<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 28, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
RAILWORKS CORPORATION
(Exact name of co registrant as specified in its charter)
---------------------
<TABLE>
<CAPTION>
DELAWARE 4789 58-2382378
<S> <C> <C>
(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
---------------------
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. [ ]
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
AMOUNT TO OFFERING PRICE OFFERING REGISTRATION
TITLE OF CLASS OF SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) PRICE(1) FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11 1/2% Senior Subordinated Notes due 2009... $125,000,000 100% $125,000,000 $34,750
- ---------------------------------------------------------------------------------------------------------------------------------
Guarantees of 11 1/2% Senior Subordinated
Notes due 2009........................... -- -- -- (2)
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</TABLE>
(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(f)(2) under the Securities Act of 1993.
(2) Pursuant to rule 457(n), no additional registration fee is payable with
respect to the Guarantees of the Additional Registrants.
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>
PRIMARY
STATE OR OTHER STANDARD
JURISDICTION OR INDUSTRIAL
INCORPORATION CLASSIFICATION I.R.S. EMPLOYER
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER OR 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
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
FCM Rail, Ltd.................................... MI 6159 38-2343435
F&V Metro RW, Inc................................ DE Holding Co. Pending
F&V Metro Contracting Corp....................... 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. R.W., 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
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
New England Railroad Service, Inc................ CT 1629 06-0996497
Northern Rail Service and Supply Company, Inc.... MI 1629 38-2974642
R.&M.B. Rail Co., Inc. (d/b/a Mize Construction
Company)....................................... IN 1629 35-1580762
Railcorp, Inc.................................... OH 1629 34-1546698
Railroad Service, Inc............................ TN 1629 41-1522172
Railroad Specialties, Inc........................ IN 1629 35-1855813
Sheldon Electric, Inc............................ DE 1731 52-2128782
Southern Indiana Wood Preserving Co., Inc........ IN 2491 35-1694417
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PRIMARY
STATE OR OTHER STANDARD
JURISDICTION OR INDUSTRIAL
INCORPORATION CLASSIFICATION I.R.S. EMPLOYER
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER OR ORGANIZATION CODE NUMBER IDENTIFICATION NO.
- ---------------------------------------------------- --------------- -------------- ------------------
<S> <C> <C> <C>
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
</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).
ii
<PAGE> 4
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT OFFER THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MAY , 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, except that 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
, 1999, 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 , 1999
<PAGE> 5
TABLE OF CONTENTS
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PAGE
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<S> <C>
Risk Factors................................................ 10
Use of Proceeds............................................. 18
Capitalization.............................................. 19
Pro Forma Financial Statements.............................. 20
Selected Historical Consolidated Financial Data............. 27
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 29
Business.................................................... 38
The Exchange Offer.......................................... 51
Management.................................................. 61
Certain Relationships and Related Party Transactions........ 66
Principal Stockholders...................................... 68
Description of Capital Stock................................ 69
Description of Credit Facility.............................. 70
Description of the New Notes................................ 70
Book-Entry; Delivery and Form............................... 110
Plan of Distribution........................................ 111
Certain United States Federal Income Tax Considerations..... 113
Legal Matters............................................... 113
Experts..................................................... 113
Where You Can Find More Information......................... 114
Special Note Regarding Forward-Looking Statements........... 114
Index to Financial Statements............................... F-1
</TABLE>
<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) all acquisitions that we have
completed prior to March 31, 1999 as if we had completed these acquisitions on
January 1, 1998 and (2) the sale of the old notes to the initial purchasers 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 $350.9 million and pro
forma EBITDA of $37.1 million. For the three months ended March 31, 1999, we had
pro forma revenue of $77.4 million and pro forma EBITDA of $5.6 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
20 operating companies that have been in the rail systems business for an
average of 29 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 quarter of 1999, we acquired four 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 $ 83.2 million.
- Since March 31, 1999, we have acquired three additional operating
companies, which had aggregate revenue of $41.3 million for their most
recent fiscal year-end dates. We have also entered into letters of intent
to acquire another three companies.
1
<PAGE> 7
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,
$125,000,000 aggregate principal amount of old
notes are outstanding.
Expiration date............ The exchange offer will expire at 5:00 p.m., New
York City time, on , 1999, 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 of 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 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
- 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
2
<PAGE> 8
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
exchange 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 for
other exchange offers that 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 will deliver 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 notes, you
should contact your intermediary promptly and
instruct it to surrender your 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 private notes
according to the guaranteed delivery procedures
appearing below under "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.
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.
3
<PAGE> 9
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,
which are as follows:
Issuer..................... RailWorks Corporation.
Securities offered......... $125,000,000 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 April 7, 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 March 31, 1999, we would have had no senior debt
outstanding and approximately $75 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.
Optional redemption........ We cannot redeem the new notes until April 15,
2004. After April 15, 2004, we may redeem some or
all of the 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
4
<PAGE> 10
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 within 120 days of completing
the equity offering;
- at least 65% of the aggregate principal amount of
notes issued remains outstanding.
Change of control offer.... If a change in control of RailWorks occurs, we must
give holders of the new 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 new 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, repay senior debt or make
an offer to purchase a principal amount of old
notes and new notes equal to the excess net cash
proceeds. The purchase price for the notes would be
100% of their principal amount, plus accrued and
unpaid interest.
Certain additional
indenture provisions....... The indenture governing the notes 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;
- 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.
5
<PAGE> 11
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 a description of how we used
the proceeds from the sale of old notes, see
"-- RailWorks Corporation -- Recent
Developments -- Offering of Old Notes."
For additional information regarding the new notes, see "Description of the
New Notes" and "Certain United States Federal Income Tax Consequences."
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 No. 97 of the SEC. All other acquisitions have been
accounted for as purchases in accordance with Accounting Principles Board 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
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 THREE MONTHS ENDED MARCH 31, 1999
---------------------------------------- -----------------------------------------
PRO PRO FORMA PRO FORMA
ACTUAL(1) 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 $350,865 $350,865 $72,673 $77,446 $77,446
Cost of revenue............ 182,817 289,800 289,800 59,111 63,219 63,219
-------- -------- -------- ------- ------- -------
Gross profit............... 29,716 61,065 61,065 13,562 14,227 14,227
Selling, general and
administrative
expenses................. 17,040 23,916 23,916 7,773 8,593 8,593
Non-recurring expenses..... 19,965(7) -- -- -- -- --
Transaction fees........... 1,281(8) -- -- -- -- --
Depreciation and
amortization............. 2,105 9,052 9,052 1,954 2,103 2,103
-------- -------- -------- ------- ------- -------
Operating (loss) income.... (10,675) 28,097 28,097 3,835 3,531 3,531
Interest expense........... 2,334 4,027 15,477 1,613 1,677 3,869
Interest and other
income................... 1,634 1,165 1,165 400 380 380
-------- -------- -------- ------- ------- -------
Income (loss) before income
taxes.................... (11,375) 25,235 13,785 2,622 2,234 42
-------- -------- -------- ------- ------- -------
Net (loss) income.......... $(12,847) $ 14,223 $ 7,239 $ 1,636 $ 1,318 $ (358)
======== ======== ======== ======= ======= =======
OTHER DATA:
EBITDA(9).................. $ 37,149 $ 5,634
EBITDA margin(10).......... 10.6% 7.3%
Capital expenditures....... $ 4,786 $ 1,031
Ratio of EBITDA to cash
interest expense......... 2.4x 1.5x
Ratio of net debt to
EBITDA................... 2.9x 20.0x
Ratio of earnings to fixed
charges(11).............. 1.9x 1.0x
</TABLE>
7
<PAGE> 13
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998 AS OF MARCH 31, 1999
--------------------------------------- --------------------------------------
PRO PRO FORMA PRO PRO FORMA
ACTUAL(1) FORMA(12) AS ADJUSTED(13) ACTUAL(4) FORMA(5) AS ADJUSTED(14)
--------- --------- --------------- --------- -------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash.......................... $ 2,846 $ -- $ 24,591 $ 3,073 $ 3,073 $ 25,692
Total assets.................. 228,636 309,729 339,070 305,747 305,747 333,116
Total debt.................... 51,504 104,492 133,833 110,781 110,781 138,150
Stockholders' equity.......... 110,008 111,008 111,008 112,658 112,658 112,658
</TABLE>
- ---------------
(1) The summary historical consolidated financial data as of and for the 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 and as adjusted to give effect to 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 three
months ended March 31, 1999 are derived from our Consolidated Financial
Statements, which are comprised of financial data of:
-- Founding Companies and 1998 Acquired Companies for the entire
period
-- the 1999 Acquired Companies from their date of acquisition.
(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 and as adjusted to
give effect to 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
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 transfers of common stock made by certain operating company
managers to other employees of such operating companies.
(8) Represents 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
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.
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(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 acquisitions of the 1999 Acquired Companies as if they each
had occurred on December 31, 1998.
(13) Reflects the acquisitions of the 1999 Acquired Companies and as adjusted to
give effect to the sale of old notes and the application of the net
proceeds, as if each had occurred on December 31, 1998.
(14) Reflects the acquisitions of the 1999 Acquired Companies and as adjusted to
give effect to the sale of old notes and the application of net proceeds,
as if each had occurred on March 31, 1999.
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RISK FACTORS
You should carefully consider the information below as well as the other
information in this prospectus before deciding 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."
Substantial Leverage and Debt Service Requirements Could Limit Our Ability
to Pay Principal and Interest on the Notes and Could Adversely Affect Our
Operations. Our substantial indebtedness could adversely affect our financial
health and could prevent us from fulfilling our obligations under the notes. On
a pro forma basis as of March 31, 1999, we had outstanding total debt of $138.2
million, ratio of earnings to fixed charges of 1.0x and stockholders' equity of
$112.7 million.
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 March 31, 1999, $75 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. See "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;
- limit our flexibility in planning for, or reacting to, changes in our
business and in the industries where we compete; and
- place us at a competitive disadvantage compared to our competitors that
have less debt.
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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 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, we will need to refinance all or a portion of our debt, including the
notes, before maturity, obtain additional financing, delay planned acquisitions
and capital expenditures, or sell assets. We cannot guarantee that we will be
able to refinance any of our debt, including debt outstanding under our credit
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 and the indenture governing the notes restrict our ability to sell
assets.
If we are unable to meet our debt service obligations for any reason, 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 Our 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. On a pro forma basis as of March 31,
1999, we and the guarantors would have had no senior debt outstanding and we
would have had $75 million 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 RailWorks or the guarantors, holders of the 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 all of our senior debt in full. In addition, the
subordination provisions of the indenture provide that we cannot make cash
payments on the notes while a payment default is continuing under certain of our
senior debt.
Restrictions in Existing Agreements May Limit Our Ability to Finance Future
Operations, Engage in Certain Business Transactions or Make Principal and
Interest Payments on the Notes. Our credit facility and the indenture governing
the notes contain a number of significant covenants that, among other things,
restrict our ability to dispose of assets, incur 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 the our best interest.
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In addition, our credit facility requires us to maintain compliance with
certain 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 a first lien on all of the capital stock of our subsidiaries and
on all our accounts receivable and the accounts receivable of our subsidiaries.
In the event of a default under the credit facility, the lenders under the
credit 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 the credit facility was repaid. See "Description of Credit
Facility".
A breach of any of the covenants contained in our credit facility or our
inability to comply with the required financial ratios could result in an event
of default, which would allow the lenders under the credit 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. If the amounts
outstanding under the credit 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, was greater than
the fair saleable value of all of its assets;
- if the present fair saleable value of its assets was 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
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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
solely a creditor 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, the Company and each guarantor believes that, after giving
effect to the indebtedness incurred in connection with this offering 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 Not Have Sufficient Cash to Purchase the New Notes Upon a Change of
Control. Upon the occurrence of certain specific kinds of change of control
events, we must offer to repurchase all outstanding 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 or that restrictions in our
credit facility 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.
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.
If a market for the new notes does develop, any such market may cease to
exist at any time, in addition, in any such market, the new notes could trade at
prices that may be higher or lower than their principal amount.
The liquidity of any market for the new notes will depend upon various
factors, including:
- the number of holders of the notes;
- prevailing interest rates;
- 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 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-
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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 the initial public offering, or "IPO", of our common stock in August
1998. We acquired the Founding Companies concurrently with the completion of our
IPO, and acquired six additional operating companies through March 31, 1999.
Subsequent to that date, we have acquired three additional operating companies
and have entered into letters of intent to acquire another three 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 operations. 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. Certain members of our management
group have only recently joined RailWorks and there can be no assurance that the
management group will be able to 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 effectively oversee 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
nine 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 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 of these occurrences could have a material adverse effect on
our business, financial condition and results of operations.
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
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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
43.7% of our pro forma revenue for the year ended December 31, 1998 from our top
ten customers. Approximately 21.1% of our 1998 pro forma revenue was derived
from projects undertaken for the New York City Transit Authority, which we refer
to as "NYCTA" in this prospectus. 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 governmental agencies, as well as contracts with
such agencies, which we refer to as "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; the availability of public funds
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
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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
only a limited number of companies 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. We derive a substantial portion of
our revenue from public contracts, which we expect will 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.
We are Exposed to Downturns in Commercial Construction. We derived
approximately 16.2% 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. The demand for electrical
installation services is affected by fluctuations in the level of new
construction and renovation of commercial buildings. 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
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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 December 31, 1998, approximately 66.9%
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 materially comply 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
sure that such individuals will remain with us throughout the terms of their
agreements, or thereafter. Further, we likely 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 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 identified potential
deficiencies related to the Year 2000 in our information systems, and we are in
the process of addressing them through upgrades and other remediation. We expect
to complete remediation and testing of our internal systems in the summer of
1999. With respect to other equipment with date-sensitive
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operating controls, such as manufacturing equipment, HVAC, security and other
similar systems, we are in the process of identifying those items that may
require remediation or replacement. We expect to complete remediation or
replacement and testing of these in the summer of 1999. We are in the process of
identifying and contacting suppliers, both inventory and non-inventory, and
customers to determine the state of their year 2000 readiness.
Based upon our current estimates, incremental out-of-pocket costs of our
Year 2000 program are expected to be approximately $250,000. As of March 31,
1999, none of these funds had been spent. These costs include third party
consultants, remediation of existing computer software and replacement and
remediation of embedded chips. These costs do not include internal management
time and the deferral of other projects, the effects of which we do not expect
to be material to our results of operations or financial condition.
At this stage of the process, we believe that it is difficult to
specifically identify the most reasonably likely worst case Year 2000 scenario.
As with all service providers and manufacturers, a reasonably likely worst case
scenario would be the result of failures of third parties (including, without
limitation, governmental entities and entities with which we have no direct
involvement) that continue for more than several days in various geographic
areas where we provide services, manufacture our products or from which we
source our materials and components. In connection with our manufacturing and
supply of raw materials and components, we are considering various contingency
plans. Any such plans would necessarily be limited to matters that we can
reasonably control.
Our Year 2000 efforts are ongoing and our overall plan, as well as the
consideration of contingency plans, will continue to evolve as new information
becomes available. While we anticipate continuity of our business activities,
that continuity will be dependent upon our ability, and the ability of third
parties upon whom we rely 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 the "Special Note Regarding Forward-Looking
Statements."
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.
18
<PAGE> 24
CAPITALIZATION
The following table describes our capitalization as of March 31, 1999 (1)
on an actual basis, (2) on a pro forma basis to reflect the 1999 Acquired
Companies and (3) on a pro forma basis as adjusted to reflect the sale of the
old notes and the application of the net proceeds. You should read this table in
conjunction with Pro Forma Financial Statements, the "Description of the Notes,"
and the Company's Consolidated Financial Statements and the related notes.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents............................... $ 3,073 $ 3,073 $ 25,692
======== ======== ========
Total debt (including current maturities):
Credit facilities(1).................................... $ 87,383 $ 87,383 $ --
Other notes payable(2).................................. 14,398 14,398 4,150
Seller promissory notes(3).............................. 9,000 9,000 9,000
Notes offered hereby.................................... -- -- 125,000
-------- -------- --------
Total debt.................................... 110,781 110,781 138,150
Stockholders' equity.................................... 112,658 112,658 112,658
-------- -------- --------
Total capitalization.......................... $223,439 $223,439 $250,808
======== ======== ========
</TABLE>
- ---------------
(1) We have two credit facilities; one that provides for borrowings of up to $75
million, and a $25 million, non-revolving bridge term facility. See
"Description of Credit Facility."
(2) Represents assumed indebtedness of the Acquired Companies and fixed asset
notes related to equipment.
(3) 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 March 2001.
19
<PAGE> 25
PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial statements give effect to (1)
the acquisitions by RailWorks of the Founding Companies and the Acquired
Companies and (2) the sale of the old notes and the application of the net
proceeds. The unaudited pro forma balance sheet reflects the acquisition of the
1999 Acquired Companies and the sales of the old notes and the application of
the net proceeds as if each had occurred on March 31, 1999. The unaudited pro
forma statement of operations for the year ended December 31, 1998 presents our
statement of operations data from our Consolidated Financial Statements for that
period 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, two 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 (3) the
sales 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 three months ended March 31, 1999 presents our statement of operations data
for that period from our Consolidated Financial Statements combined with 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.
We have analyzed the savings 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 statements 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. Since the acquired
entities were not under common control or management prior to our acquisition of
them, 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 notes relating to those financial statements that are included in this
prospectus.
20
<PAGE> 26
RAILWORKS CORPORATION
UNAUDITED PRO FORMA AS ADJUSTED BALANCE SHEET
AS OF MARCH 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
RAILWORKS
CORPORATION
HISTORICAL
FINANCIAL OFFERING PRO FORMA
STATEMENTS ADJUSTMENTS AS ADJUSTED
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash............................................... $ 3,073 $ 120,250(a) $ 25,692
(97,631)(b)
Accounts receivable................................ 82,215 82,215
Marketable securities.............................. 6,096 6,096
Lease receivables.................................. 121 121
Costs and estimated earnings in excess of billings
on uncompleted contracts........................ 31,328 31,328
Inventories........................................ 13,574 13,574
Prepaid expenses and other current assets.......... 7,006 7,006
-------- --------- --------
Total current assets....................... 143,413 22,619 166,032
Property, plant and equipment, net................... 27,690 27,690
Other assets:
Investments........................................ 30 30
Goodwill........................................... 131,842 131,842
Other assets....................................... 2,772 4,750(a) 7,522
-------- --------- --------
$305,747 $ 27,369 $333,116
======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt............... $ 39,131 $ (32,131)(b) $ 7,000
Accounts payable................................... 38,309 38,309
Accrued salaries and wages......................... 5,162 5,162
Billings in excess of costs and estimated earnings
on uncompleted contracts........................ 14,158 14,158
Accrued expenses................................... 4,936 4,936
-------- --------- --------
Total current liabilities.................. 101,696 (32,131) 69,565
-------- --------- --------
Long-Term Liabilities:
Other liabilities.................................. 11,138 11,138
Excess of acquired assets over cost, net of
amortization.................................... 8,605 8,605
Senior subordinated debt........................... 125,000(a) 125,000
Promissory notes................................... 4,000 4,000
Long-term debt..................................... 67,650 (65,500)(b) 2,150
-------- --------- --------
Total long-term liabilities................ 91,393 59,500 150,893
-------- --------- --------
Total liabilities.......................... 193,089 27,369 220,458
-------- --------- --------
Stockholders' Equity:
Preferred stock.................................... 14 14
Common stock....................................... 138 138
Additional paid-in capital......................... 122,309 122,309
Retained earnings (deficit)........................ (9,803) (9,803)
-------- --------- --------
Total stockholders' equity................. 112,658 0 112,658
-------- --------- --------
$305,747 $ 27,369 $333,116
======== ========= ========
</TABLE>
See Notes to Unaudited Pro Forma Balance Sheet
21
<PAGE> 27
RAILWORKS CORPORATION
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
a. To record the issuance of the notes, net of estimated issuance cost and
discounts of $4,750,000.
b. To record repayment of the Credit Facilities and other debt with
proceeds from the sale of the notes.
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.
22
<PAGE> 28
RAILWORKS CORPORATION
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
FOR
FOUNDING PRO FOUNDING
COMPANIES FORMA COMPANIES
RAILWORKS (THROUGH FOR AND
CORPORATION JULY 31, PRO FORMA FOUNDING ACQUIRED PRO FORMA ACQUIRED
HISTORICAL 1998) ADJUSTMENTS COMPANIES COMPANIES(1) ADJUSTMENTS COMPANIES
----------- --------- ----------- --------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue................ $212,533 $56,965 $ -- $269,498 $81,367 $ -- $350,865
Cost of revenue........ 182,817 45,892 (800)(2) 227,052 63,191 (443)(2) 289,800
(857)(3)
-------- ------- -------- -------- ------- ------- --------
Gross profit........... 29,716 11,073 1,657 42,446 18,176 443 61,065
Selling, general and
administrative
expenses............. 17,040 9,033 (2,379)(3) 19,317 9,949 (3,480)(3) 23,916
(785)(4) (231)(2)
(2,000)(2) (1,639)(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 2,928 735(11) 9,052
-------- ------- -------- -------- ------- ------- --------
Operating (loss)
income............... (10,675) 45 28,370 17,740 3,808 6,549 28,097
Other income (expense):
Interest income/other
expense............ 1,634 108 -- 1,742 (777) 200 1,165
Interest expense..... (2,334) (378) 137(13) (2,575) (1,631) 179(13) (4,027)
-------- ------- -------- -------- ------- ------- --------
(Loss) income before
income taxes......... (11,375) (225) 28,507 16,907 1,400 6,928 25,235
Provision (benefit) for
income taxes......... 1,472 453 6,170(14) 8,095 275 2,642(14) 11,012
-------- ------- -------- -------- ------- ------- --------
Net (loss) income...... $(12,847) $ (678) $ 22,337 $ 8,812 $ 1,125 $ 4,286 $ 14,223
======== ======= ======== ======== ======= ======= ========
EBITDA(15)............. $ (8,570) $ 1,640 $ 30,059 $ 23,129 $ 6,736 $ 7,284 $ 37,149
======== ======= ======== ======== ======= ======= ========
<CAPTION>
PRO FORMA
OFFERING AS
ADJUSTMENTS ADJUSTED
----------- ------------
<S> <C> <C>
Revenue................ $ -- $350,865
Cost of revenue........ -- 289,800
-------- --------
Gross profit........... -- 61,065
Selling, general and
administrative
expenses............. -- 23,916
Non-recurring
expenses............. -- --
Transaction fees....... -- --
Loss guarantee......... -- --
Depreciation and
amortization......... -- 9,052
-------- --------
Operating (loss)
income............... -- 28,097
Other income (expense):
Interest income/other
expense............ -- 1,165
Interest expense..... (10,975)(12) (15,477)
(475)(12)
-------- --------
(Loss) income before
income taxes......... (11,450) 13,785
Provision (benefit) for
income taxes......... (4,466)(14) 6,546
-------- --------
Net (loss) income...... $ (6,984) $ 7,239
======== ========
EBITDA(15)............. $ -- $ 37,149
======== ========
</TABLE>
See Notes to Unaudited Pro Forma Statement of Operations.
23
<PAGE> 29
RAILWORKS CORPORATION
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA FOR
RAILWORKS RAILWORKS PRO FORMA
CORPORATION ACQUIRED PRO FORMA AND ACQUIRED OFFERING AS
HISTORICAL COMPANIES(16) ADJUSTMENTS COMPANIES ADJUSTMENTS ADJUSTED
----------- ------------- ----------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenue................... $72,673 $ 4,773 $ -- $77,446 $ -- $77,446
Cost of revenue........... 59,111 4,108 -- 63,219 -- 63,219
------- ------- ------- ------- ------- -------
Gross profit.............. 13,562 665 -- 14,227 -- 14,227
Selling, general and
administrative
expenses................ 7,773 820 -- 8,593 -- 8,593
Depreciation and
amortization............ 1,954 149 -- 2,103 -- 2,103
------- ------- ------- ------- ------- -------
Operating (loss) income... 3,835 (304) -- 3,531 -- 3,531
Other income (expense):
Interest income/other
expense............... 400 (20) -- 380 -- 380
Interest expense........ (1,613) (64) -- (1,677) (2,073)(12) (3,869)
(119)(12)
------- ------- ------- ------- ------- -------
(Loss) income before
income taxes............ 2,622 (388) -- 2,234 (2,192) 42
Provision (benefit) for
income taxes............ 986 (70) -- 916 (516)(14) 400
------- ------- ------- ------- ------- -------
Net (loss) income......... $ 1,636 $ (318) $ -- $ 1,318 $(1,676) $ (358)
======= ======= ======= ======= ======= =======
EBITDA(15)................ $ 5,789 $ (155) $ -- $ 5,634 $ -- $ 5,634
======= ======= ======= ======= ======= =======
</TABLE>
See Notes to Unaudited Pro Forma Statement of Operations.
24
<PAGE> 30
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 $1.2 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, amortization of related transaction fees of $4.75 million over ten years,
and interest on seller notes.
13. To reduce interest expense to reflect debt at the rates that would have
been in effect for RailWorks in 1998.
14. To record the incremental provision (benefit) 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 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
25
<PAGE> 31
RAILWORKS CORPORATION
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS -- (CONTINUED)
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.
16. Includes results of operations of FCM Rail, Ltd., F&V Metro Contracting
Corp. and affiliates, and Gantrex Group from January 1, 1999 to January 31,
1999.
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.
26
<PAGE> 32
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>
RAILWORKS
-------------------------------
PREDECESSOR COMPANY THREE MONTHS
----------------------------------------- ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- -----------------
1994(1) 1995(1) 1996(1) 1997(1) 1998(2) 1998(1) 1999(3)
-------- -------- -------- -------- --------- ------- -------
(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 $41,628 $72,673
Cost of revenue......................... 137,607 164,777 169,303 136,678 182,817 37,205 60,074
-------- -------- -------- -------- --------- ------- -------
Gross profit............................ 20,142 16,839 19,464 16,932 29,716 4,423 12,599
Selling, general and administrative
expenses.............................. 16,963 15,624 15,053 13,733 17,040 3,224 7,773
Non-recurring expenses.................. -- -- -- -- 19,965(4) -- --
Transaction fees........................ -- -- -- -- 1,281(5) -- --
Depreciation and amortization........... 1,447 1,263 1,365 (213) 2,105 (39) 991
-------- -------- -------- -------- --------- ------- -------
Operating income (loss)................. 1,732 (48) 3,046 3,412 (10,675) 1,238 3,835
Interest expense........................ (38) (871) (2,023) (1,761) (2,334) (420) (1,613)
Interest and other income............... 2,401 2,115 476 975 1,634 292 400
Income (loss) before income taxes....... 3,134 (19,822) 558 2,626 (11,375) 1,110 2,622
Net income (loss)....................... 2,782 (19,972) 58 1,428 (12,847) 666 1,636
Ratio of earnings to fixed charges(6)... 4.5x *(7) 1.2x 2.1x *(7) 2.9x 2.3x
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR COMPANY RAILWORKS
--------------------------------------- -----------------------------
AS OF DECEMBER 31, AS OF MARCH 31,
---------------------------------------------------- ------------------
1994(1) 1995(1) 1996(1) 1997(1) 1998(2) 1998(1) 1999(3)
------- ------- ------- ------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital(8)....................... $30,456 $31,915 $19,257 $26,500 $ 67,391 $25,612 $ 41,717
Total assets............................. 89,168 86,108 84,344 68,352 228,636 64,417 305,747
Total debt............................... -- 19,241 24,890 15,004 51,504 13,418 110,781
Stockholders' equity..................... 56,329 20,567 16,990 1,438 110,008 2,104 112,658
</TABLE>
- ---------------
(1) The selected historical consolidated financial data as of and for the fiscal
years ended December 31, 1994, 1995, 1996 and 1997, and for the three months
ended March 31, 1998 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.
(3) The selected historical consolidated financial data as of and for the three
months ended March 31, 1999 are derived from the consolidated financial
statements of Railworks, which are comprised of financial data of:
- the Founding Companies and 1998 Acquired Companies for the entire period,
and
- the 1999 Acquired Companies from their dates of acquisition.
(4) Consists of $14.5 million in restricted common stock granted to Railworks
officers, $2.9 million related to settlement of employee benefit obligations
of one of the operating
27
<PAGE> 33
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.
(7) Earnings were inadequate to cover fixed charges by $19,822 in 1995 and
$11,375 in 1998.
(8) 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.
28
<PAGE> 34
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 that appear 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
that 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 quarter of 1999, we acquired the four 1999 Acquired
Companies. 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 acquisition. The historical financial statements prior to August 4, 1998
are those of Comstock.
Our consolidated balance sheet as of March 31, 1999, includes the Founding
Companies, the 1998 Acquired Companies and the 1999 Acquired Companies. Our
consolidated balance sheet as of December 31, 1998 includes the Founding
Companies and the 1998 Acquired Companies. Our results of operations and cash
flows for the three months ended March 31, 1999 include the results of
operations and cash flows of the Founding Companies and 1998 Acquired Companies
for the entire period and the 1999 Acquired Companies from their date of
acquisition. Our results of operations and 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 related financing activities, including the IPO, and
we had no revenue or operating expenses prior to August 1, 1998. Consequently,
management believes that RailWorks, individual Founding Company or Acquired
Company financial comparisons as discussed below may not be 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
29
<PAGE> 35
the Acquired Companies have entered into employment agreements with RailWorks.
The aggregate compensation paid to the executive officers has been reduced as
reflected in the Unaudited Pro Forma Statement of Operations included elsewhere
in this prospectus. Following 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, RailWorks 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 Three Months ended March 31, 1999 Compared to Three Months ended
March 31, 1998
Revenue. Revenue increased $31.1 million, or 74.8%, from $41.6 million for
the three months ended March 31, 1998 to $72.7 million for the three months
ended March 31, 1999. The increase was due to the fact that revenue for the
three months ended March 31, 1998 includes only the 1998 data is that of
Comstock. Revenue for the three months ended March 31, 1999 includes Comstock as
well as the other nineteen companies that now comprise RailWorks.
Gross Profit. Gross profit increased $8.2 million or 186.4%, from $4.4
million for the three months ended March 31, 1998 to $12.6 million for the three
months ended March 31, 1999. The increase was due to the fact that gross profit
for the three months ended March 31, 1998 is that of Comstock alone. The gross
profit for the three months ended March 31, 1999 data includes Comstock as well
as the other nineteen companies that now comprise RailWorks. The gross profit
percentage increased 6.7%, from 10.6% for the three months ended March 31, 1998
to 17.3% for the three months ended March 31, 1999. This increase was the result
of higher profitability
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<PAGE> 36
associated with the mix and type of work performed during the first quarter of
1999 by the consolidated group as compared to historical Comstock margins.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $4.5 million or 141.1%, from $3.2 million for
the three months ended March 31, 1998 to $7.8 million for the three months ended
March 31, 1999. The increase is due to the fact that gross profit for the three
months ended March 31, 1998 is that of Comstock alone. The gross profit for the
three months ended March 31, 1999 includes Comstock as well as the nineteen
other companies that now comprise RailWorks. As a percentage of revenue,
selling, general and administrative expenses increased from 7.7% for the three
months ended March 31, 1998 to 10.7% for the three months ended March 31, 1999.
This percentage increase was a result of acquired companies having higher
overhead selling, general and administrative cost structures than Comstock.
Net Income. Net income increased $1.0 million, or 145.6%, from $666,000
for the three months ended March 31, 1998 to $1.6 million for the three months
ended March 31, 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.
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.
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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>
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
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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 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
benefitted 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.
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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 $61.8
million of long-term debt under RailWorks's revolving credit agreement
outstanding at March 31, 1999. Approximately 84% 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
$260,000 annualized increase or decrease in interest expense and cash flows. The
remaining debt is either fixed rate debt or debt that has been essentially fixed
through the use of interest rate swaps. RailWorks will 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 instrument is
subject to strict approval levels by senior officers. Typically, the use of such
derivative instruments is, in the aggregate, not material to our financial
position, results of operations and cash flows.
In March 1999, RailWorks entered into a hedge instrument with First Union
National Bank known as a "swaption," or a collared swap for a notional amount of
$50.0 million. This agreement, which carries no premium, allows RailWorks to
"swap" into a fixed interest rate beginning March 31, 1999, at no lower than
5.73% and no higher than 6.23% against the current swap rate, which was 5.93% at
the time of trade. This instrument protects RailWorks against dramatic swings in
interest rates.
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 our common
stock at a price of $12.00 per share. We raised approximately $52.5 million, net
of underwriting discounts and other offering expenses of capital, of which we
used approximately $51.1 million for the cash portion of our acquisitions of the
Founding Companies and approximately $1.4 million for the repayment of debt.
At March 31, 1999, we had working capital of approximately $41.7 million, a
$25.7 million decrease from December 31, 1998 when working capital was $67.4
million. A majority of this decrease is attributable to the issuance of a $25
million short-term bridge term facility. Net cash provided by operating
activities was approximately $2.0 million for the three months ended March 31,
1999. Net cash used in investing activities was approximately $33.7 million for
the three months ended March 31, 1999, which consisted of $34.1 million of cash
for acquisitions. Net cash provided by financing activities for the three months
ended March 31, 1999 was approximately $31.9 million, which included $63.5
million from the issuance of long-term borrowings, offset by debt repayment of
approximately $31.6 million.
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At December 31, 1998, we 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 $54.4 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 $1.0 million, $1.3 million, $448,000 and $690,000
during the three months ended March 31, 1999, and the years ended December 31,
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 our 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.
We anticipate capital expenditures of approximately $4.0 million for
equipment and leasehold improvements during 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.
We finance cash for acquisitions and working capital by funds generated
from operations, together with borrowings under our $75 million senior revolving
was credit facility with NationsBank, N.A. (the "Credit Facility"). As of May 6,
1999, $66.2 million is available for borrowing.
Included in the Credit Facility is a $2.0 million Swingline revolving
facility (the "Swingline"). The Swingline allows for borrowings and repayments
within RailWorks existing Credit Facility in increments of $1.0 with NationsBank
directly. The Credit Facility and the Swingline expire on August 4, 2001,
however RailWorks may request NationsBank to extend the agreement for two,
one-year periods. The proceeds of the Credit Facility, including the Swingline
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 $20.0 million.
Interest on loans, commitment fees, and letter of credit fees are based
upon consolidated leverage ratios in a pricing matrix. A facility fee of 2% was
paid on the total Credit Facility and a $250 monthly fee is charged on the
Swingline.
In the first quarter of 1999, we obtained a bridge term facility (the
"Bridge"), a non-revolving, $25.0 million term commitment, issued on February 2,
1999, with a June 30, 1999 maturity date. The facility was an amendment to our
Revolving Credit Facility issued on August 4, 1998, including consistent
pricing, terms and conditions. We borrowed $25.0 million under the Bridge during
the first quarter of 1999. The interest rate during the quarter was 9.00% and
8.50% for the remainder of the term. The full principal amount of $25.0 million
was repaid on April 8, 1999. A 1.7% facility fee was paid on the Bridge.
The credit facilities are secured by a first lien on all of the capital
stock of our subsidiaries and on all our accounts receivable and the accounts
receivable of our subsidiaries.
The credit facilities contain a negative pledge on all 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 facilities bear interest, at
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<PAGE> 41
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, or (2) the "Alternate 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 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 connection with certain 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 from the sale of the old notes and borrowings under the
$75 million credit facility, will be sufficient to finance our 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.
INFLATION
We do not believe that inflation has had a material effect on our results
of operations in recent years. However, we cannot assure you that our business
will not be affected by inflation in the future.
YEAR 2000
We have developed a plan to address Year 2000 issues. The plan addresses
three main areas: (a) information systems; (b) embedded chips; and (c) supply
chain readiness, including customers as well as inventory and non-inventory
suppliers. To oversee the process, we have established a committee comprised of
accounting and information systems personnel who are reporting regularly to the
board of directors and the audit committee.
We have identified potential deficiencies related to Year 2000 in our
information systems and we are in the process of addressing them through
upgrades and other remediation. We expect to complete remediation and testing of
our internal systems in the summer of 1999. With respect to other equipment with
date-sensitive operating controls, such as manufacturing equipment, HVAC,
security and other similar systems, we are in the process of identifying those
items that may require remediation or replacement. We expect to complete
remediation or replacement and testing of these internal systems in the summer
of 1999. We are in the process of identifying and contacting suppliers -- both
inventory and non-inventory -- and customers to determine the state of their
Year 2000 readiness.
Based upon our current estimates, incremental out-of-pocket costs of our
Year 2000 program are expected to be approximately $250,000. As of March 31,
1999, none of these funds had been spent. These costs are expected to include
third-party consultants, remediation of existing computer software, and
replacement and remediation of embedded chips. These costs do not include
internal management time and the deferral of other projects, the effects of
which we do not expect to be material to our results of operations or financial
condition.
At this stage of the process, we believe that it is difficult to
specifically identify the most reasonably likely worst case Year 2000 scenario.
As with all service providers and manufacturers, a reasonably likely worst case
scenario would be the result of failures of third parties -- including, without
limitation, governmental entitles and entities with which we have no direct
involvement -- that continue for more than several days in various geographic
areas where we provide services, our products are manufactured or from which we
source raw materials and components. In connection with our manufacturing and
supply of raw materials and components,
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we are considering various contingency plans. Any such plans would necessarily
be limited to matters that we can reasonably control.
Our Year 2000 efforts are ongoing and our overall plan, as well as the
consideration of contingency plans, will continue to evolve as new information
becomes available. While we anticipate continuity of our business activities,
that continuity will be dependent upon our ability, and the ability of third
parties upon whom we directly or indirectly rely, 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. We believe RailWorks is positioned to grow significantly due to its
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, maintenance and operations; 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.
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, representing a 5.9% compound annual growth rate. As
a result of industry consolidation, there
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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 that 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" on page . This represents more than a 50%
increase of funding from the previous six-year period. The APTA reports that, in
1997, 53.7% of transit spending derived from federal funding and the balance
derived from state and local sources. Accordingly, opportunities to provide
rail-related signaling, communication, electrical and track
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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. These 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 our 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 37 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 these local facilities. RailWorks can
perform projects at multiple locations for our national account customers,
enabling these 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 weather-related or seasonal variations on 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,
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 to government-mandated
safety standards and we cannot postpone it. We sell our services
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through a large number of individual contracts. No contract accounted for more
than 5.4% 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. The Company has strong
relationships with a wide variety of customers, including:
Class I railroads which 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, which 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, which 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, which 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. As of April 30, 1999, the RailWorks directors and
executive officers and the senior managers of the operating companies
beneficially owned an aggregate of % of the RailWorks outstanding common
stock.
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<PAGE> 47
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 through March 31, 1999, we have acquired six companies with aggregate
revenue of $83.2 million for fiscal 1998. Subsequent to March 31, 1999, we have
acquired three additional operating companies and have entered into letters of
intent to acquire another three companies. We expect to execute a definitive
purchase agreement, which will have customary closing conditions, including
completion of due diligence, during June 1999. However, we cannot guarantee that
we will consummate this transaction. 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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<PAGE> 48
- Expand Within Existing Geographic Markets. Management plans to acquire
additional companies in many of the regions in which we currently
operates 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.
SERVICES AND PRODUCTS 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.
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
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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 its 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 location. By coordinating information across our
network, we can maximize inventory utilization and improve supply for projects
in different regions.
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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;
- access to public capital markets; and
- the opportunity for a continued role in management.
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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 $ 3.8 Frankfort, IN Rail construction
Contractors, Inc services
November 1998 Sheldon Electric Co., 1.4(1) Long Island City, NY Transit services
Inc
January 1999 Gantrex Group 13.9 Ajax, Ontario, Rail products and
Canada supplies
January 1999 Mid West Railroad 13.2 Salt Lake City, UT Rail construction
Construction and services
Maintenance
Corporation of
Wyoming
January 1999 FCM Rail, Ltd 4.9 Grand Blanc, MI Rail products and
supplies
March 1999 F&V Metro Contracting 46.0 Farmingdale, NY Transit services
Corp. and Affiliates
April 1999 M-Track Enterprises, 12.7 Bronx, NY Rail construction
Inc. services
April 1999 McCord Treated Wood, 11.1 Warrior, AL Wooden tie
Inc./ Birmingham suppliers
Wood, Inc.
April 1999 Pacific Northern Rail 17.5 Abbotsford, British Rail construction
Contractors Columbia, Canada services
</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.
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,
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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" beginning on page .
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 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:
a) our design and engineering groups provide timely leads to its
construction, product supply and electrical installation companies,
b) 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
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c) 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 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 the Company -- 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. Some of our 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
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<PAGE> 54
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 our 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 we
discuss safety issues. We also conduct routine safety inspections of local work
sites.
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 the corporate offices,
we lease 27 and own 10 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
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<PAGE> 55
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 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 March 31, 1999, we employed approximately 2,250 employees. We believe
that we have good relations with our employees.
Approximately 66.9% 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.
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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 in 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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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
We sold the old notes on April 7, 1999 to BT Alex. Brown, NationsBanc
Montgomery Securities LLC and First Union Capital Markets pursuant to a purchase
agreement. These initial purchasers 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 purchasers 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 June 7, 1999 and
- use our reasonable best efforts to cause the registration statement to
become effective under the Securities Act on or before September 6, 1999.
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
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the registration statement relating to this exchange offer effective. See "Plan
of Distribution" for more information regarding broker-dealers.
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 will be issued under, and be entitled to the benefits of, the
same indenture that authorized the issuance of the old notes. As a result, both
the new notes and the old 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, $125,000,000 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 , 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 holder 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
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not have to pay transfer taxes for the exchange of old notes. We will pay all
charges and expenses 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 ,
1999, 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 April 7, 1999,
payable semi-annually in arrears on April 15 and October 15 of each year,
beginning on October 15, 1999. Old notes accepted for
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exchange will not receive accrued interest thereon at the time of exchange.
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 April 7, 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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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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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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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 (i) your old notes are not
immediately available so that you can meet the expiration date deadline, (ii)
you cannot deliver your old notes or other required documents to the exchange
agent prior to the expiration date, or (iii) 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:
(a) 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
(b) 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
(c) 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
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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 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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<PAGE> 67
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 RailWorks:
<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 and Chief
Operating Officer
John Kennedy...................................... 60 Vice President, Chief Operating
Officer-- Track Contractors and Director
Peter Alan Pasch.................................. 48 Vice President, Chief Operating
Officer -- Transit Operations and
Director
Scott D. Brace.................................... 43 President of Railroad Service and
Director
Steve C. Goggin................................... 52 President of Merit and Director
Lambertus L. Tameling............................. 62 President of U.S. Trackworks and Director
Ronald W. Drucker................................. 57 Director
R.C. Matney....................................... 61 Director
KEY EMPLOYEES:
Gene J. Cellini................................... 41 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 D. 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
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<PAGE> 68
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.
Kenneth R. Burk joined RailWorks in May 1999 to serve as Executive Vice
President and Chief Operating Officer. 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 June 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.
Peter Alan Pasch has served as a director of RailWorks since the IPO and as
Vice President and Chief Operating Officer -- Transit Operations since January
1999. From August 1998 to January 1999, Mr. Pasch served as Chief Executive
Officer of Comstock and from April 1997 to August 1998 he served as President
and Chief Operating Officer of Comstock. From October 1995 to April 1997, Mr.
Pasch served as Executive Vice President of Comstock in charge of operations
outside the New York Metropolitan area. Mr. Pasch served as Executive Vice
President of Comstock from October 1987 to September 1995. Mr. Pasch joined
Comstock in 1973 after receiving his Master of Engineering Degrees from
Rensselaer Polytechnic Institute. Mr. Pasch is a Registered Professional
Engineer in 45 states, a Master Electrician in 18 states and is a member of the
International Brotherhood of Electrical Workers.
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.
Steve C. Goggin has served as a director of RailWorks since the IPO and as
President of Merit since October 1986. Mr. Goggin is a past President of the
NRCMA.
Lambertus L. Tameling has served as a director of RailWorks since the IPO,
as President of U.S. Trackworks since April 1986 and as President of Northern
Rail since February 1992. Mr. Tameling is a past President 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.
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<PAGE> 69
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.
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.
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 nine members of the board of directors. Two of the
directors, Messrs. Drucker and Matney, are non-employee, independent directors
of RailWorks. The members of the RailWorks board of directors serve staggered
terms as follows: the terms of Messrs. Kennedy, Pasch and Drucker expire at the
1999 Annual Meeting of Stockholders; the terms of Messrs. Azarela, Goggin and
Tameling expire at the 2000 Annual Meeting of Stockholders; and the terms of
Messrs. Larkin, Brace and Matney expire at the 2001 Annual Meeting of
Stockholders. The RailWorks board of directors has an audit committee and a
compensation committee that each consist of Messrs. Drucker and Matney, the
Company's two 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
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<PAGE> 70
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
The members of the Compensation Committee are Messrs. Drucker and Matney,
the Company's two independent directors. During 1998, neither member of the
Compensation Committee engaged in any transactions with RailWorks.
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 RailWorks 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...... Vice President, Chief 200,000 23,000 -- 21,200(3)
Operating Officer --
Transit
</TABLE>
- ---------------
(1) Represents $39,801 in moving expenses that were paid by RailWorks, $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, although a Named Executive Officer, was not employed by RailWorks
during the year ended December 31, 1998.
(3) 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, for each such contract,
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 $275,000, $200,000 and $100,000 for Messrs. Larkin,
Azarela and Kennedy, respectively, and provide that these executive officers
will receive 5%, 2% and 1.5% respectively,
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<PAGE> 71
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 some predetermined benchmarks. In addition, the
agreements provide 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 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.
We have 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 our 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 our stockholders have
approved, the RailWorks Incentive Plan. There are 2,000,000 shares of common
stock reserved for issuance under the Incentive Plan and, as of May 1, 1999,
there were 80,000 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, called "ISOs" or
non-qualified stock options, called "NQSOs," and together with ISOs, called
"Options"; (2) stock appreciation rights, called "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.
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<PAGE> 72
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.
