
Sections 180.1140 through 180.1145 of the WBCL provide that a "resident
domestic corporation", such as Christiana, may not engage in a "business
combination" with an "interested stockholder" (e.g., a person beneficially
owning 10% or more the aggregate voting power of the stock of such corporation)
within three years after the date (the "stock acquisition date") on which the
interested stockholder acquired his or her 10% or greater interest, unless the
business combination (or the acquisition of the 10% or greater interest) was
approved before the stock acquisition date by the corporation's board of
directors. If the interested stockholder fails to obtain such approval by the
board of directors, then even after such three-year period, a business
combination with the interested stockholder may be consummated only with the
approval of the holders of a majority of the voting stock not beneficially owned
by such interested stockholder, unless the combination satisfies certain
adequacy-of-price standards intended to provide a fair price for shares held by
non-interested shareholders.
The above sections of the WBCL could have the effect, among others, of
discouraging takeover proposals for Christiana or impeding a business
combination between Christiana and a major shareholder of Christiana.
Preemptive Rights. No holder of Christiana Common Stock has any preemptive
or subscription rights.
Conversion Rights, Redemption Provisions and Sinking Fund
Provisions. Christiana Common Stock is not convertible, is not redeemable and
has no sinking fund.
101
109
Liability to Further Calls or to Assessment. Certain statutory personal
liability may be imposed upon shareholders of Wisconsin corporations, including
Christiana, under Section 180.0622(2)(b) of the WBCL. The substantially
identical predecessor to such statute has been judicially interpreted to mean
that shareholders of a Wisconsin corporation are subject to personal liability,
up to an amount equal to the consideration for which their shares were issued
(instead of the aggregate par value in the case of shares with par value, as the
statute states), for all debts owing to employees of the corporation for
services performed for the corporation, but not exceeding six months service in
any one case. The provisions of this Section of the WBCL are presently
applicable to the shares of capital stock of Christiana.
COMPARATIVE RIGHTS OF STOCKHOLDERS OF EVI AND CHRISTIANA
The rights of holders of Christiana Common Stock are currently governed by
Wisconsin law, Christiana's Articles of Incorporation, as amended, and
Christiana's By-laws, as amended. Upon consummation of the Merger, holders of
Christiana Common Stock will become holders of EVI Common Stock, and their
rights as holders of EVI Common Stock will be governed by Delaware law and EVI's
Restated Certificate of Incorporation and By-laws. Set forth below is an
explanation of material differences between the rights of holders of Christiana
Common Stock and rights of holders of EVI Common Stock.
SPECIAL VOTE REQUIRED FOR CERTAIN COMBINATIONS
Section 203 of the DGCL applies to EVI. Although EVI is subject to Section
203, the Merger with Christiana is not prohibited by Section 203.
Except as may otherwise be provided by law, the requisite affirmative vote
of shareholders for certain significant corporate actions, including a merger or
share exchange with another corporation, sale of all or substantially all of the
corporate property and assets, or voluntary liquidation, is a majority of all
the votes entitled to be cast on the transaction by each voting group of
outstanding shares entitled to vote thereon. Section 180.1131 of the WBCL
provides generally that, in addition to the vote otherwise required by law or
the articles of incorporation of an "issuing public corporation", certain
business combinations not meeting certain adequacy-of-price standards specified
in the statute must be approved by (i) the holders of at least 80% of the votes
entitled to be cast and (ii) two-thirds of the votes entitled to be cast by the
corporation's outstanding voting shares owned by persons other than a
"significant shareholder" who is a party to the transaction or an affiliate or
associate thereof. Section 180.1130 defines "business combination" to include,
subject to certain exceptions, a merger or share exchange of the issuing public
corporation (or any subsidiary thereof) with, or the sale or other disposition
of substantially all assets of the issuing public corporation to, any
significant shareholder or affiliate thereof. "Significant shareholder" is
defined generally to mean a person that is the beneficial owner of 10% or more
of the voting power of the outstanding voting shares of the issuing public
corporation. Although Christiana believes that Sections 180.1130 through
180.1134 of the WBCL are not intended to apply to transactions such as the
Merger, Christiana will require the shareholder vote required under Section
180.1131 under the assumption that such Section applies to the Merger.
VOTE REQUIRED FOR CORPORATE TRANSACTIONS AND OTHER MATTERS
Under the DGCL, an amendment to a corporation's certificate of
incorporation requires the affirmative vote of the holders of a majority of the
outstanding stock of the corporation entitled to vote thereon and a majority of
the outstanding stock of each class entitled to vote thereon as a class unless
the corporation's certificate of incorporation provides for a higher percentage.
The DGCL also provides that the holders of a majority of the outstanding stock
of the corporation entitled to vote thereon may approve an agreement of merger
or consolidation or the dissolution of a corporation.
The WBCL generally requires the approval of a majority of the votes
entitled to be cast on the amendment by each voting group with respect to which
the amendment would create dissenters' rights and a majority of votes of every
other voting group entitled to vote on the amendment, unless the articles of
incorporation, bylaws adopted under authority granted in the articles of
incorporation or the WBCL require a greater proportion. The WBCL also provides
generally that holders of a majority of outstanding stock of a
102
110
corporation entitled to vote thereon may approve an agreement of merger,
consideration or the dissolution of a corporation, subject to the statutory
provisions described above under "-- Special Vote Required for Certain
Combinations" and "Description of EVI and Christiana Capital
Stock -- Christiana".
Article 8 of EVI's Restated Certificate of Incorporation provides that the
Restated Certificate of Incorporation may be amended, altered, changed or
repealed as prescribed by statute. Under the DGCL, such amendment must be
approved by a majority of the outstanding EVI Common Stock. Under Article 4 of
EVI's Restated Certificate of Incorporation, any amendment to the Restated
Certificate of Incorporation that affects any series of outstanding preferred
stock must be approved by a majority of the holders of such series. The DGCL
does not require a vote of the EVI stockholders for the consummation of the
Merger.
Christiana's Articles of Incorporation are silent as to amendments to the
Articles of Incorporation and the vote required to approve mergers and other
material corporate transactions.
DISPOSITION OF ASSETS
The DGCL provides that a corporation may sell, lease or exchange all or
substantially all of its property and assets for such consideration as its Board
of Directors deems expedient and in the best interest of the corporation, when
and as authorized by resolution adopted by the holders of a majority of the
outstanding stock of the corporation entitled to vote thereon.
Under the WBCL, a corporation may sell, lease, exchange or otherwise
dispose of all, or substantially all, of its property and assets otherwise than
in the usual and regular course of business on such terms and conditions and for
the consideration determined by the corporation's Board of Directors, upon
adoption of a resolution by the Board of Directors approving the proposed
transaction and approval by the majority of all the votes entitled to be cast on
the transactions by the shareholders of the corporation.
POWER TO AMEND BY-LAWS
Under the DGCL, the power to adopt, amend or repeal By-laws of a
corporation is vested in the authority of the stockholders entitled to vote,
unless the corporation's certificate of incorporation confers such power upon
its directors. However, power conferred shall not divest the stockholders of
their power to adopt, amend or repeal the By-laws. EVI's By-laws do not permit
amendments by its board of directors.
Under the WBCL, the power to adopt, amend or repeal By-laws of a
corporation is vested in the authority of the board of directors of the
corporation, unless the articles of incorporation provide otherwise. However,
the corporation's stockholders may adopt, amend or repeal By-laws even though
the board of directors has this power as well. Christiana's articles of
incorporation do not divest the directors of their power to adopt, amend and
repeal by-laws.
QUORUM REQUIREMENTS FOR DIRECTORS' MEETINGS
The DGCL provides that a majority of the total number of directors shall
constitute a quorum for the transaction of business, unless the certificate of
incorporation or by-laws require a greater number. EVI's By-laws provide that a
majority of the total number of directors shall constitute a quorum for the
transaction of business.
The WBCL provides that a majority of the total number of directors shall
constitute a quorum for the transaction of business, unless the articles of
incorporation or by-laws provide for a greater or lesser number, provided that a
quorum may not be fewer than one-third of the number of directors. Christiana's
By-laws provide that a quorum of the board of directors consists of any four
directors of the eight member board of directors.
REMOVAL OF DIRECTORS
The DGCL and EVI's By-laws provide that directors may be removed, with or
without cause, by the holders of a majority of the shares then entitled to vote
at an election of directors. In addition, EVI's By-laws
103
111
provide that directors may be removed from office to the extent permitted by
law, for cause by vote of the majority of the directors then in office.
The WBCL provides that directors may be removed with or without cause,
unless the articles of incorporation or by-laws provide that directors may be
removed only for cause. Shareholders may remove a director if the number of
shareholder votes cast to remove the director exceeds the numbers of shareholder
votes cast not to remove such director, unless the articles of incorporation or
by-laws provide for a greater voting requirement. Neither Christiana's articles
of incorporation nor its By-laws expressly addresses the removal of directors.
DIRECTOR ELECTIONS, QUALIFICATIONS AND NUMBER
The DGCL provides that the number of directors of a Delaware corporation
shall be fixed by, or in the manner provided in, the by-laws, unless such the
certificate of incorporation fixes such number, in which case, it can only be
changed by amending the certificate. Under the DGCL, a director need not be a
stockholder to be qualified unless so required by the corporation's certificate
of incorporation or by-laws. EVI's By-laws provide that directors are to be
elected by a plurality vote of the stockholders; provided, however, that any
vacancies occurring in the board may be filled by the remaining directors.
The WBCL provides that the number of directors of a Wisconsin corporation
shall be fixed in accordance with the articles of incorporation or by-laws.
Under the WBCL, a director need not be a stockholder to be qualified unless so
required by the corporation's articles of incorporation or by-laws. Under the
WBCL, unless otherwise provided by the articles of incorporation, directors are
to be elected by a plurality of votes cast by the shares entitled to vote in the
election; provided, however, that a vacancy on the board may be filled by the
shareholders or the board of directors. Christiana's articles of incorporation
are silent with respect to the qualifications and election of directors.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
EVI Common Stock and Christiana Common Stock are each traded on the NYSE
under the symbols "EVI" and "CST", respectively. The following table sets forth
the range of high and low sale prices for EVI Common Stock and Christiana Common
Stock for the periods indicated, as reported on the NYSE. The prices for the EVI
Common Stock have been adjusted to reflect a two-for-one stock split effected in
May 1997.
EVI CHRISTIANA
---------------------- ----------------------
HIGH LOW HIGH LOW
---- --- ---- ---
Twelve Months Ended December 31, 1996
Quarter ended March 31, 1996............................ $14 7/16 $11 1/8 $24 3/4 $22 1/4
Quarter ended June 30, 1996............................. 17 1/2 12 7/8 24 1/4 20 1/8
Quarter ended September 30, 1996........................ 20 1/4 14 22 3/4 20 5/8
Quarter ended December 31, 1996......................... 25 3/4 19 1/2 25 3/4 23 1/2
Twelve Months Ended December 31, 1997
Quarter ended March 31, 1997............................ $31 7/8 $23 7/8 $33 3/4 $26 1/2
Quarter ended June 30, 1997............................. 45 1/2 28 39 7/8 31 1/2
Quarter ended September 30, 1997........................ 64 42 1/16 42 5/8 37 5/8
Quarter ended December 31, 1997......................... 73 40 1/4 49 9/16 36 5/8
Twelve Months Ended December 31, 1998
Quarter ended March 31, 1998............................ $53 7/8 $37 1/2 $41 1/2 $33 15/16
Quarter ended June 30, 1998 (through June 24, 1998)..... $58 7/16 $34 3/4 $43 5/8 $31 11/16
On December 12, 1997, the last trading date prior to the announcement by
EVI and Christiana that they had reached an agreement concerning the Merger, the
closing sale prices of EVI Common Stock and of Christiania Common Stock as
reported by the NYSE were $46 3/8 and $40 3/4 per share, respectively.
104
112
On June 23, 1998, the closing sale prices of EVI Common Stock and of
Christiana Common Stock as reported by the NYSE were $38 2/3 and $32 per share,
respectively.
Following the Merger, EVI Common Stock will continue to be traded on the
NYSE under the symbol "EVI", Christiana Common Stock will cease to be traded and
there will be no further market for such stock.
EVI has not paid any dividends on the EVI Common Stock since 1984 and
currently anticipates that, for the foreseeable future, any earnings will be
retained for the development of EVI's business. The declaration of all dividends
is at the discretion of EVI's Board of Directors. EVI's dividend policy will be
reviewed by the Board of Directors at such future time as may be appropriate in
light of relevant factors at the time; however, EVI is subject to restrictions
under its principal working capital facility in the amount of dividends,
distributions and other restricted payments that it may make to stockholders.
Christiana has not declared or paid any dividends during the past five
years.
105
113
STOCK OWNERSHIP AND CERTAIN BENEFICIAL OWNERS
EVI
The following table sets forth certain information with respect to each
person who as of the Record Date, was known by EVI to be the beneficial owner of
more than 5% of the outstanding shares of EVI Common Stock.
BEFORE THE MERGER AFTER THE MERGER
------------------------------ ------------------------------
NUMBER OF SHARES NUMBER OF SHARES
BENEFICIALLY PERCENT BENEFICIALLY PERCENT
NAME AND ADDRESS OWNED(1) OF CLASS(%) OWNED(1) OF CLASS(%)
---------------- ---------------- ----------- ---------------- -----------
First Reserve Corporation(2)............
475 Steamboat Road
Greenwich, CT 06830
FMR Corp.(3)............................
82 Devonshire Street
Boston, Massachusetts 02109
- ---------------
(1) Unless otherwise indicated below, the persons or group listed have sole
voting and dispositive power with respect to their shares of EVI Common
Stock, and none of such shares are deemed to be owned because the holder has
the right to acquire the shares within 60 days.
(2) Based upon information contained in Amendment No. 4 to Schedule 13D/A dated
March 4, 1998, filed with the Commission by First Reserve Corporation
("First Reserve"). Represents shares owned by the following funds (the
"First Reserve Funds"), for each of which First Reserve is the general
partner: American Gas & Oil Investors, Limited Partnership -- 1,292,000
shares; AmGO II, Limited Partnership -- 807,500 shares; First Reserve
Secured Energy Assets Fund, Limited Partnership -- 617,500 shares; First
Reserve Fund V, Limited Partnership -- 2,185,000 shares; First Reserve Fund
V-2, Limited Partnership -- 608,000 shares; and First Reserve Fund VI,
Limited Partnership -- 698,602 shares. First Reserve, in its role as
managing general partner of the First Reserve Funds and acting on behalf of
the First Reserve Funds, has the power to cause each First Reserve Fund to
dispose of or vote shares of Common Stock held by such First Reserve Fund.
Also includes 32,238 shares owned directly by First Reserve. The principal
beneficial owners of the common stock of First Reserve are its executive
officers, including Mr. Hill, Chairman of the Board of First Reserve, and
Mr. Macaulay, President and Chief Executive Officer of First Reserve, who is
also a director of EVI.
(3) Fidelity Management & Research Company ("Fidelity"), a wholly owned
subsidiary of FMR Corp. ("FMR") and a registered investment adviser, is the
beneficial owner of shares as a result of acting as investment
adviser to various registered investment companies (the "Funds"). Fidelity
Management Trust Company ("FMTC"), a wholly owned subsidiary of FMR, is the
beneficial owner of shares as a result of serving as investment
manager of various institutional accounts. Edward C. Johnson 3d, FMR's
Chairman and principal stockholder, FMR, through its control of Fidelity,
and the Funds each has sole power to dispose of the shares owned
by the Funds and Mr. Johnson and FMR, through its control of FMTC, each has
sole power to vote and dispose of the shares owned by the
institutional accounts; however, sole power to vote shares owned
by the Funds resides with the Funds' Boards of Trustees. Fidelity carries
out the voting of the Funds' shares under written guidelines established by
the Funds' Board of Trustees. Additionally, Mr. Johnson, FMR and the Funds
may be deemed to be the beneficial owner of an additional shares
resulting from the assumed conversion of of EVI's Debentures. Members
of the Mr. Johnson's family and trusts for their benefit are the predominant
owners of Class B shares of common stock of FMR. Mr. Johnson owns 12.0% and
Abigail P. Johnson, Mr. Johnson's wife and a Director of FMR, owns 24.5% of
the voting stock of FMR. The Johnson family and all other Class B
shareholders have entered into a shareholders' voting agreement under which
all Class B shares will be voted in accordance with the majority vote of
Class B shares. Accordingly, through their ownership of voting common stock
and the execution of the shareholders' voting agreement, members of the
Johnson family may be deemed, under the Investment Company Act of 1940, to
form a controlling group with respect to FMR.
106
114
CHRISTIANA
The following table gives information, as of the date hereof, about the
beneficial ownership of Common Stock of Christiana by the persons known to the
Board of Directors to own beneficially more than 5% of the outstanding Common
Stock. As used in this proxy statement, "beneficial ownership" has the meaning
set forth in Rule 13d-3 of the Exchange Act. The information is provided as of
the date hereof except that information regarding Dimensional Fund Advisors,
Inc. is provided as of February 10, 1998, the date on which it filed its
Schedule 13G with the Commission.
NO. OF SHARES PERCENT
NAME AND ADDRESS BENEFICIALLY OWNED OF CLASS
---------------- ------------------ --------
Sheldon B. Lubar............................................ 968,615(1) 18.8%
Suite 1200
700 North Water Street
Milwaukee, WI 53202
Albert O. Nicholas.......................................... 310,700 6.0%
700 North Water Street
Milwaukee, WI 53202
David J. Lubar.............................................. 427,403 8.2%
Joan P. Lubar(1)............................................ 448,551 8.7%
Kristine L. Thomson(1)...................................... 430,478 8.4%
Susan Solvang(1)............................................ 442,953 8.6%
Dimensional Fund Advisors Inc.(2)........................... 290,100 5.6%
- ---------------
(1) Joan P. Lubar, Kristine L. Thomson and Susan Solvang (the wife of Oyvind
Solvang, the Vice President of Christiana) are Sheldon B. Lubar's daughters.
Their address is c/o Christiana Companies, Inc., 700 North Water Street,
Suite 1200, Milwaukee, Wisconsin 53202.
(2) Includes 22,100 shares owned by DFA Investment Dimensions Group Inc. (the
"Fund") and 69,000 shares owned by The DFA Investment Trust Company (the
"Trust"). Persons who are officers of Dimensional Fund Advisors Inc. also
serve as officers of the Fund and the Trust, each an open-end management
investment company registered under the Investment Company Act of 1940. In
their capacities as officers of the Fund and the Trust, these persons vote
the shares owned by the Fund and the Trust. Dimensional Fund Advisors Inc.'s
address is 1299 Ocean Avenue, 11th Floor, Santa Monica, California 90401.
The information provided with respect to the Fund and the Trust is based on
a Schedule 13G filed with the Commission.
RELATIONSHIPS WITH INDEPENDENT PUBLIC ACCOUNTANTS
It is expected that representatives of Arthur Andersen LLP will be present
at the EVI Special Meeting and the Christiana Special Meeting to respond to
appropriate questions of stockholders and make a statement if they so desire.
LEGAL MATTERS
The validity of the shares of EVI Common Stock to be issued in connection
with the Merger will be passed upon by Fulbright & Jaworski L.L.P., 1301
McKinney, Suite 5100, Houston, Texas 77010. Uriel E. Dutton, formerly a director
of EVI, is a partner of Fulbright & Jaworski L.L.P. Mr. Dutton currently holds
options to purchase 70,000 shares of EVI Common Stock, which options were
granted to him pursuant to EVI's Amended and Restated Non-Employee Director
Stock Option Plan. In addition, Curtis W. Huff, who serves as Of Counsel to
Fulbright & Jaworski L.L.P., is Senior Vice President, General Counsel and
Secretary of EVI and pursuant to an agreement with EVI holds 75,000 restricted
shares of EVI Common Stock and options to purchase 100,000 shares of EVI Common
Stock.
107
115
EXPERTS
EVI's consolidated financial statements as of December 31, 1997 and 1996
and for each of the three years in the period ended December 31, 1997,
incorporated by reference in this Joint Proxy Statement/Prospectus and the
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said report.
Christiana's consolidated financial statements as of June 30, 1997 and 1996
and for each of the three years in the period ended June 30, 1997, included in
this Joint Proxy Statement/Prospectus and the Registration Statement have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
report.
Weatherford's consolidated financial statements as of December 31, 1997 and
1996 and for each of the three years in the period ended December 31, 1997,
incorporated by reference in this Joint Proxy Statement/ Prospectus and the
Registration Statement, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said report.
GulfMark Retained Assets' financial statements as of December 31, 1996 and
1995 and for each of the three years in the period ended December 31, 1996,
incorporated by reference in this Joint Proxy Statement/ Prospectus and the
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said report.
The consolidated financial statements of Trico for the years ended December
31, 1995 and 1996 appearing in EVI's Amendment No. 1 to Form 8-K dated December
2, 1997 on Form 8-K/A, have been audited by Ernst & Young LLP, independent
public accountants, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference upon authority of such firm as experts in
accounting and auditing.
The combined financial statements for BMW as of March 31, 1997 and 1996,
and for each of the two years in the period ended March 31, 1997, incorporated
by reference in this Joint Proxy Statement/Prospectus and the Registration
Statement have been audited by Arthur Andersen & Co., independent chartered
accountants, as indicated in their reports with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said report.
STOCKHOLDERS' PROPOSALS
In light of the Weatherford Merger, EVI rescheduled its annual meeting of
stockholders for 1998 for a date to be determined in September 1998. As a
result, any proposals of holders of EVI Common Stock intended to be presented at
the 1998 annual meeting must be submitted within 10 days following the date on
which notice of the date of the meeting is made or public disclosure of the date
of the meeting is provided. Such proposals are required to be addressed to the
Secretary of EVI at 5 Post Oak Park, Suite 1760, Houston, Texas 77027.
If the Merger is not consummated, any proposals of stockholders of
Christiana intended to be presented at the Annual Meeting of Stockholders of
Christiana to be held in 1998 are required to be received by Christiana,
addressed to the Secretary at 700 North Water Street, Suite 1200, Milwaukee,
Wisconsin 53202, no later than , 1998, to be considered for
inclusion in the proxy statement and form of proxy relating to that meeting.
108
116
CHRISTIANA COMPANIES, INC.
INDEX TO FINANCIAL STATEMENTS
PAGE NO.
--------
Report of Independent Public Accountants.................... F-2
Consolidated Statements of Earnings for the years ended June
30, 1997, 1996, and 1995.................................. F-3
Consolidated Balance Sheets as of June 30, 1997 and June 30,
1996...................................................... F-4
Consolidated Statements of Shareholders' Equity for the
years ended June 30, 1997, 1996
and 1995.................................................. F-5
Consolidated Statements of Cash Flows for the years ended
June 30, 1997, 1996 and 1995.............................. F-6
Notes to Consolidated Financial Statements.................. F-7
Quarterly Financial Information............................. F-19
Consolidated Statements of Operations for the nine months
ended March 31, 1998 and 1997 and the three months ended
March 31, 1998 and 1997................................... F-20
Consolidated Balance Sheets as of March 31, 1998 and June
30, 1997.................................................. F-21
Consolidated Statements of Shareholders' Equity for the nine
months ended March 31, 1998 and the year ended June 30,
1997...................................................... F-22
Consolidated Statements of Cash Flows for the nine months
ended March 31, 1998 and 1997............................. F-23
Notes to Consolidated Financial Statements.................. F-24
F-1
117
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
of Christiana Companies, Inc.:
We have audited the accompanying consolidated balance sheets of Christiana
Companies, Inc. (a Wisconsin corporation) as of June 30, 1997 and 1996, and the
related consolidated statements of earnings, shareholders' equity and cash flows
for each of the years in the three year period ended June 30, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Christiana Companies, Inc. as of June 30, 1997 and 1996, and the results of its
consolidated operations and its cash flows for each of the three years in the
period ended June 30, 1997, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
August 1, 1997
F-2
118
CHRISTIANA COMPANIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEAR ENDED JUNE 30,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
Revenues:
Product Sales....................................... $ -- $ -- $55,239,000
Warehousing and Logistic Services................... 84,208,000 77,170,000 71,642,000
----------- ----------- -----------
84,208,000 77,170,000 126,881,000
----------- ----------- -----------
Costs and Expenses:
Cost of Product Sales............................... -- -- 47,134,000
Warehousing and Logistic Expenses................... 70,973,000 65,418,000 57,684,000
Selling, General & Administrative Expenses.......... 8,656,000 7,531,000 11,739,000
----------- ----------- -----------
79,629,000 72,949,000 116,557,000
----------- ----------- -----------
Earnings From Operations.............................. 4,579,000 4,221,000 10,324,000
----------- ----------- -----------
Other Income (Expense):
Interest Income..................................... 516,000 531,000 942,000
Interest Expense.................................... (3,166,000) (3,096,000) (4,842,000)
Gain (Loss) on Disposal of Assets................... (765,000) 2,818,000 3,083,000
Equity in Earnings of EVI, Inc...................... 10,479,000 1,745,000 --
Other (Expense), Net................................ (674,000) (208,000) (367,000)
----------- ----------- -----------
6,390,000 1,790,000 (1,184,000)
----------- ----------- -----------
Earnings Before Income Taxes and Minority Interest.... 10,969,000 6,011,000 9,140,000
Income Tax Provision.................................. 4,306,000 2,408,000 3,394,000
----------- ----------- -----------
Net Earnings Before Minority Interest................. 6,663,000 3,603,000 5,746,000
Minority Interest..................................... -- -- (684,000)
----------- ----------- -----------
Net Earnings.......................................... $ 6,663,000 $ 3,603,000 $ 5,062,000
=========== =========== ===========
Earnings Per Share.................................... $ 1.30 $ 0.69 $ 0.96
=========== =========== ===========
Weighted Average Number of Shares Outstanding......... 5,136,630 5,186,679 5,275,947
See notes to consolidated financial statements.
F-3
119
CHRISTIANA COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
AS OF JUNE 30,
---------------------------
1997 1996
------------ ------------
Current Assets:
Cash and Cash Equivalents................................. $ 2,888,000 $ 3,728,000
Short-Term Investments.................................... 4,611,000 750,000
Accounts Receivable, Net.................................. 7,649,000 8,294,000
Inventories, Prepaids and Other Assets.................... 1,729,000 1,732,000
------------ ------------
Total Current Assets.............................. 16,877,000 14,504,000
------------ ------------
Long-Term Assets:
Investment in EVI, Inc.................................... 41,257,000 23,631,000
Mortgage Notes Receivable................................. 1,749,000 3,314,000
Rental Properties, Net.................................... -- 867,000
Fixed Assets, Net......................................... 75,604,000 81,283,000
Goodwill.................................................. 5,592,000 5,749,000
Other Assets.............................................. 1,277,000 1,670,000
------------ ------------
Total Long-Term Assets............................ 125,479,000 116,514,000
------------ ------------
TOTAL ASSETS...................................... $142,356,000 $131,018,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable.......................................... $ 3,526,000 $ 5,294,000
Accrued Liabilities....................................... 5,562,000 4,072,000
Short-Term Debt........................................... -- 1,354,000
Current Portion of Long-Term Debt......................... 3,531,000 1,295,000
------------ ------------
Total Current Liabilities......................... 12,619,000 12,015,000
------------ ------------
Long-Term Liabilities:
Long-Term Debt............................................ 36,149,000 44,013,000
Deferred Income Taxes..................................... 20,289,000 12,674,000
Other Liabilities......................................... 1,214,000 1,239,000
------------ ------------
Total Long-Term Liabilities....................... 57,652,000 57,926,000
------------ ------------
Total Liabilities................................. 70,271,000 69,941,000
------------ ------------
Shareholders' Equity:
Preferred Stock........................................... -- --
Common Stock.............................................. 5,196,000 5,196,000
Additional Paid-In capital................................ 12,022,000 12,022,000
Treasury Stock, at Cost................................... (1,236,000) (1,236,000)
Retained Earnings......................................... 56,103,000 45,095,000
------------ ------------
Total Shareholders' Equity........................ 72,085,000 61,077,000
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $142,356,000 $131,018,000
============ ============
See notes to consolidated financial statements.
F-4
120
CHRISTIANA COMPANIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY(1)(2)
COMMON STOCK TREASURY STOCK ADDITIONAL
---------------------- --------------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL
--------- ---------- ------- ----------- ----------- ----------- -----------
Balance, June 30,
1994.................. 5,440,899 $5,441,000 -- $ -- $18,217,000 $36,430,000 $60,088,000
Repurchase of Stock... (245,269) (245,000) -- -- (6,195,000) -- (6,440,000)
Net Earnings.......... -- -- -- -- -- 5,062,000 5,062,000
--------- ---------- ------- ----------- ----------- ----------- -----------
Balance, June 30,
1995.................. 5,195,630 $5,196,000 -- -- $12,022,000 $41,492,000 $58,710,000
Purchase of Treasury
Stock............... -- -- (59,000) (1,236,000) -- -- (1,236,000)
Net Earnings.......... -- -- -- -- -- 3,603,000 3,603,000
--------- ---------- ------- ----------- ----------- ----------- -----------
Balance, June 30,
1996.................. 5,195,630 $5,196,000 (59,000) $(1,236,000) $12,022,000 $45,095,000 $61,077,000
EVI Stock Issuance.... -- -- -- -- -- 4,345,000 4,345,000
Net Earnings.......... -- -- -- -- -- 6,663,000 6,663,000
--------- ---------- ------- ----------- ----------- ----------- -----------
Balance, June 30,
1997.................. 5,195,630 $5,196,000 (59,000) $(1,236,000) $12,022,000 $56,103,000 $72,085,000
========= ========== ======= =========== =========== =========== ===========
- ---------------
(1) Preferred stock: $10 par value, 1,000,000 shares authorized, none issued.
(2) Common stock: $1 par value, 12,000,000 shares authorized.
See notes to consolidated financial statements.
F-5
121
CHRISTIANA COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings....................................... $ 6,663,000 $ 3,603,000 $ 5,062,000
Adjustments to Reconcile Net Earnings to Net Cash
Provided By Operating Activities:
Depreciation and Amortization................... 7,155,000 7,159,000 8,207,000
(Gain) Loss on Disposal of Assets............... 765,000 (3,024,000) (3,213,000)
Deferred Income Tax (Benefit) Provision......... 4,813,000 (1,084,000) 1,462,000
Minority Interest............................... -- -- 684,000
Equity in Earnings of EVI, Inc.................. (10,479,000) (1,745,000) --
Changes in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable...... 645,000 (34,000) (2,240,000)
(Increase) Decrease in Inventories.............. (166,000) (191,000) 2,566,000
(Increase) Decrease in Prepaids and Other
Assets........................................ (303,000) 788,000 (485,000)
Increase in Accounts Payable and Accrued
Liabilities................................... 90,000 3,091,000 396,000
------------ ------------ ------------
Net Cash Provided By Operating Activities............ 9,183,000 8,563,000 12,439,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from (Purchase of) Short-Term Investments,
net Investments, Net............................ (3,861,000) 2,072,000 11,742,000
Capital Expenditures............................... (3,488,000) (19,715,000) (10,931,000)
Business Acquisitions, Net of Cash Acquired........ -- -- (13,291,000)
(Increase) Decrease in Mortgage Notes Receivable... 1,565,000 (109,000) 356,000
Decrease in Cash due to Merger of Prideco.......... -- -- (533,000)
Proceeds from Sales of Assets...................... 2,743,000 8,894,000 6,954,000
------------ ------------ ------------
Net Cash Used In Investing Activities................ (3,041,000) (8,858,000) (5,703,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (Payments) on Line of Credit, Net....... (1,354,000) (489,000) 501,000
Stock Repurchase................................... -- (1,236,000) (3,805,000)
Proceeds from Notes Payable........................ -- 9,011,000 4,125,000
Payments of Notes and Mortgages Payable............ (5,628,000) (3,638,000) (11,111,000)
------------ ------------ ------------
Net Cash Provided By (Used In) Financing
Activities......................................... (6,982,000) 3,648,000 (10,290,000)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................................ (840,000) 3,353,000 (3,554,000)
BEGINNING CASH AND CASH EQUIVALENTS, JULY 1.......... 3,728,000 375,000 3,929,000
------------ ------------ ------------
ENDING CASH AND CASH EQUIVALENTS, JUNE 30............ $ 2,888,000 $ 3,728,000 $ 375,000
============ ============ ============
Supplemental Disclosures of Cash Flow Information:
Interest Paid...................................... $ 3,190,000 $ 3,228,000 $ 4,612,000
Income Taxes Paid.................................. $ 1,396,000 $ 2,579,000 $ 2,950,000
See notes to consolidated financial statements.
F-6
122
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(THREE YEARS ENDED JUNE 30, 1997)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business: At June 30, 1997, Christiana is engaged in
providing public refrigerated and dry (non-refrigerated) warehousing and
logistic services; and owning 3,897,462 shares of EVI, Inc. common stock which
represents an 8.5% ownership interest at that date.
Principles of Consolidation: The consolidated financial statements include
the accounts of Christiana Companies, Inc., ("Christiana") and its
majority-owned subsidiaries (together with Christiana referred to as the
"Company"). All material intercompany transactions have been eliminated.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Short-Term Investments: As of June 30, 1997 and 1996, short-term
investments are classified as "available for sale" and include U.S. Treasury
securities and commercial paper maturing in less than one year. These
investments are carried at market, which approximates cost.
Accounts Receivable: Accounts receivable are presented net of a reserve for
bad debts of $233,000 and $253,000 at June 30, 1997 and 1996, respectively. The
provision for bad debts was $123,000 and $227,000 for the years ended June 30,
1997 and 1996, respectively. Deductions from the reserve were $143,000 and
$94,000 for the years ended June 30, 1997 and 1996, respectively.
Investment in EVI, Inc.: At June 30, 1997, the Company owned 3,897,462
shares of EVI, Inc. (NYSE:EVI) which represented 8.5% of the then outstanding
common stock. Based on the facts and circumstances associated with the
Investment in EVI, Inc., including the Company's Board of Directors
representation, and in accordance with the Accounting Principles Board Opinion
No. 18 the Company accounts for this investment under the equity method of
accounting. At June 30, 1997, these shares had a market value of $163,693,000.
Mortgage Notes Receivable: At June 30, 1997, mortgage notes receivable,
derived from condominium sales, totaled $1,749,000 and accrue interest at rates
ranging from 6.875% to 9.000%. The carrying value of the Company's mortgage
notes receivable approximates fair value.
The principal balance of mortgage notes receivable matures as follows:
YEAR ENDED JUNE 30,
- --------------------------------------------------------------------
1998................. $ 17,000 2001............. $ 16,000
1999................. 407,000 2002............. 63,000
2000................. 22,000 Thereafter....... 1,224,000
During the years ended June 30, 1997 and 1996, mortgage notes receivable of
$1,882,000 and $286,000, respectively, were sold or prepaid.
Fixed Assets: Fixed assets are carried at cost less accumulated
depreciation, which is computed using both straight-line and accelerated methods
for financial reporting purposes. The cost of major renewals and
F-7
123
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
improvements are capitalized; repair and maintenance costs are expensed. A
summary of the cost of fixed assets and the estimated useful lives for financial
reporting purposes is as follows:
AT JUNE 30,
--------------------------- ESTIMATED
1997 1996 USEFUL LIVES
------------ ------------ ------------
Rental Properties.......................... $ -- $ 1,029,000 20-40 years
Less: Accumulated Depreciation........... -- (162,000)
------------ ------------
$ -- $ 867,000
============ ============
Fixed Assets:
Land..................................... $ 3,380,000 $ 3,416,000 --
Machinery and Equipment.................. 53,171,000 54,314,000 5-7 years
Buildings and Improvements............... 41,534,000 41,394,000 30-32 years
Construction-In-Progress................. 451,000 12,000 --
Less: Accumulated Depreciation........... (22,932,000) (17,853,000)
------------ ------------
$ 75,604,000 $ 81,283,000
============ ============
Goodwill: Goodwill is amortized on a straight-line basis over 40 years
($157,000 in 1997 and $157,000 in 1996). The accumulated amortization at June
30, 1997 and 1996 was $566,000 and $409,000, respectively. The Company
continually evaluates whether events and circumstances have occurred that
indicate the remaining estimated useful life may warrant revision or that the
remaining balance of goodwill may not be recoverable. When factors indicate that
goodwill should be evaluated for possible impairment, the Company uses an
estimate of the undiscounted cash flows over the remaining life of the goodwill
measuring whether the goodwill is recoverable.
Other Assets: Other Assets primarily represent deferred charges and cash
surrender value of officer's life insurance.
Long-lived Assets: During fiscal 1997, the Company adopted Statement of
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and Assets to be Disposed of." Adoption of this standard did
not have a material impact on the Company's financial position or results of
operations.
Income Taxes: Deferred income taxes are provided on the temporary
differences in the carrying values of assets and liabilities for financial
reporting and income tax purposes.
Earnings Per Share: Earnings per share is computed on the basis of the
weighted average number of common shares outstanding. The Company has stock
options which are considered common stock equivalents for purposes of computing
earnings per share. The impact of these common stock equivalents is not
material.
Cash and Cash Equivalents: The Company considers all highly liquid
investments with original maturities of less than ninety days to be cash
equivalents.
Reclassifications: Certain reclassifications have been made in the 1996
statements to conform with 1997 presentation.
Derivatives: Derivative financial instruments have been used by the Company
to manage its interest rate exposure on certain debt instruments. Amounts to be
received or paid under interest rate swap agreements are recognized as interest
income or expense in the periods in which they accrue. If interest rate swap
agreements are terminated due to the underlying debt being extinguished, any
resulting gain or loss is recognized as interest income or expense at the time
of termination.
F-8
124
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
B. ACQUISITIONS
On June 30, 1995, Prideco, Inc. ("Prideco"), a majority-owned subsidiary of
the Company, merged with Grant Acquisition Company, a wholly-owned subsidiary of
EVI, Inc. In the merger, the Company's shares of Prideco were converted into
2,071,716 shares of Common Stock, $1.00 par value, of EVI. Prideco's results of
operations are included in the Company's Consolidated Statement of Earnings
through June 30, 1995, the date of the merger. Concurrent with the merger, the
Company acquired an additional 1,825,746 shares of EVI, Inc. common stock
directly from EVI and the minority shareholders of Prideco for an aggregate cash
price of $13,291,000.
On January 4, 1994, the Company acquired, by way of merger, The TLC Group,
Inc., a Zeeland, Michigan-based firm which provides fully integrated logistic
services including refrigerated and dry warehousing, transportation and
information services. The purchase price consisted of approximately $5,630,000
in cash, the issuance of 234,269 shares of Christiana common stock, an 8%
subordinated note in the amount of $1,764,000 and the assumption of its
liabilities. As part of this acquisition, the assets of The TLC Group were
revalued to their fair market value with the excess of purchase price over fair
value amounting to $5,991,000 being recorded as goodwill. This acquisition was
accounted for as a purchase and accordingly, the results of TLC's operations are
included in the consolidated financial statements of the Company since the date
of acquisition.
During fiscal 1995, the Company repurchased the 234,269 shares issued in
the TLC acquisition for $3,805,000 and a three year note in the amount of
$2,286,000.
The following summarizes the unaudited consolidated pro forma operating
results of the Company as if the merger of Prideco and the acquisition of EVI
shares had occurred at the beginning of fiscal year 1995.
YEAR ENDED JUNE 30,
1995
-------------------
Revenues.................................................... $71,642,000
Net Earnings................................................ 4,173,000
Earnings Per Share.......................................... $ 0.79
Pro forma results are not necessarily indicative of results that would have
occurred had the purchase been made at the beginning of the respective period,
or of results which may occur in the future.
F-9
125
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
C. INDEBTEDNESS
The following is a summary of consolidated indebtedness:
AT JUNE 30,
--------------------------
1997 1996
----------- -----------
Christiana Corporate
Notes Payable........................................... $ 2,286,000 $ 2,286,000
Line of Credit.......................................... -- --
Total Logistic Control, LLC
Revolving Credit Agreement.............................. 31,248,000 35,248,000
Line of Credit.......................................... -- 1,354,000
Notes Payable, Equipment Related........................ 4,382,000 6,010,000
Subordinated Note....................................... 1,764,000 1,764,000
----------- -----------
Subtotal........................................ 39,680,000 46,662,000
Less: Current Portion of Long-Term Debt................... (3,531,000) (1,295,000)
Short-Term Debt..................................... -- (1,354,000)
----------- -----------
Long-Term Debt............................................ $36,149,000 $44,013,000
=========== ===========
Christiana has a $15,000,000 unsecured line of credit, renewable annually.
