<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 16, 1999
REGISTRATION NO. 333-90071
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
RAILWORKS CORPORATION
(Exact name of co registrant as specified in its charter)
------------------
<TABLE>
<S> <C> <C>
DELAWARE 4789 58-2382378
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
------------------
FOR INFORMATION REGARDING ADDITIONAL REGISTRANTS, SEE "TABLE OF ADDITIONAL
REGISTRANTS".
------------------
1104 KENILWORTH DRIVE
SUITE 301
BALTIMORE, MARYLAND 21204
(410) 512-0500
(Address, including zip code, and telephone number, including area code,
of registrants' principal executive offices)
JOHN G. LARKIN
CHIEF EXECUTIVE OFFICER
RAILWORKS CORPORATION
1104 KENILWORTH DRIVE, SUITE 301
BALTIMORE, MARYLAND 33807
(410) 512-0500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
WITH A COPY TO:
MARY A. BERNARD, ESQ.
KING & SPALDING
1185 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036-4003
(212) 556-2100
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED EXCHANGE OFFER: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, please check the following box. [ ]
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THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
TABLE OF ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
STATE OR OTHER PRIMARY STANDARD
JURISDICTION OR INDUSTRIAL
EXACT NAME OF REGISTRANT AS INCORPORATION OR CLASSIFICATION I.R.S EMPLOYER
SPECIFIED IN ITS CHARTER ORGANIZATION CODE NUMBER IDENTIFICATION NO.
- --------------------------- ---------------------- ----------------------- ------------------
<S> <C> <C> <C>
Alpha Keystone Engineering,
Inc............................... PA 8711 25-1784777
Armcore Acquisition Corp.......... DE Holding Co....... 52-2128915
Armcore Railroad Contractors,
Inc............................. IL 1629 37-1046831
Annex Railroad Builders, Inc...... IN 1629 35-1075159
Birmingham Wood, Inc.............. AL 2491 63-1003823
Comstock Holdings, Inc............ DE Holding Co....... 13-3928343
L.K. Comstock & Company, Inc...... NY 1731 13-0594190
Comtrak Construction, Inc......... GA 1629 58-1894467
Condon Brothers, Inc.............. WA 1629 91-1360907
CPI Concrete Products
Incorporated.................... TN 3272 62-0913636
Earl Campbell Construction
Company, Inc.................... TX 1629 76-0023665
FCM Rail, Ltd..................... MI 6159 38-2343435
F&V Metro RW, Inc................. DE Holding Co....... Pending
RWKS Transit, Inc................. NY 1731 11-2626106
Impulse Enterprises of New York,
Inc............................. NY 1731 11-3121948
V&R Electrical Contractors,
Inc............................. NY 1731 11-2843830
Gantrex RW, Inc................... DE Holding Co....... Pending
Gantrex Corporation............... PA 3469 Pending
Gantrex Systems, Inc.............. OE 3469 Pending
H.P. McGinley, Inc................ PA 2491 23-1921197
Kennedy Railroad Builders, Inc.... PA 1629 23-1685297
M-Track Enterprises, Inc.......... NY 1629 06-1093474
McCord Treated Wood, Inc.......... AL 2491 63-1115907
Merit Railroad Contractors,
Inc............................. MO 1629 43-1426110
Midwest Construction Services,
Inc............................. IN 1629 35-1549700
Mid West RW, Inc.................. DE Holding Co....... Pending
Mid West Railroad Construction &
Maintenance Corporation of
Wyoming......................... WY 1629 83-0287238
Minnesota Railroad Service,
Inc............................. TN 1629 41-1519121
Neosho Asia, Inc.................. KS 1629 48-1197426
Neosho Central America, Inc....... KS 1629 48-1212618
Neosho Construction Company,
Inc............................. KS 1629 48-1090375
Neosho Contractors, Inc........... WY 1629 74-2073664
Neosho Incorporated............... KS 1629 48-0673656
Neosho International, Inc......... KS 1629 48-1194483
New England Railroad Construction
Co., Inc........................ CT 1629 06-0996497
Northern Rail Service and Supply
Company, Inc.................... MI 1629 38-2974642
Neosho Rail Services, Inc......... KS 1629 48-1065603
Railcorp, Inc..................... OH 1629 34-1546698
Railroad Service, Inc............. TN 1629 41-1522172
Railroad Specialties, Inc......... IN 1629 35-1855813
Railworks Canada, Inc............. DE 1629 Pending
Sheldon Electric, Inc............. DE 1731 52-2128782
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
STATE OR OTHER PRIMARY STANDARD
JURISDICTION OR INDUSTRIAL
EXACT NAME OF REGISTRANT AS INCORPORATION OR CLASSIFICATION I.R.S EMPLOYER
SPECIFIED IN ITS CHARTER ORGANIZATION CODE NUMBER IDENTIFICATION NO.
- --------------------------- ---------------------- ----------------------- ------------------
<S> <C> <C> <C>
Southern Indiana Wood Preserving
Co., Inc.......................... IN 2491 35-1694417
U.S. Trackworks, Inc.............. MI 1629 38-2458838
U.S. Railway Supply, Inc.......... IN 1629 35-1911080
Wm. A. Smith Construction Co.,
Inc............................. TX 1629 74-1187403
Wm. A. Smith Rerailing Services,
Inc............................. TX 1629 76-0423514
W.T. Byler Co., Inc............... TX 1629 74-1807673
Wood Waste Energy, Inc............ VA 2498 43-1616799
</TABLE>
The address, including zip code, and telephone number, including area code,
of the principal executive offices of each of the additional registrants is the
same as for RailWorks Corporation as set forth on the facing page of this
registration statement.
The name, address, including zip code, and telephone number, including area
code of the agent for service for each of the additional registrants is the same
as for RailWorks Corporation as set forth on the facing page of this
registration statement. Copies of communications to any additional registrant
should be sent to Mary A. Bernard, King & Spalding, 1185 Avenue of the Americas,
New York, New York 10036 (telephone number (212) 556-2100).
<PAGE> 4
SUBJECT TO COMPLETION, DECEMBER 16, 1999
(RAILWORKS LOGO)
OFFER TO EXCHANGE
11 1/2% SENIOR SUBORDINATED NOTES DUE 2009
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR
ALL OUTSTANDING UNREGISTERED 11 1/2% SENIOR SUBORDINATED NOTES DUE 2009
------------------
THE REGISTERED NOTES
- The terms of the new notes are substantially identical to the outstanding
notes and the existing notes, except that, like the existing notes, the
new notes will be freely tradable.
- Interest is payable on April 15 and October 15, commencing October 15,
1999.
- We may redeem the notes at any time on or after April 2004.
- In addition, until April 15, 2002, we may redeem up to 35% of the notes
with the net proceeds of certain equity offerings.
- If we undergo a change of control or sell certain of our assets, we may
be required to offer to purchase the notes from you.
- The notes are unsecured and subordinated to all of our existing and
future senior debt, including our obligations under our credit facility.
- Our existing domestic subsidiaries have guaranteed the notes on senior
subordinated basis.
THE EXCHANGE OFFER
- The exchange offer will expire at 5:00 p.m. New York City time, on
January 21, 2000, unless extended.
- The exchange offer is not subject to any conditions other than that the
exchange offer not violate applicable law or any applicable
interpretation of the staff of the SEC.
- All old notes that are validly tendered and not withdrawn will be
exchanged.
- Tenders of old notes may be withdrawn at any time prior to the expiration
of the exchange offer.
- We will not receive any proceeds from the exchange offer.
------------------
INVESTING IN THE NOTES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 10.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED OF THESE SECURITIES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE
OR COMPLETE OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS DECEMBER , 1999
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Risk Factors................................................ 10
Use of Proceeds............................................. 19
Capitalization.............................................. 19
Pro Forma Financial Statements.............................. 20
Selected Historical Consolidated Financial Data............. 28
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 30
Business.................................................... 41
The Exchange Offer.......................................... 55
Management.................................................. 65
Certain Relationships and Related Party Transactions........ 70
Principal Stockholders...................................... 72
Description of Capital Stock................................ 73
Description of Credit Facility.............................. 74
Description of Term Loan Facility........................... 75
Description of the New Notes................................ 76
Exchange Offer; Registration Rights......................... 112
Book-Entry; Delivery and Form............................... 115
Plan of Distribution........................................ 116
Certain United States Federal Tax Considerations............ 118
Legal Matters............................................... 119
Experts..................................................... 119
Where You Can Find More Information......................... 119
Special Note Regarding Forward-Looking Statements........... 120
Index to Financial Statements............................... F-1
</TABLE>
i
<PAGE> 6
PROSPECTUS SUMMARY
The following summary contains basic information about RailWorks, the notes
and the exchange offer. It likely does not contain all the information that is
important to you. For a more complete understanding of the notes and the
exchange offer, we encourage you to read this entire document and the documents
to which we have referred you.
As used in this prospectus, unless the context otherwise requires, "we,"
"us," "our," or "RailWorks" refers to the business of RailWorks Corporation and
its subsidiaries. The term "rail systems" means transit systems, regional and
shortline railroads, Class I railroads and commercial and on-site rail
infrastructure of industrial companies. Unless the context otherwise requires,
"pro forma" information gives effect to (1) the two acquisitions that we have
completed during 1998 and the 11 acquisitions that we have completed in the
first 10 months of 1999 as if we had completed these acquisitions on January 1,
1998 and (2) the sale of the old notes to the initial purchaser and the
application of the net proceeds from that sale.
RAILWORKS CORPORATION
We are a leading provider of integrated rail system services and products
to a diverse base of customers throughout the United States. We believe we are
positioned to grow significantly due to our ability to comprehensively design,
supply, construct and maintain rail systems. Our strategy is based on providing
a full range of rail-related services and products on a "turnkey" basis
throughout North America and offering rail system solutions under the
"RailWorks" brand. We provide track construction, rehabilitation, repair and
maintenance; rail electrification and installation of communication and
signaling systems; and related products and supplies. We offer these services to
a wide variety of customers, including Class I and shortline railroads, publicly
funded transit authorities and commercial and industrial companies. We also
provide non-rail products and services such as electrical contracting, bridge
and highway support structures, and related concrete products. For the year
ended December 31, 1998, we had pro forma revenue of $544.8 million and pro
forma EBITDA of $60.6 million. For the nine months ended September 30, 1999, we
had pro forma revenue of $420.5 million and pro forma EBITDA of $52.9 million.
COMPANY HISTORY
RailWorks Corporation was formed in March 1998 to become a leading
nationwide provider of rail system services, including construction and
rehabilitation, repair and maintenance, and related products. We currently have
29 operating companies that have been in the rail systems business for an
average of 27 years. We have acquired the operating companies through the
following transactions:
- In August 1998, we acquired in separate concurrent transactions 14 groups
of companies engaged principally in the rail system services and products
business and we consummated our initial public offering (the "IPO"). We
refer to these groups of companies as the "Founding Companies."
- In November 1998, we acquired two companies. We refer to these companies
as the "1998 Acquired Companies."
- In the first 10 months of 1999, we acquired 11 companies. We refer to
these companies as the "1999 Acquired Companies." We refer to the 1998
Acquired Companies and the 1999 Acquired Companies together as the
"Acquired Companies." The Acquired Companies had combined fiscal 1998
revenue of $275.3 million.
1
<PAGE> 7
In addition, in December 1999, we acquired two additional companies engaged in
the rail products and services and transit services businesses. Based on
information provided by these two companies, they had combined revenue for 1998
of over $35 million.
THE EXCHANGE OFFER
The Exchange Offer......... We are offering to exchange:
- $1,000 principal amount of our registered 11
1/2% senior subordinated notes due April 15,
2009, which we refer to as new notes,
for
- each $1,000 principal amount of our unregistered
11 1/2% senior subordinated notes due April 15,
2009, which we refer to as old notes
We sometimes will refer to the new notes and the
old notes together as the notes. Currently,
$50,000,000 aggregate principal amount of old notes
are outstanding. Under the indenture governing the
notes, we previously issued $125,000,000 aggregate
principal amount of 11 1/2% senior subordinated
notes due 2009, which we will refer to as the
existing notes.
Expiration date............ The exchange offer will expire at 5:00 p.m., New
York City time, on January 21, 2000, unless we
extend it. In that case the phrase "expiration
date" will mean the latest date and time to which
we extend the exchange offer. We will issue new
notes as soon as practicable after that date.
Conditions to the exchange
offer.................... The exchange offer is subject to customary
conditions. We may assert or waive these conditions
in our sole discretion. If we materially change the
terms of the exchange offer, we will resolicit
tenders of the old notes. Please read the section
"The Exchange Offer -- Conditions of the Exchange
Offer" of this prospectus for more information
regarding conditions to the exchange offer.
Procedures for
participating in the
exchange offer........... If you wish to participate in the exchange offer,
you must complete, sign and date an original or
faxed letter of transmittal in accordance with the
instructions contained in the letter of transmittal
accompanying this prospectus. Then you must mail,
fax or deliver the completed letter of transmittal,
together with the old notes you wish to exchange
and any other required documentation to First Union
National Bank, which is acting as exchange agent.
Its address appears on the letter of transmittal.
By signing the letter of transmittal, you will
represent to and agree with RailWorks that
- you are acquiring the new notes in the ordinary
course of your business,
- you have no arrangement or understanding with
anyone to participate in a distribution of the
new notes, and
2
<PAGE> 8
- you are not an "affiliate," as defined in Rule
405 under the Securities Act, of RailWorks.
If you are a broker-dealer that will receive new
notes for your own account in exchange for old
notes that you acquired as a result of your
market-making or other trading activities, you will
be required to acknowledge in the letter of
transmittal that you will deliver a prospectus in
connection with any resale of the new notes.
Resale of exchange notes... We believe that you can resell and transfer your
new notes without registering them under the
Securities Act and delivering a prospectus, if you
can make the same three representations that appear
above under the heading "Procedures for
participating in the exchange offer." But, our
belief is based on interpretations of the SEC
expressed in some SEC no-action letters to other
issuers in exchange offers like ours.
We cannot guarantee that the SEC would make a
similar decision about this exchange offer. If our
belief is wrong, or if you cannot truthfully make
the representations mentioned above, and you
transfer any new note issued to you in the exchange
offer without meeting the registration and
prospectus delivery requirements of the Securities
Act, or without an exemption from such
requirements, you could incur liability under the
Securities Act. We are not indemnifying you for any
such liability.
A broker-dealer can only resell or transfer new
notes if it delivers a prospectus.
Special procedures for
beneficial owners........ If your old notes are held through a broker,
dealer, commercial bank, trust company or other
nominee and you wish to surrender such old notes,
you should contact your intermediary promptly and
instruct it to surrender your old notes on your
behalf.
Guaranteed delivery
procedures............... If you cannot meet the expiration date deadline, or
you cannot deliver your old notes, the letter of
transmittal or any other documentation on time,
then you must surrender your old notes according to
the guaranteed delivery procedures appearing in
this prospectus under the heading "The Exchange
Offer -- Guaranteed Delivery Procedures."
Acceptance of your old
notes and delivery of the
new notes................ We will accept for exchange any and all old notes
that are surrendered in the exchange offer prior to
the expiration date if you comply with the
procedures of the offer. The new notes will be
delivered as soon as practicable after the
expiration date.
Withdrawal rights.......... You may withdraw the surrender of your old notes at
any time prior to the expiration date.
3
<PAGE> 9
Certain federal income tax
considerations........... You will not have to pay federal income tax as a
result of your participation in the exchange offer.
Exchange agent............. First Union National Bank is serving as the
exchange agent in connection with the exchange
offer. First Union National Bank also serves as
trustee under the indenture for the notes.
Failure to exchange old
notes will adversely affect
you...................... If you are eligible to participate in this exchange
offer and you do not surrender your old notes as
described in this prospectus, you will not have any
further registration or exchange rights. In that
case your old notes will continue to be subject to
restrictions on transfer. As a result of such
restrictions and the availability of registered new
notes, the old notes are likely to be a much less
liquid security than before.
Neither the Delaware General Corporation Law nor
the indenture relating to the notes gives you any
appraisal or dissenters' rights or any other right
to seek monetary damages in court if you do not
participate in the exchange offer.
THE NEW NOTES
The new notes have the same financial terms and covenants as the old notes
and the existing notes, which are as follows:
Issuer..................... RailWorks Corporation.
Securities offered......... $50,000,000 principal amount of 11 1/2% senior
subordinated notes due 2009.
Maturity................... April 15, 2009.
Interest rate.............. 11 1/2% per year (calculated using a 360-day year).
Interest payment dates..... April 15 and October 15, beginning on October 15,
1999. Interest began accruing on September 30, 1999
when we first issued the old notes.
Ranking.................... The new notes will be unsecured senior subordinated
obligations of RailWorks and they will rank junior
to our existing and future senior debt, including
our obligations under our credit facility. The
guarantees of the new notes by our subsidiaries
will be subordinated to existing and future senior
debt of such subsidiaries. On a pro forma basis, as
of September 30, 1999, pro forma for the
acquisition of the 1999 Acquired Companies,
borrowings under our new term loan facility, and
the sale of the old notes and the application of
the net proceeds, we would have had approximately
$50.4 million of senior debt, excluding
approximately $82.5 million that we expect to have
available to borrow under our credit facility.
Guarantees................. Our domestic subsidiaries will unconditionally
guarantee the new notes. If we create or acquire a
new domestic subsidiary, it will guarantee the
notes unless we designate the subsidiary as an
"unrestricted subsidiary" under the indenture or
the subsidiary does not have significant assets.
4
<PAGE> 10
Optional redemption........ We cannot redeem the new notes until April 15,
2004. After April 15, 2004, we may elect to redeem
some or all of the notes and the existing notes at
the redemption prices listed under the heading
"Description of the Exchange Notes" section under
the heading "Optional Redemption," plus accrued and
unpaid interest.
Optional redemption after
equity offerings......... At any time, which may be more than once, before
April 15, 2002, we may elect to redeem up to 35% of
the outstanding notes and the existing notes with
funds that we raise in one or more equity offerings
as long as:
- we pay 111.500% of the face amount of the notes,
plus interest;
- we redeem the notes and the existing notes within
120 days of completing the equity offering;
- at least 65% of the aggregate principal amount of
notes and the existing notes issued remains
outstanding.
Change of control offer.... If a change in control of RailWorks occurs, we must
give holders of the new notes and the existing
notes the opportunity to sell their new notes to
us, at 101% of their face amount, plus accrued and
unpaid interest.
We might be unable to pay you the required price
for any new notes and the existing notes you
present to us at the time of a change of control,
because:
- we might not have enough cash at that time; or
- the terms of our senior debt may prevent us from
paying.
Asset sale proceeds........ If we or our subsidiaries engage in asset sales, we
cannot freely use the proceeds of those sales.
Generally, we must either invest the net cash
proceeds from such sales in our business within a
specified period of time, prepay senior debt or
make an offer to purchase a principal amount of the
notes and existing notes equal to the excess net
cash proceeds. The purchase price for the notes and
the existing notes would be 100% of their principal
amount, plus accrued and unpaid interest.
Certain additional
indenture provisions....... The indenture governing the notes is the same
indenture that governs the existing notes. It
contains covenants limiting our (and most or all of
our subsidiaries') ability to:
- incur additional debt or enter into sale and
leaseback transactions;
- pay dividends or distributions on our capital
stock or repurchase our capital stock;
- issue stock of subsidiaries;
- make certain investments;
- create liens on our assets to secure debt;
5
<PAGE> 11
- enter into transactions with affiliates;
- merge or consolidate with another company; and
- transfer and sell assets.
These covenants are subject to a number of
important limitations and exceptions.
Use of proceeds............ We will not receive any proceeds from the exchange
offer. See "Use of Proceeds." We have agreed to
bear the expenses of the exchange offer. No
underwriter has been retained to carry out the
exchange offer.
For additional information regarding the new notes, see "Description of the
New Notes."
6
<PAGE> 12
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
RailWorks acquired the Founding Companies concurrently with the
consummation of the IPO on August 4, 1998. For accounting and financial
statement purposes, Comstock Holdings, Inc. (one of the Founding Companies) was
identified as the "accounting acquirer" consistent with the requirements of
Staff Accounting Bulletin ("SAB") No. 97 of the SEC. All other acquisitions have
been accounted for as purchases in accordance with Accounting Principles Board
("APB") No. 16.
The summary unaudited pro forma consolidated financial data presented below
are derived from unaudited pro forma consolidated financial data contained
elsewhere in this prospectus. This pro forma information is not necessarily
indicative of (1) the results that would have occurred had our acquisitions been
completed on the dates indicated or (2) our actual or future results or
financial position. The information presented below should be read together with
the Unaudited Pro Forma Consolidated Financial Statements and related notes, our
Consolidated Financial Statements and related notes and the Management's
Discussion and Analysis of Financial Condition and Results of Operations
contained elsewhere in this prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 NINE MONTHS ENDED SEPTEMBER 30, 1999
----------------------------------------- -----------------------------------------
PRO FORMA PRO FORMA
ACTUAL(1) PRO FORMA(2) AS ADJUSTED(3) ACTUAL(4) PRO FORMA(5) AS ADJUSTED(6)
--------- ------------ -------------- --------- ------------ --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue.................. $212,533 $544,759 $544,759 $325,908 $420,521 $420,521
Cost of revenue.......... 182,817 451,114 451,114 253,174(2) 333,398 333,398
-------- -------- -------- -------- -------- --------
Gross profit............. 29,716 93,645 93,645 72,734 87,123 87,123
Selling, general and
administrative
expenses............... 17,040 33,035 33,035 31,290 34,219 34,219
Non-recurring expenses... 19,965(7) -- -- -- -- --
Transaction fees......... 1,281(8) -- -- -- -- --
Depreciation and
amortization........... 2,105 19,527 19,527 9,241(2) 15,596 15,596
-------- -------- -------- -------- -------- --------
Operating (loss) income.. (10,675) 41,083 41,083 32,203 37,308 37,308
Interest expense......... 2,334 6,643 25,037 12,370 13,924 21,534
Interest and other
income................. 1,634 3,782 3,782 1,713 2,409 2,409
-------- -------- -------- -------- -------- --------
(Loss) income before
income taxes........... (11,375) 38,222 19,828 21,546 25,793 18,183
Net (loss) income........ (12,847) 22,732 11,353 13,466 15,164 10,408
OTHER DATA:
EBITDA(9)................ $ 60,610 $ 52,904
EBITDA margin(10)........ 11.1% 12.6%
Capital expenditures..... 11,994 11,439
Ratio of earnings to
fixed charges(11)...... 1.8x 1.8x
</TABLE>
(footnotes on following page)
7
<PAGE> 13
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
-------------------------------------------
PRO FORMA
ACTUAL(4) PRO FORMA(12) AS ADJUSTED(13)
--------- ------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash................................................ $ 5,318 $ 5,381 $ 5,381
Total assets........................................ 481,409 525,469 525,469
Total debt.......................................... 241,294 272,249 272,249
Stockholders' equity................................ 126,276 129,314 129,314
</TABLE>
- ---------------
(1) The summary historical consolidated financial data as of and for the fiscal
year ended December 31, 1998 are derived from our Consolidated Financial
Statements, which are comprised of financial data of:
- Comstock Holdings, Inc., the accounting acquirer, for the year ended
December 31, 1998;
- the Founding Companies, other than Comstock Holdings, Inc., for the
period from August 1, 1998 through December 31, 1998; and
- the 1998 Acquired Companies for the period from November 4, 1998 through
December 31, 1998.
(2) Reflects the acquisitions of the Founding Companies and the Acquired
Companies as if they each had occurred on January 1, 1998.
(3) Reflects the acquisitions of the Founding Companies and the Acquired
Companies as adjusted to give effect to the sale of the old notes and the
application of the net proceeds as if they each had occurred on January 1,
1998.
(4) The summary historical consolidated financial data as of and for the nine
months ended September 30, 1999 are derived from our unaudited Consolidated
Financial Statements contained elsewhere in this prospectus. In our
opinion, such unaudited statements include all adjustments (consisting of
only normal recurring accruals) necessary for a fair presentation of our
financial position and results of operations for such period. Our results
of operations for the nine months ended September 30, 1999 are not
necessarily indicative of the results that may be expected for the full
year.
(5) Reflects the acquisitions of the 1999 Acquired Companies as if they each
had occurred on January 1, 1999.
(6) Reflects the acquisitions of the 1999 Acquired Companies as adjusted to
give effect to the sale of the old notes and the application of the net
proceeds as if they each had occurred on January 1, 1999.
(7) Consists of $14.5 million in restricted common stock granted to the
Company's officers, $2.9 million related to settlement of employee benefit
obligations of one of the operating companies and corporate relocation
costs, $2.2 million in estimated legal and settlement costs in connection
with former operations of one of the operating companies and $400,000 in
transfers of common stock made by certain operating company managers to
other employees of such operating companies.
(8) Represents offering expenses incurred in connection with the initial public
offering of common stock of RailWorks.
(9) EBITDA is the sum of earnings before interest, income taxes, depreciation
and amortization expense. Included in EBITDA is income earned on contract
retainages pursuant to contractual agreements with certain customers.
EBITDA is presented because we believe that it is a widely accepted
financial indicator of a company's ability to service indebtedness.
However, EBITDA does not represent net income or cash flow from operations
as defined by generally accepted accounting principles, is not necessarily
indicative of cash available to fund all cash flow needs, should not be
considered as an alternative to net income or to cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles) and should not be construed as an indication of a company's
8
<PAGE> 14
operating performance or as a measure of liquidity. EBITDA is not
necessarily comparable with similarly titled measures presented by other
companies.
(10) Represents EBITDA as a percentage of revenue.
(11) The ratio of earnings to fixed charges is calculated by dividing the fixed
charges into net income before taxes and minority interests plus fixed
charges. Fixed charges consist of interest expense, amortization of
deferred debt issuance costs and the estimated interest component of rent
expense.
(12) Reflects the acquisition of W.T. Byler Co., Inc. as if it had occurred on
September 30, 1999.
(13) Reflects the acquisition of W.T. Byler Co., Inc. as adjusted to give effect
to the sale of the old notes and the application of the net proceeds as if
they each had occurred on September 30, 1999.
UNAUDITED PRO FORMA FINANCIAL DATA OF THE FOUNDING COMPANIES
AND THE 1998 ACQUIRED COMPANIES
The pro forma financial data set forth below reflect the results of
operations of the Founding Companies as if we had acquired them on January 1,
1997. The presentation only includes the results of the 1998 Acquired Companies
from November 4, 1998 to December 31, 1998. Acquired Companies are otherwise
excluded. This pro forma information is not necessarily indicative of (1) the
results that would have occurred had we acquired the Founding Companies on
January 1, 1997 or (2) our actual or future results of operations or financial
position.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------
1997(1) 1998(2)
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Revenue..................................................... $256,508 $269,498
Cost of revenue............................................. 219,400 227,052
-------- --------
Gross profit................................................ 37,108 42,446
Selling, general and administrative expenses................ 20,848 19,317
Depreciation and amortization............................... 5,038 5,389
-------- --------
Operating income............................................ 11,222 17,740
Interest and other income (expenses), net................... (1,063) (833)
-------- --------
Income before income taxes.................................. 10,159 16,907
Net income.................................................. 5,438 8,812
</TABLE>
- ---------------
(1) Includes the 14 Founding Companies.
(2) Includes the 14 Founding Companies for all of 1998 and the two 1998 Acquired
Companies from November 4, 1998, their date of acquisition.
9
<PAGE> 15
RISK FACTORS
You should carefully consider the information below as well as to all other
information provided to you in this prospectus before deciding whether to tender
your old notes in exchange for new notes pursuant to the exchange offer. These
risks apply to both the old notes and the new notes.
RISKS RELATING TO THE NEW NOTES
There Could Be Adverse Consequences of Failure to Exchange Your Old Notes
for New Notes. The old notes were not registered under the Securities Act or
under the securities laws of any state and may not be resold, offered for resale
or otherwise transferred unless they are subsequently registered or resold
pursuant to an exemption from the registration requirements of the Securities
Act and applicable state securities laws. If you do not exchange your old notes
for new notes pursuant to the exchange offer, you will not be able to resell,
offer to resell or otherwise transfer the old notes unless they are registered
under the Securities Act or unless you resell them, offer to resell or otherwise
transfer them under an exemption from the registration requirements of, or in a
transaction not subject to, the Securities Act. In addition, we will no longer
be under an obligation to register the old notes under the Securities Act except
in the limited circumstances provided under the registration rights agreement.
In addition, to the extent that old notes are tendered for exchange and accepted
in the exchange offer, the trading market for the untendered and tendered but
unaccepted old notes could be adversely affected. Please refer to the section
captioned "Risk Factors -- No Assurance of Active Trading Market for the Notes."
We Have Substantial Leverage. Our substantial indebtedness could adversely
affect our financial health and could prevent us from fulfilling our obligations
under the notes. We have a substantial amount of debt outstanding. On a pro
forma basis, as of September 30, 1999, we would have had outstanding total debt
of $272.2 million (excluding approximately $82.5 million that we expect to have
available to borrow under our credit facility), ratio of earnings to fixed
charges of 1.8 and stockholders' equity of $129.3 million. In November 1999 we
entered into a $30 million term loan facility. As of December 6, 1999, this
facility was fully drawn and we had $30.0 million of borrowings outstanding
under this facility, which is included in our total pro forma debt above.
We May Make Additional Borrowings. Despite current indebtedness levels, we
and our subsidiaries will also be permitted to incur substantial additional debt
in the future. On a pro forma basis as of September 30, 1999, $82.5 million
would have been available for additional borrowing under our credit facility
(subject to customary borrowing conditions). If new debt is added to our and our
subsidiaries' current debt levels, the related risks that we and they now face
could intensify. Please refer to the sections of this prospectus entitled
"Capitalization", "Selected Historical Consolidated Financial Data", and
"Description of the Notes -- Certain Covenants -- Limitation on Incurrence of
Additional Indebtedness".
Our substantial amount of debt could have important consequences for you.
For example, it could:
- make it more difficult for us to satisfy our obligations with respect to
the notes;
- limit our ability to obtain additional financing, if we need it, for
working capital, capital expenditures, acquisitions, debt service
requirements or other purposes;
- increase our vulnerability to adverse economic and industry conditions;
- require us to dedicate a substantial portion of our cash flow from
operations to payments on our debt, thereby reducing funds available for
operations, future business opportunities or other purposes;
10
<PAGE> 16
- limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we compete; and
- place us at a competitive disadvantage compared to our competitors that
have less debt.
We May be Unable to Service Debt. To service our indebtedness, we will
require a significant amount of cash. Our ability to make payments on our debt,
including the notes and the existing notes, and to fund planned capital
expenditures and acquisitions will depend on our future operating performance
and on our ability to successfully implement our business strategy. Prevailing
general economic conditions and financial, business, regulatory and other
factors, many of which are beyond our control, will affect our ability to make
these payments. Based on our current level of operations, we believe that our
cash flow from operations, available cash and available borrowings under our
credit facility will be adequate to meet our liquidity needs for the foreseeable
future.
We cannot assure you, however, that we will realize anticipated financial
results or be successful in implementing our business strategy. If future cash
flow is not sufficient to make scheduled payments on our debt, including the
notes and the existing notes, we will need to refinance all or a portion of our
debt, including the notes and the existing notes, before maturity, obtain
additional financing, delay planned acquisitions and capital expenditures, or
sell assets. We cannot assure you that we will be able to refinance any of our
debt, including debt outstanding under our credit facility, term loan facility
and the notes, on commercially reasonable terms. We also cannot assure you that
we would be able to make an asset sale on a timely basis for proceeds sufficient
to cover our debt service requirements. The terms of our credit facility, term
loan facility and the indenture governing the notes and the existing notes
restrict our ability to sell assets.
If for any reason we are unable to meet our debt service obligations, we
would be in default under the terms of our credit facility. If such a default
were to occur, the lenders under our credit facility could elect to declare all
of our debt under the facility immediately due and payable, including accrued
and unpaid interest, and the lenders would not be obligated to continue to
advance funds under the facility. If the amounts outstanding under the credit
facility are accelerated, we cannot assure you that our assets will be
sufficient to repay in full the money owed to the banks or to our other debt
holders.
The Notes Rank Behind Other Indebtedness. The notes and the guarantees
rank behind all of our and the guarantors' existing and future senior debt,
including debt under our credit facility and term loan facility and rank equally
in right of payment with the existing notes. On a pro forma basis, as of
September 30, 1999, we and the guarantors would have had $50.4 million of senior
debt outstanding. This amount does not include the $82.5 million that we expect
to have available to borrow under our credit facility, all of which would be
senior debt. In the event of our or any of the guarantors' bankruptcy,
liquidation or reorganization, our and the guarantors' assets will be available
to pay our obligations on the notes only after we have repaid all of our and the
guarantors' senior debt in full. We cannot assure you that sufficient assets
will remain to make full payment on the notes after such payments are made.
In the event of bankruptcy, liquidation or reorganization or any similar
proceeding relating to the Company or the guarantors, holders of the notes and
the existing notes will participate with trade creditors and all other holders
of our and the guarantors' subordinated indebtedness in the assets remaining
after we and such guarantors have repaid in full all of our senior debt. In
addition, the subordination provisions of the indenture provide that we cannot
make cash payments on the notes and the existing notes while a payment default
is continuing under certain of our senior debt.
Our Credit Facilities and the Indenture Impose Certain Restrictions. Our
credit facility, term loan facility and the indenture governing the notes and
the existing notes contain a number of significant covenants that, among other
things, restrict our ability to dispose of assets, incur
11
<PAGE> 17
additional indebtedness, repay other indebtedness, pay dividends, make certain
investments or acquisitions, repurchase or redeem capital stock, engage in
mergers or consolidations, or engage in certain transactions with subsidiaries
and affiliates and otherwise restrict corporate activities. We cannot assure you
that such restrictions will not adversely affect our ability to finance future
operations or capital needs or engage in other business activities that may be
in our best interest.
In addition, our credit facility and term loan facility require us to
maintain compliance with financial ratios. Our ability to comply with these
ratios may be affected by events beyond our control. We have granted the lenders
under the credit facility and term loan facility a first lien on all of the
capital stock of our subsidiaries and on all accounts receivable of us and our
subsidiaries. In the event of a default under the credit facility or term loan
facility, the lenders under such facility could foreclose upon the assets
pledged to them and the holders of the notes might not be able to receive any
payments until any payment default was cured or waived, any acceleration was
rescinded, or the indebtedness outstanding under our credit facility and/or term
loan facility was repaid. See "Description of Credit Facility" and "Description
of Term Loan Facility".
A breach of any of the covenants contained in our credit facility or term
loan facility or our inability to comply with the required financial ratios
could result in an event of default, which would allow the lenders under such
facility to declare all borrowings outstanding to be due and payable. In
addition, our lenders could compel us to apply all of our available cash to
repay our borrowings or they could prevent us from making debt service payments
on the notes and the existing notes. If the amounts outstanding under the credit
facility, the term loan facility or the notes were to be accelerated, we cannot
assure you that our assets would be sufficient to repay in full the money owed
to the banks or to our other debt holders, including you as a noteholder.
Fraudulent Conveyance Laws Permit Courts to Void Notes in Specific
Circumstances. Federal and state statutes allow courts, under specific
circumstances, to void the notes and the guarantees and require noteholders to
return payments received from RailWorks or the guarantors in the event of the
bankruptcy or other financial difficulty of RailWorks or any of the guarantors.
Under the federal bankruptcy law and comparable provisions of state fraudulent
transfer laws, a guarantee of the notes could be voided, or claims in respect of
a guarantee could be subordinated to all other indebtedness of any subsidiary
that is the guarantor if, among other things, at the time the guarantor incurred
the debt evidenced by its guarantee, the guarantor:
- received less than reasonably equivalent value or fair consideration for
the incurrence of such guarantee;
- was insolvent or was rendered insolvent by reason of such incurrence;
- was engaged in a business or transaction for which the guarantor's
remaining assets constituted unreasonably small capital; or
- intended to incur, or believed (or reasonably should have believed) that
it would incur, debts beyond its ability to pay such debts as they
mature.
In addition, any payment by that guarantor pursuant to its guarantee could
be voided and required to be returned to the guarantor, or to a fund for the
benefit of the creditors of the guarantor.
The measure of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, a guarantor of the notes
would be considered insolvent if:
- the sum of its debts, including contingent liabilities, were greater than
the fair saleable value of all of its assets;
12
<PAGE> 18
- if the present fair saleable value of its assets were less than the
amount that would be required to pay its probable liability on its
existing debts, including contingent liabilities, as they become absolute
and matured; or
- it could not pay its debts as they become due.
A court is likely to find that a guarantor of the notes did not receive
fair consideration or reasonably equivalent value for its guarantee to the
extent that its liability under the guarantee is greater than the direct benefit
it received from the issuance of notes. By its terms, each guarantee of the
notes will limit the liability of the guarantor to the maximum amount that it
can pay without the guarantee being deemed a fraudulent transfer. A court may
not give effect to this limitation on liability. In that event, a court may find
that the issuance of the guarantee rendered the subsidiary guarantor insolvent.
If a court voids the guarantee or holds it unenforceable, you will cease to have
a claim against the subsidiary guarantor and will be a creditor solely of
RailWorks. If the limitation on liability is effective, the amount that the
guarantor is found to have guaranteed might be so low that there will not be
sufficient funds to pay the notes in full.
On the basis of historical financial information, recent operating results
and other factors, RailWorks and each guarantor believes that, after giving
effect to the indebtedness incurred in connection with the sale of the old notes
and the credit facility, it will not be insolvent, will not have unreasonably
small capital for the business in which it operates and will not have incurred
debts beyond its ability to pay such debts as they mature. We cannot assure you,
however, as to what standard a court would apply in making such determinations
or that a court would agree with our or the guarantors' conclusions in this
regard.
We May be Unable to Finance a Change of Control Offer. Upon the occurrence
of specific kinds of change of control events, we must offer to repurchase all
outstanding notes and all existing notes. However, it is possible that we will
not have sufficient funds at the time of the change of control to make the
required repurchase of notes and existing notes or that restrictions in our
credit facilities will not allow such repurchases. In addition, certain
important corporate events, such as leveraged recapitalizations that would
increase the level of our indebtedness, would not constitute a "Change of
Control" under the indenture and in such a circumstance, we would not have to
make an offer to repurchase the notes and the existing notes. See "Description
of the Notes -- Redemption."
There is No Public Market for the New Notes. The new notes are new
securities for which there is currently no trading market. We do not intend to
list the new notes on any securities exchange. Although we expect the new notes
to be eligible for trading in the PORTAL market, we cannot assure you that an
active trading market for the new notes will develop.
The liquidity of any market for the notes will depend upon various factors,
including:
- the number of holders of the notes;
- the interest of securities dealers in making a market for the notes;
- the overall market for high-yield securities;
- our financial performance and prospects; and
- the prospects for companies in our industry generally.
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of securities
similar to the new notes. We cannot assure you that the market for the new
notes, if any, will not be subject to similar disruptions. Any such disruptions
may adversely affect you as a holder of the new notes.
In addition, to the extent that old notes are surrendered and accepted in
the exchange offer, the trading market for unsurrendered old notes and for
surrendered-but-unaccepted old notes
13
<PAGE> 19
could be adversely affected due to the limited amount of old notes that are
expected to remain outstanding following the exchange offer. Generally, when
there are fewer outstanding securities of a given issue, there is less demand to
purchase such security, which results in a lower price for such security.
Conversely, if many old notes are not surrendered, or are surrendered-but-
unaccepted, the trading market for the new notes could be adversely affected.
See "Plan of Distribution" and "The Exchange Offer" for further information
regarding the distribution of the new notes and the consequences of failure to
participate in the exchange offer.
RISKS RELATING TO RAILWORKS
The Operating Companies Do Not Have a Combined Operating History; We May be
Unsuccessful Integrating Their Decentralized Operations. RailWorks was founded
in March 1998 but conducted no operations and generated no revenue until we
completed our initial public offering, or "IPO", of our common stock in August
1998. We acquired the Founding Companies concurrently with the completion of our
IPO, have acquired 15 additional operating companies since that time, and have
entered into letters of intent to acquire four additional operating companies.
Our operating companies were separate independent entities before we acquired
them and to a certain extent they continue to operate as independent entities
because we conduct our operations on a decentralized basis. The integration of
our operating companies, while allowing them to retain decentralized operations
and management, is important to our operating and growth strategies and the
achievement of efficiencies in the combined operation. We may not be able to
integrate the operations or the necessary systems and procedures, including
accounting and financial reporting systems and project management systems, to
manage effectively the combined enterprise. Some members of our management group
have only recently joined RailWorks and we cannot guarantee that the management
group will successfully implement our acquisition and operating strategies. We
cannot assure you that we will be able to establish, maintain or increase the
profitability of the operating companies. Our pro forma financial statements
include results of operations for certain operating companies when they were not
under common control or management. As a result, our pro forma financial
statements may not be indicative of our future results of operations. Any
failure by our management group to implement our strategies, integrate the
operating companies without substantial costs, delays or other operational or
financial difficulties, or oversee effectively the combined entity could have a
material adverse effect on our business, financial condition and results of
operations.
We May be Unable to Complete and Finance Acquisitions. We have completed
15 acquisitions since the IPO and we intend to grow significantly through the
acquisition of additional businesses. See "Business -- Strategy." Our
acquisition strategy entails reviewing acquired business operations, corporate
infrastructure and systems and financial controls. Unforeseen expenses,
difficulties, complications and delays frequently encountered in connection with
the rapid expansion of operations could inhibit our growth or adversely affect
our financial performance.
We have also signed letters of intent to purchase four operating companies.
We expect to execute definitive purchase agreements with one exception, which
will have customary closing conditions (including completion of due diligence),
prior to the end of 1999. However, there can be no assurance that we will
acquire any of these companies.
We cannot assure you that we will maintain or accelerate our growth or
anticipate all of the changing demands that expanding operations will impose on
our management, personnel, operational and management information systems and
financial systems. We may not be able to identify, acquire or manage profitably
additional businesses or to integrate successfully any acquired businesses
without substantial costs, delays or other operational or financial
difficulties. Any such occurrence could have a material adverse effect on our
business, financial condition and results of operations.
14
<PAGE> 20
We cannot predict the timing, size and success of our acquisition efforts
and any associated capital commitments. We currently intend to finance future
acquisitions with bank borrowings, shares of our common stock, internally
generated funds or a combination of common stock and cash. If our common stock
does not maintain a sufficient market value, or if potential acquisition
candidates are otherwise unwilling to accept common stock as part of the
consideration for the sale of their businesses, we may be required to utilize
more of our cash resources or borrowings to maintain our acquisition program. In
addition, our acquisitions typically provide for the sellers to receive
contingent consideration, which is only paid if the acquired companies achieve
certain operating results. These payments could be substantial. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operation -- Liquidity and Capital Resources".
We May be Unable to Generate Internal Growth. Our ability to grow will be
affected by various factors, including demand for rail system services and
products, our success in bidding on new projects, the success of our
cross-selling efforts and our ability to develop a national accounts program.
Our growth may also depend on increased outsourcing by rail system operators.
Many of these factors are beyond our control. Our strategies may not be
successful or we may be unable to generate cash flow adequate for combined
operations and to support internal growth. The senior managers of the operating
companies retain responsibility for day-to-day operations. If proper business
controls are not implemented and maintained, this decentralized operating
strategy could result in inconsistent operating and financial practices of the
operating companies, which could have a material adverse effect on our business,
financial condition and results of operations. See "Business -- Strategy".
We Have Been Dependent on Certain Customers. We derived approximately
28.1% of our pro forma revenue for the year ended December 31, 1998 from our top
ten customers. Approximately 15.4% of our 1998 pro forma revenue was derived
from projects undertaken for the New York City Transit Authority ("NYCTA").
These projects were undertaken under a number of separate contracts. If the
NYCTA were to significantly reduce the amount of business that it does with us
or determine not to do business with us in the future, it would have a material
adverse effect on our business, financial condition and results of operations.
See "Business -- Customers".
Certain Operating Companies Have a History of Losses. From time to time,
primarily due to industry cyclicality and uncertainties inherent in the
competitive bidding process, certain of our operating companies have experienced
net losses. See "-- Our Fixed Price Contracts Expose us to Significant Risks"
below. We cannot assure you that we or our operating companies will be
profitable in the future. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
We May Face Intense Competition. The rail system services and products
industry is highly competitive. Numerous companies provide services to transit
authorities, construct and repair rail systems or sell related products or
supplies, and some of these companies operate in more than one of these lines of
business. Some of our competitors have greater resources than we have, may also
provide a broad range of services and products and may have sufficient bonding
capacity and other resources to undertake large projects. Any inability to
compete successfully against our existing and future competitors would have a
material adverse effect on our business, financial condition and results of
operations. Certain of our operating companies also provide electrical
contracting services to non-rail industrial and commercial customers. While we
believe that we currently compete effectively in the non-rail electrical
contracting business, this industry is highly competitive and is served by
small, owner-operated private companies, public companies and several large
regional companies. Additionally, we could face competition in the future from
other competitors entering our markets. See "Business -- Competition".
We are Dependent on Public Sector Contracts and Funding. The rail system
services and products business involves contracts that are supported by funding
from federal, state and local
15
<PAGE> 21
governmental agencies, as well as contracts with such agencies ("public sector
contracts"). Public sector contracts are subject to detailed regulatory
requirements and public policies, as well as funding priorities. These contracts
may be conditioned upon the continuing availability of public funds, which in
turn depends upon lengthy and complex budgetary procedures. These contracts may
also be subject to significant pricing constraints. Moreover, public sector
contracts may generally be terminated for reasons beyond the control of the
contractor, including when such termination is in the best interests of the
governmental agency. We cannot assure you that these factors or others unique to
public sector contracts will not have a material adverse effect on our business,
financial condition and results of operations. See "Business -- Government
Regulation".
Our Fixed Price Contracts Expose us to Significant Risks. Fixed price
contracts are typically awarded in the rail system services industry pursuant to
a competitive bidding process. In compiling our bid on a particular project, we
must estimate the time it will take to complete the project, along with the
project's labor and supply costs. These costs may be affected by a variety of
factors, some of which may be beyond our control. If we cannot accurately
predict the costs of fixed price contracts, certain projects could have lower
margins than anticipated or we could suffer losses on the projects. Lower
margins and losses could have a material adverse effect on our business,
financial condition and results of operations.
We Rely on Subcontractors and Suppliers. We generally perform electrical
contracting services for transit signaling and communication systems as a
subcontractor to companies that design the systems and manufacture or purchase
the necessary equipment. In other instances, we act as the prime contractor and
subcontract the design of the signal or communication system and necessary
equipment. When we are a prime contractor for such projects, we generally
require subcontractors to post performance bonds. We may not require a
subcontractor to post a performance bond in situations where (1) the
subcontractor has strong experience with a specific type of project and
demonstrates financial stability and (2) the customer does not require bonds
from us as prime contractor. We sometimes depend upon the subcontractor to
perform design and other services and provide equipment. For certain projects
there are a limited number of companies that can perform the subcontract if the
initial subcontractor defaults. As a result, we depend upon our subcontractors
to perform under the subcontracts. Further, the major components of signaling
and communication systems for transit authorities are manufactured to
specifications and require long lead times for production. If a subcontractor or
supplier defaults, or if a supplier refuses or cannot do business with us, it
could have a material adverse effect on our business, financial condition and
results of operations.
The Rail System Industry is Cyclical. A substantial portion of our revenue
is derived from public contracts, which we expect to constitute a relatively
stable source of business due to funding provided by TEA 21. However, demand for
rail system services and products could fluctuate in conjunction with overall
economic conditions. In economic downturns, rail system operators may defer
certain construction and rehabilitation projects and purchases of related
products to conserve cash in the short term. Reductions in freight traffic due
to economic downturns or other factors may also reduce demand for our
construction and rehabilitation services and related products. In economic
upturns, railroads, particularly Class I railroads, experience heavier traffic
demands that can cause problems associated with congestion. The operational
problems related to congestion have an unpredictable impact on railroad
expenditures for construction and rehabilitation services and related products,
including those we provide. During periods of peak usage, rail system owners may
defer certain expenditures because they may need to address operational
challenges these conditions cause. Other issues, such as the possibility of
heightened government regulation during periods of congestion and the internal
challenges of managing railroad operations as the Class I railroads continue to
consolidate, may exacerbate the effects of these uncertainties.
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<PAGE> 22
We are Exposed to Downturns in Commercial Construction. We derived
approximately 10.4% of our pro forma revenue for the year ended December 31,
1998 from installation of electrical systems in newly constructed or renovated
commercial buildings and power and industrial plants. Fluctuations in the level
of new construction and renovation of commercial buildings affect the demand for
electrical installation services. These fluctuations reflect the cyclical nature
of the construction industry and depend upon general economic conditions,
changes in interest rates and other related factors. Downturns in levels of
commercial construction and renovation could have a material adverse effect on
our business, financial condition and results of operations. Further, our
electrical installation business is focused in the northeastern United States
and is therefore particularly susceptible to economic downturns in that region.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations".
Our Workforce is Unionized. As of September 30, 1999, approximately 50.0%
of our employees were covered under collective bargaining agreements. In June
1994, one of our operating companies was affected by a one-week work stoppage by
the United Brotherhood of Teamsters. We cannot assure you that future work
stoppages will not affect us. In addition, labor agreements are generally
negotiated on an industry-wide basis and the terms and conditions of future
labor agreements could be beyond our control. We may be subject to terms and
conditions in future labor agreements that could have a material adverse effect
on our business, financial condition and results of operations. See
"Business -- Employees".
We are Subject to Extensive Environmental and Government Regulation. Our
operations are subject to extensive federal, state and local regulation under
environmental laws and regulations. Among other things, these laws and
regulations cover emissions to the air, discharges to waters and the generation,
handling, storage, transportation, treatment and disposal of waste, underground
and aboveground storage tanks and remediation of soil and groundwater
contamination. Environmental liability can extend to previously owned or
operated properties, leased properties and properties owned by third parties, as
well as to properties currently owned and used by us. Environmental liabilities
may also arise from claims asserted by adjacent landowners or other third
parties in toxic tort litigation. We could incur significant ongoing costs
associated with environmental regulatory compliance. Further, we sometimes use
hazardous materials in connection with our operations. Although we believe that
we are in material compliance with all of the various environmental regulations
applicable to our business, we cannot assure you that requirements will not
change in the future or that we will not incur significant costs to comply with
such requirements.
In addition to safety, health and other regulations of general
applicability, our operations may be significantly affected by regulations of
the Surface Transportation Board, the Federal Railroad Administration, the
Occupational Safety and Health Administration, state departments of
transportation and other state and local regulatory agencies. Changes in
regulation of the rail and transit industries through legislative,
administrative, judicial or other action could have a material adverse effect on
our business, financial condition and results of operations. See "Business --
Government Regulation."
We are Dependent on Key Personnel. Our success depends to a significant
extent upon the efforts and abilities of John G. Larkin, Chairman of the Board
and Chief Executive Officer, and Michael R. Azarela, Executive Vice President
and Chief Financial Officer. We also rely on senior management of our operating
companies. While we have entered into employment agreements with Messrs. Larkin
and Azarela and certain senior managers of the operating companies, we cannot be
certain that such individuals will remain with us throughout the terms of their
agreements, or thereafter. Further, it is likely we will depend on the senior
management of any significant businesses we acquire in the future. The loss of
the services of one or more of these key employees before we are able to attract
and retain qualified replacement personnel could
17
<PAGE> 23
have a material adverse effect on our business, financial condition and results
of operation. See "Management."
Our Systems May Not be Year 2000 Compliant. We have developed a plan to
address year 2000 issues. To date, we have substantially completed the
identification, assessment, remediation, and testing of our internal information
systems and other equipment with date-sensitive operating controls, such as
manufacturing equipment, HVAC, security and other similar systems.
We have also been in communication with hardware and software vendors with
whom we transact business, third parties with whom we exchange information
electronically, major or sole source suppliers, government agencies, and major
customers. The focus of these communications is to determine the state of
readiness of each of these third parties with respect to their own year 2000
issues and how their progress may impact us. The majority of responses received
from third party inquiries indicate that they are working on their year 2000
issues, but the responses do not provide specific details. Follow-up action
related to material third party inquiries and responses is expected to continue
as these material third parties progress in their own year 2000 readiness
projects. We have no means of ensuring that third parties with whom we deal will
be year 2000 compliant or that the information obtained from such third parties
regarding year 2000 compliance will prove to be accurate.
While we anticipate that all computer systems have been assessed, remedied
and tested, there can be no assurance that all will be completely error free and
that such programs will be compliant by such dates. We rely on third party
software, equipment and services to conduct our business. While we believe we
have made reasonable efforts to address this issue, we have no means of ensuring
that third parties with whom we deal will be year 2000 compliant or that the
information obtained from such third parties regarding year 2000 compliance will
prove to be accurate.
We believe that it is difficult to specifically identify the most
reasonably likely worst case year 2000 scenario. The following factors could
result in interruptions to our operations or business activities:
- the failure to correct a material year 2000 problem,
- the inability of any key customer, key supplier or governmental agency to
make the necessary computer system changes on a timely basis,
- the inaccuracy of responses received from these third parties, and
- the potential shortage of skilled human resources to install and test
upgraded software and equipment.
Due to the general uncertainty inherent in the year 2000 issues,
particularly as it relates to the readiness of our key customers and suppliers,
and of governmental agencies, we cannot ascertain at this time whether the
consequences of year 2000 failures will have a material impact on our results of
operations, liquidity or financial condition. Our insurance coverage is limited
to business interruptions resulting from fire, explosion, or related perils
which are caused by a year 2000 system failure.
Our year 2000 efforts are ongoing and our consideration of contingency
plans will continue to evolve as new information becomes available. While we
anticipate continuity of our business activities, that continuity will depend
upon our ability, and the ability of third parties upon whom we rely on directly
or indirectly, to be year 2000 compliant. You are cautioned that you should read
forward-looking statements regarding Year 2000 issues in conjunction with
"Disclosure Regarding Forward-Looking Statements".
18
<PAGE> 24
USE OF PROCEEDS
This exchange offer is intended to satisfy our obligations under our
registration rights agreement. We will not receive any proceeds from the
exchange offer. You will receive, in exchange for old notes tendered by you in
the exchange offer, new notes in like principal amount. The old notes
surrendered in exchange for the new notes will be retired and cancelled and
cannot be reissued. Accordingly, the issuance of the new notes will not result
in any increase of our outstanding debt.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1999 (1) on an actual basis, (2) on a pro forma basis to reflect
the acquisition of the 1999 Acquired Companies and borrowings under our new term
loan facility and (3) on a pro forma basis as adjusted to reflect the sale of
the old notes and the application of the net proceeds therefrom. This table
should be read in conjunction with the Pro Forma Financial Statements,
"Description of the Notes," and our Consolidated Financial Statements and the
related notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents.................................. $ 5,318 $ 5,381 $ 5,381
======== ======== ========
Total debt (including current maturities):
Credit facility(1)....................................... $ 30,000 $ 20,400 $ 20,400
Term loan facility(2).................................... -- 30,000 30,000
Other notes payable(3)................................... 24,856 32,411 32,411
Seller promissory notes(4)............................... 12,500 15,500 15,500
Existing notes(5)........................................ 125,000 125,000 125,000
Old notes................................................ 48,938 48,938 48,938
-------- -------- --------
Total debt............................................ 241,294 272,249 272,249
Stockholders' equity....................................... 126,276 129,314 129,314
-------- -------- --------
Total capitalization............................. $367,570 $401,563 $401,563
======== ======== ========
</TABLE>
- ---------------
(1) For a description of credit facility, see "Description of Credit Facility".
(2) For a description of the term loan facility, see "Description of Term Loan
Facility".
(3) Represents assumed indebtedness of the Acquired Companies and fixed asset
notes related to equipment.
(4) Issued to owners of certain of the Acquired Companies in connection with the
acquisitions. These notes generally bear interest at 5.0% per annum and
become due between January 2000 and August 2001.
(5) Represents our $125,000,000 11 1/2% Senior Subordinated Notes due 2009 that
we issued and sold on April 7, 1999. See "Description of the Notes".
19
<PAGE> 25
PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial statements for the year ended
December 31, 1998 give effect to (1) the acquisitions by RailWorks of the
Founding Companies and the Acquired Companies as if each had occurred on January
1, 1998 and (2) the sale of the old notes and the application of the net
proceeds. The unaudited pro forma financial statements for the nine months ended
September 30, 1999 give effect to (1) the acquisitions of the 1999 Acquired
Companies as if each had occurred on January 1, 1999 and (2) the sale of the old
notes and the application of the net proceeds. The unaudited pro forma balance
sheet gives effect to the acquisition of the 1999 Acquired Companies and the
sale of the old notes and the application of the net proceeds as if each had
occurred on September 30, 1999.
The unaudited pro forma statement of operations for the year ended December
31, 1998 includes the results of operations of RailWorks for the year ended
December 31, 1998 combined with (1) the results of operations for the Founding
Companies (other than Comstock Holdings, Inc.) from January 1, 1998 through July
31, 1998, (2) the results of operations of Armcore Railroad Contractors, Inc.
from January 1, 1998 through November 4, 1998, seven of the 1999 Acquired
Companies from January 1, 1998 through December 31, 1998, two of the 1999
Acquired Companies from December 1, 1997 through November 30, 1998 and two of
the 1999 Acquired Companies from April 1, 1998 through March 31, 1999 and (3)
the sale of the old notes and the application of the net proceeds, and give
effect to the pro forma adjustments related to these transactions all as if each
had occurred on January 1, 1998. The unaudited pro forma statement of operations
for the nine months ended September 30, 1999 includes the results of operations
of RailWorks for the nine months ended September 30, 1999 combined with (1) the
results of operations of FCM Rail, Ltd., F&V Metro Contracting Corp. and
affiliates and Gantrex Group from January 1, 1999 through January 31, 1999, the
results of operations of McCord Treated Wood, Inc. and Birmingham Wood, Inc.
from January 1, 1999 through April 12, 1999, the results of operations of
M-Track Enterprises, Inc. from January 1, 1999 through April 30, 1999, the
results of operations of PNR Contractors, Inc. from January 1, 1999 through May
18, 1999, the results of operations of Neosho Incorporated and affiliates from
January 1, 1999 through May 31, 1999, the results of operations of Earl Campbell
Construction Company, Inc. and Wood Waste Energy, Inc. from January 1, 1999
through June 30, 1999 and the results of operations of W. T. Byler Co., Inc.
from January 1, 1999 through September 30, 1999 and (2) the sale of the old
notes and the application of the net proceeds, and give effect to the pro forma
adjustments related to these transactions all as if each had occurred on January
1, 1999.
We have analyzed the savings that we expect to realize from reductions in
salaries, bonuses and certain benefits to the owners of the Founding Companies
and the Acquired Companies. To the extent the owners of the Founding Companies
and the Acquired Companies have contractually agreed to changes in salaries,
bonuses, benefits and lease payments, these changes have been reflected in the
unaudited pro forma statement of operations.
Certain pro forma adjustments are based on preliminary estimates, available
information and certain assumptions that management deems appropriate and may be
revised as additional information becomes available. The pro forma financial
data do not purport to represent what our combined financial position or results
of operations would actually have been if such transactions had in fact occurred
on those dates and are not necessarily representative of our combined financial
position or results of operations for any future period. Because the acquired
entities were not under common control or management prior to their acquisition
by RailWorks, historical combined results may not be comparable to, or
indicative of, future performance. The unaudited pro forma combined financial
statements should be read in conjunction with our historical consolidated
financial statements and the related notes included elsewhere in this
prospectus.
20
<PAGE> 26
RAILWORKS CORPORATION
UNAUDITED PRO FORMA BALANCE SHEET
AS OF SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
RAILWORKS ACQUISITION PRO FORMA
CORPORATION OF PRO FORMA OFFERING AS
HISTORICAL W.T. BYLER CO., INC. ADJUSTMENTS PRO FORMA ADJUSTMENTS ADJUSTED
----------- -------------------- ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash........................ $ 5,318 $ 63 $ -- $ 5,381 $ -- $ 5,381
Accounts receivables........ 134,359 14,803 -- 149,162 -- 149,162
Costs and estimated earnings
in excess of billings on
uncompleted contracts..... 52,662 895 -- 53,557 -- 53,557
Inventories................. 17,846 253 -- 18,099 -- 18,099
Prepaid expenses and other
current assets............ 6,708 227 -- 6,935 -- 6,935
-------- ------- ------- -------- ----------- ----------
Total current
assets.............. 216,893 16,241 -- 233,134 -- 233,134
-------- ------- ------- -------- ----------- ----------
Property, plant and equipment,
net......................... 66,009 11,294 -- 77,303 -- 77,303
-------- ------- ------- -------- ----------- ----------
Other Assets:
Excess of cost over acquired
net assets, net of
amortization.............. 183,337 -- 16,525(a) 199,862 -- 199,862
Other....................... 15,170 -- -- 15,170 -- 15,170
-------- ------- ------- -------- ----------- ----------
$481,409 $27,535 $16,525 $525,469 $ -- $ 525,469
======== ======= ======= ======== =========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities:
Current maturities of long-
term debt................. $ 11,784 $ 5,722 $ -- $ 17,506 $ -- $ 17,506
Accounts payable and accrued
liabilities............... 54,252 5,148 -- 59,400 -- 59,400
Accrued interest payable.... 9,707 -- -- 9,707 -- 9,707
Accrued payroll and related
withholdings.............. 3,656 934 -- 4,590 -- 4,590
Billings in excess of costs
and estimated earnings on
uncompleted contracts..... 13,434 2,906 -- 16,340 -- 16,340
Other current liabilities... 14,296 1,079 -- 15,375 -- 15,375
-------- ------- ------- -------- ----------- ----------
Total current
liabilities......... 107,129 15,789 -- 122,918 -- 122,918
-------- ------- ------- -------- ----------- ----------
Long-term Liabilities:
Other liabilities........... 10,003 -- -- 10,003 10,003
Excess of acquired net
assets over cost, net of
amortization.............. 8,491 -- -- 8,491 -- 8,491
Senior subordinated notes... 173,938 -- -- 173,938 -- 173,938
Long-term debt.............. 55,572 1,833 23,400(a) 80,805 -- 80,805
-------- ------- ------- -------- ----------- ----------
Total long-term
liabilities......... 248,004 1,833 23,400 273,237 -- 273,237
-------- ------- ------- -------- ----------- ----------
Total liabilities..... 355,133 17,622 23,400 396,155 -- 396,155
-------- ------- ------- -------- ----------- ----------
Stockholders' Equity:
Preferred stock............. 14 -- -- 14 -- 14
Common stock................ 139 1 2(a) 142 -- 142
Additional paid-in
capital................... 123,973 40 2,995(a) 127,008 -- 127,008
Accumulated other
comprehensive income...... 123 -- -- 123 -- 123
Retained earnings
(deficit)................. 2,027 9,872 (9,872)(a) 2,027 -- 2,027
-------- ------- ------- -------- ----------- ----------
Total stockholders'
equity.............. 126,276 9,913 (6,875) 129,314 -- 129,314
-------- ------- ------- -------- ----------- ----------
$481,409 $27,535 $16,525 $525,469 $ -- $ 525,469
======== ======= ======= ======== =========== ==========
</TABLE>
See Notes to Unaudited Pro Forma Balance Sheet.
21
<PAGE> 27
RAILWORKS CORPORATION
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
a. To record goodwill and RailWorks's financing of the acquisition of W.T.
Byler Co., Inc.
The adjustments related to the acquisition of W.T. Byler Co., Inc. are
based on preliminary estimates of the allocation of the purchase price and are
subject to revision.
22
<PAGE> 28
RAILWORKS CORPORATION
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOUNDING PRO FORMA FOR
COMPANIES PRO FORMA FOUNDING
RAILWORKS (THROUGH FOR COMPANIES
CORPORATION JULY 31, PRO FORMA FOUNDING ACQUIRED PRO FORMA AND ACQUIRED
HISTORICAL 1998) ADJUSTMENTS COMPANIES COMPANIES(1) ADJUSTMENTS COMPANIES
----------- --------- ----------- --------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue...................... $212,533 $ 56,965 $ $269,498 $275,261 $ -- $544,759
Cost of revenue.............. 182,817 45,892 (800)(2) 227,052 228,972(2) (4,910)(2) 451,114
(857)(3)
-------- -------- -------- -------- -------- -------- --------
Gross profit................. 29,716 11,073 1,657 42,446 46,289 4,910 93,645
Selling, general and
administrative expenses.... 17,040 9,033 (2,379)(3) 19,317 30,027 (11,520)(3) 33,035
(785)(4) (603)(2)
(2,000)(2) (4,186)(5)
(1,592)(5)
Non-recurring expenses....... 19,965 400 (14,470)(6) -- -- -- --
(803)(7)
(5,092)(8)
Transaction fees............. 1,281 -- (1,281)(9) -- -- -- --
Loss guarantee............... -- 1,491 (1,491)(10) --
Depreciation and
amortization............... 2,105 1,595 1,689(11) 5,389 11,731 2,407(11) 19,527
-------- -------- -------- -------- -------- -------- --------
Operating income (loss)...... (10,675) 45 28,370 17,740 3,040 20,303 41,083
Other income (expense):
Interest income/other
expense.................. 1,634 108 -- 1,742 1,840 200(13) 3,782
Interest expense........... (2,334) (378) 137(13) (2,575) (4,247) 179(13) (6,643)
-------- -------- -------- -------- -------- -------- --------
(Loss) income before income
taxes...................... (11,375) (225) 28,507 16,907 633 20,682 38,222
Provision for income taxes... 1,472 453 6,170(14) 8,095 (492) 7,887(14) 15,490
-------- -------- -------- -------- -------- -------- --------
Net (loss) income............ $(12,847) $ (678) $ 22,337 $ 8,812 $ 1,125 $ 12,795 $ 22,732
======== ======== ======== ======== ======== ======== ========
EBITDA(15)................... $ (8,570) $ 1,640 $ 30,059 $ 23,129 $ 14,771 $ 22,710 $ 60,610
======== ======== ======== ======== ======== ======== ========
<CAPTION>
OFFERING PRO FORMA AS
ADJUSTMENTS ADJUSTED
----------- ------------
<S> <C> <C>
Revenue...................... $ -- $544,759
Cost of revenue.............. -- 451,114
-------- --------
Gross profit................. -- 93,645
Selling, general and
administrative expenses.... -- 33,035
Non-recurring expenses....... -- --
Transaction fees............. -- --
Loss guarantee............... -- --
Depreciation and
amortization............... -- 19,527
-------- --------
Operating income (loss)...... -- 41,083
Other income (expense):
Interest income/other
expense.................. 3,782
Interest expense........... (17,475)(12) (25,037)
(919)(12)
-------- --------
(Loss) income before income
taxes...................... (18,394) 19,828
Provision for income taxes... (7,015)(14) 8,475
-------- --------
Net (loss) income............ $(11,379) $ 11,353
======== ========
EBITDA(15)................... $ -- $ 60,610
======== ========
</TABLE>
See Notes to Unaudited Pro Forma Statement of Operations.
23
<PAGE> 29
RAILWORKS CORPORATION
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
1. Excludes results of operations of the 1998 Acquired Companies from
November 4, 1998 to December 31, 1998 because they are included in the
Consolidated Financial Statements of RailWorks for the year ended December 31,
1998.
2. To reflect the reduction of insurance and employee benefit costs
realized by RailWorks compared to the combined historical cost incurred by the
Founding Companies and the Acquired Companies.
3. To reduce compensation expense to the level the owners of the Founding
Companies and the Acquired Companies have contractually agreed to receive
subsequent to the acquisition of their companies. The employment agreements are
generally for three years. This amount is net of incremental corporate expenses
of $1.6 million.
4. To reflect the savings realized on a lease renewal by Comstock and a
reduction of compensation expense related to personnel of Comstock's former
parent.
5. To eliminate acquisition-related costs incurred by the Founding
Companies and certain professional and other costs incurred by the Acquired
Companies in anticipation of their acquisition by RailWorks.
6. To record the issuance of 1,205,872 shares of restricted common stock
(with no cash impact to RailWorks) to management, based on the IPO price of
$12.00 per share.
7. To eliminate non-cash compensation expense recorded as a result of the
transfer of common stock from certain operating company managers to other
employees of such operating companies at the price per share in effect on the
date of transfer.
8. To eliminate non-recurring expenses of RailWorks consisting of $2.9
million related to settlement of employee benefit obligations of one of the
operating companies and corporate relocation costs and $2.2 million in estimated
legal and settlement costs in connection with former operations of one of the
operating companies.
9. To eliminate offering expenses incurred in connection with the IPO.
10. To eliminate the loss related to the specific contract performance of
an unrelated venture which was guaranteed by one of the acquired companies.
11. To record goodwill amortization expense using a 40-year estimated life,
other intangible assets amortization using a 10-year estimated life and loan
origination costs amortization using a 3-year estimated life.
12. To reflect incremental interest expense related to the sale of the old
notes of 11 1/2%, and amortization of related discount and transaction fees of
$2.1 million over ten years, together with amortization of $4.8 million of
interest and transaction fees for the $125 million of existing notes issued
April 1, 1999.
13. To adjust interest expense and interest income to reflect debt at the
rates that would have been in effect for RailWorks in 1998.
14. To record the incremental provision for federal and state income taxes
at an assumed 39.0% effective tax rate increased by the effect of goodwill
amortization which is not deductible for income tax purposes.
15. EBITDA is the sum of earnings before interest, income taxes,
depreciation and amortization expense. Included in EBITDA is income earned on
contract retainages pursuant to contractual agreements with certain customers.
EBITDA is presented because management believes that it is a widely accepted
financial indicator of a company's ability to service
24
<PAGE> 30
RAILWORKS CORPORATION
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS -- (CONTINUED)
indebtedness. However, EBITDA does not represent net income or cash flow from
operations as defined by generally accepted accounting principles, is not
necessarily indicative of cash available to fund all cash flow needs, should not
be considered as an alternative to net income or to cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles) and should not be construed as an indication of a company's
operating performance or as a measure of liquidity. EBITDA is not necessarily
comparable with similarly titled measures presented by other companies.
The adjustments related to the 1999 Acquired Companies are based on
preliminary estimates of the allocation of the purchase price and are subject to
revision.
25
<PAGE> 31
RAILWORKS CORPORATION
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
RAILWORKS 1999 PRO FORMA
CORPORATION ACQUIRED PRO FORMA FOR ACQUIRED OFFERING PRO FORMA AS
HISTORICAL COMPANIES(1) ADJUSTMENTS COMPANIES ADJUSTMENTS ADJUSTED
----------- ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenue.............................. $ 325,908 $94,613 $ -- $420,521 $ -- $420,521
Cost of revenue...................... 253,174(2) 83,146 (2,922)(3) 333,398 -- 333,398
--------- ------- ------- -------- ------- --------
Gross profit......................... 72,734 11,467 2,922 87,123 -- 87,123
Selling, general and administrative
expenses........................... 31,290 7,141 (2,758)(4) 34,219 -- 34,219
(138)(3)
(1,316)(5)
Depreciation and amortization........ 9,241(2) 5,460 895(6) 15,596 -- 15,596
--------- ------- ------- -------- ------- --------
Operating (loss) income.............. 32,203 (1,134) 6,239 37,308 -- 37,308
Other income (expense):
Interest income/other expense...... 1,713 696 -- 2,409 -- 2,409
Interest expense................... (12,370) (1,554) -- (13,924) (7,324)(7) (21,534)
(286)(7)
--------- ------- ------- -------- ------- --------
Income (loss) before income taxes.... 21,546 (1,992) 6,239 25,793 (7,610) 18,183
Provision for income taxes........... 8,080 178 2,371(8) 10,629 (2,854)(8) 7,775
--------- ------- ------- -------- ------- --------
Net income (loss).................... $ 13,466 $(2,170) $ 3,868 $ 15,164 $(4,756) $ 10,408
========= ======= ======= ======== ======= ========
EBITDA(9)............................ $ 41,444 $ 4,326 $ 7,134 $ 52,904 $ -- $ 52,904
========= ======= ======= ======== ======= ========
</TABLE>
See Notes to Unaudited Pro Forma Statement of Operations.
26
<PAGE> 32
RAILWORKS CORPORATION
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
1. Excludes results of operations of the 1999 Acquired Companies from their
respective acquisition dates through September 30, 1999 because they are
included in the Consolidated Financial Statements of RailWorks for the nine
months ended September 30, 1999.
2. Depreciation and amortization expense includes $4.9 million of
depreciation and amortization expense included in the cost of revenue.
3. To reflect the reduction of insurance and employee benefit costs
realized by RailWorks compared to the combined historical cost incurred by the
Founding Companies and the Acquired Companies.
4. To reduce compensation expense to the level the owners of the Founding
Companies and the Acquired Companies have contractually agreed to receive
subsequent to the acquisition of their companies. The employment agreements are
generally for three years. This amount is net of incremental corporate expenses
of $100,000.
5. To eliminate acquisition-related costs and certain professional and
other costs incurred by the 1999 Acquired Companies in anticipation of their
acquisition by RailWorks.
6. To record goodwill amortization expense using a 40-year estimated life.
7. To reflect incremental interest expense related to the sale of the old
notes of 11 1/2% and amortization of related discount and transaction fees of
$2.1 million over ten years, together with amortization of $4.8 million of
interest and transaction fees for the $125 million of existing notes issued
April 1, 1999.
8. To record the incremental provision for federal and state income taxes
at an assumed 39.0% effective tax rate increased by the effect of goodwill
amortization which is not deductible for income tax purposes.
9. EBITDA is the sum of earnings before interest, income taxes,
depreciation and amortization expense. Included in EBITDA is income earned on
contract retainages pursuant to contractual agreements with certain customers.
EBITDA is presented because management believes that it is a widely accepted
financial indicator of a company's ability to service indebtedness. However,
EBITDA does not represent net income or cash flow from operations as defined by
generally accepted accounting principles, is not necessarily indicative of cash
available to fund all cash flow needs, should not be considered as an
alternative to net income or to cash flows from operating activities (as
determined in accordance with generally accepted accounting principles) and
should not be construed as an indication of a company's operating performance or
as a measure of liquidity. EBITDA is not necessarily comparable with similarly-
titled measures presented by other companies.
The adjustments related to the 1999 Acquired Companies are based on
preliminary estimates of the allocation of the purchase price and are subject to
revision.
27
<PAGE> 33
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
RailWorks acquired the Founding Companies concurrently with the
consummation of the IPO on August 4, 1998. For accounting and financial
statement purposes, Comstock Holdings, Inc. (one of the Founding Companies) was
identified as the "accounting acquirer" consistent with the requirements of
Staff Accounting Bulletin No. 97 of the SEC. All other acquisitions have been
accounted for as purchases in accordance with Accounting Principles Board No.
16.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY RAILWORKS(3)
---------------------------------------------------- -------------------
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- -------------------
1994(1) 1995(1) 1996(1) 1997(1) 1998(2) 1998 1999
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue.................. $157,749 $181,616 $188,767 $153,610 $212,533 $139,457 $325,908
Cost of revenue.......... 137,607 164,777 169,303 136,678 182,817 121,898 258,043
-------- -------- -------- -------- -------- -------- --------
Gross profit............. 20,142 16,839 19,464 16,932 29,716 17,559 67,865
Selling, general and
administrative
expenses............... 16,963 15,624 15,053 13,733 17,040 11,563 31,290
Non-recurring expenses... -- -- -- -- 19,965(4) 19,965 --
Transaction fees......... -- -- -- -- 1,281(5) 1,281 --
Depreciation and
amortization........... 1,447 1,263 1,365 (213) 2,105 745 4,372
-------- -------- -------- -------- -------- -------- --------
Operating income (loss).. 1,732 (48) 3,046 3,412 (10,675) (15,995) 32,203
Interest expense......... (38) (871) (2,023) (1,761) (2,334) 1,508 12,370
Interest and other
income................. 2,401 2,115 476 975 1,634 556 1,713
Income (loss) before
income taxes........... 3,134 (19,822) 558 2,626 (11,375) (16,947) 21,546
Net income (loss)........ 2,782 (19,972) 58 1,428 (12,847) (17,914) 13,466
Ratio of earnings to
fixed charges(6)....... 4.5x -- 1.2x 2.1x -- -- 2.6x
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR COMPANY RAILWORKS
------------------------------------- ----------------------------
AS OF DECEMBER 31, AS OF AS OF
------------------------------------- DECEMBER 31, SEPTEMBER 30,
1994(1) 1995(1) 1996(1) 1997(1) 1998(2) 1999
------- ------- ------- ------- ------------ -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital(7)..................... $30,456 $31,915 $19,257 $26,500 $ 67,391 $109,764
Total assets........................... 89,168 86,108 84,344 68,352 228,636 481,409
Total debt............................. -- 19,241 24,890 15,004 51,504 241,294
Stockholders' equity................... 56,329 20,567 16,990 1,438 110,008 126,276
</TABLE>
- ---------------
(1) The selected historical consolidated financial data as of and for the fiscal
years ended December 31, 1994, 1995, 1996 and 1997 are derived from the
financial statements of Comstock Holdings, Inc., the accounting acquirer,
and its predecessor, L.K. Comstock & Company, Inc., for the respective
periods.
(2) The selected historical consolidated financial data for the fiscal year
ended and as of December 31, 1998 are derived from the Company's
Consolidated Financial Statements, which are comprised of financial data of:
- Comstock Holdings, Inc., the accounting acquirer, for the year ended
December 31, 1998;
- the Founding Companies, other than Comstock Holdings, Inc., for the
period from August 1, 1998 through December 31, 1998; and
- the 1998 Acquired Companies for the period from November 4, 1998 through
December 31, 1998.
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<PAGE> 34
(3) The selected consolidated financial data as of and for the nine months ended
September 30, 1998 and 1999 are derived from the unaudited Consolidated
Financial Statements of RailWorks contained elsewhere in this prospectus. In
the opinion of management, such unaudited statements include all adjustments
(consisting of only normal recurring accruals) necessary for a fair
presentation of the financial position and results of operations of
RailWorks for such periods. RailWorks's results of operations for the nine
months ended September 30, 1999 are not necessarily indicative of the
results that may be expected.
(4) Consists of $14.5 million in restricted common stock granted to the officers
of RailWorks, $2.9 million related to settlement of employee benefit
obligations of one of the operating companies and corporate relocation
costs, $2.2 million in estimated legal and settlement costs in connection
with former operations of one of the operating companies and $400,000 in
common stock gifts made by certain employees of an operating company to
other employees of that operating company.
(5) Represents offering expenses incurred in connection with the IPO.
(6) The ratio of earnings to fixed charges is calculated by dividing the fixed
charges into net income before taxes and minority interests plus fixed
charges. Fixed charges consist of interest expense, amortization of deferred
debt issuance costs and the estimated interest component of rent expense.
Earnings were inadequate to cover fixed charges by $19,822 in 1995, $11,375
in 1998 and $16,947 during the nine months ended September 30, 1998.
(7) Working capital is the sum of cash, accounts receivable, costs and estimated
earnings in excess of billings on uncompleted contracts, inventories,
deferred tax asset and other current assets, less the sum of current
maturities of long-term debt, accounts payable and accrued liabilities,
accrued payroll and related withholdings, billings in excess of costs and
estimated earnings on uncompleted contracts and other current liabilities.
29
<PAGE> 35
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations should be read in conjunction with our Consolidated Financial
Statements and the related notes appearing elsewhere in this prospectus.
This discussion contains forward-looking statements made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995,
which involve risks and uncertainties. Our actual results may differ from the
results discussed in the forward-looking statements. Factors that could cause or
contribute to those differences include, without limitation, those discussed in
this prospectus under "Business" and this "Management's Discussion and Analysis
of Financial Condition and Results of Operations", as well as those discussed
elsewhere in this prospectus.
GENERAL
RailWorks Corporation was formed in March 1998 to become a leading
nationwide provider of rail system services, including construction and
rehabilitation, repair and maintenance, and related products. We primarily
perform services pursuant to contracts for the completion of specific projects,
some of which take up to five years to complete. On most projects, we contract
directly with rail system operators, while on other projects we act as a
subcontractor.
In August 1998, we acquired in separate concurrent transactions 14 Founding
Companies engaged principally in the rail system services and products business
and we consummated our IPO. In November 1998, we acquired the two 1998 Acquired
Companies and, in the first ten months of 1999, we acquired the 11 1999 Acquired
Companies. In addition, in December 1999, we acquired two additional companies
engaged in the rail products and services and transit services businesses.
Except for the acquisition of Comstock Holdings, Inc., referred to as
"Comstock", a Founding Company, all of the acquisitions have been accounted for
as purchases in accordance with Accounting Principles Board No. 16.
For accounting and financial statement purposes, Comstock has been
identified as the accounting acquirer consistent with the SEC's Staff Accounting
Bulletin No. 97 because its owners received the largest portion, 34.6%, of the
shares of common stock issued to the owners of the Founding Companies at the
time of their acquisition. The historical financial statements prior to August
4, 1998 are those of Comstock.
Our consolidated balance sheet as of December 31, 1998, includes the
Founding Companies and the 1998 Acquired Companies. The results of operations
for the year ended December 31, 1998, and the statement of cash flows for the
year ended December 31, 1998 include the results of operations and cash flows of
Comstock for the entire period, the results of operations and cash flows of the
Founding Companies from August 1, 1998 and the results of operations and cash
flows of the 1998 Acquired Companies from November 4, 1998. RailWorks conducted
no operations prior to the consummation of its IPO other than the acquisitions
of the Founding Companies and the financing activities related thereto,
including the IPO, and had no revenue or operating expenses prior to August 1,
1998. Consequently, management believes that RailWorks, or individual Founding
Company and 1998 Acquired Company financial comparisons, are not meaningful.
The Founding Companies and the Acquired Companies have operated
historically under varying tax structures, including both S and C corporations,
which have influenced the historical level of owners' compensation. Certain
executive officers of each of the Founding Companies and the Acquired Companies
have entered into employment agreements with the Company. The aggregate
compensation paid to such executive officers has been reduced as reflected in
the Unaudited Pro Forma Statement of Operations included elsewhere in this
prospectus. Following
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<PAGE> 36
the initial two-year term of the employment agreements, we will reevaluate our
compensation structure after examining operating results and the value of the
services those individuals provide us.
Prior to their affiliation with RailWorks, the Founding Companies and the
Acquired Companies were privately owned and managed as separate entities.
Operating performance and management compensation depended on regional market
conditions and the priorities and strategies of individual owners. For example,
under private ownership these companies experienced limitations on project
bonding capacity, access to capital and human resources. In addition, many of
these companies operated under an S corporation tax structure. In many
instances, management and employee compensation was not necessarily directed
toward the achievement of growth in profitability. As part of RailWorks, these
businesses have access to significantly more resources, including higher bonding
capacity, lower input costs through greater purchasing power, access to lower
cost capital and cross-selling opportunities.
REVENUE AND COSTS
RailWorks recognizes revenue from fixed price contracts using the
percentage-of-completion method, measured by the percentage of costs incurred to
date to management's estimate of total cost for each contract. Changes in job
performance, job conditions and estimated profitability may result in revisions
to cost and income, which are recognized in the period in which the revisions
are determined. Revenue from time-and-material contracts are recognized
currently as the work is performed.
Contract costs consist principally of wages and benefits of employees,
subcontracted services, materials, parts and supplies, depreciation and other
vehicle expenses and equipment rental, as well as indirect costs related to
contract performance. Contract costs are charged to expense as incurred.
Provisions for estimated losses on uncompleted contracts are made in the period
in which such losses are determined.
In the case of product sales, the Company recognizes revenue when products
are delivered to customers pursuant to shipping agreements. Cost of goods sold
includes raw materials cost and production cost.
RESULTS OF OPERATIONS
Historical -- Nine Months Ended September 30, 1999 Compared to Nine Months Ended
September 30, 1998
Revenue. Revenue increased $186.4 million, or 133.6%, from $139.5 million
for the nine months ended September 30, 1998 to $325.9 million for the nine
months ended September 30, 1999. The increase was due to the fact that the 1998
data is that of Comstock alone for seven months and all fourteen original
Founding Companies for the other two months in the period. The 1999 data
includes the Founding Companies as well as twelve additional companies acquired
since the IPO and prior to September 30, 1999.
Transit service revenue increased $61.2 million, or 51.2%, from $119.6
million for the nine months ended September 30, 1998 to $180.8 million for the
nine months ended September 30, 1999. The increase was due to the fact that the
1998 data is that of Comstock alone for seven months and Comstock and one other
Founding Company for the other two months in the period. The 1999 data includes
two Founding Companies as well as three additional companies acquired since the
IPO and prior to September 30, 1999.
Rail products and supplies revenue increased $28.8 million, or 533.3%, from
$5.4 million for the nine months ended September 30, 1998 to $34.2 million for
the nine months ended September 30, 1999. The increase was due to the fact that
the 1998 data is that of three Founding
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<PAGE> 37
Companies for two months in the period. The 1999 data includes three Founding
Companies as well as four additional companies acquired since the IPO and prior
to September 30, 1999.
Rail construction revenue increased $96.4 million, or 664.8%, from $14.5
million for the three months ended September 30, 1998 to $110.9 million for the
nine months ended September 30, 1999. The increase was due to the fact that the
1998 data is that of nine Founding Companies for two months in the period. The
1999 data includes nine Founding Companies as well as five additional companies
acquired since the IPO and prior to September 30, 1999.
Gross Profit. Gross profit increased $50.3 million or 285.8% from $17.6
million for the nine months ended September 30, 1998 to $67.9 million for the
nine months ended September 30, 1999. The increase was due to the fact that the
1998 data is that of Comstock alone for seven months and all fourteen original
Founding Companies for the other two months in the period. The 1999 data
includes the Founding Companies as well as twelve additional companies acquired
since the IPO and prior to September 30, 1999. The gross profit percentage
increased from 12.6% for the nine months ended September 30, 1998 to 20.8% for
the nine months ended September 30, 1999. This increase was the result of higher
profitability associated with the mix and type of work performed during 1999 by
the consolidated group as compared to historical Comstock margins.
Transit services gross profit increased $10.9 million or 77.9% from $14.0
million for the nine months ended September 30, 1998 to $24.9 million for the
nine months ended September 30, 1999. The increase was due to the fact that the
1998 data is that of Comstock alone for seven months and Comstock and one other
Founding Company for the other two months in the period. The 1999 data includes
two Founding Companies as well as three additional companies acquired since the
IPO and prior to September 30, 1999. The gross profit percentage increased from
11.7% for the nine months ended September 30, 1998 to 13.8% for the nine months
ended September 30, 1999. This increase was the result of higher profitability
associated with the mix and type of work performed during 1999 by the
consolidated group as compared to historical consolidated Founding Company
margins.
Rail products and supplies gross profit increased $12.0 million, or
1,090.9%, from $1.1 million for the nine months ended September 30, 1998 to
$13.1 million for the nine months ended September 30, 1999. The increase was due
to the fact that the 1998 data is that of three Founding Companies for two
months in the period. The 1999 data includes three Founding Companies as well as
four additional companies acquired since the IPO and prior to September 30,
1999. The gross profit percentage increased from 20.4% for the nine months ended
September 30, 1998 to 38.3% for the nine months ended September 30, 1999. This
increase was the result of higher profitability associated with the mix and type
of work performed during 1999 by the consolidated group as compared to
historical consolidated Founding Company margins.
Rail construction gross profit increased $27.4 million, or 1,096.0%, from
$2.5 million for the nine months ended September 30, 1998 to $29.9 million for
the nine months ended September 30, 1999. The increase was due to the fact that
the 1998 date is that of nine Founding Companies for two months in the period.
The 1999 data includes nine Founding Companies as well as five additional
companies acquired since the IPO and prior to September 30, 1999. The gross
profit percentage increased from 17.2% for the nine months ended September 30,
1998 to 27.0% for the nine months ended September 30, 1999. This increase was
the result of higher profitability associated with the mix and type of work
performed during 1999 by the consolidated group as compared to historical
consolidated Founding Company margins.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $19.7 million or 169.8%, from $11.6 million
for the nine months ended September 30, 1998 to $31.3 million for the nine
months ended September 30, 1999. The increase is due to the fact that the 1998
data is that of Comstock alone for seven months and all original Founding
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<PAGE> 38
Companies for the other two months in the period. The 1999 data includes the
Founding Companies as well as twelve additional companies acquired since the IPO
and prior to September 30, 1999. Also recorded during the nine months ended
September 30, 1998 were one time non-recurring expenses of $20.0 million and IPO
transaction fees of $1.3 million. There were no similar items recorded during
the nine months ended September 30, 1999. As a percentage of revenue, selling,
general and administrative expenses increased from 8.3% for the nine months
ended September 30, 1998 to 9.6% for the nine months ended September 30, 1999.
This percentage increase was a result of acquired companies having higher
overhead selling, general and administrative cost structures than Comstock.
Transit services selling, general and administrative expenses increased
$1.8 million or 18.4%, from $9.8 million for the nine months ended September 30,
1998 to $11.6 million for the nine months ended September 30, 1999. The increase
was due to the fact that the 1998 data is that of Comstock alone for seven
months and Comstock and one other Founding company for the other two months in
the period. The 1999 data includes two Founding Companies as well as three
additional companies acquired since the IPO and prior to September 30, 1999. As
a percentage of segment revenue, selling, general and administrative expenses
decreased from 8.2% for the nine months ended September 30, 1998 to 6.4% for the
nine months ended September 30, 1999. This percentage decrease was a result of
acquired companies having lower overhead selling, general and administrative
cost structures than Comstock.
Rail products and supplies selling, general and administrative expenses
increased $5.1 million, or 1,700.0%, from $276,000 for the nine months ended
September 30, 1998 to $5.4 million for the nine months ended September 30, 1999.
The increase was due to the fact that the 1998 data is that of three Founding
Companies for two months in the period. The 1999 data includes three Founding
Companies as well as four additional companies acquired since the IPO and prior
to September 30, 1999. As a percentage of segment revenue, selling general and
administrative expenses increased form 5.6% for the nine months ended September
30, 1998 to 15.8% for the nine months ended September 30, 1999. This percentage
increase was a result of acquired companies having higher overhead selling,
general and administrative cost structures than the Founding Companies.
Rail construction selling, general and administrative expenses increased
$8.1 million, or 675.0%, from $1.2 million for the nine months ended September
30, 1998 to $9.3 million for the nine months ended September 30, 1999. The
increase was due to the fact that the 1998 data is that of nine Founding
Companies for two months in the period. The 1999 data includes nine Founding
Companies as well as five additional companies acquired since the IPO and prior
to September 30, 1999. As a percentage of segment revenue, selling, general and
administrative expenses increased from 8.3% for the nine months ended September
30, 1998 to 8.4% for the nine months ended September 30, 1999. This percentage
increase was a result of acquired companies having higher overhead selling,
general and administrative cost structures than the Founding Companies.
Corporate selling, general and administrative expenses increased $4.7
million, or 1,566.7%, from $300,000 for the nine months ended September 30, 1998
to $5.0 million for the nine months ended September 30, 1999. The increase was
due to the fact that the 1998 data is that of an overhead structure to support
all fourteen Founding Companies for two months in the period. The 1999 data is
that of an overhead structure to support all fourteen Founding Companies as well
as twelve additional companies acquired since the IPO and prior to September 30,
1999. As a percentage of total revenue, selling, general and administrative
expenses increased from .2% for the nine months ended September 30, 1998 to 1.5%
for the nine months ended September 30, 1999. The increase was due to the fact
that the 1998 data is that of an overhead structure to support all fourteen
Founding Companies. The 1999 data is that of an overhead structure to support
all fourteen Founding Companies as well as twelve additional companies acquired
since the IPO and prior to September 30, 1999.
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Net Income. Net income increased $31.4 million, from a loss of $17.9
million for the nine months ended September 30, 1998 to a profit of $13.5
million for the nine months ended September 30, 1999, as a result of the items
mentioned above.