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, referred to in this prospectus as 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 the
applicable 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 RailWorks stockholders, 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 some of its officers, directors and principal
stockholders. In addition, the table below shows some information regarding
transactions and relationships prior to the IPO between some of the Founding
Companies and their respective officers, directors and principal stockholders.
GENERAL
Prior to the IPO, some 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. Some of the
directors and executive officers of RailWorks were owners of some 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>
67
<PAGE> 73
Michael R. Azarela, former Chief Executive Officer of Comstock, is
Executive Vice President and Chief Financial Officer of RailWorks. Upon
completion of the IPO, Peter Alan Pasch, then President and Chief Operating
Officer of Comstock became a director 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, Steve C.
Goggin, President of Merit, Scott D. Brace, President of Railroad Service, and
Lambertus L. Tameling, President of U.S. Trackworks, became directors of
RailWorks. Each of Messrs. Azarela, Pasch, Kennedy, Goggin, Brace and Tameling
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, called the "Contingent Note," collateralized by any
proceeds derived from three projects, called 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
cancelled. 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.
RELATED PARTY LEASES
During 1998, companies controlled by Mr. Goggin and his spouse leased some
property and equipment to one of the operating companies. Property lease
payments made by that operating company totaled approximately $81,000 in 1998.
Equipment lease payments made by that operating company totalled approximately
$250,000 in 1998.
LOANS TO OFFICERS
Pursuant to the employment agreements, RailWorks made loans to some 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 -- $609,000; Michael R.
Azarela -- $126,000; and John Kennedy -- $95,000.
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<PAGE> 74
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the common stock as of May 15, 1999 by: (1) each Named Executive
Officer of RailWorks; (2) each director of RailWorks; and (3) all directors and
executive officers of RailWorks as a group. Unless otherwise provided, each
listed person's address is c/o RailWorks Corporation, 1104 Kenilworth Drive,
Suite 301, Baltimore, Maryland 33807, and each person listed has sole voting and
investment power with respect to his or her shares unless otherwise indicated.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
-----------------------
BENEFICIAL OWNER NUMBER PERCENT(1)
---------------- ---------- ----------
<S> <C> <C>
John G. Larkin.............................................. 828,309 6.0%
BT Alex. Brown(2)........................................... 2,009,061 13.2
Michael R. Azarela.......................................... 551,747 4.0
Kenneth R. Burk(3).......................................... 50,000 *
John Kennedy................................................ 404,021 2.9
Peter Alan Pasch(4)......................................... 421,012 3.1
Scott D. Brace.............................................. 200,093 1.5
Steve C. Goggin............................................. 292,456 2.1
Lambertus L. Tameling....................................... 72,587 *
Ronald W. Drucker........................................... 3,000 *
R.C. Matney................................................. 2,000 *
All executive officers and directors as a group (10
persons).................................................. 2,825,225(5) 20.4
</TABLE>
- ---------------
* Less than one percent.
(1) Based on an aggregate of 13,796,038 shares of common stock issued and
outstanding as of May 15, 1999 plus, for each person, (i) the number of
shares of common stock issuable upon conversion of shares of Series A
convertible preferred stock beneficially owned by such person, and (ii) the
number of shares of common stock issuable upon exercise of outstanding stock
options that are or will become exercisable prior to July 27, 1999.
(2) Represents (i) 639,061 shares of common stock of RailWorks and (ii) 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, BT Alex. Brown Incorporated would own 5% or more of the
RailWorks common stock. The address of BT Alex. Brown Incorporated is 130
Liberty Street, New York, New York 10006.
(3) Represents 50,000 shares issuable upon exercise of outstanding options.
(4) Includes 20,000 shares issuable upon exercise of outstanding options.
(5) Represents (i) 2,755,225 shares beneficially owned by such directors and
executive officers, and (ii) 70,000 shares issuable upon exercise of
outstanding stock options that are or will become exercisable prior to July
27, 1999.
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<PAGE> 75
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 $1.00 per share. The following 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 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 RailWorks, 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, RailWorks issued 13,700 shares of preferred stock, designated Series A
convertible preferred stock, to BT Alex. Brown Incorporated, in exchange for
1,370,000 shares of common stock. The stock exchange reduced BT Alex. Brown
Incorporated'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, BT Alex. Brown Incorporated 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 RailWorks. 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.
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 Delaware General
Corporation Law, or "DGCL". Section 203 prohibits a publicly held Delaware
corporation from engaging in a
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"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 eliminates liability of directors of
RailWorks 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 be removed from office only 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, we have financed cash for acquisitions and working capital
from funds generated from operations, together with borrowings under our
three-year, $75 million senior secured revolving credit facility with
NationsBank, N.A. The credit facility matures on August 4, 2001, subject to
acceleration upon the occurrence of an event of default or a change in control.
Borrowings under the credit facility bear interest, at our RailWorks 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", each as defined in the credit facility, or (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 125 basis points based on
the ratio of Funded Debt to EBITDA. As of May 1, 1999, borrowings under the
credit facility bore interest at a weighted average interest rate of 8.50%.
Borrowings under the credit facility are secured by a first lien on all of
the capital stock of our subsidiaries and on all accounts receivable of
RailWorks and the RailWorks subsidiaries and repayment is guaranteed by
RailWorks and RailWorks's subsidiaries. The credit facility contains usual and
customary events of default and financial covenants regarding, among other
things, debt coverage, net worth and earnings. The credit facility also contains
covenants and provisions that restrict, among other things, our ability and the
ability of our subsidiaries to: (1) incur additional indebtedness and liens on
property, (2) merge or consolidate with or acquire another person or engage in
other fundamental changes, (3) make acquisitions and investments, (4) make
dividend and other payments and (5) engage in defined types of sales,
sale-leasebacks and dispositions of property. As of the date of this prospectus,
we comply with all covenants under the credit facility.
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.
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The old notes were, and the new notes will be, issued under the indenture
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.
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 old and new notes and will vote on all matters
with the old and new notes. Unless otherwise indicated, references herein to the
notes 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 April 7,
1999. Interest is computed on the basis of a 360-day year comprised of twelve
30-day months.
The notes are not be entitled to the benefit of any mandatory sinking fund.
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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 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.
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.
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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.
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 new
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 for the 1999 Acquisitions and the sale of the old notes and the
application of the net proceeds, at March 31, 1999, there would have been no
senior debt outstanding, and we would have had $75 million available for
borrowing under the credit facility.
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GUARANTEES
The Guarantors, which will initially include all of our domestic Restricted
Subsidiaries existing on April 7, 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
RailWorks 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 the 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 subsidiary 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 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-
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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 Notes -- We May be Unable
to Finance a Change of Control Offer."
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
securities laws and regulations and will not be deemed to have breached our
obligations under the "Change of Control" provisions of the indenture.
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
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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 the
Company 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 RailWorks Capital Stock, other than in
either case any RailWork's 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 except a Permitted Investment (each of the
actions in clauses (1), (2), (3) and (4) are referred to as a "Restricted
Payment"), if;
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
(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
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(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's
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.
The foregoing provisions do not prohibit:
(1) the payment of any dividend within 60 days after the date of its
declaration 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 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"
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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 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 will 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 we computed the required calculations, 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 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 is 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 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, such assets being
referred to as "Replacement Assets"; or
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(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, such aggregate amount of
net cash being referred to as 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 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 will 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 will 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.
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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, 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
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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.
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
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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.
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
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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 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;
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(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, with respect to the annual information only, a
report thereon by RailWorks's certified independent accounts; and
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(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 of its Restricted Subsidiaries 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 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
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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 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.
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Under the indenture, we are required to provide an officers' certificate to
the trustee promptly upon any officer's obtaining knowledge of any Default or
Event of Default, provided that such officers shall provide such certification
at least annually as to 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
(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
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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 contains some
limitations on the rights of the trustee, should it become a creditor of
RailWorks, to obtain payments of claims in some cases or to realize on some
property received in respect of any claim as security or
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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 RailWorks 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,
called "S&P", or Moody's Investors Service, Inc., called "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 the RailWorks board of directors at the beginning of the period
or whose election as a member of the RailWorks board of directors was
previously 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, called 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 RailWork's 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 RailWorks 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 the Issue Date;
(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 Credit Agreement, dated as of August 4, 1998,
as amended, among RailWorks, the lenders party to the Credit Agreement in their
capacities as lenders under the Credit Agreement 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
RailWorks 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.
"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 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 April 7, 1999.
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"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 April 7, 1999 and (2) each of the domestic Restricted
Subsidiaries of RailWorks that in the future executes a supplemental indenture
in which the 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 from 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
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(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 the Company; and (2) which, in the judgment of
the board of directors of RailWorks, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"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
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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 postemployment
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.
"Permitted Indebtedness" means, without duplication, each of the following:
(1) Indebtedness under the notes issued on April 7, 1999 in an
aggregate principal amount not to exceed $125.0 million and the Guarantees;
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(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 RailWorks's 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;
(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;
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(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;
(5) Currency Agreements and Interest Swap Obligations entered into in
the ordinary course of business of RailWorks or any of its Restricted
Subsidiaries 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;
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(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 RailWorks 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 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;
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(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 RailWorks 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.
"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.
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"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;
(2) all Interest Swap Obligations; and
(3) all obligations under Currency Agreements, in each case whether
outstanding on April 7, 1999 or thereafter incurred.
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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.
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
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(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 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.
EXCHANGE OFFER; REGISTRATION RIGHTS
As part of the sale of the old notes to BT Alex. Brown, NationsBanc
Montgomery Securities LLC and First Union Capital Markets pursuant to the
purchase agreement, dated April 1, 1999, among RailWorks and those initial
purchasers, the holder of the old notes became entitled to the benefits of the
registration rights agreement, dated as of April 7, 1999 by and among RailWorks
and the initial purchasers.
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 nots, except that the new notes will not
contain transfer restrictions, by June 7, 1999;
- to use our reasonable best efforts to cause the registration statement to
become effective under the Securities Act by September 7, 1999;
- 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
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- 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 beneficial
owners of old notes. We are sending this prospectus, together with the letter of
transmittal, to all the beneficial holders known to us. 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 (i) 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 (ii) if
no interest has been paid on the old note, from April 7, 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 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
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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 October 11, 1999,
(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 April 7, 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 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 150 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 150th 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 October 11, 1999, or (B) if
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applicable, the shelf registration statement has been declared effective
and the shelf registration statement ceases to be effective at any time
prior to April 7, 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.
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BOOK-ENTRY; DELIVERY AND FORM
The exchange 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
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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.
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
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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.
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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 purchase, ownership and disposition of
the Notes by holders thereof, based upon current provisions of the Internal
Revenue Code of 1986, 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 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 are the
initial purchasers of the notes for cash and 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 kin or extend 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, 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.
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 and F&V Metro
Contracting Corp. and Affiliates 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.
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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 our Annual Report on Form 10-K for the year
ended December 31, 1998, which we filed with the SEC on March \29, 1999, and our
Quarterly Report on Form 10-Q for the three months ended March 31, 1999, which
we filed with the SEC on May 14, 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
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;
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- 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.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
RAILWORKS CORPORATION AND SUBSIDIARIES
Audited Financials:
Report of Independent Public Accountants.................. F-2
Consolidated Balance Sheets as of December 31, 1998 and
1997................................................... F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1998, 1997 and 1996....................... F-4
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1998, 1997 and 1996........... F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996....................... F-6
Notes to Consolidated Financial Statements................ F-7
Unaudited Financials:
Consolidated Balance Sheets as of March 31, 1999 and
December 31, 1998...................................... F-24
Consolidated Statements of Income for the Three Months
Ended March 31, 1999 and 1998.......................... F-25
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1999 and 1998.......................... F-26
Notes to Consolidated Financial Statements.................. F-27
GANTREX GROUP
Report of Independent Chartered Accountants............... F-32
Combined Balance Sheet as of December 31, 1998............ F-33
Combined Statements of Income and Retained Earnings for
the Year Ended December 31, 1998....................... F-34
Combined Statement of Cash Flows for the Year Ended
December 31, 1998...................................... F-35
Notes to Combined Financial Statements.................... F-36
MID WEST RAILROAD CONSTRUCTION AND MAINTENANCE CORPORATION
OF WYOMING
Report of Independent Public Accountants.................. F-40
Balance Sheet as of December 31, 1998..................... F-41
Statement of Operations and Retained Earnings for the Year
Ended December 31, 1998................................ F-42
Statement of Cash Flows for the Year Ended December 31,
1998................................................... F-43
Notes to Financial Statements............................. F-44
F&V METRO CONTRACTING CORP. AND AFFILIATES
Report of Independent Public Accountants.................. F-48
Combined Statement of Net Liabilities as of November 30,
1998................................................... F-49
Combined Statement of Operations for the Year Ended
November 30, 1998...................................... F-50
Combined Statement of Cash Flows for the Year Ended
November 30, 1998...................................... F-51
Notes to Combined Financial Statements.................... F-52
</TABLE>
F-1
<PAGE> 123
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-2
<PAGE> 124
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-3
<PAGE> 125
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-4
<PAGE> 126
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-5
<PAGE> 127
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-6
<PAGE> 128
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-7
<PAGE> 129
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-8
<PAGE> 130
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-9
<PAGE> 131
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-10
<PAGE> 132
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-11
<PAGE> 133
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-12
<PAGE> 134
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-13
<PAGE> 135
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-14
<PAGE> 136
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-15
<PAGE> 137
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-16
<PAGE> 138
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-17
<PAGE> 139
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-18
<PAGE> 140
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-19
<PAGE> 141
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-20
<PAGE> 142
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>
F-21
<PAGE> 143
RAILWORKS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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>
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
F-22
<PAGE> 144
RAILWORKS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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> 145
RAILWORKS CORPORATION
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash...................................................... $ 3,073 $ 2,846
Accounts receivable, net of allowance for doubtful
accounts of $451 and $442 at March 31, 1999 and December
31, 1998, respectively.................................. 88,432 77,181
Costs and estimated earnings in excess of billings on
uncompleted contracts................................... 31,328 24,792
Inventories:
Raw materials........................................... 9,998 7,535
Finished goods.......................................... 3,576 1,550
Deferred tax asset........................................ 951 870
Other current assets...................................... 6,055 3,401
-------- --------
Total current assets............................... 143,413 118,175
-------- --------
PROPERTY, PLANT AND EQUIPMENT............................... 29,880 14,514
LESS -- ACCUMULATED DEPRECIATION AND AMORTIZATION........... 2,190 1,122
-------- --------
PROPERTY, PLANT AND EQUIPMENT, Net.......................... 27,690 13,392
-------- --------
OTHER ASSETS:
Excess of cost over acquired net assets, net of
amortization............................................ 131,842 93,845
Deferred tax asset........................................ 85 85
Loans to officers......................................... 959 959
Other..................................................... 1,758 2,180
-------- --------
Total other assets................................. 134,644 97,069
-------- --------
Total.............................................. $305,747 $228,636
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt...................... $ 39,131 $ 931
Accounts payable and accrued liabilities.................. 38,309 35,436
Accrued payroll and related withholdings.................. 5,162 3,777
Billings in excess of costs and estimated earnings on
uncompleted contracts................................... 14,158 5,958
Other current liabilities................................. 4,936 4,682
-------- --------
Total current liabilities.......................... 101,696 50,784
-------- --------
Long-term debt.............................................. 71,650 50,573
Excess of acquired net assets over cost, net of
amortization.............................................. 8,605 8,662
Other liabilities........................................... 11,138 8,609
-------- --------
Total long-term liabilities........................ 91,393 67,844
-------- --------
Total liabilities.................................. 193,089 118,628
-------- --------
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, 13,803,530 issued and outstanding at March 31,
1999, 13,703,530 issued and outstanding at December 31,
1998.................................................... 138 137
Additional paid-in capital................................ 122,309 121,296
Retained earnings (deficit)............................... (9,803) (11,439)
-------- --------
Total stockholders' equity......................... 112,658 110,008
-------- --------
Total.............................................. $305,747 $228,636
======== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-24
<PAGE> 146
RAILWORKS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1999 1998
----------- ----------
<S> <C> <C>
Revenues.................................................... $ 72,673 $ 41,628
Contract costs.............................................. 60,074 37,205
----------- ----------
Gross profit................................................ 12,599 4,423
Selling, general and administrative expenses................ 7,773 3,224
Depreciation and amortization expense....................... 991 (39)
Interest expense............................................ 1,613 420
Interest and other income................................... (400) (292)
----------- ----------
Income before income taxes.................................. 2,622 1,110
Provision for income taxes.................................. 986 444
----------- ----------
Net income........................................ $ 1,636 $ 666
=========== ==========
Basic earnings per share.................................... $ .12 $ .23
=========== ==========
Diluted earnings per share.................................. $ .11 $ .23
=========== ==========
Weighted average shares used in computing basic earnings per
share..................................................... 13,775,752 2,959,291
=========== ==========
Weighted average shares used in computing diluted earnings
per share................................................. 15,149,047 2,959,291
=========== ==========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-25
<PAGE> 147
RAILWORKS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
------------------
1999 1998
-------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 1,636 $ 666
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 1,954 (39)
Deferred taxes............................................ (81) 424
Gain on sale of equipment................................. (32) (8)
Change in assets and liabilities:
Accounts receivable and costs and estimated earnings in
excess of billings on uncompleted contracts........... 10,048 (105)
Inventory.............................................. (164) 990
Other current assets................................... 366 70
Accounts payable and accrued liabilities............... (9,174) 1,722
Accrued payroll and related withholdings............... 1,157 469
Billings in excess of costs and estimated earnings on
uncompleted contracts................................. (2,228) (3,107)
Other current liabilities.............................. (1,813) 418
Other assets........................................... 2,751 (21)
Other liabilities...................................... (2,380) (11)
-------- -------
Net cash provided by operating activities......... 2,040 1,468
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment........................... 1,416 8
Purchase of equipment and leasehold improvements.......... (1,031) (65)
Acquisition of subsidiaries, net of cash acquired......... (34,130) --
-------- -------
Net cash used in investing activities............. (33,745) (57)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings........................ 63,519 2,019
Repayment of long-term borrowings......................... (31,587) (3,605)
-------- -------
Net cash provided by (used in) financing
activities....................................... 31,932 (1,586)
-------- -------
NET INCREASE (DECREASE) IN CASH............................. 227 (175)
CASH, beginning of period................................... 2,846 1,120
-------- -------
CASH, end of period......................................... $ 3,073 $ 945
======== =======
SUPPLEMENTARY DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for interest.................. $ 1,350 $ 355
======== =======
Cash paid during the period for income taxes.............. $ 564 $ 66
======== =======
</TABLE>
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.
The Company also issued an aggregate amount of $9,000,000 in promissory
notes 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.
See Accompanying Notes to Consolidated Financial Statements.
F-26
<PAGE> 148
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 three months ended March 31, 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.
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 Frankfort, Indiana.
On January 7, 1999, the company acquired all the stock of MidWest Railroad
Construction & Maintenance Corporation of Wyoming ("MidWest") 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. In
March 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 combined purchase price for these first quarter 1999 acquisitions was
$33,649,000 in cash, $9,000,000 of promissory notes payable 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
$9,704,000 and the preliminary goodwill was approximately $33,945,000. The
estimated fair market values are based upon preliminary estimates and
assumptions and are subject to revision. Any additional purchase price paid will
increase the goodwill reported.
F-27
<PAGE> 149
RAILWORKS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 fair values at the date of acquisition.
3. CREDIT FACILITIES
In the first quarter of 1999, RailWorks Corporation obtained two new credit
facilities; a Bridge Term Facility and a Swingline Revolving Facility.
The Bridge Term Facility (the "Bridge") is a non-revolving, $25,000,000
term commitment, issued on February 2, 1999, with a June 30, 1999 maturity date.
The facility was an amendment to the Company's Revolving Credit Facility issued
on August 4, 1998, including consistent pricing, terms and conditions. The
Company borrowed $25,000,000 on the Bridge during the first quarter of 1999. The
interest rate during the quarter was 9.00% and 8.5% for the remainder of the
term. The full principal amount of $25,000,000 was repaid on April 8, 1999, see
Note 8. A 1.7% facility fee was paid on the Bridge.
The Swingline Revolving Facility (the "Swingline") is a revolving
commitment of $2,000,000 issued on January 5, 1999. The Swingline, which expires
on August 4, 2001, was executed as an amendment to the Company's existing
Revolving Credit Facility. The Swingline allows for borrowings and repayments
within the Company's Revolving Credit Facility in increments of $1 directly with
NationsBank, the agent under the Revolving Credit Facility. Interest is based
upon consolidated leverage ratios in a pricing matrix which may be based upon
prime or LIBOR. RailWorks borrowed against the Swingline during the first
quarter and the balance outstanding as of March 31, 1999 was $583,387. The
monthly fee for the facility is $250.
A $2,150,000 letter of credit on the Company's Revolving Credit Facility
was issued on February 26, 1999, related to the acquisition of Gantrex Group.
4. 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
F-28
<PAGE> 150
RAILWORKS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
if certain securities are converted and also includes certain shares that are
contingently issuable. The following is the computation of earnings per share as
of March 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
Net income................................................ $ 1,636,000 $ 666,000
=========== ==========
Shares used for calculating basic EPS..................... 13,775,752 2,959,291
Dilutive effect of:
Stock options........................................... 3,295 *
Convertible preferred shares............................ 1,370,000 *
----------- ----------
Shares used for calculating diluted EPS................... 15,149,047 2,959,291
=========== ==========
Basic EPS................................................. $ .12 $ .23
=========== ==========
Diluted EPS............................................... $ .11 $ .23
=========== ==========
</TABLE>
- ---------------
* There were no stock options and convertible preferred shares issued and
outstanding during the three months ended March 31, 1998.
5. FINANCIAL INSTRUMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133").
SFAS No. 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 No. 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 No. 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. 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 March 31, 1999, of the
Company's $10,000,000 notional value interest rate swap was approximately
$46,000.
RailWorks entered into an interest rate collar on March 11, 1999, to hedge
against significant interest rate changes. The transaction was comprised of two
offsetting $50,000,000 interest rate swap options, which expired on March 31,
1999. In effect, the transactions provided RailWorks with a collar on the rate
of the 10-year Treasury Swap at a floor of 5.73% and a ceiling of 6.23%. The
rate did not vary outside of the collar and the options were not executed. There
was no fee for this transaction.
On April 4, 1999, RailWorks negotiated the termination of the previously
disclosed $10,000,000 interest rate swap with First Union Bank. The bank agreed
to pay a Termination Fee
F-29
<PAGE> 151
RAILWORKS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of $32,100 to RailWorks Corporation, to be recorded as a reduction in interest
expense and which nullified the swap transaction.
6. 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,
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 matrix presents operational and financial condition data as
of and for the three months ended March 31, 1999 for analysis by reportable
segment (in thousands). For the three months ended March 31, 1998, Comstock
operated in one reportable segment: Transit Services. Accordingly, no additional
disclosures are required under SFAS No. 131.
<TABLE>
<CAPTION>
TRANSIT RAIL PRODUCTS RAIL OTHER/
SERVICES AND SUPPLIES CONSTRUCTION CORPORATE TOTAL
-------- ------------- ------------ --------- --------
<S> <C> <C> <C> <C> <C>
Revenues from external customers.... $48,758 $ 8,241 $16,326 $ -- $ 73,325
Intersegmental revenue.............. -- 334 318 -- 652
Depreciation/amortization........... 32 429 565 928 1,954
Segment operating profit (loss)..... 1,806 1,508 1,187 (666) 3,835
Costs and estimated earnings in
excess of billings on uncompleted
contracts......................... 28,673 -- 2,655 -- 31,328
Segment assets...................... 75,554 27,916 27,097 210,249 340,816
Capital expenditures................ 73 234 692 32 1,031
</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.................... $ 73,325
Elimination of intersegment revenues...................... (652)
--------
Consolidated revenues..................................... $ 72,673
========
OPERATING PROFIT OR LOSS:
Total profit or loss for reportable segments.............. $ 3,835
========
ASSETS:
Total assets for reportable segments...................... $340,816
Elimination of intercompany receivables/payables.......... (551)
Elimination of investments in subsidiaries................ (34,518)
--------
Consolidated assets....................................... $305,747
========
</TABLE>
F-30
<PAGE> 152
RAILWORKS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. CAPITAL STOCK AND STOCK OPTIONS
The Company issued 100,000 shares of common stock as partial consideration
for the acquisition of the outstanding stock of FCM Rail, Ltd.
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.
Under the terms of the Plan, the Company issued options to purchase 200,000
shares of common stock to a president and certain employees at one of the
companies that RailWorks acquired during the first quarter of 1999. 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 under the Plan, the
Company issued options to purchase 50,000 shares of common stock to an employee
of RailWorks. The exercise price of the options was the market price of the
stock on the date of grant. The options expire five years after the date of
grant.
In connection with acquisition of a subsidiary, the Company granted 10,000
options to purchase common stock to a non-employee as a finders fee. The value
of the options has been included in the cost of the acquisition.
8. SUBSEQUENT EVENTS
DEBT ISSUANCE
On April 1, 1999, the Company sold $125 million of Senior Subordinated
Notes. The notes were sold in a private placement under Rule 144A under the
Securities Act of 1933. The net proceeds from the offering were used to repay
approximately $100 million of indebtedness with the remaining proceeds available
for general corporate purposes including future acquisitions. The notes have an
interest rate of 11.50%, payable semi-annually and are due in 2009 with no
interim amortization requirements.
ACQUISITIONS
On April 12, 1999, the Company acquired all the 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 the stock of M-Track Enterprises ("M-Track") which
specializes in rail transit construction, repair and maintenance of track 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 $18,345,000 in cash and 93,842
shares of common stock, plus the potential to receive earnouts if targeted
revenue and profit goals are achieved. The estimated fair market value of assets
purchased was approximately $9,000,000 and the estimated goodwill recorded was
$10,345,000. The estimated fair market values reflected above are based on
preliminary estimates and assumptions and are subject to revision.
F-31
<PAGE> 153
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-32
<PAGE> 154
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-33
<PAGE> 155
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-34
<PAGE> 156
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-35
<PAGE> 157
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-36
<PAGE> 158
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-37
<PAGE> 159
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-38
<PAGE> 160
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-39
<PAGE> 161
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-40
<PAGE> 162
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-41
<PAGE> 163
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-42
<PAGE> 164
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-43
<PAGE> 165
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-44
<PAGE> 166
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-45
<PAGE> 167
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-46
<PAGE> 168
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-47
<PAGE> 169
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-48
<PAGE> 170
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-49
<PAGE> 171
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-50
<PAGE> 172
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-51
<PAGE> 173
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-52
<PAGE> 174
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-53
<PAGE> 175
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-54
<PAGE> 176
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-55
<PAGE> 177
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-56
<PAGE> 178
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-57
<PAGE> 179
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-58
<PAGE> 180
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-59
<PAGE> 181
- ------------------------------------------------------
- ------------------------------------------------------
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 THE COMPANY. 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 CIRCUMSTANCES, 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 THE COMPANY SINCE SUCH DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Risk Factors.......................... 10
Use of Proceeds....................... 18
Capitalization........................ 19
Pro Forma Financial Information....... 20
Selected Historical Consolidated
Financial Data...................... 27
Management's Discussion and Analysis
of Financial Conditions and Results
of Operations....................... 29
Business.............................. 38
The Exchange Offer.................... 51
Management............................ 61
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Certain Relationships and Related
Party Transactions.................. 66
Principal Stockholders................ 68
Description of Credit Facility........ 70
Description of the New Notes.......... 70
Book-Entry; Delivery and Form......... 110
Plan of Distribution.................. 111
Certain Untied States Federal Income
Tax Considerations.................. 113
Legal Matters......................... 113
Experts............................... 113
Where You Can Find More Information... 114
Special Note Regarding Forward-
Looking Statements.................. 114
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
-------------------
, 1999
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 182
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> 183
<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* -- Specimen Preferred Stock Certificate.
4.3* -- Form of 11 1/2% Senior Subordinated Notes due 2009 (included
in Exhibit 4.5).
4.4 -- 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).
4.5* -- Indenture, dated as of April 7, 1999 (the "Indenture") among
RailWorks, the Guarantors named therein and First Union
National Bank, as Trustee.
4.6* -- Registration Rights Agreement, dated as of April 7, 1999,
among RailWorks, the Guarantors named therein and BT
Alex.Brown Incorporated, NationsBanc Montgomery Securities,
LLC and First Union Capital Markets Corp., as Initial
Purchasers.
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> 184
<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> 185
<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 or 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 -- 1998 Incentive Stock Plan (incorporated by reference to
Exhibit 10.29 to the Registrant's Registration Statement on
Form S-1 (File No. 333-53483)).
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> 186
<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 -- Credit Agreement dated as of August 4, 1998 among RailWorks
Corporation, as Borrower, Certain Subsidiaries, as
Guarantors, the Lenders named therein, First Union National
Bank, as Documentation Agent and NationsBank, N.A., as
Administrative Agent (incorporated by reference to Exhibit
10.34 to the Registrant's Annual Report on Form 10-K filed
on March 29, 1999).
10.35 -- Amendment No. 1 to Credit Agreement dated December , 1998
among RailWorks Corporation, as Borrower, the Guarantors and
Lenders named therein and NationsBank, N.A., as
Administrative Agent (incorporated by reference to Exhibit
10.35 to the Registrant's Annual Report on Form 10-K filed
on March 29, 1999).
10.36 -- Amendment No. 2 to Credit Agreement dated February 2, 1999
among RailWorks Corporation, and as Borrower, the Guarantors
and Lenders named therein and NationsBank, N.A., as
Administrative Agent (incorporated by reference to Exhibit
10.36 to the Registrant's Annual Report on Form 10-K filed
on March 29, 1999).
10.37 -- Credit Agreement dated as of February 2, 1999 among
RailWorks Corporation, as Borrower, Certain Subsidiaries, as
Guarantors, the Lenders named therein and NationsBank, N.A.,
as Administrative Agent (incorporated by reference to
Exhibit 10.37 to the Registrant's Annual Report on Form 10-K
filed on March 29, 1999).
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).
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 (contained on signature pages).
25.1* -- Statement of Eligibility of Trustee on Form T-1.
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.
99.3* -- Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
</TABLE>
II-5
<PAGE> 187
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <C> <S>
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.
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> 188
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 May 28, 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>
/s/ JOHN G. LARKIN Chairman of the Board May 28, 1999
- -----------------------------------------------------
John G. Larkin
/s/ MICHAEL R. AZARELA Executive Vice President, Chief May 28, 1999
- ----------------------------------------------------- Financial Officer and Director
Michael R. Azarela (Principal Financial Officer)
/s/ HAROLD C. KROPP Vice President and Chief May 28, 1999
- ----------------------------------------------------- Accounting Officer (Principal
Harold C. Kropp Accounting Officer)
/s/ JOHN KENNEDY Vice President, Chief Operating May 28, 1999
- ----------------------------------------------------- Officer -- Track Contractors
John Kennedy and Director
</TABLE>
II-7
<PAGE> 189
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ PETER ALAN PASCH Vice President, Chief Operating May 28, 1999
- ----------------------------------------------------- Officer -- Transit Operations
Peter Alan Pasch and Director
/s/ SCOTT D. BRACE Director May 28, 1999
- -----------------------------------------------------
Scott D. Brace
/s/ LAMBERTUS L. TAMELING Director May 28, 1999
- -----------------------------------------------------
Lambertus L. Tameling
/s/ RONALD W. DRUCKER Director May 28, 1999
- -----------------------------------------------------
Ronald W. Drucker
/s/ R.C. MATNEY Director May 28, 1999
- -----------------------------------------------------
R.C. Matney
/s/ STEVE C. GOGGIN Director May 28, 1999
- -----------------------------------------------------
Steve C. Goggin
</TABLE>
II-8
<PAGE> 190
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 May 28, 1999.
ALPHA KEYSTONE ENGINEERING, INC.
By: /s/ FULTON J. KENNEDY
------------------------------------
Fulton J. Kennedy
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>
/s/ FULTON J. KENNEDY President May 28, 1999
------------------------------------------------------
Fulton J. Kennedy
/s/ HAROLD C. KROPP Treasurer May 28, 1999
------------------------------------------------------
Harold C. Kropp
/s/ MICHAEL R. AZARELA Executive Vice President, May 28, 1999
------------------------------------------------------ Assistant Secretary and
Michael R. Azarela Director
/s/ JOHN KENNEDY Assistant Secretary and May 28, 1999
------------------------------------------------------ Director
John Kennedy
/s/ JOHN G. LARKIN Director May 28, 1999
------------------------------------------------------
John G. Larkin
</TABLE>
II-9
<PAGE> 191
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 May 28, 1999.
ARMCORE ACQUISITION CORP.
By: /s/ RALPH JACKSON
------------------------------------
Ralph Jackson
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>
/s/ RALPH JACKSON President and Director May 28, 1999
------------------------------------------------------
Ralph Jackson
/s/ HAROLD C. KROPP Treasurer May 28, 1999
------------------------------------------------------
Harold C. Kropp
/s/ MICHAEL R. AZARELA Executive Vice President and May 28, 1999
------------------------------------------------------ Director
Michael R. Azarela
/s/ JOHN G. LARKIN Director May 28, 1999
------------------------------------------------------
John G. Larkin
</TABLE>
II-10
<PAGE> 192
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 May 28, 1999.
ARMCORE RAILROAD CONTRACTORS, INC.
By: /s/ RALPH JACKSON
------------------------------------
Ralph Jackson
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>
/s/ RALPH JACKSON President and Director May 28, 1999
- -----------------------------------------------------
Ralph Jackson
/s/ HAROLD C. KROPP Treasurer May 28, 1999
- -----------------------------------------------------
Harold C. Kropp
/s/ MICHAEL R. AZARELA Executive Vice President and May 28, 1999
- ----------------------------------------------------- Director
Michael R. Azarela
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
</TABLE>
II-11
<PAGE> 193
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 May 28, 1999.
ANNEX RAILROAD BUILDERS, INC.
By: /s/ RONALD E. BROWN
------------------------------------
Ronald E. Brown
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>
/s/ RONALD E. BROWN President and Director May 28, 1999
- -----------------------------------------------------
Ronald E. Brown
/s/ PAMELA J. WHITAKER Treasurer May 28, 1999
- -----------------------------------------------------
Pamela J. Whitaker
/s/ MICHAEL R. AZARELA Executive Vice President, May 28, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
</TABLE>
II-12
<PAGE> 194
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 May 28, 1999.
COMSTOCK HOLDINGS, INC.
By: /s/ C. WILLIAM MOORE
------------------------------------
C. William Moore
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>
/s/ C. WILLIAM MOORE President and Director May 28, 1999
- -----------------------------------------------------
C. William Moore
/s/ ROBERT HERSCHENFELD Treasurer May 28, 1999
- -----------------------------------------------------
Robert Herschenfeld
/s/ MICHAEL R. AZARELA Director May 28, 1999
- -----------------------------------------------------
Michael R. Azarela
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
</TABLE>
II-13
<PAGE> 195
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 May 28, 1999.
L.K. COMSTOCK & COMPANY, INC.
By: /s/ C. WILLIAM MOORE
------------------------------------
C. William Moore
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>
/s/ C. WILLIAM MOORE President and Director May 28, 1999
- -----------------------------------------------------
C. William Moore
/s/ ROBERT HERSCHENFELD Treasurer May 28, 1999
- -----------------------------------------------------
Robert Herschenfeld
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
/s/ MICHAEL R. AZARELA Director May 28, 1999
- -----------------------------------------------------
Michael R. Azarela
</TABLE>
II-14
<PAGE> 196
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 May 28, 1999.
COMTRAK CONSTRUCTION, INC.
By: /s/ JOHN H. LAPP
------------------------------------
John H. Lapp
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>
/s/ JOHN H. LAPP President and Director May 28, 1999
- -----------------------------------------------------
John H. Lapp
/s/ HAROLD C. KROPP Treasurer May 28, 1999
- -----------------------------------------------------
Harold C. Kropp
/s/ MICHAEL R. AZARELA Executive Vice President, May 28, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
</TABLE>
II-15
<PAGE> 197
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 May 28, 1999.
CONDON BROTHERS, INC.
By: /s/ MARK E. CONDON
------------------------------------
Mark E. Condon
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>
/s/ MARK E. CONDON President and Director May 28, 1999
- -----------------------------------------------------
Mark E. Condon
/s/ KENNETH REGER Treasurer May 28, 1999
- -----------------------------------------------------
Kenneth Reger
/s/ MICHAEL R. AZARELA Executive Vice President, May 28, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
</TABLE>
II-16
<PAGE> 198
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 May 28, 1999.
CPI CONCRETE PRODUCTS INCORPORATED
By: /s/ JOHN D. BAKER
------------------------------------
John D. Baker
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>
/s/ JOHN D. BAKER President and Director May 28, 1999
- -----------------------------------------------------
John D. Baker
/s/ JULIE COLETTA Treasurer May 28, 1999
- -----------------------------------------------------
Julie Coletta
/s/ MICHAEL R. AZARELA Executive Vice President, May 28, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
</TABLE>
II-17
<PAGE> 199
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 May 28, 1999.
FCM RAIL, LTD.
By: /s/ DENNIS J. GILSTAD
------------------------------------
Dennis J. Gilstad
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>
/s/ DENNIS J. GILSTAD President and Director May 28, 1999
- -----------------------------------------------------
Dennis J. Gilstad
/s/ HAROLD S. YIP Treasurer and Vice President May 28, 1999
- -----------------------------------------------------
Harold S. Yip
/s/ MICHAEL R. AZARELA Executive Vice President and May 28, 1999
- ----------------------------------------------------- Director
Michael R. Azarela
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
</TABLE>
II-18
<PAGE> 200
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 May 28, 1999.
F&V METRO RW, INC.
By: /s/ BEN D'ALESSANDRO
------------------------------------
Ben D'Alessandro
President 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, 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>
/s/ BEN D'ALESSANDRO President, Chief Executive May 28, 1999
- ----------------------------------------------------- Officer and Director
Ben D'Alessandro
/s/ GENE CELLINI Treasurer May 28, 1999
- -----------------------------------------------------
Gene Cellini
/s/ MICHAEL R. AZARELA Executive Vice President and May 28, 1999
- ----------------------------------------------------- Director
Michael R. Azarela
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
</TABLE>
II-19
<PAGE> 201
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 May 28, 1999.
F&V METRO CONTRACTING CORP.
By: /s/ BEN D'ALESSANDRO
------------------------------------
Ben D'Alessandro
President 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, a Director of F&V Metro
Contracting Corp., and Michael R. Azarela, Executive Vice President and a
Director of F&V Metro Contracting 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 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 Contracting Corp. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ BEN D'ALESSANDRO President, Chief Executive May 28, 1999
- ----------------------------------------------------- Officer and Director
Ben D'Alessandro
/s/ GENE CELLINI Treasurer May 28, 1999
- -----------------------------------------------------
Gene Cellini
/s/ MICHAEL R. AZARELA Executive Vice President and May 28, 1999
- ----------------------------------------------------- Director
Michael R. Azarela
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
</TABLE>
II-20
<PAGE> 202
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 May 28, 1999.
IMPULSE ENTERPRISES OF NEW YORK, INC.
By: /s/ DAWN D'ALESSANDRO
------------------------------------
Dawn D'Alessandro
President 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, 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>
/s/ DAWN D'ALESSANDRO President and Chief Executive May 28, 1999
- ----------------------------------------------------- Officer
Dawn D'Alessandro
/s/ GENE CELLINI Treasurer May 28, 1999
- -----------------------------------------------------
Gene Cellini
/s/ MICHAEL R. AZARELA Executive Vice President and May 28, 1999
- ----------------------------------------------------- Director
Michael R. Azarela
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
/s/ BEN D'ALESSANDRO Director May 28, 1999
- -----------------------------------------------------
Ben D'Alessandro
</TABLE>
II-21
<PAGE> 203
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 May 28, 1999.
V&R ELECTRICAL CONTRACTORS, INC.
By: /s/ BEN D'ALESSANDRO
------------------------------------
Ben D'Alessandro
President 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, 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>
/s/ BEN D'ALESSANDRO President, Chief Executive May 28, 1999
- ----------------------------------------------------- Officer and Director
Ben D'Alessandro
/s/ GENE CELLINI Treasurer May 28, 1999
- -----------------------------------------------------
Gene Cellini
/s/ MICHAEL R. AZARELA Executive Vice President and May 28, 1999
- ----------------------------------------------------- Director
Michael R. Azarela
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
</TABLE>
II-22
<PAGE> 204
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 May 28, 1999.
GANTREX RW, INC.
By: /s/ PETER LEVEY
------------------------------------
Peter Levey
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>
/s/ PETER LEVEY President and Director May 28, 1999
- -----------------------------------------------------
Peter Levey
/s/ GENE CELLINI Treasurer May 28, 1999
- -----------------------------------------------------
Gene Cellini
/s/ MICHAEL R. AZARELA Executive Vice President and May 28,1999
- ----------------------------------------------------- Director
Michael R. Azarela
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
</TABLE>
II-23
<PAGE> 205
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 May 28, 1999.
GANTREX CORPORATION
By: /s/ PETER LEVEY
------------------------------------
Peter Levey
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>
/s/ PETER LEVEY President and Director May 28, 1999
- -----------------------------------------------------
Peter Levey
/s/ GENE CELLINI Treasurer May 28, 1999
- -----------------------------------------------------
Gene Cellini
/s/ MICHAEL R. AZARELA Executive Vice President and May 28, 1999
- ----------------------------------------------------- Director
Michael R. Azarela
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
</TABLE>
II-24
<PAGE> 206
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 May 28, 1999.
GANTREX SYSTEMS, INC.
By: /s/ PETER LEVEY
------------------------------------
Peter Levey
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>
/s/ PETER LEVEY President and Director May 28, 1999
- -----------------------------------------------------
Peter Levey
/s/ GENE CELLINI Treasurer May 28, 1999
- -----------------------------------------------------
Gene Cellini
/s/ MICHAEL R. AZARELA Executive Vice President and May 28, 1999
- ----------------------------------------------------- Director
Michael R. Azarela
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
</TABLE>
II-25
<PAGE> 207
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 May 28, 1999.
H.P. McGINLEY INC.
By: /s/ DAVID H. MCGINLEY
------------------------------------
David H. McGinley
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>
/s/ DAVID H. MCGINLEY President and Director May 28, 1999
- -----------------------------------------------------
David H. McGinley
/s/ LYNN MINGLE Treasurer May 28, 1999
- -----------------------------------------------------
Lynn Mingle
/s/ MICHAEL R. AZARELA Executive Vice President, May 28, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
</TABLE>
II-26
<PAGE> 208
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 May 28, 1999.
KENNEDY RAILROAD BUILDERS, INC.
By: /s/ JOHN KENNEDY
------------------------------------
John Kennedy
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>
/s/ JOHN KENNEDY President and Director May 28, 1999
- -----------------------------------------------------
John Kennedy
/s/ HAROLD C. KROPP Treasurer May 28, 1999
- -----------------------------------------------------
Harold C. Kropp
/s/ MICHAEL R. AZARELA Executive Vice President, May 28, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
</TABLE>
II-27
<PAGE> 209
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 May 28, 1999.
MERIT RAILROAD CONTRACTORS, INC.
By: /s/ STEVE C. GOGGIN
------------------------------------
Steve C. Goggin
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>
/s/ STEVE C. GOGGIN President and Director May 28, 1999
- -----------------------------------------------------
Steve C. Goggin
/s/ DAVID LEEHY Treasurer May 28, 1999
- -----------------------------------------------------
David Leehy
/s/ MICHAEL R. AZARELA Executive Vice President, May 28, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
</TABLE>
II-28
<PAGE> 210
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 May 28, 1999.
MIDWEST CONSTRUCTION SERVICES, INC.
By: /s/ WILLIAM C. LUCAITIS
------------------------------------
William C. Lucaitis
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>
/s/ WILLIAM C. LUCAITIS President and Director May 28, 1999
- -----------------------------------------------------
William C. Lucaitis
/s/ HAROLD C. KROPP Treasurer May 28, 1999
- -----------------------------------------------------
Harold C. Kropp
/s/ MICHAEL R. AZARELA Executive Vice President, May 28, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
</TABLE>
II-29
<PAGE> 211
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 May 28, 1999.
MID WEST RW, INC.
By: /s/ ROBERT D. WOLFF
------------------------------------
Robert D. Wolff
Chief Executive Officer
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>
/s/ ROBERT D. WOLFF Chief Executive Officer and May 28, 1999
- ----------------------------------------------------- Director
Robert D. Wolff
/s/ WILLIAM BUSH President May 28, 1999
- -----------------------------------------------------
William Bush
/s/ MARY ANNE HAASE Treasurer May 28, 1999
- -----------------------------------------------------
Mary Anne Haase
/s/ MICHAEL R. AZARELA Executive Vice President and May 28, 1999
- ----------------------------------------------------- Director
Michael R. Azarela
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
</TABLE>
II-30
<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 May 28, 1999.
MID WEST RAILROAD CONSTRUCTION &
MAINTENANCE CORPORATION OF WYOMING
By: /s/ ROBERT D. WOLFF
------------------------------------
Robert D. Wolff
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, 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>
/s/ ROBERT D. WOLFF Chief Executive Officer and May 28, 1999
- ----------------------------------------------------- Director
Robert D. Wolff
/s/ WILLIAM BUSH President May 28, 1999
- -----------------------------------------------------
William Bush
/s/ MARY ANNE HAASE Treasurer and Secretary May 28, 1999
- -----------------------------------------------------
Mary Anne Haase
/s/ MICHAEL R. AZARELA Executive Vice President and May 28, 1999
- ----------------------------------------------------- Director
Michael R. Azarela
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
</TABLE>
II-31
<PAGE> 213
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 May 28, 1999.
MINNESOTA RAILROAD SERVICE, INC.
By: /s/ SCOTT D. BRACE
------------------------------------
Scott D. Brace
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>
/s/ SCOTT D. BRACE President and Director May 28, 1999
- -----------------------------------------------------
Scott D. Brace
/s/ MARIE ZUEGER Treasurer May 28, 1999
- -----------------------------------------------------
Marie Zueger
/s/ MICHAEL R. AZARELA Executive Vice President, May 28, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
</TABLE>
II-32
<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 May 28, 1999.