Borrowings under this line bear interest at either the London Interbank Offered
Rate ("LIBOR") plus 125 basis points, or prime at the Company's option. No
compensating balances are required under the terms of this credit facility.
Notes payable attributable to Christiana Corporate are amounts due as a
result of repurchased common stock. The notes payable are unsecured and bear
interest at the rate of 7%.
Total Logistic Control, LLC has a revolving credit agreement that provides
for borrowings at June 30, 1997 up to $40,000,000. Borrowings under this
agreement mature on March 31, 2001 and bear interest, payable monthly at either
LIBOR plus 125 basis points, or a floating rate at the bank's prime rate (6.7%
at June 30, 1997) and are unsecured. At June 30, 1996 Wiscold's borrowings under
the original revolving credit were priced at LIBOR plus 175 basis points or
prime (7.10% at June 30, 1996) and were secured by Wiscold's assets. The
revolving credit agreement requires, among other things, that defined levels of
net worth and debt service coverage be maintained and restricts certain
activities including limitation on new indebtedness and the disposition of
assets. No compensating balances are required under the terms of this credit
facility.
On September 15, 1992, Wiscold entered into an interest rate swap agreement
with three commercial banks which expires on December 15, 1997. As of June 30,
1997, $12,650,000 of outstanding Wiscold debt was subject to the swap agreement.
The agreement effectively fixes the interest rate payable by Wiscold on this
portion of the debt at 5.3% plus an interest rate spread determined by Wiscold's
leverage ratio. As of June 30, 1997, the effective rate of this outstanding debt
was 6.55%.
Under the swap agreement, the Company is exposed to credit risk only in the
event of nonperformance by the commercial banks, which is not anticipated.
Total Logistic Control, LLC has a bank line of credit which permits
borrowings up to $5,000,000. Borrowings bear interest at either LIBOR plus 200
basis points, or the bank's prime rate, at TLC's option (7.69% and 7.48% at June
30, 1997 and 1996, respectively), and are secured by certain accounts
receivable. Notes payable relate to specific equipment purchases, primarily
transportation and material handling equipment and a new distribution facility,
and are secured by specified assets. These notes bear interest on both fixed and
floating terms ranging from 6.375% to 9.37%. No compensating balances are
required under the terms of these credit arrangements. TLC's subordinated note
bears interest at 8% and was incurred in the
F-10
126
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
redemption of a former shareholder's ownership coincident with the sale to
Christiana. This obligation is guaranteed by Christiana.
Future maturities of consolidated indebtedness are as follows:
YEAR ENDED
JUNE 30, TOTAL
- ---------- -----------
1998............................................ $ 3,531,000
1999............................................ 4,078,000
2000............................................ 5,193,000
2001............................................ 25,150,000
2002............................................ 1,728,000
Thereafter........................................ --
The weighted average interest rate paid on short term borrowings, all of
which was attributable to TLC, was 7.46% and 8.21% for fiscal 1997 and 1996,
respectively. The carrying value of the Company's debt approximates fair value.
D. INCOME TAXES
The Income Tax Provision consists of the following:
YEAR ENDED JUNE 30,
---------------------------------------
1997 1996 1995
---------- ----------- ----------
Current
Federal..................................... $ (442,000) $ 3,029,000 $1,866,000
State....................................... (65,000) 463,000 66,000
Deferred...................................... 4,813,000 (1,084,000) 1,462,000
---------- ----------- ----------
$4,306,000 $ 2,408,000 $3,394,000
========== =========== ==========
The components of Deferred Income Taxes are:
AT JUNE 30,
--------------------------
1997 1996
----------- -----------
Deferred Tax Assets:
Alternative Minimum Tax................................. $ -- $ 1,255,000
Other................................................... 1,612,000 1,431,000
----------- -----------
Total Deferred Tax Asset........................ $ 1,612,000 $ 2,686,000
----------- -----------
Deferred Tax Liabilities:
Condemnation Proceeds................................... $ 4,513,000 $ 5,259,000
Tax Over Book Depreciation.............................. 7,816,000 7,311,000
Equity in Earnings of EVI, Inc.......................... 4,767,000 649,000
EVI, Inc. Stock Issuance................................ 2,787,000 --
Installment Sale........................................ 407,000 676,000
Other................................................... 860,000 1,083,000
----------- -----------
Total Deferred Tax Liability.................... 21,150,000 14,978,000
----------- -----------
Net Deferred Tax Liability................................ $19,538,000 $12,292,000
=========== ===========
F-11
127
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of the statutory Federal income tax rate to the Company's
effective tax rate follows:
YEAR ENDED JUNE 30,
--------------------
1997 1996 1995
---- ---- ----
Statutory Federal Income Tax Rate........................... 35% 34% 34%
Increase (Reduction) in Taxes Resulting From:
State Income Tax, Net.................................. 5 5 3
Municipal Bond Interest................................ -- -- (1)
Other, Net............................................. (1) 1 1
-- -- --
39% 40% 37%
== == ==
E. EMPLOYEE BENEFIT PLANS
The Company has 295,000 shares of its common stock reserved for issuance
under a stock option plan, which permits the granting of options as well as
appreciation rights and awards. During fiscal 1997, options for a total of
40,000 shares were granted at exercise prices of $21.50 and $22.25. During
fiscal 1996, options for a total of 100,000 shares were granted at an exercise
price of $24.25 per share. At June 30, 1997 and 1996, 36.0% and 23.5%,
respectively, of total options granted were exercisable. The remaining options
are exercisable over the next seven years.
Changes in stock options outstanding are summarized as follows:
NUMBER OF EXERCISE PRICE
OPTIONS PER OPTION
--------- ----------------
Balance, June 30, 1994.................................... 151,250 26.000 - 34.375
Options Granted......................................... 5,000 28.8125
Options Canceled........................................ 5,000 27.125
------- ----------------
Balance, June 30, 1995.................................... 151,250 26.000 - 34.375
Options Granted......................................... 100,000 24.250
Options Canceled........................................ 7,500 27.125 - 34.375
------- ----------------
Balance, June 30, 1996.................................... 243,750 24.250 - 34.375
Options Granted......................................... 40,000 21.500 - 22.250
------- ----------------
Balance, June 30, 1997.................................... 283,750 21.500 - 34.375
======= ================
As of June 30, 1997, the total number of stock options outstanding and
those currently exercisable was 283,750 and 102,167, respectively. The
weighted-average exercise price of total stock options and those currently
exercisable was $27.145 and $28.950, respectively. Additionally, the
weighted-average contractual life of stock options outstanding as of June 30,
1997 was 2.7 years.
Pro forma information regarding net income and earnings per share is
required by Statement of Financial Accounting Standards No. 123 and has been
determined as if the Company had accounted for its stock options under the fair
value method as provided there-in. The fair value of each option grant is
estimated on the date of the grant using an option pricing model with the
following weighted-average assumptions used for options issued in fiscal 1997
and 1996, respectively: risk-free interest rate of 6.5%; expected remaining
lives of 6 and 5 years; expected volatility of 25% and 20%; and no expected
dividends.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. Set forth
below is a summary of the Company's net income and earnings per share as
reported and pro forma as if the fair value based method of accounting defined
in SFAS No. 123 had been applied. The pro forma information is not meant to be
representative of the effects on reported net income for
F-12
128
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
future years, because as provided by SFAS No. 123, only the effects of awards
granted after July 1, 1996 are considered in the pro forma calculation.
JUNE 30, 1997 JUNE 30, 1996
------------------------- -------------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA
----------- ---------- ----------- ----------
Net Earnings............................ $6,663,000 $6,282,000 $3,603,000 $3,330,000
Earnings Per Share...................... $ 1.30 $ 1.22 $ .69 $ .65
The Company has 401(k) plans covering substantially all of its employees.
The costs under these plans have not been material. The Company does not provide
post employment medical or life insurance benefits.
F. COMMITMENTS
Total Logistic Control, LLC has operating leases for warehousing and office
facilities. Rental expense under these leases was $7,213,000, $5,479,000 and
$5,100,000 in fiscal 1997, 1996 and 1995, respectively. At June 30, 1997, future
minimum lease payments under these operating leases are as follows:
YEAR ENDED JUNE 30,
-------------------
1998............................................ $ 5,800,773
1999............................................ 4,513,455
2000............................................ 3,982,490
2001............................................ 2,993,435
2002............................................ 2,274,180
Thereafter...................................... 11,976,486
G. ACCOUNTING STANDARDS
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings per Share". This statement
establishes standards for computing and presenting earnings per share (EPS).
This statement simplifies the standards for computing earnings per share
previously found in APB Opinion No. 15, Earnings per Share. The Company is
required to adopt this statement for financial statements issued for the years
ending after June 30, 1998; earlier application is not permitted. Pro forma
disclosure of EPS computed in accordance with SFAS No. 128 is as follows:
FISCAL YEAR ENDED JUNE 30,
--------------------------
1997 1996 1995
------ ------ ------
Earnings Per Share As Reported.............................. $1.30 $0.69 $0.96
Pro Forma:
Basic Earnings Per Common Share........................... $1.30 $0.69 $0.96
Diluted Earnings Per Common Share......................... $1.29 $0.69 $0.96
F-13
129
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
H. MARKET SEGMENT INFORMATION
The Company was engaged in primarily two distinct lines of business,
namely, the manufacture of industrial products and the operation of warehousing,
logistic services and rental properties. On June 30, 1995, the Company's
manufacturing segment, Prideco, was merged with a unit of EVI, Inc.
YEAR ENDED JUNE 30,
------------------------------------------
1997 1996 1995
------------ ------------ ------------
Revenues
Industrial Products.............................. $ -- $ -- $ 55,239,000
Warehousing and Logistic Services................ 84,208,000 77,170,000 71,642,000
------------ ------------ ------------
Total.................................... $ 84,208,000 $ 77,170,000 $126,881,000
============ ============ ============
Earnings from Operations
Industrial Products.............................. $ -- $ -- $ 4,226,000
Warehousing and Logistic Services................ 6,473,000 5,580,000 7,533,000
Corporate Expenses............................... (1,894,000) (1,359,000) (1,435,000)
------------ ------------ ------------
Total.................................... $ 4,579,000 $ 4,221,000 $ 10,324,000
============ ============ ============
Assets
Industrial Products.............................. $ -- $ -- $ --
Warehousing and Logistic Services................ 91,355,000 98,370,000 91,992,000
Corporate........................................ 51,001,000 32,648,000 29,750,000
------------ ------------ ------------
Total.................................... $142,356,000 $131,018,000 $121,742,000
============ ============ ============
Capital Expenditures
Industrial Products.............................. $ -- $ -- $ 682,000
Warehousing and Logistic Services................ 3,488,000 19,715,000 10,249,000
------------ ------------ ------------
Total.................................... $ 3,488,000 $ 19,715,000 $ 10,931,000
============ ============ ============
Depreciation and Amortization
Industrial Products.............................. $ -- $ -- $ 1,256,000
Warehousing and Logistic Services................ 7,148,000 7,144,000 6,885,000
Corporate........................................ 7,000 15,000 66,000
------------ ------------ ------------
Total.................................... $ 7,155,000 $ 7,159,000 $ 8,207,000
============ ============ ============
There were no intersegment sales. Corporate assets consist primarily of
cash equivalents, short-term investments, marketable securities and residential
real estate.
F-14
130
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
I. EVI, INC. SUMMARY FINANCIAL INFORMATION
The following represents summarized financial information for EVI, Inc. The
Company's investment is accounted for under the equity method. EVI's fiscal year
ends on December 31, 1996. For more information regarding EVI's financial
condition and operations, reference is made to the EVI's Form 10-K filed with
the Securities and Exchange Commission.
SUMMARIZED BALANCE SHEETS
AT DECEMBER 31,
-------------------
1996 1995
-------- --------
(IN THOUSANDS)
Current Assets.............................................. $558,681 $249,574
Noncurrent Assets........................................... 294,162 241,486
-------- --------
Total Assets...................................... $852,843 $491,060
======== ========
Current Liabilities......................................... $233,126 $ 97,116
Noncurrent Liabilities...................................... 165,633 165,878
Stockholders' Equity........................................ 454,084 228,066
-------- --------
$852,843 $491,060
======== ========
SUMMARIZED INCOME STATEMENTS
FOR YEAR ENDED DECEMBER 31,
---------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
Revenues................................................... $ 478,020 $ 351,587 $ 248,537
Expenses................................................... (431,733) (319,147) (229,068)
Other Expenses, Net........................................ (14,741) (16,049) (13,021)
--------- --------- ---------
Income Before Taxes........................................ 31,546 16,391 6,448
Taxes...................................................... (7,041) (5,080) (1,806)
--------- --------- ---------
Income from Continuing Operations.......................... 24,505 11,311 4,642
Discontinued Operations, Net of Taxes...................... 74,392 -- --
--------- --------- ---------
Income before Extraordinary Item........................... 98,897 11,311 4,642
Extraordinary Item......................................... (731) -- (3,784)
--------- --------- ---------
Net Income....................................... $ 98,166 $ 11,311 $ 858
========= ========= =========
During fiscal 1997, EVI issued additional stock in a public offering. The
Company's share of the gain was $4,345,000 and is reflected as an increase in
retained earnings in the consolidated statement of Shareholders' Equity.
Included in the Company's retained earnings if $11,812,000 related to its'
investment in EVI.
F-15
131
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
J. PARENT COMPANY ONLY STATEMENTS
Following are the Parent Company only Condensed Balance Sheet, Statement of
Operations and Statement of Cash Flows:
PARENT COMPANY ONLY STATEMENTS
CONDENSED BALANCE SHEET
AS OF JUNE 30, 1997 AND 1996
ASSETS
AT JUNE 30,
--------------------------
1997 1996
----------- -----------
Current Assets:
Cash Equivalents and Short-Term Investments............... $ 7,276,000 $ 4,444,000
Accounts Receivable and Other Current Assets.............. 1,576,000 1,309,000
Long-Term Assets:
Investment in EVI, Inc.................................... 41,257,000 23,631,000
Investments in and Advances to Subsidiaries............... 33,551,000 34,071,000
Fixed Assets, Net......................................... 10,848,000 11,330,000
Other Assets.............................................. 1,039,000 1,035,000
----------- -----------
TOTAL ASSETS...................................... $95,547,000 $75,820,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable and Accrued Liabilities.................. $ 5,525,000 $ 1,884,000
Long-Term Liabilities:
Deferred Income Taxes..................................... 17,083,000 9,711,000
Other Liabilities......................................... 854,000 3,148,000
----------- -----------
Total Liabilities................................. 23,462,000 14,743,000
----------- -----------
Total Shareholders' Equity........................ 72,085,000 61,077,000
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $95,547,000 $75,820,000
=========== ===========
F-16
132
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PARENT COMPANY ONLY STATEMENTS
CONDENSED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
FISCAL YEAR ENDED JUNE 30,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
Revenues:
Warehousing and Logistic Services................... $14,628,000 $11,432,000 $10,943,000
----------- ----------- -----------
14,628,000 11,432,000 10,943,000
----------- ----------- -----------
Costs and Expenses:
Warehousing and Logistic Services................... 8,554,000 7,692,000 6,682,000
Selling, General and Administrative Expenses........ 1,815,000 1,504,000 1,582,000
----------- ----------- -----------
10,369,000 9,196,000 8,264,000
----------- ----------- -----------
Earnings from Operations......................... 4,259,000 2,236,000 2,679,000
Other Income (Expense):
Interest Income (Expense), Net...................... 174,000 (426,000) 2,000
Equity in Earnings of EVI, Inc...................... 10,479,000 1,745,000 --
Other (Expense), Net................................ (3,975,000) (3,129,000) (2,683,000)
----------- ----------- -----------
Total Other Income (Expense)................ 6,678,000 (1,810,000) (2,681,000)
----------- ----------- -----------
Earnings Before Income Taxes.......................... 10,937,000 426,000 (2,000)
Income Tax Provision (Benefit)........................ 4,287,000 167,000 (648,000)
----------- ----------- -----------
Net Earnings (Loss) Before Equity in Undistributed
Net Earnings of Subsidiaries..................... 6,650,000 259,000 646,000
Equity in Undistributed Net Earnings of
Subsidiaries........................................ 13,000 3,344,000 4,416,000
----------- ----------- -----------
Net Earnings................................ $ 6,663,000 $ 3,603,000 $ 5,062,000
=========== =========== ===========
F-17
133
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PARENT COMPANY ONLY STATEMENTS
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
FISCAL YEAR ENDED JUNE 30,
-----------------------------------------
1997 1996 1995
------------ ----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings...................................... $ 6,663,000 $ 3,603,000 $ 5,062,000
Adjustments to Reconcile Net Earnings to Net Cash
Provided By (Used In) Operating Activities:
Equity in Earnings of EVI, Inc................. (10,479,000) (1,745,000) --
Equity in Undistributed Net Income of
Subsidiaries................................. (13,000) (3,344,000) (4,416,000)
Depreciation and Amortization.................. 979,000 859,000 828,000
Deferred Income Tax Provision.................. 4,571,000 997,000 1,348,000
Net Changes in Assets and Liabilities.......... 1,076,000 (410,000) 1,868,000
------------ ----------- ------------
Net Cash Provided By (Used In) Operating
Activities........................................ 2,797,000 (40,000) 4,690,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from (Purchase of) Short-Term
Investments.................................... (3,861,000) 2,072,000 11,742,000
Capital Expenditures.............................. (512,000) (793,000) (143,000)
Investment In Subsidiaries........................ 546,000 3,691,000 (2,546,000)
Investment In EVI, Inc............................ -- -- (13,291,000)
------------ ----------- ------------
Net Cash Provided By (Used In) Investing
Activities........................................ (3,827,000) 4,970,000 (4,238,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock Repurchase/Purchase of Treasury Stock....... -- (1,236,000) (3,805,000)
------------ ----------- ------------
Net Cash Used In Financing Activities............... -- (1,236,000) (3,805,000)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS....................................... (1,030,000) 3,694,000 (3,353,000)
BEGINNING CASH AND CASH EQUIVALENTS, JULY 1......... 3,695,000 1,000 3,354,000
------------ ----------- ------------
ENDING CASH AND CASH EQUIVALENTS, JUNE 30........... $ 2,665,000 $ 3,695,000 $ 1,000
============ =========== ============
F-18
134
CHRISTIANA COMPANIES, INC.
QUARTERLY FINANCIAL INFORMATION
(UNAUDITED)
QUARTER ENDED
-----------------------------------------------------
SEPTEMBER DECEMBER MARCH JUNE TOTAL
----------- ----------- ----------- ----------- -----------
FISCAL 1997
Revenues.................... $20,480,000 $20,342,000 $22,450,000 $20,936,000 $84,208,000
Earnings From Operations.... 1,489,000 1,525,000 1,093,000 472,000 4,579,000
Earnings Before Taxes....... 1,767,000 6,126,000* 1,671,000 1,405,000 10,969,000
Net Earnings................ 1,083,000 3,730,000 1,019,000 831,000 6,663,000
Basic Earnings Per Share.... $ 0.21 $ 0.73 $ 0.20 $ 0.16 $ 1.30
FISCAL 1996
Revenues.................... $19,937,000 $19,651,000 $19,416,000 $18,166,000 $77,170,000
Earnings From Operations.... 2,053,000 1,053,000 810,000 305,000 4,221,000
Earnings Before Taxes....... 2,694,000 1,249,000 1,510,000 558,000 6,011,000
Net Earnings................ 1,638,000 760,000 918,000 287,000 3,603,000
Basic Earnings Per Share.... $ 0.32 $ 0.14 $ 0.18 $ 0.05 $ 0.69
- ---------------
* Includes $5,715,000 of gain on the sale of Mallard Drilling, an EVI
subsidiary.
F-19
135
CHRISTIANA COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
NINE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, MARCH 31,
-------------------------- --------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
Revenues:
Warehousing and logistic services... $68,579,000 $63,271,000 $21,865,000 $22,450,000
Costs and Expenses:
Warehousing and logistic services... 57,843,000 53,051,000 18,526,000 19,138,000
Selling, general and
administrative................... 6,615,000 6,114,000 2,273,000 2,219,000
----------- ----------- ----------- -----------
64,458,000 59,165,000 20,799,000 21,357,000
----------- ----------- ----------- -----------
Earnings from Operations.............. 4,121,000 4,106,000 1,066,000 1,093,000
Other Income (Expense):
Interest income..................... 349,000 376,000 101,000 119,000
Interest expense.................... (2,150,000) (2,437,000) (658,000) (770,000)
Gain (losses) on sales of real
estate........................... -- 279,000 -- --
Equity in earnings of EVI, Inc...... 6,011,000 8,855,000 2,564,000 1,219,000
Gain (loss) on disposal of assets... (17,000) (1,281,000) (24,000) --
Other income (expenses), net........ (1,434,000) (336,000) (48,000) 10,000
----------- ----------- ----------- -----------
2,759,000 5,456,000 1,935,000 578,000
----------- ----------- ----------- -----------
Earnings before income taxes.......... 6,880,000 9,562,000 3,001,000 1,671,000
Income tax provision.................. 2,704,000 3,731,000 1,168,000 652,000
----------- ----------- ----------- -----------
Net earnings.......................... $ 4,176,000 $ 5,831,000 $ 1,833,000 $ 1,019,000
=========== =========== =========== ===========
Basic earnings per common share
(Note 5)............................ $ 0.81 $ 1.14 $ 0.36 $ 0.20
=========== =========== =========== ===========
Diluted net earnings per common share
(Note 5)............................ $ 0.80 $ 1.13 $ 0.35 $ 0.20
=========== =========== =========== ===========
Average number of shares
outstanding......................... 5,142,980 5,136,630 5,149,330 5,136,630
See notes to consolidated financial statements.
F-20
136
CHRISTIANA COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
MARCH 31, JUNE 30,
1998 1997
------------ ------------
(UNAUDITED) (AUDITED)
Cash and cash equivalents................................... $ 5,290,000 2,888,000
Short-term investments...................................... -- 4,611,000
Accounts receivable......................................... 8,169,000 7,649,000
Prepaids and other current assets........................... 1,734,000 1,729,000
------------ ------------
Total Current Assets.............................. 15,193,000 16,877,000
------------ ------------
Long-Term Assets:
Investment in EVI, Inc.................................... 47,268,000 41,257,000
Mortgage notes receivable................................. 1,231,000 1,749,000
Fixed assets, net......................................... 72,301,000 75,604,000
Other long-term assets.................................... 6,771,000 6,869,000
------------ ------------
Total Long-Term Assets............................ 127,571,000 125,479,000
------------ ------------
$142,764,000 $142,356,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 4,081,000 $ 3,526,000
Accrued liabilities....................................... 4,815,000 5,562,000
Short term debt........................................... 159,000 --
Current portion of long-term debt......................... 1,245,000 3,531,000
------------ ------------
Total Current Liabilities......................... 10,300,000 12,619,000
------------ ------------
Long-Term Liabilities:
Long-term debt............................................ 31,167,000 36,149,000
Deferred federal and state income taxes................... 23,518,000 20,289,000
Other liabilities......................................... 1,181,000 1,214,000
------------ ------------
Total Long-Term Liabilities....................... 55,866,000 57,652,000
------------ ------------
Total Liabilities................................. 66,166,000 70,271,000
------------ ------------
Shareholders' Equity:
Preferred stock........................................... -- --
Common stock, par value $1 per share; authorized
12,000,000 shares; issued 5,208,330.................... 5,209,000 5,196,000
Additional paid-in capital................................ 12,346,000 12,022,000
Less: Treasury Stock........................................ (1,236,000) (1,236,000)
Retained earnings........................................... 60,279,000 56,103,000
------------ ------------
Total Shareholders' Equity........................ 76,598,000 72,085,000
------------ ------------
$142,764,000 $142,356,000
============ ============
See notes to consolidated financial statements.
F-21
137
CHRISTIANA COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
COMMON STOCK TREASURY STOCK ADDITIONAL
---------------------- ---------------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS
--------- ---------- -------- ----------- ----------- -----------
Balance, June 30, 1996.... 5,195,630 $5,196,000 (59,000) $(1,236,000) $12,022,000 $45,095,000
EVI stock issuance........ -- -- -- -- -- 4,345,000
Net earnings.............. -- -- -- -- -- 6,663,000
--------- ---------- -------- ----------- ----------- -----------
Balance, June 30, 1997.... 5,195,630 $5,196,000 (59,000) $(1,236,000) $12,022,000 $56,103,000
Common shares issued...... 12,700 13,000 -- -- 324,000 --
Net earnings
(Unaudited)............. -- -- -- -- -- 4,176,000
--------- ---------- -------- ----------- ----------- -----------
Balance, March 31, 1998... 5,208,330 $5,209,000 (59,000) $(1,236,000) $12,346,000 $60,279,000
========= ========== ======== =========== =========== ===========
See notes to consolidated financial statements.
F-22
138
CHRISTIANA COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
MARCH 31,
------------------------
1998 1997
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings.............................................. $ 4,176,000 $5,831,000
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization.......................... 4,951,000 5,432,000
Loss on sale of assets................................. 17,000 1,002,000
Deferred income tax expenses........................... 3,229,000 3,693,000
Equity earnings of EVI, Inc............................ (6,011,000) (8,855,000)
Changes in assets and liabilities:
(Increase) in accounts receivable...................... (520,000) (637,000)
Decrease in other assets............................... 6,000 580,000
(Decrease) in accounts payable and accrued
liabilities........................................... (192,000) (713,000)
----------- ----------
Net cash provided by operating activities................... 5,656,000 6,333,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets.............................. 308,000 2,242,000
Decrease in mortgage notes receivable..................... 518,000 1,477,000
(Increase) decrease in short-term investments............. 4,611,000 (5,621,000)
Capital expenditures...................................... (1,919,000) (2,306,000)
----------- ----------
Net cash provided by (used in) investing activities......... 3,518,000 (4,208,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) on long-term notes and credit
lines.................................................. 159,000 (1,684,000)
Payments of notes and loans payable....................... (7,268,000) (3,447,000)
Common stock issuance..................................... 337,000 --
----------- ----------
Net cash (used in) financing activities..................... (6,772,000) (5,131,000)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 2,402,000 (3,006,000)
BEGINNING CASH AND CASH EQUIVALENTS, July 1................. 2,888,000 3,728,000
----------- ----------
ENDING CASH AND CASH EQUIVALENTS, December 31............... $ 5,290,000 $ 722,000
=========== ==========
Supplemental disclosures of cash flow information:
Interest paid............................................. $ 2,150,000 $2,398,000
Income taxes paid......................................... $ 395,000 $ 381,000
See notes to consolidated financial statements.
F-23
139
CHRISTIANA COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- ACCOUNTING POLICIES
The accompanying unaudited financial statements reflect all adjustments
which are, in the opinion of management, necessary to fairly present the results
for the interim periods presented and should be read in conjunction with the
Company's 1997 Annual Report.
NOTE 2 -- EVI, INC. STOCK ISSUANCE
The Company accounts for its investment in EVI under the equity method of
accounting. In July 1996, the Company's share of the underlying net assets of
EVI increased $7,146,000 as a result of a public offering of EVI's common stock.
This was recorded as an increase of $4,345,000 in retained earnings, and a
$2,801,000 increase in deferred income taxes.
NOTE 3 -- MERGER AGREEMENT
The Company and EVI, Inc. executed a definitive merger agreement, dated
December 12, 1997, under which EVI will acquire all the outstanding common
shares of the Company. The terms of the merger provide that each Christiana
common share will be converted into approximately .74913 shares of EVI common
stock, cash in the approximate amount of $3.60, depending on the balance of
certain assets and liabilities at the time of closing and a contingent cash
payment of approximately $1.92 after five years, subject to the incurrence of
any indemnity claims by EVI during this period.
The merger transaction is subject to the approval of shareholders of both
EVI and the Company as well as customary regulatory approvals.
NOTE 4 -- ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1998, the Company adopted Statement of Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income." This statement
established standards for reporting and display of comprehensive income and its
components. Components of comprehensive income are net income and all other
non-owner changes in equity. Because the Company has no comprehensive income
components other than net income, comprehensive income and net income are
identical for all periods presented.
Effective January 1, 1998, the Company adopted Statement of Position
("SOP") No. 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use." The Company's accounting for costs of computer
software developed or obtained for internal use is consistent with the guidance
established in the SOP. As a result, adoption of this statement did not have a
material impact on the Company's financial position or results of operations.
Effective January 1, 1998, the Company adopted SOP 98-5, "Reporting on the
Costs of Start-up Activities." This SOP provides guidance on the financial
reporting of start-up costs and organization costs. It requires costs of
start-up activities and organization costs to be expensed as incurred. Adoption
of this statement did not have a material impact on the Company's financial
position or results of operations.
F-24
140
CHRISTIANA COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5 -- EARNINGS PER SHARE
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
----------------------- -----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
Basic earnings per share:
Net income available to common
shareholders............................. $1,833,000 $1,019,000 $4,176,000 $5,831,000
========== ========== ========== ==========
Average shares of common stock
outstanding.............................. 5,149,330 5,136,630 5,142,980 5,136,630
Basic earnings per share.................... $ 0.36 $ 0.20 $ 0.81 $ 1.14
========== ========== ========== ==========
Diluted earnings per share:
Average shares of common stock
outstanding.............................. 5,149,330 5,136,630 5,142,980 5,136,630
Incremental common shares applicable to
common stock options..................... 57,434 32,356 68,854 8,402
---------- ---------- ---------- ----------
Average common shares assuming full
dilution................................. 5,206,764 5,168,986 5,211,834 5,145,032
Diluted earnings per share.................. $ 0.35 $ 0.20 $ 0.80 $ 1.13
========== ========== ========== ==========
F-25
141
APPENDIX A
AGREEMENT AND PLAN OF MERGER*
AMONG
EVI, INC.,
CHRISTIANA ACQUISITION, INC.,
CHRISTIANA COMPANIES, INC.
AND
C2, INC.
DECEMBER 12, 1997
* As amended by Amendment No. 1 to Agreement and Plan of Merger and Logistic
Purchase Agreement dated May 26, 1998.
142
TABLE OF CONTENTS
ARTICLE I
THE MERGER.................................................. 1
1.1 THE MERGER.................................................. 1
1.2 CLOSING DATE................................................ 2
1.3 CONSUMMATION OF THE MERGER.................................. 2
1.4 EFFECTS OF THE MERGER....................................... 2
1.5 CERTIFICATE OF INCORPORATION; BYLAWS........................ 2
1.6 DIRECTORS AND OFFICERS...................................... 2
1.7 CONVERSION OF SECURITIES.................................... 2
1.8 EXCHANGE OF CERTIFICATES.................................... 4
(a) Exchange Agent.......................................... 4
(b) Payment of Merger Consideration......................... 4
(c) Retention of Cash Pending Post Closing Audit............ 4
(d) Payment of Contingent Cash Consideration................ 4
(e) Exchange Procedure...................................... 5
(f) Distributions with Respect to Unexchanged Christiana
Shares...................................................... 6
(g) No Further Ownership Rights in Christiana Shares........ 6
(h) Escheat................................................. 6
1.9 TAKING OF NECESSARY ACTION; FURTHER ACTION.................. 7
ARTICLE II
REPRESENTATIONS AND WARRANTIES.............................. 7
2.1 REPRESENTATIONS AND WARRANTIES OF EVI AND SUB............... 7
(a) Organization and Compliance with Law.................... 7
(b) Capitalization.......................................... 7
(c) Authorization and Validity of Agreement................. 8
(d) No Approvals or Notices Required; No Conflict........... 8
(e) Commission Filings; Financial Statements................ 8
(f) Absence of Certain Charges and Events................... 9
(g) Tax Matters............................................. 9
(h) Voting Requirements..................................... 9
(i) Brokers................................................. 9
(j) Information Supplied.................................... 10
2.2 REPRESENTATIONS AND WARRANTIES OF CHRISTIANA AND C2......... 10
(a) Organization............................................ 10
(b) Capitalization.......................................... 10
(c) Authorization and Validity of Agreement................. 11
(d) No Approvals or Notices Required; No Conflict with
Instruments
to which Christiana is a Party.............................. 12
(e) Commission Filings; Financial Statements................ 13
(f) Conduct of Business in the Ordinary Course; Absence of
Certain Changes and Events.................................. 13
(g) Litigation.............................................. 14
(h) Employee Benefit Plans.................................. 14
(i) Taxes................................................... 16
(j) Environmental Matters................................... 17
(k) Investment Company...................................... 18
(l) Severance Payments...................................... 18
(m) Voting Requirements..................................... 19
A-1
143
(n) Brokers................................................. 19
(o) Assets and Liabilities at Closing....................... 19
(p) Compliance with Laws.................................... 19
(q) Contracts............................................... 20
(r) Title to Property....................................... 21
(s) Insurance Policies...................................... 21
(t) Loans................................................... 21
(u) No Fraudulent Transfer.................................. 21
(v) Information Supplied.................................... 22
ARTICLE III
COVENANTS OF CHRISTIANA..................................... 22
3.1 CONDUCT OF BUSINESS BY CHRISTIANA PENDING THE MERGER........ 22
3.2 CASH REQUIREMENTS........................................... 25
3.3 AFFILIATES' AGREEMENTS...................................... 25
ARTICLE IV
COVENANTS OF EVI PRIOR TO THE EFFECTIVE TIME................ 26
4.1 RESERVATION OF EVI STOCK.................................... 26
4.2 CONDUCT OF EVI PENDING THE MERGER........................... 26
4.3 STOCK EXCHANGE LISTING...................................... 26
ARTICLE V
ADDITIONAL AGREEMENTS....................................... 26
5.1 JOINT PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT.... 26
5.2 ACCOUNTANTS LETTER.......................................... 26
5.3 MEETINGS OF STOCKHOLDERS.................................... 27
5.4 FILINGS; CONSENTS; REASONABLE EFFORTS....................... 27
5.5 NOTIFICATION OF CERTAIN MATTERS............................. 27
5.6 EXPENSES.................................................... 28
5.7 CHRISTIANA'S EMPLOYEE BENEFITS.............................. 28
5.8 LIQUIDATION OR MERGER OF CHRISTIANA......................... 28
ARTICLE VI
CONDITIONS.................................................. 29
CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE
6.1 MERGER...................................................... 29
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF EVI................. 29
6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF CHRISTIANA.......... 31
ARTICLE VII
MISCELLANEOUS............................................... 32
7.1 TERMINATION................................................. 32
7.2 EFFECT OF TERMINATION....................................... 33
7.3 WAIVER AND AMENDMENT........................................ 33
7.4 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES............... 33
7.5 PUBLIC STATEMENTS........................................... 33
7.6 ASSIGNMENT.................................................. 33
7.7 NOTICES..................................................... 34
7.8 GOVERNING LAW............................................... 35
7.9 ARBITRATION................................................. 35
A-2
144
7.10 SEVERABILITY................................................ 36
7.11 COUNTERPARTS................................................ 36
7.12 HEADINGS.................................................... 36
7.13 CONFIDENTIALITY AGREEMENT................................... 36
7.14 ENTIRE AGREEMENT: THIRD PARTY BENEFICIARIES................. 36
7.15 DISCLOSURE LETTERS.......................................... 36
LIST OF EXHIBITS
Exhibit A -- Logistic Purchase Agreement
Exhibit B -- Amended and Restated Certificate of Incorporation of Christiana
A-3
145
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER dated as of December 12, 1997 (this
"Agreement"), is made and entered into by and among EVI, INC., a Delaware
corporation ("EVI"), CHRISTIANA ACQUISITION, INC., a Wisconsin corporation and
wholly owned subsidiary of EVI ("Sub"), CHRISTIANA COMPANIES, INC., a Wisconsin
corporation ("Christiana"), and C2, INC., a Wisconsin corporation ("C2").
WHEREAS, subject to and in accordance with the terms and conditions of this
Agreement, the respective Boards of Directors of EVI, Sub and Christiana, and
EVI as sole stockholder of Sub, have approved the merger of Sub with and into
Christiana (the "Merger"), whereby each issued and outstanding share of common
stock, $1.00 par value, of Christiana ("Christiana Common Stock") not owned
directly or indirectly by Christiana will be converted into the right to receive
(i) common stock, $1.00 par value, of EVI ("EVI Common Stock") plus (ii) the
Cash Consideration Per Share (as defined in Section 1.7(e)) and (iii) the
Contingent Cash Consideration Per Share (as defined in Section 1.7(f));
WHEREAS, as a condition to the Merger, Christiana will sell to C2
two-thirds of the interest (the "Logistic Interest") in Total Logistic Control,
LLC, a Delaware limited liability company and wholly owned subsidiary of
Christiana ("Logistic"), in consideration for $10,666,667 in cash (the "Logistic
Sale") pursuant to a Purchase Agreement between Christiana, C2, EVI and Sub in
substantially the form attached hereto as Exhibit A (the "Logistic Purchase
Agreement");
WHEREAS, immediately after the Effective Time, Christiana will only hold
the Christiana Assets, as such terms are hereinafter defined in Sections 1.3 and
2.2(o);
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a)(1)(A) by
reason of Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as amended
(the "Code"); and
WHEREAS, the parties hereto desire to set forth certain representations,
warranties and covenants made by each to the other as an inducement to the
consummation of the Merger;
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants herein contained, the parties hereto
hereby agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Subject to and in accordance with the terms and conditions
of this Agreement and in accordance with the General Corporation Law of the
State of Wisconsin ("WGCL"), at the Effective Time (as defined in Section 1.3),
Sub shall be merged with and into Christiana. As a result of the Merger, the
separate corporate existence of Sub shall cease and Christiana shall continue as
the surviving corporation (sometimes referred to herein as the "Surviving
Corporation"), and all the properties, rights, privileges, powers and franchises
of Sub and Christiana shall vest in the Surviving Corporation, without any
transfer or assignment having occurred, and certain liabilities, debts and
duties of Sub and Christiana shall attach to the Surviving Corporation, all in
accordance with the WGCL and subject to the provisions of the Logistic Purchase
Agreement.
1.2 CLOSING DATE. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Fulbright &
Jaworski L.L.P, Houston, Texas, as soon as practicable after the satisfaction or
waiver of the conditions set forth in Article VI hereof or at such other time
and place and on such other date as EVI and Christiana shall agree; provided
that the closing conditions set forth in Article VI hereof shall have been
satisfied or waived at or prior to such time. The date on which the Closing
occurs is herein referred to as the "Closing Date".
1.3 CONSUMMATION OF THE MERGER. As soon as practicable on the Closing
Date, the parties hereto will cause the Merger to be consummated by filing with
the Secretary of State of Wisconsin a certificate of merger in such form as
required by, and executed in accordance with, the relevant provisions of the
WGCL. The
A-4
146
"Effective Time" of the Merger, as that term is used in this Agreement, shall
mean such time as a certificate of merger is duly filed with the Wisconsin
Secretary of State or at such later time (not to exceed seven days from the date
the certificate of merger is filed) as is specified in the certificates of
merger pursuant to the mutual agreement of EVI and Christiana.
1.4 EFFECTS OF THE MERGER. The Merger shall have the effects set forth in
the applicable provisions of the WGCL. If at any time after the Effective Time
of the Merger, the Surviving Corporation shall consider or be advised that any
further assignments or assurances in law or otherwise are necessary or desirable
to vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation, all rights, title and interests in all real estate and other
property and all privileges, powers and franchises of Christiana and Sub, the
Surviving Corporation and its proper officers and directors, in the name and on
behalf of Christiana and Sub, shall execute and deliver all such proper deeds,
assignments and assurances in law and do all things necessary and proper to
vest, perfect or confirm title to such property or rights in the Surviving
Corporation and otherwise to carry out the purpose of this Agreement, and the
proper officers and directors of the Surviving Corporation are fully authorized
in the name of Christiana or otherwise to take any and all such action.