Historical -- Year Ended December 31, 1998
Revenue was $212.5 million for the year ended December 31, 1998. Cost of
revenue was $182.8 million. Gross profit for the year ended December 31, 1998
was $29.7 million. Selling, general and administrative expenses were $38.3
million, including non-recurring expenses of $20.0 million and transaction fees
of $1.3 million recorded during the third quarter related to the IPO. The $20.0
million of non-recurring expenses consists of a non-cash compensation charge of
$14.9 million for stock grants issued to management resulting from the
consummation of the IPO, $2.9 million related to the settlement of certain
employee benefit obligations and relocation expenses and $2.2 million for
estimated legal and settlement costs in connection with certain claims and
litigation associated with our former west coast operations. Included in other
income in the fourth quarter was a gain of $861,000 on the disposition of our
Longview, Washington industrial electrical contracting division. This
divestiture was in conjunction with Comstock's change in strategic focus to
rail-based transit projects. The net loss for the year ended December 31, 1998
was $12.8 million.
Pro Forma Founding Companies -- Year Ended December 31, 1998 Compared to the
Year Ended December 31, 1997
The presentation below provides the pro forma results of operations of the
Founding Companies as if the Founding Companies had been acquired on January 1,
1997. The presentation only includes the results of the 1998 Acquired Companies
from November 4, 1998 to December 31, 1998. Acquired Companies are otherwise
excluded. The presentation includes pro forma results of the Founding Companies
and the Acquired Companies on a combined basis, see Pro Forma Financial
Statements beginning on page 21.
The pro forma results of operations of RailWorks for the periods presented
may not be comparable to, and may not be indicative of, our actual results of
operations because (1) the Founding Companies and the Acquired Companies were
not under common control or management during the periods presented and (2) the
pro forma data do not reflect all of the potential benefits and cost savings
RailWorks expects to realize as a result of operating as a combined entity. The
following discussion should be read in conjunction with the Unaudited Pro Forma
Financial Statements and the related notes appearing elsewhere in this
prospectus.
The following table sets forth selected pro forma financial data for the
periods indicated.
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA
RESULTS OF OPERATIONS
--------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------
1997 1998
----------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenue.......................................... $256,508 100.0% $269,498 100.0%
Cost of revenue.................................. 219,400 85.5 227,052 84.2
-------- --------
Gross profit..................................... 37,108 14.5 42,446 15.8
Selling, general and administrative expenses..... 20,848 8.1 19,317 7.2
Depreciation and amortization.................... 5,038 2.0 5,389 2.0
-------- --------
Operating income................................. 11,222 4.4 17,740 6.6
Interest and other income (expenses), net........ (1,063) (0.4) (833) (0.3)
-------- --------
Income before income taxes....................... 10,159 4.0 16,907 6.3
Net income....................................... 5,438 2.1 8,812 3.3
</TABLE>
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<PAGE> 40
Revenue. Revenue increased $13.0 million, or 5.1%, from $256.5 million for
the year ended December 31, 1997 to $269.5 million for the year ended December
31, 1998. The increase was primarily due to growth of the Company's transit
services segment, which grew at 7.1% and represented $11.0 million in additional
revenue.
Gross Profit. Gross profit increased $5.3 million, or 14.4%, from $37.1
million for the year ended December 31, 1997 to $42.4 million for the year ended
December 31, 1998. As a percentage of revenue, gross profit increased to 15.8%
for the year ended December 31, 1998 from 14.5% for the year ended December 31,
1997. The increase in gross profit was due to the higher revenue base and
improved revenue mix as a result of higher margin contracts.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $1.5 million, or 7.3%, from $20.8 million for
the year ended December 31, 1997 to $19.3 million for the year ended December
31, 1998. As a percentage of revenue, selling, general and administrative
expenses decreased from 8.1% for the year ended December 31, 1997 to 7.2% for
the year ended December 31, 1998. The decrease in selling, general and
administrative expenses was the result of decreased salaries and wages during
1998.
Net Income. Net income increased to $8.8 million for the year ended
December 31, 1998 from $5.4 million for the year ended December 31, 1997, an
increase of $3.4 million, or 62.0%. As a percentage of revenue, net income
increased to 3.3% for the year ended December 31, 1998 from 2.1% for the year
ended December 31, 1997. The increase was the result of the increase in revenue
and profitability discussed above.
Historical -- December 31, 1997 Compared to December 31, 1996 -- Comstock
Holdings, Inc.
Founded in 1904, L.K. Comstock & Co., Inc. ("L.K. Comstock"), a
wholly-owned subsidiary of Comstock, is one of the largest electrical
contractors in the United States based on revenue. L.K. Comstock specializes in
power, communication and signaling installations for rail-based transit systems
and also provides electrical contracting services for commercial buildings,
heavy industrial and manufacturing plants and power plants. Through incremental
investments from 1986 through 1989, L.K. Comstock's former parent company,
Comstock Group, Inc. ("CGI"), was acquired by Spie Enertrans S.A. ("Spie"), a
multinational electrical engineering firm headquartered in Paris, France. During
Spie's ownership, L.K. Comstock sought to increase revenue by expanding its
non-transit operations in California and entering into joint ventures to design
and build large power and industrial projects in other locations. Effective
January 1, 1997, L.K. Comstock was acquired (the "Comstock Acquisition") from
Spie by Comstock, a corporation owned by certain employees of L.K. Comstock.
Following the Comstock Acquisition, Comstock's management instituted a plan
to reduce Comstock's costs and improve profitability. As a result of this plan,
Comstock has reduced general and administrative expenses by eliminating certain
management positions, including those of several French expatriates, and
reducing its Los Angeles-based staff. Comstock also improved gross profit
margins through (1) improved control over contract costs by consolidating
transit project estimating and bidding functions and (2) exiting unprofitable,
risky operations which had been expanded under Spie's ownership (such as
electrical projects for traffic systems, non-rail projects in California and
large joint ventures for the design and construction of power and industrial
plants). Under joint ventures with general construction contractors, as
preferred by Spie, Comstock had limited management control and was subject to
increased costs due to general contract conditions. Following the Comstock
Acquisition, management focused the business to benefit from its core
competencies, including rail-based transit projects. However, Comstock's
electricians and supervisors are capable of performing services on rail and
non-rail projects, thus enabling the efficient use of experienced labor on
projects in response to demand. Additionally, its accounting and management
systems are designed to provide necessary information for both rail and non-rail
projects. In 1997, Comstock derived 56.7% of its revenue
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<PAGE> 41
and 58.6% of its gross profit from rail-related projects as compared to 48.1%
and 48.5%, respectively, in 1996.
Revenue. Revenue decreased to $153.6 million for the year ended December
31, 1997 from $188.8 million for the year ended December 31, 1996, a decrease of
$35.2 million, or 18.6%. This decrease was due to a decrease in revenue from
Comstock's power and industrial operations attributable to the completion of
certain large projects in 1996 and early 1997 that were not immediately
replaced, as well as a decrease in revenue from Comstock's traffic operations,
offset in part by an increase in revenue from Comstock's commercial operations.
The decrease in revenue from traffic operations, as well as a portion of the
decrease in revenue from power and industrial operations, were due to the change
in strategic focus discussed above and it is unlikely that such projects will be
replaced. Rail-related revenue did not change significantly from 1996 to 1997
due to limited bonding capacity.
Gross Profit. Gross profit decreased to $16.9 million for the year ended
December 31, 1997 from $19.5 million for the year ended December 31, 1996, a
decrease of $2.5 million, or 13.0%. As a percentage of revenue, gross profit
increased to 11.0% for the year ended December 31, 1997 from 10.3% for the year
ended December 31, 1996. Gross profit decreased as a result of the decline in
revenue, offset in part by tighter cost controls implemented by management and a
reduction in the amount of activity in traffic and Los Angeles-based non-rail
projects which had significantly lower margins. Additionally, 1996 gross profit
benefited from a reduction in contract reserves of approximately $3.0 million
related to the settlement of outstanding project contingencies.
General and Administrative Expenses. General and administrative expenses
decreased to $13.7 million for the year ended December 31, 1997 from $15.1
million for the year ended December 31, 1996, a decrease of $1.3 million, or
8.8%. This decrease was a result of the tighter cost controls implemented by
management, including reductions in executive and administrative staff in the
power, industrial and Los Angeles-based non-rail operations. As a percentage of
revenue, general and administrative expenses increased to 8.9% for the year
ended December 31, 1997 from 8.0% for the year ended December 31, 1996. This
increase was the result of the decrease in revenue.
Net Income. Net income increased to $1.4 million for the year ended
December 31, 1997 from $58,000 for the year ended December 31, 1996, an increase
of $1.3 million. For each period, net income as a percentage of revenue was less
than 1%. The increase in net income was partially due to the reduction of
general and administrative expenses discussed above and the elimination of
management expenses of $941,000 paid to Spie and related entities in 1996. In
addition, as a result of the Comstock Acquisition and the related purchase
accounting, approximately $1.6 million of depreciation and amortization were
eliminated in 1997 as compared to 1996. These factors were partially offset by
the decrease in gross profit due to the factors discussed above.
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
RailWorks is subject to market risk associated principally with changes in
interest rates. Interest rate exposure has been principally limited to the $30.0
million of long-term debt under our revolving credit agreement outstanding at
September 30, 1999. All of that debt is priced at interest rates that float with
the market. A 50 basis point movement in the interest rate on the floating rate
debt would have resulted in an approximate $150,000 annualized increase or
decrease in interest expense and cash flows. The remaining debt is fixed-rate
debt. RailWorks may from time to time enter into interest rate swaps on its
debt, when it believes there is a clear financial advantage for doing so.
RailWorks does not use derivative financial or commodity instruments for trading
purposes and the use of such instruments is subject to strict approval levels by
senior officers. Typically, the use of such derivative instruments is, in the
aggregate, not
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<PAGE> 42
material to our financial position, results of operations and cash flows. At
September 30, 1999, there were no swaps outstanding.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Founding Companies and the Acquired Companies have in the past
experienced quarterly variations in revenue, operating income (including
operating losses), net income (including net losses) and cash flows (including
operating cash flow deficits) as a result of various factors, including projects
commenced and completed during a quarter, the number of business days in a
quarter and the size and scope of projects. A variation in the number of
projects, progress on projects or the timing of the initiation or completion of
projects can cause periods in which certain operating resources are not
generating revenue and can cause significant variations in operating results
between reporting periods. Negative fluctuations have been particularly
pronounced, and net losses have been incurred, in the first and fourth calendar
quarters, generally due to adverse weather conditions. We expect to continue to
experience such quarterly fluctuations in operating results, including possible
net losses. See "Risk Factors -- Risks Relating to RailWorks -- Certain
Operating Companies Have a History of Losses" and "-- The Rail System Industry
is Cyclical".
LIQUIDITY AND CAPITAL RESOURCES
On August 4, 1998, we completed the IPO of 5.0 million shares of its common
stock at a price of $12.00 per share. We raised approximately $52.5 million of
capital, net of underwriting discounts and other offering expenses, of which
approximately $51.1 million was used for the cash portion of our acquisitions of
the Founding Companies and approximately $1.4 million was used for the repayment
of debt.
At September 30, 1999, RailWorks had working capital of approximately
$109.8 million, a $42.4 million increase from December 31, 1998 when working
capital was $67.4 million. Net cash used in operating activities was
approximately $24.5 million for the nine months ended September 30, 1999. Net
cash used in investing activities was approximately $104.7 million for the nine
months ended September 30, 1999, which included $89.2 million of cash for
acquisitions. Net cash provided by financing activities for the nine months
ended September 30, 1999 was approximately $131.6 million, which included $173.9
million from the issuance of the existing and old notes. Also included in
financing activities was $28.6 million from the issuance of long-term
borrowings, offset by debt repayment of approximately $45.9 million from
long-term borrowings and net repayments of $19.3 million on the RailWorks credit
facility.
At December 31, 1998, RailWorks had working capital of approximately $67.4
million. Net cash used in operating activities for the year ended December 31,
1998, was approximately $13.9 million. Net cash used in investing activities for
the year ended December 31, 1998 was approximately $54.3 million which consisted
of $52.5 million of cash for acquisitions (including $49.5 million for the
Founding Companies) and $1.3 million for purchase of equipment and leasehold
improvements. Net cash provided by financing activities for the year ended
December 31, 1998 was approximately $70.0 million, which included $52.5 million
from the issuance of common stock relating to the IPO and borrowings of
approximately $61.3 million, offset by debt repayment of approximately $41.2
million.
Capital expenditures were $11.8 million, $1.3 million, $448,000 and
$690,000 in the nine months ended September 30, 1999, fiscal 1998, 1997 and
1996, respectively. Historically, capital expenditures have been, and future
expenditures are anticipated to be, primarily to support expansion of our
operations, including its management information systems. Our capital
expenditures over the next several years, as a percentage of its revenues, are
expected to decrease compared to those of the past three fiscal years.
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We anticipate capital expenditures of approximately $2.5 million for
equipment and leasehold improvements over the balance of 1999. This investment,
which we expect to finance primarily by working capital and vendor financing,
relates to the anticipated facility consolidations of the operating companies,
the installation of a comprehensive financial reporting computer system and the
purchase of supplemental machinery and equipment needed to meet operational
demands. We have no other significant commitments for future capital
expenditures, although it is likely that cash outflows for business acquisitions
and equipment leases will continue.
Cash for acquisitions and working capital are financed by funds generated
from operations, together with borrowings under our $105 million credit facility
with NationsBank, N.A. At September 30, 1999, on an actual basis, we had $30.0
million of borrowings outstanding under the credit facility, which bore interest
at a weighted average annual rate of 9.0% as of such date. As of September 30,
1999, pro forma for the 1999 Acquired Companies, borrowings under our new term
loan facility, and the sale of the old notes and the application of the net
proceeds, we would have had approximately $82.5 million available for borrowing
under our credit facility. The credit facility is secured by a first lien on all
of the capital stock of our subsidiaries and on all accounts receivable of
RailWorks and its subsidiaries. The credit facility contains a negative pledge
on all of our other assets and the assets of our subsidiaries and other usual
and customary covenants and events of default for transactions of the type
contemplated by the credit facilities. Borrowings under the credit facility bear
interest, at our option, at an interest rate equal to
- LIBOR plus the applicable margin for LIBOR loans, which ranges from 125
basis points to 250 basis points based on the ratio of Funded Debt to
EBITDA, as such terms are defined in the credit facility, or
- the Alternate Base Rate, which is defined as the higher of (1) the
NationsBank prime rate and (2) the Federal Funds rate plus 50 basis
points, plus up to 125 basis points based on the ratio of Funded Debt to
EBITDA.
We may also finance future acquisitions with shares of common stock and
contingent consideration.
In addition, on November 5, 1999, we entered into a term loan facility with
the lenders named therein. Under the term loan facility, at December 6, 1999, we
had $30.0 million of borrowings outstanding, which bore interest at a weighted
average annual rate of 9.83% as of such date. Borrowings outstanding under the
term loan facility mature on November 5, 2004. Borrowings under the term loan
facility bear interest, at our option, at an interest rate equal to (1) the Base
Rate plus 200 basis points or (2) the Eurodollar Rate plus 375 basis points. The
interest rate is increased by 2% upon the occurrence, and during the
continuance, of an event of default. The term loan facility is guaranteed by all
of our domestic subsidiaries.
In connection with some acquisitions, we have agreed, and in the future may
agree, to pay additional consideration based on operating results of the
acquired entity. The payment of any such earnouts could result in an increase in
the purchase prices of such acquisitions and, as a result, additional goodwill.
We believe that funds generated from operations, together with existing
cash, the net proceeds of this offering and borrowings under our credit
facility, will be sufficient to finance its current operations, planned capital
expenditures, pending acquisitions and internal growth for at least the next
several years. If we were to make a significant acquisition for cash, it may be
necessary for us to obtain additional debt or equity financing.
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INFLATION
We do not believe that inflation has had a material effect on its results
of operations in recent years. However, there can be no assurance that our
business will not be affected by inflation in the future.
YEAR 2000
The Company developed a plan for year 2000 issues, which addressed three
main areas: (1) information systems; (2) embedded chips; and (3) supply chain
readiness (including customers as well as inventory and non-inventory
suppliers). To oversee the process, the Company established a committee
comprised of accounting and information systems personnel who reported regularly
to the board of directors and the Audit Committee.
The evaluation of the Company's state of readiness relating to its year
2000 issues has been a continual process emphasizing a constant awareness of
computer systems and business relationships that may be sensitive to year 2000
issues. Management categorized the activities necessary to solve the year 2000
issues into the identification and assessment phase, the remediation phase, and
the testing and contingency planning phase. The identification and assessment
phase included conducting a comprehensive inventory and evaluation of all the
Company's IT systems and non-IT electronic equipment (collectively referred to
as a computer programs) to identify those computer programs that contained date
sensitive features. Those computer programs that contained such features were
then further evaluated and categorized as either mission critical or non-mission
critical based upon their relative importance to the uninterrupted continuation
of the Company's daily operations. Mission critical computer programs gained top
priority when allocating the available resources to solve year 2000 issues.
The Company has substantially completed the identification, assessment,
remediation, and testing of its internal information systems and other equipment
with date sensitive operating controls, such as manufacturing equipment, HVAC,
security and other similar systems.
The Company has also been in communication with hardware and software
vendors with whom the Company transacts business, third parties with whom the
Company exchanges information electronically, major or sole source suppliers,
government agencies, and major customers. The focus of these communications has
been to determine the state of readiness of each of these third parties with
respect to their own year 2000 issues and how their progress may impact the
Company. The majority of responses received from third party inquiries indicate
that they are working on their year 2000 issues, but the responses do not
provide specific details. Follow-up action related to material third party
inquiries and responses is expected to continue. However, the Company has no
means of ensuring that third parties with whom it deals will be year 2000
compliant or that the information obtained from such third parties regarding
year 2000 compliance will prove to be accurate.
While the Company's management anticipates that all computer systems have
been assessed, remedied and tested, there can be no assurance that all will be
completely error free and that such programs will be compliant by year 2000. We
rely on third party software, equipment and services to conduct our business.
While the Company believes it has made reasonable efforts to address this issue,
it has no means of ensuring that third parties with whom it deals will be year
2000 compliant or that the information obtained from such third parties
regarding year 2000 compliance will prove to be accurate.
The Company believes that it is difficult to specifically identify the most
reasonably likely worst case year 2000 scenario. The failure to correct a
material year 2000 problem or the inability of any key customer, key supplier or
a governmental agency to make the necessary computer system changes on a timely
basis, the inaccuracy of responses received from these third parties, and the
potential shortage of skilled human resources to install and test upgraded
software and
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equipment could result in interruptions to Company operations or business
activities. Due to the general uncertainty inherent in the year 2000 issue,
particularly as it relates to the readiness of the Company's key customers and
suppliers, and of governmental agencies, the Company cannot ascertain whether
the consequences of the year 2000 failures will have a material impact on the
Company's results of operations, liquidity or financial condition. The Company's
insurance coverage is limited to business interruption resulting from fire,
explosion, or related perils which are caused by a year 2000 system failure.
Based upon the Company's current estimates, remaining incremental
out-of-pocket costs of its year 2000 program are expected not to exceed $10,000.
As of September 30, 1999, the Company had spent an aggregate of $40,000 on its
year 2000 program. These costs were expensed as incurred. These costs did not
include internal management time and the deferral of other projects, the effects
of which were not material to the Company's results of operations or financial
condition.
The Company's year 2000 efforts are ongoing and its consideration of
contingency plans will continue to evolve as new information becomes available.
While the Company anticipates continuity of its business activities, that
continuity will be dependent upon its ability, and the ability of third parties
upon whom the Company relies on directly or indirectly, to be year 2000
compliant.
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BUSINESS
OVERVIEW
RailWorks Corporation is a leading provider of integrated rail system
services and products to a diverse base of customers throughout the United
States. Management believes RailWorks is positioned to grow significantly due to
its ability to comprehensively design, supply, construct and maintain rail
systems. We base our strategy on providing a full range of rail-related services
and products on a "turnkey" basis throughout North America and offering rail
system solutions under the "RailWorks" brand. RailWorks provides track
construction, rehabilitation, repair, maintenance and operations; rail
electrification and installation of communication and signaling systems; and
related products and supplies. We provide these services to a wide variety of
customers, including Class I and shortline railroads, publicly funded transit
authorities and commercial and industrial companies. RailWorks also provides
non-rail products and services such as electrical contracting, bridge and
highway support structures and related concrete products.
INDUSTRY OVERVIEW
The rail passenger and freight industries have undergone significant
changes in recent years. Changes in the industry have affected Class I
railroads, shortline and regional railroads, passenger railroads and transit
systems. In addition, industrial and other commercial companies that own and
maintain their own rail systems have become more focused on transportation
logistics and achieving cost efficiencies. These changes have resulted in an
ongoing reconfiguration of the country's rail infrastructure, significant new
construction projects and emerging demand for outsourced construction,
rehabilitation, repair and maintenance services.
Total Expenditures. Based on information published by the Association of
American Railroads (the "AAR") and the American Public Transit Association
("APTA"), management estimates that expenditures by rail system operators for
domestic new construction, rehabilitation, repair and maintenance were
approximately $16 billion in 1998. Management estimates that the breakdown of
expenditures was as follows:
(EXPENDITURES PIE CHART)
We also believe that expenditures for these services outside the United
States have increased significantly in recent years as a result of
infrastructure construction and modernization programs, as well as privatization
of large rail systems. In many instances, foreign governments and companies have
sought the expertise of designers, engineers and construction managers in the
United States.
Class I Railroads. According to the AAR, Class I track usage (defined as
tons shipped per track mile) has increased significantly from 4.7 million in
1988 to 7.8 million in 1997,
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representing a 5.9% compound annual growth rate. As a result of industry
consolidation, there are only eight Class I railroads, as defined by the Surface
Transportation Board, operating in the United States today, compared to 27 in
1980. These railroads are Burlington Northern Sante Fe Railway, CSX
Transportation, Kansas City Southern Lines, Norfolk Southern Railway Company,
Union Pacific Railroad, Canadian National, Canadian Pacific and Consolidated
Rail Corporation. According to the AAR, these railroads accounted for 71% of the
rail mileage operated in the United States and 91% of railroad revenue in 1997.
In recent years, the Class I railroads have sought to rationalize their systems,
for example by "double-tracking" certain high traffic main lines and abandoning
portions of their systems that generate lower volumes of traffic. Mergers of
Class I systems have also created significant construction projects as the
systems are reconfigured and integrated. Historically, the major railroads have
been vertical organizations that sought to perform their own construction and
maintenance by utilizing specialized workforces and equipment for these
functions. Management believes that as Class I railroads seek to continue to
improve their cost structures, they will increasingly continue to outsource
certain construction and maintenance functions to independent contractors.
Shortline and Regional Railroads. In recent years, the number and coverage
of shortline and regional railroads, i.e., those railroads which are not Class I
railroads, have increased significantly. The Staggers Rail Act of 1980 provided
for partial deregulation of the railroad industry and created mechanisms by
which larger railroads could more easily dispose of portions of rail line. Since
that time, the larger railroad systems in the United States have streamlined
their operations by disposing of portions of their systems that generate lower
volumes of traffic and other companies have acquired portfolios of shortline
railroads. According to the AAR, there are approximately 550 shortline and
regional railroads, which in the aggregate generated approximately 9% of all
railroad revenue in 1997. The percentage of total track miles operated by
shortline and regional railroads in the United States increased to 29% in 1997
from approximately 17% in 1986. Shortline and regional railroads spend a
relatively large portion of their capital and operating budgets on maintenance
of their track assets, because these assets are often in poor condition when
they are acquired. These railroads typically utilize independent contractors for
their maintenance and construction programs, because they do not have systems
large enough to support the purchases of equipment and development of workforces
that would be required for these functions.
Passenger Rail Transit Services. The growth of major metropolitan areas
and the aging of existing rail systems have resulted in significant developments
in passenger rail transit services. Heavy rail, commuter rail (service between
metropolitan and suburban areas) and light rail (typically, short trains
operating on rights-of-way that are not separated from other traffic) have
emerged as attractive alternatives to bus or automobile transit and older
commuter rail systems have been rehabilitated and extended to handle increased
ridership. Many older urban systems (such as the New York City subway system)
are undergoing significant rehabilitation and/or modernization, while major
heavy rail systems built in the 1970s (such as the systems in San Francisco and
Atlanta) are being extended and upgraded. Additionally, there have been several
recent initiatives to develop high-speed rail transit networks between major
urban areas (for example, in Florida and the Northeast corridor). According to
APTA, there are now 18 commuter rail agencies in 14 urban areas, 14 heavy rail
agencies in 11 urban areas and 23 light rail agencies nationwide. According to
APTA, commuter and light rail ridership has increased 30% and 99%, respectively,
from 1985 to 1997. Since 1979, approximately 16 cities have constructed new
light rail-based transit systems and other cities have either extended or
refurbished their existing systems, with ridership increasing by approximately
150% over the period from 1978 through 1996. In June 1998, the President signed
the Transportation Equity Act for the 21st Century ("TEA 21"), which is expected
to provide $42 billion of funds for transit projects through 2003. See
"Government Regulation -- TEA 21." This represents more than a 50% increase of
funding from the previous six-year period. According to APTA, in 1997, 53.7% of
transit spending was derived from federal funding with the balance derived from
state and local sources. Accordingly,
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opportunities to provide rail-related signaling, communication, electrical and
track system construction, rehabilitation, repair and maintenance services for
transit systems have increased and are expected to continue to increase
significantly.
Industrial Companies. Companies install trackwork in their plants to
transport raw materials, equipment and finished goods. This trackwork consists
of connector lines that provide access to Class I or shortline railroads and
railyards to coordinate the shipment and delivery of cargo to and from their
plants. Companies are responsible for maintaining their own track and typically
construct and reconfigure trackage as part of plant construction and expansion.
Companies seek to optimize their track infrastructure in order to (1) reduce the
risk of accidents that can cause delays, property damage, and environmental
spills, (2) gain access to competing railroads to drive down costs and (3)
reduce transportation costs by minimizing the switching of railcars which is
time consuming and expensive. Such companies generally do not have the internal
resources to perform these services and typically use independent contractors to
design, construct and maintain these rail lines.
COMPETITIVE STRENGTHS
Breadth of Services and Products. Management believes that RailWorks
offers a broader range of services and products than most industry participants.
We believe that larger rail system operators are seeking to establish
relationships with contractors that specialize in rail system services and
products and that can provide efficient, integrated solutions over the entire
life cycle of their assets. We further believe that rail system operators and
industrial companies increasingly seek to enter into arrangements with a smaller
number of companies that can provide integrated services on a national or
regional basis, in order to ensure centralized management of their rail assets,
adherence to uniform quality standards and more cost-effective procurement
practices. We cross-sell our services and products by combining the strengths of
the operating companies to provide its customers with integrated rail system
solutions. For example, we combine our design and engineering services with
track construction to offer a turnkey approach to track construction projects.
Our ability to bundle services, including construction, rehabilitation and
maintenance, under a single contract has allowed us to compete more effectively
against companies that provide a more limited range of services.
Expansive Geographic Coverage. Our 48 operating facilities provide us with
expansive geographic coverage that enables us to reach customers throughout
North America. These multiple facilities enable us to undertake projects more
cost effectively than we could without local facilities. RailWorks can perform
projects at multiple locations for our national account customers, enabling our
customers to use a single company for rail system projects throughout the United
States and Canada. We also can allocate equipment and technical specialists
throughout the United States and Canada to maximize asset utilization, satisfy
regional demand and complete projects in remote locations. We believe our broad
geographic presence reduces the impact of local and regional economic cycles,
and reduces weather-related or seasonal variations in our business.
Significant Market Presence. In an industry that has traditionally been
comprised of regional competitors, we believe our size gives us a competitive
advantage. Our substantial contract bonding capacity allows us to bid on
additional projects and more substantial projects to which smaller companies may
not have access. Our ability to bid on these additional projects has allowed us
to significantly increase our project backlog since August 1998. In addition,
our size provides significant economies of scale in terms of materials
purchasing, capital expenditures and administrative costs.
Diverse Sources of Revenue. We derive a significant portion of our revenue
from public transit authorities whose funding is appropriated from federal,
state and local sources which makes those funds less sensitive to economic
cycles. In addition, a portion of our work is related
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to government-mandated safety standards and we therefore cannot postpone it. We
sell our services through a large number of individual contracts. No contract
accounted for more than 3.5% of our pro forma revenue for the year ended
December 31, 1998. More than half of our contracts have a duration in excess of
one year, providing us with a significant source of future revenue. We have
strong relationships with a wide variety of customers, including:
Class I railroads that have utilized RailWorks for repair and maintenance,
construction or engineering and supply:
- CSX Transportation
- Union Pacific Railroad
- Burlington Northern Santa Fe Railway
- Canadian National Railway
Shortline and regional railroads that have contracted with RailWorks for
track construction and maintenance work or product supply:
- Alaska Railroad Corp.
- Louisville & Indiana Railroad
- Indiana Southern Railroad Company
- Indiana & Ohio Rail Systems
Publicly funded transit authorities that have contracted with RailWorks for
electrical installations, signaling, communications and station projects:
- New York City Transit Authority
- New York Department of Transportation
- Los Angeles Metropolitan Transit Authority
- Connecticut Department of Transportation Rail Division
Commercial and industrial companies that have contracted with RailWorks for
track construction and maintenance and non-rail electrical contracting work:
- United States Steel
- Bethlehem Steel
- Morse Diesel
- Babcock & Wilcox
Experienced Management. Our senior operating managers have an average of
26 years of experience in the rail services and products industry, and many of
them are or have previously served as leaders of industry trade groups. We use a
corporate management structure that allows these senior managers to focus on
marketing and growing their operations instead of administrative
responsibilities. Management has created a culture of cooperation and teamwork
among the operating companies that emphasizes dissemination of best practices
among our regional and local management teams. For example, management believes
that RailWorks can successfully implement best practices in the areas of 24-hour
emergency rerailment services, annual maintenance contracts and efficient
inventory management.
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STRATEGY
Key elements of our strategy include the following:
Capitalize on Scale and Geographic Coverage. By combining the operations
of the Founding Companies and the Acquired Companies, we have achieved greater
size and scope than regional and local contractors. We believe that we will be
able to achieve continued internal growth by building our national accounts
program to serve rail customers with multiple sites and by enhancing our sales
and marketing programs. Management expects to leverage our geographic network
and greater bonding capacity to increase our business. We currently have very
limited international operations but over time we may increase our activity in
international markets, where privatizations of railroads and large transit
projects are creating increased demand for sophisticated design and construction
management services. We also share equipment and labor while managing multiple
work sites. We believe that this process of sharing resources and our
comprehensive bidding capabilities enable us to compete more effectively.
Utilize Cross-selling. The Founding Companies and the Acquired Companies
have provided RailWorks with a broad range of rail-related services and
products. We intend to leverage our existing customer base to "cross-sell" these
services and products. For example, we will seek to provide additional track
construction and maintenance services to Class I railroads who are already
significant buyers of our track supplies. We also intend to continue to
emphasize the marketing of rail maintenance programs, which provide recurring
revenue and strengthen customer relationships. We have been successful in
leveraging our maintenance relationships to obtain new rail system installation
projects. In addition, by placing a stronger emphasis on our design and
engineering services we expect to gain access to more track construction
opportunities.
Expand Through Acquisitions. Management believes RailWorks is
well-positioned to capitalize on the consolidation of the rail system services
and products industry on a regional and nationwide basis. We have created an
efficient operating platform that management expects will facilitate the
integration of future acquisitions. Our acquisition program includes expanding
geographic coverage throughout North America, broadening our lines of services
and products, and adding density and operating leverage within our current
markets. Management believes that the experience and industry reputations of the
senior managers of the operating companies and senior corporate management of
RailWorks provide RailWorks with a competitive advantage in identifying,
completing and integrating acquisitions. Since we completed our IPO in August
1998, we have acquired 15 companies. We have entered into letters of intent to
acquire another four companies. We expect to execute definitive purchase
agreements with one exception, which will have customary closing conditions,
including completion of due diligence, prior to the end of 1999. However, we
cannot guarantee that we will consummate any of these acquisitions. Our
acquisition strategy includes the following elements:
- Enter New Geographic Markets. Management intends to expand into
geographic markets that we do not currently serve by acquiring
well-established contractors and related supply companies that are
leaders in their regional or local markets. In addition, after an initial
emphasis on acquisitions within the United States and Canada, management
may pursue international acquisition opportunities.
- Enter Complementary Services and Product Markets. Management intends to
continue acquiring companies offering complementary services and products
to those currently offered by the operating companies. Specifically,
management believes that attractive acquisition opportunities will
continue to exist with respect to design and engineering firms, designers
and manufacturers of signaling and communication systems and suppliers of
electrical equipment, rail, switches and panels, and concrete and steel
ties.
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- Expand Within Existing Geographic Markets. Management plans to acquire
additional companies in many of the regions in which we currently operate
in order to expand the volume and scope of our operations in a particular
market. Management will continue to pursue acquisitions of smaller
companies to increase utilization of our existing fixed assets and
equipment or to gain access to new customers. Management believes these
types of acquisitions will improve operating efficiencies and more
effectively use our capital resources without a proportionate increase in
administrative costs.
Reduce Operating Costs. Key areas in which management has achieved and
expects to continue to achieve cost savings include (1) purchasing of equipment
and supplies, (2) insurance expenses and (3) financing costs. We have also
established an operating platform to achieve optimal utilization of equipment,
inventory and our workforce. We expect to continue to reduce administrative
expenses through the integration of certain accounting, financing, human
resources and other functions.
SERVICES AND PRODUCTS
We operate in three business lines: (1) transit services; (2) rail
construction services; and (3) rail products and supplies. The following chart
sets forth the percentage of 1998 pro forma revenue that was represented by each
business line.
(CHART)
Transit Services
Our transit services business includes all products and services that we
provide to rail-based public transit agencies and authorities in various
metropolitan markets. We typically contract with these agencies to install (1)
electric train traction power systems by means of third rail or overhead
catenary wiring, (2) train control signal systems, (3) train, station and
command station communications systems, (4) general electrical installations for
lighting and other applications and (5) tunnel and station track. We can perform
major new projects that involve track installation including excavation,
grading, paving and drainage improvements as well as minor rehabilitation
projects. Projects for new public transit lines generally include the
installation of all of these systems, giving us a competitive advantage.
In addition, we leverage our knowledge of transit systems to efficiently
provide mechanical services, including installations of heating and air
conditioning systems, ventilating and pump rooms, fan chambers, elevators and
escalators. We have experience with rubber tired vehicular people mover systems,
installing concrete guided trackway, power guide beam, central guidance rail,
walkway and handrails.
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The duration and size of our transit contracts vary greatly depending on
the scope of the project. Large scale transit projects have had a term of up to
four years and have a total contract size of up to $100 million. We have
performed installations for most of the country's transit authorities, including
those in Atlanta, Boston, Chicago, Los Angeles, New York, Philadelphia,
Portland, San Diego, San Francisco, St. Louis and Washington, D.C. We generally
perform our services as either a prime contractor directly to the transit
agencies or as a subcontractor to large civil engineering contractors or
equipment manufacturers. Transit authorities award contracts through competitive
bidding and award contracts on a fixed price basis, generally to the lowest
bidder. As a result, we focus our business to (1) provide accurate bid
estimating to both win contracts and ensure a profit and (2) monitor
construction costs to ensure that projects are completed on time and within
budget. Our bidding process is highly involved and draws on the expertise of
many individuals within RailWorks. We carefully consider a variety of factors,
including material prices, local labor rates and practices, our knowledge of the
work site and contracting practices of the transit authorities. We have a
rigorous project review process that continually monitors the incurred labor and
material costs against an initial plan to avoid overruns. We believe that these
methods provide us with a competitive advantage.
As an outgrowth of our transit-related business, we also perform commercial
real estate electrical installations, primarily in the New York City
metropolitan area and industrial electrical installations throughout the United
States. We contract for these projects on an opportunistic basis, that is, when
we have resources available and can realize attractive returns. We do not intend
to grow our non-rail-related businesses beyond the current scope.
Rail Construction Services
Our rail construction services business consists of providing rail design,
construction and maintenance services to Class I and shortline railroads and
industrial companies with on-site rail infrastructure. Rail design is a highly
specialized discipline and there are a limited number of companies that can
provide these services. We utilize our rail design capabilities to facilitate
access to rail construction projects. By having the ability to provide
integrated design-build services, we have had success in increasing our project
flow. Our rail construction efforts primarily involve the construction of main
line segments, passing sidings, rail yards, connector segments between railroads
and industrial sites, turnouts and track and road intersections. With respect to
track maintenance, we enter into multi-year contracts with several customers to
provide ongoing maintenance of on-site rail infrastructure. Maintenance
contracts allow us to obtain recurring revenues and gain access to additional
new construction projects from the same customer. Additional rail contracting
services also include the removal of tracks which are no longer in use.
Rail construction and maintenance are highly complex processes that usually
involve numerous separate parties that design, supply and construct the
different elements of the track. Following the design stage, construction
entails (1) site preparation and grading, (2) the laying of ballast (gravel) to
provide a solid track fixation medium, (3) the positioning of cross ties, (4)
securing rail with high precision using metal plates, spikes and clamps, (5)
installing complex track crossings and turnouts and (6) installing other track
related systems such as signal, communications and automatic train control and
safety devices. Management believes that our ability to bundle these services on
a turnkey basis provides RailWorks with a significant competitive advantage.
We provide our rail services on a nationwide basis. Since it is generally
not economical to work on contracts outside of a 300 mile radius of an operating
facility, this broad footprint facilitates servicing customers with multiple
sites across regions. Most of our competitors in this market are regionally
focused. Management believes RailWorks has a competitive advantage due to its
ability to direct equipment and labor resources to regions with higher demand
due to economic or seasonal fluctuations. We also maintain track and track
material inventory at each
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location. By coordinating information across our network we can maximize
inventory utilization and improve supply for projects in different regions.
Rail Products and Supplies
We manufacture wooden and concrete products and rail fastening systems out
of four facilities. Our wooden products include cross ties and switch and bridge
timbers. Our wood treating operations consist of pressure-treating pre-cut beams
of hardwood to provide weather-proofing. These treated cross ties are used for
securing rail for tracks or assembled to construct bridge support structures.
Concrete products consist primarily of pre-cast structural components for
bridges and other support structures. Our concrete operations consist of pouring
mixed concrete into large molds to create specialized structural support
components. We also design and manufacture rail fastening systems, which are
primarily used in overhead and portal crane rail applications.
Our rail construction operations source rail and other track materials
(primarily metal components such as plates and spikes) from (1) the reclamation
of existing track that is no longer in use, (2) track materials brokers and (3)
manufacturers. We sell our rail products and supplies directly to contractors,
including our own subsidiaries, and to Class I and shortline railroads that
perform their own track construction and maintenance. Some of our products are
used in non-rail applications such as highway construction and decorative
landscaping.
Our product capabilities provide us with an advantage in supplying our
track construction and maintenance operations. This is particularly important in
the context of wooden cross ties as the market has experienced shortages in the
past. There are a limited number of cross tie manufacturing facilities in North
America due to stringent regulations. We enhance our competitive advantage by
having uninterrupted access to cross ties and other track products. We have also
developed strong customer relationships through products sales, particularly
with Class I and shortline railroads. Additionally, we lease track construction
and maintenance equipment. By offering operating leases for such equipment, we
have formed additional industry relationships, created an additional revenue
source and established an avenue to fully utilize the operating life of our
equipment. As part of our growth strategy, we intend to leverage these
relationships to cross-sell other services, particularly design and engineering
as well as track construction and maintenance.
ACQUISITION PROGRAM
Management believes the combination of management's acquisition expertise
and the highly fragmented nature of the rail services and products industry
provides RailWorks with significant acquisition opportunities. RailWorks
identifies acquisition candidates by leveraging the relationships of its
experienced operational managers and utilizing its dedicated acquisitions team.
We focus on acquiring companies that have a strategic fit, provide us with cost
synergies, complement our geographic presence, and demonstrate a willingness to
learn and share best practices through open communications. After an initial
screening, management evaluates each acquisition candidate through its due
diligence process, which includes detailed financial and operational reviews.
During the due diligence process, we often identify a number of areas in which
we expect to realize efficiencies during the integration process. We offer
acquisition candidates several benefits, including:
- expertise to expand in specialized markets;
- enhanced productivity through the reduction of administrative burdens;
- national name recognition;
- increased bonding capacity;
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- access to public capital markets; and
- the opportunity for a continued role in management.
Other key elements of our acquisition program include:
Retain and Provide Incentives to Existing Management. We seek acquisitions
of successful companies whose senior managers will remain as employees of
RailWorks and continue to operate their respective businesses on a local level.
We motivate these managers and align their interests with those of RailWorks
through (1) employment agreements, (2) shares of common stock as a portion of
the acquisition consideration and (3) a structured earnout program which is tied
to the acquired entity meeting specific earnings targets.
Leverage Industry Reputation and Contacts. We utilize existing industry
relationships established by the operating companies and RailWorks management to
develop a broad base of potential acquisitions. We intend to remain actively
involved in industry organizations on local and national levels, working with
independent companies to support issues of interest to RailWorks.
Acquisition Consideration. In the course of implementing our acquisition
strategy, we have typically used cash and performance-based earnouts as
consideration for the acquired businesses. In the future, we expect to use a
combination of cash, common stock, promissory notes and performance-based
earnouts as consideration for acquired businesses. See "Risk Factors -- Risks
Relating to the Company -- We May Be Unable to Complete and Finance
Acquisitions".
Since completion of the IPO, RailWorks has acquired the following
companies:
<TABLE>
<CAPTION>
ACQUISITION NAME OF FISCAL 1998
DATE ACQUIRED COMPANY REVENUE HEADQUARTERS BUSINESS LINE
- ------------- ------------------- ----------- --------------- --------------------------
(in
millions)
<S> <C> <C> <C> <C>
November 1998 Armcore Railroad
Contractors,
Inc................ $ 3.8 Frankfort, IN Rail construction services
November 1998 Sheldon Electric
Co., Inc........... 1.4(1) Long Island Transit services
City, NY
January 1999 Gantrex Group...... 13.9 Ajax, Ontario, Rail products and supplies
Canada
January 1999 Mid West Railroad
Construction and
Maintenance
Corporation of
Wyoming............ 13.2 Salt Lake City, Rail construction services
UT
January 1999 FCM Rail, Ltd...... 4.9 Grand Blanc, MI Rail products and supplies
March 1999 F&V Metro
Contracting Corp.
and Affiliates..... 46.0 Farmingdale, NY Transit services
April 1999 M-Track
Enterprises,
Inc................ 10.6 Bronx, NY Rail construction services
April 1999 McCord Treated
Wood,
Inc./Birmingham
Wood, Inc.......... 11.1 Warrior, AL Wooden tie suppliers
May 1999 Pacific Northern
Rail Contractors... 21.9 Abbotsford, Rail construction services
British
Columbia,
Canada
</TABLE>
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<PAGE> 55
<TABLE>
<CAPTION>
ACQUISITION NAME OF FISCAL 1998
DATE ACQUIRED COMPANY REVENUE HEADQUARTERS BUSINESS LINE
- ------------- ------------------- ----------- --------------- --------------------------
(in
millions)
<S> <C> <C> <C> <C>
June 1999 Neosho Incorporated
and Affiliates..... 80.7 Topeka, KS Rail construction services
June 1999 Earl Campbell
Construction
Company, Inc....... 7.4 Houston, TX Rail construction services
August 1999 Wood Waste Energy,
Inc................ 6.0 Saint Louis, MO Rail products and supplies
October 1999 W.T. Byler Co.,
Inc. .............. 56.2 Houston, TX Rail Construction Services
December 1999 an operating
division of Harsco
Corporation(2)..... 6.2 Syracuse, NY Rail Products and Services
December 1999 Twigg Corporation.. 29.4 Upper Transit Services
Marlborough, MD
</TABLE>
- ---------------
(1) Railworks acquired certain assets and ongoing contracts of Sheldon Electric
Co., Inc. Therefore, only revenue since the date of acquisition ($1.4
million since November 4, 1998) has been included above.
(2) Pandrol Jackson, Inc., a Delaware corporation, was in the business of, among
other things, manufacturing and selling switch and crossing grinders and
providing related services. On January 30, 1998, Harsco Corporation, a
Delaware corporation, and Harsco Technologies Corporation, a Minnesota
corporation, agreed to purchase certain assets of Pandrol Jackson, Inc. and
Pandrol Jackson Limited, a corporation incorporated under the laws of
England. RailWorks acquired from Harsco only those assets previously owned
by Pandrol Jackson, Inc. relating to manufacturing and selling switch and
crossing grinders and providing related services.
SOURCES OF SUPPLY
We purchase new rail from a limited number of suppliers. New rail is
generally installed only on main lines, where the track may carry high volumes
of heavy traffic at high speeds. Over time, rail is removed, inspected and, if
in the appropriate condition, refurbished for sale as "relay" rail. Relay rail
is typically installed on secondary -- non-main line -- tracks, as well as yard
or branch tracks. Total rail life before scrapping may be as long as 60 years.
We also purchase a large volume of relay rail that third parties refurbish and
resell.
Similarly, we regularly purchase entire sections of track that we remove
and subsequently disassemble at our facilities. We inspect the various track
components -- rail, ties, and accessories -- and items are placed into our
inventory, either in their "as removed" condition or after being refurbished by
third parties, or sold for scrap. Additionally, in connection with certain
repair and rehabilitation projects, we acquire removed trackwork. Management
believes the RailWorks network of contractors enables it to acquire previously
used track on comparatively advantageous terms.
For installing electrical signaling and communication systems for transit
authorities, we purchase equipment from a limited number of suppliers. See "Risk
Factors -- Risks Relating to the Company -- We Rely on Subcontractors and
Suppliers".
Certain of our operating companies process creosote-treated wooden ties.
Their operations include the purchase of raw lumber, trimming the lumber to
specified sizes, pressurized impregnation of the lumber with creosote
preservative and finishing of the ties, which would
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<PAGE> 56
include the pre-drilling of spike holes and the attachment of plates, as
specified by the customer. The service life of pressure treated ties has been
extended to a range of 25 to 40 years.
Management believes RailWorks can purchase materials in sufficient
quantities to permit it to realize purchasing economies and discounts from its
suppliers. Historically, the cost of the lumber used to produce wooden ties,
steel used to produce rail, and copper used to produce electrical wiring has
fluctuated significantly due to market and industry conditions. Increasing
demand for these raw materials may result in cost increases. We cannot guarantee
that we will be able to recoup any of those increases by increasing the prices
of our products. Further, a reduction in supply of lumber, steel or copper due
to increased demand or other factors could have an adverse effect on our
business, financial condition and results of operations.
SALES AND MARKETING
We maintain a targeted national sales program to further develop the
business of each of the operating companies. This initiative focuses on the
Class I railroads and other large industrial companies with facilities in
multiple areas. Prior to their acquisition by RailWorks, the individual
operating companies had been unable to serve such customers on a comprehensive,
nationwide basis. In addition, our ability to offer electrical installation
services together with rail construction, rehabilitation, repair and maintenance
services and related products provides us with opportunities to cross-sell our
services to large industrial companies. Management believes that RailWorks has
an advantage over its competitors since it can offer consistent, high-quality
service and products throughout the United States. Our expansive geographic
coverage enables customers to use our services and products in multiple
locations rather than dealing with numerous regional or local companies.
We have achieved significant synergies in our marketing programs.
Management also believes that RailWorks has developed and will continue to
refine cross-selling programs under which:
(1) our design and engineering groups provide timely leads to its
construction, product supply and electrical installation companies,
(2) our electrical signaling and communications companies, which have
previously utilized third parties for track engineering and construction,
utilize other operating companies for these projects, and
(3) our track construction companies contract with other operating
companies for signaling, communication and electrical installation
services.
Similarly, our product supply companies have, over the years, developed
long-term relationships with the Class I railroads and large industrial
companies, and management believes that these relationships provide an
attractive basis for marketing our construction and maintenance services.
BIDDING AND CONTRACTS
A majority of our pro forma revenue for the year ended December 31, 1998
was derived from contracts entered into through a competitive bidding process.
Public agencies, including the NYCTA, that solicit bids are generally required
to accept the lowest cost proposal. In some cases, the party that submitted the
low bid must first pass a technical qualification before being awarded a
project. Following the acceptance of a bid, we typically enter into a contract
with the customer. Our track construction and repair projects generally do not
involve long-term contracts.
Many projects that are competitively bid require the company that is
awarded the project to post a bond, which varies according to the size of the
project. Each company has a bonding limit, which is based on the company's
working capital and work in progress. The bond provides the customer with
insurance in the event that the company is unable to complete the project.
Accordingly, the ability of each of the operating companies to bid on larger
projects had, prior to
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<PAGE> 57
their acquisition by RailWorks, had been limited by their ability to obtain the
required bonding. The size of RailWorks, as compared to the size of the
individual operating companies, facilitated increases in the bonding limits for
each operating company thereby better positioning them to bid on and undertake
significantly larger construction and maintenance projects. Management believes
that the increased bonding capacity permits us to bid on and undertake more
projects than could smaller companies. See "Risk Factors -- Risks Relating to
RailWorks -- Our Fixed Price Contracts Expose us to Significant Risks".
CUSTOMERS
The following table lists our top four customers in each category on a pro
forma basis giving effect to the acquisitions of the Founding Companies and the
Acquired Companies as if they had occurred on January 1, 1998:
<TABLE>
<CAPTION>
CLASS I RAILROADS SHORTLINE AND REGIONAL RAILROADS
- -------------------------------------------- --------------------------------------------
<S> <C>
CSX Transportation Alaska Railroad Corporation
Union Pacific Railroad Louisville & Indiana Railroad
Burlington Northern Santa Fe Indiana Southern Railroad Company
Canadian National Railway Indiana & Ohio Rail Systems
</TABLE>
<TABLE>
<CAPTION>
TRANSIT AUTHORITIES AND INDUSTRIAL COMPANIES AND
COMMUTER RAILROADS COMMERCIAL ENTERPRISES
- -------------------------------------------- --------------------------------------------
<S> <C>
NYCTA (New York) United States Steel
NYDOT (New York) Bethlehem Steel
LAMTA (Los Angeles) Morse Diesel
CDOT Rail Division (Connecticut) Babcock & Wilcox
</TABLE>
COMPETITION
The rail system services and products industry is competitive, and projects
are often awarded through competitive bidding. We compete with other rail system
construction, rehabilitation and maintenance companies, electrical contractors
and suppliers of products. Certain competitors have significantly greater
resources than we have, may provide a broad range of services and products, and
may have sufficient bonding capacity to undertake large projects. We compete on
the basis of our breadth of services and products, ability to take on large
projects and nationwide presence. Any inability of RailWorks to compete
successfully against existing and future competitors would have a material
adverse effect on our business, results of operations and financial condition.
Moreover, we may depend in part upon opportunities for consolidation in the rail
system services and products industry in order to execute effectively our
acquisition and vertical integration strategy. If our customers do not receive
our vertical integration strategy favorably, these customers have numerous
alternative sources of services and supply.
RISK MANAGEMENT AND SAFETY
Because our business is labor intensive, workers' compensation is a
significant operating expense for us. We could be exposed to liability for the
acts or negligence of its employees who cause personal injury or damage while on
assignment, as well as claims of misuse of customer proprietary information or
theft of client property. We have adopted policies and procedures intended to
reduce our exposure to these risks.
We maintain insurance against these risks with policy limits we consider
sufficient and consistent with industry standards. We have retained a risk
management professional who is responsible for claims management and the
establishment of appropriate reserves for the deductible portion of claims. We
hold regular meetings with the presidents of the operating companies at which
safety issues are discussed. We also conduct routine safety inspections of local
work sites.
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<PAGE> 58
EQUIPMENT AND FACILITIES
We own and maintain specialized equipment used in rail construction,
rehabilitation, repair and maintenance. This equipment may be moved between job
sites and, consequently, we are seeking to increase the sharing of equipment
between the operating companies where it is appropriate and cost effective. For
example, during the winter months, the operating companies located in the
northern United States could relocate their equipment to the operating companies
located in the South. Each of the operating companies generally performs its own
equipment maintenance. We intend to manage our equipment through our equipment
leasing subsidiary, which will maintain a comprehensive database that tracks the
use of all of our equipment.
Our corporate offices are in approximately 3,000 square feet of leased
space in a suburb of Baltimore, Maryland. In addition to our corporate offices,
we lease 38 and own 12 operating facilities. These facilities consist of local
offices, storage yards, distribution facilities, warehouses and wood processing
plants.
GOVERNMENT REGULATION
Overview. In addition to the environmental, safety and other regulations
generally applicable to all businesses, regulations that are administered by the
Surface Transportation Board, the successor to the Interstate Commerce
Commission ("ICC"), the FRA and by regulatory agencies impact our business in
the various states where we and our customers do business. Since 1980, there has
been a significant relaxation in regulations governing the sale, leasing or
other transfer of railroad properties, and this change has favorably affected
the operations of many of our customers. Various interests in the United States
have sought and continue to seek reimposition of government controls on the
railroad industry in areas deregulated in whole or in part since 1980, including
stricter rate regulation and more onerous labor protection conditions for rail
line transfers.
Railroad Regulations. The ICC Termination Act, enacted on December 29,
1995, eliminated the ICC as an independent agency and created the STB, a new
agency within the Department of Transportation which began functioning on
January 1, 1996. The ICC Termination Act changed the procedure and timing for
federal approval of rail projects, including abandonments, line sales, mergers,
rates and tariffs, simplifying and streamlining the abandonment process. The FRA
regulates railroad safety and equipment standards, including track maintenance
and train speed standards, special procedures for handling hazardous shipments,
locomotive and railcar inspection and repair requirements, operating practices
and crew qualifications. The Roadway Worker Protection Rules, promulgated by the
FRA, apply to rail contractors and establish certain safety criteria that must
be complied with on rail projects.
TEA 21. On June 9, 1998, the President signed TEA 21, the six-year surface
transportation program that represents a significant development in the federal
transit program. TEA 21, the largest infrastructure funding bill in U.S.
history, authorizes funding for transit in the amount of $42 billion through
2003. TEA 21 authorizes over 50 percent more than the 1991 Intermodal Surface
Transportation Efficiency Act, whose funding has expired.
State Regulatory Agencies. State regulatory agencies no longer have
authority to engage in economic regulation of railroads that are part of the
intrastate network. State and local governments generally retain jurisdiction
over local rail safety matters, such as the installation of grade crossings and
grade crossing warnings devices.
ENVIRONMENTAL MATTERS
Our operations and properties are subject to environmental laws and
regulations relating to pollution and protection of the environment and public
and employee health and safety. The principal environmental regulatory
requirements applicable to our operations relate to the use of
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<PAGE> 59
creosote to treat lumber, and the generation, storage, transportation, treatment
and disposal of solid and hazardous wastes. We believe that our operations have
all required environmental permits and currently comply, in all material
respects, with applicable regulatory requirements.
We have had environmental assessments performed for recent acquisitions.
Based on these reports and available information, we are not aware of any
significant environmental exposures or claims against us. However, the
historical and current uses of our facilities may have resulted in spills or
releases of various hazardous materials, which now, or in the future, could
require remediation. We also may be subject to requirements related to
remediation of hazardous materials that have been released into the environment
at properties that we own or operate, or that we owned or operated in the past
or at properties to which we send, or may have sent, hazardous materials for
treatment or disposal. Such remediation requirements generally are imposed
without regard to fault, and liability for any required environmental
remediation can be substantial.
EMPLOYEES
As of September 30, 1999, we employed approximately 2,900 employees. We
believe that we have good relations with our employees.
Approximately 50% of our employees are members of certain labor unions and
are employed pursuant to collective bargaining agreements. Some of the operating
companies are parties to collective bargaining agreements with the International
Brotherhood of Electrical Workers, Laborers' International Union of North
America, the International Union of Operating Engineers, United Brotherhood of
Carpenters and Joiners of America and the United Brotherhood of Teamsters. Some
of our customers hire only unionized labor. Our largest collective bargaining
agreement, covering 1,054 employees, expires in June 2001. Except for a one-week
work stoppage in Connecticut by the United Brotherhood of Teamsters in June
1994, we have not experienced any work stoppages in the past five years.
INFORMATION TECHNOLOGY SYSTEMS
We are in the process of implementing integrated information technology
systems that will be utilized by each of the operating companies. These
information technology systems will be used for a variety of purposes, including
monitoring inventory levels, tracking the progress of construction projects and
integrating our financial, general ledger, payables and receivables functions.
In addition, we will network our corporate offices to the offices of our
operating companies and will have e-mail capability at all offices. We expect
that the required systems will be purchased and installed by the end of 1999 and
that our expenditures for these systems will not be material to us. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." All of the new systems will be
Year 2000 compatible. Until these new systems are fully operational, each of the
operating companies will continue using the information systems that they
currently use.
LEGAL PROCEEDINGS
From time to time, we may be involved in routine legal proceedings
incidental to the conduct of our business. In the opinion of management, the
litigation, individually or in the aggregate, to which we are currently a party,
is not likely to have a material adverse effect on our business, financial
condition and results of operations.
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<PAGE> 60
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
We sold the old notes on September 30, 1999 to First Union Capital Markets
pursuant to a purchase agreement. The initial purchaser subsequently sold the
old notes to:
- "qualified institutional buyers" ("QIBs"), as defined in Rule 144A under
the Securities Act, in reliance on Rule 144A, and to
- persons in offshore transactions in reliance on Regulation S under the
Securities Act.
As a condition to the initial sale of the old notes, RailWorks and the
initial purchaser entered into a registration rights agreement. Pursuant to the
registration rights agreement, we agreed to
- file a registration statement under the Securities Act with respect to
the exchange notes with the SEC by November 13, 1999 and
- use our reasonable best efforts to cause the registration statement to
become effective under the Securities Act on or before January 28, 2000.
We agreed to issue and exchange the new notes for all old notes validly
tendered and not validly withdrawn prior to the expiration of the exchange
offer. A copy of the registration rights agreement has been filed as an exhibit
to the registration statement, which includes this prospectus. The registration
statement is intended to satisfy some of our obligations under the registration
rights agreement and the purchase agreement.
The term "holder" with respect to the exchange offer means any person in
whose name old notes are registered on the trustee's books or any other person
who has obtained a properly completed bond power from the registered holder, or
any person whose old notes are held of record by The Depository Trust Company
(the "Depositary" or "DTC") who desires to deliver such old note, by book-entry
transfer at DTC.
RESALE OF THE NEW NOTES
We believe that you will be allowed to resell the new notes to the public
without registration under the Securities Act, and without delivering a
prospectus that satisfies the requirements of Section 10 of the Securities Act
if you can make the representations set forth above under "Prospectus
Summary -- The Exchange Offer -- Procedures for participating in the exchange
offer." However, if you intend to participate in a distribution of the new
notes, or you are an "affiliate" of RailWorks as defined under Rule 405 of the
Securities Act, you must comply with the registration requirements of the
Securities Act and deliver a prospectus, unless an exemption from registration
is otherwise available. You have to represent to RailWorks in the letter of
transmittal accompanying this prospectus that you meet these conditions
exempting you from the registration requirements.
We base our view on interpretations by the staff of the SEC in no-action
letters issued to other issuers in exchange offers like ours. However, we have
not asked the SEC to consider this particular exchange offer in the context of a
no-action letter. Therefore, you cannot be sure that the SEC will treat it in
the same way it has treated other exchange offers in the past.
A broker-dealer that has bought old notes for market-making or other
trading activities has to deliver a prospectus in order to resell any old notes
it has received for its own account in the exchange. This prospectus may be used
by a broker-dealer to resell any of its old notes. We have agreed in the
registration rights agreement to send this prospectus to any broker-dealer that
requests copies in the letter of transmittal for a period of up to 180 days
after the SEC declares the registration statement relating to this exchange
offer effective. See "Plan of Distribution" for more information regarding
broker-dealers.
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<PAGE> 61
The exchange offer is not being made to, nor will we accept surrenders for
exchange from, holders of old notes in any jurisdiction in which this exchange
offer or the acceptance thereof would not be in compliance with the securities
or blue sky laws.
TERMS OF THE EXCHANGE OFFER
General. Based on the terms and conditions set forth in this prospectus
and in the letter of transmittal, we will accept any and all old notes validly
tendered and not validly withdrawn prior to 5:00 p.m., New York City time, on
the expiration date.
Subject to the minimum denomination requirements of the new notes, we will
issue $1,000 principal amount of new notes in exchange for each $1,000 principal
amount of outstanding old notes validly tendered pursuant to the exchange offer
and not validly withdrawn prior to the expiration date. Holders may tender some
or all of their old notes pursuant to the exchange offer. However, old notes may
be tendered only in amounts that are integral multiples of $1,000 principal
amount.
The form and terms of the new notes are the same as the form and terms of
the old notes except that:
- the new notes will be registered under the Securities Act and, therefore,
the new notes will not bear legends restricting the transfer the new
notes,
- the new notes shall not contain provisions for additional interest and
- holders of the new notes will not be entitled to any of the registration
rights of holders of old notes under the registration rights agreement,
which rights will terminate upon the consummation of the exchange offer.
The new notes will evidence the same indebtedness as the old notes, which
they replace, and the existing notes. The new notes will be issued under, and be
entitled to the benefits of, the same indenture that authorized the issuance of
the old notes and the existing notes. As a result, both the new notes, the old
notes and the existing notes will be treated as a single class of debt
securities under the indenture. The exchange offer does not depend upon any
minimum aggregate principal amount of old notes being surrendered for exchange.
As of the date of this prospectus, $50,000,000 in aggregate principal
amount of the old notes is outstanding, all of which is registered in the name
of Cede & Co., as nominee for DTC. Solely for reasons of administration, we have
fixed the close of business on December 14, 1999 as the record date for the
exchange offer for purposes of determining the persons to whom this prospectus
and the letter of transmittal will be initially mailed. There will be no fixed
record date for determining holders of the old notes entitled to participate in
this exchange offer.
As a holder of old notes, you do not have any appraisal or dissenters'
rights, or any other right to seek monetary damages in court under the Delaware
General Corporation Law or the indenture governing the notes. We intend to
conduct the exchange offer in accordance with the provisions of the registration
rights agreement and the applicable requirements of the Exchange Act and the
related rules and regulations of the SEC. Old notes that are not surrendered for
exchange in the exchange offer will remain outstanding and interest thereon will
continue to accrue.
We will be deemed to have accepted validly surrendered old notes if and
when we give oral or written notice of our acceptance to the exchange agent. The
exchange agent will act as agent for the tendering holders of old notes for the
purpose of receiving the new notes from us.
If you surrender old notes in the exchange offer, you will not be required
to pay brokerage commissions or fees. In addition, subject to the instructions
in the letter of transmittal, you will not have to pay transfer taxes for the
exchange of old notes. We will pay all charges and expenses
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<PAGE> 62
in connection with the exchange offer, other than certain applicable taxes
described under "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The "expiration date" is 5:00 p.m., New York City time, on January 21,
2000, unless we extend the exchange offer, in which case the expiration date is
the latest date and time to which we extend the exchange offer.
In order to extend the exchange offer, we will:
- notify the exchange agent of any extension by oral or written
communication;
- issue a press release or other public announcement, which will report the
approximate number of old notes deposited; such press release or
announcement would be issued prior to 9:00 a.m., New York City time, on
the next business day after the previously scheduled expiration date.
During any extension of the exchange offer, all old notes previously
surrendered and not withdrawn will remain subject to the exchange offer.
We reserve the right:
- to delay accepting any old notes,
- to amend the terms of the exchange offer in any manner,
- to extend the exchange offer, or
- if, in the opinion of our counsel, the consummation of the exchange offer
would violate any law or interpretation of the staff of the SEC, to
terminate or amend the exchange offer by giving oral or written notice to
the exchange agent.
Any delay in acceptance, extension, termination or amendment will be
followed as soon as practicable by a press release or other public announcement.
If we amend the exchange offer in a manner that we determine constitutes a
material change, we will promptly disclose that amendment by means of a
prospectus supplement that will be distributed to the holders, and we will
extend the exchange offer for a period of time, depending upon the significance
of the amendment and the manner of disclosure to the holders, if the exchange
offer would otherwise expire during that period.
We will have no obligation to publish, advertise, or otherwise communicate
any public announcement that we may choose to make, other than by making a
timely release to an appropriate news agency.
In all cases, issuance of the new notes for old notes that are accepted for
exchange will be made only after timely receipt by the exchange agent of a
properly completed and duly executed letter of transmittal and all other
required documents. However, we reserve the absolute right to waive any
conditions of the exchange offer or any defects or irregularities in the
surrender of old notes. If we do not accept any surrendered old notes for any
reason set forth in the terms and conditions of the exchange offer or if you
submit old notes for a greater principal amount than you want to exchange, we
will return certificates for the unaccepted or non-exchanged old notes, or
substitute old notes evidencing the unaccepted portion, as appropriate, to you.
See "-- Return of Old Notes."
INTEREST ON THE NEW NOTES
The new notes will accrue cash interest on the same terms as the old notes,
i.e., at the rate of 11 1/2% per year (using a 360-day year) from September 30,
1999, payable semi-annually in arrears on April 15 and October 15 of each year,
beginning on October 15, 1999. Old notes accepted for exchange will not receive
accrued interest thereon at the time of exchange.
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<PAGE> 63
However, each new note will bear interest from the most recent date to which
interest has been paid on the old notes or new notes, or if no interest has been
paid on the old notes or new notes, from September 30, 1999.
PROCEDURES FOR TENDERING OLD NOTES
If you wish to surrender old notes you must:
- complete and sign the letter of transmittal or a facsimile thereof,
- have the signatures thereon guaranteed if required by the letter of
transmittal, and
- mail or deliver the letter of transmittal or facsimile, together with any
corresponding certificate or certificates representing the old notes
being surrendered -- or confirmation of a book-entry transfer of such old
notes into the exchange agent's account at DTC pursuant to the book-entry
procedures described below -- to the exchange agent at its address set
forth in the letter of transmittal for receipt prior to the expiration
date. If the certificate representing the old notes being tendered -- or
the confirmation of a book-entry transfer, if applicable -- is not
delivered to the exchange agent with the letter of transmittal, you must
comply with the guaranteed delivery procedures described below. DELIVERY
OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH ITS
PROCEDURE DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
If you do not withdraw your surrender of old notes prior to the expiration
date, it will indicate an agreement between you and RailWorks that you have
agreed to surrender the old notes, in accordance with the terms and conditions
in the letter of transmittal.
THE METHOD OF DELIVERY OF OLD NOTES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT YOUR ELECTION AND RISK.
INSTEAD OF DELIVERY BY MAIL, YOU SHOULD USE AN OVERNIGHT OR HAND DELIVERY
SERVICE, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED. IN ALL CASES, YOU
SHOULD ALLOW SUFFICIENT TIME TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE
EXPIRATION DATE. DO NOT SEND ANY LETTER OF TRANSMITTAL OR OLD NOTES TO US. YOU
MAY REQUEST THAT YOUR BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR NOMINEE
EFFECT THE ABOVE TRANSACTIONS FOR YOU.
If you are a beneficial owner of the old notes and your old notes and hold
those notes through a broker, dealer, commercial bank, trust company or other
nominee and you want to surrender your old notes, you should contact that
intermediary promptly and instruct it to surrender the old notes on your behalf.
Generally, an eligible institution must guarantee signatures on a letter of
transmittal or a notice of withdrawal described below under "-- Withdrawal of
Tenders of Old Notes" unless
- you tender your old notes as the registered holder, which term includes
any participant in DTC whose name appears on a security listing as the
owner of old notes,
- you sign the letter of transmittal, and the new notes issued in exchange
for your old notes to be issued in your name, or
- you surrender your old notes for the account of an eligible institution.
In any other case, the surrendered old notes must be endorsed or
accompanied by written instruments of transfer in form satisfactory to us and
duly executed by the registered holder. If the new notes or unexchanged old
notes are to be delivered to an address other than that of the registered holder
appearing on the security register for the old notes, an eligible institution
must guarantee the signature in the letter of transmittal. In the event that
signatures on a letter of
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<PAGE> 64
transmittal or a notice of withdrawal are required to be guaranteed, such
guarantee must be made by:
- a member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc.,
- a commercial bank or trust company having an office or correspondent in
the United States, or an "eligible guarantor institution" as defined by
Rule 17Ad-15 under the Exchange Act that is a member of one of the
recognized signature guarantee programs identified in the letter of
transmittal.
Your surrender will be deemed to have been received as of the date when:
- the exchange agent receives a properly completed and signed letter of
transmittal accompanied by the old notes, or a confirmation of book-entry
transfer of such old notes into the exchange agent's account at DTC, or
- the exchange agent receives a notice of guaranteed delivery from an
eligible institution. Issuances of new notes in exchange for old notes
surrendered pursuant to a notice of guaranteed delivery or letter,
telegram or facsimile transmission to similar effect by an eligible
institution will be made only against submission of a duly signed letter
of transmittal, and any other required documents, and deposit of the
surrendered old notes, or confirmation of a book-entry transfer of such
old notes into the exchange agent's account at DTC pursuant to the
book-entry procedures described below.
We will make the determination regarding all questions relating to the
validity, form, eligibility, including time of receipt, acceptance and
withdrawal of surrendered old notes, and our determination will be final and
binding on all parties.
We reserve the absolute right to reject any and all old notes improperly
surrendered. We will not accept any old notes if our acceptance of them would,
in the opinion of our counsel, be unlawful. We also reserve the absolute right
to waive any defects, irregularities, or conditions of surrender as to any
particular old notes. Our interpretation of the terms and conditions of the
exchange offer, including the instructions in the letter of transmittal, will be
final and binding on all parties. Unless waived, you must cure any defects or
irregularities in connection with surrenders of old notes within the time we
will determine. Although we intend to notify holders of defects or
irregularities in connection with surrenders of old notes, neither we, the
exchange agent nor anyone else will incur any liability for failure to give such
notice. Surrenders of old notes will not be deemed to have been made until any
defects or irregularities have been cured or waived.
We have no current plan to acquire any old notes that are not surrendered
in the exchange offer or to file a registration statement to permit resales of
any old notes that are not surrendered pursuant to the exchange offer. We
reserve the right in our sole discretion to purchase or make offers for any old
notes that remain outstanding after the expiration date. To the extent permitted
by law, we also reserve the right to purchase old notes in the open market, in
privately negotiated transactions or otherwise. The terms of any future
purchases or offers could differ from the terms of the exchange offer.
Pursuant to the letter of transmittal, if you elect to surrender old notes
in exchange for new notes, you must exchange, assign and transfer the old notes
to us and irrevocably constitute and appoint the exchange agent as your true and
lawful agent and attorney-in-fact with respect to such surrendered old notes,
with full power of substitution, among other things, to cause the old notes to
be assigned, transferred and exchanged. By executing the letter of transmittal,
you make the representations and warranties set forth above under the heading
"Prospectus Summary -- The Exchange Offer -- Procedures for participating in the
exchange offer" to us. By executing the letter of transmittal you also promise
to, upon request, execute and deliver any additional
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<PAGE> 65
documents that we consider necessary to complete the transactions described in
the letter of transmittal.
By surrendering old notes in the exchange offer, you will be telling us
that, among other things,
- you have full power and authority to tender, sell, assign and transfer
the old notes surrendered,
- we will acquire good title to the old notes being surrendered, free and
clear of all security interests, liens, restrictions, charges,
encumbrances, conditional sale agreements or other obligations relating
to their sale or transfer, and not subject to any adverse claim when we
accept the old notes,
- you are acquiring the new notes in the ordinary course of your business,
- you are not engaging and do not intend to engage in a distribution of the
new notes,
- you have no arrangement or understanding with any person to participate
in the distribution of the new notes,
- you acknowledge and agree that if you are a broker-dealer registered
under the Exchange Act or you are participating in the exchange offer for
the purpose of distributing the new notes, you must comply with the
registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale of the new notes, and that you
cannot rely on the position of the SEC's staff set forth in their
no-action letters,
- you understand that a secondary resale transaction described above and
any resales of new notes obtained by you in exchange for old notes
acquired by you directly from us should be covered by an effective
registration statement containing the selling security holder information
required by Item 507 or 508, as applicable, of Regulation S-K of the SEC,
and
- you are not an "affiliate", as defined in Rule 405 under the Securities
Act, of RailWorks or any subsidiary guarantor, or, if you are an
"affiliate," that you will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable.
If you are a broker-dealer and you will receive new notes for your own
account in exchange for old notes that were acquired as a result of
market-making activities or other trading activities, you will be required to
acknowledge in the letter of transmittal that you will deliver a prospectus in
connection with any resale of such old notes.
Participation in the exchange offer is voluntary. You are urged to consult
your financial and tax advisors in making your decision on whether to
participate in the exchange offer.
RETURN OF OLD NOTES
If any old notes are not accepted for any reason described here, or if old
notes are withdrawn or are submitted for a greater principal amount than you
want to exchange, the exchange agent will return those unaccepted or
non-exchanged old notes to the surrendering holder, or, in the case of old notes
surrendered by book-entry transfer, into the exchange agent's account at DTC,
unless otherwise provided in the letter of transmittal. The old notes will be
credited to an account maintained with DTC as promptly as practicable.
BOOK ENTRY TRANSFER
The exchange agent will make a request to establish an account with respect
to the old notes at DTC for purposes of the exchange offer promptly after the
date of this prospectus. Any financial institution that is a participant in
DTC's system may make book-entry delivery of old
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<PAGE> 66
notes by causing DTC to transfer such old notes into the exchange agent's
account at DTC in accordance with DTC's procedures for transfer. However,
although delivery of old notes may be effected through book-entry transfer at
DTC, you have to deliver the letter of transmittal, or a facsimile thereof, with
any required signature guarantees and any other required documents to the
exchange agent at the address set forth in the letter of transmittal for its
receipt on or prior to the expiration date or pursuant to the guaranteed
delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
If you wish to surrender your old notes and (1) your old notes are not
immediately available so that you can meet the expiration date deadline, (2) you
cannot deliver your old notes or other required documents to the exchange agent
prior to the expiration date, or (3) the procedure for book-entry transfer
cannot be completed on a timely basis, you may nonetheless participate in the
exchange offer if:
- you surrender your notes through an eligible institution;
- prior to the expiration date, the exchange agent receives from the
eligible institution a properly completed and duly executed notice of
guaranteed delivery substantially in the form provided by us, by
telegram, telex, facsimile transmission, mail or hand delivery, showing
the name and address of the holder, the name(s) in which the old notes
are registered, the certificate number(s) of the old notes, if
applicable, and the principal amount of old notes surrendered; the notice
of guaranteed delivery must state that the surrender is being made by the
notice of guaranteed delivery and guaranteeing that, within three Nasdaq
National Market trading days after the expiration date, the letter of
transmittal, or facsimile thereof, together with the certificate(s)
representing such old notes, in proper form for transfer or a book-entry
confirmation, and any other required documents, will be delivered by such
eligible institution to the exchange agent, and
- the properly executed letter of transmittal, as well as the
certificate(s) representing all surrendered old notes, in proper form for
transfer, or a book-entry confirmation, as the case may be, and all other
documents required by the Letter of Transmittal are received by the
exchange agent within three Nasdaq National Market trading days after the
expiration date.
Unless old notes are surrendered by the above-described method and
deposited with the exchange agent within the time period set forth above, we
may, at our option, reject the surrender. The exchange agent will send you a
notice of guaranteed delivery upon your request if you want to surrender your
old notes according to the guaranteed delivery procedures described above.
WITHDRAWAL OF TENDERS OF OLD NOTES
Except as otherwise provided in this prospectus, you may withdraw your
surrender of old notes at any time prior to 5:00 p.m., New York City time, on
the expiration date.
To withdraw a surrender of old notes in the exchange offer, the exchange
agent must receive a written or facsimile transmission notice of withdrawal at
its address set forth herein prior to 5:00 p.m., New York City time, on the
expiration date. Any notice of withdrawal must:
- specify the name of the person having deposited the old notes to be
withdrawn,
- identify the old notes to be withdrawn, including the certificate number
or numbers, if applicable, and principal amount of the old notes,
- contain a statement that you are withdrawing your election to have such
old notes exchanged,
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- be signed by the holder in the same manner as the original signature on
the letter of transmittal by which the old notes were surrendered, and
- specify the name in which any old notes are to be registered, if
different from that of the person depositing the old notes. If old notes
have been surrendered pursuant to the procedure for book-entry transfer,
any notice of withdrawal must specify the name and number of the account
at DTC.
We, in our sole discretion, will make the final determination on all
questions regarding the validity, form, eligibility and time of receipt of
notices, and our determination shall bind all parties. Any old notes withdrawn
will be deemed not to have been validly surrendered for purposes of the exchange
offer and no new notes will be issued unless the old notes so withdrawn are
validly resurrendered. Properly withdrawn old notes may be resurrendered by
following one of the procedures described above under "-- Procedures for
Tendering Old Notes" at any time prior to the business day prior to the
expiration date. Any old notes that are not accepted for exchange will be
returned at no cost to the holder or, in the case of old notes surrendered by
book-entry transfer, into the exchange agent's account at DTC pursuant to the
book-entry transfer procedures described above, as soon as practicable after
withdrawal, rejection of surrender or termination of the exchange offer.
TERMINATION OF CERTAIN RIGHTS
All registration rights under the registration rights agreement that
benefit the holders of the old notes will terminate when we consummate the
exchange offer. That includes all rights to receive additional interest in the
event of a registration default under the registration rights agreement. In any
event, we are under a continuing obligation, for a period of up to 180 days
after the SEC declares the registration statement effective, to keep the
registration statement effective and to provide copies of the latest version of
the prospectus to any broker-dealer that requests copies in the letter of
transmittal for use in a resale.
CONDITIONS OF THE EXCHANGE OFFER
Notwithstanding any other term of the exchange offer, or any extension of
the exchange offer, we do not have to accept for exchange, or exchange new notes
for, any old notes, and we may terminate the exchange offer before acceptance of
the old notes, if:
(1) any statute, rule or regulation has been enacted, or any action
has been taken by any court or governmental authority that, in our
reasonable judgment, seeks to or would prohibit, restrict or otherwise
render consummation of the exchange offer illegal; or
(2) any change, or any development that would cause a change, in our
business or financial affairs has occurred that, in our sole judgment,
might materially impair our ability to proceed with the exchange offer or a
change that would materially impair the contemplated benefits to us of the
exchange offer; or
(3) a change occurs in the current interpretations by the staff of the
SEC that, in our reasonable judgment, might materially impair our ability
to proceed with the exchange offer.
If we, in our sole discretion, determine that any of the above conditions
is not satisfied, we may:
- refuse to accept any old notes and return all surrendered old notes to
the surrendering holders,
- extend the exchange offer and retain all old notes surrendered prior to
the expiration date, subject to the holders' right to withdraw the
surrender of the old notes, or
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- waive any unsatisfied conditions regarding the exchange offer and accept
all properly surrendered old notes that have not been withdrawn. If this
waiver constitutes a material change to the exchange offer, we will
promptly disclose the waiver by means of a prospectus supplement that
will be distributed to the registered holders, and we will extend the
exchange offer for a period of time that we will determine, depending
upon the significance of the waiver and the manner of disclosure to the
registered holders, if the exchange offer would otherwise expire during
that period of time.
EXCHANGE AGENT
We have appointed First Union National Bank as exchange agent for the
exchange offer. Questions and requests for assistance, requests for additional
copies of this prospectus or of the letter of transmittal and requests for
notices of guaranteed delivery should be directed to the exchange agent at the
following address:
<TABLE>
<S> <C>
By Hand or Overnight Courier: By Registered or Certified Mail:
First Union National Bank First Union National Bank
First Union Customer Information Center First Union Customer Information Center
Corporate Trust Operations -- NC1153 Corporate Trust Operations -- NC1153
1525 West W. T. Harris Boulevard -- 3C3 1525 West W. T. Harris Boulevard -- 3C3
Charlotte, NC 28288 Charlotte, NC 28288
Attn: Mike Klotz Attn: Mike Klotz
</TABLE>
By Facsimile Transmission (for Eligible Institutions only):
(704) 590-7628
Confirm by Telephone:
(704) 590-7408
For information with respect to the Exchange Offer, call
Mike Klotz of the Exchange Agent:
(704) 590-7408
FEES AND EXPENSES
We will bear the expenses of soliciting tenders. The principal solicitation
is being made by mail; however, additional solicitation may be made by telecopy,
telephone or in person by our officers and regular employees or by officers and
employees of our affiliates. No additional compensation will be paid to any such
officers and employees who engage in soliciting tenders.
We have not retained any dealer-manager or other soliciting agent for the
exchange offer and will not make any payments to brokers, dealers or others
soliciting acceptance of the exchange offer. We will, however, pay the exchange
agent reasonable and customary fees for its services and will reimburse it for
related, reasonable out-of-pocket expenses. We may also reimburse brokerage
houses and other custodians, nominees and fiduciaries for reasonable
out-of-pocket expenses they incur in forwarding copies of this prospectus, the
letter of transmittal and related documents.
We will pay any expenses you will incur in connection with the exchange
offer, including registration fees, fees and expenses of the exchange agent, the
transfer agent and registrar, accounting and legal fees and printing costs,
among others.
We will pay all transfer taxes, if any, applicable to the exchange of the
old notes. If, however, new notes, or old notes for principal amounts not
surrendered or accepted for exchange, are to be delivered to, or are to be
issued in the name of, any person other than the registered holder of the old
notes surrendered, or if a transfer tax is imposed for any reason other than the
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exchange, then the amount of any transfer taxes will be payable by the person
surrendering the notes. If you do not submit satisfactory evidence of payment of
such taxes or exemption with the letter of transmittal, the amount of those
transfer taxes will be billed directly to you.
CONSEQUENCES OF FAILURE TO EXCHANGE
Old notes that are not exchanged will remain "restricted securities" within
the meaning of Rule 144(a)(3) of the Securities Act. Accordingly, they may not
be offered, sold, pledged or otherwise transferred except:
- to us or to any of our subsidiaries, inside the United States to a
qualified institutional buyer in compliance with Rule 144A,
- inside the United States to an institutional accredited investor that,
prior to such transfer, furnishes to the trustee a signed letter
containing certain representations and agreements relating to the
restrictions on transfer of the old notes, the form of which you can
obtain from the trustee and, if such transfer is in respect of an
aggregate principal amount of old notes at the time of transfer of less
than $100,000, an opinion of counsel acceptable to us that the transfer
complies with the Securities Act,
- outside the United States in compliance with Rule 904 under the
Securities Act,
- pursuant to the exemption from registration provided by Rule 144 under
the Securities Act, if available, or
- pursuant to an effective registration statement under the Securities Act.
The liquidity of the old notes could be adversely affected by the exchange
offer.
ACCOUNTING TREATMENT
For accounting purposes, we will recognize no gain or loss as a result of
the exchange offer. We will amortize the expenses of the exchange offer and the
unamortized expenses related to the issuance of the old notes over the remaining
term of the notes.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The following table sets forth certain information concerning each of the
executive officers, directors and key employees of the Company:
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS AND DIRECTORS: AGE POSITION
- --------------------------------- --- --------
<S> <C> <C>
John G. Larkin............................. 43 Chairman of the Board, Chief Executive
Officer and Director
Michael R. Azarela......................... 41 Executive Vice President, Chief Financial
Officer and Director
Kenneth R. Burk............................ 39 Executive Vice President, Chief Operating
Officer and Director
John Kennedy............................... 60 Vice President, Chief Operating Officer --
Track Contractors and Director
Scott D. Brace............................. 43 President of Railroad Service and Director
Ronald W. Drucker.......................... 57 Director
R.C. Matney................................ 61 Director
Donald P. Traviss.......................... 54 Director
KEY EMPLOYEES:
Gene J. Cellini............................ 42 Vice President, Tax
William R. Donley.......................... 43 Vice President and Chief Operating
Officer -- Manufacturing and Supply
Harold C. Kropp, Jr........................ 42 Vice President and Chief Accounting Officer
John P. Nuzzo.............................. 51 Vice President, Risk Management
Robert W. Wolff............................ 56 Vice President -- Western Track
Construction & Maintenance
</TABLE>
John G. Larkin has been the Chairman of the Board and Chief Executive
Officer and a director of RailWorks since its inception in March 1998. For the
past 21 years, Mr. Larkin has worked in the transportation industry. From
December 1994 to February 1998, Mr. Larkin was a managing director of BT Alex.
Brown Incorporated, where he focused on the transportation industry. Prior
thereto, he served in various capacities at BT Alex. Brown Incorporated since
1987, including as an equity research analyst, focused exclusively on the
transportation industry. From 1986 to 1987, Mr. Larkin was Assistant Vice
President of CSX Transportation, Inc., where he was responsible for strategic
planning and analysis. From 1985 to 1986, Mr. Larkin was Director of Strategic
Planning of Seaboard System Railroad, Inc. From January 1979 through July of
1982, Mr. Larkin served as an engineering project coordinator for Day &
Zimmermann, Inc., an engineering and construction management firm. During this
period, Mr. Larkin was focused exclusively on railroad and rail transit design
and valuation projects. Mr. Larkin has a Master of Business Administration from
Harvard University and a Master of Science in Civil Engineering from the
University of Texas.
Michael R. Azarela has served as the Executive Vice President, Chief
Financial Officer and a director of RailWorks since May 1998. Mr. Azarela was
Chief Executive Officer of L.K. Comstock from February 1998 to August 1998 and
Senior Vice President and Chief Financial Officer of CGI and Spie from May 1994
to February 1998, Chairman of the Board of Comstock Holdings, Inc. since
November 1996 and Vice President and Treasurer of L.K. Comstock from September
1992 to April 1994 and in various other positions at Comstock since June 1983.
Mr. Azarela is a certified public accountant and has a Master of Business
Administration from Iona College.
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Kenneth R. Burk joined RailWorks in May 1999 to serve as Executive Vice
President and Chief Operating Officer. He has been a director of RailWorks since
July 1999. For the past 17 years, Mr. Burk has worked in the construction
industry with significant emphasis on the transportation market. Prior to
joining RailWorks, Mr. Burk served as Senior Vice President and Chief Financial
Officer at Dick Corporation since July 1994. At Dick Corporation, Mr. Burk was a
member of the executive committee and had overall responsibility for finance and
administration and was the Chairman of corporate marketing, strategic planning
and merger and acquisition teams. Mr. Burk served as Vice President and Chief
Financial Officer with Tutor-Saliba Corporation from April 1989 to June 1994 and
held significant positions with Blount, Inc. from January 1983 to April 1989.
Mr. Burk has a Master of Business Administration degree from Pepperdine
University.
John Kennedy has served as Vice President and a director of RailWorks since
its inception in March 1998, and Chief Operating Officer -- Track Contractors
since January 1999. From March 1998 to January 1999, he was Chief Operating
Officer of RailWorks. Mr. Kennedy has served as President of Kennedy Railroad, a
Founding Company, from June 1965 to February 1998, as President of Railcorp,
Inc. from April 1986 to February 1998 and as Principal of Alpha-Keystone from
January 1996 to February 1998. From 1980 to 1988, Mr. Kennedy served as an
Elected Member of the Pennsylvania House of Representatives.
Scott D. Brace has served as a director of RailWorks and President of
Railroad Service since the IPO. Mr. Brace has served as Vice President of
Railroad Service since May 1989 and as President of Minnesota Railroad Service,
Inc. since May 1989. Mr. Brace is President-elect of the NRCMA.
Ronald W. Drucker has been a director of RailWorks since June 1998. Mr.
Drucker has been an independent consultant on transportation and technology
issues since May 1992. From September 1966 to April 1992, Mr. Drucker served in
various capacities for CSX Corporation and certain of its subsidiaries,
including Chief Engineer, Senior Vice President for Transportation and President
and Chief Executive Officer of CSX Rail Transport. Additionally, from December
1989 to October 1997, he was the Chairman of the Board of Encompass, a global
logistics information partnership. Mr. Drucker also serves on the Board of
Directors of SunTrust Bank, North Florida, N.A., Landstar System, Inc.,
Jacksonville University, the National Defense Transportation Association and the
New World Symphony Orchestra.
R.C. Matney has been a director of RailWorks since June 1998. Mr. Matney
has been President, Chairman of the Board of Directors and Chief Executive
Officer of Mark VII Transportation Company, Inc., since he founded the Company
in August 1987. From March 1985 to December 1988, he served as President of
American President Distribution Services, Inc. Prior thereto, Mr. Matney was the
President of the Surface Transportation Group of Brae Corporation from October
1980 to March 1985. Mr. Matney is a former member of the Intermodal Freight
Committee of the National Transportation Research Board.
Donald P. Traviss has been a director of RailWorks since July 1999. Mr.
Traviss has been President and Chief Executive Officer of Envirotrol, Inc., a
private specialty chemicals and services company, since 1998. He was Chief
Executive Officer of Koppers Industries, Inc. from March 1996 to June 1997 and
was President, Chief Operating Officer and a non-voting Director of Koppers from
November 1994 to June 1997. Mr. Traviss had previously served as Vice President,
Refining and Petrochemicals at Universal Oil Products, from 1992 to 1994. Prior
to 1992, he was Vice President, Engineered Products Group. From 1985 to 1988,
Mr. Traviss served as Vice President, Engineering Products and Processes at
Union Carbide Corporation.
Gene J. Cellini has served as Vice President, Tax of RailWorks since the
IPO. Prior thereto, Mr. Cellini was Vice President, Tax of Comstock and its
predecessor, Spie Group, Inc. and subsidiaries, from January 1985. Before
joining Comstock, Mr. Cellini served in various capacities for two international
public accounting firms, most recently as tax manager in public accounting.
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William R. Donley has served as Vice President -- Manufacturing and Supply
since April 1999. For the past 20 years, Mr. Donley has worked in the wood
treating industry serving the railroad, construction, and utility industries.
Before joining RailWorks, Mr. Donley worked for Koppers Industries Inc. in
various capacities including sales and marketing, distribution, operations and
procurement, general management, and most recently as Vice President -- Total
Quality, Productivity, and Strategic Planning. Koppers Industries is the largest
supplier of treated wood products, such as railroad crossties, to the railroad
industry. Mr. Donley has been a member of the American Wood Preservers
Association and the American Wood Preservers Institute. He served the American
Wood Preservers Institute as Chairman, Vice Chairman, and a member of their
Governmental Affairs Committee. Mr. Donley has a Bachelor of Science from
Pennsylvania State University and a Master of Business Administration from the
University of Pittsburgh Katz School of Business.
Harold C. Kropp, Jr. has served as the Vice President and Chief Accounting
Officer of RailWorks since its inception in March 1998. Prior thereto, Mr. Kropp
was a valuation specialist at Larson, Kellett & Associates, P.C. from May 1996
to March 1998. Prior thereto, he was the Controller of Eck Realty Co. from
September 1994 to May 1996 and the Chief Financial Officer of Dame Media, Inc.
from April 1993 to September 1994. Mr. Kropp was employed by a large regional
certified public accounting firm from January 1983 to April 1993 where he
achieved the level of partner. Mr. Kropp is a certified public accountant
accredited in business valuation, a certified valuation analyst and a certified
management accountant.
John P. Nuzzo has served as Vice President, Risk Management of RailWorks
since the IPO. Prior thereto, Mr. Nuzzo was Vice President Administration of
Comstock from 1992, where he was responsible for risk management.
Robert D. Wolff has served as Vice President -- Western Track Construction
and Maintenance of RailWorks since January 1999. From 1977 to January 1999, Mr.
Wolff was the Chief Executive Officer of Mid West Railroad Construction &
Maintenance Corp. Mr. Wolff is a past President of the National Railroad
Construction and Maintenance Association, Inc.