NEW ENGLAND RAILROAD
CONSTRUCTION CO., INC.
By: /s/ ANTHONY D. JULIAN, JR.
------------------------------------
Anthony D. Julian, Jr.
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>
/s/ ANTHONY D. JULIAN, JR. President and Director May 28, 1999
- -----------------------------------------------------
Anthony D. Julian, Jr.
/s/ DANIEL F. JULIAN Treasurer May 28, 1999
- -----------------------------------------------------
Daniel F. Julian
/s/ MICHAEL R. AZARELA Executive Vice President, May 28, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
</TABLE>
II-33
<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 May 28, 1999.
NORTHERN RAIL SERVICE AND SUPPLY
COMPANY, INC.
By: /s/ LAMBERTUS L. TAMELING
------------------------------------
Lambertus L. Tameling
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>
/s/ LAMBERTUS L. TAMELING President and Director May 28, 1999
- -----------------------------------------------------
Lambertus L. Tameling
/s/ HAROLD C. KROPP Treasurer May 28, 1999
- -----------------------------------------------------
Harold C. Kropp
/s/ MICHAEL R. AZARELA Executive Vice President, May 28, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
</TABLE>
II-34
<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 May 28, 1999.
R.&M.B. RAIL CO., INC.
By: /s/ MARK A. BROWN
------------------------------------
Mark A. Brown
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 R.&M.B. Rail Co.,
Inc., and Michael R. Azarela, Executive Vice President, Assistant Secretary and
a Director of R.&M.B. Rail 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, R.&M.B. Rail Co., Inc. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MARK A. BROWN President and Director May 28, 1999
- -----------------------------------------------------
Mark A. Brown
/s/ PAMELA J. WHITAKER Treasurer May 28, 1999
- -----------------------------------------------------
Pamela J. Whitaker
/s/ MICHAEL R. AZARELA Executive Vice President, May 28, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
</TABLE>
II-35
<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 May 28, 1999.
RAILCORP, INC.
By: /s/ FULTON J. KENNEDY
------------------------------------
Fulton J. Kennedy
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>
/s/ FULTON J. KENNEDY President May 28, 1999
- -----------------------------------------------------
Fulton J. Kennedy
/s/ HAROLD C. KROPP Treasurer May 28, 1999
- -----------------------------------------------------
Harold C. Kropp
/s/ MICHAEL R. AZARELA Executive Vice President, May 28, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
/s/ JOHN KENNEDY Director May 28, 1999
- -----------------------------------------------------
John Kennedy
</TABLE>
II-36
<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 May 28, 1999.
RAILROAD SERVICE, INC.
By: /s/ SCOTT D. BRACE
------------------------------------
Scott D. Brace
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>
/s/ SCOTT D. BRACE President and Director May 28, 1999
- -----------------------------------------------------
Scott D. Brace
/s/ MARIE ZUEGER Treasurer May 28, 1999
- -----------------------------------------------------
Marie Zueger
/s/ MICHAEL R. AZARELA Executive Vice President, May 28, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
</TABLE>
II-37
<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 May 28, 1999.
RAILROAD SPECIALTIES, INC.
By: /s/ RONALD E. BROWN
------------------------------------
Ronald E. Brown
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>
/s/ RONALD E. BROWN President and Director May 28, 1999
- -----------------------------------------------------
Ronald E. Brown
/s/ PAMELA J. WHITAKER Treasurer May 28, 1999
- -----------------------------------------------------
Pamela J. Whitaker
/s/ MICHAEL R. AZARELA Executive Vice President, May 28, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
</TABLE>
II-38
<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 May 28, 1999.
SHELDON ELECTRIC, INC.
By: /s/ MICHAEL PRATT
------------------------------------
Michael Pratt
President and Chief Operating
Officer
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>
/s/ MICHAEL A. CAHN Chief Executive Officer May 28, 1999
- -----------------------------------------------------
Michael A. Cahn
/s/ MICHAEL PRATT President and Chief Operating May 28, 1999
- ----------------------------------------------------- Officer
Michael Pratt
/s/ HAROLD C. KROPP Treasurer May 28, 1999
- -----------------------------------------------------
Harold C. Kropp
/s/ MICHAEL R. AZARELA Executive Vice President and May 28, 1999
- ----------------------------------------------------- Director
Michael R. Azarela
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
Director May , 1999
- -----------------------------------------------------
Barry Beil
</TABLE>
II-39
<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 May 28, 1999.
SOUTHERN INDIANA WOOD
PRESERVING CO., INC.
By: /s/ SEAN G. GOUGH
------------------------------------
Sean G. Gough
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>
/s/ SEAN G. GOUGH President and Director May 28, 1999
- -----------------------------------------------------
Sean G. Gough
/s/ HAROLD C. KROPP Treasurer May 28, 1999
- -----------------------------------------------------
Harold C. Kropp
/s/ MICHAEL R. AZARELA Executive Vice President, May 28, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
</TABLE>
II-40
<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 May 28, 1999.
U.S. TRACKWORKS, INC.
By: /s/ LAMBERTUS L. TAMELING
------------------------------------
Lambertus L. Tameling
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>
/s/ LAMBERTUS L. TAMELING President and Director May 28, 1999
- -----------------------------------------------------
Lambertus L. Tameling
/s/ HAROLD C. KROPP Treasurer May 28, 1999
- -----------------------------------------------------
Harold C. Kropp
/s/ MICHAEL R. AZARELA Executive Vice President, May 28, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
</TABLE>
II-41
<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 May 28, 1999.
U.S. RAILWAY SUPPLY, INC.
By: /s/ RONALD E. BROWN
------------------------------------
Ronald E. Brown
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>
/s/ RONALD E. BROWN President and Director May 28, 1999
- -----------------------------------------------------
Ronald E. Brown
/s/ PAMELA J. WHITAKER Treasurer May 28, 1999
- -----------------------------------------------------
Pamela J. Whitaker
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
/s/ MICHAEL R. AZARELA Executive Vice President, May 28, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
</TABLE>
II-42
<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 May 28, 1999.
WM. A. SMITH CONSTRUCTION CO., INC.
By: /s/ JACK I. WILT
------------------------------------
Jack I. Wilt
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>
/s/ JACK I. WILT President and Director May 28, 1999
- -----------------------------------------------------
Jack I. Wilt
/s/ DAN BURG Treasurer May 28, 1999
- -----------------------------------------------------
Dan Burg
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
/s/ MICHAEL R. AZARELA Executive Vice President, May 28, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
</TABLE>
II-43
<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 May 28, 1999.
WM. A. SMITH RERAILING SERVICES, INC.
By: /s/ JACK I. WILT
------------------------------------
Jack I. Wilt
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>
/s/ JACK I. WILT President and Director May 28, 1999
- -----------------------------------------------------
Jack I. Wilt
/s/ DAN BURG Treasurer May 28, 1999
- -----------------------------------------------------
Dan Burg
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
/s/ MICHAEL R. AZARELA Executive Vice President, May 28, 1999
- ----------------------------------------------------- Assistant Secretary and
Michael R. Azarela Director
</TABLE>
II-44
<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 May 28, 1999.
M-TRACK ENTERPRISES, INC.
By: /s/ LUIGI IMPERIA
------------------------------------
Luigi Imperia
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>
/s/ LUIGI IMPERIA President and Director May 28, 1999
- -----------------------------------------------------
Luigi Imperia
/s/ GENE CELLINI Treasurer May 28, 1999
- -----------------------------------------------------
Gene Cellini
/s/ JOHN G. LARKIN Director May 28, 1999
- -----------------------------------------------------
John G. Larkin
/s/ MICHAEL R. AZARELA Director May 28, 1999
- -----------------------------------------------------
Michael R. Azarela
</TABLE>
II-45
<PAGE> 1
EXHIBIT 4.2
RAILWORKS CORPORATION
Series A Convertible Preferred Stock
13,700 Shares Authorized
Par Value $.01 per Share
THIS CERTIFIES THAT _____________________________________ is the owner of
___________________ fully paid and non-assessable Shares of the above
Corporation transferable only on the books of the Corporation by the holder
hereof in person or by duly authorized Attorney upon surrender of this
Certificate properly endorsed.
IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and to be sealed with the Seal of the
Corporation.
Dated __________________
/s/ /s/
- ------------------------------- -------------------------------
Chief Executive Officer Secretary
<PAGE> 2
EXHIBIT 4.2
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "1933 ACT") OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL A
REGISTRATION STATEMENT WITH RESPECT THERETO IS DECLARED EFFECTIVE UNDER SUCH
ACT OR THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE COMPANY THAT AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT IS AVAILABLE.
<TABLE>
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were
written not in full according to applicable laws or regulations. Additional abbreviations may also be used though not in the list.
<S> <C> <C> <C> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT..........Custodian......(Minor)
TEN ENT -- as tenants by the entireties under Uniform Gifts to Minors Act.......(State)
JT TEN -- as joint tenants with right of survivorship
and not as tenants in common
For value received, the undersigned hereby sells, assigns and transfers unto Please insert Social Security or other NOTICE: The
____________________________________________________________________________ identifying number of assignee. signature to
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OR ASSIGNEE ______________________________________ this assignment
must correspond
___________________________________________________________________________________________________________________ with the name
as written upon
____________________________________________________________________________________________________________ Shares the face of
this certifi-
represented by the within Certificate, and hereby irrevocably constitutes and appoints_____________________________ cate in every
_____________________________________________________________________________________ Attorney to transfer the said particular,
shares on the books of the within-named Corporation with full power of substitution in the premises. without atten-
tion or
enlargement or
in any change
whatsoever.
</TABLE>
Dated _____________________________
In presence of ___________________________________________
___________________________________
<PAGE> 1
EXHIBIT 4.5
RAILWORKS CORPORATION,
THE GUARANTORS named herein
and
FIRST UNION NATIONAL BANK, as Trustee
------------------
INDENTURE
Dated as of April 7, 1999
------------------
Up to $250,000,000
11 1/2% Senior Subordinated Notes due 2009
-------------------
===============================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- ---------
<S> <C>
310(a) (1) 7.10
(a) (2).................................................................. 7.10
(a) (3).................................................................. N.A.
(a) (4).................................................................. N.A.
(a) (5).................................................................. 7.08; 7.10
(b) ..................................................................... 7.08; 7.10;
13.02
(c) ..................................................................... N.A.
311(a) 7.11
(b) ..................................................................... 7.11
(c) ..................................................................... N.A.
312(a) 2.05
(b) ..................................................................... 13.03
(c) ..................................................................... 13.03
313(a) 7.06
(b) (1).................................................................. N.A.
(b) (2).................................................................. 7.06
(c) ..................................................................... 7.06; 13.02
(d) ..................................................................... 7.06
314(a) 4.06; 4.07;
13.02
(b) ..................................................................... N.A.
(c) (1).................................................................. 13.04
(c) (2).................................................................. 13.04
(c) (3).................................................................. N.A.
(d) ..................................................................... N.A.
(e) ..................................................................... 13.05
(f) ..................................................................... N.A.
315(a) 7.01(b)
(b) ..................................................................... 7.05; 13.02
(c) ..................................................................... 7.01(a)
(d) ..................................................................... 7.01(c)
(e) ..................................................................... 6.11
316(a) (last sentence) 2.09
(a) (1) (A).............................................................. 6.05
(a) (1) (B).............................................................. 6.04
(a) (2).................................................................. N.A.
(b) ..................................................................... 6.07
317(a) (1) 6.08
(a) (2).................................................................. 6.09
(b) ..................................................................... 2.04
318(a) 13.01
(c)...................................................................... 13.01
</TABLE>
- --------------------
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to
be a part of this Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C> <C>
SECTION 1.01. Definitions. ................................................. 1
SECTION 1.02. Incorporation by Reference of TIA............................. 31
SECTION 1.03. Rules of Construction......................................... 31
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating............................................... 32
SECTION 2.02. Execution and Authentication;
Aggregate Principal Amount................................. 33
SECTION 2.03. Registrar and Paying Agent.................................... 35
SECTION 2.04. Paying Agent To Hold Assets in Trust.......................... 35
SECTION 2.05. Holder Lists.................................................. 36
SECTION 2.06. Transfer and Exchange......................................... 36
SECTION 2.07. Replacement Notes............................................. 37
SECTION 2.08. Outstanding Notes............................................. 38
SECTION 2.09. Treasury Notes................................................ 38
SECTION 2.10. Temporary Notes............................................... 39
SECTION 2.11. Cancellation.................................................. 39
SECTION 2.12. Defaulted Interest............................................ 40
SECTION 2.13. CUSIP Numbers................................................. 41
SECTION 2.14. Deposit of Moneys............................................. 41
SECTION 2.15. Book-Entry Provisions for Global Notes........................ 41
SECTION 2.16. Special Transfer Provisions................................... 43
SECTION 2.17. Restrictive Legends........................................... 45
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee............................................ 46
SECTION 3.02. Selection of Notes To Be Redeemed............................. 46
SECTION 3.03. Optional Redemption........................................... 47
SECTION 3.04. Notice of Redemption.......................................... 47
SECTION 3.05. Effect of Notice of Redemption................................ 49
SECTION 3.06. Deposit of Redemption Price................................... 49
SECTION 3.07. Notes Redeemed in Part........................................ 50
</TABLE>
-i-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
ARTICLE FOUR
COVENANTS
<S> <C> <C>
SECTION 4.01. Payment of Notes.............................................. 50
SECTION 4.02. Maintenance of Office or Agency............................... 50
SECTION 4.03. Corporate Existence........................................... 51
SECTION 4.04. Payment of Taxes and Other Claims............................. 51
SECTION 4.05. Maintenance of Properties and
Insurance.................................................. 51
SECTION 4.06. Compliance Certificate; Notice of
Default.................................................... 52
SECTION 4.07. Reports to Holders............................................ 53
SECTION 4.08. Waiver of Stay, Extension or Usury
Laws....................................................... 54
SECTION 4.09. Limitation on Restricted Payments............................. 54
SECTION 4.10. Limitations on Transactions with
Affiliates................................................. 57
SECTION 4.11. Limitation on Incurrence of
Additional Indebtedness.................................... 59
SECTION 4.12. Limitation on Dividend and Other
Payment Restrictions Affecting
Restricted Subsidiaries.................................... 59
SECTION 4.13. Change of Control............................................. 60
SECTION 4.14. Limitation on Asset Sales..................................... 62
SECTION 4.15. Prohibition on Incurrence of Senior
Subordinated Indebtedness.................................. 66
SECTION 4.16. Limitation on Liens........................................... 66
SECTION 4.17. Conduct of Business........................................... 67
SECTION 4.18. Limitation on Preferred Stock of Restricted
Subsidiaries............................................... 67
SECTION 4.19. Additional Subsidiary Guarantees.............................. 68
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale of
Assets..................................................... 68
SECTION 5.02. Successor Corporation Substituted............................. 70
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default............................................. 71
SECTION 6.02. Acceleration.................................................. 73
SECTION 6.03. Other Remedies................................................ 74
</TABLE>
-ii-
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 6.04. Waiver of Past Defaults....................................... 74
SECTION 6.05. Control by Majority........................................... 74
SECTION 6.06. Limitation on Suits........................................... 75
SECTION 6.07. Rights of Holders To Receive Payment.......................... 75
SECTION 6.08. Collection Suit by Trustee.................................... 76
SECTION 6.09. Trustee May File Proofs of Claim.............................. 76
SECTION 6.10. Priorities. ................................................. 77
SECTION 6.11. Undertaking for Costs......................................... 77
SECTION 6.12. Restoration of Rights and Remedies............................ 78
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee............................................. 78
SECTION 7.02. Rights of Trustee............................................. 79
SECTION 7.03. Individual Rights of Trustee.................................. 81
SECTION 7.04. Trustee's Disclaimer.......................................... 81
SECTION 7.05. Notice of Default............................................. 81
SECTION 7.06. Reports by Trustee to Holders................................. 82
SECTION 7.07. Compensation and Indemnity.................................... 82
SECTION 7.08. Replacement of Trustee........................................ 83
SECTION 7.09. Successor Trustee by Merger, Etc.............................. 85
SECTION 7.10. Eligibility; Disqualification................................. 85
SECTION 7.11. Preferential Collection of
Claims Against the Company................................. 86
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of the Company's
Obligations................................................ 86
SECTION 8.02. Legal Defeasance and Covenant
Defeasance................................................. 87
SECTION 8.03. Conditions to Legal Defeasance or
Covenant Defeasance........................................ 89
SECTION 8.04. Application of Trust Money.................................... 91
SECTION 8.05. Repayment to the Company or the Guarantors.................... 92
SECTION 8.06. Reinstatement................................................. 92
SECTION 8.07. Satisfaction and Discharge.................................... 93
</TABLE>
-iii-
<PAGE> 6
<TABLE>
<CAPTION>
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Page
----
<S> <C> <C>
SECTION 9.01. Without Consent of Holders.................................... 95
SECTION 9.02. With Consent of Holders....................................... 95
SECTION 9.03. Compliance with TIA........................................... 96
SECTION 9.04. Revocation and Effect of Consents............................. 96
SECTION 9.05. Notation on or Exchange of Notes.............................. 97
SECTION 9.06. Trustee To Sign Amendments, Etc............................... 97
SECTION 9.07. Effect on Senior Debt......................................... 97
ARTICLE TEN
SUBORDINATION OF NOTES
SECTION 10.01. Notes Subordinated to Senior Debt............................. 98
SECTION 10.02. No Payment on Notes in Certain
Circumstances.............................................. 98
SECTION 10.03. Payment Over of Proceeds upon
Dissolution, Etc........................................... 100
SECTION 10.04. Payments May Be Paid Prior to
Dissolution................................................ 101
SECTION 10.05. Subrogation................................................... 102
SECTION 10.06. Obligations of the Company
Unconditional.............................................. 103
SECTION 10.07. Notice to Trustee............................................. 103
SECTION 10.08. Reliance on Judicial Order or
Certificate of Liquidating Agent........................... 104
SECTION 10.09. Trustee's Relation to Senior Debt............................. 104
SECTION 10.10. Subordination Rights Not Impaired by
Acts or Omissions of the Company or
Holders of Senior Debt..................................... 105
SECTION 10.11. Noteholders Authorize Trustee To
Effectuate Subordination of Notes.......................... 105
SECTION 10.12. This Article Ten Not To Prevent
Events of Default.......................................... 106
SECTION 10.13. Trustee's Compensation Not
Prejudiced................................................. 106
ARTICLE ELEVEN
GUARANTEE
SECTION 11.01. Unconditional Guarantee....................................... 106
SECTION 11.02. Subordination of Guarantee.................................... 108
SECTION 11.03. Severability.................................................. 108
SECTION 11.04. Release of a Guarantor........................................ 108
SECTION 11.05. Limitation of Guarantor's Liability........................... 109
SECTION 11.06. Guarantors May Consolidate, etc., on
Certain Terms.............................................. 109
SECTION 11.07. Contribution.................................................. 110
</TABLE>
-iv-
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<S> <C> <C>
SECTION 11.08. Waiver of Subrogation......................................... 111
SECTION 11.09. Execution of Guarantee........................................ 112
SECTION 11.10. Waiver of Stay, Extension or Usury Laws....................... 112
ARTICLE TWELVE
SUBORDINATION OF GUARANTEE OBLIGATIONS
SECTION 12.01. Guarantee Obligations Subordinated to
Guarantor Senior Debt...................................... 113
SECTION 12.02. No Payment on Notes in Certain
Circumstances.............................................. 113
SECTION 12.03. Payment Over of Proceeds upon
Dissolution, Etc........................................... 115
SECTION 12.04. Payments May Be Paid Prior to
Dissolution................................................ 116
SECTION 12.05. Subrogation................................................... 117
SECTION 12.06. Obligations of the Guarantors
Unconditional.............................................. 118
SECTION 12.07. Notice to Trustee............................................. 118
SECTION 12.08. Reliance on Judicial Order or
Certificate of Liquidating Agent........................... 119
SECTION 12.09. Trustee's Relation to Guarantor
Senior Indebtedness........................................ 119
SECTION 12.10. Subordination Rights Not Impaired by
Acts or Omissions of the Guarantors
or Holders of Guarantor Senior
Debt....................................................... 120
SECTION 12.11. Noteholders Authorize Trustee To
Effectuate Subordination of
Guarantee Obligations...................................... 120
SECTION 12.12. This Article Twelve Not To Prevent
Events of Default.......................................... 121
SECTION 12.13. Trustee's Compensation Not
Prejudiced................................................. 121
ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01. TIA Controls.................................................. 122
SECTION 13.02. Notices....................................................... 122
SECTION 13.03. Communications by Holders with Other
Holders.................................................... 123
SECTION 13.04. Certificate and Opinion as to
Conditions Precedent....................................... 124
</TABLE>
-v-
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SECTION 13.05. Statements Required in Certificate or
Opinion.................................................... 124
SECTION 13.06. Rules by Trustee, Paying Agent,
Registrar.................................................. 125
SECTION 13.07. Legal Holidays................................................ 125
SECTION 13.08. Governing Law................................................. 125
SECTION 13.09. No Adverse Interpretation of Other
Agreements................................................. 125
SECTION 13.10. No Recourse Against Others.................................... 125
SECTION 13.11. Successors.................................................... 126
SECTION 13.12. Duplicate Originals........................................... 126
SECTION 13.13. Severability.................................................. 126
SECTION 13.14. Independence of Covenants..................................... 126
SIGNATURES...................................................................... S-1
Exhibit A - Form of Series A Note
Exhibit B - Form of Series B Note
Exhibit C - Form of Legend for Global Notes
Exhibit D - Form of Certificate To Be Delivered in Connection with
Transfers to Non-QIB Accredited Investors
Exhibit E - Form of Certificate To Be Delivered in Connection with
Transfers Pursuant to Regulation S
Exhibit F - Form of Guarantee
</TABLE>
Note: This Table of Contents shall not, for any purpose, be deemed to be
part of this Indenture.
-vi-
<PAGE> 9
INDENTURE, dated as of April 7, 1999, among RAILWORKS
CORPORATION, a Delaware corporation (the "Company"), each of the Guarantors
named herein, as guarantors, and FIRST UNION NATIONAL BANK, as trustee (the
"Trustee").
The Company has duly authorized the creation of an issue of
11 1/2% Senior Subordinated Notes due 2009, Series A, and 11 1/2% Senior
Subordinated Notes due 2009, Series B, to be issued in exchange for the 11 1/2%
Senior Subordinated Notes due 2009, Series A, pursuant to a Registration Rights
Agreement (as defined) and, to provide therefor, the Company has duly
authorized the execution and delivery of this Indenture. All things necessary
to make the Notes (as defined), when duly issued and executed by the Company
and authenticated and delivered hereunder, the valid and binding obligations of
the Company and to make this Indenture a valid and binding agreement of the
Company, have been done.
Each party hereto agrees as follows for the benefit of the
other parties and for the equal and ratable benefit of the Holders of the
Company's 11 1/2% Senior Subordinated Notes due 2009, Series A and Series B:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acceleration Notice" has the meaning provided in Section
6.02.
"Acquired Indebtedness" means Indebtedness of a Person or any
of its Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary of the Company or at the time it merges or consolidates with the
Company 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 the Company or such acquisition,
merger or consolidation, provided that any Indebtedness of such Person that is
redeemed, defeased, retired or otherwise repaid at the time of or immediately
upon consummation of the transaction by which such Person is merged with or
into the Company, becomes a Restricted Sub-
<PAGE> 10
-2-
sidiary or such assets are acquired from such Person will not be Acquired
Indebtedness.
"Additional Interest" has the meaning provided in the
Registration Rights Agreement.
"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.
"Affiliate Transaction" has the meaning provided in Section
4.10.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Asset Acquisition" means (a) an Investment by the Company or
any Restricted Subsidiary of the Company in any other Person pursuant to which
such Person shall become a Restricted Subsidiary of the Company or any
Restricted Subsidiary of the Company, or shall be merged with or into the
Company or any Restricted Subsidiary of the Company, or (b) the acquisition by
the Company or any Restricted Subsidiary of the Company of the assets of any
Person (other than a Restricted Subsidiary of the Company) 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 the
Company or any of its Restricted Subsidiaries (including any Sale and Leaseback
Transaction) to any Person other than the Company or a Restricted Subsidiary of
the Company of: (1) any Capital Stock of any Restricted Subsidiary of the
Company; or (2) any other property or assets of the Company or any Restricted
Subsidiary of the Company 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 the Company or its
Restricted Subsidiaries receive
<PAGE> 11
-3-
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 the Company as permitted by Section 5.01; (c) a transaction
constituting a Restricted Payment permitted under Section 4.09; (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 Section 4.16.
"Authenticating Agent" has the meaning provided in Section
2.02.
"Bankruptcy Law" means Title 11, United States Code, or any
similar federal, state or foreign law for the relief of debtors.
"Blockage Period" has the meaning provided in Section 10.02.
"Board of Directors" means, as to any Person, the board of
directors of such Person (or the equivalent thereof to the extent such Person
is not a corporation) or any duly authorized committee thereof.
"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.
"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 the Company and the Restricted Subsidiaries
arising in the ordinary course of business from the sale of products sold by
the Company and the Restricted Subsidiaries or the provision of services by the
Company 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 the Company 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.
"Business Day" means a day that is not a Legal Holiday.
<PAGE> 12
-4-
"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 S&P or 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: (i) 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 the
<PAGE> 13
-5-
Company to any Person or group of related Persons for purposes of Section 13(d)
of the Exchange Act (a "Group"), together with any Affiliates thereof (whether
or not otherwise in compliance with the provisions of this Indenture); (ii) the
approval by the holders of Capital Stock of the Company of any plan or proposal
for the liquidation or dissolution of the Company (whether or not otherwise in
compliance with the provisions of this Indenture); (iii) 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 the Company; or (iv)
the replacement of a majority of the Board of Directors of the Company over any
consecutive two-year period from the directors who constituted the Board of
Directors of the Company at the beginning of such period, and such replacement
shall not have been approved by a vote of at least a majority of the Board of
Directors of the Company 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.
"Change of Control Offer" has the meaning provided in Section
4.13.
"Change of Control Payment Date" has the meaning provided in
Section 4.13.
"Commission" or "SEC" means the Securities and Exchange
Commission, as from time to time constituted, created under the Exchange Act,
or, if at any time after the execution of this Indenture such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties at such time.
"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 the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.
"Company" means RailWorks Corporation, and any and all
successors thereto.
"Consolidated EBITDA" means, with respect to any Person, for
any period, the sum (without duplication) of: (i) Consolidated Net Income; and
(ii) to the extent Consolidated Net Income has been reduced thereby, (a) all
income taxes
<PAGE> 14
-6-
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 (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: (i) 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 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 (ii) 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 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
<PAGE> 15
-7-
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 Company's Capital
Stock consisting of shares of Capital Stock of a Restricted Subsidiary of the
Company.
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: (i) Consolidated
Interest Expense; plus (ii) 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 this 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
<PAGE> 16
-8-
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.
"Consolidated Interest Expense" means, with respect to any
Person for any period, the sum of, without duplication: (i) 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 (ii) 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: (i)
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; (ii)
after-tax items classified as extraordinary or nonrecurring gains or losses (to
the extent such losses are non-cash losses); (iii) solely for purposes of
calculating Consolidated Net Income pursuant to Section 4.09 hereof, 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; (iv) 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 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; (v) 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;
(vi) any restoration to income of any contingency reserve, except to the extent
that provision
<PAGE> 17
-9-
for such reserve was made out of Consolidated Net Income accrued at any time
following the Issue Date; (vii) 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
(viii) 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 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 under this 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).
"Covenant Defeasance" has the meaning set forth in Section
8.02.
"Credit Agreement" means the Credit Agreement, dated as of
August 4, 1998, as amended, among the Company, 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
<PAGE> 18
-10-
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
the Company 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 the Company against
fluctuations in currency values.
"Custodian" means any receiver, trustee, assignee,
liquidator, sequestrator or similar official under any Bankruptcy Law.
"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.
"Default Notice" has the meaning provided in Section 10.02.
"Depositary" means The Depository Trust Company, its nominees
and successors.
"Designated Senior Debt" means (i) Indebtedness under or in
respect of the Credit Agreement and (ii) 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 the
Company.
"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.
<PAGE> 19
-11-
"Event of Default" has the meaning provided in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute or statutes thereto.
"Exchange Notes" means the 11 1/2% Senior Subordinated Notes
due 2009, Series B, to be issued in exchange for the Initial Notes pursuant to
the Registration Rights Agreement or, with respect to Initial Notes issued
under this Indenture subsequent to the Issue Date pursuant to Section 2.02, a
registration rights agreement similar to the Registration Rights Agreement.
"Exchange Offer" has the meaning provided in the Registration
Rights Agreement.
"Exchange Offer Registration Statement" has the meaning
provided in the Registration Rights Agreement.
"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 Board of Directors of
the Company acting reasonably and in good faith and shall be evidenced by a
Board Resolution of the Board of Directors of the Company 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 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
Issue Date.
"Global Note" has the meaning provided in Section 2.01.
"Guarantee" means the guarantee of the Obligations of the
Company with respect to the Notes by each Guarantor pursuant to the terms of
this Indenture.
"Guarantor" means: (i) each of the Company's domestic
Restricted Subsidiaries as of the Issue Date and (ii) each
<PAGE> 20
-12-
of the Company's domestic Restricted Subsidiaries that in the future executes a
supplemental indenture in which such domestic Restricted Subsidiary agrees to
be bound by the terms of this 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 this 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 the Issue Date 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 the Issue Date 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;
<PAGE> 21
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(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 this Indenture pursuant to the provisions set forth under Section
4.11 (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 the Company 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 this
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 the Company; and
(8) any Indebtedness which is, by its express terms,
subordinated in right of payment to any other Indebtedness of such
Guarantor.
"Holder" means the Person in whose name a Note is registered
on the Registrar's books.
"incur" has the meaning provided in Section 4.11.
"Indebtedness" means with respect to any Person, without
duplication, (i) all Obligations of such Person for borrowed money; (ii) all
Obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments; (iii) all Capitalized Lease Obligations of such Person;
(iv) all Obligations of such Person issued or assumed as the
<PAGE> 22
-14-
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); (v) all Obligations for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction; (vi)
guarantees and other contingent obligations in respect of Indebtedness referred
to in clauses (i) through (v) above and clause (viii) below; (vii) all
Obligations of any other Person of the type referred to in clauses (i) through
(vi) 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;
(viii) all Obligations under Currency Agreements and Interest Swap Agreements
of such Person; and (ix) 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 this 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.
"Indenture" means this Indenture, as amended or supplemented
from time to time in accordance with the terms hereof.
<PAGE> 23
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"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 the Company; and (2) which, in the
judgment of the Board of Directors of the Company, is otherwise independent and
qualified to perform the task for which it is to be engaged.
"Initial Notes" means, collectively, (i) the 11 1/2% Senior
Subordinated Notes due 2009, Series A, of the Company issued on the Issue Date
and (ii) one or more series of 11 1/2% Senior Subordinated Notes due 2009 that
are issued under this Indenture subsequent to the Issue Date pursuant to
Section 2.02, in each case for so long as such securities constitute Restricted
Notes.
"Initial Purchasers" means BT Alex. Brown Incorporated,
NationsBanc Montgomery Securities LLC and First Union Capital Markets Corp.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Notes.
"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 the Company and its Restricted Subsidiaries on commercially
reasonable terms in accordance with normal trade practices of the Company
<PAGE> 24
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or such Restricted Subsidiary, as the case may be. If the Company or any
Restricted Subsidiary of the Company sells or otherwise disposes of any Common
Stock of any direct or indirect Restricted Subsidiary of the Company such that,
after giving effect to any such sale or disposition, the Company no longer
owns, directly or indirectly, 100% of the outstanding Common Stock of such
Restricted Subsidiary, the Company 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.
"Issue Date" means April 7, 1999, the date of original
issuance of the Notes.
"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 the Company and/or one or more of its Restricted Subsidiaries.
"Legal Defeasance" has the meaning set forth in Section 8.02.
"Legal Holiday" has the meaning provided in Section 13.07.
"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).
"Maturity Date" means, with respect to any Note, April 15,
2009 or the date on which the principal of such Note becomes due and payable as
provided in such Note or this Indenture, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
"Moody's" means Moody's Investors Service, Inc.
"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 the Company or any of its Restricted
Subsidiaries from such Asset Sale net of: (i) reasonable out-of-pocket expenses
and fees relating to such Asset Sale (inclu-
<PAGE> 25
-17-
ding, without limitation, legal, accounting and investment banking fees and
sales commissions); (ii) 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;
(iii) repayment of Indebtedness that is required to be repaid in connection
with such Asset Sale; and (iv) appropriate amounts to be provided by the
Company 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 the Company 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.
"Net Proceeds Offer" has the meaning provided in Section
4.14.
"Net Proceeds Offer Amount" has the meaning provided in
Section 4.14.
"Net Proceeds Offer Payment Date" has the meaning provided in
Section 4.14.
"Net Proceeds Offer Trigger Date" has the meaning provided in
Section 4.14.
"Non-U.S. Person" has the meaning assigned to such term in
Regulation S.
"Notes" means, collectively, the Initial Notes, the Private
Exchange Notes, if any, and the Unrestricted Notes, treated as a single class
of securities, as amended or supplemented from time to time in accordance with
the terms of this Indenture, that are issued pursuant to this Indenture.
"Obligations" means all obligations for principal, premium,
interest, penalties, fees, indemnification, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the Chairman of
the Board, the Chief Executive Officer, the President, any Vice President, the
Chief Financial Officer, the Treasurer, the Controller, or the Secretary of
such Person, or
<PAGE> 26
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any other officer designated by the Board of Directors of such Person serving
in a similar capacity.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chief Executive Officer, the President or any Vice
President and the Chief Financial Officer or any Treasurer of such Person that
shall comply with applicable provisions of this Indenture.
"Opinion of Counsel" means a written opinion from legal
counsel who is acceptable to the Trustee complying with the requirements of
Sections 13.04 and 13.05, as they relate to the giving of an Opinion of
Counsel, and delivered to the Trustee. Such counsel may be an employee or of
counsel to the Company.
"Paying Agent" has the meaning provided in Section 2.03,
except that, any bankruptcy or reorganization proceeding relating to the
Company, the Paying Agent shall not be the Company or any Affiliate of the
Company.
"Permitted Indebtedness" means, without duplication, each of
the following:
(i) Indebtedness under the Notes issued in the Offering in
an aggregate principal amount not to exceed $125.0 million and the
Guarantees relating thereto;
(ii) 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;
(iii) other Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the Issue Date reduced by the amount of
any scheduled amortization payments or mandatory prepayments when
actually paid or permanent reductions thereon;
(iv) Interest Swap Obligations of the Company covering
Indebtedness of the Company or any of its Restricted Subsidiaries and
Interest Swap Obligations of any Restricted Subsidiary of the Company
covering Indebtedness
<PAGE> 27
-19-
of such Restricted Subsidiary; provided, however, that such Interest
Swap Obligations are entered into to protect the Company and its
Restricted Subsidiaries from fluctuations in interest rates on
Indebtedness incurred in accordance with this 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;
(v) 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 the Company
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;
(vi) Indebtedness of a Wholly Owned Restricted Subsidiary
of the Company to the Company or to a Wholly Owned Restricted
Subsidiary of the Company for so long as such Indebtedness is held by
the Company or a Wholly Owned Restricted Subsidiary of the Company, in
each case subject to no Lien held by a Person other than the Company
or a Wholly Owned Restricted Subsidiary of the Company; provided that
if as of any date any Person other than the Company or a Wholly Owned
Restricted Subsidiary of the Company 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;
(vii) Indebtedness of the Company to a Wholly Owned
Restricted Subsidiary of the Company for so long as such Indebtedness
is held by a Wholly Owned Restricted Subsidiary of the Company, in
each case subject to no Lien held by a Person other than a Wholly
Owned Restricted Subsidiary; provided that (a) any Indebtedness of the
Company to any Wholly Owned Restricted Subsidiary of the Company that
is not a Guarantor is unsecured and subordinated, pursuant to a
written agreement, to the Company's obligations under this Indenture
and the Notes and (b) if as of any date any Person other than a Wholly
Owned Restricted Subsidiary of the Company 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 the Company;
<PAGE> 28
-20-
(vii) 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;
(ix) Indebtedness of the Company or any of its Restricted
Subsidiaries represented by letters of credit for the account of the
Company 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;
(x) Indebtedness represented by Capitalized Lease
Obligations and Purchase Money Indebtedness of the Company 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 the Company and its
Restricted Subsidiaries;
(xi) Indebtedness in respect of financed insurance premium
obligations incurred in the ordinary course of business;
(xii) Refinancing Indebtedness;
(xiii) Guarantees by the Company or a Guarantor of
Indebtedness that was permitted to be incurred under this Indenture;
and
(xiv) additional Indebtedness of the Company 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 the Company and its Restricted
Subsidiaries.
For purposes of determining compliance with Section 4.11, in
the event that an item of Indebtedness meets the criteria of more than one of
the categories of Permitted Indebtedness described in clauses (i) through (xiv)
above or is entitled to be incurred pursuant to the Consolidated Fixed Charge
Coverage Ratio provisions of such Section, the Company shall, in its sole
discretion, classify (or later reclassify) such item of Indebtedness in any
manner that complies with such Sec-
<PAGE> 29
-21-
tion. 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
Section 4.11.
"Permitted Investments" means: (i) Investments by the Company
or any Restricted Subsidiary of the Company in any Person that is or will
become immediately after such Investment a Wholly Owned Restricted Subsidiary
of the Company or that will merge or consolidate into the Company or a Wholly
Owned Restricted Subsidiary of the Company; (ii) Investments in the Company by
any Restricted Subsidiary of the Company; 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 Company's obligations under the Notes and this Indenture;
(iii) Investments in cash and Cash Equivalents; (iv) loans and advances to
employees and officers of the Company 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; (v)
Currency Agreements and Interest Swap Obligations entered into in the ordinary
course of the Company's or its Restricted Subsidiaries' businesses and
otherwise in compliance with this Indenture; (vi) 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; (vii) Investments made by the Company or its Restricted
Subsidiaries as a result of consideration received in connection with an Asset
Sale made in compliance with Section 4.14 hereof; (viii) Guarantees of
Indebtedness otherwise permitted under this Indenture; (ix) Investments in
Joint Ventures in an aggregate amount not to exceed $5.0 million at any one
time outstanding; and (x) additional Investments not to exceed $5.0 million at
any one time outstanding.
"Permitted Liens" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges
or claims either (a) not delinquent or (b) con-
<PAGE> 30
-22-
tested in good faith by appropriate proceedings and as to which the
Company or its Restricted Subsidiaries shall have set aside on its
books such reserves as may be required pursuant to GAAP;
(ii) 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;
(iii) 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);
(iv) judgment Liens not giving rise to an Event of Default;
(v) 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 the Company or any of its Restricted Subsidiaries;
(vi) 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;
(vii) purchase money Liens to finance property or assets of
the Company or any Restricted Subsidiary of the Company 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 the Company or any Restricted Subsidiary of the Company other than
the property and assets so acquired and (b) the
<PAGE> 31
-23-
Lien securing such Indebtedness shall be created within 90 days of
such acquisition;
(viii) 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 the account of
such Person to facilitate the purchase, shipment or storage of such
inventory or other goods;
(ix) 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;
(x) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual, or warranty
requirements of the Company or any of its Restricted Subsidiaries,
including rights of offset and set-off;
(xi) Liens securing Interest Swap Obligations which
Interest Swap Obligations relate to Indebtedness that is otherwise
permitted under this Indenture;
(xii) Liens securing Capitalized Lease Obligations and
Purchase Money Indebtedness permitted pursuant to clause (x) 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 the Company or any Restricted Subsidiary of
the Company 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;
(xiii) Liens securing Indebtedness under Currency Agreements;
(xiv) Liens securing Acquired Indebtedness incurred in
accordance with Section 4.11; provided that:
(a) such Liens secured such Acquired
Indebtedness at the time of and prior to the incurrence of
such Acquired Indebtedness by the Company or a Re-
<PAGE> 32
-24-
stricted Subsidiary of the Company and were not granted in
connection with, or in anticipation of, the incurrence of
such Acquired Indebtedness by the Company or a Restricted
Subsidiary of the Company; and
(b) such Liens do not extend to or cover any
property or assets of the Company 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 the Company or a Restricted
Subsidiary of the Company and are no more favorable to the
lienholders than those securing the Acquired Indebtedness
prior to the incurrence of such Acquired Indebtedness by the
Company or a Restricted Subsidiary of the Company; and
(xv) Liens not permitted by clauses (i) through (xiv) that
are incurred in the ordinary course of business of the Company or any
Restricted Subsidiary of the Company 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.
"Physical Notes" shall have the meaning provided in
Section 2.01.
"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.
"principal" of any Indebtedness (including the Notes) means
the principal amount of such Indebtedness plus the premium, if any, on such
Indebtedness.
"Private Exchange Notes" shall have the meaning provided in
the Registration Rights Agreement.
"Private Placement Legend" means the legend initially set
forth on the Initial Notes in the form set forth on Exhibit A.
<PAGE> 33
-25-
"pro forma" means, with respect to any calculation made or
required to be made pursuant to the terms of this Indenture, a calculation in
accordance with Article 11 of Regulation S-X under the Securities Act as
interpreted by the Company's Board of Directors in consultation with its
independent certified public accountants.
"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.
"Qualified Institutional Buyer" or "QIB" shall have the
meaning specified in Rule 144A under the Securities Act.
"Redemption Date," when used with respect to any Note to be
redeemed (in whole or in part) means the date fixed for such redemption
pursuant to this Indenture and the Notes.
"Redemption Price," when used with respect to any Note to be
redeemed, means the price fixed for such redemption pursuant to this Indenture
and the Notes.
"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 the
Company or any Restricted Subsidiary of the Company of Indebtedness incurred in
accordance with the ratio under Section 4.11 or pursuant to clause (i), (iii)
or (xi) of the definition of "Permitted Indebtedness," in each case that does
not:
(i) 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 the Company in connection with such
Refinancing); or
<PAGE> 34
-26-
(ii) 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 the
Company, then such Refinancing Indebtedness shall be Indebtedness of
the Company 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.
"Registrar" has the meaning provided in Section 2.03.
"Registration Rights Agreement" means the registration rights
agreement dated the Issue Date between the Company, the Guarantors and the
Initial Purchasers.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Note" means a permanent Global Note in
registered form representing the aggregate principal amount of Notes sold in
reliance on Regulation S.
"Replacement Assets" has the meaning provided in Section
4.14.
"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 Note" means a Note that constitutes a "Restricted
Security" within the meaning of Rule 144(a)(3) under the Securities Act;
provided, however, that the Trustee shall be entitled to request and
conclusively rely on an Opinion of Counsel with respect to whether any Note
constitutes a Restricted Note.
"Restricted Payment" has the meaning provided in Section
4.09.
<PAGE> 35
-27-
"Restricted Subsidiary" of any Person means any Subsidiary of
such Person which at the time of determination is not an Unrestricted
Subsidiary.
"S&P" means Standard & Poor's Ratings Group.
"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 the Company or a Restricted Subsidiary of any property,
whether owned by the Company or any Restricted Subsidiary at the Issue Date or
later acquired, which has been or is to be sold or transferred by the Company
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.
"Securities Act" means the Securities Act of 1933, as
amended, or any successor statute or statutes thereto, and the rules and
regulations of the Commission promulgated thereunder.
"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 the Company, whether outstanding on the
Issue Date 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:
(i) all monetary obligations of every nature of the
Company under the Credit Agreement, including, without limitation,
obligations to pay principal and interest, reimbursement obligations
under letters of credit, fees, expenses and indemnities;
(ii) all Interest Swap Obligations; and
(iii) all obligations under Currency Agreements,
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in each case whether outstanding on the Issue Date or thereafter incurred.
Notwithstanding the foregoing, "Senior Debt" shall not include:
(i) any Indebtedness of the Company to a Restricted
Subsidiary of the Company or any Affiliate of the Company or any of
such Affiliate's Subsidiaries;
(ii) Indebtedness to, or guaranteed on behalf of, any
shareholder, director, officer or employee of the Company or any
Subsidiary of the Company (including, without limitation, amounts owed
for compensation);
(iii) Indebtedness to trade creditors and other amounts
incurred in connection with obtaining goods, materials or services;
(iv) Indebtedness represented by Disqualified Capital
Stock;
(v) any liability for federal, state, local or other taxes
owed or owing by the Company;
(vi) that portion of any Indebtedness incurred in violation
of this Indenture pursuant to the provisions set forth under Section
4.11 (but, as to any such obligation, no such violation shall be
deemed to exist for purposes of this clause (vi) if the holder(s) of
such obligation or their representative and the Trustee shall have
received an officers' certificate of the Company 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 this
Indenture);
(vii) Indebtedness which, when incurred and without respect
to any election under Section 1111(b) of Title 11, United States Code,
is without recourse to the Company; and
(viii) any Indebtedness which is, by its express terms,
subordinated in right of payment to any other Indebtedness of the
Company.
"Significant Subsidiary," with respect to any Person, means
any Restricted Subsidiary of such Person that satisfies
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the criteria for a "significant subsidiary" set forth in Rule 1.02(w) of
Regulation S-X under the Securities Act.
"Stated Maturity," when used with respect to any Note or any
installment of interest thereon, means the date specified in such Note as the
fixed date on which the principal of such Note or such installment of interest
is due and payable.
"Subsidiary," with respect to any Person, means (i) 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 (ii) 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.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb), as amended, as in effect on the date on which this Indenture is
qualified under the TIA, except as otherwise provided in Section 9.03.
"Trust Officer" means any officer or assistant officer of the
Trustee assigned by the Trustee to administer its corporate trust matters or,
in the case of a successor trustee, an officer assigned to the department,
division or group performing the corporate trust work of such successor.
"Trustee" means the party named as such in this Indenture
until a successor replaces it in accordance with the provisions of this
Indenture and thereafter means such successor.