1.5 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of Incorporation
of Christiana, as amended and restated by the amendment set forth in Exhibit B
attached hereto, shall be the Certificate of Incorporation of the Surviving
Corporation and thereafter shall continue to be its Certificate of Incorporation
until amended as provided therein or under the WGCL. The bylaws of Sub, as in
effect immediately prior to the Effective Time, shall be the bylaws of the
Surviving Corporation and thereafter shall continue to be its bylaws until
amended as provided therein or under the WGCL.
1.6 DIRECTORS AND OFFICERS. The directors of Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation at and after
the Effective Time, each to hold office in accordance with the Certificate of
Incorporation and bylaws of the Surviving Corporation, and the officers of Sub
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation at and after the Effective Time, in each case until the earlier of
their resignation or removal or their respective successors are duly elected or
appointed and qualified.
1.7 CONVERSION OF SECURITIES. Subject to the terms and conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any
further action on the part of EVI, Christiana, Sub or their stockholders:
(a) Subject to adjustments pursuant to Sections 1.7(d) and 1.7(e)
hereof, each share of Christiana Common Stock issued and outstanding
immediately prior to the Effective Time (the "Christiana Shares") shall be
converted into the right to receive (i) .75876 of one share of EVI Common
Stock (the "Stock Exchange Ratio") plus (ii) the Cash Consideration Per
Share as defined in Section 1.7(e) and (iii) the Contingent Cash
Consideration Per Share (as defined in Section 1.7(f)); provided, however,
that no fractional shares of EVI Common Stock shall be issued and, in lieu
thereof, all fractional shares of EVI Common Stock that would otherwise be
issuable in the Merger shall be rounded to the nearest whole share of EVI
Common Stock. Except as set forth in the preceding sentence with respect to
the Cash Consideration Per Share, no other consideration will be paid to
the Christiana stockholders.
(b) Each Christiana Share owned directly or indirectly by Christiana
as treasury stock and each Christiana Share owned by Sub, EVI or any direct
or indirect wholly-owned subsidiary of EVI or of Christiana immediately
prior to the Effective Time shall be canceled and extinguished without any
conversion thereof and no payment or other consideration shall be made or
paid with respect thereto.
(c) Each share of common stock, $1.00 par value, of Sub issued and
outstanding immediately prior to the Effective Time shall be converted into
one fully paid and nonassessable share of common stock, $1.00 par value, of
the Surviving Corporation.
(d) The Stock Exchange Ratio is based on (i) 5,136,630 shares of
Christiana Common Stock being issued and outstanding immediately prior to
the Effective Time and (ii) 3,897,462 shares of EVI Common Stock being held
by Christiana immediately prior to the Effective Time. In the event the
number of shares of Christiana Common Stock outstanding immediately prior
to the Effective Time is
A-5
147
greater or less than 5,136,630 or the number of shares of EVI Common Stock
held by Christiana immediately prior to the Effective Time is greater or
less than 3,897,462, the Stock Exchange Ratio shall be adjusted to equal
the number of shares of EVI Common Stock held by Christiana immediately
prior to the Effective Time divided by the number of shares of Christiana
Common Stock issued and outstanding immediately prior to the Effective
Time.
(e) The "Cash Consideration Per Share", shall equal the quotient of
the Christiana Net Cash divided by 5,136,630. The "Christiana Net Cash"
shall mean and be equal to (i) the sum of (A) $20,000,000 obtained in
connection with the TLC Dividend, (B) $10,666,667 to be obtained in
connection with the Logistic Sale (provided, however, that if such funds
are not received by Christiana when and as required under the Logistic
Purchase Agreement, such funds will not be considered as part of Christiana
Net Cash), (C) $3,000,000 obtained in connection with the Wiscold Note, (D)
the cash received from the exercise of stock options and (E) all other cash
on hand of Christiana at the Closing minus (ii) the sum of (A) an amount of
cash necessary to pay the Christiana Liabilities in full without giving
effect to the use or application of any tax deductions relating to the
exercise of options or any tax benefits that may be realized as a result of
amended Tax Returns and (B) $10,000,000. The "Cash Consideration Per Share"
is based on 5,136,630 shares of Christiana Common Stock being issued and
outstanding immediately prior to the Effective Time. In the event the
number of shares of Christiana Common Stock outstanding immediately prior
to the Effective Time is greater or less than 5,136,630, the Cash
Consideration Per Share shall be adjusted to equal the quotient of the
Christiana Net Cash divided by the number of shares of Christiana Common
Stock issued and outstanding immediately prior to the Effective Time. The
terms "TLC Dividend," "Wiscold Note" and "Christiana Liabilities" shall
have the meanings set forth in Sections 3.1(s), 3.1(t) and 2.2(o),
respectively.
(f) The "Contingent Cash Consideration Per Share" shall mean the
Remaining Contingent Cash divided by 5,136,630. The "Remaining Contingent
Cash" shall mean $10,000,000 less the sum of (i) all Assumed Liabilities
(as defined in the C2 Purchase Agreement) paid by Christiana, EVI or their
respective successors and assigns during the Contingent Liability Period
and (ii) all other Liabilities (as defined in the Logistic Purchase
Agreement) incurred by or on behalf of them during the Contingent Liability
Period; provided, however, that no subtraction shall be made in either (i)
or (ii) for liabilities previously subtracted for Christiana Liabilities in
Section 1.7(e). The Contingent Liability Period shall mean the period from
the Effective Date through the earlier of: (a) fifth anniversary of
Effective Date or (b) the date that Christiana receives consideration with
a fair market value of $20,000,000 or more for its one-third interest in
TLC; provided, however, that if there is any pending or threatened claim,
demand or suit or existing matter for which EVI has reasonably determined
that an EVI Indemnified Party (as defined in the Logistic Purchase
Agreement) will be entitled to indemnification under Section 6.1(a) of the
Logistic Purchase Agreement, the Contingent Liability Period shall be
extended until such time that such claim, demand, suit or matter is wholly
resolved, paid and not subject to appeal or further claims. The "Contingent
Cash Consideration Per Share" is based on 5,136,630 shares of Christiana
Common Stock being issued and outstanding immediately prior to the
Effective Time. In the event the number of shares of Christiana Common
Stock outstanding immediately prior to the Effective Time is greater or
less than 5,136,630, the Contingent Cash Consideration Per Share shall be
adjusted to equal the quotient of the Remaining Contingent Cash divided by
the number of shares of Christiana Common Stock issued and outstanding
immediately prior to the Effective Time.
1.8 EXCHANGE OF CERTIFICATES.
(a) Exchange Agent. Prior to the Effective Time of the Merger, EVI
shall select a bank or trust company to act as exchange agent (the
"Exchange Agent") for the issue of shares of EVI Common Stock upon
surrender of certificates representing Christiana Shares.
(b) Payment of Merger Consideration. EVI shall take all steps
necessary to enable and cause there to be provided to the Exchange Agent on
a timely basis, as and when needed after the Effective Time of the Merger,
certificates for the shares of EVI Common Stock to be issued upon the
conversion of the
A-6
148
Christiana Shares pursuant to Section 1.7 and the cash necessary to be
issued for the Cash Consideration Per Share. The Contingent Cash
Consideration Per Share shall be paid as provided in Section 1.8(d).
(c) Retention of Cash Pending Post Closing Audit. Within 30 days
following the Effective Date, EVI shall (i) complete a post closing audit
by EVI of the Christiana Net Cash and (ii) pay to the Exchange Agent on
behalf of the holders of the Christiana Shares the Cash Consideration Per
Share in respect of such Christiana Shares subject to the prior
presentation of the certificates that immediately prior to the Effective
Time represented the outstanding Christiana Shares (the "Certificates").
(d) Payment of Contingent Cash Consideration. Within 60 days following
the expiration of the Contingent Liability Period, EVI shall send a notice
to the prior holders of the Christiana Shares as of the Effective Time of
the Merger at their last known address advising them as to the amount of
the Contingent Cash Consideration Per Share as determined in the reasonable
good faith by EVI; provided, however, that if on the date the Contingent
Liability Period would otherwise terminate, there is any pending or
threatened claim, demand or suit or existing matter for which EVI has
reasonably determined an EVI Indemnified Party will be entitled to
indemnification under Section 6.1(a) of the Logistic Agreement (an
"Extension Event"), EVI shall within 60 days thereafter determine the
amount, if any, of the Contingent Cash Consideration that is in excess of
the sum of (i) the amount necessary to pay the full amount of all such
pending or threatened claims, demands, suits or matters based on the amount
claimed, demanded or sought and (ii) the estimated costs of investigation
and defense of such matters (the "Excess Cash") and send a notice to the
prior holders of the Christiana Shares as of the Effective Time of the
Merger at their last known address advising them of the amount of the
Excess Cash Per Share (as defined below). The Excess Cash Per Share shall
mean the Excess Cash divided by the number of shares of Christiana Common
Stock issued and outstanding immediately prior to the Effective Time. The
Excess Cash Per Share shall be part of the Contingent Cash Per Share and
not a separate right to payment. Such determinations shall be conclusive
and binding on the prior holders of the Christiana Shares. Subject to any
limitations existing under law, along with the aforementioned notice, EVI
shall send to each holder of record of a Certificate that was tendered for
exchange pursuant to Section 1.8(e) a check in an amount equal to (i) if an
Extension Event exists on the fifth anniversary of the Effective Date, the
Excess Cash Per Share with the first notice and the Contingent Cash
Consideration Per Share, if any, less the Excess Cash Per Share at the time
of the second notice and (ii) if an Extension Event does not exist on the
fifth anniversary of the Effective Time of the Merger, the Contingent Cash
Consideration Per Share, in each case, payable in respect of the Christiana
Shares represented by such Certificate. Such payments shall be made without
interest and be subject to any applicable withholding for taxes thereon.
The Contingent Cash Consideration Per Share shall represent an inchoate
right to receive cash in the future under certain limited circumstances
provided herein and shall not represent any right to or in any of the
assets of EVI or Christiana. The right to receive the Contingent Cash
Consideration Per Share shall not be transferrable except for transfers by
operation of law or by will or intestate succession. EVI may, but shall not
be required to, establish a trust or escrow fund with respect to the
Contingent Cash Consideration Per Share that may be payable hereunder.
(e) Exchange Procedure. As soon as reasonably practical after the
Effective Time of the Merger, the Exchange Agent shall mail to each holder
of record of a Certificate or Certificates, other than EVI, Sub and
Christiana and any directly or indirectly wholly owned subsidiary of EVI,
Sub or Christiana, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent
and shall be in a form and have such other provisions as EVI and Sub may
reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the certificates representing
the shares of EVI Common Stock, the Cash Consideration Per Share and
Contingent Cash Consideration Per Share. Upon surrender of a Certificate
for cancellation to the Exchange Agent or to such other agent or agents as
may be appointed by the Surviving Corporation, together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such Certificate shall be
entitled to receive in exchange therefor a certificate or certificates
representing the number of whole shares of EVI Common Stock into which the
Christiana Shares theretofore represented
A-7
149
by such Certificate shall have been converted pursuant to Section 1.7 and
the Cash Consideration Per Share and Contingent Cash Consideration Per
Share as provided in Section 1.8(c) and (d), and the Certificate so
surrendered shall forthwith be canceled. If the shares of EVI Common Stock
are to be issued to an individual, corporation, limited liability company,
partnership, governmental authority or any other entity (a "Person"), other
than the person in whose name the Certificate so surrendered is registered,
it shall be a condition of exchange that such Certificate shall be properly
endorsed or otherwise in proper form for transfer and that the Person
requesting such exchange shall pay any transfer or other taxes required by
reason of the exchange to a Person other than the registered holder of such
Certificate or establish to the satisfaction of the Surviving Corporation
that such tax has been paid or is not applicable. Until surrendered as
contemplated by this Section 1.8, each Certificate shall be deemed at any
time after the Effective Time of the Merger to represent only the right to
receive upon such surrender the number of shares of EVI Common Stock, the
Cash Consideration Per Share and Contingent Cash Consideration Per Share
payable in respect of the Christiana Shares pursuant to Section 1.7. The
Exchange Agent shall not be entitled to vote or exercise any rights of
ownership with respect to the shares of EVI Common Stock held by it from
time to time hereunder, except that it shall receive and hold all dividends
or other distributions paid or distributed with respect thereto for the
account of Persons entitled thereto. Any unexchanged shares of EVI Common
Stock issuable pursuant to the Merger in respect of the Christiana Shares
shall be issued in the name of the Exchange Agent pending the receipt by
the Exchange Agent of Certificates.
(f) Distributions with Respect to Unexchanged Christiana Shares. No
dividends or other distributions declared or made after the Effective Time
of the Merger with respect to the shares of EVI Common Stock with a record
date after the Effective Time of the Merger shall be paid to the holder of
any unsurrendered Certificate with respect to the shares of EVI Common
Stock represented thereby and the Cash Consideration Per Share shall not be
paid until the holder of record of such Certificate shall surrender such
Certificate. Subject to the effect of applicable laws, following surrender
of any such Certificate, there shall be paid to the record holder of the
Certificates representing the shares of EVI Common Stock issued in exchange
therefor, without interest, (i) the amount of dividends or other
distributions with a record date after the Effective Time of the Merger
theretofore paid with respect to such whole shares of EVI Common Stock, as
the case may be, (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective
Time of the Merger but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole shares of EVI Common Stock and
(iii) the Cash Consideration Per Share and Contingent Cash Consideration
Per Share at the appropriate payment date as provided in this Section 1.8.
(g) No Further Ownership Rights in Christiana Shares. All shares of
EVI Common Stock issued upon the surrender of Certificates in accordance
with the terms of this Article I, together with any dividends payable
thereon to the extent contemplated by this Section 1.8 and the rights to
receive the Cash Consideration Per Share and the Contingent Cash
Consideration Per Share as provided herein, shall be deemed to have been
exchanged and paid in full satisfaction of all rights pertaining to the
Christiana Shares theretofore represented by such Certificates and there
shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of the Christiana Shares that were outstanding
immediately prior to the Effective Time of the Merger. If, after the
Effective Time of the Merger, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as
provided in this Article I.
(h) Escheat. None of EVI, Sub, Christiana, the Surviving Corporation
or their transfer agents shall be liable to a holder of the Christiana
Shares for any amount properly paid to a public official pursuant to
applicable property, escheat or similar laws.
1.9 TAKING OF NECESSARY ACTION; FURTHER ACTION. The parties hereto shall
take all such reasonable and lawful action as may be necessary or appropriate in
order to effectuate the Merger and the Logistic Sale as promptly as possible.
If, at any time after the Effective Time, any such further action is necessary
or desirable to carry out the purposes of this Agreement or the Logistic Sale,
and to vest the Surviving Corporation with
A-8
150
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of Christiana or Sub as of the Effective Time, such
corporations shall direct their respective officers and directors to take all
such lawful and necessary action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF EVI AND SUB. EVI and Sub hereby
jointly and severally represent and warrant to Christiana that:
(a) Organization and Compliance with Law. EVI and Sub are corporations
duly incorporated, validly existing and in good standing under the laws of
the states of Delaware and Wisconsin, respectively. Each of EVI and Sub has
all requisite corporate power and corporate authority to own, lease and
operate all of its properties and assets and to carry on its business as
now being conducted, except where the failure to be so organized, existing
or in good standing would not have a material adverse effect on the
financial condition of EVI and its subsidiaries (the "EVI Subsidiaries"),
taken as a whole (an "EVI MAE"). Each of EVI and Sub is duly qualified to
do business, and is in good standing, in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except in such
jurisdictions where the failure to be duly qualified would not have an EVI
MAE. Each of EVI and Sub is in compliance with all applicable laws,
judgments, orders, rules and regulations, except where such failure would
not have an EVI MAE. EVI has heretofore delivered to Christiana true and
complete copies of EVI's Restated Certificate of Incorporation, as amended
(the "EVI Certificate"), and Sub's Certificate of Incorporation and their
respective bylaws as in existence on the date hereof.
(b) Capitalization.
(i) The authorized capital stock of EVI consists of 80,000,000
shares of EVI Common Stock, $1.00 par value, and 3,000,000 shares of
preferred stock, $1.00 par value ("EVI Preferred Stock"). As of December
10, 1997, there were 47,103,494 shares of EVI Common Stock issued and
outstanding. As of December 10, 1997, (i) 5,031,250 shares of EVI Common
Stock were reserved for issuance pursuant to the conversion provisions
of EVI's 5% Convertible Subordinated Preferred Equivalent Debentures due
2027, (ii) 800,000 shares of EVI Common Stock were reserved for issuance
pursuant to pending or proposed acquisitions and (iii) 2,506,400 shares
of EVI Common Stock were reserved for issuance pursuant to EVI's
employee and director benefit plans and arrangements, of which 1,376,400
shares of EVI Common Stock were reserved for issuance upon exercise of
outstanding options. At December 10, 1997, there were no shares of EVI
Preferred Stock issued or outstanding. No holder of EVI Common Stock is
entitled to preemptive rights under Delaware law or EVI's Certificate of
Incorporation.
(ii) As of the date hereof, the authorized capital stock of Sub
consists of 1,000 shares of common stock, $1.00 par value, all of which
are validly issued, fully paid and nonassessable and are owned by EVI.
(iii) Each share of EVI Common Stock to be issued hereunder as a
result of the Merger will be fully paid and non-assessable upon
issuance.
(c) Authorization and Validity of Agreement. The execution and
delivery by EVI and Sub of this Agreement and the consummation by each of
them of the transactions contemplated hereby have been duly authorized by
all necessary corporate action (subject only, with respect to the Merger,
to approval of this Agreement by each of their stockholders as provided for
in Section 5.3). On or prior to the date hereof, the Board of Directors of
EVI or duly authorized committee thereof has determined to recommend
approval of the Merger to the stockholders of EVI, and such determination
is in effect on the date hereof. This Agreement has been duly executed and
delivered by EVI and Sub and is the valid and binding obligation of EVI and
Sub, enforceable against EVI and Sub in accordance with its terms.
A-9
151
(d) No Approvals or Notices Required; No Conflict. Neither the
execution and delivery of this Agreement nor the performance by EVI or Sub
of its obligations hereunder, nor the consummation of the transactions
contemplated hereby by EVI and Sub, will (i) conflict with the EVI
Certificate or the bylaws of EVI or Sub; (ii) assuming satisfaction of the
requirements set forth in clause (iii) below, violate any provision of law
applicable to EVI or any of the EVI Subsidiaries; (iii) except for (A)
requirements of Federal or state securities laws, (B) requirements arising
out of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
Act"), (C) requirements of notice filings in such foreign jurisdictions as
may be applicable, and (D) the filing of a Certificate of Merger by Sub in
accordance with the WGCL, require any consent or approval of, or filing
with or notice to, any public body or authority, domestic or foreign, under
any provision of law applicable to EVI or any of the EVI Subsidiaries; or
(iv) require any consent, approval or notice under, or violate, breach, be
in conflict with or constitute a default (or an event that, with notice or
lapse of time or both, would constitute a default) under, or permit the
termination of any provision of, or result in the creation or imposition of
any lien, mortgage, pledge, security interest, restriction on transfer,
option, charge, right of any third Person or any other encumbrance of any
nature (a "Lien") upon any properties, assets or business of EVI or any of
the EVI Subsidiaries under, any note, bond, indenture, mortgage, deed of
trust, lease, franchise, permit, authorization, license, contract,
instrument or other agreement or commitment or any order, judgment or
decree to which EVI or any of the EVI Subsidiaries is a party or by which
EVI or any of the EVI Subsidiaries or any of its or their assets or
properties is bound or encumbered, except (A) those that have already been
given, obtained or filed and (B) those that, in the aggregate, would not
have an EVI MAE.
(e) Commission Filings; Financial Statements. EVI has filed all
reports and documents required to filed with the Securities and Exchange
Commission (the "Commission") since December 31, 1994. All reports,
registration statements and other filings (including all notes, exhibits
and schedules thereto and documents incorporated by reference therein)
filed by EVI with the Commission since December 31, 1994, through the date
of this Agreement, together with any amendments thereto, are sometimes
collectively referred to as the "EVI Commission Filings". EVI has
heretofore delivered to, or made accessible to, Christiana copies of the
EVI Commission Filings. As of the respective dates of their filing with the
Commission, the EVI Commission Filings complied in all material respects
with the applicable requirements of the Securities Act of 1934 (the
"Securities Act"), the Securities Exchange Act of 1934 (the "Exchange Act")
and the rules and regulations of the Commission thereunder, and did not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
(f) Absence of Certain Charges and Events. Since December 31, 1996,
except as contemplated by this Agreement or as disclosed in the EVI
Commission Filings filed with the Commission prior to the date hereof,
there has been no EVI MAE.
(g) Tax Matters.
(i) Except as set forth in Section 2.1(g) of the disclosure letter
delivered by EVI to Christiana on the date hereof (the "EVI Disclosure
Letter"), all returns and reports, including, without limitation,
information and withholding returns and reports ("Tax Returns"), of or
relating to any foreign, federal, state or local tax, assessment or
other governmental charge ("Taxes" or a "Tax") that are required to be
filed on or before the Closing Date by or with respect to EVI or any of
the EVI Subsidiaries, or any other corporation that is or was a member
of an affiliated group (within the meaning of Section 1504(a) of the
Code) of corporations of which EVI was a member for any period ending on
or prior to the Closing Date, have been or will be duly and timely
filed, and all Taxes, including interest and penalties, due and payable
pursuant to such Tax Returns have been paid or, except as set forth in
Section 2.1(g) of the EVI Disclosure Letter, adequately provided for in
reserves established by EVI, except where the failure to file, pay or
provide for would not have a EVI MAE.
A-10
152
(ii) EVI has no present plan or intention after the Merger to (A)
liquidate the Surviving Corporation, (B) merge the Surviving Corporation
with or into another corporation, (C) sell or otherwise dispose of the
stock of the Surviving Corporation, (D) cause or permit the Surviving
Corporation to sell or otherwise dispose of any of the assets of
Christiana or the assets of Sub vested in the Surviving Corporation
except for dispositions made in the ordinary course of business or
transfers of assets to a corporation controlled by the Surviving
Corporation within the meaning of Section 368(a)(2)(C) of the Code, or
(E) reacquire any of the stock issued to the Christiana stockholders
pursuant to the Merger.
(iii) EVI is not an investment company as defined in
sec.368(a)(2)(F)(iii) and (iv) of the Code or as defined in the
Investment Company Act of 1940 and the rules and regulations promulgated
thereunder.
(h) Voting Requirements. The affirmative vote of the holders of a
majority of the shares of EVI Common Stock present at the special
stockholders' meeting and entitled to vote is the only vote of the holders
and any class or series of the capital stock of EVI necessary to approve
this Agreement and the Merger.
(i) Brokers. Except for fees and expenses payable by EVI to Morgan
Stanley & Co. Incorporated, no broker, investment banker, or other Person
acting on behalf of EVI is or will be entitled to any broker's, finder's or
other similar fee or commission in connection with the transactions
contemplated by this Agreement.
(j) Information Supplied. None of the information supplied or to be
supplied by EVI for inclusion or incorporation by reference in (i) the
Registration Statement (as defined in Section 5.1) will, at the time the
Registration Statement is filed with the Commission, and at any time it is
amended or supplemented or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and (ii) the Proxy Statement will,
at the date the Proxy Statement is first mailed to EVI's stockholders and
at the time of the EVI Stockholders Meeting, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The Proxy
Statement will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder.
For purposes of this Agreement, the parties agree that the statements made
and information in the Registration Statement and the Proxy Statement
relating to the Federal income tax consequences of the transactions
contemplated hereby shall be deemed to be supplied by Christiana and not by
EVI or Sub.
2.2 REPRESENTATIONS AND WARRANTIES OF CHRISTIANA AND C2. Each of
Christiana and C2 hereby, jointly and severally, represents and warrants to EVI
that:
(a) Organization. Each of Christiana and C2 is a corporation duly
organized, validly existing and in good standing under the laws of the
state of Wisconsin. Logistic is a limited liability company duly organized,
validly existing and in good standing under the laws of the state of
Delaware. Each of Christiana, C2 and Logistic has all requisite corporate
(or equivalent) power and corporate (or equivalent) authority and all
necessary governmental authorizations to own, lease and operate all of its
properties and assets and to carry on its business as now being conducted,
except where the failure to be so organized, existing or in good standing
or to have such governmental authority would not (i) have a material
adverse effect on the financial condition of Christiana or Logistic after
giving effect to the Logistic Sale or (ii) prevent or adversely affect the
ability of Christiana and C2 to perform and comply with their respective
obligations under this Agreement, the Logistic Purchase Agreement or any
other agreement to be executed and delivered in connection with the
transactions contemplated hereby or thereby (a "Christiana MAE"). Except as
set forth in Section 2.2(a) of the disclosure letter delivered by
Christiana to EVI on the date hereof (the "Christiana Disclosure Letter"),
each of Christiana, Logistic and C2 is duly qualified as a foreign
corporation or limited liability company to do business, and is in good
A-11
153
standing, in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary, except in such jurisdictions where the failure to
be duly qualified does not and would not have a Christiana MAE. Each of
Christiana, Logistic and C2 is in compliance with all applicable laws,
judgments, orders, rules and regulations, domestic and foreign, except
where failure to be in such compliance would not have a Christiana MAE.
Christiana has heretofore delivered to EVI true and complete copies of (i)
Christiana's Certificate of Incorporation (the "Christiana Certificate")
and bylaws, (ii) Logistic's Certificate of Organization and operating
agreement and (iii) C2's Articles of Incorporation and operating agreement,
in each case as in existence on the date hereof.
(b) Capitalization.
(i) The authorized capital stock of Christiana consists of
12,000,000 shares of Christiana Common Stock, $1.00 par value, and
1,000,000 shares of preferred stock, $10.00 par value ("Christiana
Preferred Stock"). As of December 12, 1997, there were 5,136,630 shares
of Christiana Common Stock issued and outstanding and no shares of
Christiana Common Stock were held as treasury shares. There are no
outstanding shares of Christiana Preferred Stock. A total of 500,000
shares of Christiana Common Stock have been reserved for issuance
pursuant to the stock option plan described in Section 2.2(b)(iii). All
issued and outstanding shares of Christiana Common Stock are validly
issued, fully paid and nonassessable (except as set forth in Wis Stats
sec. 180.0622) and no holder thereof is entitled to preemptive rights.
Christiana is not a party to, and is not aware of, any voting agreement,
voting trust or similar agreement or arrangement relating to any class
or series of its capital stock, or any agreement or arrangement
providing for registration rights with respect to any capital stock or
other securities of Christiana.
(ii) Christiana owns 100% of the membership interests in Logistic.
All issued and outstanding membership interests of Logistic are validly
issued, fully paid and nonassessable and no holder thereof is entitled
to preemptive rights. Logistic is not a party to, any voting agreement,
voting trust or similar agreement or arrangement relating to its
membership interests, or any agreement or arrangement providing for
registration rights with respect to any membership interests or other
interests of Logistic.
(iii) As of the date hereof, there are outstanding options (the
"Christiana Options") to purchase an aggregate of 267,083 shares of
Christiana Common Stock under the 1995 Stock Option Plan (the
"Christiana Option Plan"). All Christiana Options shall be terminated or
exercised prior to the Effective Time. As of the Effective Time, there
will be no options outstanding under the Christiana Option Plan. There
are not now (other than as set forth in this Section 2.2(b)), and at the
Effective Time there will not be, any (A) shares of capital stock or
other equity securities of Christiana outstanding other than Christiana
Common Stock issued pursuant to the exercise of Christiana Options or
(B) outstanding options, warrants, scrip, rights to subscribe for, calls
or commitments of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, shares of any class of
capital stock of Christiana, or contracts, understandings or
arrangements to which Christiana is a party, or by which it is or may be
bound, to issue additional shares of its capital stock or options,
warrants, scrip or rights to subscribe for, or securities or rights
convertible into or exchangeable for, any additional shares of its
capital stock.
(iv) Section 2.2(b)(iv) of the Christiana Disclosure Letter sets
forth a list of all corporations, partnerships, limited liability
companies and other entities of which Christiana owns directly or
indirectly, an equity interest (such entities, excluding EVI and its
subsidiaries, referred to herein as the "Christiana Subsidiaries").
(c) Authorization and Validity of Agreement. Each of Christiana and C2
has all requisite corporate power and authority to enter into this
Agreement, the Logistic Purchase Agreement and the other agreements and
instruments contemplated to be executed and delivered in connection with
the Merger and the Logistic Sale (the Logistic Purchase Agreement and such
other agreements and instruments contemplated to be executed and delivered
in connection with the Merger and the Logistic Sale being
A-12
154
referred to as the "Other Agreements") and to perform its obligations
hereunder and thereunder. The execution and delivery by Christiana and C2
of this Agreement and the Other Agreements to which it is a party and the
consummation by it of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action (subject only, with
respect to the Merger and the Logistic Sale, to approval of this Agreement
and the Logistic Sale by the Christiana stockholders as provided for in
Section 5.3). On or prior to the date hereof the Board of Directors of
Christiana has determined to recommend approval of the Merger and the
Logistic Sale to the stockholders of Christiana, and such determination is
in effect as of the date hereof. This Agreement has been duly executed and
delivered by Christiana and C2 and is the valid and binding obligation of
Christiana and C2 enforceable against it in accordance with its terms. The
Other Agreements, when executed and delivered by Christiana and C2, as
applicable, will constitute valid and binding obligations of Christiana and
C2, enforceable against them in accordance with their respective terms.
(d) No Approvals or Notices Required; No Conflict with Instruments to
which Christiana is a Party. The execution and delivery of this Agreement
and the Other Agreements do not, and the consummation of the transactions
contemplated hereby and thereby and compliance with the provisions hereof
and thereof will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of or "put"
right with respect to any obligation or to loss of a material benefit
under, or result in the creation of any Lien upon any of the properties or
assets of Christiana, Logistic, C2 or any of their subsidiaries under, any
provision of (i) the Christiana Certificate or bylaws of Christiana, the
Certificate of Organization or operating agreement of Logistic or the
Articles of Incorporation or bylaws of C2, or any provision of the
comparable organizational documents of its subsidiaries, (ii) except as set
forth in Section 2.2(d) of the Christiana Disclosure Letter, any loan or
credit agreement, note, bond, mortgage, indenture, lease, guaranty or other
financial assurance agreement or other agreement, instrument, permit,
concession, franchise or license applicable to Christiana or its properties
or assets, (iii) except as set forth in Section 2.2(d) of the Christiana
Disclosure Letter, any loan or credit agreement, note, bond, mortgage,
indenture, lease, guaranty or other financial assurance agreement or other
agreement, instrument, permit, concession, franchise or license applicable
to Logistic or any other Christiana Subsidiary, or their respective
properties or assets and (iv) subject to governmental filing and other
matters referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule or regulation or arbitration award applicable
to Christiana, Logistic or C2 or any of their subsidiaries or their
respective properties or assets, other than, in the case of clauses (ii)
and (iii), any such conflicts, violations, defaults, rights or Liens that
individually or in the aggregate would not have a Christiana MAE. No
consent, approval, order or authorization of, or registration, declaration
or filing with, any court, administrative agency or commission or other
governmental authority or agency, domestic or foreign, including local
authorities (a "Governmental Entity"), is required by or with respect to
Christiana, Logistic or C2 or any of their subsidiaries in connection with
the execution and delivery of this Agreement by Christiana and C2 or the
consummation by Christiana of the transactions contemplated hereby, except
for (i) the filing of a pre-merger notification and report form by
Christiana under the HSR Act, (ii) the filing with the Commission of (A) a
proxy or information statement relating to Stockholder Approval (such proxy
or information statement as amended or supplemented from time to time, the
"Proxy Statement"), and (B) such reports under Section 13(a) of the
Exchange Act as may be required in connection with this Agreement and the
transactions contemplated hereby, (iii) the filing of the Certificate of
Merger with the Wisconsin Secretary of State with respect to the Merger as
provided in the WGCL and appropriate documents with the relevant
authorities of other states in which Christiana is qualified to do business
and (iv) such other consents, approvals, orders, authorizations,
registrations, declarations, filings and notices as are set forth in
Section 2.2(d) of the Christiana Disclosure Letter.
(e) Commission Filings; Financial Statements. Christiana has filed all
reports, registration statements and other filings, together with any
amendments required to be made with respect thereto, that it has been
required to file with the Commission. All reports, registration statements
and other filings (including all notes, exhibits and schedules thereto and
documents incorporated by reference therein) filed by Christiana with the
Commission since December 31, 1994, through the date of this Agreement,
A-13
155
together with any amendments thereto, are sometimes collectively referred
to as the "Christiana Commission Filings." Christiana has heretofore
delivered to EVI copies of the Christiana Commission Filings. As of the
respective dates of their filing with the Commission, the Christiana
Commission Filings complied in all material respects with the Securities
Act, the Exchange Act and the rules and regulations of the Commission
thereunder, and did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which
they were made, not misleading. To the best knowledge of Christiana, all
material contracts of Christiana and its subsidiaries have been included in
the Christiana's filings with the Commission since the initial registration
of its stock under the Exchange Act, except for those contracts not
required to be filed pursuant to the rules and regulations of the
Commission.
Each of the consolidated financial statements (including any related
notes or schedules) included in the Christiana Commission Filings was
prepared in accordance with generally accepted accounting principles
applied on a consistent basis (except as may be noted therein or in the
notes or schedules thereto) and complied with the rules and regulations of
the Commission. Such consolidated financial statements fairly present the
consolidated financial position of Christiana as of the dates thereof and
the results of operations, cash flows and changes in stockholders' equity
for the periods then ended (subject, in the case of the unaudited interim
financial statements, to normal year-end audit adjustments on a basis
comparable with past periods). As of the date hereof, Christiana has no
liabilities, absolute or contingent, that may reasonably be expected to
have a Christiana MAE, that are not reflected in the Christiana Commission
Filings, except (i) those incurred in the ordinary course of business
consistent with past operations and not relating to the borrowing of money
and (ii) those set forth in Section 2.2(e) of the Christiana Disclosure
Letter.
(f) Conduct of Business in the Ordinary Course; Absence of Certain
Changes and Events. Since December 31, 1995, except as contemplated by this
Agreement, the Logistic Purchase Agreement or as disclosed in the
Christiana Commission Filings or set forth in Section 2.2(f) of the
Christiana Disclosure Letter, Christiana and its subsidiaries have
conducted their respective businesses only in the ordinary and usual course
in accordance with past practice, and there has not been: (i) a Christiana
MAE or any other material adverse change in the financial condition,
results of operations, assets or business of Christiana, taken as a whole;
(ii) to the knowledge of Christiana, any other condition, event or
development that reasonably may be expected to result in any such material
adverse change or a Christiana MAE; (iii) any change by Christiana or
Logistic in its accounting methods, principles or practices; (iv) any
revaluation by Christiana or Logistic of any of its assets, including,
without limitation, writing down the value of inventory or writing off
notes or accounts receivable other than in the ordinary course of business
and consistent with past practice; (v) any entry by Christiana or Logistic
into any commitment or transaction that would be material to Christiana or
Logistic; (vi) any declaration, setting aside or payment of any dividends
or distributions in respect of the Christiana Common Stock or any
redemption, purchase or other acquisition of any of its securities; (vii)
any damage, destruction or loss (whether or not covered by insurance)
adversely affecting the properties or business of Christiana or Logistic;
(viii) any increase in indebtedness of borrowed money other than borrowing
under existing credit facilities as disclosed in Section 2.2(f) of the
Christiana Disclosure Letter; (ix) any granting of a security interest or
Lien on any property or assets of Christiana or Logistic, other than (A)
Liens for taxes not due and payable and (B) inchoate mechanics',
warehousemen's and other statutory Liens incurred in the ordinary course of
business (collectively, "Permitted Liens"); or (x) any increase in or
establishment of any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option (including, without
limitation, the granting of stock options, stock appreciation rights,
performance awards or restricted stock awards), stock purchase or other
employee benefit plan or any other increase in the compensation payable or
to become payable to any directors, officers or key employees of Christiana
or Logistic or which Christiana or Logistic would be responsible.
(g) Litigation. Except as disclosed in the Christiana Commission
Filings or as set forth in Section 2.2(g) of the Christiana Disclosure
Letter, there are no claims, actions, suits, investigations, inquiries or
proceedings, ("Demands"), pending or, to the knowledge of Christiana,
threatened against or
A-14
156
affecting (i) Christiana or Logistic or any of their respective properties
at law or in equity, or any of their employee benefit plans or fiduciaries
of such plans, or (ii) C2 or any Christiana or C2 subsidiaries or any of
their respective properties at law or in equity, or any of their respective
employee benefit plans or fiduciaries of such plans, before or by any
federal, state, municipal or other governmental agency or authority, or
before any arbitration board or panel (each a "Governmental Entity"),
wherever located (i) that exist today or (ii) that would otherwise, if
adversely determined, have a Christiana MAE. None of Christiana, Logistic
or C2 is subject to any judicial, governmental or administrative order,
writ, judgment, injunction or decree.
(h) Employee Benefit Plans.
(i) Section 2.2(h) of the Christiana Disclosure Letter provides a
description of each of the following which is sponsored, maintained or
contributed to by Christiana or any corporation, trade, business or
entity under common control with Christiana within the meaning of
Section 414(b),(c),(m) or (o) of the Code or Section 4001 of ERISA (a
"Christiana ERISA Affiliate") for the benefit of its employees, or has
been so sponsored, maintained or contributed to within three years prior
to the Closing Date.
(A) each "employee benefit plan," as such term is defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), ("Plan"); and
(B) each stock option plan, collective bargaining agreement,
bonus plan or arrangement, incentive award plan or arrangement,
vacation policy, severance pay plan, policy or agreement, deferred
compensation agreement or arrangement, executive compensation or
supplemental income arrangement, consulting agreement, employment
agreement and each other employee benefit plan, agreement,
arrangement, program, practice or understanding that is not described
in Section 2.2(h)(i)(A) to which Christiana or Logistic is a party or
has any obligation ("Benefit Program or Agreement").
True and complete copies of each of the Plans, Benefit Programs
or Agreements, related trusts, if applicable, and all amendments
thereto, together with (i) the Forms 5500, 990 and 1041, as
applicable, for the three most recent fiscal years, (ii) all current
summary plan descriptions for each such Plan, (iii) the most recent
Internal Revenue Service determination letters for each such Plan, as
applicable, and all correspondence with the Internal Revenue Service
and the Department of Labor relating to such Plans, Benefit Programs
and Agreements have been furnished to EVI.
(ii) Except as otherwise set forth in Section 2.2(h) of the
Christiana Disclosure Letter,
(A) None of Christiana or any Christiana ERISA Affiliate
contributes to or has an obligation to contribute to, or has at any
time contributed to or had an obligation to contribute to, a plan
subject to Title IV of ERISA, including, without limitation, a multi
employer plan within the meaning of Section 3(37) of ERISA, nor have
such companies engaged in any transaction described in Sections 406
and 407 of ERISA (unless exempt under Section 408) or Section 4975 of
the Code (unless exempt);
(B) Each Plan and each Benefit Program or Agreement has been
administered, maintained and operated in all material respects in
accordance with the terms thereof and in compliance with its
governing documents and applicable law (including, where applicable,
ERISA and the Code and timely filing of Form 5500's for each year);
(C) There is no matter pending with respect to any of the Plans
before any governmental agency, and there are no actions, suits or
claims pending (other than routine claims for benefits) or, to the
knowledge of Christiana or C2, threatened against, or with respect
to, any of the Plans or Benefit Programs or Agreements or its assets;
(D) No act, omission or transaction has occurred which would
result in imposition on Christiana or any Christiana ERISA Affiliate
of breach of fiduciary duty liability damages
A-15
157
under Section 409 of ERISA, a civil penalty assessed pursuant to
subsections (c), (i) or (l) of Section 502 of ERISA or a tax imposed
pursuant to Chapter 43 of Subtitle D of the Code; and
(E) Except as provided in Section 5.7, the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby will not require Christiana or any Christiana
ERISA Affiliate to make a larger contribution to, or pay greater
benefits under, any Plan, Benefit Program or Agreement than it
otherwise would or create or give rise to any additional vested
rights or service credits under any Plan or Benefit Program or
Agreement or cause the companies to make accelerated payments.