There are currently eight members of the board of directors. Three of the
directors, Messrs. Drucker, Matney and Traviss, are non-employee, independent
directors of RailWorks. The members of the RailWorks board of directors serve
staggered terms as follows: the terms of Messrs. Azarela, Burk and Traviss
expire at the 2000 Annual Meeting of Stockholders; the terms of Messrs. Larkin,
Brace and Matney expire at the 2001 Annual Meeting of Stockholders; and the
terms of Messrs. Kennedy and Drucker expire at the 2002 Annual Meeting of
Stockholders. The RailWorks board of directors has an audit committee and a
compensation committee that each consist of Messrs. Drucker, Matney and Traviss,
the three independent directors.
DIRECTOR COMPENSATION
Directors who are not currently receiving compensation as officers,
employees or consultants of RailWorks are entitled to receive fees of $2,000 per
board meeting attended and $1,000 per committee meeting attended, plus
reimbursement of expenses for each meeting of the board of directors and each
committee meeting that they attend in person. In addition, each non-employee
director was granted options to purchase 10,000 shares of common stock upon
consummation of the IPO. See "-- 1998 Stock Incentive Plan".
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1998, the members of the Compensation Committee were Messrs.
Drucker, Matney and Traviss, RailWorks's three independent directors. During
1998, neither member of the Compensation Committee engaged in any transactions
with RailWorks.
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EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation earned by the
Chief Executive Officer and the executive officers (collectively, the "Named
Executive Officers") for services rendered in all capacities to the Company
during the year ended December 31, 1998.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL AWARDS
COMPENSATION ------------
----------------- RESTRICTED ALL OTHER
NAME POSITION SALARY BONUS STOCK AWARDS COMPENSATION
---- -------- -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
John G. Larkin........ Chief Executive $275,000 -- 678,299 --
Officer
Michael R. Azarela.... Executive Vice 200,000 $23,000 150,735 $85,001(1)
President, Chief
Financial Officer
Kenneth R. Burk(2).... Executive Vice -- -- -- --
President and Chief
Operating Officer
John Kennedy.......... Vice President, Chief 100,000 -- 150,735 --
Operating Officer --
Track Contractors
Peter Alan Pasch(3)... Vice President, Chief 200,000 23,000 -- 21,200(4)
Operating Officer --
Transit
</TABLE>
- ---------------
(1) Represents $39,801 in moving expenses that were paid by the Company, $2,000
in automobile allowance, $1,000 in life insurance premiums, $34,000 in FICA
and $8,200 in 401(k) contributions.
(2) Mr. Burk joined the Company in May 1999.
(3) Resigned in June 1999.
(4) Represents $3,000 in automobile allowance, $2,000 in life insurance
premiums, $8,000 in FICA and $8,200 in 401(k) contributions.
EMPLOYMENT AGREEMENTS
RailWorks has employment agreements with each of Messrs. Larkin, Azarela
and Kennedy. The agreements expire on December 31, 2001, that date is the
"Expiration Date", and will continue on a year-to-year basis, unless terminated
by either party. Each agreement is terminable by RailWorks with or without cause
or upon the employee's death or inability to perform his duties on account of a
disability for a period of six months during any consecutive 12 month period or
by the employee. The agreements provide for annual base salaries of $325,000,
$275,000 and $100,000 for Messrs. Larkin, Azarela and Kennedy, respectively, and
provide that these executive officers will receive 5%, 2% and 1.5% respectively,
of RailWorks's first bonus pool, called the "First Bonus Pool", and 33.3%, 13.3%
and 10.0%, respectively, of RailWorks's second bonus pool, called the "Second
Bonus Pool". The First Bonus Pool consists of 10% of RailWorks's pre-tax
profits, and the Second Bonus Pool consists of 15% of the amount by which
RailWorks's net income exceeds certain benchmarks. In addition, the agreements
provided for the grant of shares of restricted stock and options to purchase
common stock, as described under the heading "-- Executive Compensation." The
agreements provide further that the employee may request a loan from RailWorks
in the amount of the income taxes due on stock granted to the employee under his
employment agreement. These loans are collateralized only by the stock granted
and the employee otherwise has no personal obligation to repay the loan. The
term of
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<PAGE> 74
these loans are five years, requiring annual interest payments; however, the
term is accelerated following termination of employment. Each agreement also
contains noncompetition, nonsolicitation and confidential information
provisions.
RailWorks also has an employment agreement with Mr. Burk. The agreement
expires on May 10, 2002 and will continue on a year-to-year basis, unless
terminated by either party. The agreement is terminable by RailWorks with or
without cause or upon the employee's death or inability to perform his duties on
account of a disability for a period of six months during any consecutive
twelve-month period, or by the employee. The agreement provides for an annual
base salary of $275,000 and provides that he will receive, as a bonus for each
fiscal year during which the agreement is in force, .3% of the net income of
RailWorks before income taxes and bonuses (or, for the year ending December 31,
1999, $100,000, if .3% of such net income is less than $100,000), and for the
grant of options to purchase common stock. The agreement also contains
noncompetition, nonsolicitation and confidential information provisions.
RailWorks has also entered into employment agreements with the key
employees and certain employees of each Founding Company and Acquired Company.
The agreements generally expire on the second anniversary of the closing of the
Company's acquisition of the employee's company. On and after such date, the
agreements automatically renew for successive one-year terms until either party
gives 90 days written notice of termination of the agreement, each termination
date is called the "Expiration Date". Each agreement is terminable by RailWorks
with or without cause or upon the employee's death or inability to perform his
duties on account of a disability for a period of six months during any
consecutive 12-month period or by the employee. Each agreement provides for an
annual base salary and provides that the salary will be adjusted after the
initial term of the agreement to reflect the employee's duties and
responsibilities. Further, each employee is entitled to a portion of the First
Bonus Pool and the Second Bonus Pool. As a group, the owners of the Founding
Companies and Acquired Companies are entitled to an aggregate of 40% of the
First Bonus Pool and 33.3% of the Second Bonus Pool.
1998 STOCK INCENTIVE PLAN
The RailWorks board of directors has adopted, and the RailWorks
stockholders have approved, the RailWorks 1998 Stock Incentive Plan. There are
2,000,000 shares of common stock reserved for issuance under the Incentive Plan
and, as of September 30, 1999, there were 842,500 options outstanding under the
Incentive Plan. The purpose of the Incentive Plan is to provide executive
officers, directors and key employees with additional incentives by enabling
such persons to increase their ownership interests in RailWorks. Individual
awards under the Incentive Plan may take the form of one or more of: (1) either
incentive stock options ("ISOs") or non-qualified stock options ("NQSOs," and
together with ISOs, "Options"); (2) stock appreciation rights ("SARs"); (3)
restricted or deferred stock; (4) dividend equivalents; (5) bonus shares and
awards in lieu of RailWorks obligations to pay cash compensation; and (6) other
awards the value of which is based in whole or in part upon the value of the
common stock. Upon a change of control of RailWorks, as defined in the Incentive
Plan, some of the conditions and restrictions relating to an award with respect
to the exercisability or settlement of such award will lapse.
The Compensation Committee administers the Incentive Plan and generally
selects the individuals who receive awards. In addition, the Audit Committee
determines the type and number of awards and the terms and conditions of those
awards (including exercise prices, vesting and forfeiture conditions,
performance conditions and periods during which awards will remain outstanding).
The Incentive Plan also provides that no participant may be granted in any
calendar year awards which may be settled by delivery of more than 100,000
shares and limits payments under cash-settled awards in any calendar year to an
amount equal to the fair market value of that number of shares.
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<PAGE> 75
On October 26, 1999, the board of directors approved an amendment to the
Incentive Plan which was effective as of January 1, 1999. The amendment adds
consultants to the category of persons entitled to receive non-qualified stock
options. The amendment also provides that the limitation on the number of
options that may be granted during any calendar year shall apply only to key
employees who are officers or directors at the time of the grant. Accordingly,
options granted to consultants would not be subject to this limitation.
RailWorks generally will be entitled to a tax deduction equal to the amount
of compensation realized by a participant through awards under the Incentive
Plan, except that (1) no deduction is permitted in connection with ISOs if the
participant holds the shares acquired upon exercise for the required holding
periods, and (2) deductions for some awards could be limited under the $1.0
million deductibility cap of Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"). This limitation, however, should not apply to
awards granted under a plan during a grace period that expires in August 2001,
and should not apply to certain options, SARs and performance-based awards
granted thereafter if RailWorks complies with certain requirements under Section
162(m) of the Code.
The Incentive Plan will remain in effect until terminated by the board of
directors. The Incentive Plan may be amended by the board of directors without
the consent of the stockholders of RailWorks, except that any amendment,
although effective when made, will be subject to stockholder approval if
required by any federal or state law or regulation or by the rules of any stock
exchange or automated quotation system on which the common stock may then be
listed or quoted.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Set forth below is a description of certain transactions and relationships
between RailWorks and certain officers, directors and principal stockholders of
the Company. In addition, set forth below is certain information regarding
transactions and relationships prior to the IPO between certain of the Founding
Companies and their respective officers, directors and principal stockholders.
GENERAL
Prior to the IPO, certain of the Founding Companies engaged in transactions
with companies that are under common ownership, which transactions are described
below. Since the IPO, transactions between RailWorks and its officers, directors
or principal stockholders must be approved by a majority of the disinterested
members of the board of directors.
ACQUISITION OF CERTAIN FOUNDING COMPANIES
On August 4, 1998, concurrently with the consummation of the IPO, RailWorks
acquired all of the outstanding stock of the Founding Companies. Certain of the
directors and executive officers of RailWorks were owners of certain of the
Founding Companies. These companies, and the consideration their owners received
in the acquisitions, are set forth below:
<TABLE>
<CAPTION>
CONSIDERATION
---------------------------
SHARES OF
FOUNDING COMPANY CASH COMMON STOCK
- ---------------- ------------- ------------
<S> <C> <C>
Comstock Holdings, Inc................................. $13.1 million 2,959,291
Kennedy Railroad Builders, Inc......................... 2.8 million 386,795
Merit Railroad Contractors, Inc........................ 2.0 million 292,456
Railroad Service, Inc.................................. 3.5 million 454,680
U.S. Trackworks, Inc................................... 1.3 million 305,609
</TABLE>
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Michael R. Azarela, former Chief Executive Officer of Comstock, is
Executive Vice President and Chief Financial Officer of RailWorks. John Kennedy,
then President of Kennedy, is the Vice President and Chief Operating
Officer -- Track Contractors and a director of RailWorks. Upon completion of the
IPO, Scott D. Brace, President of Railroad Service became a director of
RailWorks. Each of Messrs. Azarela, Kennedy and Brace entered into a two-year
employment agreement with RailWorks in connection with the acquisition of the
Founding Companies.
COMSTOCK
Effective January 1, 1997, Comstock acquired all of the outstanding stock
of L.K. Comstock from Spie for $5.0 million plus a contingent payment of up to
$5.0 million based on 1997, 1998 and 1999 pre-tax income. In May 1998, Comstock
agreed to pay Spie $1.6 million in lieu of such contingent payment, which amount
was paid by RailWorks on September 8, 1998.
In connection with the Comstock Acquisition, Comstock, L.K. Comstock, Spie
and CGI entered into an Indemnity and Cooperation Agreement pursuant to which
L.K. Comstock issued a contingent promissory note to Spie in the amount of
approximately $14.9 million (the "Contingent Note") collateralized by any
proceeds derived from three projects (the "Spie Projects") for which Comstock
had not been fully paid. Each of these projects is the subject of a lawsuit in
which L.K. Comstock seeks payment of a portion of the contract price. In each
proceeding, the defendant has filed a counterclaim against L.K. Comstock for
breach of contract. Spie is obligated to indemnify L.K. Comstock for all losses
and expenses incurred with respect to these lawsuits. The Contingent Note is
payable only from amounts collected by L.K. Comstock with respect to the Spie
Projects prior to April 3, 2007, at which time the Contingent Note will be
canceled. As such, Spie and any successor or creditor may not look to any other
assets of L.K. Comstock or RailWorks to satisfy the Contingent Note. Because
there is a right of offset for any gains or losses incurred in connection with
the Spie Projects, neither the Contingent Note nor the right to receive proceeds
from the Spie Projects is reflected in Comstock's financial statements, the
RailWorks Consolidated Financial Statements or the RailWorks Pro Forma Financial
Statements.
LOANS TO OFFICERS
Pursuant to the employment agreements, RailWorks made loans to certain of
its executive officers to cover income taxes due with respect to grants of
restricted common stock. These loans, which are due in full on August 4, 2003,
were in the following principal amounts: John G. Larkin -- $3,982,245; Michael
R. Azarela -- $876,236; and John Kennedy -- $834,047.
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<PAGE> 77
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the common stock as of December 6, 1999 by: (1) each Named
Executive Officer of RailWorks; (2) each director of RailWorks; and (3) all of
the RailWorks directors and executive officers as a group. Unless otherwise
provided, all persons listed have an address c/o RailWorks's principal executive
offices and have sole voting and investment power with respect to their shares
unless otherwise indicated.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
----------------------
BENEFICIAL OWNER NUMBER PERCENT(1)
- ---------------- --------- ----------
<S> <C> <C>
John G. Larkin.............................................. 828,309 5.8
Michael R. Azarela.......................................... 551,765 3.9
Kenneth R. Burk(2).......................................... 50,000 *
John Kennedy................................................ 404,021 2.8
Scott D. Brace.............................................. 200,093 1.4
Ronald W. Drucker(3)........................................ 8,000 *
R.C. Matney(4).............................................. 7,000 *
Donald P. Traviss(5)........................................ 2,500 *
All executive officers and directors as a group (8
persons)(6)............................................... 2,051,688 14.3
Deutsche Bank Securities Inc.(7)............................ 2,003,385 12.3%
</TABLE>
- ---------------
* Less than one percent
(1) Based on an aggregate of 14,255,706 shares of common stock issued and
outstanding as of December 6, 1999 plus, for each person, (a) the number of
shares of common stock issuable upon conversion of shares of Series A
convertible preferred stock beneficially owned by such person, and (b) the
number of shares of common stock issuable upon exercise of outstanding stock
options that are or will become exercisable prior to February 4, 2000.
(2) Represents 50,000 shares issuable upon exercise of outstanding options.
(3) Includes 5,000 shares issuable upon exercise of outstanding options.
(4) Includes 5,000 shares issuable upon exercise of outstanding options.
(5) Represents 2,500 shares issuable upon exercise of outstanding options.
(6) Represents (a) 1,989,688 shares beneficially owned by such directors and
executive officers, and (b) 62,000 shares issuable upon exercise of
outstanding stock options that are or will become exercisable prior to
February 4, 2000.
(7) Represents (a) 633,385 shares of common stock of RailWorks and (b) 13,700
shares of Series A convertible preferred stock. Each share of Series A
convertible preferred stock is convertible at any time into 100 shares of
common stock, subject to some exceptions. Conversion is prohibited if, after
the conversion, Deutsche Bank Securities Inc. (formerly BT Alex. Brown
Incorporated) would own 5% or more of the RailWorks common stock. The
address of Deutsche Bank Securities Inc. is 130 Liberty Street, New York,
New York 10006.
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<PAGE> 78
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of RailWorks consists of 100,000,000 shares of
common stock, par value $.01 per share and 10,000,000 shares of preferred stock,
par value $.01 per share. The following summary description of the capital stock
of RailWorks is a summary only and is subject to the detailed provisions of, and
qualified in its entirety by reference to, the Company's Certificate of
Incorporation and Bylaws of RailWorks, copies of which are available from
RailWorks by writing or calling our principal executive offices, and to the
applicable provisions of the Delaware General Corporation Law ("DGCL").
COMMON STOCK
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Subject to the
rights of any holders of preferred stock, holders of common stock are entitled
to receive ratably such dividends as may be declared by the board of directors
out of funds legally available. In the event of a liquidation, dissolution or
winding up of the Company, holders of the common stock are entitled to share
ratably in the distribution of all assets remaining after payment of
liabilities, subject to the rights of any holders of preferred stock of
RailWorks. The holders of common stock have no preemptive rights to subscribe
for additional shares of RailWorks and no right to convert their common stock
into any other securities. In addition, there are no redemption or sinking fund
provisions applicable to the common stock. All of the outstanding shares of
common stock are fully paid and nonassessable.
PREFERRED STOCK
RailWorks has 10,000,000 shares of authorized preferred stock. On October
8, 1998, the Company issued 13,700 shares of preferred stock, designated Series
A convertible preferred stock, to Deutsche Bank Securities Inc. (formerly BT
Alex. Brown Incorporated), in exchange for 1,370,000 shares of common stock. The
stock exchange reduced Deutsche Bank Securities Inc.'s common stock holdings to
satisfy the Bank Holding Company Act (the "BHCA"). The BHCA requires that a bank
holding company own less than 5% of the voting stock of a publicly-traded
corporation. Each share of Series A convertible preferred stock is convertible
into 100 shares of common stock; however, subject to certain exceptions allowed
by the BHCA, conversion is prohibited if, after the conversion, Deutsche Bank
Securities Inc. would own 5% or more of the common stock. Shares of Series A
convertible preferred stock carry no voting rights, share ratably with shares of
common stock as to dividend distributions as if shares of Series A convertible
preferred stock had been converted to shares of common stock and have a
liquidation preference over shares of common stock.
The board of directors is authorized to provide for the issuance of
additional classes and series of preferred stock out of remaining undesignated
shares, and the board of directors may establish the voting powers,
designations, preferences and relative, participating, optional or other special
rights and qualifications, limitations or restrictions of any such additional
class or series of preferred stock, including the dividend rights, dividend
rate, terms of redemption, redemption price or prices, conversion rights and
liquidation preferences of the shares constituting any series, without any
further vote or action by the stockholders of the Company. The issuance of
preferred stock by the board of directors could have the effect of making it
more difficult for a third party to acquire a majority of the outstanding voting
stock of RailWorks, thereby delaying, deferring or preventing a change in
control of RailWorks.
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CERTAIN PROVISIONS OF DELAWARE LAW AND THE COMPANY'S CERTIFICATE OF
INCORPORATION AND BYLAWS
We are subject to the provisions of Section 203 of the DGCL. Section 203
prohibits a publicly held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
A "business combination" includes a merger, asset sale or other transaction
resulting in a financial benefit to the interested stockholder. Subject to
certain exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns or within three years prior to the proposed
business combination has owned 15% or more of the corporation's voting stock.
Our Certificate of Incorporation provides that liability of directors of
RailWorks is eliminated to the fullest extent permitted under Section 102(b)(7)
of the DGCL. As a result, no director of RailWorks will be liable to RailWorks
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability: (i) for any breach of the director's duty of
loyalty to RailWorks or its stockholders; (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law;
(iii) for any willful or negligent payment of an unlawful dividend, stock
purchase or redemption; or (iv) for any transaction from which the director
derived an improper personal benefit.
Our Bylaws provide that the board of directors be elected to staggered
one-, two-and three-year terms and, thereafter, for successive three-year terms.
In addition, directors may only be removed from office for cause. These
provisions of the Bylaws could discourage potential acquisition proposals and
could delay or prevent a change in control of RailWorks.
DESCRIPTION OF CREDIT FACILITY
Since the IPO, cash for acquisitions and working capital has been financed
by funds generated from operations, together with borrowings under the Company's
three-year, $105 million senior secured revolving credit facility with Bank of
America, N.A. ("B of A"). The credit facility matures on August 5, 2002, subject
to acceleration upon the occurrence of an event of default or a change in
control. Of the $105 million senior secured revolving credit facility, $90
million can be borrowed by RailWorks (the "U.S. credit facility"), and $15
million can be borrowed by Canadian subsidiaries of RailWorks (the "Canadian
credit facility"). Borrowings under the credit facility bear interest, at our
option, at an interest rate equal to (1) LIBOR plus the applicable margin for
LIBOR loans, which ranges from 125 basis points to 250 basis points based on the
ratio of Funded Debt to EBITDA (as such terms are defined in the credit
facility), (2) the Base Rate (defined as the higher of (a) the NationsBank prime
rate and (b) the Federal Funds rate plus 50 basis points) plus up to 100 basis
points based on the ratio of Funded Debt to EBITDA or (3) a rate negotiated with
B of A at the time of borrowing for up to $5 million of the U.S. credit facility
available to RailWorks as a swing line. In addition, borrowings under the
Canadian credit facility can be funded through bankers' acceptances, issued at a
discount to face value. As of September 30, 1999, borrowings under the credit
facility bore interest at a weighted average interest rate of 9.0% per annum.
Borrowings under the U.S. credit facility are secured by a first priority
lien on all capital stock of our U.S. subsidiaries, 66% of the voting capital
stock of our non-U.S. subsidiaries, all non-voting capital stock of our non-U.S.
subsidiaries and all of our accounts receivable and the accounts receivable of
our U.S. subsidiaries. Repayment of the U.S. credit facility is guaranteed by
all of our U.S. subsidiaries. Borrowings under the Canadian credit facility are
secured by a first priority lien on all capital stock of our U.S. and non-U.S.
subsidiaries and all accounts receivable of RailWorks and its subsidiaries,
other than Canadian subsidiaries, and by a second priority lien on all accounts
receivable of the Canadian subsidiaries. Repayment of the Canadian credit
facility
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<PAGE> 80
is guaranteed by RailWorks and all of its subsidiaries. The credit facility
contains usual and customary events of default as well as financial covenants
for RailWorks regarding, among other things, debt coverage, net worth and
earnings. The credit facility also contains covenants and provisions that
restrict, among other things, the ability of RailWorks and its subsidiaries to:
(1) incur additional indebtedness and liens on their property, (2) merge or
consolidate with or acquire another person or engage in other fundamental
changes, (3) make certain acquisitions and investments, (4) make dividend and
certain other payments and (5) engage in certain sales, sale-leasebacks and
certain dispositions of property. As of the date of this prospectus, we were in
compliance with all covenants under the credit facility.
DESCRIPTION OF TERM LOAN FACILITY
On November 5, 1999, we entered into a term loan facility with the lenders
named therein. Under the term loan facility, at December 6, 1999, we had $30.0
million of borrowings outstanding, which bore interest at a weighted average
annual rate of 9.83% as of such date. Borrowings outstanding under the term loan
facility mature on November 5, 2004. Borrowings under the term loan facility
bear interest, at our option, at an interest rate equal to (1) the Base Rate
plus 200 basis points or (2) the Eurodollar Rate plus 375 basis points. The
interest rate is increased by 2% upon the occurrence, and during the
continuance, of an event of default. The term loan facility is guaranteed by all
of our domestic subsidiaries.
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<PAGE> 81
DESCRIPTION OF THE NEW NOTES
The form and terms of the new notes and the old notes are identical in all
material respects, except that transfer restrictions and registration rights
applicable to the old notes do not apply to the new notes.
The old notes were, and the new notes will be, issued under the same
indenture as the existing notes, which is dated as of April 7, 1999, among
RailWorks, the Subsidiary Guarantors and First Union National Bank, as trustee.
The following description of the material provisions of the indenture is a
summary only. It does not include all of the provisions of the indenture. We
urge you to read the indenture because it defines your rights. The terms of the
notes include those stated in the indenture and those made part of the indenture
by reference to the Trust Indenture Act of 1939, which will govern the indenture
upon effectiveness of the registration statement that includes this prospectus.
A copy of the indenture may be obtained from RailWorks upon request. You can
find definitions of certain capitalized terms used in this description under
"-- Certain Definitions." For purposes of this section, references to "we,"
"our," "us" and "RailWorks" include only RailWorks Corporation and not its
subsidiaries. References in this section to the "notes" are references to both
the old notes and the new notes.
The notes are general unsecured obligations of RailWorks, and rank
subordinate in right of payment to all Senior Debt of RailWorks.
We will issue the new notes in fully registered form in denominations of
$1,000 and integral multiples. The trustee will initially act as paying agent
and registrar for the new notes. The new notes may be presented for registration
or transfer and exchange at the offices of the registrar. We may change any
paying agent and registrar without notice to note holders. We will pay
principal, and premium, if any, on the notes at the trustee's corporate office
in New York, New York. At our option, interest may be paid at the trustee's
corporate trust office or by check mailed to the registered address of holders.
Any notes that remain outstanding after the completion of the exchange offer,
together with the new notes issued in connection with the exchange offer, will
be treated as a single class of securities under the indenture.
PRINCIPAL, MATURITY AND INTEREST
The notes are limited in aggregate principal amount to $250.0 million, of
which $125.0 million in aggregate principal amount was issued on April 7, 1999,
which we refer to as the "existing notes", and $50.0 million in aggregate
principal amount was issued on September 30, 1999. The notes mature on April 15,
2009. Additional notes may be issued from time to time, subject to the
limitations set forth under "-- Certain Covenants -- Limitation on Incurrence of
Additional Indebtedness" and restrictions contained in the Credit Agreement. Any
additional notes will be part of the same issue as the existing notes, the old
notes and the new notes and will vote on all matters with the existing notes,
the old notes and the new notes. Unless otherwise indicated, references in this
section to the notes include the existing notes but do not include the
additional notes. No offering of any such additional notes is being or shall be
deemed to be made by this prospectus. In addition, there can be no assurance as
to when or whether RailWorks will issue any such additional notes or as to the
aggregate principal amount of any such additional notes.
Interest on the notes accrues at the annual rate of 11 1/2% and is payable
semi-annually in cash on each April 15 and October 15 commencing on October 15,
1999, to the persons who are registered holders at the close of business on the
April 1 and October 1 immediately preceding the applicable interest payment
date. Interest on the notes accrues from the most recent date to which interest
has been paid or, if no interest has been paid, from and including September 30,
1999. Interest is computed on the basis of a 360-day year comprised of twelve
30-day months.
The notes are not entitled to the benefit of any mandatory sinking fund.
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<PAGE> 82
REDEMPTION
Optional Redemption. Except as described below, the notes are not
redeemable before April 15, 2004. After April 15, 2004, we may redeem the notes
at our option, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices expressed as percentages of the principal
amount as described in the following table, plus accrued and unpaid interest to
the redemption date, if redeemed during the twelve-month period commencing on
April 15 of the years indicated in the table set forth below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2004........................................................ 105.750%
2005........................................................ 103.833%
2006........................................................ 101.917%
2007 and thereafter......................................... 100.000%
</TABLE>
In addition, we must pay accrued and unpaid interest on the notes we
redeem.
Optional Redemption. Except as described below, the notes are not
redeemable before April 15, 2004. After April 15, 2004, we may redeem the notes
at our option, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices expressed as percentages of the principal
amount as described in the following table, plus accrued and unpaid interest to
the redemption date, if redeemed during the twelve-month period beginning on
April 15 of the years indicated in the table below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2004........................................................ 105.750%
2005........................................................ 103.833%
2006........................................................ 101.917%
2007 and thereafter......................................... 100.000%
</TABLE>
In addition, we must pay accrued and unpaid interest on the notes we
redeem.
Optional Redemption upon Equity Offerings. At any time, which may be more
than once, on or prior to April 15, 2002, we may, at our option, use the net
cash proceeds of one or more Equity Offerings to redeem up to 35% of the
principal amount of the notes issued under the indenture at a redemption price
of 111.500% of the principal amount of such notes plus accrued and unpaid
interest, if any, to the redemption date; provided that:
(1) at least 65% of the principal amount of notes issued under the
indenture remains outstanding immediately after any such redemption; and
(2) we make such redemption not more than 120 days after the
consummation of any such Equity Offering.
"Equity Offering" means public or private offering of our Qualified Capital
Stock; provided that, in the event such equity offering is not in the form of an
underwritten public offering registered under the Securities Act, the proceeds
we directly or indirectly receive from such offering are not less than $10.0
million.
SELECTION AND NOTICE OF REDEMPTION
In the event that we choose to redeem less than all of the notes, the
trustee will select notes for redemption either:
(1) in compliance with the requirements of the principal national
securities exchange, if any, on which the notes are listed; or,
(2) on a pro rata basis, by lot or by such method as the trustee shall
deem fair and appropriate.
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<PAGE> 83
No notes of a principal amount of $1,000 or less shall be redeemed in part.
If a partial redemption is made with the proceeds of an Equity Offering, the
trustee will select the notes only on a pro rata basis or on as nearly a pro
rata basis as is practicable, subject to DTC procedures, unless such method is
otherwise prohibited. Notice of redemption will be mailed by first-class mail at
least 30 but not more than 60 days before the redemption date to each holder of
notes to be redeemed at the holder's registered address. On and after the
redemption date, interest will cease to accrue on notes or portions thereof
called for redemption as long as we have deposited with the paying agent funds
in satisfaction of the applicable redemption price.
SUBORDINATION
The payment of all Obligations on the notes is subordinated in right of
payment to the prior payment in full in cash or Cash Equivalents of all
Obligations on Senior Debt of RailWorks.
The holders of Senior Debt are entitled to receive payment in full in cash
or Cash Equivalents of all Obligations due in respect of Senior Debt. The
payment includes any interest accruing subsequent to a bankruptcy or other
similar proceeding, whether or not such interest is an allowed claim enforceable
against RailWorks in a bankruptcy case, before the holders of notes will be
entitled to receive any payment with respect to the notes, or any note is
acquired for cash or property or otherwise, in the event of any distribution to
our creditors:
(1) in a liquidation or dissolution of RailWorks;
(2) in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to RailWorks or its property;
(3) in an assignment for the benefit of creditors; or
(4) in any marshaling of RailWorks's assets and liabilities.
We also may not make any payment in respect of the notes, or acquire any
notes for cash or property or otherwise, if:
(1) a payment default on Designated Senior Debt occurs and is
continuing; or
(2) any other default occurs and is continuing on Designated Senior
Debt (as such event of default is defined in the instrument creating or
evidencing such Designated Senior Debt) that permits holders of the
Designated Senior Debt to accelerate its maturity and the trustee receives
a notice of such default (a "Payment Blockage Notice") from the
Representative of any Designated Senior Debt.
Payments on the notes may and shall be resumed:
(1) in the case of a payment default, upon the date on which such
default is cured or waived; and
(2) in case of a nonpayment default, the earliest of the date on which
such nonpayment default is cured or waived or ceases to exist or such
Designated Senior Debt is paid in full (so long as no other event of
default exists), or the trustee receives notice from the Representative for
the respective issue of Designated Senior Debt terminating the Blockage
Period, or 180 days after the date on which the applicable Payment Blockage
Notice is received, unless the maturity of any Designated Senior Debt has
been accelerated.
No new Payment Blockage Notice may be delivered unless and until 360 days
have elapsed since the initial effective date of the immediately prior Payment
Blockage Notice.
No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the trustee shall be, or be made, the
basis for a subsequent Payment Blockage Notice unless such default shall have
been cured or waived for a period of not less than 90 days.
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We must promptly notify holders of Senior Debt if payment of the notes is
accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event
of a bankruptcy, liquidation or reorganization of RailWorks, holders of the
notes may recover less ratably than creditors of RailWorks who are holders of
Senior Debt. See "Risk Factors -- Risks Relating to the Notes -- The Notes Rank
Behind Other Indebtedness".
Pro forma basis for the acquisition of the 1999 Acquired Companies,
borrowings under the new term loan facility and the sale of the old notes and
the application of the net proceeds, at September 30, 1999, the aggregate amount
of senior debt outstanding would have been approximately $50.4 million, and
RailWorks would have had $82.5 million available for borrowing under the Credit
Facility.
GUARANTEES
The Guarantors, which will initially include all of our domestic Restricted
Subsidiaries existing on September 30, 1999, will jointly and severally fully
and unconditionally guarantee, on an unsecured senior subordinated basis, our
obligations under the indenture and the notes. Each Guarantee will be
subordinated to Guarantor Senior Debt on the same basis as the notes are
subordinated to Senior Debt. For purposes hereof, the trustee and the holders
shall have the right to receive and/or retain payments by any of the Guarantors
only at such times as they may receive and/or retain payments from RailWorks in
respect of the notes pursuant to the indenture. The obligations of each
Guarantor under its Guarantee will be limited as necessary to prevent the
Guarantee from constituting a fraudulent conveyance or fraudulent transfer under
applicable law.
Each Guarantor may consolidate with or merge into or sell its assets to the
Company or another Guarantor that is a Wholly Owned Restricted Subsidiary of
RailWorks without limitation, or with other Persons upon the terms and
conditions set forth in the indenture. See "-- Certain Covenants -- Merger,
Consolidation and Sale of Assets". In the event all or substantially all of the
assets or all of the Capital Stock of a Guarantor is sold by RailWorks and the
sale complies with the provisions set forth in "-- Certain
Covenants -- Limitation on Asset Sales", the Guarantor's Guarantee will be
automatically and unconditionally discharged and released.
Separate financial statements of the Guarantors are not included herein
because such Guarantors are jointly and severally liable for our obligations
pursuant to the notes, and the aggregate net assets, earnings and equity of the
Guarantors and RailWorks are substantially equivalent to the net assets,
earnings and equity of RailWorks on a consolidated basis.
HOLDING COMPANY STRUCTURE
RailWorks is a holding company. We have no material operations of our own
and only limited assets. Accordingly, we depend upon the distribution of the
earnings of our subsidiaries, whether in the form of dividends, advances or
payments on account of intercompany obligations, to service our debt
obligations. We cannot assure you that, after providing for all prior claims,
there would be sufficient assets available from RailWorks and our subsidiaries
to satisfy the claims of the holders of our new notes.
CHANGE OF CONTROL
In the event of a Change of Control, each holder will have the right to
require that we purchase all or a portion of such holder's new notes pursuant to
the offer described below, the "Change of Control Offer", at a purchase price
equal to 101% of the principal amount of the new notes plus accrued and unpaid
interest, if any, to the date of purchase.
Within 30 days following the date upon which the Change of Control
occurred, we must send, by first class mail, a notice to each holder, with a
copy to the trustee, which notice shall
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govern the terms of the Change of Control Offer. Such notice shall state, among
other things, the purchase date, which must be no earlier than 30 days nor later
than 60 days from the date such notice is mailed, other than as may be required
by law, the date of such purchase being the "Change of Control Payment Date".
Holders electing to have a note purchased pursuant to a Change of Control Offer
will be required to surrender the note, with the form entitled "Option of Holder
to Elect Purchase" on the reverse of the note completed, to the paying agent at
the address specified in the notice prior to the close of business on the third
business day prior to the Change of Control Payment Date.
If we make a Change of Control Offer, we cannot guarantee that we will have
available funds sufficient to pay the Change of Control purchase price for all
the notes that might be delivered by holders seeking to accept the Change of
Control Offer. In the event we are required to purchase outstanding notes
pursuant to a Change of Control Offer, we expect that we would seek third-party
financing to the extent we do not have available funds to meet our purchase
obligations. However, we cannot guarantee that we would be able to obtain the
necessary financing.
In addition, we cannot guarantee that our debt instruments will permit us
to make a Change of Control Offer. Our credit facility does not permit us to
make a Change of Control Offer and, in order to make such offer, we would be
required to pay off the credit facility in full or seek a waiver from the
lenders under the credit facility in order to make the Change of Control Offer.
A Change of Control is an event of default under the credit facility and would
entitle the lenders to accelerate all amounts owing under the credit facility.
Any future credit agreements or other agreements relating to Senior Debt to
which we become a party may contain similar restrictions and provisions.
Moreover, the exercise by the holders of their rights to require us to
repurchase the notes could cause a default under such indebtedness, even if the
Change of Control itself does not, due to the financial effect of such
repurchase on RailWorks. Failure to make a Change of Control Offer, even if
prohibited by our debt instruments, would constitute a default under the
indenture. See "Risk Factors -- Risks Relating to the New Notes -- We May Not
Have Sufficient Cash to Purchase the New Notes Upon a Change of Control."
We are not required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in compliance with
the requirements applicable to a Change of Control Offer made by RailWorks and
purchases all notes validly tendered and not withdrawn under such Change of
Control Offer.
Neither the board of directors of RailWorks nor the trustee may waive the
covenant relating to a holder's right to redemption when a Change of Control
occurs. Each holder's right to require us to purchase that holder's notes upon a
Change of Control, and the restrictions in the indenture described in this
prospectus on the ability of RailWorks and its Restricted Subsidiaries to incur
additional Indebtedness, to grant liens on their property, to make Restricted
Payments and to make Asset Sales, may also make a takeover of RailWorks more
difficult or discourage it, whether favored or opposed by our management.
Carrying out Change of Control Offers may sometimes require redemption or
repurchase of the notes, and we cannot guarantee that we or the acquiring party
will have sufficient financial resources to do so. These restrictions and the
restrictions on transactions with affiliates may, in certain circumstances, make
more difficult or discourage any leveraged buyout of RailWorks or any of its
subsidiaries by our management. While the restrictions cover a wide variety of
arrangements that have traditionally been used to effect highly leveraged
transactions, the indenture may not afford the holders of new notes protection
in all circumstances from the adverse aspects of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction.
We will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations in connection with the repurchase
of notes pursuant to a Change of Control Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Change of
Control" provisions of the indenture, we will comply with the applicable
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securities laws and regulations and will not be deemed to have breached our
obligations under the "Change of Control" provisions of the indenture by doing
so.
CERTAIN COVENANTS
Limitation on Incurrence of Additional Indebtedness. We will not, and will
not permit any of our Restricted Subsidiaries to, directly or indirectly,
create, incur, assume, guarantee, acquire, become liable, contingently or
otherwise, with respect to, or otherwise become responsible for payment of
(collectively, "incur") any Indebtedness, other than Permitted Indebtedness;
provided, however, that if no Default or Event of Default shall have occurred
and be continuing at the time of or as a consequence of the incurrence of any
such Indebtedness, RailWorks or any of its Restricted Subsidiaries that is or,
upon such incurrence, becomes a Guarantor may incur Indebtedness (including,
without limitation, Acquired Indebtedness) and Restricted Subsidiaries of
RailWorks that are not Guarantors may incur Acquired Indebtedness, in each case
if on the date of the incurrence of such Indebtedness, after giving effect to
the incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of
RailWorks is greater than (x) 2.0 to 1.0 if the date of such occurrence is on or
prior to April 1, 2001, or (y) 2.25 to 1.0 if the date of such occurrence is on
or after April 1, 2001 and prior to April 1, 2004, or (z) 2.5 to 1.0 if the date
of such occurrence is on or after April 1, 2004.
Limitation on Restricted Payments. We will not, and will not cause or
permit any of our Restricted Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any distribution, other than
dividends or distributions payable in Qualified Capital Stock of RailWorks
or in options, warrants or other rights to purchase Qualified Capital Stock
of RailWorks, on or in respect of shares of the RailWorks Capital Stock to
holders of such Capital Stock;
(2) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of RailWorks or any warrants, rights or options to purchase
or acquire shares of any class of such Capital Stock, other than in either
case any RailWorks Capital Stock or other securities owned by RailWorks or
any of its Restricted Subsidiaries;
(3) make any principal payment on, purchase, defease, redeem, prepay,
decrease or otherwise acquire or retire for value, prior to any scheduled
final maturity, scheduled repayment or scheduled sinking fund payment, any
Indebtedness of RailWorks that is subordinate or junior in right of payment
to the notes, (i) other than any such subordinated Indebtedness owed to
RailWorks or any of its Restricted Subsidiaries and (ii) except the
prepayment, purchase, repurchase or other acquisition or retirement of
Indebtedness in anticipation of satisfying a sinking fund obligation,
principal installment or final maturity, in each case due within one year
of the date of prepayment, purchase, repurchase or other acquisition or
retirement; or
(4) make any Investment (other than Permitted Investments) (each of
the foregoing actions set forth in clauses (1), (2), (3) and (4) being
referred to as a "Restricted Payment");
if at the time of such Restricted Payment or immediately after giving
effect to it,
(i) a Default or an Event of Default shall have occurred and be
continuing; or
(ii) we are not able to incur at least $1.00 of additional
Indebtedness, other than Permitted Indebtedness, in compliance with the
"Limitation on Incurrence of Additional Indebtedness" covenant; or
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(iii) the aggregate amount of Restricted Payments, including such
proposed Restricted Payment made subsequent to April 7, 1999 exceeds the
sum of:
(w) 50% of the cumulative Consolidated Net Income, or if
cumulative Consolidated Net Income shall be a loss, minus 100% of
such loss, of RailWorks earned subsequent to April 7, 1999 and on or
prior to the date the Restricted Payment occurs (the "Reference
Date"), and treating such period as a single accounting period; plus
(x) 100% of the aggregate net cash proceeds received by
RailWorks from any Person, other than a Restricted Subsidiary, from
the issuance and sale subsequent to April 7, 1999 and on or prior to
the Reference Date of (i) Qualified Capital Stock of RailWorks and
(ii) Indebtedness or Disqualified Capital Stock that has been
converted into or exchanged for Qualified Capital Stock together with
the aggregate net cash proceeds received by RailWorks or any
Restricted Subsidiary at the time of such conversion or exchange;
plus
(y) without duplication of any amounts included in clause (iii)
(x) above, 100% of the aggregate net cash proceeds of any equity
contribution received by RailWorks from a holder of RailWorks Capital
Stock, excluding, in the case of clauses (iii) (x) and (y), any net
cash proceeds from an Equity Offering to the extent used to redeem
the notes in compliance with the provisions set forth under
"Redemption -- Optional Redemption upon Equity Offerings"; plus
(z) without duplication, the sum of:
(1) the aggregate amount returned in cash on or with respect
to Investments, except for Permitted Investments, made subsequent
to April 7, 1999 whether through interest payments, principal
payments, dividends or other distributions or payments;
(2) the net cash proceeds received by RailWorks or any of
its Restricted Subsidiaries from the disposition of all or any
portion of such Investments, other than to a Restricted
Subsidiary of RailWorks; and
(3) upon redesignation of an Unrestricted Subsidiary as a
Restricted Subsidiary, the fair market value of such Subsidiary;
provided, however, that the sum of clauses (1), (2) and (3) above
shall not exceed the aggregate amount of all such Investments
made subsequent to April 7, 1999.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration of such dividend if the dividend would have been permitted on
the date of declaration;
(2) the acquisition of any shares of Capital Stock of RailWorks,
either (i) solely in exchange for shares of Qualified Capital Stock of
RailWorks or (ii) through the application of net proceeds of a
substantially concurrent sale for cash, other than to a Restricted
Subsidiary, of shares of Qualified Capital Stock;
(3) the acquisition of any Indebtedness of RailWorks that is
subordinate or junior in right of payment to the notes either (i) solely in
exchange for shares of Qualified Capital Stock of RailWorks, or (ii)
through the application of net proceeds of a substantially concurrent sale
for cash, other than to a Restricted Subsidiary of RailWorks of (a) shares
of Qualified Capital Stock of RailWorks or (b) Refinancing Indebtedness;
(4) so long as no Default or Event of Default shall have occurred and
be continuing, repurchases by RailWorks of its Capital Stock from
employees, former employees, directors or
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former directors of RailWorks or any of its Subsidiaries or their
authorized representatives upon the death, disability or termination of
employment of such employees or former employees, or termination of the
term of such director or former director, in an aggregate amount not to
exceed $1.0 million in any calendar year;
(5) loans and advances made to officers or other employees to make tax
payments associated with stock grants and/or the grant or exercise of stock
options (i) pursuant to existing employment agreements in an amount not to
exceed $6.5 million within six months after April 7, 1999 and (ii) in an
amount not to exceed $1.0 million in any calendar year thereafter;
(6) loans and advances to officers and other employees of RailWorks or
any of its Restricted Subsidiaries for the exercise of stock options in an
amount not to exceed $1.0 million at any one time outstanding;
(7) the repurchase of any subordinated Indebtedness at a purchase
price not greater than 101% of the principal amount of such subordinated
Indebtedness in the event of a "change of control" in accordance with
provisions similar to the "Change of Control" covenant; provided that,
prior to or simultaneously with such repurchase, RailWorks has made the
Change of Control Offer as provided in such covenant with respect to the
notes and has repurchased all notes validly tendered for payment in
connection with such Change of Control Offer;
(8) payments or distributions to stockholders pursuant to appraisal
rights in respect of up to 10% of the Capital Stock of RailWorks or any
Restricted Subsidiary required by law in connection with a consolidation,
merger or transfer of assets that complies with the covenant described
under "-- Merger, Consolidation and Sale of Assets"; and
(9) other Restricted Payments in an aggregate amount since April 7,
1999 not to exceed $1.0 million.
In determining the aggregate amount of Restricted Payments made subsequent
to April 7, 1999 in accordance with clause (iii) of the immediately preceding
paragraph, amounts expended pursuant to clauses (1), (2) (ii), (4), (5), (6),
(7) and (9) shall be included in such calculation.
Not later than the date of making any Restricted Payment, we shall deliver
to the trustee an officers' certificate stating that such Restricted Payment
complies with the indenture and setting forth in reasonable detail the basis
upon which the required calculations were computed, which calculations may be
based upon our latest available internal quarterly financial statements.
Limitation on Asset Sales. We will not, and will not permit any of our
Restricted Subsidiaries to, consummate an Asset Sale unless:
(1) RailWorks or the applicable Restricted Subsidiary, as the case may
be, receives consideration at the time of such Asset Sale at least equal to
the fair market value of the assets sold or otherwise disposed of, as
determined in good faith by our board of directors;
(2) at least 75% of the consideration received by RailWorks or the
Restricted Subsidiary, as the case may be, from such Asset Sale shall be in
the form of cash or Cash Equivalents and is received at the time of such
disposition; provided that the amount of (x) any liabilities of RailWorks
or any of its Restricted Subsidiaries (as shown on the most recent balance
sheet of RailWorks or such Restricted Subsidiary), other than liabilities
that are by their terms subordinated to the notes or any Guarantee, as the
case may be, that are assumed by the transferee of any such assets pursuant
to a customary novation agreement that releases RailWorks or such
Restricted Subsidiary from further liability and (y) any securities, notes
or other obligations received by RailWorks or any such Restricted
Subsidiary from such transferee that are converted by RailWorks or such
Restricted Subsidiary into cash, to the
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extent of the cash received, within 180 days after receipt, shall be deemed
to be cash for the purposes of this clause (2); and
(3) upon the consummation of an Asset Sale, RailWorks shall apply, or
cause such Restricted Subsidiary to apply, the Net Cash Proceeds relating
to such Asset Sale within 360 days of receipt thereof either:
(a) to prepay any Senior Debt and, in the case of any Senior Debt
under any revolving credit facility, effect a permanent reduction in the
availability under such revolving credit facility;
(b) to make an investment in properties and assets that replace the
properties and assets that were the subject of such Asset Sale or in
properties and assets that will be used in the business of RailWorks and
its Restricted Subsidiaries as existing on April 7, 1999 or in
businesses reasonably related or ancillary thereto ("Replacement
Assets"); or
(c) a combination of prepayment and investment permitted by the
foregoing clauses (3)(a) and (3)(b).
On the 361st day after an Asset Sale or such earlier date, if any, as the
Board of Directors of RailWorks or of such Restricted Subsidiary determines not
to apply the Net Cash Proceeds relating to such Asset Sale as set forth in
clauses (3)(a), (3)(b) and (3)(c) of the preceding paragraph, each such date a
"Net Proceeds Offer Trigger Date", subject to the immediately succeeding
paragraph, such aggregate amount of Net Cash Proceeds that have not been applied
on or before such Net Proceeds Offer Trigger Date as permitted in clauses
(3)(a), (3)(b) and (3)(c) of the preceding paragraph (each a "Net Proceeds Offer
Amount") shall be applied by RailWorks or such Restricted Subsidiary to make an
offer to purchase, such offer being the "Net Proceeds Offer", on a date, the
"Net Proceeds Offer Payment Date", not less than 30 nor more than 60 days
following the applicable Net Proceeds Offer Trigger Date, from all holders on a
pro rata basis, that amount of notes equal to the Net Proceeds Offer Amount at a
price equal to 100% of the principal amount of the notes to be purchased, plus
accrued and unpaid interest thereon, if any, to the date of purchase.
We may defer the Net Proceeds Offer until there is an aggregate unutilized
Net Proceeds Offer Amount equal to or in excess of $10.0 million resulting from
one or more Asset Sales, at which time, the entire unutilized Net Proceeds Offer
Amount, and not just the amount in excess of $10.0 million, shall be applied as
required pursuant to this paragraph. Upon completion of a Net Proceeds Offer,
the amount of Net Cash Proceeds and the aggregate unutilized Net Proceeds Offer
Amount will be reset to zero. Accordingly, to the extent that any Net Proceeds
remain after consummation of a Net Proceeds Offer, we may use such Net Proceeds
for any purpose not prohibited by the indenture.
Notwithstanding the first two paragraphs of this covenant, RailWorks and
its Restricted Subsidiaries will be permitted to consummate an Asset Sale
without complying with such paragraphs to the extent that:
(1) at least 75% of the consideration for such Asset Sale constitutes
Replacement Assets; and
(2) such Asset Sale is for fair market value; provided that any
consideration not constituting Replacement Assets received by RailWorks or
any of its Restricted Subsidiaries in connection with any Asset Sale
permitted to be consummated under this paragraph shall constitute Net Cash
Proceeds subject to the provisions of the first two paragraphs of this
covenant.
Each Net Proceeds Offer will be mailed to the record holders as shown on
the register of holders within 25 days following the Net Proceeds Offer Trigger
Date, with a copy to the trustee, and shall comply with the procedures set forth
in the indenture. Upon receiving notice of the
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Net Proceeds Offer, holders may elect to tender their notes in whole or in part
in integral multiples of $1,000 in exchange for cash. To the extent holders
properly tender notes in an amount exceeding the Net Proceeds Offer Amount,
notes of tendering holders will be purchased on a pro rata basis. A Net Proceeds
Offer shall remain open for a period of 20 business days or such longer period
as may be required by law.
We will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of notes
pursuant to a Net Proceeds Offer. To the extent that the provisions of any
securities laws or regulations conflict with the "Asset Sale" provisions of the
indenture, we shall comply with the applicable securities laws and regulations
and shall not be deemed to have breached its obligations under the "Asset Sale"
provisions of the indenture by doing so.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries. We will not, and will not permit any of our Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or permit to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(1) pay dividends or make any other distributions on or in respect of
its Capital Stock;
(2) make loans or advances or to pay any Indebtedness owed to
RailWorks or any of its Restricted Subsidiaries; or
(3) transfer any of its property or assets to RailWorks or any of its
Restricted Subsidiaries, except for such encumbrances or restrictions
existing under or by reason of:
(a) applicable law;
(b) the indenture, the Guarantees and the notes;
(c) customary non-assignment provisions of any contract or any
lease governing a leasehold interest of any of our Restricted
Subsidiaries;
(d) any instrument governing Acquired Indebtedness, which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person or the
properties or assets of the Person so acquired;
(e) the Credit Agreement and any other agreements in effect on
April 7, 1999;
(f) an agreement entered into for the sale or disposition of
Capital Stock or assets of a Restricted Subsidiary or an agreement
entered into for the sale of specified assets, in either case, so long
as such encumbrance or restriction, by its terms, terminates upon
consummation of such sale or termination of such agreements;
(g) any agreement or instrument governing Indebtedness or Capital
Stock of any Person in effect at the time it is acquired by RailWorks or
any of its Restricted Subsidiaries;
(h) purchase money obligations for assets acquired in the ordinary
course of business that impose restrictions of the nature described in
(3) above on the property so acquired;
(i) customary provisions with respect to the disposition or
distribution of assets in joint venture agreements and other similar
agreements;
(j) customary restrictions on transfers of property subject to a
Lien permitted under the indenture imposed by the holder of such Lien;
or
(k) an agreement governing Indebtedness incurred to Refinance the
Indebtedness issued, assumed or incurred pursuant to an agreement
permitted above; provided,
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however, that the provisions relating to such encumbrance or restriction
contained in any such Indebtedness are no less favorable to RailWorks in
any material respect as determined by the RailWorks board of directors
in their reasonable and good faith judgment than the provisions relating
to such encumbrance or restriction contained in agreements referred to
above.
Limitation on Preferred Stock of Restricted Subsidiaries. We will not
permit any of our Restricted Subsidiaries that are not Guarantors to issue any
Preferred Stock (other than to or to a Wholly Owned Restricted Subsidiary of
RailWorks) or permit any Person (other than RailWorks or a Wholly Owned
Restricted Subsidiary of RailWorks) to own any Preferred Stock of any Restricted
Subsidiary that is not a Guarantor. Notwithstanding the foregoing, nothing in
such covenant will prohibit Preferred Stock issued by a Person prior to the time
(A) such Person becomes a Restricted Subsidiary of RailWorks, (B) such Person
merges with or into a Restricted Subsidiary of RailWorks or (C) a Restricted
Subsidiary of RailWorks merges with or into such Person; provided that such
Preferred Stock was not issued or incurred by such Person in anticipation of a
transaction contemplated by subclause (A), (B) or (C) above.
Limitation on Liens. We will not, and will not permit any of our
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
permit or suffer to exist any Liens of any kind against or upon any property or
assets of ours or of any of our Restricted Subsidiaries whether owned on, or
acquired after April 7, 1999, or any proceeds therefrom, or assign or otherwise
convey any right to receive income or profits therefrom unless:
(1) in the case of Liens securing Indebtedness that is expressly
subordinate or junior in right of payment to the notes, the notes are
secured by a Lien on such property, assets or proceeds that is senior in
priority to such Liens; and
(2) in all other cases, the notes are equally and ratably secured,
except for:
(a) Liens existing as of April 7, 1999 to the extent and in the
manner such Liens are in effect on April 7, 1999;
(b) Liens securing Senior Debt and Liens securing Guarantor Senior
Debt;
(c) Liens securing the notes and the Guarantees;
(d) Liens of RailWorks or a Wholly Owned Restricted Subsidiary of
RailWorks on assets of any Restricted Subsidiary of RailWorks;
(e) Liens securing Refinancing Indebtedness which is incurred to
Refinance any Indebtedness which has been secured by a Lien permitted
under the indenture and which has been incurred in accordance with the
provisions of the indenture; provided, however, that such Liens: (i) are
no less favorable to the holders and are not more favorable to the
lienholders with respect to such Liens than the Liens in respect of the
Indebtedness being Refinanced; and (ii) do not extend to or cover any
property or assets of RailWorks or any of its Restricted Subsidiaries
not securing the Indebtedness so Refinanced; and
(f) Permitted Liens.
Prohibition on Incurrence of Senior Subordinated Debt. We will not, and
will not permit any Restricted Subsidiary that is a Guarantor to, incur or
suffer to exist Indebtedness that is senior in right of payment to the notes or
such Guarantor's Guarantee, as the case may be, and subordinate in right of
payment to any other Indebtedness of RailWorks or such Guarantor, as the case
may be.
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Merger, Consolidation and Sale of Assets. We will not, in a single
transaction or series of related transactions, consolidate or merge with or into
any Person, or sell, assign, transfer, lease, convey or otherwise dispose of, or
permit any of our Restricted Subsidiaries to sell, assign, transfer, lease,
convey or otherwise dispose of, all or substantially all of our assets
(determined on a consolidated basis for RailWorks and its Restricted
Subsidiaries), whether as an entirety or substantially as an entirety to any
Person unless:
(1) either:
(a) RailWorks shall be the surviving or continuing corporation; or
(b) the Person, if other than RailWorks, formed by such
consolidation or into which RailWorks is merged or the Person which
acquires by sale, assignment, transfer, lease, conveyance or other
disposition the properties and assets of RailWorks and of its Restricted
Subsidiaries substantially as an entirety, such Person being referred to
as the "Surviving Entity":
(x) shall be a corporation organized and validly existing under
the laws of the United States or any State thereof or the District of
Columbia; and
(y) shall expressly assume, by supplemental indenture (in form
and substance reasonably satisfactory to the trustee), executed and
delivered to the trustee, the due and punctual payment of the
principal of (and premium, if any) and interest on all of the notes
and the performance of every covenant of the notes, the indenture and
the registration rights agreement to be performed or observed by
RailWorks;
(2) immediately after giving effect to such transaction and the
assumption contemplated by clause (1)(b)(y) above (including giving effect
to any Indebtedness and Acquired Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction), RailWorks
or such Surviving Entity, as the case may be, (a) shall have a Consolidated
Net Worth equal to or greater than the Consolidated Net Worth of RailWorks
immediately prior to such transaction and (b) shall be able to incur at
least $1.00 of additional Indebtedness, not including Permitted
Indebtedness, pursuant to the "Limitation on Incurrence of Additional
Indebtedness" covenant;
(3) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (1)(b)(y) above,
including, without limitation, giving effect to any Indebtedness and
Acquired Indebtedness incurred or anticipated to be incurred and any Lien
granted in connection with or in respect of the transaction, no Default or
Event of Default shall have occurred or be continuing; and
(4) RailWorks or the Surviving Entity shall have delivered to the
trustee an officers' certificate and an opinion of counsel, each stating
that such consolidation, merger, sale, assignment, transfer, lease,
conveyance or other disposition and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture
comply with the applicable provisions of the indenture and that all
conditions precedent in the indenture relating to such transaction have
been satisfied.
Notwithstanding the foregoing clauses (2), (3) and (4), (a) any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of its
property and assets to RailWorks or any other Restricted Subsidiary and (b)
RailWorks may merge with an Affiliate incorporated solely for the purpose of
reincorporating RailWorks in another jurisdiction in the United States.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more of our Restricted
Subsidiaries, the Capital Stock of which constitutes all or substantially all of
the properties and assets of RailWorks, shall be deemed to be the transfer of
all or substantially all of the properties and assets of RailWorks.
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The indenture provides that upon any consolidation, combination or merger
or any transfer of all or substantially all of the assets of RailWorks in
accordance with the foregoing, in which RailWorks is not the Surviving Entity,
the Surviving Entity shall succeed to, and be substituted for, and may exercise
every right and power of, RailWorks under the indenture and the notes with the
same effect as if such surviving entity had been named as such.
Each Guarantor (other than any Guarantor whose Guarantee is to be released
in accordance with the terms of the Guarantee and the Indenture in connection
with any transaction complying with the provisions of "-- Limitation on Asset
Sales") will not, and we will not cause or permit any Guarantor to, consolidate
with or merge with or into any Person other than RailWorks or any other
Guarantor unless:
(1) the entity formed by or surviving any such consolidation or merger
(if other than the Guarantor) or to which such sale, lease, conveyance or
other disposition shall have been made is a corporation organized and
existing under the laws of the United States or any State thereof or the
District of Columbia;
(2) such entity assumes by supplemental indenture all of the
obligations of the Guarantor on the Guarantee;
(3) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing; and
(4) immediately after giving effect to such transaction and the use of
any net proceeds therefrom on a pro forma basis, RailWorks could satisfy
the provisions of clause (2) of the first paragraph of this covenant.
Any merger or consolidation of a Guarantor with and into RailWorks (with
RailWorks being the surviving entity) or another Guarantor that is a Wholly
Owned Restricted Subsidiary of RailWorks need only comply with clause (4) of the
first paragraph of this covenant.
Limitations on Transactions with Affiliates. (a) We will not, and will not
permit any of our Restricted Subsidiaries to, directly or indirectly, enter into
or permit to exist any transaction or series of related transactions (including,
without limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with, or for the benefit of, any of our Affiliates,
each such transaction is referred to as an "Affiliate Transaction", other than
(x) Affiliate Transactions permitted under paragraph (b) below and (y) Affiliate
Transactions on terms that are no less favorable than those that might
reasonably have been obtained in a comparable transaction at such time on an
arm's-length basis from a Person that is not an Affiliate of RailWorks or such
Restricted Subsidiary.
All Affiliate Transactions, and each series of related Affiliate
Transactions which are similar or part of a common plan, involving aggregate
payments or other property with a fair market value in excess of $2.0 million
shall be approved by the board of directors of RailWorks or such Restricted
Subsidiary, as the case may be, such approval to be evidenced by a Board
Resolution stating that such board of directors has determined that the
transaction complies with the foregoing provisions. If RailWorks or any of its
Restricted Subsidiaries enters into an Affiliate Transaction, or a series of
related Affiliate Transactions related to a common plan, that involves an
aggregate fair market value of more than $5.0 million, RailWorks or such
Restricted Subsidiary, as the case may be, will, prior to the consummation of
the transaction, obtain a favorable opinion as to the fairness of such
transaction or series of related transactions to RailWorks or the relevant
Restricted Subsidiary, as the case may be, from a financial point of view, from
an Independent Financial Advisor and file the same with the trustee.
(b) The restrictions set forth in the first paragraph of this covenant
shall not apply to:
(1) reasonable fees and compensation, including severance payments and
compensation in the form of securities, and customary expense reimbursement
paid to and indemnity and
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reimbursement provided on behalf of, officers, directors, employees or
consultants of RailWorks or any of its RailWorks Restricted Subsidiaries as
determined in good faith by RailWorks's board of directors or senior
management;
(2) transactions exclusively between or among RailWorks and any of its
Restricted Subsidiaries or exclusively between or among such Restricted
Subsidiaries, provided such transactions are not otherwise prohibited by
the indenture;
(3) transactions pursuant to or contemplated by any agreement as in
effect as of April 7, 1999 or any amendment thereto or any replacement
agreement so long as any such amendment or replacement agreement is not
more disadvantageous to the holders in any material respect than the
original agreement as in effect on April 7, 1999;
(4) loans and advances to employees or officers of RailWorks and its
Restricted Subsidiaries permitted by clause (4) of the definition of
"Permitted Investments;"
(5) Restricted Payments permitted by the indenture; and
(6) contingent and "earn out" payments incurred in connection with any
Asset Acquisition or otherwise, which are contingent on the performance of
the assets or properties acquired.
Additional Subsidiary Guarantees. If RailWorks or any of its Restricted
Subsidiaries transfers or causes to be transferred, in one transaction or a
series of related transactions, any property to any domestic Restricted
Subsidiary that is not a Guarantor, or if RailWorks or any of its Restricted
Subsidiaries organizes, acquires or otherwise invests in another domestic
Restricted Subsidiary having total assets with a book value in excess of
$500,000, then such transferee or acquired or other Restricted Subsidiary shall:
(1) execute and deliver to the trustee a supplemental indenture in
form reasonably satisfactory to the trustee pursuant to which such
Restricted Subsidiary unconditionally guarantees on a senior subordinated
basis all of the RailWorks obligations under the notes and the indenture on
the terms set forth in the indenture; and
(2) deliver to the trustee an opinion of counsel that such
supplemental indenture has been duly authorized, executed and delivered by
such Restricted Subsidiary and constitutes a legal, valid, binding and
enforceable obligation of such Restricted Subsidiary. Thereafter, such
Restricted Subsidiary shall be a Guarantor for all purposes of the
indenture.
Conduct of Business. RailWorks and its Restricted Subsidiaries will not
engage in any businesses which are not the same, similar or reasonably related
or ancillary to the businesses in which RailWorks and its Restricted
Subsidiaries are engaged on April 7, 1999, except to such extent as would not be
material to RailWorks and its Restricted Subsidiaries taken as a whole.
Reports to Holders. The indenture will provide that, whether or not
required by the rules and regulations of the SEC, so long as any notes are
outstanding, RailWorks will furnish the holders of notes:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the SEC on Forms 10-Q and 10-K if
RailWorks were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
that describes the financial condition and results of operations of
RailWorks and its consolidated Subsidiaries, showing in reasonable detail,
either on the face of the financial statements or in the footnotes thereto
and in Management's Discussion and Analysis of Financial Condition and
Results of Operations, the financial condition and results of operations of
RailWorks and its Restricted Subsidiaries separate from the financial
condition and results of operations of the Unrestricted Subsidiaries of
RailWorks, if any, and,
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with respect to the annual information only, a report thereon by
RailWorks's certified independent accounts; and
(2) all current reports that would be required to be filed with SEC on
Form 8-K if RailWorks were required to file such reports, in each case
within the time periods specified in the SEC's rules and regulations.
In addition, following the consummation of the exchange offer contemplated
by the registration rights agreement, whether or not required by the rules and
regulations of the SEC, we will file a copy of all such information and reports
with the SEC for public availability within the time periods specified in the
SEC's rules and regulations, unless the SEC will not accept such a filing, and
make such information available to securities analysts and prospective investors
upon request. In addition, we have agreed that, for so long as any notes remain
outstanding, we will furnish to the holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT
The following events are defined in the indenture as "Events of Default":
(1) the failure to pay interest on any notes when they become due and
payable and the default continues for a period of 30 days, whether or not
such payment is prohibited by the subordination provisions of the
indenture;
(2) the failure to pay the principal on any notes, when such principal
becomes due and payable, at maturity, upon redemption or otherwise,
including the failure to make a payment to purchase notes tendered pursuant
to a Change of Control Offer or a Net Proceeds Offer, whether or not such
payment is prohibited by the subordination provisions of the indenture;
(3) a default in the observance or performance of any other covenant
or agreement contained in the indenture, which default continues for a
period of 60 days after RailWorks receives written notice specifying the
default, and demanding that such default be remedied, from the trustee or
the holders of at least 25% of the outstanding principal amount of the
notes (except in the case of a default with respect to the "Merger,
Consolidation and Sale of Assets" covenant, which will constitute an Event
of Default with such notice requirement but without such passage of time
requirement);
(4) the failure to pay at final maturity, after giving effect to any
applicable grace periods and any extensions thereof, the principal amount
of any Indebtedness of RailWorks or any Restricted Subsidiary of RailWorks
and such failure continues for a period of 20 days or more, or the
acceleration of the final stated maturity of any such Indebtedness, which
acceleration is not rescinded, annulled or otherwise cured within 20 days
of receipt by RailWorks or such Restricted Subsidiary of notice of any such
acceleration, if the aggregate principal amount of such Indebtedness,
whether outstanding under one or more agreements, together with the
principal amount of any other such Indebtedness in default for failure to
pay principal at final maturity or which has been accelerated, aggregates
$10.0 million or more at any time;
(5) one or more judgments in an aggregate amount in excess of $10.0
million shall have been rendered against RailWorks or any of its Restricted
Subsidiaries and such judgments remain undischarged, unpaid or unstayed for
a period of 60 days after such judgment or judgments become final and
non-appealable;
(6) certain events of bankruptcy affecting RailWorks or any of its
Significant Subsidiaries; or
(7) any Guarantee of a Significant Subsidiary ceases to be in full
force and effect or any Guarantee of a Significant Subsidiary is declared
to be null and void and unenforceable or
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any Guarantee of a Significant Subsidiary is found to be invalid or any
Guarantor that is a Significant Subsidiary denies its liability under its
Guarantee (other than by reason of release of a Guarantor in accordance
with the terms of the indenture) and such condition has continued for a
period of 30 days after written notice of such failure requiring the
Guarantor and RailWorks to remedy the same has been given (x) to RailWorks
by the trustee or (y) to RailWorks and the trustee by the holders of 25% in
aggregate principal amount of the notes then outstanding.
If an Event of Default, other than an Event of Default specified in clause
(6) above with respect to RailWorks, shall occur and be continuing, the trustee
or the holders of at least 25% in principal amount of outstanding notes may
declare the principal of and accrued interest on all the notes to be due and
payable by notice in writing to RailWorks and the trustee specifying the
respective Event of Default and that it is a "notice of acceleration", such
notice being an "Acceleration Notice", and the same:
(1) shall become immediately due and payable; or
(2) if there are any amounts outstanding under the Credit Agreement,
shall become immediately due and payable upon the first to occur of an
acceleration under the Credit Agreement or 5 business days after receipt by
RailWorks and the Representative under the Credit Agreement of such
Acceleration Notice but only if such Event of Default is then continuing.
If an Event of Default specified in clause (6) above with respect to
RailWorks occurs and is continuing, then all unpaid principal of, and
premium, if any, and accrued and unpaid interest on all of the outstanding
notes shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the trustee or any holder.
The indenture provides that, at any time after a declaration of
acceleration with respect to the notes as described in the preceding paragraph,
the holders of a majority in principal amount of the notes may rescind and
cancel such declaration and its consequences:
(1) if the rescission would not conflict with any judgment or decree;
(2) if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of
the acceleration;
(3) to the extent the payment of such interest is lawful, interest on
overdue installments of interest and overdue principal, which has become
due otherwise than by such declaration of acceleration, has been paid;
(4) if RailWorks has paid the trustee its reasonable compensation and
reimbursed the trustee for its expenses, disbursements and advances; and
(5) in the event of the cure or waiver of an Event of Default of the
type described in clause (6) of the description above of Events of Default,
the trustee shall have received an officers' certificate and an opinion of
counsel that such Event of Default has been cured or waived. No such
rescission shall affect any subsequent Default or impair any right
consequent to a Default.
The holders of not less than a majority in principal amount of the notes
may waive any existing Default or Event of Default under the indenture, and its
consequences, except a default in the payment of the principal of or interest on
any notes.
Holders of the notes may not enforce the indenture or the notes except as
provided in the indenture and under the Trust Indenture Act. Subject to the
provisions of the indenture relating to the duties of the trustee, the trustee
is under no obligation to exercise any of its rights or powers under the
indenture at the request, order or direction of any of the holders, unless such
holders have offered reasonable indemnity to the trustee. Subject to all
provisions of the indenture and applicable law, the holders of a majority in
aggregate principal amount of the then
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outstanding notes have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the trustee or exercising
any trust or power conferred on the trustee.
Under the indenture, we are required to provide an officers' certificate to
the trustee promptly upon any such officer's obtaining knowledge of any Default
or Event of Default, provided that such officers shall provide such
certification at least annually whether or not they know of any Default or Event
of Default, that has occurred and, if applicable, describe such Default or Event
of Default and the status thereof.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
We may, at our option and at any time, elect to have our obligations and
the obligations of the Guarantors discharged with respect to the outstanding
notes, such discharge is called "Legal Defeasance". Legal Defeasance means that
RailWorks and, if it so elects, the Guarantors, shall be deemed to have paid and
discharged the entire indebtedness represented by the outstanding notes, except
for:
(1) the rights of holders to receive payments in respect of the
principal of, premium, if any, and interest on the notes when those
payments are due;
(2) our obligations with respect to the notes concerning issuing
temporary notes, registration of notes, mutilated, destroyed, lost or
stolen notes and the maintenance of an office or agency for payments;
(3) the rights, powers, trust, duties and immunities of the trustee
and our related obligations; and
(4) the Legal Defeasance provisions of the indenture.
In addition, we may, at our option and at any time, elect to have our
obligations and the obligations of the Guarantors released with respect to
certain covenants that are described in the indenture, such release is called
"Covenant Defeasance", and thereafter any omission to comply with those
obligations shall not constitute a Default or Event of Default with respect to
the notes. In the event Covenant Defeasance occurs, certain events, described
under "Events of Default" but not including non-payment, bankruptcy,
receivership, reorganization and insolvency events, will no longer constitute an
Event of Default with respect to the notes. Concurrently with any Legal
Defeasance or Covenant Defeasance, we may, at our further option, cause to be
terminated, as of the date on which such Legal Defeasance or Covenant Defeasance
occurs, all of the obligations under any or all of the Guarantees, if any, then
existing. In order to exercise such option regarding a Guarantee, we will
provide the trustee with written notice of our desire to terminate that
Guarantee prior to the delivery of the opinion of counsel referred to in clause
(2) or (3), as applicable, of the next succeeding paragraph.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) we must irrevocably deposit with the trustee, in trust, for the
benefit of the holders, cash in U.S. dollars, non-callable U.S. government
obligations, or a combination thereof, in amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest on the
notes on the stated date for their payment or on the applicable redemption
date, as the case may be;
(2) in the case of Legal Defeasance, we must deliver to the trustee an
opinion of counsel in the United States reasonably acceptable to the
trustee confirming that:
(a) we have received from, or there has been published by, the
Internal Revenue Service a ruling; or
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(b) since the date of the indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that,
and based thereon such opinion of counsel shall confirm that, the
holders will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance had not
occurred;
(3) in the case of Covenant Defeasance, we must deliver to the trustee
an opinion of counsel in the United States reasonably acceptable to the
trustee confirming that the holders will not recognize income, gain or loss
for federal income tax purposes as a result of such Covenant Defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or an Event of
Default resulting from the borrowing of funds to be applied to such deposit
and the grant of any Lien securing such borrowing) or insofar as Events of
Default from bankruptcy or insolvency events are concerned, at any time in
the period ending on the 91st day after the date of deposit;
(5) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under the indenture (other
than a Default or an Event of Default resulting from the borrowing of funds
to be applied to such deposit and the grant of any Lien securing such
borrowing) or any other material agreement or instrument to which we or any
of our subsidiaries is a party or by which we or any of our subsidiaries is
bound;
(6) we must deliver to the trustee an officers' certificate stating
that we did not make the deposit with the intent of preferring the holders
over any of our other creditors or with the intent of defeating, hindering,
delaying or defrauding any of our other creditors or others;
(7) we must deliver to the trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent provided for
or relating to the Legal Defeasance or the Covenant Defeasance have been
complied with;
(8) we must deliver to the trustee an opinion of counsel to the effect
that, subject to customary assumptions and exclusions:
(a) the trust funds will not be subject to any rights of holders of
Senior Debt, including, without limitation, those arising under the
indenture; and
(b) assuming no intervening bankruptcy of RailWorks between the
date of deposit and the 91st day following the date of deposit and that
no holder is an insider of RailWorks, after the 91st day following the
date of deposit, the trust funds will not be subject to the effect of
any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally; and
(9) certain other customary conditions precedent are satisfied.
Despite the above, the opinion of counsel required by clause (2) above with
respect to a Legal Defeasance need not be delivered if all notes not theretofore
delivered to the trustee for cancellation (1) have become due and payable, (2)
will become due and payable on the maturity date within one year or (3) are to
be called for redemption within one year under arrangements satisfactory to the
trustee for the giving of notice of redemption by the trustee in our name, and
at our expense.
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SATISFACTION AND DISCHARGE
The indenture, the notes and the Guarantees will be discharged and will
cease to be of further effect, except as to surviving rights or registration of
transfer or exchange of the notes, as expressly provided for in the indenture,
as to all outstanding notes when:
(1) either:
(a) all the notes previously authenticated and delivered, except
lost, stolen or destroyed notes which have been replaced or paid and
notes for whose payment money has previously been deposited in trust or
segregated and held in trust by us and afterwards repaid to us or
discharged from such trust, have been delivered to the trustee for
cancellation; or
(b) all notes not previously delivered to the trustee for
cancellation have become due and payable and we have irrevocably
deposited or caused to be deposited with the trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the notes not
previously delivered to the trustee for cancellation, for principal of,
premium, if any, and interest on the notes to the date of deposit
together with irrevocable instructions from us directing the trustee to
apply the funds to the payment at maturity or redemption;
(2) we have paid all other sums payable under the indenture by us; and
(3) we have delivered to the trustee an officers' certificate and an
opinion of counsel stating that all conditions precedent under the
indenture relating to the satisfaction and discharge of the indenture have
been complied with.
MODIFICATION OF THE INDENTURE
From time to time, we, the Guarantors and the trustee, without the consent
of the holders, may amend the indenture for certain specified purposes,
including:
(1) to evidence the succession of another person to RailWorks or any
Guarantor and the assumption by any such succession of the covenants of
RailWorks or any Guarantor in the indenture and in the notes;
(2) to add to the covenants of RailWorks or any Guarantor for the
benefit of the holders, or to surrender any right or power herein conferred
upon RailWorks or any Guarantor; or
(3) to add additional Events of Default; or
(4) to provide for uncertificated notes in addition to or in place of
the certificated notes; or
(5) to evidence and provide for the acceptance of appointment under
the indenture by a successor trustee; or
(6) to secure the notes or any Guarantee; or
(7) to cure any ambiguity or inconsistencies or to correct or
supplement any provision in the indenture that may be defective or
inconsistent with any other provisions in the indenture or to make any
other provisions with respect to matters or questions arising under the
indenture so long as such change does not adversely affect the rights of
the holders in any material respect; or
(8) to comply with any requirements of the SEC in order to effect and
maintain the qualification of the indenture under the Trust Indenture Act,
if applicable; or
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(9) to release any Guarantor from its Guarantee in accordance with the
provisions of the indenture, including in connection with a sale of all of
the Capital Stock or all or substantially all of the assets of the
Guarantor.
Other modifications and amendments of the indenture may be made with the
consent of the holders of a majority in principal amount of the then outstanding
notes issued under the indenture, including without limitation, consents
obtained in connection with a purchase of, or tender offer or exchange offer
for, notes, except that, without the consent of each holder affected thereby, no
amendment may:
(1) reduce the amount of notes whose holders must consent to an
amendment;
(2) reduce the rate of or change or have the effect of changing the
time for payment of interest, including defaulted interest, on any notes;
(3) reduce the principal of or change or have the effect of changing
the fixed maturity of any notes, or change the date on which any notes may
be subject to redemption or reduce the redemption price therefor;
(4) make any notes payable in money other than that stated in the
notes;
(5) make any change in provisions of the indenture protecting the
right of each holder to receive payment of principal of and interest on
such note on or after the due date thereof or to bring suit to enforce such
payment, or permitting holders of a majority in principal amount of notes
to waive Defaults or Events of Default;
(6) after our obligation to purchase notes arises under the indenture,
amend, change or modify in any material respect our obligation to make and
consummate a Change of Control Offer in the event of a Change of Control or
make and consummate a Net Proceeds Offer with respect to any Asset Sale
that has been consummated or, after such Change of Control has occurred or
such Asset Sale has been consummated, modify any of the related provisions
or definitions;
(7) modify or change any provision of the indenture or the related
definitions affecting the subordination or ranking of the notes or any
Guarantee in a manner materially adverse to the holders; or
(8) release any Guarantor that is a Significant Subsidiary from any of
its obligations under its Guarantee or the indenture otherwise than in
accordance with the terms of the indenture.
GOVERNING LAW
The indenture provides that it, the notes and the Guarantees are governed
by, and construed in accordance with, the laws of the State of New York but
without giving effect to applicable principles of conflicts of law to the extent
that the application of the law of another jurisdiction would be required by New
York State law.
THE TRUSTEE
The indenture provides that, except during the continuance of an Event of
Default, the trustee will perform only such duties as are specifically set forth
in the indenture. During the existence of an Event of Default, the trustee will
exercise such rights and powers vested in it by the indenture, and use the same
degree of care and skill in its exercise as a prudent person would exercise or
use under the circumstances in the conduct of such person's own affairs.
The indenture and the provisions of the Trust Indenture Act contain certain
limitations on the rights of the trustee, should it become a creditor of
RailWorks, to obtain payments of claims in certain cases or to realize on
certain property received in respect of any such claim as security
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or otherwise. Subject to the Trust Indenture Act, the trustee will be permitted
to engage in other transactions; provided that if the trustee acquires any
conflicting interest as described in the Trust Indenture Act, it must eliminate
such conflict or resign.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
indenture. We refer you to the indenture for the full definition of all these
terms, as well as any other terms used in this prospectus for which no
definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of
RailWorks or at the time it merges or consolidates with RailWorks or any of its
Subsidiaries or assumed in connection with the acquisition of assets from such
Person and in each case whether or not incurred by such Person in connection
with, or in anticipation or contemplation of, such Person becoming a Restricted
Subsidiary of RailWorks or such acquisition, merger or consolidation, provided
that any Indebtedness of such Person that is redeemed, defeased, retried or
otherwise repaid at the time of or immediately upon consummation of the
transaction by which such Person is merged with or into RailWorks, becomes a
Restricted Subsidiary or such assets are acquired from such Person will not be
Acquired Indebtedness.
"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative of the foregoing.
"Asset Acquisition" means (1) an Investment by RailWorks or any Restricted
Subsidiary of RailWorks in any other Person pursuant to which such Person shall
become a Restricted Subsidiary of RailWorks or any Restricted Subsidiary of
RailWorks, or shall be merged with or into RailWorks or any Restricted
Subsidiary of RailWorks, or (2) the acquisition by RailWorks or any Restricted
Subsidiary of RailWorks of the assets of any Person, other than a Restricted
Subsidiary of RailWorks, which constitute all or substantially all of the assets
of such Person or comprises any division or line of business of such Person or
any other properties or assets of such Person other than in the ordinary course
of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by RailWorks or any of its
Restricted Subsidiaries, including any Sale and Leaseback Transaction, to any
Person other than the Company or a Restricted Subsidiary of RailWorks of: (1)
any Capital Stock of any Restricted Subsidiary of RailWorks; or (2) any other
property or assets of RailWorks or any Restricted Subsidiary of RailWorks other
than in the ordinary course of business; provided, however, that asset sales or
other dispositions shall not include: (a) a transaction or series of related
transactions for which RailWorks or its Restricted Subsidiaries receive
aggregate consideration of less than $1.0 million; (b) the sale, lease,
conveyance, disposition or other transfer of all or substantially all of the
assets of RailWorks as permitted under "Merger, Consolidation and Sale of
Assets"; (c) a transaction constituting a Restricted Payment permitted under
"-- Restricted Payments" above; (d) sales of obsolete, worn out, damaged or used
equipment in the ordinary course of business; (e) sales of equipment or
inventory in the ordinary course of business; (f) any Permitted Investment; and
(g) granting of Liens as permitted under "Limitation on Liens" above.
"Borrowing Base" means the sum of (i) 85% of the net book value (after
allowance for doubtful accounts) of accounts receivable (other than intercompany
receivables) of RailWorks and the Restricted Subsidiaries arising in the
ordinary course of business from the sale of
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products sold by RailWorks and the Restricted Subsidiaries or the provision of
services by RailWorks and the Restricted Subsidiaries and (ii) 60% of the net
book value (after appropriate write-downs of obsolescence, quality problems and
the like) of inventories of RailWorks and the Restricted Subsidiaries held in
the ordinary course of business, calculated in each case on a consolidated basis
with the Restricted Subsidiaries in accordance with GAAP.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
trustee.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means:
(1) with respect to any Person that is a corporation, any and all
shares, interests, participations or other equivalents (however designated
and whether or not voting) of corporate stock, including each class of
Common Stock and Preferred Stock of such Person; and
(2) with respect to any Person that is not a corporation, any and all
partnership, membership or other equity interests of such Person.
"Cash Equivalents" means:
(1) marketable direct obligations issued by, or unconditionally
guaranteed by, the United States Government or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within one year from the date of acquisition thereof;
(2) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any
public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard & Poor's Ratings Group
("S&P") or Moody's Investors Service, Inc. ("Moody's");
(3) commercial paper maturing no more than one year from the date of
creation thereof and, at the time of acquisition, having a rating of at
least A-1 from S&P or at least P-1 from Moody's;
(4) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by any bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia or any U.S. branch of a foreign bank having at the
date of acquisition thereof combined capital and surplus of not less than
$250,000,000;
(5) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (1) above entered
into with any bank meeting the qualifications specified in clause (4)
above; and
(6) investments in money market funds which invest substantially all
their assets in securities of the types described in clauses (1) through
(5) above.
"Change of Control" means the occurrence of one or more of the following
events:
(1) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all or substantially all of the assets
of RailWorks to any Person or group of
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related Persons for purposes of Section 13(d) of the Exchange Act, called a
"Group", together with any Affiliates thereof, whether or not otherwise in
compliance with the provisions of the indenture;
(2) the approval by the holders of Capital Stock of RailWorks of any
plan or proposal for the liquidation or dissolution of RailWorks, whether
or not otherwise in compliance with the provisions of the indenture;
(3) any Person or Group shall become the owner, directly or
indirectly, beneficially or of record, of shares representing more than 50%
of the aggregate ordinary voting power represented by the issued and
outstanding Capital Stock of RailWorks; or
(4) the replacement of a majority of the RailWorks board of directors
over any consecutive two-year period from the directors who constituted the
RailWorks board of directors at the beginning of such period, and such
replacement shall not have been approved by a vote of at least a majority
of the RailWorks board of directors then still in office who either were
members of such board of directors at the beginning of such period or whose
election as a member of such board of directors was previously so approved.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common stock, whether outstanding on April 7,
1999 or issued after April 7, 1999, and includes, without limitation, all series
and classes of such common stock.
"Consolidated EBITDA" means, with respect to any Person, for any period,
the sum (without duplication) of:
(1) Consolidated Net Income; and
(2) to the extent Consolidated Net Income has been reduced thereby,
(a) all income taxes of such Person and its Restricted Subsidiaries
paid or accrued in accordance with GAAP for such period (other than
income taxes attributable to extraordinary, unusual or nonrecurring
gains or losses or taxes attributable to sales or dispositions outside
the ordinary course of business);
(b) Consolidated Interest Expense; and
(c) Consolidated Non-cash Charges less any non-cash items
increasing Consolidated Net Income for such period, all as determined on
a consolidated basis for such Person and its Restricted Subsidiaries in
accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of (a) Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending prior to the date of the
transaction giving rise to the need to calculate the Consolidated Fixed Charge
Coverage Ratio for which financial statements are available, that date being the
"Transaction Date", to (b) Consolidated Fixed Charges of such Person for the
Four Quarter Period. In addition to and without limitation of the foregoing, for
purposes of this definition, "Consolidated EBITDA" and "Consolidated Fixed
Charges" shall be calculated after giving effect on a pro forma basis for the
period of such calculation to:
(1) the incurrence, repayment or retirement of any Indebtedness of
such Person or any of its Restricted Subsidiaries (and the application of
the proceeds thereof) giving rise to the need to make such calculation and
any incurrence or repayment of other Indebtedness (and the application of
the proceeds thereof), other than the incurrence or repayment of
Indebtedness in the ordinary course of business for working capital
purposes pursuant to any revolving Credit Agreement, occurring during the
Four Quarter Period or at any time subsequent to the last day of the Four
Quarter Period and on or prior to the Transaction
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Date, as if such incurrence, repayment or retirement, as the case may be
(and the application of the proceeds thereof), occurred on the first day of
the Four Quarter Period; and
(2) any Asset Sales or Asset Acquisitions (including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Restricted
Subsidiaries (including any Person who becomes a Restricted Subsidiary as a
result of the Asset Acquisition) incurring, assuming or otherwise being
liable for Acquired Indebtedness and also including any Consolidated EBITDA
(including any pro forma expense and cost reductions calculated on a basis
consistent with Regulation S-X of the Exchange Act) attributable to the
assets which are the subject of the Asset Acquisition or asset sale or
other disposition during the Four Quarter Period) occurring during the Four
Quarter Period or at any time subsequent to the last day of the Four
Quarter Period and on or prior to the Transaction Date, as if such Asset
Sale or Asset Acquisition, including the incurrence, assumption or
liability for any such Acquired Indebtedness, occurred on the first day of
the Four Quarter Period. If such Person or any of its Restricted
Subsidiaries directly or indirectly guarantees Indebtedness of a third
Person, the preceding sentence shall give effect to the incurrence of such
guaranteed Indebtedness as if such Person or any Restricted Subsidiary of
such Person had directly incurred or otherwise assumed such guaranteed
Indebtedness. For purposes of calculating the Consolidated Fixed Charge
Coverage Ratio only, clause (c) of the definition of Asset Sale shall not
be given effect to the extent it relates to a dividend or distribution in
respect of shares of the RailWorks Capital Stock consisting of shares of
Capital Stock of a Restricted Subsidiary of RailWorks.
Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated Fixed
Charge Coverage Ratio":
(1) interest on outstanding Indebtedness determined on a fluctuating
basis as of the Transaction Date and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate per
annum equal to the rate of interest on such Indebtedness in effect on the
Transaction Date;
(2) notwithstanding clause (1) above, interest on Indebtedness
determined on a fluctuating basis, to the extent such interest is covered
by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation
of such agreements; and
(3) if interest on any Indebtedness actually incurred on the
Transaction Date may optionally be determined at an interest rate based
upon a factor of a prime or similar rate, a eurocurrency interbank offered
rate; or other rates, then the interest rate in effect on the Transaction
Date will be deemed to have been in effect during the Four Quarter Period.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of:
(1) Consolidated Interest Expense; plus
(2) the product of (x) the amount of all dividend payments on any
series of Preferred Stock of such Person and, to the extent permitted under
the Indenture, its Restricted Subsidiaries (other than dividends paid in
Qualified Capital Stock) paid or accrued during such period times (y) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current effective consolidated federal, state and local tax
rate of such Person, expressed as a decimal, provided that Consolidated
Fixed Charges shall not include (x) gain or loss from the extinguishment of
debt, including, without limitation, write-off of debt issuance costs,
commissions, fees and expenses, (y) amortization of customary debt issuance
costs, commissions, fees and expenses or (z) customary commitment,
administrative and transaction fees or charges.
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"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication:
(1) the aggregate of the interest expense of such Person and its
Restricted Subsidiaries for such period determined on a consolidated basis
in accordance with GAAP, including without limitation: (a) any amortization
of debt discount and amortization or write-off deferred financing costs;
(b) the net costs under Interest Swap Obligations; (c) all capitalized
interest; and (d) the interest portion of any deferred payment obligation;
and
(2) the interest component of Capitalized Lease Obligations paid or
accrued by such Person and its Restricted Subsidiaries during such period
as determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom:
(1) after-tax gains or losses (to the extent such losses are non-cash
losses) from Asset Sales (without regard to the $1,000,000 limitation set
forth in the definition thereof) or abandonments or reserves relating
thereto;
(2) after-tax items classified as extraordinary or nonrecurring gains
or losses (to the extent such losses are non-cash losses);
(3) solely for purposes of calculating Consolidated Net Income for the
covenant described under "Limitation on Restricted Payments," the net
income of any Person acquired in a "pooling of interests" transaction
accrued prior to the date it becomes a Restricted Subsidiary of the
referent Person or is merged or consolidated with the referent Person or
any Restricted Subsidiary of the referent Person;
(4) the net income (but not loss) of any Restricted Subsidiary of the
referent Person to the extent that the declaration of dividends or similar
distributions by that Restricted Subsidiary of that income is restricted by
a contract, operation of law or otherwise, except to the extent that such
net income is actually paid to the Company or one of its Restricted
Subsidiaries through dividends, loans or otherwise;
(5) the net income of any Person, other than a Restricted Subsidiary
of the referent Person, except to the extent of cash dividends or
distributions paid to the referent Person or to a Wholly Owned Restricted
Subsidiary of the referent Person by such Person;
(6) any restoration to income of any contingency reserve, except to
the extent that provision for such reserve was made out of Consolidated Net
Income accrued at any time following April 7, 1999;
(7) income or loss attributable to discontinued operations (including,
without limitation, operations disposed of during such period whether or
not such operations were classified as discontinued); and
(8) in the case of a successor to the referent Person by consolidation
or merger or as a transferee of the referent Person's assets, any earnings
of the successor corporation prior to such consolidation, merger or
transfer of assets.
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with
GAAP, less (without duplication) amounts attributable to Disqualified Capital
Stock of such Person.
"Consolidated Non-Cash Charges" means, with respect to any Person, for any
period, (a) the sum of (i) the aggregate depreciation, amortization (including
amortization of goodwill and
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other intangibles) and other non-cash expenses of such Person and its Restricted
Subsidiaries reducing Consolidated Net Income of such Person and its Restricted
Subsidiaries for such period, (ii) expenses and charges relating to any equity
offering or incurrence of Indebtedness permitted to be incurred by the
Indenture, (iii) the amount of any restructuring charge or reserve, (iv)
unrealized gains and losses from hedging, foreign currency or commodities
translations and transactions, and (v) the amount of any reduction representing
a minority interest in Guarantors, minus (b) any cash payment with respect to
which a charge or reserve referred to in clause (a) was taken in a prior period,
in each case, determined on a consolidated basis in accordance with GAAP
(excluding any such charges constituting an extraordinary item or loss or any
such charge which requires an accrual of or a reserve for cash payments for any
future period).
"Credit Agreement" means the Amended and Restated Credit Agreement, dated
as of August 5, 1999, as amended, among RailWorks, Certain Subsidiaries, the
lenders party thereto in their capacities as lenders thereunder and Nationsbank
N.A., as agent, together with the related documents thereto (including, without
limitation, any guarantee agreements and security documents), in each case as
such agreements may be amended (including, any amendment and restatement
thereof), supplemented or otherwise modified in any manner from time to time,
including any agreement extending the maturity of, refinancing, replacing,
extending the maturity of or restructuring (including increasing the amount of
available borrowings thereunder or adding Restricted Subsidiaries of RailWorks
as additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of RailWorks against fluctuations in
currency values.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of Default.