"Unrestricted Subsidiary" of any Person means: (i) 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 (ii) any Subsidiary of an
Unrestricted Subsidiary.
The 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, the Company or any other Subsidiary of the Company
that is not a Subsidiary of the Subsidiary to be so designated; provided that:
(i) the Company certifies to the Trustee that such designation complies with
Section 4.09 hereof; and (ii) each Sub-
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sidiary 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
the Company or any of its Restricted Subsidiaries.
The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary only if: (x) immediately after giving
effect to such designation, the Company is able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) in compliance with
Section 4.11 hereof; and (y) 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 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.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.
"U.S. Legal Tender" means such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts.
"Unrestricted Notes" means one or more Notes that do not and
are not required to bear the private placement legend in the form set forth on
Exhibit A, including, without limitation, the Exchange Notes in the form set
forth as Exhibit B hereto.
"Weighted Average Life to Maturity" means, when applied to
any Indebtedness at any date, the number of years obtained by dividing (i) the
then outstanding aggregate principal amount of such Indebtedness into (ii) the
sum of the total of the products obtained by multiplying (A) 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 (B) the number of years (calcu-
<PAGE> 39
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lated 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.
SECTION 1.02. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA,
such provision is incorporated by reference in, and made a part of, this
Indenture. The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the indenture securities means the Company, the
Guarantors, if any, or any other obligor on the Notes or the Guarantees, if
any.
All other TIA terms used in this Indenture that are defined
by the TIA, defined by the TIA by reference to another statute or defined by
SEC rule and not otherwise defined herein have the meanings assigned to them
therein.
SECTION 1.03. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
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(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP as in effect on the
Issue Date;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in
the plural include the singular; and
(5) "herein," "hereof" and other words of similar import
refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision.
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating.
The Initial Notes, the notation thereon relating to the
Guarantees, if any, and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto. The Exchange Notes, the notation
thereon relating to the Guarantees, if any, and the Trustee's certificate of
authentication relating thereto shall be substantially in the form of Exhibit B
hereto. The Notes may have notations, legends or endorsements required by law,
stock exchange rule or usage. The Company and the Trustee shall approve the
form of the Notes and any notation, legend or endorsement thereon. Each Note
shall be dated the date of issuance and shall show the date of its
authentication. Each Note shall have an executed Guarantee from each of the
Guarantors endorsed thereon substantially in the form of Exhibit F hereto. Each
Note shall be dated the date of its authentication.
The terms and provisions contained in the Notes and the
Guarantees, if any, annexed hereto as Exhibits A and B and Exhibit F, if any,
shall constitute, and are hereby expressly made, a part of this Indenture and,
to the extent applicable, the Company, the Guarantors and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
Notes offered and sold in reliance on Rule 144A, and Notes
offered and sold in reliance on Regulation S, shall be issued initially in the
form of one or more permanent global
<PAGE> 41
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notes in fully registered form without interest coupons, substantially in the
form set forth in Exhibit A (each a "Global Note"), and shall be deposited with
the Trustee, as custodian for the Depositary, and registered in the name of a
nominee of the Depositary. The Global Note shall bear the legend set forth in
Exhibit C, and shall be duly executed by the Company (and have an executed
Guarantee from each of the Guarantors endorsed thereon) and shall be
authenticated by the Trustee as hereinafter provided. The aggregate principal
amount of the Global Note may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for the
Depository, as hereinafter provided.
Notes issued in exchange for interests in a Global Note
pursuant to Section 2.15 may be issued in the form of permanent certificated
Notes in registered form in substantially the form set forth in Exhibit A (the
"Physical Notes") and shall bear the legend set forth in Exhibit A. All Notes
offered and sold in reliance on Regulation S shall remain in the form of a
Global Note until the consummation of the Exchange Offer pursuant to the
Registration Rights Agreement; provided, however, that all of the time periods
specified in the Registration Rights Agreement to be complied with by the
Company and the Guarantors have been so complied with.
SECTION 2.02. Execution and Authentication; Aggregate
Principal Amount.
One Officer shall sign the Notes for the Company, and the
Guarantees for the Guarantors, by manual or facsimile signature and may be
imprinted or otherwise reproduced. Each Guarantor, if any, shall execute the
Guarantee in the manner set forth in Section 11.09.
If an Officer whose signature is on a Note or a Guarantee, as
the case may be, was an Officer at the time of such execution but no longer
holds that office or position at the time the Trustee authenticates the Note,
the Note and Guarantee shall nevertheless be valid.
A Note shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Note. The
signature of such representative of the Trustee shall be conclusive evidence
that the Note has been authenticated under this Indenture.
The Trustee shall authenticate (i) Initial Notes for original
issue in the aggregate principal amount not to exceed
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$250,000,000 in one or more series; provided that the aggregate principal
amount of Initial Notes on the Issue Date shall not exceed $125,000,000, (ii)
Private Exchange Notes from time to time only in exchange for a like principal
amount of Initial Notes and (iii) Unrestricted Notes from time to time only (x)
in exchange for a like principal amount of Initial Notes or (y) in an aggregate
principal amount of not more than the excess of $250,000,000 over the sum of
the aggregate principal amount of (A) Initial Notes then outstanding, (B)
Private Exchange Notes then outstanding and (C) Unrestricted Notes issued in
accordance with (iii)(x) above, in each case upon a written order of the
Company in the form of an Officers' Certificate of the Company. Each such
written order shall specify the amount of Notes to be authenticated and the
date on which the Notes are to be authenticated, whether the Notes are to be
Initial Notes, Private Exchange Notes or Unrestricted Notes and whether
(subject to Section 2.01) the Notes are to be issued as Physical Notes or
Global Notes and such other information as the Trustee may reasonably request.
In addition, with respect to authentication pursuant to clauses (ii) or (iii)
of the first sentence of this paragraph, the first such written order from the
Company shall be accompanied by an Opinion of Counsel of the Company in a form
reasonably satisfactory to the Trustee stating that the issuance of the Private
Exchange Notes or the Unrestricted Notes, as the case may be, does not give
rise to an Event of Default, complies with this Indenture and has been duly
authorized by the Company. The aggregate principal amount of Notes outstanding
at any time may not exceed $250,000,000, except as provided in Sections 2.07
and 2.08.
In the event that the Company shall issue and the Trustee
shall authenticate any Notes issued under this Indenture subsequent to the
Issue Date pursuant to clauses (i) and (iii) of the first sentence of the
immediately preceding paragraph, the Company shall use its best efforts to
obtain the same "CUSIP" number for such Notes as is printed on the Notes
outstanding at such time; provided, however, that if any series of Notes issued
under this Indenture subsequent to the Issue Date is determined, pursuant to an
Opinion of Counsel of the Company in a form reasonably satisfactory to the
Trustee, to be a different class of security than the Notes outstanding at such
time for federal income tax purposes, the Company may obtain a "CUSIP" number
for such Notes that is different than the "CUSIP" number printed on the Notes
then outstanding. Notwithstanding the foregoing, all Notes issued under this
Indenture shall vote and consent together on all matters (as to which any of
such Notes may vote or consent) as one class and no series
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of Notes will have the right to vote or consent as a separate class on any
matter.
The Notes shall be issuable in fully registered form only,
without coupons, and only in denominations of $1,000 and integral multiples
thereof.
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency (which shall
be located in the Borough of Manhattan in the City of New York, State of New
York) where (a) Notes may be presented or surrendered for registration of
transfer or for exchange ("Registrar"), (b) Notes may be presented or
surrendered for payment ("Paying Agent") and (c) notices and demands to or upon
the Company in respect of the Notes and this Indenture may be served. The
Registrar shall keep a register of the Notes and of their transfer and
exchange. The Company, upon notice to the Trustee, may have one or more
co-Registrars and one or more additional paying agents. The term "Paying Agent"
includes any additional paying agent.
In the event that the Company shall retain any Person not a
party to this Indenture as an Agent hereunder, the Company shall enter into an
appropriate agency agreement with such Agent, which agreement shall incorporate
the provisions of the TIA and implement the provisions of this Indenture that
relate to such Agent. The Company shall notify the Trustee, in advance, of the
name and address of any such Agent. If the Company fails to maintain a
Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee
shall act as such and shall be entitled to appropriate compensation in
accordance with Section 7.07.
The Company initially appoints the Trustee as Registrar and
Paying Agent until such time as the Trustee has resigned or a successor has
been appointed. Any of the Registrar, the Paying Agent or any other agent may
resign upon 30 days' notice to the Company. The office of the Paying Agent as
Registrar for purposes of this Section 2.03 shall initially be at First Union
National Bank, 40 Broad Street, 5th Floor, Suite 550, New York, New York 10004.
SECTION 2.04. Paying Agent To Hold Assets in Trust.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that, subject to Articles Ten and Eleven hereof,
each Paying Agent shall hold in trust
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for the benefit of the Holders or the Trustee all assets held by the Paying
Agent for the payment of principal of, premium, if any, or interest on, the
Notes (whether such assets have been distributed to it by the Company or any
other obligor on the Notes), and the Company and the Paying Agent shall notify
the Trustee in writing of any default by the Company (or any other obligor on
the Notes) in making any such payment. If the Company or an Affiliate acts as
Paying Agent, it shall segregate the money held by it as Paying Agent and hold
it as a separate trust fund. The Company at any time may require a Paying Agent
to distribute all assets held by it to the Trustee and to account for any
assets disbursed, and the Trustee may at any time during the continuance of any
payment Default, upon written request to a Paying Agent, require such Paying
Agent to distribute all assets held by it to the Trustee and to account for any
assets distributed. Upon distribution to the Trustee of all assets that shall
have been delivered by the Company to the Paying Agent, the Paying Agent shall
have no further liability for such assets delivered to the Trustee.
SECTION 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of the Holders and shall otherwise comply with TIA 312(a). If the
Trustee is not the Registrar, the Company shall furnish or cause the Registrar
to furnish to the Trustee at least five (5) Business Days before each Record
Date and before each related Interest Payment Date and at such other times as
the Trustee may request in writing, a list as of such date and in such form as
the Trustee may reasonably require of the names and addresses of the Holders,
which list may be conclusively relied upon by the Trustee.
SECTION 2.06. Transfer and Exchange.
Subject to Sections 2.15 and 2.16, when Notes are presented
to the Registrar or a co-Registrar with a request to register the transfer of
such Notes or to exchange such Notes for an equal principal amount of Notes of
other authorized denominations, the Registrar or co-Registrar shall register
the transfer or make the exchange as requested if its requirements for such
transaction are met; provided, however, that the Notes presented or surrendered
for registration of transfer or exchange shall be duly endorsed or accompanied
by a written instrument of transfer in form satisfactory to the Company and the
Registrar or co-Registrar, duly executed by the Holder thereof or his attorney
duly authorized in writing; provided,
<PAGE> 45
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further, that no exchange of Initial Notes for Exchange Notes shall occur until
an Exchange Offer Registration Statement shall have been declared effective by
the Commission, and that the Initial Notes to be exchanged for the Exchange
Notes shall be cancelled by the Trustee. To permit registrations of transfers
and exchanges, the Company shall execute and the Guarantors shall execute
Guarantees thereon and the Trustee shall authenticate Notes at the Registrar's
or co-Registrar's written request. No service charge shall be made for any
registration of transfer or exchange, but the Company may require from such
Holder payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such
transfer taxes or similar governmental charges payable upon exchanges or
transfers pursuant to Sections 2.10, 3.07, 4.13, 4.14 or 9.05, in which event
the Company shall be responsible for the payment of such taxes).
The Registrar or co-Registrar shall not be required to
register the transfer of or exchange of any Note (i) during a period beginning
at the opening of business 15 days before (a) the selection of Notes to be
redeemed under Section 3.02, or (b) the mailing of a notice of redemption of
Notes, and ending at the close of business on the day of such mailing of the
relevant notice of redemption and (ii) selected for redemption in whole or in
part pursuant to Article Three, except the unredeemed portion of any Note being
redeemed in part.
Any Holder of a Global Note shall, by acceptance of such
Global Note, agree that transfers of beneficial interests in such Global Notes
may be effected only through a book entry system maintained by the Holder of
such Global Note (or its agent), and that ownership of a beneficial interest in
the Note shall be required to be reflected in a book entry system.
SECTION 2.07. Replacement Notes.
If a mutilated Note is surrendered to the Trustee or the
Registrar or if the Holder of a Note shall provide the Company and the Trustee
with evidence to their satisfaction that the Note has been lost, destroyed or
wrongfully taken, the Company shall issue and execute and the Trustee shall
authenticate a replacement Note and each of the Guarantors shall execute a
Guarantee thereon if the Trustee's requirements are met and the Holder
satisfies any other reasonable requirement of the Trustee. If required by the
Trustee or the Company, such Holder must provide an indemnity bond or other
indemnity, sufficient in the reasonable judgment of the Company, the Guarantors
and the Trustee, to protect the Company, the Guarantors, the Trus-
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tee or any Agent (including the Paying Agent) from any loss which any of them
may suffer if a Note is replaced. The Company may charge such Holder for its
reasonable expenses in replacing a Note, including reasonable fees and expenses
of the Trustee and counsel. The Trustee may charge the Company for the
Trustee's expenses in replacing such Note. Every replacement Note shall
constitute an additional obligation of the Company and every replacement
Guarantee shall constitute an additional obligation of the Guarantors.
SECTION 2.08. Outstanding Notes.
Notes outstanding at any time are all the Notes that have
been authenticated by the Trustee (except for those cancelled by it), those
delivered to it for cancellation and those described in this Section as not
outstanding. Subject to Section 2.09, a Note does not cease to be outstanding
because the Company, any Guarantor or any of their Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.07 (other than a
mutilated Note surrendered for replacement), such Note, together with the
related Guarantee, ceases to be outstanding unless the Trustee receives proof
satisfactory to it that the replaced Note is held by a bona fide purchaser. A
mutilated Note and the related Guarantee cease to be outstanding upon surrender
of such Note and replacement thereof pursuant to Section 2.07.
If on a Redemption Date or the Maturity Date the Paying Agent
segregates and holds in trust, in accordance with this Indenture, U.S. Legal
Tender or U.S. Government Obligations sufficient to pay all of the principal,
premium, if any, and interest due on the Notes payable on that date with
respect to the Notes (or portions thereof) to be redeemed or maturing, as the
case may be, and the Paying Agent is not prohibited from paying such money to
the Holders thereof pursuant to the terms of this Indenture, then on and after
that date such Notes (or portions thereof) cease to be outstanding and interest
on them ceases to accrue.
SECTION 2.09. Treasury Notes.
In determining whether the Holders of the required aggregate
principal amount of Notes have concurred in any direction, waiver, consent or
notice, Notes owned by the Company or any of its Affiliates shall be considered
as though they are not outstanding, except that for the purposes of determining
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whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Notes which a Trust Officer of the Trustee actually knows are
so owned shall be so considered. The Company shall notify the Trustee, in
writing, when it or any of its Affiliates repurchases or otherwise acquires
Notes, of the aggregate principal amount of such Notes so repurchased or
otherwise acquired and such other information as the Trustee may reasonably
request and the Trustee shall be entitled to rely thereon.
SECTION 2.10. Temporary Notes.
Until definitive Notes are ready for delivery, the Company
may prepare and the Trustee shall authenticate temporary Notes and the
Guarantors shall prepare temporary Guarantees thereon upon receipt of a written
order of the Company in the form of an Officers' Certificate. The Officers'
Certificate shall specify the amount of temporary Notes to be authenticated and
the date on which the temporary Notes are to be authenticated and shall direct
the Trustee to authenticate such Notes and certify that all conditions
precedent to the issuance of such Notes contained herein have been complied
with. Temporary Notes shall be substantially in the form of definitive Notes
but may have variations that the Company and the Trustee consider appropriate
for temporary Notes. Without unreasonable delay, the Company shall prepare and
execute, and the Trustee shall authenticate and the Guarantors shall execute
Guarantees on, upon receipt of a written order of the Company pursuant to
Section 2.02, definitive Notes and deliver them in exchange for temporary
Notes.
SECTION 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee,
or at the direction of the Trustee, the Registrar or the Paying Agent, and no
one else, shall cancel and, at the written direction of the Company, shall
dispose of, in its customary manner and deliver evidence of disposal of, all
Notes surrendered for transfer, exchange, payment or cancellation. Subject to
Section 2.07, the Company may not issue new Notes to replace Notes that the
Company has paid or delivered to the Trustee for cancellation. If the Company
shall acquire any of the Notes, such acquisition shall not operate as a
redemption or satisfaction of the Indebtedness represented by such Notes unless
and until the same
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are surrendered to the Trustee for cancellation pursuant to this Section 2.11.
SECTION 2.12. Defaulted Interest.
The Company will pay interest on overdue principal from time
to time on demand at the rate of interest then borne by the Notes. The Company
shall, to the extent lawful, pay interest on overdue installments of interest
(without regard to any applicable grace periods) from time to time on demand at
the rate of interest then borne by the Notes. Interest will be computed 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.
If the Company defaults in a payment of interest on the
Notes, it shall pay the defaulted interest, plus (to the extent lawful) any
interest payable on the defaulted interest to the Persons who are Holders on a
subsequent special record date, which special record date shall be the
fifteenth day next preceding the date fixed by the Company for the payment of
defaulted interest or the next succeeding Business Day if such date is not a
Business Day. The Company shall notify the Trustee in writing of the amount of
defaulted interest proposed to be paid on each Note and the date of the
proposed payment (a "Default Interest Payment Date"), and at the same time the
Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such defaulted interest or
shall make arrangements satisfactory to the Trustee for such deposit on or
prior to the date of the proposed payment, such money when deposited to be held
in trust for the benefit of the Persons entitled to such defaulted interest as
provided in this Section; provided, however, that in no event shall the Company
deposit monies proposed to be paid in respect of defaulted interest later than
11:00 a.m. New York City time on the proposed Default Interest Payment Date. At
least 15 days before the subsequent special record date, the Company shall mail
to each Holder, with a copy to the Trustee, a notice that states the subsequent
special record date, the Default Interest Payment Date and the amount of
defaulted interest, and interest payable on such defaulted interest, if any, to
be paid.
Notwithstanding the foregoing, any interest which is paid
prior to the expiration of the 30-day period set forth in Section 6.01(1) shall
be paid to Holders as of the regular record date for the Interest Payment Date
for which interest has not been paid. Notwithstanding the foregoing, the
Company may
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make payment of any defaulted interest in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Notes may be listed, and upon such notice as may be required by such exchange
if, after notice given by the Company to the Trustee of the proposed payment
pursuant to this Section, such payment shall be deemed practicable by the
Trustee.
SECTION 2.13. CUSIP Numbers.
The Company in issuing the Notes may use one or more "CUSIP"
number(s), and, if so, the appropriate CUSIP number(s) shall be included in all
notices of redemption or exchange as a convenience to Holders; provided,
however, that any such notice may state that no representation is thereby
deemed to be made by the Trustee as to the correctness or accuracy of any CUSIP
number(s) printed on the Notes or as contained in any notice of a redemption,
and that reliance may be placed only on the other identification numbers
printed on the Notes, and any such redemption shall not be affected by any
defect in or omission of such numbers. The Company shall promptly notify the
Trustee of any change in the CUSIP number.
SECTION 2.14. Deposit of Moneys.
Prior to 10:00 a.m. New York City time on each Interest
Payment Date, Maturity Date, Redemption Date, Change of Control Date, Payment
Date and Net Proceeds Offer Payment Date, the Company shall have deposited with
the Paying Agent in immediately available funds money sufficient to make cash
payments, if any, due on such Interest Payment Date, Maturity Date, Redemption
Date, Change of Control Date, Payment Date or Net Proceeds Offer Payment Date,
as the case may be, in a timely manner which permits the Paying Agent to remit
payment to the Holders on such Interest Payment Date, Maturity Date, Redemption
Date, Change of Control Payment Date or Net Proceeds after Payment Date, as the
case may be.
SECTION 2.15. Book-Entry Provisions for Global Notes.
(a) The Global Note initially shall (i) be registered in the
name of the Depositary for such Global Note or the nominee of such Depositary,
(ii) be deposited with, or on behalf of, the Depositary or with the Trustee, as
custodian for such Depositary and (iii) bear legends as set forth in Exhibit C.
<PAGE> 50
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Members of, or participants in, the Depositary
("Participants") shall have no rights under this Indenture with respect to any
Global Note held on their behalf by the Depositary, or the Trustee as its
custodian, or under the Global Note, and the Depositary may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of the Global Note for all purposes whatsoever. Notwithstanding
the foregoing, nothing herein shall prevent the Company, the Trustee or any
agent of the Company or the Trustee from giving effect to any written
certification, proxy or other authorization furnished by the Depositary or
shall impair, as between the Depositary and Participants, the operation of
customary practices governing the exercise of the rights of a Holder of any
Note.
(b) Transfers of Global Notes shall be limited to
transfers in whole, but not in part, to the Depositary, its successors or their
respective nominees. Interests of beneficial owners in the Global Notes may be
transferred or exchanged for Physical Notes in accordance with the rules and
procedures of the Depositary and the provisions of Section 2.16. In addition,
Physical Notes shall be transferred to all beneficial owners in exchange for
their beneficial interests in Global Note (i) if the Depositary notifies the
Company and the Company notifies the Trustee in writing that the Depositary is
unwilling or unable to continue as depositary for any Global Note, and a
successor depositary is not appointed by the Company within 90 days of such
notice or (ii) if requested by a holder of such interests.
(c) In connection with the transfer of the entire Global
Note to beneficial owners pursuant to paragraph (b), the Global Note shall be
deemed to be surrendered to the Trustee for cancellation, and the Company shall
execute, and the Trustee shall authenticate and deliver, to each beneficial
owner identified by the Depositary in exchange for its beneficial interest in
the Global Note, an equal aggregate principal amount of Physical Notes of
authorized denominations.
(d) Any Physical Note constituting a Restricted Note
delivered in exchange for an interest in the Global Note pursuant to paragraph
(b) or (c) shall, except as otherwise provided by paragraphs (a)(i)(x) and (c)
of Section 2.16, bear the legend regarding transfer restrictions applicable to
the Physical Notes set forth in Exhibit A.
(e) The Holder of the Global Note may grant proxies and
otherwise authorize any person, including Participants and
<PAGE> 51
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persons that may hold interests through Participants, to take any action which
a Holder is entitled to take under this Indenture or the Notes.
SECTION 2.16. Special Transfer Provisions.
The Trustee is entitled to rely upon the certificates
delivered pursuant to this Section 2.16 and is irrevocably authorized to
produce such certificates or copies thereof to any interested party in any
administrative or legal proceeding or official inquiry with respect to the
matters covered thereby.
(a) Transfers to Non-QIB Institutional Accredited
Investors and Non-U.S. Persons. The following provisions shall apply with
respect to the registration of any proposed transfer of a Restricted Note to
any Institutional Accredited Investor which is not a QIB or to any Non-U.S.
Person:
(i) the Registrar shall register the transfer of any
Restricted Note, whether or not such Note bears the Private Placement
Legend, if (x) the requested transfer is after the second anniversary
of the Issue Date; provided, however, that neither the Company nor any
Affiliate of the Company has held any beneficial interest in such
note, or portion thereof, at any time on or prior to the second
anniversary of the Issue Date or (y) (1) in the case of a transfer to
an Institutional Accredited Investor which is not a QIB (excluding
Non-U.S. Persons), the proposed transferee has delivered to the
Registrar a certificate substantially in the form of Exhibit D hereto
and any legal opinions and certifications required thereby and (2) in
the case of a transfer to a Non-U.S. Person, the proposed transferor
has delivered to the Registrar a certificate substantially in the form
of Exhibit E hereto;
(ii) if the proposed transferor is a Participant holding a
beneficial interest in the Global Note, upon receipt by the Registrar
of (x) the certificate, if any, required by paragraph (i) above and
(y) instructions given in accordance with the Depositary's and the
Registrar's procedures,
whereupon (a) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Physical Notes) a
decrease in the principal amount of the Global Note in an amount equal to the
principal amount of the beneficial interest in the Global Note to be
<PAGE> 52
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transferred, and (b) the Company shall execute and the Trustee shall
authenticate and deliver one or more Physical Notes of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a Note
constituting a Restricted Security to a QIB (excluding transfers to
Non-U.S. Persons):
(i) the Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has checked the
box provided for on the form of Note stating, or has otherwise advised
the Company and the Registrar in writing, that the sale has been made
in compliance with the provisions of Rule 144A to a transferee who has
signed the certification provided for on the form of Note stating, or
has otherwise advised the Company and the Registrar in writing, that
it is purchasing the Note for its own account or an account with
respect to which it exercises sole investment discretion and that it
and any such account, or the Person on whose behalf it is acting with
respect to any such account, is a QIB within the meaning of Rule 144A,
and is aware that the sale to it is being made in reliance on Rule
144A and acknowledges that it has received such information regarding
the Company as it has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that
the transferor is relying upon its foregoing representations in order
to claim the exemption from registration provided by Rule 144A; and
(ii) if the proposed transferee is a Participant, and the
Notes to be transferred consist of Physical Notes which after transfer
are to be evidenced by an interest in the Global Note, upon receipt by
the Registrar of instructions given in accordance with the
Depositary's and the Registrar's procedures, the Registrar shall
reflect on its books and records the date and an increase in the
principal amount of the Global Note in an amount equal to the
principal amount of the Physical Notes to be transferred, and the
Trustee shall cancel the Physical Notes so transferred.
(c) Private Placement Legend. Upon the registration of transfer,
exchange or replacement of Notes not bearing the Private Placement
Legend, the Registrar shall deliver
<PAGE> 53
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Notes that do not bear the Private Placement Legend. Upon the
registration of transfer, exchange or replacement of Notes bearing the
Private Placement Legend, the Registrar shall deliver only Notes that
bear the Private Placement Legend unless (i) the circumstance
contemplated by paragraph (a)(i)(x) of this Section 2.16 exist or (ii)
there is delivered to the Registrar an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither
such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities
Act.
(d) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the
restrictions on transfer of such Note set forth in this Indenture and
in the Private Placement Legend and agrees that it will transfer such
Note only as provided in this Indenture.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.15 or this Section
2.16 for a period of three years. The Company shall have the right to inspect
and make copies of all such letters, notices or other written communications at
any reasonable time upon the giving of reasonable written notice to the
Registrar.
SECTION 2.17. Restrictive Legends.
Each Global Note and Physical Note that constitutes a
Restricted Note shall bear the legend (the "Private Placement Legend") as set
forth in Exhibit A on the face thereof until after the second anniversary of
the later of the Issue Date and the last date on which the Company or any
Affiliate of the Company was the owner of such Note (or any predecessor
security) (or such shorter period of time as permitted by Rule 144(k) under the
Securities Act or any successor provision thereunder) (or such longer period of
time as may be required under the Securities Act or applicable state securities
laws in the opinion of counsel for the Company, unless otherwise agreed by the
Company and the Holder thereof).
Each Global Note shall also bear the legend as set forth in
Exhibit C.
<PAGE> 54
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ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to paragraph 5
of the Notes and Section 3.03, it shall notify for the Trustee and the Paying
Agent in writing of the Redemption Date and the aggregate principal amount of
the Notes to be redeemed. Such notice must be mailed by first-class mail at
least 45 days prior to the Redemption Date, but shall not be given more than 60
days before the Redemption Date together with an Officers' Certificate and
Opinion of Counsel stating that such redemption shall comply with the
conditions contained herein and in the Notes. Any such notice may be cancelled
at any time prior to notice of such redemption being mailed to any Holder and
shall thereby be void and of no effect.
SECTION 3.02. Selection of Notes To Be Redeemed.
If fewer than all of the Notes are to be redeemed, the
Trustee shall select the Notes to be redeemed either: (1) on a pro rata basis,
by lot or by such method as the Trustee shall deem fair and appropriate or (2)
in compliance with the requirements of the principal national securities
exchange, if any, on which the Notes are listed; provided, however, that if
partial redemption is made with the proceeds of an Equity Offering (as defined
in Section 3.03(b)) prior to April 15, 2002, selection of the Notes or portions
thereof for redemption shall be made by the Trustee only on a pro rata basis or
on as nearly a pro rata basis as is practicable (subject to the applicable
procedures of the Depositary) unless such method is otherwise prohibited. The
Trustee shall make the selection from the Notes outstanding and not previously
called for redemption and shall promptly notify the Company in writing of the
Notes selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000. The
Trustee may select for redemption portions (equal to $1,000 or any integral
multiple thereof) of the principal of Notes that have denominations larger than
$1,000. Provisions of this Indenture that apply to Notes called for redemption
also apply to portions of Notes called for redemption.
<PAGE> 55
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SECTION 3.03. Optional Redemption.
(a) Except as provided in Section 3.03(b), the Notes are not
redeemable before April 15, 2004. Thereafter, the Company may redeem the Notes
at its option, in whole or in part, upon not less than 30 nor more than 60
days' notice, at the following redemption prices (expressed as percentages of
principal amount thereof) plus accrued and unpaid interest thereon, if any, to
the date of redemption, if redeemed during the twelve-month period commencing
on April 15 of the year set forth below:
<TABLE>
<CAPTION>
PERCENTAGE
OF PRINCIPAL
YEAR AMOUNT
---- ------------
<S> <C>
2004.......................... 105.750%
2005.......................... 103.833%
2006.......................... 101.917%
2007 and thereafter........... 100.000%
</TABLE>
In addition, the Company must pay accrued and unpaid interest on the
Notes redeemed.
(b) Notwithstanding the foregoing, at any time, or from time
to time, on or prior to April 15, 2002, the Company may, at its option, use the
net cash proceeds of one or more Equity Offerings (as defined below) to redeem
up to 35% of the principal amount of the Notes issued under this Indenture at a
redemption price of 111.500% of the principal amount thereof plus accrued and
unpaid interest thereon, if any, to the date of redemption; provided that: (i)
at least 65% of the principal amount of Notes issued under this Indenture
remains outstanding immediately after any such redemption; and (ii) the Company
makes such redemption not more than 120 days after the consummation of any such
Equity Offering. "Equity Offering" means public or private offering of
Qualified Capital Stock of the Company; 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 received by the Company directly or indirectly
from such offering are not less than $10.0 million.
SECTION 3.04. Notice of Redemption.
At least 30 days but not more than 60 days before a
Redemption Date, the Company shall mail or cause to be mailed a notice of
redemption by first-class mail, postage prepaid, to
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each Holder whose Notes are to be redeemed at its registered address, with a
copy to the Trustee and any Paying Agent. Each notice for redemption shall
identify the Notes to be redeemed, including the CUSIP number, and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued and
unpaid interest, if any, to be paid as of the Redemption Date;
(3) the paragraph and subparagraph of the Notes pursuant to
which the Notes are being redeemed;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to
the Paying Agent to collect the Redemption Price plus accrued and
unpaid interest, if any;
(6) that, unless the Company defaults in paying the
Redemption Price, or the Paying Agent is prohibited from making such
payment pursuant to the terms of this Indenture, interest, if any, on
Notes (or a portion thereof) called for redemption shall cease to
accrue on and after the Redemption Date, and the only remaining right
of the Holders of such Notes is to receive payment as of the
Redemption Date of the Redemption Price plus accrued and unpaid
interest as of the Redemption Date, if any, upon surrender to the
Paying Agent of the Notes redeemed;
(7) that, if any Note is being redeemed in part, the
portion of the principal amount (equal to $1,000 or any integral
multiple thereof) of such Note to be redeemed and that, after the
Redemption Date, and upon surrender of such Note, a new Note or Notes
in the aggregate principal amount equal to the unredeemed portion
thereof will be issued;
(8) that, if fewer than all the Notes are to be redeemed,
the identification of the particular Notes (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Notes to be
redeemed and the aggregate principal amount of Notes to be outstanding
after such partial redemption; and
(9) the CUSIP number, provided that no representation is
made as to the correctness or accuracy of the
<PAGE> 57
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CUSIP number, if any, listed on such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such
event, the Company shall provide the Trustee with the information required by
this Section.
The Company 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
purchase of Notes.
SECTION 3.05. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with
Section 3.04, such notice of redemption shall be irrevocable and Notes called
for redemption become due and payable on the Redemption Date and at the
Redemption Price plus accrued and unpaid interest, if any. Upon surrender to
the Trustee or Paying Agent, such Notes called for redemption shall be paid at
the Redemption Price plus accrued and unpaid interest, if any, thereon to the
Redemption Date, but installments of interest, the maturity of which is on or
prior to the Redemption Date, shall be payable to Holders of record at the
close of business on the relevant record dates referred to in the Notes.
Interest shall accrue on or after the Redemption Date and shall be payable only
if the Company defaults in payment of the Redemption Price.
SECTION 3.06. Deposit of Redemption Price.
On or before 11:00 a.m. New York City time on the Redemption
Date, the Company shall deposit with the Paying Agent (or, if the Company or
any Affiliate is the Paying Agent, shall segregate and hold in trust), in
immediately available funds, U.S. Legal Tender sufficient to pay the Redemption
Price plus accrued and unpaid interest, if any, on all Notes, or portions
thereof, to be redeemed on that date other than Notes or portions of Notes
called for redemption which have been delivered by the Company to the Trustee
for cancellation. The Paying Agent shall return to the Company, as soon as
practicable, any U.S. Legal Tender so deposited that is not required for that
purpose, except with respect to monies owed as obligations to the Trustee
pursuant to Article Seven.
Unless the Company fails to comply with the preceding
paragraph and defaults in the payment of such Redemption Price
<PAGE> 58
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plus accrued and unpaid interest, if any, on and after the applicable Redemption
Date, interest will cease to accrue on Notes or portions thereof called for
redemption, whether or not such Notes are presented for payment.
SECTION 3.07. Notes Redeemed in Part.
Upon surrender of a Note that is to be redeemed in part, the
Company shall issue and execute, and the Trustee shall authenticate for the
Holder a new Note or Notes equal in principal amount to the unredeemed portion
of the Note surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes.
The Company shall pay the principal of, or premium, if any,
and interest on the Notes on the dates and in the manner provided in the Notes
and in this Indenture. An installment of principal of or interest, if any, on
the Notes shall be considered paid on the date it is due if on such date the
Trustee or Paying Agent holds (or segregates if the Company is the Paying
Agent), prior to 11:00 a.m. New York City time on that date, U.S. Legal Tender
designated for and sufficient to pay in a timely manner the installment in full
and is not prohibited from paying such money to the Holders pursuant to the
terms of this Indenture.
The Company shall pay, to the extent such payments are
lawful, interest on overdue principal and on overdue installments of interest
(without regard to any applicable grace periods) from time to time on demand at
the rate borne by the Notes. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months.
SECTION 4.02. Maintenance of Office or Agency.
The Company shall maintain the office or agency required
under Section 2.03. The Company shall give prior written notice to the Trustee
of the location, and any change in the location, of such office or agency. If
at any time the Company shall fail to maintain any such required office or
agency or shall fail to furnish the Trustee with the address
<PAGE> 59
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thereof, the presentations, surrenders, notices and demands referred to in
Section 2.03 may be made or served at the address of the Trustee set forth in
Section 13.02.
SECTION 4.03. Corporate Existence.
Except as otherwise permitted by Articles Four and Five, the
Company shall do or cause to be done, at its own cost and expense, all things
necessary to preserve and keep in full force and effect its corporate existence
and corporate power and the corporate or other existence and corporate power of
each of its Restricted Subsidiaries; provided, however, that the Company shall
not be required to preserve, with respect to itself, any right and, with
respect to any of its Restricted Subsidiaries, any such existence or right, if
in the judgment of an executive officer of the Company or such Restricted
Subsidiary, as the case may be, shall determine in good faith that the
preservation thereof is no longer desirable in the conduct of the business of
the Company or its Subsidiaries, taken as a whole.
SECTION 4.04. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (i) all material taxes,
assessments and governmental charges (including withholding taxes and any
penalties, interest and additions to taxes) levied or imposed upon it or any of
its Subsidiaries or properties of it or any of its Subsidiaries and (ii) all
material lawful claims for labor, materials, supplies and services that, if
unpaid when due, might by law become a Lien upon the property of it or any of
its Subsidiaries to the extent the failure to pay or discharge the items
referred to in clause (i) or (ii) could have a material adverse effect on the
consolidated financial condition of the Company and its Restricted Subsidiaries,
taken as a whole; provided, however, that there shall not be required to be paid
or discharged any such tax, assessment, charge or claim, the amount,
applicability or validity of which is being contested in good faith by
appropriate proceedings properly instituted and diligently conducted for which
adequate reserves, to the extent required under GAAP, have been taken.
SECTION 4.05. Maintenance of Properties and Insurance.
(a) The Company shall, and shall cause each of its Restricted
Subsidiaries to, maintain its properties in good
<PAGE> 60
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working order and in normal condition (subject to ordinary wear and tear) and
make or cause to be made all repairs, renewals, replacements, additions,
betterments and improvements thereto, and actively conduct and carry on its
business; provided, however, that nothing in this Section 4.05 shall prevent the
Company or any of its Restricted Subsidiaries from discontinuing the operation
and maintenance of any of its properties if such discontinuance is, in the
ordinary course of business or, in the judgment of an executive officer of the
Company or the Restricted Subsidiary concerned, as the case may be, desirable in
the conduct of its businesses and is not disadvantageous in any material respect
to the Holders.
(b) The Company shall provide or cause to be provided, for
itself and each of its Restricted Subsidiaries, insurance (including
appropriate self-insurance) against loss or damage of the kinds that, in the
judgment of an executive officer of the Company, are adequate and appropriate
for the conduct of the business of the Company and such Restricted Subsidiaries
in a prudent manner, with reputable insurers or with the government of the
United States of America or any state thereof or an agency or instrumentality
of such governments, in such amounts, with such deductibles, and by such
methods as shall be customary, in the judgment of an executive officer of the
Company, for companies similarly situated in the industry.
SECTION 4.06. Compliance Certificate; Notice of Default.
(a) The Company shall deliver to the Trustee, within 120 days
after the end of each of the Company's fiscal years, an Officers' Certificate
(signed by the principal executive officer, principal financial officer or
principal accounting officer) stating, as to each such officer signing such
certificate, that to such officers' knowledge (after due inquiry) the Company
and its Restricted Subsidiaries during such preceding fiscal year has kept,
observed, performed and fulfilled each and every such obligation under this
Indenture and no Default or Event of Default occurred during such year and at
the date of such certificate there is no Default or Event of Default that has
occurred and is continuing or, if such signers do know of such Default or Event
of Default, the certificate shall describe the Default or Event of Default and
its status with particularity. The Officers' Certificate shall also notify the
Trustee should the Company elect to change the manner in which it fixes its
fiscal year end.
<PAGE> 61
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(b) The annual financial statements delivered pursuant to
Section 4.07 shall be accompanied by a written report of the Company's
independent certified public accountants (who shall be a firm of established
national reputation) stating whether, in connection with their audit
examination, any Default or Event of Default, insofar as such Default or Event
of Default relates to accounting matters, has come to their attention and if
such a Default or Event of Default has come to their attention, specifying the
nature thereof, and, to the extent available, the period of existence thereof;
provided, however, that any such report shall be in such form permitted by, and
subject to such qualifications and limitations provided by, the then current
recommendations of the American Institute of Certified Public Accountants;
provided, further, however, that, without any restriction as to the scope of
the audit examination, such independent certified public accountants shall not
be liable by reason of any failure to obtain knowledge of any such Default or
Event of Default that would not be disclosed in the course of an audit
examination conducted in accordance with generally accepted auditing standards.
(c) So long as any of the Notes are outstanding (i) if any
Default or Event of Default has occurred and is continuing or (ii) if any
Holder shall have notified the Company that it seeks to exercise any remedy
hereunder with respect to a claimed Default under this Indenture or the Notes,
the Company shall promptly deliver to the Trustee by registered or certified
mail or by telegram, telex or facsimile transmission followed by hard copy by
registered or certified mail an Officers' Certificate specifying such event,
notice or other action (including any action the Company is taking or proposes
to take in respect thereof) within five Business Days of its becoming aware of
such occurrence.
SECTION 4.07. Reports to Holders.
(a) Whether or not required by the rules and regulations of
the SEC, so long as any Notes are outstanding, the Company shall furnish to the
Holders of Notes (i) all quarterly and annual financial information that would
be required to be contained in a filing with the Commission on Forms 10-Q and
10-K if the Company 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 the Company 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
<PAGE> 62
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and Results of Operations, the financial condition and results of operations of
the Company and its Restricted Subsidiaries separate from the financial
condition and results of operations of the Unrestricted Subsidiaries of the
Company, if any) and, with respect to the annual information only, a report
thereon by the Company's certified independent accountants; and (ii) all current
reports that would be required to be filed with the Commission on Form 8-K if
the Company were required to file such reports, in each case within the time
periods specified in the Commission's rules and regulations. Upon qualification
of this Indenture under the TIA, the Company shall also comply with the
provisions of TIA ss. 314(a).
(b) In addition, following the consummation of the Exchange
Offer , whether or not required by the rules and regulations of the Commission,
the Company will file a copy of all such information and reports with the
Commission for public availability within the time periods specified in the
Commission's rules and regulations (unless the Commission will not accept such a
filing) and make such information available to securities analysts and
prospective investors upon request. In addition, for so long as any Notes remain
outstanding, the Company 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.
SECTION 4.08. Waiver of Stay, Extension or Usury Laws.
The Company and each Guarantor each covenant (to the extent
that it may lawfully do so) that it will not at any time insist upon, plead, or
in any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law wherever enacted, now or at any time hereafter
in force, which may affect the obligations or the performance of this
Indenture; and (to the extent that it may lawfully do so) the Company and each
Guarantor hereby each expressly waive all benefit or advantage of any such law,
and covenant that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution
of every such power as though no such law had been enacted.
SECTION 4.09. Limitation on Restricted Payments.
The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly:
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(1) declare or pay any dividend or make any distribution (other than dividends
or distributions payable in Qualified Capital Stock of the Company or in
options, warrants or other rights to purchase Qualified Capital Stock of the
Company) on or in respect of shares of the Company's Capital Stock to holders of
such Capital Stock; (2) purchase, redeem or otherwise acquire or retire for
value any Capital Stock of the Company or any warrants, rights or options to
purchase or acquire shares of any class of such Capital Stock (other than in
either case any such Capital Stock or other securities owned by the Company 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 the Company that is subordinate or
junior in right of payment to the Notes ((i) other than any such subordinated
Indebtedness owed to the Company 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 thereto, (i) a Default or an Event of Default
shall have occurred and be continuing; or (ii) the Company is not able to incur
at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with Section 4.11; or (iii) the aggregate amount of Restricted
Payments (including such proposed Restricted Payment) made subsequent to the
Issue Date (the amount expended for such purposes, if other than in cash, being
the fair market value of such property as determined in good faith by the Board
of Directors of the Company) shall exceed 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 the Company earned subsequent to the Issue
Date and on or prior to the date the Restricted Payment occurs (the "Reference
Date") (treating such period as a single accounting period); plus (x) 100% of
the aggregate net cash proceeds received by the Company from any Person (other
than a Restricted Subsidiary of the Company) from the issuance and sale
subsequent to the Issue Date and on or prior to the Reference Date of (i)
Qualified Capital Stock of the Company and (ii) Indebtedness or Disqualified
Capital Stock that has been converted into or exchanged for Qualified Capital
Stock together
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with the aggregate net cash proceeds received by the Company 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 the
Company from a holder of the Company's 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 Section 3.03(b); plus (z) without duplication, the sum of: (1) the
aggregate amount returned in cash on or with respect to Investments (other than
Permitted Investments) made subsequent to the Issue Date whether through
interest payments, principal payments, dividends or other distributions or
payments; (2) the net cash proceeds received by the Company or any of its
Restricted Subsidiaries from the disposition of all or any portion of such
Investments (other than to a Restricted Subsidiary of the Company); 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 the Issue Date.
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 the Company, either (i) solely in
exchange for shares of Qualified Capital Stock of the Company or (ii) through
the application of net proceeds of a substantially concurrent sale for cash
(other than to a Restricted Subsidiary of the Company) of shares of Qualified
Capital Stock of the Company; (3) the acquisition of any Indebtedness of the
Company that is subordinate or junior in right of payment to the Notes either
(i) solely in exchange for shares of Qualified Capital Stock of the Company, or
(ii) through the application of net proceeds of a substantially concurrent sale
for cash (other than to a Restricted Subsidiary of the Company) of (a) shares
of Qualified Capital Stock of the Company or (b) Refinancing Indebtedness; (4)
so long as no Default or Event of Default shall have occurred and be
continuing, repurchases by the Company of Capital Stock of the Company from
employees, former employees, directors or former directors of the Company 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
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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 the Issue Date 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 the Company 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 those set
forth in Section 4.13; provided that, prior to or simultaneously with such
repurchase, the Company has made the Change of Control Offer as provided in
Section 4.13 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 the Company or any Restricted
Subsidiary required by law in connection with a consolidation, merger or
transfer of assets that complies with Section 5.01; and (9) other Restricted
Payments in an aggregate amount since the Issue Date not to exceed $1.0 million.
In determining the aggregate amount of Restricted Payments made subsequent to
the Issue Date 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, the
Company shall deliver to the trustee an Officers' Certificate stating that such
Restricted Payment complies with this Indenture and setting forth in reasonable
detail the basis upon which the required calculations were computed, which
calculations may be based upon the Company's latest available internal
quarterly financial statements.
SECTION 4.10. Limitations on Transactions with Affiliates.
(a) The Company will not, and will not permit any of its
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 its Affiliates
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(each 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 the Company 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 the Company 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 such transaction complies with the
foregoing provisions. If the Company or any Restricted Subsidiary of the
Company 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, the Company or such Restricted Subsidiary, as
the case may be, shall, prior to the consummation thereof, obtain a favorable
opinion as to the fairness of such transaction or series of related
transactions to the Company 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 reimbursement provided on
behalf of, officers, directors, employees or consultants of the Company or any
Restricted Subsidiary of the Company as determined in good faith by the
Company's Board of Directors or senior management; (2) transactions exclusively
between or among the Company and any of its Restricted Subsidiaries or
exclusively between or among such Restricted Subsidiaries, provided such
transactions are not otherwise prohibited by this Indenture; (3) transactions
pursuant to or contemplated by any agreement as in effect as of the Issue Date
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 the Issue
Date; (4) loans and advances to employees or officers of the Company and its
Restricted Subsidiaries permitted by clause (iv) of the definition of
"Permitted Investments"; (5) Restricted Payments permitted by this Indenture;
and (6) contingent and "earn out" payments incurred in connection with any
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Assets Acquisition or otherwise, which are contingent on the performance of the
assets or properties acquired.