(iii) Except as set forth in Section 2.2(h) of the Christiana
Disclosure Letter, termination of employment of any employee of
Christiana immediately after consummation of the transactions
contemplated by this Agreement would not result in payments under the
Plans, Benefit Programs or Agreements which, in the aggregate, would
result in imposition of the sanctions imposed under Sections 280G and
4999 of the Code.
(iv) Each Plan may be unilaterally amended or terminated in its
entirety without liability except as to benefits accrued thereunder
prior to such amendment or termination.
(v) Except as set forth in Section 2.2(h) of the Christiana
Disclosure Letter, none of the employees of Christiana or Logistic are
subject to union or collective bargaining agreements.
(vi) None of Christiana or any of the Christiana ERISA Affiliates
has agreed or is obligated to provide retiree medical coverage and each
of such companies has fully complied with all obligations under COBRA
applicable to it.
(i) Taxes.
(i) Except as set forth in Section 2.2(i) of the Christiana
Disclosure Letter, all Tax Returns of or relating to any Tax that are
required to be filed on or before the Closing Date by or with respect to
Christiana or any Christiana Subsidiary, or any other corporation that
is or was a member of an affiliated group (within the meaning of Section
1504(a) of the Code) of corporations of which Christiana was a member
for any period ending on or prior to the Closing Date, have been or will
be duly and timely filed, and all Taxes, including interest and
penalties, due and payable pursuant to such Tax Returns have been or
will be duly and timely paid or adequately provided for in reserves
established by Christiana or any such Christiana Subsidiary, except
where the failure to file, pay or provide for would not have a material
adverse effect on the financial condition, results of operations, or
business of Christiana or otherwise result in a Christiana MAE. All
income Tax returns of or with respect to Christiana or any Christiana
Subsidiary have been audited by the applicable Governmental Authority,
or the applicable statute of limitations has expired, for all periods up
to and including the tax year ended June 30, 1993. There is no material
claim against Christiana or any Christiana Subsidiary with respect to
any Taxes, and no material assessment, deficiency or adjustment has been
asserted or proposed with respect to any Tax Return of or with respect
to Christiana or any Christiana Subsidiary that has not been adequately
provided for in reserves established by Christiana or such Christiana
Subsidiary. The total amounts set up as liabilities for current and
deferred Taxes in the consolidated financial statements included in the
Christiana Commission Filings have been prepared in accordance with
generally accepted accounting principles and are sufficient to cover the
payment of all material Taxes, including any penalties or interest
thereon and whether or not assessed or disputed, that are, or are
hereafter found to be, or to have been, due with respect to the
operations of Christiana or any Christiana Subsidiary through the
periods covered thereby. Christiana has (and as of the Closing Date will
have) made estimated tax payments for taxable years for which the United
States consolidated federal income Tax return is not yet due required
with respect to Taxes. Except as set forth in Section 2.2(i) of the
Christiana Disclosure Letter, no waiver or extension of any statute of
limitations as to any federal, state, local or foreign Tax matter has
been given by or requested from Christiana or any Christiana Subsidiary.
Except for statutory Liens for current Taxes not yet due, no Liens for
Taxes exist upon the assets of Christiana. Except as set forth
A-16
158
in paragraph 2.2(i) of the Christiana Disclosure Letter, none of
Christiana or any Christiana Subsidiary has filed consolidated income
Tax Returns with any corporation, other than consolidated federal, state
or foreign income Tax returns by Christiana for any taxable period which
is not now closed by the applicable statute of limitations. Except as
set forth in Section 2.2(i) of the Christiana Disclosure Letter, none of
Christiana or any Christiana Subsidiary has any deferred intercompany
gain as defined in Treasury Regulations Section 1.1502-13.
(ii) As of the Closing Date, to Christiana's knowledge, there is no
plan or intention by the stockholders of Christiana to sell, exchange or
otherwise dispose of a number of shares of EVI received in the Merger
that would reduce the Christiana stockholders' ownership of EVI shares
to a number of shares having a value, as of the date of the Merger, of
less than 50% of the value of all of the formerly outstanding Christiana
Shares as of the same date. The shares of EVI Common Stock held by the
Christiana stockholders and otherwise sold, redeemed or disposed of
prior or subsequent to the Merger will be considered in making this
representation.
(iii) Christiana is not under the jurisdiction of a court in a
Title 11 or similar case with the meaning of sec.368(a)(3)(A) of the
Code.
(iv) There is no intercorporate indebtedness existing between
Christiana and EVI that was issued, acquired or will be settled at a
discount.
(v) As of the Closing Date, Christiana shall have fully accrued for
all Taxes that may be required to be paid as a result of the Logistic
Sale and the other transactions contemplated hereby. The value of the
interest in Logistic Common Stock to be sold pursuant to the Logistic
Sale has been determined pursuant to an outside appraisal and reflects
an amount equal to or greater than the fair value and fair market value
of such shares.
(j) Environmental Matters. Except as set forth in Section 2.2(j) of
the Christiana Disclosure Letter, (i) the properties, operations and
activities of Christiana and each of its Subsidiaries complies in all
material respects with all applicable Environmental Laws; (ii) none of
Christiana or any of its Christiana Subsidiaries is subject to any
existing, pending or, to the knowledge of Christiana, threatened action,
suit, investigation, inquiry or proceeding by or before any governmental
authority under any Environmental Law; (iii) except where the failure would
have a Christiana MAE, all notices, permits, licenses, or similar
authorizations, if any, required to be obtained or filed by Christiana
under any Environmental Law in connection with any aspect of the business
of Christiana, Logistic or any Christiana Subsidiary, including without
limitation those relating to the treatment, storage, disposal or release of
a hazardous substance or solid waste, have been duly obtained or filed and
will remain valid and in effect after the Merger and the Logistic Sale, and
each of Christiana, Logistic and each other Christiana Subsidiary is in
compliance with the terms and conditions of all such notices, permits,
licenses and similar authorizations; (iv) Christiana and each of its
Subsidiaries has satisfied and are currently in compliance with all
financial responsibility requirements applicable to their operations and
imposed by any governmental authority under any other Environmental Law,
and none of such parties has received any notice of noncompliance with any
such requirements; (v) to Christiana's knowledge, there are no physical or
environmental conditions existing on any property currently owned or
previously owned by Christiana or any entity in which it has or had
ownership interest that could reasonably be expected to give rise to any
on-site or off-site remedial obligations under any Environmental Laws; and
(vi) to Christiana's knowledge, since the effective date of the relevant
requirements of applicable Environmental Laws, all hazardous substances or
solid wastes generated by Christiana or used in connection with their
properties or operations have been transported only by carriers authorized
under Environmental Laws to transport such substances and wastes, and
disposed of only at treatment, storage, and disposal facilities authorized
under environmental laws to treat, store or dispose of such substances and
wastes, and, to the knowledge of Christiana, such carriers and facilities
have been and are operating in compliance with such authorizations and are
not the subject of any existing, pending, or overtly threatened action,
investigation, or inquiry by any governmental authority in connection with
any Environmental Laws.
A-17
159
For purposes of this Agreement, the term "Environmental Laws" shall
mean any and all laws, statutes, ordinances, rules, regulations, orders or
determinations of any Governmental Authority pertaining to health or the
environment currently in effect in any and all jurisdictions in which the
party in question and its subsidiaries own property or conduct business,
including without limitation, the Clean Air Act, as amended, the
Comprehensive Environmental, Response, Compensation, and Liability Act of
1980 ("CERCLA"), as amended, the Federal Water Pollution Control Act, as
amended, the Occupational Safety and Health Act of 1970, as amended, the
Resource Conservation and Recovery Act of 1976 ("RCRA"), as amended, the
Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as
amended, the Hazardous & Solid Waste Amendments Act of 1984, as amended,
the Superfund Amendments and Reauthorization Act of 1986, as amended, the
Hazardous Materials Transportation Act, as amended, the Oil Pollution Act
of 1990 ("OPA"), any state laws pertaining to the handling of oil and gas
exploration and production wastes or the use, maintenance, and closure of
pits and impoundments, and all other environmental conservation or
protection laws. For purposes of this Agreement, the terms "hazardous
substance" and "release" have the meanings specified in RCRA; provided,
however, that to the extent the laws of the state in which the property is
located establish a meaning for "hazardous substance," "release," "solid
waste" or "disposal" that is broader than that specified in either CERCLA
or RCRA, such broader meaning shall apply. For purposes of this Agreement,
the term "Governmental Authority" includes the United States, any foreign
jurisdiction, the state, county, city, and political subdivisions in which
the party in question owns property or conducts business, and any agency,
department, commission, board, bureau or instrumentality of any of them.
(k) Investment Company. Christiana is not an investment company as
defined in the Investment Company Act of 1940 and the rules and regulations
promulgated thereunder.
(l) Severance Payments. Except as set forth in Section 2.2(l) of the
Christiana Disclosure Letter, Christiana will not have any liability or
obligation to pay a severance payment or similar obligation to any of their
respective employees, officers, or directors as a result of the Merger or
the transactions contemplated by this Agreement, nor will any of such
Persons be entitled to an increase in severance payments or other benefits
as a result of the Merger, the Logistic Sale or the transactions
contemplated by this Agreement or the Other Agreements in the event of the
subsequent termination of their employment.
(m) Voting Requirements. Subject to the provisions of Section 5.3(a),
the affirmative vote of the holders of a majority of the outstanding shares
of Christiana Common Stock is the only vote of the holders of any class or
series of the capital stock of Christiana necessary to approve this
Agreement, the Merger, the Logistic Sale and the transactions contemplated
hereby and by the Other Agreements in order to comply with the WGCL,
Christiana's Certificate of Incorporation and Bylaws and the rules and
regulations of the New York Stock Exchange (the "NYSE").
(n) Brokers. Except for Prudential Securities Incorporated, whose fees
shall be paid by Christiana, no broker, investment banker, or other Person
acting on behalf of Christiana is or will be entitled to any broker's,
finder's or other similar fee or commission in connection with the
transactions contemplated by this Agreement.
(o) Assets and Liabilities at Closing. At the Effective Time:
(i) the assets of Christiana (the "Christiana Assets") shall
consist of (1) 3,897,462 shares of EVI Common Stock, which shall be held
free and clear of all Liens, (2) cash in the amount of $20,000,000
received in connection with the TLC Dividend as defined in Section
3.1(s), (3) the right to receive $10,666,667 in connection with the
Logistic Sale (4) $3,000,000 to be received in connection with the
Wiscold Note, (5) the cash received from the exercise of stock options,
(6) all other cash on hand, (7) a one-third interest in Logistic, and
(8) all tax, financial, accounting and other general corporate records,
including records relating to all past operations and subsidiaries
(including partnerships and joint ventures);
A-18
160
(ii) the liabilities of Christiana (the "Christiana Liabilities")
shall consist only of (1) transactional expenses related to the Merger
and the Logistic Sale, (2) all Taxes of Christiana relating to periods
through the Closing Date, including Taxes (other than the EVI Related
Taxes) from the Logistic Sale and deferred intercompany Taxes and (3)
all other outstanding and accrued liabilities to which Christiana may be
subject, other than Assumed Liabilities (as defined in the Logistic
Purchase Agreement) and EVI Related Taxes;
(iii) all obligations and liabilities (fixed or contingent, known
or unknown) of Christiana shall have been assumed by C2 and Logistic
other than liabilities described in clause (ii); and
(iv) except as set forth in Section 2.2(o) of the Disclosure
Schedule or agreed to in writing by EVI prior to the Closing, Christiana
shall have been released from all continuing obligations (i) relating to
Logistic or any other historical business of Christiana or its
subsidiaries and affiliates and (ii) under any and all agreements
relating to the borrowing of funds, including any and all guarantees or
similar arrangements relating thereto.
(p) Compliance with Laws. Christiana, Logistic, C2 and each of their
respective subsidiaries hold all required, necessary or applicable permits,
licenses, variances, exemptions, orders, franchises and approvals of all
Governmental Entities, except where the failure to so hold could not
reasonably be expected to have a Christiana MAE (the "Christiana Permits").
All applications with respect to such permits, licenses, variances,
exemptions, orders, franchises and approvals were complete and correct in
all material respects when made and neither Christiana nor C2 know of any
reason why any of such permits, licenses, variances, exemptions, orders,
franchises and approvals would be subject to cancellation. Christiana,
Logistic, C2 and each of their respective subsidiaries are in compliance
with the terms of the Christiana Permits except where the failure to so
comply could not reasonably be expected to have a Christiana MAE. None of
Christiana, Logistic, C2 or any of their respective subsidiaries has
violated or failed to comply with any statute, law, ordinance, regulation,
rule, permit or order of any Federal, state or local government, domestic
or foreign, or any Governmental Entity, any arbitration award or any
judgment, decree or order of any court or other Governmental Entity,
applicable to Christiana, Logistic, C2 or any of their respective
subsidiaries or their respective business, assets or operations, except for
violations and failures to comply that would not have a Christiana MAE.
(q) Contracts.
(i) Section 2.2(q) to the Christiana Disclosure Letter contains a
complete list of the following contracts, agreements, arrangements and
commitments: (i) all employment or consulting contracts or agreements to
which Christiana or Logistic is contractually obligated; (ii) current
leases, sales contracts and other agreements with respect to any
property, real or personal, of Christiana or Logistic or to which
Christiana or Logistic is contractually obligated; (iii) contracts or
commitments for capital expenditures or acquisitions in excess of
$30,000 to which Christiana or Logistic is obligated; (iv) agreements,
contracts, indentures or other instruments relating to the borrowing of
money, or the guarantee of any obligation for the borrowing of money, to
which Christiana or Logistic or any of their subsidiaries is a party or
any of their respective properties is bound; (v) contracts or agreements
or amendments thereto that would be required to be filed as an exhibit
to an Annual Report on Form 10-K filed by Christiana as of the date
hereof that has not been filed as an exhibit to the Christiana's Annual
Report on Form 10-K for the year ended June 30, 1997, filed by it with
the Commission or any report filed with the Commission under the
Exchange Act since such date; (vi) all corporations, partnerships,
limited liability companies and other entities which Christiana has
owed, directly or indirectly, an equity interest since 1953, (vii) all
material indemnification and guaranty or other similar obligations to
which Christiana or Logistic is bound and which the officers of
Christiana, after reasonable investigation, are aware, (viii) any
outstanding bonds, letters of credit posted or guaranteed by Christiana
or Logistic with respect to any Person, (ix) any covenants not to
compete or other obligations affecting Christiana or Logistic that would
restrict the Surviving Corporation or EVI and its affiliates from
engaging in any business or activity which the officers of Christiana or
Logistic are aware, after reasonable investigation and
A-19
161
(x) contracts, agreements, arrangements or commitments, other than the
foregoing that could reasonably be considered to be material to
Christiana or Logistic.
(ii) True and correct copies of all the instruments described in
Section 2.2(q) of the Christiana Disclosure Letter have been furnished
or made available to EVI. Except as noted in the Christiana Disclosure
Letter, all such agreements, arrangements or commitments are valid and
subsisting and each of Christiana, Logistic and their respective
subsidiaries to the extent each is a party, has duly performed its
obligations thereunder in all material respects to the extent such
obligations have accrued, and no breach or default thereunder by
Christiana, Logistic or their respective subsidiaries or, to the
knowledge of Christiana, any other party thereto has occurred that could
impair the ability of Christiana, Logistic or their respective
subsidiaries to enforce any material rights thereunder. There are no
material liabilities of any of the parties to any of the contracts
between Christiana, Logistic or C2 or any of their respective
subsidiaries and third parties arising from any breach of or default in
any provision thereof or which would permit the acceleration of any
obligation of any party thereto or the creation of a Lien upon any asset
of Christiana, Logistic or any of their respective subsidiaries.
(r) Title to Property.
(i) At the Effective Time, Christiana will have good and marketable
title to, or valid leasehold interests in, all its properties and
assets. Christiana has good and valid title to 3,897,462 shares of EVI
Common Stock, free and clear of all Liens. Christiana has good and valid
title to 1000 units of Logistic, free and clear of all Liens, which
units represents all of the interest in Logistics.
(ii) Except as set forth in Section 2.2(r)(ii) of the Christiana
Disclosure Letter, each of Christiana and Logistic has complied in all
material respects with the terms of all leases to which it is a party
and under which it is in occupancy, and all such leases are in full
force and effect. Each of Christiana and Logistic enjoys peaceful and
undisturbed possession under all such leases.
(s) Insurance Policies. Section 2.2(s) of the Christiana Disclosure
Letter contains a correct and complete description of all insurance
policies of Christiana covering Christiana, Logistic and their respective
subsidiaries, any employees or other agents of Christiana, Logistic and
their respective subsidiaries or any assets of Christiana and its
subsidiaries. Each such policy is in full force and effect, is with
responsible insurance carriers and is substantially equivalent in coverage
and amount to policies covering companies of the size of Christiana and in
the business in which Christiana and its subsidiaries is engaged, in light
of the risk to which such companies and their employees, businesses,
properties and other assets may be exposed. All retroactive premium
adjustments under any worker's compensation policy of Christiana or any of
its Subsidiaries have been recorded in Christiana's financial statements in
accordance with generally accepted accounting principles and are reflected
in the financial statements contained in the Commission Filings.
(t) Loans. Section 2.2(t) of the Christiana Disclosure Letter sets
forth all existing loans, advances or other extensions of credit (excluding
accounts receivable arising in the ordinary course of business) by
Christiana or its subsidiaries to any party other than intercompany loans,
advances, guaranties or extensions of credit. All items listed in Section
2.2(t) of the Christiana Disclosure Letter will be repaid in full or
assumed by C2 prior to the Effective Time of the Merger. All intercompany
obligations and loans between Christiana and its subsidiaries, including
C2, will be extinguished prior to the Logistic Sale without any ongoing
liability to Christiana or C2 with respect thereto, except as set forth
herein or in the Logistic Purchase Agreement.
(u) No Fraudulent Transfer. Christiana has not within the last twelve
months made any transfer or incurred any obligation with actual intent to
hinder, delay or defraud any entity to which it was or may become indebted
and it has not transferred any material property without receiving
reasonably equivalent value for any such transfer obligation. Both
immediately prior to and immediately after the Logistic Sale and the
Merger, (i) the fair value of (x) Christiana's assets at the time of the
Merger and (y) Logistic's and C2's assets after the Logistic Sale and (z)
the assets of CST Financial, Inc. ("CST") Martinique
A-20
162
Holdings, Inc. ("MHI") and Christiana Community Builders, Inc. ("CCB")
immediately prior to their liquidation in each case at a fair valuation
exceeds their respective debts and liabilities, subordinated, contingent or
otherwise, (ii) the present fair saleable value of Christiana's,
Logistic's, C2's, CST's, MHI's and CCB's property is greater than the
amount that will be required to pay its probable liability on their
respective debts and other liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and mature, (iii)
Christiana prior to the Logistic Sale and Logistic, C2 after the Logistic
Sale and CST, MHI and CCB prior to their liquidation each reasonably expect
to be able to pay its debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured, and
(iv) Christiana before the Logistic Sale and Logistic and C2 after the
Logistic Sale will not have unreasonably small capital with which to
conduct the business in which it is engaged as such business is now
conducted and is proposed to be conducted. For all purposes of clauses of
(i) through (iv), the amount of contingent liabilities at any time shall be
computed as the amount that, in light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be
expected to become an actual or matured liability.
(v) Information Supplied. None of the information supplied or to be
supplied by Christiana or C2 for inclusion or incorporation by reference in
(i) the Registration Statement (as defined in Section 5.1) will, at the
time the Registration Statement is filed with the Commission, and at any
time it is amended or supplemented or at the time it becomes effective
under the Securities Act, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and (ii) the Proxy
Statement will, at the date the Proxy Statement is first mailed to
Christiana's stockholders and at the time of the Christiana Stockholders
Meeting, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
are made, not misleading. The Proxy Statement will comply as to form in all
material respects with the requirements of the Exchange Act and the rules
and regulations thereunder. For purposes of this Agreement, the parties
agree that the statements made and information in the Registration
Statement and the Proxy Statement relating to the Federal income tax
consequences of the transactions contemplated hereby shall be deemed to be
supplied by Christiana and C2 and not by EVI or Sub.
ARTICLE III
COVENANTS OF CHRISTIANA
3.1 CONDUCT OF BUSINESS BY CHRISTIANA PENDING THE MERGER. Christiana
covenants and agrees that, from the date of this Agreement until the Effective
Time, unless EVI shall otherwise agree in writing or as otherwise expressly
contemplated by this Agreement or the Logistic Purchase Agreement or set forth
in Section 3.1 of the Christiana Disclosure Letter:
(a) the business of Christiana and the Christiana Subsidiaries shall
be conducted only in, and Christiana and the Christiana Subsidiaries shall
not take any action except in, the ordinary course of business and
consistent with past practice;
(b) Christiana shall not directly or indirectly do any of the
following: (i) issue, sell, pledge, dispose of or encumber any capital
stock of Christiana except upon the exercise of Christiana Options; (ii)
split, combine, or reclassify any outstanding capital stock, or declare,
set aside, or pay any dividend payable in cash, stock, property, or
otherwise with respect to its capital stock whether now or hereafter
outstanding; (iii) redeem, purchase or acquire or offer to acquire any of
its capital stock; (iv) acquire, agree to acquire or make any offer to
acquire for cash or other consideration, any equity interest in or assets
of any corporation, partnership, joint venture, or other entity in an
amount greater than $500,000; or (v) enter into any contract, agreement,
commitment, or arrangement with respect to any of the matters set forth in
this Section 3.1(b);
(c) Christiana shall not transfer, dispose or otherwise convey any of
the shares of EVI Common Stock held by it or grant or permit there to exist
any Lien on such shares;
A-21
163
(d) Christiana shall not enter into any contract regarding its
business having a term greater than 120 days or involving an amount in
excess of $50,000 or commit to do the same and except for a cold storage
facility in Hudsonville, Michigan, no Christiana Subsidiary shall enter
into any contract outside the ordinary course of business;
(e) Christiana shall not become bound by any agreement or obligation
in an amount in excess of $500,000 in the aggregate for all such agreements
and obligations;
(f) Christiana shall not pledge or encumber any of the assets to be
held by Christiana following the Logistic Sale;
(g) Neither Christiana nor any of its Subsidiaries shall enter into
any employment or consulting contracts;
(h) Neither Christiana nor any of its Subsidiaries shall enter into
any contract or agreement that if effective on the date hereof would be
required to be identified as a disclosure pursuant to Section 2.2(q) of the
Christiana Disclosure Letter;
(i) Neither Christiana nor any of its Subsidiaries shall sell, lease,
mortgage, pledge, grant a Lien on or otherwise encumber or otherwise
dispose of any of Christiana's or its Subsidiaries' properties or assets,
except sales of inventory in the ordinary course of business consistent
with past practice and Christiana may liquidate (in a manner acceptable to
EVI) CST Financial, Inc., Martinique Holdings, Inc. and Christiana
Community Builders, Inc. and transfer their assets to Logistic without
consideration;
(j) Neither Christiana nor any of its Subsidiaries shall, directly or
indirectly, incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of Christiana or
its Subsidiaries, guarantee any debt securities of another Person, enter
into any "keep well" or other agreement to maintain any financial statement
condition of another Person or enter into any arrangement having the
economic effect of any of the foregoing, except for short-term borrowings
incurred in the ordinary course of business consistent with past practice
which obligations in respect of Christiana and its Subsidiaries other than
Logistic shall be released in connection with the Logistic Sale, or make or
permit to remain outstanding any loans, advances or capital contributions
to, or investments in, any other Person, other than to Christiana or any
direct or indirect wholly owned subsidiary of Christiana;
(k) Neither Christiana nor any of its Subsidiaries shall make any
election relating to Taxes except for those elections to be made in
connection with its 1997 Tax Returns that are consistent with the 1996 Tax
Returns;
(l) Neither Christiana nor any of its Subsidiaries shall change any
accounting principle used by it;
(m) Christiana shall use its reasonable efforts (i) to preserve intact
the business organization of Christiana and Logistic except Christiana may
liquidate (in a manner acceptable to EVI) CST Financial, Inc., Martinique
Holdings, Inc. and Christiana Community Builders, Inc. and transfer their
assets to Logistic without consideration, (ii) to maintain in effect any
material authorizations or similar rights of Christiana and Logistic, (iii)
to preserve the goodwill of those having material business relationships
with it; (iv) to maintain and keep each of Christiana's properties in the
same repair and condition as presently exists, except for deterioration due
to ordinary wear and tear and damage due to casualty; and (v) to maintain
in full force and effect insurance comparable in amount and scope of
coverage to that currently maintained by it;
(n) Christiana shall, and shall cause the Christiana Subsidiaries to,
perform their respective obligations under any contracts and agreements to
which it is a party or to which any of its assets is subject, except to the
extent such failure to perform would not have a Christiana MAE and except
for such obligations as Christiana in good faith may dispute;
A-22
164
(o) Christiana shall cause there to exist immediately prior to the
Effective Time Christiana Net Cash (including $10,666,677 to be paid by C2
under the Logistic Purchase Agreement) of not less than $20 million;
(p) Neither Christiana nor any of its Subsidiaries shall settle or
compromise any litigation (whether or not commenced prior to the date of
this Agreement) other than settlements or compromises: (i) of litigation
where the amount paid in settlement or compromise does not exceed $500,000,
or if greater, the amount of the reserve therefor reflected in the most
recent SEC Documents and the terms of the settlement would not otherwise
have a Christiana MAE, or (ii) in consultation and cooperation with EVI,
and, with respect to any such settlement, with the prior written consent of
EVI;
(q) Christiana shall cause the Logistic Purchase Agreement to be
executed and delivered by Christiana and the Logistic Sale to be effected
prior to the Merger immediately prior to the Effective Time;
(r) Christiana shall not authorize any of, or commit or agree to take
any of, or permit any Christiana Subsidiary to take any of, the foregoing
actions to the extent prohibited by the foregoing and shall not, and shall
not permit any of the Christiana Subsidiaries to, take any action that
would, or that reasonably could be expected to, result in any of the
representations and warranties set forth in this Agreement becoming untrue
or any of the conditions to the Merger set forth in Article VI not being
satisfied. Christiana promptly shall advise EVI orally and in writing of
any change or event having, or which, insofar as reasonably can be
foreseen, would have, a material adverse effect on Christiana and the
Christiana Subsidiaries, taken as a whole, or cause a Christiana MAE.
(s) Christiana shall cause Logistic to pay to Christiana a
distribution in the amount of $20 million cash prior to the Effective Time
(the "TLC Dividend");
(t) Christiana shall cause Logistic to pay in full the entire
principal amount of the Wiscold Note dated September 1, 1992, in the
principal amount of $3,000,000, together with all accrued interest thereon
(the "Wiscold Note"); and
(u) Except as set forth in Section 2.2(o) of the Disclosure Schedule
or agreed to in writing by EVI prior to the Closing, Christiana shall cause
all of its obligations (i) relating to Logistics or any other historical
business of Christiana or its Subsidiaries and (ii) under any and all
agreements relating to the borrowing of funds, including all guarantees and
other similar arrangements relating thereto, to be fully released or
otherwise satisfied in a manner acceptable to EVI.
3.2 CASH REQUIREMENTS. Christiana covenants that as of the Effective Time
it shall have cash equal to the sum of (i) $30 million (including $10,666,677 to
be received under the Logistic Purchase Agreement) and (ii) all accrued and
unpaid liabilities and obligations of Christiana. For purposes of this Section
3.2, the unpaid liabilities and obligations of Christiana shall mean the full
undiscounted amount of liabilities for which Christiana shall be responsible,
including any liabilities that will accrue as a result of the Merger, the
Logistic Sale or the transactions contemplated herein, whether or not such
liabilities would be required to be reflected as a liability by generally
accepted accounting principles; provided, however, that such liabilities shall
not include any liabilities for any gain on any EVI Common Stock held by
Christiana realized as a result of a sale of such stock by Christiana or a
liquidation or merger of Christiana (other than the Merger) within two years
after the Effective Time, nor any tax liability for income of EVI attributable
to Christiana under the equity method of accounting either before or after the
Effective Time (the "EVI Related Taxes"). Further, for purposes of calculating
such liabilities, any Taxes (other than the EVI Related Taxes) payable in
respect of the Logistic Sale or other transactions contemplated herein or under
the Logistic Purchase Agreement shall be fully accrued as a liability and any
Tax credits, deductions, other Tax benefits of Christiana shall not be
considered or used to offset any such liability. The provisions of this Section
3.2 shall not affect Logistic's and C2's obligations under the Logistic Purchase
Agreement to assume and indemnify EVI as set forth therein.
3.3 AFFILIATES' AGREEMENTS. Prior to the Closing Date, Christiana shall
deliver to EVI a letter identifying all Persons that are, at the time this
Agreement is submitted for approval to the stockholders of Christiana,
A-23
165
"affiliates" of Christiana for purposes of Rule 145 under the Securities Act
("Affiliates"). Christiana shall deliver or cause to be delivered to EVI an
undertaking by each Affiliate in form satisfactory to EVI that no EVI Common
Stock received or to be received by such Affiliate pursuant to the Merger will
be sold or disposed of except pursuant to an effective registration statement
under the Securities Act or in accordance with the provisions of Rule 144 or
paragraph (d) of Rule 145 under the Securities Act or another exemption from
registration under the Securities Act.
ARTICLE IV
COVENANTS OF EVI PRIOR TO THE EFFECTIVE TIME
4.1 RESERVATION OF EVI STOCK. EVI shall reserve for issuance, out of its
authorized but unissued capital stock, such number of shares of EVI Common Stock
as may be issuable upon consummation of the Merger.
4.2 CONDUCT OF EVI PENDING THE MERGER. EVI covenants and agrees that, from
the date of this Agreement until the Effective Time, unless Christiana shall
otherwise agree in writing or as otherwise expressly contemplated by this
Agreement, it will not take any action that would, or that could be expected to,
result in any of the representations and warranties set forth in this Agreement
becoming untrue or any of the conditions to the merger set forth in Article VI
not being satisfied.
4.3 STOCK EXCHANGE LISTING. EVI shall use reasonable efforts to cause the
shares of EVI Common Stock to be issued in the Merger to be approved for listing
on the NYSE, subject to official notice of issuance, prior to the Closing Date.
4.4 PUBLICATION OF FINANCIAL RESULTS. In the event that the proposed
merger (the "Weatherford Merger") between EVI and Weatherford Enterra, Inc., a
Delaware corporation, does not close prior to June 1, 1998, EVI shall publish,
as soon as reasonably practicable following the closing of the Weatherford
Merger, financial results covering 30 days of post-Weatherford Merger combined
operations of EVI and Weatherford; provided, however, that EVI shall not be
required to publish financial results covering any period other than a period
ending on the last business day of a calendar month.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 JOINT PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT. As promptly
as reasonably practicable after the execution of this Agreement, EVI and
Christiana shall prepare and file with the Commission preliminary proxy
materials that shall constitute the Proxy Statement of EVI and Christiana and
the registration statement with respect to the EVI Common Stock to be issued in
connection with the Merger (the "Registration Statement"). As promptly as
reasonably practicable after final comments are received from and cleared by the
Commission on the preliminary proxy materials, EVI and Christiana shall file
with the Commission a combined joint proxy statement and registration statement
on Form S-4 (or on such other form as shall be appropriate) relating to the
approval and adoption of the Merger and this Agreement by the stockholders of
EVI and the stockholders of Christiana and the issuance by EVI of EVI Common
Stock in connection with the Merger and shall use their reasonable efforts to
cause the Registration Statement to become effective as soon as practicable.
Subject to the terms and conditions set forth in Section 6.2 and the fiduciary
obligations of the Board of Directors of EVI with respect to such matters, the
Proxy Statement shall contain a statement that the Board of Directors of EVI
recommended that the stockholders of EVI approve and adopt the Merger and this
Agreement. Subject to the terms and conditions set forth in Section 6.3 and the
fiduciary obligations of the Board of Directors of Christiana with respect to
such matters, the Proxy Statement shall contain a statement that the Board of
Directors of Christiana recommended that the stockholders of Christiana approve
and adopt the Merger and this Agreement.
5.2 ACCOUNTANTS LETTER. Christiana shall use its reasonable efforts to
cause Arthur Andersen LLP to deliver a letter pursuant to SAS 72 dated as of the
date of the Proxy Statement and confirmed and updated at the Closing as of the
Closing Date, and addressed to itself and EVI, in the form and substance
reasonably
A-24
166
satisfactory to EVI and customary in the scope and substance for agreed upon
procedures letters delivered by independent public accountants in connection
with registration statements and proxy statements similar to the Registration
Statement and Proxy Statement.
5.3 MEETINGS OF STOCKHOLDERS.
(a) Christiana shall promptly take all action reasonably necessary in
accordance with the WGCL and its Certificate of Incorporation and bylaws to
convene a meeting of its stockholders to consider and vote upon the
adoption and approval of the Merger and this Agreement and the Logistic
Sale. Christiana shall provide that, in addition to any vote that may be
required by law, the approval of the Merger and this Agreement and the
Logistic Sale shall require approval of a majority of the votes cast for or
against such matters excluding any shares of Christiana Common Stock held
by Lubar & Co. Incorporated and its affiliates; provided, however,
Christiana may, in lieu of such requirement, obtain an agreement by Lubar &
Co. Incorporated and its affiliates to vote all of its shares of Christiana
Common Stock for, against or abstain from voting with respect to such
matters in the same proportion as the shares of Christiana Common Stock are
voted on such matters by the other stockholders of Christiana. Subject to
the terms and conditions set forth in Section 6.3 and the fiduciary
obligations of the Board of Directors of Christiana with respect to such
matters, the Board of Directors of Christiana (i) shall recommend at such
meeting that the stockholders of Christiana vote to adopt and approve the
Merger and this Agreement and the Logistic Sale, (ii) shall use its best
efforts to solicit from stockholders of Christiana proxies in favor of such
adoption and approval and (iii) shall take all other action reasonably
necessary to secure a vote of its stockholders in favor of the adoption and
approval of the Merger and this Agreement.
(b) EVI shall promptly take all action reasonably necessary in
accordance with the General Corporation Law of the State of Delaware (the
"DGCL") and its Certificate of Incorporation and bylaws to convene a
meeting of its stockholders to consider and vote upon the adoption and
approval of the Merger and this Agreement. Subject to the terms and
conditions set forth in Section 6.2 and the fiduciary obligations of the
Board of Directors of EVI with respect to such matters, the Board of
Directors of EVI (i) shall recommend at such meeting that the stockholders
of EVI vote to adopt and approve the Merger and this Agreement, (ii) shall
use its reasonable efforts to solicit from stockholders of EVI proxies in
favor of such adoption and approval and (iii) shall take all other action
reasonably necessary to secure a vote of its stockholders in favor of the
adoption and approval of the Merger and this Agreement.
(c) EVI and Christiana shall coordinate and cooperate with respect to
the timing of such meetings and shall endeavor to hold such meetings on the
same day and as soon as practicable after the date hereof.
5.4 FILINGS; CONSENTS; REASONABLE EFFORTS. Subject to the terms and
conditions of this Agreement, Christiana and EVI shall (i) make all necessary
filings with respect to the Merger and this Agreement under the HSR Act, the
Securities Act, the Exchange Act, and applicable blue sky or similar securities
laws and shall use all reasonable efforts to obtain required approvals and
clearances with respect thereto; (ii) use reasonable efforts to obtain all
consents, waivers, approvals, authorizations, and orders required in connection
with the authorization, execution, and delivery of this Agreement and the
consummation of the Merger; and (iii) use reasonable efforts to take, or cause
to be taken, all appropriate action, and do, or cause to be done, all things
necessary, proper, or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement.
5.5 NOTIFICATION OF CERTAIN MATTERS. Christiana shall give prompt notice
to EVI, and EVI shall give prompt notice to Christiana, orally and in writing,
of (i) the occurrence, or failure to occur, of any event which occurrence or
failure would be likely to cause any representation or warranty contained in
this Agreement to be untrue or inaccurate at any time from the date hereof to
the Effective Time; and (ii) any material failure of Christiana or EVI, as the
case may be, or any officer, director, employee or agent thereof, to comply with
or satisfy any covenant, condition or agreement to be compiled with or satisfied
by it hereunder.
5.6 EXPENSES. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring
A-25
167
such expenses, except those out-of-pocket expenses (which do not include fees
for attorneys, accountants and financial advisors) incurred in connection with
(i) the registration fees for the EVI Common Stock under the Securities Act to
be issued in the Merger, (ii) the registration and qualification of the EVI
Common Stock under any state securities and blue sky laws, (iii) the listing of
the EVI Common Stock on the NYSE, (iv) the HSR filing fee (v) the investment
banking, appraisal, and related expenses of Christiana, (vi) the cost of any
proxy solicitors and (vii) the printing and mailing of the Registration
Statement and the Proxy Statement shall be paid by Christiana; provided,
however, that if this Agreement shall have been terminated pursuant to Section
7.1 as a result of the willful breach by a party of any of its representations,
warranties, covenants, or agreements set forth in this Agreement, such breaching
party shall pay the direct out-of-pocket costs and expenses of the other parties
in connection with the transactions contemplated by this Agreement.
5.7 CHRISTIANA'S EMPLOYEE BENEFITS.
(a) Christiana shall take action prior to the Merger and the Logistic
Sale to (i) either cancel all outstanding Christiana Options or accelerate
such Christiana Options and make such Christiana Options terminate prior to
the Effective Time and (ii) and terminate the Christiana Option Plan.
(b) Christiana shall pay to each holder of Christiana Options an
amount of cash necessary to obtain cancellation of all Christiana Options
held by such holders.
(c) Christiana shall cause all employee benefit plans to which it is a
sponsor or has obligations to be terminated or assumed by Logistic or C2
without any continuing obligations on the part of Christiana.
(d) Christiana shall transfer to Logistic or C2 all employees of
Christiana without any liability to the Surviving Corporation. C2 shall be
responsible for all severance and other obligations with respect to such
terminated employees, if any. As of the Effective Time, Christiana shall
have no employees or employee benefit plans or obligations.
5.8 LIQUIDATION OR MERGER OF CHRISTIANA. EVI agrees that for a period of
two years following the Effective Date it shall not cause or permit Christiana
to (i) liquidate or dissolve, (ii) sell or transfer any shares of EVI Common
Stock held by Christiana or (iii) merge Christiana into any other entity unless
EVI receives an opinion of a nationally-recognized tax counsel or accounting
firm that such transaction will not adversely affect the tax treatment of the
Merger; provided, however, this restriction shall not be deemed to prohibit or
restrict (i) a sale or disposition of Christiana's interest in Logistic to the
extent permitted by the Logistic Purchase Agreement or the operating agreement
relating to Logistic, (ii) a change in control of EVI, (iii) a merger,
consolidation, share exchange or similar transaction involving EVI or its
subsidiaries (other than Christiana) or (iv) a sale or disposition of any assets
of EVI or its subsidiaries (other than Christiana).