"Designated Senior Debt" means (1) Indebtedness under or in respect of the
Credit Agreement and (2) any other Indebtedness constituting Senior Debt which,
at the time of determination, has an aggregate principal amount of at least
$25.0 million and is specifically designated in the instrument evidencing such
Senior Debt as "Designated Senior Debt" by RailWorks.
"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable at the option of the holder thereof), or upon the
happening of any event (other than an event which would constitute a Change of
Control), matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof (except, in each case, upon the occurrence of a Change of Control) on or
prior to the final maturity date of the notes.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute or statutes thereto.
"Fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair market value
shall be determined by the RailWorks board of directors acting reasonably and in
good faith and shall be evidenced by a Board Resolution of the RailWorks board
of directors delivered to the trustee.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or
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in such other statements by such other entity as may be approved by a
significant segment of the accounting profession of the United States, which are
in effect as of the April 7, 1999.
"Guarantee" means the guarantee of the Obligations of RailWorks with
respect to the notes by each Guarantor pursuant to the terms of the indenture.
"Guarantor" means: (1) each of the domestic Restricted Subsidiaries of
RailWorks as of the Issue Date and (2) each of the domestic Restricted
Subsidiaries of RailWorks that in the future executes a supplemental indenture
in which such Restricted Subsidiary agrees to be bound by the terms of the
indenture as a Guarantor; provided that any Person constituting a Guarantor as
described above shall cease to constitute a Guarantor when its respective
Guarantee is released in accordance with the terms of the indenture.
"Guarantor Senior Debt" means, with respect to any Guarantor: the principal
of, premium, if any, and interest (including any interest accruing subsequent to
the filing of a petition of bankruptcy at the rate provided for in the
documentation with respect thereto, whether or not such interest is an allowed
claim under applicable law) on any Indebtedness of a Guarantor, whether
outstanding on April 7, 1999 or thereafter created, incurred or assumed, unless,
in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall not be senior in right of payment to the
Guarantee of such Guarantor. Without limiting the generality of the foregoing,
"Guarantor Senior Debt" shall also include the principal of, premium, if any,
interest (including any interest accruing subsequent to the filing of a petition
of bankruptcy at the rate provided for in the documentation with respect
thereto, whether or not such interest is an allowed claim under applicable law)
on, and all other amounts owing in respect of:
(x) all monetary obligations of every nature of such Guarantor under
the Credit Agreement, including, without limitation, obligations to pay
principal and interest, reimbursement obligations under letters of credit,
fees, expenses and indemnities;
(y) all Interest Swap Obligations; and
(z) all obligations under Currency Agreements;
in each case whether outstanding on April 7, 1999 or thereafter incurred.
Notwithstanding the foregoing, "Guarantor Senior Debt" shall not include:
(1) any Indebtedness of such Guarantor to a Restricted Subsidiary of
such Guarantor or an Affiliate of such Guarantor or any of such Affiliate's
subsidiaries;
(2) Indebtedness to, or guaranteed on behalf of, any shareholder,
director, officer or employee of such Guarantor or any Subsidiary of such
Guarantor (including, without limitation, amounts owed for compensation);
(3) Indebtedness to trade creditors and other amounts incurred in
connection with obtaining goods, materials or services;
(4) Indebtedness represented by Disqualified Capital Stock;
(5) any liability for federal, state, local or other taxes owed or
owing by such Guarantor;
(6) that portion of any Indebtedness incurred in violation of the
Indenture provisions set forth under "Limitation on Incurrence of
Additional Indebtedness", but, as to any such obligation, no such violation
shall be deemed to exist for purposes of this clause (6) if the holder(s)
of such obligation or their representative and the trustee shall have
received an officers' certificate of RailWorks to the effect that the
incurrence of such Indebtedness does not, or, in the case of revolving
credit indebtedness, that the incurrence of the entire committed amount
thereof at the date on which the initial borrowing thereunder is made would
not, violate such provisions of the indenture;
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(7) Indebtedness which, when incurred and without respect to any
election under Section 1111(b) of Title 11, United States Code, is without
recourse to RailWorks; and
(8) any Indebtedness which is, by its express terms, subordinated in
right of payment to any other Indebtedness of such Guarantor.
"Indebtedness" means with respect to any Person, without duplication:
(1) all Obligations of such Person for borrowed money;
(2) all Obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments;
(3) all Capitalized Lease Obligations of such Person;
(4) all Obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations and all
Obligations under any title retention agreement (but excluding trade
accounts payable and other accrued liabilities arising in the ordinary
course of business);
(5) all Obligations for the reimbursement of any obligor on any letter
of credit, banker's acceptance or similar credit transaction;
(6) guarantees and other contingent obligations in respect of
Indebtedness referred to in clauses (1) through (5) above and clause (8)
below;
(7) all Obligations of any other Person of the type referred to in
clauses (1) through (6) which are secured by any lien on any property or
asset of such Person, the amount of such Obligation being deemed to be the
lesser of the fair market value of such property or asset or the amount of
the Obligation so secured;
(8) all Obligations under Currency Agreements and Interest Swap
Agreements of such Person; and
(9) all Disqualified Capital Stock issued by such Person with the
amount of Indebtedness represented by such Disqualified Capital Stock being
equal to the greater of its voluntary or involuntary liquidation preference
and its maximum fixed repurchase price, but excluding accrued dividends, if
any.
For purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Disqualified Capital Stock as if
such Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the Indenture, and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock, such fair market value shall be determined reasonably and in good
faith by the board of directors of the issuer of such Disqualified Capital
Stock.
Notwithstanding the foregoing, "Indebtedness" shall not include (i) any
holdback or escrow of the purchase price for any assets or properties of any
Person, (ii) any contingent payment obligations incurred in connection with any
Asset Acquisition or otherwise, which are contingent on the performance of the
assets or properties acquired or (iii) obligations in the ordinary course of
business with respect to performance bonds, surety bonds, appeal bonds, security
deposits or similar obligations.
"Independent Financial Advisor" means a firm: (1) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in RailWorks; and (2) which, in the judgment of the
RailWorks board of directors, is otherwise independent and qualified to perform
the task for which it is to be engaged.
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"Interest Swap Obligations" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
shall include, without limitation, interest rate swaps, caps, floors, collars
and similar agreements.
"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any Person. "Investment" shall exclude extensions of trade credit by
RailWorks and its Restricted Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of RailWorks or such Restricted
Subsidiary, as the case may be. If RailWorks or any Restricted Subsidiary of
RailWorks sells or otherwise disposes of any Common Stock of any direct or
indirect Restricted Subsidiary of RailWorks such that, after giving effect to
any such sale or disposition, RailWorks no longer owns, directly or indirectly,
100% of the outstanding Common Stock of such Restricted Subsidiary, RailWorks
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Common Stock of such
Restricted Subsidiary not sold or disposed of.
"Joint Venture" means any partnership, corporation or other entity, in
which up to and including 50% of the partnership interests, outstanding voting
stock or other equity interests is owned, directly or indirectly, by RailWorks
and/or one or more of its Restricted Subsidiaries.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest).
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents (other
than the portion of any such deferred payment constituting interest) received by
RailWorks or any of its Restricted Subsidiaries from such Asset Sale net of:
(1) reasonable out-of-pocket expenses and fees relating to such Asset
Sale (including, without limitation, legal, accounting and investment
banking fees and sales commissions);
(2) taxes paid or required to be accrued in accordance with GAAP after
taking into account any reduction in consolidated tax liability due to
available tax credits or deductions and any tax sharing arrangements;
(3) repayment of Indebtedness that is required to be repaid in
connection with such Asset Sale; and
(4) appropriate amounts to be provided by RailWorks or any Restricted
Subsidiary, as the case may be, as a reserve, in accordance with GAAP,
against any liabilities associated with such Asset Sale and retained by
RailWorks or any Restricted Subsidiary, as the case may be, after such
Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated
with such Asset Sale.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnification, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
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"Permitted Indebtedness" means, without duplication, each of the following:
(1) Indebtedness under the existing notes issued on April 7, 1999 in
an aggregate principal amount not to exceed $125.0 million and the related
Guarantees;
(2) Indebtedness incurred pursuant to the Credit Agreement or one or
more other credit agreements in an aggregate principal amount at any time
outstanding not to exceed the greater of (A) $100.0 million or (B) the
Borrowing Base reduced, in either case, by any required permanent
repayments under the Credit Agreement or any such other credit agreement
actually made with the proceeds from Asset Sales (which in the case of a
revolving Credit Agreement are accompanied by a corresponding permanent
commitment reduction) thereunder;
(3) other Indebtedness of RailWorks and its Restricted Subsidiaries
outstanding on April 7, 1999 reduced by the amount of any scheduled
amortization payments or mandatory prepayments when actually paid or
permanent reductions thereon;
(4) Interest Swap Obligations of RailWorks covering Indebtedness of
RailWorks or any of its Restricted Subsidiaries and Interest Swap
Obligations of any Restricted Subsidiary of RailWorks covering Indebtedness
of such Restricted Subsidiary; provided, however, that such Interest Swap
Obligations are entered into to protect RailWorks and its Restricted
Subsidiaries from fluctuations in interest rates on Indebtedness incurred
in accordance with the Indenture to the extent the notional principal
amount of such Interest Swap Obligation does not exceed the principal
amount of the Indebtedness to which such Interest Swap Obligation relates;
(5) Indebtedness under Currency Agreements; provided that in the case
of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of RailWorks and its Restricted
Subsidiaries outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and compensation
payable thereunder;
(6) Indebtedness of a Wholly Owned Restricted Subsidiary of RailWorks
to RailWorks or to a Wholly Owned Restricted Subsidiary of RailWorks for so
long as such Indebtedness is held by RailWorks or a Wholly Owned Restricted
Subsidiary of RailWorks, in each case subject to no Lien held by a Person
other than RailWorks or a Wholly Owned Restricted Subsidiary of RailWorks;
provided that if as of any date any Person other than RailWorks or a Wholly
Owned Restricted Subsidiary of RailWorks owns or holds any such
Indebtedness or holds a Lien in respect of such Indebtedness, such date
shall be deemed the incurrence of Indebtedness not constituting Permitted
Indebtedness by the issuer of such Indebtedness;
(7) Indebtedness of RailWorks to a Wholly Owned Restricted Subsidiary
of RailWorks for so long as such Indebtedness is held by a Wholly Owned
Restricted Subsidiary of RailWorks, in each case subject to no Lien held by
a Person other than a Wholly Owned Restricted Subsidiary; provided that (a)
any Indebtedness of RailWorks to any Wholly Owned Restricted Subsidiary of
RailWorks that is not a Guarantor is unsecured and subordinated, pursuant
to a written agreement, to the RailWorks obligations under the indenture
and the notes and (b) if as of any date any Person other than a Wholly
Owned Restricted Subsidiary of RailWorks owns or holds any such
Indebtedness or Lien in respect of such Indebtedness, such date shall be
deemed the incurrence of Indebtedness not constituting Permitted
Indebtedness by RailWorks;
(8) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
Indebtedness is extinguished within five business days of incurrence;
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(9) Indebtedness of RailWorks or any of its Restricted Subsidiaries
represented by letters of credit for the account of RailWorks or such
Restricted Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with
self-insurance or similar requirements in the ordinary course of business;
(10) Indebtedness represented by Capitalized Lease Obligations and
Purchase Money Indebtedness of RailWorks and its Restricted Subsidiaries
incurred in the ordinary course of business not to exceed at any one time
outstanding the greater of (a) $5.0 million or (b) 5% of the Consolidated
Net Worth of RailWorks and its Restricted Subsidiaries;
(11) Indebtedness in respect of financed insurance premium obligations
incurred in the ordinary course of business;
(12) Refinancing Indebtedness;
(13) Guarantees by RailWorks or a Guarantor of Indebtedness that was
permitted to be incurred under the indenture; and
(14) additional Indebtedness of RailWorks and its Restricted
Subsidiaries in an aggregate principal amount not to exceed at any one time
outstanding the greater of (a) $10.0 million or (b) 5% of the Consolidated
Net Worth of RailWorks and its Restricted Subsidiaries.
For purposes of determining compliance with the "Limitation on Incurrence
of Additional Indebtedness" covenant, in the event that an item of Indebtedness
meets the criteria of more than one of the categories of Permitted Indebtedness
described in clauses (1) through (14) above or is entitled to be incurred
pursuant to the Consolidated Fixed Charge Coverage Ratio provisions of such
covenant, RailWorks shall, in its sole discretion, classify (or later
reclassify) such item of Indebtedness in any manner that complies with this
covenant. Accrual of interest, accretion or amortization of original issue
discount, the payment of interest on any Indebtedness in the form of additional
Indebtedness with the same terms, and the payment of dividends on Disqualified
Capital Stock in the form of additional shares of the same class of Disqualified
Capital Stock will not be deemed to be an incurrence of Indebtedness or an
issuance of Disqualified Capital Stock for purposes of the "Limitations on
Incurrence of Additional Indebtedness" covenant.
"Permitted Investments" means:
(1) Investments by RailWorks or any Restricted Subsidiary of RailWorks
in any Person that is or will become immediately after such Investment a
Wholly Owned Restricted Subsidiary of RailWorks or that will merge or
consolidate into RailWorks or a Wholly Owned Restricted Subsidiary of
RailWorks;
(2) Investments in RailWorks by any Restricted Subsidiary of
RailWorks; provided that any Indebtedness evidencing such Investment to the
extent held by a Restricted Subsidiary that is not a Guarantor is unsecured
and subordinated, pursuant to a written agreement, to the obligations of
RailWorks under the notes and the indenture;
(3) Investments in cash and Cash Equivalents;
(4) loans and advances to employees and officers of RailWorks and its
Restricted Subsidiaries (A) in the ordinary course of business for bona
fide business purposes not in excess of $1.0 million at any one time
outstanding, (B) for reasonable travel and business expenses in the
ordinary course of business for bona fide business purposes and (C) for
reasonable relocation expenses in the ordinary course of business not in
excess of $1.0 million at any one time outstanding;
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(5) Currency Agreements and Interest Swap Obligations entered into in
the ordinary course of the business of RailWorks or of its Restricted
Subsidiaries' businesses and otherwise in compliance with the indenture;
(6) Investments in securities of trade creditors or customers received
pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers;
(7) Investments made by RailWorks or its Restricted Subsidiaries as a
result of consideration received in connection with an Asset Sale made in
compliance with the "Limitation on Asset Sales" covenant;
(8) Guarantees of Indebtedness otherwise permitted under the
indenture;
(9) Investments in Joint Ventures in an aggregate amount not to exceed
$5.0 million at any one time outstanding; and
(10) additional Investments not to exceed $5.0 million at any one time
outstanding.
"Permitted Liens" means the following types of Liens:
(1) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which RailWorks or its Restricted Subsidiaries shall
have set aside on its books such reserves as may be required pursuant to
GAAP;
(2) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(3) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security, including any Lien securing letters of credit
issued in the ordinary course of business consistent with past practice in
connection therewith, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(4) judgment Liens not giving rise to an Event of Default;
(5) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of RailWorks or
any of its Restricted Subsidiaries;
(6) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(7) purchase money Liens to finance property or assets of the Company
or any Restricted Subsidiary of RailWorks acquired in the ordinary course
of business; provided, however, that (a) the related purchase money
Indebtedness shall not exceed the cost of such property or assets and shall
not be secured by any property or assets of RailWorks or any Restricted
Subsidiary of RailWorks other than the property and assets so acquired and
(b) the Lien securing such Indebtedness shall be created within 90 days of
such acquisition;
(8) Liens upon specific items of inventory or other goods and proceeds
of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for
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the account of such Person to facilitate the purchase, shipment or storage
of such inventory or other goods;
(9) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(10) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of
RailWorks or any of its Restricted Subsidiaries, including rights of offset
and set-off;
(11) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
indenture;
(12) Liens securing Capitalized Lease Obligations and Purchase Money
Indebtedness permitted pursuant to clause (10) of the definition of
"Permitted Indebtedness"; provided, however, that in the case of Purchase
Money Indebtedness (a) the Indebtedness shall not exceed the cost of such
property or assets and shall not be secured by any property or assets of
RailWorks or any Restricted Subsidiary of RailWorks other than the property
and assets so acquired or constructed and (b) the Lien securing such
Indebtedness shall be created within 180 days of such acquisition or
construction or, in the case of a refinancing of any Purchase Money
Indebtedness, within 180 days of such refinancing;
(13) Liens securing Indebtedness under Currency Agreements;
(14) Liens securing Acquired Indebtedness incurred in accordance with
the "Limitation on Incurrence of Additional Indebtedness" covenant;
provided that:
(a) such Liens secured such Acquired Indebtedness at the time of
and prior to the incurrence of such Acquired Indebtedness by RailWorks
or a Restricted Subsidiary of RailWorks and were not granted in
connection with, or in anticipation of, the incurrence of such Acquired
Indebtedness by RailWorks or a Restricted Subsidiary of RailWorks; and
(b) such Liens do not extend to or cover any property or assets of
RailWorks or of any of its Restricted Subsidiaries other than the
property or assets that secured the Acquired Indebtedness prior to the
time such Indebtedness became Acquired Indebtedness of RailWorks or a
Restricted Subsidiary of RailWorks and are no more favorable to the
lienholders than those securing the Acquired Indebtedness prior to the
incurrence of such Acquired Indebtedness by RailWorks or a Restricted
Subsidiary of RailWorks; and
(15) Liens not permitted by clauses (1) through (14) that are incurred
in the ordinary course of business of RailWorks or any Restricted
Subsidiary of RailWorks with respect to obligations that do not exceed $5.0
million at any one time outstanding.
"Person" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, or a governmental
agency or political subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Purchase Money Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries incurred in the normal course of business for the
purpose of financing all or any part of the purchase price, or the cost of
installation, construction or improvement, of property or equipment.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
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"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by RailWorks or any
Restricted Subsidiary of RailWorks of Indebtedness incurred in accordance with
the ratio under the "Limitation on Incurrence of Additional Indebtedness"
covenant or pursuant to clause (1), (3), or (11) of the definition of Permitted
Indebtedness), in each case that does not:
(1) result in an increase in the aggregate principal amount of the
Indebtedness of such Person being Refinanced (plus the amount of any
premium required to be paid under the terms of the instrument governing
such Indebtedness and plus the amount of reasonable expenses incurred by
RailWorks in connection with such Refinancing); or
(2) create Indebtedness with: (a) a Weighted Average Life to Maturity
that is less than the Weighted Average Life to Maturity of the Indebtedness
being Refinanced; or (b) a final maturity earlier than the final maturity
of the Indebtedness being Refinanced; provided that (x) if such
Indebtedness being Refinanced is Indebtedness of RailWorks, then such
Refinancing Indebtedness shall be Indebtedness of RailWorks or any
Restricted Subsidiary that is a Guarantor and (y) if such Indebtedness
being Refinanced is subordinate or junior to the notes, then such
Refinancing Indebtedness shall be subordinate to the notes at least to the
same extent and in the same manner as the Indebtedness being Refinanced.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Debt; provided that if, and
for so long as, any Designated Senior Debt lacks such a representative, then the
Representative for such Designated Senior Debt shall at all times constitute the
holders of a majority in outstanding principal amount of such Designated Senior
Debt in respect of any Designated Senior Debt.
"Restricted Subsidiary" of any Person means any Subsidiary of such Person
which at the time of determination is not an Unrestricted Subsidiary.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to RailWorks or a Restricted Subsidiary of any property, whether owned
by RailWorks or any Restricted Subsidiary at April 7, 1999 or later acquired,
which has been or is to be sold or transferred by RailWorks or such Restricted
Subsidiary to such Person or to any other Person from whom funds have been or
are to be advanced by such Person on the security of such Property.
"Senior Debt" means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on any
Indebtedness of RailWorks, whether outstanding on April 7, 1999 or thereafter
created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the notes. Without limiting the generality
of the foregoing, "Senior Debt" shall also include the principal of, premium, if
any, interest (including any interest accruing subsequent to the filing of a
petition of bankruptcy at the rate provided for in the documentation with
respect thereto, whether or not such interest is an allowed claim under
applicable law) on, and all other amounts owing in respect of:
(1) all monetary obligations of every nature of RailWorks under the
Credit Agreement, including, without limitation, obligations to pay
principal and interest, reimbursement obligations under letters of credit,
fees, expenses and indemnities;
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(2) all Interest Swap Obligations; and
(3) all obligations under Currency Agreements, in each case whether
outstanding on the Issue Date or thereafter incurred.
Notwithstanding the foregoing, "Senior Debt" shall not include:
(1) any Indebtedness of RailWorks to a Restricted Subsidiary of
RailWorks or any Affiliate of RailWorks or any of such Affiliate's
Subsidiaries;
(2) Indebtedness to, or guaranteed on behalf of, any shareholder,
director, officer or employee of RailWorks or any Subsidiary of RailWorks
(including, without limitation, amounts owed for compensation);
(3) Indebtedness to trade creditors and other amounts incurred in
connection with obtaining goods, materials or services;
(4) Indebtedness represented by Disqualified Capital Stock;
(5) any liability for federal, state, local or other taxes owed or
owing by RailWorks;
(6) that portion of any Indebtedness incurred in violation of the
Indenture provisions set forth under "Limitation on Incurrence of
Additional Indebtedness" (but, as to any such obligation, no such violation
shall be deemed to exist for purposes of this clause (6) if the holder(s)
of such obligation or their representative and the trustee shall have
received an officers' certificate of RailWorks to the effect that the
incurrence of such Indebtedness does not (or, in the case of revolving
credit indebtedness, that the incurrence of the entire committed amount
thereof at the date on which the initial borrowing thereunder is made would
not) violate such provisions of the indenture);
(7) Indebtedness which, when incurred and without respect to any
election under Section 1111(b) of Title 11, United States Code, is without
recourse to RailWorks; and
(8) any Indebtedness which is, by its express terms, subordinated in
right of payment to any other Indebtedness of RailWorks.
"Significant Subsidiary", with respect to any Person, means any Restricted
Subsidiary of such Person that satisfies the criteria for a "significant
subsidiary" set forth in Rule 1.02(w) of Regulation S-X under the Securities
Act.
"Subsidiary", with respect to any Person, means:
(1) any corporation of which the outstanding Capital Stock having at
least a majority of the votes entitled to be cast in the election of
directors under ordinary circumstances shall at the time be owned, directly
or indirectly, by such Person; or
(2) any other Person of which at least a majority of the voting
interest under ordinary circumstances is at the time, directly or
indirectly, owned by such Person.
"Unrestricted Subsidiary" of any Person means:
(1) any Subsidiary of such Person that at the time of determination
shall be or continue to be designated an Unrestricted Subsidiary by the
board of directors of such Person in the manner provided below; and
(2) any Subsidiary of an Unrestricted Subsidiary.
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The RailWorks board of directors may designate any Subsidiary (including
any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary
unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on
any property of, RailWorks or any other Subsidiary of RailWorks that is not a
Subsidiary of the Subsidiary to be so designated; provided that:
(1) RailWorks certifies to the trustee that such designation complies
with the "Limitation on Restricted Payments" covenant; and
(2) each Subsidiary to be so designated and each of its Subsidiaries
has not at the time of designation, and does not thereafter, create, incur,
issue, assume, guarantee or otherwise become directly or indirectly liable
with respect to any Indebtedness pursuant to which the lender has recourse
to any of the assets of RailWorks or any of its Restricted Subsidiaries.
The RailWorks board of directors may designate any Unrestricted Subsidiary
to be a Restricted Subsidiary only if:
(1) immediately after giving effect to such designation, RailWorks is
able to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance with the "Limitation on Incurrence of
Additional Indebtedness" covenant; and
(2) immediately before and immediately after giving effect to such
designation, no Default or Event of Default shall have occurred and be
continuing. Any such designation by the RailWorks board of directors shall
be evidenced to the trustee by promptly filing with the trustee a copy of
the Board Resolution giving effect to such designation and an officers'
certificate certifying that such designation complied with the foregoing
provisions.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total of
the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of any Person means any Wholly Owned
Subsidiary of such Person which at the time of determination is a Restricted
Subsidiary of such Person.
"Wholly Owned Subsidiary" of any Person means any Subsidiary of such Person
of which all the outstanding voting securities (other than in the case of a
foreign Subsidiary, directors' qualifying shares or an immaterial amount of
shares required to be owned by other Persons pursuant to applicable law) are
owned by such Person or any Wholly Owned Subsidiary of such Person.
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EXCHANGE OFFER; REGISTRATION RIGHTS
As part of the sale of the old notes to First Union Capital Markets
pursuant to the purchase agreement, dated September 23, 1999, among RailWorks
and the initial purchaser, the holder of the old notes became entitled to the
benefits of the registration rights agreement, dated as of September 30, 1999 by
and among RailWorks and the initial purchaser.
Under the registration rights agreement, we have agreed:
- to file a registration statement with the SEC with respect to a
registered offer to exchange the old notes for new 11 1/2% Senior
Subordinated Notes due 2009, having terms substantially identical in all
material respects to the old notes, except that the new notes will not
contain transfer restrictions, by November 13, 1999;
- to use our reasonable best efforts to cause the registration statement to
become effective under the Securities Act by January 28, 2000;
- to offer the new notes and the related guarantees in exchange for
surrender of the old notes following the effective date of the
registration statement; and
- to use our reasonable best efforts to keep the exchange offer open for at
least 30 days, or longer if required by applicable law, after the date
that the notice of the exchange offer is mailed to the holders of the old
notes.
The exchange offer being made hereby, if consummated within the required
time periods, will satisfy our obligations under the registration rights
agreement. We understand that there are approximately 15 record holders of old
notes. For each old note validly surrendered to us pursuant to the exchange
offer and not validly withdrawn, the holder will receive a new note having a
principal amount equal to that of the surrendered old note. Interest on each old
note will accrue (1) from the later of (A) the last interest payment date on
which interest was paid on the old note surrendered in exchange for the new note
or, (B) if the old note is surrendered for exchange on a date in a period that
includes the record date for an interest payment date to occur on or after the
date of the exchange and as to which interest will be paid, the date of such
interest payment date, or (2) if no interest has been paid on the old notes,
from September 30, 1999.
Under existing interpretations of the SEC contained in several no-action
letters to third parties, we believe that the new notes and the related
guarantees will be freely transferable by the holders, other than affiliates of
RailWorks, after the exchange offer without further registration under the
Securities Act; provided, however, that if you want to exchange your old notes
for new notes, you will be required to represent:
(1) you have full power and authority to tender, sell, assign and
transfer the old notes surrendered;
(2) we will acquire good title to the old notes being surrendered,
free and clear of all security interests, liens, restrictions, charges,
encumbrances, conditional sale agreements or other obligations relating to
their sale or transfer, and not subject to any adverse claim when we accept
the old notes;
(3) you are acquiring the new notes in the ordinary course of your
business;
(4) you are not engaging and do not intend to engage in a distribution
of the new notes;
(5) you have no arrangement or understanding with any person to
participate in the distribution of the new notes;
(6) you acknowledge and agree that if you are a broker-dealer
registered under the Exchange Act or you are participating in the exchange
offer for the purpose of distributing
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the new notes, you must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale of the new notes, and that you cannot rely on the position of the
SEC's staff set forth in their no-action letters;
(7) you understand that a secondary resale transaction described above
and any resales of new notes obtained by you in exchange for old notes
acquired by you directly from us should be covered by an effective
registration statement containing the selling security holder information
required by Item 507 or 508, as applicable, of Regulation S-K of the SEC;
and
(8) you are not an "affiliate", as defined in Rule 405 under the
Securities Act, of RailWorks or any subsidiary guarantor, or, if you are an
"affiliate," that you will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable.
We agree to make available, during the period required by the Securities
Act, a prospectus meeting the requirements of the Securities Act for use by
Participating Broker-Dealers and other persons, if any, with similar prospectus
delivery requirements for use in connection with any resale of new notes.
If (1) because of any change in law or in currently prevailing
interpretations of the staff of the SEC, we are not permitted to effect an
exchange offer, (2) we do not complete the exchange offer by February 27, 2000,
(3) under certain circumstances, some holders of unregistered new notes so
request, or (4) in the case of any holder that participates in the exchange
offer, that holder does not receive new notes on the date of the exchange that
may be sold without restriction under state and federal securities laws, other
than due solely to the status of that holder as an affiliate of RailWorks or
within the meaning of the Securities Act, then in each case, we will
- promptly deliver to the holders and the trustee written notice of one of
these changes and
- at our sole expense, file a shelf registration statement covering resales
of the old notes;
- use our reasonable best efforts to keep the shelf registration statement
effective until the earlier of September 30, 2001 or such time as all of
the applicable old notes have been sold under the shelf registration
statement.
In the event that we file a shelf registration statement, we will provide
each holder with copies of the prospectus that is a part of the shelf
registration statement, notify each holder when the shelf registration statement
for the notes has become effective, and take some other actions that are
required to permit unrestricted resales of the notes. A holder that sells notes
pursuant to the shelf registration statement will be required to be named as a
selling security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
Securities Act in connection with such sales and will be bound by the provisions
of the registration rights agreement that are applicable to that kind of holder,
including certain indemnification rights and obligations.
If we fail to comply with the above provisions or if the exchange offer
registration statement or the shelf registration statement fails to become
effective, then, as liquidated damages, we will pay "additional interest" on the
notes as follows:
(1) if (A) neither the exchange offer registration statement nor the
shelf registration statement is filed with the SEC on or prior to the
applicable filing date or (B) despite the fact that we have consummated or
will consummate an exchange offer, we are required to file a shelf
registration statement and we do not file the shelf registration statement
on or prior to the date required by the registration rights agreement, then
commencing on the day after either such required filing date, additional
interest will accrue on the principal amount of the notes at a yearly rate
of 0.25% for the first 90 days immediately following each such
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filing date; the additional interest rate will increase by an additional
0.25% per annum at the beginning of each subsequent 90-day period; or
(2) if (A) neither the exchange offer registration statement nor a
shelf registration statement is declared effective by the SEC on or prior
to 120 days after the applicable filing date set forth in the registration
rights agreement or (B) despite the fact that we have consummated or will
consummate an exchange offer, we are required to file a shelf registration
statement and the SEC does not declare the shelf registration statement
effective on or prior to the 120th day following the date the shelf
registration statement was filed, then, commencing on the day after either
required effective date, additional interest will accrue on the principal
amount of the note at a yearly rate of 0.25% for the first 90 days
immediately following that required effective date; the additional interest
rate will increase by an additional 0.25% per annum at the beginning of
each subsequent 90-day period; or
(3) if (A) we have not exchanged new notes for all old notes validly
surrendered in accordance with the terms of the exchange offer on or prior
to February 27, 2000, or (B) if applicable, the shelf registration
statement has been declared effective and the shelf registration statement
ceases to be effective at any time prior to September 30, 2001, other than
after such time as all notes have been disposed of under the shelf
registration statement, then additional interest will accrue on the
principal amount of the notes at a yearly rate of 0.25% for the first 90
days commencing on (x) the 36th day after the effective date, in the case
of (A) above, or (y) the day the shelf registration statement ceases to be
effective, in the case of (B) above; the additional interest rate will
increase by an additional 0.25% per annum at the beginning of each
subsequent 90-day period;
provided, however, that the additional interest rate on the notes may not accrue
under more than one of the foregoing clauses (1) -- (3) at any one time and at
no time shall the aggregate amount of additional interest accruing exceed in the
aggregate 1.5% per year; provided, further, however, that (c) upon the filing of
the exchange offer registration statement or a shelf registration statement, in
the case of clause (1) above, (d) upon the effectiveness of the exchange offer
registration statement or a shelf registration statement, in the case of clause
(2) above, or (e) upon the exchange of new notes for all old notes surrendered,
in the case of clause (3)(A) above, or upon the effectiveness of the shelf
registration statement that had ceased to remain effective, in the case of
clause (3)(B) above, additional interest on the notes as a result of such
clause, or the relevant subclause of that clause, as the case may be, shall
cease to accrue.
Any amounts of additional interest due pursuant to clause (1), (2) or (3)
above will be payable in cash on the same original interest payment dates as the
notes.
114
<PAGE> 120
BOOK-ENTRY; DELIVERY AND FORM
The new notes initially will be represented by one or more permanent global
certificates in definitive, fully registered form (the "Global notes"). The
Global notes will be deposited upon issuance with DTC and registered in the name
of a nominee of DTC.
THE GLOBAL NOTE
We expect that pursuant to procedures established by DTC (1) upon the
issuance of the Global notes, DTC or its custodian will credit, on its internal
system, the principal amount at maturity of the individual beneficial interests
represented by such Global notes to the respective accounts of persons who have
accounts with such depositary and (2) ownership of beneficial interests in the
Global notes will be shown on, and the transfer of such ownership will be
effected only through, records maintained by DTC or its nominee (with respect to
interests of participants) and the records of participants (with respect to
interests of persons other than participants). Ownership of beneficial interests
in the Global notes will be limited to persons who have accounts with DTC
("participants") or persons who hold interests through participants. Holders may
hold their interests in the Global notes directly through DTC if they are
participants in DTC's system, or indirectly through organizations that are
participants in such system.
So long as DTC, or its nominee, is the registered owner or holder of the
new notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the new notes represented by such Global notes for all
purposes under the indenture. No beneficial owner of an interest in the Global
notes will be able to transfer that interest except in accordance with DTC's
procedures, in addition to those provided for under the indenture with respect
to the new notes.
Payments of the principal of, premium, if any, interest, including
additional interest, on, the Global notes will be made to DTC or its nominee as
the registered owner of the Global notes. None of RailWorks, the trustee or any
paying agent will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global notes or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interest.
We expect that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, interest, including additional interest, on the
Global notes, will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of the Global notes as shown on the records of DTC or its nominee. We also
expect that payments by participants to owners of beneficial interests in the
Global notes held through such participants will be governed by standing
instructions and customary practice, as is now the case with securities held for
the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same day funds. If a holder requires physical delivery of a
certificated security for any reason, including to sell new notes to persons in
states that require physical delivery of the new notes, or to pledge such
securities, such holder must transfer its interest in a Global note, in
accordance with the normal procedures of DTC and with the procedures set forth
in the indenture.
DTC has advised us that it will take any action permitted to be taken by a
holder of new notes, including the presentation of new notes for exchange as
described below, only at the direction of one or more participants to whose
account the DTC interests in the Global notes are credited and only in respect
of such portion of the aggregate principal amount of notes as to which such
participant or participants has or have given such direction. However, if there
is an
115
<PAGE> 121
Event of Default under the Indenture, DTC will exchange the Global notes for
certificated securities, which it will distribute to its participants.
DTC has advised us as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "Clearing Agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global note among participants of DTC, it is under
no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither RailWorks nor the trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
CERTIFICATED SECURITIES
Certificated securities will be issued in exchange for beneficial interests
in the Global notes (1) if requested by a holder of such interests or (2) if DTC
is at any time unwilling or unable to continue as a depositary for the Global
notes and a successor depositary is not appointed by RailWorks within 90 days.
PLAN OF DISTRIBUTION
We are not using any underwriters for this exchange offer. We are also
bearing the expenses of the exchange, which we expect will be approximately
$75,000.
This prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of any new notes
received in exchange for old notes acquired by such broker-dealer as a result of
market-making or other trading activities. Each such broker-dealer that receives
new notes for its own account in exchange for such old notes pursuant to the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of such new notes. We have agreed that for a period of up to 180
days after the registration statement is declared effective, we will make this
prospectus, as amended or supplemented, available to any such broker-dealer that
requests copies of this prospectus in the letter of transmittal for use in
connection with any such resale.
We will not receive any proceeds from any sale of new notes by
broker-dealers or any other persons. New notes received by broker-dealers for
their own account pursuant to the exchange offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions or through the writing of options on the exchange notes, or a
combination of such methods of resale, at market prices prevailing at the time
of resale or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer and/or the
purchasers of any such exchange notes. Any broker-dealer that resells new notes
that were received by it for its own account pursuant to the exchange offer in
exchange for old notes acquired by such broker-dealer as a result of
market-making or other trading activities and any broker-dealer that
participates in a distribution of such new notes may
116
<PAGE> 122
be deemed to be an "underwriter" within the meaning of the Securities Act. Any
profit on these resales of new notes and any commissions or concessions received
by any persons may be deemed to be underwriting compensation under the
Securities Act. The letter of transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
We have agreed to pay all expenses incident to our performance of, or
compliance with, the registration rights agreement and will indemnify the
holders of old notes, including any broker-dealers, and certain parties related
to these holders, against various liabilities, including liabilities under the
Securities Act.
117
<PAGE> 123
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
THIS SUMMARY IS OF A GENERAL NATURE AND IS INCLUDED HEREIN SOLELY FOR
INFORMATIONAL PURPOSES. IT IS NOT INTENDED TO BE, NOR SHOULD IT BE CONSTRUED AS
BEING, LEGAL OR TAX ADVICE. WE MAKE NO REPRESENTATION WITH RESPECT TO THE
CONSEQUENCES TO ANY HOLDER OF THE NOTES. YOU SHOULD CONSULT YOUR OWN TAX
ADVISORS WITH RESPECT TO YOUR PARTICULAR CIRCUMSTANCES.
The following discussion is a summary of certain United States federal
income tax considerations relevant to the exchange of old notes for new notes
pursuant to the exchange offer. The summary is based upon current provisions of
the Internal Revenue Code of 1986, as amended, judicial decisions, and
administrative interpretations, all of which are subject to change at any time
by legislative, judicial or administrative action. Any such changes may be
applied retroactively in a manner that could adversely affect a holder of the
notes. There can be no complete assurance that the Internal Revenue Service will
not challenge the conclusions stated below, and no ruling from the Internal
Revenue Service has been or will be sought on any of the matters discussed
below.
The following discussion does not purport to be a complete analysis of all
the potential federal income tax consequences of exchanging old notes for new
notes, and, without limiting the generality of the foregoing, this summary does
not address the effect of any special rules applicable to certain types of
holders, including dealers in securities, insurance companies, financial
institutions, tax-exempt entities, persons owning notes through partnerships or
other pass-through entities, former citizens or residents of the United States
and persons who hold notes as part of a straddle, hedge, or conversion
transaction. In addition, this discussion is limited to holders who hold the
notes as capital assets within the meaning of Section 1221 of the Internal
Revenue Code. This discussion does not address the effect of any state, local,
or foreign tax laws.
The exchange of old notes for new notes pursuant to the exchange offer will
not be treated as an "exchange" for federal income tax purposes because the new
notes do not differ materially in kind or extent from the old notes.
Accordingly, (i) holders will not recognize taxable gain or loss upon the
receipt of new notes in exchange for old notes in the exchange offer, (ii) the
holding period for a new note received in the exchange offer will include the
holding period of the old note surrendered in exchange for the new note, and
(iii) the adjusted tax basis of a new note immediately after the exchange will
be the same as the adjusted tax basis of the old note surrendered in exchange
for the new note.
We recommend that you consult your own tax advisor as to the particular
consequences of exchanging your old notes for new notes, including the
applicability and effect of any state, local or foreign tax laws.
118
<PAGE> 124
LEGAL MATTERS
The validity of the new notes will be passed upon for us by King &
Spalding, New York, New York.
EXPERTS
The financial statements of RailWorks Corporation and Subsidiaries, Mid
West Railroad Construction and Maintenance Corporation of Wyoming, F&V Metro
Contracting Corp. and Affiliates and W.T. Byler Co., Inc. included in this
prospectus and elsewhere in 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 giving said reports.
The financial statements of Gantrex Group included in this prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent chartered accountants, as indicated in their report with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in giving said report.
WHERE YOU CAN FIND MORE INFORMATION
RailWorks Corporation files annual, quarterly and other reports, proxy
statements and other information with the SEC. Our current SEC filings are
available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file at the SEC's
public reference rooms in Washington, D.C., New York, New York and Chicago,
Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms.
Because our common stock is listed on The Nasdaq National Market, our
reports, proxy statements and other information can be reviewed and copied at
the offices of The Nasdaq Stock Market, Inc. at 1735 K Street, N.W. Washington,
D.C. 20006-1506.
We recommend that you review the following reports, which we have filed
with the SEC:
Form 10-K for the year ended December 31, 1998
Form 10-Q for the quarter ended March 31, 1999
Form 10-Q for the quarter ended June 30, 1999
Form 10-Q for the quarter ended September 30, 1999
Current Report on Form 8-K dated March 17, 1999
Current Report on Form 8-K dated November 5, 1999
Current Report on Form 8-K/A (Amendment No. 1) dated November 5, 1999
You may request a copy of our SEC filings (without exhibits) at no cost, by
writing or telephoning us at the following address:
RailWorks Corporation
1104 Kenilworth Drive, Suite 301
Baltimore, Maryland 21204
(410) 512-0500
119
<PAGE> 125
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933. You can find discussions containing
forward-looking statements in the "Prospectus Summary," the "Management's
Discussion and Analysis of Financial Condition and Results of Operation,"
"Business -- Competitive Strengths," "Business -- Strategy" and "Business
-- Competition" sections, as well as within this prospectus generally. We use
the words "believes," "anticipates," "expects," "estimates," "plans," "intends"
and similar expressions so as to identify forward-looking statements. All
forward-looking statements involve substantial risks and uncertainties. There
may be events in the future that we are not accurately able to predict, or over
which we have no control. Some factors that may cause actual results to differ
from projected results are:
- absence of a combined operating history of the operating companies and
difficulties in integrating their operations;
- unanticipated difficulties or delays in implementing our acquisition
program;
- cyclicality in the demand for rail system services and products;
- availability of capital, including our ability to service or refinance
indebtedness;
- an unanticipated decrease in public sector contracts and funding;
- changes in our relationships with major customers;
- effects of changes in general economic conditions;
- actions by competitors;
- ability to retain qualified personnel; and
- unanticipated costs, difficulties or delays in implementing our Year 2000
compliance program.
Forward-looking statements include, without limitation, our expectations
and estimates as to development of our services and products and expansion of
our customer base, future financial performance, including growth in revenues
and earnings and the effect on our finances of new acquisitions, cash flows from
operations, acquisitions, capital expenditures, the availability of funds from
credit facilities, the sale of securities and the cost and timely implementation
of our Year 2000 compliance modifications.
Consequently, you should regard forward-looking statements only as our
current plans, estimates and beliefs. We do not promise to notify you if we
learn that our assumptions or projections are wrong for any reason. Before you
decide to exchange your notes, you should be aware that the factors we discuss
in the "Risk Factors" section and elsewhere in this prospectus could cause our
actual results to differ from what we have stated in any forward-looking
statements.
---------------------
Our principal executive offices are located at 1104 Kenilworth Drive, Suite
301, Baltimore, Maryland 21204. The telephone number at that address is (410)
512-0500.
120
<PAGE> 126
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
RAILWORKS CORPORATION AND SUBSIDIARIES
Audited Financial Statements:
Report of Independent Public Accountants............... F-3
Consolidated Balance Sheets as of December 31, 1998 and
1997.................................................. F-4
Consolidated Statements of Operations for the Years
Ended December 31, 1998, 1997 and 1996................ F-5
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1998, 1997 and 1996.......... F-6
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1998, 1997 and 1996................ F-7
Notes to Consolidated Financial Statements............. F-8
Unaudited Financial Statements:
Consolidated Balance Sheets as of September 30, 1999
and December 31, 1998................................. F-24
Consolidated Statements of Income for the Nine Months
Ended September 30, 1999 and 1998..................... F-25
Consolidated Statements of Stockholders' Equity for the
Nine Months Ended September 30, 1999 and 1998......... F-26
Consolidated Statements of Cash Flow for the Nine
Months Ended September 30, 1999 and 1998.............. F-27
Notes to Consolidated Financial Statements............. F-29
GANTREX GROUP
Report of Independent Chartered Accountants............... F-39
Combined Balance Sheet as of December 31, 1998............ F-40
Combined Statements of Income and Retained Earnings for
the Year Ended December 31, 1998....................... F-41
Combined Statement of Cash Flows for the Year Ended
December 31, 1998...................................... F-42
Notes to Combined Financial Statements.................... F-43
MID WEST RAILROAD CONSTRUCTION AND MAINTENANCE CORPORATION
OF WYOMING
Report of Independent Public Accountants.................. F-47
Balance Sheet as of December 31, 1998..................... F-48
Statement of Operations and Retained Earnings for the Year
Ended December 31, 1998................................ F-49
Statement of Cash Flows for the Year Ended December 31,
1998................................................... F-50
Notes to Financial Statements............................. F-51
F & V METRO CONTRACTING CORP. (CURRENTLY KNOWN AS RWKS
TRANSIT, INC.) AND AFFILIATES
Report of Independent Public Accountants.................. F-55
Combined Statement of Net Liabilities as of November 30,
1998 .................................................. F-56
Combined Statement of Operations for the Year Ended
November 30, 1998...................................... F-57
Combined Statement of Cash Flows for the Year Ended
November 30, 1998...................................... F-58
Notes to Combined Financial Statements.................... F-59
</TABLE>
F-1
<PAGE> 127
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
W.T. BYLER CO., INC.
Audited Financial Statements:
Report of Independent Public Accountants............... F-67
Balance Sheet as of December 31, 1998.................. F-68
Statement of Income for the Year Ended December 31,
1998.................................................. F-69
Statement of Changes in Stockholder's Equity for the
Year Ended December 31, 1998.......................... F-70
Statement of Cash Flows for the Year Ended December 31,
1998.................................................. F-71
Notes to Financial Statements.......................... F-72
Unaudited Financial Statements:
Balance Sheet as of September 30, 1999 and December 31,
1998 (audited)........................................ F-76
Statement of Income for the Nine Months Ended September
30, 1999 and 1998..................................... F-77
Statement of Changes in Stockholder's Equity for the
Nine Months Ended September 30, 1999 and 1998......... F-78
Statement of Cash Flows for the Nine Months Ended
September 30, 1999 and 1998........................... F-79
</TABLE>
F-2
<PAGE> 128
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To RailWorks Corporation:
We have audited the accompanying consolidated balance sheets of RailWorks
Corporation (a Delaware corporation) and Subsidiaries and its predecessor entity
(the "Company"), as of December 31, 1998 and 1997 and the related consolidated
statements of operations, stockholders' equity and cash flows for the three
years in the period ended December 31, 1998. 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 the disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 1998 and 1997 and the results of its operations and its cash
flows for the three years in the period ended December 31, 1998 in conformity
with generally accepted accounting principles.
Arthur Andersen LLP
Stamford, Connecticut
February 8, 1999
F-3
<PAGE> 129
RAILWORKS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
1998 1997
-------- -------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 2,846 $ 1,120
Accounts receivable, net of allowance for doubtful
accounts of $442 and $58................................ 77,181 46,436
Costs and estimated earnings in excess of billings on
uncompleted contracts................................... 24,792 17,149
Inventories:
Raw materials........................................... 7,535 1,240
Finished goods.......................................... 1,550 --
Deferred tax asset........................................ 870 1,020
Other current assets...................................... 3,401 977
-------- -------
Total current assets............................... 118,175 67,942
-------- -------
PROPERTY, PLANT AND EQUIPMENT............................... 14,514 448
LESS ACCUMULATED DEPRECIATION AND
AMORTIZATION.............................................. 1,122 56
-------- -------
PROPERTY, PLANT AND EQUIPMENT, NET.......................... 13,392 392
-------- -------
OTHER ASSETS:
Excess of cost over net assets acquired, net of
amortization............................................ 93,845 --
Deferred tax asset........................................ 85 --
Loans to officers......................................... 959 --
Other..................................................... 2,180 18
-------- -------
Total other assets................................. 97,069 18
-------- -------
$228,636 $68,352
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt...................... $ 931 $ 2,555
Accounts payable and accrued liabilities.................. 35,436 22,547
Accrued payroll and related withholdings.................. 3,777 4,711
Billings in excess of costs and estimated earnings on
uncompleted contracts................................... 5,958 8,510
Other current liabilities................................. 4,682 3,119
-------- -------
Total current liabilities.......................... 50,784 41,442
-------- -------
Long-term debt............................................ 50,573 12,449
Excess of acquired net assets over cost, net of
amortization............................................ 8,662 10,210
Other liabilities......................................... 8,609 2,813
-------- -------
Total long-term liabilities........................ 67,844 25,472
-------- -------
Total liabilities.................................. 118,628 66,914
-------- -------
Stockholders' Equity:
Series A, convertible preferred stock, $1.00 par value,
authorized 10,000,000 shares, 13,700 shares issued and
outstanding............................................. 14 --
Common stock, $0.01 par value, authorized 100,000,000
shares, 13,703,530 shares issued and outstanding in
1998, 2,959,291 issued and outstanding in 1997.......... 137 30
Additional paid-in capital................................ 121,296 --
Retained earnings (deficit)............................... (11,439) 1,408
-------- -------
Total stockholders' equity......................... 110,008 1,438
-------- -------
$228,636 $68,352
======== =======
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE> 130
RAILWORKS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
1998 1997 1996
---------- ---------- -----------
<S> <C> <C> <C>
Revenue................................................ $ 212,533 $ 153,610 $188,767
Cost of revenue........................................ 182,817 136,678 169,303
---------- ---------- --------
Gross profit........................................... 29,716 16,932 19,464
Selling, general and administrative expenses........... 17,040 13,733 15,053
Non-recurring expenses................................. 19,965 -- --
Transaction fees....................................... 1,281 -- --
Depreciation and amortization expense.................. 2,105 (213) 1,365
---------- ---------- --------
Operating (loss) income................................ (10,675) 3,412 3,046
---------- ---------- --------
Other income(expense):
Interest expense..................................... (2,334) (1,761) (2,023)
Interest and other income............................ 1,634 975 476
Management fee to former parent...................... -- -- (941)
---------- ---------- --------
Other expense, net................................... (700) (786) (2,488)
---------- ---------- --------
(Loss) income before income taxes...................... (11,375) 2,626 558
Provision for income taxes............................. 1,472 1,198 500
---------- ---------- --------
Net (loss) income...................................... $ (12,847) $ 1,428 $ 58
========== ========== ========
Basic and diluted (loss) earnings per share............ $ (1.67) $ .48
========== ==========
Weight average shares used in computing (loss) earnings
per share............................................ 7,694,267 2,959,291
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE> 131
RAILWORKS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
--------------- --------------- ADDITIONAL RETAINED EARNINGS
SHARES AMOUNT SHARES AMOUNT PAID-IN CAPITAL (DEFICIT) TOTAL
------ ------ ------ ------ --------------- ----------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
PREDECESSOR COMPANY
BALANCE, DECEMBER 31, 1995.......... 1,200 $ -- -- $-- $ 22,114 $ (1,547) $ 20,567
Capital contribution.............. -- -- -- -- 1,110 -- 1,110
Transfer of note receivable....... -- -- -- -- (4,745) -- (4,745)
Net income........................ -- -- -- -- -- 58 58
------ ---- -- --- -------- -------- --------
BALANCE DECEMBER 31, 1996........... 1,200 $ -- -- $-- $ 18,479 $ (1,489) $ 16,990
====== ==== == === ======== ======== ========
BALANCE JANUARY 1, 1997............. -- $ -- -- $-- $ -- $ -- $ --
Capital contribution.............. 111 1 -- -- 9 -- 10
Recapitalization.................. 2,849 29 -- -- (9) (20) --
Net income........................ -- -- -- -- -- 1,428 1,428
------ ---- -- --- -------- -------- --------
BALANCE DECEMBER 31, 1997........... 2,960 30 -- -- -- 1,408 1,438
Issuance of common stock.......... 5,908 59 -- -- 54,023 -- 54,082
Non-cash compensation charge...... 1,206 12 -- -- 14,861 -- 14,873
Initial public offering, net of
underwriting discount and
offering expenses............... 5,000 50 -- -- 52,412 -- 52,462
Issuance of preferred stock....... (1,370) (14) 14 14 -- -- --
Net loss.......................... -- -- -- -- -- (12,847) (12,847)
------ ---- -- --- -------- -------- --------
BALANCE, DECEMBER 31, 1998.......... 13,704 $137 14 $14 $121,296 $(11,439) $110,008
====== ==== == === ======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE> 132
RAILWORKS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
1998 1997 1996
-------- -------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income........................................... $(12,847) $ 1,428 $ 58
Adjustments to reconcile net (loss) income to net cash used
in operating activities:
Depreciation and amortization............................. 2,105 (213) 1,365
Non-cash compensation charge.............................. 14,873 -- --
Deferred taxes............................................ 65 664 --
Gain on sale of division.................................. (861) -- --
Gain on sale of equipment................................. (3) (194) (39)
Change in contract reserves............................... -- -- (3,000)
Change in operating assets and liabilities:
Accounts receivable and costs and estimated earnings in
excess of billings on uncompleted contracts........... (15,236) (8,176) (6,231)
Inventory............................................... (274) 296 (947)
Other current assets.................................... (1,066) (271) (4,209)
Accounts payable and accrued liabilities................ 2,726 (1,159) (1,772)
Accrued payroll and related withholdings................ (1,269) 549 365
Billings in excess of costs and estimated earnings on
uncompleted contracts................................. (4,458) 3,320 2,307
Other current liabilities............................... (1,252) 909 (103)
Other assets............................................ (1,145) (18) (3)
Other liabilities....................................... 4,713 (336) 257
-------- -------- --------
Net cash used in operating activities............... (13,929) (3,201) (11,952)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of division............................ 1,000 -- --
Proceeds from sale of equipment........................... 32 194 130
Purchase of equipment and leasehold improvements.......... (1,280) (448) (690)
Acquisition of subsidiaries, net of cash acquired......... (52,535) -- --
Contingent earnout payment................................ (1,600) -- --
-------- -------- --------
Net cash used in investing activities............... (54,383) (254) (560)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of loan origination fee........................... (1,615) -- --
Proceeds from issuance of common stock, net............... 52,462 -- 1,110
Proceeds from contingent promissory notes................. -- 14,608 --
Repayment of contingent promissory notes.................. -- (157) --
Loans to officers......................................... (959) -- --
Proceeds from note payable................................ -- 4,000 --
Repayments of note payable................................ -- (4,000) --
Proceeds from long-term borrowing......................... 61,325 16,937 7,961
Repayment of long-term borrowing.......................... (41,175) (26,823) (2,312)
-------- -------- --------
Net cash provided by financing activities........... 70,038 4,565 6,759
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 1,726 1,110 (5,753)
CASH AND CASH EQUIVALENTS, beginning of year................ 1,120 10 9,924
-------- -------- --------
CASH AND CASH EQUIVALENTS, end of year...................... $ 2,846 $ 1,120 $ 4,171
======== ======== ========
SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for interest.................... $ 2,107 $ 1,478 $ 1,305
======== ======== ========
Cash paid during the year for income taxes................ $ 392 $ 188 $ 57
======== ======== ========
</TABLE>
NON-CASH OPERATING, INVESTING AND FINANCING ACTIVITIES: The Company issued
8,867,648 shares of common stock in exchange for 100% of the outstanding common
stock of the Subsidiaries.
See Notes to Consolidated Financial Statements.
F-7
<PAGE> 133
RAILWORKS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
RailWorks Corporation, a Delaware corporation, ("RailWorks" or the
"Company"), was formed in March 1998 to acquire, integrate and facilitate the
growth of similar and complementary companies in the rail system services and
products industry.
On July 29, 1998, RailWorks announced the initial public offering ("IPO")
of 5,000,000 shares of its common stock at a price of $12.00 per share. The
initial public offering was consummated on August 4, 1998. The capital raised by
this offering was $55,800,000 net of underwriting discounts.
Concurrent with the consummation of the IPO, the Company acquired 14 groups
of companies (the "Founding Companies") in the rail system services and related
products industry. The aggregate consideration paid by the Company to acquire
these companies was approximately $51,100,000 in cash and 8,867,648 shares of
RailWorks common stock.
For accounting and financial statement purposes, Comstock Holdings, Inc.
(one of the Founding Companies) ("Comstock" or the "Accounting Acquirer") has
been identified as the accounting acquirer consistent with Staff Accounting
Bulletin ("SAB") No. 97 of the Securities and Exchange Commission. The
acquisitions of the remaining Founding Companies were accounted for using the
purchase method of accounting and accordingly, the purchase price has been
allocated to the assets acquired and the liabilities assumed based upon the fair
values at the date of acquisition. The acquisitions of the Founding Companies
resulted in the recording of goodwill of approximately $94,817,000, which is
being amortized over 40 years.
On November 4, 1998, the Company acquired substantially all of the net
assets of Sheldon Electric, Inc. ("Sheldon"). Also, on November 4, 1998, the
Company acquired the stock of Armcore Railroad Contractors, Inc. ("Armcore"), an
Indiana corporation located in Frankfurt, Indiana. The aggregate price paid for
these acquisitions was approximately $3,100,000 in cash. The acquisitions of
Sheldon and Armcore were accounted for using the purchase method of accounting.
The estimated goodwill associated with these acquisitions aggregated
approximately $2,449,000.
Comstock was incorporated on November 20, 1996 as a Delaware corporation
for the purpose of acquiring L.K. Comstock & Company, Inc. (the "Predecessor
Company"). Comstock had no operations from incorporation through January 1,
1997.
Effective January 1, 1997, Comstock purchased the stock of the Predecessor
Company. The financial statements, including those of the Predecessor Company
prior to its acquisition, have been prepared by Comstock management and present
the financial position and results of operations of Comstock as of and for the
year ended December 31, 1997 and of the Predecessor Company for the periods
prior to January 1, 1997. Accordingly, the financial information for periods
prior to 1997 do not reflect the significant impact of the Predecessor Company
acquisition or of the purchase accounting adjustments on the financial position
and results of operations of Comstock.
The Predecessor Company was acquired by Comstock through various agreements
(the "Agreements") entered into with Comstock Group, Inc. ("Group", the
Predecessor Company's former parent), Spie Group Inc. ("Spie", the parent of
Group), Spie Enertrans SA ("Enertrans", the former parent of Spie) and Schneider
Electric Holdings Inc. ("Schneider", parent of Spie). The Agreements principally
called for: (1) the sale of the common stock of the Predecessor Company to
Comstock (the "Sale"), (2) the issuance of various contingent promissory notes
by Comstock to Enertrans and Group in exchange for approximately $18,903,000,
(3) the transfer of
F-8
<PAGE> 134
RAILWORKS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
various intangible assets of Spie to Comstock, (4) the provision for various
income tax elections and indemnifications, and (5) certain other
indemnifications and cooperative understandings. The effects of the Agreements
have been accounted for as a purchase in the accompanying financial statements
as of and for the year ended December 31, 1997. In connection with the IPO of
RailWorks, Group agreed to accept a one-time payment of $1,600,000 to satisfy
all potential contingent payments owed in connection with the Agreements. Such
payment was made by RailWorks on September 8, 1998.
As part of the Agreements, certain intangible assets (recorded at no value)
were assigned to Comstock. In addition, Comstock issued a promissory note (the
"Contingent Promissory Note"), collateralized by certain investments related to
customer contracts involving claims and an investment in a joint venture (the
"Investments"). The remaining balance of the Contingent Promissory Note of
$12,240,000 at December 31, 1998 is payable only from amounts collected by
Comstock relating to the Investments until April 3, 2007, at which time the note
is cancelled. As such, Enertrans and any successor to it or creditor may not
look to any other Comstock assets to satisfy this indebtedness. Accordingly,
management believes a right of offset exists for financial reporting purposes
and the Investments and the Contingent Promissory Note have been offset in the
accompanying balance sheets at December 31, 1998 and 1997 in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 125 "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities."
In connection with the Sale, $5,095,000 of cash from the Predecessor
Company was used by Comstock to fund its acquisition of the Predecessor Company.
Accordingly, and as a result of the purchase price adjustments, the fair value
of the net assets acquired exceeds the purchase price funded solely by Comstock.
In accordance with Accounting Principles Board Opinion No. 16 "Business
Combinations", the excess of the cost of net assets acquired first reduced the
non current assets to zero with the remainder allocated to "Excess of Acquired
Net Assets Over Cost", (negative goodwill) which amount is being amortized over
40 years.
2. NATURE OF BUSINESS
RailWorks was formed to become a leading nationwide provider of rail system
services, including construction and rehabilitation, repair and maintenance, and
related products. The Company provides contracting services and rail related
products to a broad range of customers including Class I railroads, transit
authorities and commuter railroads, municipalities, industrial companies and
commercial enterprises. RailWorks operates principally in the United States.
During 1998, the Company adopted SFAS No. 131 "Disclosures about Segments
of an Enterprise and Related Information" ("SFAS No. 131"). In accordance with
SFAS No. 131, the Company has three reportable segments: (1) transit services,
(2) rail construction, rehabilitation, repair and maintenance services and (3)
rail products and supplies. The transit services segment provides transit
construction and rehabilitation services, as well as installation of signaling,
communications and electrical systems. The rail construction services segment
provides design, engineering, construction, rehabilitation and repair and
maintenance of track systems. The rail products and supplies segment provides a
broad range of rail related products, including treated wood ties. The
accounting policies of the segments are the same as those described in the
summary of significant accounting policies. RailWorks evaluates performance
based on profit or loss from operations before income taxes, interest income and
expense, and non-recurring gains and losses.
F-9
<PAGE> 135
RAILWORKS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All significant intercompany
transactions have been eliminated.
The Company accounts for intersegment sales and transfers as if the sales
or transfers were to third parties, utilizing current market prices and arms
length terms and conditions.
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 amount 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.
REVENUE RECOGNITION
The Company recognizes revenues from fixed-fee contracts using the
percentage-of-completion method, measured by the percentage of cost incurred to
date to management's estimated total cost for each contract. This method is used
because management considers total cost to be the best available measure of
progress on the contracts. Changes in job performance, job conditions and
estimated profitability may result in revisions to cost and income, which are
recognized in the period in which the revisions are determined. Revenues from
time-and-material contracts are recognized currently as the work is performed.
Contract costs include all direct material, labor and equipment costs and
those indirect costs related to contract performance and are charged to cost of
revenues as incurred. Provisions for estimated losses on uncompleted contracts
are made in the period in which such losses are determined.
The asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenues recognized in excess of amounts
billed. The liability, "Billings in excess of costs and estimated earnings on
uncompleted contracts," represents billings in excess of revenues recognized.
With regard to the rail products segment, the Company recognizes revenue
when products are delivered to customers pursuant to shipping agreements. Cost
of goods sold includes the raw materials cost, labor and overhead costs of
producing the product.
In accordance with industry practice, the Company classifies as current all
assets and liabilities related to the performance of long-term contracts. The
contracting cycle for certain long-term contracts may extend beyond one year
and, accordingly, collection or payment of amounts related to these contracts
may extend beyond one year.
CASH AND CASH EQUIVALENTS
The Company considers cash and cash equivalents to include cash on hand and
temporary cash investments purchased with an original maturity of three months
or less.
F-10
<PAGE> 136
RAILWORKS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
by the first-in, first-out (FIFO) method. Inventory consists of stored materials
and parts to be used in long-term construction contracts and raw materials and
finished goods produced by the rail products segment companies.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Included in machinery
and equipment is specialty construction tools and other equipment which,
although purchased in connection with a particular contract, is expected to be
used in future contracts. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets as follows:
<TABLE>
<S> <C>
Building and improvements................................... 15 - 30 years
Machinery and equipment..................................... 3 - 7 years
Office furniture and equipment.............................. 5 - 7 years
Transportation equipment.................................... 5 - 7 years
</TABLE>
Leasehold improvements are capitalized and amortized over the shorter of
the estimated useful lives of the assets or the terms of the related leases.
Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of property and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in the statements of operations.
INCOME TAXES
The Company follows the liability method of accounting for income taxes in
accordance with SFAS No. 109. Under this method, deferred income taxes are
recorded based upon differences between the financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the underlying assets or liabilities are received or
settled. Valuation allowances are established when necessary to reduce deferred
tax assets to the amount expected to be realized.
F-11
<PAGE> 137
RAILWORKS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings per Share". This statement supersedes APB Opinion No. 15,
"Earnings per Share" and simplifies the computation of earnings per share
("EPS"). Primary EPS is replaced with a presentation of basic EPS. Basic EPS
includes no dilution and is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for the
period. Fully diluted EPS is replaced with diluted EPS. Diluted EPS reflects the
potential dilution if certain securities are converted and also includes certain
shares that are contingently issuable. The following is the computation of
earnings per share (in thousands, except per share data):
<TABLE>
<CAPTION>
1998 1997
-------- ------
<S> <C> <C>
Net (loss) income........................................... $(12,847) $1,428
======== ======
Shares used for determining basic EPS....................... 7,694 2,960
Dilutive effect of:
Stock options............................................. * --
Convertible preferred shares.............................. * --
-------- ------
Shares used for determining diluted EPS..................... 7,694 2,960
======== ======
Basic EPS................................................... $ (1.67) $ .48
======== ======
Diluted EPS................................................. $ (1.67) $ .48
======== ======
</TABLE>
- ---------------
* Outstanding stock options and convertible preferred shares would be
antidilutive in 1998 and therefore were excluded.
No stock options or convertible preferred shares were outstanding in 1997.
INTANGIBLE ASSETS
Intangible assets consist primarily of excess purchase price over net
assets acquired (goodwill), which is being amortized over its estimated useful
life of 40 years. In conformance with SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of",
the Company's management regularly evaluates whether events and circumstances
indicate that the remaining balance of intangibles or other long-lived assets
may not be recoverable.
The Excess of Acquired Net Assets Over Cost (negative goodwill) was
generated from the acquisition of the Predecessor Company. The amortization
period of the negative goodwill is 40 years. During 1998, the negative goodwill
was reduced by the additional $1,600,000 purchase price paid to Group.
Amortization expense, including negative amortization of $252,000 in 1998
and $269,000 in 1997, of the years ended December 31, 1998, 1997 and 1996
amounted to $965,000, $(269,000) and $16,000, respectively.
F-12
<PAGE> 138
RAILWORKS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. ACCOUNTS RECEIVABLE AND CONTRACTS IN PROGRESS
Accounts receivable at December 31, 1998 and 1997 consisted of the
following (in thousands):
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Billed...................................................... $58,702 $31,400
Retainages.................................................. 18,479 15,036
------- -------
$77,181 $46,436
======= =======
</TABLE>
Retainages of approximately $5,783,000 and $4,388,000 at December 31, 1998
and 1997 are invested in U.S. government obligations and municipal bonds. The
Company anticipates that 47% of all retainages at December 31, 1998 will be
collected within one year.
Costs and estimated earnings in excess of billings on uncompleted contracts
arise when revenues have been recorded but the amounts cannot be billed
currently under the terms of the contracts. Such amounts are recoverable from
customers upon various measures of performance, including achievement of certain
milestones, completion of specified units or completion of the contract. The
Company anticipates that substantially all amounts, other than unanticipated
additional contract costs (see below), will be billed and collected within one
year.
The Company has recorded as costs and estimated earnings in excess in
billings on uncompleted contracts amounts that it seeks or will seek to collect
from customers or others for error or changes in contract specifications or
design, contract change orders in dispute or unapproved as to both scope and
price, or other customer-related causes of unanticipated additional contract
costs (pending change orders or claims). These amounts are recorded at their
estimated net realizable value when realization is probable and can be
reasonably estimated. No profit is recognized on the construction costs incurred
in connection with these amounts. Pending change orders and claims involve the
use of estimates and it is reasonably possible that revisions to the estimated
recoverable amounts of recorded pending change orders and claims may be made in
the near-term. Claims made by the Company involve negotiation and, in certain
cases litigation. The Company expenses such costs as incurred, although it may
seek to recover these costs as part of the claim. The Company believes that it
has established legal bases for pursuing recovery of recorded claims and it is
management's intention to pursue and litigate these claims, if necessary, until
a decision or settlement is reached.
The Company is pursuing unanticipated additional contract costs on certain
completed contracts. Costs and estimated earnings in excess of billings on
uncompleted contracts includes unbilled revenues of approximately $11,054,000
and $3,915,000 at December 31, 1998 and 1997, respectively, related to these
contracts. In addition, billed accounts receivable and retainages include
contractually billed amounts related to these contracts of approximately
$3,105,000 and $2,257,000 at December 31, 1998 and 1997, respectively. Certain
contractually billed amounts related to these contracts may not be paid by the
customer to the Company until final resolution of the contract. At December 31,
1998 and 1997, the Company had reserves of approximately $4,500,00 and
$2,285,000, respectively, related to unbilled revenue and estimated legal costs
to settle.
F-13
<PAGE> 139
RAILWORKS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Costs and estimated earnings at December 31, 1998 and 1997, on uncompleted
contracts and related amounts billed are as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Costs....................................................... $429,114 $363,561
Estimated earnings.......................................... 47,575 46,027
-------- --------
476,689 409,588
Billings.................................................... 457,855 400,949
-------- --------
$ 18,834 $ 8,639
======== ========
</TABLE>
Such amounts are included in the accompanying consolidated balance sheets
under the following captions (in thousands):
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Costs and estimated earnings in excess of billings on
uncompleted contracts....................................... $24,792 $17,149
Billings in excess of costs and estimated earnings on
uncompleted contracts..................................... (5,958) (8,510)
------- -------
$18,834 $ 8,639
======= =======
</TABLE>
At December 31, 1998, 1997 and 1996, earned revenues from government
related funding sources were 40%, 66% and 61%, respectively, of total earned
revenues. Approximately 27%, 30% and 27% of total earned revenues for 1998, 1997
and 1996, respectively, were from a single government customer.
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at December 31,
1998 and 1997 (in thousands):
<TABLE>
<CAPTION>
1998 1997
------- ----
<S> <C> <C>
Land and buildings.......................................... $ 1,780 $ --
Transportation equipment.................................... 2,121 --
Machinery and equipment..................................... 10,038 448
Office furniture and equipment.............................. 326 --
Leasehold improvements...................................... 249 --
------- ----
14,514 448
Less accumulated depreciation and amortization.............. 1,122 56
------- ----
Property, plant and equipment, net.......................... $13,392 $392
======= ====
</TABLE>
Depreciation and amortization expense on property, plant and equipment
charged to operations for the years ended December 31, 1998, 1997 and 1996 was
approximately $1,140,000, $56,000 and $1,349,000, respectively.
F-14
<PAGE> 140
RAILWORKS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1998 and 1997 (in
thousands):
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Revolving credit agreement(a)............................... $49,300 $ --
Revolving credit agreement(b)............................... -- 12,057
Temporary revolver(c)....................................... -- 550
Promissory note(d).......................................... -- 1,700
Fixed asset notes........................................... 2,204 697
------- -------
51,504 15,004
Less current portion........................................ 931 2,555
------- -------
$50,573 $12,449
======= =======
</TABLE>
- ---------------
(a) On August 4, 1998, the Company entered into a secured $75,000,000 revolving
credit agreement with NationsBank, N.A. (the "Credit Facility"). The Credit
Facility expires on August 4, 2001; however, the Company may request the
bank to extend the agreement for two, one-year periods. The proceeds of the
Credit Facility are to be utilized for working capital, future acquisitions
and letters of credit. The aggregate amount of letter of credit obligations
that can be drawn against the Credit Facility shall not exceed $20,000,000.
There were no letters of credit outstanding at December 31, 1998. Interest
on loans, commitment fees, and letter of credit fees are based upon
consolidated leverage ratios in a pricing matrix which may be based on
prime or LIBOR. The annual interest rates in effect at December 31, 1998,
for prime and LIBOR borrowings were 8.5% and 7.26%, respectively. A one
time facility fee of 2% was paid on the total Credit Facility.
(b) On April 4, 1997, the Company entered into a secured revolving credit
agreement (the "Revolver") with a maximum aggregate principal amount of
$15,000,000 (the "Commitment"). Interest on Base Rate loans was at a rate
of 1% plus the Base Rate, as defined (approximately prime rate); interest
on Eurodollar loans was at 3.25% plus the Eurodollar Rate, as defined
(approximately LIBOR). An annual facility fee of 1% and a commitment fee of
1/2 of 1% were payable on the total Commitment and the total unused
Commitment, respectively. Up to $10,000,000 of letters of credit could be
drawn against the Commitment, $2,911,655 of which was drawn at December 31,
1997. This obligation was repaid in its entirety on August 4, 1998.
(c) On December 11, 1997, the Company entered into a short-term secured
revolving credit agreement (the "Temporary Revolver") with a maximum
principal amount of $2,000,000. Interest on the unpaid principal was at a
rate of 2% plus the Base Rate (approximately prime rate). The Temporary
Revolver was extended from its original maturity and was repaid in its
entirety on August 4, 1998.
(d) Interest on this agreement was payable semi-annually at a rate of 8.5%.
This obligation was repaid in its entirety on August 4, 1998.
The Credit Facility is secured by a first lien on all of the capital stock
of the Company's subsidiaries and on all accounts receivable of the Company and
its subsidiaries. In addition, the Credit Facility contains a negative pledge on
all other assets of the Company and its subsidiaries. The Credit Facility
contains restrictive covenants that, among other things impose limitations on
the Company with respect to its ability to incur additional indebtedness, make
certain investments, sell assets or pay dividends. The Credit Facility also
contains various financial
F-15
<PAGE> 141
RAILWORKS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
covenants which require the Company to meet certain targets including, but not
limited to, the maintenance of net worth, earnings before interest, taxes,
depreciation and amortization (EBITDA) to debt ratio and fixed charge coverage
ratio.
7. INCOME TAXES
The Company files a consolidated federal income tax return. The Predecessor
Company's results were included in the consolidated federal income tax return of
Spie.
The income tax provision in the accompanying consolidated statements of
operations for the years ended December 31, 1998, 1997 and 1996 consists of (in
thousands):
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
1998 1997 1996
------ ------ -----------
<S> <C> <C> <C>
Current:
Federal............................................... $ -- $ -- $150
State................................................. 895 132 268
------ ------ ----
895 132 418
------ ------ ----
Deferred:
Federal............................................... 503 941 70
State................................................. 74 125 12
------ ------ ----
577 1,066 82
------ ------ ----
$1,472 $1,198 $500
====== ====== ====
</TABLE>
Factors accounting for the variation from U.S. statutory income tax rates
relating to continuing operations for the years ended December 31, 1998, 1997
and 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
1998 1997 1996
------- ------ -----------
<S> <C> <C> <C>
Federal income taxes at the statutory rate............. $(3,981) $ 893 $189
Benefit of NOL......................................... -- -- (189)
Federal alternative minimum tax........................ -- -- 150
State and local taxes.................................. (680) 206 242
Other.................................................. 229 99 108
Valuation allowance.................................... 5,904 -- --
------- ------ ----
$ 1,472 $1,198 $500
======= ====== ====
</TABLE>
F-16
<PAGE> 142
RAILWORKS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of the net deferred income tax asset in the accompanying
consolidated balance sheets at December 31, 1998 and 1997 are as follows (in
thousands):
<TABLE>
<CAPTION>
1998 1997
------- ------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward........................... $ 3,005 $ 317
Excess of amounts expensed for financial statement
purposes over amounts deducted for income tax
purposes............................................... 4,097 1,451
State and local income taxes, net of federal tax
benefits............................................... 915 481
------- ------
Total deferred tax asset.................................... 8,017 2,249
------- ------
Deferred tax liability,
Costs capitalized for financial statement purposes and
deducted for income tax purposes....................... 1,158 1,229
------- ------
Total deferred tax liability................................ 1,158 1,229
------- ------
Net deferred tax asset before valuation allowance........... 6,859 1,020
Valuation allowance for net deferred tax asset.............. (5,904) --
------- ------
$ 955 $1,020
======= ======
</TABLE>
8. PREFERRED STOCK
The Company has authorized 10,000,000 shares of Series A convertible
preferred stock. The stock has no voting rights, shares dividends ratably with
the common stock, is non-cumulative and has a liquidation preference over shares
of common stock. Each share of preferred stock is convertible into 100 shares of
the Company's common stock.
On October 8, 1998, the Company issued 13,700 shares of its nonvoting
Series A convertible preferred stock in exchange for 1,370,000 shares of common
stock. Each share of Series A convertible preferred stock is convertible to 100
shares of common stock upon five days prior written notice from the holder,
subject to certain conditions.
9. STOCK OPTION PLAN
On August 13, 1998, the Company approved the 1998 Stock Incentive Plan (the
"Plan") which provides for the granting or awarding of stock options and stock
appreciation rights to non-employee directors, officers and other key employees
(including officers of the Subsidiaries) and consultants. The Plan reserves for
issuance 2,000,000 shares of common stock. In general, the terms of the option
awards (including vesting schedules) will be established by the Compensation
Committee of the Company's board of directors.
During 1998 options covering an aggregate of 30,000 shares of common stock
were issued under the Plan. Two non-employee directors were each issued options
to purchase 10,000 shares of common stock at the IPO price. Options to purchase
10,000 shares were also issued to a President of one of the Subsidiaries at the
price of the common stock on the date of the grant. The options expire ten years
after the date of grant.
F-17
<PAGE> 143
RAILWORKS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1998, 30,000 options were outstanding:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
SHARES EXERCISE PRICE
------ ----------------
<S> <C> <C>
Balance at inception....................................... -- $ --
Granted.................................................... 30,000 10.02
Exercised.................................................. -- --
------ ------
Balance, December 31, 1998................................. 30,000 $10.02
====== ======
Exercisable, December 31, 1998............................. -- $ --
====== ======
</TABLE>
The weighted average fair value of options granted in 1998 at market value
was $4.79.
The fair value of each stock option grant is estimated as of the date of
grant using the Black-Scholes option pricing model with the following weighted
average assumptions:
<TABLE>
<S> <C>
Risk-free interest rate at date of grants................... 5.25 - 5.79%
Expected lives.............................................. 3 to 6 years
Expected volatility......................................... 44.0%
Expected dividend yield..................................... 0%
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1998:
<TABLE>
<CAPTION>
NUMBER OF
OPTIONS WEIGHTED WEIGHTED
OUTSTANDING AT AVERAGE REMAINING AVERAGE
EXERCISE PRICE DECEMBER 31, 1998 CONTRACTUAL LIFE EXERCISE PRICE
- -------------- ----------------- ----------------- --------------
<S> <C> <C> <C>
$6.06 to 12.00..................... 30,000 9.59 $10.02
====== ==== ======
</TABLE>
The Company applies APB No. 25 and related interpretations in accounting
for its stock option plans. Accordingly, no compensation cost has been
recognized in the accompanying consolidated statements of operations for the
year ended December 31, 1998 for options granted during that year. Had
compensation expense for all stock options granted in 1998 been determined
consistent with SFAS No. 123, the Company's net income per share would have been
as follows:
<TABLE>
<S> <C>
Net loss:
As Reported............................................... $(12,847)
========
Pro Forma................................................. $(12,864)
========
Net loss per share:
As Reported -- basic and diluted.......................... $ (1.67)
========
Pro Forma -- basic and diluted............................ $ (1.67)
========
</TABLE>
The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts and additional awards in future years are
anticipated.
10. EMPLOYEE BENEFIT PLANS
Certain of the acquired companies have qualified defined contribution
employee benefit plans (the "Plans"), the majority of which allowed for
voluntary pretax contributions by employees. The Subsidiaries paid all general
and administrative expenses of the Plans and in some cases, the Subsidiaries
made matching and discretionary contributions to the Plans. The
F-18
<PAGE> 144
RAILWORKS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Subsidiaries currently offer no post-employment or post-retirement benefits. The
expense incurred related to the Plans by the Company was approximately $367,000,
$321,000 and $337,000 for the years ended December 31, 1998, 1997 and 1996,
respectively.
Prior to 1997, Comstock was generally self insured for its automobile and
general liability insurance and, to a lesser extent, for workers' compensation.
Included primarily in accrued payroll and related withholdings, and other
liabilities at December 31, 1998 and 1997 are reserves of $2,348,000 and
$3,574,000, respectively, relating to these insurance liabilities. The Company,
including Comstock, currently participates in a paid indemnity plan for these
insurance coverages.
Comstock sponsored an unfunded, fully insured postretirement medical plan
covering eligible retirees and their dependents which it elected to terminate
effective December 31, 1997. In 1996 Comstock offered, at group rates,
comprehensive medical care benefits to retirees and their covered dependents.
Comstock contributed approximately one-half of the total premium medical cost.
Under the plan, employees were eligible to enroll on the first day of the month
following retirement from Comstock after age 55 and ten years of service. Upon
adoption of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
other than Pensions" the accumulated postretirement benefit obligation was
$943,000. This amount was amortized over 20 years.
The postretirement benefit cost for 1996 included the following items (in
thousands):
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
1996
-----------
<S> <C>
Service cost................................................ $ 42
Interest cost............................................... 81
Transition amortization..................................... 47
----
$170
====
</TABLE>
The assumed discount rate used to measure the accumulated postretirement
benefit obligation was 7.25% in 1996. The assumed health care cost trend rate
was 9.5% in December 31, 1996, gradually decreasing to an ultimate rate of 5% in
2004 for participants under age 65. For those above age 65, a rate of 7.5% was
used in 1996, gradually decreasing to an ultimate rate of 5% in 2004. A one
percent increase in the assumed health care cost trend rate would increase costs
by $25,000 in 1996. This plan was discontinued in 1997.
The Company also has nonqualified defined benefit plans covering certain
current and former employees of one of the Subsidiaries which provide benefits
based on years of service and compensation. In aggregate, at December 31, 1998
and 1997 approximately $3,007,000 and $1,518,000, respectively relating to these
programs is included in the accompanying balance sheets.
The Company's self-insurance programs and certain employee benefit plan
liabilities are estimated using actuarial estimates and management assumptions.
These estimates are based on historical information, along with certain
assumptions about future events. Changes in assumptions, as well as changes in
actual experience could cause these estimates to change.
The Company has established two bonus incentive plans (the "Plans")
covering certain employees. The first bonus pool consists of 10% of the
Company's pre-tax profits and the second bonus pool consists of 15% of the
amount by which the Company's net income exceeds certain benchmarks. No benefits
were earned or paid under either of the Plans during 1998.
F-19
<PAGE> 145
RAILWORKS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. LEASE COMMITMENTS
The Company and its subsidiaries lease various office buildings, machinery,
equipment, and vehicles under operating leases expiring at various dates through
2004. Most of the real property leases have escalation clauses related to
increases in real property taxes. Future minimum lease payments under operating
leases are as follows (in thousands):
<TABLE>
<S> <C>
Years Ending December 31
1999...................................................... $2,163
2000...................................................... 1,252
2001...................................................... 1,070
2002...................................................... 1,046
2003...................................................... 930
</TABLE>
Rent expense for all operating leases, including amounts charged to cost of
revenues, for the year ended December 31, 1998, 1997 and 1996 was approximately
$3,047,000, $2,685,000 and $3,527,000, respectively.
12. RELATED-PARTY TRANSACTIONS
LEASING TRANSACTIONS
Certain of the subsidiaries lease their operating facilities from former
Founding Company owners who remained employees or directors of the Company.
Total rent paid to related parties for 1998 was $330,000. The Company believes
the rents to be the fair market rental value of the property.
13. COMMITMENTS AND CONTINGENCIES
PERFORMANCE BONDS
The Company's performance under certain construction contracts is secured
by performance bonds for which the Company pays a separate fee.
EMPLOYMENT CONTRACTS
Certain executives of the Company have entered into employment agreements
with the Company. In general, the employment agreements provide that, in the
event of a termination of employment by the Company without cause, such employee
will be entitled to receive from the Company an amount in cash equal to the
employee's then current annual base salary for the remainder of the term.
CONTINGENT PURCHASE PRICE FOR ACQUISITIONS
The sellers of Sheldon and Armcore are eligible to receive additional cash
amounts ("earnouts"), consisting of cash, as adjustments to the purchase prices
paid for those companies. Such cash payments are contingent upon the achievement
of earnings targets for 1999, 2000 and 2001.
ENVIRONMENTAL
The Company's operations are subject to extensive federal, state and local
regulations under environmental laws and regulations concerning, among other
things, emissions to the air, discharges to waters and the generation, handling,
storage, transportation, treatment and disposal of waste, hazardous substances,
underground and aboveground storage tanks and soil and
F-20
<PAGE> 146
RAILWORKS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
groundwater contamination. The Company is also subject to certain Federal, state
and local environmental laws and regulations relating to the use of creosote.
Creosote is used in certain of the Company's manufacturing processes to treat
wood railroad ties so that they can withstand exposure to outside elements.
Creosote, a coal tar treated derivative, has been recognized by the
environmental regulating agencies as a hazardous material. The Company believes
that it is in material compliance with all of the various regulations applicable
to their businesses and has not been notified of any violations by regulatory
agencies.
LITIGATION
The Company is involved in legal proceedings and claims, asserted by and
against the Company, which have arisen in the ordinary course of business. The
Company believes it has a number of valid defenses to these actions and the
Company intends to vigorously defend or assert these claims. Management
believes, upon advice of outside counsel, that none of these actions will have a
material adverse effect on the financial position or results of operations of
the Company.
14. LOANS TO OFFICERS
Pursuant to their employment agreements, certain officers of the Company
have been granted loans for the payment of income taxes related to stock grants.
These loans have a term of five years, are interest bearing and are
collateralized by the stock granted.
15. FINANCIAL INSTRUMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133").
SFAS 133 establishes accounting and reporting standards requiring that every
derivative instrument be recorded in the balance sheet as either an asset or a
liability measured at its fair value. SFAS 133 requires that changes in each
derivative's fair value be recognized into earnings unless specific hedge
accounting criteria are met. The Company does not anticipate that SFAS 133 will
have a material impact upon its operations.
INTEREST RATE SWAPS
The Company has entered into an interest rate swap agreement to manage
exposure to interest rate fluctuations. The outstanding agreement involves the
exchange of floating rate interest payments for fixed rate interest payments
over a specified time period without the exchange of any underlying principal
amounts. The Company's credit exposure is limited to the fair value of the
agreements, and the Company only enters into agreements with highly rated
counterparties. The Company does not enter into interest rate swap agreements
for trading or speculative purposes and matches the terms and contract notional
amounts to existing debt. The net amounts paid or received under interest rate
swap agreements are recognized as an adjustment to interest expense.
At December 31, 1998, the Company had an interest rate swap agreement with
a total notional value of $10,000,000, expiring December 7, 2001 or December 7,
2000 at the counterparties' option. The agreements effectively convert floating
rate obligations to a fixed rate of 4.85 percent. If the Company were to
terminate its existing interest rate swap agreements, any resulting gain or loss
would be deferred and recognized over the remaining life of the related debt.
F-21
<PAGE> 147
RAILWORKS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
RailWorks uses the following methods and assumptions in estimating the fair
value of its financial instruments:
Cash and Cash Equivalents -- The carrying amount is equal to fair
market value due to their short-term nature.
U.S. Government and Municipal Bonds -- These securities are classified
as held to maturity and are valued at cost which approximates market value.
Debt -- The Company's bank loans and floating rate debt approximate
fair value. The fair value of fixed rate long-term debt is based upon
quoted market prices for these or similar issues, or rates currently
available to the Company for debt with similar terms and maturities.
Interest Rate Swap Agreements -- The fair value of interest rate swap
agreements is based upon the estimated cost to terminate the agreements,
taking into account current interest rates and creditworthiness of the
counterparties. The fair value at December 31, 1998 was approximately
$10,500.
16. SEGMENT REPORTING
Comstock and the Predecessor Company operated in one reportable segment:
transit services. Accordingly, no additional disclosures are required under SFAS
No. 131. The following matrix presents operational and financial condition data
as of and for the year ended December 31, 1998 for analysis by reportable
segment (in thousands):
<TABLE>
<CAPTION>
TRANSIT RAIL PRODUCTS RAIL OTHER/
SERVICES AND SUPPLIES CONSTRUCTION CORPORATE TOTAL
-------- ------------- ------------ --------- --------
<S> <C> <C> <C> <C> <C>
Revenues from external
customers.................. $165,989 $11,195 $37,184 $ -- $214,368
Intersegmental revenue..... -- 952 883 -- 1,835
Depreciation/amortization... (17) 192 709 1,221 2,105
Segment operating profit
(loss)................... 6,084 1,683 4,596 (23,038) (10,675)
Costs and estimated
earnings in excess of
billings on uncompleted
contracts................ 22,897 -- 1,895 -- 24,792
Segment assets............. 58,224 8,299 26,676 159,677 252,876
Capital Expenditures....... 676 29 490 85 1,280
</TABLE>
The Company's reconciliation of segment totals to enterprise values are as
follows (in thousands):
<TABLE>
<S> <C>
REVENUES:
Total revenues for reportable segments.................... $214,368
Elimination of intersegment revenues...................... (1,835)
--------
Consolidated revenues..................................... $212,533
========
OPERATING PROFIT OR LOSS:
Total profit or loss for reportable segments.............. $(10,675)
========
ASSETS:
Total assets for reportable segments...................... $252,876
Elimination of intercompany receivables/payables.......... (826)
Elimination of investments in subsidiaries................ (23,414)
--------
Consolidated assets....................................... $228,636
========
</TABLE>
F-22
<PAGE> 148
RAILWORKS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
17. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Quarterly financial information for the years ended December 31, 1998 and
1997 are summarized as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
-------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues....................................... $41,628 $44,752 $53,077 $73,076
Operating income (loss)........................ 1,237 1,172 (18,404) 5,320
Net income (loss).............................. 666 456 (19,036) 5,067
Basic EPS...................................... .23 .15 (1.72) .37
Diluted EPS.................................... .23 .15 (1.72) .34
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues....................................... $32,401 $34,739 $41,197 $45,273
Operating income............................... 604 1,105 992 711
Net income..................................... 440 418 467 103
Basic EPS...................................... .15 .14 .16 .03
Diluted EPS.................................... .15 .14 .16 .03
</TABLE>
18. SUBSEQUENT EVENTS (UNAUDITED)
On January 7, 1999, the Company acquired all the stock of Mid West Railroad
Construction Maintenance Corporation of Wyoming (Mid West) which specializes in
construction, repair and maintenance of railroad tracks in various western
states. On January 26, 1999, the Company acquired all the stock of Gantrex Group
(Gantrex) which manufactures and supplies crane rail fastening systems including
pad manufacturing, extrusion and continuous vulcanizing capabilities. On January
29, 1999, the Company acquired all the stock of FCM Rail, Ltd. (FCM) which
provides customized leasing services to users of on track rail equipment. On
February 1, 1999, the Company acquired all of the stock of F & V Metro
Contracting Corp. and Affiliates (F & V) which performs electrical and
mechanical installations for transit and transportation agencies in the
metropolitan New York City area. The acquisitions were accounted for using the
purchase method of accounting and accordingly, the purchase price has been
allocated to the assets acquired and the liabilities assumed based upon the fair
values at the date of acquisition. The combined purchase price was $26,000,000
in cash, $8,833,000 of promissory notes payable and 100,000 shares of Common
Stock, plus the potential to receive earnouts if targeted revenue and profit
goals are achieved over the next 5 years. The estimated fair market value of
assets purchased was approximately $6,300,000 and the estimated goodwill was
$29,500,000. Any additional purchase price paid will increase the goodwill
reported. The estimated fair market values reflected above are based on
preliminary estimates and assumptions and are subject to revision.