SECTION 4.11. Limitation on Incurrence of Additional Indebtedness.
The Company will not, and will not permit any of its
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, the Company
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 the Company 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 the Company is greater than (x)
2.0 to 1.0 if the date of such incurrence is on or prior to April 1, 2001, or
(y) 2.25 to 1.0 if the date of such incurrence 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 incurrence is on
or after April 1, 2004.
SECTION 4.12. Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries.
The Company will not, and will not cause or permit any of its
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 of the Company to: (i) pay dividends or
make any other distributions on or in respect of its Capital Stock; (ii) make
loans or advances or to pay any Indebtedness owed to the Company or any other
Restricted Subsidiary of the Company; or (iii) transfer any of its property or
assets to the Company or any other Restricted Subsidiary of the Company, except
for such encumbrances or restrictions existing under or by reason of: (a)
applicable law; (b) this Indenture, the Guarantees and the Notes; (c) customary
non-assignment provisions of any contract or any lease governing a leasehold
interest of any Restricted Subsidiary of the Company; (d) any instrument
governing Acquired Indebtedness, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of
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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 the
Issue Date; (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 the Company 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 this
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, however, that the provisions
relating to such encumbrance or restriction contained in any such Indebtedness
are no less favorable to the Company in any material respect as determined by
the Board of Directors of the Company in their reasonable and good faith
judgment than the provisions relating to such encumbrance or restriction
contained in agreements referred to above.
SECTION 4.13. Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder
will have the right to require the Company to purchase all or a portion of such
Holder's Notes pursuant to the offer described below (the "Change of Control
Offer"), at a purchase price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the date of purchase.
(b) Within 30 days following the date upon which a Change of
Control occurred, the Company must send, by first class mail, a notice to each
Holder, with a copy to the Trustee, which notice shall govern the terms of the
Change of Control Offer. The notice to the Holders shall contain all
instructions and materials necessary to enable such Holders to tender Notes
pursuant to the Change of Control Offer. Such notice shall state:
(1) that the Change of Control Offer is being made pursuant
to Section 4.13 and that all Notes validly tendered
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and not withdrawn will be accepted for payment and that the Change of
Control Offer shall remain open for a period of 20 Business Days or
such longer period as may be required by law;
(2) the purchase price (including the amount of accrued and
unpaid interest, if any) and the purchase date (which shall 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 "Change of
Control Payment Date");
(3) that any Note not tendered will continue to accrue
interest;
(4) that, unless the Company defaults in making payment
therefor, any Note accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of
Control Payment Date;
(5) that 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 and Registrar for
the Notes 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;
(6) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than 5:00 p.m., New
York City time, on the second Business Day prior to the Change of
Control Payment Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of
the Notes the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased;
(7) that Holders whose Notes are purchased only in part
will be issued new Notes in a principal amount equal to the
unpurchased portion of the Notes surrendered; provided, however, that
each Note purchased and each new Note issued shall be in a principal
amount of $1,000 or integral multiples thereof; and
(8) the circumstances and relevant facts regarding such
Change of Control to the extent required by law.
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(c) On or before the Change of Control Payment Date, the
Company shall (i) accept for payment Notes or portions thereof tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent
U.S. Legal Tender sufficient to pay the purchase price plus accrued and unpaid
interest, if any, of all Notes so tendered and (iii) deliver to the Trustee
Notes so accepted together with an Officers' Certificate stating the Notes or
portions thereof being purchased by the Company. The Paying Agent shall
promptly mail or deliver to the Holders of Notes so accepted payment in an
amount equal to the purchase price plus accrued and unpaid interest, if any,
and the Company shall execute and issue, and the Trustee shall promptly
authenticate and mail or deliver to such Holders new Notes equal in principal
amount to any unpurchased portion of the Notes surrendered. Upon the payment of
the purchase price for the Notes accepted for purchase, the Trustee shall
return the Notes purchased to the Company for cancellation. Any Notes not so
accepted shall be promptly mailed or delivered by the Company to the Holder
thereof. For purposes of this Section 4.13, the Trustee shall act as the Paying
Agent.
Neither the Board of Directors of the Company nor the Trustee
may waive provisions of this Section 4.13 relating to a Holder's right of
redemption upon a Change of Control, or the Company's obligations to make a
Change of Control Offer.
(d) The Company 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 Change of Control Offer. To the
extent that the provisions of any securities laws or regulations conflict with
the "Change of Control" provisions of this Indenture, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Section 4.13 by virtue thereof.
The Company shall not be required to make a Change of Control
Offer upon a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
SECTION 4.14. Limitation on Asset Sales.
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(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless: (i) the Company 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 the
Company's Board of Directors); (ii) at least 75% of the consideration received
by the Company 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 (as
shown on the most recent balance sheet of the Company or such Restricted
Subsidiary) of the Company or any of its Restricted Subsidiaries (other than
liabilities that are by their terms subordinated to the Notes or any Guarantee
thereof, as the case may be) that are assumed by the transferee of any such
assets pursuant to a customary novation agreement that releases the Company or
such Restricted Subsidiary from further liability and (y) any securities, notes
or other obligations received by the Company or any such Restricted Subsidiary
from such transferee that are converted by the Company or such Restricted
Subsidiary into cash (to the extent of the cash received) within 180 days after
receipt, shall be deemed to be cash for the purposes of this clause (ii); and
(iii) upon the consummation of an Asset Sale, the Company 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 the Company and its Restricted
Subsidiaries as existing on the Issue Date or in businesses reasonably related
or ancillary thereto ("Replacement Assets"); or (c) a combination of prepayment
and investment permitted by the foregoing clauses (iii)(a) and (iii)(b). On the
361st day after an Asset Sale or such earlier date, if any, as the Board of
Directors of the Company or of such Restricted Subsidiary determines not to
apply the Net Cash Proceeds relating to such Asset Sale as set forth in clauses
(iii)(a), (iii)(b) and (iii)(c) above (each, a "Net Proceeds Offer Trigger
Date"), subject to the immediately succeeding paragraph such aggregate amount of
Net Cash Proceeds which have not been applied on or before such Net Proceeds
Offer Trigger Date as permitted in clauses (iii)(a), (iii)(b) and (iii)(c) above
(each a "Net Proceeds Offer Amount") shall be applied by the Company or such
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Restricted Subsidiary to make an offer to purchase (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.
The Company 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, the Company may use such Net Proceeds for any purpose not
prohibited by this Indenture.
(b) Notwithstanding clauses (i) and (ii) of Section 4.14(a),
the Company and its Restricted Subsidiaries will be permitted to consummate an
Asset Sale without complying with such paragraphs to the extent that: (i) at
least 75% of the consideration for such Asset Sale constitutes Replacement
Assets; and (ii) such Asset Sale is for fair market value; provided that any
consideration not constituting Replacement Assets received by the Company 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 clauses (i) and (ii) of Section 4.14(a).
(c) 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 this Indenture. Upon receiving notice of the 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 (based on
amounts tendered). A Net Proceeds Offer shall remain open for a period of 20
Business Days or such longer period as may be required by law. The notice shall
contain all instructions and materials necessary
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to enable such Holders to tender Notes pursuant to the Net Proceeds Offer and
shall state the following terms:
(1) that the Net Proceeds Offer is being made
pursuant to this Section 4.14 and that all Notes tendered will be
accepted for payment; provided, however, that if the aggregate
principal amount of Notes tendered in a Net Proceeds Offer plus accrued
and unpaid interest at the expiration of such offer exceeds the
aggregate amount of the Net Proceeds Offer, the Company shall select
the Notes to be purchased on a pro rata basis (based on amounts
tendered) (with such adjustments as may be deemed appropriate by the
Company so that only Notes in denominations of $1,000 or integral
multiples thereof shall be purchased);
(2) the purchase price (including the amount of
accrued interest) and the purchase date (which shall 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 "Proceeds Purchase Date");
(3) that any Note not tendered will continue to
accrue interest if interest is then accruing;
(4) that, unless the Company defaults in making
payment therefor, any Note accepted for payment pursuant to the Net
Proceeds Offer shall cease to accrue interest after the Proceeds
Purchase Date;
(5) that Holders electing to have a Note purchased
pursuant to a Net Proceeds 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 5:00 p.m., New York City time, on the
second Business Day prior to the Proceeds Purchase Date;
(6) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than 5:00 p.m., New
York City time, on the second Business Day preceding the Proceeds
Purchase Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the Notes
the Holder delivered for purchase and a statement that such Holder is
withdrawing his/her election to have such Note purchased; and
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(7) that Holders whose Notes were purchased only in
part will be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered.
On or before the Proceeds Purchase Date, the Company shall (i)
accept for payment Notes or portions thereof tendered pursuant to the Net
Proceeds Offer which are to be purchased in accordance with item (b)(1) above,
(ii) deposit with the Paying Agent U.S. Legal Tender sufficient to pay the
purchase price of all Notes to be purchased and (iii) deliver to the Trustee
Notes so accepted together with an Officers' Certificate stating the Notes or
portions thereof being purchased by the Company. The Paying Agent shall promptly
mail to the Holders of Notes so accepted payment in an amount equal to the
purchase price plus accrued and unpaid interest, if any, and the Company shall
execute and issue, and the Trustee shall promptly authenticate and mail or
deliver to such Holders new Notes equal in principal amount to any unpurchased
portion of the Notes surrendered. Any Notes not so accepted shall be promptly
mailed or delivered by the Company to the Holder thereof. The Company shall
publicly announce the results of the Net Proceeds Offer on or as soon as
practicable after the Proceeds Purchase Date. For purposes of this Section 4.14,
the Trustee shall act as the Paying Agent.
The Company 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 this Section
4.14, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.14 by virtue thereof.
SECTION 4.15. Prohibition on Incurrence of Senior Subordinated Indebtedness.
The Company 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
the Company or such Guarantor, as the case may be.
SECTION 4.16. Limitation on Liens.
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The Company will not, and will not cause or permit any of its
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 the Company or any of its Restricted Subsidiaries whether owned on the
Issue Date or acquired after the Issue Date, or any proceeds therefrom, or
assign or otherwise convey any right to receive income or profits therefrom
unless: (i) 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 (ii) in all other cases, the Notes are equally and ratably secured,
except for: (a) Liens existing as of the Issue Date to the extent and in the
manner such Liens are in effect on the Issue Date; (b) Liens securing Senior
Debt and Liens securing Guarantor Senior Debt; (c) Liens securing the Notes and
the Guarantees; (d) Liens of the Company or a Wholly Owned Restricted Subsidiary
of the Company on assets of any Restricted Subsidiary of the Company; (e) Liens
securing Refinancing Indebtedness which is incurred to Refinance any
Indebtedness which has been secured by a Lien permitted under this Indenture and
which has been incurred in accordance with the provisions of this Indenture;
provided, however, that such Liens: (1) 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 (2) do not extend to
or cover any property or assets of the Company or any of its Restricted
Subsidiaries not securing the Indebtedness so Refinanced; and (f) Permitted
Liens.
SECTION 4.17. Conduct of Business.
The Company 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 the Company and its Restricted Subsidiaries
are engaged on the Issue Date, except to such extent as would not be material to
the Company and its Restricted Subsidiaries taken as a whole.
SECTION 4.18. Limitation on Preferred Stock of Restricted Subsidiaries.
The Company will not permit any of its Restricted Subsidiaries
that are not Guarantors to issue any Preferred Stock (other than to the Company
or to a Wholly Owned Restricted Subsidiary of the Company) or permit any Person
(other than the Company or a Wholly Owned Restricted Subsidiary of the
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Company) to own any Preferred Stock of any Restricted Subsidiary of the Company
that is not a Guarantor. Notwithstanding the foregoing, nothing in this Section
4.18 will prohibit Preferred Stock issued by a Person prior to the time (A) such
Person becomes a Restricted Subsidiary of the Company, (B) such Person merges
with or into a Restricted Subsidiary of the Company or (C) a Restricted
Subsidiary of the Company 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.
SECTION 4.19. Additional Subsidiary Guarantees.
If the Company 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 the Company or any of its Restricted Subsidiaries shall
organize, acquire or otherwise invest 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: (i) execute and
deliver to the Trustee a supplemental indenture in form reasonably satisfactory
to the Trustee pursuant to which such Restricted Subsidiary shall
unconditionally guarantee on a senior subordinated basis all of the Company's
obligations under the Notes and this Indenture on the terms set forth in this
Indenture; and (ii) 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 this Indenture.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale of Assets.
(a) The Company shall 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 cause or permit any
Restricted Subsidiary of the Company to sell, assign, transfer, lease, convey
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or otherwise dispose of) all or substantially all of the Company's assets
(determined on a consolidated basis for the Company and the Company's Restricted
Subsidiaries) whether as an entirety or substantially as an entirety to any
Person unless (i) either: (a) the Company shall be the surviving or continuing
corporation; or (b) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which acquires
by sale, assignment, transfer, lease, conveyance or other disposition the
properties and assets of the Company and of the Company's Restricted
Subsidiaries substantially as an entirety (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 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, this Indenture and the Registration
Rights Agreement on the part of the Company to be performed or observed; (ii)
immediately after giving effect to such transaction and the assumption
contemplated by clause (i)(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), the Company 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 the Company immediately
prior to such transaction and (b) shall be able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to Section
4.11; (iii) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(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 (iv) the Company 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 this Indenture
and that all conditions precedent in this Indenture relating to such transaction
have been satisfied.
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Notwithstanding the foregoing clauses (a)(ii), (iii) and (iv)
of this Section 5.01, (a) any Restricted Subsidiary may consolidate with, merge
into or transfer all or part of its property and assets to the Company or any
other Restricted Subsidiary and (b) the Company may merge with an Affiliate
incorporated solely for the purpose of reincorporating the Company in another
jurisdiction in the United States.
(b) 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 Restricted Subsidiaries of the Company the Capital Stock of which
constitutes all or substantially all of the properties and assets of the
Company, shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Company.
(c) Each Guarantor (other than any Guarantor whose Guarantee
is to be released in accordance with the terms of the Guarantee and this
Indenture in connection with any transaction complying with the provisions of
Section 4.14) will not, and the Company will not cause or permit any Guarantor
to, consolidate with or merge with or into any Person other than the Company or
any other Guarantor except in accordance with the provisions of Section
11.06(b).
SECTION 5.02. Successor Corporation Substituted.
Upon any consolidation, combination or merger or any transfer
of all or substantially all of the assets of the Company in accordance with
Section 5.01, in which the Company is not the Surviving Entity, the Surviving
Entity shall succeed to, and be substituted for, and may exercise every right
and power of, the Company under this Indenture and the Notes with the same
effect as if such surviving entity had been named as such, so that in the event
of a conveyance, lease or transfer, the conveyor, lessor or transferor will be
released from the provisions of this Indenture. When a successor corporation
assumes all of the obligations of the predecessor hereunder and under the Notes
and agrees to be bound hereby and thereby, the predecessor shall be released
from such obligations.
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ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
Each of the following shall be an "Event of Default":
(1) the failure to pay interest on any Notes when the same
becomes due and payable and the default continues for a period of 30
days (whether or not such payment shall be prohibited by Articles 10 or
12 of this 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 Net Proceeds
Offer)(whether or not such payment shall be prohibited by Articles 10
or 12 of this Indenture);
(3) a default in the observance or performance of any other
covenant or agreement contained in this Indenture which default
continues for a period of 60 days after the Company 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 Section 5.01, 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 (giving effect to any
applicable grace periods and any extensions thereof) the principal
amount of any Indebtedness of the Company or any Restricted Subsidiary
of the Company 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 the Company 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;
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(5) one or more judgments in an aggregate amount in excess of
$10.0 million shall have been rendered against the Company 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) the Company or any of its Significant Subsidiaries
pursuant to or under or within the meaning of any Bankruptcy Law:
(a) commences a voluntary case or proceeding;
(b) consents to the entry of an order for relief
against it in an involuntary case or proceeding;
(c) consents to the appointment of a Custodian of it
or for all or substantially all of its property; or
(d) makes a general assignment for the benefit of its
creditors;
(7) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(a) is for relief against the Company or any
Significant Subsidiary of the Company in an involuntary case
or proceeding,
(b) appoints a Custodian of the Company or any
Significant Subsidiary of the Company for all or substantially
all of its properties, or
(c) orders the liquidation of the Company or any
Significant Subsidiary of the Company; or
(8) 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 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 this Indenture) and such condition has continued for a period
of 30 days after written notice of such failure requiring the Guarantor
and the Company to remedy the same has been given (x) to the Company by
the
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Trustee or (y) to the Company and the Trustee by the Holders of 25% in
aggregate principal amount of the Notes then outstanding.
SECTION 6.02. Acceleration.
(a) If an Event of Default (other than an Event of Default
specified in Section 6.01(6) or (7) above with respect to the Company) 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 and unpaid
interest on all the Notes to be due and payable by notice in writing to the
Company and the Trustee specifying the respective Event of Default and that it
is a "notice of acceleration" (the "Acceleration Notice"), and the same (i)
shall become immediately due and payable or (ii) 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 the Company 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 Section 6.01(6) or (7)
with respect to the Company occurs and is continuing, then all unpaid principal
of, and premium, if any, and accrued and the 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.
(b) At any time after a declaration of acceleration with
respect to the Notes as described in Section 6.02(a), the Holders of a majority
in principal amount of the Notes may rescind and cancel such declaration and its
consequences (i) if the rescission would not conflict with any judgment or
decree; (ii) 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; (iii) 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;
(iv) if the Company has paid the Trustee its reasonable compensation and
reimbursed the Trustee for its expenses, disbursements and advances; and (v) in
the event of the cure or waiver of an Event of Default of the type described in
clause (6) or (7) of Section 6.01, 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 re-
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scission shall affect any subsequent Default or impair any right consequent
thereto.
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of, premium, if any, or accrued and unpaid interest on the
Notes or to enforce the performance of any provision of the Notes or this
Indenture.
All rights of action and claims under this Indenture or the
Notes may be entered by the Trustee even if it does not possess any of the Notes
or does not produce any of them in the proceeding. A delay or omission by the
Trustee or any Holder in exercising any right or remedy accruing upon an Event
of Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative to the extent permitted by law.
SECTION 6.04. Waiver of Past Defaults.
Subject to Sections 6.07 and 9.02, the Holders of not less
than a majority in aggregate principal amount of the Notes then outstanding by
notice to the Trustee may, on behalf of the Holders of all the Notes, waive any
existing Default or Event of Default and its consequences under this Indenture,
except a Default or Event of Default specified in Section 6.01(1) or (2) or in
respect of any provision hereof which cannot be modified or amended without the
consent of the Holder so affected pursuant to Section 9.02. When a Default or
Event of Default is so waived, it shall be deemed cured and shall cease to
exist. This Section 6.04 shall be in lieu of ss. 316(a)(i)(B) of the TIA and
such ss. 316(a)(1)(B) of the TIA is hereby expressly excluded from this
Indenture and the Notes, as permitted by the TIA.
SECTION 6.05. Control by Majority.
The Holders of a majority in aggregate principal amount of the
Notes then outstanding may 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, including, without limitation, any remedies
provided for in Section 6.03. Subject to Section 7.01, however, the Trustee may,
in its discretion, refuse to follow any direction that conflicts with any law or
this Indenture,
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that the Trustee determines may be unduly prejudicial to the rights of another
Holder or that may involve the Trustee in personal liability; provided, however,
that the Trustee may take any other action deemed proper by the Trustee, in its
discretion, that is not inconsistent with such direction; and provided further,
that this provision shall not affect the rights of the Trustee set out in
Section 7.01(d). Prior to taking any action hereunder, the Trustee shall be
entitled to indemnification reasonably satisfactory to it against all losses and
expenses caused by taking or not taking such action.
SECTION 6.06. Limitation on Suits.
A Holder may not pursue any remedy with respect to this
Indenture or the Notes unless:
(1) the Holder gives to a Trust Officer of the Trustee notice
of a continuing Event of Default;
(2) Holders of at least 25% in aggregate principal amount of
the then outstanding Notes make a written request to the Trustee to
pursue the remedy;
(3) such Holders offer to the Trustee reasonable indemnity or
security against any loss, liability or expense to be incurred in
compliance with such request, which such indemnity is satisfactory to
the Trustee;
(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of satisfactory
indemnity or security; and
(5) during such 60-day period following receipt of the request
the Holders of a majority in aggregate principal amount of the then
outstanding Notes do not give the Trustee a direction which, in the
opinion of the Trustee, is inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the
right of any Holder to receive payment of principal of, premium, if any, and
interest on a Note, on or after the respective due dates expressed in such Note,
or to bring suit
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for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default in payment of principal or interest
specified in clause (1) or (2) of Section 6.01 occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company, any Guarantor or any other obligor on the Notes for the
whole amount of principal and accrued interest then due and remaining unpaid
(together with interest on overdue principal and, to the extent that payment of
such interest is lawful, interest on overdue installments of interest) at the
rate set forth in the Notes and such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel and any other amounts due the Trustee under Section 7.07.
SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses, taxes,
disbursements and advances of the Trustee, its agents, consultants and counsel)
and the Holders allowed in any judicial proceedings relating to the Company or
any other obligor upon the Notes, any of their respective creditors or any of
their respective property, and shall be entitled and empowered to collect and
receive any monies or other property payable or deliverable on any such claims
and to distribute the same, and any custodian in any such judicial proceedings
is hereby authorized by each Holder to make such payments to the Trustee and, in
the event that the Trustee shall consent to the making of such payments directly
to the Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, taxes, disbursements and advances of the Trustee, its
agents and counsel, and any other amounts due the Trustee under Section 7.07.
The Company's payment obligations under this Section 6.09 shall be secured in
accordance with the provisions of Section 7.07. Nothing herein contained shall
be deemed to authorize the Trustee to authorize or consent to or accept or adopt
on behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof, or to
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authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money pursuant to this Article
Six, it shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts
due under Sections 6.09 and 7.07, including payment of all
compensation, expense and liabilities incurred and all advances made by
the Trustee and the cost and expenses of collection;
Second: to holders of Senior Debt, to the extent required in
Article Ten and the holders of Guarantor Senior Debt, to the extent
required in Article Twelve;
Third: if the Holders are forced to proceed against the
Company directly without the Trustee, to Holders for their collection
costs;
Fourth: to Holders for amounts due and unpaid on the Notes
for principal, premium, if any, and interest, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium, if any, and interest,
respectively; and
Fifth: to the Company, the Guarantor, if any, or any other
obligor on the Notes, as their interests may appear, or as a court of
competent jurisdiction may direct.
The Trustee, upon prior notice to the Company, may fix a
record date and payment date for any payment to Holders pursuant to this Section
6.10.
SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a
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Holder pursuant to Section 6.07, or a suit by a Holder or Holders of more than
10% in aggregate principal amount of the outstanding Notes.
SECTION 6.12. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture or any Note and such proceeding
has been discontinued or abandoned for any reason, or has been determined
adversely to the Trustee or to such Holder, then and in every such case the
Company, the Guarantors, if any, the Trustee and the Holders shall, subject to
any determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding had been
instituted.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this 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.
(b) Except during the continuance of a Default or an Event of
Default:
(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture or the TIA and no duties,
covenants, responsibilities or obligations shall be implied in this
Indenture that are adverse to the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates
(including Officers' Certificates) or opinions (including Opinions of
Counsel) furnished to the Trustee and conforming to the requirements
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of this Indenture. However, as to any certificates or opinions which
are required by any provision of this Indenture to be delivered or
provided to the Trustee, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements
of this Indenture.
(c) Notwithstanding anything to the contrary herein contained,
the Trustee may not be relieved from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except that:
(1) This paragraph does not limit the effect of paragraph
(b) of this Section 7.01.
(2) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.02, 6.04 or 6.05.
(d) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section
7.01 and the provisions of the TIA.
(f) In the absence of negligence or willful misconduct on the
part of the Trustee, the Trustee shall not be responsible for the application of
any money by any Paying Agent other than the Trustee.
SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may conclusively rely and shall be fully
protected in acting or refraining from acting upon
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any document believed by it to be genuine and to have been signed or
presented by the proper Person. The Trustee need not investigate any
fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
consult with counsel of its selection and may require an Officers'
Certificate or an Opinion of Counsel. The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate, or an Opinion of Counsel.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent
or attorney appointed with due care.
(d) The Trustee shall not be liable for any action that it
takes or omits to take in good faith that it reasonably believes to be
authorized or within its rights or powers; provided, however, that the
Trustee's conduct does not constitute willful misconduct or negligence.
(e) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, notice, request, direction, consent,
order, bond, debenture, or other paper or document, but the Trustee, in
its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be
entitled, upon reasonable notice to the Company, to examine the books
and records of the Company pertaining to the Notes, personally or by
agent or attorney and to consult with the officers and representatives
of the Company, including the Company's accountants and attorneys.
(f) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request,
order or direction of any of the Holders of the Notes pursuant to the
provisions of this Indenture, unless such Holders shall have offered to
the Trustee security or indemnity reasonably satisfactory to the
Trustee against the costs, expenses and liabilities which may be
incurred by it in compliance with such request, order or direction.
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(g) The Trustee may consult with counsel, and the advice or
opinion of such counsel as to matters of law shall be full and complete
authorization and protection from liability with respect to any action
taken, omitted or suffered by it hereunder in good faith and in
accordance with the advice or opinion of such counsel.
(h) The Trustee shall not be charged with knowledge of any
Defaults or Events of Default unless either (1) a Trust Officer of the
Trustee shall have actual knowledge of such Default or Event of Default
or (2) written notice of such Default or Event of Default shall have
been given to the Trustee by any Holder or by the Company or any other
obligor on the Notes or any holder of Senior Debt or any Representative
thereof.
(i) The Trustee shall not be required to give any bond or
surety in respect of the performance of its powers and duties
hereunder.
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may otherwise deal with the Company, any
Subsidiary, or their respective Affiliates, with the same rights it would have
if it were not Trustee. Any Agent may do the same with like rights. However, the
Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
The Trustee makes no representation as to the validity or
adequacy of this Indenture or the Notes, and it shall not be accountable for the
Company's use of the proceeds from the Notes, it shall not be responsible for
the use or application of any money received by any Paying Agent other than the
Trustee, and it shall not be responsible for any statement of the Company in
this Indenture or the Notes other than the Trustee's certificate of
authentication.
SECTION 7.05. Notice of Default.
If a Default or an Event of Default occurs and is continuing
and if the Trustee has knowledge of such Default or Event of Default, the
Trustee shall mail to each Holder notice of the uncured Default or Event of
Default within 90 days after such Default or Event of Default occurs. Except in
the case of a Default or an Event of Default in the payment of principal
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of, premium, if any, or interest on, any Note, including an accelerated payment
and the failure to make payment on the Change of Control Payment Date pursuant
to a Change of Control Offer or on the Net Proceeds Offer Payment Date pursuant
to a Net Proceeds Offer and, except in the case of a failure to comply with
Article Five, the Trustee may withhold the notice if and so long as its Board of
Directors, the executive committee of its Board of Directors or a committee of
its Board of Directors and/or Trust Officers in good faith determines that
withholding the notice is in the interest of the Holders.
SECTION 7.06. Reports by Trustee to Holders.
Within 60 days after May 15 of each year beginning with May
15, 1999, the Trustee shall, to the extent that any of the events described in
TIA ss. 313(a) occurred within the previous twelve months, but not otherwise,
mail to each Holder a brief report dated as of such date that complies with TIA
ss. 313(a). The Trustee also shall comply with TIA ss.ss. 313(b) and 313(c).
A copy of each report at the time of its mailing to
Noteholders shall be mailed to the Company and filed with the SEC and each stock
exchange, if any, on which the Notes are listed.
The Company shall promptly notify the Trustee if the Notes
become listed on any stock exchange, and if the Notes are so listed, the Trustee
shall comply with TIA ss. 313(d).
SECTION 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee, from time to time, such
compensation for its services as the parties shall agree in writing from time to
time. The Trustee's compensation shall not be limited by any law on compensation
of a trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses incurred or made by it in
connection with the performance of its duties and the discharge of its
obligations under this Indenture. Such expenses shall include the reasonable
fees and expenses of the Trustee's agents and counsel.
The Company and the Guarantors shall indemnify the Trustee and
its agents, employees, officers, stockholders and directors for, and hold it
harmless against, any loss, liability or expense (including reasonable fees and
expenses of counsel) incurred by them except for such actions to the extent
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caused by any negligence or willful misconduct on their part, arising out of or
in connection with the acceptance or administration of this trust including the
reasonable costs and expenses of defending itself against any claim or liability
in connection with the exercise or performance of any of the Trustee's rights,
powers or duties hereunder. The Trustee shall notify the Company promptly of any
claim asserted against the Trustee for which it may seek indemnity. The failure
by the Trustee to so notify the Company will not relieve the Company of its
obligations hereunder. At the Trustee's sole discretion, the Company shall
defend the claim and the Trustee shall cooperate in the defense; provided that
any settlement of a claim shall be approved in writing by the Trustee.
Alternatively, the Trustee may at its option have separate counsel of its own
choosing and the Company shall pay the reasonable fees and expenses of such
counsel. The Company need not pay for any settlement made without its written
consent, which consent shall not be unreasonably withheld. The Company need not
reimburse any expense or indemnify against any loss or liability to the extent
incurred by the Trustee through its negligence or willful misconduct.
To secure the Company's payment obligations in this Section
7.07, the Trustee shall have a lien prior to the Notes on all assets or money
held or collected by the Trustee, in its capacity as Trustee, except assets or
money held in trust to pay principal of premium, if any, or interest on
particular Notes.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(6) or (7) occurs, such expenses and
the compensation for such services shall be paid to the extent allowed under any
Bankruptcy Law.
The obligations of the Company under this Section 7.07 and any
lien arising hereunder shall survive the resignation or removal of the Trustee,
the discharge of the Company's Obligations pursuant to Article Eight or the
termination of this Indenture.
SECTION 7.08. Replacement of Trustee.
The Trustee may resign by so notifying the Company in writing,
such resignation to be effective upon the appointment of a successor Trustee.
The Holders of a majority in principal amount of the outstanding Notes may
remove the Trustee by so notifying the Company and the Trustee in writing and
may ap-
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point a successor Trustee, which consent shall not be unreasonably withheld. The
Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy
Law;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall notify each Holder of
such event and shall promptly appoint a successor Trustee. Within one year after
the successor Trustee takes office, the Holders of a majority in principal
amount of the Notes may appoint a successor Trustee to replace the successor
Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Promptly after that, the
retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided in Section 7.07, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Holder.
If a successor Trustee does not take office within 30 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of at least 10% in aggregate principal amount of the
outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07 shall continue for
the benefit of the retiring Trustee.
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SECTION 7.09. Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business or assets to,
another corporation or relevant banking association, the resulting, surviving or
transferee corporation without any further act shall, if such resulting,
surviving or transferee corporation is otherwise eligible hereunder, be the
successor Trustee; provided, however, that such corporation shall be otherwise
qualified and eligible under this Article Seven.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Notes shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Trustee may authenticate such Notes either
in the name of any predecessor hereunder or in the name of the successor to the
Trustee; and in all such cases such certificates shall have the full force which
it is anywhere in the Notes or in this Indenture provided that the certificate
of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirement of TIA ss.ss. 310(a)(1), (2) and (5). The Trustee (or in the case of
a corporation included in a bank holding company system, the related bank
holding company) shall have a combined capital and surplus of at least
$100,000,000 as set forth in its most recent published annual report of
condition and have a Corporate Trust Office in the City of New York. In
addition, if the Trustee is a corporation included in a bank holding company
system, the Trustee, independently of such bank holding company, shall meet the
capital requirements of TIA ss. 310(a)(2). The Trustee shall comply with TIA ss.
310(b); provided, however, that there shall be excluded from the operation of
TIA ss. 310(b)(1) any indenture or indentures under which other notes, or
certificates of interest or participation in other notes, of the Company are
outstanding, if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met. The provisions of TIA ss. 310 shall apply to the Company and
any other obligor of the Notes.
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SECTION 7.11. Preferential Collection of Claims Against the Company.
The Trustee shall comply with TIA ss. 311(a), excluding any
creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or
been removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
The provisions of TIA ss. 311 shall apply to the Company and any other obligor
of the Notes.
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of the Company's Obligations.
The Company may terminate its obligations under the Notes and
this Indenture, except those obligations referred to in the penultimate
paragraph of this Section 8.01, if all Notes previously authenticated and
delivered (other than destroyed, lost or stolen Notes which have been replaced
or paid or Notes for whose payment U.S. Legal Tender has theretofore been
deposited with the Trustee or the Paying Agent in trust or segregated and held
in trust by the Company and thereafter repaid to the Company, as provided in
Section 8.05) have been delivered to the Trustee for cancellation and the
Company has paid all sums payable by it hereunder, or if:
(a) either (i) pursuant to Article Three, the Company shall
have given notice to the Trustee and mailed a notice of redemption to
each Holder of the redemption of all of the Notes under arrangements
satisfactory to the Trustee for the giving of such notice or (ii) all
Notes have otherwise become due and payable hereunder;
(b) the Company shall have irrevocably deposited or caused to
be deposited with the Trustee or a trustee satisfactory to the Trustee,
under the terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee, as trust funds in trust solely for the
benefit of the Holders for that purpose, U.S. Legal Tender in such
amount as is sufficient, in the opinion of a nationally recognized firm
of independent public accountants, without consideration of
reinvestment of such interest, to pay principal of, premium, if any,
and interest on the
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outstanding Notes to maturity or redemption; provided that the Trustee
shall have been irrevocably instructed to apply such U.S. Legal Tender
to the payment of said principal, premium, if any, and interest with
respect to the Notes; and, provided, further, that from and after the
time of deposit, the money deposited shall not be subject to the rights
of holders of Senior Debt pursuant to the provisions of Article Ten;
(c) no Default or Event of Default with respect to this
Indenture or the Notes shall have occurred and be continuing on the
date of such deposit or shall occur as a result of such deposit and
such deposit will not result in a breach or violation of, or constitute
a default under, any other instrument to which the Company is a party
or by which it is bound;
(d) the Company shall have paid all other sums payable by it
hereunder; and
(e) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent providing for or relating to the termination of
the Company's obligations under the Notes and this Indenture have been
complied with. Such Opinion of Counsel shall also state that such
satisfaction and discharge does not result in a default under the
Credit Agreement (if then in effect) or any other agreement or
instrument then known to such counsel that binds or affects the
Company.
Notwithstanding the foregoing paragraph, the Company's
obligations in Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02, 7.07, 8.05 and 8.06
shall survive until the Notes are no longer outstanding pursuant to the last
paragraph of Section 2.08. After the Notes are no longer outstanding, the
Company's and the obligations in Sections 7.07, 8.05 and 8.06 shall survive.
After such delivery or irrevocable deposit, the Trustee upon
request shall acknowledge in writing the discharge of the Company's and the
Guarantor's obligations under the Notes the Guarantees, and this Indenture
except for those surviving obligations specified above.
SECTION 8.02. Legal Defeasance and Covenant Defeasance.
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(a) The Company may, at its option by Board Resolution of the
Board of Directors of the Company, at any time, elect to have either paragraph
(b) or (c) below be applied to all outstanding Notes upon compliance with the
conditions set forth in Section 8.03.
(b) Upon the Company's exercise under paragraph (a) hereof of
the option applicable to this paragraph (b), the Company and the Guarantors
shall, subject to the satisfaction of the conditions set forth in Section 8.03,
be deemed to have been discharged from their obligations with respect to all
outstanding Notes on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that
the Company shall be deemed to have paid and discharged the entire Indebtedness
represented by the outstanding Notes, which shall thereafter be deemed to be
"outstanding" only for the purposes of Section 8.04 and the other Sections of
this Indenture referred to in (i) and (ii) below, and to have satisfied all its
other obligations under such Notes and this Indenture (and the Trustee, on
demand of and at the expense of the Company, shall execute proper instruments
acknowledging the same), and Holders of the Notes and any amounts deposited
under Section 8.03 shall cease to be subject to any obligations to, or the
rights of, any holder of Senior Debt or Guarantor Senior Debt under Article Ten
or Eleven, as the case may be, or otherwise, except for the following
provisions, which shall survive until otherwise terminated or discharged
hereunder: (i) the rights of Holders of outstanding Notes to receive solely from
the trust fund described in Section 8.04, and as more fully set forth in such
Section, payments in respect of the principal of premium, if any, and interest
on the Notes when such payments are due, (ii) the Company's obligations with
respect to the Notes under Article Two and Section 4.02, (iii) the rights,
powers, trust, duties and immunities of the Trustee and the Company's
obligations in connection therewith and (iv) this Article Eight. Subject to
compliance with this Article Eight, the Company may exercise its option under
this paragraph (b) notwithstanding the prior exercise of its option under
paragraph (c) hereof.
(c) Upon the Company's exercise under paragraph (a) hereof of
the option applicable to this paragraph (c), the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.03, be released from its
obligations under the covenants contained in Sections 4.10 through 4.19 and
Article Five with respect to the outstanding Notes on and after the date the
conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"),
and the Notes shall thereafter be
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deemed not "outstanding" for the purposes of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Notes shall not
be deemed outstanding for accounting purposes) and Holders of the Notes and any
amounts deposited under Section 8.03 shall cease to be subject to any
obligations to, or the rights of, any holder of Senior Debt or Guarantor Senior
Debt under Article Ten or Eleven or otherwise. For this purpose, such Covenant
Defeasance means that, with respect to the outstanding Notes, the Company may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein or
in any other document and such omission to comply shall not constitute a Default
or an Event of Default under Section 6.01(3), but, except as specified above,
the remainder of this Indenture and such Notes shall be unaffected thereby. In
addition, upon the Company's exercise under paragraph (a) hereof of the option
applicable to this paragraph (c), subject to the satisfaction of the conditions
set forth in Sections 6.01(3), 6.01(4), 6.01(5), 6.01(8) and 8.03 shall not
constitute Events of Default.
SECTION 8.03. Conditions to Legal Defeasance or Covenant Defeasance.
The following shall be the conditions to the application of
either Section 8.02(b) or 8.02(c) to the outstanding Notes:
(a) the Company shall have irrevocably deposited with the
Trustee, in trust, for the benefit of the Holders U.S. Legal Tender or
U.S. Government Obligations, or a combination thereof, in such 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 payment thereof
or on the applicable redemption date, as the case may be;
(b) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company
has received from, or there has been published by, this Internal
Revenue Service
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a ruling or (B) since the date of this Indenture, there has been a
change in the applicable Unites States 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 United States federal income tax purposes as a result of
such Legal Defeasance and will be subject to United States 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;
(c) in the case of Covenant Defeasance, the Company shall have
delivered 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;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or 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 Sections 6.01 (6) and (7) are concerned, at any time in the period
ending on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under this
Indenture (other than as permitted by the parenthetical phrase in
clause (d) above) or any other material agreement or instrument to
which the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders over any other
creditors of the Company or with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Company or others;
(g) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for or re-
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lating to the Legal Defeasance or the Covenant Defeasance have been
complied with; and
(h) the Company shall have delivered 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 the
Company between the date of deposit and the 91st day following the date
of deposit and that no Holder is an insider of the Company, 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.
Notwithstanding the foregoing, the Opinion of Counsel required
by clause (b) above with respect to a Legal Defeasance need not be delivered if
all Notes not theretofore delivered to the Trustee for cancellation (x) have
become due and payable, (y) will become due and payable within one year or (z)
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 the
name, and at the expense, of the Company.
SECTION 8.04. Application of Trust Money.
The Trustee or Paying Agent shall hold in trust U.S. Legal
Tender or U.S. Government Obligations deposited with it pursuant to Article
Eight, and shall apply the deposited U.S. Legal Tender and the money from U.S.
Government Obligations in accordance with this Indenture to the payment of
principal of and interest on the Notes. The Trustee shall be under no obligation
to invest said U.S. Legal Tender or U.S. Government Obligations except as it may
agree with the Company.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Legal Tender or
U.S. Government Obligations deposited pursuant to Section 8.03 or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article Eight to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company
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from time to time upon the Company's request any U.S. Legal Tender or U.S.
Government Obligations held by it as provided in Section 8.03 which, in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, are in
excess of the amount thereof that would then be required to be deposited to
effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.05. Repayment to the Company or the Guarantors.
Subject to Sections 7.07 and 8.01, the Trustee and the Paying
Agent shall promptly pay to the Company, or if deposited with the Trustee by any
Guarantor, to such Guarantor, upon request any excess U.S. Legal Tender or U.S.
Government Obligations held by them at any time and thereupon shall be relieved
from all liability with respect to such money. The Trustee and the Paying Agent
shall pay as soon as practicable to the Company, or if deposited with the
Trustee by any Guarantor, to such Guarantor, upon request any money held by them
for the payment of principal or interest that remains unclaimed for two years
after the date of payment of such principal and interest; provided, however,
that the Company shall, if requested by the Trustee or Paying Agent, give to the
Trustee or Paying Agent indemnification reasonably satisfactory to it against
and any and all liability which may be incurred by it by reason of such payment;
provided further, that the Trustee or such Paying Agent, before being required
to make any payment, may at the expense of the Company cause to be published
once in a newspaper of general circulation in the City of New York or mail to
each Holder entitled to such money notice that such money remains unclaimed and
that after a date specified therein which shall be at least 30 days from the
date of such publication or mailing any unclaimed balance of such money then
remaining will be repaid to the Company or a Guarantor. After payment to the
Company or a Guarantor, as the case may be, Holders entitled to such money must
look to the Company for payment as general creditors unless an applicable law
designates another Person and all liability of the Trustee and such Paying Agent
with respect to such money shall cease.
SECTION 8.06. Reinstatement.
If the Trustee or Paying Agent is unable to apply any U.S.
Legal Tender or U.S. Government Obligations in accordance with Article Eight by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental
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authority enjoining, restraining or otherwise prohibiting such application, the
Company's and each Guarantor's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Article Eight until such time as the Trustee or Paying Agent is permitted to
apply all such U.S. Legal Tender or U.S. Government Obligations in accordance
with Article Eight; provided that if the Company or any Guarantor, as the case
may be, has made any payment of principal of premium, if any, or interest on,
any Notes because of the reinstatement of its obligations, the Company or any
Guarantor, as the case may be, shall be subrogated to the rights of the Holders
of such Notes to receive such payment from the U.S. Legal Tender or U.S.
Government Obligations held by the Trustee or Paying Agent.
SECTION 8.07. Satisfaction and Discharge.
This Indenture, the Notes and the Guarantees will be
discharged and will cease to be of further effect (except as to surviving rights
of registration of transfer or exchange of the Notes, as expressly provided for
in this Indenture) as to all outstanding Notes when: (i) either: (a) all the
Notes theretofore authenticated and delivered (except lost, stolen or destroyed
Notes which have been replaced or paid and Notes for whose payment money has
theretofore been deposited in trust or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged from such trust) have
been delivered to the Trustee for cancellation; or (b) all Notes not theretofore
delivered to the Trustee for cancellation have become due and payable and the
Company has 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 theretofore 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 the Company directing the Trustee to
apply such funds to the payment thereof at maturity or redemption, as the case
may be; (ii) the Company has paid all other sums payable under this Indenture by
the Company; and (iii) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel stating that all conditions precedent
under this Indenture relating to the satisfaction and discharge of this
Indenture have been complied with.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
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SECTION 9.01. Without Consent of Holders.
The Company and the Guarantors, when authorized by a Board
Resolution, and the Trustee, together, may amend or supplement this Indenture or
the Notes or any Guarantee without the consent of any Holders:
(1) to comply with Article Five; or
(2) to add to the covenants of the Company or any Guarantor
for the benefit of the Holders, or to surrender any right or power
herein conferred upon the Company 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 certificated Notes; or
(5) to evidence and provide for the acceptance of appointment
under this 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 this Indenture that may be defective or
inconsistent with any other provisions in this Indenture or to make any
other provisions with respect to matters or questions arising under
this 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 Commission in order
to effect or maintain the qualification of this Indenture under the
TIA, if applicable; or
(9) to release any Guarantor from its Guarantee in accordance
with the provisions of this Indenture (including in connection with a
sale of all of the Capital Stock or all or substantially all of the
assets of such Guarantor);
provided, however, that the Company has delivered to the Trustee an Opinion of
Counsel and an Officers' Certificate, each stating that such amendment or
supplement complies with the provisions of this Section 9.01.
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SECTION 9.02. With Consent of Holders.
Subject to Section 6.07, the Company, when authorized by a
Board Resolution, and the Trustee, together, with the consent of the Holder or
Holders of at least a majority in aggregate principal amount of the then
outstanding Notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes),
may modify, amend or supplement this Indenture or the Notes, without notice to
any other Holders. Subject to Section 6.07, the Holder or Holders of a majority
in aggregate principal amount of the outstanding Notes may waive compliance by
the Company with any provision of this Indenture or the Notes without notice to
any other Holder. No amendment, supplement or waiver, including a waiver
pursuant to Section 6.04, shall, without the consent of each Holder of each Note
affected thereby:
(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 this 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 the Company's obligations to purchase Notes arises
hereunder, amend, change or modify in any material respect the
obligation of the Company 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 provisions or definitions with
respect thereto;
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(7) modify or change any provision of this 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 this Indenture
otherwise than in accordance with the terms of this Indenture.
After an amendment, supplement or waiver under this Section
9.02 becomes effective (as provided in Section 9.04), the Company shall mail to
the Holders affected thereby at their registered addresses a notice briefly
describing the amendment, supplement or waiver. Any failure of the Company to
mail such notice, or any defect therein, shall not, however, in any way impair
or affect the validity of any such supplemental indenture.