ARTICLE VI
CONDITIONS
6.1 CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions:
(a) This Agreement and the Merger (and the Logistic Sale in the case
of Christiana) shall have been approved and adopted by the requisite vote
of the stockholders of Christiana and EVI, as may be required by law, by
the rules of the NYSE, by Section 5.3(a) and by any applicable provisions
of their respective charters or bylaws;
(b) The waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated;
(c) No order shall have been entered and remain in effect in any
action or proceeding before any foreign, federal or state court or
governmental agency or other foreign, federal or state regulatory or
A-26
168
administrative agency or commission that would prevent or make illegal the
consummation of the Logistic Sale and the Merger;
(d) The Registration Statement and a registration statement under the
Securities Act to be filed by C2 in connection with the Merger shall each
be effective on the Closing Date, and all post-effective amendments thereto
filed shall have been declared effective or shall have been withdrawn; and
no stop-order suspending the effectiveness thereof shall have been issued
and no proceedings for that purpose shall have been initiated or, to the
knowledge of the parties, threatened by the Commission;
(e) There shall have been obtained any and all material permits,
approvals and consents of securities or blue sky commissions of any
jurisdiction, and of any other governmental body or agency, that reasonably
may be deemed necessary so that the consummation of the Merger and the
transactions contemplated thereby will be in compliance with applicable
laws, the failure to comply with which would have a Christiana MAE or EVI
MAE;
(f) The shares of EVI Common Stock issuable upon consummation of the
Merger shall have been approved for listing on the NYSE, subject to
official notice of issuance;
(g) EVI, C2 and Christiana shall have received an opinion, dated as of
the Effective Date, from American Appraisal Associates, Inc. in form and
substance satisfactory to them, in respect of the matters described in
Section 2.2(u); and
(h) All approvals and consents of third Persons (i) the granting of
which is necessary for the consummation of the Merger, the Logistic Sale or
the transactions contemplated in connection therewith and (ii) the
non-receipt of which would have a Christiana MAE or an EVI MAE.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF EVI. The obligation of EVI to
effect the Merger is, at the option of EVI, also subject to the fulfillment at
or prior to the Closing Date of the following conditions:
(a) The representations and warranties of Christiana contained in
Section 2.2 shall be accurate as of the date of this Agreement and (except
to the extent such representations and warranties speak specifically as of
an earlier date) as of the Closing Date as though such representations and
warranties had been made at and as of that time; all of the terms,
covenants and conditions of this Agreement to be complied with and
performed by Christiana on or before the Closing Date shall have been duly
complied with and performed in all material respects; and a certificate to
the foregoing effect dated the Closing Date and signed by the chief
executive officer and the president of Christiana shall have been delivered
to EVI;
(b) There shall not have occurred or exist any fact or condition that
would reasonably result in a Christiana MAE or would constitute a material
fixed or contingent liability to Christiana, and EVI shall have received a
certificate signed by the president of Christiana dated the Closing Date to
such effect;
(c) The Board of Directors of EVI shall have received from Morgan
Stanley & Co. Incorporated, financial advisor to EVI, a written opinion,
satisfactory in form and substance to the Board of Directors of EVI, to the
effect that consideration to be paid by EVI in the Merger is fair to EVI
from a financial point of view, which opinion shall have been confirmed in
writing to such Board as of a date reasonably proximate to the date the
Proxy Statement is first mailed to the stockholders of EVI and not
subsequently withdrawn;
(d) The Christiana Options shall have been cancelled and the
Christiana Plans shall have been terminated or such options shall have been
exercised;
(e) Christiana shall have received, and furnished written copies of
EVI of, the Christiana affiliates' agreements pursuant to Section 3.3;
(f) EVI shall have received from Foley & Lardner, counsel to
Christiana, an opinion dated the Closing Date covering customary matters
relating to the Agreement and the Merger, including an opinion in form and
substance satisfactory to EVI with respect to the matters described in
Section 2.2(a), (b),
A-27
169
(c), (d) and (k) (provided that the form of such opinion shall be agreed
upon prior to the filing of the Registration Statement with the
Commission);
(g) EVI shall have received from Arthur Andersen LLP a written
opinion, in form and substance satisfactory to EVI, dated as of the date
that the Proxy Statement is first mailed to the Stockholders of Christiana
and EVI to the effect that (i) the Merger will be treated for U.S. federal
income tax purposes as a reorganization within the meaning of Section
368(a)(1)(A) of the Code by reason of Section 368(a)(2)(E) of the Code,
(ii) EVI, Sub and Christiana will each be a party to that reorganization
within the meaning of Section 368(b) of the Code and (iii) EVI, Sub and
Christiana shall not recognize any gain or loss for U.S. federal income tax
purposes as a result of the Merger (although Christiana will recognize gain
or loss for U.S. federal income tax purposes as a result of the Logistic
Sale), and such opinion shall be confirmed at the Closing;
(h) EVI shall have received from Arthur Andersen LLP a letter, in form
and substance satisfactory to EVI, dated as of the Closing Date, to the
effect that the Merger would not adversely affect the ability of EVI to
account for any prior or future business combination as a pooling of
interest;
(i) C2 shall have executed and delivered to Christiana and EVI the
Logistic Purchase Agreement and agreement among members in form and
substance, including schedules, acceptable to EVI;
(j) The Logistic Sale shall have been consummated;
(k) Christiana shall have delivered to EVI a pro forma balance sheet
after giving effect to the Logistic Sale, including a full accrual for
Taxes thereon without regard to any tax credits or tax deductions that
Christiana may have in connection with the exercise of any stock options,
reflecting Christiana Net Cash in an amount not less than $20 million;
(l) Except as permitted by Section 3.1, all outstanding Indebtedness
(including guarantees thereof) of Christiana and its Subsidiaries (other
than Logistics) shall have been paid in full or Christiana shall have been
fully released therefrom;
(m) The assets of Christiana shall consist only of cash of at least
$30 million, 3,897,462 shares of EVI Common Stock and 333.333 units of
Logistic representing one-third of the outstanding interests of Logistic;
and
(n) There shall not be pending any litigation involving Christiana or
any of its subsidiaries, that EVI, in its sole discretion, considers to be
a material liability for which adequate security has not been provided.
6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF CHRISTIANA. The obligation of
Christiana to effect the Merger is, at the option of Christiana, also subject to
the fulfillment at or prior to the Closing Date of the following conditions:
(a) The representations and warranties of EVI and Sub contained in
Section 2.1 shall be accurate as of the date of this Agreement and (except
to the extent such representations and warranties speak specifically as of
an earlier date) as of the Closing Date as though such representations and
warranties had been made at and as of that time; all the terms, covenants
and conditions of this Agreement to be complied with and performed by EVI
on or before the Closing Date shall have been duly complied with and
performed in all material respects; and a certificate to the foregoing
effect dated the Closing Date and signed by the chief executive officer of
EVI shall have been delivered to Christiana;
(b) The Board of Directors of Christiana and C2 shall have received
from Prudential Securities Corporation, financial advisor to Christiana and
C2, a written opinion, satisfactory in form and substance to the Board of
Directors of Christiana and C2, to the effect that from a financial point
of view to the Christiana Shareholders the Merger, which includes (i) the
consideration to be received in the Merger and (ii) the purchase price for
Logistic is fair to the Christiana Shareholders, which opinion shall have
been confirmed in writing to such Board as of a date reasonably proximate
to the date the Proxy Statement is first mailed to the stockholders of
Christiana and EVI and not subsequently withdrawn;
A-28
170
(c) Christiana and C2 shall have received from Fulbright & Jaworski
L.L.P. counsel to EVI, an opinion dated the Closing Date covering customary
matters relating to this Agreement and the Merger, including an opinion in
form and substance with respect to the matters described in Section 2.1(a),
(b)(iii), (c) and (d)(i), (ii) and (iii);
(d) C2 and Christiana shall have received from Arthur Andersen LLP, a
written opinion, in form and substance satisfactory to Christiana, dated as
of the date that the Proxy Statement is first mailed to stockholders of
Christiana and EVI to the effect that (i) the Merger will be treated for
U.S. federal income tax purposes as a reorganization within the meaning of
Section 368(a)(1)(A) of the Code by reason of Section 368(a)(2)(E) of the
Code; (ii) EVI, Sub and Christiana will each be a party to that
reorganization within the meaning of Section 368(b) of the Code, and (iii)
EVI, Sub and Christiana shall not recognize any gain or loss for U.S.
federal income tax purposes as a result of the Merger (although Christiana
will recognize gain or loss for U.S. federal income tax purposes as a
result of the Logistic Sale), and such opinion shall be confirmed at the
Closing; and
(e) The Logistic Sale under the Logistic Purchase Agreement shall have
occurred.
ARTICLE VII
MISCELLANEOUS
7.1 TERMINATION. This Agreement may be terminated and the Merger and the
other transactions contemplated herein may be abandoned at any time prior to the
Effective Time, whether prior to or after approval by the stockholders of EVI or
the stockholders of Christiana:
(a) by mutual written consent of EVI and Christiana;
(b) by either EVI or Christiana if (i) the Merger has not been
consummated on or before June 30, 1998 (provided that the right to
terminate this Agreement under this clause (i) shall not be available to
any party whose breach of any representation or warranty or failure to
fulfill any covenant or agreement under this Agreement has been the cause
of or resulted in the failure of the Merger to occur on or before such
date); (ii) any court of competent jurisdiction, or some other governmental
body or regulatory authority shall have issued an order, decree or ruling
or taken any other action restraining, enjoining or otherwise prohibiting
the Merger; (iii) the stockholders of Christiana shall not approve the
Logistic Sale or the Merger at the Christiana stockholder meeting or at any
adjournment thereof; (iv) the stockholders of EVI shall not approve the
Merger at the EVI stockholder meeting or any adjournment thereof; or (v) in
the exercise of its good faith judgment as to its fiduciary duties to its
stockholders imposed by law, as advised by outside counsel, the Board of
Directors of Christiana or EVI determines that such termination is
appropriate in complying with its fiduciary obligations.
(c) by Christiana if (i) EVI shall have failed to comply in any
material respect with any of the covenants or agreements contained in this
Agreement to be complied with or performed by EVI or Sub at or prior to
such date of termination (provided such breach has not been cured within 30
days following receipt by EVI of written notice from Christiana of such
breach and is existing at the time of termination of this Agreement); (ii)
any representation or warranty of EVI contained in this Agreement shall not
be true in all respects when made (provided such breach has not been cured
within 30 days following receipt by EVI of written notice from Christiana
of such breach and is existing at the time of termination of this
Agreement) or on and as of the Effective Time as if made on and as of the
Effective Time (except to the extent it relates to a particular date),
except for such failures to be so true and correct which would not
individually or in the aggregate, reasonably be expected to have an EVI
MAE, assuming the effectiveness of the Merger; or (iii) the Board of
Directors of EVI withdraws, modifies or changes its recommendation of this
Agreement or the Merger in a manner adverse to Christiana or shall have
resolved to do any of the foregoing.
(d) by EVI if (i) Christiana shall have failed to comply in any
material respect with any of the covenants or agreements contained in this
Agreement to be complied with or performed by it at or prior
A-29
171
to such date of termination (provided such breach has not been cured within
30 days following receipt by Christiana of written notice from EVI of such
breach and is existing at the time of termination of this Agreement; (ii)
any representation or warranty of Christiana contained in this Agreement
shall not be true in all respects when made (provided such breach has not
been cured within 30 days following receipt by Christiana of written notice
from EVI of such breach and is existing at the time of termination of this
Agreement) or on and as of the Effective Time as if made on and as of the
Effective Time (except to the extent it relates to a particular date),
except for such failures to be so true and correct which would not
individually or in the aggregate, reasonably be expected to have a
Christiana MAE assuming the effectiveness of the Merger or (iii) the Board
of Directors of Christiana withdraws, modifies or changes its
recommendation of this Agreement or the Merger in a manner adverse to EVI
or shall have resolved to do any of the foregoing.
7.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
by either EVI or Christiana as provided in Section 7.1, this Agreement shall
forthwith become void and there shall be no liability or obligation on the part
of EVI, Sub or Christiana, except (i) with respect to this Section 7.2, Section
5.6 and Section 7.13, and (ii) such termination shall not relieve any party
hereto for any intentional breach prior to such termination by a party hereto of
any of its representations or warranties or of any of its covenants or
agreements set forth in this Agreement.
7.3 WAIVER AND AMENDMENT. Any provision of this Agreement may be waived at
any time by the party that is, or whose stockholders are, entitled to the
benefits thereof. This Agreement may not be amended or supplemented at any time,
except by an instrument in writing signed on behalf of each party hereto,
provided that after this Agreement has been approved and adopted by the
stockholders of EVI and Christiana, this Agreement may be amended only as may be
permitted by applicable provisions of the DGCL and the WGCL. The waiver by any
party hereto of any condition or of a breach of another provision of this
Agreement shall not operate or be construed as a waiver of any other condition
or subsequent breach. The waiver by any party hereto of any of the conditions
precedent to its obligations under this Agreement shall not preclude it from
seeking redress for breach of this Agreement other than with respect to the
condition so waived.
7.4 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except for the
representations and warranties of C2 contained herein, which shall survive
without limitation, none of the representations and warranties in this Agreement
shall survive the Effective Time.
7.5 PUBLIC STATEMENTS. Christiana and EVI agree to consult with each other
prior to issuing any press release or otherwise making any public statement with
respect to the transactions contemplated hereby.
7.6 ASSIGNMENT. This Agreement shall inure to the benefit of and will be
binding upon the parties hereto and their respective legal representatives,
successors and permitted assigns.
7.7 NOTICES. All notices, requests, demands, claims and other
communications which are required to be or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (i) delivered
in Person or by courier, (ii) sent by telecopy or facsimile transmission, answer
back requested, or (iii) mailed, certified first class mail, postage prepaid,
return receipt requested, to the parties hereto at the following addresses:
if to Christiana:
Christiana Companies, Inc.
700 N. Water Street, Suite 1200
Milwaukee, Wisconsin 53202
Attn: William T. Donovan
Facsimile: (414) 291-9061
A-30
172
with a copy to:
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attn: Joseph B. Tyson, Jr.
Facsimile: (414) 297-4900
if to C2:
C2, Inc.
700 N. Water Street, Suite 1200
Milwaukee, Wisconsin 53202
Attn: William T. Donovan
Facsimile: (414) 291-9061
with a copy to:
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attn: Joseph B. Tyson, Jr.
Facsimile: (414) 297-4900
if to EVI or Sub:
EVI, Inc.
5 Post Oak Park, Suite 1760
Houston, Texas 77027
Attn: Bernard J. Duroc-Danner
Facsimile: (713) 297-8488
with a copy to:
Fulbright & Jaworski, L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Attn: Curtis W. Huff
Facsimile: (713) 651-5246
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section 7.7. Such notices shall be
effective, (i) if delivered in Person or by courier, upon actual receipt by the
intended recipient, (ii) if sent by telecopy or facsimile transmission, when the
answer back is received, or (iii) if mailed, upon the earlier of five days after
deposit in the mail and the date of delivery as shown by the return receipt
therefor.
7.8 GOVERNING LAW. All questions arising out of this Agreement and the
rights and obligations created herein, or its validity, existence,
interpretation, performance or breach shall be governed by the laws of the State
of Delaware, without regard to conflict of laws principles.
7.9 ARBITRATION. Any disputes, claims or controversies connected with,
arising out of, or related to, this Agreement and the rights and obligations
created herein, or the breach, validity, existence or termination hereof, shall
be settled by Arbitration to be conducted in accordance with the Commercial
Rules of Arbitration of the American Arbitration Association, except as such
Commercial Rules may be changed by this Section 7.9. The disputes, claims or
controversies shall be decided by three independent arbitrators (that is,
arbitrators having no substantial economic or other material relationship with
the parties), one to be appointed by Christiana, if prior to the Merger, or C2,
if after the Merger, and one to be appointed by EVI within fourteen days
following the submission of the claim to the parties hereto and the third to be
appointed by the two so appointed within five days thereafter. Should either
party refuse or neglect to join in the timely
A-31
173
appointment of the arbitrators, the other party shall be entitled to select both
arbitrators. Should the two arbitrators fail timely to appoint a third
arbitrator, either party may apply to the Chief Judge of the United States
District Court for the Southern District of Texas to make such appointment. The
arbitrators shall have ninety days after the selection of the third arbitrator
within which to allow discovery, hear evidence and issue their decision or award
and shall in good faith attempt to comply with such time limits; provided,
however, if two of the three arbitrators believe additional time is necessary to
reach a decision, they may notify the parties and extend the time to reach a
decision in thirty day increments, but in no event to exceed an additional
ninety days. Discovery of evidence shall be conducted expeditiously by the
parties, bearing in mind the parties desire to limit discovery and to expedite
the decision or award of the arbitrators at the most reasonable cost and expense
of the parties. Judgment upon an award rendered pursuant to such Arbitration may
be entered in any court having jurisdiction, or application may be made to such
court for a judicial acceptance of the award, and an order of enforcement, as
the case may be. The place of Arbitration shall be Houston, Texas. The decision
of the arbitrators, or a majority thereof, made in writing, shall be final and
binding upon the parties hereto as to the questions submitted, and each party
shall abide by such decision. Notwithstanding the provisions of this Section
7.9, neither party shall be prohibited from seeking injunctive relief pending
the completion of any arbitration. The costs and expenses of the arbitration
proceeding, including the fees of the arbitrators and all costs and expenses,
including legal fees and witness fees, incurred by the prevailing party, shall
be borne by the losing party.
Solely for purposes of injunctive relief, orders in aid of arbitration and
entry of the arbitrators' award:
(a) each of the parties hereto irrevocably consents to the
non-exclusive jurisdiction of, and venue in, any state court located in
Harris County, Texas or any federal court sitting in the Southern District
of Texas in any suit, action or proceeding seeking injunctive relief,
orders in aid of arbitration, or entry of an arbitral award arising out of
or relating to this Agreement or any of the other agreements contemplated
hereby and any other court in which a matter that may result in a claim for
indemnification hereunder by an EVI Indemnified Party (as defined in the
Logistic Purchase Agreement) may be brought with respect to any claim for
indemnification by an EVI Indemnified Party;
(b) each of the parties hereto waives, to the fullest extent permitted
by law, any objection that it may now or hereafter have to the laying of
venue of any suit, action or proceeding seeking injunctive relief, orders
in aid of arbitration or entry of an arbitral award arising out of or
relating to this Agreement or any of the other agreements contemplated
hereby brought in any state court located in Harris County, Texas or any
federal court sitting in the Southern District of Texas or any other court
in which a matter that may result in a claim hereunder or for
indemnification under the Logistic Purchase Agreement by an EVI Indemnified
Party may be brought with respect to any claim for indemnification by an
EVI Indemnified Party, and further irrevocably waive any claim that any
such suit, action or proceeding brought in any such court has been brought
in an inconvenient forum;
(c) each of the parties hereto irrevocably designates, appoints and
empowers CT Corporation System, Inc. and any successor thereto as its
designee, appointee and agent to receive, accept and acknowledge for and on
its behalf, and in respect of its property, service of any and all legal
process, summons, notices and documents which may be served in any suit,
action or proceeding arising out of or relating to this Agreement or any of
the other agreements contemplated hereby for the purposes of injunctive
relief, orders in aid of arbitration and entry of an arbitral award.
7.10 SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provision, covenants and restrictions
of this Agreement shall continue in full force and effect and shall in no way be
affected, impaired or invalidated.
7.11 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same agreement.
7.12 HEADINGS. The Section headings herein are for convenience only and
shall not affect the construction hereof.
A-32
174
7.13 CONFIDENTIALITY Agreement. The Confidentiality Agreements entered
into between EVI and Christiana on December 10, 1997 (the "Confidentiality
Agreements") are hereby incorporated by reference herein and made a part hereof.
7.14 ENTIRE AGREEMENT: THIRD PARTY BENEFICIARIES. This Agreement, the
Other Agreements and the Confidentiality Agreements constitute the entire
agreement and supersede all other prior agreements and understandings, both oral
and written, among the parties or any of them, with respect to the subject
matter hereof and neither this nor any document delivered in connection with
this Agreement confers upon any Person not a party hereto any rights or remedies
hereunder.
7.15 DISCLOSURE LETTERS.
(a) The Christiana Disclosure Letter, executed by Christiana as of the
date hereof, and delivered to EVI on the date hereof, contains all
disclosure required to be made by Christiana under the various terms and
provisions of this Agreement. Each item of disclosure set forth in the
Christiana Disclosure Letter specifically refers to the Article and Section
of the Agreement to which such disclosure responds, and shall not be deemed
to be disclosed with respect to any other Article or Section of the
Agreement.
(b) The EVI Disclosure Letter, executed by EVI as of the date hereof,
and delivered to Christiana on the date hereof, contains all disclosure
required to be made by EVI under the various terms and provisions of this
Agreement. Each item of disclosure set forth in the EVI Disclosure Letter
specifically refers to the Article and Section of the Agreement to which
such disclosure responds, and shall not be deemed to be disclosed with
respect to any other Article or Section of the Agreement.
IN WITNESS WHEREOF each of the parties caused this Agreement to be executed
on its behalf by its officers thereunto duly authorized, all as of the date
first above written.
EVI, INC.
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
CHRISTIANA ACQUISITION, INC.
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
CHRISTIANA COMPANIES, INC.
By:
------------------------------------
Name: William T. Donovan
Title: President
C2, INC.
By:
------------------------------------
Name: William T. Donovan
Title: President
A-33
175
APPENDIX B
AGREEMENT*
BY AND AMONG
EVI, INC.,
TOTAL LOGISTIC CONTROL, LLC,
CHRISTIANA COMPANIES, INC.,
AND
C2, INC.
DECEMBER 12, 1997
* As amended by Amendment No. 1 to Agreement and Plan of Merger and Logistic
Purchase Agreement dated May 26, 1998.
176
AGREEMENT
THIS AGREEMENT ("Agreement") made as of this 12th day of December, 1997 by
and among EVI, INC., a Delaware corporation ("EVI"), TOTAL LOGISTIC CONTROL,
LLC, a Delaware limited liability company ("TLC"), CHRISTIANA COMPANIES, INC., a
Wisconsin corporation ("Christiana") and C2, INC., a Wisconsin corporation
("C2").
W I T N E S S E T H :
WHEREAS, EVI, Christiana Acquisition, Inc., a Wisconsin corporation
("Sub"), Christiana and C2 have entered into an Agreement and Plan of Merger
dated December 12, 1997 (the "Merger Agreement") pursuant to which Sub, a wholly
owned subsidiary of EVI, will merge with and into Christiana and thereby
Christiana will become a wholly owned subsidiary of EVI (the "Merger").
WHEREAS, as a condition to the Merger, Christiana will sell 666.667
Membership Units (as defined in Section 1.16 hereof) of TLC to C2 pursuant to
the terms and conditions hereinafter set forth (the "Logistic Sale").
NOW, THEREFORE, in consideration of the mutual covenants of the parties
herein and the mutual benefits derived from this Agreement ("Agreement"), the
parties, intending to be legally bound, hereby agree as follows:
1. Definitions.
1.1 Affiliate. Affiliate means, as to the person specified, any person
controlling, controlled by or under common control with such person, with the
concept of control in such context meaning the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of another, whether through the ownership of voting securities, by
contract or otherwise.
1.2 Assumed Liabilities. Assumed Liabilities means any and all Liabilities
and Environmental Liabilities (except for the Retained Liabilities) to which
Christiana, EVI or a Christiana Company may now or at any time in the future
become subject (whether directly or indirectly, including by reason of
Christiana or a Christiana Company owning, controlling or operating any business
or assets of any Person (including any current or past Affiliate)), resulting
from, arising out of or relating to (i) any Christiana Company (other than TLC),
(ii) the business, operations or assets of Christiana or any Christiana Company
on or prior to the Effective Date, (iii) any Christiana Taxes for periods ending
on or before the Effective Date (except Christiana Taxes to be expressly
retained by Christiana pursuant to the Merger Agreement), (iv) any obligation,
matter, fact, circumstance or action or omission by any Person in any way
relating to or arising from the business, operations or assets of Christiana or
a Christiana Company that existed on or prior to the Effective Date; (v) any
product or service provided by Christiana or any Christiana Company prior to the
Effective Date, (vi) the Merger, the Logistic Sale or any of the other
transactions contemplated hereby, (vii) previously conducted operations of
Christiana or any Christiana Company and (viii) C2's interest in TLC. The term
"Assumed Liabilities" shall include, without limitation, the following
Liabilities (other than Retained Liabilities):
(a) Any and all Liabilities and Environmental Liabilities resulting
from, arising out of or relating to (i) the assets, activities, operations,
current or former facilities, actions or omissions of Christiana or any of
its officers, directors, employees, independent contractors or agents
occurring on or before the Effective Date, (ii) the assets, activities,
operations, current or former facilities, actions or omissions of any
Christiana Company or any of its officers, directors, employees,
independent contractors or agents, (iii) any product liability claim,
recall, replacement, returns or customer allowances of or relating to
Christiana or any Christiana Company, or (iv) any contract or permit of
Christiana or any Christiana Company;
(b) Any and all accounts and notes payable of Christiana or any
Christiana Company, excluding accounts payable which have been accounted
for in the calculation of Christiana Net Cash set forth in the Merger
Agreement;
B-1
177
(c) Any and all Liabilities relating to Christiana or any Christiana
Company employee benefit plans;
(d) Any and all Liabilities and Environmental Liabilities on behalf of
or which arise from or relate to active employees, or retired and inactive
employees, of Christiana or any Christiana Company, including, without
limitation, (i) liability for any salaries, wages, tax equalization
payments, vacation pay, sick leave, personal leave, severance pay, wrongful
dismissal or discrimination claims; (ii) liability for or under any
employee benefit plan, policy or arrangement, including, without
limitation, retirement, pension, medical, dental, profit sharing,
unemployment, supplemental unemployment or disability plan policy or
arrangement; (iii) liability for any payroll taxes, social security or
similar taxes or withholding; (iv) liability arising from claims or
litigation; and (v) liability arising from any injury, death, loss,
disability, occupational disease or claims under any worker's compensation
laws;
(e) Any and all Liabilities and Environmental Liabilities resulting
from, arising out, relating to or occurring on the Properties, including
those properties listed on Schedule 1.2 hereof, the operations on any of
the foregoing, and any off-site Environmental Liabilities related to any of
the foregoing, including without limitation, those under any
indemnification agreement or obligation of Christiana or any Christiana
Company and any documents relating thereto;
(f) Any and all Liabilities of TLC or any of its subsidiaries with
respect to transactions or events occurring or existing on or prior to the
Effective Date;
(g) Any and all litigation and claims for Liabilities of Christiana or
any Christiana Company existing as of the Effective Date;
(h) Any and all Liabilities for Christiana Taxes, arising out of, or
related to, Christiana for taxable periods on or before the Effective Date
(except such Christiana Taxes expressly retained by Christiana pursuant to
the Merger Agreement);
(i) Any misrepresentation or incorrect representation or warranty of
Christiana under the Merger Agreement without regard to any materiality or
knowledge qualification; and
(j) Any and all legal, accounting, consulting and expert fees and
expenses incurred after the date hereof in investigating, preparing,
defending, settling or discharging any claim or action arising under, out
of or in connection with any of the Assumed Liabilities other than those
associated with EVI's counsel's evaluation of the Merger and the Logistic
sale.
1.3 Business Day. Business Day means a day on which national banks are
generally open for the transaction of business in Houston, Texas.
1.4 CERCLA. CERCLA means the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. sec. 9601, et seq.
1.5 Christiana. Christiana, for purposes of the assumption indemnification
provisions of this Agreement includes Christiana Companies, Inc. and any and all
predecessors thereto, whether by merger, purchase or acquisition of assets or
otherwise, and any and all predecessors to any such entities.
1.6 Circumstance. Circumstance has the meaning specified in Section 6.2
hereof.
1.7 Effective Date. Effective Date means the time and date the Merger is
made effective.
1.8 Environmental Conditions. Environmental Conditions means any
pollution, contamination, degradation, damage or injury caused by, related to,
arising form or in connection with the generation, handling, use, treatment,
storage, transportation, disposal, discharge, release or emission of any Waste
Materials.
1.9 Environmental Law or Environmental Laws. Environmental Law or
Environmental Laws means all laws, rules, regulations, statutes, ordinances,
decrees or orders of any governmental entity now or at any time in the future in
effect relating to (i) the control of any potential pollutant or protection of
the air, water or land, (ii) solid, gaseous or liquid waste generation,
handling, treatment, storage, disposal or transportation, and
B-2
178
(iii) exposure to hazardous, toxic or other substances alleged to be harmful.
The term "Environmental Law" or "Environmental Laws" includes, without
limitation, (1) the terms and conditions of any license, permit, approval or
other authorization by any governmental entity and (2) judicial, administrative
or other regulatory decrees, judgments and orders of any governmental entity.
The term "Environmental Law" or "Environmental Laws" includes, but is not
limited to the following statutes and the regulations promulgated thereunder:
the Clean Air Act, 42 U.S.C. sec. 7401 et seq., The Clean Water Act, 33 U.S.C.
sec. 1251 et seq., the Resource Conservation Recovery Act, 42 U.S.C. sec. 6901
et seq., the Superfund Amendments and Reauthorization Act, 42 U.S.C. sec. 11011
et seq., the Toxic Substances Control Act, 15 U.S.C. sec. 2601 et seq., the
Water Pollution Control Act, 33 U.S.C. sec. 1251, et seq., the Safe Drinking
Water Act, 42 U.S.C. sec. 300f et seq., CERCLA and any state, county or local
regulations similar thereto.
1.10 Environmental Liabilities. Environmental Liabilities means any and
all liabilities, responsibilities, claims, suits, losses, costs (including
remediation, removal, response, abatement, clean-up, investigative or monitoring
costs and any other related costs and expenses), other causes of action
recognized now or at any later time, damages, settlements, expenses, charges,
assessments, liens, penalties, fines, pre-judgment and post-judgment interest,
attorney fees and other legal fees (i) pursuant to any agreement, order, notice,
requirement, responsibility or directive (including directives embodied in
Environmental Laws), injunction, judgment or similar documents (including
settlements) arising out of or in connection with any Environmental Laws, or
(ii) pursuant to any claim by a governmental entity or other person or entity
for personal injury, property damage, damage to natural resources, remediation
or similar costs or expenses incurred or asserted by such entity or person
pursuant to common law or statute.
1.11 EVI Indemnified Parties. EVI Indemnified Parties shall have the
meaning set forth in Section 6.1(a) hereof.
1.12 Christiana Company. Christiana Company means any corporation,
partnership, limited liability company, association or other entity, of which
Christiana or any Christiana Company now or at any time in the past owned,
directly or indirectly, an ownership interest in (whether or not such ownership
interest constituted control of the entity and whether or not such interest
represented a passive or active investment), including those companies named on
Schedule 1.12 hereto.
1.13 Christiana Taxes. Christiana Taxes means any and all taxes (other
than EVI Related Taxes as defined in the Merger Agreement) to which Christiana
or any Christiana Company may be obligated relating to or arising from (i) the
current or past operations or assets of Christiana or any Christiana Company
through the Effective Date, (ii) the Logistic Sale, (iii) the Merger, (iv) any
tax return filed by any current or past member of Christiana's consolidated
group, (v) any Tax to which Christiana may be alleged to be liable by reason of
being affiliated with any other Person for all periods prior to the Effective
Date, (vi) property taxes with respect to the assets of Christiana or any
Christiana Company for all periods prior to the Effective Date and (vii) any
transfer taxes or value added taxes in connection with the transactions
contemplated by the Logistic Sale and the Merger.
1.14 Liability. Liability means any and all claims, demands, liabilities,
responsibilities, disputes, causes of action and obligations of every nature
whatsoever, liquidated or unliquidated, known or unknown, matured or unmatured,
or fixed or contingent.
1.15 Member. Member means each person who has been admitted to TLC as a
member as provided in the Delaware Limited Liability Company Act (the "DLLCA")
and the Operating Agreement.
1.16 Membership Units. Membership Units means the basis by which a
Member's ownership interest in TLC issued pursuant to the Operating Agreement is
measured.
1.17 Merger. Merger means the merger of Christiana Acquisition, Inc. with
and into Christiana Companies, Inc. as contemplated by the Merger Agreement.
1.18 Merger Agreement. Merger Agreement means the Agreement and Plan of
Merger dated December 12, 1997, by and among EVI, Christiana Acquisition, Inc.,
Christiana Companies, Inc. and C2, Inc.
B-3
179
1.19 Operating Agreement. Operating Agreement shall mean the form of
Operating Agreement attached hereto as Exhibit A.
1.20 Person. Person means an individual, corporation, limited liability
company, partnership, governmental authority or any other entity.
1.21 Properties. Properties means the properties currently or previously
owned or operated by Christiana or any Christiana Company.
1.22 Retained Liabilities. Retained Liabilities shall mean and be limited
solely to (i) those accounts payable relating to Christiana that are reflected
on the Effective Date balance sheet of Christiana, (ii) those accounts payable
reflected on the Effective Date balance sheet of Christiana and agreed to by EVI
prior to the Effective Date, (iii) the obligations of Christiana that arise
after the Effective Date (other than obligations relating to matters existing or
occurring on or prior to the Effective Date and indemnification, warranty and
product liability, wrongful death or property claims associated with actions or
omissions prior to the Effective Date or any business conducted prior to the
Effective Date) and (iv) EVI Related Taxes (as defined in the Merger Agreement).
1.23 Taxes. Taxes means all federal, state, local, foreign and other
taxes, charges, fees, duties, levies, imposts, customs or other assessments,
including, without limitation, all net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, profit share, license,
lease, service, service use, value added, withholding, payroll, employment,
excise, estimated, severance, stamp, occupation, premium, property, windfall
profits or other taxes, fees, assessments, customs, duties, levies, imposts, or
charges of any kind whatsoever with any interest, penalties, additions to tax,
fines or other additional amounts imposed thereon or related thereto, and the
term Tax means any one of the foregoing Taxes.
1.24 Waste Materials. Waste Material means any (i) toxic or hazardous
materials or substances; (ii) solid wastes, including asbestos, polychlorinated
biphenyls, mercury, buried contaminants, chemicals, flammable or explosive
materials; (iii) radioactive materials; (iv) petroleum wastes and spills or
releases of petroleum products; and (v) any other chemical, pollutant,
contaminant, substance or waste that is regulated by any governmental entity
under any Environmental Law.
2. Purchase and Sale of Membership Units; Purchase Price.
2.1 Purchase and Sale of Membership Units.
(a) Effective as of the closing, Christiana shall sell, transfer,
assign, convey and deliver, and C2 shall purchase and accept, 666.667
Membership Units.
(b) CHRISTIANA MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, WITH RESPECT TO THE MEMBERSHIP UNITS OR THE ASSETS (CURRENT,
FIXED, PERSONAL, REAL, TANGIBLE OR INTANGIBLE) OF TLC AND ITS SUBSIDIARIES,
INCLUDING, BUT NOT LIMITED TO, CONDITION OR WORKMANSHIP THEREOF, OR THE
ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT, CAPACITY,
SUITABILITY, UTILITY, SALABILITY, AVAILABILITY, COLLECTIBILITY, OPERATIONS,
CONDITIONS, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, IT BEING
THE EXPRESS AGREEMENT OF C2, TLC AND CHRISTIANA THAT, EXCEPT AS EXPRESSLY
SET FORTH IN THIS AGREEMENT, C2 WILL ACQUIRE THE MEMBERSHIP UNITS AND
INTEREST IN THE ASSETS OF TLC THROUGH SUCH OWNERSHIP INTEREST IN THEIR
PRESENT CONDITION AND STATE OF REPAIR, ON AN "AS IS AND WHERE IS, WITH ALL
FAULTS" BASIS.
2.2 Assumption. Effective as of the closing, as an inducement to Sub to
merge with Christiana, C2 hereby unconditionally assumes and undertakes to pay,
satisfy and discharge when due the Assumed Liabilities. Notwithstanding the
foregoing, Christiana hereby retains and C2 will have no liability with respect
to the Retained Liabilities. In addition, effective as of the Closing, as a
further inducement to Sub to merge with Christiana, TLC hereby unconditionally
assumes and undertakes to pay, satisfy and discharge when due
B-4
180
the Assumed Liabilities to the extent such Assumed Liabilities relate to any of
the historical businesses, operations or assets of TLC and its subsidiaries. The
closing shall occur on or prior to the closing of the Merger.
2.3 Purchase Price. The aggregate purchase price ("Purchase Price") for
the 666.667 Membership Units shall be (i) $10,666,667, payable on the same date
that funds are paid by EVI to the Exchange Agent (as defined in the Merger
Agreement) pursuant to Section 1.8(c) of the Merger Agreement by C2 to
Christiana in the form of a certified or cashier's check, or, at the option of
Christiana, by wire transfer of immediately available funds to an account
designated by Christiana and (ii) the assumption by C2 at the closing of the
Assumed Liabilities.
2.4 ABSOLUTE ASSUMPTION. IT IS THE INTENT OF THE PARTIES THAT THE
LIABILITIES AND ENVIRONMENTAL LIABILITIES ASSUMED BY C2 AND TLC UNDER THIS
AGREEMENT SHALL BE WITHOUT REGARD TO THE CAUSE THEREOF OR THE NEGLIGENCE OF ANY
PERSON, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, ACTIVE OR PASSIVE,
AND WHETHER SUCH LIABILITY OR ENVIRONMENTAL LIABILITY IS BASED ON STRICT
LIABILITY, ABSOLUTE LIABILITY OR ARISING AS AN OBLIGATION OF CONTRIBUTION. C2
AND TLC EACH HEREBY WAIVES AND RELEASES FOR ITSELF AND ON BEHALF OF AFFILIATES
(OTHER THAN CHRISTIANA, EVI AND THEIR RESPECTIVE AFFILIATES) ANY CLAIMS,
DEFENSES OR CLAIMS FOR CONTRIBUTION THAT IT HAS OR MAY HAVE AGAINST CHRISTIANA,
EVI OR ANY OF THEIR RESPECTIVE AFFILIATES WITH RESPECT TO THE ASSUMED
LIABILITIES.
3. Representations of Christiana.
3.1 Organization. Christiana is a corporation duly organized and validly
existing under the laws of the state of Wisconsin. TLC is a limited liability
company duly organized, validly existing and in good standing under the laws of
the state of Delaware.
3.2 Title. The 666.667 Membership Units being transferred pursuant to this
Agreement without any representation or warranty of any kind, including any
implied representations of the title.
4. Representations of C2 and TLC.
4.1 Organization. TLC is a limited liability company duly organized and
validly existing under the laws of the state of Delaware. C2 is a corporation
duly organized and validly existing under the laws of the state of Wisconsin.
4.2 Corporate Power. Each of C2 and TLC has full power, legal right and
authority to enter into this Agreement, and to carry out the transactions
contemplated hereby. The execution of this Agreement, and full performance
hereunder, has been duly authorized by C2's Board of Directors and TLC's
Members.
4.3 Validity. This Agreement has been duly and validly executed and
delivered by C2 and TLC and is the legal, valid and binding obligation of each
of C2 and TLC, enforceable in accordance with its terms.
5. Operating Agreement; Put and Participation Rights.
5.1 Operating Agreement. At the Closing, C2 and Christiana shall enter
into the Operating Agreement.
5.2 Put. At any time after the fifth anniversary date of the Effective
Date, Christiana shall have the option (but shall not be required) to sell to C2
or TLC, at Christiana's option, and C2 and TLC, as applicable, shall be required
to purchase, all (but not less than all) of Christiana's Membership Units for a
price equal to $7 million. To exercise this option, Christiana shall provide
notice in writing to C2 or TLC, as applicable, of such election. The closing of
any purchase pursuant to this Section 5.2 shall occur within 60 days of notice
to C2 or TLC, as applicable. The price required to be paid by C2 or TLC, as
applicable pursuant to this Section 5.2 shall be paid in cash. The rights
contained in this Section 5.2 shall expire on the date one year after the fifth
anniversary of the Effective Date.
B-5
181
5.3 Participation Rights.
(a) If (x) there shall be proposed a C2 Change of Control or (y) C2 shall
propose to transfer or sell all of its interest in TLC to an unrelated third
party (a "Third Party") in one or more transactions (a "TLC Disposition"),
Christiana shall have the right, but not the obligation, to participate (a "Tag
Along Right") in such transaction as follows:
(i) In the case of a C2 Change of Control, Christiana shall have a
right to sell its Membership Units to C2 and Logistic as determined as set
forth below for cash at the fair market value of such Membership Units as
may be agreed to by Christiana and C2 or, in the absence of such agreement,
as determined by appraisal, as set forth below; and
(ii) In the case of a TLC Disposition, Christiana shall have the right
to sell its Membership Units to the proposed purchaser of C2's Membership
Units for the same equivalent consideration per equivalent unit in TLC, in
cash, and otherwise on the same terms as C2 sells or transfers its
interests in TLC.
The purchasing entity in the case of a C2 Change of Control shall be
determined by C2 and Logistic; provided, however, that each shall be responsible
for the purchase in the event of a default by the selected purchasing entity.