F-23
<PAGE> 149
RAILWORKS CORPORATION
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash...................................................... $ 5,318 $ 2,846
Accounts receivable, net of allowance for doubtful
accounts of $491 and $442 at September 30, 1999 and
December 31, 1998, respectively......................... 134,359 77,181
Costs and estimated earnings in excess of billings on
uncompleted contracts................................... 52,662 24,792
Inventories:
Raw materials............................................. 13,031 7,535
Finished goods............................................ 4,815 1,550
Deferred tax asset........................................ 951 870
Other current assets...................................... 5,757 3,401
-------- --------
Total current assets................................ 216,893 118,175
-------- --------
PROPERTY, PLANT AND EQUIPMENT............................... 75,201 14,514
LESS -- ACCUMULATED DEPRECIATION AND AMORTIZATION........... 9,192 1,122
-------- --------
PROPERTY, PLANT AND EQUIPMENT, Net.......................... 66,009 13,392
-------- --------
OTHER ASSETS:
Excess of cost over acquired net assets, net of
amortization............................................ 183,337 93,845
Deferred tax asset........................................ 85 85
Loans to officers......................................... 6,764 959
Other..................................................... 8,321 2,180
-------- --------
Total other assets.................................. 198,507 97,069
-------- --------
Total............................................... $481,409 $228,636
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt...................... $ 11,784 $ 931
Accounts payable and accrued liabilities.................. 63,959 35,436
Accrued payroll and related withholdings.................. 3,656 3,777
Billings in excess of costs and estimated earnings on
uncompleted contracts................................... 13,434 5,958
Other current liabilities................................. 14,296 4,682
-------- --------
Total current liabilities........................... 107,129 50,784
-------- --------
LONG-TERM DEBT.............................................. 229,510 50,573
EXCESS OF ACQUIRED NET ASSETS OVER COST, net of
amortization.............................................. 8,491 8,662
OTHER LIABILITIES........................................... 10,003 8,609
-------- --------
Total long-term liabilities......................... 248,004 67,844
-------- --------
Total liabilities................................... 355,133 118,628
======== ========
STOCKHOLDERS' EQUITY:
Series A. convertible preferred stock, $1.00 par value,
authorized 10,000,000 shares, 13,700 shares issued and
outstanding............................................. 14 14
Common stock, $0.01 par value, authorized 100,000,000
shares,
13,955,706 issued and outstanding at September 30, 1999,
13,703,530 issued and outstanding at December 31,
1998.................................................... 139 137
Additional paid-in capital................................ 123,973 121,296
Accumulated other comprehensive income.................... 123 --
Retained earnings (deficit)............................... 2,027 (11,439)
-------- --------
Total stockholders' equity.......................... 126,276 110,008
-------- --------
Total............................................... $481,409 $228,636
======== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-24
<PAGE> 150
RAILWORKS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
Revenue..................................................... $ 325,908 $ 139,457
Cost of revenue............................................. 258,043 121,898
---------- ----------
Gross profit................................................ 67,865 17,559
Selling, general and administrative expenses................ 31,290 11,563
Non-recurring expenses...................................... -- 19,965
Transaction Fees............................................ -- 1,281
Depreciation and amortization expense....................... 4,372 745
Interest expense............................................ 12,370 1,508
Interest and other (income) expense, net.................... (1,713) (556)
---------- ----------
Income (loss) before taxes.................................. 21,546 (16,947)
Provision for income taxes.................................. 8,080 967
---------- ----------
Net income (loss)........................................... $ 13,466 $ (17,914)
========== ==========
Basic earnings (loss) per share............................. $ .97 $ (3.17)
========== ==========
Diluted earnings (loss) per share........................... $ .88 $ (3.17)
========== ==========
Weighted average shares used in computing basic earnings
(loss) per share.......................................... 13,867,599 5,651,896
========== ==========
Weighted average shares used in computing diluted earnings
(loss) per share.......................................... 15,244,892 5,651,896
========== ==========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-25
<PAGE> 151
RAILWORKS CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER RETAINED
COMMON STOCK PREFERRED STOCK PAID-IN COMPREHENSIVE EARNINGS COMPREHENSIVE
SHARES AMOUNT SHARES AMOUNT CAPITAL INCOME (DEFICIT) INCOME
------ ------ ------ ------ ---------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1999... 13,704 $137 14 $14 $121,296 $ -- $(11,439) $ --
Issuance of common stock
for acquisition.......... 252 2 -- -- 2,698 -- -- --
Stock option compensation.. -- -- -- -- 37 -- -- --
Stock issuance costs....... -- -- -- -- (58) -- -- --
Foreign currency
translation adjustment... -- -- -- -- -- 123 -- 123
Net income................. -- -- -- -- -- -- 13,466 13,466
------ ---- -- --- -------- ---- -------- -------
BALANCE, JUNE 30, 1999..... 13,956 $139 14 $14 $123,973 $123 $ 2,027 $13,589
====== ==== == === ======== ==== ======== =======
</TABLE>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER RETAINED
COMMON STOCK PREFERRED STOCK PAID-IN COMPREHENSIVE EARNINGS COMPREHENSIVE
SHARES AMOUNT SHARES AMOUNT CAPITAL INCOME (DEFICIT) INCOME
------ ------ ------ ------ ---------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1998... 2,960 $ 30 -- $-- $ -- $ -- $ 1,406 $ --
Issuance of common stock
for Founding Companies... 5,908 59 -- -- 54,023 -- -- --
Non-cash compensation
charge................... 1,206 12 -- -- 14,861 -- -- --
Initial public offering,
net of underwriting
discount and offering
expenses................. 5,000 50 -- -- 52,437 -- -- --
Net loss................... -- -- -- -- -- -- (17,914) (17,914)
------ ---- -- --- -------- ---- -------- --------
BALANCE, SEPTEMBER 30,
1998..................... 15,074 $151 -- $-- $121,321 $ -- $(16,508) $(17,914)
====== ==== == === ======== ==== ======== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-26
<PAGE> 152
RAILWORKS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1999 1998
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................... $ 13,466 $(17,914)
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization............................. 9,241 745
Non-cash compensation charge.............................. -- 14,873
Deferred taxes............................................ (81) --
Gain on sale of equipment................................. (25) (3)
Change in assets and liabilities:
Accounts receivable and costs and estimated earnings in
excess of billings on uncompleted contracts............. (31,230) (6,679)
Inventory................................................. 571 183
Other current assets...................................... 1,922 (667)
Accounts payable and accrued liabilities.................. (1,964) 4,492
Accrued payroll and related withholdings.................. (1,240) (343)
Billings in excess of costs and estimated earnings on
uncompleted contracts................................... (4,052) (3,920)
Other current liabilities................................. (2,892) (2,225)
Other assets.............................................. 1,728 (120)
Other liabilities......................................... (9,969) 5,073
--------- --------
Net cash used in operating activities.............. (24,525) (6,505)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment........................... 2,062 3
Purchase of equipment and leasehold improvements.......... (11,810) (914)
Loans to officers......................................... (5,805) --
Acquisition of subsidiaries, net of cash acquired......... (89,180) (51,139)
--------- --------
Net cash used in investing activities.............. (104,733) (52,050)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings on revolving line of credit... (19,300) 38,300
Payment of loan origination fees.......................... (532) (1,520)
Proceeds from issuance of common stock, net............... -- 52,487
Proceeds from long-term borrowings........................ 28,576 11,025
Debt issuance costs....................................... (5,150) --
Proceeds from issuance of Senior Subordinated Notes....... 173,938 --
Repayment of long-term borrowings......................... (45,925) (39,652)
--------- --------
Net cash provided by financing activities.......... 131,607 60,640
--------- --------
EXCHANGE RATE EFFECT ON CASH AND CASH EQUIVALENTS........... 123 --
NET INCREASE IN CASH........................................ 2,349 2,085
CASH, beginning of period................................... 2,846 1,120
--------- --------
CASH, end of period......................................... $ 5,318 $ 3,205
========= ========
SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest.................. $ 4,698 $ 1,269
========= ========
Cash paid during the period for income taxes.............. $ 5,769 $ 118
========= ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-27
<PAGE> 153
NON-CASH OPERATING, INVESTING AND FINANCING ACTIVITIES:
In January 1999, the Company issued 100,000 shares of common stock as
partial consideration for 100% of the outstanding common stock in the FCM Rail,
Ltd. acquisition. In April 1999, the Company issued 93,842 shares of common
stock as partial consideration for 100% of the outstanding common stock in the
McCord Treated Wood, Inc. and Birmingham Wood, Inc. acquisitions. In July 1999,
the Company issued 58,334 shares of common stock as additional consideration for
the November 1998 acquisition of Armcore Railroad Contractors, Inc.
During the first quarter of 1999, the Company issued an aggregate amount of
$9,000,000 in promissory notes and deferred payments as partial consideration
for the Midwest Railroad Construction & Maintenance Corporation of Wyoming, FCM
Rail, Ltd., F&V Metro Contracting Corp. and Affiliates and Gantrex Group
acquisitions. During the second quarter of 1999, the Company also issued an
aggregate amount of $1,500,000 and $2,500,000 in promissory notes and deferred
payments as partial consideration for the Pacific Northern Rail Contractors,
Inc. and
M-Track Enterprises, Inc. acquisitions, respectively. During the third quarter
of 1999, the Company issued an aggregate amount of 3,000,000 in promissory notes
as partial consideration for the Wood Waste Energy, Inc. acquisition.
See Accompanying Notes to Consolidated Financial Statements.
F-28
<PAGE> 154
RAILWORKS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation
have been included in the accompanying unaudited consolidated financial
statements. Operating results for the nine months ended September 30, 1999 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1999.
2. ORGANIZATION
RailWorks Corporation ("RailWorks" or the "Company") was incorporated in
Delaware on March 20, 1998 and was initially capitalized on such date through
the sale of 10 shares of Common Stock for an aggregate purchase price of $100.
RailWorks seeks to become a leading nationwide provider of rail system services,
including construction and rehabilitation, repair and maintenance, and related
products. RailWorks' strategy is to provide a full range of rail related
services and products on a national basis and offer integrated rail system
solutions. To accomplish this objective, RailWorks acquired, effective August 4,
1998, (the "Acquisitions") fourteen U.S. businesses (the "Founding Companies"),
completed an initial public offering (the "Offering") of five million shares of
its Common Stock on the same date (taken together the "Consolidation") and,
subsequent to the Consolidation, acquired, through merger or purchase similar
companies to expand its operations. RailWorks and the Founding Companies merged
together upon consummation of the Offering.
For accounting and financial statement purposes, Comstock Holdings, Inc.
(one of the Founding Companies) ("Comstock" or the "Accounting Acquirer") has
been identified as the accounting acquirer consistent with Staff Accounting
Bulletin ("SAB") No. 97 of the Securities and Exchange Commission. The
historical financial statements of RailWorks prior to August 4, 1998, are those
of Comstock. The acquisitions of the remaining Founding Companies and subsequent
acquired companies have been accounted for as purchases in accordance with
Accounting Principles Board ("APB") Statement No. 16 "Business Combinations".
Each purchase price has been allocated to the assets and the liabilities assumed
based upon the estimated fair values at the date of acquisition.
On November 4, 1998, the Company acquired substantially all of the net
assets of Sheldon Electric, Inc. ("Sheldon"). Also, on November 4, 1998, the
Company acquired all of the outstanding stock of Armcore Railroad Contractors,
Inc. ("Armcore"), an Indiana corporation, located in Frankfort, Indiana. During
1999, the Company recorded an additional $4,300,000 in goodwill related to the
settlement of contingent purchase price payments and the resolution of the
uncertainties related to the fair value of contracts acquired.
On January 7, 1999, the Company acquired all of the outstanding stock of
MidWest Railroad Construction & Maintenance Corporation of Wyoming ("Midwest")
which specializes in construction, repair and maintenance or railroad tracks in
various western states. On January 26, 1999, the Company acquired all of the
outstanding stock of Gantrex Group ("Gantrex") which manufactures and supplies
crane rail fastening systems including pad manufacturing, extrusion and
continuous vulcanizing capabilities. On January 29, 1999, the Company acquired
all of the outstanding stock of FCM Rail, Ltd. ("FCM") which provides customized
leasing services to users
F-29
<PAGE> 155
RAILWORKS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of on track rail equipment. In March 1999, the Company acquired all of the
outstanding stock of F&V Metro Contracting Corp. and Affiliates ("F&V") which
performs electrical and mechanical installations for transit and transportation
agencies in the metropolitan New York City area. The combined purchase price for
these first quarter 1999 acquisitions was $36,000,000 in cash, $9,000,000 of
promissory notes payable and deferred payments, and 100,000 shares of RailWorks
Common Stock at an aggregate value of $1,000,000, plus the potential to receive
earnouts if targeted revenue and profit goals are achieved over the next five
years. The fair market value of assets purchased was $12,055,000 and the
preliminary goodwill was approximately $33,945,000. Subsequent to the initial
recording of goodwill, an additional $6,552,000 of goodwill has been recorded
through September 30, 1999 relating to these first quarter 1999 acquisitions.
Such adjustments reflect the settlement of contingent purchase price payments
and the resolution of the uncertainties related to the fair value of contracts
acquired.
On April 12, 1999, the Company acquired all of the outstanding stock of
McCord Treated Wood, Inc. and Birmingham Wood, Inc. ("McCord") which supply
creosote treated wooden cross ties throughout the Southeastern United States. On
April 30, 1999, the Company acquired all of the outstanding stock of M-Track
Enterprises, Inc. ("M-Track") which specializes in rail transit construction,
repair and maintenance of track in the metropolitan New York City area. In May
1999, the Company acquired all of the outstanding stock of Pacific Northern Rail
Contractors, Inc. ("PNR") which specializes in construction, repair and
maintenance of railroad tracks throughout Canada. On June 3, 1999, the company
acquired all the outstanding stock of Neosho, Incorporated ("Neosho") which
provides track and transit construction, repair and maintenance to public and
private industrial customers nationally. On June 30, 1999, the Company acquired
all of the outstanding stock of Earl Campbell Construction Company, Inc.
("Campbell") which specializes in construction, repair and maintenance of
railroad tracks in various Southern states. The combined purchase price for
these second quarter 1999 acquisitions was $49,535,000 in cash, $4,000,000 of
promissory notes payable and deferred payments and 93,842 shares of common stock
at an aggregate value of $1,000,000 plus the potential to receive earn-outs if
targeted revenue and profit goals are achieved over the next five years. The
fair market value of assets purchased for the second quarter 1999 acquisitions
was approximately $16,262,000 and the preliminary goodwill recorded was
approximately $38,273,000. Subsequent to the initial recording of goodwill, an
additional $2,208,000 of goodwill has been recorded through September 30, 1999
relating to these third quarter 1999 acquisitions. Such adjustments represent
the resolution of litigation which was pending at the time of acquisition.
On August 4, 1999, the Company acquired all of the outstanding stock of
Wood Waste Energy, Inc. ("Wood Waste") which collects used cross ties along the
railroad rights of way and processes them into fuel which is sold to industrial
customers. The purchases price for this acquisition was $5,000,000 in cash and a
$3,000,000 promissory note, plus the potential to receive earn-outs if targeted
revenue and profit goals are achieved for the years ended December 31, 2000 and
2001. The fair market value of assets purchased was approximately $1,078,000 and
the preliminary goodwill recorded was approximately $6,922,000.
Assets acquired and liabilities assumed are recorded at their fair values
at the time of acquisition. The excess of the purchase price over the net fair
value is allocated to goodwill. The estimated fair values of acquired assets and
liabilities are subject to adjustment pending finalization of, among other
things, certain fixed asset appraisals and the quantification of contract and/or
litigation uncertainties based on information which was not available at the
time of acquisition but subsequently obtained. Goodwill is adjusted as these
items are resolved as well as when, and if, additional contingent purchase price
is paid. The Company evaluates periodically whether events and circumstances
indicate that any goodwill is impaired.
F-30
<PAGE> 156
RAILWORKS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. SENIOR SUBORDINATED NOTES
On September 30, 1999, the Company sold $50 million of its 11.5% senior
subordinated notes (the "Notes"). The Notes were sold in a private placement
pursuant to Rule 144A under the Securities Act of 1933. The Company has filed a
registration statement on Form S-4, pursuant to which it will offer to exchange
registered notes that are substantially identical to the Notes for the Notes.
The net proceeds from the offering were used to repay approximately $48 million
of indebtedness under the senior revolving credit facility. The notes have an
interest rate of 11.5%, payable semi-annually and are due in 2009 with no
interim amortization requirements.
4. EARNINGS PER SHARE
The following is the computation of basic and diluted earnings per share
for the three months ended September 30, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
----------- ------------
<S> <C> <C>
Net income (loss)....................................... $ 7,693,000 $(19,036,000)
=========== ============
Shares used for calculating basic EPS................... 13,939,220 11,035,687
Dilutive effect of:
Stock options...................................... 2,303 --
Convertible preferred shares....................... 1,370,000 *
----------- ------------
Shares used for calculating diluted EPS................. 15,311,523 11,035,687
=========== ============
Basic EPS............................................. $ .55 $ (1.72)
Diluted EPS........................................... $ .50 $ (1.72)
</TABLE>
- ---------------
* There were no convertible preferred shares issued and outstanding during the
three months ended September 30, 1998.
The following is the computation of basic and diluted earnings per share
for the nine months ended September 30, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
----------- ------------
<S> <C> <C>
Net income (loss)....................................... $13,466,000 $(17,914,000)
=========== ============
Shares used for calculating basic EPS................... 13,867,599 5,651,896
Dilutive effect of:
Stock options...................................... 7,293 --
Convertible preferred shares....................... 1,370,000 *
----------- ------------
Shares used for calculating diluted EPS................. 15,244,892 5,651,896
=========== ============
Basic EPS............................................. $ .97 $ (3.17)
=========== ============
Diluted EPS........................................... $ .88 $ (3.17)
=========== ============
</TABLE>
- ---------------
* There were no convertible preferred shares issued and outstanding during the
nine months ended September 30, 1998.
5. SEGMENT REPORTING
During 1998, the Company adopted SFAS No. 131 "Disclosures about Segments
of an Enterprise and Related Information" ("SFAS No. 131"). In accordance with
SFAS No. 131, the Company has three reportable segments: (1) transit services,
(2) rail construction, rehabilitation, repair and maintenance services and (3)
rail products and supplies. The transit services segment provides transit
construction and rehabilitation services, as well as installation of signaling,
F-31
<PAGE> 157
RAILWORKS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
communications and electrical systems. The rail construction services segment
provides design, engineering, construction, rehabilitation and repair and
maintenance of track systems. The rail products and supplies segment provides a
broad range of rail related products, including treated wood ties. RailWorks
evaluates performance based on profit or loss from operations before income
taxes, interest income and expense, and non-recurring gains and losses. Each of
the segments follow a uniform set of accounting policies.
The following table sets forth operational and financial condition data as
of and for the three months ended September 30, 1999 for analysis by reportable
segment (in thousands).
<TABLE>
<CAPTION>
TRANSIT RAIL PRODUCTS RAIL OTHER/
SERVICES AND SUPPLIES CONSTRUCTION CORPORATE TOTAL
-------- ------------- ------------ --------- --------
<S> <C> <C> <C> <C> <C>
Revenues from external customers... $ 65,554 $15,451 $60,489 $ -- $141,494
Inter-segmental revenue............ 1,020 1,557 1,492 -- 4,069
Depreciation/amortization.......... 133 1,067 1,532 1,365 4,097
Segment operating profit (loss).... 11,849 3,247 6,377 (3,901) 17,572
Segment assets..................... 109,268 36,178 83,385 356,255 585,086
</TABLE>
The Company's reconciliation of segment totals to enterprise values are as
follows (in thousands):
<TABLE>
<S> <C>
REVENUES:
Total revenues for reportable segments.................... $141,494
Elimination of inter-segment revenues..................... (4,069)
--------
Consolidated revenues..................................... $137,425
========
ASSETS:
Total assets for reportable segments...................... $585,086
Elimination of intercompany receivables/payables.......... (6,121)
Elimination of investments in subsidiaries................ (97,556)
--------
Consolidated assets....................................... $481,409
========
</TABLE>
The following table sets forth operational and financial condition data as
of and for three months ended September 30, 1998 for analysis by reportable
segment (in thousands).
<TABLE>
<CAPTION>
TRANSIT RAIL PRODUCTS RAIL OTHER/
SERVICES AND SUPPLIES CONSTRUCTION CORPORATE TOTAL
-------- ------------- ------------ --------- --------
<S> <C> <C> <C> <C> <C>
Revenues from external customers.... $33,206 $5,630 $14,491 $ -- $ 53,327
Inter-segmental revenue............. 0 250 0 -- 250
Depreciation/amortization........... (7) 76 256 478 803
Segment operating profit (loss)..... 1,477 775 1,304 (21,960) (18,404)
Segment assets...................... 50,546 8,715 24,729 146,366 230,356
</TABLE>
The Company's reconciliation of segment totals to enterprise values are as
follows (in thousands):
<TABLE>
<S> <C>
REVENUES:
Total revenues for reportable segments.................... $ 53,327
Elimination of inter-segment revenues..................... (250)
--------
Consolidated revenues..................................... $ 53,077
========
ASSETS:
Total assets for reportable segments...................... $230,356
Elimination of investments in subsidiaries................ (18,658)
--------
Consolidated assets....................................... $211,698
========
</TABLE>
F-32
<PAGE> 158
RAILWORKS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth operational and financial condition data as
of and for the nine months ended September 30, 1999 for analysis by reportable
segment (in thousands).
<TABLE>
<CAPTION>
TRANSIT RAIL PRODUCTS RAIL OTHER/
SERVICES AND SUPPLIES CONSTRUCTION CORPORATE TOTAL
-------- ------------- ------------ --------- --------
<S> <C> <C> <C> <C> <C>
Revenues from external customers... $183,462 $37,504 $114,576 $ -- $335,542
Inter-segmental revenue............ 2,706 3,254 3,674 -- 9,634
Depreciation/amortization.......... 222 2,255 3,266 3,498 9,241
Segment operating profit (loss).... 18,630 7,619 13,684 (7,729) 32,204
Segment assets..................... 109,268 36,178 83,385 356,255 585,086
</TABLE>
The Company's reconciliation of segment totals to enterprise values are as
follows (in thousands):
<TABLE>
<S> <C>
REVENUES:
Total revenues for reportable segments.................... $335,542
Elimination of inter-segment revenues..................... (9,634)
--------
Consolidated revenues..................................... $325,908
========
ASSETS:
Total assets for reportable segments...................... $585,086
Elimination of inter-company receivables/payables......... (6,121)
Elimination of investments in subsidiaries................ (97,556)
--------
Consolidated assets....................................... $481,409
========
</TABLE>
The following table sets forth operational and financial condition data as
of and for the nine months ended September 30, 1998 for analysis by reportable
segment (in thousands).
<TABLE>
<CAPTION>
TRANSIT RAIL PRODUCTS RAIL OTHER/
SERVICES AND SUPPLIES CONSTRUCTION CORPORATE TOTAL
-------- ------------- ------------ --------- --------
<S> <C> <C> <C> <C> <C>
Revenues from external customers... $119,586 $5,630 $14,491 $ -- $139,707
Inter-segmental revenue............ 0 250 0 -- 250
Depreciation/amortization.......... (65) 76 256 478 745
Segment operating profit (loss).... 3,886 775 1,304 (21,960) (15,995)
Segment assets..................... 50,546 8,715 24,729 146,366 230,356
</TABLE>
The Company's reconciliation of segment totals to enterprise values are as
follows (in thousands):
<TABLE>
<S> <C>
REVENUES:
Total revenues for reportable segments.................... $139,707
Elimination of inter-segment revenues..................... (250)
--------
Consolidated revenues..................................... $139,457
========
ASSETS:
Total assets for reportable segments...................... $230,356
Elimination of investments in subsidiaries................ (18,658)
--------
Consolidated assets....................................... $211,698
========
</TABLE>
6. CAPITAL STOCK AND STOCK OPTIONS
During the three months ended September 30, 1999, the Company issued 58,334
shares of common stock in lieu of all future additional purchase price payments
relating to the Armcore acquisition.
F-33
<PAGE> 159
RAILWORKS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On August 13, 1998, the Company approved the 1998 Stock Incentive Plan (the
"Plan"), which provides for the granting or awarding of stock options and stock
appreciation rights to non-employee directors, officers and other key employees
(including officers of the Subsidiaries) and consultants. The Plan reserves for
issuance 2,000,000 shares of common stock. In general, the terms of the option
awards (including vesting schedules) will be established by the Compensation
Committee of the Company's board of directors.
During the three months ended September 30, 1999 the Company issued options
to purchase 172,500 shares of common stock to seven employees of RailWorks. The
exercise price of the options was the market price of the stock on the date of
grant.
The options expire ten years after the date of grant. Also during the
quarter, the Company issued options to purchase 10,000 shares of common stock to
a newly appointed outside director of RailWorks. The exercise price of the
options was the market price of the stock on the date of grant. The options
expire ten years after the date of grant.
7. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTOR AND NON-GUARANTOR SUBSIDIARIES
The Company conducts a significant portion of its business through its
subsidiaries. All of the Company's domestic subsidiaries have fully and
unconditionally guaranteed the Notes ("Subsidiary Guarantors"). The Company's
non-U.S. subsidiaries have not guaranteed the Notes (the "Non-Guarantor
Subsidiaries"). The Notes are effectively subordinated in right of payment to
all indebtedness and other liabilities (including trade payables) of the
Non-Guarantor Subsidiaries.
Set forth below are condensed consolidating financial statements for the
Company, the Subsidiary Guarantors and the Non-Guarantor Subsidiaries as of
September 30, 1999 and for the three and nine months ended September 30, 1999.
The Company has not presented statements of operations for the three or nine
months ended September 30, 1998 or a statement of cash flows for the nine months
ended September 30, 1998 because during such periods all of the Company's
subsidiaries had fully and unconditionally guaranteed the Notes. The equity
method has been used by the Company with respect to investments in subsidiaries.
Separate financial statements for the Subsidiary Guarantors are not presented
based on management's determination that they do not provide additional
information that is material to investors.
F-34
<PAGE> 160
RAILWORKS CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 1999
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
RAILWORKS
CORPORATION NON-
(PARENT GUARANTOR GUARANTOR
COMPANY ONLY) SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash...................................... $ 1,546 $ 1,450 $ 2,322 $ -- $ 5,318
Accounts receivable, net.................. -- 129,560 10,920 (6,121)(a) 134,359
Costs and estimated earnings in excess of
billings on uncompleted contracts....... -- 52,662 -- -- 52,662
Inventories:
Raw Materials........................... -- 10,278 2,753 -- 13,031
Finished goods.......................... -- 3,393 1,422 -- 4,815
Deferred tax asset........................ -- 951 -- -- 951
Due (to) from Parent Company.............. 64,377 (59,504) (4,873) -- --
Other current assets...................... 71 5,570 116 -- 5,757
-------- -------- ------- --------- --------
Total current assets................ 65,994 144,360 12,660 (6,121) 216,893
-------- -------- ------- --------- --------
INVESTMENT IN SUBSIDIARIES.................. 270,148 -- -- (270,148)(b) --
-------- -------- ------- --------- --------
PROPERTY, PLANT AND EQUIPMENT............... 188 70,611 4,402 -- 75,201
LESS ACCUMULATED DEPRECIATION
AND AMORTIZATION........................ 32 8,752 408 -- 9,192
-------- -------- ------- --------- --------
PROPERTY, PLANT AND EQUIPMENT, NET.......... 156 61,859 3,994 -- 66,009
-------- -------- ------- --------- --------
OTHER ASSETS:
Excess of cost over acquired net assets,
net of amortization..................... -- 163,593 19,744 -- 183,337
Deferred tax asset........................ -- 85 -- -- 85
Loans to officers......................... 6,764 -- -- -- 6,764
Other..................................... 6,532 1,717 72 -- 8,321
-------- -------- ------- --------- --------
Total other assets.................. 13,296 165,395 19,816 -- 198,507
-------- -------- ------- --------- --------
Total............................... $349,594 $371,614 $36,470 $(276,269) $481,409
======== ======== ======= ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Current maturities of long-term debt...... $ 5,750 $ 6,034 $ -- $ -- $ 11,784
Accounts payable and accrued
liabilities............................. 3,500 52,780 4,093 (6,121)(a) 54,252
Accrued interest payable.................. 9,707 -- -- -- 9,707
Accrued payroll and related
withholdings............................ 18 3,495 143 -- 3,656
Billings in excess of costs and estimated
earnings on uncompleted contracts....... -- 11,617 1,817 -- 13,434
Other current liabilities................. 2,251 10,486 1,559 -- 14,296
-------- -------- ------- --------- --------
Total current liabilities........... 21,226 84,412 7,612 (6,121) 107,129
-------- -------- ------- --------- --------
LONG TERM DEBT.............................. 210,688 16,722 2,100 -- 229,510
EXCESS OF ACQUIRED NET
ASSETS OVER COST............................ -- 8,491 -- -- 8,491
OTHER LIABILITIES........................... 4,026 5,730 247 -- 10,003
-------- -------- ------- --------- --------
Total long-term liabilities......... 214,714 30,943 2,347 -- 248,004
-------- -------- ------- --------- --------
Total liabilities................... 235,940 115,355 9,959 (6,121) 355,133
-------- -------- ------- --------- --------
STOCKHOLDERS' EQUITY:
Series A, convertible preferred stock..... 14 -- -- -- 14
Common stock.............................. 109 2,116 122 (2,208)(b) 139
Additional paid-in capital................ 123,973 214,022 23,892 (237,914)(b) 123,973
Accumulated other comprehensive income.... -- -- 123 -- 123
Retained earnings (deficit)............... (10,442) 40,121 2,374 (30,026)(b) 2,027
-------- -------- ------- --------- --------
Total stockholders' equity
(deficit)......................... 113,654 256,259 26,511 (270,148) 126,276
-------- -------- ------- --------- --------
Total............................... $349,594 $371,614 $36,470 $(276,269) $481,409
======== ======== ======= ========= ========
</TABLE>
- ---------------
(a) Elimination of inter-company receivables/payables.
(b) Elimination of investment in subsidiaries.
F-35
<PAGE> 161
RAILWORKS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
RAILWORKS
CORPORATION NON-
(PARENT GUARANTOR GUARANTOR
COMPANY ONLY) SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Sales.................. $ -- $309,993 $25,548 $ (9,633)(a) $325,908
Cost of sales.............. -- 251,024 16,652 (9,633)(a) 258,043
------- -------- ------- -------- --------
Gross profit............... -- 58,969 8,896 -- 67,865
Selling, general and
administrative Expenses.. 7,286 24,268 4,108 -- 35,662
------- -------- ------- -------- --------
Income (loss) from
operations............... (7,286) 34,701 4,788 -- 32,203
Equity in earnings of
subsidiaries............. 24,494 -- -- (24,494)(b) --
Interest expense........... 11,152 1,096 122 -- 12,370
Other (income), net........ (1,365) (275) (73) -- (1,713)
------- -------- ------- -------- --------
Income (loss) before income
taxes.................... 7,421 33,880 4,739 (24,494) 21,546
Income taxes............... -- 5,714 2,366 -- 8,080
------- -------- ------- -------- --------
Net income (loss).......... $ 7,421 $ 28,166 $ 2,373 $(24,494) $ 13,466
======= ======== ======= ======== ========
</TABLE>
- ---------------
(a) Elimination of inter-company revenue.
(b) Elimination of equity in earnings subsidiaries.
(c) Elimination of inter-company revenue.
(d) Elimination of equity in earnings subsidiaries.
F-36
<PAGE> 162
RAILWORKS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
RAILWORKS
CORPORATION
(PARENT NON-
COMPANY GUARANTOR GUARANTOR
ONLY) SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss)......................... $ 7,421 $28,166 $2,373 $ (24,494)(a) $ 13,466
Adjustments to reconcile net income (loss)
to net cash (used in) provided by
operating activities:
Depreciation and amortization........... 28 8,504 709 -- 9,241
Equity in earnings of subsidiaries...... (24,494) -- -- 24,494(a) --
Deferred income taxes................... -- (81) -- -- (81)
Gain on sale of equipment............... -- (16) (9) -- (25)
Changes in operating assets and
liabilities:
Accounts receivable and costs and
estimated earnings in excess of
billings on uncompleted contracts... -- (26,378) (4,852) -- (31,230)
Inventory............................. -- 226 345 -- 571
Other current assets.................. 1,077 754 91 -- 1,922
Accounts payable and accrued
liabilities......................... (172) (12,548) 1,267 -- (11,453)
Accrued interest payable.............. 9,489 -- -- -- 9,489
Accrued payroll and related
withholdings........................ 17 (1,204) (53) -- (1,240)
Billings in excess of costs and
estimated earnings on uncompleted
contracts........................... -- (5,869) 1,817 -- (4,052)
Other current liabilities............. 1,823 (5,523) 808 -- (2,892)
Other assets.......................... 557 1,185 (14) -- 1,728
Other liabilities..................... (739) (7,380) (1,850) -- (9,969)
Due (to) from Parent.................. (41,915) 37,042 4,873 -- --
--------- ------- ------ --------- ---------
Net cash (used in) provided by
operating Activities.............. (46,908) 16,878 5,505 -- (24,525)
--------- ------- ------ --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment........... -- 2,005 57 -- 2,062
Purchase of equipment and leasehold
improvements............................ (103) (10,908) (799) -- (11,810)
Loans to officers......................... (5,805) -- -- -- (5,805)
Acquisitions of subsidiaries, net of cash
acquire................................. (94,594) -- -- 5,414(b) (89,180)
--------- ------- ------ --------- ---------
Net cash (used in) provided by
investing activities.............. (100,502) (8,903) (742) 5,414 (104,733)
--------- ------- ------ --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayment)borrowings on revolving
line of credit.......................... (19,300) -- -- -- (19,300)
Payment of loan origination fees.......... (532) -- -- -- (532)
Proceeds from long-term borrowings........ -- 26,476 2,100 -- 288,576
Debt issuance costs....................... (5,150) -- -- -- (5,150)
Proceeds from issuance of Senior
Subordinated Notes...................... 173,938 -- -- -- 173,938
Repayment of long-term borrowings......... -- (40,992) (4,933) -- (45,925)
--------- ------- ------ --------- ---------
Net cash (used in) provided by
financing Activities.............. 148,956 (14,516) (2,833) -- 131,607
--------- ------- ------ --------- ---------
EXCHANGE RATE EFFECT ON CASH................ -- -- 123 -- 123
NET INCREASE IN CASH........................ 1,546 (6,541) 1,930 5,414 2,349
CASH, Beginning of period................... -- 7,992 268 (5,414)(b) 2,846
--------- ------- ------ --------- ---------
CASH, End of period......................... $ 1,546 $ 1,451 $2,321 $ -- $ 5,318
========= ======= ====== ========= =========
</TABLE>
- ---------------
(a) Elimination of equity in earnings of subsidiary.
(b) Elimination of cash acquired.
F-37
<PAGE> 163
8. SUBSEQUENT EVENTS
ACQUISITION
On October 22, 1999, the Company acquired all of the outstanding stock of
W. T. Byler Corporation ("Byler") which provides railroad construction and
maintenance, grading, excavation, soil stabilization, concrete paving, asphalt
paving and underground utilities construction to public and private industrial
customers located throughout Texas and the other Gulf coast states.
TERM LOAN
On October 29, 1999, the Company secured a $30 million term loan (the "Term
Loan"). The Term Loan was established in conjunction with the Company's current
revolving credit facility (the "Credit Facility") utilizing identical
collateral. The Term Loan is due and payable in twenty (20) consecutive
quarterly installments ranging from $75,000 to $7.2 million through October 29,
2004. The proceeds of the Term Loan were utilized to pay down the existing
Credit Facility. The interest rate is variable based upon the bank's Base Rate
plus 2% per annum.
F-38
<PAGE> 164
REPORT OF INDEPENDENT CHARTERED ACCOUNTANTS
To the Shareholders of
Gantrex Group Limited, Norapco Limited,
Gantrex Holding Corporation and Gantrex Systems Inc.:
We have audited the combined balance sheet of GANTREX GROUP LIMITED,
NORAPCO LIMITED, GANTREX HOLDING CORPORATION AND GANTREX SYSTEMS INC. as at
December 31, 1998 and the combined statements of income and retained earnings
and cash flows for the year then ended. These combined financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these combined financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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.
In our opinion, these combined financial statements present fairly, in all
material respects, the combined financial position of Gantrex Group Limited,
Norapco Limited, Gantrex Holding Corporation and Gantrex Systems Inc. as at
December 31, 1998 and the combined results of their operations and their cash
flows for the year then ended in accordance with generally accepted accounting
principles.
Arthur Andersen LLP
March 15, 1999
Mississauga, Canada
F-39
<PAGE> 165
GANTREX GROUP LIMITED, NORAPCO LIMITED,
GRANTREX HOLDING CORPORATION AND GANTREX SYSTEMS INC.
COMBINED BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Current Assets
Cash and cash equivalents................................. $ 571,872
Accounts receivable....................................... 3,225,328
Inventories (Note 2)...................................... 1,392,711
Prepaid expenses.......................................... 93,089
Deferred income taxes..................................... 15,573
Income taxes receivable................................... 114,744
Other current assets...................................... 102,729
----------
5,516,046
CAPITAL ASSETS (Note 3)..................................... 1,071,567
TRADEMARKS, net of accumulated amortization of $15,648...... 11,162
PATENTS, net of accumulated amortization of $92,234......... 28,588
OTHER LONG-TERM ASSETS...................................... 83,628
----------
$6,710,991
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Bank demand loan (Note 4)................................. $ 206,607
Accounts payable and accrued liabilities.................. 2,724,081
----------
2,930,688
----------
DEFERRED INCOME TAXES....................................... 18,841
----------
SHAREHOLDERS' EQUITY
Share capital (Note 5).................................... 259,446
Retained earnings......................................... 3,502,016
----------
3,761,462
----------
$6,710,991
==========
</TABLE>
The accompanying notes are an integral part of this combined balance sheet.
F-40
<PAGE> 166
GANTREX GROUP LIMITED, NORAPCO LIMITED,
GRANTREX HOLDING CORPORATION AND GANTREX SYSTEMS INC.
COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
NET SALES................................................... $13,944,643
COST OF SALES............................................... 10,106,384
-----------
GROSS PROFIT................................................ 3,838,259
-----------
EXPENSES
Selling, general and administrative....................... 4,230,800
Depreciation and amortization............................. 33,254
Interest income, net...................................... (25,951)
Other income.............................................. (376,483)
-----------
3,861,620
-----------
LOSS BEFORE RECOVERY OF INCOME TAXES........................ (23,361)
RECOVERY OF INCOME TAXES.................................... 73,461
-----------
NET INCOME.................................................. 50,100
RETAINED EARNINGS, beginning of year........................ 3,451,916
-----------
RETAINED EARNINGS, end of year.............................. $ 3,502,016
===========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-41
<PAGE> 167
GANTREX GROUP LIMITED, NORAPCO LIMITED,
GRANTREX HOLDING CORPORATION AND GANTREX SYSTEMS INC.
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
CASH FLOWS PROVIDED FROM OPERATING ACTIVITIES:
Net income.................................................. $ 50,100
Items not affecting cash -
Depreciation and amortization............................. 145,870
Deferred income taxes..................................... (82,775)
Changes in non-cash working capital items................... (137,248)
---------
(24,053)
INVESTING ACTIVITY
Purchase of capital assets................................ (64,785)
FINANCING ACTIVITY
Decrease in bank demand loan.............................. (44,280)
---------
DECREASE IN CASH DURING THE YEAR............................ (133,118)
CASH AND CASH EQUIVALENTS, beginning of year................ 704,990
---------
CASH AND CASH EQUIVALENTS, end of year...................... $ 571,872
=========
</TABLE>
The accompanying notes are an integral part of this combined statement.
F-42
<PAGE> 168
GANTREX GROUP LIMITED, NORAPCO LIMITED,
GRANTREX HOLDING CORPORATION AND GANTREX SYSTEMS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION
The parent companies and their subsidiaries employ accounting policies and
standards of financial disclosure which are in accordance with the
recommendations of the Canadian Institute of Chartered Accountants.
All significant intercompany accounts and transactions have been
eliminated.
The combined financial statements include the accounts of:
1. GANTREX GROUP LIMITED consolidated with its wholly owned
subsidiaries:
Cranequip Limited
Gantrex Limited
Gantrex Systems Limited
2. NORAPCO LIMITED
3. GANTREX HOLDING CORPORATION consolidated with its wholly owned
subsidiary, Gantrex Corporation
4. GANTREX SYSTEMS INC.
USE OF ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
revenues and expenses during the reporting period as well as disclosure of
contingencies at the date of the financial statements. Actual results could
differ from those estimates.
INVENTORIES
Inventories are valued at the lower of cost and net realizable value with
cost being determined on a first-in, first-out basis.
CAPITAL ASSETS
The Companies record their capital assets at cost. Depreciation and
amortization are provided in order to allocate the costs over the estimated
useful lives of the capital assets as follows:
<TABLE>
<S> <C>
Building.................................................... 5% straight line
Equipment and machinery..................................... 10% - 30% straight line
Furniture and fixtures...................................... 20% straight line
Computer hardware........................................... 30% declining balance
Computer software........................................... 50% straight line
Trademarks.................................................. 5% straight line
Tooling..................................................... 50% straight line
</TABLE>
F-43
<PAGE> 169
GANTREX GROUP LIMITED, NORAPCO LIMITED,
GRANTREX HOLDING CORPORATION AND GANTREX SYSTEMS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
TRANSLATION OF FOREIGN CURRENCIES
All foreign companies and their subsidiaries included in the combined group
are treated as integrated foreign operations for combination purposes.
Accordingly, their monetary assets and liabilities have been converted to United
States dollars using the exchange rate in effect at the balance sheet date. All
other assets and liabilities are converted at historical rates. Revenues and
expenses are translated at average exchange rates prevailing during the year.
The resulting exchange gain/loss on translation is included in net income.
INCOME TAXES
The Companies follow the deferral method of tax allocation in accounting
for income taxes. Under this method timing differences between accounting and
taxable income result in the recording of deferred income taxes.
2. INVENTORIES
<TABLE>
<S> <C>
Finished goods.............................................. $1,273,318
Raw materials............................................... 119,393
----------
$1,392,711
==========
</TABLE>
3. CAPITAL ASSETS
<TABLE>
<CAPTION>
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
---------- ------------ ----------
<S> <C> <C> <C>
Land................................................... $ 130,095 $ -- $ 130,095
Building............................................... 746,287 238,636 507,651
Equipment and machinery................................ 1,467,965 1,225,235 242,730
Furniture and fixtures................................. 406,484 299,478 107,006
Computer hardware...................................... 505,442 423,922 81,520
Computer software...................................... 77,953 75,388 2,565
---------- ---------- ----------
$3,334,226 $2,262,659 $1,071,567
========== ========== ==========
</TABLE>
4. BANK DEMAND LOAN
The Companies have operating lines of credit totalling $1,100,000 bearing
interest at rates not exceeding the bank's prime rate of interest plus 1% per
annum. Accounts receivable, inventories and certain other assets of subsidiaries
have been pledged as collateral under the bank lines of credit. As at December
31, 1998 the Companies had unused and available operating lines of credit of
approximately $900,000.
F-44
<PAGE> 170
GANTREX GROUP LIMITED, NORAPCO LIMITED,
GRANTREX HOLDING CORPORATION AND GANTREX SYSTEMS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
5. SHARE CAPITAL
As at December 31, 1998, the authorized share capital of the Companies
consisted of the following:
<TABLE>
<S> <C>
GANTREX GROUP LIMITED:
Unlimited................................................... Class A shares
Unlimited................................................... Class B shares
Unlimited................................................... Class C shares
Unlimited................................................... Common shares
NORAPCO LIMITED:
Unlimited................................................... Class A shares
Unlimited................................................... Class B shares
Unlimited................................................... Class C shares
Unlimited................................................... Class D shares
</TABLE>
<TABLE>
<S> <C>
GANTREX HOLDING CORPORATION:
10,235 Common shares........................................
GANTREX SYSTEMS INC.:
3,000 Common shares.........................................
</TABLE>
As at December 31, 1998 the following shares had been issued and remained
outstanding:
<TABLE>
<S> <C>
GANTREX GROUP LIMITED:
14,730,404 Class A shares................................... $101,834
1,068,171 Class B shares.................................... 20,372
10,792 Common shares........................................ 204
--------
$122,410
========
NORAPCO LIMITED:
955,085 Class A shares...................................... $127,500
1,043,361 Class B shares.................................... 8,415
10,544 Class D shares....................................... 85
--------
$136,000
========
GANTREX HOLDING CORPORATION:
3,500 Preferred shares...................................... $ 850
10,235 Common shares........................................ 86
--------
$ 936
========
GANTREX SYSTEMS INC.:
100 Common shares........................................... $ 100
========
</TABLE>
F-45
<PAGE> 171
GANTREX GROUP LIMITED, NORAPCO LIMITED,
GRANTREX HOLDING CORPORATION AND GANTREX SYSTEMS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
6. COMMITMENTS
At December 31, 1998, the Companies had commitments under lease contracts
for the rental of real estate, expiring in 2001, requiring annual rental
payments as follows:
<TABLE>
<S> <C>
1999........................................................ $ 73,447
2000........................................................ 64,447
2001........................................................ 42,965
--------
$180,859
========
</TABLE>
7. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
Most entities depend on computerized systems and therefore are exposed to
the Year 2000 conversion risk, which, if not properly addressed, could affect an
entity's ability to conduct normal business operations. Management is addressing
this issue, however, given the nature of this risk, it is not possible to be
certain that all aspects of the Year 2000 Issue affecting the Company and those
with whom it deals such as customers, suppliers or other third parties, will be
fully resolved without having an adverse impact on the Company's operations.
8. SUBSEQUENT EVENT
On January 26, 1999, the shareholders of the Companies sold all of the
outstanding shares to RailWorks Corporation.
F-46
<PAGE> 172
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Mid West Railroad Construction and Maintenance Corporation of Wyoming:
We have audited the accompanying balance sheet of MID WEST RAILROAD
CONSTRUCTION AND MAINTENANCE CORPORATION OF WYOMING (a Wyoming corporation) as
of December 31, 1998, and the related statements of operations, retained
earnings and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of MID WEST RAILROAD
CONSTRUCTION AND MAINTENANCE CORPORATION OF WYOMING as of December 31, 1998, and
the results of its operations and its cash flows for the year then ended, in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
Stamford, Connecticut
March 12, 1999
F-47
<PAGE> 173
MID WEST RAILROAD CONSTRUCTION AND MAINTENANCE CORPORATION OF WYOMING
BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 264,261
Accounts receivable....................................... 1,145,048
Due from employees, current portion....................... 15,679
Inventory................................................. 140,866
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 63,772
Prepaid expenses.......................................... 29,262
Income tax refund receivable.............................. 161,365
----------
Total current assets.............................. 1,820,253
----------
PROPERTY, PLANT AND EQUIPMENT:
Land...................................................... 69,715
Building.................................................. 408,950
Locomotives............................................... 494,340
Construction equipment.................................... 1,990,961
Vehicles.................................................. 401,981
Leasehold improvements.................................... 119,248
Office equipment.......................................... 68,946
----------
3,554,141
Less accumulated depreciation.......................... 983,477
----------
Property, plant and equipment, net........................ 2,570,664
----------
OTHER ASSETS,
Due from employees, non-current........................... 6,721
----------
$4,397,638
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt......................... $ 500,640
Accounts payable.......................................... 657,269
Accrued expenses.......................................... 96,241
Accrued payroll and payroll taxes......................... 32,007
Deferred income taxes..................................... 42,000
Billings in excess of costs and estimated earnings on
uncompleted contracts.................................. 83,054
----------
Total current liabilities......................... 1,411,211
----------
OTHER LIABILITIES:
Long-term debt, net of current portion.................... 1,089,725
Deferred income taxes..................................... 232,000
----------
Total other liabilities........................... 1,321,725
----------
STOCKHOLDERS' EQUITY:
Common Stock, no par value; authorized 1,000 shares;
issued and outstanding 1,000 shares.................... 1,000
Additional paid-in capital................................ 606,780
Retained earnings......................................... 1,056,922
----------
Total stockholders' equity........................ 1,664,702
----------
$4,397,638
==========
</TABLE>
See Notes to Financial Statements.
F-48
<PAGE> 174
MID WEST RAILROAD CONSTRUCTION AND MAINTENANCE CORPORATION OF WYOMING
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
EARNED REVENUE.............................................. $13,219,410
COST OF EARNED REVENUE...................................... 11,064,566
-----------
Gross profit.............................................. 2,154,844
GENERAL AND ADMINISTRATIVE EXPENSES......................... 1,646,408
-----------
INCOME FROM OPERATIONS...................................... 508,436
-----------
OTHER INCOME (EXPENSE):
Loss on sale of fixed assets.............................. (35,981)
Other income.............................................. 1,356
Interest expense.......................................... (155,402)
Interest income........................................... 17,402
Net rental income......................................... 2,921
-----------
OTHER EXPENSE, NET.......................................... (169,704)
-----------
INCOME BEFORE PROVISION FOR INCOME TAXES.................... 338,732
PROVISION FOR INCOME TAXES.................................. 2,635
-----------
NET INCOME.................................................. 336,097
RETAINED EARNINGS, BEGINNING................................ 720,825
-----------
RETAINED EARNINGS, ENDING................................... $ 1,056,922
===========
</TABLE>
See Notes to Financial Statements.
F-49
<PAGE> 175
MID WEST RAILROAD CONSTRUCTION AND MAINTENANCE CORPORATION OF WYOMING
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 336,097
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 391,391
Loss on sale of fixed assets.............................. 35,981
Deferred income taxes..................................... (121,000)
Change in operating assets and liabilities:
Accounts receivables................................... 1,967,778
Due from employees..................................... (11,800)
Inventory.............................................. (25,002)
Costs and estimated earnings in excess of billings on
uncompleted contracts................................. 2,227,390
Prepaid expenses and other assets...................... (3,141)
Income tax refund receivable........................... (161,365)
Accounts payable....................................... (3,657,189)
Accrued expenses....................................... (133,589)
Billings in excess of costs and estimated earnings on
uncompleted contracts................................. (93,717)
Accrued payroll and payroll taxes...................... (4,363)
-----------
Net cash provided by operating activities......... 747,471
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment........................... 13,087
Purchases of equipment.................................... (805,605)
-----------
Net cash used in investing activities............. (792,518)
-----------
CASH FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt.................. 1,010,823
Principal payments of long-term debt...................... (1,006,942)
-----------
Net cash provided by financing activities......... 3,881
-----------
NET DECREASE IN CASH........................................ (41,166)
CASH AND CASH EQUIVALENTS, beginning of year................ 305,427
-----------
CASH AND CASH EQUIVALENTS, end of year...................... $ 264,261
===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest.................................................. $ 164,262
===========
Income taxes.............................................. $ 455,000
===========
</TABLE>
See Notes to Financial Statements.
F-50
<PAGE> 176
MID WEST RAILROAD CONSTRUCTION AND MAINTENANCE CORPORATION OF WYOMING
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS
Mid West Railroad Construction and Maintenance of Wyoming ("the Company")
is a Wyoming corporation which was formed in 1988. The Company operates in
Wyoming, Utah and Colorado and other western U.S. states.
The Company performs contracts for repair, maintenance and construction of
privately owned railroad tracks, contracts to move railroad cars on private
railroad tracks to and from common carrier interchange points and provides
railroad track engineering.
2. SIGNIFICANT ACCOUNTING POLICIES
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 vary from the estimates that were assumed
in preparing the financial statements.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, accounts receivable and accounts payable
approximate fair value because of their short-term nature. The carrying amount
of long-term debt approximates fair value based on the borrowing rates currently
available to the Company for bank loans with similar terms and maturities.
REVENUE AND COST RECOGNITION
The Company recognizes revenues from fixed-fee construction contracts using
the percentage-of-completion method, measured by the ratio of cost incurred to
date to management's estimated total cost for each contract. That method is used
because management considers total cost to be the best available measure of
progress on the contracts. Changes in job performance, job conditions and
estimated profitability may result in revisions to cost and income, which are
recognized in the period in which the revisions are determined.
Revenues from time-and-material contracts are recognized as the work is
performed.
Contract costs include all direct material and labor costs and those
indirect costs related to contract performance. General and administrative costs
are charged to expense as incurred. Provisions for estimated losses on
uncompleted contracts are made in the period in which such losses are
determined.
The asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenues recognized in excess of amounts
billed. The liability, "Billings in excess of costs and estimated earnings on
uncompleted contracts," represents billings in excess of revenues recognized.
INVENTORY
Inventory, principally materials and supplies, is stated at the lower of
cost or net realizable value. Cost is determined by the first-in, first-out
method.
F-51
<PAGE> 177
MID WEST RAILROAD CONSTRUCTION AND MAINTENANCE CORPORATION OF WYOMING
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Depreciation is provided
principally by use of the straight-line method over the estimated useful life of
the related asset. Accelerated methods are used for income tax reporting
purposes.
INCOME TAXES
Deferred income taxes are determined based on the difference between the
financial statement and income tax basis of assets and liabilities using tax
rates expected to be in effect in the years in which the differences are
expected to reverse. The temporary differences related primarily to the
reporting of revenue recognition on long-term contracts, depreciation and net
operating loss carryforwards.
CASH
From time to time, the Company's cash balance with financial institutions
exceeds the maximum FDIC insured balance of $100,000. The Company has not
experienced any losses in such accounts and believes it is not exposed to any
significant credit risk on cash.
For the reporting of cash flows, the Company considers savings accounts and
certificate of deposits with original maturities of three months or less to be
cash.
3. ACCOUNTS RECEIVABLE
Accounts receivable at December 31, 1998, consisted of the following:
<TABLE>
<S> <C>
Contract receivables........................................ $1,117,358
Retainage................................................... 27,690
----------
$1,145,048
==========
</TABLE>
Contract retainages have been billed but are not due pursuant to contract
provisions until contract completion. Such contract retainage is expected to be
collected within the following year.
4. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Information with respect to contracts in process at December 31, 1998, are
as follows:
<TABLE>
<S> <C>
Costs incurred on uncompleted contracts..................... $1,084,103
Estimated earnings.......................................... 114,805
----------
1,198,908
Less billings to date....................................... 1,218,190
----------
$ (19,282)
==========
</TABLE>
Included in the balance sheet under the following captions:
<TABLE>
<S> <C>
Costs and estimated earnings in excess of billings on
uncompleted contracts....................................... $ 63,772
Billings in excess of costs and estimated earnings on
uncompleted contracts..................................... (83,054)
--------
$(19,282)
========
</TABLE>
F-52
<PAGE> 178
MID WEST RAILROAD CONSTRUCTION AND MAINTENANCE CORPORATION OF WYOMING
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. LONG-TERM DEBT
Long-term debt at December 31, 1998 consisted of the following:
<TABLE>
<S> <C>
Notes payable to Grand National Bank, principal and interest
at rates from 9.15% to 9.90%, payable monthly, maturing from
May 2000 to May 2001, secured by all inventory, accounts
receivable, contract rights, equipment, general intangibles,
fixtures and the personal guarantees of the shareholders.... $ 961,050
Vehicle and equipment notes payable, principal and interest
at rates from 7.90% to 18.20%, payable monthly, maturing
from May 1999 to December 2003, secured by vehicles and
equipment................................................. 568,867
Mortgage note payable in monthly installments of $1,661
including interest at 9.04%, maturing in June 1999,
secured by real property.................................. 8,119
Mortgage note payable in monthly installments of $1,349
including interest at 9.40%, maturing in November 2002,
secured by real Property.................................. 52,329
----------
1,590,365
Less current maturities..................................... 500,640
----------
$1,089,725
==========
</TABLE>
Aggregate principal payments as of December 31, 1998, on long-term debt are
as follows:
<TABLE>
<S> <C>
Year Ending December 31
1999...................................................... $ 500,640
2000...................................................... 645,453
2001...................................................... 240,697
2002...................................................... 91,688
2003...................................................... 111,887
----------
$1,590,365
==========
</TABLE>
Long-term debt contains certain restrictive covenants which place some
requirements and restrictions on the Company regarding the maintenance of
certain financial ratios measured on an annual basis.
6. LEASE AGREEMENTS
The Company leases certain vehicles under the classification of operating
leases. The following is a schedule of future minimum lease payments for
operating leases as of December 31, 1998:
<TABLE>
<S> <C>
Period Ending December 31
1999...................................................... $ 5,500
==========
</TABLE>
Rent expense under operating leases totaled $24,660 for the year ended
December 31, 1998.
7. EMPLOYEE BENEFIT PLAN
The Company sponsors a 401k plan (the "Plan") covering certain of its
employees. The Plan provides for contributions by the Company in such amounts as
the Board of Directors may annually determine. Contributions to the Plan
amounted to $8,126 for the year ended December 31, 1998.
F-53
<PAGE> 179
MID WEST RAILROAD CONSTRUCTION AND MAINTENANCE CORPORATION OF WYOMING
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. INCOME TAXES
The income tax provision (benefit) as reported in the combined statements
of operations differs from the amounts computed by applying federal statutory
rates due to the following:
<TABLE>
<S> <C>
Federal income tax at statutory rate........................ $ 118,556
State income taxes, net of federal income tax benefit....... 8,402
Benefit of previously unrecognized alternative minimum tax
credits................................................... (126,198)
Other....................................................... 1,875
---------
Income tax provision........................................ $ 2,635
=========
</TABLE>
The tax effect of temporary differences that give rise to significant
portions of deferred tax assets at December 31, 1998 consisted of the following:
<TABLE>
<S> <C>
Deferred tax assets:
Depreciation.............................................. $232,000
Other, primarily deferred contract income................. 42,000
--------
Total deferred tax liabilities.................... $274,000
========
</TABLE>
9. RELATED PARTY TRANSACTIONS
The Company rents a building from a shareholder on a month to month basis.
The rent requires monthly payments of $2,447, plus real estate taxes. Rent
expense for the year ended December 31, 1998 was $30,417.
10. COMMITMENTS AND CONTINGENCIES
The Company is engaged in various lawsuits arising in the ordinary course
of business. In the opinion of management, based upon the advice of counsel, the
ultimate outcome of these lawsuits will not have a material impact on the
Company's financial statements.
11. SUBSEQUENT EVENT
On January 7, 1999, the stockholders of the Company sold all of the
outstanding stock to RailWorks Corporation.
F-54
<PAGE> 180
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Stockholders
F & V Metro Contracting Corp. and Affiliates
We have audited the accompanying combined statement of net liabilities of F
& V METRO CONTRACTING CORP. AND AFFILIATES at November 30, 1998, and the related
combined statements of operations and cash flows for the year then ended. These
combined financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall combined
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of F & V METRO
CONTRACTING CORP. AND AFFILIATES at November 30, 1998 and the results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles.
Arthur Andersen LLP
Stamford, Connecticut
March 15, 1999
F-55
<PAGE> 181
F & V METRO CONTRACTING CORP. AND AFFILIATES
COMBINED STATEMENT OF NET LIABILITIES
NOVEMBER 30, 1998
<TABLE>
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 1,335,528
Marketable securities..................................... 7,846,300
Contract receivables...................................... 14,459,447
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 3,285,554
Inventory................................................. 1,740,873
Advances to and equity in joint ventures.................. 2,059,983
Advances to stockholders.................................. 71,378
Advances to affiliates.................................... 1,295,719
Prepaid expenses and other current assets................. 190,894
-----------
Total current assets.............................. 32,285,676
-----------
PROPERTY AND EQUIPMENT, net................................. 546,999
-----------
OTHER ASSET:
Security deposits........................................... 53,978
-----------
Total assets...................................... $32,886,653
-----------
LIABILITIES
Current Liabilities:
Notes payable - banks..................................... $ 4,653,333
Loans payable - other..................................... 239,148
Current maturities of long-term debt...................... 47,685
Accounts payable.......................................... 11,534,641
Billings in excess of costs and estimated earnings on
uncompleted contracts.................................. 9,620,264
Accrued expenses and other current liabilities............ 871,189
-----------
Total current liabilities......................... 26,966,260
-----------
Long-Term Liabilities:
Notes payable -- banks.................................... 111,111
Long-term debt, less current maturities................... 69,397
Long-term advances........................................ 7,532,724
-----------
Total liabilities................................. 34,679,492
-----------
Excess of liabilities over assets................. $(1,792,839)
===========
</TABLE>
See independent auditors' report and notes to combined financial statements.
F-56
<PAGE> 182
F & V METRO CONTRACTING CORP. AND AFFILIATES
COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1998
<TABLE>
<S> <C>
Contract Revenues........................................... $46,039,928
Contract Costs.............................................. 42,227,163
-----------
Gross Profit................................................ 3,812,765
General and Administrative Expenses......................... 2,307,228
Other Income (Expense):
Interest income........................................... 375,043
Interest expense.......................................... (541,753)
Loss from joint ventures.................................. (578,279)
Loss on guarantee of project.............................. (1,490,646)
Other income.............................................. 54,944
-----------
Total other expense............................... (2,180,691)
-----------
Loss Before Income Taxes.................................... (675,154)
Income Taxes................................................ --
-----------
Net Loss.................................................... $ (675,154)
===========
</TABLE>
See independent auditors' report and notes to combined financial statements.
F-57
<PAGE> 183
F & V METRO CONTRACTING CORP. AND AFFILIATES
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED NOVEMBER 30, 1998
<TABLE>
<S> <C>
NET LOSS.................................................... $ (675,154)
-----------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Depreciation and amortization............................. 121,884
Loss on disposal of fixed assets.......................... 16,651
Equity in loss from joint ventures........................ 578,279
Changes in assets (increase) decrease:
Marketable securities.................................. (495,000)
Contract receivables................................... (1,049,331)
Costs and estimated earnings in excess of billings on
uncompleted contracts................................. (1,500,742)
Inventory.............................................. (1,640,873)
Prepaid expenses and other current assets.............. 378,816
Security deposits...................................... 26,375
Changes in liabilities increase (decrease):
Accounts payable....................................... (2,098,124)
Billings in excess of costs and estimated earnings on
uncompleted contracts................................. 7,038,393
Accrued expenses and other current liabilities......... 224,363
-----------
Total adjustments................................. 1,600,691
-----------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 925,537
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment.............. 147,756
Purchase of property and equipment........................ (112,282)
Advances to joint ventures................................ (2,638,262)
-----------
NET CASH USED IN INVESTING ACTIVITIES............. (2,602,788)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term advances........................................ 5,184,814
Repayment of advances to stockholders..................... 460,328
Repayment of advances to affiliates....................... 100,078
Advances to affiliates.................................... (1,295,719)
Advances to stockholders.................................. (71,378)
Repayment of advances from stockholders................... (128,886)
Distributions to stockholders............................. (579,417)
Principal payments of long-term borrowings................ (81,002)
Repayment of notes payable -- bank........................ (1,013,334)
Repayment of advances from affiliates..................... (962,295)
-----------
NET CASH PROVIDED BY FINANCING ACTIVITIES................... 1,613,189
-----------
NET DECREASE IN CASH........................................ (64,060)
CASH, BEGINNING OF PERIOD................................... 1,399,588
-----------
CASH, END OF PERIOD......................................... $ 1,335,528
===========
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Property and equipment acquired through long-term
financing.............................................. $ 38,388
===========
</TABLE>
See independent auditors' report and notes to combined financial statements.
F-58
<PAGE> 184
F & V METRO CONTRACTING CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS
F & V Metro Contracting Corp. and Affiliates (the "Companies") serve as
contractors for governmental, institutional and commercial projects, primarily
in the New York City Metropolitan area. Construction work is generally performed
under fixed-price and unit-price contracts. These contracts are undertaken by
the Companies or in partnership with other contractors through joint ventures.
The length of the Companies' contracts varies but typically ranges from one to
three years.
2. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION
The combined financial statements include the accounts of F & V Metro
Contracting Corp., V & R Electrical Contractors, Inc., F & V Mechanical/V & R
Electrical -- A Joint Venture, Impulse Enterprises of N.Y., Inc. and Impulse
Enterprises of N.Y., Inc. and F & V Mechanical Plumbing & Heating Corp. A Joint
Venture, which are related by virtue of common ownership. All intercompany
balances and transactions have been eliminated in the combined financial
statements.
The balance sheet dates for the entities included in the combined report
are as follows:
<TABLE>
<S> <C>
F&V Metro Contracting Corp.................................. 11/30/98
V&R Electrical Contractors, Inc............................. 12/31/98
F&V Mechanical/V&R Electrical a Joint Venture............... 12/31/98
Impulse Enterprises of N.Y., Inc............................ 10/31/98
Impulse Enterprises of N.Y., Inc. and F&V Mechanical a Joint
Venture................................................... 10/31/98
</TABLE>
REVENUE AND COST RECOGNITION
Revenues from fixed-price and unit-price, long-term construction contracts
are recognized under the percentage of completion method. Under this method,
progress towards completion is recognized according to the ratio of incurred
costs to estimated total costs.
Contract costs include all direct material and labor costs and all other
direct and indirect costs related to contract performance. General and
administrative costs are charged to expense as incurred. Provisions for
estimated losses on uncompleted contracts are made in the period in which such
losses are determined. Changes in job performance, job conditions and estimated
profitability, including those arising from settlements, may result in revisions
to costs and income and are recognized in the period in which the revisions are
determined. Because of the inherent uncertainty in estimating the costs to
complete on contracts in process, it is at least reasonably possible that the
estimates used will change in the near term. Profit incentives are included in
revenues when their realization is reasonably assured. An amount equal to
contract costs attributable to claims is included in revenues when realization
is probable and the amount can be reliably estimated.
The Asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenues recognized in excess of amounts
billed. The Liability, "Billings in excess of costs and estimated earnings on
uncompleted contracts," represents billings in excess of revenues recognized.
In accordance with normal construction industry practice, the Companies
classify as current all assets and liabilities related to the performance of
long-term construction contracts. The
F-59
<PAGE> 185
F & V METRO CONTRACTING CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
contracting cycle may extend beyond one year and, accordingly, collection or
payment of amounts related to these contracts may extend beyond one year.
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.
CASH EQUIVALENTS
The Companies consider securities with original maturities of three months
or less to be cash equivalents.
MARKETABLE SECURITIES
The Companies determine cost of marketable securities using the average
cost method for purposes of calculating realized gains or losses.
INVENTORY
Inventory is valued at the lower of cost or market, with cost determined
using the first-in, first-out method and with market defined as the lower of
replacement cost or realizable value.
CONCENTRATION OF CREDIT RISK
Substantially all of the Companies' business activity is with customers
located within the New York City metropolitan area. Substantially all of the
Companies' cash is maintained in two financial institutions, each of which are
in excess of the Federal Deposit Insurance Corporation (FDIC) insured limits of
$100,000. The Companies believe they are not exposed to any significant credit
risk on cash and cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. The costs of additions and
betterments are capitalized and expenditures for repairs and maintenance are
expensed in the period incurred. When items of property and equipment are sold
or retired, the related costs and accumulated depreciation are removed from the
accounts and any gain or loss is included in income.
Depreciation and amortization of property and equipment is provided
utilizing accelerated methods over the estimated useful lives of the respective
assets as follows:
<TABLE>
<S> <C>
Building.................................................... 31.5 years
Transportation equipment.................................... 5 years
Office equipment............................................ 3 to 5 years
Furniture and fixtures...................................... 5 to 7 years
</TABLE>
Leasehold improvements are amortized over the shorter of the remaining term
of the lease or the useful life of the improvement utilizing the straight-line
method.
F-60
<PAGE> 186
F & V METRO CONTRACTING CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES
Federal income taxes have not been provided because the stockholders have
elected to have F & V Metro Contracting Corp., V & R Electrical Contractors,
Inc., and Impulse Enterprises of N.Y., Inc. treated as S corporations for income
tax purposes as provided in Section 1362(a) of the Internal Revenue Code. As
such, the Corporations' income or loss and credits are passed through to the
stockholders and reported on their individual income tax returns.
Generally, income taxes are not payable or provided by the Partnerships, F
& V Mechanical/V & R Electrical -- A Joint Venture and Impulse Enterprises of
N.Y., Inc. and F & V Mechanical Plumbing and Heating Corp. -- A Joint Venture.
Partners are taxed individually on their share of partnership earnings. The
partnership net income or loss is allocated to the partners based upon their
profit and loss percentages. The partnerships are subject to the New York City
unincorporated business tax for which no amounts are due for 1998.
PENSION PLANS
Union employees are covered by collectively bargained employee benefit
plans under which the Companies make contributions on a monthly basis based upon
hours worked.
PROFIT SHARING PLAN
The Companies sponsor a 401(k) plan covering all eligible salaried
employees who have met age and service requirements. Annual contributions to the
plan are discretionary and are determined by the Board of Directors. No Company
contributions were made in 1998.
3. MARKETABLE SECURITIES
The Companies' investments in marketable securities are classified as held
to maturity and are valued at cost, which approximates market value.
MARKETABLE DEBT SECURITIES
<TABLE>
<S> <C>
Municipal bonds............................................. $7,630,000
Cash........................................................ 216,300
----------
$7,846,300
==========
</TABLE>
The marketable securities have various maturity dates ranging from
December, 1998 to July, 2004 with interest rates ranging from 3.75% to 6.75% per
annum.
Bonds maturing after November 30, 1998 were replaced with similar
securities.
The Companies have substituted certain of their municipal bonds in lieu of
retainage totaling $7,902,788, related to certain uncompleted and completed
contracts.
F-61
<PAGE> 187
F & V METRO CONTRACTING CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
4. CONTRACT RECEIVABLES
Contract receivables are summarized as follows:
<TABLE>
<S> <C>
Completed contracts......................................... $ 1,459,506
Contracts in process........................................ 10,740,881
Retainage................................................... 2,377,957
-----------
14,578,344
Less: Allowance for doubtful accounts....................... 118,897
-----------
$14,459,447
===========
</TABLE>
The Companies anticipate that approximately 55% of retainage at November
30, 1998 will be collected within one year.
5. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Costs and estimated earnings in excess of billings on uncompleted contracts
arise when revenues have been recorded but the amounts cannot be billed
currently under the terms of the contracts. Such amounts are recoverable from
customers upon various measures of performance, including achievement of certain
milestones, completion of specified units or completion of the contract. The
Companies anticipate that substantially all amounts, will be billed and
collected within one year.
Costs and estimated earning on uncompleted contracts are as follows:
<TABLE>
<S> <C>
Contract costs incurred..................................... $83,533,894
Estimated earnings.......................................... 10,442,645
-----------
93,976,539
Less: Billings to date...................................... 100,311,249
-----------
$(6,334,710)
===========
</TABLE>
Such amounts are included in the accompanying combined balance sheet under
the following captions:
<TABLE>
<S> <C>
Costs and estimated earnings in excess of billings on
uncompleted contracts....................................... $ 3,285,554
Billings in excess of costs and estimated earnings on
uncompleted contracts..................................... (9,620,264)
-----------
$(6,334,710)
===========
</TABLE>
6. JOINT VENTURES
F & V Metro Contracting Corp. and Affiliates, in the normal conduct of its
business, has entered into four joint venture partnership agreements with third
parties. The joint venture agreements, which require the participants to
contribute additional capital as needed, provide that the Companies will receive
from the joint ventures their proportionate share of any profits or losses
realized from the contracts. The Companies have 50% or less participation in
these joint ventures and account for them under the equity method. The
investment is included in the balance "Advances to and equity in joint
ventures."
F-62
<PAGE> 188
F & V METRO CONTRACTING CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
In addition, the Companies fulfill certain joint venture contractual
obligations and are reimbursed for all related costs incurred. During the year
ended November 30, 1998, the Companies received management fees from joint
ventures totaling $162,500, which is included in contract revenues.
7. RELATED PARTY TRANSACTIONS
Advances to and from affiliates and stockholders are summarized as follows:
<TABLE>
<S> <C>
ADVANCES TO AFFILIATES
Balance, beginning of period.............................. $ 100,078
Advances to affiliates.................................... 1,295,719
Repayment of advances..................................... (100,078)
----------
Balance, end of period.................................... $1,295,719
==========
ADVANCES TO STOCKHOLDERS
Balance, beginning of period.............................. $ 460,328
Advances to Stockholders.................................. 71,378
Repayment of advances..................................... (460,328)
----------
Balance, end of period.................................... $ 71,378
==========
ADVANCES FROM STOCKHOLDERS
Balance, beginning of period.............................. $ 128,886
Repayment of advances..................................... (128,886)
----------
Balance, end of period.................................... $ --
==========
</TABLE>
Advances between affiliates are repaid periodically throughout the year and
are non-interest bearing. The Companies anticipate that these advances will be
repaid within one year.
The Companies lease their office and warehouse facilities from an affiliate
on a month-to-month tenancy. Rent expense charged to operations for the year
ended November 30, 1998 amounted to $302,160, of which $47,520 is included in
contract costs.
The Companies have various loans receivable from related parties in the
amount of $85,310. These loans are unsecured, non-interest bearing and have no
specific repayment terms. The Companies anticipate these loans to be repaid
within one year. Such loans are included in the caption "Prepaid expenses and
other current assets."
8. PROPERTY AND EQUIPMENT
Property and equipment is summarized as follows:
<TABLE>
<S> <C>
Transportation equipment.................................... $ 983,113
Office equipment............................................ 42,973
Furniture and fixtures...................................... 31,928
Leasehold improvements...................................... 250,604
----------
1,308,618
Less: Accumulated depreciation and amortization............. 761,619
----------
$ 546,999
==========
</TABLE>
Depreciation and amortization expense related to property and equipment
amounted to $121,884, of which $68,771 is included in contract costs for the
year ended November 30, 1998.
F-63
<PAGE> 189
F & V METRO CONTRACTING CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
9. NOTES PAYABLE -- BANKS
Pursuant to an agreement with its bank, the Companies may borrow up to
$2,300,000 under an unsecured line of credit. The agreement contains financial
covenants related to the Companies' working capital, net worth and bank
borrowings. The agreement also contains a 30-day clean-up provision and is
personally guaranteed by the stockholders of the Companies. Interest is payable
at 1/2% above the bank's prime rate (for a total rate of 8.25% at November 30,
1998). The line of credit expires on May 31, 1999.
The outstanding balance on the above mentioned line of credit totaled
$2,220,000 at November 30, 1998. Subsequent to November 30, 1998, the Companies
repaid $1,817,908 of this balance.
Pursuant to an agreement with another bank, the Companies have borrowed
$2,300,000 under a term loan agreement. The agreement contains financial
covenants related to the Companies' working capital, net worth and bank
borrowings. The agreement also contains a provision whereby the Companies will
repay $40,000 per month, plus interest, towards the balance of the loan. The
loan is personally guaranteed by the stockholders of the Companies. Interest is
payable at 1/2% above the bank's prime rate (for a total rate of 8.25% at
November 30, 1998). The term loan expires on May 31, 1999.
The outstanding balance on the above mentioned term loan totals $2,100,000
at November 30, 1998. Subsequent to November 30, 1998, the Companies repaid
$160,000 of this balance.
In addition, the Companies have entered into agreements with the banks for
two, $500,000 term loans. Each loan is to be repaid in equal monthly
installments of $13,889, plus interest through March, 2000. These loans are
secured by the fixed assets of the Companies and are personally guaranteed by
the stockholders of the Companies. Interest is payable at 3/4% above the banks'
prime rate (for a combined rate of 8.50% at November 30, 1998).
The outstanding balances on the above mentioned term loans total $444,444
at November 30, 1998, of which $111,111 is long-term. Subsequent to November 30,
1998, the Companies repaid all outstanding balances relating to these term
loans.
Aggregate maturities of notes payable -- banks are as follows:
<TABLE>
<CAPTION>
YEARS ENDING NOVEMBER 30:
- -------------------------
<S> <C>
1999........................................................ $4,653,333
2000........................................................ 111,111
----------
$4,764,444
==========
</TABLE>
10. LONG-TERM DEBT
Long-term debt is summarized as follows:
<TABLE>
<S> <C>
Installment loans payable -- in equal monthly installments
totaling $4,670 including interest ranging from 7.9% to 9.9%
per annum through varying periods from October, 1999 through
October, 2002, secured by related transportation
equipment................................................... $117,082
Less: Current maturities.................................... 47,685
--------
Long-Term Debt.............................................. $ 69,397
========
</TABLE>
F-64
<PAGE> 190
F & V METRO CONTRACTING CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Aggregate maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
YEARS ENDING NOVEMBER 30:
- -------------------------
<S> <C>
1999........................................................ $ 47,685
2000........................................................ 38,830
2001........................................................ 23,896
2002........................................................ 6,671
--------
$117,082
========
</TABLE>
11. PAYABLE -- OTHER
The Companies have various other loans payable to a related party which are
unsecured, non-interest bearing and have no specific repayment terms. The
Companies anticipate repaying these loans within one year.
12. LONG-TERM ADVANCES
The Companies have received various advances from a joint venture partner
which have been used to finance certain contracts unrelated to such joint
venture. Such amounts are non-interest bearing and have no specific repayment
terms. The Companies do not anticipate repaying such amounts within one year.
13. STOCKHOLDERS' EQUITY
Stockholders' equity of the Companies on a non-combined basis are
summarized as follows:
<TABLE>
<S> <C>
F & V METRO CONTRACTING CORP.
Common stock -- no par value; 400 shares authorized; 280
shares issued and outstanding.......................... $ 50,350
Retained earnings......................................... 605,638
-----------
Total Stockholders' Equity at November 30, 1998... $ 655,988
===========
V & R ELECTRICAL CONTRACTORS, INC.
Common stock -- no par value; 200 shares authorized, 100
shares issued and outstanding.......................... $ 10,000
Accumulated deficit....................................... (210,224)
-----------
Total Stockholders' Deficit at December 31,
1998............................................ $ (200,224)
===========
IMPULSE ENTERPRISES OF N.Y., INC.
Common stock -- no par value; 200 shares authorized,
issued and outstanding................................. $ 241,000
Accumulated deficit....................................... (2,489,603)
-----------
Total Stockholders' Deficit at October 31, 1998... $(2,248,603)
===========
</TABLE>
The changes in combined excess of liabilities over assets for the year
ended November 30, 1998 are as follows:
<TABLE>
<S> <C>
Net liabilities, beginning of year.......................... $ (538,268)
Net loss.................................................... (675,154)
Distributions to stockholders............................... (579,417)
-----------
Net liabilities, end of year................................ $(1,792,839)
===========
</TABLE>
F-65
<PAGE> 191
F & V METRO CONTRACTING CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
14. COMMITMENTS AND CONTINGENCIES
The Companies have guaranteed a loan agreement entered into by a
non-combined affiliated company and its bank. The amount outstanding on this
loan agreement totals $664,444 at November 30, 1998.
The Companies are contingently liable to their surety under a general
indemnity agreement. Under this agreement, the Companies agree to indemnify the
surety for any payments made on their behalf and on behalf of their joint
ventures. The Companies believe that all contingent liabilities will be
satisfied by their performance on the specific contracts covered by the
agreement.
F & V Metro Contracting Corp., in an unrelated business transaction, has
entered into an agreement with another general contractor as a guarantor on one
of its projects. F&V Metro Contracting Corp. had no equity interest in the
project and was entitled to a fee based on the profit of the project. Each party
is jointly and severally liable to the surety under a general indemnity
agreement. Included in other expenses is $1,490,646, which represents amounts
reimbursed to the surety and vendors and the anticipated remaining cost to
complete the contract. F & V Metro Contracting Corp. will seek recovery of all
amounts from the general contractor; however, no amounts have been recorded as
ultimate collection is uncertain. It is reasonably possible that F & V Metro
Contracting Corp. will have to reimburse the surety for additional amounts under
the indemnity. Any such additional reimbursement cannot be estimated at November
30, 1998.
The Companies are involved in various legal proceedings which have been
filed against them. In the opinion of management and legal counsel, the outcome
of this litigation will not materially affect the Companies' financial position.
15. INCOME TAXES
The net deferred tax benefits in the accompanying combined balance sheet
include the following components:
<TABLE>
<S> <C>
Tax benefit from net operating loss carryforward............ $600,321
Valuation allowance......................................... (600,321)
--------
Net deferred tax asset...................................... $ --
========
</TABLE>
As of November 30, 1998, the Companies have New York State and New York
City net operating loss carryforwards of approximately $10,000,000, subject to
review by taxing authorities, expiring at varying dates ranging from October,
2007 to December, 2012.
16. SUBSEQUENT EVENT
On February 1, 1999, the stockholders of the Companies entered into an
agreement with RailWorks Corporation. Under the terms of the agreement, the
stockholders agreed to exchange their stock and ownership interests in the
Companies for cash and promissory notes. The transaction was completed on March
15, 1999.
F-66
<PAGE> 192
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder of W.T. Byler Co., Inc.:
We have audited the accompanying balance sheet of W.T. BYLER CO., INC. (a
Texas corporation) as of December 31, 1998 and the related statements of income,
changes in stockholder's equity and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of W.T. BYLER CO., INC. as of
December 31, 1998 and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Stamford, Connecticut
November 12, 1999
F-67
<PAGE> 193
W.T. BYLER CO., INC.
BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Current Assets:
Cash...................................................... $ 66,528
Receivables -- contracts.................................. 11,621,635
Receivables -- other...................................... 163,054
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 3,190,593
Inventory................................................. 452,373
Deposits and prepaids..................................... 95,092
-----------
Total current assets.............................. 15,589,275
PROPERTY AND EQUIPMENT net of accumulated depreciation...... 11,688,856
-----------
Total assets...................................... $27,278,131
===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Line of credit............................................ $ 1,020,013
Long-term debt -- current portion......................... 2,484,998
Trade accounts payable.................................... 5,722,465
Accrued expenses and other liabilities.................... 574,506
Billings in excess of costs and estimated earnings on
uncompleted contracts.................................. 2,740,591
-----------
Total current liabilities......................... 12,542,573
LONG-TERM DEBT.............................................. 3,272,154
DEFERRED COMPENSATION....................................... 1,100,000
-----------
Total liabilities................................. 16,914,727
-----------
STOCKHOLDER'S EQUITY:
Common stock of $.10 par value; 100,000 shares authorized;
8,280 shares issued and outstanding.................... 828
Additional paid in capital................................ 40,567
Retained earnings......................................... 10,322,009
-----------
Total stockholder's equity........................ 10,363,404
-----------
Total liabilities and stockholder's equity........ $27,278,131
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-68
<PAGE> 194
W.T. BYLER CO., INC.
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
EARNED REVENUES............................................. $56,174,829
COST OF EARNED REVENUES..................................... 51,090,955
-----------
GROSS PROFIT................................................ 5,083,874
GENERAL AND ADMINISTRATIVE EXPENSES......................... 2,400,295
-----------
OPERATING INCOME............................................ 2,683,579
-----------
OTHER INCOME (EXPENSE):
Interest expense.......................................... (418,582)
Interest income........................................... 4,895
Gain on sale of property and equipment.................... 177,849
Other income.............................................. 107,964
-----------
Total other income (expense)...................... (127,874)
-----------
NET INCOME.................................................. $ 2,555,705
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-69
<PAGE> 195
W.T. BYLER CO., INC.
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDER'S
STOCK CAPITAL EARNINGS EQUITY
------ ---------- ----------- -------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997............. $828 $40,567 $ 8,616,304 $ 8,657,699
NET INCOME............................. -- -- 2,555,705 2,555,705
DISTRIBUTION TO STOCKHOLDER............ -- -- (850,000) (850,000)
---- ------- ----------- -----------
BALANCE, DECEMBER 31, 1998............. $828 $40,567 $10,322,009 $10,363,404
==== ======= =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-70
<PAGE> 196
W.T. BYLER CO., INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 2,555,705
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation expense...................................... 2,534,402
Gain on sale of property and equipment.................... (177,849)
Decrease (increase) in assets:
Receivables............................................ (991,595)
Costs and estimated earnings in excess of billings on
uncompleted contracts................................. (682,055)
Inventory.............................................. (452,373)
Deposits and prepaids.................................. 313,218
Increase (decrease) in liabilities:
Trade accounts payable................................. (753,516)
Accrued expenses and other liabilities................. (43,572)
Billings in excess of costs and estimated earnings on
uncompleted contracts................................. 1,716,906
Deferred compensation.................................. 250,000
-----------
Total adjustments................................. 1,713,566
-----------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 4,269,271
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment....................... (1,734,463)
Proceeds from sale of property and equipment.............. 506,388
-----------
NET CASH USED IN INVESTING ACTIVITIES....................... (1,228,075)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt.............................. (2,151,811)
Distribution to stockholder............................... (850,000)
-----------
NET CASH USED IN FINANCING ACTIVITIES....................... (3,001,811)
-----------
NET INCREASE IN CASH........................................ 39,385
CASH AT BEGINNING OF YEAR................................... 27,143
-----------
CASH AT END OF YEAR......................................... $ 66,528
===========
SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for interest.................... $ 418,582
Cash paid during the year for state income taxes.......... $ 20,806
NON-CASH OPERATING, INVESTING AND FINANCIAL ACTIVITIES:
Purchase of property and equipment with long-term debt.... $ 2,783,053
Prepaid insurance premiums financed with debt............. $ 331,938
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-71
<PAGE> 197
W.T. BYLER CO., INC.
NOTES TO THE FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF BUSINESS
W.T. Byler Co., Inc., (the "Company"), operates as a general contractor
performing work in the construction and repair of railroad tracks, grading,
bridge construction, paving, structural concrete work and light rail
construction projects throughout the continental United States. For the year
ended December 31, 1998, two customers accounted for 36.5% of the Company's
revenue.
2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
Management used estimates and assumptions in preparing these financial
statements in accordance with generally accepted accounting principles. These
estimates and assumptions affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities and the reported revenues
and expenses. Actual results could vary from the estimates that were assumed in
preparing the financial statements.
REVENUE AND COST RECOGNITION
The Company recognizes revenues from fixed-fee contracts using the
percentage-of-completion method, measured by the percentage of cost incurred to
date to management's estimate of total cost for each contract. This method is
used because management considers total cost to be the best available measure of
progress on the contracts. Because of uncertainties in estimating costs, it is
at least reasonably possible that the estimates used could change within the
near term.
Contract costs include all direct labor and benefits, materials,
subcontract costs, other direct costs and allocations of indirect costs of
construction. Indirect costs of construction are allocated based on direct labor
dollars or equipment usage.
As long-term contracts extend over one or more years, revisions in
estimates of costs and earnings during the course of the work are reflected in
the accounting period in which the facts which require the revisions become
known. At the time a significant loss on a contract becomes known, the entire
amount of the estimated ultimate loss is recognized in the financial statements.
The asset "Costs and estimated earnings in excess of billings on
uncompleted contracts" represents revenues recognized in excess of amounts
billed. The liability "Billings in excess of costs and estimated earnings on
uncompleted contracts" represents billings in excess of revenues recognized.
OPERATING CYCLE
In accordance with industry practice, the Company classifies as current all
assets and liabilities related to the performance of long-term contracts. The
contracting cycle for certain long-term contracts may extend beyond one year
and, accordingly, collection or payment of amounts related to these contracts
may extend beyond one year.
INVENTORY
Inventory is stated at the lower of cost or market. Inventory consists of
rail used for construction projects.
F-72
<PAGE> 198
W.T. BYLER CO., INC.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and is depreciated using the
straight-line method over the estimated useful life of the related asset.
Significant renewals and betterments are capitalized and depreciated over the
asset's remaining useful life. The cost of routine maintenance and minor repairs
are charged to earnings as incurred. As assets are retired or otherwise disposed
of, the cost and accumulated depreciation are eliminated from the accounts and
any gain or loss is reflected in income.
The ranges of estimated useful lives used in computing depreciation for
financial statement purposes are as follows:
<TABLE>
<S> <C>
Buildings and parking lot................................... 8-25 years
Automobiles and trucks...................................... 3-5 years
Construction equipment...................................... 3-7 years
Furniture and fixtures...................................... 5-8 years
</TABLE>
The components of property and equipment are:
<TABLE>
<S> <C>
Land........................................................ $ 242,857
Buildings and parking lot................................... 191,859
Construction equipment...................................... 17,926,028
Automobiles and trucks...................................... 2,677,542
Furniture and fixtures...................................... 117,651
Less: accumulated depreciation.............................. (9,467,081)
-----------
Net property and equipment........................ $11,688,856
===========
</TABLE>
INCOME TAXES
The Company has elected for tax purposes to be taxed under provisions of
Subchapter S of the Internal Revenue Code. The election allows the stockholder
to include the Company's net earnings in his own income for tax purposes.
Accordingly, the Company generally is not liable for federal income taxes. The
Company may be liable for federal income taxes related to accumulated earnings
and profits, built-in capital gains and recapture of investment tax credits.
Where allowed by state taxing authorities, the Company is also taxed as an "S"
Corporation and is not subject to tax. Any income taxes for states which do not
recognize "S" Corporation status would be included in the income tax provision.
There is no provision for income taxes required at December 31, 1998.
3. ACCOUNTS RECEIVABLE
Accounts receivable consists of the following:
<TABLE>
<S> <C>
Accounts receivable......................................... $ 9,522,335
Retainages.................................................. 2,099,300
-----------
$11,621,635
===========
</TABLE>
Contract retainages have been billed but are not due until contract
completion pursuant to contract provisions.
F-73
<PAGE> 199
W.T. BYLER CO., INC.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
4. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Information with respect to contracts in progress follows:
<TABLE>
<S> <C>
Costs incurred on uncompleted contracts..................... $49,361,089
Estimated earnings.......................................... 6,331,087
-----------
55,692,176
Less billings............................................... 55,242,174
-----------
$ 450,002
===========
</TABLE>
Contracts in progress are included in the accompanying balance sheet under
the following captions:
<TABLE>
<S> <C>
Costs and estimated earnings in excess of billings on
uncompleted
contracts................................................. $3,190,593
Billings in excess of costs and estimated earnings on
uncompleted
contracts................................................... 2,740,591
----------
$ 450,002
==========
</TABLE>
5. LINE OF CREDIT
The Company maintains a line-of-credit in the amount of $1,650,000, which
bears interest at 7% and matures December 1999. The line is secured by accounts
receivable and a personal guaranty of the stockholder. The line-of-credit
agreement contains various affirmative covenants relative to working capital,
current ratios and debt-to equity ratios.
6. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<S> <C>
Notes payable to Case Credit, maturing from May 1999 to
January 2000 payable in monthly installments, secured by
equipment................................................. $ 260,659
Note payable to Cananwill, Inc., Premium Finance maturing
March 1999, payable in monthly installments with interest at
7.39%, secured by unearned insurance premiums............... 62,032
Notes payable to Safeco, maturing from January 2002 to March
2002, payable in monthly installments including interest
from 7.5% to 7.85%, secured by equipment.................. 4,019,426
Notes payable to Cat Financial, maturing May 1999 to
December 2002, payable in monthly installments with
interest at .35% to 8.75%, secured by equipment........... 1,149,859
Note payable to Newcourt equipment, maturing November 2000,
payable in monthly installments with interest at 7.5%,
secured by equipment...................................... 146,337
Note payable to KDC Financial, maturing June 2000, payable
in monthly installments with interest at 6.5%, secured by
equipment................................................. 118,839
-----------
5,757,152
Less -- current portion..................................... (2,484,998)
-----------
Total............................................. $ 3,272,154
===========
</TABLE>
F-74
<PAGE> 200
W.T. BYLER CO., INC.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
Aggregate principal payments on long-term debt are as follows:
<TABLE>
<S> <C>
1999........................................................ $2,484,998
2000........................................................ 1,687,869
2001........................................................ 1,365,919
2002........................................................ 218,366
----------
Total............................................. $5,757,152
==========
</TABLE>
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair values of financial instruments is made in
accordance with the requirements of SFAS No. 107, "Disclosures about Fair Value
of Financial Instruments." The estimated fair value amounts have been determined
by the Company using available market information and appropriate valuation
methodologies.
CASH, ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE
The carrying amount of these items are a reasonable estimate of their fair
value due to their short-term nature.
LONG-TERM DEBT
The carrying amount of the line of credit facility approximates fair value
as the interest rates are comparable to market value. The carrying value of
other loans relating to equipment approximates fair value as the interest rates
are comparable to market rates.
8. PROFIT SHARING PLAN
The Company has a 401(k) plan that covers all eligible employees. The plan
is a salary deferral plan covering all full-time employees who are at least 21
years of age with one year of service. Employees may contribute from 1% up to
15% of their pretax annual compensation, as defined in the plan. Company
contributions to the profit sharing plan are at the discretion of the Board of
Directors. During 1998, total contributions to the plan charged to operations
were $30,770.