SECTION 9.03. Compliance with TIA.
Every amendment, waiver or supplement of this Indenture or the
Notes shall comply with the TIA as then in effect; provided, however, that this
Section 9.03 shall not of itself require that this Indenture or the Trustee be
qualified under the TIA or constitute any admission or acknowledgment by any
party hereto that any such qualification is required prior to the time the
Indenture and the Trustee are required by the TIA to be so qualified.
SECTION 9.04. Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. Subject to the following paragraph, any such Holder or subsequent Holder
may revoke the consent as to such Holder's Note or portion of such Note by
notice to the Trustee or the Company received before the date on which the
Trustee receives an Officers' Certificate certifying that the Holders of the
requisite principal amount of Notes have consented (and not theretofore revoked
such consent) to the amendment, supplement or waiver (at which time such
amendment, supplement or waiver shall become effective).
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The Company may, but shall not be obligated to, fix such
record date for the purpose of determining the Holders entitled to consent to
any amendment, supplement or waiver. If a record date is fixed, then
notwithstanding the last sentence of the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated proxies),
and only those Persons, shall be entitled to revoke any consent previously
given, whether or not such Persons continue to be Holders after such record
date. No such consent shall be valid or effective for more than 120 days after
such record date.
SECTION 9.05. Notation on or Exchange of Notes.
If an amendment, supplement or waiver changes the terms of a
Note, the Trustee may require the Holder of the Note to deliver it to the
Trustee. The Trustee may place an appropriate notation on the Note about the
changed terms and return it to the Holder. Alternatively, if the Company or the
Trustee so determines, the Company in exchange for the Note shall issue and the
Trustee shall authenticate a new Note that reflects the changed terms. Any such
notation or exchange shall be made at the sole cost and expense of the Company.
Failure to make the appropriate notation or issue a new Note shall not affect
the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. Trustee To Sign Amendments, Etc.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to and adopted in accordance with this Article Nine;
provided, however, that the Trustee may, but shall not be obligated to, execute
any such amendment, supplement or waiver which affects the Trustee's own rights,
duties or immunities under this Indenture. The Trustee shall be entitled to
receive, and shall be fully protected in relying upon, an Opinion of Counsel and
an Officers' Certificate each stating that the execution of any amendment,
supplement or waiver authorized pursuant to this Article Nine is authorized or
permitted by this Indenture and that no default or event of default shall occur
as a result of such amendment, supplement or waiver. Such Opinion of Counsel
shall not be an expense of the Trustee.
SECTION 9.07. Effect on Senior Debt.
No amendment, supplement or waiver of this Indenture shall
adversely affect the rights of any holder of Senior Debt,
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or Guarantor Senior Debt, if any (including their rights under Article Ten or
Eleven), without the consent of such holder.
ARTICLE TEN
SUBORDINATION OF NOTES
SECTION 10.01. Notes Subordinated to Senior Debt.
The Company covenants and agrees, and the Trustee and each
Holder of the Notes, by its acceptance thereof, likewise covenants and agrees,
that all Notes shall be issued subject to the provisions of this Article Ten;
and the Trustee and each Person holding any Note, whether upon original issue or
upon transfer, assignment or exchange thereof, accepts and agrees that the
payment of all Obligations on the Notes by the Company shall, to the extent and
in the manner herein set forth, be subordinated and junior in right of payment
to the prior payment in full in cash or Cash Equivalents of all Obligations on
the Senior Debt; that the subordination is for the benefit of, and shall be
enforceable directly by, the holders of Senior Debt, and that each holder of
Senior Debt whether now outstanding or hereafter created, incurred, assumed or
guaranteed shall be deemed to have acquired Senior Debt in reliance upon the
covenants and provisions contained in this Indenture and the Notes.
SECTION 10.02. No Payment on Notes in Certain Circumstances.
(a) If any default occurs and is continuing in the payment
when due, whether at stated maturity, upon any redemption, by declaration or
otherwise, of any principal of, interest on, unpaid drawings for letters of
credit issued in respect of or regularly accruing fees with respect to any
Senior Debt, no payment of any kind or character shall be made by or on behalf
of the Company or any other Person on its or their behalf with respect to any
Obligations on the Notes or to acquire any of the Notes for cash or property or
otherwise. In addition, if any other event of default occurs and is continuing
with respect to any Designated Senior Debt, as such event of default is defined
in the instrument creating or evidencing such Designated Senior Debt, permitting
the holders of such Designated Senior Debt then outstanding to accelerate the
maturity thereof and if the Representative for the respective issue of
Designated Senior Debt gives written notice of the event of default
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to the Trustee (a "Payment Blockage Notice"), then, unless and until all events
of default have been cured or waived or have ceased to exist or the Trustee
receives notice from the Representative for the respective issue of Designated
Senior Debt terminating the Blockage Period (as defined below), during the 180
days after the delivery of such Payment Blockage Notice (the "Blockage Period"),
neither the Company nor any other Person on its behalf shall (x) make any
payment of any kind or character with respect to any Obligations on the Notes or
(y) acquire any of the Notes for cash or property or otherwise. Notwithstanding
anything herein to the contrary, in no event will a Blockage Period extend
beyond 180 days from the date the payment on the Notes was due and only one such
Blockage Period may be commenced within any 360 consecutive days. No event of
default that existed or was continuing on the date of the delivery of any
Payment Blockage Notice to the Trustee of any Blockage Period with respect to
the Designated Senior Debt shall be, or be made, the basis for commencement of a
second Blockage Period by the Representative of such Designated Senior Debt
whether or not within a period of 360 consecutive days, unless such default
shall have been cured or waived for a period of not less than 90 consecutive
days (it being acknowledged that any subsequent action, or any breach of any
financial covenants for a period commencing after the date of delivery of any
Payment Blockage Notice that, in either case, would give rise to an event of
default pursuant to any provisions under which an event of default previously
existed or was continuing shall constitute a new event of default for this
purpose).
(b) In the event that, notwithstanding the foregoing, any
payment shall be received by the Trustee or any Holder when such payment is
prohibited by Section 10.02(a), such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Senior Debt
(pro rata to such holders on the basis of the respective amount of Senior Debt
held by such holders) or their respective Representatives, as their respective
interests may appear. The Trustee shall be entitled to rely on information
regarding amounts then due and owing on the Senior Debt, if any, received from
the holders of Senior Debt (or their Representatives) or, if such information is
not received from such holders or their Representatives, from the Company and
only amounts included in the information provided to the Trustee shall be paid
to the holders of Senior Debt.
Nothing contained in this Article Ten shall limit the right of
the Trustee or the Holders of Notes to take any action
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to accelerate the maturity of the Notes pursuant to Section 6.02 or to pursue
any rights or remedies hereunder; provided that all Senior Debt thereafter due
or declared to be due shall first be paid in full in cash or Cash Equivalents
before the Holders are entitled to receive any payment of any kind or character
with respect to Obligations on the Notes.
SECTION 10.03. Payment Over of Proceeds upon Dissolution, Etc.
(a) Upon any payment or distribution of assets of the Company
of any kind or character, whether in cash, property or securities, to creditors
upon any total or partial liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors or marshalling of assets and liabilities
of the Company or in a bankruptcy, reorganization, insolvency, receivership or
other similar proceeding relating to the Company or its property, whether
voluntary or involuntary, all Obligations with respect to all Senior Debt shall
first be paid in full in cash or Cash Equivalents, before any payment or
distribution of any kind or character is made on account of any Obligations on
the Notes, or for the acquisition of any of the Notes for cash or property or
otherwise; and until all such Obligations with respect to all Senior Debt are
paid in full in cash or Cash Equivalents, any distribution to which the Holders
of the Notes would be entitled but for the subordination provisions will be made
to the holders of Senior Debt as their interests may appear. Upon any such
dissolution, winding-up, liquidation, reorganization, receivership or similar
proceeding, any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, to which the Holders of the
Notes or the Trustee under this Indenture would be entitled, except for the
provisions hereof, shall be paid by the Company or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other Person making such payment or
distribution, or by the Holders or by the Trustee under this Indenture if
received by them, directly to the holders of Senior Debt (pro rata to such
holders on the basis of the respective amounts of Senior Debt held by such
holders) or their respective Representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Senior Debt may have been
issued, as their respective interests may appear, for application to the payment
of Senior Debt remaining unpaid until all such Senior Debt has been paid in full
in cash or Cash Equivalents after giving effect to any concurrent payment,
distribution or provision therefor to or for the holders of Senior Debt.
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(b) To the extent any payment of Senior Debt (whether by or on
behalf of the Company, as proceeds of security or enforcement of any right of
setoff or otherwise) is declared to be fraudulent or preferential, set aside or
required to be paid to any receiver, trustee in bankruptcy, liquidating trustee,
agent or other similar Person under any bankruptcy, insolvency, receivership,
fraudulent conveyance or similar law, then, if such payment is recovered by, or
paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent
or other similar Person, the Senior Debt or part thereof originally intended to
be satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred.
(c) In the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, shall be received by the Trustee or any
Holder when such payment or distribution is prohibited by Section 10.03(a), such
payment or distribution shall be held in trust for the benefit of, and shall be
paid over or delivered to, the holders of Senior Debt (pro rata to such holders
on the basis of the respective amount of Senior Debt held by such holders) or
their respective Representatives, or to the trustee or trustees under any
indenture pursuant to which any of such Senior Debt may have been issued, as
their respective interests may appear, for application to the payment of Senior
Debt remaining unpaid until all such Senior Debt has been paid in full in cash
or Cash Equivalents, after giving effect to any concurrent payment, distribution
or provision therefor to or for the holders of such Senior Debt.
(d) The consolidation of the Company with, or the merger of
the Company with or into, another corporation or the liquidation or dissolution
of the Company following the conveyance or transfer of all or substantially all
of its assets, to another corporation upon the terms and conditions provided in
Article Five hereof and as long as permitted under the terms of the Senior Debt
shall not be deemed a dissolution, winding-up, liquidation or reorganization for
the purposes of this Section if such other corporation shall, as a part of such
consolidation, merger, conveyance or transfer, assumed the Company's obligations
hereunder in accordance with Article Five hereof.
SECTION 10.04. Payments May Be Paid Prior to Dissolution.
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Nothing contained in this Article Ten or elsewhere in this
Indenture shall prevent (i) the Company, except under the conditions described
in Sections 10.02 and 10.03, from making payments at any time for the purpose of
making payments of principal of and interest on the Notes, or from depositing
with the Trustee any moneys for such payments, or (ii) in the absence of actual
knowledge by the Trustee that a given payment would be prohibited by Section
10.02 or 10.03, the application by the Trustee of any moneys deposited with it
for the purpose of making such payments of principal of, and interest on, the
Notes to the Holders entitled thereto unless at least two Business Days prior to
the date upon which such payment would otherwise become due and payable a Trust
Officer shall have actually received the written notice provided for in the
second sentence of Section 10.02(a) or in Section 10.07 (provided that,
notwithstanding the foregoing, such application shall otherwise be subject to
the provisions of the first sentence of Section 10.02(a) and Section 10.03). The
Company shall give prompt written notice to the Trustee of any dissolution,
winding-up, liquidation or reorganization of the Company.
SECTION 10.05. Subrogation.
After the payment in full in cash or Cash Equivalents of all
Senior Debt, the Holders of the Notes shall be subrogated to the rights of the
holders of Senior Debt to receive payments or distributions of cash, property or
securities of the Company applicable to the Senior Debt until the Notes shall be
paid in full; and, for the purposes of such subrogation, no such payments or
distributions to the holders of the Senior Debt by or on behalf of the Company
or by or on behalf of the Holders by virtue of this Article Ten which otherwise
would have been made to the Holders shall, as between the Company and the
Holders of the Notes, be deemed to be a payment by the Company to or on account
of the Senior Debt, it being understood that the provisions of this Article Ten
are and are intended solely for the purpose of defining the relative rights of
the Holders of the Notes, on the one hand, and the holders of the Senior Debt,
on the other hand.
If any payment or distribution to which the Holders would
otherwise have been entitled but for the provisions of this Article Ten shall
have been applied, pursuant to the provisions of this Article Ten, to the
payment of amounts payable under the Senior Debt, then the Holders shall be
entitled to receive from the holders of such Senior Debt any payments or
distributions received by such holders of Senior Debt in excess
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of the amount sufficient to pay all amounts payable under or in respect of the
Senior Debt in full in cash or Cash Equivalents.
SECTION 10.06. Obligations of the Company Unconditional.
Nothing contained in this Article Ten or elsewhere in this
Indenture or in the Notes is intended to or shall impair, as among the Company,
its creditors other than the holders of Senior Debt, and the Holders, the
obligation of the Company, which is absolute and unconditional, to pay to the
Holders the principal of and any interest on the Notes as and when the same
shall become due and payable in accordance with their terms, or is intended to
or shall affect the relative rights of the Holders and creditors of the Company
other than the holders of the Senior Debt, nor shall anything herein or therein
prevent the Holder of any Note or the Trustee on its behalf from exercising all
remedies otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, in respect of cash, property or
securities of the Company received upon the exercise of any such remedy.
SECTION 10.07. Notice to Trustee.
The Company shall give prompt written notice to the Trustee of
any fact known to the Company which would prohibit the making of any payment to
or by the Trustee in respect of the Notes pursuant to the provisions of this
Article Ten. Regardless of anything to the contrary contained in this Article
Ten or elsewhere in this Indenture, the Trustee shall not be charged with
knowledge of the existence of any default or event of default with respect to
any Senior Debt or of any other facts which would prohibit the making of any
payment to or by the Trustee unless and until a Trust Officer shall have
received notice in writing from the Company, or from a holder of Senior Debt or
a Representative therefor, and, prior to the receipt of any such written notice,
the Trustee shall be entitled to assume (in the absence of actual knowledge by a
Trust Officer to the contrary) that no such facts exist.
In the event that the Trustee determines in good faith that
any evidence is required with respect to the right of any Person as a holder of
Senior Debt to participate in any payment or distribution pursuant to this
Article Ten, the Trustee may request such Person to furnish evidence to the
satisfaction of the Trustee as to the amounts of Senior Debt held by such
Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts perti-
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nent to the rights of such Person under this Article Ten, and if such evidence
is not furnished the Trustee may defer any payment to such Person pending
judicial determination as to the right of such person to receive such payment.
SECTION 10.08. Reliance on Judicial Order or Certificate of Liquidating
Agent.
Upon any payment or distribution of assets of the Company
referred to in this Article Ten, the Trustee, subject to the provisions of
Article Seven hereof, and the Holders of the Notes shall be entitled to rely
upon any order or decree made by any court of competent jurisdiction in which
bankruptcy, dissolution, winding-up, liquidation or reorganization proceedings
are pending, or upon a certificate of the receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making such payment or distribution,
delivered to the Trustee or the Holders of the Notes, for the purpose of
ascertaining the persons entitled to participate in such distribution, the
holders of the Senior Debt and other Indebtedness of the Company, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article Ten.
SECTION 10.09. Trustee's Relation to Senior Debt.
The Trustee and any agent of the Company or the Trustee shall
be entitled to all the rights set forth in this Article Ten with respect to any
Senior Debt which may at any time be held by it in its individual or any other
capacity to the same extent as any other holder of Senior Debt and nothing in
this Indenture shall deprive the Trustee or any such agent of any of its rights
as such holder.
With respect to the holders of Senior Debt, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article Ten, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt.
Whenever a distribution is to be made or a notice given to
holders or owners of Senior Debt, the distribution may be made and the notice
may be given to their Representative, if any.
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SECTION 10.10. Subordination Rights Not Impaired by Acts or Omissions of the
Company or Holders of Senior Debt.
No right of any present or future holders of any Senior Debt
to enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms of this Indenture, regardless of any
knowledge thereof which any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Debt may, at any time and from time to time,
without the consent of or notice to the Trustee, without incurring
responsibility to the Trustee or the Holders of the Notes and without impairing
or releasing the subordination provided in this Article Ten or the obligations
hereunder of the Holders of the Notes to the holders of the Senior Debt, do any
one or more of the following: (i) change the manner, place or terms of payment
or extend the time of payment of, or renew or alter, Senior Debt, or otherwise
amend or supplement in any manner Senior Debt, or any instrument evidencing the
same or any agreement under which Senior Debt is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Debt; (iii) release any Person liable in any manner
for the payment or collection of Senior Debt; and (iv) exercise or refrain from
exercising any rights against the Company and any other Person.
SECTION 10.11. Noteholders Authorize Trustee To Effectuate Subordination of
Notes.
Each Holder of Notes by its acceptance of them authorizes and
expressly directs the Trustee on its behalf to take such action as may be
necessary or appropriate to effectuate, as between the holders of Senior Debt
and the Holders of Notes, the subordination provided in this Article Ten, and
appoints the Trustee its attorney-in-fact for such purposes, including, in the
event of any dissolution, winding-up, liquidation or reorganization of the
Company (whether in bankruptcy, insolvency, receivership, reorganization or
similar proceedings or upon an assignment for the benefit of creditors or
otherwise) tending towards liquidation of the business and assets of the
Company, the filing of a claim for the unpaid balance of its Notes and accrued
interest in the form required in those proceedings.
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If the Trustee does not file a proper claim or proof of debt
in the form required in such proceeding prior to 30 days before the expiration
of the time to file such claim or claims, then the holders of the Senior Debt or
their Representative are or is hereby authorized to have the right to file and
are or is hereby authorized to file an appropriate claim for and on behalf of
the Holders of said Notes. Nothing herein contained shall be deemed to authorize
the Trustee or the holders of Senior Debt or their Representative to authorize
or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee or the holders of
Senior Debt or their Representative to vote in respect of the claim of any
Holder in any such proceeding.
SECTION 10.12. This Article Ten Not To Prevent Events of Default.
The failure to make a payment on account of principal of or
interest on the Notes by reason of any provision of this Article Ten will not be
construed as preventing the occurrence of a Default or an Event of Default under
Section 6.01.
Nothing contained in this Article Ten shall limit the right of
the Trustee or the Holders of Notes to take any action to accelerate the
maturity of the Notes pursuant to Article Six or to pursue any rights or
remedies hereunder or under applicable law, subject to the rights, if any, under
this Article Ten of the holders, from time to time, of Senior Debt.
SECTION 10.13. Trustee's Compensation Not Prejudiced.
Nothing in this Article Ten will apply to amounts due to the
Trustee pursuant to other sections in this Indenture.
ARTICLE ELEVEN
GUARANTEE
SECTION 11.01. Unconditional Guarantee.
Each Guarantor hereby fully and unconditionally, jointly and
severally, guarantees, on an unsecured senior subordinated basis subject to
Article Twelve, to each Holder of a Note authenticated and delivered by the
Trustee and to the Trustee and its successors and assigns, that: (i) the
princi-
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pal of and interest on the Notes will be promptly paid in full when due, subject
to any applicable grace period, whether at maturity, by acceleration or
otherwise and interest on the overdue principal, if any, and interest on any
interest, to the extent lawful, of the Notes and all other obligations of the
Company to the Holders or the Trustee hereunder or thereunder will be promptly
paid in full or performed, all in accordance with the terms hereof and thereof;
and (ii) in case of any extension of time of payment or renewal of any Notes or
of any such other obligations, the same will be promptly paid in full when due
or performed in accordance with the terms of the extension or renewal, subject
to any applicable grace period, whether at stated maturity, by acceleration or
otherwise, subject, however, in the case of clauses (i) and (ii) above, to the
limitations set forth in Section 11.05. Each Guarantor hereby agrees that its
Obligations hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of the Notes or this Indenture, the absence of any
action to enforce the same, any waiver or consent by any Holder of the Notes
with respect to any provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same or any other circumstance
which might otherwise constitute a legal or equitable discharge or defense of a
guarantor. Each Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or bankruptcy
of the Company, any right to require a proceeding first against the Company,
protest, notice and all demands whatsoever and covenants that this Guarantee
will not be discharged except by omplete performance of the obligations
contained in the Notes, this Indenture and in this Guarantee. If any Holder or
the Trustee is required by any court or otherwise to return to the Company, any
Guarantor, or any custodian, trustee, liquidator or other similar official
acting in relation to the Company or any Guarantor, any amount paid by the
Company or any Guarantor to the Trustee or such Holder, this Guarantee, to the
extent theretofore discharged, shall be reinstated in full force and effect.
Each Guarantor further agrees that, as between each Guarantor, on the one hand,
and the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article Six for
the purposes of this Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any acceleration of such obligations
as provided in Article Six, such obligations (whether or not due and payable)
shall forthwith become due and payable by each Guarantor for the purpose of this
Guarantee.
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SECTION 11.02. Subordination of Guarantee.
The obligations of each Guarantor to the Holders of Notes and
to the Trustee pursuant to the Guarantee and this Indenture are expressly
subordinate and subject in right of payment to the prior payment in full of all
Guarantor Senior Debt of such Guarantor, to the extent and in the manner
provided in Article Twelve.
SECTION 11.03. Severability.
In case any provision of this Guarantee shall be invalid,
illegal or unenforceable, the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 11.04. Release of a Guarantor.
(a) If no Default exists or would exist under this Indenture,
upon the sale or disposition of all of the Capital Stock, or all or
substantially all of the assets, of a Guarantor by the Company or one or more
Restricted Subsidiaries of the Company in a transaction constituting an Asset
Sale the Net Cash Proceeds of which are applied in accordance with Section 4.14
and the Guarantor is released from all of its obligations under the Credit
Agreement, or upon the consolidation or merger of a Guarantor with or into any
Person in compliance with Article Five (in each case, other than to the Company
or a Wholly Owned Restricted Subsidiary), or if any Guarantor is dissolved or
liquidated in accordance with this Indenture, or if a Guarantor is designated an
Unrestricted Subsidiary, such Guarantor and each Subsidiary of such Guarantor
that is also a Guarantor shall be automatically and unconditionally released
from all obligations under this Article Eleven without any further action
required on the part of the Trustee or any Holder; provided, however, that each
such Guarantor is sold or disposed of in accordance with this Indenture. Any
Guarantor not so released or the entity surviving such Guarantor, as applicable,
shall remain or be liable under its Guarantee as provided in this Article
Eleven.
(b) The Trustee shall execute an appropriate instrument
delivered by the Company evidencing such release upon receipt of a request by
the Company accompanied by an Officers' Certificate and Opinion of Counsel
certifying as to the compliance with this Section 11.04. Any Guarantor not so
released remains liable for the full amount of principal of and interest on the
Notes as provided in this Article Eleven.
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SECTION 11.05. Limitation of Guarantor's Liability.
Each Guarantor and by its acceptance hereof each Holder hereby
confirms that it is the intention of all such parties that the guarantee by such
Guarantor pursuant to its Guarantee not constitute a fraudulent transfer or
conveyance for purposes of the Bankruptcy Law, the Uniform Fraudulent Conveyance
Act, the Uniform Fraudulent Transfer Act or any similar Federal or state law. To
effectuate the foregoing intention, the Holders and such Guarantor hereby
irrevocably agree that the obligations of such Guarantor under the Guarantee
shall be limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Guarantor (including, but not limited
to, the Guarantor Senior Debt of such Guarantor) and after giving effect to any
collections from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under its Guarantee or
pursuant to Section 11.07, result in the obligations of such Guarantor under the
Guarantee not constituting such fraudulent transfer or conveyance.
SECTION 11.06. Guarantors May Consolidate, etc., on Certain Terms.
(a) Nothing contained in this Indenture or in any of the Notes
shall prevent any consolidation or merger of a Guarantor with or into the
Company or another Guarantor that is a Wholly Owned Restricted Subsidiary of the
Company or shall prevent any sale of assets or conveyance of the property of a
Guarantor as an entirety or substantially as an entirety, to the Company or
another Guarantor that is a Wholly Owned Restricted Subsidiary of the Company.
Upon any such consolidation, merger, sale or conveyance, the Guarantee given by
such Guarantor shall no longer have any force or effect.
(b) Except as set forth in Article Four, nothing contained in
this Indenture or in any of the Notes shall prevent any consolidation or merger
of a Guarantor with or into a corporation or corporations other than the Company
or another Guarantor (whether or not affiliated with the Guarantor), or shall
prevent any sale or conveyance of all or substantially all of the assets of a
Guarantor to a corporation other than the Company or another Guarantor (whether
or not affiliated with the Guarantor); provided, however, that, subject to
Sections 11.04 and 11.06(a), either (x) the transaction is an Asset Sale
consummated in accordance with Section 4.14, or (y) (i) the entity formed by or
surviving any such consolidation or merger (if other than such Guarantor) or to
which such
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sale, lease, conveyance or other disposition shall have been made is a
corporation organized and existing under the laws of the United States, any
State thereof or the District of Columbia, (ii) immediately after such
transaction, and giving effect thereto, no Default or Event of Default shall
have occurred as a result of such transaction and be continuing, (iii) each
Guarantor hereby covenants and agrees that, upon any such consolidation, merger,
sale or conveyance, the Guarantee of such Guarantor set forth in this Article
Eleven, and the due and punctual performance and observance of all of the
covenants and conditions of this Indenture to be performed by such Guarantor,
shall be expressly assumed (in the event that the Guarantor is not the Surviving
Entity), by supplemental indenture satisfactory in form to the Trustee, executed
and delivered to the Trustee, together with an Officers' Certificate of the
Company and an Opinion of Counsel stating that the transaction and such
supplemental indenture comply with this Indenture, by the corporation formed by
such consolidation, or into which the Guarantor shall have merged, or by the
corporation that shall have acquired such property and (iv) immediately after
giving effect to such transaction, the Company shall be in compliance with
Section 5.01(a)(ii) of this Indenture. In the case of any such consolidation,
merger, sale or conveyance that is not an Asset Sale consummated in accordance
with Section 4.14 upon the assumption by the successor corporation, by
supplemental indenture executed and delivered to the Trustee and satisfactory in
form to the Trustee of the due and punctual performance of all of the covenants
and conditions of this Indenture to be performed by the Guarantor, such
successor corporation shall succeed to and be substituted for the Guarantor with
the same effect as if it had been named herein as a Guarantor. Any merger or
consolidation of a Guarantor with and into the Company (with the Company being
the surviving entity) or another Guarantor that is a Wholly Owned Restricted
Subsidiary of the Company need only comply with clause (iv) of Section 5.01(a).
SECTION 11.07. Contribution.
In order to provide for just and equitable contribution among
the Guarantors, the Guarantors agree, inter se, that in the event any payment or
distribution is made by any Guarantor (a "Funding Guarantor") under the
Guarantee, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a pro rata amount based on the Adjusted Net Assets of each
Guarantor (including the Funding Guarantor) for all payments, damages and
expenses incurred by that Funding Guarantor in discharging the Company's
obligations with respect to the Notes or any other Guarantor's obligations with
respect
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to the Guarantee. "Adjusted Net Assets" of such Guarantor at any date shall mean
the lesser of the amount by which (x) the fair value of the property of such
Guarantor exceeds the total amount of liabilities, including, without
limitation, contingent liabilities (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date), but excluding
liabilities under the Guarantee, of such Guarantor at such date and (y) the
present fair salable value of the assets of such Guarantor at such date exceeds
the amount that will be required to pay the probable liability of such Guarantor
on its debts including, without limitation, Guarantor Senior Debt (after giving
effect to all other fixed and contingent liabilities incurred or assumed on such
date and after giving effect to any collection from any Subsidiary of such
Guarantor in respect of the obligations of such Subsidiary under the Guarantee),
excluding debt in respect of the Guarantee of such Guarantor, as they become
absolute and matured.
SECTION 11.08. Waiver of Subrogation.
Until all Obligations are paid in full each Guarantor hereby
irrevocably waives any claim or other rights which it may now or hereafter
acquire against the Company that arise from the existence, payment, performance
or enforcement of such Guarantor's obligations under the Guarantees and this
Indenture, including, without limitation, any right of subrogation,
reimbursement, exoneration, indemnification, and any right to participate in any
claim or remedy of any Holder of Notes against the Company, whether or not such
claim, remedy or right arises in equity, or under contract, statute or common
law, including, without limitation, the right to take or receive from the
Company, directly or indirectly, in cash or other property or by set-off or in
any other manner, payment or security on account of such claim or other rights.
If any amount shall be paid to any Guarantor in violation of the preceding
sentence and the Notes shall not have been paid in full, such amount shall have
been deemed to have been paid to such Guarantor for the benefit of, and held in
trust for the benefit of, the Holders of the Notes, and shall, subject to the
provisions of Section 11.02, Article Ten and Article Twelve, forthwith be paid
to the Trustee for the benefit of such Holders to be credited and applied upon
the Notes, whether matured or unmatured, in accordance with the terms of this
Indenture. Each Guarantor acknowledges that it will receive direct and indirect
benefits from the financing arrangements contemplated by this Indenture and that
the waiver set forth in this Section 11.08 is knowingly made in contemplation of
such benefits.
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SECTION 11.09. Execution of Guarantee.
To evidence their Guarantee to the Holders set forth in this
Article Eleven, the Guarantors hereby agree to execute the Guarantee in
substantially the form included in Exhibit F, which shall be endorsed on each
Note ordered to be authenticated and delivered by the Trustee. Each Guarantor
hereby agrees that its Guarantee set forth in this Article Eleven shall remain
in full force and effect notwithstanding any failure to endorse on each Note a
notation of such Guarantee. Each such Guarantee shall be signed on behalf of
each Guarantor by one Officer, (who shall have been duly authorized by all
requisite corporate actions) who shall attest to such Guarantee prior to the
authentication of the Note on which it is endorsed, and the delivery of such
Note by the Trustee, after the authentication thereof hereunder, shall
constitute due delivery of such Guarantee on behalf of such Guarantor. Such
signature upon the Guarantee may be by manual or facsimile signature of such
officers and may be imprinted or otherwise reproduced on the Guarantee, and in
case any such officer who shall have signed the Guarantee shall cease to be such
officer before the Note on which such Guarantee is endorsed shall have been
authenticated and delivered by the Trustee or disposed of by the Company, such
Note nevertheless may be authenticated and delivered or disposed of as though
the person who signed the Guarantee had not ceased to be such officer of the
Guarantor.
SECTION 11.10. Waiver of Stay, Extension or Usury Laws.
Each Guarantor covenants (to the extent that it may lawfully
do so) that it will not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
or any usury law wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this Indenture; and (to the
extent that it may lawfully do so) each such Guarantor hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
ARTICLE TWELVE
SUBORDINATION OF GUARANTEE OBLIGATIONS
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SECTION 12.01. Guarantee Obligations Subordinated to Guarantor Senior Debt.
Each Guarantor covenants and agrees, and the Trustee and each
Holder of the Notes, by its acceptance thereof, likewise covenants and agrees,
that all Guarantees shall be issued subject to the provisions of this Article
Twelve; and the Trustee and each Person holding any Note, whether upon original
issue or upon transfer, assignment or exchange thereof, accepts and agrees that
the payment of all Obligations on the Notes pursuant to the Guarantees by any
Guarantor shall, to the extent and in the manner herein set forth, be
subordinated and junior in right of payment to the prior payment in full in cash
or Cash Equivalents of all Obligations on the Guarantor Senior Debt of such
Guarantor; that the subordination is for the benefit of, and shall be
enforceable directly by, the holders of Guarantor Senior Debt, and that each
holder of Guarantor Senior Debt whether now outstanding or hereafter created,
incurred, assumed or guaranteed shall be deemed to have acquired Guarantor
Senior Debt in reliance upon the covenants and provisions contained in this
Indenture, the Notes and the Guarantees.
SECTION 12.02. No Payment on Notes in Certain Circumstances.
(a) If any default occurs and is continuing in the payment
when due, whether at stated maturity, upon any redemption, by declaration or
otherwise, of any principal of, interest on, unpaid drawings for letters of
credit issued in respect of or regularly accruing fees with respect to any
Guarantor Senior Debt of any Guarantor, no payment of any kind or character
shall be made by or on behalf of such Guarantor or any other Person on its or
their behalf with respect to any Obligations on the Notes or any of the
obligations of such Guarantor on its Guarantee or to acquire any of the Notes
for cash or property or otherwise. In addition, if any other event of default
occurs and is continuing with respect to any Designated Senior Debt guaranteed
by a Guarantor (which guarantee constitutes Guarantor Senior Debt of such
Guarantor), as such event of default is defined in the instrument creating or
evidencing such Designated Senior Debt, permitting the holders of such
Designated Senior Debt then outstanding to accelerate the maturity thereof and
if the Representative for the respective issue of Designated Senior Debt gives
written notice of the event of default to the Trustee (a "Payment Blockage
Notice"), then, unless and until all events of default have been cured or waived
or have ceased to exist or the Trustee receives notice from the Representative
for the respective issue of Designated
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Senior Debt terminating the Blockage Period (as defined below), during the 180
days after the delivery of such Payment Blockage Notice (the "Blockage Period"),
neither such Guarantor nor any other Person on its behalf shall (x) make any
payment of any kind or character with respect to any Obligations on the Notes or
(y) acquire any of the Notes for cash or property or otherwise. Notwithstanding
anything herein to the contrary, in no event will a Blockage Period extend
beyond 180 days from the date the payment on the Notes was due and only one such
Blockage Period may be commenced within any 360 consecutive days. No event of
default that existed or was continuing on the date of the delivery of any
Payment Blockage Notice to the Trustee with respect to the Designated Senior
Debt shall be, or be made, the basis for commencement of a second Blockage
Period by the Representative of such Designated Senior Debt whether or not
within a period of 360 consecutive days unless such event of default shall have
been cured or waived for a period of not less than 90 consecutive days (it being
acknowledged that any subsequent action or any breach of any financial covenants
for a period commencing after the date of delivery of any Payment Blockage
Notice that, in either case, would give rise to an event of default pursuant to
any provisions under which an event of default previously existed or was
continuing shall constitute a new event of default for this purpose).
(b) In the event that, notwithstanding the foregoing, any
payment shall be received by the Trustee or any Holder when such payment is
prohibited by Section 12.02(a), such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Guarantor
Senior Debt (pro rata to such holders on the basis of the respective amount of
Guarantor Senior Debt held by such holders) or their respective Representatives,
as their respective interests may appear. The Trustee shall be entitled to rely
on information regarding amounts then due and owing on the Guarantor Senior
Debt, if any, received from the holders of Guarantor Senior Debt (or their
Representatives) or, if such information is not received from such holders or
their Representatives, from the Guarantors and only amounts included in the
information provided to the Trustee shall be paid to the holders of Guarantor
Senior Debt.
Nothing contained in this Article Twelve shall limit the right
of the Trustee or the Holders of Notes to take any action to accelerate the
maturity of the Notes pursuant to Section 6.02 or to pursue any rights or
remedies hereunder; provided that all Guarantor Senior Debt thereafter due or
declared to be due shall first be paid in full in cash or Cash Equiva-
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lents before the Holders are entitled to receive any payment of any kind or
character with respect to Obligations on the Guarantees.
SECTION 12.03. Payment Over of Proceeds upon Dissolution, Etc.
(a) Upon any payment or distribution of assets of any
Guarantor of any kind or character, whether in cash, property or securities, to
creditors upon any total or partial liquidation, dissolution, winding up,
reorganization, assignment for the benefit of creditors or marshalling of assets
and liabilities of such Guarantor or in a bankruptcy, reorganization,
insolvency, receivership or other similar proceeding relating to such Guarantor
or its property, whether voluntary or involuntary, all Obligations due or to
become due upon all Guarantor Senior Debt shall first be paid in full in cash or
Cash Equivalents, before any payment or distribution of any kind or character is
made on account of any Obligations on the Notes or any of the Obligations of
such Guarantor on its Guarantee, or for the acquisition of any of the Notes for
cash or property or otherwise; and until all such Obligations with respect to
all Guarantor Senior Debt are paid in full in cash or Cash Equivalents, any
distribution to which the Holders of the Notes would be entitled but for the
subordination provisions will be made to the holders of Guarantor Senior Debt as
their interests may appear. Upon any such dissolution, winding-up, liquidation,
reorganization, receivership or similar proceeding, any payment or distribution
of assets of any Guarantor of any kind or character, whether in cash, property
or securities, to which the Holders of the Notes or the Trustee under this
Indenture would be entitled, except for the provisions hereof, shall be paid by
such Guarantor or by any receiver, trustee in bankruptcy, liquidating trustee,
agent or other Person making such payment or distribution, or by the Holders or
by the Trustee under this Indenture if received by them, directly to the holders
of Guarantor Senior Debt of such Guarantor (pro rata to such holders on the
basis of the respective amounts of such Guarantor Senior Debt held by such
holders) or their respective Representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Guarantor Senior Debt may have
been issued, as their respective interests may appear, for application to the
payment of such Guarantor Senior Debt remaining unpaid until all such Guarantor
Senior Debt has been paid in full in cash or Cash Equivalents after giving
effect to any concurrent payment, distribution or provision therefor to or for
the holders of such Guarantor Senior Debt.
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(b) To the extent any payment of such Guarantor Senior Debt
(whether by or on behalf of such Guarantor, as proceeds of security or
enforcement of any right of setoff or otherwise) is declared to be fraudulent or
preferential, set aside or required to be paid to any receiver, trustee in
bankruptcy, liquidating trustee, agent or other similar Person under any
bankruptcy, insolvency, receivership, fraudulent conveyance or similar law,
then, if such payment is recovered by, or paid over to, such receiver, trustee
in bankruptcy, liquidating trustee, agent or other similar Person, such
Guarantor Senior Debt or part thereof originally intended to be satisfied shall
be deemed to be reinstated and outstanding as if such payment had not occurred.
(c) In the event that, notwithstanding the foregoing, any
payment or distribution of assets of such Guarantor of any kind or character,
whether in cash, property or securities, shall be received by any Holder when
such payment or distribution is prohibited by Section 12.03(a), such payment or
distribution shall be held in trust for the benefit of, and shall be paid over
or delivered to, the holders of such Guarantor Senior Debt (pro rata to such
holders on the basis of the respective amount of such Guarantor Senior Debt held
by such holders) or their respective Representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Guarantor Senior Debt
may have been issued, as their respective interests may appear, for application
to the payment of such Guarantor Senior Debt remaining unpaid until all such
Guarantor Senior Debt has been paid in full in cash or Cash Equivalents, after
giving effect to any concurrent payment, distribution or provision therefor to
or for the holders of such Guarantor Senior Debt.
(d) The consolidation of any Guarantor with, or the merger of
any Guarantor with or into, another corporation or the liquidation or
dissolution of any Guarantor following the conveyance or transfer of all or
substantially all of its assets, to another corporation upon the terms and
conditions provided in Section 11.06 and as long as permitted under the terms of
the Guarantor Senior Debt of such Guarantor shall not be deemed a dissolution,
winding-up, liquidation or reorganization for the purposes of this Section if
such other corporation shall, as a part of such consolidation, merger,
conveyance or transfer, assume such Guarantor's obligations hereunder in
accordance with Section 11.06.
SECTION 12.04. Payments May Be Paid Prior to Dissolution.
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Nothing contained in this Article Twelve or elsewhere in this
Indenture shall prevent (i) a Guarantor, except under the conditions described
in Sections 12.02 and 12.03, from making payments of principal and interest on
the Notes at any time for the purpose of making payments in respect of its
Guarantee, or from depositing with the Trustee any moneys for such payments, or
(ii) in the absence of actual knowledge by the Trustee that a given payment
would be prohibited by Section 12.02 or 12.03, the application by the Trustee of
any moneys deposited with it for the purpose of making such payments in respect
of principal and interest on the Notes to the Holders entitled thereto unless at
least two Business Days prior to the date upon which such payment would
otherwise become due and payable a Trust Officer shall have actually received
the written notice provided for in the second sentence of Section 10.02(a), or
Section 10.07, 12.02(a) or 12.07 (provided that, notwithstanding the foregoing,
such application shall otherwise be subject to the provisions of the first
sentence of Section 12.02(a) and Section 12.03). A Guarantor shall give prompt
written notice to the Trustee of any dissolution, winding-up, liquidation or
reorganization of such Guarantor.
SECTION 12.05. Subrogation.
After the payment in full in cash or Cash Equivalents of all
Guarantor Senior Debt of a Guarantor, the Holders of the Guarantee of such
Guarantor shall be subrogated to the rights of the holders of Guarantor Senior
Debt of such Guarantor to receive payments or distributions of cash, property or
securities of such Guarantor applicable to such Guarantor Senior Debt until the
Notes shall be paid in full; and, for the purposes of such subrogation, no such
payments or distributions to the holders of such Guarantor Senior Debt by or on
behalf of such Guarantor or by or on behalf of the Holders by virtue of this
Article Twelve which otherwise would have been made to the Holders shall, as
between such Guarantor and the Holders of the Notes, be deemed to be a payment
by such Guarantor to or on account of such Guarantor Senior Debt, it being
understood that the provisions of this Article Twelve are and are intended
solely for the purpose of defining the relative rights of the Holders of the
Notes, on the one hand, and the holders of the Guarantor Senior Debt, on the
other hand.
If any payment or distribution to which the Holders would
otherwise have been entitled but for the provisions of this Article Twelve shall
have been applied, pursuant to the provisions of this Article Twelve, to the
payment of amounts payable under the Guarantor Senior Debt, then the Holders
shall
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be entitled to receive from the holders of such Guarantor Senior Debt any
payments or distributions received by such holders of Guarantor Senior Debt in
excess of the amount sufficient to pay all amounts payable under or in respect
of the Guarantor Senior Debt in full in cash or Cash Equivalents.
SECTION 12.06. Obligations of the Guarantors Unconditional.
Nothing contained in this Article Twelve or elsewhere in this
Indenture or in the Notes or the Guarantees is intended to or shall impair, as
among the Guarantors, its creditors other than the holders of Guarantor Senior
Debt, and the Holders, the obligation of the Guarantors, which is absolute and
unconditional, to pay to the Holders all amounts due and payable under the
Guarantees as and when the same shall become due and payable in accordance with
their terms, or is intended to or shall affect the relative rights of the
Holders and creditors of the Guarantors other than the holders of the Guarantor
Senior Debt, nor shall anything herein or therein prevent the Holder of any Note
or the Trustee on its behalf from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
in respect of cash, property or securities of the Guarantors received upon the
exercise of any such remedy.
SECTION 12.07. Notice to Trustee.
The Guarantors shall give prompt written notice to the Trustee
of any fact known to the Guarantors which would prohibit the making of any
payment to or by the Trustee in respect of the Notes and the Guarantees pursuant
to the provisions of this Article Twelve. Regardless of anything to the contrary
contained in this Article Twelve or elsewhere in this Indenture, the Trustee
shall not be charged with knowledge of the existence of any default or event of
default with respect to any Guarantor Senior Debt or of any other facts which
would prohibit the making of any payment to or by the Trustee unless and until a
Trust Officer shall have received notice in writing from the Guarantors, or from
a holder of Guarantor Senior Debt or a Representative therefor, and, prior to
the receipt of any such written notice, the Trustee shall be entitled to assume
(in the absence of actual knowledge by a Trust Officer to the contrary) that no
such facts exist.
In the event that the Trustee determines in good faith that
any evidence is required with respect to the right of any Person as a holder of
Guarantor Senior Debt to partici-
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pate in any payment or distribution pursuant to this Article Twelve, the Trustee
may request such Person to furnish evidence to the satisfaction of the Trustee
as to the amounts of Guarantor Senior Debt held by such Person, the extent to
which such Person is entitled to participate in such payment or distribution and
any other facts pertinent to the rights of such Person under this Article
Twelve, and if such evidence is not furnished the Trustee may defer any payment
to such Person pending judicial determination as to the right of such person to
receive such payment.
SECTION 12.08. Reliance on Judicial Order or Certificate of Liquidating
Agent.
Upon any payment or distribution of assets of any Guarantor
referred to in this Article Twelve, the Trustee, subject to the provisions of
Article Seven hereof, and the Holders of the Notes shall be entitled to rely
upon any order or decree made by any court of competent jurisdiction in which
bankruptcy, dissolution, winding-up, liquidation or reorganization proceedings
are pending, or upon a certificate of the receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making such payment or distribution,
delivered to the Trustee or the Holders of the Notes, for the purpose of
ascertaining the persons entitled to participate in such distribution, the
holders of the Guarantor Senior Debt and other Indebtedness of such Guarantor,
the amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article Twelve.
SECTION 12.09. Trustee's Relation to Guarantor Senior Indebtedness.
The Trustee and any agent of the Guarantors or the Trustee
shall be entitled to all the rights set forth in this Article Twelve with
respect to any Guarantor Senior Debt which may at any time be held by it in its
individual or any other capacity to the same extent as any other holder of
Guarantor Senior Debt and nothing in this Indenture shall deprive the Trustee or
any such agent of any of its rights as such holder.
With respect to the holders of Guarantor Senior Debt, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article Twelve, and no implied
covenants or obligations with respect to the holders of Guarantor Senior Debt
shall be read into this Indenture against the Trustee. The Trustee
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shall not be deemed to owe any fiduciary duty to the holders of Guarantor Senior
Debt.
Whenever a distribution is to be made or a notice given to
holders or owners of Guarantor Senior Debt, the distribution may be made and the
notice may be given to their Representative, if any.
SECTION 12.10. Subordination Rights Not Impaired by Acts or Omissions of the
Guarantors or Holders of Guarantor Senior Debt.
No right of any present or future holders of any Guarantor
Senior Debt to enforce subordination as provided herein shall at any time in any
way be prejudiced or impaired by any act or failure to act on the part of the
Guarantors or by any act or failure to act, in good faith, by any such holder,
or by any noncompliance by the Guarantors with the terms of this Indenture,
regardless of any knowledge thereof which any such holder may have or otherwise
be charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Guarantor Senior Debt may, at any time and from time
to time, without the consent of or notice to the Trustee, without incurring
responsibility to the Trustee or the Holders of the Notes and without impairing
or releasing the subordination provided in this Article Twelve or the
obligations hereunder of the Holders of the Notes to the holders of the
Guarantor Senior Debt, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, Guarantor Senior Debt, or otherwise amend or supplement in any manner
Guarantor Senior Debt, or any instrument evidencing the same or any agreement
under which Guarantor Senior Debt is outstanding; (ii) sell, exchange, release
or otherwise deal with any property pledged, mortgaged or otherwise securing
Guarantor Senior Debt; (iii) release any Person liable in any manner for the
payment or collection of Guarantor Senior Debt; and (iv) exercise or refrain
from exercising any rights against the Guarantors and any other Person.