If circumstances occur which give rise to the Tag Along Right, then C2
shall give written notice ("Tag Along Notice") to Christiana providing a summary
of the terms of the proposed transaction and advising Christiana of its Tag
Along Right. The Tag Along Notice shall be required to be accompanied by the
offer to purchase required by this Section 5.3 by (x) the proposed purchasing
entity in the case of a C2 Change of Control and (y) the proposed purchaser in
the case of a proposed TLC Disposition. Christiana may exercise its Tag Along
Right by delivery of written notice to C2 within fifteen (15) days of its
receipt of the Tag Along Notice. If Christiana gives written notice indicating
that it wishes to exercise its Tag Along Right,
(1) In the case of a C2 Change of Control, Christiana shall be
obligated to sell its Membership Units to C2 or TLC, as the case may be,
and C2 and TLC shall be obligated to purchase for cash at the fair market
value of such Membership Units as may be agreed to by Christiana and C2 or,
in the absence of such agreement, as determined by a mutually acceptable
Third Party appraiser contemporaneous with the closing of the C2 Change of
Control; provided that if the parties cannot agree on an appraiser, each
shall appoint its own appraiser and those appraisers will appoint the Third
Party appraiser; and, provided, further, that the final decision of the
appraisers shall be as agreed by two of the three appraisers; and
(2) In the case of a TLC Disposition, Christiana shall be obligated to
sell its Membership Units, and the proposed purchaser shall be obligated to
purchase, for the same equivalent consideration per equivalent unit in TLC
and otherwise on the same terms as C2 sells or transfers its interests in
TLC with the sale to occur on or prior to the closing of the TLC
Disposition; provided, however, that Christiana shall receive its
equivalent consideration per equivalent unit in TLC in cash.
No transaction which would result in a C2 Change of Control may be effected
unless such transaction is effected in full compliance with the terms of this
Section 5.3.
(b) For the purposes of this Section 5.3, a "C2 Change of Control" shall be
defined to be (x) a transfer, conveyance or other disposition of shares of C2
stock by a member of the Lubar Family, (y) the issuance by C2 of any additional
shares of C2 stock or (z) a merger, consolidation, conversion or share exchange
or other similar transaction involving C2, if, after giving effect to such
transaction described in (x), (y) or (z), the Lubar Family shall cease to
beneficially own (defined to mean both the right to vote and dispose of the full
economic interests in the shares) at least 25% of all of the voting and
ownership interests in C2 or the resulting entity.
(c) For the purposes of this Section 5.3, the "Lubar Family" shall be
defined to be Sheldon B. Lubar, Joan P. Lubar, David J. Lubar, Kristine L.
Thomson, Susan L. Solvang, their spouses, their children, trusts for the benefit
of any of the foregoing and the Lubar Family Foundation.
6. Indemnification.
B-6
182
6.1 Indemnification Matters.
(a) Indemnification. Each of C2 and TLC, jointly and severally, hereby
agree to indemnify, defend and hold Christiana, EVI and their respective
officers, directors, employees, agents and assigns (collectively, the "EVI
Indemnified Parties") harmless from and against any and all Liabilities or
Environmental Liabilities (including, without limitation, reasonable fees and
expenses of attorneys, accountants, consultants and experts) that the EVI
Indemnified Parties incur, are subject to a claim for, or are subject to, that
are based upon, arising out of, relating to or otherwise in respect of:
(i) Any breach of any covenant or agreement of C2 or TLC contained in
this Agreement or in any other agreement contemplated hereby;
(ii) The acts or omissions of Christiana or any Christiana Company on
or before the Effective Date;
(iii) The acts or omissions of TLC, any Christiana Company or any of
its Affiliates (other than Christiana or EVI) or the conduct of any
business by them on or after the Effective Date (it being understood that
this indemnification shall not apply to acts or omissions by Christiana or
EVI after the Effective Date);
(iv) The Assumed Liabilities;
(v) Any and all amounts for which Christiana or EVI may be liable on
account of any claims, administrative charges, self-insured retentions,
deductibles, retrospective premiums or fronting provisions in insurance
policies, including as the result of any uninsured period, insolvent
insurance carriers or exhausted policies, arising from claims by Christiana
or any Christiana Company, or the employees of any of the foregoing, or
claims by insurance carriers of Christiana or any Christiana Company for
indemnity arising from or out of claims by or against Christiana or any
Christiana Company for acts or omissions of Christiana or any Christiana
Company, or related to any current or past business of Christiana or any
Christiana Company or any product or service provided by Christiana or any
Christiana Company in whole or part prior to the Effective Date;
(vi) Any settlements or judgments in any litigation commenced by one
or more insurance carriers against Christiana or EVI on account of claims
by any Christiana Company or employees of any Christiana Company and, if
filed prior to the Effective Date, by Christiana or any employee of
Christiana;
(vii) Any Taxes (other than EVI Related Taxes) as a result of the
Logistic Sale and any Taxes as a result of the Merger subsequently being
determined to be a taxable transaction for foreign, federal, state or local
law purposes regardless of the theory or reason for the transactions being
subject to Tax;
(viii) The on-site or off-site handling, storage, treatment or
disposal of any Waste Materials generated by Christiana or any Christiana
Company on or prior to the Effective Date or any Christiana Company at any
time;
(ix) Any COBRA Liability with respect to any employees of Christiana
or any Christiana Company prior to the Closing;
(x) Any and all Environmental Conditions, known or unknown, existing
on, at or underlying any of the Properties on or prior to the Effective
Date;
(xi) Any and all Liabilities incurred by Christiana or EVI pursuant to
its obligations hereunder in seeking to obtain or obtaining any consent or
approval to assign and transfer any interest in TLC;
(xii) Any acts or omissions of Christiana or any Christiana Company
relating to the ownership or operation of the business of Christiana or any
Christiana Company or the Properties on or prior to the Effective Date;
(xiii) Any Liability relating to any claim or demand by any
stockholder of Christiana or EVI with respect to the Merger, the Logistic
Sale or the transactions relating thereto; and
B-7
183
(xiv) Any Liability relating to any Christiana or any Christiana
Company employee benefit or welfare plans arising out of circumstances
occurring on or prior to the Effective Date.
(b) Allocation of Liability Payment Obligations. To the extent a Liability
exists or a claim for indemnification is made by an EVI Indemnified Party
hereunder, such Liability shall be paid and such claim shall be defended and
paid as follows:
(i) If the Liability or claim relates primarily to the historic
assets, liability operations of business TLC (excluding [describe non TLC
historic subs] (the "TLC Historic Business"), TLC shall, as between C2 and
TLC, be primarily responsible for the payment of such Liability and the
defense and payment of such claim. If TLC does not defend or pay such
claim, C2 shall be responsible for the defense and payment of such claim.
(ii) If the Liability or claim relates primarily to a matter other
than the TLC Historic Business, C2 shall, as between C2 and TLC and subject
to the provisions of clause (iii) below, be primarily responsible for the
payment of such Liability and the defense and payment of such claim. If C2
does not defend or pay such claim, TLC shall be responsible for the defense
and payment of such claim.
(iii) If the Liability or claim relates primarily to a matter other
than the TLC Historic Business, the costs of defense and payment of the
Liability shall be paid by EVI to the extent and only to the extent of the
Christiana Retained Cash (as defined in the Merger Agreement); provided
that once such Christiana Retained Cash is paid pursuant to the Merger
Agreement, EVI shall have no obligation to pay such amounts. Any such
payments shall be subject to EVI being provided with reasonable
documentation regarding the payment obligations.
(iv) If TLC pays any amounts relating to an Assumed Liability or an
indemnification claim hereunder, Christiana shall be entitled to receive a
cash payment equal to one-third of any such amount paid when and if (i) TLC
or all or substantially all of its assets are sold, (ii) there is a sale of
Membership Units by C2 or (iii) there is a direct or indirect transfer or
sale of the membership units of TLC held by C2 or of the membership units
of C2. The obligation to pay such amounts shall be payable by C2.
(v) To secure the obligations of C2 hereunder, C2 shall pledge to
Christiana all of C2's interest in TLC, including all rights to
distributions in respect thereof, pursuant to a pledge agreement in such
form and having such terms as Christiana may reasonably request.
(vi) Notwithstanding the foregoing, nothing contained in this
Agreement shall be construed to be an assumption of any obligation or
responsibility by EVI of any Assumed Liabilities and its obligations
hereunder shall be personal to TLC and C2 to the extent and only to the
extent EVI has agreed to fund the payment of indemnity claims by it with
the Christiana Retained Cash as expressly provided herein. No third party
shall be deemed to have any rights against EVI as result of this Agreement.
(c) Absolute Indemnity. NONE OF THE EVI INDEMNIFIED PARTIES WILL BE
OBLIGATED TO INSTITUTE ANY LEGAL PROCEEDINGS IN CONNECTION WITH THE COLLECTION
OR PURSUIT OF ANY INSURANCE IN ORDER TO EXERCISE AN INDEMNIFICATION REMEDY UNDER
THIS SECTION VI. UNLESS OTHERWISE SPECIFICALLY EXPRESSED, THIS INDEMNITY
OBLIGATION SHALL APPLY WITHOUT REGARD TO WHETHER THE LIABILITY OR ENVIRONMENTAL
LIABILITY WAS CAUSED BY THE ORDINARY OR GROSS NEGLIGENCE OF ANY OF THE EVI
INDEMNIFIED PARTIES (WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT OR
ACTIVE OR PASSIVE), OR WHETHER THE LIABILITY OR ENVIRONMENTAL LIABILITY IS BASED
ON STRICT LIABILITY, ABSOLUTE LIABILITY OR ARISES AS AN OBLIGATION OF
CONTRIBUTION OR INDEMNITY. EACH OF C2 AND TLC ACKNOWLEDGES THAT IT IS AWARE OF
VARIOUS THEORIES KNOWN AS THE "EXPRESS NEGLIGENCE" DOCTRINE AND OTHER SIMILAR
DOCTRINES AND THEORIES THAT MAY LIMIT INDEMNIFICATION AND AGREES AND STIPULATES
THAT THE PROVISIONS OF THIS AGREEMENT REFLECT THE EXPRESS INTENT OF THE PARTIES
THAT THE INDEMNIFICA-
B-8
184
TION TO BE PROVIDED BY TLC AND C2 APPLY NOTWITHSTANDING THE FACT THAT THE
LIABILITY OR ENVIRONMENTAL LIABILITY (I) MAY NOT CURRENTLY BE KNOWN BY IT OR
MANIFEST ITSELF IN ANY REGARD, (II) MAY ARISE UNDER A STATUTE OR THEORY THAT MAY
NOT CURRENTLY EXIST OR BE KNOWN TO TLC, (III) MAY ARISE AS A RESULT OF A
NEGLIGENT ACT OR OMISSION BY ANY OF THE EVI INDEMNIFIED PARTIES (WHETHER SUCH
CONDUCT BE SOLE, JOINT OR CONCURRENT OR ACTIVE OR PASSIVE) OR (IV) MAY
CONSTITUTE A VIOLATION OF ANY APPLICABLE CIVIL OR CRIMINAL LAW OR REGULATION.
6.2 Notice of Circumstance. After receipt by an EVI Indemnified Party of
notice, or an EVI Indemnified Party's actual discovery, of any action,
proceeding, claim, demand or potential claim which could give rise to a right to
indemnification pursuant to any provision of this Agreement (any of which is
individually referred to a as a "Circumstance"), the EVI Indemnified Party shall
give TLC and C2 (collectively the "TLC Parties") written notice describing the
Circumstances in reasonable detail; provided, however, that no delay by an EVI
Indemnified Party in notifying the TLC Parties shall relieve the TLC Parties
from any Liability or Environmental Liability hereunder unless (and then solely
to the extent) the TLC Parties' position is actually adversely prejudiced. In
the event the TLC Parties notifies the EVI Indemnified Party within 15 days
after such notice that the TLC Parties is assuming the defense thereof, (i) the
TLC Parties will defend the EVI Indemnified Parties against the Circumstances
with counsel of its choice, provided such counsel is reasonably satisfactory to
EVI, (ii) the EVI Indemnified Parties may retain separate co-counsel at its or
their sole cost or expense (except that the TLC Parties will be responsible for
the fees and expenses for the separate co-counsel to the extent EVI concludes
reasonably that the counsel the TLC Parties has selected has a conflict of
interest), (iii) the EVI Indemnified Parties will not consent to the entry of
any judgment or enter into any settlement with respect to the Circumstances
without the written consent of the TLC Parties, and (iv) the TLC Parties will
not consent to the entry of any judgment with respect to the Circumstances, or
enter into any settlement which (x) requires any payments by or continuing
obligations of an EVI Indemnified Party, (y) requires an EVI Indemnified Party
to admit any facts or liability that could reasonably be expected to adversely
affect an EVI Indemnified Party in any other matter or (z) does not include a
provision whereby the plaintiff or claimant in the matter released the EVI
Indemnified Parties from all Liability with respect thereto, without the written
consent of EVI. In the event the TLC Parties does not notify EVI within 15 days
after EVI has given notice of the Circumstance that the TLC Parties is assuming
the defense thereof, the EVI Indemnified Parties may defend against, or enter
into any settlement with respect to, the Circumstance in any manner the EVI
Indemnified Parties reasonably may deem appropriate, at the TLC Parties' sole
cost. The foregoing provisions shall be subject to the provisions of Section
6.1(b).
6.3 Insurance. The TLC Parties shall not be obligated to indemnify the EVI
Indemnified Parties for amounts which shall have been covered and paid by
insurance of the EVI Indemnified Parties, provided, however, insurance shall not
include deductibles or self-insured retentions.
6.4 Scope of Indemnification. INDEMNIFICATION UNDER THIS SECTION VI SHALL
BE IN ADDITION TO ANY REMEDIES CHRISTIANA, EVI OR ANY EVI INDEMNIFIED PARTY MAY
HAVE AT LAW OR EQUITY. THERE SHALL BE NO TIME LIMIT AS TO C2'S OF TLC'S
INDEMNIFICATION OBLIGATIONS HEREUNDER.
6.5 Indemnity for Certain Environmental Liabilities. It is the intention
of the parties that the indemnity provided herein with respect to Environmental
Liabilities under CERCLA and corresponding provisions of state law is an
agreement expressly not barred by 42 U.S.C. sec. 9607(e)(i) and corresponding
provisions of state law.
6.6 C2 and TLC Covenants. To assure the performance of the obligations of
C2 and TLC under this Agreement, C2 and TLC each hereby covenants and agrees
that it will not, and will cause its subsidiaries to not, merge, convert into
another entity, engage in a share or interest exchange for a majority of its
units or shares, liquidate or transfer, assign or otherwise convey or allocate,
directly or indirectly, in one or more transactions, whether or not related, a
majority of C2's or TLC's assets (determined in good faith by a board or similar
managing body's resolution prior to the transaction on a fair value and
consolidated basis) to any
B-9
185
Person unless the acquiring Person expressly assumes the obligations of C2 or
TLC, as the case may be, hereunder, (ii) executes and delivers to Christiana and
EVI an agreement agreeing to be bound by each and every provision of this
Agreement as if it were C2 or TLC, as the case may be,and (iii) has a net worth
on a pro forma basis after giving effect to the acquisition or business
combination equal to or greater than that of C2 or TLC, as the case may be, on a
consolidated basis.
7. Miscellaneous.
7.1 Waiver and Amendment. Any provision of this Agreement may be waived at
any time by the party that is entitled to the benefits thereof. This Agreement
may not be amended or supplemented at any time, except by an instrument in
writing signed on behalf of each party hereto, provided that this Agreement may
be amended only as may be permitted by the laws that govern EVI, TLC, Christiana
and C2. The waiver by any party hereto of any condition or of a breach of
another provision of this Agreement shall not operate or be construed as a
waiver of any other condition or subsequent breach. The waiver by any party
hereto of any of the conditions precedent to its obligations under this
Agreement shall not preclude it from seeking redress for breach of this
Agreement other than with respect to the condition so waived.
7.2 Arbitration. Any disputes, claims or controversies connected with,
arising out of, or related to, this Agreement and the rights and obligations
created herein, or the breach, validity, existence or termination hereof, shall
be settled by Arbitration to be conducted in accordance with the Commercial
Rules of Arbitration of the American Arbitration Association, except as such
Commercial Rules may be changed by this Section 7.2. The disputes, claims or
controversies shall be decided by three independent arbitrators (that is,
arbitrators having no substantial economic or other material relationship with
the parties), one to be appointed by TLC and C2 and one to be appointed by EVI
within fourteen days following the submission of the claim to the parties hereto
and the third to be appointed by the two so appointed within five days. Should
either party refuse or neglect to join in the timely appointment of the
arbitrators, the other party shall be entitled to select both arbitrators.
Should the two arbitrators fail timely to appoint a third arbitrator, either
party may apply to the Chief Judge of the United States District Court for the
Southern District of Texas to make such appointment. The arbitrators shall have
ninety days after the selection of the third arbitrator within which to allow
discovery, hear evidence and issue their decision or award and shall in good
faith attempt to comply with such time limits; provided, however, if two of the
three arbitrators believe additional time is necessary to reach a decision, they
may notify the parties and extend the time to reach a decision in thirty day
increments, but in no event to exceed an additional ninety days. Discovery of
evidence shall be conducted expeditiously by the Parties, bearing in mind the
parties desire to limit discovery and to expedite the decision or award of the
arbitrators at the most reasonable cost and expense of the parties. Judgment
upon an award rendered pursuant to such Arbitration may be entered in any court
having jurisdiction, or application may be made to such court for a judicial
acceptance of the award, and an order of enforcement, as the case may be. The
place of Arbitration shall be Houston, Texas. The decision of the arbitrators,
or a majority thereof, made in writing, shall be final and binding upon the
parties hereto as to the questions submitted, and each party shall abide by such
decision. Notwithstanding the provisions of this Section 7.2, neither party
shall be prohibited from seeking injunctive relief pending the completion of any
arbitration. The costs and expenses of the arbitration proceeding, including the
fees of the arbitrators and all costs and expenses, including legal fees and
witness fees, incurred by the prevailing party, shall be borne by the losing
party.
Solely for purposes of injunctive relief, orders in aid of arbitration and entry
of the arbitrator's award:
(a) each of the parties hereto irrevocably consents to the non-exclusive
jurisdiction of, and venue in, any state court located in Harris County, Texas
or any federal court sitting in the Southern District of Texas in any suit,
action or proceeding seeking injunctive relief, arising out of or relating to
this Agreement or any of the other agreements contemplated hereby and any other
court in which a matter that may result in a claim for indemnification hereunder
by an EVI Indemnified Party may be brought with respect to any claim for
indemnification by an EVI Indemnified Party;
(b) each of the parties hereto waives, to the fullest extent permitted by
law, any objection that it may now or hereafter have to the laying of venue of
any suit, action or proceeding seeking injunctive relief, orders in aid of
arbitration or entry of an arbitration arising out of or relating to this
Agreement or any of the other
B-10
186
agreements contemplated hereby brought in any state court located in Harris
County, Texas or any federal court sitting in the Southern District of Texas or
any other court in which a matter that may result in a claim for indemnification
hereunder by an EVI Indemnified Party may be brought with respect to any claim
for indemnification by an EVI Indemnified Party, and further irrevocably waive
any claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum; and
(c) each of the parties hereto irrevocably designates, appoints and
empowers CT Corporation System, Inc. and any successor thereto as its designee,
appointee and agent to receive, accept and acknowledge for and on its behalf,
and in respect of its property, service of any and all legal process, summons,
notices and documents which may be served in any suit, action or proceeding
arising out of or relating to this Agreement or any of the other agreements
contemplated hereby.
7.3 Assignment. This Agreement shall inure to the benefit of and will be
binding upon the parties hereto and their respective legal representatives,
successors and permitted assigns. Nothing in this Agreement, express or implied,
is intended to or shall confer upon any person other than TLC, C2, Christiana,
EVI, and the EVI Indemnified Parties any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement.
7.4 Notices. All notices, requests, demands, claims and other
communications which are required to be or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (i) delivered
in Person or by courier, (ii) sent by telecopy or facsimile transmission, answer
back requested, or (iii) mailed, certified first class mail, postage prepaid,
return receipt requested, to the parties hereto at the following addresses:
if to EVI:
EVI, Inc.
5 Post Oak Park, Suite 1760
Houston, Texas 77027
Attn: Bernard J. Duroc-Danner
Facsimile: (713) 297-8488
with a copy to:
Fulbright & Jaworski, L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Attn: Curtis W. Huff
Facsimile: (713) 651-5246
if to TLC:
Total Logistic Control, LLC
700 N. Water Street
Suite 1200
Milwaukee, Wisconsin 53202
Attn: William T. Donovan
Facsimile: (414) 291-9061
with a copy to:
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attn: Joseph B. Tyson, Jr.
Facsimile: (414) 297-4900
B-11
187
if to Christiana:
5 Post Oak Park, Suite 1760
Houston, Texas 77027
Attn: James G. Kiley
Facsimile: (713) 297-8488
with a copy to:
Fulbright & Jaworski, L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Attn: Curtis W. Huff
Facsimile: (713) 651-5246
if to C2:
700 N. Water Street
Suite 1200
Milwaukee, Wisconsin 53202
Attn: William T. Donovan
Facsimile: (414) 291-9061
with a copy to:
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attn: Joseph B. Tyson, Jr.
Facsimile: (414) 297-4900
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section 7.4. Such notices shall be
effective, (i) if delivered in Person or by courier, upon actual receipt by the
intended recipient, (ii) if sent by telecopy or facsimile transmission, when the
answer back is received, or (iii) if mailed, upon the earlier of five days after
deposit in the mail and the date of delivery as shown by the return receipt
therefor.
7.5 Governing Law. All questions arising out of this Agreement and the
rights and obligations created herein, or its validity, existence,
interpretation, performance or breach shall by governed by the laws of the State
of Texas without regard to conflict of laws principles.
7.6 Severability. If any provision of this Agreement is held to be
unenforceable, this Agreement shall be considered divisible and such provision
shall be deemed inoperative to the extent it is deemed unenforceable, and in all
other respects this Agreement shall remain in full force and effect; provided,
however, that if any such provision may be made enforceable by limitation
thereof, then such provision shall be deemed to be so limited and shall be
enforceable to the maximum extent permitted by applicable law.
7.7 Counterparts. This Agreement may be executed in counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same agreement.
7.8 Headings. The Section headings herein are for convenience only and
shall not affect the construction hereof.
7.9 Entire Agreement. This Agreement constitutes the entire agreement and
supersedes all other prior agreements and understandings, both oral and written,
among the parties or any of them, with respect to the subject matter hereof.
B-12
188
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
EVI, INC.
("EVI")
By:
----------------------------------
Title:
---------------------------------
TOTAL LOGISTIC CONTROL, LLC
("TLC")
By:
----------------------------------
Title:
---------------------------------
CHRISTIANA COMPANIES, INC.
("Christiana")
By:
----------------------------------
Title:
---------------------------------
C2, INC.
("C2")
By:
----------------------------------
Title:
---------------------------------
B-13
189
APPENDIX C
TOTAL LOGISTIC CONTROL, LLC
FIRST AMENDED AND RESTATED
OPERATING AGREEMENT *
, 1997
* As amended by Amendment No. 1 to Agreement and Plan of Merger and Logistic
Purchase Agreement dated May 26, 1998.
C-1
190
TABLE OF CONTENTS
PAGE
----
ARTICLE I FORMATION................................................. 4
1.01 Definitions................................................. 4
1.02 Formation; Name............................................. 4
1.03 Purposes.................................................... 4
1.04 Registered and Principal Offices............................ 4
1.05 Term........................................................ 4
1.06 Foreign Qualification....................................... 5
1.07 No State Law Partnership.................................... 5
1.08 Partnership Classification.................................. 5
ARTICLE II MEMBERS.................................................. 5
2.01 Members..................................................... 5
2.02 Admission of Additional Members............................. 5
ARTICLE III CAPITAL CONTRIBUTIONS................................... 5
3.01 Capital Contributions by Members............................ 5
3.02 Purchase of Units by C2, Inc................................ 5
3.03 Loans to the Company........................................ 5
3.04 Withdrawal and Return of Contributions...................... 6
3.05 Interest on Contributions................................... 6
3.06 Limitation on Member's Deficit Make-up...................... 6
3.07 Capital Accounts............................................ 6
3.08 Units....................................................... 6
ARTICLE IV ALLOCATIONS.............................................. 6
4.01 Profits and Losses.......................................... 6
4.02 Tax Allocations............................................. 6
4.03 Construction................................................ 7
ARTICLE V DISTRIBUTIONS............................................. 7
5.01 Current Tax Distributions................................... 7
5.02 Other Distributions......................................... 7
5.03 Amounts Withheld............................................ 7
5.04 Distribution Restrictions................................... 7
ARTICLE VI MANAGEMENT............................................... 8
6.01 Voting and Decisions........................................ 8
6.02 Restriction on Transactions................................. 8
6.03 Regular Meetings............................................ 8
6.04 Special Meetings............................................ 8
6.05 Quorum...................................................... 9
6.06 Notice...................................................... 9
6.07 Manner of Acting............................................ 9
6.08 Vacancies................................................... 9
6.09 Presumption of Assent....................................... 9
6.10 Resignation of Manager...................................... 9
6.11 Action Without Meeting...................................... 9
6.12 Telephonic Meetings......................................... 10
6.13 Reliance by Third Parties................................... 10
6.14 Filing of Documents......................................... 10
6.15 Limitation on Liability; Indemnification.................... 10
6.16 Delegation to Members or Representatives of Members......... 10
C-2
191
PAGE
----
6.17 Time Devoted to Business.................................... 11
6.18 Compensation of Members and Officers........................ 12
ARTICLE VII ASSIGNMENT, TRANSFER AND REPURCHASE OF MEMBER'S UNITS AND
DISASSOCIATION..................................................... 12
7.01 Assignment and Transfer..................................... 12
7.02 Disassociation.............................................. 13
7.03 Restraining Order........................................... 13
ARTICLE VIII DISSOLUTION AND WINDING UP.............................. 13
8.01 Dissolution................................................. 13
8.02 Winding Up and Liquidation.................................. 14
8.03 Compliance With Timing Requirements of Regulations.......... 14
ARTICLE IX BOOKS, REPORTS, ACCOUNTING, AND TAX ELECTIONS............. 14
9.01 Books and Records........................................... 14
9.02 Fiscal Year and Method of Accounting........................ 14
9.03 Reports and Statements...................................... 15
9.04 Tax Elections............................................... 15
9.05 Tax Matters Partner......................................... 15
ARTICLE X MISCELLANEOUS.............................................. 15
10.01 Amendments.................................................. 15
10.02 Bank Accounts............................................... 15
10.03 Binding Effect.............................................. 15
10.04 Rules of Construction....................................... 15
10.05 Choice of Law and Severability.............................. 16
10.06 Counterparts................................................ 16
10.07 Entire Agreement............................................ 16
10.08 Last Day for Performance Other Than a Business Day.......... 16
10.09 Notices..................................................... 16
10.10 Title to Property; No Partition............................. 16
ARTICLE XI GLOSSARY.................................................. 17
C-3
192
TOTAL LOGISTIC CONTROL, LLC
FIRST AMENDED AND RESTATED
OPERATING AGREEMENT
THIS FIRST AMENDED AND RESTATED OPERATING AGREEMENT (this "Operating
Agreement") is effective as of the [ ] day of [ ], 1997, between
Christiana Companies, Inc., a Wisconsin corporation, and C2, Inc., a Wisconsin
corporation (individually, "Member", and collectively, the "Members").
WITNESSETH:
WHEREAS, Christiana Companies, Inc. has formed a limited liability company
known as Total Logistic Control, LLC (the "Company"), by causing the filing of a
Certificate of Organization (the "Certificate") pursuant to the Act;
WHEREAS, C2, Inc. desires to acquire an interest in the Company and
Christiana Companies, Inc. desires to sell a portion of its interest to C2, Inc.
pursuant to the terms and conditions of that certain Purchase Agreement by and
among EVI, Inc., a Delaware corporation, Christiana Acquisition Co., a Wisconsin
corporation, Christiana Companies, Inc., a Wisconsin corporation, and C2, Inc.,
a Wisconsin corporation, dated , 1997 (the "Purchase Agreement").
WHEREAS, the parties hereto desire to set forth in full all of the terms
and conditions of their agreements and understandings in this Operating
Agreement;
NOW, THEREFORE, in consideration of the foregoing, of the mutual promises
contained herein, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending
legally to be bound, hereby agree as follows:
ARTICLE I
FORMATION
1.01 Definitions. Capitalized terms used in this Operating Agreement shall
have the meanings set forth in the text of this Operating Agreement in the
Glossary contained in Article XI.
1.02 Formation; Name. Christiana Companies, Inc. formed the Company as a
limited liability company pursuant to the Act by causing, on June 13, 1997, the
Certificate to be filed with the Delaware Secretary of State, which shall
constitute notice that the Company is a limited liability company. The Company's
name shall be Total Logistic Control, LLC.
1.03 Purposes. The purposes of the Company shall be to engage in any and
all general business activities permissible under the Act.
1.04 Registered and Principal Offices. The registered office of the
Company shall initially be located at 1209 Orange Street, Wilmington (County of
New Castle), Delaware, 19801. The registered agent of the Company shall be the
Corporation Trust Company, whose address is the same as that of the registered
office. The principal office of the Company shall be located at 777 East
Wisconsin Avenue, Milwaukee, Wisconsin 53202. The Board of Managers may
establish additional offices or may relocate the principal or registered
offices.
1.05 Term. The Company's term officially began on June 13, 1997, and shall
continue until terminated by operation of law or by some provision of this
Operating Agreement.
1.06 Foreign Qualification. Prior to the Company's conducting business in
any jurisdiction other than Delaware, the Board of Managers shall cause the
Company to comply, to the extent procedures are available and those matters are
reasonably within the control of the Board of Managers, with all requirements
necessary
C-4
193
to qualify the Company as a foreign limited liability company in that
jurisdiction. Each Member shall execute, acknowledge, swear to, and deliver all
certificates and other instruments conforming with this Operating Agreement that
are necessary or appropriate to qualify, continue, and terminate the Company as
a foreign limited liability company in all such jurisdictions in which the
Company may conduct business.
1.07 No State Law Partnership. The Members intend that the Company be
operated in a manner consistent with its treatment as a partnership for federal
and state income tax purposes and not be operated or treated as a "partnership"
(including, without limitation, a limited partnership or joint venture) for any
other purpose, including, but not limited to, Section 303 of the Federal
Bankruptcy Code, and this Operating Agreement shall not be construed to suggest
otherwise. No Member shall take any action inconsistent with the express intent
of the parties hereto as set forth herein.
1.08 Partnership Classification. The Members hereby agree that the Company
shall not be operated or treated as an "association" taxed as a corporation
under the Code and that no election shall be made under the Treasury Regulations
by the Members, the Members or any officer to treat the Company as an
"association" taxable as a corporation without the prior unanimous written
consent of the Members.
ARTICLE II
MEMBERS
2.01 Members. The names and business addresses of the Members of the
Company are set forth on Exhibit A hereto.
2.02 Admission of Additional Members. Additional members may be admitted
to the Company only with Member Approval.
ARTICLE III
CAPITAL CONTRIBUTIONS
3.01 Capital Contributions by Members.
(a) Initial Capital Contributions. The initial capital contribution
made by Christiana Companies, Inc. to the Company in exchange for its 100%
percentage interest in the Company is set forth on Exhibit C to this
Operating Agreement of Total Logistic Control, LLC dated June 13, 1997.
Christiana Companies, Inc.'s 100% percentage interest is hereby restated as
1,000 Units in the Company.
(b) Additional Capital Contributions. No additional capital
contributions to the Company shall be required. Additional capital
contributions to the Company may be made with Manager Approval. No
additional Units in the Company may be issued without prior Member
Approval.
3.02 Purchase of Units by C2, Inc. Pursuant to the terms and conditions of
the Purchase Agreement, C2, Inc. purchased 666.667 of the Units in the Company
held by Christiana Companies, Inc. Immediately following such purchase, each
Member holds the number of Units in the Company set forth on Exhibit A hereto.
3.03 Loans to the Company. Except as set forth in this Operating
Agreement, no Member shall make a loan to the Company without Manager Approval.
3.04 Withdrawal and Return of Contributions. No Member shall be entitled
to withdraw or to the return of its capital contributions. No Member shall have
the right to demand and receive property other than cash in return for its
contributions, except that upon dissolution, the Members shall be entitled to
share in the distribution of the remaining assets of the Company in accordance
with Article VIII of this Operating Agreement.
3.05 Interest on Contributions. Capital contributions to the Company shall
not earn interest.
C-5
194
3.06 Limitation on Member's Deficit Make-up. The Members shall have no
obligation to restore any deficit in their Capital Accounts.
3.07 Capital Accounts.
(a) Maintenance of Capital Accounts. A separate Capital Account shall
be maintained and adjusted for each Member on the books and records of the
Company in accordance with the Code and the Treasury Regulations. The
initial balance of each Member's Capital Account shall be the amount of its
initial contribution to the Company.
(b) Transfers. In the event any interest in the Company is transferred
in accordance with the terms of this Operating Agreement, the transferee
shall succeed to the Capital Account of the transferor to the extent it
relates to the transferred interest.
(c) Revaluation. In the event the Values of Company assets are
adjusted pursuant to the definition of the term "Value" in Article XI
hereof, the Capital Accounts of all Members shall be adjusted
simultaneously to reflect the aggregate net adjustment as if the Company
recognized gain or loss equal to the amount of such aggregate net
adjustment, and such adjustment shall be allocated to the Members in
accordance with Article IV hereof.
(d) Interpretation. The manner in which Capital Accounts are to be
maintained pursuant to this Section 3.07 is intended to and shall be
construed so as to comply with the requirements of Section 704(b) of the
Code and the Treasury Regulations promulgated thereunder.
3.08 Units. The membership interests in the Company shall be divided into
Units. Except as set forth herein, each Unit shall have identical preferences,
limitations, and other relative rights.
ARTICLE IV
ALLOCATIONS
4.01 Profits and Losses. Except as otherwise provided in Section 4.02
hereof, Profits and Losses shall be allocated among the Members in proportion to
the number of Units held by such Members.
4.02 Tax Allocations.
(a) Capital Contributions. In accordance with section 704(c) of the
Code and the Treasury Regulations under that section, income, gain, loss,
and deduction with respect to any capital contribution shall, solely for
tax purposes, be allocated among the Members so as to take account of any
variation between the adjusted basis of the capital contribution for
federal income tax purposes and its initial Value.
(b) Adjustment of Value. If the Value of any Company asset is
adjusted, subsequent allocations of income, gain, loss, and deduction with
respect to the asset shall take account of any variation between the
asset's adjusted basis for federal income tax purposes and its Value as so
adjusted in the same manner as under section 704(c) of the Code and the
Treasury Regulations under that section.
(c) Elections. Any elections or other decisions relating to the
allocations shall be made by the Board of Managers in any manner that
reasonably reflects the purpose and intent of this Operating Agreement.
Allocations pursuant to this Section 4.02 are solely for purposes of
national, state and local taxes and shall not affect, or in any way be
taken into account in computing, any Capital Account or share of Profits
and Losses, other items, or Distributions pursuant to any provision of this
Operating Agreement.
(d) Determination of Allocable Amounts. For purposes of determining
the Profits and Losses, or any other items of income, gain, loss, or
deduction allocable to any fiscal period, Profits and Losses, and any other
such items shall be determined on a daily, monthly, or other basis, as
determined by the Board
C-6
195
of Managers using any permissible method under section 706 of the Code and
the Treasury Regulations under that section.
(e) Income Tax Consequences. The Members are aware of the income tax
consequences of the allocations made by this Article IV and agree to be
bound by the provisions of this Article IV in reporting their shares of
income, gain, loss, and deductions for income tax purposes.
4.03 Construction. The provisions of this Article IV (and other related
provisions in this Operating Agreement) pertaining to the allocation of items of
Company income, gain, loss, deductions, and credits shall be interpreted
consistently with the Treasury Regulations, and to the extent unintentionally
inconsistent with such Treasury Regulations, shall be deemed to be modified to
the extent necessary to make such provisions consistent with the Treasury
Regulations.
ARTICLE V
DISTRIBUTIONS
5.01 Current Tax Distributions. To the extent permitted by law and
consistent with the Company's obligations to its creditors, the Company shall
make distributions ("Tax Distributions") in accordance with this Section 5.01 on
or before April 15, June 15, September 15 and December 15 of each year. The
aggregate amount of the Tax Distribution made with respect to a given date shall
be the product of (1) the Company's estimated federal taxable income (computed
without taking into account any asset change in value due to the Agreement among
EVI, Inc., Total Logistic Control, LLC, Christiana and C2, Inc. dated
, 1997) for the calendar quarter that includes such date, multiplied by (2)
the sum of (i) the highest corporate federal income tax rate as stated in the
Internal Revenue Code, plus (ii) the highest corporate Wisconsin income tax rate
as stated in Wisconsin law, minus (iii) the product of (i) and (ii). The
aggregate amount of each Tax Distribution shall be distributed to the Members in
proportion to the number of Units held by such Members.
5.02 Other Distributions. At such times and in such form as may be
determined by Member Approval, distributions (in addition to the distributions
described in Sections 5.01 and 5.03) shall be made to the Members in proportion
to the number of Units held by each such Member.
5.03 Amounts Withheld. All amounts withheld pursuant to the Code or any
provision of any state or local tax law with respect to any payment or
distribution to the Members shall be treated as amounts distributed to the
Members pursuant to this Article V for all purposes under this Operating
Agreement.
5.04 Distribution Restrictions. The Company shall make no distribution if,
and to the extent, that after such distribution, the Company would not be able
to pay its debts as they become due in the usual course of business, or the fair
value of the Company's total assets would be less than the sum of its total
liabilities.
ARTICLE VI
MANAGEMENT
6.01 Voting and Decisions. Subject to the provisions of Section 6.02, the
management of the Company shall be vested in a Board of Managers. The initial
Board of Managers shall consist of ( ) ( ) Managers. Each Manager shall
be elected by the vote or written consent of the Members owning at least a
majority of the Units in the Company provided, however, that Christiana
Companies, Inc. and C2, Inc. shall at all times each be entitled to elect,
without the consent of any other Member, a number of Managers that is
proportionate to the number of Units in the Company held by Christiana
Companies, Inc. and C2, Inc., respectively.
6.02 Restriction on Transactions. The following actions shall require
Member Approval:
(a) The authorization or issuance of additional Units except for the
issuance of up to 101 Units to Company management for management incentive
options with five year cliff vesting;
C-7
196
(b) The authorization or payment of any distribution with respect to
Units, except for payment of any distribution that is necessary for C2,
Inc. to fulfill its obligation with respect to Section 5.2 of the agreement
among EVI, Inc., Total Logistic Control, LLC, Christiana and C2, Inc. dated
, 1997;
(c) The direct or indirect purchase or acquisition by the Company or
any Subsidiary of the Company of Units;
(d) The approval of any merger, consolidation or other similar
transaction involving the Company or any subsidiary of the Company or sale
of all or substantially all of the operating assets of the Company or any
subsidiary of the Company in one or more transactions;
(e) The creation of any new direct or indirect Subsidiary of the
Company;
(f) The making of any tax election;
(g) The liquidation or dissolution of the Company or any Subsidiary of
the Company;
(h) Any transaction between the Company or any Subsidiary of the
Company and any affiliate of a Member (other than a transaction between the
Company and a Subsidiary of the Company);
(i) The payment of any compensation to any Member or any affiliate of
a Member or the entering into any employee benefit plan or compensatory
arrangement with or for the benefit of any Member or affiliate of any
Member except as permitted under Section 6.18;
(j) Any amendment to this Operating Agreement or the Certificate; and
(k) Any other matter for which Member Approval is required under the
Act.
6.03 Regular Meetings. A regular meeting of the Managers shall be held
without other notice other than this Operating Agreement [INSERT TIME AND
PLACE]. The Board of Managers may provide, by resolution, the time and place,
either within or without the State of Delaware, for the holding of additional
regular meetings without other notice than such resolution. An annual meeting of
Members shall be held without notice other than this Operating Agreement [INSERT
TIME AND PLACE].