9. DEFERRED COMPENSATION PLAN
The Company has a deferred compensation arrangement with a key management
employee (the "Deferred Compensation Agreement") which was executed on May 3,
1994. The Deferred Compensation Agreement provides for up to $2.6 million of
additional compensation, which vested on a straight line basis over a 10 1/2
year period of employment. Premature vesting occurs upon the sale of greater
than fifty-one percent of the Company's assets or more than a forty-nine percent
change in ownership. As a result of the Company's acquisition (see below),
premature vesting occurred in 1999.
10. SUBSEQUENT EVENT
On October 22, 1999, the shareholder of the Company sold his stock of the
Company to Railworks Corporation for cash and other consideration.
F-75
<PAGE> 201
W.T. BYLER CO., INC.
BALANCE SHEETS
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash...................................................... $ 62,967 $ 66,528
Receivables -- contracts.................................. 14,664,879 11,621,635
Receivables -- other...................................... 138,347 163,054
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 894,913 3,190,593
Inventory................................................. 253,158 452,373
Deposits and prepaid expenses............................. 226,335 95,092
----------- -----------
Total current assets.............................. 16,240,599 15,589,275
PROPERTY AND EQUIPMENT net of accumulated depreciation...... 11,294,019 11,688,856
----------- -----------
Total............................................. $27,534,618 $27,278,131
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Line of credit............................................ $ 600,000 $ 1,020,013
Long-term debt -- current portion......................... 5,121,869 2,484,998
Accounts payable, trade................................... 5,147,886 5,722,465
Accrued expenses and other liabilities.................... 2,013,431 574,506
Billings in excess of costs and estimated earnings on
uncompleted contracts.................................. 2,905,684 2,740,591
----------- -----------
Total current liabilities......................... 15,788,870 12,542,573
LONG-TERM DEBT.............................................. 1,832,639 3,272,154
DEFERRED COMPENSATION....................................... -- 1,100,000
----------- -----------
Total liabilities................................. 17,621,509 16,914,727
----------- -----------
STOCKHOLDER'S EQUITY:
Common stock of $.10 par value; 100,000 shares authorized;
8,280 shares issued and outstanding.................... 828 828
Additional paid-in capital................................ 40,567 40,567
Retained earnings......................................... 9,871,714 10,322,009
----------- -----------
Total stockholder's equity........................ 9,913,109 10,363,404
----------- -----------
Total............................................. $27,534,618 $27,278,131
=========== ===========
</TABLE>
F-76
<PAGE> 202
W.T. BYLER CO., INC.
STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Earned revenues............................................. $43,690,509 $42,350,579
Cost of earned revenues..................................... 39,872,785 38,877,332
----------- -----------
Gross profit...................................... 3,817,724 3,473,247
General and administrative expenses......................... 1,183,065 925,413
Nonrecurring expenses:
Deferred compensation..................................... 1,500,000 187,500
Bonus salaries and wages.................................. 700,000 --
----------- -----------
Operating income.................................. 434,659 2,360,334
----------- -----------
Other income (Expense):
Interest expense.......................................... (297,280) (349,429)
Interest income........................................... 9,880 2,734
Gain on sale of property and equipment.................... 28,827 175,452
Other income.............................................. 73,619 91,422
----------- -----------
Other (expense), net................................... (184,954) (79,821)
----------- -----------
Net income........................................ $ 249,705 $ 2,280,513
=========== ===========
</TABLE>
F-77
<PAGE> 203
W.T. BYLER CO., INC.
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDER'S
STOCK CAPITAL EARNINGS EQUITY
------ ---------- ----------- -------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1998................... $828 $40,567 $10,322,009 $10,363,404
Net Income................................... -- -- 249,705 249,705
Distribution to stockholder.................. -- -- (700,000) (700,000)
---- ------- ----------- -----------
BALANCE, SEPTEMBER 30, 1999.................. $828 $40,567 $ 9,871,714 $ 9,913,109
==== ======= =========== ===========
</TABLE>
W.T. BYLER CO., INC.
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDER'S
STOCK CAPITAL EARNINGS EQUITY
------ ---------- ----------- -------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997................... $828 $40,567 $ 8,616,304 $ 8,657,699
Net Income................................... -- -- 2,280,513 2,280,513
Distribution to stockholder.................. -- -- (360,000) (360,000)
---- ------- ----------- -----------
BALANCE, SEPTEMBER 30, 1998.................. $828 $40,567 $10,536,817 $10,578,212
==== ======= =========== ===========
</TABLE>
F-78
<PAGE> 204
W.T. BYLER CO., INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 249,705 $ 2,280,513
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation expense.................................... 2,123,840 1,863,860
Gain on sale of property and equipment.................. (28,827) (175,452)
Decrease (increase) in assets:
Receivables........................................... (3,018,537) 2,275,180
Costs and estimated earnings in excess of billings on
uncompleted contracts................................ 2,295,680 (1,712,628)
Inventory............................................. 199,215 --
Deposits and prepaid expenses......................... (131,243) (149,770)
Increase (decrease) in liabilities:
Accounts payable, trade............................... (574,579) (2,288,407)
Accrued expenses and other liabilities................ 1,438,925 (82,281)
Billings in excess of costs and estimated earnings on
uncompleted contracts................................ 165,093 1,531,319
Deferred compensation................................. (1,100,000) 187,500
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES............... 1,619,272 3,729,834
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment....................... (1,789,176) (3,414,033)
Proceeds from sale of property and equipment.............. 89,000 269,589
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES................... (1,700,176) (3,144,444)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayment of line of credit arrangement............... (420,013) (900,000)
Proceeds from issuance of long-term debt.................. 2,600,000 3,657,307
Repayments of long-term debt.............................. (1,402,644) (2,213,169)
Distribution to stockholder............................... (700,000) (360,000)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES............... 77,343 184,138
----------- -----------
NET (DECREASE) INCREASE IN CASH............................. (3,561) 769,528
CASH AT BEGINNING OF PERIOD................................. 66,528 27,143
----------- -----------
CASH AT END OF PERIOD....................................... $ 62,967 $ 796,671
=========== ===========
CASH PAID DURING THE PERIOD FOR INTEREST.................... $ 297,280 $ 349,429
=========== ===========
</TABLE>
F-79
<PAGE> 205
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY RAILWORKS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER IN SUCH JURISDICTIONS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CREATE ANY IMPLICATION THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF
OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF RAILWORKS SINCE SUCH DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Risk Factors.......................... 10
Use of Proceeds....................... 19
Capitalization........................ 20
Pro Forma Financial Statements........ 21
Selected Historical Consolidated
Financial Data...................... 29
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 31
Business.............................. 42
The Exchange Offer.................... 56
Management............................ 66
Certain Relationships and Related
Party Transactions.................. 71
Principal Stockholders................ 73
Description of Capital Stock.......... 74
Description of Credit Facility........ 75
Description of Term Loan Facility..... 76
Description of the New Notes.......... 77
Exchange Offer; Registration Rights... 113
Book-Entry; Delivery and Form......... 116
Plan of Distribution.................. 117
Certain United States Federal Tax
Considerations...................... 119
Legal Matters......................... 120
Experts............................... 120
Where You Can Find More Information... 120
Special Note Regarding Forward-
Looking Statements.................. 121
Index to Financial Statements......... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
OFFER TO EXCHANGE
(RAILWORKS LOGO)
11 1/2% SENIOR SUBORDINATED
NOTES DUE 2009
THAT HAVE BEEN REGISTERED
UNDER THE
SECURITIES ACT OF 1933
FOR ALL OUTSTANDING UNREGISTERED
11 1/2% SENIOR SUBORDINATED
NOTES DUE 2009
-------------------
PROSPECTUS
-------------------
DECEMBER , 1999
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 206
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102(b)(7) of the Delaware General Corporation Law (the "DGCL")
permits a corporation, in its certificate of incorporation, to limit or
eliminate, subject to some statutory limitations, the liability of directors to
the corporation or its stockholders for monetary damages for breaches of
fiduciary duty, except for liability (a) for any breach of the director's duty
of loyalty to the corporation or its stockholders, (b) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (c) under Section 174 of the DGCL, or (d) for any transaction from which
the director derived an improper personal benefit. Article 10 of the
registrant's restated Certificate of Incorporation provides that the personal
liability of directors of the registrant is eliminated to the fullest extent
permitted by Section 102(b)(7) of the DGCL.
Under Section 145 of the DGCL, a corporation has the power to indemnify
directors and officers under certain prescribed circumstances and subject to
certain limitations against certain costs and expenses, including attorneys'
fees actually and reasonably incurred in connection with any action, suit or
proceeding, whether civil, criminal, administrative or investigative, to which
any of them is a party by reason of being a director or officer of the
corporation if it is determined that the director or officer acted in accordance
with the applicable standard of conduct set forth in such statutory provision.
Article 7 of the registrant's Bylaws provides that the registrant will indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding by reason of the
fact that he is or was a director, officer, employee or agent of the registrant,
or is or was serving at the request of the registrant as a director, officer,
employee or agent of another entity, against certain liabilities, costs and
expenses. Article 7 further permits the registrant to maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
registrant, or is or was serving at the request of the registrant as a director,
officer, employee or agent of another entity, against any liability asserted
against such person and incurred by such person in any such capacity or arising
out of his status as such, whether or not the registrant would have the power to
indemnify such person against such liability under the DGCL. The registrant
expects to maintain directors' and officers' liability insurance.
The foregoing statements are subject to the detailed provisions of Article
10 of the registrant's restated Certificate of Incorporation.
Pursuant to the Registration Rights Agreement, RailWorks has agreed to
indemnify holders of registrable notes against certain liabilities. Also
pursuant to the Registration Rights Agreement, RailWorks and certain
broker-dealers, including certain persons associated with such broker-dealers,
have agreed to indemnify each other against certain liabilities.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <C> <S>
3.1 -- Restated Certificate of Incorporation of RailWorks
Corporation (incorporated by reference to Exhibit 3.1 to
Registration Statement on Form S-1 (File No. 333-53483)).
3.2 -- Bylaws of RailWorks Corporation (incorporated by reference
to Exhibit 3.2 to Registration Statement on Form S-1 (File
No. 333-53483)).
</TABLE>
II-1
<PAGE> 207
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <C> <S>
3.3 -- Certificate of Designation of the Series A Convertible
Preferred Stock (incorporated by reference to Exhibit 3.1 to
the Registrant's Current Report on Form 8-K filed on October
14, 1998).
4.1 -- Specimen Common Stock Certificate (incorporated herein by
reference to Exhibit 4.1 to Registration Statement on Form
S-1, File No. 333-53483).
4.2 -- Form of 11 1/2% Senior Subordinated Notes due 2009 (included
in Exhibit 4.5).
4.3 -- Certificate of Designation of the Series A Convertible
Preferred Stock (incorporated by reference to Exhibit 3.1 to
the Registrant's Current Report on Form 8-K filed on October
14, 1998).
4.4 -- Indenture, dated as of April 7, 1999 (the "Indenture") among
RailWorks, the Guarantors named therein and First Union
National Bank, as Trustee (incorporated by reference to
Exhibit 4.5 to Registration Statement on Form S-4 (File No.
333-79649)).
4.5 -- Form of Supplemental Indenture adding Subsidiary Guarantors
(incorporated by reference to Exhibit 4.1 to the
Registrant's Quarterly Report on Form 10-Q filed November
15, 1999).
4.6* -- Registration Rights Agreement, dated as of September 30,
1999, among RailWorks, the Guarantors named therein and
First Union Capital Markets Corp., as Initial Purchaser.
5.1* -- Opinion of King & Spalding.
10.1 -- Uniform Provisions for the Acquisition of Founding Companies
(incorporated by reference to Exhibit 10.1 to Registration
Statement on Form S-1 (File No. 333-53483)).
10.2 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Wildcats
Alpha-Keystone Company, Alpha-Keystone Engineering, Inc. and
the stockholders named therein (incorporated by reference to
Exhibit 10.2 to Registration Statement on Form S-1 (File No.
333-53483)).
10.3 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Bulldog Comtrak
Company, Comtrak Construction, Inc. and the stockholders
named therein (incorporated by reference to Exhibit 10.3 to
Registration Statement on Form S-1 (File No. 333-53483)).
10.4 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Cardinal Annex
Railroad Builders Company, Annex Railroad Builders, Inc. and
the stockholders named therein (incorporated by reference to
Exhibit 10.4 to Registration Statement on Form S-1 (File No.
333-53483)).
10.5 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Huskies Condon
Brothers Company, Condon Brothers Inc. and the stockholders
named therein (incorporated by reference to Exhibit 10.5 to
Registration Statement on Form S-1 (File No. 333-53483)).
10.6 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Commodores
Concrete Company, CPI Concrete Products, Inc. and the
stockholders named therein (incorporated by reference to
Exhibit 10.6 to Registration Statement on Form S-1 (File No.
333-53483)).
10.7 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Nittany Lions
McGinley Company, HP McGinley Inc. and the stockholders
named therein (incorporated by reference to Exhibit 10.7 to
Registration Statement on Form S-1 (File No. 333-53483)).
10.8 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Owls Kennedy
Railroad Builders Company, Kennedy Railroad Builders, Inc.
and the stockholders named therein (incorporated by
reference to Exhibit 10.8 to Registration Statement on Form
S-1 (File No. 333-53483)).
</TABLE>
II-2
<PAGE> 208
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <C> <S>
10.9 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Red Storm
Comstock Company, Inc., L.K. Comstock & Company, Inc. and
the stockholders named therein (incorporated by reference to
Exhibit 10.9 to Registration Statement on Form S-1 (File No.
333-53483)).
10.10 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Sycamores Midwest
Construction Company, Midwest Construction Services, Inc.
and the stockholders named therein (incorporated by
reference to Exhibit 10.10 to Registration Statement on Form
S-1 (File No. 333-53483)).
10.11 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Bears Merit
Company, Merit Railroad Contractors, Inc. and the
stockholders named therein (incorporated by reference to
Exhibit 10.11 to Registration Statement on Form S-1 (File
No. 333-53483)).
10.12 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Hoosier Mize
Company, Mize Construction Company and the stockholders
named therein (incorporated by reference to Exhibit 10.12 to
Registration Statement on Form S-1 (File No. 333-53483)).
10.13 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Husky New England
Railroad Construction Company, New England Railroad
Construction Company Inc. and the stockholders named therein
(incorporated by reference to Exhibit 10.13 to Registration
Statement on Form S-1 (File No. 333-53483)).
10.14 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Wolverines
Northern Rail Services Company, Northern Rail Service and
Supply Company, Inc. and the stockholders named therein
(incorporated by reference to Exhibit 10.14 to Registration
Statement on Form S-1 (File No. 333-53483)).
10.15 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Big Orange
Minnesota Company, Minnesota Railroad Service Company and
the stockholders named therein (incorporated by reference to
Exhibit 10.15 to Registration Statement on Form S-1 (File
No. 333-53483)).
10.16 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Buckeye Railcorp,
Inc., Railcorp Inc. and the stockholders named therein
(incorporated by reference to Exhibit 10.16 to Registration
Statement on Form S-1 (File No. 333-53483)).
10.17 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Runnin' Rebels
Railroad Service Company, Railroad Service, Inc. and the
stockholders named therein (incorporated by reference to
Exhibit 10.17 to Registration Statement on Form S-1 (File
No. 333-53483)).
10.18 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Crusader Railroad
Specialties Company, Railroad Specialties, Inc. and the
stockholders named therein (incorporated by reference to
Exhibit 10.18 to Registration Statement on Form S-1 (File
No. 333-53483)).
10.19 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Screaming Eagle
Wood Preserving Company, Southern Indiana Wood Preserving
Company, Inc. and the stockholders named therein
(incorporated by reference to Exhibit 10.19 to Registration
Statement on Form S-1 (File No. 333-53483)).
</TABLE>
II-3
<PAGE> 209
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <C> <S>
10.20 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Fighting
Irish-U.S. Railway Supply Company, U.S. Railway Supply, Inc.
and the stockholders named therein (incorporated by
reference to Exhibit 10.20 to Registration Statement on Form
S-1 (File No. 333-53483)).
10.21 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Spartans
Trackworks Company, U.S. Trackworks, Inc. and the
stockholders named therein (incorporated by reference to
Exhibit 10.21 to Registration Statement on Form S-1 (File
No. 333-53483)).
10.22 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Mustang Smith
Construction Company, Wm. A. Smith Construction Co., Inc.
and the stockholders named therein (incorporated by
reference to Exhibit 10.22 to Registration Statement on Form
S-1 (File No. 333-53483)).
10.23 -- Agreement and Plan of Reorganization dated as of May 21,
1998 by and between RailWorks Corporation, Longhorn Smith
Rerailing Company, Wm. A. Smith Rerailing Services, Inc. and
the stockholders named therein (incorporated by reference to
Exhibit 10.23 to Registration Statement on Form S-1 (File
No. 333-53483)).
10.24 -- Amended and Restated Employment Agreement between RailWorks
Corporation and John G. Larkin dated as of August 4, 1998
(incorporated by reference to Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q filed on
September 11, 1998).
10.25 -- Amended and Restated Employment Agreement between RailWorks
Corporation and Michael R. Azarela dated as of August 4,
1998 (incorporated by reference to Exhibit 10.2 to the
Registrant's Quarterly Report on Form 10-Q filed on
September 11, 1998).
10.26 -- Amended and Restated Employment Agreement between RailWorks
Corporation and John Kennedy dated as of August 4, 1998
(incorporated by reference to Exhibit 10.3 to the
Registrant's Quarterly Report on Form 10-Q filed on
September 11, 1998).
10.27 -- Amended and Restated Employment Agreement between RailWorks
Corporation and Harold C. Kropp, Jr. dated as of August 4,
1998 (incorporated by reference to Exhibit 10.4 to the
Registrant's Quarterly Report on Form 10-Q filed on
September 11, 1998).
10.28 -- Form of Employment Agreement between each Founding Company
and Founding Company Officer (incorporated by reference to
Exhibit 10.28 to the Registrant's Registration Statement on
Form S-1 (File No. 333-53483)).
10.29 -- Amendment to the RailWorks Corporation 1998 Stock Incentive
Plan effective January 1, 1999 (incorporated by reference to
Exhibit 10.5 to the Registrant's Quarterly Report on Form
10-Q filed on November 15, 1999).
10.30 -- Indemnity and Cooperation Agreement dated as of April 3,
1997 between Spie Enertrans S.A., Comstock Group, Inc., L.K.
Comstock & Company and LKC Acquisition Corp., together with
Memorandum of Understanding dated August 20, 1997 between
Spie Enertrans S.A., Comstock Group, Inc., L.K. Comstock &
Company and LKC Acquisition Corp. (incorporated by reference
to Exhibit 10.30 to the Registrant's Registration Statement
on Form S-1 (File No. 333-53483)).
10.31 -- Stock Purchase Agreement dated April 3, 1997 between
Comstock Group, Inc. and LKC Acquisition Corp., as amended
(incorporated by reference to Exhibit 10.31 to the
Registrant's Registration Statement on Form S-1 (File No.
333-53483)).
10.32 -- Contingent Promissory Note dated April 3, 1997 made by L.K.
Comstock & Company, Inc. to the order of Spie Enertrans S.A.
(incorporated by reference to Exhibit 10.32 to the
Registrant's Registration Statement on Form S-1 (File No.
333-53483)).
</TABLE>
II-4
<PAGE> 210
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <C> <S>
10.33 -- Employment Agreement dated as of January 7, 1999 between
Robert D. Wolff and MidWest Railroad Construction and
Maintenance Corporation of Wyoming (incorporated by
reference to Exhibit 10.33 to the Registrant's Annual Report
on Form 10-K filed on March 29, 1999).
10.34 -- Amended and Restated Credit Agreement dated as of August 5,
1999 among RailWorks Corporation, as Borrower, Certain
Subsidiaries, as Guarantors, the Lenders named therein, Bank
of America, N.A., as Domestic Administrative Agent, Bank of
America, N.A., as Canadian Administrative Agent and First
Union National Bank, as Documentation Agent (incorporated by
reference to Exhibit 10.1 to the Registrant's Quarterly
Report on Form 10-Q filed on November 15, 1999).
10.35 -- Amendment No. 1 to the Amended and Restated Credit Agreement
dated as of September 29, 1999 by and among RailWorks
Corporation and Certain of its Subsidiaries, the Lenders
named therein, Bank of America, N.A., as Domestic
Administrative Agent and Bank of America, N.A., as Canadian
Administrative Agent (incorporated by reference to Exhibit
10.2 to the Registrant's Quarterly Report on Form 10-Q filed
on November 15, 1999).
10.36* -- Amendment No. 2 to the amended and Restated Credit Agreement
dated as of November 5, 1999 by and among RailWorks
Corporation and Certain of its Subsidiaries, the Lenders
named therein, Bank of America, N.A., as Domestic
Administrative Agent and Bank of America, N.A., as Canadian
Administrative Agent.
10.37* -- Term Loan Credit Agreement dated as of November 5, 1999
among RailWorks Corporation, as Borrower, Certain
Subsidiaries of the Borrower, as Guarantors, the Lenders
named herein, First Union National Bank, as Documentation
Agent and Bank of America, N.A., as Administrative Agent.
10.38 -- Employment Agreement between RailWorks Corporation and
Kenneth R. Burk dated as of May 10, 1999 (incorporated by
reference to Exhibit 10.1 to the Registrant's Quarterly
Report on Form 10-Q filed on May 14, 1999).
10.39 -- Amended and Restated Employment Agreement dated as of August
4, 1999 between RailWorks Corporation and Michael R. Azarela
(incorporated by reference to Exhibit 10.3 to the
Registrant's Quarterly Report on Form 10-Q filed on November
15, 1999).
10.40 -- Amended and Restated Employment Agreement dated as of August
4, 1999 between RailWorks Corporation and John G. Larkin
(incorporated by reference to Exhibit 10.4 to the
Registrant's Quarterly Report on Form 10-Q filed on November
15, 1999).
12.1* -- Computation of Ratio of Earnings to Fixed Charges.
21.1* -- List of Subsidiaries.
23.1* -- Consent of King & Spalding (included as part of its opinion
filed as Exhibit 5.1).
23.2* -- Consent of Arthur Andersen LLP.
23.3* -- Consent of Arthur Andersen LLP (Canada).
24.1** -- Powers of Attorney.
25.1 -- Statement of Eligibility of Trustee on Form T-1
(incorporated by reference to Exhibit 25.1 to Registration
Statement on Form S-4 (File No. 333-79649)).
99.1** -- Form of Letter of Transmittal for 11 1/2% Senior
Subordinated Notes Due 2009.
99.2** -- Form of Notice of Guaranteed Delivery for 11 1/2% Senior
Subordinated Notes Due 2009.
</TABLE>
II-5
<PAGE> 211
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <C> <S>
99.3** -- Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
99.4 -- Stock Exchange Agreement dated October 8, 1998 between the
Registrant and BT Alex. Brown Incorporated (incorporated by
reference to Exhibit 99.1 to the Registrant's Current Report
on Form 8-K filed on October 14, 1998).
</TABLE>
- ---------------
* Filed herewith.
** Filed previously.
ITEM 22. UNDERTAKINGS
That, for purposes of determining any liability under the Securities Act of
1933, each filing of any Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1993 may be permitted to directors, officers and controlling persons of the
registrants pursuant to the foregoing provisions, or otherwise, the registrants
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrants of expenses incurred
or paid by a director, officer or controlling person of the registrants in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrants will, unless in the opinion of their counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by them is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-6
<PAGE> 212
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
RAILWORKS CORPORATION
By: /s/ JOHN G. LARKIN
------------------------------------
John G. Larkin
Chairman of the Board
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, Chairman of the Board and Chief
Executive Officer of RailWorks, and Michael R. Azarela, Executive Vice
President, Chief Financial Officer and a Director of RailWorks, or either one of
them, and any agent for service named in this Registration Statement and each of
them, his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended and any and
all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with RailWorks Corporation, and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chairman of the Board December 16, 1999
- -----------------------------------------------------
John G. Larkin
* Executive Vice President, December 16, 1999
- ----------------------------------------------------- Chief Financial Officer
Michael R. Azarela and Director (Principal
Financial Officer)
* Vice President and Chief December 16, 1999
- ----------------------------------------------------- Accounting Officer
Harold C. Kropp (Principal Accounting
Officer)
* Vice President, Chief December 16, 1999
- ----------------------------------------------------- Operating Officer --
John Kennedy Track Contractors and
Director
</TABLE>
II-7
<PAGE> 213
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Director December 16, 1999
- -----------------------------------------------------
Scott D. Brace
* Director December 16, 1999
- -----------------------------------------------------
Kenneth R. Burk
* Director December 16, 1999
- -----------------------------------------------------
Ronald W. Drucker
* Director December 16, 1999
- -----------------------------------------------------
R. C. Matney
* Director December 16, 1999
- -----------------------------------------------------
Don Traviss
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-8
<PAGE> 214
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
ALPHA KEYSTONE ENGINEERING, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Alpha Keystone
Engineering, Inc., and Michael R. Azarela, Executive Vice President, Assistant
Secretary and a Director of Alpha Keystone Engineering, Inc., or either one of
them, and any agent for service named in this Registration Statement and each of
them, his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended and any and
all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Alpha Keystone Engineering, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President December 16, 1999
- -----------------------------------------------------
Fulton J. Kennedy
* Treasurer December 16, 1999
- -----------------------------------------------------
Harold C. Kropp
* Executive Vice President, December 16, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
* Assistant Secretary and December 16, 1999
- ----------------------------------------------------- Director
John Kennedy
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-9
<PAGE> 215
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
ARMCORE ACQUISITION CORP.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Armcore Acquisition
Corp., and Michael R. Azarela, Executive Vice President and a Director of
Armcore Acquisition Corp., or either one of them, and any agent for service
named in this Registration Statement and each of them, his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any registration statement filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Armcore Acquisition Corp. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director December 16, 1999
- -----------------------------------------------------
Ralph Jackson
* Treasurer December 16, 1999
- -----------------------------------------------------
Harold C. Kropp
* Executive Vice President December 16, 1999
- ----------------------------------------------------- and Director
Michael R. Azarela
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-10
<PAGE> 216
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
ARMCORE RAILROAD CONTRACTORS, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Armcore Railroad
Contractors, Inc., and Michael R. Azarela, Executive Vice President and Director
of Armcore Railroad Contractors, Inc., or either one of them, and any agent for
service named in this Registration Statement and each of them, his or her true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any registration statement filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Armcore Railroad Contractors, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director December 16, 1999
- -----------------------------------------------------
Ralph Jackson
* Treasurer December 16, 1999
- -----------------------------------------------------
Harold C. Kropp
* Executive Vice President December 16, 1999
- ----------------------------------------------------- and Director
Michael R. Azarela
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-11
<PAGE> 217
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
ANNEX RAILROAD BUILDERS, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Annex Railroad
Builders, Inc., and Michael R. Azarela, Executive Vice President, Assistant
Secretary and a Director of Annex Railroad Builders, Inc., or either one of
them, and any agent for service named in this Registration Statement and each of
them, his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended and any and
all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Annex Railroad Builders, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director December 16, 1999
- -----------------------------------------------------
Ronald E. Brown
* Treasurer December 16, 1999
- -----------------------------------------------------
Pamela J. Whitaker
* Executive Vice President, December 16, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-12
<PAGE> 218
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
COMSTOCK HOLDINGS, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Comstock Holdings,
Inc., and Michael R. Azarela, Executive Vice President, Assistant Secretary and
a Director of Comstock Holdings, Inc., or either one of them, and any agent for
service named in this Registration Statement and each of them, his or her true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and her and in his or her name, place and stead, in any
and all capacities, to sign any registration statement filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Comstock Holdings, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director December 16, 1999
- -----------------------------------------------------
C. William Moore
* Treasurer December 16, 1999
- -----------------------------------------------------
Robert Herschenfeld
* Director December 16, 1999
- -----------------------------------------------------
Michael R. Azarela
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-13
<PAGE> 219
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
L.K. COMSTOCK & COMPANY, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints , John G. Larkin, a Director of L.K. Comstock &
Company, Inc., and Michael R. Azarela, a Director of L.K. Comstock & Company,
Inc., or either one of them, and any agent for service named in this
Registration Statement and each of them, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any registration statement filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with L.K. Comstock & Company, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director December 16, 1999
- -----------------------------------------------------
C. William Moore
* Treasurer December 16, 1999
- -----------------------------------------------------
Robert Herschenfeld
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
* Director December 16, 1999
- -----------------------------------------------------
Michael R. Azarela
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-14
<PAGE> 220
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
COMTRAK CONSTRUCTION, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Comtrak
Construction, Inc., and Michael R. Azarela, Executive Vice President, Assistant
Secretary and a Director of Comtrak Construction, Inc., or either one of them,
and any agent for service named in this Registration Statement and each of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended and any and
all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Comtrak Construction, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director December 16, 1999
- -----------------------------------------------------
John H. Lapp
* Treasurer December 16, 1999
- -----------------------------------------------------
Harold C. Kropp
* Executive Vice President, December 16, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-15
<PAGE> 221
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
CONDON BROTHERS, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Condon Brothers,
Inc., and Michael R. Azarela, Executive Vice President, Assistant Secretary and
a Director of Condon Brothers, Inc., or either one of them, and any agent for
service named in this Registration Statement and each of them, his or her true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any registration statement filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Condon Brothers, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director December 16, 1999
- -----------------------------------------------------
Mark E. Condon
* Treasurer December 16, 1999
- -----------------------------------------------------
Kenneth Reger
* Executive Vice President, December 16, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-16
<PAGE> 222
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
CPI CONCRETE PRODUCTS INCORPORATED
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of CPI Concrete
Products Incorporated, and Michael R. Azarela, Executive Vice President,
Assistant Secretary and a Director of CPI Concrete Products Incorporated, or
either one of them, and any agent for service named in this Registration
Statement and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him or her and in
his or her name, place and stead, in any and all capacities, to sign any
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended and any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agents or any
of them, their, or his or her, substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with CPI Concrete Products Incorporated and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director December 16, 1999
- -----------------------------------------------------
John D. Baker
* Treasurer December 16, 1999
- -----------------------------------------------------
Julie Coletta
* Executive Vice December 16, 1999
- ----------------------------------------------------- President, Assistant
Michael R. Azarela Secretary and Director
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-17
<PAGE> 223
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
FCM RAIL, LTD.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of FCM Rail, Ltd., and
Michael R. Azarela, Executive Vice President and a Director of FCM Rail, Ltd.,
or either one of them, and any agent for service named in this Registration
Statement and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him or her and in
his or her name, place and stead, in any and all capacities, to sign any
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended and any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agents or any
of them, their, or his or her, substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with FCM Rail, Ltd. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director December 16, 1999
- -----------------------------------------------------
Dennis J. Gilstad
* Treasurer and Vice December 16, 1999
- ----------------------------------------------------- President
Harold S. Yip
* Executive Vice President December 16, 1999
- ----------------------------------------------------- and Director
Michael R. Azarela
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-18
<PAGE> 224
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
F&V METRO RW, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of F&V Metro RW, Inc.,
and Michael R. Azarela, Executive Vice President and a Director of F&V Metro RW,
Inc., or either one of them, and any agent for service named in this
Registration Statement and each of them, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any registration statement filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with F&V Metro RW, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President, Chief Executive December 16, 1999
- ----------------------------------------------------- Officer and Director
Ben D'Alessandro
* Treasurer December 16, 1999
- -----------------------------------------------------
Gene Cellini
* Executive Vice President December 16, 1999
- ----------------------------------------------------- and Director
Michael R. Azarela
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-19
<PAGE> 225
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
RWKS TRANSIT, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of RWKS Transit, Inc.,
and Michael R. Azarela, Executive Vice President and a Director of RWKS Transit,
Inc., or either one of them, and any agent for service named in this
Registration Statement and each of them, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any registration statement filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with RWKS Transit, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President, Chief Executive December 16, 1999
- ----------------------------------------------------- Officer and Director
Ben D'Alessandro
* Treasurer December 16, 1999
- -----------------------------------------------------
Gene Cellini
* Executive Vice President December 16, 1999
- ----------------------------------------------------- and Director
Michael R. Azarela
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-20
<PAGE> 226
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
IMPULSE ENTERPRISES OF NEW YORK, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Impulse Enterprises
of New York, Inc., and Michael R. Azarela, Executive Vice President and a
Director of Impulse Enterprises of New York, Inc., or either one of them, and
any agent for service named in this Registration Statement and each of them, his
or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended and any and
all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Impulse Enterprises of New York, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Chief December 16, 1999
- ----------------------------------------------------- Executive Officer
Dawn D'Alessandro
* Treasurer December 16, 1999
- -----------------------------------------------------
Gene Cellini
* Executive Vice President December 16, 1999
- ----------------------------------------------------- and Director
Michael R. Azarela
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
* Director December 16, 1999
- -----------------------------------------------------
Ben D'Alessandro
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-21
<PAGE> 227
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
V&R ELECTRICAL CONTRACTORS, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of V&R Electrical
Contractors, Inc., and Michael R. Azarela, Executive Vice President and a
Director of V&R Electrical Contractors, Inc., or either one of them, and any
agent for service named in this Registration Statement and each of them, his or
her true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him or her and in his name, place and stead, in any and
all capacities, to sign any registration statement filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with V&R Electrical Contractors, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President, Chief Executive December 16, 1999
- ----------------------------------------------------- Officer and Director
Ben D'Alessandro
* Treasurer December 16, 1999
- -----------------------------------------------------
Gene Cellini
* Executive Vice President December 16, 1999
- ----------------------------------------------------- and Director
Michael R. Azarela
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
-------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-22
<PAGE> 228
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
GANTREX RW, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Gantrex RW, Inc.,
and Michael R. Azarela, Executive Vice President and a Director of Gantrex RW,
Inc., or either one of them, and any agent for service named in this
Registration Statement and each of them, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any registration statement filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Gantrex RW, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director December 16, 1999
- -----------------------------------------------------
Peter Levey
* Treasurer December 16, 1999
- -----------------------------------------------------
Gene Cellini
* Executive Vice President December 16, 1999
- ----------------------------------------------------- and Director
Michael R. Azarela
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
-------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-23
<PAGE> 229
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
GANTREX CORPORATION
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Gantrex
Corporation, and Michael R. Azarela, Secretary and a Director of Gantrex
Corporation, or either one of them, and any agent for service named in this
Registration Statement and each of them, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any registration statement filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Gantrex Corporation and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director December 16, 1999
- -----------------------------------------------------
Peter Levey
* Treasurer December 16, 1999
- -----------------------------------------------------
Gene Cellini
* Executive Vice President December 16, 1999
- ----------------------------------------------------- and Director
Michael R. Azarela
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
-----------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-24
<PAGE> 230
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
GANTREX SYSTEMS, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Gantrex Systems,
Inc., and Michael R. Azarela, Secretary and a Director of Gantrex Systems, Inc.,
or either one of them, and any agent for service named in this Registration
Statement and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him or her and in
his or her name, place and stead, in any and all capacities, to sign any
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended and any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agents or any
of them, their, or his or her, substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Gantrex Systems, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director December 16, 1999
- -----------------------------------------------------
Peter Levey
* Treasurer December 16, 1999
- -----------------------------------------------------
Gene Cellini
* Executive Vice President December 16, 1999
- ----------------------------------------------------- and Director
Michael R. Azarela
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-25
<PAGE> 231
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
H.P. McGINLEY INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of H.P. McGinley Inc.,
and Michael R. Azarela, Executive Vice President, Assistant Secretary and a
Director of H.P. McGinley Inc., or either one of them, and any agent for service
named in this Registration Statement and each of them, his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any registration statement filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with H.P. McGinley Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director December 16, 1999
- -----------------------------------------------------
David H. McGinley
* Treasurer December 16, 1999
- -----------------------------------------------------
Lynn Mingle
* Executive Vice President, December 16, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-26
<PAGE> 232
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
KENNEDY RAILROAD BUILDERS, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Kennedy Railroad
Builders, Inc., and Michael R. Azarela, Executive Vice President, Assistant
Secretary and a Director of Kennedy Railroad Builders, Inc., or either one of
them, and any agent for service named in this Registration Statement and each of
them, his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended and any and
all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Kennedy Railroad Builders, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director December 16, 1999
- -----------------------------------------------------
John Kennedy
* Treasurer December 16, 1999
- -----------------------------------------------------
Harold C. Kropp
* Executive Vice President, December 16, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-27
<PAGE> 233
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
MERIT RAILROAD CONTRACTORS, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Merit Railroad
Contractors, Inc., and Michael R. Azarela, Executive Vice President, Assistant
Secretary and a Director of Merit Railroad Contractors, Inc., or either one of
them, and any agent for service named in this Registration Statement and each of
them, his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended and any and
all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Merit Railroad Contractors, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director December 16, 1999
- -----------------------------------------------------
Steve C. Goggin
* Treasurer December 16, 1999
- -----------------------------------------------------
David Leehy
* Executive Vice President, December 16, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-28
<PAGE> 234
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
MIDWEST CONSTRUCTION SERVICES, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Midwest
Construction Services, Inc., and Michael R. Azarela, Executive Vice President,
Assistant Secretary and a Director of Midwest Construction Services, Inc., or
either one of them, and any agent for service named in this Registration
Statement and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him or her and in
his or her name, place and stead, in any and all capacities, to sign any
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended and any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agents or any
of them, their, or his or her, substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Midwest Construction Services, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director December 16, 1999
- -----------------------------------------------------
William C. Lucaitis
* Treasurer December 16, 1999
- -----------------------------------------------------
Harold C. Kropp
* Executive Vice December 16, 1999
- ----------------------------------------------------- President, Assistant
Michael R. Azarela Secretary and Director
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-29
<PAGE> 235
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
MID WEST RW, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Michael R. Azarela, Executive Vice President and
a Director of Mid West RW, Inc., and John G. Larkin, a Director of Mid West RW,
Inc., or either one of them, and any agent for service named in this
Registration Statement and each of them, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any registration statement filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Mid West RW, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chief Executive Officer December 16, 1999
- ----------------------------------------------------- and Director
Robert D. Wolff
* President December 16, 1999
- -----------------------------------------------------
William Bush
* Treasurer December 16, 1999
- -----------------------------------------------------
Mary Anne Haase
* Executive Vice President December 16, 1999
- ----------------------------------------------------- and Director
Michael R. Azarela
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-30
<PAGE> 236
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
MID WEST RAILROAD CONSTRUCTION &
MAINTENANCE CORPORATION OF WYOMING
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Mid West Railroad
Construction & Maintenance Corporation of Wyoming, and Michael R. Azarela,
Executive Vice President and a Director of Mid West Railroad Construction &
Maintenance Corporation of Wyoming, or either one of them, and any agent for
service named in this Registration Statement and each of them, his or her true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any registration statement filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Mid West Railroad Construction & Maintenance Corporation of
Wyoming and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chief Executive Officer December 16, 1999
- ----------------------------------------------------- and Director
Robert D. Wolff
* President December 16, 1999
- -----------------------------------------------------
William Bush
* Treasurer and Secretary December 16, 1999
- -----------------------------------------------------
Mary Anne Haase
* Executive Vice President December 16, 1999
- ----------------------------------------------------- and Director
Michael R. Azarela
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-31
<PAGE> 237
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
MINNESOTA RAILROAD SERVICE, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Minnesota Railroad
Service, Inc., and Michael R. Azarela, Executive Vice President, Assistant
Secretary and a Director, of Minnesota Railroad Service, Inc., or either one of
them, and any agent for service named in this Registration Statement and each of
them, his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended and any and
all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Minnesota Railroad Service, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director December 16, 1999
- -----------------------------------------------------
Scott D. Brace
* Treasurer December 16, 1999
- -----------------------------------------------------
Kenneth Reger
* Executive Vice President, December 16, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-32
<PAGE> 238
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
NEW ENGLAND RAILROAD
CONSTRUCTION CO., INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of New England
Railroad Construction Co., Inc., and Michael R. Azarela, Executive Vice
President, Assistant Secretary and a Director of New England Railroad
Construction Co., Inc., or either one of them, and any agent for service named
in this Registration Statement and each of them, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any registration statement filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with New England Railroad Construction Co., Inc. and on the date
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director December 16, 1999
- -----------------------------------------------------
Anthony D. Julian, Jr.
* Treasurer December 16, 1999
- -----------------------------------------------------
Daniel F. Julian
* Executive Vice President, December 16, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-33
<PAGE> 239
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
NORTHERN RAIL SERVICE AND SUPPLY
COMPANY, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Northern Rail
Service and Supply Company, Inc., and Michael R. Azarela, Executive Vice
President, Assistant Secretary and a Director of Northern Rail Service and
Supply Company, Inc., or either one of them, and any agent for service named in
this Registration Statement and each of them, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any registration statement filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Northern Rail Service and Supply Company, Inc. and on the date
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director December 16, 1999
- -----------------------------------------------------
Lambertus L. Tameling
* Treasurer December 16, 1999
- -----------------------------------------------------
Harold C. Kropp
* Executive Vice President, December 16, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-34
<PAGE> 240
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
RAILCORP, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Railcorp, Inc., and
Michael R. Azarela, Executive Vice President, Assistant Secretary and a Director
of Railcorp, Inc., or either one of them, and any agent for service named in
this Registration Statement and each of them, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any registration statement filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Railcorp, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President December 16, 1999
- -----------------------------------------------------
Fulton J. Kennedy
* Treasurer Executive Vice December 16, 1999
- ----------------------------------------------------- President,
Harold C. Kropp
* Assistant Secretary and December 16, 1999
- ----------------------------------------------------- Director
Michael R. Azarela
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
* Director December 16, 1999
- -----------------------------------------------------
John Kennedy
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-35
<PAGE> 241
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
RAILROAD SERVICE, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Railroad Service,
Inc., and Michael R. Azarela, Executive Vice President, Assistant Secretary and
a Director Railroad Service, Inc., or either one of them, and any agent for
service named in this Registration Statement and each of them, his or her true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any registration statement filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Railroad Service, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director December 16, 1999
- -----------------------------------------------------
Scott D. Brace
* Treasurer December 16, 1999
- -----------------------------------------------------
Kenneth Reger
* Executive Vice President, December 16, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-36
<PAGE> 242
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
RAILROAD SPECIALTIES, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Railroad
Specialties, Inc., and Michael R. Azarela, Executive Vice President, Assistant
Secretary and a Director of Railroad Specialties, Inc., or either one of them,
and any agent for service named in this Registration Statement and each of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended and any and
all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Railroad Specialties, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director December 16, 1999
- -----------------------------------------------------
Ronald E. Brown
* Treasurer December 16, 1999
- -----------------------------------------------------
Pamela Whitaker
* Executive Vice President, December 16, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-37
<PAGE> 243
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
SHELDON ELECTRIC, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Sheldon Electric,
Inc., and Michael R. Azarela, Executive Vice President and a Director of Sheldon
Electric, Inc., or either one of them, and any agent for service named in this
Registration Statement and each of them, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any registration statement filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Sheldon Electric, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chief Executive Officer December 16, 1999
- -----------------------------------------------------
Michael A. Cahn
* President and Chief December 16, 1999
- ----------------------------------------------------- Operating Officer
Michael Pratt
* Treasurer December 16, 1999
- -----------------------------------------------------
Harold C. Kropp
* Executive Vice President December 16, 1999
- ----------------------------------------------------- and Director
Michael R. Azarela
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
* Director December 16, 1999
- -----------------------------------------------------
Ben D'Alessandro
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-38
<PAGE> 244
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
SOUTHERN INDIANA WOOD PRESERVING CO.,
INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Southern Indiana
Wood Preserving Co., Inc., and Michael R. Azarela, Executive Vice President,
Assistant Secretary and a Director of Southern Indiana Wood Preserving Co.,
Inc., or either one of them, and any agent for service named in this
Registration Statement and each of them, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any registration statement filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with, Southern Indiana Wood Preserving Co., Inc. and on the date
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director December 16, 1999
- -----------------------------------------------------
Sean G. Gough
* Treasurer Executive Vice December 16, 1999
- ----------------------------------------------------- President,
Harold C. Kropp
* Assistant Secretary and December 16, 1999
- ----------------------------------------------------- Director
Michael R. Azarela
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-39
<PAGE> 245
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
U.S. TRACKWORKS, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of U.S. Trackworks,
Inc., and Michael R. Azarela, Executive Vice President, Assistant Secretary and
a Director of U.S. Trackworks, Inc., or either one of them, and any agent for
service named in this Registration Statement and each of them, his or her true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any registration statement filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with U.S. Trackworks, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director December 16, 1999
- -----------------------------------------------------
Lambertus L. Tameling
* Treasurer December 16, 1999
- -----------------------------------------------------
Harold C. Kropp
* Executive Vice President, December 16, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-40
<PAGE> 246
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
U.S. RAILWAY SUPPLY, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of U.S. Railway
Supply, Inc., and Michael R. Azarela, Executive Vice President, Assistant
Secretary and a Director of U.S. Railway Supply, Inc., or either one of them,
and any agent for service named in this Registration Statement and each of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended and any and
all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with U.S. Railway Supply, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director December 16, 1999
- -----------------------------------------------------
Ronald E. Brown
* Treasurer December 16, 1999
- -----------------------------------------------------
Pamela J. Whitaker
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
* Executive Vice President, December 16, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-41
<PAGE> 247
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
WM. A. SMITH CONSTRUCTION CO., INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Wm. A. Smith
Construction Co., Inc., and Michael R. Azarela, Executive Vice President,
Assistant Secretary and a Director of Wm. A. Smith Construction Co., Inc., or
either one of them, and any agent for service named in this Registration
Statement and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him or her and in
his or her name, place and stead, in any and all capacities, to sign any
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended and any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agents or any
of them, their, or his or her, substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Wm. A. Smith Construction Co., Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director December 16, 1999
- -----------------------------------------------------
Jack I. Wilt
* Treasurer December 16, 1999
- -----------------------------------------------------
Dan Burg
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
* Executive Vice President, December 16, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-42
<PAGE> 248
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
WM. A. SMITH RERAILING SERVICES, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Wm. A. Smith
Rerailing Services, Inc., and Michael R. Azarela, Executive Vice President,
Assistant Secretary and a Director of Wm. A. Smith Rerailing Services, Inc., or
either one of them, and any agent for service named in this Registration
Statement and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him or her and in
his or her name, place and stead, in any and all capacities, to sign any
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended and any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agents or any
of them, their, or his or her, substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Wm A. Smith Rerailing Services, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director December 16, 1999
- --------------------------------------------------------
Jack I. Wilt
* Treasurer December 16, 1999
- --------------------------------------------------------
Dan Burg
* Director December 16, 1999
- --------------------------------------------------------
John G. Larkin
* Executive Vice December 16, 1999
- -------------------------------------------------------- President, Assistant
Michael R. Azarela Secretary and Director
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-43
<PAGE> 249
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
M-TRACK ENTERPRISES, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of M-Track
Enterprises, Inc., and Michael R. Azarela, a Director of M-Track Enterprises,
Inc., or either one of them, and any agent for service named in this
Registration Statement and each of them, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any registration statement filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with M-Track Enterprises, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director December 16, 1999
- -----------------------------------------------------
Luigi Imperia
* Treasurer December 16, 1999
- -----------------------------------------------------
Gene Cellini
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
* Director December 16, 1999
- -----------------------------------------------------
Michael R. Azarela
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-44
<PAGE> 250
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
RAILWORKS CANADA, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, President and a Director of
RailWorks Canada, Inc., and Michael R. Azarela, Executive Vice President and a
Director of RailWorks Canada, Inc., or either one of them, and any agent for
service named in this Registration Statement and each of them, his or her true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any registration statement filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with RailWorks Canada, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President and Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
* Treasurer December 16, 1999
- -----------------------------------------------------
Gene Cellini
* Executive Vice President December 16, 1999
- ----------------------------------------------------- and Director
Michael R. Azarela
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-45
<PAGE> 251
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
PARSONS RAILWAY SHOPS, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Parsons Railway
Shops, Inc., and Michael R. Azarela, a Director of Parsons Railway Shops, Inc.,
or either one of them, and any agent for service named in this Registration
Statement and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him or her and in
his or her name, place and stead, in any and all capacities, to sign any
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended and any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agents or any
of them, their, or his or her, substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Parsons Railway Shops, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President December 16, 1999
- -----------------------------------------------------
Douglas W. Hutchinson
* Treasurer December 16, 1999
- -----------------------------------------------------
Steven G. Hutchinson
* Director December 16, 1999
- -----------------------------------------------------
Michael R. Azarela
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-46
<PAGE> 252
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
NEOSHO CONSTRUCTION COMPANY, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Neosho Construction
Company, Inc., and Michael R. Azarela, a Director of Neosho Construction
Company, Inc., or either one of them, and any agent for service named in this
Registration Statement and each of them, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any registration statement filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Neosho Construction Company, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President December 16, 1999
- -----------------------------------------------------
Steven G. Hutchinson
* Treasurer December 16, 1999
- -----------------------------------------------------
Douglas W. Hutchinson
* Director December 16, 1999
- -----------------------------------------------------
Michael R. Azarela
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-47
<PAGE> 253
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
NEOSHO INCORPORATED
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Neosho
Incorporated, and Michael R. Azarela, a Director of Neosho Incorporated, or
either one of them, and any agent for service named in this Registration
Statement and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him or her and in
his or her name, place and stead, in any and all capacities, to sign any
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended and any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agents or any
of them, their, or his or her, substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Neosho Incorporated and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President December 16, 1999
- -----------------------------------------------------
Steven G. Hutchinson
* Treasurer December 16, 1999
- -----------------------------------------------------
Douglas W. Hutchinson
* Executive Vice President, December 16, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-48
<PAGE> 254
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
NEOSHO INTERNATIONAL, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Neosho
International, Inc., and Michael R. Azarela, a Director of Neosho International,
Inc., or either one of them, and any agent for service named in this
Registration Statement and each of them, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any registration statement filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Neosho International, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President December 16, 1999
- -----------------------------------------------------
Steven G. Hutchinson
* Treasurer December 16, 1999
- -----------------------------------------------------
Douglas W. Hutchinson
* Director December 16, 1999
- -----------------------------------------------------
Michael R. Azarela
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-49
<PAGE> 255
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
NEOSHO ASIA, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Neosho Asia, Inc.,
and Michael R. Azarela, a Director of Neosho Asia, Inc., or either one of them,
and any agent for service named in this Registration Statement and each of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended and any and
all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Neosho Asia, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President December 16, 1999
- -----------------------------------------------------
Steven G. Hutchinson
* Treasurer December 16, 1999
- -----------------------------------------------------
Douglas W. Hutchinson
* Director December 16, 1999
- -----------------------------------------------------
Michael R. Azarela
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-50
<PAGE> 256
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
NEOSHO CENTRAL AMERICA, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Neosho Central
America, Inc., and Michael R. Azarela, a Director of Neosho Central America,
Inc., or either one of them, and any agent for service named in this
Registration Statement and each of them, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any registration statement filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Neosho Central America, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President December 16, 1999
- -----------------------------------------------------
Steven G. Hutchinson
* Treasurer December 16, 1999
- -----------------------------------------------------
Douglas W. Hutchinson
* Director December 16, 1999
- -----------------------------------------------------
Michael R. Azarela
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-51
<PAGE> 257
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
NEOSHO CONTRACTORS, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Neosho Contractors,
Inc., and Michael R. Azarela, a Director of Neosho Contractors, Inc., or either
one of them, and any agent for service named in this Registration Statement and
each of them, his or her true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him or her and in his or her name,
place and stead, in any and all capacities, to sign any registration statement
filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended and
any and all amendments (including post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agents or any of them, their,
or his or her, substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Neosho Contractors, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President December 16, 1999
- -----------------------------------------------------
Steven W. Hutchinson
* Treasurer December 16, 1999
- -----------------------------------------------------
Douglas W. Hutchinson
* Director December 16, 1999
- -----------------------------------------------------
Michael R. Azarela
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-52
<PAGE> 258
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
McCORD TREATED WOOD, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of McCord Treated
Wood, Inc., and Michael R. Azarela, Executive Vice President and a Director of
McCord Treated Wood, Inc., or either one of them, and any agent for service
named in this Registration Statement and each of them, his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any registration statement filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with McCord Treated Wood, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chief Executive Officer December 16, 1999
- -----------------------------------------------------
William R. Donley
* Treasurer December 16, 1999
- -----------------------------------------------------
Gene Cellini
* Executive Vice President December 16, 1999
- ----------------------------------------------------- and Director
Michael R. Azarela
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-53
<PAGE> 259
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
EARL CAMPBELL CONSTRUCTION COMPANY, INC.
By: /s/ MICHAEL R. AZARELA
---------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Earl Campbell
Construction Company, Inc., and Michael R. Azarela, Executive Vice President and
a Director of Earl Campbell Construction Company, Inc., or either one of them,
and any agent for service named in this Registration Statement and each of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended and any and
all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Earl Campbell Construction Company, Inc. and on the date
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President December 16, 1999
- -----------------------------------------------------
Robert D. Wolff
* Treasurer December 16, 1999
- -----------------------------------------------------
Kenneth Reger
* Executive Vice President December 16, 1999
- ----------------------------------------------------- and Director
Michael R. Azarela
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-54
<PAGE> 260
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
BIRMINGHAM WOOD, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Birmingham Wood,
Inc., and Michael R. Azarela, Executive Vice President and a Director of
Birmingham Wood, Inc., or either one of them, and any agent for service named in
this Registration Statement and each of them, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any registration statement filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Birmingham Wood, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chief Executive Officer December 16, 1999
- -----------------------------------------------------
William R. Donley
* Treasurer December 16, 1999
- -----------------------------------------------------
Gene Cellini
* Executive Vice President December 16, 1999
- ----------------------------------------------------- and Director
Michael R. Azarela
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-55
<PAGE> 261
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
W.T. BYLER, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Birmingham Wood,
Inc., and Michael R. Azarela, Executive Vice President and a Director of
Birmingham Wood, Inc., or either one of them, and any agent for service named in
this Registration Statement and each of them, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any registration statement filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Birmingham Wood, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chief Executive Officer December 16, 1999
- -----------------------------------------------------
William Troy Byler
* Treasurer December 16, 1999
- -----------------------------------------------------
Gene Cellini
* Executive Vice President December 16, 1999
- ----------------------------------------------------- and Director
Michael R. Azarela
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-56
<PAGE> 262
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, on December 16, 1999.
WOOD WASTE ENERGY, INC.
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Larkin, a Director of Birmingham Wood,
Inc., and Michael R. Azarela, Executive Vice President and a Director of
Birmingham Wood, Inc., or either one of them, and any agent for service named in
this Registration Statement and each of them, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any registration statement filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended and any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their, or his or her, substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Birmingham Wood, Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President December 16, 1999
- -----------------------------------------------------
Greg M. Smith
* Treasurer December 16, 1999
- -----------------------------------------------------
Gene Cellini
* Executive Vice President December 16, 1999
- ----------------------------------------------------- and Director
Michael R. Azarela
* Director December 16, 1999
- -----------------------------------------------------
John G. Larkin
*By: /s/ MICHAEL R. AZARELA
------------------------------------------------
Michael R. Azarela
Attorney-in-Fact
</TABLE>
II-57
<PAGE> 1
EXHIBIT 4.6
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of September 30, 1999
Among
RAILWORKS CORPORATION
and
THE GUARANTORS NAMED HEREIN
as Issuers,
and
FIRST UNION CAPITAL MARKETS CORP.,
as Initial Purchaser
11 1/2% Senior Subordinated Notes due 2009
- --------------------------------------------------------------------------------
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is dated
as of September 30, 1999, among RAILWORKS CORPORATION, a Delaware corporation
(the "Company"), the subsidiaries of the Company that are listed on the
signature pages hereof (collectively, and together with any subsidiary that in
the future executes a supplemental indenture pursuant to which such subsidiary
agrees to guarantee the Notes (as hereinafter defined), the "Guarantors" and,
together with the Company, the "Issuers"), and FIRST UNION CAPITAL MARKETS
CORP., as initial purchaser (the "Initial Purchaser").
This Agreement is entered into in connection with the Purchase
Agreement by and among the Issuers and the Initial Purchaser, dated as of
September 23, 1999 (the "Purchase Agreement"), which provides for, among other
things, the sale by the Company to the Initial Purchaser of $50,000,000
aggregate principal amount of the Company's 11 1/2% Senior Subordinated Notes
due 2009 (the "Notes"), guaranteed by the Guarantors (the "Guarantees"). The
Notes and the Guarantees are collectively referenced to herein as the
"Securities". In order to induce the Initial Purchaser to enter into the
Purchase Agreement, the Issuers have agreed to provide the registration rights
set forth in this Agreement for the benefit of the Initial Purchaser and any
subsequent holder or holders of the Securities. The execution and delivery of
this Agreement is a condition to the Initial Purchaser's obligation to purchase
the Securities under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4 hereof.
Advice: See the last paragraph of Section 5 hereof.
Agreement: See the introductory paragraphs hereto.
Applicable Period: See Section 2(b) hereof.
Business Day: Any day that is not a Saturday, Sunday or a day
on which banking institutions in New York are authorized or required by law to
be closed.
Closing Date: The Closing Date as defined in the Purchase
Agreement.
<PAGE> 3
-2-
Company: See the introductory paragraphs hereto.
Effectiveness Date: The 120th day after the Issue Date;
provided, however, that with respect to any Shelf Registration, the
Effectiveness Date shall be the 120th day after the Filing Date with respect
thereto.
Effectiveness Period: See Section 3 hereof.
Event Date: See Section 4 hereof.
Exchange Act: The Securities Exchange Act of 1934, and the
rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2(a) hereof.
Exchange Offer: See Section 2(a) hereof.
Exchange Offer Registration Statement: See Section 2(a)
hereof.
Filing Date: (A) If no Exchange Offer Registration Statement
has been filed by the Issuers pursuant to this Agreement, the 45th day after the
Issue Date; and (B) with respect to a Shelf Registration Statement, the 45th day
after the delivery of a Shelf Notice as required pursuant to Section 2(c)
hereof.
Guarantees: See the introductory paragraphs hereto.
Guarantors: See the introductory paragraphs hereto.
Holder: Any holder of a Registrable Note or Registrable Notes.
Indemnified Person: See Section 7(c) hereof.
Indemnifying Persons: See Section 7(c) hereof.
Indenture: The Indenture, dated as of April 7, 1999, by and
among the Issuers and First Union National Bank, as Trustee, pursuant to which
the Notes are being issued, as amended or supplemented from time to time in
accordance with the terms thereof.
Information: See Section 5(n) hereof.
Initial Purchaser: See the introductory paragraphs hereto.
Inspectors: See Section 5(n) hereof.
<PAGE> 4
-3-
Issue Date: September 30, 1999, the date of original issuance
of these Notes.
Issuers: See the introductory paragraphs hereto.
NASD: See Section 5(s) hereof.
Notes: See the introductory paragraphs hereto.
Participant: See Section 7(a) hereof.
Participating Broker-Dealer: See Section 2(b) hereof.
Person: An individual, trustee, corporation, partnership,
limited liability company, joint stock company, trust, unincorporated
association, union, business association, firm or other legal entity.
Private Exchange: See Section 2(b) hereof.
Private Exchange Notes: See Section 2(b) hereof.
Prospectus: The prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement, and all
other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
Purchase Agreement: See the introductory paragraphs hereof.
Records: See Section 5(n) hereof.
Registrable Notes: Each Note upon its original issuance and at
all times subsequent thereto, each Exchange Note (and the related Guarantees) as
to which Section 2(c)(iv) hereof is applicable upon original issuance and at all
times subsequent thereto and each Private Exchange Note (and the related
Guarantees) upon original issuance thereof and at all times subsequent thereto,
until the earliest to occur of (i) a Registration Statement (other than, with
respect to any Exchange Note as to which Section 2(c)(iv) hereof is applicable,
the Exchange Offer Registration Statement) covering such Note, Exchange Note or
Private Exchange Note has been declared effective by the SEC and such Note,
Exchange Note or such Private Exchange Note (and the related Guarantees), as the
case may be, has been disposed of in accordance with such effective Registration
Statement, (ii) such Note has been exchanged pursuant to the Exchange Offer for
an Exchange Note or Exchange Notes (and the related Guarantees) that may be
resold without restriction under state and federal securities laws, (iii) such
Note, Exchange Note or Private Exchange Note (and the related Guarantees), as
the
<PAGE> 5
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case may be, ceases to be outstanding for purposes of the Indenture, (iv) such
Note is sold pursuant to Rule 144 under circumstances in which any legend borne
by such Note relating to restrictions on transferability thereof, under the
Securities Act or otherwise, is removed by the Company or pursuant to the
Indenture, or (v) such Note, Exchange Note or Private Exchange Note (and the
related Guarantees), as the case may be, in the reasonable opinion of the
Company, may be resold without restriction pursuant to Rule 144(k) under the
Securities Act.
Registration Statement: Any registration statement of the
Issuers that covers any of the Notes, the Exchange Notes or the Private Exchange
Notes (and the related Guarantees) filed with the SEC under the Securities Act,
including the Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
Rule 144: Rule 144 under the Securities Act.
Rule 144A: Rule 144A under the Securities Act.
Rule 405: Rule 405 under the Securities Act.
Rule 415: Rule 415 under the Securities Act.
Rule 424: Rule 424 under the Securities Act.
SEC: The Securities and Exchange Commission.
Securities: See the introductory paragraphs hereto.
Securities Act: The Securities Act of 1933, and the rules and
regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c) hereof.
Shelf Registration: See Section 3(a) hereof.
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture and the trustee (if
any) under any indenture governing the Exchange Notes and Private Exchange Notes
(and the related Guarantees).
<PAGE> 6
-5-
Underwritten registration or underwritten offering: A
registration in which securities of one or more of the Issuers are sold to an
underwriter for reoffering to the public.
Except as otherwise specifically provided, all references in
this Agreement to acts, laws, statutes, rules, regulations, releases, forms,
no-action letters and other regulatory requirements (collectively, "Regulatory
Requirements") shall be deemed to refer also to any amendments thereto and all
subsequent Regulatory Requirements adopted as a replacement thereto having
substantially the same effect therewith; provided that Rule 144 shall not be
deemed to amend or replace Rule 144A.
2. Exchange Offer
(a) The Issuers shall file with the SEC, no later than the
Filing Date, a Registration Statement (the "Exchange Offer Registration
Statement") on an appropriate registration form with respect to a registered
offer (the "Exchange Offer") to exchange any and all of the Registrable Notes
for a like aggregate principal amount of debt securities of the Company,
guaranteed by the Guarantor, that are identical in all material respects to the
Securities, except that (i) the Exchange Notes shall have been registered
pursuant to an effective registration statement under the Securities Act, shall
not contain provisions for Additional Interest, and shall contain no restrictive
legend thereon (the "Exchange Notes"), and (ii) interest thereon shall accrue
from the last date on which interest was paid on the Notes or, if no such
interest has been paid, from April 7, 1999, and which are entitled to the
benefits of the Indenture or a trust indenture which is identical in all
material respects to the Indenture (other than such changes to the Indenture or
any such identical trust indenture as are necessary to comply with the TIA) and
which, in either case, has been qualified under the TIA. The Exchange Offer
shall comply with all applicable tender offer rules and regulations under the
Exchange Act and other applicable law. The Issuers shall use their reasonable
best efforts to (x) cause the Exchange Offer Registration Statement to be
declared effective under the Securities Act on or before the Effectiveness Date;
(y) keep the Exchange Offer open for at least 30 days (or longer if required by
applicable law) after the date that notice of the Exchange Offer is mailed to
Holders; and (z) complete the Exchange Offer on or prior to the 35th day
following the date on which the Exchange Offer Registration Statement is
declared effective by the SEC. If, after the Exchange Offer Registration
Statement is initially declared effective by the SEC, the Exchange Offer or the
issuance of the Exchange Notes thereunder is interfered with by any stop order,
injunction or other order or requirement of the SEC or any other governmental
agency or court, the Exchange Offer Registration Statement shall be deemed not
to have become effective for purposes of this Agreement, unless such
interference is cured within five Business Days.
Each Holder (including, without limitation, each Participating
Broker-Dealer) who participates in the Exchange Offer will be required to
represent to the Company in writing
<PAGE> 7
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(which may be contained in the applicable letter of transmittal) that: (i) any
Exchange Notes acquired in exchange for Registrable Notes tendered is being
acquired in the ordinary course of business of the Person receiving such
Exchange Notes, whether or not such recipient is such Holder itself; (ii)
neither such Holder nor, any other Person receiving Exchange Notes from such
Holder is engaging in or intends to engage in a distribution of the Exchange
Notes; (iii) at the time of the consummation of the Exchange Offer neither such
Holder nor, any other Person receiving Exchange Notes from such Holder has an
arrangement or understanding with any Person to participate in the distribution
of the Exchange Notes in violation of the provisions of the Securities Act; (iv)
neither the Holder nor, any other Person receiving Exchange Notes from such
Holder is an "affiliate" (as defined in Rule 405) of the Company or, if it is an
affiliate of the Company, it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable; and (v) if
such Holder is a Participating Broker-Dealer, such Holder has acquired the
Registrable Notes as a result of market-making activities or other trading
activities and that it will comply with the applicable provisions of the
Securities Act. Each Holder using the Exchange Offer to participate in a
distribution of the Exchange Notes hereby acknowledges and agrees that, if the
resales are of Exchange Notes obtained by such Holder in exchange for
Registrable Notes acquired directly from the Company or an Affiliate thereof, it
(1) could not, under Commission policy as in effect on the date of this
Agreement, rely on the position of the Commission enunciated in Morgan Stanley
and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation
(available May 13, 1988), as interpreted in the Commission's letter to Shearman
& Sterling dated July 2, 1993, and similar no-action letters, and (2) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction and that such
secondary resale transaction must be covered by an effective registration
statement containing the selling security holder information required by Item
507 or 508, as applicable, of Regulation S-K.
Upon consummation of the Exchange Offer in accordance with
this Section 2, the provisions of this Agreement shall continue to apply,
mutatis mutandis, solely with respect to Registrable Notes that are Private
Exchange Notes, Exchange Notes as to which Section 2(c)(iv) is applicable and
Exchange Notes held by Participating Broker-Dealers (as defined), and the
Issuers shall have no further obligation to register Registrable Notes (other
than Private Exchange Notes and Exchange Notes as to which clause 2(c)(iv)
hereof applies) pursuant to Section 3 hereof.
No securities other than the Securities shall be included in
the Exchange Offer Registration Statement.
(b) The Issuers shall include within the Prospectus contained
in the Exchange Offer Registration Statement a section entitled "Plan of
Distribution," reasonably acceptable to the Initial Purchaser, which shall
contain a summary statement of the positions
<PAGE> 8
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taken or policies made by the staff of the SEC with respect to the potential
"underwriter" status of any broker-dealer that is the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) of Exchange Notes received by such
broker-dealer in the Exchange Offer (a "Participating Broker-Dealer"), whether
such positions or policies have been publicly disseminated by the staff of the
SEC or such positions or policies represent the prevailing views of the staff of
the SEC. Such "Plan of Distribution" section shall also expressly permit, to the
extent permitted by applicable policies and regulations of the SEC, the use of
the Prospectus by all Persons subject to the prospectus delivery requirements of
the Securities Act, including, to the extent permitted by applicable policies
and regulations of the SEC, all Participating Broker-Dealers, and include a
statement describing the means by which Participating Broker-Dealers may resell
the Exchange Notes in compliance with the Securities Act.
The Issuers shall use their reasonable best efforts to keep
the Exchange Offer Registration Statement effective and to amend and supplement
the Prospectus contained therein in order to permit such Prospectus to be
lawfully delivered by all Persons subject to the prospectus delivery
requirements of the Securities Act for such period of time as is necessary to
comply with applicable law in connection with any resale of the Exchange Notes;
provided, however, that such period shall not be required to exceed 180 days or
such longer period if extended pursuant to the last paragraph of Section 5
hereof (the "Applicable Period").
If, following the date hereof, there has been announced a
change in SEC policy with respect to exchange offers such as the Exchange Offer,
that in the reasonable opinion of counsel to the Company, raises a substantial
question as to whether the Exchange Offer is permitted by applicable federal
law, the Company hereby agrees to seek a no-action letter or other favorable
decision from the SEC allowing the Company to consummate the Exchange Offer. The
Company hereby agrees to pursue the issuance of such a decision to the SEC staff
level. In connection with the foregoing, the Company hereby agrees to take all
such other actions as may be reasonably requested by the SEC or otherwise
reasonably required in connection with the issuance of such decision, including,
without limitation, (A) participating in telephonic conferences with the SEC,
(B) delivering to the SEC staff an analysis prepared by counsel to the Company
setting forth the legal bases, if any, upon which such counsel has concluded
that such an Exchange Offer should be permitted and (C) diligently pursuing a
resolution (which need not be favorable) by the SEC staff.
If, prior to consummation of the Exchange Offer, the Initial
Purchaser holds any Notes acquired by it that have the status of an unsold
allotment in the initial distribution, the Issuers upon the request of the
Initial Purchaser shall simultaneously with the delivery of the Exchange Notes
issue and deliver to the Initial Purchaser, in exchange (the "Private Exchange")
for such Notes held by any such Holder, a like principal amount of notes (the
"Private Exchange Notes") of the Issuers, guaranteed by the Guarantors, that are
identical in all material respects to the Exchange Notes except for the
placement of a restrictive legend on
<PAGE> 9
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such Private Exchange Notes. The Private Exchange Notes shall be issued pursuant
to the same indenture as the Exchange Notes and bear the same CUSIP number as
the Exchange Notes.
In connection with the Exchange Offer, the Issuers shall:
(1) mail, or cause to be mailed, to each Holder of record
entitled to participate in the Exchange Offer a copy of the Prospectus
forming part of the Exchange Offer Registration Statement, together
with an appropriate letter of transmittal and related documents;
(2) use their reasonable best efforts to keep the Exchange
Offer open for not less than 20 Business Days after the date that
notice of the Exchange Offer is mailed to Holders (or longer if
required by applicable law);
(3) utilize the services of a depositary for the Exchange
Offer with an address in the Borough of Manhattan, The City of New
York;
(4) permit Holders to withdraw tendered Securities at any time
prior to the close of business, New York time, on the last Business
Day on which the Exchange Offer remains open; and
(5) otherwise comply in all material respects with all
applicable laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer
and the Private Exchange, if any, the Issuers shall:
(1) accept for exchange all Registrable Notes validly tendered
and not validly withdrawn pursuant to the Exchange Offer and the
Private Exchange, if any;
(2) deliver to the Trustee for cancellation all Registrable
Notes so accepted for exchange; and
(3) cause the Trustee to authenticate and deliver promptly to
each Holder of Securities, Exchange Notes or Private Exchange Notes,
as the case may be, equal in principal amount to the Securities of
such Holder so accepted for exchange; provided that, in the case of
any Securities held in global form by a depositary, authentication and
delivery to such depositary of one or more replacement Securities in
global form in an equivalent principal amount thereto for the account
of such Holders in accordance with the Indenture shall satisfy such
authentication and delivery requirement.
<PAGE> 10
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The Exchange Offer and the Private Exchange shall not be
subject to any conditions, other than that (i) the Exchange Offer or Private
Exchange, as the case may be, does not violate applicable law or any applicable
interpretation of the staff of the SEC; (ii) no action or proceeding shall have
been instituted or threatened in any court or by any governmental agency which
might materially impair the ability of the Issuers to proceed with the Exchange
Offer or the Private Exchange, and no material adverse development shall have
occurred in any existing action or proceeding with respect to the Issuers; (iii)
all governmental approvals shall have been obtained, which approvals the Issuers
deem necessary for the consummation of the Exchange Offer or Private Exchange;
and (iv) the conditions precedent to the Issuers' obligations under this
Agreement shall have been fulfilled.
The Exchange Notes and the Private Exchange Notes shall be
issued under (i) the Indenture or (ii) an indenture identical in all material
respects to the Indenture and which, in either case, has been qualified under
the TIA or is exempt from such qualification and shall provide that the Exchange
Notes shall not be subject to the transfer restrictions set forth in the
Indenture. The Indenture or such indenture shall provide that the Exchange
Notes, the Private Exchange Notes and the Securities shall vote and consent
together on all matters as one class and that none of the Exchange Notes, the
Private Exchange Notes or the Securities will have the right to vote or consent
as a separate class on any matter.
(c) If, (i) because of any change in law or in currently
prevailing interpretations of the staff of the SEC, the Issuers are not
permitted to effect the Exchange Offer, (ii) the Exchange Offer is not completed
on or prior to the 150th day after the Issue Date, (iii) any holder of Private
Exchange Notes so requests after the consummation of the Private Exchange, or
(iv) in the case of any Holder that participates in the Exchange Offer, such
Holder does not receive Exchange Notes on the date of the exchange that may be
sold without restriction under state and federal securities laws (other than due
solely to the status of such Holder as an affiliate of the Issuers under Rule
405) and such Holder so requests, then in the case of each of clauses (i) to and
including (iv) of this sentence, the Issuers shall promptly deliver to the
Holders and the Trustee written notice thereof (the "Shelf Notice") and shall
file a Shelf Registration pursuant to Section 3 hereof.
3. Shelf Registration
If at any time a Shelf Notice is delivered as contemplated by
Section 2(c) hereof, then:
(a) Shelf Registration. The Issuers shall as promptly as
practicable file with the SEC a Registration Statement for an offering to be
made on a continuous basis pursuant to Rule 415 covering all of the Registrable
Notes (the "Shelf Registration"). If the Issuers shall not have yet filed an
Exchange Offer Registration Statement, the Issuers shall use their best
<PAGE> 11
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efforts to file with the SEC the Shelf Registration on or prior to the Filing
Date. The Shelf Registration shall be on Form S-1 or another appropriate form
permitting registration of such Registrable Notes for resale by Holders in the
manner or manners designated by them (including, without limitation, one or more
underwritten offerings). The Issuers shall not permit any securities other than
the Registrable Notes and the Guarantees to be included in the Shelf
Registration.
The Issuers shall use their reasonable best efforts to cause
the Shelf Registration to be declared effective under the Securities Act on or
prior to the Effectiveness Date and to keep the Shelf Registration continuously
effective under the Securities Act until the date that is two years from the
Issue Date (the "Effectiveness Period"), or such shorter period ending when all
Registrable Notes covered by the Shelf Registration have been sold in the manner
set forth and as contemplated in the Shelf Registration; provided, however, that
no Holder shall be entitled to be named as a selling securityholder in the Shelf
Registration or to use the Prospectus forming a part thereof for resales of
Registrable Securities unless such Holder has provided the Issuers within 10
Business Days after receipt of a request therefor, with the information required
by the first two paragraphs which follow Section 5(t), as applicable; and
provided, further, however, that the Effectiveness Period in respect of the
Shelf Registration shall be extended to the extent required to permit dealers to
comply with the applicable prospectus delivery requirements of Rule 174 under
the Securities Act and as otherwise provided therein.
(b) Withdrawal of Stop Orders. If the Shelf Registration
ceases to be effective for any reason at any time during the Effectiveness
Period (other than because of the sale of all of the securities registered
thereunder), the Issuers shall use their reasonable best efforts to obtain the
prompt withdrawal of any order suspending the effectiveness thereof.
(c) Supplements and Amendments. The Issuers shall promptly
supplement and amend the Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if reasonably
requested by the Holders of a majority in aggregate principal amount of the
Registrable Notes covered by such Registration Statement (provided all such
requesting Holders have provided the Issuers within 10 Business Days after
receipt of a request therefor, with the information required by the first two
paragraphs which follow Section 5(t)) or by any underwriter of such Registrable
Notes.
4. Additional Interest
(a) The Issuers and the Initial Purchaser agree that the
Holders will suffer damages if the Issuers fail to fulfill their obligations
under Section 2 or Section 3 hereof and that it would not be feasible to
ascertain the extent of such damages with precision. Accordingly,
<PAGE> 12
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the Issuers agree to pay, as liquidated damages, additional interest on the
Notes ("Additional Interest") under the circumstances and to the extent set
forth below (each of which shall be given independent effect):
(i) if (A) neither the Exchange Offer Registration Statement
nor the Shelf Registration has been filed on or prior to the
applicable Filing Date or (B) notwithstanding that the Issuers have
consummated or will consummate the Exchange Offer, the Issuers are
required to file a Shelf Registration and such Shelf Registration is
not filed on or prior to the Filing Date applicable thereto, then,
commencing on the day after any such lapsed Filing Date, Additional
Interest shall accrue on the principal amount of the Securities at a
rate of 0.25% per annum for the first 90 days immediately following
each such lapsed Filing Date, and such Additional Interest rate shall
increase by an additional 0.25% per annum at the beginning of each
subsequent 90-day period; or
(ii) if (A) neither the Exchange Offer Registration Statement
nor the Shelf Registration is declared effective by the SEC on or
prior to the relevant Effectiveness Date or (B) notwithstanding that
the Issuers have consummated or will consummate the Exchange Offer,
the Issuers are required to file a Shelf Registration and such Shelf
Registration is not declared effective by the SEC on or prior to the
Effectiveness Date in respect of such Shelf Registration, then,
commencing on the day after such Effectiveness Date, Additional
Interest shall accrue on the principal amount of the Securities at a
rate of 0.25% per annum for the first 90 days immediately following
the day after such Effectiveness Date, and such Additional Interest
rate shall increase by an additional 0.25% per annum at the beginning
of each subsequent 90-day period; or
(iii) if (A) the Issuers have not exchanged Exchange Notes for
all Securities validly tendered in accordance with the terms of the
Exchange Offer on or prior to the 150th day after the Issue Date or
(B) if applicable, a Shelf Registration has been declared effective
and such Shelf Registration ceases to be effective at any time during
the Effectiveness Period, then Additional Interest shall accrue on the
principal amount of the Securities at a rate of 0.25% per annum for
the first 90 days commencing on (x) the 36th day after such effective
date, in the case of (A) above, or (y) the day such Shelf Registration
ceases to be effective in the case of (B) above, and such Additional
Interest rate shall increase by an additional 0.25% per annum at the
beginning of each such subsequent 90-day period;
provided, however, that the Additional Interest rate on the Notes may not exceed
at any one time in the aggregate 1.50% per annum; provided, further, however,
that (1) upon the filing of the applicable Exchange Offer Registration Statement
or the Shelf Registration as required hereunder (in the case of clause (i) above
of this Section 4(a)), (2) upon the effectiveness of
<PAGE> 13
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the Exchange Offer Registration Statement or the Shelf Registration Statement as
required hereunder (in the case of clause (ii) of this Section 4), or (3) upon
the exchange of the applicable Exchange Notes for all Securities tendered (in
the case of clause (iii)(A) of this Section 4), or upon the effectiveness of the
Shelf Registration Statement which had ceased to remain effective (in the case
of clause (iii)(B) of this Section 4), Additional Interest on the Notes in
respect of which such events relate as a result of such clause (or the relevant
subclause thereof), as the case may be, shall cease to accrue and the interest
rate borne by the Registrable Notes will be reduced to the original interest
rate.
(b) The Issuers shall notify the Trustee within one Business
Day after each and every date on which an event occurs in respect of which
Additional Interest is required to be paid (an "Event Date"). Any amounts of
Additional Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section
4 will be payable in cash semiannually on each April 15 and October 15 (to the
holders of record on the April 1 and October 1 immediately preceding such
dates), commencing with the first such date occurring after any such Additional
Interest commences to accrue. The amount of Additional Interest will be
determined by multiplying the applicable Additional Interest rate by the
principal amount of the Registrable Notes, multiplied by a fraction, the
numerator of which is the number of days such Additional Interest rate was
applicable during such period (determined on the basis of a 360-day year
comprised of twelve 30-day months and, in the case of a partial month, the
actual number of days elapsed), and the denominator of which is 360.
5. Registration Procedures
In connection with the filing of any Registration Statement
pursuant to Section 2 or 3 hereof, the Issuers shall effect such registrations
to permit the sale of the securities covered thereby in accordance with the
intended method or methods of disposition thereof, and pursuant thereto and in
connection with any Registration Statement filed by the Issuers hereunder each
of the Issuers shall:
(a) Prepare and file with the SEC prior to the Filing Date a
Registration Statement or Registration Statements as prescribed by
Section 2 or 3 hereof, and use its best efforts to cause each such
Registration Statement to become effective and remain effective as
provided herein; provided, however, that if (1) such filing is
pursuant to Section 3 hereof, or (2) a Prospectus contained in the
Exchange Offer Registration Statement filed pursuant to Section 2
hereof is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period relating thereto, before filing any Registration
Statement or Prospectus or any amendments or supplements thereto,
Issuers shall furnish to, with respect to clause (1) above and only if
so requested with respect to clause (2) above, and afford the Holders
of the Registrable Notes included in such Registration Statement
<PAGE> 14
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(with respect to a Registration Statement filed pursuant to Section 3
hereof) or each such Participating Broker-Dealer (with respect to any
such Registration Statement), as the case may be, their counsel and
the managing underwriters, if any, a reasonable opportunity to review
copies of all such documents (including copies of any documents to be
incorporated by reference therein and all exhibits thereto) proposed
to be filed (in each case at least three Business Days prior to such
filing or such later date as is reasonable under the circumstances).
The Issuers shall not file any Registration Statement or Prospectus or
any amendments or supplements thereto if the Holders of a majority in
aggregate principal amount of the Registrable Notes included in such
Registration Statement, or any such Participating Broker-Dealer, as
the case may be, their counsel, or the managing underwriters, if any,
shall reasonably object on a timely basis; provided, however, that if
the Issuers' failure to file a Registration Statement or Prospectus,
or any amendments or supplements thereto, in the applicable time
periods as set forth in Section 4, is based upon such an objection, no
Additional Interest shall accrue.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Shelf Registration Statement or
Exchange Offer Registration Statement, as the case may be, as may be
necessary to keep such Shelf Registration Statement or Exchange Offer
Registration Statement continuously effective for the Effectiveness
Period or the Applicable Period, respectively; cause the related
Prospectus to be supplemented by any Prospectus supplement required by
applicable law, and as so supplemented to be filed pursuant to Rule
424; and comply with the provisions of the Securities Act and the
Exchange Act applicable to each of them with respect to the
disposition of all securities covered by such Registration Statement
as so amended or in such Prospectus as so supplemented and with
respect to the subsequent resale of any securities being sold by a
Participating Broker-Dealer covered by any such Prospectus.
(c) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required
to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period relating thereto from whom any Issuer has received written
notice that it will be a Participating Broker-Dealer in the Exchange
Offer, notify the selling Holders of Registrable Notes (with respect
to a Registration Statement filed pursuant to Section 3 hereof), or
each such Participating Broker-Dealer (with respect to any such
Registration Statement), as the case may be, their counsel and the
managing underwriters, if any, promptly, and confirm such notice in
writing, (i) when a Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to a
Registration Statement or any post-effective amendment, when the same
has become effective
<PAGE> 15
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under the Securities Act (including in such notice a written statement
that any Holder may, upon written request, obtain, at the sole expense
of the Issuers, one conformed copy of such Registration Statement or
post-effective amendment including financial statements and schedules,
documents incorporated or deemed to be incorporated by reference and
exhibits), (ii) of the issuance by the SEC of any stop order
suspending the effectiveness of a Registration Statement or of any
order preventing or suspending the use of any preliminary prospectus
or the initiation of any proceedings for that purpose, (iii) of the
receipt by any Issuer of any notification with respect to the
suspension of the qualification or exemption from qualification of a
Registration Statement or any of the Registrable Notes or the Exchange
Notes to be sold by any Participating Broker-Dealer for offer or sale
in any jurisdiction, or the initiation or threatening of any
proceeding for such purpose, (iv) of the happening of any event, the
existence of any condition or any information becoming known that
makes any statement made in such Registration Statement or related
Prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires
the making of any changes in or amendments or supplements to such
Registration Statement, Prospectus or documents so that, in the case
of the Registration Statement, it will not 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 that in the case of the Prospectus, it
will not 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, in light of the circumstances under which
they were made, not misleading, and (v) of the Issuers' determination
that a post-effective amendment to a Registration Statement would be
appropriate.
(d) Use its reasonable best efforts to prevent the issuance
of any order suspending the effectiveness of a Registration Statement
or of any order preventing or suspending the use of a Prospectus or
suspending the qualification (or exemption from qualification) of any
of the Registrable Notes or the Exchange Notes to be sold by any
Participating Broker-Dealer, for sale in any jurisdiction, and, if any
such order is issued, to use its reasonable best efforts to obtain the
withdrawal of any such order at the earliest practicable moment.
(e) If a Shelf Registration is filed pursuant to Section 3 and
if requested during the Effectiveness Period by the managing
underwriter or underwriters (if any), the Holders of a majority in
aggregate principal amount of the Registrable Notes being sold in
connection with an underwritten offering or any Participating
Broker-Dealer, (i) as promptly as practicable incorporate in a
prospectus supplement or post-effective amendment such information as
the managing underwriter or underwriters (if any),
<PAGE> 16
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such Holders, any Participating Broker-Dealer or counsel for any of
them reasonably request to be included therein, (ii) make all required
filings of such prospectus supplement or such post-effective amendment
as soon as practicable after any Issuer has received notification of
the matters to be incorporated in such prospectus supplement or
post-effective amendment, and (iii) supplement or make amendments to
such Registration Statement.
(f) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required
to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period, if so requested by a selling Holder of Registrable Notes or a
Participating Broker-Dealer, as the case may be, furnish to each
selling Holder of Registrable Notes who so requests, (with respect to
a Registration Statement filed pursuant to Section 3 hereof) and to
each such Participating Broker-Dealer who so requests (with respect to
any such Registration Statement) and to their respective counsel and
each managing underwriter, if any, at the sole expense of the Issuers,
one conformed copy of the Registration Statement or Registration
Statements and each post-effective amendment thereto, including
financial statements and schedules, and, if requested, all documents
incorporated or deemed to be incorporated therein by reference and all
exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required
to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period, deliver to each selling Holder of Registrable Notes (with
respect to a Registration Statement filed pursuant to Section 3
hereof), or each such Participating Broker-Dealer (with respect to any
such Registration Statement), as the case may be, their respective
counsel, and the underwriters, if any, at the sole expense of the
Issuers, as many copies of the Prospectus or Prospectuses (including
each form of preliminary prospectus) and each amendment or supplement
thereto and any documents incorporated by reference therein as such
Persons may reasonably request; and, subject to the last paragraph of
this Section 5, the Issuers hereby consent to the use of such
Prospectus and each amendment or supplement thereto by each of the
selling Holders of Registrable Notes or each such Participating
Broker-Dealer, as the case may be, and the underwriters or agents, if
any, and dealers, if any, in connection with the offering and sale of
the Registrable Notes covered by, or the sale by Participating
Broker-Dealers of the Exchange Notes pursuant to, such Prospectus and
any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or
Exchange Notes or any delivery of a Prospectus contained in the
Exchange Offer Registration Statement
<PAGE> 17
-16-
by any Participating Broker-Dealer who seeks to sell Exchange Notes
during the Applicable Period, use its reasonable best efforts to
register or qualify, and to cooperate with the selling Holders of
Registrable Notes or each such Participating Broker-Dealer, as the
case may be, the managing underwriter or underwriters, if any, and
their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification)
of such Registrable Notes for offer and sale under the securities or
Blue Sky laws of such jurisdictions within the United States as any
selling Holder, Participating Broker-Dealer, or the managing
underwriter or underwriters reasonably request in writing; provided,
however, that where Exchange Notes held by Participating
Broker-Dealers or Registrable Notes are offered other than through an
underwritten offering, the Issuers agree to cause their counsel to
perform Blue Sky investigations and file registrations and
qualifications required to be filed pursuant to this Section 5(h),
keep each such registration or qualification (or exemption therefrom)
effective during the period such Registration Statement is required to
be kept effective and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the
Exchange Notes held by Participating Broker-Dealers or the Registrable
Notes covered by the applicable Registration Statement; provided,
however, that no Issuer shall be required to (A) qualify generally to
do business in any jurisdiction where it is not then so qualified, (B)
take any action that would subject it to general service of process in
any such jurisdiction where it is not then so subject, (C) subject
itself to taxation in excess of a nominal dollar amount in any such
jurisdiction where it is not then so subject, or (D) make any material
changes to its respective certificate of incorporation or bylaws or
any agreement between it and its stockholders.
(i) If a Shelf Registration is filed pursuant to Section 3
hereof, cooperate with the selling Holders of Registrable Notes and
the managing underwriter or underwriters, if any, to facilitate the
timely preparation and delivery of certificates representing
Registrable Notes to be sold, which certificates shall not bear any
restrictive legends and shall be in a form eligible for deposit with
The Depository Trust Company; and enable such Registrable Notes to be
in such denominations (subject to applicable requirements contained in
the Indenture) and registered in such names as the managing
underwriter or underwriters, if any, or Holders may request.
(j) Use their reasonable best efforts to cause the Registrable
Notes covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof or the underwriter
or underwriters, if any, to consummate the disposition of such
Registrable Notes, except as may be required solely as a consequence
of the nature of such selling Holder's business, in which case the
Issuers will cooperate in all
<PAGE> 18
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respects with the filing of such Registration Statement and the
granting of such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required
to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period, upon the occurrence of any event contemplated by paragraph
5(c)(iv), 5(c)(v) or 5(c)(vi) hereof, as promptly as practicable
prepare and (subject to Section 5(a) hereof) file with the SEC, at the
sole expense of the Issuers, a supplement or post-effective amendment
to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated
therein by reference, or file any other required document so that, as
thereafter delivered to the purchasers of the Registrable Notes being
sold thereunder (with respect to a Registration Statement filed
pursuant to Section 3 hereof) or to the purchasers of the Exchange
Notes to whom such Prospectus will be delivered by a Participating
Broker-Dealer (with respect to any such Registration Statement), any
such Prospectus will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(l) Prior to the effective date of the first Registration
Statement relating to the Registrable Notes, (i) provide the Trustee
with certificates for the Registrable Notes in a form eligible for
deposit with The Depository Trust Company and (ii) provide a CUSIP
number for the Registrable Notes.
(m) In connection with any underwritten offering of
Registrable Notes pursuant to a Shelf Registration, enter into an
underwriting agreement as is customary in underwritten offerings of
debt securities similar to the Securities, and take all such other
actions as are reasonably requested by the managing underwriter or
underwriters in order to expedite or facilitate the registration or
the disposition of such Registrable Notes and, in such connection, (i)
make such representations and warranties to, and covenants with, the
underwriters with respect to the business of the Issuers (including
any acquired business, properties or entity, if applicable), and the
Registration Statement, Prospectus and documents, if any, incorporated
or deemed to be incorporated by reference therein, in each case, as
are customarily made by issuers to underwriters in underwritten
offerings of debt securities similar to the Securities, and confirm
the same in writing if and when requested; (ii) obtain the written
opinions of counsel to the Issuers, and written updates thereof in
form, scope and substance reasonably satisfactory to the managing
underwriter or underwriters, addressed to the underwriters covering
the matters customarily covered in opinions requested in underwritten
offering
<PAGE> 19
-18-
and such other matters as may be reasonably requested by the managing
underwriter or underwriters; (iii) obtain "cold comfort" letters and
updates thereof in form, scope and substance reasonably satisfactory
to the managing underwriter or underwriters from the independent
certified public accountants of the Issuers (and, if necessary, any
other independent certified public accountants the Issuers, or of any
business acquired by the Issuers, for which financial statements and
financial data are, or are required to be, included or incorporated by
reference in the Registration Statement), addressed to each of the
underwriters, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters in
connection with underwritten offerings of debt securities similar to
the Securities and such other matters as reasonably requested by the
managing underwriter or underwriters as permitted by the Statement on
Auditing Standards No. 72; and (iv) if an underwriting agreement is
entered into, the same shall contain indemnification provisions and
procedures no less favorable to the sellers and underwriters, if any,
than those set forth in Section 7 hereof (or such other provisions and
procedures acceptable to Holders of a majority in aggregate principal
amount of Registrable Notes covered by such Registration Statement who
have provided the information to the Issuers as required by the
paragraphs following Section 5(t) and the managing underwriter or
underwriters or agents, if any). The above shall be done at each
closing under such underwriting agreement, or as and to the extent
required thereunder.