SECTION 12.11. Noteholders Authorize Trustee To Effectuate Subordination of
Guarantee Obligations.
Each Holder of the Notes and the Guarantees by its acceptance
of them authorizes and expressly directs the Trustee on its behalf to take such
action as may be necessary or appro-
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priate to effectuate, as between the holders of Guarantor Senior Debt and the
Holders, the subordination provided in this Article Twelve, and appoints the
Trustee its attorney-in-fact for such purposes, including, in the event of any
dissolution, winding-up, liquidation or reorganization of any Guarantor (whether
in bankruptcy, insolvency, receivership, reorganization or similar proceedings
or upon an assignment for the benefit of creditors or otherwise) tending towards
liquidation of the business and assets of any Guarantor, the filing of a claim
for the unpaid balance of its Notes and accrued interest in the form required in
those proceedings.
If the Trustee does not file a proper claim or proof of debt
in the form required in such proceeding prior to 30 days before the expiration
of the time to file such claim or claims, then the holders of the Guarantor
Senior Debt or their Representative are or is hereby authorized to have the
right to file and are or is hereby authorized to file an appropriate claim for
and on behalf of the Holders of said Notes. Nothing herein contained shall be
deemed to authorize the Trustee or the holders of Guarantor Senior Debt or their
Representative to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee or the holders of Guarantor Senior Debt or their Representative to vote
in respect of the claim of any Holder in any such proceeding.
SECTION 12.12. This Article Twelve Not To Prevent Events of Default.
The failure to make a payment in respect of the Guarantees by
reason of any provision of this Article Twelve will not be construed as
preventing the occurrence of an Event of Default.
Nothing contained in this Article Twelve shall limit the right
of the Trustee or the Holders of Notes to take any action to accelerate the
maturity of the Notes pursuant to Article Six or to pursue any rights or
remedies hereunder or under applicable law, subject to the rights, if any, under
this Article Ten of the holders, from time to time, of Guarantor Senior Debt.
SECTION 12.13. Trustee's Compensation Not Prejudiced.
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Nothing in this Article Twelve will apply to amounts due to
the Trustee pursuant to other sections in this Indenture.
ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01. TIA Controls.
If any provision of this Indenture limits, qualifies, or
conflicts with another provision which is required to be included in this
Indenture by the TIA, the required provision shall control; provided that this
Section 13.01 shall not of itself require that this Indenture or the Trustee be
qualified under the TIA or constitute any admission or acknowledgment by any
party hereto that any such qualification is required prior to the time this
Indenture and the Trustee are required by the TIA to be so qualified. If any
provision of this Indenture modifies or excludes any provision of the TIA that
may be so modified or excluded, the latter provision shall be deemed to apply to
this Indenture as so modified or excluded, as the case may be.
SECTION 13.02. Notices.
Any notices or other communications required or permitted
hereunder shall be in writing, and shall be sufficiently given if made by hand
delivery, by telex, by telecopier, by reputable overnight delivery service, or
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to the Company and/or any Guarantor:
RailWorks Corporation
1104 Kenilworth Drive, Suite 301
Baltimore, Maryland 21204
Facsimile No.: (410) 825-6920
Attention: Chief Financial Officer
with copies to:
King & Spalding
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1185 Avenue of the Americas
New York, NY 10036
Facsimile No.: (212) 556-2100
Attention: Mary A. Bernard
If to the Trustee:
First Union National Bank
Corporate Trust (VA 2379)
800 East Main Street
Richmond, VA 23219
Telecopier No.:
Attention: Corporate Trust Administration
The Company, the Guarantors and the Trustee by written notice
to each other may designate additional or different addresses for notices. Any
notice or communication to the Company, the Guarantors or the Trustee shall be
deemed to have been given or made as of the date so delivered if personally
delivered; when answered back, if telexed; when receipt is acknowledged, if
faxed; one (1) Business Day after mailing by reputable overnight courier, and
five (5) calendar days after mailing if sent by registered or certified mail,
postage prepaid (except that a notice of change of address shall not be deemed
to have been given until actually received by the addressee).
Any notice or communication mailed to a Holder shall be mailed
to such Holder by first class mail or other equivalent means at such Holder's
address as it appears on the registration books of the Registrar and shall be
sufficiently given to such Holder if so mailed within the time prescribed.
Failure to mail a notice or communication to a Noteholder or
any defect in it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 13.03. Communications by Holders with Other Holders.
Holders may communicate pursuant to TIA ss. 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Guarantors, if any, the Trus-
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tee, the Registrar and any other Person shall have the protection of TIA ss.
312(c).
SECTION 13.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company or the
Guarantors to the Trustee to take any action under this Indenture, the Company
shall furnish to the Trustee:
(1) an Officers' Certificate, in form and substance
satisfactory to the Trustee, stating that, in the opinion of the
signers, all conditions precedent to be performed by the Company, if
any, provided for in this Indenture relating to the proposed action
have been complied with;
(2) an Opinion of Counsel stating that, in the opinion of
such counsel, all such conditions precedent to be performed by the
Company, if any, provided for in this Indenture relating to the
proposed action have been complied with; and
(3) where applicable, a certificate or opinion by an
independent certified public accountant reasonably satisfactory to the
Trustee that complies with TIA ss. 314(c).
SECTION 13.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.06, shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition and the definitions
relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has
made such examination or investigation as is reasonably necessary to
enable him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
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(4) a statement as to whether or not, in the opinion of each
such Person, such condition or covenant has been complied with.
SECTION 13.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules in accordance with the
Trustee's customary practices for action by or at a meeting of Holders. The
Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 13.07. Legal Holidays.
A "Legal Holiday" used with respect to a particular place of
payment is a Saturday, a Sunday or a day on which banking institutions in New
York, New York, or at such place of payment are not required to be open. If a
payment date is a Legal Holiday at such place, payment may be made at such place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.
SECTION 13.08. Governing Law.
THIS INDENTURE, THE NOTES AND THE GUARANTEES SHALL BE 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
THEREBY. 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 INDENTURE OR THE NOTES.
SECTION 13.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture,
loan or debt agreement of the Company or any of its Subsidiaries. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 13.10. No Recourse Against Others.
A past, present or future director, officer, employee,
stockholder or incorporator, as such, of the Company or any Guarantor shall not
have any liability for any obligations of the Company or any Guarantor under the
Notes, the Guarantees
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or this Indenture or for any claim based on, in respect of or by reason of such
obligations or their creations. Each Holder by accepting a Note waives and
releases all such liability. Such waiver and release are part of the
consideration for the issuance of the Notes. This provision does not affect any
possible claims under federal securities laws.
SECTION 13.11. Successors.
All agreements of the Company and the Guarantors, if any, in
this Indenture, the Notes and the Guarantees, if any, shall bind their
successors. All agreements of the Trustee in this Indenture shall bind its
successors.
SECTION 13.12. Duplicate Originals.
All parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together shall represent
the same agreement.
SECTION 13.13. Severability.
In case any one or more of the provisions in this Indenture or
in the Notes or the Guarantees, if any, shall be held invalid, illegal or
unenforceable, in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions shall not in any way be affected or impaired thereby, it being
intended that all of the provisions hereof shall be enforceable to the full
extent permitted by law.
SECTION 13.14. Independence of Covenants.
All covenants and agreements in this Indenture and the Notes
shall be given independent effect so that if any particular action or condition
is not permitted by any of such covenants, the fact that it would be permitted
by an exception to, or otherwise be within the limitations of, another covenant
shall not avoid the occurrence of a Default or an Event of Default if such
action is taken or condition exists.
[Remainder of Page Intentionally Left Blank]
<PAGE> 135
S-1
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, all as of the date first written above.
RAILWORKS CORPORATION
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
Guarantors:
ALPHA-KEYSTONE ENGINEERING, INC.,
as guarantor
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
ARMCORE ACQUISITION CORP.,
as guarantor
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
ARMCORE RAILROAD CONTRACTORS, INC., as
guarantor
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
<PAGE> 136
S-2
ANNEX RAILROAD BUILDERS, INC.,
as guarantor
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
COMSTOCK HOLDINGS, INC.,
as guarantor
By:
-----------------------------------------
Name: Peter Alan Pasch
Title: President
L.K. COMSTOCK & COMPANY, INC.
as guarantor
By:
-----------------------------------------
Name: Peter Alan Pasch
Title: Vice Chairman
COMTRAK CONSTRUCTION, INC.,
as guarantor
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
CONDON BROTHERS, INC.,
as guarantor
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
<PAGE> 137
S-3
CPI CONCRETE PRODUCTS INCORPORATED, as
guarantor
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
FCM RAIL, LTD., as guarantor
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
F&V METRO RW, INC.
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
F&V METRO CONTRACTING CORP.,
as guarantor
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
GANTREX RW, INC.,
as guarantor
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
<PAGE> 138
S-4
GANTREX CORPORATION,
as guarantor
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
GANTREX SYSTEMS, INC.,
as guarantor
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
H.P. MCGINLEY INC.,
as guarantor
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
IMPULSE ENTERPRISES
OF NEW YORK, INC.
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
KENNEDY RAILROAD BUILDERS, INC.,
as guarantor
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
<PAGE> 139
S-5
MERIT RAILROAD CONTRACTORS, INC.,
as guarantor
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
MIDWEST CONSTRUCTION SERVICES, INC., as
guarantor
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
MID WEST RW, INC.,
as guarantor
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
MID WEST RAILROAD CONSTRUCTION &
MAINTENANCE CORPORATION OF WYOMING,
as guarantor
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
<PAGE> 140
S-6
MINNESOTA RAILROAD SERVICE, INC.,
as guarantor
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
NEW ENGLAND RAILROAD CONSTRUCTION CO.,
INC., as guarantor
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
NORTHERN RAIL SERVICE AND SUPPLY
COMPANY, INC., as guarantor
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
R. & M. B. RAIL CO., INC.,
as guarantor
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
RAILCORP, INC.,
as guarantor
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
<PAGE> 141
S-7
RAILROAD SERVICE, INC.,
as guarantor
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
RAILROAD SPECIALTIES, INC.,
as guarantor
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
SHELDON ELECTRIC, INC.,
as guarantor
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
SOUTHERN INDIANA WOOD PRESERVING CO.,
INC., as guarantor
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
U.S. TRACKWORKS, INC.,
as guarantor
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
<PAGE> 142
S-8
U.S. RAILWAY SUPPLY, INC.,
as guarantor
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
V & R ELECTRICAL
CONTRACTORS, INC.
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
WM. A. SMITH CONSTRUCTION CO. INC., as
guarantor
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
WM A. SMITH RERAILING SERVICES, INC.,
as guarantor
By:
-----------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
Trustee:
FIRST UNION NATIONAL BANK
as Trustee
<PAGE> 143
S-9
By:
----------------------------------------
Name:
Title:
<PAGE> 144
EXHIBIT A
[FORM OF SERIES A NOTE]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL
ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A)
TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES
ACT, (C) INSIDE THE UNITED STATES TO AN "ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501(a)(1),(2),(3) or (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED
INVESTOR") THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS
BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE FOR
THIS SECURITY), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) PURSUANT
TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE), (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE
COMPANY SO REQUESTS), OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM
THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER
THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN
ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE
TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION
AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING
MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN
TO THEM BY REGULATIONS S UNDER THE SECURITIES ACT.
A-1
<PAGE> 145
CUSIP No.
RAILWORKS CORPORATION
11 1/2% Senior Subordinated Note due 2009, Series A
No. $
RAILWORKS CORPORATION, a Delaware corporation (the "Company"), for
value received, promises to pay to or registered assigns, the principal sum
of , on April 15, 2009.
Interest Payment Dates: April 15 and October 15
Record Dates: April 1 and October 1
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
A-2
<PAGE> 146
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officer.
Dated: April 7, 1999 RAILWORKS CORPORATION
By:
--------------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
and Chief Financial Officer
Trustee's Certificate of Authentication
This is one of the 11 1/2% Senior Subordinated Notes due 2009, Series
A, referred to in the within-mentioned Indenture.
Dated: April 7, 1999
FIRST UNION NATIONAL BANK, as Trustee
By:
--------------------------------------
Authorized Signatory
A-3
<PAGE> 147
(REVERSE OF NOTE)
11 1/2% Senior Subordinated Note due 2009, Series A
1. Principal and Interest. RAILWORKS CORPORATION, a
Delaware corporation (the "Company"), promises to pay the principal of this Note
on April 15, 2009, or earlier as provided in the Indenture. The Company promises
to pay interest on the principal amount of this Note at the rate per annum shown
above. Interest on the Notes will accrue from the most recent date on which
interest has been paid or, if no interest has been paid, from April 7, 1999. The
Company will pay interest semi-annually in arrears on each April 15 and October
15 (each, an "Interest Payment Date") and at stated maturity, commencing on
October 15, 1999. Interest will be computed on the basis of a 360-day year of
twelve 30-day months and in the case of a partial month, the actual number of
days elapsed.
The Company shall pay interest on overdue principal and on
overdue installments of interest, to the extent lawful, from time to time
on demand at the rate borne by the Notes and on overdue installments of
interest (without regard to any applicable grace periods).
2. Method of Payment. The Company shall pay interest on
the Notes (except defaulted interest) to the Persons who are the registered
Holders at the close of business on the Record Date immediately preceding the
Interest Payment Date even if the Notes are cancelled on registration of
transfer or registration of exchange after such Record Date. Holders must
surrender Notes to a Paying Agent to collect principal payments. The Company
shall pay principal, premium and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts
("U.S. Legal Tender"). However, the Company may pay principal, premium and
interest by its check payable in such U.S. Legal Tender. The Company may deliver
any such interest payment to the Paying Agent or to a Holder at the Holder's
registered address. If an Interest Payment Date is a date other than a Business
Day, payment may be made on the next succeeding day that is a Business Day.
3. Paying Agent and Registrar. FIRST UNION NATIONAL BANK
(the "Trustee") will act as Paying Agent and Registrar. The Company may change
any Paying Agent, Registrar or co-Registrar without notice to the Holders. The
Company, any Subsidiary or any Affiliate of any of them may act as Paying Agent,
Registrar or co-Registrar.
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<PAGE> 148
4. Indenture. The Company issued the Notes under an
Indenture, dated as of April 7, 1999 (the "Indenture"), among the Company, each
of the Guarantors named therein and the Trustee. This Note is one of a duly
authorized issue of Notes of the Company designated as its 11 1/2% Senior
Subordinated Notes due 2009, Series A (the "Initial Notes"), limited (except as
otherwise provided in the Indenture) in aggregate principal amount to
$250,000,000, which may be issued under the Indenture; provided the principal
amount of Initial Notes issued on the Issue Date will not exceed $125,000,000.
The Notes include the Initial Notes, the Private Exchange Notes and the
Unrestricted Notes issued in exchange for the Initial Notes pursuant to the
Registration Rights Agreement or, with respect to Initial Notes issued under the
Indenture subsequent to the Issue Date, a registration rights agreement similar
to the Registration Rights Agreement. The Initial Notes and the Unrestricted
Notes are treated as a single class of securities under the Indenture.
Capitalized terms used herein shall have the meanings assigned to them in the
Indenture unless otherwise defined herein. 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 (15 U.S.C. ss.ss. 77aaa-77bbbb) (the "TIA"), as in
effect on the date of the Indenture. Notwithstanding anything to the contrary
herein, the Notes are subject to all such terms, and Holders of Notes are
referred to the Indenture and the TIA for a statement of them. The Notes are
general unsecured obligations of the Company limited in aggregate principal
amount to $250,000,000. Under Article Eleven of the Indenture the payment on
each Note is guaranteed on a senior subordinated basis by the Guarantors. Each
Holder, by accepting a Note, agrees to be bound by all of the terms and
provisions of the Indenture, as the same may be amended from time to time.
5. (a) Redemption. Except as provided below, the Notes
may not be redeemed prior to April 15, 2004. Thereafter, the Company may redeem
the Notes at its option, in whole or in part, upon not less than 30 nor more
than 60 days' notice, at the following redemption prices (expressed as
percentages of the principal amount thereof) plus accrued and unpaid interest
thereon, if any, to the date of redemption, if redeemed during the twelve-month
period commencing on April 15 of the year set forth below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2004..................................................... 105.750%
2005..................................................... 103.833%
2006..................................................... 101.917%
2007 and thereafter...................................... 100.000%
</TABLE>
A-5
<PAGE> 149
In addition, the Company must pay accrued and unpaid interest on the Notes
redeemed.
(b) Optional Redemption Upon Equity Offerings. At any time, or
from time to time, on or prior to April 15, 2002, the Company may, at its
option, use the net cash proceeds of one or more Equity Offerings (as defined
below) 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 thereof,
plus accrued and unpaid interest thereon, if any, to the date of redemption;
provided that at least 65% of the principal amount of Notes issued under the
Indenture remains outstanding immediately after any such redemption and the
Company makes such redemption not more than 120 days after the consummation of
any such Equity Offering.
As used in the preceding paragraph, "Equity Offering" means a
public or private offering of Qualified Capital Stock of the Company; 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 received by
the Company directly or indirectly from such offering are not less than $10.0
million.
6. Notice of Redemption. Notice of redemption will be
mailed at least 30 days but not more than 60 days before the Redemption Date to
each Holder of Notes to be redeemed at such Holder's registered address. Notes
in denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the
redemption of the Notes called for redemption shall have been deposited
with the Paying Agent for redemption on such Redemption Date, then, unless
the Company defaults in the payment of such Redemption Price plus accrued
and unpaid interest, if any, the Notes called for redemption will cease to
bear interest from and after such Redemption Date and the only right of the
Holders of such Notes will be to receive payment of the Redemption Price
plus accrued and unpaid interest, if any.
7. Offers to Purchase. Sections 4.13 and 4.14 of the
Indenture provide that, upon the occurrence of a Change of Control (as defined
in the Indenture) and after certain Asset Sales (as defined in the Indenture),
and subject to further limitations contained therein, the Company will make an
offer to purchase certain amounts of the Notes in accordance with the procedures
set forth in the Indenture.
8. Subordination. The Notes are subordinated in right of
payment, in the manner and to the extent set forth in the Indenture, to the
prior payment in full in cash or Cash
A-6
<PAGE> 150
Equivalents of all Senior Debt of the Company, whether outstanding on the date
of the Indenture or thereafter created, incurred, assumed or guaranteed. The
Guarantees in respect of the Notes are subordinated in right of payment, in the
manner and to the extent set forth in the Indenture, to the prior payment in
full in cash or Cash Equivalents of all Guarantor Senior Debt of each Guarantor,
whether outstanding on the date of the Indenture or thereafter created,
incurred, assumed or guaranteed. Each Holder by his acceptance hereof agrees to
be bound by such provisions and authorizes and expressly directs the Trustee, on
his behalf, to take such action as may be necessary or appropriate to effectuate
the subordination provided for in the Indenture and appoints the Trustee his
attorney-in-fact for such purposes.
9. Denominations; Transfer; Exchange. The Notes are in
registered form, without coupons, in denominations of $1,000 and integral
multiples of $1,000. A Holder shall register the transfer or exchange of Notes
in accordance with this Indenture. The Registrar may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents and to
pay certain transfer taxes or similar governmental charges payable in connection
therewith as required by law or as permitted by the Indenture. The Registrar
need not register the transfer or exchange of any Notes selected for redemption
(except the unredeemed portion of any Note being redeemed in part). The
Registrar need not register the transfer or exchange of any Notes during a
period beginning 15 days before the mailing of a redemption notice for any Notes
or portions thereof selected for redemption.
10. Persons Deemed Owners. The registered Holder of a
Note shall be treated as the owner of it for all purposes.
11. Unclaimed Money. If money for the payment of
principal or interest remains unclaimed for two years, the Trustee and the
Paying Agent will pay the money back to the Company. After that, all liability
of the Trustee and such Paying Agent with respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity. If the
Company at any time deposits with the Trustee U.S. Legal Tender or U.S.
Government Obligations sufficient to pay the then outstanding principal of,
premium, if any, and interest on the Notes to redemption or maturity and
complies with the other provisions of this Indenture relating thereto, the
Company will be discharged from certain provisions of the Indenture and the
Notes (including certain covenants, but excluding its obligation to pay the
principal of, premium and interest on the Notes).
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<PAGE> 151
13. Amendment; Supplement; Waiver. Subject to certain
exceptions in the Indenture, the Indenture, the Notes or the Guarantees, if any,
may be amended or supplemented with the written consent of the Holders of at
least a majority in aggregate principal amount of the then outstanding Notes,
and any existing Default or Event of Default or noncompliance with any provision
may be waived with the written consent of the Holders of a majority in aggregate
principal amount of the then outstanding Notes. Without consent of any Holder,
the parties thereto may amend or supplement this Indenture or the Notes to,
among other things, cure any ambiguity, defect or inconsistency, provide for
uncertificated Notes in addition to or in place of certificated Notes, or comply
with Article Five of the Indenture or make any other change that does not
adversely affect in any material respect the rights of any Holder of a Note.
14. Restrictive Covenants. The Indenture imposes certain
limitations on the ability of the Company and its Restricted Subsidiaries to,
among other things, incur additional Indebtedness, pay dividends or make certain
other Restricted Payments, consummate certain Asset Sales, enter into certain
transactions with Affiliates, incur Liens, incur Indebtedness that is
subordinate to Senior Debt but senior in right of payment to the Notes, impose
restrictions on the ability of a Subsidiary to pay dividends or make certain
payments to the Company and its Subsidiaries, merge or consolidate with any
other Person or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of the assets of the Company. Such limitations are
subject to a number of important qualifications and exceptions. The Company must
annually report to the Trustee on compliance with such limitations.
15. Successors. When a successor assumes, in accordance
with the Indenture, all the obligations of its predecessor under the Notes and
the Indenture, the predecessor will be released from those obligations.
16. Defaults and Remedies. If an Event of Default occurs
and is continuing, the Trustee or the Holders of at least 25% in principal
amount of the then outstanding Notes may declare all the Notes to be due and
payable in the manner, at the time and with the effect provided in the
Indenture. Holders of Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee is not obligated to enforce the Indenture
or the Notes unless it has been offered indemnity or security reasonably
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Notes then outstanding to direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from
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<PAGE> 152
Holders of Notes notice of any continuing Default or Event of Default (except a
Default in payment of principal or interest) if it determines in good faith that
withholding notice is in their interest.
17. Trustee Dealings with Company. The Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with the Company, its Subsidiaries or
their respective Affiliates as if it were not the Trustee.
18. No Recourse Against Others. No past, present or
future stockholder, director, officer, employee or incorporator, as such, of the
Company shall have any liability for any obligation of the Company under the
Notes or the Indenture or for any claim based on, in respect of or by reason of,
such obligations or their creation. Each Holder of a Note by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
19. Authentication. This Note shall not be valid until
the Trustee or authenticating agent manually signs the certificate of
authentication on this Note.
20. Governing Law. THIS NOTE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING
EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS TO THE EXTENT THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. EACH
OF THE HOLDERS 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 NOTE.
21. Abbreviations and Defined Terms. Customary
abbreviations may be used in the name of a Holder of a Note or an assignee, such
as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN
(= joint tenants with right of survivorship and not as tenants in common), CUST
(= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
22. CUSIP Numbers. Pursuant to a recommendation
promulgated by the Committee on Uniform Security Identification Procedures, the
Company has caused CUSIP numbers to be printed on the Notes as a convenience to
the Holders of the Notes. No representation is made as to the accuracy of such
numbers as printed on the Notes and reliance may be placed only on the other
identification numbers printed hereon.
23. Registration Rights. Pursuant to the Registration
Rights Agreement, the Company and the Guarantors will be
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<PAGE> 153
obligated upon the occurrence of certain events to consummate an exchange offer
pursuant to which the Holder of this Note shall have the right to exchange this
Series A Note for an 11 1/2% Senior Subordinated Note due 2009, Series B, of the
Company (an "Unrestricted Note") which have been registered under the Securities
Act, in like principal amount and having terms identical in all material
respects as the Series A Notes (other than as relates to registration rights and
transfer restrictions). The Holders shall be entitled to receive certain
additional interest payments in the event such exchange offer is not consummated
and upon certain other conditions, all pursuant to and in accordance with the
terms of the Registration Rights Agreement.
24. Indenture. Each Holder, by accepting a Note, agrees
to be bound by all of the terms and provisions of this Indenture, as the same
may be amended from time to time. Capitalized terms used herein and not defined
herein have the meanings ascribed thereto in the Indenture.
25. Guarantees. This Note will be entitled to the
benefits of certain Guarantees, if any, made for the benefit of the Holders.
Reference is hereby made to the Indenture for a statement of the respective
rights, limitations of rights, duties and obligations thereunder of the
Guarantors, the Trustee and the Holders.
The Company will furnish to any Holder of a Note upon written
request and without charge a copy of the Indenture. Requests may be made to:
RAILWORKS CORPORATION, 1104 Kenilworth Drive, Suite 301, Baltimore, MD 21204,
Attention: Chief Financial Officer.
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<PAGE> 154
[FORM OF ASSIGNMENT]
I or we assign to
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER
- --------------------------------
- --------------------------------------------------------------------------------
(please print or type name and address)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints
- --------------------------------------------------------------------------------
attorney to transfer the Note on the books of the Company with full power of
substitution in the premises.
Dated:
----------------------------- ----------------------------------------
NOTICE: The signature on this assignment
must correspond with the name as it
appears upon the face of the within Note
in every particular without alteration
or enlargement or any change whatsoever
and be guaranteed by the endorser's bank
or broker.
Signature Guarantee:
------------------------------------------------------------
In connection with any transfer of this Note occurring prior
to the date which is the earlier of (i) the date of the declaration by the
Commission of the effectiveness of a registration statement under the Securities
Act of 1933, as amended (the "Securities Act") covering resales of this Note
(which effectiveness shall not have been suspended or terminated at the date of
the transfer) and (ii) April 7, 2001 the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer:
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<PAGE> 155
[Check One]
(1) ___ to the Company or a subsidiary thereof; or
(2) ___ pursuant to and in compliance with Rule 144A under the Securities
Act of 1933, as amended; or
(3) ___ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as
amended) that has furnished to the Trustee a signed letter containing
certain representations and agreements (the form of which letter can
be obtained from the Trustee); or
(4) ___ outside the United States to a "foreign purchaser" in compliance with
Rule 904 of Regulation S under the Securities Act of 1933, as amended;
or
(5) ___ pursuant to the exemption from registration provided by Rule 144 under
the Securities Act of 1933, as amended; or
(6) ___ pursuant to an effective registration statement under the Securities
Act of 1933, as amended; or
(7) ___ pursuant to another available exemption from the registration
statement requirements of the Securities Act of 1933, as amended.
and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate"):
[ ] The transferee is an Affiliate of the Company.
Unless one of the items is checked, the Trustee will refuse to
register any of the Notes evidenced by this certificate in the name of any
person other than the registered Holder thereof; provided, however, that if item
(3), (4), (5) or (7) is checked, the Company or the Trustee may require, prior
to registering any such transfer of the Notes, in their sole discretion, such
written legal opinions, certifications (including an investment letter in the
case of box (3) or (4) and other information as the Trustee or the Company have
reasonably requested to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of l933, as amended.
A-12
<PAGE> 156
If none of the foregoing items are checked, the Trustee or
Registrar shall not be obligated to register this Note in the name of any person
other than the Holder hereof unless and until the conditions to any such
transfer of registration set forth herein and in Section 2.16 of the Indenture
shall have been satisfied.
Dated: Signed:
-------------------------------- ----------------------------------
(Sign exactly as name appears on
the other side of this Note)
Signature Guarantee:
------------------------------------------------------------
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:
---------------------------- -----------------------------------------
NOTICE: To be executed by an executive
officer
A-13
<PAGE> 157
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.13 or Section 4.14 of the Indenture, check the
appropriate box:
Section 4.13 [ ] Section 4.14 [ ]
If you want to elect to have only part of this Note purchased
by the Company pursuant to Section 4.13 or Section 4.14 of the Indenture, state
the amount: $_____________
Date: Your Signature:
----------------------------- -------------------------
(Sign exactly as your name
appears on the other side
of this Note)
Signature Guarantee:
------------------------------------------------------------
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
A-14
<PAGE> 158
EXHIBIT B
CUSIP NO.
RAILWORKS CORPORATION
11 1/2% Senior Subordinated Note due 2009, Series B
No. $
RAILWORKS CORPORATION, a Delaware corporation (the "Company"),
for value received, promises to pay to or registered assigns,
the principal sum of Dollars, on April 15, 2009.
Interest Payment Dates: April 15 and October 15
Record Dates: April 1 and October 1
Reference is made to the further provisions of this Note
contained herein, which will for all purposes have the same effect as if set
forth at this place.
B-1
<PAGE> 159
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officer.
Dated: , 1999 RAILWORKS CORPORATION
By:
-----------------------------------------
Name:
Title:
Trustee's Certificate of Authentication
This is one of the 11 1/2% Senior Subordinated Notes due 2009,
Series B referred to in the within-mentioned Indenture.
Dated: , 1999
FIRST UNION NATIONAL BANK, as Trustee
By:
-----------------------------------------
Authorized Signatory
B-2
<PAGE> 160
(REVERSE OF NOTE)
11 1/2% Senior Subordinated Note due 2009, Series B
1. Principal and Interest. RAILWORKS CORPORATION, a
Delaware corporation (the "Company"), promises to pay the principal of this Note
on April 15, 2009 or earlier as provided in the Indenture. The Company promises
to pay interest on the principal amount of this Note at the rate per annum shown
above. Interest on the Notes will accrue from the most recent date on which
interest has been paid or, if no interest has been paid, from April 7, 1999. The
Company will pay interest semi-annually in arrears on each April 15 and October
15 (each, an "Interest Payment Date") and at stated maturity, commencing on
October 15, 1999. Interest will be computed on the basis of a 360-day year of
twelve 30-day months and in the case of a partial month, the actual number of
days elapsed.
The Company shall pay interest on overdue principal and on
overdue installments of interest, to the extent lawful, from time to time on
demand at the rate borne by the Notes and on overdue installments of interest
(without regard to any applicable grace periods).
2. Method of Payment. The Company shall pay interest on
the Notes (except defaulted interest) to the Persons who are the registered
Holders at the close of business on the Record Date immediately preceding the
Interest Payment Date even if the Notes are canceled on registration of transfer
or registration of exchange after such Record Date. Holders must surrender Notes
to a Paying Agent to collect principal payments. The Company shall pay
principal, premium and interest in money of the United States that at the time
of payment is legal tender for payment of public and private debts ("U.S. Legal
Tender"). However, the Company may pay principal, premium and interest by its
check payable in such U.S. Legal Tender. The Company may deliver any such
interest payment to the Paying Agent or to a Holder at the Holder's registered
address. If an Interest Payment Date is a date other than a Business Day,
payment may be made on the next succeeding day that is a Business Day.
3. Paying Agent and Registrar. FIRST UNION NATIONAL BANK
(the "Trustee") will act as Paying Agent and Registrar. The Company may change
any Paying Agent, Registrar or co-Registrar without notice to the Holders. The
Company, any Subsidiary or any Affiliate of any of them may act as Paying Agent,
Registrar or co-Registrar.
B-3
<PAGE> 161
4. Indenture. The Company issued the Notes under an
Indenture, dated as of April 7, 1999 (the "Indenture"), among the Company, each
of the Guarantors named therein and the Trustee. This Note is one of a duly
authorized issue of Notes of the Company designated as its 11 1/2% Senior
Subordinated Notes due 2009, Series B (the "Exchange Notes"), limited (except as
otherwise provided in the Indenture) in aggregate principal amount to
$250,000,000, which may be issued under the Indenture; provided the principal
amount of Initial Notes issued on the Issue Date shall not exceed $125,000,000.
The Notes include the 11 1/2% Senior Subordinated Notes due 2009, Series A (the
"Initial Notes"), the Private Exchange Notes and the Unrestricted Notes.
Capitalized terms used herein shall have the meanings assigned to them in the
Indenture unless otherwise defined herein. 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 (15 U.S.C. ss.ss. 77aaa-77bbbb) (the "TIA"), as in
effect on the date of the Indenture. Notwithstanding anything to the contrary
herein, the Notes are subject to all such terms, and Holders of Notes are
referred to the Indenture and the TIA for a statement of them. The Notes are
general unsecured obligations of the Company limited in aggregate principal
amount to $250,000,000. Under Article Eleven of the Indenture the payment on
each Note is guaranteed on a senior subordinated basis by the Guarantors. Each
Holder, by accepting a Note, agrees to be bound by all of the terms and
provisions of the Indenture, as the same may be amended from time to time.
5. (a) Redemption. Except as provided below, the Notes
may not be redeemed prior to April 15, 2004. Thereafter, the Company may redeem
the Notes at its option, in whole or in part, upon not less than 30 nor more
than 60 days' notice, at the following redemption prices (expressed as
percentages of the principal amount thereof) plus accrued and unpaid interest
thereon, if any, to the date of redemption, if redeemed during the twelve-month
period commencing on April 15 of the year 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, the Company must pay accrued and unpaid interest on the Notes
redeemed.
B-4
<PAGE> 162
(b) Optional Redemption Upon Equity Offerings. At any time, or
from time to time, on or prior to April 15, 2002, the Company may, at its
option, use the net cash proceeds of one or more Equity Offerings (as defined
below) 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 Notes to
be redeemed, plus accrued and unpaid interest thereon, if any, to the date of
redemption; provided that at least 65% of the principal amount of Notes issued
under the Indenture remains outstanding immediately after any such redemption
and the Company makes such redemption not more than 120 days after the
consummation of any such Equity Offering.
As used in the preceding paragraph, "Equity Offering" means a
public or private offering of Qualified Capital Stock of the Company; 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 received by
the Company directly or indirectly from such offering are not less than $10.0
million.
6. Notice of Redemption. Notice of redemption will be
mailed at least 30 days but not more than 60 days before the Redemption Date to
each Holder of Notes to be redeemed at such Holder's registered address. Notes
in denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the
redemption of the Notes called for redemption shall have been deposited with the
Paying Agent for redemption on such Redemption Date, then, unless the Company
defaults in the payment of such Redemption Price plus accrued and unpaid
interest, if any, the Notes called for redemption will cease to bear interest
from and after such Redemption Date and the only right of the Holders of such
Notes will be to receive payment of the Redemption Price plus accrued and unpaid
interest, if any.
7. Offers to Purchase. Sections 4.13 and 4.14 of the
Indenture provide that, upon the occurrence of a Change of Control (as defined
in the Indenture) and after certain Asset Sales (as defined in the Indenture),
and subject to further limitations contained therein, the Company will make an
offer to purchase certain amounts of the Notes in accordance with the procedures
set forth in the Indenture.
8. Subordination. The Notes are subordinated in right of
payment, in the manner and to the extent set forth in the Indenture, to the
prior payment in full in cash or Cash Equivalents of all Senior Debt of the
Company, whether outstanding on the date of the Indenture or thereafter created,
incurred, assumed or guaranteed. The Guarantees in respect of
B-5
<PAGE> 163
the Notes are subordinated in right of payment, in the manner and to the extent
set forth in the Indenture, to the prior payment in full in cash or Cash
Equivalents of all Guarantor Senior Debt of each Guarantor, whether outstanding
on the date of the Indenture or thereafter created, incurred, assumed or
guaranteed. Each Holder by his acceptance hereof agrees to be bound by such
provisions and authorizes and expressly directs the Trustee, on his behalf, to
take such action as may be necessary or appropriate to effectuate the
subordination provided for in the Indenture and appoints the Trustee his
attorney-in-fact for such purposes.
9. Denominations; Transfer; Exchange. The Notes are in
registered form, without coupons, in denominations of $1,000 and integral
multiples of $1,000. A Holder shall register the transfer of or exchange Notes
in accordance with this Indenture. The Registrar may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents and to
pay certain transfer taxes or similar governmental charges payable in connection
therewith as required by law or as permitted by the Indenture. The Registrar
need not register the transfer or exchange of any Notes selected for redemption
(except the unredeemed portion of any Note being redeemed in part). The
Registrar need not register the transfer of or exchange any Notes during a
period beginning 15 days before the mailing of a redemption notice for any Notes
or portions thereof selected for redemption.
10. Persons Deemed Owners. The registered Holder of a
Note shall be treated as the owner of it for all purposes.
11. Unclaimed Money. If money for the payment of
principal or interest remains unclaimed for two years, the Trustee and the
Paying Agent will pay the money back to the Company. After that, all liability
of the Trustee and such Paying Agent with respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity. If the
Company at any time deposits with the Trustee U.S. Legal Tender or U.S.
Government Obligations sufficient to pay the then outstanding principal of,
premium, if any, and interest on the Notes to redemption or maturity and
complies with the other provisions of this Indenture relating thereto, the
Company will be discharged from certain provisions of the Indenture and the
Notes (including certain covenants, but excluding its obligation to pay the
principal of, premium and interest on the Notes).
13. Amendment; Supplement; Waiver. Subject to certain
exceptions in the Indenture, the Indenture, the Notes or the Guarantees, if
any, may be amended or supplemented with the
B-6
<PAGE> 164
written consent of the Holders of at least a majority in aggregate principal
amount of the then outstanding Notes, and any existing Default or Event of
Default or noncompliance with any provision may be waived with the written
consent of the Holders of a majority in aggregate principal amount of the then
outstanding Notes. Without consent of any Holder, the parties thereto may amend
or supplement this Indenture or the Notes to, among other things, cure any
ambiguity, defect or inconsistency, provide for uncertificated Notes in addition
to or in place of certificated Notes, or comply with Article Five of the
Indenture or make any other change that does not adversely affect in any
material respect the rights of any Holder of a Note.
14. Restrictive Covenants. The Indenture imposes certain
limitations on the ability of the Company and its Restricted Subsidiaries to,
among other things, incur additional Indebtedness, pay dividends or make certain
other Restricted Payments, consummate certain Asset Sales, enter into certain
transactions with Affiliates, incur Liens, incur Indebtedness that is
subordinate to Senior Debt but senior in right of payment to the Notes, impose
restrictions on the ability of a Subsidiary to pay dividends or make certain
payments to the Company and its Subsidiaries, merge or consolidate with any
other Person, sell, assign, transfer, lease, convey or otherwise dispose of all
or substantially all of the assets of the Company. Such limitations are subject
to a number of important qualifications and exceptions. The Company must
annually report to the Trustee on compliance with such limitations.
B-7
<PAGE> 1
EXHIBIT 4.6
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of April 7, 1999
Among
RAILWORKS CORPORATION
and
THE GUARANTORS NAMED HEREIN
as Issuers,
and
BT ALEX. BROWN INCORPORATED,
NATIONSBANC MONTGOMERY SECURITIES, LLC
and
FIRST UNION CAPITAL MARKETS CORP.,
as Initial Purchasers
11 1/2% Senior Subordinated Notes due 2009
- --------------------------------------------------------------------------------
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is dated
as of April 7, 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 pur suant to which such subsidiary agrees to
guarantee the Notes (as hereinafter defined), the "Guarantors" and, together
with the Company, the "Issuers"), and BT ALEX. BROWN IN CORPORATED, NATIONSBANC
MONTGOMERY SECURITIES, LLC and FIRST UN ION CAPITAL MARKETS CORP., as initial
purchasers (the "Initial Purchasers").
This Agreement is entered into in connection with the Purchase
Agreement by and among the Issuers and the Initial Purchasers, dated as of April
1, 1999 (the "Pur chase Agreement"), which provides for, among other things, the
sale by the Company to the Initial Purchasers of $125,000,000 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 Purchasers 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 Purchasers and any subsequent holder or
holders of the Securities. The execution and delivery of this Agreement is a
condition to the Initial Purchasers' 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.
<PAGE> 3
-2-
Closing Date: The Closing Date as defined in the Purchase
Agreement.
Company: See the introductory paragraphs hereto.
Effectiveness Date: The 150th day after the Issue Date;
provided, however, that with respect to any Shelf Registration, the
Effectiveness Date shall be the 150th 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 60th day after the
Issue Date; and (B) with respect to a Shelf Registration Statement, the 60th 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 Purchasers: See the introductory paragraphs hereto.
<PAGE> 4
-3-
Inspectors: See Section 5(n) hereof.
Issue Date: April 7, 1999, the date of original issuance of
the 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
<PAGE> 5
-4-
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 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 the Issue Date, 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
-6-
(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 Purchasers, which shall
contain a summary statement of the positions
<PAGE> 8
-7-
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, prior to consummation of the Exchange Offer, the Initial
Purchasers hold any Notes acquired by them that have the status of an unsold
allotment in the initial distribution, the Issuers upon the request of the
Initial Purchasers shall simultaneously with the delivery of the Exchange Notes
issue and deliver to the Initial Purchasers, 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 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);
<PAGE> 9
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(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.
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
<PAGE> 10
-9-
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 185th 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 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
<PAGE> 11
-10-
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 Purchasers 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, 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
<PAGE> 12
-11-
(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 185th 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 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
<PAGE> 13
-12-
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 (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.
<PAGE> 14
-13-
(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
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
<PAGE> 15
-14-
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), 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
<PAGE> 16
-15-
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 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
<PAGE> 17
-16-
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 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
<PAGE> 18
-17-
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 offerings 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
<PAGE> 19
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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 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.
<PAGE> 20
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(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 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.
<PAGE> 21
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(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.
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.
<PAGE> 22
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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 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,
<PAGE> 23
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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 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,
<PAGE> 24
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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.
(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
<PAGE> 25
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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 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
<PAGE> 26
-25-
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.
(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
<PAGE> 27
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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
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
<PAGE> 28
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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 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 Purchasers and
any subsequent holder or holders of such Additional Notes 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
<PAGE> 29
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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
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.
<PAGE> 30
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(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 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.
<PAGE> 31
-30-
(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:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
ALPHA-KEYSTONE ENGINEERING, INC.,
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
ARMCORE ACQUISITION CORP.,
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
ARMCORE RAILROAD CONTRACTORS, INC.,
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
<PAGE> 33
S-2
ANNEX RAILROAD BUILDERS, INC.,
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
COMSTOCK HOLDINGS, INC.,
as guarantor
By:
----------------------------------
Name: Peter Alan Pasch
Title: President
L.K. COMSTOCK & COMPANY, INC.,
as guarantor
By:
----------------------------------
Name: Peter Alan Pasch
Title: Vice Chairman
COMTRAK CONSTRUCTION, INC.,
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
<PAGE> 34
S-3
CONDON BROTHERS, INC.,
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
CPI CONCRETE PRODUCTS
INCORPORATED,
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
FCM RAIL, LTD.,
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
F&V METRO RW, INC.,
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
<PAGE> 35
S-4
F&V METRO CONTRACTING CORP.,
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
GANTREX RW, INC.,
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
GANTREX CORPORATION,
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
GANTREX SYSTEMS, INC.,
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
H.P. MCGINLEY INC.,
as guarantor
By:
Name: Michael R. Azarela
----------------------------------
Title: Executive Vice President
<PAGE> 36
S-5
IMPULSE ENTERPRISES OF NEW
YORK, INC.,
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
KENNEDY RAILROAD BUILDERS, INC.,
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
MERIT RAILROAD CONTRACTORS, INC.,
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
MIDWEST CONSTRUCTION SERVICES,
INC.,
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
<PAGE> 37
S-6
MID WEST RW, INC.,
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
MID WEST RAILROAD CONSTRUCTION &
MAINTENANCE CORPORATION OF
WYOMING,
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
MINNESOTA RAILROAD SERVICE, INC.,
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
NEW ENGLAND RAILROAD
CONSTRUCTION CO., INC.,
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
<PAGE> 38
S-7
NORTHERN RAIL SERVICE AND SUPPLY
COMPANY, INC.,
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
R. & M. B. RAIL CO., INC.,
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
RAILCORP, INC.,
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
RAILROAD SERVICE, INC.,
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
<PAGE> 39
S-8
RAILROAD SPECIALTIES, INC.,
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
SHELDON ELECTRIC, INC.,
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
SOUTHERN INDIANA WOOD
PRESERVING CO., INC.,
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
U.S. TRACKWORKS, INC.,
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
<PAGE> 40
S-9
U.S. RAILWAY SUPPLY, INC.,
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
V&R ELECTRICAL CONTRACTORS, INC.
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
WM. A. SMITH CONSTRUCTION CO. INC.,
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
WM. A. SMITH RERAILING SERVICES,
INC.,
as guarantor
By:
----------------------------------
Name: Michael R. Azarela
Title: Executive Vice President
<PAGE> 41
S-10
The foregoing Agreement is hereby
confirmed and accepted as of the date first
above written.
BT ALEX. BROWN INCORPORATED
NATIONSBANC MONTGOMERY SECURITIES LLC
FIRST UNION CAPITAL MARKETS CORP.