6.04 Special Meetings. Special meetings of the Board of Managers or
Members may be called at the request of any two Managers or any Member. The
person or persons authorized to call special meetings of the Board of Managers
may fix any place, either within our without the State of Delaware, as the place
for holding any special meeting of the Board of Managers called by them.
6.05 Quorum.
(a) Managers. A majority of the number of Managers shall constitute a
quorum for the transaction of business at any meeting of the Board of
Managers, but if less than such majority is present at a meeting, a
majority of the Board of Managers or Members present may adjourn the
meeting from time to time without further notice.
(b) Members. All Members shall be required to be present to constitute
a quorum for the transaction of business of a meeting of the Members. A
Member may not unreasonably fail to attend a meeting of Members where such
failure would cause irreparable damage to the Company, its business or its
assets.
6.06 Notice. Notice of any special meeting shall be given at least five
business days prior thereto by written notice delivered personally or mailed to
each Manager at his business address, or by telegram; provided, however,
telephonic meetings may be called on only two business days' notice. If mailed,
such notice shall be deemed to be delivered when deposited in the United States
mail, so addressed, with postage thereon prepaid. If notice is given by
telegram, such notice shall be deemed to be delivered when the telegram is
delivered to the telegraph company. Any Manager or Member may waive notice of
any meeting. The attendance of a Manager or Member at a meeting shall constitute
a waiver of notice of such meeting, except
C-8
197
where a Manager or Member attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Managers need be specified in the notice or
waiver of notice of such meeting.
6.07 Manner of Acting. The act of the majority of the Managers present at
a meeting at which a quorum is present shall be the act of the Board of Managers
("Manager Approval").
6.08 Vacancies. Subject to the provisions of Section 6.01 hereof, any
vacancy occurring in the Board of Managers shall be filled by the affirmative
vote of a majority of the remaining Managers through less than a quorum of the
Board of Managers. A Manager elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office.
6.09 Presumption of Assent. A Manager of the Company who is present at a
meeting of the Board of Managers at which action on any corporate matter is
taken shall be presumed to have assented to the action taken unless such
Manager's dissent shall be entered into the minutes of the meeting or unless
such Manager shall file his or her written dissent to such action with the
person acting as the secretary of the meeting before the adjournment thereof or
shall forward such dissent by registered mail to the secretary of the Company
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a Manager who voted in favor of such action.
6.10 Resignation of Manager. A Manager may resign from his or her position
as a Manager at any time by notice to the Board of Managers. Such resignation
shall become effective as set forth in such notice.
6.11 Action Without Meeting. Any action required or permitted by this
Operating Agreement or by law to be taken at a meeting of the Board of Managers
or by the Members may be taken without a meeting if a written consent or
consents, describing the action so taken, is signed by all of the Managers or
Members, respectively, entitled to vote with respect to the subject matter
thereof and delivered to the Company for inclusion in the Company's records.
6.12 Telephonic Meetings. Except as herein provided and notwithstanding
any place set forth in the notice of the meeting or this Operating Agreement,
Members, Board of Managers and any committees thereof may participate in regular
or special meetings by, or through the use of, any means of communication by
which (a) all participants may simultaneously hear each other, such as by
conference telephone, or (b) all communication is immediately transmitted to
each participant, and each participant can immediately send messages to all
other participants. If a meeting is conducted by such means, then at the
commencement of such meeting, the presiding person shall inform the
participating Managers and Members that a meeting is taking place at which
official business may be transacted. Any participants in a meeting by such means
shall be deemed present in person at such meeting. Notwithstanding the
foregoing, no action may be taken at any meeting held by such means on any
particular matter, which the presiding person determines, in his or her sole
discretion, to be inappropriate under the circumstances for action at a meeting
held by such means. Such determination shall be made and announced in advance of
such meeting.
6.13 Reliance by Third Parties. Any person dealing with the Company, other
than a Member, may rely on the authority of the Board of Managers and any
officer of the Company in taking any action that is in the name of the Company
without inquiry into the provisions of this Operating Agreement or compliance
therewith. Every instrument purporting to be the action of the Company and
executed by the Board of Managers or any officer of the Company shall be
conclusive evidence in favor of any person relying thereon or claiming
thereunder that, at the time of delivery thereof, this Operating Agreement was
in full force and effect and that the execution and delivery of that instrument
is duly authorized by the Company.
6.14 Filing of Documents. The Board of Managers shall file or cause to be
filed all certificates or documents as may be determined by the Board of
Managers to be necessary or appropriate for the formation, continuation,
qualification, and operation of a limited liability company in the State of
Delaware and any other state in which the Company may elect to do business. To
the extent that the Board of Managers determines the action to be necessary or
appropriate, the Board of Managers shall do all things to maintain the Company
C-9
198
as a limited liability company under the laws of the State of Delaware and any
other state in which the Company may elect to do business.
6.15 Limitation on Liability; Indemnification. No Manager, Member or
officer of the Company shall be liable, responsible, or accountable in damages
or otherwise to the Members or the Company for any act or omission in connection
with the business of the Company if the officer acted (i) in good faith and in a
manner he or she reasonably believed to be within the scope of the authority
granted to him or her by this Operating Agreement and (ii) in the best
interests, or not opposed to the best interests, of the Company; provided that
the Manager or officer shall not be relieved from liability for any claim, issue
or matter as to which the officer shall have been finally adjudicated to have
committed fraud or willful misconduct. Subject to this limitation in the case of
such adjudication of liability, the Company shall indemnify the Managers, to the
fullest extent permitted under the Act, against any losses, judgements,
liabilities, and expenses (including, without limitation, reasonable attorney's
fees) incurred by reason of any act or omission in connection with the business
of the Company.
6.16 Delegation to Members or Representatives of Members. The Board of
Managers may, from time to time, fill the offices of president, vice president,
secretary and treasurer. The Board of Managers may appoint such other officers
and assistant officers as they deem necessary. Unless the Board of Managers
decide otherwise, if the title is one commonly used for officers of a business
corporation, the assignment of such title shall constitute the delegation of the
authority and duties that are normally associated with that office, as set forth
below, subject to any specific delegation of authority and duties made pursuant
to the first sentence of this Section 6.16. Any number of titles may be held by
the same person. Any delegation pursuant to this Section 6.16 may be revoked at
any time by the Board of Managers. Any person so delegated under this Section
6.16 shall not be considered a "manager" as defined in Section 18.101(10) of the
Act.
(a) President. The President shall be the principal executive officer
of the Company and, subject to the direction of the Board of Managers,
shall in general supervise and control the day-to-day operations of the
Company. The President shall preside at all meetings of the Board of
Managers. He or she shall have authority, subject to the terms of this
Operating Agreement and such rules as may be prescribed by the Board of
Managers, to appoint such agents and employees of the Company as he or she
shall deem necessary, to prescribe their powers, duties and compensation,
and to delegate authority to them. Such agents and employees shall hold
office at the discretion of the President. He or she shall have authority
to sign, execute, and acknowledge, on behalf of the Company, all deeds,
mortgages, bonds, stock certificates, contracts, leases, reports, and all
other documents or instruments necessary or proper to be executed in the
course of the Company's regular business, or which shall be authorized by
resolution of the Board of Managers or Members; and except as otherwise
provided by the Board of Managers, he or she may authorize any Vice
President or other officer or agent of the Corporation to sign, execute,
and acknowledge such documents or instruments in his or her place and
stead. In general, he or she shall perform all duties incident to the
office of the President and such other duties as may be prescribed by the
Board of Managers from time to time.
(b) The Vice President. In the absence of the President or in the
event of the President's death, inability or refusal to act, or in the
event for any reason it shall be impracticable for the President to act
personally, the Vice President (or in the event there be more than one vice
President, the Vice Presidents in the order designated by the Board of
Managers, or in the absence of any designation, then in the order of their
election or appointment) shall perform the duties of the President, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. Any Vice President shall perform such
other duties and have such authority as from time to time may be delegated
or assigned to him or her by the President or by the Board of Managers. The
execution of any instrument of the Company by any Vice President shall be
conclusive evidence, as to third parties, of his or her authority to act in
the stead of the President.
(c) The Secretary. The Secretary shall (i) keep minutes of the
meetings of the Members and the Board of Managers (and of committees
thereof) in one or more books provided for that purpose (including records
of actions taken by the Members and the Board of Managers); (ii) see that
all notices
C-10
199
are duly given in accordance with the provisions of this Operating
Agreement or as required by the Act; (iii) be custodian of the corporate
records; (iv) maintain a record of the Members of the Company, in a form
that conforms to the requirements of the Act; and (v) in general perform
all duties incidental to the office of Secretary and have such other duties
and exercise such other authority as from time to time may be delegated or
assigned by the President.
(d) The Treasurer. The Treasurer shall (i) have charge and custody of
and be responsible for all funds and securities of the Company; (ii)
maintain appropriate accounting records; (iii) receive and give receipt for
monies due and payable to the Company from any source whatsoever, and
deposit all such monies in the name of the Company in such banks, trust
companies, or other depositories as shall be selected in accordance with
the provisions of this Operating Agreement; and (iv) in general perform all
of the duties incident to the office of Treasurer and have such other
duties and exercise such other authority as from time to time may be
delegated or assigned by the President.
6.17 Time Devoted to Business. The Members and the Managers shall not be
required to devote their full time and efforts to the Company, but only so much
of their time and efforts as is reasonably necessary to perform their duties and
responsibilities to the Company.
6.18 Compensation of Members and Officers. The Board of Managers may
authorize the Company to pay the officers (other than those affiliated with
Lubar & Co., Incorporated) any reasonable fees or other compensation for their
services. Lubar & Co., Incorporated shall be paid an annual management fee of
$250,000.
ARTICLE VII
ASSIGNMENT, TRANSFER AND REPURCHASE OF MEMBER'S UNITS AND DISASSOCIATION
7.01 Assignment and Transfer.
(a) General Restrictions on Transfers. Except as otherwise provided
herein, a Member may not Transfer any Unit without the prior written
consent of the Board of Managers. Any Transfer, attempted Transfer, or
purported Transfer in violation of this Operating Agreement's terms and
conditions shall be null and void. Notwithstanding the foregoing, C2, Inc.
may pledge and assign its interest to Christiana and Christiana may effect
a Transfer of C2, Inc.'s Units pursuant to any action taken with respect to
any security interest granted to it by C2, Inc. Christiana may also
transfer its Units without consent of the Board of Managers if the
transferee is an affiliate of Christiana or C2, Inc. and such party agrees
in writing to be bound by the provisions of this Operating Agreement. At
any time after the [fifth] anniversary of the date of this Operating
Agreement, Christiana may transfer any or all of its Units in the Company
to any person without the prior consent of the Board of Managers, provided,
however, that in order to effect any such Transfer, Christiana must provide
C2, Inc. with a copy of the terms of the proposed transfer (the "Transfer
Notice"). C2, Inc. shall have a right of first refusal to purchase such
Units for the same price and on the same terms set forth in the Transfer
Notice. Such right shall be exercised by C2, Inc. sending an appropriate
notice to Christiana within 60 days after receipt of the Transfer Notice.
The closing shall then be held 30 days after C2, Inc. sends its notice to
Christiana.
(b) Involuntary Transfer.
(i) Notice of Involuntary Transfer. In the event of an Involuntary
Transfer of a Unit, the Transferor or the Involuntary Transferee shall
immediately deliver a Notice of Involuntary Transfer to the Company.
During the 90-day period beginning on the earlier of (i) the date of
receipt by the Company of the Notice of Involuntary Transfer or (ii) the
date that the Company provides a notice to the Involuntary Transferee
and the Members that the Company is aware of the Involuntary Transfer,
the Company shall have the option to purchase the Units that are subject
to the Involuntary Transfer. The purchase price shall be an amount equal
to the book value attributable to those Units, as determined by the
Company's accountants, calculated as of the last day of the calendar
quarter immediately preceding the date of the Involuntary Transfer. The
purchase price
C-11
200
shall be payable pursuant to the terms of payment set forth in the
applicable provisions of Section 7.01(e) below. Notwithstanding the
foregoing, in the case of a Member that is an entity, the option
described above in this Section 7.01(b) shall not apply with respect to
an Involuntary Transfer of Units resulting from a merger of such Member
into another entity if the proportionate interest owned by each person
who owns, directly or indirectly, an ownership interest in such other
entity immediately after the merger is substantially the same as the
proportionate interest owned, directly or indirectly, by such person in
the Member immediately before the merger.
(ii) Acceptance of Offer. The Company shall exercise any such
option by delivering a written notice to the Transferor (if the
Transferor is still in existence) and the Involuntary Transferee within
such 90-day period, which notice shall specify a closing date, occurring
within 30 days after the end of such 90-day period, for the purchase by
the Company.
(iii) Status of Involuntary Transferee. Regardless of whether the
Company exercises such option or closes such purchase, the Involuntary
Transferee shall not be considered to be a Member, for any period of
time, as a result of the Involuntary Transfer (and the rights of the
Involuntary Transferee shall be as described in Section 7.01(c)), unless
all the Nontransferring Members have delivered (within such 90-day
period) their written consent, which consent may be withheld in the sole
and absolute discretion of the Nontransferring Members, to treating the
Involuntary Transferee as a Member.
(c) Effect of Transfers. Until an Involuntary Transferee is considered
a Member, if ever, pursuant to the applicable provisions of this Article
VII, the Units transferred to an Involuntary Transferee shall be considered
in all respects as Units held by the Transferor for purposes of this
Operating Agreement except for those provisions relating to the economic
rights associated with such Units, the nonmanagement provisions of which
will apply to the Involuntary Transferee as though the Involuntary
Transferee held the Units. Except as otherwise provided in this Operating
Agreement, any actions that a Member takes or would be entitled to take
with respect to Units, including, without limitation, votes, consents,
offers, sales, purchases, options, or other deeds taken pursuant to this
Operating Agreement, shall be taken by the Member for its Involuntary
Transferees with respect to the Units held by those Involuntary
Transferees. This Section 7.01(c) shall constitute an irrevocable and
absolute proxy and power of attorney granted by each Involuntary Transferee
to its Transferor to (1) take such actions on behalf of the Involuntary
Transferee without any further deed than the taking of the action by the
Member, and (2) sign any document or instrument evidencing such action for
or on behalf of the Involuntary Transferee relating to the Units held by
the Involuntary Transferee.
(d) Time and Place of Closing. Except as otherwise agreed by the
Company, the closing of any Involuntary Transfer (or purchase by the
Company) pursuant to this Article VII shall occur at the Company's
principal office on such day as the Company shall select pursuant to the
provisions of this Article VII. The Company shall notify the Transferor and
the Involuntary Transferee in writing of the exact date and time of closing
at least 10 days before the closing date.
(e) Transfer and Payment of Purchase Price. At the closing, the
Transferor shall deliver the Units that are subject to the Involuntary
Transfer (or purchase or redemption by the Company) free and clear of any
liens, security interests, encumbrances, charges, or other restrictions
(other than those created pursuant to this Operating Agreement), together
with all such instruments or documents of conveyance as shall be reasonably
required. If not otherwise provided pursuant to this Section 7.01 and the
Notice of Involuntary Transfer, or otherwise agreed, the price for any
Units to be purchased or redeemed by the Company shall be paid by certified
or bank cashier's check.
7.02 Disassociation. A person ceases to be a Member of the Company upon
the occurrence of, and at the time of, any event of disassociation defined under
the Act.
7.03 Restraining Order. In the event that any Member shall at any time
Transfer or attempt to Transfer its Units in violation of the provisions of this
Operating Agreement and any rights hereby granted, then the other Members and
the Company shall, in addition to all rights and remedies at law and in equity,
be
C-12
201
entitled to a decree or order restraining and enjoining such Transfer, and the
offending Member shall not plead in defense thereto that there would be an
adequate remedy at law; it being hereby expressly acknowledged and agreed that
damages at law will be an inadequate remedy for a breach or threatened breach of
the violation of the provisions concerning transfer set forth in this Operating
Agreement.
ARTICLE VIII
DISSOLUTION AND WINDING UP
8.01 Dissolution. The Company shall be dissolved upon the happening of any
of the following:
(a) By Member Approval to dissolve the Company;
(b) The Company being adjudicated insolvent or bankrupt; or
(c) Entry of a decree of judicial dissolution.
8.02 Winding Up and Liquidation. Upon a dissolution of the Company, the
Members shall by Member Approval select a liquidator (the "Liquidator"). The
Liquidator shall liquidate as much of the Company's assets in its discretion,
and shall do so as promptly as is consistent with obtaining fair value for them,
and shall apply and distribute the assets of the Company in accordance with the
following:
(a) First, to the payment and discharge of all of the Company's debts
and liabilities to creditors of the Company regardless of whether they are
Members, including, without limitation, the unpaid principal balance (and
any interest thereon) of any loan made by a Member; and
(b) Second, to the Members in accordance with their Capital Accounts,
after giving effect to all contributions, distributions and allocations for
all periods.
8.03 Compliance With Timing Requirements of Regulations. In the event the
Company is "liquidated" within the meaning of Section 1.704-1(b)(2)(ii)(g) of
the Treasury Regulations, distributions shall be made pursuant to this Article
IX by the end of the fiscal year in which such liquidation occurs, or if later,
within ninety (90) days of such liquidation. Distributions pursuant to the
preceding sentence may be distributed to a trust established for the benefit of
the Members for the purposes of liquidating Company assets, collecting amounts
owed to the Company, and paying any contingent or unforeseen liabilities or
obligations of the Company or of the Members arising out of or in connection
with the Company. The assets of any such trust shall be distributed to the
Members from time to time, in the reasonable discretion of the Members in the
same proportions as the amount distributed to such trust by the Company would
otherwise have been distributed to the Members pursuant to this Operating
Agreement; provided, however, such trust may only be created if the Company has
received an opinion from counsel, which is generally recognized as being capable
and qualified in the area of federal income taxation, that such trust will not
be classified as an association which would be taxed as a corporation for
federal income tax purposes.
ARTICLE IX
BOOKS, REPORTS, ACCOUNTING, AND TAX ELECTIONS
9.01 Books and Records. The Company shall maintain or cause to be
maintained at the Company's principal place of business, complete and accurate
books and records with respect to all Company business and transactions. Such
books and records shall be at all times during normal business hours open to
inspection by any Member. At a minimum, the Company shall keep the following
books and records at the principal place of business of the Company: (a) a list
of the full name(s) and last known business address(es) of each current and
former Member in alphabetical order, setting forth the date on which such person
became a Member and the date, if applicable, on which the person ceased to be a
Member; (b) a copy of the Articles of Organization and all certificates of
amendment, together with executed copies of any powers of attorney pursuant to
which any certificate has been executed; (c) a copy of this Operating Agreement
and all amendments thereto,
C-13
202
including any prior Operating Agreements no longer in effect; (d) copies of the
Company's federal, state, and local income tax returns and reports for the seven
(7) most recent years; (e) copies of any effective written Company agreements
and of any financial statements of the Company for the seven (7) most recent
years; (f) all such other records as may be required by law; and (g) full and
true books of account.
9.02 Fiscal Year and Method of Accounting. The Company's fiscal year for
both tax and financial reporting purposes shall be the calendar year. The method
of accounting for both tax and financial reporting purposes shall be the cash
method, unless otherwise required for tax purposes or if the Board of Managers
determine that there would be a significant advantage to the Company if
different methods were followed.
9.03 Reports and Statements.
(a) Annual Tax Reports. Within ninety (90) days of the end of each
fiscal year of the Company, the Company shall deliver to the Members such
information as shall be necessary for the preparation by the Members of
their federal, state, and local income and other tax returns.
(b) Annual Financial Reports. Within ninety (90) days after the end of
each fiscal year of the Company, the Company shall deliver to the Members
unaudited financial statements of the Company for the just completed fiscal
year, prepared at the expense of the Company, which financial statements
shall set forth, as of the end of and for the preceding fiscal year, the
following:
(1) A profit and loss statement and a balance sheet of the Company;
(2) Members' equity and changes in financial position; and
(3) The balances in the Capital Accounts of each Member.
9.04 Tax Elections.
(a) General. The Members shall have the sole authority through Member
Approval to make or revoke any elections on behalf of the Company for tax
purposes.
(b) Section 754 Election. In the event of a transfer of all or part of
the interest of a Member in the Company, at the request of the transferee,
the Board of Managers may, in its sole discretion, cause the Company to
elect, pursuant to Code Section 754, or the corresponding provision of
subsequent law, to adjust the basis of the Company property as provided by
Code Sections 734 and 743 provided, however, such election shall be made
effective as of the Closing of the transactions contemplated by the
Purchase Agreement.
9.05 Tax Matters Partner. is designated as the "tax matters
partner" of the Company, as provided in regulations pursuant to Code Section
6231 and to perform such duties as are required or appropriate thereunder.
ARTICLE X
MISCELLANEOUS
10.01 Amendments. Except as provided in Section 10.05 hereof, amendments
to this Operating Agreement shall be undertaken and effective only with Member
Approval.
10.02 Bank Accounts. Company funds shall be deposited in the name of the
Company in accounts designated by the Board of Managers and withdrawals shall be
made only by persons duly authorized by the Board of Managers.
10.03 Binding Effect. Except as provided to the contrary, the terms and
provisions of this Operating Agreement shall be binding upon and shall inure to
the benefit of all the Members, their personal representatives, heirs,
successors, and assigns.
10.04 Rules of Construction. The captions in this Operating Agreement are
inserted only as a matter of convenience and in no way affect the terms or
intent of any provision of this Operating Agreement. All
C-14
203
defined phrases, pronouns, and other variations thereof shall be deemed to refer
to the masculine, feminine, neuter, singular, or plural, as the actual identity
of the organization, person, or persons may require. No provision of this
Operating Agreement shall be construed against any party hereto by reason of the
extent to which such party or its counsel participated in the drafting hereof.
10.05 Choice of Law and Severability. This Operating Agreement shall be
construed in accordance with the internal laws of Delaware. If any provision of
this Operating Agreement shall be contrary to the internal laws of Delaware or
any other applicable law, at the present time or in the future, such provision
shall be deemed null and void, but shall not affect the legality of the
remaining provisions of this Operating Agreement. This Operating Agreement shall
be deemed to be modified and amended so as to be in compliance with applicable
law and this Operating Agreement shall then be construed in such a way as will
best serve the intention of the parties at the time of the execution of this
Operating Agreement.
10.06 Counterparts. This Operating Agreement may be executed in one or
more counterparts. Each such counterpart shall be considered an original and all
of such counterparts shall constitute a single agreement binding all the parties
as if all had signed a single document.
10.07 Entire Agreement. This Operating Agreement constitutes the entire
agreement among the Members regarding the terms and operations of the Company,
except for any amendments to this Operating Agreement adopted in accordance with
Section 10.01 hereof. This Operating Agreement and the other agreements referred
to in the preceding sentence supersede all prior and contemporaneous agreements,
statements, understandings, and representations of the parties regarding the
terms and operations of the Company, except as provided in the preceding
sentence.
10.08 Last Day for Performance Other Than a Business Day. In the event
that the last day for performance of an act or the exercise of a right hereunder
falls on a day other than a Business Day, then the last day for such performance
or exercise shall be the first Business Day immediately following the otherwise
last day for such performance or such exercise.
10.09 Notices. All notices, requests, consents, or other communications
provided for in or to be given under this Operating Agreement shall be in
writing, may be delivered in person, by facsimile transmission (fax), by
overnight air courier or by mail, and shall be deemed to have been duly given
and to have become effective (i) upon receipt if delivered in person or by fax,
(ii) one day after having been delivered to an overnight air courier, or (iii)
three days after having been deposited in the mails as certified or registered
matter, all fees prepaid, directed to the parties or their assignees at the
following addresses (or at such other address as shall be given in writing by a
party hereto):
If to the Company, to the Board of Managers at:
Total Logistic Control, LLC
700 North Water Street
Suite 1200
Milwaukee, Wisconsin 53202
Attention: William T. Donovan
(414) 291-9000
If to a Member, to the intended recipient at the Member's most recent
address as reflected in the Company's records.
10.10 Title to Property; No Partition.
All real and personal property owned by the Company shall be owned by it as
an entity and no Member shall have any ownership interest in such property in
its individual right or name, and each Member's Units represented thereby shall
be personal property.
C-15
204
ARTICLE XI
GLOSSARY
In this Operating Agreement, the following terms shall have the meanings
indicated below, and any derivations of these terms shall have correlative
meanings:
"Act" means the Delaware Limited Liability Company Act in its form as of
the date of this Operating Agreement.
"Affiliate" means any of the following persons or entities: (i) any person
directly or indirectly controlling, controlled by, or under common control with
the person in question; (ii) any person owning any interest in the person in
question; (iii) any officer, director, employee, or partner of the person in
question; and (iv) if the person in question or any partner of the person in
question is an officer, director, or partner, any company for which such person
in question or any partner of the person in question acts in any such capacity.
"Board of Managers" means the management body of the Company acting on
behalf of the Members pursuant to Section 6.01.
"Business Day" means a day other than a Saturday, Sunday, or a legal
holiday on which federally chartered banks in the United States of America are
generally closed for business.
"Capital Account" means the separate account maintained for each Member
pursuant to Section 3.06 hereof.
"Christiana" means Christiana Companies, Inc. and its permitted successors
and assigns.
"Code" means the Internal Revenue Code of 1986, and any successor
provisions or codes thereto.
"Company" means Total Logistic Control, LLC.
"Depreciation" means, for each fiscal year or other period, an amount equal
to the depreciation, amortization, or other cost recovery deduction allowable
with respect to an asset for such year or other period, except that if the Value
of an asset differs from its adjusted basis for federal income tax purposes at
the beginning of such year or other period, Depreciation shall be an amount
which bears the same ratio to such beginning Value as the federal income tax
depreciation, amortization, or other cost recovery deduction for such year or
other period bears to such beginning adjusted tax basis.
"Involuntary Transfer" means a Transfer of a Unit due to the bankruptcy of
a Member under applicable federal law.
"Involuntary Transferee" means any person receiving an interest in Units
due to the bankruptcy of a Member under applicable federal law pursuant to
Section 7.01(b).
"Liquidator" means the person selected as such by the Member pursuant to
Section 8.02 hereof.
"Manager" means an individual serving on the Board of Managers.
"Manager Approval" means an act of a majority of the Board of Managers
pursuant to Section 6.07.
"Member" means the parties executing this Operating Agreement or any Member
admitted pursuant to Section 2.02 or any Transferee permitted to become a Member
pursuant to Section 7.01.
"Member Approval" means the unanimous vote or written consent of the
Members.
"Nontransferring Members" means, with respect to a Transfer of Units, all
persons (other than the Transferor) who are Members immediately prior to such
Transfer.
"Notice of Involuntary Transfer" means the written notice to be sent by a
Transferor or an Involuntary Transferee to the Company pursuant to Article VII
describing the event giving rise to the Involuntary Transfer; the date upon
which the Transfer occurred; the reason or reasons for the Transfer; the name,
address and capacity of the Involuntary Transferee; and the number of Units
involved.
C-16
205
"Profits and Losses" means, for each fiscal year or other period, an amount
equal to the Company's taxable income or loss for such year or period,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss, or deduction required to be stated separately pursuant to
Code Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
i. Any income of the Company that is exempt from federal income tax
and not otherwise taken into account in computing Profits or Losses
pursuant to this definition shall be added to such taxable income or loss;
ii. Any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant
to Section 1.704-1(b)(2)(iv)(i) of the Treasury Regulations, and not
otherwise taken into account in computing Profits or Losses pursuant to
this definition, shall be subtracted from such taxable income or loss;
iii. Gain or loss resulting from any disposition of Company property
with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Value of the property
disposed of, notwithstanding that the adjusted tax basis of such property
differs from its Value;
iv. In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such fiscal year or
other period hereof; and
v. Notwithstanding any other provision of this definition, any items,
which are specially allocated pursuant to Section 4.02 hereof shall not be
taken into account in computing Profits or Losses.
"Sale" (or "Sell") means a sale, transfer, financing, refinancing,
condemnation, or other disposition by the Company of all or any portion of its
assets.
"Subsidiary" means any corporation, partnership, limited partnership,
association, limited liability company or other business entity.
"Tax Matters Partner" means the person designated in Section 9.05 as
provided in regulations pursuant to Code Section 6231.
"Transfer" means, with respect to a Unit, to voluntarily sell, give,
assign, bequeath, pledge or otherwise encumber, divest, dispose of, or transfer
direct ownership of all, any part of, or any interest in the Unit, but does not
include a change in control of any Member or any affiliate thereof.
"Transferor" means a Member who Transfers, or proposes to Transfer, any of
its Units pursuant to the terms of Article VII.
"Treasury Regulations" means the Federal Income Tax Regulations promulgated
under the Code, as such Regulations may be amended from time to time. All
references herein to specific sections of the Treasury Regulations shall be
deemed also to refer to any corresponding provisions of succeeding Treasury
Regulations, and any References to Temporary Regulations shall be deemed also to
refer to any corresponding provisions of final Treasury Regulations.
"Unit" or "Units" means the basis by which a Member's ownership interest in
the Company issued pursuant to Section 3.01(a) or (b) is measured.
"Value" means, with respect to any asset, the assets adjusted basis for
federal income tax purposes, except as follows:
(a) The initial Value of any asset contributed by a Member to the Company
shall be the gross fair market value of such asset, as determined by the
Members;
vi. The Values of all Company assets shall be adjusted to equal their
respective gross fair market values, as determined by the Members as of the
following times: (A) the acquisition of any additional interest in the
Company by any new or existing Member in exchange for more than a de
minimis capital contribution; (B) the distribution by the Company to a
Member of more than a de minimis amount of
C-17
206
Company property, unless all Members receive simultaneous distributions of
undivided interests in the distributed property in proportion to their
interests in the Company; and (C) the termination of the Company for
federal income tax purposes pursuant to Code Section 708(b)(1)(B); and
vii. If the Value of an asset has been determined or adjusted pursuant
to (i) or (ii) above, such Value shall thereafter be adjusted by the
Depreciation taken into account with respect to such asset for purposes of
computing Profits and Losses.
IN WITNESS WHEREOF, the undersigned have caused this Operating Agreement to
be executed as of the day and year first above written.
CHRISTIANA COMPANIES, INC.
By:
------------------------------------
William T. Donovan, President
C2, INC.
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
C-18
207
EXHIBIT A
MEMBER UNITS
------ -------
C2, Inc..................................................... 666.667
700 North Water Street
Suite 1200
Milwaukee, Wisconsin 53202
Christiana Companies, Inc................................... 333.333
[insert address]
C-19
208
APPENDIX D
[MORGAN STANLEY LETTERHEAD]
December 15, 1997
Board of Directors
EVI, Inc.
4400 Post Oak Parkway
5 Post Oak Park
Suite 1760
Houston, TX 77027-3415
Gentlemen:
We understand that EVI, Inc. ("EVI"), Christiana Acquisition, Inc., a
wholly owned subsidiary of EVI ("Sub"), Christiana Companies, Inc.
("Christiana"), and C2, Inc., ("C2"), propose to enter into an Agreement and
Plan of Merger, substantially in the form of the draft dated December 12, 1997
(the "Merger Agreement"), which provides, among other things, for the merger
(the "Merger") of Sub with and into Christiana. Pursuant to the Merger,
Christiana will become a wholly owned subsidiary of EVI and each issued and
outstanding share of common stock, par value $1.00 per share, of Christiana,
other than shares held directly or indirectly by Christiana, (the "Christiana
Common Stock"), will be converted into the right to receive (i) .75876 of a
share of common stock, par value $1.00 per share, of EVI (the "EVI Common
Stock") and (ii) a certain cash amount per share determined pursuant to a
certain formula set forth in the Merger Agreement (the "Cash Consideration"). In
addition, $10,000,000 of the Cash Consideration will be held back for a period
of 5 years with respect to certain indemnity obligations of C2 and Total
Logistic Control, LLC ("Logistic").
We further understand that in a separate but related transaction, EVI,
Christiana, C2 and Logistic, propose to enter into an Agreement, substantially
in the form of the draft dated December 12, 1997 (the "Logistic Agreement" and
together with the Merger Agreement, the "Agreements"), which provides, among
other things, as a condition to the Merger, for the sale by Christiana to C2 of
667 Membership Units (two-thirds of the outstanding interest) in Logistic for
$10,666,667 in cash and the assumption by C2 of certain Assumed Liabilities (as
defined in the Logistic Agreement) (the "Logistic Sale"). In addition, the
Logistic Agreement also provides for the indemnification by C2 and Logistic of
EVI and Christiana and certain other parties in certain circumstances. The terms
and conditions of the Merger and the Logistic Sales are more fully set forth in
the Agreements.
You have asked for our opinion as to whether the consideration to be paid
by EVI pursuant to the Merger Agreement is fair from a financial point of view
to EVI.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of EVI and Christiana;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning EVI, Christiana and Logistic
prepared by the managements of EVI, Christiana and Logistic, respectively;
(iii) analyzed certain financial projections concerning EVI,
Christiana and Logistic prepared by the managements of EVI, Christiana and
Logistic, respectively;
D-1
209
(iv) discussed the past and current operations and financial condition
and the prospects of EVI, Christiana and Logistic with senior executives of
EVI, Christiana and Logistic, respectively;
(v) analyzed the pro forma impact of the Merger on EVI's earnings per
share;
(vi) reviewed the reported prices and trading activity for EVI Common
Stock and Christiana Common Stock;
(vii) reviewed the Agreements and certain related documents;
(viii) reviewed a certain draft letter provided to Logistic by Arthur
Andersen LLP, regarding the tax treatment of the Merger;
(ix) discussed and reviewed with Fulbright & Jaworski L.L.P. the
results of their legal and environmental due diligence; and
(x) performed other such analysis and considered such other factors as
we have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial projections, we have assumed that
they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial performance of EVI,
Christiana and Logistic. We have not made any independent valuation or appraisal
of the assets or liabilities of EVI, Christiana or Logistic, except, that we
have received the draft letter of Arthur Andersen LLP referred to in paragraph
(viii) above and the verbal report concerning certain legal and environmental
due diligence analyses performed by Fulbright & Jaworski L.L.P. referred to in
paragraph (ix) above and we have relied, without independent verification, upon
such items for purposes of this opinion. In addition, we have assumed the
Logistic Sale will be consummated prior to or simultaneously with the Merger and
that the Merger will be consummated in accordance with the terms set forth in
the Merger Agreement including that all material conditions to closing have been
satisfied and not waived. We have also assumed that the Merger shall qualify as
a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended. In arriving at our opinion, we were not authorized to
consider, and did not consider, any alternative transaction or transaction
structure. Our opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to us as of, the
date hereof.
It is understood that this letter is for the information of the Board of
Directors of EVI and may not be used for any other purpose without our prior
written consent, provided however that we consent to the inclusion of our
opinion in any filing made by EVI with the Securities and Exchange Commission in
connection with the Merger. In addition, we provide no advice or opinion as to
how holders of EVI Common Stock should vote at the shareholders' meeting held in
connection with the Merger.
We have been engaged solely to provide this opinion to the Board of
Directors of EVI in connection with this transaction and will receive a fee for
our services. In the past, Morgan Stanley & Co. Incorporated and its affiliates
have provided financial advisory and financing services for EVI and have
received fees for the rendering of these services.
D-2
210
Based on and subject to the foregoing, we are of the opinion on the date
hereof that the consideration to be paid by EVI pursuant to the Merger Agreement
is fair from a financial point of view to EVI.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ STEPHEN M. TRAUBER
-------------------------------------------
Stephen M. Trauber
Principal
D-3
211
APPENDIX E
[PRUDENTIAL SECURITIES LETTERHEAD]
PRIVATE AND CONFIDENTIAL
December 24, 1997
The Board of Directors
Christiana Companies, Inc.
Suite 3380
777 E. Wisconsin Avenue
Milwaukee, Wisconsin 53202-5302
Members of the Board:
We understand that Christiana Companies, Inc., a Wisconsin corporation (the
"Company" or "CST"), EVI, Inc., a Delaware corporation ("EVI"), Christiana
Acquisition Inc., a Wisconsin corporation and a wholly-owned subsidiary of EVI
(the "Acquisition Sub"), and C2, Inc., a Wisconsin Corporation ("C2") and a
wholly owned subsidiary of Lubar & Co. Incorporated ("Lubar"), have entered into
an Agreement and Plan of Merger dated December 12, 1997 (the "Agreement").
Pursuant to the Agreement, the Acquisition Sub shall merge with and into CST
(the "Merger"). In the Merger, each outstanding share of CST common stock, par
value $1.00 per share (the "CST Common Stock"), will be converted into the right
to receive a number of shares of EVI common stock, par value $1.00 per share
(the "EVI Common Stock") and certain cash payments (the "Cash Payment"). The
number of shares of EVI Common Stock and the amount of the Cash Payment payable
pursuant to the Merger are each determined pursuant to the provisions of section
1.7 of the Agreement. The Agreement is conditioned upon, among other matters,
the sale by CST of two-thirds of its interest in Total Logistic Control, LLC, a
Delaware Limited Liability Company and a wholly-owned subsidiary of CST ("TLC"),
to C2 for $10,666,667 in cash (the "Acquisition"), pursuant to an Acquisition
Agreement (the "Acquisition Agreement"). In addition, we understand that C2 and
Sheldon Lubar, a stockholder of CST, have entered into an agreement dated
December 22, 1997 (the "C2 Agreement") pursuant to which C2 will agree that, at
the election of each and any stockholder of CST, such stockholder may purchase
from C2 a number of shares of C2 common stock, par value $1.00 per share (the
"C2 Common Stock"), representing at least the same proportionate ownership
interest in C2 as such stockholder held in CST immediately prior to the
effective time of the Merger at the same price as the C2 Common Stock will be
acquired by Lubar and its affiliates, by applying a portion of the Cash Payment
they will receive pursuant to the Merger (the "C2 Optional Purchase" and
together with the Acquisition and the Merger, the "Transaction"). We understand
further that C2 will agree that each stockholder of CST at the effective time of
the Merger will be a beneficiary of the C2 Agreement for the purpose of
enforcing such stockholder's rights thereunder.
You have requested our opinion as to the fairness of the Transaction from a
financial point of view to the stockholders of the Company.
In conducting our analysis and arriving at the opinion expressed herein, we
have reviewed such materials and considered such financial and other factors as
we deemed relevant under the circumstances, including:
(i) The Agreement, the C2 Agreement and a draft of the Acquisition
Agreement dated December 12, 1997;
(ii) certain publicly-available historical financial and operating
data concerning the Company, including, but not limited to, (a) the Annual
Report to Shareholders and Annual Report on Form 10-K for the fiscal year
ended June 30, 1997, (b) the Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997, and (c) the Proxy Statement for the Annual
Meeting of Shareholders held on October 29, 1996; and certain financial
pro-forma financial data prepared by CST management;
E-1
212
(iii) certain publicly-available historical financial and operating
data for EVI including, but not limited to, (a) the Annual Report on Form
10-K for the fiscal year ended December 31, 1996, (b) the Quarterly Report
on Form 10-Q for the quarter ended September 30, 1997, and (c) Proxy
Statement for the Meeting of Stockholders held on May 6, 1997;
(iv) certain information relating to TLC, including historical
financial data for the fiscal years ended June 30, 1993 through June 30,
1997, and the quarters ended September 30, 1997 and September 30, 1996,
provided by the management of TLC;
(v) certain information relating to TLC, including financial forecasts
for the fiscal years ending June 30, 1998 through June 30, 2002, prepared
by the management of TLC;
(vi) publicly available financial, operating and stock market data
concerning certain companies engaged in businesses we deemed comparable to
TLC or otherwise relevant to our inquiry;
(vii) the financial terms of certain recent transactions we deemed
relevant to our inquiry;
(viii) the historical stock prices and trading volumes of CST Common
Stock and EVI Common Stock; and
(ix) such other financial studies, analyses and investigations that we
deemed appropriate.
We have assumed, with your consent, that the draft of the Acquisition
Agreement which we reviewed (as referred to above) will conform in all material
respects to the document when in final form.