(n) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required
to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period, make available for inspection by any selling Holder of such
Registrable Notes being sold (with respect to a Registration Statement
filed pursuant to Section 3 hereof), or each such Participating
Broker-Dealer, as the case may be, any underwriter participating in
any such disposition of Registrable Notes, if any, and any attorney,
accountant or other agent retained by any such selling Holder or each
such Participating Broker-Dealer (with respect to any such
Registration Statement), as the case may be, or underwriter
(collectively, the "Inspectors"), upon written request, at the offices
where normally kept, during reasonable business hours and upon
reasonable advance notice, all pertinent financial and other records,
pertinent corporate documents and instruments of the Issuers and
subsidiaries of the Issuers (collectively, the "Records"), as shall be
reasonably necessary to enable them to exercise any applicable due
diligence responsibilities, and cause the officers, directors and
employees of the Issuers and any of their respective subsidiaries to
supply all information ("Information") reasonably requested by any
such Inspector in connection with such due diligence responsibilities;
provided, however that each Inspector shall agree in writing that it
will keep the Records
<PAGE> 20
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and Information confidential and that it will not disclose any of the
Records that the any Issuer determines, in good faith, to be
confidential and notifies the Inspectors in writing are confidential
unless (i) the Issuers determine in their sole discretion on advice of
counsel that the disclosure of such Records or Information is
necessary to avoid or correct a misstatement or omission in such
Registration Statement or Prospectus, (ii) the release of such Records
or Information is ordered pursuant to a subpoena or other order from a
court of competent jurisdiction, or (iii) the information in such
Records or Information has been made generally available to the public
other than by an Inspector or an "affiliate" (as defined in Rule 405)
thereof; provided, however, that prior notice shall be provided as
soon as practicable to the any Issuer of the potential disclosure of
any information by such Inspector pursuant to clause (ii) of this
sentence to permit the Issuers to obtain a protective order (or waive
the provisions of this paragraph (o)) and that such Inspector shall
take such actions as are reasonably necessary to protect the
confidentiality of such information (if practicable) to the extent
such action is otherwise not inconsistent with, an impairment of or in
derogation of the rights and interests of the Holder or any Inspector.
(o) Provide an indenture trustee for the Registrable Notes or
the Exchange Notes, as the case may be, and cause the Indenture or the
trust indenture provided for in Section 2(a) hereof, as the case may
be, to be qualified under the TIA not later than the effective date of
the first Registration Statement relating to the Registrable Notes;
and in connection therewith, cooperate with the trustee under any such
indenture and the Holders of the Registrable Notes, to effect such
changes (if any) to such indenture as may be required for such
indenture to be so qualified in accordance with the terms of the TIA;
and execute, and use their best efforts to cause such trustee to
execute, all documents as may be required to effect such changes, and
all other forms and documents required to be filed with the SEC to
enable such indenture to be so qualified in a timely manner.
(p) Comply with all applicable rules and regulations of the
SEC and make generally available to its securityholders with regard to
any applicable Registration Statement, a consolidated earnings
statement satisfying the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder (or any similar rule promulgated under the
Securities Act) no later than 45 days after the end of any fiscal
quarter (or 90 days after the end of any 12-month period if such
period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Registrable Notes are sold to underwriters in a firm
commitment or best efforts underwritten offering and (ii) if not sold
to underwriters in such an offering, commencing on the first day of
the first fiscal quarter of the Company, after the effective date of a
Registration Statement (as such term is defined
<PAGE> 21
-20-
in paragraph (c) of Rule 158 under the Securities Act), which
statements shall cover said 12-month periods.
(q) Upon consummation of the Exchange Offer or a Private
Exchange, if so requested by the Trustee, obtain an opinion of counsel
to the Issuers, in a form customary for underwritten transactions,
addressed to the Trustee for the benefit of all Holders of Registrable
Notes participating in the Exchange Offer or the Private Exchange, as
the case may be, that the Exchange Notes or Private Exchange Notes, as
the case may be, the related Guarantee and the related indenture
constitute legal, valid and binding obligations of the Issuers,
enforceable against the Issuers in accordance with their respective
terms, subject to customary exceptions and qualifications.
(r) If the Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Notes by Holders to the
Company (or to such other Person as directed by the Issuers), in
exchange for the Exchange Notes or the Private Exchange Notes, as the
case may be, the Issuers shall mark, or cause to be marked, on such
Registrable Notes that such Registrable Notes are being cancelled in
exchange for the Exchange Notes or the Private Exchange Notes, as the
case may be; in no event shall such Registrable Notes be marked as
paid or otherwise satisfied.
(s) Cooperate with each seller of Registrable Notes covered by
any Registration Statement and each underwriter, if any, participating
in the disposition of such Registrable Notes and their respective
counsel in connection with any filings required to be made with the
National Association of Securities Dealers, Inc. (the "NASD").
(t) Use its reasonable best efforts to take all other steps
necessary to effect the registration of the Exchange Notes and/or
Registrable Notes covered by a Registration Statement contemplated
hereby.
No Holder of Registrable Notes as to which any registration is
being effected may include any such Registrable Securities in any Shelf
Registration pursuant to this Agreement unless and until such Holder furnishes
to the Issuers in writing, the information regarding such seller and the
distribution of such Registrable Notes as the Issuers may, from time to time,
reasonably request. The Issuers may exclude from such registration the
Registrable Notes of any seller so long as such seller fails to furnish such
information within a reasonable time (but no later than 10 Business Days) after
receiving such request. Each seller as to which any Shelf Registration is being
effected agrees to furnish promptly to the Issuers all information required to
be disclosed in order to make the information previously furnished to the
Issuers by such seller not materially misleading.
<PAGE> 22
-21-
In the event of a Shelf Registration, in addition to the
information required to be provided by each selling Holder in accordance with
the preceding paragraph, the Company may require such selling Holder to furnish
to the Company such additional information regarding such selling Holder and
such selling Holder's intended method of distribution of Registrable Notes as
may be required in order to comply with the Securities Act. Each such selling
Holder agrees to notify the Company as promptly as practicable of any inaccuracy
or change in information previously furnished by such selling Holder to the
Company or of the occurrence of any event in either case as a result of which
any prospectus relating to such Shelf Registration contains or would contain an
untrue statement of a material fact regarding such selling Holder or such
selling Holder's intended method of disposition of such Registrable Notes or
omits to state any material fact regarding such selling Holder or such selling
Holder's intended method of disposition of such Registrable Notes required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing, and promptly to furnish to the Company
any additional information required to correct and update any previously
furnished information or required so that such prospectus shall not contain,
with respect to such selling Holder or the disposition of such Registrable
Notes, an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing.
If any such Registration Statement refers to any Holder by
name or otherwise as the holder of any securities of the Company, then such
Holder shall have the right to require (i) the insertion therein of language, in
form and substance reasonably satisfactory to such Holder, to the effect that
the holding by such Holder of such securities is not to be construed as a
recommendation by such Holder of the investment quality of the securities
covered thereby and that such holding does not imply that such Holder will
assist in meeting any future financial requirements of the Company, or (ii) in
the event that such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force, the
deletion of the reference to such Holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
Each Holder of Registrable Notes and each Participating
Broker-Dealer agrees by its acquisition of such Registrable Notes or Exchange
Notes to be sold by such Participating Broker-Dealer, as the case may be, that,
upon actual receipt of any notice from the Company of the happening of any event
of the kind described in Section 5(c)(ii), 5(c)(iii), 5(c)(iv), or 5(c)(v),
hereof, such Holder will forthwith discontinue disposition of such Registrable
Notes covered by such Registration Statement or Prospectus or Exchange Notes to
be sold by such Holder or Participating Broker-Dealer, as the case may be, until
such Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated
<PAGE> 23
-22-
by Section 5(k) hereof, or until it is advised in writing (the "Advice") by the
Issuers that the use of the applicable Prospectus may be resumed, and has
received copies of any amendments or supplements thereto. In the event that the
Issuers shall give any such notice, the Applicable Period shall be extended by
the number of days during such periods from and including the date of the giving
of such notice to and including the date when each seller of Registrable Notes
covered by such Registration Statement or Exchange Notes to be sold by such
Participating Broker-Dealer, as the case may be, shall have received (x) the
copies of the supplemented or amended Prospectus contemplated by Section 5(k)
hereof or (y) the Advice. Each holder of Registrable Notes agrees that the
Company has the right to require such holders to discontinue dispositions for up
to 90 days if the Company gives notice of a material non-public acquisition or
event; provided, however, that each holder shall be subject to the hold-back
restrictions of this Section 5 only twice during the term of this Agreement.
During any such discontinuance, no Additional Interest shall accrue or otherwise
be payable to the Holders.
6. Registration Expenses
All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuers (other than any underwriting
discounts or commissions) shall be borne by the Issuers, whether or not the
Exchange Offer Registration Statement or any Shelf Registration is filed or
becomes effective or the Exchange Offer is consummated, including, without
limitation, (i) all registration and filing fees (including, without limitation,
(A) fees with respect to filings required to be made with the NASD in connection
with an underwritten offering and (B) reasonable fees and expenses of compliance
with state securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel in connection with Blue Sky qualifications of the
Registrable Notes or Exchange Notes and determination of the eligibility of the
Registrable Notes or Exchange Notes for investment under the laws of such
jurisdictions (x) where the holders of Registrable Notes are located, in the
case of the Exchange Notes, or (y) as provided in Section 5(h) hereof, in the
case of Registrable Notes or Exchange Notes to be sold by a Participating
Broker-Dealer during the Applicable Period)), (ii) printing expenses, including,
without limitation, expenses of printing certificates for Registrable Notes or
Exchange Notes in a form eligible for deposit with The Depository Trust Company
and of printing prospectuses if the printing of prospectuses is requested by the
managing underwriter or underwriters, if any, by the Holders of a majority in
aggregate principal amount of the Registrable Notes included in any Registration
Statement or in respect of Registrable Notes or Exchange Notes to be sold by any
Participating Broker-Dealer during the Applicable Period, as the case may be,
(iii) reasonable messenger, telephone and delivery expenses relating to the
offering, sale or delivery of Securities and the preparation of documents
referenced in clause (xi) below, (iv) fees and disbursements of counsel for the
Issuers and, in case of a Shelf Registration, reasonable fees and disbursements
of not more than one special
<PAGE> 24
-23-
counsel for all of the sellers of Registrable Notes (exclusive of any counsel
retained pursuant to Section 7 hereof), (v) fees and disbursements of all
independent certified public accountants referred to in Section 5(m)(iii) hereof
(including, without limitation, the expenses of any special audit and "cold
comfort" letters required by or incident to such performance), (vi) Securities
Act liability insurance, if the Issuers desire such insurance, (vii) fees and
expenses of all other Persons retained by the Issuers, (viii) internal expenses
of the Issuers (including, without limitation, all salaries and expenses of
officers and employees of the Issuers performing legal or accounting duties),
(ix) the expense of any annual audit, (x) any fees and expenses incurred in
connection with the listing of the securities to be registered on any securities
exchange, if applicable, and (xi) the expenses relating to printing, word
processing and distributing all Registration Statements, underwriting
agreements, indentures and any other documents necessary in order to comply with
this Agreement.
7. Indemnification
(a) Each of the Issuers, jointly and severally, agrees to
indemnify and hold harmless each Holder of Registrable Notes and each
Participating Broker-Dealer selling Exchange Notes during the Applicable Period,
the affiliates, officers, directors, representatives, employees and agents of
each such Person, and each Person, if any, who controls any such Person within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act (each, a "Participant"), from and against any and all losses,
claims, damages, judgments, liabilities and expenses (including, without
limitation, the legal fees and other expenses actually incurred in connection
with any suit, action or proceeding or any claim asserted) caused by, arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement (or any amendment thereto)
or Prospectus (as amended or supplemented if any of the Issuers shall have
furnished any amendments or supplements thereto) or any preliminary prospectus,
or caused by, arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the case of the Prospectus in light of the
circumstances under which they were made, not misleading, except (i) insofar as
such losses, claims, damages or liabilities are caused by any untrue statement
or omission or alleged untrue statement or omission made in reliance upon and in
conformity with information relating to any Participant furnished to any of the
Issuers in writing by such Participant expressly for use therein and with
respect to any preliminary Prospectus, or (ii) to the extent that any such loss,
claim, damage or liability arises solely from the fact that any Participant sold
Notes to a person to whom there was not sent or given a copy of the Prospectus
(as amended or supplemented) at or prior to the written confirmation of such
sale if the Issuers shall have previously furnished copies thereof to the
Participant in accordance herewith and the Prospectus (as so amended or
supplemented) would have corrected any such untrue statement or omission.
<PAGE> 25
-24-
(b) Each Participant agrees, severally and not jointly, to
indemnify and hold harmless the Issuers, their respective affiliates, officers,
directors, representatives, employees and agents of each Issuer and each Person
who controls each Issuer within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act to the same extent (but on a several, and not
joint, basis) as the foregoing indemnity from the Issuers to each Participant,
but only with reference to information relating to such Participant furnished to
the Issuers in writing by such Participant expressly for use in any Registration
Statement or Prospectus, any amendment or supplement thereto, or any preliminary
prospectus. The liability of any Participant under this paragraph shall in no
event exceed the proceeds received by such Participant from sales of Registrable
Notes or Exchange Notes giving rise to such obligations.
(c) If any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand shall be brought or
asserted against any Person in respect of which indemnity may be sought pursuant
to either of the two preceding paragraphs, such Person (the "Indemnified
Person") shall promptly notify the Persons against whom such indemnity may be
sought (the "Indemnifying Persons") in writing, and the Indemnifying Persons,
upon request of the Indemnified Person, shall retain counsel reasonably
satisfactory to the Indemnified Person to represent the Indemnified Person and
any others the Indemnifying Persons may reasonably designate in such proceeding
and shall pay the fees and expenses actually incurred by such counsel related to
such proceeding; provided, however, that the failure to so notify the
Indemnifying Persons (i) will not relieve it from any liability under paragraph
(a) or (b) above unless and to the extent such failure results in material
prejudice to any Indemnifying Person and (ii) will not, in any event, relieve
the Indemnifying Person from any other obligations to any Indemnified Person. In
any such proceeding, any Indemnified Person shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such Indemnified Person unless (i) the Indemnifying Persons and the
Indemnified Person shall have mutually agreed to the contrary, (ii) the
Indemnifying Persons shall have failed within a reasonable period of time to
retain counsel reasonably satisfactory to the Indemnified Person, or (iii) the
named parties in any such proceeding (including any impleaded parties) include
both any Indemnifying Person and the Indemnified Person or any affiliate thereof
and representation of both parties by the same counsel would be inappropriate
due to actual or potential conflicting interests between them. It is understood
that the Indemnifying Persons shall not, in connection with such proceeding or
separate but substantially similar related proceeding in the same jurisdiction
arising out of the same general allegations, be liable for the fees and expenses
of more than one separate firm (in addition to any reasonably necessary local
counsel) for all Indemnified Persons, and that all such fees and expenses shall
be reimbursed promptly as they are incurred, subject to an undertaking by such
Indemnified Persons that all such amounts to which any Indemnified Person is not
entitled pursuant to this Section 7, as determined by a final non-appealable
judicial determination, shall be returned promptly to the relevant Indemnifying
Persons. Any such separate firm for the Participants
<PAGE> 26
-25-
and such control Persons of Participants shall be designated in writing by
Participants who sold a majority in interest of Registrable Notes and Exchange
Notes sold by all such Participants and shall be reasonably acceptable to the
Company and any such separate firm for the Issuers, their affiliates, officers,
directors, representatives, employees and agents and such control Persons of
such Issuer shall be designated in writing by such Issuer and shall be
reasonably acceptable to the Holders.
The Indemnifying Persons shall not be liable for any
settlement of any proceeding effected without its prior written consent (which
consent shall not be unreasonably withheld or delayed), but if settled with such
consent or if there be a final non-appealable judgment for the plaintiff for
which the Indemnified Person is entitled to indemnification pursuant to this
Agreement, each of the Indemnifying Persons agrees to indemnify and hold
harmless each Indemnified Person from and against any loss or liability by
reason of such settlement or judgment. No Indemnifying Person shall, without the
prior written consent of the Indemnified Persons (which consent shall not be
unreasonably withheld or delayed), effect any settlement or compromise of any
pending or threatened proceeding in respect of which any Indemnified Person is
or could have been a party, or indemnity could have been sought hereunder by
such Indemnified Person, unless such settlement (A) includes an unconditional
written release of such Indemnified Person, in form and substance reasonably
satisfactory to such Indemnified Person, from all liability on claims that are
the subject matter of such proceeding and (B) does not include any statement as
to an admission of fault, culpability or failure to act by or on behalf of such
Indemnified Person.
(d) If the indemnification provided for in Section 7(a) or
(b) is for any reason unavailable to, or insufficient to hold harmless, an
Indemnified Person in respect of any losses, claims, damages or liabilities
referred to therein, then each Indemnifying Person under such subsections, in
lieu of indemnifying such Indemnified Person thereunder and in order to provide
for just and equitable contribution, shall contribute to the amount paid or
payable by such Indemnified Person as a result of such losses, claims, damages
or liabilities in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Person or Persons on the one hand and the Indemnified
Person or Persons on the other in connection with the statements or omissions or
alleged statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Issuers on the one hand or
such Participant or such other Indemnified Person, as the case may be, on the
other, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission, and any other
equitable considerations appropriate in the circumstances.
<PAGE> 27
-26-
(e) The parties agree that it would not be just and equitable
if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Participants were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages, judgments, liabilities and expenses referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any reasonable legal or other expenses actually
incurred by such Indemnified Person in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 7, in no event shall a Participant be required to contribute any amount
in excess of the amount by which proceeds received by such Participant from
sales of Registrable Notes or Exchange Notes, as the case may be, exceeds the
amount of any damages that such Participant has otherwise been required to pay
or has paid by reason of such untrue or alleged untrue statement or omission or
alleged omission. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for
which an indemnified party is entitled to indemnification or contribution under
this Section 7 shall be paid by the Indemnifying Persons to the Indemnified
Person as such losses, claims, damages, liabilities or expenses are incurred,
subject to an undertaking by such Indemnified Person that all such amounts to
which such Indemnified Person is not entitled pursuant to this Section 7, as
determined by a final non-appealable judicial determination, shall be returned
promptly to the relevant Indemnifying Persons. The indemnity and contribution
agreements contained in this Section 7 and the representations and warranties of
the Issuers set forth in this Agreement shall remain operative and in full force
and effect, regardless of (i) any investigation made by or on behalf of any
Holder or any person who controls a Holder, an Issuer, its directors, officers,
employees or agents or any person controlling an Issuer, and (ii) any
termination of this Agreement.
(g) The indemnity and contribution agreements contained in
this Section 7 will be in addition to any liability which the Indemnifying
Persons may otherwise have to the Indemnified Persons referred to above.
8. Rules 144 and 144A
Each of the Issuers covenants and agrees that it will file the
reports required to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the SEC thereunder in a timely manner
in accordance with the requirements of the Securities Act and the Exchange Act
and, if at any time such Issuer is not required to file such reports, such
Issuer will, upon the request of any Holder or beneficial owner of Registrable
<PAGE> 28
-27-
Notes, make available such information necessary to permit sales pursuant to
Rule 144A. Each of the Issuers further covenants and agrees, for so long as any
Registrable Notes remain outstanding that it will take such further action as
any Holder of Registrable Notes may reasonably request, all to the extent
required from time to time to enable such holder to sell Registrable Notes
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144(k) under the Securities Act and Rule 144A.
9. Underwritten Registrations
If any of the Registrable Notes covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will manage the offering will
be selected by the Holders of a majority in aggregate principal amount of such
Registrable Notes included in such offering and shall be reasonably acceptable
to the Issuers.
No Holder of Registrable Notes may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Notes on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
10. Miscellaneous
(a) No Inconsistent Agreements. The Issuers have not, as of
the date hereof, and the Issuers shall not, after the date of this Agreement,
enter into any agreement with respect to any of its securities that is
inconsistent with the rights granted to the Holders of Registrable Notes in this
Agreement or otherwise conflicts with the provisions hereof. The rights granted
to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Issuers' other issued
and outstanding securities under any such agreements. The Issuers will not enter
into any agreement with respect to any of their securities which will grant to
any Person piggy-back registration rights with respect to any Registration
Statement.
(b) Additional Amounts of Notes. The Notes are limited in
aggregate principal amount to $250,000,000, of which $125,000,000 in aggregate
principal amount was issued on April 7, 1999 and $50,000,000 in aggregate
principal amount will be issued on the date hereof. Additional amounts of Notes
may be issued in one or more series from time to time under the Indenture
(collectively "Additional Notes") prior to the filing of any Registration
Statement. The Issuers shall provide the registration rights set forth under
this Agreement to the Initial Purchaser and any subsequent holder or holders of
such Additional Notes
<PAGE> 29
-28-
and notwithstanding anything contained herein may, but are not obligated to,
include such Additional Notes in any Registration Statement filed hereunder.
(c) Amendments and Waivers. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, otherwise than with the
prior written consent of (I) the Company, and (II)(A) the Holders of not less
than a majority in aggregate principal amount of the then outstanding
Registrable Notes and (B) in circumstances that would adversely affect the
Participating Broker-Dealers, the Participating Broker-Dealers holding not less
than a majority in aggregate principal amount of the Exchange Notes held by all
Participating Broker-Dealers; provided, however, that Section 7 and this Section
10(c) may not be amended, modified or supplemented without the prior written
consent of each Holder and each Participating Broker-Dealer (including any
person who was a Holder or Participating Broker-Dealer of Registrable Notes or
Exchange Notes, as the case may be, disposed of pursuant to any Registration
Statement) affected by any such amendment, modification or supplement.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Holders of Registrable Notes whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect, impair,
limit or compromise the rights of other Holders of Registrable Notes may be
given by Holders of at least a majority in aggregate principal amount of the
Registrable Notes being sold pursuant to such Registration Statement and with
the consent of the Issuers which consent shall not be unreasonably withheld.
(d) Notices. All notices and other communications (including,
without limitation, any notices or other communications to the Trustee) provided
for or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or facsimile:
(i) if to a Holder of the Registrable Notes or any
Participating Broker-Dealer, at the most current address of such
Holder or Participating Broker-Dealer, as the case may be, set forth
on the records of the registrar under the Indenture.
(ii) if to the Issuers, at the address as follows:
c/o RAILWORKS CORPORATION
1104 Kenilworth Drive
Suite 301
Baltimore, MD 21204
Attention: Chief Financial Officer
Telephone No.: (410) 512-0501
Facsimile No.: (760) 770-2199
<PAGE> 30
-29-
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, GA 30303
Attention: Mary A. Bernard
Telephone No.: (212) 556-2100
Facsimile No.: (212) 556-2222
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; one Business
Day after being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if sent by facsimile.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee at
the address and in the manner specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto, the Holders and the Participating Broker-Dealers; provided, however,
that nothing herein shall be deemed to permit any assignment, transfer or other
disposition of Registrable Notes in violation of the terms of the Purchase
Agreement or the Indenture. If any transferee of any holder shall acquire
Registrable Notes, in any manner, whether by operation of law or otherwise, such
Registrable Notes shall be held subject to all of the terms of this Agreement,
and by taking and holding such Registrable Notes, such person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement, including the restrictions on resale set
forth in this Agreement and, if applicable, the Purchase Agreement, and such
person shall be entitled to receive the benefits hereof.
(f) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(H) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED ENTIRELY
<PAGE> 31
-30-
WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF
THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT.
(i) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(j) Securities Held by the Issuers or Their Respective
Affiliates. Whenever the consent or approval of Holders of a specified
percentage of Registrable Notes is required hereunder, Registrable Notes held by
the Issuers or their respective affiliates (as such term is defined in Rule 405)
shall not be counted in determining whether such consent or approval was given
by the Holders of such required percentage.
(k) Third-Party Beneficiaries. Holders of Registrable Notes
and Participating Broker-Dealers are intended third-party beneficiaries of this
Agreement, and this Agreement may be enforced by such Persons.
(l) Entire Agreement. This Agreement, together with the
Purchase Agreement and the Indenture, is intended by the parties as a final and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein and any and all prior
oral or written agreements, representations, or warranties, contracts,
understandings, correspondence, conversations and memoranda between the Holders
on the one hand and the Issuers on the other, or between or among any agents,
representatives, parents, subsidiaries, affiliates, predecessors in interest or
successors in interest with respect to the subject matter hereof and thereof are
merged herein and replaced hereby.
<PAGE> 32
S-1
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
RAILWORKS CORPORATION
By: /s/ Michael R. Azarela
---------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
ALPHA-KEYSTONE ENGINEERING, INC.,
as guarantor
By: /s/ Michael R. Azarela
---------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
ARMCORE ACQUISITION CORP.,
as guarantor
By: /s/ Michael R. Azarela
---------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
ARMCORE RAILROAD CONTRACTORS, INC.,
as guarantor
By: /s/ Michael R. Azarela
---------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
<PAGE> 33
S-2
ANNEX RAILROAD BUILDERS, INC.,
as guarantor
By: /s/ Michael R. Azarela
----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
BIRMINGHAM WOOD, INC.,
as guarantor
By: /s/ Michael R. Azarela
----------------------------------------
Name: Michael R. Azarela
Title:
COMSTOCK HOLDINGS, INC.,
as guarantor
By: /s/ C. William Moore
----------------------------------------
Name: C. William Moore
Title: President
L.K. COMSTOCK & COMPANY, INC.,
as guarantor
By: /s/ C. William Moore
----------------------------------------
Name: C. William Moore
Title: President
COMTRAK CONSTRUCTION, INC.,
as guarantor
By: /s/ Michael R. Azarela
----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
<PAGE> 34
S-3
CONDON BROTHERS, INC.,
as guarantor
By: /s/ Michael R. Azarela
--------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
CPI CONCRETE PRODUCTS INCORPORATED,
as guarantor
By: /s/ Michael R. Azarela
--------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
EARL CAMPBELL CONSTRUCTION COMPANY, INC.,
as guarantor
By: /s/ Michael R. Azarela
--------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
FCM RAIL, LTD., as guarantor
By: /s/ Michael R. Azarela
--------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
F&V METRO RW, INC.,
as guarantor
By: /s/ Michael R. Azarela
--------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
<PAGE> 35
S-4
F&V METRO CONTRACTING CORP.,
as guarantor
By: /s/ Michael R. Azarela
--------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
GANTREX RW, INC.,
as guarantor
By: /s/ Michael R. Azarela
-------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
GANTREX CORPORATION,
as guarantor
By: /s/ Michael R. Azarela
--------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
GANTREX SYSTEMS, INC.,
as guarantor
By: /s/ Michael R. Azarela
--------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
H.P. MCGINLEY INC.,
as guarantor
By: /s/ Michael R. Azarela
--------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
<PAGE> 36
S-5
IMPULSE ELECTRIC ENTERPRISES OF NEW YORK,
INC., as guarantor
By: /s/ Michael R. Azarela
--------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
KENNEDY RAILROAD BUILDERS, INC.,
as guarantor
By: /s/ Michael R. Azarela
--------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
M-TRACK ENTERPRISES, INC.,
as guarantor
By: /s/ Michael R. Azarela
--------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
MCCORD TREATED WOOD, INC.,
as guarantor
By: /s/ Michael R. Azarela
--------------------------------------
Name: Michael R. Azarela
Title:
MERIT RAILROAD CONTRACTORS, INC.,
as guarantor
By: /s/ Michael R. Azarela
--------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
<PAGE> 37
S-6
MIDWEST CONSTRUCTION SERVICES, INC.,
as guarantor
By:/s/ Michael R. Azarela
--------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
MID WEST RW, INC.,
as guarantor
By: /s/ Michael R. Azarela
--------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
MID WEST RAILROAD CONSTRUCTION &
MAINTENANCE CORPORATION OF WYOMING,
as guarantor
By: /s/ Michael R. Azarela
--------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
MINNESOTA RAILROAD SERVICE, INC.,
as guarantor
By: /s/ Michael R. Azarela
--------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
NEOSHO, INCORPORATED,
as guarantor
By: /s/ Michael R. Azarela
-------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
<PAGE> 38
S-7
NEOSHO CONSTRUCTION COMPANY, INCORPORATED,
as guarantor
By: /s/ Michael R. Azarela
---------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
NEOSHO INTERNATIONAL, INC.,
as guarantor
By: /s/ Michael R. Azarela
---------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
NEOSHO ASIA, INC.,
as guarantor
By: /s/ Michael R. Azarela
---------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
NEOSHO CENTRAL AMERICA, INC.,
as guarantor
By: /s/ Michael R. Azarela
---------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
NEOSHO CONTRACTORS, INC.,
a guarantor
By: /s/ Michael R. Azarela
---------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
<PAGE> 39
S-8
NEW ENGLAND RAILROAD CONSTRUCTION CO., INC.,
as guarantor
By: /s/ Michael R. Azarela
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
NORTHERN RAIL SERVICE AND SUPPLY
COMPANY, INC.,
as guarantor
By: /s/ Michael R. Azarela
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
PARSONS RAILWAY SHOPS, INC.,
as guarantor
By: /s/ Michael R. Azarela
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
R. & M. B. RAIL CO., INC.,
as guarantor
By: /s/ Michael R. Azarela
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
<PAGE> 40
S-9
RAILCORP, INC.,
as guarantor
By: /s/ Michael R. Azarela
---------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
RAILROAD RESOURCES, INC.,
as guarantor
By: /s/ Kenneth R. Burk
---------------------------------------
Name: Kenneth R. Burk
Title: Executive Vice President
RAILROAD SERVICE, INC.,
as guarantor
By: /s/ Michael R. Azarela
---------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
RAILROAD SPECIALTIES, INC.,
as guarantor
By: /s/ Michael R. Azarela
---------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
RAILWORKS CANADA, INC.,
as guarantor
By: /s/ Michael R. Azarela
---------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
<PAGE> 41
S-10
SHELDON ELECTRIC, INC.,
as guarantor
By: /s/ Michael R. Azarela
----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
SOUTHERN INDIANA WOOD PRESERVING CO., INC.,
as guarantor
By: /s/ Michael R. Azarela
----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
U.S. TRACKWORKS, INC.,
as guarantor
By: /s/ Michael R. Azarela
----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
U.S. RAILWAY SUPPLY, INC.,
as guarantor
By: /s/ Michael R. Azarela
----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
V&R ELECTRICAL CONTRACTORS, INC.
as guarantor
By: /s/ Michael R. Azarela
----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
<PAGE> 42
S-11
WM. A. SMITH CONSTRUCTION CO. INC.,
as guarantor
By: /s/ Michael R. Azarela
--------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
WM. A. SMITH RERAILING SERVICES, INC.,
as guarantor
By: /s/ Michael R. Azarela
--------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
WOOD WASTE ENERGY, INC.,
as guarantor
By: /s/ Michael R. Azarela
--------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
<PAGE> 43
S-12
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
By: FIRST UNION CAPITAL MARKETS CORP.
By: /s/ Richard E. Fogg Jr
---------------------------------------
Name: Richard E. Fogg Jr
Title: Director
<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF KING & SPALDING]
December 16, 1999
RailWorks Corporation
1104 Kenilworth Drive
Suite 301
Baltimore, Maryland 21204
Re: RailWorks Corporation--
Registration Statement on Form S-4
relating to $50,000,000 aggregate principal amount
of 11 1/2% Senior Subordinated Notes Due 2009
Ladies and Gentlemen:
We have acted as counsel for RailWorks Corporation, a Delaware corporation
(the "Company"), in connection with the preparation of a Registration Statement
of Form S-4 (the "Registration Statement") filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, relating to
the proposed exchange of up to $50,000,000 of 11 1/2% Senior Subordinated Notes
Due 2009 of the Company (the "New Notes") for a like principal amount of the
Company's issued and outstanding 11 1/2% Senior Subordinated Notes Due 2009 (the
"Old Notes"). Certain domestic subsidiaries of the Company named in the
Indenture (defined blow)(the "Subsidiary Guarantors", and, together with the
Company, the "Registrants") have issued guarantees, on a senior subordinated
basis, of the obligations of the Company under the New Notes (the "Guarantees").
In our capacity as such counsel, we have reviewed the Indenture (the
"Indenture") dated as of April 7, 1999 among the Company, the Subsidiary
Guarantors and First Union National Bank, as trustee (the "Trustee") and all
amendments thereto. We have also reviewed such matters of law and examined
original, certified, conformed or photographic copies of such other documents,
records, agreements and certificates as we have deemed necessary as a basis for
the opinions hereinafter expressed. In such review, we have assumed the
genuineness of signatures on all documents submitted to us as originals and the
conformity to original documents of all copies submitted to us as certified,
conformed or photographic copies, and, as to certificates of public officials,
we have assumed the same to have been properly given and to be accurate. As to
matters of fact material to this opinion, we have relied, without independent
investigation, upon statements and representations of representatives of the
Registrants, the Trustee and of public officials.
<PAGE> 2
RailWorks Corporation
December 16, 1999
Page 2
This opinion is limited in all respects to the laws of the States of
Delaware and New York, and no opinion is expressed with respect to the laws of
any other jurisdiction or any effect which such laws may have on the opinions
expressed herein. This opinion is limited to the matters stated herein, and no
opinion is implied or may be inferred beyond the matters expressly stated
herein.
Based upon the foregoing, and subject to all of the assumptions,
limitations and qualifications set forth herein, we are of the opinion that:
(a) The issuance, execution and delivery of the New Notes have been duly
authorized by the Company, and when executed, authenticated, issued and
delivered in the manner provided for the Indenture in exchange for the Old
Notes, will constitute legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, subject, as to
enforcement of remedies, to bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally and general equitable
principles. The New Notes will be entitled to the benefits of the Indenture.
(b) The Indenture constitutes a legal, valid and binding obligation of the
Company and each Subsidiary Guarantor, enforceable against the Company and each
Subsidiary Guarantor in accordance with their terms, subject, as to enforcement
of remedies, to bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally and general equitable principles.
(c) The Guarantees constitute legal, valid and binding obligations of
each such Subsidiary Guarantor, enforceable against each Subsidiary Guarantor
in accordance with their terms, subject, as to enforcement of remedies, to
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and general equitable principles.
This opinion is given as of the date hereof, and we assume no obligation to
advise you after the date hereof of facts or circumstances that come to our
attention or changes in law that occur, which could affect the opinions
contained herein. This opinion may not be furnished to or relied upon by any
person or entity for any purpose without our prior written consent.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to us under the captions "Legal
Matters" in the Prospectus that is included in the Registration Statement.
Very truly yours,
KING & SPALDING
<PAGE> 1
EXHIBIT 10.36
AMENDMENT NO. 2
THIS AMENDMENT NO. 2 (this "Amendment") dated as of November 5, 1999,
to the Credit Agreement referenced below, is by and among RAILWORKS CORPORATION,
a Delaware corporation (the "Domestic Borrower"), the Subsidiaries of the
Borrower identified herein, the Lenders identified herein, BANK OF AMERICA
CANADA, as Canadian Administrative Agent, and BANK OF AMERICA, N.A., as Domestic
Administrative Agent. Terms used herein but not otherwise defined herein shall
have the meanings provided to such terms in the Credit Agreement.
W I T N E S S E T H
WHEREAS, a $105 million credit facility has been extended to the
Domestic Borrower and certain of its Subsidiaries pursuant to the terms of that
Amended and Restated Credit Agreement dated as of August 5, 1999 (as amended and
modified, the "Credit Agreement") among the Domestic Borrower, certain of its
Subsidiaries as Canadian Borrowers, certain of its Subsidiaries as Guarantors,
the lenders identified therein, First Union National Bank, as Documentation
Agent, Bank of America Canada, as Canadian Administrative Agent, and Bank of
America, N.A., as Domestic Administrative Agent;
WHEREAS, the Domestic Borrower has requested certain modifications to
the Credit Agreement;
WHEREAS, the requested modifications require the consent of the
Required Lenders;
WHEREAS, the Required Lenders have agreed to the requested
modifications on the terms and conditions set forth herein;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. The Credit Agreement is amended in the following respects:
1.1 The following definitions are added to Section 1.1 of the
Credit Agreement to read as follows:
"Borrowing Base" means, as of any day, an amount
equal to the sum of (i) eighty-five percent (85%) of Eligible
Receivables of the Credit Parties, (ii) eighty-five percent
(85%) of Eligible Receivables Retainage of the Credit Parties
and (iii) sixty percent (60%) of Eligible Inventory of the
Credit Parties, in each case as set forth in the most recent
Borrowing Base Certificate delivered to the Administrative
Agents and the Lenders in accordance with the terms of Section
7.1(c), with adjustments to give effect to Acquisitions and
Divestitures since the date of such Borrowing Base Certificate
on a Pro Forma Basis.
"Intercreditor Agreement" means that certain
Intercreditor Agreement to be entered into by and among Bank
of America, N.A., as Collateral Agent under the Term Loan
Credit
<PAGE> 2
Agreement, Bank of America, N.A., as Collateral Agent under
this Credit Agreement, and the Credit Parties, as amended or
modified from time to time, in substantially the form of
Exhibit A attached to Amendment No. 2.
"Term Loan Credit Agreement" means that certain $30
million Term Loan Credit Agreement to be entered into by and
among the Domestic Borrower, the Domestic Guarantors, the
lenders party thereto and Bank of America, N.A., as
administrative agent for the lenders, as amended, modified,
extended or renewed.
1.2 In the definition of "Permitted Liens" in Section 1.1, clauses
(xv) and (xvi) are renumbered as clauses (xvi) and (xvii), and a new clause (xv)
is added to read as follows:
(xv) Liens in favor of the administrative agent and
lenders under the Term Loan Credit Agreement securing the
loans and obligations owing under the Term Loan Credit
Agreement on a pari passu basis with the Domestic Obligations
owing under this Credit Agreement, but only to the extent (A)
such Liens are on the same collateral as to which the Lenders
also have a lien and (B) such Liens are subject to the
Intercreditor Agreement.
1.3 The following sentence is add to Section 3.3(b) of the Credit
Agreement immediately following the last sentence thereof:
If at any time the aggregate principal Dollar Amount
of Obligations plus the aggregate principal amount of the term
loan under the Term Loan Credit Agreement shall exceed the
Borrowing Base, the Borrowers shall immediately make payment
on the Loans, on the term loan under the Term Loan Credit
Agreement and/or to a cash collateral account in respect of
the LOC Obligations or the BA Obligations in an amount
sufficient to eliminate the excess.
1.4 Clauses (l) and (m) of Section 8.1 of the Credit Agreement are
renumbered as clauses (m) and (n) thereof, and a new clause (l) is
added thereto to read as follows:
(l) other senior secured Indebtedness of the Domestic
Credit Parties in an aggregate principal amount of up to $30
million incurred pursuant to the Term Loan Credit Agreement;
1.5 Section 8.10 of the Credit Agreement is amended to read as
follows:
Except with respect to (i) prohibitions against other
encumbrances on specific Property encumbered to secure payment
of particular Indebtedness (which Indebtedness relates solely
to such specific Property, and improvements and accretions
thereto, and is otherwise permitted hereby), (ii) the Term
Loan Credit Agreement and (iii) the Senior Subordinated Notes,
enter into, assume or become subject to any agreement
prohibiting or otherwise restricting the creation or
assumption of any Lien upon its properties or assets, whether
now owned or hereafter acquired, or requiring the grant of any
security for such obligation if security is given for some
other obligation.
1.5 Clause (k) of Section 9.1 is renumbered as clause (l), and a
new clause (k) is added to read as follows:
(j) The occurrence of an Event of Default under the
Term Loan Credit Agreement;
2
<PAGE> 3
2. The Required Lenders hereby consent to the designation in the
Term Loan Credit Agreement that the Indebtedness evidenced thereby shall
constitute "Designated Senior Debt" (as such term is defined in the Senior
Subordinated Notes)).
3. By execution of this Amendment, the Required Lenders authorize
and direct the Administrative Agent, on behalf of the Lenders, to enter into the
Intercreditor Agreement.
4. This Amendment shall be effective as of the date hereof upon
execution of this Amendment by the Credit Parties and the Required Lenders.
5. The Credit Parties hereby affirm (i) the representations and
warranties set out in Section 6 of the Credit Agreement are true and correct as
of the date hereof (except those which expressly relate to an earlier period)
and (ii) no Default or Event of Default presently exists.
6. Each of the Guarantors (i) acknowledges and consents to all of
the terms and conditions of this Amendment, (ii) affirms all of its obligations
under the Credit Documents and (iii) agrees that this Amendment and all
documents executed in connection herewith do not operate to reduce or discharge
the Guarantors' obligations under the Credit Agreement or the other Credit
Documents.
7. The Borrower and the Guarantors, as applicable, affirm the
liens and security interests created and granted in the Credit Agreement and the
Credit Documents and agree that this Amendment shall in no manner adversely
affect or impair such liens and security interests.
8. Except as modified hereby, all of the terms and provisions of
the Credit Agreement (including Schedules and Exhibits) shall remain in full
force and effect.
9. The Borrower agrees to pay all reasonable costs and expenses
of the Administrative Agent in connection with the preparation, execution and
delivery of this Amendment, including without limitation the reasonable fees and
expenses of Moore & Van Allen, PLLC.
10. This Amendment may be executed in any number of counterparts,
each of which when so executed and delivered shall be deemed an original and it
shall not be necessary in making proof of this Amendment to produce or account
for more than one such counterpart.
11. This Amendment shall be deemed to be a contract made under,
and for all purposes shall be construed in accordance with the laws of the State
of New York.
[Remainder of Page Intentionally Left Blank]
3
<PAGE> 4
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Amendment No. 1 to be duly executed and delivered as of the date first
above written.
DOMESTIC
BORROWER: RAILWORKS CORPORATION,
- -------- a Delaware corporation
By: /s/ Michael R. Azarela
----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President and
Chief Financial Officer
CANADIAN
BORROWERS: GANTREX RW COMPANY,
- --------- a Nova Scotia unlimited liability company
By: /s/ Michael R. Azarela
----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President and
Chief Financial Officer
RAILWORKS CANADA COMPANY,
a Nova Scotia unlimited liability company
By: /s/ Michael R. Azarela
----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President and
Chief Financial Officer
[Signature Pages Continue]
<PAGE> 5
DOMESTIC
GUARANTORS:
ALPHA-KEYSTONE ENGINEERING, INC.,
a Pennsylvania corporation
ANNEX RAILROAD BUILDERS, INC.,
an Indiana corporation
ARMCORE ACQUISITION CORP.,
a Delaware corporation
ARMCORE RAILROAD CONTRACTORS, INC.,
an Illinois corporation
BIRMINGHAM WOOD, INC.,
an Alabama corporation
COMSTOCK HOLDINGS INC.,
a Delaware corporation
COMTRAK CONSTRUCTION, INC.,
a Georgia corporation
CONDON BROTHERS, INC.,
a Washington corporation
CPI CONCRETE PRODUCTS INCORPORATED,
a Tennessee corporation
EARL CAMPBELL CONSTRUCTION COMPANY, INC.,
a Texas corporation
FCM RAIL, LTD., a Michigan corporation
F&V METRO CONTRACTING CORP.,
a New York corporation
GANTREX CORPORATION,
a Pennsylvania corporation
H.P. MCGINLEY INC.,
a Pennsylvania corporation
IMPULSE ENTERPRISES OF NEW YORK, INC.,
a New York corporation
KENNEDY RAILROAD BUILDERS, INC.,
a Pennsylvania corporation
M-TRACK ENTERPRISES, INC.,
a New York corporation
MCCORD TREATED WOOD, INC.,
an Alabama corporation
MERIT RAILROAD CONTRACTORS, INC.,
a Missouri corporation
By: /s/ Michael R. Azarela
----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President of each
of the foregoing Domestic Guarantors
[Signature Pages Continue]
<PAGE> 6
MIDWEST CONSTRUCTION SERVICES, INC.,
an Indiana corporation
MIDWEST RAILROAD CONSTRUCTION & MAINTENANCE CORPORATION
OF WYOMING, a Wyoming corporation
MIDWEST RW, INC.,
a Delaware corporation
MINNESOTA RAILROAD SERVICE, INC.,
a Tennessee corporation
NEOSHO ASIA, INC.,
a Kansas corporation
NEOSHO CENTRAL AMERICA, INC.,
a Kansas corporation
NEOSHO CONSTRUCTION COMPANY, INCORPORATED,
a Kansas corporation
NEOSHO CONTRACTORS, INC.,
a Wyoming corporation
NEOSHO INCORPORATED,
a Kansas corporation
NEOSHO INTERNATIONAL, INC.,
a Kansas corporation
NEW ENGLAND RAILROAD CONSTRUCTION CO., INC.,
a Connecticut corporation
NORTHERN RAIL SERVICE AND SUPPLY COMPANY, INC.,
a Michigan corporation
PARSONS RAILWAY SHOPS, INC.,
a Kansas corporation
R. & M. B. RAIL CO., INC.,
an Indiana corporation
RAILCORP, INC.,
an Ohio corporation
RAILROAD RESOURCES, INC.,
a Missouri corporation
RAILROAD SERVICE, INC.,
a Nevada corporation
RAILROAD SPECIALTIES, INC.,
an Indiana corporation
SOUTHERN INDIANA WOOD PRESERVING CO., INC.,
an Indiana corporation
By: /s/ Michael R. Azarela
--------------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President of each
of the foregoing Domestic Guarantors
[Signature Pages Continue]
<PAGE> 7
U.S. RAILWAY SUPPLY, INC.,
an Indiana corporation
U.S. TRACKWORKS, INC.,
a Michigan corporation
V&R ELECTRICAL CONTRACTORS, INC.,
a New York corporation
WM. A. SMITH CONSTRUCTION CO., INC.,
a Texas corporation
WM. A. SMITH RERAILING SERVICES, INC.,
a Texas corporation
By: /s/ Michael R. Azarela
----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President of each
of the foregoing Domestic Guarantors
L.K. COMSTOCK & COMPANY, INC.,
a New York corporation
By: /s/ Michael R. Azarela
----------------------------------------
Name: C. William Moore
Title: Chief Executive Officer and President
F&V METRO RW, INC.,
a Delaware corporation
By: /s/ John P. Nuzzo
----------------------------------------
Name: John P. Nuzzo
Title: Assistant Secretary
GANTREX RW, INC.,
a Delaware corporation
GANTREX SYSTEMS, INC.,
a Delaware corporation
RAILWORKS CANADA, INC.
a Delaware corporation
By: /s/ John P. Nuzzo
----------------------------------------
Name: John P. Nuzzo
Title: Secretary of each of the foregoing
Domestic Guarantors
By: /s/ Michael R. Azarela
----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President of each
of the foregoing Domestic Guarantors
[Signature Pages Continue]
<PAGE> 8
CANADIAN
GUARANTORS:
GANTREX GROUP, LTD.,
an Ontario corporation
GANTREX HOLDINGS-CANADA, INC.,
a Nova Scotia corporation
GANTREX LIMITED,
an Ontario corporation
GANTREX SYSTEMS LIMITED,
an Ontario corporation
PACIFIC NORTHERN RAIL CONTRACTORS CORP.,
a British Columbia company
PACIFIC NORTHERN RAIL HOLDINGS LTD.,
a British Columbia company
PACIFIC NORTHERN RAIL RW, INCORPORATED,
a Nova Scotia corporation
PNR LEASING LTD.,
a British Columbia company
PNR INVESTMENTS LTD.,
a British Columbia company
By: /s/ Michael R. Azarela
------------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President of each
of the foregoing Canadian Guarantors
[Signature Pages Continue]
<PAGE> 9
LENDERS: BANK OF AMERICA, N.A.,
individually in its capacity as a Lender
and in its capacity as Domestic
Administrative Agent
By: /s/ Christopher A. Pope
----------------------------------------
Name: Christopher A. Pope
Title: Senior Vice President
BANK OF AMERICA CANADA,
individually in its capacity as a Lender
and in its capacity as Canadian
Administrative Agent
By: /s/ Christopher A. Pope
----------------------------------------
Name: Christopher A. Pope
Title: Senior Vice President
FIRST UNION NATIONAL BANK
By: /s/ Barbara Gell Carroll
----------------------------------------
Name: Barbara Gell Carroll
Title: SVP
SUMMIT BANK
By: /s/ Seill P. Nakamura
----------------------------------------
Name: Seill P. Nakamura
Title: Vice President
FLEET BANK, N.A.
By: /s/ Nancy Foran-Pinzan
----------------------------------------
Name: Nancy Foran-Pinzan
Title: Vice President
KEYBANK NATIONAL ASSOCIATION
By: /s/ Daniel W. Lally
----------------------------------------
Name: Daniel W. Lally
Title: Assistant Vice President
BANK ONE OF MICHIGAN
By: /s/ Guy J. Rau
----------------------------------------
Name: Guy J. Rau
Title: Vice President
[Signature Pages Continue]
<PAGE> 10
M&T BANK
By: /s/ Michael Weinstock
----------------------------------------
Name: Michael Weinstock
Title: Vice President
CONGRESS FINANCIAL CORPORATION [CANADA]
By: /s/ Wayne Engoetz
----------------------------------------
Name: Wayne Engoetz
Title: President
<PAGE> 1
EXHIBIT 10.37
TERM LOAN CREDIT AGREEMENT
Dated as of November 5, 1999
among
RAILWORKS CORPORATION,
as Borrower,
CERTAIN SUBSIDIARIES OF THE BORROWER,
as Guarantors,
THE LENDERS NAMED HEREIN,
FIRST UNION NATIONAL BANK,
as Documentation Agent
AND
BANK OF AMERICA, N.A.,
as Administrative Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1 DEFINITIONS.............................................................................................1
1.1 Definitions.....................................................................................1
1.2 Computation of Time Periods.....................................................................7
SECTION 2 CREDIT FACILITIES.......................................................................................7
2.1 Term Loan.......................................................................................7
SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES..........................................................9
3.1 Default Rate....................................................................................9
3.2 Extension and Conversion........................................................................9
3.3 Prepayments....................................................................................10
3.4 [Intentionally Omitted]........................................................................10
3.5 Fees...........................................................................................10
3.6 Capital Adequacy...............................................................................11
3.7 Inability To Determine Interest Rate...........................................................11
3.8 Illegality.....................................................................................11
3.9 Requirements of Law............................................................................12
3.10 Taxes..........................................................................................13
3.11 Indemnity......................................................................................14
3.12 Certain Limitations............................................................................15
3.13 Pro Rata Treatment.............................................................................16
3.14 Sharing of Payments............................................................................16
3.15 Payments, Computations, Etc....................................................................17
3.16 Evidence of Debt...............................................................................19
SECTION 4 GUARANTY...............................................................................................19
4.1 The Guarantee..................................................................................19
4.2 Obligations Unconditional......................................................................20
4.3 Reinstatement..................................................................................21
4.4 Certain Additional Waivers.....................................................................21
4.5 Remedies.......................................................................................21
4.6 Rights of Contribution.........................................................................22
4.7 Continuing Guarantee...........................................................................22
SECTION 5 CONDITIONS.............................................................................................23
5.1 Conditions to Closing..........................................................................23
5.2 Conditions to All Extensions of Credit.........................................................24
SECTION 6 REPRESENTATIONS, WARRANTIES AND COVENANTS..............................................................24
6.1 Incorporation..................................................................................24
6.2 Additional Representations.....................................................................25
6.3 Additional Covenants...........................................................................25
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
SECTION 7 EVENTS OF DEFAULT......................................................................................26
7.1 Events of Default..............................................................................26
7.2 Acceleration; Remedies.........................................................................28
SECTION 8 AGENCY PROVISIONS......................................................................................29
8.1 Appointment....................................................................................29
8.2 Delegation of Duties...........................................................................29
8.3 Exculpatory Provisions.........................................................................29
8.4 Reliance on Communications.....................................................................30
8.5 Notice of Default..............................................................................30
8.6 Non-Reliance on Administrative Agent and Other Lenders.........................................31
8.7 Indemnification................................................................................31
8.8 Administrative Agent in its Individual Capacity................................................32
8.9 Successor Administrative Agent.................................................................32
8.10 Intercreditor Agreement........................................................................32
SECTION 9 MISCELLANEOUS..........................................................................................33
9.1 Notices........................................................................................33
9.2 Right of Set-Off...............................................................................34
9.3 Benefit of Agreement...........................................................................34
9.4 No Waiver; Remedies Cumulative.................................................................37
9.5 Payment of Expenses, etc.......................................................................37
9.6 Amendments, Waivers and Consents...............................................................38
9.7 Counterparts...................................................................................39
9.8 Headings.......................................................................................39
9.9 Survival.......................................................................................39
9.10 Governing Law; Submission to Jurisdiction; Venue...............................................39
9.11 Severability...................................................................................40
9.12 Entirety.......................................................................................40
9.13 Binding Effect; Termination....................................................................40
9.14 Confidentiality................................................................................41
9.15 Source of Funds................................................................................41
9.16 Conflict.......................................................................................42
</TABLE>
ii
<PAGE> 4
SCHEDULES
Schedule 2.1(a) Lenders and Commitments
Schedule 2.1(b)(i) Form of Notice of Borrowing
Schedule 2.1(e) Form of Term Note
Schedule 3.2 Form of Notice of Extension/Conversion
Schedule 5.1(d)(iii) Form of Officer's Certificate
Schedule 6.3(b) Form of Joinder Agreement
Schedule 8.10 Form of Intercreditor Agreement
Schedule 9.1 Lenders and Addresses
Schedule 9.3(b) Form of Assignment and Acceptance
iii
<PAGE> 5
TERM LOAN CREDIT AGREEMENT
THIS TERM LOAN CREDIT AGREEMENT dated as of November 5, 1999 (the
"Credit Agreement"), is by and among RAILWORKS CORPORATION, a Delaware
corporation (the "Borrower"), the Subsidiaries of the Borrower identified as
Guarantors on the signature pages hereto and such other Subsidiaries of the
Borrower as may from time to time become Guarantors hereunder in accordance with
the provisions hereof (the "Guarantors"), the lenders named herein and such
other lenders as may become a party hereto (the "Lenders"), FIRST UNION NATIONAL
BANK, as Documentation Agent, and BANK OF AMERICA, N.A., as Administrative Agent
(in such capacity, the "Administrative Agent").
W I T N E S S E T H
WHEREAS, the Borrower has requested that the Lenders provide a US$30
million term loan credit facility for the purposes hereinafter set forth;
WHEREAS, the Lenders have agreed to make the requested term loan credit
facility available to the Borrower on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
1.1 Definitions.
Terms used in this Credit Agreement (including the Incorporated
Representations and the Incorporated Covenants) but not otherwise defined in
this Credit Agreement shall have the meanings assigned to such terms in the
Revolving Credit Agreement. As used in this Credit Agreement (including the
Incorporated Representations, the Incorporated Covenants and any definitions
incorporated herein from the Revolving Credit Agreement pursuant to the
foregoing sentence), the following terms shall have the meanings specified below
unless the context otherwise requires:
"Administrative Agent" shall have the meaning assigned to such
term in the heading hereof, together with any successors or assigns.
"Administrative Agent's Fee Letter" means that certain letter
agreement dated as of September 29, 1999, between the Administrative
Agent and the Borrower, as amended, modified, supplemented or replaced
from time to time.
"Administrative Agent's Fees" shall have the meaning assigned
to such term in Section 3.5.
<PAGE> 6
"Agents" means the Administrative Agent and the Collateral
Agent.
"Base Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest whole multiple of 1/100 of 1%)
equal to the greater of (a) the Federal Funds Rate in effect on such
day plus 1/2 of 1% or (b) the Prime Rate in effect on such day. If for
any reason the Administrative Agent shall have determined (which
determination shall be conclusive absent manifest error) that it is
unable after due inquiry to ascertain the Federal Funds Rate for any
reason, including the inability or failure of the Administrative Agent
to obtain sufficient quotations in accordance with the terms hereof,
the Base Rate shall be determined without regard to clause (a) of the
first sentence of this definition until the circumstances giving rise
to such inability no longer exist. Any change in the Base Rate due to a
change in the Prime Rate or the Federal Funds Rate shall be effective
on the effective date of such change in the Prime Rate or the Federal
Funds Rate, respectively.
"Base Rate Loan" means any Loan bearing interest at a rate
determined by reference to the Base Rate.
"Borrower" means RailWorks Corporation, a Delaware
corporation, as referenced in the opening paragraph, and its successors
and permitted assigns.
"Closing Date" means the date hereof.
"Collateral Agent" means Bank of America, N.A., and its
successors in such capacity.
"Commitment" means the Term Loan Commitment.
"Consolidated Group" means the Borrower and its consolidated
subsidiaries as determined in accordance with GAAP.
"Credit Documents" means a collective reference to this Credit
Agreement, the Term Notes, the Pledge Agreement, the Security
Agreement, the Intercreditor Agreement, each Joinder Agreement, the
Administrative Agent's Fee Letter, and all other related agreements and
documents issued or delivered hereunder or thereunder or pursuant
hereto or thereto.
"Credit Party" means any of the Borrower and the Guarantors.
"Default" means any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.
"Defaulting Lender" means, at any time, any Lender that, at
such time, (i) has failed to make an Extension of Credit required
pursuant to the terms of this Credit Agreement, (ii) has failed to pay
to the Agents or any Lender an amount owed by such Lender pursuant to
the terms of the Credit Agreement or any other of the Credit
2
<PAGE> 7
Documents, or (iii) has been deemed insolvent or has become subject to
a bankruptcy or insolvency proceeding or to a receiver, trustee or
similar proceeding.
"Eurodollar Loan" means any Loan bearing interest at a rate
determined by reference to the Eurodollar Rate.
"Eurodollar Rate" means, for the Interest Period for each
Eurodollar Loan comprising part of the same borrowing (including
conversions, extensions and renewals), a per annum interest rate
determined pursuant to the following formula:
Eurodollar Rate = Interbank Offered Rate
---------------------------------
1 - Eurodollar Reserve Percentage
"Eurodollar Reserve Percentage" means for any day, that
percentage (expressed as a decimal) which is in effect from time to
time under any regulations of the Board of Governors of the Federal
Reserve System (or any successor) as the maximum reserve requirement
(including, without limitation, any basic, supplemental, emergency,
special, or marginal reserves) applicable with respect to Eurocurrency
liabilities as that term is defined in Regulation D (or against any
other category of liabilities that includes deposits by reference to
which the interest rate of Eurodollar Loans is determined), whether or
not Lender has any Eurocurrency liabilities subject to such reserve
requirement at that time. Eurodollar Loans shall be deemed to
constitute Eurocurrency liabilities and as such shall be deemed subject
to reserve requirements without benefits of credits for proration,
exceptions or offsets that may be available from time to time to a
Lender. The Eurodollar Rate shall be adjusted automatically on and as
of the effective date of any change in the Eurodollar Reserve
Percentage.
"Event of Default" means such term as defined in Section 7.1.
"Extension of Credit" means, as to any Lender, the making of,
or participation in, a Loan by such Lender.
"Fees" means all fees payable pursuant to Section 3.5.
"Federal Funds Rate" means, for any day, the rate of interest
per annum (rounded upwards, if necessary, to the nearest whole multiple
of 1/100 of 1%) equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by the
Federal Reserve Bank of New York on the Business Day next succeeding
such day, provided that (A) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions
on the next preceding Business Day and (B) if no such rate is so
published on such next preceding Business Day, the Federal Funds Rate
for such day shall be the average rate quoted to the Administrative
Agent on such day on such transactions as determined by the
Administrative Agent.
3
<PAGE> 8
"Guarantor" means each of those other Persons identified as a
"Guarantor" on the signature pages hereto, and each other Person which
may hereafter become a Guarantor by execution of a Joinder Agreement,
together with their successors and permitted assigns.
"Guaranteed Obligations" means, as to each Guarantor, without
duplication, (i) all obligations of the Borrower (including interest
accruing after a Bankruptcy Event, regardless of whether such interest
is allowed as a claim under the Bankruptcy Code) to the Lenders and the
Agents, whenever arising, under this Credit Agreement, the Term Notes
or the other Credit Documents, and (ii) all liabilities and
obligations, whenever arising, owing from the Borrower to any Lender,
or any Affiliate of a Lender, arising under any Hedging Agreement to
the extent permitted hereunder.
"Hedging Agreement" means any interest rate protection
agreement or foreign currency exchange agreement between the Borrower
and any Lender, or any Affiliate of a Lender, relating to the Term
Loan.
"Incorporated Covenants" means such term as defined in Section
6.1.
"Incorporated Representations" means such term as defined in
Section 6.1.
"Interbank Offered Rate" means, for the Interest Period for
each Eurodollar Loan comprising part of the same borrowing (including
conversions, extensions and renewals), a per annum interest rate
(rounded upwards, if necessary, to the nearest whole multiple of 1/100
of 1%) equal to the rate of interest, determined by the Administrative
Agent on the basis of the offered rates for deposits in U.S. Dollars
for a period of time corresponding to such Interest Period (and
commencing on the first day of such Interest Period), appearing on
Telerate Page 3750 (or, if, for any reason, Telerate Page 3750 is not
available, the Reuters Screen LIBO Page) as of approximately 11:00 A.M.
(London time) two (2) Business Days before the first day of such
Interest Period. As used herein, "Telerate Page 3750" means the display
designated as page 3750 by Dow Jones Markets, Inc. (or such other page
as may replace such page on that service for the purpose of displaying
the British Bankers Association London interbank offered rates) and
"Reuters Screen LIBO Page" means the display designated as page "LIBO"
on the Reuters Monitor Money Rates Service (or such other page as may
replace the LIBO page on that service for the purpose of displaying
London interbank offered rates of major banks).
"Intercreditor Agreement" means that certain Intercreditor
Agreement dated as of the date hereof by and among Bank of America,
N.A., as collateral agent under the Revolving Credit Agreement, Bank of
America, N.A., as collateral agent under this Credit Agreement, and the
Credit Parties, as amended or modified from time to time, in
substantially the form of Schedule 8.10.
"Interest Payment Date" means (i) as to any Base Rate Loan,
the last day of each March, June, September and December and the date
on which the final principal
4
<PAGE> 9
amortization payment is made and (ii) as to any Eurodollar Loan, the
last day of each Interest Period for such Loan, the date of repayment
of principal of such Loan and on the date the final principal
amortization payment is made, and in addition where the applicable
Interest Period is more than three months, then also on the date three
months from the beginning of the Interest Period, and each three months
thereafter. If an Interest Payment Date falls on a date which is not a
Business Day, such Interest Payment Date shall be deemed to be the next
succeeding Business Day.
"Joinder Agreement" means a Joinder Agreement substantially in
the form of Schedule 6.3(b), executed and delivered by a Domestic
Subsidiary of the Borrower in accordance with the provisions of Section
6.3(b).
"Lenders" means each of the Persons identified as a "Lender"
on the signature pages hereto, and their successors and assigns.
"Loan" or "Loans" means the Term Loan and the Base Rate Loans
and Eurodollar Loans comprising the Term Loan.
"Material Adverse Effect" means a material adverse effect on
(i) the condition (financial or otherwise), operations, business,
assets or liabilities of the Consolidated Group taken as a whole, (ii)
the ability of the Credit Parties taken as a whole to perform any
material obligation under the Credit Documents or (iii) the rights and
remedies of the Lenders under the Credit Documents.
"Net Proceeds" means gross cash proceeds (including any cash
received by way of deferred payment pursuant to a promissory note,
receivable or otherwise, but only as and when received) received in
connection with an Equity Transaction or Debt Transaction, net of (i)
reasonable transaction costs, including in the case of an Equity
Transaction or a Debt Transaction, underwriting discounts and
commissions, (ii) estimated taxes payable in connection therewith, and
(iii) in the case of a Debt Transaction, any amounts payable in respect
of Subordinated Debt, including without limitation principal, interest,
premiums and penalties, which is secured by, or otherwise related to,
any property or asset which is the subject thereof to the extent that
such Subordinated Debt and any payments in respect thereof are paid
with a portion of the proceeds therefrom.
"Notice of Borrowing" means a written notice of borrowing in
substantially the form of Schedule 2.1(b)(i), as required by Section
2.1(b)(i).
"Notice of Extension/Conversion" means a written notice of
extension or conversion in substantially the form of Schedule 3.2, as
required by Section 3.2.
"Participation Interest" means the purchase by a Lender of a
participation in Loans as provided in Section 3.14.
5
<PAGE> 10
"Pledge Agreement" means the pledge agreement dated as of the
Closing Date given by the Borrower and certain Domestic Subsidiaries of
the Borrower identified therein to the Collateral Agent to secure the
obligations of the Credit Parties under the Credit Documents, as such
pledge agreement may be amended and modified from time to time.
"Prime Rate" means the rate of interest per annum publicly
announced from time to time by Bank of America as its prime rate in
effect at its principal office in Charlotte, North Carolina, with each
change in the Prime Rate being effective on the date such change is
publicly announced as effective (it being understood and agreed that
the Prime Rate is a reference rate used by Bank of America in
determining interest rates on certain loans and is not intended to be
the lowest rate of interest charged on any extension of credit by Bank
of America to any debtor).
"Register" shall have the meaning given such term in Section
9.3(c).
"Required Lenders" means, at any time, Lenders having more
than fifty percent (50%) of the aggregate principal amount of the Term
Loan outstanding (taking into account in each case Participation
Interests or obligation to participate therein); provided that the
outstanding principal amount of the Term Loan (taking into account
Participation Interests therein) owing to a Defaulting Lender shall be
excluded for purposes hereof in making a determination of Required
Lenders.
"Revolving Credit Agreement" means that certain Amended and
Restated Credit Agreement dated as of August 5, 1999 by and among the
Borrower, the subsidiaries of the Borrower identified therein, the
lenders party thereto, First Union National Bank, as Documentation
Agent, Bank of America Canada, as Canadian Administrative Agent, and
Bank of America, N.A., as Domestic Administrative Agent, as amended,
modified, supplemented, extended, renewed or replaced from time to
time.
"Security Agreement" means the security agreement dated as of
the Closing Date given by the Credit Parties to the Collateral Agent to
secure the obligations of the Credit Parties under the Credit
Documents, as such security agreement may be amended and modified from
time to time.
"Term Loan" shall have the meaning assigned to such term in
Section 2.1(a).
"Term Loan Commitment" means, with respect to each Lender, the
commitment of such Lender to make its Term Loan Commitment Percentage
of the Term Loan (and for purposes of making determinations of Required
Lenders after the Closing Date, such Lender's Term Loan Commitment
Percentage of the aggregate principal amount outstanding on the Term
Loan).
"Term Loan Commitment Percentage" means, for each Lender, a
fraction (expressed as a percentage) the numerator of which is the Term
Loan Committed Amount of such Lender at such time and the denominator
of which is the aggregate of the Term
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<PAGE> 11
Loan Committed Amounts of all the Lenders at such time. The initial
Term Loan Commitment Percentage of each Lender is set forth on Schedule
2.1(a).
"Term Loan Committed Amount" means, with respect to each
Lender, the amount of such Lender's Term Loan Commitment (and for
purposes of making determinations of Required Lenders after the Closing
Date, such Lender's portion of the principal amount outstanding on the
Term Loan), as such amount may be reduced from time to time in
accordance with the provisions hereof. The initial Term Loan Committed
Amount of each Lender is set forth on Schedule 2.1(a).
"Term Note" or "Term Notes" means the promissory notes of the
Borrower in favor of each of the Lenders evidencing the Term Loan in
substantially the form attached as Schedule 2.1(e), individually or
collectively, as appropriate, as such promissory notes may be amended,
modified, supplemented, extended, renewed or replaced from time to
time.
1.2 Computation of Time Periods.
For purposes of computation of periods of time hereunder, the
word "from" means "from and including" and the words "to" and "until" each mean
"to but excluding."
1.3 Accounting Terms.
Except as otherwise expressly provided herein, all accounting
terms used herein shall be interpreted, and all financial statements and
certificates and reports as to financial matters required to be delivered to the
Lenders hereunder shall be prepared, in accordance with GAAP applied on a
consistent basis.
SECTION 2
CREDIT FACILITIES
2.1 Term Loan.
(a) Term Loan Commitment. Subject to the terms and conditions
hereof, on the Closing Date each Lender severally agrees to make its Term Loan
Commitment Percentage of a term loan (the "Term Loan") in the aggregate
principal amount of THIRTY MILLION DOLLARS (US$30,000,000) in no more than two
advances to the Borrower in U.S. Dollars for the purposes hereinafter set forth.
The Term Loan may consist of Base Rate Loans or Eurodollar Loans, or a
combination thereof, as the Borrower may request. Amounts repaid on the Term
Loan may not be reborrowed.
(b) Term Loan Borrowing. The Borrower shall submit an appropriate
Notice of Borrowing relating to the Term Loan not later than 11:00 A.M.
(Charlotte, North Carolina time) on the date of the requested borrowing, with
respect to the portion of the Term Loan initially consisting of a Base Rate
Loan, or on the third Business Day prior to the date of the requested
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<PAGE> 12
borrowing, with respect to the portion of the Term Loan initially consisting of
one or more Eurodollar Loans, which Notice of Borrowing shall be irrevocable and
shall specify (i) that the funding of the Term Loan is requested, (ii) the date
of the requested borrowing, (iii) the principal amount of the requested
borrowing, and (iv) whether the funding of the Term Loan shall be comprised of
Base Rate Loans, Eurodollar Loans or combination thereof, and if Eurodollar
Loans are requested, the Interest Period(s) therefor. Each Lender shall make its
Term Loan Commitment Percentage of the Term Loan available to the Administrative
Agent for the account of the Borrower, or in such other manner as the
Administrative Agent may specify in writing, by 1:00 P.M. (Charlotte, North
Carolina time) on the date of the requested borrowing in U.S. Dollars and in
funds immediately available to the Administrative Agent.
(c) Minimum Amounts. The Loans shall be in minimum aggregate
principal amounts of US$2,500,000 and integral multiples of US$500,000 in excess
thereof, in the case of Eurodollar Loans, and US$100,000 (or the remaining
portion of the outstanding principal amount of the Term Loan, if less) and
integral multiples of US$50,000 in excess thereof, in the case of Base Rate
Loans.
(d) Repayment. The aggregate principal amount of the Term Loan shall be
due and payable in twenty (20) consecutive quarterly installments as follows:
<TABLE>
<CAPTION>
Principal Principal
Amortization Amortization
Payment Payment
as a Percentage of as a Percentage of
Original Principal Original Principal
Date Amount Date Amount
---- ------ ---- ------
<S> <C> <C> <C>
February 5, 2000 0.25% August 5, 2002 0.25%
May 5, 2000 0.25% November 5, 2002 0.25%
August 5, 2000 0.25% February 5, 2003 0.25%
November 5, 2000 0.25% May 5, 2003 0.25%
February 5, 2001 0.25% August 5, 2003 0.25%
May 5, 2001 0.25% November 5, 2003 0.25%
August 5, 2001 0.25% February 5, 2004 24.00%
November 5, 2001 0.25% May 5, 2004 24.00%
February 5, 2002 0.25% August 5, 2004 24.00%
May 5, 2002 0.25% November 5, 2004 24.00%
-------
Total 100.00%
</TABLE>
(e) Interest. Subject to the provisions of Section 3.1,
(i) Base Rate Loans. During such periods as the Term Loan
shall be comprised in whole or in part of Base Rate Loans, such Base
Rate Loans shall bear interest at a per annum rate equal to the Base
Rate plus 200 basis points (2.00%); and
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<PAGE> 13
(ii) Eurodollar Loans. During such periods as the Term
Loan shall be comprised in whole or in part of Eurodollar Loans, such
Eurodollar Loans shall bear interest at a per annum rate equal to the
Eurodollar Rate plus 375 basis points (3.75%).
Interest on the Term Loan shall be payable in arrears on each applicable
Interest Payment Date (or at such other times as may be specified herein).
(f) Term Notes. The Term Loan shall be evidenced by a duly
executed Term Note in favor of each Lender.
(g) Maximum Number of Eurodollar Loans. The Borrower will be
limited to a maximum number of five (5) Eurodollar Loans outstanding at any
time. For purposes hereof, Eurodollar Loans with separate or different Interest
Periods will be considered as separate Eurodollar Loans even if their Interest
Periods expire on the same date.
SECTION 3
OTHER PROVISIONS RELATING TO CREDIT FACILITIES
3.1 Default Rate.
Upon the occurrence, and during the continuance, of an Event of
Default, the principal of and, to the extent permitted by law, interest on the
Loans and any other amounts owing hereunder or under the other Credit Documents
shall bear interest, payable on demand, at a per annum rate 2% greater than the
rate which would otherwise be applicable (or if no rate is applicable, whether
in respect of interest, fees or other amounts, then 2% greater than the Base
Rate).
3.2 Extension and Conversion.
Subject to the terms of Section 5.2, the Borrower shall have the
option, on any Business Day, to extend existing Eurodollar Loans into a
subsequent permissible Interest Period or to convert Base Rate Loans into
Eurodollar Loans; provided, however, that (i) except as provided in Section 3.8,
Eurodollar Loans may be converted into Base Rate Loans only on the last day of
the Interest Period applicable thereto, (ii) Eurodollar Loans may be extended,
and Base Rate Loans may be converted into Eurodollar Loans, only if no Default
or Event of Default is in existence on the date of extension or conversion,
(iii) Loans extended as, or converted into, Eurodollar Loans shall be subject to
the terms of the definition of "Interest Period" and shall be in such minimum
amounts as provided in Section 2.1(c), and (iv) any request for extension or
conversion of a Eurodollar Loan which shall fail to specify an Interest Period
shall be deemed to be a request for an Interest Period of one month. Each such
extension or conversion shall be effected by the Borrower by giving a Notice of
Extension/Conversion (or telephone notice promptly confirmed in writing) to the
Administrative Agent prior to 11:00 A.M. (Charlotte, North Carolina time) on the
Business Day of, in the case of the conversion of a Eurodollar Loan into a Base
Rate Loan, and on the third Business Day prior to, in the case of the extension
of a Eurodollar Loan as, or conversion of a Base Rate
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<PAGE> 14
Loan into, a Eurodollar Loan, the date of the proposed extension or conversion,
specifying the date of the proposed extension or conversion, the Loans to be so
extended or converted, the types of Loans into which such Loans are to be
converted and, if appropriate, the applicable Interest Periods with respect
thereto. Each request for extension of a Eurodollar Loan or conversion of a
Base Rate Loan into a Eurodollar Loan shall be irrevocable and shall constitute
a representation and warranty by the Borrower of the matters specified in
subsections (a) and (b) of Section 5.2. In the event the Borrower fails to
request extension or conversion of any Eurodollar Loan in accordance with this
Section, or any such conversion or extension is not permitted or required by
this Section, then such Eurodollar Loan shall be automatically converted into a
Base Rate Loan at the end of the Interest Period applicable thereto. The
Administrative Agent shall give each Lender notice as promptly as practicable
of any such proposed extension or conversion affecting any Loan.
3.3 Prepayments.
(a) Voluntary Prepayments. Loans may be repaid in whole or in part
without premium or penalty; provided that (i) Eurodollar Loans may be prepaid
only upon three (3) Business Days' prior written notice to the Administrative
Agent and must be accompanied by payment of any amounts owing under Section
3.11, and (ii) partial prepayments shall be (A) in the case of Eurodollar Loans,
in a minimum aggregate principal amount of US$2,500,000 and integral multiples
of US$500,000 in excess thereof and (B) in the case of Base Rate Loans, in a
minimum aggregate principal amount of US$100,000 and integral multiples of
US$50,000 in excess thereof.
(b) Mandatory Prepayments. If at any time the aggregate principal
Dollar Amount of Obligations plus the aggregate principal amount of the Term
Loan shall exceed the Borrowing Base, the Borrower shall immediately make
payment on the Term Loan and/or on the loans and other extensions of credit
outstanding under the Revolving Credit Agreement in an amount sufficient to
eliminate the excess.
(c) Application. Unless otherwise specified by the Borrower,
amounts prepaid on the Term Loan shall be applied first to Base Rate Loans, then
to Eurodollar Loans in direct order of Interest Period maturities. Amounts
prepaid on the Term Loan shall serve to reduce remaining principal installment
payments ratably and may not be reborrowed.
3.4 [Intentionally Omitted].
3.5 Fees.
The Borrower agrees to pay to the Administrative Agent, for its own
account, the annual administrative fee and such other fees, if any, referred to
in the Administrative Agent's Fee Letter (collectively, the "Administrative
Agent's Fees").
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<PAGE> 15
3.6 Capital Adequacy.
If any Lender has reasonably determined, after the date hereof, that
the adoption or the becoming effective of, or any change in, or any change by
any Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof in the interpretation or administration
of, any applicable law, rule or regulation regarding capital adequacy, or
compliance by such Lender with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on such Lender's capital or assets as a consequence of its commitments or
obligations hereunder to a level below that which such Lender could have
achieved but for such adoption, effectiveness, change or compliance (taking into
consideration such Lender's policies with respect to capital adequacy), then,
subject to the provisions of Section 3.12, the Borrower shall be obligated to
pay to such Lender such additional amount or amounts as will compensate such
Lender for such reduction.
3.7 Inability To Determine Interest Rate.
If prior to the first day of any Interest Period, the Administrative
Agent shall have determined (which determination shall be conclusive and binding
upon the Borrower) that, by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate for such Interest Period, the Administrative Agent shall give
telecopy or telephonic notice thereof to the Borrower and the Lenders as soon as
practicable thereafter (which notice shall be withdrawn the Administrative Agent
whenever such circumstances no longer exist). If such notice is given (a) any
Eurodollar Loans requested to be made on the first day of such Interest Period
shall be made as Base Rate Loans and (b) any Loans that were to have been
converted on the first day of such Interest Period to or continued as Eurodollar
Loans shall be converted to or continued as Base Rate Loans. Until such notice
has been withdrawn by the Administrative Agent, no further Eurodollar Loans
shall be made or continued as such, nor shall the Borrower have the right to
convert Base Rate Loans to Eurodollar Loans.
3.8 Illegality.
Notwithstanding any other provision herein, if the adoption of or any
change in any Requirement of Law or in the interpretation or application thereof
occurring after the Closing Date shall make it unlawful for any Lender to make
or maintain Eurodollar Loans as contemplated by this Credit Agreement, (a) such
Lender shall promptly give written notice of such circumstances to the Borrower
and the Administrative Agent (which notice shall be withdrawn by such Lender
whenever such circumstances no longer exist), (b) the commitment of such Lender
hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and
convert a Base Rate Loan to Eurodollar Loans shall forthwith be canceled and,
until such time as it shall no longer be unlawful for such Lender to make or
maintain Eurodollar Loans, such Lender shall then have a commitment only to make
a Base Rate Loan when a Eurodollar Loan is requested and (c) such Lender's Loans
then outstanding as Eurodollar Loans, if any, shall be converted automatically
to Base Rate Loans on the respective last days of the then current Interest
Periods with respect to such Loans or within such earlier period as required by
law. If any such conversion of a Eurodollar Loan occurs on a day
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<PAGE> 16
which is not the last day of the then current Interest Period with respect
thereto, the Borrower shall pay to such Lender such amounts, if any, as may be
required pursuant to Section 3.11.
3.9 Requirements of Law.
If, after the date hereof, the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof applicable to
any Lender, or compliance by any Lender with any request or directive (whether
or not having the force of law) from any central bank or other Governmental
Authority, in each case made subsequent to the Closing Date (or, if later, the
date on which such Lender becomes a Lender):
(a) shall subject such Lender to any tax of any kind whatsoever
with respect to any Eurodollar Loans made by it or its obligation to make
Eurodollar Loans, or change the basis of taxation of payments to such Lender in
respect thereof (except for (i) Taxes covered by Section 3.10 (including Taxes
imposed solely by reason of any failure of such Lender to comply with its
obligations under Section 3.10(d)) and (ii) changes in taxes measured by or
imposed upon the overall net income, or franchise tax (imposed in lieu of such
net income tax), of such Lender or its applicable lending office, branch, or any
affiliate thereof));
(b) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by, deposits
or other liabilities in or for the account of, advances, loans or other
extensions of credit by, or any other acquisition of funds by, any office of
such Lender which is not otherwise included in the determination of the
Eurodollar Rate hereunder; or
(c) shall impose on such Lender any other condition (excluding any
tax of any kind whatsoever);
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or to reduce any amount receivable
hereunder in respect thereof, then, in any such case, subject to the provisions
of Section 3.12, the Borrower shall be obligated to promptly pay such Lender,
upon its demand, any additional amounts necessary to compensate such Lender for
such increased cost or reduced amount receivable, provided that, in any such
case, the Borrower may elect to convert the Eurodollar Loans made by such Lender
hereunder to Base Rate Loans by giving the Administrative Agent at least one
Business Day's notice of such election, in which case the Borrower shall
promptly pay to such Lender, upon demand, without duplication, such amounts, if
any, as may be required pursuant to Section 3.11. Each Lender agrees that, as
promptly as practicable after it becomes aware of any circumstances of the type
referred to in paragraphs (a) through (c) above which would result in any such
increased cost or reduced amount receivable, the affected Lender shall, to the
extent not inconsistent with such Lender's internal policies of general
application, designate a different lending office for the making of Loans
hereunder or otherwise use reasonable commercial efforts to minimize the amounts
payable to it by the Borrower pursuant to this Section 3.9. This covenant shall
survive the termination of this Credit Agreement and the payment of the Loans
and all other amounts payable hereunder.
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<PAGE> 17
3.10 Taxes.
(a) Any and all payments by any Credit Party to or for the account
of any Lender or the Administrative Agent hereunder or under any other Credit
Document shall be made free and clear of and without deduction for any and all
present or future taxes, duties, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding, in the case
of each Lender and the Administrative Agent, taxes imposed on its income, and
franchise taxes imposed on it, by the jurisdiction under the laws of which such
Lender (or its applicable lending office) or the Administrative Agent (as the
case may be) is organized or any political subdivision thereof (all such
non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings,
and liabilities being hereinafter referred to as "Taxes"). If any Credit Party
shall be required by law to deduct or withhold any Taxes from or in respect of
any sum payable under this Credit Agreement or any other Credit Document to any
Lender or the Administrative Agent, (i) the sum payable shall be increased as
necessary so that after making all required deductions and withholdings
(including deductions and withholdings applicable to additional sums payable
under this Section 3.10) such Lender or the Administrative Agent receives an
amount equal to the sum it would have received had no such deductions been made,
(ii) such Credit Party shall make such deductions and withholdings, (iii) such
Credit Party shall pay the full amount deducted or withheld to the relevant
taxation authority or other authority in accordance with applicable law, and
(iv) such Credit Party shall furnish to the Administrative Agent, in each case
at its address referred to in Section 9.1, the original or a certified copy of a
receipt evidencing payment thereof.
(b) In addition, the Borrower agrees to pay any and all present or
future stamp or documentary taxes and any other excise or property taxes or
charges or similar levies which arise from any payment made under this Credit
Agreement or any other Credit Document or from the execution or delivery of, or
otherwise with respect to, this Credit Agreement or any other Credit Document
(hereinafter referred to as "Other Taxes").
(c) The Borrower agrees to indemnify each Lender and the
Administrative Agent for the full amount of Taxes and Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed or asserted by any
jurisdiction on amounts payable under this Section 3.10) paid by such Lender or
the Administrative Agent (as the case may be) and any liability (including
penalties, interest, and expenses) arising therefrom or with respect thereto.
(d) Each Lender that is not a United States person under Section
7701(a)(30) of the Internal Revenue Code, on or prior to the date of its
execution and delivery of this Credit Agreement in the case of each Lender
listed on the signature pages hereto and on or prior to the date on which it
becomes a Lender in the case of each other Lender, and from time to time
thereafter if requested in writing by the Borrowers or the Administrative Agent
(but only so long as such Lender remains lawfully able to do so), shall provide
the Borrower and the Administrative Agent with (i) Internal Revenue Service Form
W-8 BEN or W-8 ECI, as appropriate, or any successor form prescribed by the
Internal Revenue Service, certifying that such Lender is entitled to benefits
under an income tax treaty to which the United States is a party which reduces
to zero the rate of withholding tax on payments of interest or certifying that
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<PAGE> 18
the income receivable pursuant to this Credit Agreement is effectively connected
with the conduct of a trade or business in the United States, (ii) Internal
Revenue Service Form W-8 or W-9, as appropriate, or any successor form
prescribed by the Internal Revenue Service, and/or (iii) any other form or
certificate required by any taxing authority (including any certificate required
by Sections 871(h) and 881(c) of the Internal Revenue Code), certifying that
such Lender is entitled to an exemption from tax on payments pursuant to this
Credit Agreement or any of the other Credit Documents.
(e) For any period with respect to which a Lender has failed to
provide the Borrower and the Administrative Agent with the appropriate form
pursuant to Section 3.10(d) (unless such failure is due to a change in treaty,
law, or regulation occurring subsequent to the date on which a form originally
was required to be provided), such Lender shall not be entitled to
indemnification under Section 3.10(a) or 3.10(b) with respect to Taxes imposed
by the United States; provided, however, that should a Lender, which is
otherwise exempt from or subject to a reduced rate of withholding tax, become
subject to Taxes because of its failure to deliver a form required hereunder,
the Borrower shall take such steps as such Lender shall reasonably request to
assist such Lender to recover such Taxes.
(f) If any Credit Party is required to pay additional amounts to
or for the account of any Lender pursuant to this Section 3.10, then such Lender
will agree to use reasonable efforts to change the jurisdiction of its
applicable lending office so as to eliminate or reduce any such additional
payment which may thereafter accrue if such change, in the judgment of such
Lender, is not otherwise disadvantageous to such Lender.
(g) Within thirty (30) days after the date of any payment of
Taxes, the applicable Credit Party shall furnish to the Administrative Agents
the original or a certified copy of a receipt evidencing such payment.
(h) Without prejudice to the survival of any other agreement of
the Credit Parties hereunder, the agreements and obligations of the Credit
Parties contained in this Section 3.10 shall survive the repayment of the Loans
and other obligations under the Credit Documents and the termination of the
Commitments hereunder.
3.11 Indemnity.
The Borrower promises to indemnify each Lender and to hold each Lender
harmless from any loss or expense which such Lender may sustain or incur (other
than through such Lender's gross negligence or willful misconduct) as a
consequence of (a) default by the Borrower in making a borrowing of, conversion
into or continuation of Eurodollar Loans after the Borrower has given a notice
requesting the same in accordance with the provisions of this Credit Agreement,
(b) default by the Borrower in making any prepayment of a Eurodollar Loan after
the Borrower has given a notice thereof in accordance with the provisions of
this Credit Agreement or (c) the making of a prepayment of Eurodollar Loans on a
day which is not the last day of an Interest Period with respect thereto. With
respect to Eurodollar Loans, such indemnification may be calculated, in lieu of
any other method, based on an amount equal to the excess, if any, of (i) the
amount of interest
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<PAGE> 19
which would have accrued on the amount so prepaid, or not so borrowed, converted
or continued, for the period from the date of such prepayment or of such failure
to borrow, convert or continue to the last day of the applicable Interest Period
(or, in the case of a failure to borrow, convert or continue, the Interest
Period that would have commenced on the date of such failure) in each case at
the applicable rate of interest for such Loans provided for herein over (ii) the
amount of interest (as reasonably determined by such Lender) which would have
accrued to such Lender on such amount by placing such amount on deposit for a
comparable period with leading banks in the interbank Eurodollar market. The
covenants of the Borrower set forth in this Section 3.11 shall survive the
termination of this Credit Agreement and the payment of the Loans and all other
amounts payable hereunder.
3.12 Certain Limitations.
The provisions of Sections 3.6, 3.9, 3.10 and 3.11 hereof shall be
subject to the following:
(a) Each Lender that desires compensation or indemnification under
Sections 3.6, 3.9 or 3.11 hereof shall notify the Borrower through the
Administrative Agent of any event occurring after the Closing Date entitling
such Lender to compensation or indemnification under any of such Sections as
promptly as practicable, but in any event within 90 days after the occurrence of
the event giving rise thereto; provided that (i) if any such Lender fails to
give such notice within 90 days after the occurrence of such an event, such
Lender shall only be entitled to compensation or indemnification in respect of
such event accruing under Sections 3.6, 3.9 or 3.11 hereof with respect to the
period from and after the date 90 days prior to the date that such Lender does
give notice.
(b) Any notice given by a Lender pursuant to subsection (a) above
shall certify (i) that one of the events described in Sections 3.6, 3.9 or 3.11
hereof has occurred, describing in reasonable detail the nature of such event,
(ii) as to the increased cost, reduced amount receivable or loss or expense
resulting from such event and (iii) as to the additional amount demanded by such
Lender, attaching a reasonably detailed explanation of the calculation thereof.
Such a certificate as to any compensation or indemnification payable pursuant to
Sections 3.6, 3.9 or 3.11, submitted by such Lender through the Administrative
Agent to the Borrower, shall be conclusive and binding on the parties hereto in
the absence of manifest error.
(c) If any Lender requests compensation or indemnification from
the Borrower under Sections 3.6, 3.9 or 3.10 hereof, the Borrower may, at its
option, within fifteen (15) days after receipt by the Borrower of written demand
from the affected Lender for payment of such compensation or indemnification,
notify the Administrative Agent and such affected Lender of its intention to
replace the affected Lender. So long as no Event of Default shall have occurred
and be continuing, the Borrower may obtain, at the Borrower's expense, a
replacement Lender for the affected Lender. If the Borrower obtains a
replacement Lender within ninety (90) days following notice of its intention to
do so, the affected Lender must sell and assign its Loans and any related
Commitments to such replacement Lender pursuant to Section 9.3(b) hereof
(without giving effect to any requirement therein that the Administrative Agent
consent thereto), for an amount equal to the principal balance of all Loans held
by the affected Lender and all accrued
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<PAGE> 20
interest and Fees with respect thereto through the date of such sale, provided
that the Borrower shall have paid to such affected Lender the compensation or
indemnification that it is entitled to receive under Sections 3.6, 3.9 or 3.10
hereof, through the date of such sale and assignment. Notwithstanding the
foregoing, the Borrower shall not have the right to obtain a replacement Lender
if the affected Lender rescinds its demand for such compensation or
indemnification within fifteen (15) days following its receipt of the Borrower's
notice of intention to replace such affected Lender. Additionally, if the
Borrower gives a notice to the Administrative Agent and an affected Lender of
its intention to replace such affected Lender and does not so replace such
affected Lender within ninety (90) days thereafter, the Borrower's rights under
this Section 3.12(c) shall terminate and the Borrower shall promptly pay all
compensation or indemnification demanded by such affected Lender pursuant to
Sections 3.6, 3.9 or 3.10 hereof.
3.13 Pro Rata Treatment.
Except to the extent otherwise provided herein:
(a) Loans. Each payment or prepayment of principal on the Term
Loan, each payment of interest on the Term Loan and each conversion or extension
of any Loan comprising the Term Loan, shall be allocated pro rata among the
Lenders in accordance with the respective principal amounts of their respective
Term Loan Commitment Percentages.
(b) Advances. No Lender shall be responsible for the failure or
delay by any other Lender in its obligation to make its ratable share of a
borrowing hereunder; provided, however, that the failure of any Lender to
fulfill its obligations hereunder shall not relieve any other Lender of its
obligations hereunder. Unless the Administrative Agent shall have been notified
in writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its ratable share of such borrowing available to
the Administrative Agent, the Administrative Agent may assume that such Lender
is making such amount available to the Administrative Agent, and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrower a corresponding amount. If such amount is not made available to the
Administrative Agent by such Lender within the time period specified therefor
hereunder, such Lender shall pay to the Administrative Agent, on demand, such
amount with interest thereon at a rate equal to the Federal Funds Rate for a
period of two (2) Business Days, and thereafter at the Base Rate, for the period
until such Lender makes such amount immediately available to the Administrative
Agent. If such Lender does not pay such amounts to the Administrative Agent
forthwith upon demand, the Administrative Agent may notify the Borrower and
request the Borrower to immediately pay such amount to the Administrative Agent
with interest at the rate applicable thereto. A certificate of the
Administrative Agent submitted to any Lender with respect to any amounts owing
under this subsection shall be conclusive in the absence of manifest error.