By: BT ALEX. BROWN INCORPORATED
By:
--------------------------------------
Name: Pedro G. Garcia
Title: Vice President
<PAGE> 1
Exhibit 5.1
May 28, 1999
Railworks Corporation
1104 Kenilworth Drive
Suite 301
Baltimore, Maryland 21204
Re: Railworks Corporation--
Registration Statement on Form S-4
relating to $125,000,000 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
on 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 $125,000,000 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% of Senior Subordinated Notes Due 2009
(the "Old Notes"). Certain domestic subsidiaries of the Company named in the
Indenture (defined below) (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"). 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
MAY 28, 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 in 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 its 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,
/s/ King & Spalding
<PAGE> 1
EXHIBIT 12.1
RAILWORKS CORPORATION AND SUBSIDIARIES
Ratio of Earnings to Fixed Charges
(unaudited, dollars in thousands)
<TABLE>
<CAPTION> For the Year Ended For the Year Ended For the Quarter Ended
--------------------------------- ----------------------------------- ----------------------------------
December 31, December 31, 1998 March 31, 1999
--------------------------------- ----------------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pro Forma Pro Forma
1994 1995 1996 1997 Historical Pro Forma As Adjusted Historical Pro Forma As Adjusted
Earnings:
Income (loss) from
continuing operations.. $2,782 $(19,972) $ 58 $1,428 $(12,847) $14,223 $ 7,239 $1,636 $1,318 $ (358)
Add:
Undistributed Equity
Loss .................. -- -- -- -- -- 578 578 -- -- --
Income taxes ............ 352 150 500 1,198 1,472 11,012 6,546 986 916 400
---------------------------------- ---------------------------------- ------------------------------
3,134 (19,822) 558 2,626 (11,375) 25,813 14,363 2,622 2,234 42
Adjustments to Earnings
for Fixed Charges:
Interest and other
financial charges .... 38 871 2,023 1,761 2,334 4,027 15,002 1,613 1,677 3,750
Amortization of deferred
financing costs ...... -- -- -- -- 224 224 475 118 118 119
Interest factor
attributable to
rentals............... 865 792 882 671 762 917 917 212 220 220
--------------------------------- --------------------------------- ------------------------------
Total Fixed Charges ..... 903 1,663 2,905 2,432 3,320 5,168 16,394 1,943 2,015 4,089
---------------------------------- --------------------------------- ------------------------------
Adjusted Earnings.. ..... $4,037 $(18,159) $3,463 $5,058 $(8,055) $30,981 $30,757 $4,565 $4,249 $4,131
================================== ================================= ==============================
Total fixed charges
from above: ............ $ 903 $ 1,663 $2,905 $2,432 $ 3,320 $ 5,168 $16,394 $1,943 $2,015 $4,089
================================== ================================= ==============================
Ratio of earnings as
adjusted to total fixed
charges ................ 4.5 -- 1.2 2.1 -- 6.0 1.9 2.3 2.1 1.0
</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>
STATE OF NAMES UNDER
NAME OF COMPANY INCORPORATION WHICH DOING BUSINESS
- --------------- ------------- --------------------
<S> <C> <C>
Alpha-Keystone Engineering, Inc. Pennsylvania
Alpha-Keystone, Inc. Ohio
Armcore Acquisition Corp. Delaware
Armcore Railroad Contractors, Inc. Illinois
(subsidiary of Armcore Acquisition Corp.)
Annex Railroad Builders, Inc. Indiana
Birmingham Wood, Inc. Alabama
Comstock Holdings, Inc. Delaware
L.K. Comstock & Company, Inc. New York
(subsidiary of Comstock Holdings Inc.)
Comtrak Construction, Inc. Georgia
Condon Brothers, Inc. Washington
CPI Concrete Products Incorporated Tennessee
FCM Rail, Ltd. Michigan
F&V Metro RW, Inc. Delaware
F&V Metro Contracting Corp. New York
(subsidiary of F&V Metro RW, Inc.)
Impulse Enterprises of New York, Inc. New York
(subsidiary of F&V Metro RW, Inc.)
V&R Electrical Contractors, Inc. New York
(subsidiary of F&V Metro RW, Inc.)
Gantrex RW, Inc. Delaware
Gantrex Holding Corporation Delaware
(subsidiary of Gantrex RW, Inc.)
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
STATE OF NAMES UNDER
NAME OF COMPANY INCORPORATION WHICH DOING BUSINESS
- --------------- ------------- --------------------
<S> <C> <C>
Gantrex Corporation (subsidiary of Pennsylvania
Gantrex Holding Corp)
Gantrex Systems, Inc. (subsidiary of Delaware
Gantrex RW, Inc. and Gantrex
Holding Corp)
Gantrex RW Company (subsidiary of Nova Scotia unlimited
Gantrex RW, Inc.) liability company
Gantrex Holdings-Canada, Inc. Nova Scotia corporation
("GHC")(subsidiary of Gantrex RW Co)
Gantrex Group Ltd (subsidiary of GHC) Ontario corporation
Gantrex Limited (subsidiary of
Gantrex Group Ltd)
Gantrex Systems Limited (subsidiary Ontario corporation
of Gantrex Group Ltd)
Norapco Limited (subsidiary of GHC) Ontario corporation
H.P. McGinley, Inc. Pennsylvania
Kennedy Railroad Builders, Inc. Pennsylvania
M Track Enterprises, Inc. New York
McCord Treated Wood, Inc. Alabama
Merit Railroad Contractors, Inc. Missouri
Midwest Construction Services, Inc. Indiana
MidWest RW, Inc. Delaware
MidWest Railroad Construction & Wyoming
Maintenance Corporation of Wyoming
(subsidiary of Mid West RW, Inc.)
Minnesota Railroad Service, Inc. Tennessee
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
NAMES UNDER
NAME OF COMPANY STATE OF INCORPORATION WHICH DOING BUSINESS
- --------------------------------- ---------------------- --------------------
<S> <C> <C>
New England Railroad Construction Connecticut NERRCO, Inc.
Co., Inc.
Northern Rail Service and Supply Michigan
Company, Inc.
Pacific Northern Rail Contractors Canadian
Corp.
Pacific Northern Rail Holdings Ltd. Canadian
Pacific Northern Rail RW, Inc. Canadian
PNR Investments Ltd. Canadian
PNR Leasing Ltd. Canadian
R. & M. B. Rail Co., Inc. Indiana Mize Construction Company
Railcorp Inc. Ohio
Railcorp Service, Inc. Nevada Brace and Matson, Inc.,;
Brace and Matson, Co.
Railcorp Specialties, Inc. Indiana
Railroad Service Inc. Tennessee
RailWorks Canada Company Canadian
RailWorks Canada Inc. Delaware
Sheldon Electric, Inc. Delaware
Southern Indiana Wood Preserving Indiana
Co., Inc.
U.S. Trackworks, Inc. Michigan
U.S. Railway Supply, Inc. Indiana
Wm. A. Smith Construction Co., Texas
Inc.
Wm. A Smith Rerailing Services, Texas
Inc.
</TABLE>
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Stamford, Connecticut
May 28, 1999
<PAGE> 2
EXHIBIT 23.3
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
As independent chartered accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Mississauga, Canada
May 28, 1999
<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM T-1
---------------------
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED,
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2)
---------------------
FIRST UNION NATIONAL BANK
(Exact name of Trustee as specified in its charter)
<TABLE>
<S> <C> <C>
230 SOUTH TRYON STREET, 9TH FL.
CHARLOTTE, NC 28288-1179 22-1147033
(Address of principal executive office) (Zip Code) (I.R.S. Employer Identification No.)
</TABLE>
PATRICIA A. WELLING
800 EAST MAIN STREET,
RICHMOND, VIRGINIA 23219
(804) 343-6067
---------------------
RAILWORKS CORPORATION
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 58-2382378
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1104 KENILWORTH DRIVE
SUITE 301
BALTIMORE, MD 21204
(Address of principal executive offices) (Zip Code)
</TABLE>
---------------------
11.50% SENIOR SUBORDINATED NOTES DUE 2009
(Title of the indenture securities)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
1. GENERAL INFORMATION.
(a) The following are the names and addresses of each examining or
supervising authority to which the Trustee is subject:
The Comptroller of the Currency, Washington, D.C.
Federal Reserve Bank of Richmond, Richmond, Virginia.
Federal Deposit Insurance Corporation, Washington, D.C.
Securities and Exchange Commission, Division of Market Regulation,
Washington, D.C.
(b) The Trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH OBLIGOR.
The obligor is not an affiliate of the Trustee.
3. VOTING SECURITIES OF THE TRUSTEE.
Response not required. (See answer to Item 13)
4. TRUSTEESHIPS UNDER OTHER INDENTURES.
Response not required. (See answer to Item 13)
5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR OR
UNDERWRITERS.
Response not required. (See answer to Item 13)
6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS OFFICIALS.
Response not required. (See answer to Item 13)
7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR OFFICIALS.
Response not required. (See answer to Item 13)
8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
Response not required. (See answer to Item 13)
9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE.
Response not required. (See answer to Item 13)
10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN
AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.
Response not required. (See answer to Item 13)
11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON OWNING 50
PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR.
Response not required. (See answer to Item 13)
12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
Response not required. (See answer to Item 13)
2
<PAGE> 3
13. DEFAULTS BY THE OBLIGOR.
A. None
B. None
14. AFFILIATIONS WITH THE UNDERWRITERS.
Response not required. (See answer to Item 13)
15. FOREIGN TRUSTEE.
Trustee is a national banking association organized under the laws of the
United States.
16. LIST OF EXHIBITS.
(1) *Articles of Incorporation.
(2) Certificate of Authority of the Trustee to conduct business. No
Certificate of Authority of the Trustee to commence business is
furnished since this authority is continued in the Articles of
Association of the Trustee.
(3) *Certificate of Authority of the Trustee to exercise corporate trust
powers.
(4) *By-Laws.
(5) Inapplicable.
(6) Consent by the Trustee required by Section 321(b) of the Trust
Indenture Act of 1939 as amended. Included at Page 5 of this Form T-1
Statement.
(7) *Report of condition of Trustee. (Incorporated herein by reference per
SEC registration number 333- 76965).
(8) Inapplicable.
(9) Inapplicable.
* Exhibits thus designated have heretofore been filed with the Securities and
Exchange Commission, have not been amended since filing are incorporated
herein by reference (See Exhibit T-1 Registration Number 333- 76965).
3
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the Trustee, FIRST UNION NATIONAL BANK, a national banking association
organized and existing under the laws of the United States of America, has duly
caused this Statement of Eligibility and Qualification to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Richmond, and in the Commonwealth of Virginia on the 20th day of May, 1999.
FIRST UNION NATIONAL BANK
(Trustee)
BY:
--------------------------------------
EXHIBIT T-1 (6)
CONSENT OF TRUSTEE
Under Section 321(b) of the Trust Indenture Act of 1939 and in connection
with the issuance by Railworks Corporation 11.50% Senior Subordinated Notes due
2009, First Union National Bank, as the Trustee herein named, hereby consents
that reports of examinations of said Trustee by Federal, State, Territorial or
District authorities may be furnished by such authorities to the Securities and
Exchange Commission upon requests therefor.
FIRST UNION NATIONAL BANK
BY:
--------------------------------------
Dated: May 20, 1999
4
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
RAILWORKS CORPORATION
TO TENDER FOR EXCHANGE
11 1/2% SENIOR SUBORDINATED NOTES DUE 2009
FOR
11 1/2% SENIOR SUBORDINATED NOTES DUE 2009
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON , 1999 UNLESS EXTENDED (THE "EXPIRATION DATE").
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
If you desire to accept the Exchange Offer, this Letter of Transmittal
should be completed, signed, and submitted to the Exchange Agent:
<TABLE>
<S> <C>
By Overnight Carrier or by Hand: 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 28262-1153 Charlotte, NC 28288
Attention: Mike Klotz Attention: Mike Klotz
</TABLE>
By Facsimile (for Eligible Institutions only):
(704) 590-7628
Confirm by telephone:
(704) 590-7408
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
FOR ANY QUESTIONS REGARDING THIS LETTER OF TRANSMITTAL OR FOR ANY
ADDITIONAL INFORMATION, YOU MAY CONTACT THE EXCHANGE AGENT BY TELEPHONE AT (704)
590-7408 (ATTN: MIKE KLOTZ), OR BY FACSIMILE AT (704) 590-7628.
<PAGE> 2
The undersigned hereby acknowledges receipt of the Prospectus dated
, 1999 (the "Prospectus") of Railworks Corporation, a Delaware
corporation (the "Company"), and this Letter of Transmittal (the "Letter of
Transmittal"), which together constitute the Company's offer (the "Exchange
Offer") to exchange its 11 1/2% Senior Subordinated Notes due 2009 (the "New
Notes") that have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), for its outstanding 11 1/2% Senior Subordinated Notes
due 2009 (the "Old Notes"), of which $125,000,000 aggregate principal amount is
outstanding. Capitalized terms used but not defined herein have the meanings
ascribed to them in the Prospectus.
For each Old Note accepted for exchange, the Holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. The New Notes will bear interest from the most recent date to which
interest has been paid on the Old Notes or, if no interest has been paid on the
Old Notes, from April 7, 1999. Accordingly, registered holders of New Notes on
the relevant record date for the first interest payment date following the
consummation of the Exchange Offer will receive interest accruing from the most
recent date to which interest has been paid or, if no interest has been paid,
from April 7, 1999. Old Notes accepted for exchange will cease to accrue
interest from and after the date of consummation of the Exchange Offer. Holders
of Old Notes whose Old Notes are accepted for exchange will not receive any
payment in respect of interest on such Old Notes otherwise payable on any
interest payment date the record date for which occurs on or after consummation
of the Exchange Offer.
This letter is to be completed by a holder of Old Notes either if
certificates are to be forwarded herewith or if a tender of certificates for Old
Notes, if available, is to be made by book-entry transfer to the account
maintained by the Exchange Agent at The Depository Trust Company ("DTC")
pursuant to the procedures set forth in "The Exchange Offer -- Book Entry
Transfer" section of the Prospectus. Holders of Old Notes whose certificates are
not immediately available, or who are unable to deliver their certificates or
confirmation of the book-entry tender of their Old Notes into the Exchange
Agent's account at DTC (a "Book-Entry Confirmation") and all other documents
required by this Letter to the Exchange Agent on or prior to the Expiration
Date, must tender their Old Notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer -- Guaranteed Delivery Procedures"
section of the Prospectus. See Instruction 2. DELIVERY OF DOCUMENTS TO DTC DOES
NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The undersigned hereby tenders the Old Notes described in Box 1 below
pursuant to the terms and conditions described in the Prospectus and this Letter
of Transmittal. The undersigned is the registered owner of all the tendered Old
Notes and the undersigned represents that it has received from each beneficial
owner of the tendered Old Notes (collectively, the "Beneficial Owners") a duly
completed and executed form of "Instruction to Registered Holder and/or
Book-Entry Transfer Facility Participant from Beneficial Owner" accompanying
this Letter of Transmittal, instructing the undersigned to take the action
described in this Letter of Transmittal.
Subject to, and effective upon, the acceptance for exchange of the tendered
Old Notes, the undersigned hereby exchanges, assigns and transfers to, or upon
the order of, the Company, all right, title, and interest in, to, and under such
Old Notes.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the true and lawful agent and attorney-in-fact of the undersigned with
respect to the tendered Old Notes, with full power of substitution (such power
of attorney being deemed to be an irrevocable power coupled with an interest),
to (i) deliver the tendered Old Notes to the Company or cause ownership of the
tendered Old Notes to be transferred to, or upon the order of, the Company, on
the books of the registrar for the Old Notes and deliver all accompanying
evidences of transfer and authenticity to, or upon the order of, the Company
upon receipt by the Exchange Agent, as the undersigned's agent, of the New Notes
to which the undersigned is entitled upon acceptance by the Company of the
tendered Old Notes pursuant to the Exchange Offer, and (ii) receive all benefits
and otherwise exercise all rights of beneficial ownership of the tendered Old
Notes, all in accordance with the terms of the Exchange Offer.
Unless otherwise indicated under "Special Issuance Instructions" below (Box
2), please issue the New Notes exchanged for tendered Old Notes in the name(s)
of the undersigned. Similarly, unless otherwise
2
<PAGE> 3
indicated under "Special Delivery Instructions" below (Box 3), please send or
cause to be sent the certificates for the New Notes (and accompanying documents,
as appropriate) to the undersigned at the address shown below in Box 1.
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer" in the Prospectus
and in the instructions hereto will constitute a binding agreement between the
undersigned and the Company upon the terms and subject to the conditions of the
Exchange Offer, subject only to withdrawal of such tenders on the terms set
forth in the Prospectus under the caption "The Exchange Offer -- Withdrawal of
Tenders of Old Notes." All authority herein conferred or agreed to be conferred
shall survive the death, bankruptcy or incapacity of the undersigned and any
Beneficial Owner(s), and every obligation of the undersigned or any Beneficial
Owners hereunder shall be binding upon the heirs, personal representatives,
executors, administrators, successors, assigns, trustees in bankruptcy and other
legal representatives of the undersigned and such Beneficial Owner(s).
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the Old Notes
being tendered and to acquire the New Notes issuable upon the exchange of such
tendered Old Notes, and that, when the same are accepted for exchange as
contemplated herein, the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges, encumbrances and
adverse claims. The undersigned and each Beneficial Owner will, upon request,
execute and deliver any additional documents reasonably requested by the Company
or the Exchange Agent as necessary or desirable to complete and give effect to
the transactions contemplated hereby.
By accepting the Exchange Offer, the undersigned hereby represents and
warrants that (i) the New Notes to be acquired by the undersigned and any
Beneficial Owner(s) pursuant to the Exchange Offer are being acquired by the
undersigned and any Beneficial Owner(s) in the ordinary course of business of
the undersigned and any Beneficial Owner(s), (ii) neither the undersigned nor
any Beneficial Owner is participating in, or intends to participate in, or has
an arrangement or understanding with any person to participate in the
distribution of the New Notes, (iii) except as otherwise disclosed in writing
herewith, neither the undersigned nor any Beneficial Owner is an "affiliate," as
defined in Rule 405 under the Securities Act, of the Company and, if the
undersigned or any Beneficial Owner is such an affiliate, that it will comply
with the registration and prospectus delivery requirements of the Securities Act
to the extent applicable, (iv) if neither the undersigned nor any Beneficial
Owner is a broker-dealer, that neither the undersigned nor any such Beneficial
Owner is engaged in or intends to engage in the distribution of any New Notes,
or (v) if any of the undersigned or any Beneficial Owner(s) is a broker-dealer
that will receive New Notes for its own account in exchange for tendered Old
Notes, that the Old Notes to be exchanged for the New Notes were acquired by it
as a result of market-making activities or other trading activities and
acknowledges that it will deliver a prospectus in connection with any resale of
such New Notes. The undersigned, by agreeing to so deliver any such prospectus,
shall not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
3
<PAGE> 4
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED WITH THIS LETTER OF
TRANSMITTAL.
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE
BOX 4 BELOW.
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE
TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE BOX 5
BELOW.
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS TO
THE PROSPECTUS.
Name:
-----------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------------
-----------------------------------------------------------------------
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES
4
<PAGE> 5
BOX 1
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTED TENDERED
(ATTACH ADDITIONAL SIGNED PAGES, IF NECESSARY)
- ------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S), AGGREGATE
EXACTLY AS NAME(S) APPEAR(S) ON NOTE CERTIFICATE PRINCIPAL AMOUNT AGGREGATE
CERTIFICATE(S) NUMBER(S) OF REPRESENTED BY PRINCIPAL AMOUNT
(PLEASE FILL IN, IF BLANK) OLD NOTES* CERTIFICATE(S) TENDERED
- ------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
TOTAL
- ------------------------------------------------------------------------------------------------------------------------
* Need not be completed if Old Notes are being tendered by book-entry transfer.
** The minimum permitted tender is $1,000 in principal amount of Old Notes. All other tenders must be in integral
multiples of $1,000 of principal amount. Unless otherwise indicated in this column, the aggregate principal amount
of the Old Notes represented by the certificates identified in this Box 1 or delivered to the Exchange Agent
herewith shall be deemed tendered. See Instruction 4.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 6
BOX 2
------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
To be completed ONLY if certificates for Old Notes not exchanged
and/or New Notes are to be issued in the name of and sent to someone other
than the undersigned or if Old Notes delivered by book-entry transfer
which are not accepted for exchange are to be returned by credit to an
account maintained at DTC other than the account set forth in Box 5.
Issue New Note(s) and/or Old Notes to:
Name(s):
-----------------------------------------------
(PLEASE TYPE OR PRINT)
Address:
------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
[ ] Credit unexchanged Old Notes delivered by book-entry transfer to the
DTC account set forth below:
------------------------------------------------------------
(DTC ACCOUNT NUMBER)
- ------------------------------------------------------------
BOX 3
------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
To be completed ONLY if certificates for Old Notes not exchanged
and/or New Notes are to be sent to someone other than the undersigned, or
to the undersigned at an address other than that shown above.
Mail New Note(s) and any untendered Old Notes to:
Name(s):
-----------------------------------------------
(PLEASE TYPE OR PRINT)
Address:
------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
6
<PAGE> 7
BOX 4
------------------------------------------------------------
USE OF GUARANTEED DELIVERY
(SEE INSTRUCTION 2)
To be completed ONLY if Old Notes are being tendered by means of a
notice of guaranteed delivery.
Name(s) of Registered Holder(s):
----------------------------------
------------------------------------------------------------
Date of Execution of Notice of Guaranteed
Delivery:
-------------------------------------------------------------------
------------------------------------------------------------
Name of Institution which Guaranteed
Delivery:
-------------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
BOX 5
------------------------------------------------------------
USE OF BOOK-ENTRY TRANSFER
(SEE INSTRUCTION 1)
To be completed ONLY if delivery of Old Notes is to be made by
book-entry transfer.
Name of Tendering Institution:
------------------------------------
------------------------------------------------------------
Account Number:
-------------------------------------------------------------------
------------------------------------------------------------
Transaction Code Number:
-------------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
7
<PAGE> 8
BOX 6
- --------------------------------------------------------------------------------
TENDERING HOLDER SIGNATURE
(SEE INSTRUCTIONS 1 AND 5)
IN ADDITION, COMPLETE SUBSTITUTE FORM W-9
X
--------------------------------------------------------------------------
X
--------------------------------------------------------------------------
(SIGNATURE OF REGISTERED HOLDER(S) OR AUTHORIZED SIGNATORY)
Note: The above lines must be signed by the registered holder(s) of
Old Notes as their name(s) appear(s) on the Old Notes or by person(s)
authorized to become registered holder(s) (evidence of which authorization
must be transmitted with this Letter of Transmittal). If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer, or
other person acting in a fiduciary or representative capacity, such person
must set forth his or her full title below. See Instruction 5.
Name(s):
--------------------------------------------------------------------------
Capacity:
--------------------------------------------------------------------------
Street Address:
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(INCLUDE ZIP CODE)
--------------------------------------------------------------------------
AREA CODE AND TELEPHONE NUMBER:
--------------------------------------------------------------------------
TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER:
Signature Guarantee
(IF REQUIRED BY INSTRUCTION 5)
Authorized Signature
--------------------------------------------------------------------------
Name:
--------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Title:
--------------------------------------------------------------------------
Name of Firm:
--------------------------------------------------------------------------
(MUST BE AN ELIGIBLE INSTITUTION AS DEFINED IN INSTRUCTION 2)
Address:
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and telephone Number:
--------------------------------------------------------------------------
Dated:
--------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8
<PAGE> 9
PAYER'S NAME: RAILWORKS CORPORATION
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
NAME (IF JOINT NAMES, LIST FIRST AND CIRCLE THE NAME OF THE PERSON OR ENTITY WHOSE NUMBER YOU ENTER IN PART 1 BELOW. SEE
INSTRUCTIONS IF YOUR NAME HAS CHANGED.)
ADDRESS
--------------------------------------------------------------------------------------------------------------------------
CITY, STATE AND ZIP CODE
--------------------------------------------------------------------------------------------------------------------------
LIST ACCOUNT NUMBER(S) HERE (OPTIONAL)
--------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE
FORM W-9
PART 1 -- PLEASE PROVIDE YOUR TAXPAYER IDENTIFICATION NUMBER ("TIN")
AND CERTIFY BY SIGNING AND DATING BELOW:
TIN: -----------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
DEPARTMENT OF THE PART 2 -- PART 3 -- CHECK THE BOX IF YOU ARE NOT SUBJECT TO BACKUP
TREASURY TIN APPLIED FOR: [ ] WITHHOLDING UNDER THE PROVISIONS OF SECTION 3406(A)(1)(C)
INTERNAL REVENUE SERVICE OF THE INTERNAL REVENUE CODE BECAUSE (I) YOU HAVE NOT
BEEN NOTIFIED THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING
AS A RESULT OF FAILURE TO REPORT ALL INTEREST OR
DIVIDENDS OR (II) THE INTERNAL REVENUE SERVICE HAS
NOTIFIED YOU THAT YOU ARE NO LONGER SUBJECT TO BACKUP
WITHHOLDING. [ ]
--------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
CERTIFICATION -- UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT THE INFORMATION PROVIDED
ON THIS FORM IS TRUE, CORRECT AND COMPLETE.
SIGNATURE ________ DATE ________ , 1999
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
9
<PAGE> 10
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD NOTES. A properly
completed and duly executed copy of this Letter of Transmittal, including
Substitute Form W-9, and any other documents required by this Letter of
Transmittal must be received by the Exchange Agent at its address set forth
herein, and either certificates for tendered Old Notes must be received by the
Exchange Agent at its address set forth herein or such tendered Old Notes must
be transferred pursuant to the procedures for book-entry transfer described in
the Prospectus under the caption "The Exchange Offer -- Procedures for Tendering
Old Notes" (and a confirmation of such transfer received by the Exchange Agent),
in each case prior to 5:00 p.m., New York City time, on the Expiration Date. The
method of delivery of certificates for tendered Old Notes, this Letter of
Transmittal and all other required documents to the Exchange Agent is at the
election and risk of the tendering holder and the delivery will be deemed made
only when actually received by the Exchange Agent. If delivery is by mail,
registered mail with return receipt requested, properly insured, is recommended.
Instead of delivery by mail, it is recommended that the holder use an overnight
or hand delivery service. In all cases, sufficient time should be allowed to
assure timely delivery. No Letter of Transmittal or Old Notes should be sent to
the Company. Neither the Company nor the registrar is under any obligation to
notify any tendering holder of the Company's acceptance of tendered Old Notes
prior to the closing of the Exchange Offer.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Old
Notes but whose Old Notes are not immediately available or who cannot deliver
their Old Notes, this Letter of Transmittal or any other documents required
hereby to the Exchange Agent prior to the Expiration Date must tender their Old
Notes according to the guaranteed delivery procedures set forth below, including
completion of Box 4. Pursuant to such procedures: (i) such tender must be made
through 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 (in any
such case, an "Eligible Institution"), (ii) prior to the Expiration Date, the
Exchange Agent must have received from an Eligible Institution a properly
completed and duly executed Letter of Transmittal (or facsimile thereof) and
Notice of Guaranteed Delivery (by telegram, telex, facsimile, transmission, mail
or hand delivery) setting forth the name and address of the tendering holder,
the certificate number(s) of the tendered Old Notes and the principal amount of
the Old Notes tendered, and stating that the tender is being made thereby and
guaranteeing that, within three New York Stock Exchange trading days after the
date of execution of the Notice of Guaranteed Delivery, this Letter of
Transmittal together with the certificate(s) representing the tendered Old Notes
and any other required documents will be deposited by the Eligible Institution
with the Exchange Act; and (iii) the certificate(s) representing all tendered
Old Notes in proper form for transfer, or a confirmation of book-entry transfer
of such tendered Old Notes into the Exchange Agent's account at DTC, as the case
may be, and all other documents required by this Letter of Transmittal, must be
received by the Exchange Agent within three NASDAQ National Market trading days
after the date of execution of the Notice of Guaranteed Delivery. Any holder who
wishes to tender Old Notes pursuant to the guaranteed delivery procedures
described above must ensure that the Exchange Agent receives the Notice of
Guaranteed Delivery within the time period prescribed above. Failure to complete
the guaranteed delivery procedures outlined above will not, of itself, affect
the validity or effect a revocation of any Letter of Transmittal form properly
completed and executed by a holder who attempted to use the guaranteed delivery
process.
3. BENEFICIAL OWNER INSTRUCTIONS TO REGISTERED HOLDERS. Only a holder in
whose name tendered Old Notes are registered on the books of the registrar (or
the legal representative or attorney-in-fact of such registered holder) may
execute and deliver this Letter of Transmittal. Any Beneficial Owner of tendered
Old Notes who is not the registered holder must arrange promptly with the
registered holder to execute and deliver this Letter of Transmittal on his or
her behalf through the execution and delivery to the registered holder of the
Instructions of Registered Holder and/or Book-Entry Transfer Facility
Participant from Beneficial Owner form accompanying this Letter of Transmittal.
10
<PAGE> 11
4. PARTIAL TENDERS. Tenders of Old Notes will be accepted only in integral
multiples of $1,000 in principal amount. If less than the entire principal
amount of Old Notes held by the holder is tendered, the tendering holder should
fill in the principal amount tendered in the column labeled "Aggregate Principal
Amount Tendered" of Box 1 above. The entire principal amount of Old Notes
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated. If the entire principal amount of all Old Notes held by the
holder is not tendered, then Old Notes for the principal amount of Old Notes not
tendered and New Notes issued in exchange for any Old Notes tendered and
accepted will be sent to the Holder at his or her registered address, unless a
different address is provided in the appropriate box on this Letter of
Transmittal, as soon as practicable following the Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the
registered holder(s) of the tendered Old Notes, the signature must correspond
with the name(s) as written on the face of the tendered Old Notes without any
change whatsoever.
If any of the tendered Old Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any Tendered
Notes are held in different names, it will be necessary to complete, sign and
submit as many separate copies of the Letter of Transmittal as there are
different names in which Tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder(s) of
tendered Old Notes, and New Notes issued in exchange therefor are to be issued
(and any untendered principal amount of Old Notes is to be reissued) in the name
of the registered holder(s), then such registered holder(s) need not and should
not endorse any tendered Old Notes, nor provide a separate bond power. In any
other case, such registered holder(s) must either properly endorse the tendered
Old Notes or transmit a properly completed separate bond power with this Letter
of Transmittal, with the signature(s) on the endorsement or bond power
guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any tendered Old Notes, such tendered Old Notes must be
endorsed or accompanied by appropriate bond powers, in each case signed exactly
as the name(s) of the registered holder(s) appear(s) on the tendered Old Notes,
with the signature(s) on the endorsement or bond power guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any tendered Old Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with this Letter of Transmittal.
Endorsements on tendered Old Notes or signatures on bond powers required by
this Instruction 5 must be guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution unless the tendered Old Notes are tendered (i) by a registered
holder who has not completed Box 2 set forth herein (entitled "Special Issuance
Instructions"), (ii) by a registered holder who has not completed Box 3 set
forth herein (entitled "Special Delivery Instructions") or (iii) by an Eligible
Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in the appropriate box (Box 2 or 3), the name and address to which the
New Notes and/or substitute certificates evidencing Old Notes for principal
amounts not tendered or not accepted for exchange are to be sent, if different
from the name and address of the person signing this Letter of Transmittal. In
the case of issuance in a different name, the taxpayer identification or social
security number of the person name must also be indicated. Holders of Old Notes
tendering Old Notes by book-entry transfer may request that Old Notes not
exchanged be credited to such account maintained at DTC as such Holder may
designate hereon. If no such instructions are given, such Old Notes not
exchanged will be returned to the name or address of the person signing this
Letter of Transmittal.
11
<PAGE> 12
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of tendered Old Notes pursuant to the Exchange Offer.
If, however, New Notes and/or substitute Old Notes not exchanged or to be
delivered to, or are to be registered or issued in the name of, any person other
than the registered holder of the Old Notes tendered hereby, or if tendered Old
Notes tendered hereby, or if tendered Old Notes are registered in the name of
any person other than the person signing this Letter of Transmittal, a transfer
tax is imposed for any reason other than the transfer and exchange of tendered
Old Notes pursuant to the Exchange Offer, then the amount of any such transfer
taxes (whether imposed on the registered holder or on any other person) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with this Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the tendered Old Notes listed in this
Letter of Transmittal.
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that the
holder(s) of any tendered Old Notes which are accepted for exchange must provide
the Company (as payor) with its correct taxpayer identification number ("TIN")
which, in the case of a holder who is an individual, is his or her social
security number. If the Company is not provided with the correct TIN, the holder
may be subject to backup withholding and a $50 penalty imposed by the Internal
Revenue Service. (If withholding results in an over-payment of taxes, a refund
may be obtained.) Certain holders (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional
instructions.
To prevent backup withholding, each holder of tendered Old Notes must
provide such holder's correct TIN by completing the Substitute Form W-9 set
forth herein, certifying that the TIN provided is correct (or that such holder
is awaiting a TIN) and that (i) the holder has not been notified by the Internal
Revenue Service that such holder is subject to backup withholding as a result of
failure to report all interest or dividends or (ii) the Internal Revenue Service
has notified the holder that such holder is no longer subject to backup
withholding. If the tendered Old Notes are registered in more than one name or
are not in the name of the actual owner, consult the "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
information on which TIN to report.
The Company reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Company's obligation regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of tendered
Old Notes will be determined by the Company, which determination will be final
and binding. The Company reserves the absolute right to reject any and all
tenders of Old Notes not in proper form or the acceptance of which for exchange
may, in the opinion of the Company's counsel, be unlawful. The Company also
reserves the absolute right to waive any conditions of the Exchange Offer or any
defect or irregularity in the tender of Old Notes. The interpretation of the
terms and conditions of the Exchange Offer (including this Letter of Transmittal
and the instructions hereto) by the Company shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Notes must be cured within such time as the Company shall determine.
Neither the Company, the Exchange Agent nor any other person shall be under any
duty to give notification of defects or irregularities to holders of Old Notes
or incur any liability for failure to give such notification. Tenders of Old
Notes will not be deemed to have been made until such defects or irregularities
have been cured or waived. Any Old Notes received by the Exchange Agent that are
not properly tendered and as to which the defects or irregularities have not
been cured or waived, or if Old Notes are submitted in principal amount greater
than the principal amount of Old Notes being tendered, such unaccepted or
non-exchanged Old Notes will be returned by the Exchange Agent to the tendering
holders, unless otherwise provided in this Letter of Transmittal, as soon as
practicable following the Expiration Date.
12
<PAGE> 13
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive
any of the conditions in the Exchange Offer in the case of any tendered Old
Notes.
11. NO CONDITIONAL TENDERS. No alternative, conditional, irregular, or
contingent tender of Old Notes or transmittal of this Letter of Transmittal will
be accepted.
12. MUTILATED, LOST, STOLE OR DESTROYED OLD NOTES. Any holder whose Old
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated herein for further instructions.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus or this
Letter of Transmittal may be directed to the Exchange Agent at the address and
telephone number indicated herein. Holders may also contact their broker,
dealer, commercial bank, trust company or other nominee for assistance
concerning the Exchange Offer.
14. ACCEPTANCE OF TENDERED OLD NOTES AND ISSUANCE OF OLD NOTES; RETURN OF
OLD NOTES. Subject to the terms and conditions of the Exchange Offer, the
Company will accept for exchange all validly tendered Old Notes as soon as
practicable after the Expiration Date and will issue New Notes therefor as soon
as practicable thereafter. For purposes of the Exchange Offer, the Company shall
be deemed to have accepted tendered Old Notes when, as and if the Company has
given written or oral notice (immediately followed in writing) thereof to the
Exchange Agent. If any tendered Old Notes are not exchanged pursuant to the
Exchange Offer for any reason, such unexchanged Old Notes will be returned,
without expense, to the undersigned at the address shown in Box 1 or at a
different address as may be indicated herein under "Special Delivery
Instructions" (Box 3).
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the procedures
set forth in the Prospectus under the caption "The Exchange Offer -- Withdrawal
of Tenders of Old Notes."
13
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
11 1/2% SENIOR SUBORDINATED NOTES DUE 2009
OF
RAILWORKS CORPORATION
PURSUANT TO THE PROSPECTUS DATED , 1999
This form must be used by a holder of 11 1/2% Senior Subordinated Notes due
2009 (the "Notes") of Railworks Corporation, a Delaware corporation (the
"Company"), who wishes to tender Old Notes to the Exchange Agent pursuant to the
guaranteed delivery procedures described in "The Exchange Offer -- Guaranteed
Delivery Procedures" of the Company's Prospectus, dated ,
1999 (the "Prospectus") and in Instruction 2 to the related Letter of
Transmittal. Any holder who wishes to tender Old Notes pursuant to such
guaranteed delivery procedures must ensure that the Exchange Agent receives this
Notice of Guaranteed Delivery prior to the Expiration Date of the Exchange
Offer. Capitalized terms used but not defined herein have the meanings ascribed
to them in the Prospectus or the Letter of Transmittal.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, , 1999 UNLESS EXTENDED (THE "EXPIRATION DATE").
FIRST UNION NATIONAL BANK
(THE "EXCHANGE AGENT")
<TABLE>
<S> <C>
By Overnight Carrier or by Hand: 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 28262-1153 Charlotte, NC 28288
Attention: Mike Klotz Attention: Mike Klotz
</TABLE>
By Facsimile (for Eligible Institutions only):
(704) 590-7628
Confirm by telephone: (704) 590-7408
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE> 2
Ladies and Gentlemen:
Upon the terms and subject to the conditions set forth in the Prospectus
and the related Letter of Transmittal, the undersigned hereby tenders to the
Company, the principal amount of Old Notes set forth below pursuant to the
guaranteed delivery procedures set forth in the Prospectus and in Instruction 2
of the Letter of Transmittal.
The undersigned hereby tenders the Old Notes listed below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
AGGREGATE PRINCIPAL
AMOUNT REPRESENTED
CERTIFICATE NUMBER(S) (IF KNOWN) OF OLD NOTES OR BY OLD NOTES AGGREGATE PRINCIPAL
ACCOUNT NUMBER AT THE DTC CERTIFICATE(S) AMOUNT TENDERED
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
PLEASE SIGN AND COMPLETE
Signatures of Registered Holder(s) or Authorized Signatory:
- --------------------------------------------------------------------------------
Name(s) of Registered Holder(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Date: , 1999
------------------------------------------
Address:
----------------------------------------------
Area Code and Telephone No.
---------------------------
This Notice of Guaranteed Delivery must be signed by the holder(s) exactly
as their name(s) appear on certificates for Old Notes or on a security position
listing as the owner of Old Notes, or by person(s) authorized to become
registered holder(s) by endorsements and documents transmitted with this Notice
of Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
Please print name(s) and address(es)
(Name(s)):
Capacity:
- --------------------------------------------------------------------------------
Address(es):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities and Exchange Act of 1934, as
amended, guarantees deposit with the Exchange Agent of the Letter of Transmittal
(or facsimile thereof), together with the Old Notes tendered hereby in proper
form for transfer (or confirmation of the book-entry transfer of such Old Notes
into the Exchange Agent's account at DTC described in the prospectus under the
caption "The Exchange Offer -- Guaranteed Delivery Procedures" and in the Letter
of Transmittal) and any other required documents, all by 5:00 p.m., New York
City time, on the third NASDAQ National Market trading day following the date of
execution hereof.
Name of firm
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
Area Code and Tel. No.
- --------------------------------------------------------------------------------
Authorized Signature
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
(Please Print)
Title
- --------------------------------------------------------------------------------
Dated
- ---------------------------, 1999
DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. ACTUAL SURRENDER OF
CERTIFICATES FOR OLD NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN
EXECUTED LETTER OF TRANSMITTAL.
<PAGE> 4
RAILWORKS CORPORATION
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
DTC PARTICIPANT FROM BENEFICIAL OWNER
OF 11 1/2% SENIOR SUBORDINATED NOTES DUE 2009
To Registered Holder and/or DTC Participant:
The undersigned hereby acknowledge receipt of the Prospectus, dated -- ,
1999 (the "Prospectus") of, Railworks Corporation, a Delaware corporation (the
"Company"), and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Company's offer (the "Exchange
Offer") to exchange 11 1/2% Senior Subordinated Notes due 2009 (the "New Notes")
that have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), for its outstanding 11 1/2% Senior Subordinated Notes due
2009 (the "Old Notes"). Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or DTC participant, as to
action to be taken by you relating to the Exchange Offer with respect to the Old
Notes held by you for the account of the undersigned.
The aggregate face amount of the Old Notes held by you for the account of
the undersigned is (FILL IN AMOUNT):
$ of the 11 1/2% Senior Subordinated Notes due 2009;
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[ ] TO TENDER the following aggregate principal amount of Old
Notes held by you for the account of the undersigned (INSERT
PRINCIPAL AMOUNT OF OLD NOTES TO BE TENDERED, IF ANY): $
[ ] NOT TO TENDER any Old Notes held by you for the account of
the undersigned.
If the undersigned instruct you to tender the Old Notes held by you for the
account of the undersigned, it is understood that you are authorized (a) to make
on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representations and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations that (i) the
undersigned's principal residence is in the state of (FILL IN STATE), (ii) the
undersigned is acquiring the New Notes in the ordinary course of business of the
undersigned, (iii) the undersigned has no arrangement or understanding with any
person to participate in the distribution of the New Notes, (iv) except as
otherwise disclosed in writing herewith, the undersigned is not an "affiliate,"
as defined in Rule 405 under the Securities Act, of the Company and, if the
undersigned is such an affiliate, that it will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable,
(v) if the undersigned is not a broker-dealer, that the undersigned is not
engaged in and does not intend to engage in the distribution of any New Notes,
or (vi) if the undersigned is a broker-dealer, that it will receive New Notes
for its own account in exchange for tendered Old Notes that were acquired as a
result of market-making activities or other trading activities and that it will
deliver a prospectus in connection with any resale of such New Notes; (b) to
agree, on behalf of the undersigned, as set forth in the Letter of Transmittal;
and (c) to take such other action as necessary under the Prospectus or the
Letter of Transmittal to effect the valid tender of such Old Notes.
<PAGE> 5
SIGN HERE
Name of beneficial owner(s):
- --------------------------------------------------------------------------------
Signature(s):
- --------------------------------------------------------------------------------
Name (please print):
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Telephone number:
- --------------------------------------------------------------------------------
Taxpayer Identification or Social Security Number:
- --------------------------------------------------------------------------------
Date:
- --------------------------------------------------------------------------------
<PAGE> 6
TENDER FOR ALL OUTSTANDING
112% SENIOR SUBORDINATED NOTES DUE 2009
IN EXCHANGE FOR
112% SENIOR SUBORDINATED NOTES DUE 2009
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OF
RAILWORKS CORPORATION
To Registered Holders:
We are enclosing herewith the material listed below relating to the offer
(the "Exchange Offer") by Railworks Corporation (the "Company"), a Delaware
corporation, to exchange its 112% Senior Subordinated Notes Due 2009 (the "New
Notes") that have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), for a like principal amount of the Company's issued and
outstanding 112% Senior Subordinated Notes Due 2009 (the "Old Notes") upon the
terms and subject to the conditions set forth in the Prospectus, dated -- ,
1999, and the related Letter of Transmittal.
Enclosed herewith are copies of the following documents:
1. Prospectus dated -- , 1999;
2. Letter of Transmittal;
3. Notice of Guaranteed Delivery; and
4. Instruction to Registered Holder and/or DTC Participant from Beneficial
Owner.
We urge you to contact your clients promptly. Please note that the Exchange
Offer will expire at 5:00 p.m., New York City time, on -- , 1999, unless
extended.
The Exchange Offer is not conditioned upon any minimum number of Old Notes
being tendered.
Pursuant to the Letter of Transmittal, each holder of Old Notes will
represent to the Company that (i) the New Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary course of business of the
person receiving such New Notes, whether or not such person is such holder, (ii)
neither the holder of the Old Notes nor any such other person is participating
in, intends to participate in or has an arrangement or understanding with any
person to participate in the distribution of such Notes, (iii) neither the
holder nor any such other person is an "affiliate" of the Company as defined in
Rule 405 under the Securities Act of the Company or, if such holder is such an
affiliate, that it will comply with the registration and prospectus delivery
requirements of the Security Act to the extent applicable, (iv) if the holder is
not a broker-dealer, that neither the holder nor such other person is engaged in
or intends to engage in the distribution of any New Notes, and (v) if the holder
is a broker-dealer, that it will receive New Notes for its own account in
exchange for tendered Old Notes that were required as a result of market-making
activities or other trading activities and that it will deliver a prospectus in
connection with any resale of such New Notes. By acknowledging that it will
deliver and by delivering a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
The enclosed Instruction to Registered Holder and/or DTC Participant from
Beneficial Owner contains an authorization by the beneficial owners of the Old
Notes for you to make the foregoing representations.
The Company will not pay any fee or commission to any broker or dealer to
any other persons (other than the exchange agent for the Exchange Offer) in
connection with the solicitation of tenders of Old Notes pursuant to the
Exchange Offer. The Company will pay or cause to be paid any transfer taxes
payable
<PAGE> 7
on the transfer of Old Notes to it, except as otherwise provided in Instruction
7 of the enclosed Letter of Transmittal.
Additional copies of the enclosed material may be obtained from the
undersigned.
Very truly yours,
First Union National Bank
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
THE AGENT OF THE COMPANY OR THE EXCHANGE AGENT OR AUTHORIZE YOU TO USE ANY
DOCUMENT OR MAKE ANY STATEMENT ON THEIR BEHALF IN CONNECTION WITH THE EXCHANGE
OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED
THEREIN.
<PAGE> 1
EXHIBIT 99.3
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER
ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE
PAYER -- Social Security numbers have nine digits separated by two hyphens:
i.e., 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e., 00-0000000. The table below will help determine the
number to give the payer.
<TABLE>
<CAPTION>
- ----------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF:
- ----------------------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, any
one of the
individuals(1)
3. Husband and wife (joint The actual owner of
account) the account or, if
joint funds, either
person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if the
minor is the only
contributor, the
minor(3)
6. Account in the name of guardian The ward, minor, or
or committee for a designated incompetent person(4)
ward, minor, or incompetent
person
7. a. The usual revocable savings The grantor trustee(3)
trust account (grantor is
also trustee)
b. So called trust account that The actual owner(3)
is not a legal or valid trust
under State law
8. Sole proprietorship account The owner(5)
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF:
- ----------------------------------------------------------
<S> <C>
9. A valid trust, estate, or Legal entity (Do not
pension trust furnish the
identifying number of
the personal
representative or
trustee unless the
legal entity itself is
not designated in the
account title.)(3)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held in The partnership
the name of the business
13. Association, club, or other The organization
tax exempt organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State
or local government, school
district, or prison) that
receives agricultural program
payments
- ----------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) List first and circle the name of the legal trust, estate, or pension trust.
(4) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(5) Show the name of the owner.
Note: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