We have met with members of the senior management of the Company and TLC to
discuss (i) the prospects for the Company's business, (ii) their estimates of
the future financial performance of the Company, (iii) the financial impact of
the Merger on CST and (iv) such other matters that we deemed relevant. We have
also visited selected CST and TLC facilities.
In connection with our review and analysis and in arriving at our opinion,
we have relied upon the accuracy and completeness of the financial and other
information provided to us by the Company and by TLC, and have not undertaken
any independent verification of such information or any independent valuation or
appraisal of any of the assets or liabilities of the Company or TLC. With
respect to the financial forecasts provided to us by the Company for the Company
and by TLC for TLC, we have assumed that such forecasts (and the assumptions and
bases therefor) have been reasonably prepared and represent the respective
management's best currently available estimate as to the future financial
performance of the Company and TLC. Our opinion assumes that: (i) the Merger
will qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended; (ii) neither CST nor the Acquisition
Sub will recognize any gain or loss for federal income tax purposes as a result
of the receipt by EVI of CST Common Stock in exchange for EVI Common Stock in
the Merger; (iii) the holders of CST Common Stock will not recognize any gain or
loss for federal income tax purposes as a result of the receipt of EVI Common
Stock as partial consideration for their CST Common Stock in the Merger and we
have assumed that such taxes are the only relevant taxes for purposes of this
Opinion other than taxes which may be applicable to the Cash Payment and the C2
Optional Purchase.
For purposes of our opinion, we have assumed that the stockholders of CST
at the effective time of the Merger will be legally entitled to compel
performance by C2 of the C2 Agreement in accordance with its terms in a legal
proceeding brought by such stockholders and we have further assumed that the C2
Agreement will not be amended or modified.
Our engagement by the Company was limited to reviewing the financial terms
of the transactions described herein, and accordingly, our opinion does not
address nor should it be construed to address the relative merits of the
Transaction or alternative business strategies that may be available to the
Company. In addition, this option does not in any manner address the prices at
which EVI Common Stock or C2 Common Stock will trade following consummation of
the Merger. Further, our opinion is necessarily based on economic, financial and
market conditions as they exist and can only be evaluated as of the date hereof.
E-2
213
As you know, we have been retained by the Company to render this opinion in
connection with the Merger and will receive a fee for such services, the
majority of which fee is contingent upon the consummation of the Merger. In the
ordinary course of business we may actively trade the shares of CST Common Stock
and EVI Common Stock for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
This letter and the opinion expressed herein are for the use of the Board
of Directors of the Company. This opinion does not constitute a recommendation
to the stockholders of the Company as to how such stockholders should vote in
connection with the Merger or as to any other action such stockholders should
take regarding the Merger. This opinion may not be reproduced, summarized,
excerpted from or otherwise publicly referred to or disclosed in any manner,
without our prior written consent; except that the Company may include this
opinion in its entirety (a) in any proxy statement, or information statement
relating to the Merger sent to the Company's stockholders or (b) in a
registration statement filed under the Securities Act of 1933 with respect to
the C2 Common Stock to be issued pursuant to the C2 Optional Purchase.
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Transaction is fair to the stockholders of the Company from
a financial point of view.
Very truly yours,
/s/ PRUDENTIAL SECURITIES INCORPORATED
------------------------------------------
PRUDENTIAL SECURITIES INCORPORATED
E-3
214
APPENDIX G
[AMERICAN APPRAISAL ASSOCIATES LETTERHEAD]
December 1, 1997
Boards of Directors
Christiana Companies, Inc.
EVI, Inc. and
C2, Inc.
This letter is furnished at the request of Christiana Companies, Inc.
("CST") regarding the proposed restructuring (the "Restructuring") of Total
Logistic Control, LLC ("TLC").
OVERVIEW
We understand that CST currently holds 100% of the member interests of TLC
(the "TLC Member Interest"). Pursuant to the Restructuring, CST intends to sell
two-thirds ( 2/3) of its TLC Member Interest to a new company, C2, Inc. ("C2").
We also understand that as part of the Restructuring, CST has a put exercisable
after five years from the Restructuring (the "Put") to sell its remaining
one-third TLC Member Interests to C2.
As part of the Restructuring, TLC intends to enter into a $65.0 million
revolving line of credit (the "Revolver" or "the Financing") with a group of
banks led by Firstar Bank Milwaukee, N.A. (Firstar Bank Milwaukee, N.A. and the
banks collectively referred to herein as "the Banks"). We understand that the
Financing will be used to refinance (the "Refinancing") existing debt of TLC,
and as part of the Restructuring, TLC will pay a $20.0 million dividend (the
"Dividend") to CST and repay a $3.0 million subordinated note to CST (the
"Subordinated Note"), thereby drawing an additional $23.0 million on the
Revolver over and above the amount needed for the Refinancing.
We understand that there will be a number of other transactions involving
CST as well as CST and EVI, Inc. ("EVI") which are not a part of this Opinion.
The transactions contemplated as a result of the Restructuring, the
Revolver, the Dividend, the Refinancing, the repayment of the Subordinated Note
and the Financing and the payment of related fees and expenses are collectively
referred to as the "Transaction".
SOLVENCY TESTS AND DEFINITIONS
In connection with the Transaction, you have requested that we render a
written opinion (the "Opinion") addressed to the Board of Directors of CST and
EVI and C2, as to whether, assuming the Transaction has been consummated
substantially as proposed after, and giving effect to, the consummation of the
Transaction:
(a) The fair value of the aggregate assets of TLC will exceed its
respective total liabilities (including, without limitation, subordinated,
unmatured, unliquidated, disputed and contingent liabilities);
(b) The present fair saleable value of the aggregate assets of TLC
will be greater than its respective probable liabilities on its debts as
such debts become absolute and matured;
(c) TLC will be able to pay its respective debts and other
liabilities, including contingent liabilities and other commitments, as
they mature; and
(d) TLC will not have unreasonably small capital for the business in
which it is engaged, as managements of TLC and CST have indicated such
business is now conducted and proposed to be conducted following the
consummation of the Transaction.
G-1
215
For purposes of the Opinion, the following terms will have meanings set
forth below:
(1) "Fair value" means the amount at which the aggregate assets would
change hands between a willing buyer and a willing seller, within a
commercially reasonable period of time, each having reasonable knowledge of
the relevant facts, neither being under any compulsion to act, with equity
to both;
(2) "Present fair saleable value" means the amount that may be
realized if the aggregate assets are sold with reasonable promptness in an
arm's-length transaction under present conditions in a current market for
the sale of assets of a comparable business enterprise;
(3) "Contingent liabilities" of TLC means the maximum estimated amount
of contingent liabilities which contingent liabilities have been identified
to us by responsible officers and employees of TLC and CST, their
respective accountants and financial advisors, and such other experts as we
deemed necessary to consult, and valued by AAA after consultation with
responsible officers and employees of TLC and CST, and/or such industry,
economic and other experts as we deemed necessary to consult (the valuation
of contingent liabilities to be computed in light of all of the facts and
circumstances existing at the time of such valuation as an amount that can
reasonably be expected to become an actual or matured liability), which
contingent liabilities may not meet the criteria for accrual under
Statement of Financial Accounting Standards No. 5 and therefore may not be
recorded as liabilities under Generally Accepting Accounting Principles
("GAAP");
(4) "Able to pay its debts as they mature" means that assuming the
Transaction has been consummated as proposed (and taking into consideration
additional borrowing capacity under TLC's Revolver) during the period
covered July 1, 1997 through June 30, 2002 covered by the financial
projections faxed to American Appraisal Associates, Inc. on November 17,
1997 and prepared by CST and TLC management (the "Financial Projections"),
TLC will have positive cash flow after paying its scheduled anticipated
indebtedness; the realization of current assets in the ordinary course of
business will be sufficient to pay recurring current debt, short-term debt,
long-term debt service and other contractual obligations, including
contingent liabilities, as such obligations mature; and the cash flow will
be sufficient to provide cash necessary to repay TLC's long-term
indebtedness as such debt matures; and
(5) "Will not have unreasonably small capital with which to conduct
its business" means that TLC will not lack sufficient capital for the needs
and anticipated needs for capital of its business, including contingent
liabilities, as management of TLC and CST have indicated it is, and
proposed to be, conducted following the consummation of the Transaction.
No representation is made herein as to the sufficiency of the above
definitions for any purpose; such definitions are used solely for setting forth
the scope of our Opinion.
VALUATION METHODOLOGY
In rendering our Opinion, we have valued the aggregate assets of TLC, on a
going concern basis, immediately after, and giving effect to the Transaction and
the associated indebtedness incurred or remaining outstanding in connection
therewith. The valuation included the aggregate assets of the business of TLC or
total invested capital as represented by the total net working capital, tangible
plant, property and equipment, and intangible assets of the business enterprise.
We believe that this is a reasonable basis to value TLC. Nothing has come to our
attention that causes us to believe that TLC, after the Transaction, is not a
going concern.
The determination of fair value and present fair saleable value was based
on the generally accepted valuation principles used in the market and discounted
cash flow approaches, described as follows:
Market Approach -- Based on correlation of (a) current stock market
prices of publicly held companies whose businesses are similar to that of
TLC and premiums paid over market price by acquirors of total or
controlling ownership in such businesses; and (b) acquisition prices paid
for total ownership positions in business whose lines of business are
similar to that of TLC.
G-2
216
Discounted Cash Flow Approach -- Based on the present value of TLC's
future debt-free operating cash flow as estimated by the management of TLC
contained in the Financial Projections. The present value is determined by
discounting the projected operating cash flow at a rate of return that
reflects the financial and business risks of TLC.
Our Opinion of fair value and present fair saleable value is subject to the
following conditions:
(i) Any sale of TLC, including the underlying assets thereof, will be
completed as the sale of an ongoing business entity;
(ii) A "commercially reasonable period" of time means at least twelve
months for a willing buyer and a willing seller to agree on price and
terms, plus the time necessary to complete the sale of TLC;
(iii) "Reasonable promptness" means a period of time of nine to twelve
months for a willing buyer and a willing seller to agree on price and
terms, plus the time necessary to complete the sale of TLC; and
(iv) In determining the fair value and present fair saleable value of
the assets of TLC, any taxes or transaction costs which may be owed by TLC
as a result of the Transaction, other than those specifically identified in
the Financial Projections were not considered.
While we believe that TLC would be marketable as a separate business
enterprise, we have not been requested to identify, and have not identified,
potential purchasers or to ascertain the actual prices and terms of which TLC
can currently be sold. Furthermore, because the sale of any business enterprise
involves numerous assumptions and uncertainties, not all of which can be
quantified or ascertained prior to engaging in an actual selling effort, we
express no opinion as to whether TLC could actually be sold for amounts we
believe to be equivalent to the fair value and present fair saleable values.
FINANCIAL RESULTS AND PROJECTIONS
In connection with the analysis underlying the Opinion, we were provided
historical and projected operating results (the Financial Projections as
previously defined). In addition to this information, we were provided other
operating data and information all of which has been accepted, without
independent verification, as representing a fair statement of historical and
projected results of TLC, in the opinion of the managements of TLC and CST.
However, in the course of our investigation, nothing has led us to believe that
our acceptance and reliance on such operating data and information was
unreasonable.
Although we have not independently verified the accuracy and completeness
of the Financial Projections and forecasts, or any of the assumptions,
estimates, or judgments referred to therein, or the basis therefore, and
although no assurances can be given that such Financial Projections and
forecasts can be realized or that actual results will not vary materially from
those projected, nothing has come to our attention during the course of our
engagement which led us to believe that any information reviewed by us or
presented to us in connection with our rendering of the Opinion is unreasonable
in any material respect or that it was unreasonable for us to utilize and rely
upon the financial projections, financial statements, assumptions, description
of the business and liabilities, estimates and judgments of the management of
TLC and CST, and their respective counsel, accountants and financial advisors.
Our Opinion is necessarily based on business, economic, market and other
conditions as they currently exist and as they can be evaluated by us at the
date of this Opinion.
CONTINGENT LIABILITIES
In determining the amount that would be required to pay the total
liabilities of TLC as such liabilities become absolute and mature for purposes
of Opinion (b) below, we have applied valuation techniques, including present
value analysis, using appropriate rates over appropriate periods, to the amounts
that will be required from time to time to pay such liabilities and contingent
liabilities as they become absolute and mature based on their scheduled
maturities.
G-3
217
In the course of our investigation of identified contingent liabilities,
the areas brought to our attention by the management of TLC included, but were
not limited to: (i) the adequacy of the corporate safety and insurance program;
(ii) lawsuits or claims filed and or pending against TLC; (iii) environmental
matters; (iv) customer concentration; and (v) liabilities of TLC in connection
with the Agreement and Plan of Merger by and among EVI, Christiana Acquisition
Co., C2 and CST, anticipated to be dated and signed on December 4, 1997 (the
"Merger Agreement"), and the Proposed Agreement among EVI, CST, TLC, and C2
regarding the purchase of TLC Member Interests anticipated to be dated and
signed on December 4, 1997 (the "TLC Acquisition Agreement").
We have determined that reserves for the contingent liabilities have been
made in the pro forma consolidated balance sheet as of September 30, 1997 (the
"Pro Forma Balance Sheet") prepared and furnished to us by the management of
TLC, and provisions for the ongoing expenses related to these issues have been
included with the projection of income and expenses presented in the Financial
Projections, and are considered in our valuation study as ongoing business
operating expenses. We have taken these identified contingent liabilities into
account in rendering our Opinion and have concluded that such liabilities and
ongoing expenses do not require any qualification of our Opinion. Our conclusion
is based on, among other things: (i) our review of various acquisition
transactions, including leveraged transactions and significant debt-financed
recapitalization transactions, involving corporations engaged in businesses
similar to those of TLC; (ii) the opinion of the managements of TLC and CST that
the issues concerning various lawsuits, claims and other identified contingent
liabilities will not have a material adverse effect on the financial position of
TLC; and (iii) our discussions with the managements of TLC and CST, their
accountants, consultants and counsel concerning, and our investigation of, the
various lawsuits, claims and other contingent liabilities identified to us.
We have assumed that as of the effective date of the closing of the
Transaction, the total identified liabilities of TLC will be only those
liabilities set forth in its respective Pro Forma Balance Sheet and incorporated
in the Financial Projections that were prepared by TLC and CST and furnished to
us by the managements of TLC and CST and their financial advisors. In the course
of our investigation, nothing came to our attention which caused us to believe
such assumptions to be unreasonable. The Pro Forma Balance Sheet is the
unaudited Pro Forma Opening Balance Sheet for TLC as of September 30, 1997
reflecting the closing of the Transaction, as reflected in the Financial
Projections and adjusted to give effect to (a) the planned financing of the
Transaction; and (b) the application of the proceeds of the financing and
restated by us to reflect the fair value and present fair saleable value of TLC.
TLC's and CST's management have represented to us, and we have relied on
the representations of the managements of TLC and CST that no adverse changes
have occurred since their preparation which would materially impact the content
of TLC's Pro Forma Balance Sheet and Financial Projections. Nothing has come to
our attention which would lead us to believe our reliance on such
representations to be unreasonable.
OPINION CONDITIONS AND ASSUMPTIONS
We have assumed, without independent verification, that the Pro Forma
Balance Sheet and Financial Projections provided to us have been reasonably
prepared and reflect the best currently available estimates, after the
consummation of the Transaction, of the future financial results and conditions
of TLC, and that there has been no material adverse change in the assets,
financial condition, business or prospects of TLC, since the date of the most
recent financial statements made available to us. Nothing has come to our
attention which would lead us to believe that the foregoing assumption is
unreasonable. Further our Opinion is subject to the following assumptions:
(i) The Transaction is consummated as described herein;
(ii) Pursuant to the terms and conditions of the various financing
documents, the operating cash flow of TLC will be made available and used
to satisfy its obligations as they mature;
G-4
218
(iii) Our opinion of TLC's ability to be able to pay its debts and
other liabilities including contingent liabilities and other commitments,
as they mature, is limited to the period of time of the Financial
Projections;
(iv) Any indebtedness of TLC is permitted to be refinanced in
conformity with common business practice to the extent consistent with
covenants in the various Financing documents;
OPINION DUE DILIGENCE
In connection with our Opinion, we have made such reviews, analyses and
inquiries as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:
(i) Reviewed the Transaction documents including but not limited to
the following: (a) draft of the Credit Agreement among Total Logistic
Control, LLC, as Borrower and Firstar Bank Milwaukee, N.A., as Agent for
the Banks; (b) the Merger Agreement; and (c) the TLC Acquisition Agreement.
(ii) Reviewed the Financial Projections prepared by CST and TLC and
inquired of managements of CST and TLC as to the foundation for any such
projections and the basic assumptions made in the preparation of the
Financial Projections relating to the type of business, geographic markets,
economic conditions, and capital facilities and working capital
requirements;
(iii) Reviewed audited and unaudited historical financial statements
of TLC including income statements, balance sheets and cash flow statements
as provided by management of and their accounting firm:
(iv) Discussed historical and projected operating results and industry
data, including the impact of future trends on the industry and TLC, as
well as the effects of Financing and the Transaction with management of CST
and TLC;
(v) Reviewed internal financial analyses and other internally
generated data with CST and TLC including asset valuations of TLC, if any;
(vi) Inquired of management of CST and TLC as to estimated levels of
cash and working capital to be required by TLC after the Transaction;
(vii) Reviewed certain publicly available economic, financial and
market information as it relates to the business operations of TLC;
(viii) Reviewed information regarding businesses similar to TLC and
investigated the financial terms and post-transaction performance of recent
acquisitions;
(ix) Discussed all of the foregoing information, where appropriate,
with management of CST and TLC and their respective employees and agents;
(x) Met with members of the senior management of CST and TLC, to
discuss the business, properties, past history, results of operations and
prospects of TLC, including discussions of the competitive environment in
which TLC will operate;
(xi) Held discussions with representatives of CST's and TLC's
independent accounting firm, financial advisors and counsel to discuss
certain matters; and
(xii) Conducted such other studies, analyses and investigations as we
deemed relevant or necessary for purposes of the Opinion.
G-5
219
OPINION
Based on the foregoing, and in reliance thereon, it is our opinion as of
this date that, assuming the Transaction has been consummated as proposed,
immediately after giving effect to, the consummation of the Transaction:
(a) The fair value of the aggregate assets of TLC exceed its
respective total liabilities (including, without limitation, subordinated,
unmatured, unliquidated, disputed and contingent liabilities);
(b) The present fair saleable value of the aggregate assets of TLC is
greater than its respective probable liabilities on its debts as such debts
become absolute and matured;
(c) TLC is able to pay its respective debts and other liabilities,
including contingent liabilities and other commitments, as they mature; and
(d) TLC does not have unreasonably small capital for the business in
which it is engaged, as managements of TLC and CST have indicated such
business is now conducted and proposed to be conducted following the
consummation of the Transaction.
It is understood that this Opinion is solely for the information of the
above mentioned addressees, their successors, assignees, participants, title
companies delivering policies or commitments with respect to the Financing and
transferees, and is not to be quoted, or referred to, in whole or in part, in
any written document other than a reference in (i) the filing and disclosure of
the Opinion with the Securities and Exchange Commission (the "SEC") and any
state securities commission or blue sky authority, or other governmental
authority or agency if such filing or disclosure is required pursuant to the
rules and regulations thereof, or required by applicable law in the opinion of
TLC's counsel; (ii) the use or disclosure of the Opinion upon the demand, order
or request of any court, administrative or governmental agency or regulatory
body (whether or not such demand, order or request has the force of law) or as
may be required or appropriate in response to any summons, subpoena, or
discovery requests; (iii) the attachment of this Opinion as an exhibit to the
Transaction documents governing the Financing; (iv) the disclosure of this
Opinion in connection with (A) the Transaction; (B) the prospective sale,
assignment, participation or any other disposition by the Banks or any right of
interest in the Financing; (C) an audit of TLC by an independent public
accountant or any administrative agency or regulation body; or (D) the exercise
of any right or remedy, defense or claim by TLC in any litigation, or any
governmental proceeding or investigation to which TLC is subject or purported to
be subject; (v) the disclosure of the Opinion as may be requested, required or
ordered in, or to protect TLC's interest in, any litigation, governmental
proceeding or investigation to which any of such persons or entities is subject
or purported to be subject; or (vi) the disclosure of the Opinion as otherwise
required by, or reasonably determined by TLC to be required by any law, order,
regulation or ruling to TLC.
Very truly yours,
AMERICAN APPRAISAL ASSOCIATES, INC.
/s/ NANCY M. CZAPLINSKI
------------------------------------
Nancy M. Czaplinski
Assistant Vice President
G-6
220
APPENDIX H
DISSENTERS' RIGHTS PROVISIONS OF THE
WISCONSIN BUSINESS CORPORATION LAW
180.1301 DEFINITIONS. In sec.sec. 180.1301 to 180.1331:
(1) "Beneficial shareholder" means a person who is a beneficial owner of
shares held by a nominee as the shareholder.
(1m) "Business combination" has the meaning given in sec. 180.1130(3).
(2) "Corporation" means the issuer corporation or, if the corporate action
giving rise to dissenters' rights under sec. 180.1302 is a merger or share
exchange that has been effectuated, the surviving domestic corporation or
foreign corporation of the merger or the acquiring domestic corporation or
foreign corporation of the share exchange.
(3) "Dissenter" means a shareholder or beneficial shareholder who is
entitled to dissent from corporate action under sec. 180.1302 and who exercises
that right when and in the manner required by sec.sec. 180.1320 to 180.1328.
(4) "Fair value", with respect to a dissenter's shares other than in a
business combination, means the value of the shares immediately before the
effectuation of the corporate action to which the dissenter objects, excluding
any appreciation or depreciation in anticipation of the corporate action unless
exclusion would be inequitable. "Fair value", with respect to a dissenter's
shares in a business combination, means market value, as defined in
sec. 180.1130(9)(a)1. to 4.
(5) "Interest" means interest from the effectuation date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all of the circumstances.
(6) "Issuer corporation" means a domestic corporation that is the issuer of
the shares held by a dissenter before the corporate action.
180.1302 RIGHT TO DISSENT. (1) Except as provided in sub. (4) and
sec. 180.1008(3), a shareholder or beneficial shareholder may dissent from, and
obtain payment of the fair value of his or her shares in the event of, any of
the following corporate actions:
(a) Consummation of a plan of merger to which the issuer corporation
is a party if any of the following applies:
1. Shareholder approval is required for the merger by sec. 180.1103
or by the articles of incorporation.
2. The issuer corporation is a subsidiary that is merged with its
parent under sec. 180.1104.
(b) Consummation of a plan of share exchange if the issuer
corporation's shares will be acquired, and the shareholder or the
shareholder holding shares on behalf of the beneficial shareholder is
entitled to vote on the plan.
(c) Consummation of a sale or exchange of all, or substantially all,
of the property of the issuer corporation other than in the usual and
regular course of business, including a sale in dissolution, but not
including any of the following:
1. A sale pursuant to court order.
2. A sale for cash pursuant to a plan by which all or substantially
all of the net proceeds of the sale will be distributed to the
shareholders within one year after the date of sale.
(d) Except as provided in sub. (2), any other corporate action taken
pursuant to a shareholder vote to the extent that the articles of
incorporation, bylaws or a resolution of the board of directors provides
H-1
221
that the voting or nonvoting shareholder or beneficial shareholder may
dissent and obtain payment for his or her shares.
(2) Except as provided in sub. (4) and sec. 180.1008(3), the articles
of incorporation may allow a shareholder or beneficial shareholder to
dissent from an amendment of the articles of incorporation and obtain
payment of the fair value of his or her shares if the amendment materially
and adversely affects rights in respect of a dissenter's shares because it
does any of the following:
(a) Alters or abolishes a preferential right of the shares.
(b) Creates, alters or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares.
(c) Alters or abolishes a preemptive right of the holder of shares to
acquire shares or other securities.
(d) Excludes or limits the right of the shares to vote on any matter
or to cumulate votes, other than a limitation by dilution through issuance
of shares or other securities with similar voting rights.
(e) Reduces the number of shares owned by the shareholder or
beneficial shareholder to a fraction of a share if the fractional share so
created is to be acquired for cash under sec. 180.0604.
(3) Notwithstanding sub.(1)(a) to (c), if the issuer corporation is a
statutory close corporation under sec.sec. 180.1801 to 180.1837, a shareholder
of the statutory close corporation may dissent from a corporate action and
obtain payment of the fair value of his or her shares, to the extent permitted
under sub. (1)(d) or (2) or sec. 180.1803, 180.1813(1)(d) or (2)(b), 180.1815(3)
or 180.1829(1)(c).
(4) Except in a business combination or unless the articles of
incorporation provide otherwise, subs. (1) and (2) do not apply to the holders
of shares of any class or series if the shares of the class or series are
registered on a national securities exchange or quoted on the national
association of securities dealers, inc., automated quotations system on the
record date fixed to determine the shareholders entitled to notice of a
shareholders meeting at which shareholders are to vote on the proposed corporate
action.
(5) Except as provided in sec. 180.1833, a shareholder or beneficial
shareholder entitled to dissent and obtain payment for his or her shares under
sec.sec. 180.1301 to 180.1331 may not challenge the corporate action creating
his or her entitlement unless the action is unlawful or fraudulent with respect
to the shareholder, beneficial shareholder or issuer corporation.
180.1303 DISSENT BY SHAREHOLDERS AND BENEFICIAL SHAREHOLDERS. (1) A shareholder
may assert dissenters' rights as to fewer than all of the shares registered in
his or her name only if the shareholder dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he or she asserts
dissenters' rights. The rights of a shareholder who under this subsection
asserts dissenters' rights as to fewer than all of the shares registered in his
or her name are determined as if the shares as to which he or she dissents and
his or her other shares were registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on his or her behalf only if the beneficial shareholder does all of the
following:
(a) Submits to the corporation the shareholder's written consent to
the dissent not later than the time that the beneficial shareholder asserts
dissenters' rights.
(b) Submits the consent under par.(a) with respect to all shares of
which he or she is the beneficial shareholder.
180.1320 NOTICE OF DISSENTERS' RIGHTS. (1) If proposed corporate action
creating dissenters' rights under sec. 180.1302 is submitted to a vote at a
shareholders' meeting, the meeting notice shall state that shareholders and
beneficial shareholders are or may be entitled to assert dissenters' rights
under sec.sec. 180.1301 to 180.1331 and shall be accompanied by a copy of those
sections.
H-2
222
(2) If corporate action creating dissenters' rights under sec. 180.1302 is
authorized without a vote of shareholders, the corporation shall notify, in
writing and in accordance with sec. 180.0141, all shareholders entitled to
assert dissenters' rights that the action was authorized and send them the
dissenters' notice described in sec. 180.1322.
180.1321 NOTICE OF INTENT TO DEMAND PAYMENT. (1) If proposed corporate action
creating dissenters' rights under sec. 180.1302 is submitted to a vote at a
shareholders' meeting, a shareholder or beneficial shareholder who wishes to
assert dissenters' rights shall do all of the following:
(a) Deliver to the Issuer corporation before the vote is taken written
notice that complies with sec. 180.0141 of the shareholder's or beneficial
shareholder's intent to demand payment for his or her shares if the
proposed action is effectuated.
(b) Not vote his or her shares in favor of the proposed action.
(2) A shareholder or beneficial shareholder who fails to satisfy sub.(1) is
not entitled to payment for his or her shares under sec.sec. 180.1301 to
180.1331.
180.1322 DISSENTERS' NOTICE. (1) If proposed corporate action creating
dissenters' rights under sec. 180.1302 is authorized at a shareholders' meeting,
the corporation shall deliver a written dissenters' notice to all shareholders
and beneficial shareholders who satisfied sec. 180.1321.
(2) The dissenters' notice shall be sent no later than 10 days after the
corporate action is authorized at a shareholders' meeting or without a vote of
shareholders, whichever is applicable. The dissenters' notice shall comply with
sec. 180.0141 and shall include or have attached all of the following:
(a) A statement indicating where the shareholder or beneficial
shareholder must send the payment demand and where and when certificates
for certificated shares must be deposited.
(b) For holders of uncertificated shares, an explanation of the extent
to which transfer of the shares will be restricted after the payment demand
is received.
(c) A form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action and that requires the shareholder or beneficial
shareholder asserting dissenters' rights to certify whether he or she
acquired beneficial ownership of the shares before that date.
(d) A date by which the corporation must receive the payment demand,
which may not be fewer than 30 days nor more than 60 days after the date on
which the dissenters' notice is delivered.
(3) A copy of sec.sec. 180.1301 to 180.1331.
180.1323 DUTY TO DEMAND PAYMENT. (1) A shareholder or beneficial shareholder
who is sent a dissenters' notice described in sec. 180.1322, or a beneficial
shareholder whose shares are held by a nominee who is sent a dissenters' notice
described in sec. 180.1322, must demand payment in writing and certify whether
he or she acquired beneficial ownership of the shares before the date specified
in the dissenters' notice under sec. 180.1322(2)(c). A shareholder or beneficial
shareholder with certificated shares must also deposit his or her certificates
in accordance with the terms of the notice.
(2) A shareholder or beneficial shareholder with certificated shares who
demands payment and deposits his or her share certificates under sub. (1)
retains all other rights of a shareholder or beneficial shareholder until these
rights are canceled or modified by the effectuation of the corporate action.
(3) A shareholder or beneficial shareholder with certificated or
uncertificated shares who does not demand payment by the date set in the
dissenters' notice, or a shareholder or beneficial shareholder with certificated
shares who does not deposit his or her share certificates where required and by
the date set in the dissenters' notice, is not entitled to payments for his or
her shares under sec.sec. 180.1301 to 180.1331.
H-3
223
180.1324 RESTRICTIONS ON UNCERTIFICATED SHARES. (1) The issuer corporation may
restrict the transfer of uncertificated shares from the date that the demand for
payment for those shares is received until the corporate action is effectuated
or the restrictions released under sec. 180.1326.
(2) The shareholder or beneficial shareholder who asserts dissenters'
rights as to uncertificated shares retains all of the rights of a shareholder or
beneficial shareholder, other than those restricted under sub. (1), until these
rights are canceled or modified by the effectuation of the corporate action.
180.1325 PAYMENT. (1) Except as provided in sec. 180.1327, as soon as the
corporate action is effectuated or upon receipt of a payment demand, whichever
is later, the corporation shall pay each shareholder or beneficial shareholder
who has complied with sec. 180.1323 the amount that the corporation estimates to
be the fair value of his or her shares, plus accrued interest.
(2) The payment shall be accompanied by all of the following:
(a) the corporation's latest available financial statements, audited
and including footnote disclosure if available, but including not less than
a balance sheet as of the end of a fiscal year ending not more than 16
months before the date of payment, an income statement for that year, a
statement of changes in shareholders' equity for that year and the latest
available interim financial statements, if any.
(b) A statement of the corporation's estimate of the fair value of the
shares.
(c) An explanation of how the interest was calculated.
(d) A statement of the dissenter's right to demand payment under
sec. 180.1328 if the dissenter is dissatisfied with the payment.
(e) A copy of sec.sec. 180.1301 to 180.1331.
180.1326 FAILURE TO TAKE ACTION. (1) If an issuer corporation does not
effectuate the corporate action within 60 days after the date set under
sec. 180.1322 for demanding payment, the issuer corporation shall return the
deposited certificates and release the transfer restrictions imposed on
uncertificated shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the issuer corporation effectuates the corporate action, the
corporation shall deliver a new dissenters' notice under sec. 180.1322 and
repeat the payment demand procedure.
180.1327 AFTER-ACQUIRED SHARES. (1) A corporation may elect to withhold payment
required by sec. 180.1325 from a dissenter unless the dissenter was the
beneficial owner of the shares before the date specified in the dissenters'
notice under sec. 180.1322 (2)(c) as the date of the first announcement to news
media or to shareholders of the terms of the proposed corporate action.
(2) To the extent that the corporation elects to withhold payment under
sub. (1) after effectuating the corporate action, it shall estimate the fair
value of the shares, plus accrued interest, and shall pay this amount to each
dissenter who agrees to accept it in full satisfaction of his or her demand. The
corporation shall send with its offer a statement of its estimate of the fair
value of the shares, an explanation of how the interest was calculated, and a
statement of the dissenter's right to demand payment under sec. 180.1328 if the
dissenter is dissatisfied with the offer.
180.1328 PROCEDURE IF DISSENTER DISSATISFIED WITH PAYMENT OR OFFER. (1) A
dissenter may, in the manner provided in sub. (2), notify the corporation of the
dissenter's estimate of the fair value of his or her shares and amount of
interest due, and demand payment of his or her estimate, less any payment
received under sec. 180.1325, or reject the offer under sec. 180.1327 and demand
payment of the fair value of his or her shares and interest due, if any of the
following applies:
(a) The dissenter believes that the amount paid under sec. 180.1325 or
offered under sec. 180.1327 is less than the fair value of his or her
shares or that the interest due is incorrectly calculated.
(b) The corporation fails to make payment under sec. 180.1325 within
60 days after the date set under sec. 180.1322 for demanding payment.
H-4
224
(c) The issuer corporation, having failed to effectuate the corporate
action, does not return the deposited certificates or release the transfer
restrictions imposed on uncertificated shares within 60 days after the date
set under sec. 180.1322 for demanding payment.
(2) A dissenter waives his or her right to demand payment under this
section unless the dissenter notifies the corporation of his or her demand under
sub. (1) in writing within 30 days after the corporation made or offered payment
for his or her shares. The notice shall comply with sec. 180.0141.
180.1330 COURT ACTION. (1) If a demand for payment under sec. 180.1328 remains
unsettled, the corporation shall bring a special proceeding within 60 days after
receiving the payment demand under sec. 180.1328 and petition the court to
determine the fair value of the shares and accrued interest. If the corporation
does not bring the special proceeding within the 60-day period, it shall pay
each dissenter whose demand remains unsettled the amount demanded.
(2) The corporation shall bring the special proceeding in the circuit court
for the county where its principal office or, if none in this state, its
registered office is located. If the corporation is a foreign corporation
without a registered office in this state, it shall bring the special proceeding
in the county in this state in which was located the registered office of the
issuer corporation that merged with or whose shares were acquired by the foreign
corporation.
(3) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the special proceeding.
Each party to the special proceeding shall be served with a copy of the petition
as provided in sec. 801.14.
(4) The jurisdiction of the court in which the special proceeding is
brought under sub. (2) is plenary and exclusive. The court may appoint one or
more persons as appraisers to receive evidence and recommend decision on the
question of fair value. An appraiser has the power described in the order
appointing him or her or in any amendment to the order. The dissenters are
entitled to the same discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the special proceeding is entitled to
judgment for any of the following:
(a) The amount, if any, by which the court finds the fair value of his
or her shares, plus interest, exceeds the amount paid by the corporation.
(b) The fair value, plus accrued interest, of his or her shares
acquired on or after the date specified in the dissenter's notice under
sec. 180.1322 (2)(c), for which the corporation elected to withhold payment
under sec. 180.1327.
180.1331 COURT COSTS AND COUNSEL FEES. (1) (a) Notwithstanding sec.sec. 814.01
to 814.04, the court in a special proceeding brought under sec. 180.1330 shall
determine all costs of the proceeding, including the reasonable compensation and
expenses of appraisers appointed by the court and shall assess the costs against
the corporation, except as provided in par. (b).
(b) Notwithstanding sec.sec. 814.01 and 814.04, the court may assess costs
against all or some of the dissenters, in amounts that the court finds to be
equitable, to the extent that the court finds the dissenters acted arbitrarily,
vexatiously or not in good faith in demanding payment under sec. 180.1328.
(2) The parties shall bear their own expenses of the proceeding, except
that, notwithstanding sec.sec. 814.01 to 814.04, the court may also assess the
fees and expenses of counsel and experts for the respective parties, in amounts
that the court finds to be equitable, as follows:
(a) Against the corporation and in favor of any dissenter if the court
finds that the corporation did not substantially comply with
sec.sec. 180.1320 to 180.1328.
H-5
225
(b) Against the corporation or against a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously or not in good faith
with respect to the rights provided by this chapter.
(3) Notwithstanding sec.sec. 814.01 to 814.04, if the court finds that the
services of counsel and experts for any dissenter were of substantial benefit to
other dissenters similarly situated, the court may award to these counsel and
experts reasonable fees to be paid out of the amounts awarded the dissenters who
were benefited.
H-6
226
EVI WEATHERFORD, INC.
PROXY FOR
SPECIAL MEETING OF STOCKHOLDERS
, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The undersigned
stockholder of EVI Weatherford, Inc. ("EVI") hereby appoints Bernard J.
Duroc-Danner and James G. Kiley, or either of them, as proxies, each with power
to act without the other and with full power of substitution, for the
undersigned to vote the number of shares of Common Stock of EVI that the
undersigned would be entitled to vote if personally present at the Special
Meeting of Stockholders of EVI to be held on , 1998, at :00 .m.,
Houston time, at The Luxury Collection Hotel of Houston, Houston, Texas, and at
any adjournment or postponement thereof, on the following matters that are more
particularly described in the Joint Proxy Statement/ Prospectus dated
, 1998:
(1) Proposal to approve the acquisition by merger of Christiana Companies, Inc.
("Christiana") pursuant to an Agreement and Plan of Merger dated December
12, 1997, among EVI, Christiana, C2, Inc. ("C2") and Christiana Acquisition,
Inc. for (i) 3,897,462 shares of EVI common stock, $1.00 par value, (ii)
cash in an amount equal to the amount of cash of Christiana as of the
effective time of the merger less the sum of Christiana's accrued taxes and
other liabilities as of such time that are not assumed by C2 and (iii) a
contingent cash payment of up to $10.0 million payable no earlier than five
years after the effective date of the merger to the extent such funds are
not required to satisfy contingent claims against Christiana and various
indemnity obligations all more specifically described in the accompanying
Joint Proxy Statement/Prospectus.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
(2) To approve a postponement or adjournment of the meeting to solicit
additional votes in the event that there are not sufficient votes to approve
the foregoing proposal.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
(3) To consider and take action upon any other matter which may properly come
before the meeting or any adjournment or postponement thereof.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
227
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" PROPOSAL 1. Receipt of the Joint Proxy Statement/Prospectus dated
, 1998, is hereby acknowledged.
-------------------------------------
-------------------------------------
Signature of Stockholder(s)
Please sign your name exactly as it
appears hereon. Joint owners must
each sign. When signing as attorney,
executor, administrator, trustee or
guardian, please give your full title
as it appears thereon.
Dated:
------------------------------------- ,
1998
PLEASE MARK, SIGN, DATE AND RETURN USING THE ENCLOSED ENVELOPE.
228
PROXY
CHRISTIANA COMPANIES, INC.
700 North Water Street
Milwaukee, Wisconsin 53202
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Sheldon B. Lubar and William T. Donovan as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all of the shares of common
stock of Christiana Companies, Inc. (the "Common Shares") held of record by the
undersigned on , 1998, at the special meeting of shareholders to be
held on , 1998, and any and all adjournments thereof.
You are encouraged to specify your choices by marking the appropriate boxes
(SEE BELOW) but you need not mark any boxes if you wish to vote in accordance
with the Board of Directors' recommendations.
[X] Please mark your votes as in this example.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1 AND 2.
FOR AGAINST ABSTAIN
1. PROPOSAL TO APPROVE THE MERGER AGREEMENT (which includes as -------------------------------
a part thereof the AGREEMENT PROVIDING FOR THE LOGISTIC
SALE), the terms and conditions of which are described in
the enclosed Joint Proxy Statement/Prospectus. -------------------------------
FOR AGAINST ABSTAIN
2. To approve an adjournment of the Meeting to solicit -------------------------------
additional proxies in the event that there are not
sufficient votes to approve the foregoing proposal.
-------------------------------
3. In their discretion the Proxies are authorized to vote upon such other business as may properly
come before the meeting.
(continued and to be signed on the reverse side)
229
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY AND ELECTION FORM
PROMPTLY USING THE ENCLOSED ENVELOPE.
Please sign exactly as your name appears below. When Common Shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
DATED --------------- , ------------------------------ ------------------------------
1998 Signature Signature if held jointly