3.14 Sharing of Payments.
The Lenders agree among themselves that, in the event that any Lender
shall obtain payment in respect of any Loan or any other obligation owing to
such Lender under this Credit Agreement through the exercise of a right of
setoff, banker's lien or counterclaim, or pursuant to a
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secured claim under Section 506 of the Bankruptcy Code or other security or
interest arising from, or in lieu of, such secured claim, received by such
Lender under any applicable bankruptcy, insolvency or other similar law or
otherwise, or by any other means, in excess of its pro rata share of such
payment as provided for in this Credit Agreement, such Lender shall promptly
purchase from the other Lenders a participation in such Loans and other
obligations in such amounts, and make such other adjustments from time to time,
as shall be equitable to the end that all Lenders share such payment in
accordance with their respective ratable shares as provided for in this Credit
Agreement. The Lenders further agree among themselves that if payment to a
Lender obtained by such Lender through the exercise of a right of setoff,
banker's lien, counterclaim or other event as aforesaid shall be rescinded or
must otherwise be restored, each Lender which shall have shared the benefit of
such payment shall, by repurchase of a participation theretofore sold, return
its share of that benefit (together with its share of any accrued interest
payable with respect thereto) to each Lender whose payment shall have been
rescinded or otherwise restored. The Borrower agrees that any Lender so
purchasing such a participation may, to the fullest extent permitted by law,
exercise all rights of payment, including setoff, banker's lien or counterclaim,
with respect to such participation as fully as if such Lender were a holder of
such Loan or other obligation in the amount of such participation. Except as
otherwise expressly provided in this Credit Agreement, if any Lender or either
Agent shall fail to remit to an Agent or any other Lender an amount payable by
such Lender or such Agent to such Agent or such other Lender pursuant to this
Credit Agreement on the date when such amount is due, such payments shall be
made together with interest thereon for each date from the date such amount is
due until the date such amount is paid to such Agent or such other Lender at a
rate per annum equal to the Federal Funds Rate. If under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a secured claim
in lieu of a setoff to which this Section 3.14 applies, such Lender shall, to
the extent practicable, exercise its rights in respect of such secured claim in
a manner consistent with the rights of the Lenders under this Section 3.14 to
share in the benefits of any recovery on such secured claim.
3.15 Payments, Computations, Etc.
(a) Except as otherwise specifically provided herein, all payments
hereunder shall be made to the Administrative Agent in U.S. Dollars in
immediately available funds, without setoff, deduction, counterclaim or
withholding of any kind, at the Administrative Agent's office specified in
Section 9.1 not later than 2:00 P.M. (Charlotte, North Carolina time) on the
date when due. Payments received after such time shall be deemed to have been
received on the next succeeding Business Day. The Administrative Agent may (but
shall not be obligated to) debit the amount of any such payment which is not
made by such time to any ordinary deposit account of the Borrower maintained
with the Administrative Agent (with notice to the Borrower). The Borrower shall,
at the time it makes any payment under this Credit Agreement, specify to the
Administrative Agent the Loans, Fees, interest or other amounts payable by the
Borrower hereunder to which such payment is to be applied (and in the event that
it fails so to specify, or if such application would be inconsistent with the
terms hereof, the Administrative Agent shall distribute such payment to the
Lenders in such manner as the Administrative Agent may determine to be
appropriate in respect of obligations owing by the Borrower hereunder, subject
to the terms of Section 3.13(a)). The Administrative Agent will distribute such
payments to such Lenders, if any such payment is received prior to 12:00 Noon
(Charlotte, North Carolina time) on a Business Day in like funds as
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received prior to the end of such Business Day and otherwise the Administrative
Agent will distribute such payment to such Lenders entitled thereto on the next
succeeding Business Day. Whenever any payment hereunder shall be stated to be
due on a day which is not a Business Day, the due date thereof shall be extended
to the next succeeding Business Day (subject to accrual of interest and Fees for
the period of such extension), except that in the case of Eurodollar Loans, if
the extension would cause the payment to be made in the next following calendar
month, then such payment shall instead be made on the next preceding Business
Day. Except as expressly provided otherwise herein, all computations of interest
and fees shall be made on the basis of the actual number of days elapsed over a
year of 360 days, except with respect to computation of interest on Base Rate
Loans which (unless the Base Rate is determined by reference to the Federal
Funds Rate) shall be calculated based on a year of 365 or 366 days, as
appropriate. Interest shall accrue from and include the date of borrowing, but
exclude the date of payment.
(b) Allocation of Payments After Event of Default. Notwithstanding
any other provisions of this Credit Agreement to the contrary, after the
occurrence and during the continuance of an Event of Default, all amounts
collected or received by the Administrative Agent or any Lender on account of
the Term Loan or any other amounts outstanding under any of the Credit Documents
shall be paid over or delivered as follows:
FIRST, to the payment of all reasonable out-of-pocket costs
and expenses (including without limitation reasonable attorneys' fees)
of the Agents in connection with enforcing the rights of the Lenders
under the Credit Documents;
SECOND, to payment of any Administrative Agent's Fees then
due and payable;
THIRD, to the payment of all reasonable out-of-pocket costs
and expenses (including without limitation, reasonable attorneys' fees)
of each of the Lenders in connection with enforcing its rights under
the Credit Documents or otherwise with respect to the portion of the
Term Loan owing to such Lender;
FOURTH, to the payment of all accrued interest and Fees on or
in respect of the Term Loan;
FIFTH, to the payment of the outstanding principal amount of
the Term Loan;
SIXTH, to all other obligations which shall have become due
and payable under the Credit Documents or otherwise and not repaid
pursuant to clauses "FIRST" through "SIXTH" above; and
SEVENTH, to the payment of the surplus, if any, to whoever may
be lawfully entitled to receive such surplus.
In carrying out the foregoing, (i) amounts received shall be applied in
the numerical order provided until exhausted prior to application to
the next succeeding category; and (ii) each of the Lenders shall
receive an amount equal to its pro rata share (based on the proportion
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that the then outstanding Term Loan held by such Lender bears to the
aggregate then outstanding Term Loan) of amounts available to be
applied pursuant to clauses "THIRD", "FOURTH", "FIFTH" and "SIXTH"
above.
3.16 Evidence of Debt.
(a) Each Lender shall maintain an account or accounts evidencing
each Loan made by such Lender to the Borrower from time to time, including the
amounts of principal and interest payable and paid to such Lender from time to
time under this Credit Agreement. Each Lender will make reasonable efforts to
maintain the accuracy of its account or accounts and to promptly update its
account or accounts from time to time, as necessary.
(b) The Administrative Agent shall maintain the Register pursuant
to Section 9.3(c) hereof, and a subaccount for each Lender, in which Register
and subaccounts (taken together) shall be recorded (i) the amount, type and
Interest Period of each such Loan hereunder, (ii) the amount of any principal or
interest due and payable or to become due and payable to each Lender hereunder
and (iii) the amount of any sum received by the Administrative Agent hereunder
from or for the account of the Borrower and each Lender's share thereof. The
Administrative Agent will make reasonable efforts to maintain the accuracy of
the subaccounts referred to in the preceding sentence and to promptly update
such subaccounts from time to time, as necessary.
(c) The entries made in the accounts, Register and subaccounts
maintained pursuant to subsection (b) of this Section 3.16 (and, if consistent
with the entries of the Administrative Agent, subsection (a)) shall be prima
facie evidence of the existence and amounts of the obligations of the Borrower
therein recorded; provided, however, that the failure of any Lender or the
Administrative Agent to maintain any such account, such Register or such
subaccount, as applicable, or any error therein, shall not in any manner affect
the obligation of the Borrower to repay the Loans made by such Lender in
accordance with the terms hereof.
SECTION 4
GUARANTY
4.1 The Guarantee.
(a) Each of the Guarantors hereby jointly and severally guarantees
to each Lender, to each Affiliate of a Lender that enters into a Hedging
Agreement to the extent permitted hereunder, and to the Agents as hereinafter
provided, the prompt payment of the Guaranteed Obligations in full when due
(whether at stated maturity, as a mandatory prepayment, by acceleration, as a
mandatory cash collateralization or otherwise) strictly in accordance with the
terms thereof. The Guarantors hereby further agree that if any of the Guaranteed
Obligations are not paid in full when due (whether at stated maturity, as a
mandatory prepayment, by acceleration, as a mandatory cash collateralization or
otherwise), the Guarantors will, jointly and severally, promptly pay the same,
without any demand or notice whatsoever, and that in the case of any extension
of time of payment or renewal of any of the Guaranteed Obligations, the same
will be promptly paid in full when due
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(whether at extended maturity, as a mandatory prepayment, by acceleration, as a
mandatory cash collateralization or otherwise) in accordance with the terms of
such extension or renewal.
(b) Notwithstanding any provision to the contrary contained herein or
in any other of the Credit Documents or Hedging Agreements, to the extent the
obligations of a Guarantor shall be adjudicated to be invalid or unenforceable
for any reason (including, without limitation, because of any applicable state
or federal law relating to fraudulent conveyances or transfers) then the
obligations of each Guarantor hereunder shall be limited to the maximum amount
that is permissible under applicable law (whether federal or state and
including, without limitation, the Bankruptcy Code).
4.2 Obligations Unconditional.
The obligations of the Guarantors under Section 4.1 hereof are joint
and several, absolute and unconditional, irrespective of the value, genuineness,
validity, regularity or enforceability of any of the Credit Documents or Hedging
Agreements, or any other agreement or instrument referred to therein, or any
substitution, release or exchange of any other guarantee of or security for any
of the Guaranteed Obligations, and, to the fullest extent permitted by
applicable law, irrespective of any other circumstance whatsoever which might
otherwise constitute a legal or equitable discharge or defense of a surety or
guarantor, it being the intent of this Section 4.2 that the obligations of the
Guarantors hereunder shall be absolute and unconditional under any and all
circumstances. Each Guarantor agrees that such Guarantor shall have no right of
subrogation, indemnity, reimbursement or contribution against the Borrower or
any other Guarantor of the Guaranteed Obligations for amounts paid under this
Guaranty until such time as the Lenders (and any Affiliates of Lenders entering
into Hedging Agreements) have been paid in full, all Commitments under the
Credit Agreement have been terminated and no Person or Governmental Authority
shall have any right to request any return or reimbursement of funds from the
Lenders in connection with monies received under the Credit Documents or Hedging
Agreements. Without limiting the generality of the foregoing, it is agreed that,
to the fullest extent permitted by law, the occurrence of any one or more of the
following shall not alter or impair the liability of any Guarantor hereunder
which shall remain absolute and unconditional as described above:
(i) at any time or from time to time, without notice to
any Guarantor, the time for any performance of or compliance with any
of the Guaranteed Obligations shall be extended, or such performance or
compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of
any of the Credit Documents, any Hedging Agreement or any other
agreement or instrument referred to in the Credit Documents or Hedging
Agreements shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations
shall be accelerated, or any of the Guaranteed Obligations shall be
modified, supplemented or amended in any respect, or any right under
any of the Credit Documents, any Hedging Agreement or any other
agreement or instrument referred to in the Credit Documents or Hedging
Agreements shall
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be waived or any other guarantee of any of the Guaranteed Obligations
or any security therefor shall be released or exchanged in whole or in
part or otherwise dealt with;
(iv) any Lien granted to, or in favor of, either Agent or
any Lender or Lenders as security for any of the Guaranteed Obligations
shall fail to attach or be perfected; or
(v) any of the Guaranteed Obligations shall be determined
to be void or voidable (including, without limitation, for the benefit
of any creditor of any Guarantor) or shall be subordinated to the
claims of any Person (including, without limitation, any creditor of
any Guarantor).
With respect to its obligations hereunder, each Guarantor hereby expressly
waives diligence, presentment, demand of payment, protest and all notices
whatsoever, and any requirement that either Agent or any Lender exhaust any
right, power or remedy or proceed against any Person under any of the Credit
Documents, any Hedging Agreement or any other agreement or instrument referred
to in the Credit Documents or Hedging Agreements, or against any other Person
under any other guarantee of, or security for, any of the Guaranteed
Obligations.
4.3 Reinstatement.
The obligations of the Guarantors under this Section 4 shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Guaranteed Obligations is rescinded
or must be otherwise restored by any holder of any of the Guaranteed
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each Guarantor agrees that it will indemnify
each Agent and each Lender on demand for all reasonable costs and expenses
(including, without limitation, reasonable fees and expenses of counsel)
incurred by such Agent or such Lender in connection with such rescission or
restoration, including any such costs and expenses incurred in defending against
any claim alleging that such payment constituted a preference, fraudulent
transfer or similar payment under any bankruptcy, insolvency or similar law.
4.4 Certain Additional Waivers.
Each Guarantor agrees that such Guarantor shall have no right of
recourse to security for the Guaranteed Obligations, except through the exercise
of the rights of subrogation pursuant to Section 4.2.
4.5 Remedies.
The Guarantors agree that, to the fullest extent permitted by law, as
between the Guarantors, on the one hand, and the Agents and the Lenders, on the
other hand, the Guaranteed Obligations may be declared to be forthwith due and
payable as provided in Section 7.2 hereof (and shall be deemed to have become
automatically due and payable in the circumstances provided in said Section 7.2)
for purposes of Section 4.1 hereof notwithstanding any stay, injunction or other
prohibition preventing such declaration (or preventing the Guaranteed
Obligations from becoming
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automatically due and payable) as against any other Person and that, in the
event of such declaration (or the Guaranteed Obligations being deemed to have
become automatically due and payable), the Guaranteed Obligations (whether or
not due and payable by any other Person) shall forthwith become due and payable
by the Guarantors for purposes of said Section 4.1.
4.6 Rights of Contribution.
The Guarantors hereby agree, as among themselves, that if any Guarantor
shall become an Excess Funding Guarantor (as defined below), each other
Guarantor shall, on demand of such Excess Funding Guarantor (but subject to the
succeeding provisions of this Section 4.6), pay to such Excess Funding Guarantor
an amount equal to such Guarantor's Pro Rata Share (as defined below and
determined, for this purpose, without reference to the properties, assets,
liabilities and debts of such Excess Funding Guarantor) of such Excess Payment
(as defined below). The payment obligation of any Guarantor to any Excess
Funding Guarantor under this Section 4.6 shall be subordinate and subject in
right of payment to the prior payment in full of the obligations of such
Guarantor under the other provisions of this Section 4, and such Excess Funding
Guarantor shall not exercise any right or remedy with respect to such excess
until payment and satisfaction in full of all of such obligations. For purposes
hereof, (i) "Excess Funding Guarantor" shall mean, in respect of any obligations
arising under the other provisions of this Section 4 (hereafter, the "Guarantied
Obligations"), a Guarantor that has paid an amount in excess of its Pro Rata
Share of the Guarantied Obligations; (ii) "Excess Payment" shall mean, in
respect of any Guarantied Obligations, the amount paid by an Excess Funding
Guarantor in excess of its Pro Rata Share of such Guarantied Obligations; and
(iii) "Pro Rata Share", for the purposes of this Section 4.6, shall mean, for
any Guarantor, the ratio (expressed as a percentage) of (a) the amount by which
the aggregate present fair saleable value of all of its assets and properties
exceeds the amount of all debts and liabilities of such Guarantor (including
contingent, subordinated, unmatured, and unliquidated liabilities, but excluding
the obligations of such Guarantor hereunder) to (b) the amount by which the
aggregate present fair saleable value of all assets and other properties of the
Borrower and all of the Guarantors exceeds the amount of all of the debts and
liabilities (including contingent, subordinated, unmatured, and unliquidated
liabilities, but excluding the obligations of the Borrower and the Guarantors
hereunder) of the Borrower and all of the Guarantors, all as of the Closing Date
(if any Guarantor becomes a party hereto subsequent to the Closing Date, then
for the purposes of this Section 4.6 such subsequent Guarantor shall be deemed
to have been a Guarantor as of the Closing Date and the information pertaining
to, and only pertaining to, such Guarantor as of the date such Guarantor became
a Guarantor shall be deemed true as of the Closing Date).
4.7 Continuing Guarantee.
The guarantee in this Section 4 is a continuing guarantee, and shall
apply to all Guaranteed Obligations whenever arising.
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SECTION 5
CONDITIONS
5.1 Conditions to Closing.
This Credit Agreement shall become effective, and the initial
Extensions of Credit may be made, upon the satisfaction of the following
conditions precedent:
(a) Execution of Credit Agreement and Credit Documents.
Receipt by the Administrative Agent of (i) multiple counterparts of this Credit
Agreement, (ii) a Term Note for each Lender, (iii) multiple counterparts of the
Pledge Agreement, (iv) multiple counterparts of the Security Agreement, (v)
multiple counterparts of the Intercreditor Agreement and (vi) UCC financing
statements relating to the Pledge Agreement and the Security Agreement, if any,
in each case executed by a duly authorized officer of each party thereto and in
each case conforming to the requirements of this Credit Agreement.
(b) Legal Opinions. Receipt of multiple counterparts of
opinions of counsel for the Credit Parties relating to the Credit Documents and
the transactions contemplated herein, in form and substance satisfactory to the
Administrative Agent and the Required Lenders.
(c) Absence of Legal Proceedings. The absence of any
action, suit, investigation or proceeding pending in any court or before any
arbitrator or governmental instrumentality which could reasonably be expected to
have a Material Adverse Effect.
(d) Corporate Documents. Receipt by the Administrative
Agent of the following (or their equivalent) for each of the Credit Parties:
(i) Resolutions. Copies of resolutions of the
Board of Directors approving and adopting the respective
Credit Documents, the transactions contemplated therein and
authorizing execution and delivery thereof, certified by a
secretary or assistant secretary as of the Closing Date to be
true and correct and in force and effect as of such date.
(ii) Good Standing. Copies, where applicable, of
(A) certificates of good standing, existence or its equivalent
certified as of a recent date by the appropriate governmental
authorities of the state of incorporation and the state in
which such Credit Party maintains its chief executive office
and (B) certificates indicating payment of all corporate
franchise taxes certified as of a recent date by the
appropriate governmental taxing authorities of the state of
incorporation and the state in which such Credit Party
maintains its chief executive office.
(iii) Officer's Certificate. An officer's
certificate for each of the Credit Parties dated as of the
Closing Date substantially in the form of Schedule 5.1(d)(iii)
with appropriate insertions and attachments.
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(e) Amendment No. 2 to Revolving Credit Agreement.
Receipt by the Administrative Agent of an executed copy of Amendment No. 2 to
the Revolving Credit Agreement, in form and substance satisfactory to the
Lenders hereunder.
(f) Fees. Receipt of by the Administrative Agent and the
Lenders of all fees, if any, owing pursuant to the Administrative Agent's Fee
Letter, Section 3.5 or otherwise.
(g) Subsection 5.2 Conditions. The conditions specified
in Section 5.2 shall be satisfied.
5.2 Conditions to All Extensions of Credit.
The obligation of each Lender to make any Extension of Credit hereunder
(including the initial Extension of Credit to be made hereunder) is subject to
the satisfaction of the following conditions precedent on the date of making
such Extension of Credit:
(a) Representations and Warranties. The representations
and warranties made by the Credit Parties herein and in the other Credit
Documents and which are contained in any certificate furnished at any time under
or in connection herewith shall be true and correct in all material respects on
and as of the date of such Extension of Credit as if made on and as of such date
(except for those which expressly relate to an earlier date and those which are
untrue solely as a result of a change permitted by this Agreement).
(b) No Default or Event of Default. No Default or Event
of Default shall have occurred and be continuing on such date or after giving
effect to the Extension of Credit to be made on such date unless such Default or
Event of Default shall have been waived in accordance with this Credit
Agreement.
(c) Section 2 Conditions. All conditions set forth in
Section 2 as to the making of the Term Loan shall have been satisfied.
Each request for an Extension of Credit (including extensions of
Eurodollar Loans and conversions of Base Rate Loans into Eurodollar Loans) and
each acceptance by the Borrower of an Extension of Credit (including extensions
of Eurodollar Loans and conversions of Base Rate Loans into Eurodollar Loans)
shall be deemed to constitute a representation and warranty by the Borrower as
of the date of such Extension of Credit that the applicable conditions in
paragraphs (a), (b) and (c) of this Section 5.2 have been satisfied.
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SECTION 6
REPRESENTATIONS, WARRANTIES AND COVENANTS
6.1 Incorporation.
The representations and warranties contained in Section 6 of the
Revolving Credit Agreement as in effect on the Closing Date (the "Incorporated
Representations") and the affirmative and negative covenants contained in
Sections 7 and 8, respectively, of the Revolving Credit Agreement as in effect
on the Closing Date (the "Incorporated Covenants") are incorporated herein by
reference with the same effect as if stated at length. The Credit Parties affirm
and represent and warrant to the Administrative Agent and the Lenders that the
Incorporated Representations are true and correct in all material respects as of
the date hereof (except for those which expressly relate to an earlier date and
those which are untrue solely as a result of a change permitted by the Revolving
Credit Agreement) and covenant and agree that the Incorporated Covenants shall
be as binding on the Credit Parties as if set forth fully herein, provided that
(i) the Incorporated Representations and the Incorporated Covenants shall run in
favor of the Agents and the Lenders hereunder (rather than the Agents and the
Lenders under the Revolving Credit Agreement as literally provided in the
Revolving Credit Agreement), (ii) in the event of the amendment or modification
of any of the affirmative and negative covenants contained in Sections 6 and 7
of the Revolving Credit Agreement, the Incorporated Covenants shall be as in
effect immediately prior to such amendment or modification, unless the requisite
Lenders hereunder consent to such amendment or modification in accordance with
the terms of Section 9.6 hereof, and (iii) in the event that the Revolving
Credit Agreement shall be refinanced, repaid, terminated or replaced by another
credit agreement, the Incorporated Covenants shall be as in effect immediately
prior to such refinancing or replacement.
6.2 Additional Representations.
(a) Purposes of Term Loan. Notwithstanding the provisions of
Section 6.15 of the Incorporated Representations, the proceeds of the Term Loan
shall be used by the Borrower solely (i) to repay Indebtedness outstanding under
the Revolving Credit Agreement and (ii) to finance working capital, capital
expenditures and other general corporate purposes, including, without
limitation, acquisitions permitted hereunder.
6.3 Additional Covenants.
(a) Purposes of Term Loan. Notwithstanding the provisions of
Section 7.13 of the Incorporated Covenants, the proceeds of the Term Loan shall
be used solely for the purposes provided in Section 6.2(a) hereof.
(b) Additional Credit Parties. The Borrower will provide to the
Administrative Agent, for the benefit of the Lenders, a Joinder Agreement and
the other items required by Section 7.11 of the Incorporated Covenants in the
same form and from the same Domestic Subsidiaries as required therein, except
that such other items shall reflect that they are delivered to, and run in favor
of, the Administrative Agent and secure the obligations of the Credit Parties
under this Credit Agreement and the other Credit Documents.
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SECTION 7
EVENTS OF DEFAULT
7.1 Events of Default.
An Event of Default shall exist upon the occurrence of any of the
following specified events (each an "Event of Default"):
(a) Payment. Any Credit Party shall
(i) default in the payment when due of any principal of
any of the Loans, or
(ii) default, and such default shall continue for three
(3) or more Business Days, in the payment when due of any interest on
the Loans, or of any Fees or other amounts owing hereunder, under any
of the other Credit Documents or in connection herewith or therewith;
or
(b) Representations. Any representation, warranty or statement
made or deemed to be made herein, in any of the other Credit Documents, or in
any statement or certificate delivered or required to be delivered pursuant
hereto or thereto shall prove untrue in any material respect on the date as of
which it was made or deemed to have been made (other than those which are untrue
solely as a result of changes permitted by this Agreement); or
(c) Covenants.
(i) Default in the due performance or observance of any
term, covenant or agreement contained in Section 7.3(a), 7.9, 7.11,
7.13 or 8.1 through 8.12, inclusive, in each case of the Incorporated
Covenants; or
(ii) Default in the due performance or observance by it of
any term, covenant or agreement (other than those referred to in
subsections (a), (b) or (c)(i) of this Section 7.1) contained in this
Credit Agreement and such default shall continue unremedied for a
period of at least 30 days after the earlier of a Responsible Officer
becoming aware of such default or notice thereof by the Administrative
Agent; or
(d) Other Credit Documents. (i) Any Credit Party shall default in
the due performance or observance of any material term, covenant or agreement in
any of the other Credit Documents (subject to applicable grace or cure periods,
if any), or (ii) except as to any Credit Party which is dissolved, released or
merged or consolidated out of existence as the result of or in connection with a
dissolution, merger or disposition permitted by Section 8.3 or Section 8.4 , in
each case of the Incorporated Covenants, any Credit Document shall fail to be in
full force and effect or to give the Administrative Agent and/or the Lenders any
material part of the Liens, rights, powers and privileges purported to be
created thereby; or
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(e) Guaranties. Except as to the Credit Party which is dissolved,
released or merged or consolidated out of existence as the result of or in
connection with a dissolution, merger or disposition permitted by Section 8.3 or
Section 8.4 of the Incorporated Covenants, the guaranty given by any Guarantor
hereunder or any material provision thereof shall cease to be in full force and
effect, or any Guarantor hereunder or any Person acting by or on behalf of such
Guarantor shall deny or disaffirm such Guarantor's obligations under such
guaranty, or any Guarantor shall default in the due performance or observance of
any term, covenant or agreement on its part to be performed or observed pursuant
to any guaranty; or
(f) Bankruptcy, etc. Any Bankruptcy Event shall occur with respect
to any Material Credit Party; or
(g) Defaults under Other Agreements. With respect to any
Indebtedness (other than Indebtedness outstanding under this Credit Agreement)
in excess of US$3,000,000 in the aggregate for the Consolidated Group taken as a
whole, (A) (1) any Material Credit Party shall default in any payment (beyond
the applicable grace period with respect thereto, if any) with respect to any
such Indebtedness, or (2) the occurrence and continuance of a default in the
observance or performance relating to such Indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event or condition shall occur or condition exist, the effect of which default
or other event or condition is to cause, or permit, the holder or holders of
such Indebtedness (or trustee or agent on behalf of such holders) to cause
(determined without regard to whether any notice or lapse of time is required),
any such Indebtedness to become due prior to its stated maturity; or (B) any
such Indebtedness shall be declared due and payable, or required to be prepaid
other than by a regularly scheduled required prepayment, prior to the stated
maturity thereof; or
(h) Judgments. Any Material Credit Party shall fail within 30 days
of the date due and payable to pay, bond or otherwise discharge any judgment,
settlement or order for the payment of money which judgment, settlement or
order, when aggregated with all other such judgments, settlements or orders due
and unpaid at such time, exceeds US$3,000,000, and which is not stayed on appeal
(or for which no motion for stay is pending) or is not otherwise being executed;
or
(i) ERISA. Any of the following events or conditions, if such
event or condition could reasonably be expected to have a Material Adverse
Effect: (1) any "accumulated funding deficiency," as such term is defined in
Section 302 of ERISA and Section 412 of the Internal Revenue Code, whether or
not waived, shall exist with respect to any Plan, or any Lien shall arise on the
assets of a member of the Consolidated Group or any ERISA Affiliate in favor of
the PBGC or a Plan; (2) an ERISA Event shall occur with respect to a Single
Employer Plan, which is, in the reasonable opinion of the Administrative Agent,
likely to result in the termination of such Plan for purposes of Title IV of
ERISA; (3) an ERISA Event shall occur with respect to a Multiemployer Plan or
Multiple Employer Plan, which is, in the reasonable opinion of the
Administrative Agent, likely to result in (i) the termination of such Plan for
purposes of Title IV of ERISA, or (ii) a member of the Consolidated Group or any
ERISA Affiliate incurring any liability in connection with a withdrawal from,
reorganization of (within the meaning of Section
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4241 of ERISA), or insolvency of (within the meaning of Section 4245 of ERISA)
such Plan; or (4) any prohibited transaction (within the meaning of Section 406
of ERISA or Section 4975 of the Internal Revenue Code) or breach of fiduciary
responsibility shall occur which may subject a member of the Consolidated Group
or any ERISA Affiliate to any liability under Sections 406, 409, 502(i), or
502(l) of ERISA or Section 4975 of the Internal Revenue Code, or under any
agreement or other instrument pursuant to which a member of the Consolidated
Group or any ERISA Affiliate has agreed or is required to indemnify any person
against any such liability; or
(j) Ownership. There shall occur a Change of Control; or
(k) Revolving Credit Agreement. There shall occur an Event of
Default under the Revolving Credit Agreement.
7.2 Acceleration; Remedies.
Upon the occurrence and during the continuation of an Event of Default,
the Administrative Agent shall, upon the request and direction of the Required
Lenders, by written notice to the Credit Parties take any of the following
actions without prejudice to the rights of either Agent or any Lender to enforce
its claims against the Credit Parties, except as expressly provided for herein:
(i) Acceleration. Declare the unpaid principal of and any
accrued interest in respect of all Loans and any and all other
indebtedness or obligations of any and every kind owing by the Credit
Parties to either Agent and/or any of the Lenders under the Credit
Documents to be due whereupon the same shall be immediately due and
payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by each of the Credit Parties.
(ii) Enforcement of Rights. Enforce any and all rights and
interests created and existing under the Credit Documents and all
rights of set-off.
Notwithstanding the foregoing, if an Event of Default specified in Section
7.1(f) shall occur, then all Loans, all accrued interest in respect thereof, all
accrued and unpaid Fees and other indebtedness or obligations owing to either
Agent and/or any of the Lenders hereunder automatically shall immediately become
due and payable without presentment, demand, protest or the giving of any notice
or other action by the Agents or the Lenders, all of which are hereby waived by
the Credit Parties.
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SECTION 8
AGENCY PROVISIONS
8.1 Appointment.
Each Lender hereby designates and appoints Bank of America as
administrative agent and as collateral agent of such Lender to act as specified
herein and the other Credit Documents, and each such Lender hereby authorizes
the Agents to take such action on its behalf under the provisions of this Credit
Agreement and the other Credit Documents and to exercise such powers and perform
such duties as are expressly delegated to the Agents by the terms hereof and of
the other Credit Documents, together with such other powers as are reasonably
incidental thereto. Each Lender further directs and authorizes the Agents to
execute releases (or similar agreements) to give effect to the provisions of
this Credit Agreement and the other Credit Documents, including specifically,
without limitation, in connection with a Divestiture consented to or permitted
pursuant the provisions of Section 8.3 of the Incorporated Covenants or a sale,
lease, transfer or other disposition of Property not prohibited by this Credit
Agreement. Notwithstanding any provision to the contrary elsewhere herein and in
the other Credit Documents, the Agents shall not have any duties or
responsibilities, except those expressly set forth herein and therein, or any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Credit Agreement or any of the other Credit Documents, or shall otherwise exist
against either Agent. The provisions of this Section are solely for the benefit
of the Agents and the Lenders, and none of the Credit Parties shall have any
rights as a third party beneficiary of the provisions hereof (other than as set
forth in the second sentence hereof). In performing their functions and duties
under this Credit Agreement and the other Credit Documents, the Agents shall act
solely as Agent of the Lenders and do not assume and shall not be deemed to have
assumed any obligation or relationship of agency or trust with or for any Credit
Party or any of their respective Affiliates.
8.2 Delegation of Duties.
The Agents may execute any of their duties hereunder or under the other
Credit Documents by or through agents or attorneys-in-fact and shall be entitled
to advice of counsel concerning all matters pertaining to such duties. The
Agents shall not be responsible for the negligence or misconduct of any agents
or attorneys-in-fact selected by it with reasonable care.
8.3 Exculpatory Provisions.
No Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates shall be (i) liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection
herewith or in connection with any of the other Credit Documents (except for its
or such Person's own gross negligence or willful misconduct), or (ii)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by any of the Credit Parties contained herein
or in any of the other Credit Documents or in any certificate, report, document,
financial statement or other written or oral statement referred to or provided
for in, or received by such Agent under or in connection herewith or in
connection with the other Credit
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Documents, or enforceability or sufficiency therefor of any of the other Credit
Documents, or for any failure of any Credit Party to perform its obligations
hereunder or thereunder. No Agent shall be responsible to any Lender for the
effectiveness, genuineness, validity, enforceability, collectability or
sufficiency of this Credit Agreement, or any of the other Credit Documents or
for any representations, warranties, recitals or statements made herein or
therein or made by the Borrower or any Credit Party in any written or oral
statement or in any financial or other statements, instruments, reports,
certificates or any other documents in connection herewith or therewith
furnished or made by such Agent to the Lenders or by or on behalf of the Credit
Parties to such Agent or any Lender or be required to ascertain or inquire as to
the performance or observance of any of the terms, conditions, provisions,
covenants or agreements contained herein or therein or as to the use of the
proceeds of the Term Loan or of the existence or possible existence of any
Default or Event of Default or to inspect the properties, books or records of
the Credit Parties or any of their respective Affiliates.
8.4 Reliance on Communications.
Each Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to any of the Credit Parties, independent accountants and
other experts selected by such Agent with reasonable care). Each Agent may deem
and treat the Lenders as the owners of their respective interests hereunder for
all purposes unless a written notice of assignment, negotiation or transfer
thereof shall have been filed with the Administrative Agent in accordance with
Section 9.3(b). Each Agent shall be fully justified in failing or refusing to
take any action under this Credit Agreement or under any of the other Credit
Documents unless it shall first receive such advice or concurrence of the
Required Lenders as it deems appropriate or it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action.
Each Agent shall in all cases be fully protected in acting, or in refraining
from acting, hereunder or under any of the other Credit Documents in accordance
with a request of the Required Lenders (or to the extent specifically provided
in Section 9.6, all the Lenders) and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lenders (including
their successors and assigns).
8.5 Notice of Default.
No Agent shall be deemed to have knowledge or notice of the occurrence
of any Default or Event of Default hereunder unless such Agent has received
notice from a Lender or a Credit Party referring to the Credit Document,
describing such Default or Event of Default and stating that such notice is a
"notice of default." In the event that such Agent receives such a notice, such
Agent shall give prompt notice thereof to the other Agent and the Lenders. The
Agents shall take such action with respect to such Default or Event of Default
as shall be reasonably directed by the Required Lenders.
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8.6 Non-Reliance on Administrative Agent and Other Lenders.
Each Lender expressly acknowledges that neither Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates has made
any representations or warranties to it and that no act by the Agents or any
affiliate thereof hereinafter taken, including any review of the affairs of any
Credit Party or any of their respective Affiliates, shall be deemed to
constitute any representation or warranty by any Agent to any Lender. Each
Lender represents to the Agents that it has, independently and without reliance
upon either Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, assets, operations, property, financial and
other conditions, prospects and creditworthiness of the Borrower, the other
Credit Parties or their respective Affiliates and made its own decision to make
its Loans hereunder and enter into this Credit Agreement. Each Lender also
represents that it will, independently and without reliance upon either Agent or
any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Credit Agreement, and to
make such investigation as it deems necessary to inform itself as to the
business, assets, operations, property, financial and other conditions,
prospects and creditworthiness of the Borrower, the other Credit Parties and
their respective Affiliates. Except for notices, reports and other documents
expressly required to be furnished to the Lenders by the Administrative Agent
hereunder, the Agents shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, operations,
assets, property, financial or other conditions, prospects or creditworthiness
of the Borrower, the other Credit Parties or any of their respective Affiliates
which may come into the possession of either Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates.
8.7 Indemnification.
The Lenders agree to indemnify each Agent in its capacity as such (to
the extent not reimbursed by the Borrower and without limiting the obligation of
the Borrower to do so), ratably in accordance with the respective principal
amounts of outstanding Loans and Participation Interests of the Lenders), from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever which may at any time (including without limitation at any time
following the final payment of all of the obligations of the Borrower hereunder
and under the other Credit Documents) be imposed on, incurred by or asserted
against such Agent in its capacity as such in any way relating to or arising out
of this Credit Agreement or the other Credit Documents or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by such Agent
under or in connection with any of the foregoing; provided that no Lender shall
be liable for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the gross negligence or willful misconduct of such
Agent. If any indemnity furnished to an Agent for any purpose shall, in the
opinion of such Agent, be insufficient or become impaired, such Agent may call
for additional indemnity and cease, or not commence, to do the acts indemnified
against until such additional indemnity is furnished. The agreements in this
Section shall survive the repayment
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of the Loans and other obligations under the Credit Documents and the
termination of the Commitments hereunder.
8.8 Administrative Agent in its Individual Capacity.
The Agents and their affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower, its Subsidiaries
or their respective Affiliates as though the Agents were not the Agents
hereunder. With respect to the Loans made by and all obligations of the Borrower
hereunder and under the other Credit Documents, the Agents shall have the same
rights and powers under this Credit Agreement as any Lender and may exercise the
same as though it were not an Agent, and the terms "Lender" and "Lenders" shall
include the Agents in its individual capacity.
8.9 Successor Administrative Agent.
Any Agent may, at any time, resign upon 20 days' written notice to the
Lenders, and may be removed, upon show of cause, by the Required Lenders upon 30
days' written notice to such Agent. Upon any such resignation or removal, the
Required Lenders shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Required Lenders, and shall
have accepted such appointment, within 30 days after the notice of resignation
or notice of removal, as appropriate, then the retiring Agent shall select a
successor Agent provided such successor is a Lender hereunder or a commercial
bank organized under the laws of the United States of America or of any State
thereof and has a combined capital and surplus of at least US$400,000,000. Upon
the acceptance of any appointment as Agent hereunder by a successor, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations as Agent, as
appropriate, under this Credit Agreement and the other Credit Documents and the
provisions of this Section 8 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent under this Credit Agreement.
8.10 Intercreditor Agreement.
Inasmuch as the obligations under the Revolving Credit Agreement are
secured by the same collateral as that securing the obligations under this
Credit Agreement, an intercreditor agreement is required in order that the
respective obligations share in such collateral on a pari passu basis. By
execution hereof, each Lender hereby acknowledges and agrees to be bound by the
terms of the Intercreditor Agreement and further authorizes and directs the
Collateral Agent to enter into the Intercreditor Agreement on its behalf.
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SECTION 9
MISCELLANEOUS
9.1 Notices.
Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (i) when
delivered, (ii) when transmitted via telecopy (or other facsimile device) to the
number set out below, (iii) the day following the day on which the same has been
delivered prepaid to a reputable national overnight air courier service, or (iv)
the third Business Day following the day on which the same is sent by certified
or registered mail, postage prepaid, in each case to the respective parties at
the address, in the case of the Borrower, Guarantors and the Agents, set forth
below, and, in the case of the Lenders, set forth on Schedule 9.1, or at such
other address as such party may specify by written notice to the other parties
hereto:
if to the Borrower or the Guarantors:
RailWorks Corporation
1104 Kenilworth Drive
Suite 301
Baltimore, MD 21204
Attn: Michael R. Azarela
Telephone: (410) 512-0501
Telecopy: (410) 825-6920
if to either Agent:
Bank of America, N.A.
101 N. Tryon Street
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attn: Gregg Newland
Agency Services
Telephone: (704) 386-4218
Telecopy: (704) 388-9436
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with a copy to:
Bank of America, N.A.
10 Light Street
Sixteenth Floor
MD4-302-16-01
Baltimore, MD 21202-1435
Attn: Monica Brandes
Telephone: (410) 605-8019
Telecopy: (410) 539-7508
9.2 Right of Set-Off.
In addition to any rights now or hereafter granted under applicable law
or otherwise, and not by way of limitation of any such rights, upon the
occurrence of an Event of Default, each Lender is authorized at any time and
from time to time, without presentment, demand, protest or other notice of any
kind (all of which rights being hereby expressly waived), to set-off and to
appropriate and apply any and all deposits (general or special) and any other
indebtedness at any time held or owing by such Lender (including, without
limitation branches, agencies or Affiliates of such Lender wherever located) to
or for the credit or the account of any Credit Party against obligations and
liabilities of such Person to such Lender hereunder, under the Term Notes, the
other Credit Documents or otherwise, irrespective of whether such Lender shall
have made any demand hereunder and although such obligations, liabilities or
claims, or any of them, may be contingent or unmatured, and any such set-off
shall be deemed to have been made immediately upon the occurrence of an Event of
Default even though such charge is made or entered on the books of such Lender
subsequent thereto. Any Person purchasing a participation in the Loans and
Commitments hereunder pursuant to Section 3.14 or Section 9.3(d) may exercise
all rights of set-off with respect to its participation interest as fully as if
such Person were a Lender hereunder.
9.3 Benefit of Agreement.
(a) Generally. This Credit Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; provided that none of the Credit Parties may
assign or transfer any of its interests without prior written consent of the
Lenders; provided further that the rights of each Lender to transfer, assign or
grant participations in its rights and/or obligations hereunder shall be limited
as set forth in this Section 9.3, provided however that nothing herein shall
prevent or prohibit any Lender from (i) pledging its Loans hereunder to a
Federal Reserve Bank in support of borrowings made by such Lender from such
Federal Reserve Bank, or (ii) granting assignments or selling participations in
such Lender's Loans and/or Commitments hereunder to its parent company and/or to
any Affiliate or Subsidiary of such Lender.
(b) Assignments. Each Lender may assign all or a portion of its
rights and obligations hereunder (including, without limitation, all or a
portion of its Commitments or its Loans), pursuant to an assignment agreement
substantially in the form of Schedule 9.3(b), to (i) a Lender, (ii) an
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affiliate of a Lender or (iii) any bank, financial institution, commercial
lender or institutional investor reasonably acceptable to the Administrative
Agent and, so long as no Default or Event of Default has occurred and is
continuing, the Borrower (the consent of the Borrower shall not be unreasonably
withheld or delayed); provided that (i) any such assignment (other than any
assignment to an existing Lender) shall be in a minimum aggregate amount of
US$5,000,000 (or, if less, the remaining amount of the Commitment being assigned
by such Lender) of the Commitments and in integral multiples of US$250,000 above
such amount and (ii) each such assignment shall be of a constant, not varying,
percentage of all such Lender's rights and obligations under this Credit
Agreement. Any assignment hereunder shall be effective upon delivery to the
Administrative Agent of written notice of the assignment together with a
transfer fee of US$3,500 payable to the Administrative Agent for its own account
from and after the later of (i) the effective date specified in the applicable
assignment agreement and (ii) the date of recording of such assignment in the
Register pursuant to the terms of subsection (c) below. The assigning Lender
will give prompt notice to the Administrative Agent and the Borrower of any such
assignment. Upon the effectiveness of any such assignment (and after notice to,
and (to the extent required pursuant to the terms hereof), with the consent of,
the Borrower as provided herein), the assignee shall become a "Lender" for all
purposes of this Credit Agreement and the other Credit Documents and, to the
extent of such assignment, the assigning Lender shall be relieved of its
obligations hereunder to the extent of the Loans and Commitment components being
assigned. Along such lines the Borrower agrees that upon notice of any such
assignment and surrender of the appropriate Term Note or Term Notes, it will
promptly provide to the assigning Lender and to the assignee separate promissory
notes in the amount of their respective interests substantially in the form of
the original Term Note (but with notation thereon that it is given in
substitution for and replacement of the original Term Note or any replacement
notes thereof). By executing and delivering an assignment agreement in
accordance with this Section 9.3(b), the assigning Lender thereunder and the
assignee thereunder shall be deemed to confirm to and agree with each other and
the other parties hereto as follows: (i) such assigning Lender warrants that it
is the legal and beneficial owner of the interest being assigned thereby free
and clear of any adverse claim; (ii) except as set forth in clause (i) above,
such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Credit Agreement, any of the other Credit
Documents or any other instrument or document furnished pursuant hereto or
thereto, or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Credit Agreement, any of the other Credit Documents
or any other instrument or document furnished pursuant hereto or thereto or the
financial condition of any Credit Party or any of their respective Affiliates or
the performance or observance by any Credit Party of any of its obligations
under this Credit Agreement, any of the other Credit Documents or any other
instrument or document furnished pursuant hereto or thereto; (iii) such assignee
represents and warrants that it is legally authorized to enter into such
assignment agreement; (iv) such assignee confirms that it has received a copy of
this Credit Agreement, the other Credit Documents and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such assignment agreement; (v) such assignee will
independently and without reliance upon the Agents, such assigning Lender or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Credit Agreement and the other Credit Documents;
(vi) such assignee appoints and authorizes the Agents
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to take such action on its behalf and to exercise such powers under this Credit
Agreement or any other Credit Document as are delegated to the Agents by the
terms hereof or thereof, together with such powers as are reasonably incidental
thereto; and (vii) such assignee agrees that it will perform in accordance with
their terms all the obligations which by the terms of this Credit Agreement and
the other Credit Documents are required to be performed by it as a Lender.
(c) Maintenance of Register. The Administrative Agent shall
maintain at one of its offices in Charlotte, North Carolina a copy of each
Lender assignment agreement delivered to it in accordance with the terms of
subsection (b) above and a register for the recordation of the identity of the
principal amount, type and Interest Period of each Loan outstanding hereunder,
the names, addresses and the Commitments of the Lenders pursuant to the terms
hereof from time to time (the "Register"). The Administrative Agent will make
reasonable efforts to maintain the accuracy of the Register and to promptly
update the Register from time to time, as necessary. The entries in the Register
shall be conclusive in the absence of manifest error and the Borrower, the
Agents and the Lenders may treat each Person whose name is recorded in the
Register pursuant to the terms hereof as a Lender hereunder for all purposes of
this Credit Agreement. The Register shall be available for inspection by the
Borrower and each Lender, at any reasonable time and from time to time upon
reasonable prior notice.
(d) Participations. Each Lender may sell, transfer, grant or
assign participations in all or a portion of such Lender's rights, obligations
or rights and obligations hereunder (including all or a portion of its
Commitments or its Loans); provided that (i) such selling Lender shall remain a
"Lender" for all purposes under this Credit Agreement (such selling Lender's
obligations under the Credit Documents remaining unchanged) and the participant
shall not constitute a Lender hereunder, (ii) no such participant shall have, or
be granted, rights to approve any amendment or waiver relating to this Credit
Agreement or the other Credit Documents except to the extent any such amendment
or waiver would (A) reduce the principal of or rate of interest on or Fees in
respect of any Loans in which the participant is participating, (B) postpone the
date fixed for any payment of principal, interest or Fees in which the
participant is participating, (C) except as the result of or in connection with
a dissolution, merger or disposition of a Subsidiary permitted under Section 8.3
of the Incorporated Covenants, release the Borrower or substantially all of the
Guarantors from its or their obligations under the Credit Documents, or (D)
except as the result of or in connection with a Divestiture permitted under
Section 8.3(b) of the Incorporated Covenants, release all or substantially all
of the collateral, and (iii) sub-participations by the participant (except to an
affiliate, parent company or affiliate of a parent company of the participant)
shall be prohibited. In the case of any such participation, the participant
shall not have any rights under this Credit Agreement or the other Credit
Documents (the participant's rights against the selling Lender in respect of
such participation to be those set forth in the participation agreement with
such Lender creating such participation) and all amounts payable by the Borrower
hereunder shall be determined as if such Lender had not sold such participation,
provided, however, that such participant shall be entitled to receive additional
amounts under Sections 3.6, 3.9, 3.10, 3.11 and 9.2 on the same basis as if it
were a Lender.
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9.4 No Waiver; Remedies Cumulative.
No failure or delay on the part of either Agent or any Lender in
exercising any right, power or privilege hereunder or under any other Credit
Document and no course of dealing between either Agent or any Lender and any of
the Credit Parties shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder or under any other
Credit Document preclude any other or further exercise thereof or the exercise
of any other right, power or privilege hereunder or thereunder. The rights and
remedies provided herein are cumulative and not exclusive of any rights or
remedies which either Agent or any Lender would otherwise have. No notice to or
demand on any Credit Party in any case shall entitle the Borrower or any other
Credit Party to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Agents or the Lenders
to any other or further action in any circumstances without notice or demand.
9.5 Payment of Expenses, etc.
The Borrower agrees to: (i) pay all reasonable out-of-pocket costs and
expenses (A) of the Agents in connection with the negotiation, preparation,
execution and delivery and administration of this Credit Agreement and the other
Credit Documents and the documents and instruments referred to therein
(including, without limitation, the reasonable fees and expenses of Moore & Van
Allen, PLLC, special counsel to the Agents) and any amendment, waiver or consent
relating hereto and thereto including, but not limited to, any such amendments,
waivers or consents resulting from or related to any work-out, renegotiation or
restructure relating to the performance by the Credit Parties under this Credit
Agreement and (B) of the Agents and the Lenders in connection with enforcement
of the Credit Documents and the documents and instruments referred to therein
(including, without limitation, in connection with any such enforcement, the
reasonable fees and disbursements of counsel for the Administrative Agent and
each of the Lenders); (ii) permit the Administrative Agent to perform inventory
and accounts receivable field audits at the Borrower's expense, provided that
unless an Event of Default shall be in existence the Borrower's obligation to
reimburse the Administrative Agent for such field audits shall be limited to one
such field audit each fiscal year; (iii) pay and hold each of the Lenders
harmless from and against any and all present and future stamp and other similar
taxes with respect to the foregoing matters and save each of the Lenders
harmless from and against any and all liabilities with respect to or resulting
from any delay or omission (other than to the extent attributable to such
Lender) to pay such taxes; and (iv) indemnify each Lender, its officers,
directors, employees, representatives and the Agents from and hold each of them
harmless against any and all losses, liabilities, claims, damages or expenses
incurred by any of them as a result of, or arising out of, or in any way related
to, or by reason of (A) any investigation, litigation or other proceeding
(whether or not any Lender is a party thereto) related to the entering into
and/or performance of any Credit Document or the use of proceeds of any Loans
(including other Extensions of Credit) hereunder or the consummation of any
other transactions contemplated in any Credit Document, including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation, litigation or other proceeding or (B)
the presence or Release of any Materials of Environmental Concern at, under or
from any Property owned, operated or leased by the Borrower or any of its
Subsidiaries, or the failure by the Borrower or any of its Subsidiaries to
comply with any Environmental Law (but
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excluding, in the case of either of clause (A) or (B) above, any such losses,
liabilities, claims, damages or expenses to the extent incurred by reason of
gross negligence or willful misconduct on the part of the Person to be
indemnified).
9.6 Amendments, Waivers and Consents.
Neither this Credit Agreement nor any other Credit Document nor any of
the terms hereof or thereof may be amended, changed, waived, discharged or
terminated unless such amendment, change, waiver, discharge or termination is in
writing entered into by, or approved in writing by, the Required Lenders and the
Borrower, provided, however, that:
(a) without the consent of each Lender affected thereby, neither
this Credit Agreement nor any of the other Credit Documents may be
amended to
(i) extend the final maturity of any Loan (other than
the waiver of any mandatory prepayment required by Section
3.3(b)),
(ii) reduce the rate or extend the time of payment of
interest thereon or Fees hereunder (other than as a result of
waiving the applicability of any increase in interest rates
or Fees after the occurrence of an Event of Default or on
account of a failure to deliver financial statements on a
timely basis),
(iii) reduce or waive the principal amount of any Loan,
(iv) increase the Commitment of a Lender over the
amount thereof in effect (it being understood and agreed that
a waiver of any mandatory prepayment required by Section
3.3(b) or a waiver of any Default or Event of Default shall
not constitute an increase in the Commitment of any Lender),
(v) except as the result of or in connection with a
dissolution, merger or disposition of a Subsidiary permitted
under Section 8.3 of the Incorporated Covenants, release the
Borrower or substantially all of the Guarantors from its or
their obligations under the Credit Documents,
(vi) except as the result of or in connection with a
Divestiture permitted under Section 8.3(b) of the
Incorporated Covenants, release all or substantially all of
the collateral,
(vii) amend, modify or waive any provision of this
Section 9.6 or Section 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.13,
3.14, 3.15, 7.1(a), 9.2, 9.3, 9.5 or 9.9,
(viii) reduce any percentage specified in, or otherwise
modify, the definition of Required Lenders, or
38
<PAGE> 43
(ix) consent to the assignment or transfer by the
Borrower (or another Credit Party) of any of its rights and
obligations under (or in respect of) the Credit Documents
except as permitted thereby;
(b) without the consent of the Administrative Agent, no
provision of Section 8 may be amended;
Notwithstanding the fact that the consent of all the Lenders is
required in certain circumstances as set forth above, (x) each Lender is
entitled to vote as such Lender sees fit on any bankruptcy reorganization plan
that affects the Loans, and each Lender acknowledges that the provisions of
Section 1126(c) of the Bankruptcy Code supersedes the unanimous consent
provisions set forth herein and (y) the Required Lenders may consent to allow a
Credit Party to use cash collateral in the context of a bankruptcy or insolvency
proceeding.
9.7 Counterparts.
This Credit Agreement may be executed in any number of counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall constitute one and the same instrument. It shall not be necessary in
making proof of this Credit Agreement to produce or account for more than one
such counterpart.
9.8 Headings.
The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.
9.9 Survival.
All indemnities set forth herein, including, without limitation, in
Section 3.9, 3.11, 8.7 or 9.5 shall survive the execution and delivery of this
Credit Agreement, the making of the Loans, the repayment of the Loans and other
obligations under the Credit Documents and the termination of the Commitments
hereunder, and all representations and warranties made by the Credit Parties
herein shall survive delivery of the Term Notes and the making of the Loans
hereunder.
9.10 Governing Law; Submission to Jurisdiction; Venue.
(a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED
BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
(b) Any legal action or proceeding with respect to this Credit
Agreement or any other Credit Document may be brought in the courts of the State
of North Carolina in Mecklenburg County, or of the United States for the Western
District of North Carolina, and, by execution and delivery of this Credit
Agreement, each of the Credit Parties hereby irrevocably accepts for itself
39
<PAGE> 44
and in respect of its property, generally and unconditionally, the nonexclusive
jurisdiction of such courts. Each of the Credit Parties further irrevocably
consents to the service of process out of any of the aforementioned courts in
any such action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to it at the address set out for notices
pursuant to Section 9.1, such service to become effective three (3) days after
such mailing. Nothing herein shall affect the right of the Agents to serve
process in any other manner permitted by law or to commence legal proceedings or
to otherwise proceed against any Credit Party in any other jurisdiction.
(c) Each of the Credit Parties hereby irrevocably waives any
objection which it may now or hereafter have to the laying of venue of any of
the aforesaid actions or proceedings arising out of or in connection with this
Credit Agreement or any other Credit Document brought in the courts referred to
in subsection (a) hereof and hereby further irrevocably waives and agrees not to
plead or claim in any such court that any such action or proceeding brought in
any such court has been brought in an inconvenient forum.
(d) TO THE EXTENT PERMITTED BY LAW, EACH OF THE ADMINISTRATIVE
AGENT, THE COLLATERAL AGENT, THE LENDERS, THE BORROWER AND THE OTHER CREDIT
PARTIES HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS CREDIT AGREEMENT,
ANY OF THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY.
9.11 Severability.
If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
9.12 Entirety.
This Credit Agreement together with the other Credit Documents
represent the entire agreement of the parties hereto and thereto, and supersede
all prior agreements and understandings, oral or written, if any, including any
commitment letters or correspondence relating to the Credit Documents or the
transactions contemplated herein and therein.
9.13 Binding Effect; Termination.
(a) This Credit Agreement shall become effective at such time on
or after the Closing Date when it shall have been executed by the Borrower, the
Guarantors and the Administrative Agent, and the Administrative Agent shall have
received copies hereof (telefaxed or otherwise) which, when taken together, bear
the signatures of each Lender, and thereafter this Credit Agreement shall be
binding upon and inure to the benefit of the Borrower, the Guarantors, the
Agents and each Lender and their respective successors and assigns.
40
<PAGE> 45
(b) The term of this Credit Agreement shall commence on the
effective date pursuant to subsection (a) above and shall continue until no
Loans or any other amounts payable hereunder or under any of the other Credit
Documents shall remain outstanding and until all of the Commitments hereunder
shall have expired or been terminated.
9.14 Confidentiality.
The Administrative Agent and the Lenders agree to keep confidential
(and to cause their respective affiliates, officers, directors, employees,
agents and representatives to keep confidential) all information, materials and
documents furnished to the Administrative Agent or any such Lender by or on
behalf of any Credit Party (whether before or after the Closing Date) which
relates to the Borrower or any of its Subsidiaries (the "Information").
Notwithstanding the foregoing, the Administrative Agent and each Lender shall be
permitted to disclose Information (i) to its affiliates, officers, directors,
employees, agents and representatives in connection with its participation in
any of the transactions evidenced by this Credit Agreement or any other Credit
Documents or the administration of this Credit Agreement or any other Credit
Documents, subject to the provisions of this Section 9.14; (ii) to the extent
required by applicable laws and regulations or by any subpoena or similar legal
process, or requested by any Governmental Authority; (iii) to the extent such
Information (A) becomes publicly available other than as a result of a breach of
this Credit Agreement or any agreement entered into pursuant to clause (iv)
below, (B) becomes available to the Administrative Agent or such Lender on a
non-confidential basis from a source other than a Credit Party or (C) was
available to the Administrative Agent or such Lender on a non-confidential basis
prior to its disclosure to the Administrative Agent or such Lender by a Credit
Party; (iv) to any assignee or participant (or prospective assignee or
participant) so long as such assignee or participant (or prospective assignee or
participant) first specifically agrees in a writing furnished to and for the
benefit of the Credit Parties to be bound by the terms of this Section 9.14; or
(v) to the extent that the Borrower shall have consented in writing to such
disclosure. Nothing set forth in this Section 9.14 shall obligate the
Administrative Agent or any Lender to return any materials furnished by the
Credit Parties.
9.15 Source of Funds.
Each of the Lenders hereby represents and warrants to the Borrower that
at least one of the following statements is an accurate representation as to the
source of funds to be used by such Lender in connection with the financing
hereunder:
(a) no part of such funds constitutes assets allocated to
any separate account maintained by such Lender in which any employee
benefit plan (or its related trust) has any interest;
(b) to the extent that any part of such funds constitutes
assets allocated to any separate account maintained by such Lender,
such Lender has disclosed to the Borrower the name of each employee
benefit plan whose assets in such account exceed 10% of the total
assets of such account as of the date of such purchase (and, for
purposes of this subsection
41
<PAGE> 46
(b), all employee benefit plans maintained by the same employer or
employee organization are deemed to be a single plan);
(c) to the extent that any part of such funds constitutes
assets of an insurance company's general account, such insurance
company has complied with all of the requirements of the regulations
issued under Section 401(c)(1)(A) of ERISA; or
(d) such funds constitute assets of one or more specific
benefit plans which such Lender has identified in writing to the
Borrower.
As used in this Section 9.15, the terms "employee benefit plan" and "separate
account" shall have the respective meanings assigned to such terms in Section 3
of ERISA.
9.16 Conflict.
To the extent that there is a conflict or inconsistency between any
provision hereof, on the one hand, and any provision of any Credit Document, on
the other hand, this Credit Agreement shall control.
9.17 Senior Subordinated Note Indenture.
The Borrower hereby (a) acknowledges and agrees that the Indebtedness
evidenced by this Agreement and the other Credit Documents constitutes Senior
Debt as defined in the Senior Subordinated Note Indenture, (b) specifically
designates the Indebtedness evidenced by this Agreement and the other Credit
Documents (specifically including all Obligations) as "Designated Senior Debt"
for all purposes, including without limitation for purposes of the Senior
Subordinated Note Indenture and (c) agrees that it will not designate any other
Indebtedness incurred by it as "Designated Senior Debt" without the prior
written consent of the Required Lenders.
[Signature Page to Follow]
42
<PAGE> 47
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Credit Agreement to be duly executed and delivered as of the date first
above written.
BORROWER: RAILWORKS CORPORATION,
a Delaware corporation
By: /s/ MICHAEL R. AZARELA
----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President and
Chief Financial Officer
GUARANTORS: ALPHA-KEYSTONE ENGINEERING, INC.,
a Pennsylvania corporation
ANNEX RAILROAD BUILDERS, INC.,
an Indiana corporation
ARMCORE ACQUISITION CORP.,
a Delaware corporation
ARMCORE RAILROAD CONTRACTORS, INC.,
an Illinois corporation
BIRMINGHAM WOOD, INC.,
an Alabama corporation
COMSTOCK HOLDINGS INC.,
a Delaware corporation
COMTRAK CONSTRUCTION, INC.,
a Georgia corporation
CONDON BROTHERS, INC.,
a Washington corporation
CPI CONCRETE PRODUCTS INCORPORATED,
a Tennessee corporation
EARL CAMPBELL CONSTRUCTION COMPANY, INC.,
a Texas corporation
FCM RAIL, LTD., a Michigan corporation
GANTREX CORPORATION,
a Pennsylvania corporation
H.P. MCGINLEY INC.,
a Pennsylvania corporation
IMPULSE ENTERPRISES OF NEW YORK, INC.,
a New York corporation
KENNEDY RAILROAD BUILDERS, INC.,
a Pennsylvania corporation
By: /s/ MICHAEL R. AZARELA
----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President of each
of the foregoing Domestic Guarantors
[Signature Pages Continue]
<PAGE> 48
M-TRACK ENTERPRISES, INC., a New York
corporation MCCORD TREATED WOOD, INC.,
an Alabama corporation MERIT RAILROAD
CONTRACTORS, INC., a Missouri corporation
MIDWEST CONSTRUCTION SERVICES, INC.,
an Indiana corporation MIDWEST RAILROAD
CONSTRUCTION & MAINTENANCE CORPORATION OF WYOMING,
a Wyoming corporation
MIDWEST RW, INC.,
a Delaware corporation
MINNESOTA RAILROAD SERVICE, INC.,
a Tennessee corporation
NEOSHO ASIA, INC.,
a Kansas corporation
NEOSHO CENTRAL AMERICA, INC.,
a Kansas corporation
NEOSHO CONSTRUCTION COMPANY, INCORPORATED,
a Kansas corporation
NEOSHO CONTRACTORS, INC.,
a Wyoming corporation
NEOSHO INCORPORATED,
a Kansas corporation
NEOSHO INTERNATIONAL, INC.,
a Kansas corporation
NEW ENGLAND RAILROAD CONSTRUCTION CO., INC.,
a Connecticut corporation
NORTHERN RAIL SERVICE AND SUPPLY COMPANY, INC.,
a Michigan corporation
PARSONS RAILWAY SHOPS, INC.,
a Kansas corporation
R. & M. B. RAIL CO., INC.,
an Indiana corporation
RAILCORP, INC.,
an Ohio corporation
RAILROAD RESOURCES, INC.,
a Missouri corporation
RAILROAD SERVICE, INC.,
a Nevada corporation
By: /s/ Michael R. Azarela
--------------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President of each
of the foregoing Domestic Guarantors
[Signature Pages Continue]
<PAGE> 49
RAILROAD SPECIALTIES, INC.,
an Indiana corporation
SOUTHERN INDIANA WOOD PRESERVING CO., INC.,
an Indiana corporation
U.S. RAILWAY SUPPLY, INC.,
an Indiana corporation
U.S. TRACKWORKS, INC.,
a Michigan corporation
V&R ELECTRICAL CONTRACTORS, INC.,
a New York corporation
WM. A. SMITH CONSTRUCTION CO., INC.,
a Texas corporation
WM. A. SMITH RERAILING SERVICES, INC.,
a Texas corporation
WOOD WASTE ENERGY, INC.,
a Virginia corporation
By: /s/ Michael R. Azarela
---------------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President of each
of the foregoing Domestic Guarantors
L.K. COMSTOCK & COMPANY, INC.,
a New York corporation
By: /s/ C. William Moore
---------------------------------------------
Name: C. William Moore
Title: Chief Executive Officer and President
F&V METRO RW, INC.,
a Delaware corporation
RAILWORKS CANADA, INC.
a Delaware corporation
By: /s/ John P. Nuzzo
---------------------------------------------
Name: John P. Nuzzo
Title: Assistant Secretary
By: /s/ Michael R. Azarela
---------------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President of each
of the foregoing Domestic Guarantors
[Signature Pages Continue]
<PAGE> 50
GANTREX RW, INC.,
a Delaware corporation
GANTREX SYSTEMS, INC.,
a Delaware corporation
By: /s/ John P. Nuzzo
------------------------------------------
Name: John P. Nuzzo
Title: Secretary of each of the foregoing
Domestic Guarantors
By: /s/ Michael R. Azarela
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President of each
of the foregoing Domestic Guarantors
[Signature Pages Continue]
<PAGE> 51
LENDERS: BANK OF AMERICA, N.A.,
individually in its capacity as a
Lender and in its capacity as Administrative Agent
By: /s/ Monica R. Brandes
---------------------------------
Name: Monica R. Brandes
Title: Senior Vice President
FIRST UNION NATIONAL BANK
By: /s/ Barbara Gell Carroll
---------------------------------
Name: Barbara Gell Carroll
Title: Senior Vice President
FLEET BANK, N.A.
By: /s/ Thomas A. Rogers
---------------------------------
Name: Thomas A. Rogers
Title: Vice President
BANK ONE, MICHIGAN
By: /s/ Guy J. Rau
---------------------------------
Name: Guy J. Rau
Title: Vice President
KEYBANK NATIONAL ASSOCIATION
By: /s/ Daniel W. Lally
---------------------------------
Name: Daniel W. Lally
Title: Assistant Vice President
M&T BANK
By: /s/ Michael Weinstock
---------------------------------
Name: Michael Weinstock
Title: Vice President
<PAGE> 52
Schedule 2.1(a)
Schedule of Lenders and Commitments
<TABLE>
<CAPTION>
Lender Term Loan Term Loan
------ Committed Amount Commitment Percentage
---------------- ---------------------
<S> <C> <C>
Bank of America, N.A. US$ 6,300,000 21.00000000%
First Union National Bank US$ 6,300,000 21.00000000%
Fleet Bank, N.A. US$ 5,000,000 16.66666667%
Bank One, Michigan US$ 5,000,000 16.66666667%
M&T Bank US$ 5,000,000 16.66666667%
KeyBank National Association US$ 2,400,000 8.00000000%
------------- -----------
Total US$30,000,000 100.00%
</TABLE>
<PAGE> 53
Schedule 2.1(b)(i)
FORM OF NOTICE OF BORROWING
Bank of America, N.A.
as Administrative Agent for the Lenders
101 N. Tryon Street
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
RE: Term Loan Credit Agreement dated as of November 5, 1999 (as
amended and modified from time to time, the "Credit
Agreement") among RailWorks Corporation, a Delaware
corporation (the "Borrower"), the Subsidiaries of the Borrower
identified therein, the Lenders identified therein, First
Union National Bank, as Documentation Agent, and Bank of
America, N.A., as Administrative Agent. Terms used but not
otherwise defined herein shall have the meanings provided in
the Credit Agreement.
Ladies and Gentlemen:
The Borrower hereby gives notice of a request for the Term Loan pursuant to
Section 2.1(b) of the Credit Agreement as follows:
(A) Date of Borrowing
(which is the Closing Date) -------------------------------
(B) Principal Amount of
Borrowing -------------------------------
(C) Interest rate basis
-------------------------------
(D) Interest Period and the
last day thereof -------------------------------
In accordance with the requirements of Section 5.2 of the Credit Agreement, the
undersigned Borrower hereby certifies that:
(a) The representations and warranties contained in the Credit
Agreement and the other Credit Documents are true and correct in all material
respects as of the date of this request, and will be true and correct after
giving effect to the requested Extension of Credit (except for those which
expressly related to an earlier date).
(b) No Default or Event of Default exists, or will exist after giving
effect to the requested Extension of Credit.
(c) All conditions set forth in Section 2 as to the making of the Term
Loan have been satisfied.
<PAGE> 54
Very truly yours,
RAILWORKS CORPORATION
By:
------------------------------------
Name:
Title:
3
<PAGE> 55
Schedule 2.1(e)
Form of Term Note
November 5, 1999
FOR VALUE RECEIVED, RAILWORKS CORPORATION, a Delaware corporation (the
"Borrower"), hereby promises to pay to the order of __________________, and its
successors and permitted assigns (the "Lender"), in such amounts and on such
dates as set forth in the Credit Agreement to the office of the Administrative
Agent in immediately available funds as provided in the Credit Agreement, such
Lender's Term Loan Committed Amount, together with interest thereon at the rates
and as provided in the Credit Agreement.
This Term Note is one of the Term Notes referred to in the Term Loan
Credit Agreement dated as of the date hereof (as amended and modified from time
to time, the "Credit Agreement") among the Borrower, the Subsidiaries of the
Borrower identified therein, the Lenders identified therein, First Union
National Bank, as Documentation Agent, and Bank of America, N.A., as
Administrative Agent. Terms used but not otherwise defined herein shall have the
meanings provided in the Credit Agreement.
The holder may endorse and attach a schedule to reflect borrowings
evidenced by this Term Note and all payments and prepayments thereon; provided
that any failure to endorse such information shall not affect the obligation of
the undersigned Borrower to pay amounts evidenced hereby.
Upon the occurrence of an Event of Default, all amounts evidenced by
this Term Note may, or shall, become immediately due and payable as provided in
the Credit Agreement without presentment, demand, protest or notice of any kind,
all of which are waived by the undersigned Borrower. In the event payment of
amounts evidenced by this Term Note is not made at any stated or accelerated
maturity, the undersigned Borrower agrees to pay, in addition to principal and
interest, all costs of collection, including reasonable attorneys' fees.
This Term Note and the Loans and amounts evidenced hereby may be
transferred only as provided in the Credit Agreement.
This Term Note shall be governed by, and construed and interpreted in
accordance with, the law of the State of New York.
In WITNESS WHEREOF, the undersigned Borrower has caused this Term Note
to be duly executed as of the date first above written.
RAILWORKS CORPORATION,
a Delaware corporation
By:
---------------------------
Name:
Title:
4
<PAGE> 56
Schedule 3.2
Form of Notice of Extension/Conversion
Bank of America, N.A.,
as Administrative Agent for the Lenders
101 N. Tryon Street
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Re: Term Loan Credit Agreement dated as of November 5, 1999 (as
amended and modified from time to time, the "Credit
Agreement") among RailWorks Corporation, a Delaware
corporation (the "Borrower"), the Subsidiaries of the Borrower
identified therein, the Lenders identified therein, First
Union National Bank, as Documentation Agent, and Bank of
America, N.A., as Administrative Agent. Terms used but not
otherwise defined herein shall have the meanings provided in
the Credit Agreement.
Ladies and Gentlemen:
The Borrower hereby gives notice pursuant to Section 3.2 of the Credit
Agreement that it requests an extension or conversion of a Loan outstanding
under the Credit Agreement, and in connection therewith sets forth below the
terms on which such extension or conversion is requested to be made:
(A) Date of Extension or Conversion
(which is the last day of the
applicable Interest Period) ----------------------------------
(B) Principal Amount of
Extension or Conversion ----------------------------------
(C) Interest rate basis ----------------------------------
(D) Interest Period and the
last day thereof ----------------------------------
In accordance with the requirements of Section 3.2 of the Credit
Agreement, the Borrower hereby certifies that, in the case of an extension of a
Eurodollar Loan or the conversion of a Base Rate Loan into a Eurodollar Loan:
(a) The representations and warranties contained in the
Credit Agreement and the other Credit Documents are true and correct in
all material respects as of the date of
5
<PAGE> 57
this request, and will be true and correct after giving effect to the
requested Extension of Credit (except for those which expressly relate
to an earlier date).
(b) No Default or Event of Default exists, or will exist
after giving effect to the requested Extension of Credit.
(c) All conditions set forth in Section 3.2 as to the
extension of a Eurodollar Loan or the conversion of a Base Rate Loan
into a Eurodollar Loan:
Very truly yours,
RAILWORKS CORPORATION
By:
------------------------------
Name:
Title:
6
<PAGE> 58
Schedule 5.1(d)(iii)
Secretary's Certificate
Pursuant to Section 5.1(d)(iii) of the Credit Agreement (the "Credit
Agreement"; terms used but not otherwise defined herein shall have the meanings
provided in the Credit Agreement), dated as of November 5, 1999, among RailWorks
Corporation, a Delaware corporation (the "Borrower"), the Subsidiaries of the
Borrower identified therein, the Lenders identified therein, First Union
National Bank, as Documentation Agent, and Bank of America, N.A., as
Administrative Agent, the undersigned, ______________, Secretary of
_______________ (the "Corporation"), hereby certifies as follows:
1. Attached hereto as Annex I is a true and complete copy of
resolutions duly adopted by the Board of Directors of the Corporation on
_______________________, 199_. The attached resolutions have not been rescinded
or modified and remain in full force and effect. The attached resolutions are
the only corporate proceedings of the Corporation now in force relating to or
affecting the matters referenced to therein.
2. The Bylaws of the Corporation and the Articles of
Incorporation of the Corporation attached to the Secretary's Certificate of the
Corporation (the "Prior Secretary's Certificate") previously delivered to Bank
of America, N.A., as administrative agent under the Revolving Credit Agreement,
are true and correct copies of the Bylaws of the Corporation and the Articles of
Incorporation of the Corporation as in effect on the date hereof.
3. Each officer of the Corporation identified on the Prior
Secretary's Certificate is now a duly elected and qualified officer of the
Corporation, holding the office indicated, and such officer is duly authorized
to execute and deliver on behalf of the Corporation, the Credit Agreement, the
Term Notes and the other Credit Documents and to act as a Responsible Officer on
behalf of the Corporation under the Credit Agreement.
IN WITNESS WHEREOF, the undersigned has hereunto set his/her name and
affixed the corporate seal of the Corporation.
-----------------------------
Secretary
Date: November 5, 1999
(CORPORATE SEAL)
I, __________Vice President of the Corporation, hereby certify that
__________, whose genuine signature appears above, is, and has been at all times
since __________, a duly elected, qualified and acting Secretary of the
Corporation.
-------------------------------
Vice President
November 5, 1999
7
<PAGE> 59
Schedule 6.3(b)
Form of Joinder Agreement
THIS JOINDER AGREEMENT (the "Agreement"), dated as of
___________________, ____, is by and among _______________________, a
__________________ (the "Applicant Guarantor"), and BANK OF AMERICA, N.A., in
its capacity as Administrative Agent under that Term Loan Credit Agreement dated
as of November 5, 1999 (as amended and modified from time to time, the "Credit
Agreement") by and among RailWorks Corporation, a Delaware corporation (the
"Borrower"), the Subsidiaries of the Borrower identified therein, the lenders
identified therein, First Union National Bank, as Documentation Agent, and Bank
of America, N.A., as Administrative Agent. All of the defined terms in the
Credit Agreement are incorporated herein by reference.
The Applicant Guarantor has indicated its desire to become a Guarantor
or is required by the terms of Section 6.3(b) of the Credit Agreement to become
a Guarantor.
Accordingly, the Applicant Guarantor hereby agrees with the Agents, for
the benefit of the Lenders, as follows:
1. The Applicant Guarantor hereby acknowledges, agrees and
confirms that, by its execution of this Agreement, the Applicant Guarantor will
be deemed to be a party to the Credit Agreement and a "Guarantor" for all
purposes of the Credit Agreement and the other Credit Documents, and shall have
all of the obligations of a Guarantor thereunder as if it had executed the
Credit Agreement and the other Credit Documents. The Applicant Guarantor agrees
to be bound by all of the terms, provisions and conditions contained in the
Credit Documents, including without limitation (i) all of the affirmative and
negative covenants set forth in Section 6.3 of the Credit Agreement and
contained in Sections 7 and 8 of the Incorporated Covenants applicable to a
Guarantor and (ii) all of the undertakings and waivers applicable to a Guarantor
set forth in Section 4 of the Credit Agreement. Without limiting the generality
of the foregoing terms of this paragraph 1, the Applicant Guarantor hereby (A)
jointly and severally together with the other Guarantors, guarantees to each
Lender (including the Issuing Lender), each Affiliate of a Lender which enters
into a Hedging Agreement and the Administrative Agent, as provided in Section 4
of the Credit Agreement, the prompt payment and performance of the Guaranteed
Obligations in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration, as a mandatory cash collateralization or otherwise)
strictly in accordance with the terms thereof, (B) agrees that if any of the
Guaranteed Obligations are not paid or performed in full when due (whether at
stated maturity, as a mandatory prepayment, by acceleration, as a mandatory cash
collateralization or otherwise), the Applicant Guarantor will, jointly and
severally together with the other Guarantors, promptly pay and perform the same,
without any demand or notice whatsoever, and that in the case of any extension
of time of payment or renewal of any of the Guaranteed Obligations, the same
will be promptly paid in full when due (whether at extended maturity, as a
mandatory prepayment, by acceleration, as a mandatory cash collateralization or
otherwise) in accordance with the terms of such extension or renewal, (C) grants
to the Collateral Agent, for the benefit of the Lenders, a security interest in
its Collateral as referred in, and pursuant to the terms of, the Security
Agreement, and (D) pledges and grants a security interest to the Collateral
Agent, for the benefit of the Lenders, in the Collateral as referred in, and
pursuant to the terms of, the Pledge Agreement, including the Pledged Stock
identified in Schedule A attached hereto, if any.
2. The Applicant Guarantor acknowledges and confirms that it has
received a copy of the Credit Agreement and the other Credit Documents
(including the Schedules and Exhibits thereto). The
8
<PAGE> 60
information on the Schedules to the Security Agreement and the Pledge Agreement
is amended to provide the information shown on the attached Schedule A with
respect to the Applicant Guarantor.
3. The Applicant Guarantor hereby waives acceptance by the Agents
and the Lenders of the guaranty by the Applicant Guarantor under Section 4 of
the Credit Agreement upon the execution of this Joinder Agreement by the
Applicant Guarantor.
4. This Agreement may be executed in two or more counterparts,
each of which shall constitute an original but all of which when taken together
shall constitute one contract.
5. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, each of the parties hereto has caused this Joinder
Agreement to be duly executed by its authorized officer as of the day and year
first above written.
APPLICANT GUARANTOR
By:
----------------------------
Name:
Title:
Acknowledged and accepted:
BANK OF AMERICA, N.A.,
as Administrative Agent
By:
----------------------------
Name:
Title:
9
<PAGE> 61
Schedule A
to
Joinder Agreement
<PAGE> 62
Schedule 9.1
Schedule of Lenders' Addresses
1. Bank of America, N.A. Bank of America, N.A.
101 N. Tryon Street
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attn: Gregg Newland
Agency Services
Telephone: (704) 386-4218
Telecopy: (704) 388-9436
with a copy to:
Bank of America, N.A.
10 Light Street
Baltimore, Maryland 21202-1435
Attn: Monica Brandes
Telephone: 410-605-8019
Telecopy: 410-539-7508
2. First Union National Bank First Union National Bank 1970 Chain
Bridge Road McLean, Virginia 22102
Attn: Barbara Gell Carroll
Telephone: 703-760-6100 Telecopy:
3. Fleet Bank Fleet Bank
300 Broad Hollow Road
Melville, New York 11747
Attn: Tom Rogers
Telephone: 516-547-7733
Telecopy: 516-547-7828
5. M&T Bank M&T Bank
135 Main Street
2nd Floor
Nyack, New York 10960
Attn: Michael Weinstock
Telephone: 914-358-4197
Telecopy: 914-358-4273
<PAGE> 63
5. Key Bank Key Bank
Mailcode: OH-01-27-0606
127 Public Square
Cleveland, Ohio 44114-1306
Attn: Dan Lally
Telephone: 216-689-8065
Telecopy: 216-689-4981
6. Bank One, Michigan Bank One, Michigan
500 Town Center Drive, Suite 350
Dearborne, Michigan 48126
Attn: Guy Rau
Telephone: 313-271-7723
Telecopy: 313-271-9527
<PAGE> 64
Schedule 9.3(b)
Form of Assignment and Acceptance
THIS ASSIGNMENT AND ACCEPTANCE dated as of , 199_ is entered into
between THE LENDER IDENTIFIED ON THE SIGNATURE PAGES AS THE "ASSIGNOR" (the
"Assignor") and THE PARTY IDENTIFIED ON THE SIGNATURE PAGES AS "ASSIGNEE"
("Assignee").
Reference is made to that Term Loan Credit Agreement dated as of
November 5, 1999 (as amended and modified from time to time, the "Credit
Agreement") among RailWorks Corporation, a Delaware corporation (the
"Borrower"), the Subsidiaries of the Borrower identified therein, the Lenders
identified therein and Bank of America, N.A., as Administrative Agent. Terms
defined in the Credit Agreement are used herein with the same meanings.
1. The Assignor hereby sells and assigns, without recourse, to
the Assignee, and the Assignee hereby purchases and assumes, without recourse,
from the Assignor, effective as of the Effective Date shown below, those rights
and interests of the Assignor under the Credit Agreement identified below (the
"Assigned Interests"), including the Loans and Commitments relating thereto,
together with unpaid interest and fees relating thereto accruing from the
Effective Date. The Assignor represents and warrants that it owns interests
assigned hereby free and clear of liens, encumbrances or other claims. The
Assignee represents that it is a permitted assignee under Section 9.3(b) of the
Credit Agreement. The Assignor and the Assignee hereby make and agree to be
bound by all the representations, warranties and agreements set forth in Section
9.3 of the Credit Agreement, a copy of which has been received by each such
party. From and after the Effective Date (i) the Assignee, if it is not already
a Lender under the Credit Agreement, shall be a party to and be bound by the
provisions of the Credit Agreement and, to the extent of the interests assigned
by this Assignment and Acceptance, have the rights and obligations of a Lender
thereunder and (ii) the Assignor shall, to the extent of the interests assigned
by this Assignment and Acceptance, relinquish its rights and be released from
its obligations under the Credit Agreement (other than the rights of
indemnification referenced in Section 9.9 of the Credit Agreement). Schedule
2.1(a) is deemed modified and amended to the extent necessary to give effect to
this Assignment.
2. This Assignment and Acceptance shall be governed by and
construed in accordance with the laws of the State of New York.
3. Terms of Assignment
(a) Date of Assignment: , 199__
-------------------
(b) Legal Name of Assignor: SEE SIGNATURE PAGE
(c) Legal Name of Assignee: SEE SIGNATURE PAGE
(d) Effective Date of Assignment: , 199__
-------------------
<PAGE> 65
See Schedule I attached for a description of the Loans and Commitments (and the
percentage interests therein and relating thereto) which are the subject of this
Assignment and Acceptance.
4. The fee payable to the Administrative Agent in connection with
this Assignment is enclosed.
IN WITNESS WHEREOF, the parties hereto have caused the execution of
this instrument by their duly authorized officers as of the date first above
written.
ASSIGNOR: ASSIGNEE:
By: By:
-------------------------------- -----------------------------
Name: Name:
Title: Title:
Address for Notices:
ACKNOWLEDGEMENT AND CONSENT
BANK OF AMERICA, N.A., RAILWORKS CORPORATION,
as Administrative Agent a Delaware corporation
By: By:
-------------------------------- -----------------------------
Name: Name:
Title: Title:
<PAGE> 66
SCHEDULE I
TO ASSIGNMENT AND ACCEPTANCE
RAILWORKS CORPORATION
TERM LOANS PRIOR TO ASSIGNMENT
<TABLE>
<CAPTION>
Term Loan Term Loan Term
Committed Commitment Loans
Amount Percentage Outstanding
------ ---------- -----------
<S> <C> <C> <C>
ASSIGNOR
ASSIGNEE
-------------------- -------------------- --------------------
US$ US$
</TABLE>
TERM LOANS SUBJECT TO THIS ASSIGNMENT
<TABLE>
<CAPTION>
Term Loan Term Loan Term
Committed Commitment Loans
Amount Percentage Outstanding
------ ---------- -----------
<S> <C> <C> <C>
ASSIGNOR
ASSIGNEE
-------------------- -------------------- --------------------
US$ US$
</TABLE>
TERM LOANS AFTER ASSIGNMENT
<TABLE>
<CAPTION>
Term Loan Term Loan Term
Committed Commitment Loans
Amount Percentage Outstanding
------ ---------- -----------
<S> <C> <C> <C>
ASSIGNOR
ASSIGNEE
-------------------- -------------------- --------------------
US$ US$
</TABLE>
<PAGE> 1
EXHIBIT 12.1
<TABLE>
<CAPTION>
RailWorks Corporation and Subsidiaries
Ratio of Earnings to Fixed Charges
(unaudited, dollars in thousands)
For the Year Ended For the Year Ended
-------------------------------------------- -----------------------
December 31, December 31, 1998
-------------------------------------------- -----------------------
1994 1995 1996 1997 Historical Pro Forma
-------- -------- ------ -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Income (loss) from continuing operations $ 2,782 ($19,972) $ 58 $ 1,428 ($12,847) $22,732
Add:
Undistributed Equity Loss -- -- -- -- -- 578
Income taxes 352 150 500 1,198 1,472 15,490
-------------------------------------------- ----------------------
3,134 (19,822) 558 2,626 (11,375) 38,800
Adjustments to Earnings for Fixed Charges:
Interest and other financial charges 38 871 2,023 1,761 2,334 6,643
Amortization of deferred financing costs -- -- -- -- 224 224
Interest factor attributable to rentals 865 792 882 671 762 1,074
-------------------------------------------- ----------------------
Total Fixed Charges 903 1,663 2,905 2,432 3,320 7,941
-------------------------------------------- ----------------------
Adjusted Earnings $ 4,037 ($18,159) $3,463 $ 5,058 ($ 8,055) $46,741
============================================ ======================
Total fixed charges from above: $ 903 $ 1,663 $2,905 $ 2,432 $ 3,320 $ 7,941
============================================ ======================
Ratio of earnings as adjusted to total fixed charges 4.5 * 1.2 2.1 * 5.9
<CAPTION>
For the Nine Months Ended
----------- ---------------------------------
30-Sep-1999
----------- ---------------------------------
Pro Forma Pro Forma
As Adjusted Historical Pro Forma As Adjusted
----------- ---------- --------- -----------
<S> <C> <C> <C> <C>
Earnings:
Income (loss) from continuing operations $ 11,353 $ 13,466 $15,164 $10,408
Add:
Undistributed Equity Loss 578 -- -- --
Income taxes 8,475 8,080 10,629 7,775
----------- ---------------------------------
20,406 21,546 25,793 18,183
Adjustments to Earnings for Fixed Charges:
Interest and other financial charges 24,118 12,370 13,924 21,248
Amortization of deferred financing costs 919 286
Interest factor attributable to rentals 1,074 719 805 805
----------- ---------------------------------
Total Fixed Charges 26,111 13,089 14,729 22,339
----------- ---------------------------------
Adjusted Earnings $ 46,517 $34,635 $40,522 $40,522
=========== =================================
Total fixed charges from above: $ 26,111 $13,089 $14,729 $22,339
=========== =================================
Ratio of earnings as adjusted to total fixed charges 1.8 2.6 2.8 1.8
</TABLE>
* Earnings were inadequate to cover fixed charges by $19,822 in 1995 and $11,375
in 1998
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF RAILWORKS CORPORATION
<TABLE>
<CAPTION>
SUBSIDIARY STATE OF INCORPORATION
- ------------------------------------------------ ---------------------------------------
<S> <C>
Alpha-Keystone Engineering, Inc. PA
Alpha-Keystone, Inc. OH
Annex Railroad Builders, Inc. IN
Armcore Acquisition Corp. DE
Armcore Railroad Contractors, Inc. IL
Birmingham Wood, Inc. AL
Comstock Holdings Inc. DE
Comtrak Construction, Inc. GA
Condon Brothers, Inc. VA
CPI Concrete Products, Incorporated TN
Earl Campbell Construction Company, Inc. TX
FCM Rail, Ltd. MI
F&V Metro RW, Inc. DE
Gantrex Corporation PA
Gantrex Group Ltd. Ontario corporation
Gantrex Holdings - Canada, Inc. Nova Scotia corporation
Gantrex Limited Ontario corporation
Gantrex RW Company Nova Scotia unlimited liability company
Gantrex Systems, Inc. DE
Gantrex Systems Limited Ontario corporation
HP McGinley, Inc. PA
Impulse Enterprises of New York, Inc. NY
Kennedy Railroad Builders, Inc. PA
L.K. Comstock & Company, Inc. NY
McCord Treated Wood, Inc. AL
Merit Railroad Contractors, Inc. MO
Midwest Construction Services, Inc. IN
Midwest Railroad Construction and Maintenance WY
Corporation of Wyoming
Midwest RW, Inc. DE
Minnesota Railroad Service, Inc. TN
M-Track Enterprises, Inc. NY
Neosho Asia, Inc. KS
Neosho Central America, Inc. KS
Neosho Construction Company, Incorporated KS
Neosho Contractors, Inc. WY
Neosho, Incorporated KS
Neosho International, Inc. KS
Neosho Rail Services, Inc., f/k/a Parsons Railway KS
Shops, Inc.
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
SUBSIDIARY STATE OF INCORPORATION
- ------------------------------------------------ ---------------------------------------
<S> <C>
New England Railroad Construction Co., Inc. CT
Northern Rail Service and Supply Company, Inc. MI
Pacific Northern Rail Contractors Corp. British Columbia corporation
Pacific Northern Rail Contractors Holdings Ltd. British Columbia corporation
Pacific Northern Rail RW, Incorporated Nova Scotia corporation
Pandrol Jackson, Inc. DE
PNR Investments Ltd. British Columbia corporation
PNR Leasing Ltd. British Columbia corporation
Railcorp, Inc. OH
Railroad Resources, Inc. MO
Railroad Service, Inc. NV
Railroad Specialists, Inc. IN
RailWorks Canada Company Nova Scotia corporation
RailWorks Canada, Inc. DE
RWKS Transit, Inc. d/b/a F&V Metro Contracting NY
Sheldon Electric, Inc. DB
Southern Indiana Wood Preserving Co., Inc. IN
Twigg Corporation MD
U.S. Railway Supply, Inc. IN
U.S. Trackworks, Inc. MI
V&R Electrical Contractors, Inc. NY
Wm. A. Smith Construction Co., Inc. TX
Wm. A. Smith Rerailing Services, Inc. TX
Wood Waste Energy, Inc. VA
W.T. Byler Co., Inc. TX
</TABLE>
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Amendment No. 1 to Form S-4) and related Prospectus for
the registration of $50 million 11 1/2% Senior Subordinated Notes due 2009 of
the Company and to the inclusion and/or incorporation by reference therein of
(i) our report dated February 8, 1999, with respect to the consolidated
financial statements and schedule of RailWorks Corporation included in this
registration statement, (ii) our report dated March 12, 1999, with respect to
the balance sheet of Mid West Railroad Construction and Maintenance Corporation
of Wyoming included in this registration statement, (iii) our report dated March
15, 1999, with respect to combined financial statements of F&V Metro Contracting
Corp. (currently known as RWKS Transit, Inc.) and Affiliates included in this
registration statement, (iv) our report dated September 24, 1999, with respect
to the consolidated financial statements of Neosho Incorporated and Subsidiaries
included in this registration statement and (v) our report dated November 12,
1999, with respect to the financial statements of W.T. Byler Co., Inc. included
in this registration statement, each filed with the Securities and Exchange
Commission.
Arthur Andersen LLP
December 13, 1999
Stamford, Connecticut
<PAGE> 1
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Amendment No. 1 to Form S-4) and related Prospectus for
the registration of $50 million 11 1/2% Senior Subordinated Notes due 2009 of
the Company and to the inclusion therein of our report dated March 15, 1999,
with respect to the combined financial statements of Gantrex Group Limited,
Norapco Limited, Gantrex Holding Corporation and Gantrex Systems Inc. included
in this registration statement, filed with the Securities and Exchange
Commission.
Arthur Andersen LLP
December 13, 1999
Mississauga, Canada
