<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended June 30, 1999
-------------------------------------
Commission File Number 1-7654
-----------------------------------------
XTRA CORPORATION
----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 06-0954158
------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
60 State Street, Boston, Massachusetts 02109
----------------------------------------------------------------
(Address of principal executive offices)
(617) 367-5000
----------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
----------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at August 2, 1999
- -------------------------------------- -----------------------------
Common Stock, Par Value $.50 Per Share 13,187,200
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<C> <S> <C>
Part I. Financial Information
Item 1. Financial Statements
Management Representation .................................. 3
Consolidated Balance Sheets June 30, 1999 and September 30,
1998 ...................................................... 4
Consolidated Income Statements For the Three Months and
Nine Months Ended June 30, 1999 and 1998 .................. 5
Consolidated Statements of Cash Flows For the Nine Months
Ended June 30, 1999 and 1998 .............................. 6
Consolidated Statements of Stockholders' Equity For the
Nine Months Ended June 30, 1999 and 1998 .................. 7
Notes to Consolidated Financial Statements ................. 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ................................. 12
Item 3. Quantitative and Qualitative Disclosures about Market Risk . 22
Part II. Other Information
Item 5. Other Matters .................................... 23
Item 6. Exhibits and Reports on Form 8-K ................. 25
Signatures ................................................. 26
Exhibit Index .............................................. 27
</TABLE>
2
<PAGE>
PART 1 - FINANCIAL INFORMATION
XTRA CORPORATION AND SUBSIDIARIES
ITEM 1 MANAGEMENT REPRESENTATION
The financial statements included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. The Company believes, however, that the disclosures are adequate to
make the information presented not misleading.
The Board of Directors carries out its responsibility for the financial
statements included herein through its Audit Committee, composed of non-employee
Directors. During the year, the Committee meets periodically with both
management and the independent public accountants to ensure that each is
carrying out its responsibilities. The independent public accountants have full
and free access to the Audit Committee and meet with its members, with and
without management being present, to discuss auditing and financial reporting
matters.
These financial statements should be read in conjunction with the financial
statements and the notes thereto included in the Company's latest Annual Report
on Form 10-K.
This financial information reflects, in the opinion of management, all
adjustments, consisting of only normal recurring adjustments, necessary to
present fairly the results for the interim periods. The results of operations
for such interim periods are not necessarily indicative of the results to be
expected for the full year.
3
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Millions of dollars, except share amounts)
<TABLE>
<CAPTION>
June 30,
1999 September 30,
(Unaudited) 1998/(1)/
------------ ------------
<S> <C> <C>
Assets
Property and equipment $2,276 $2,200
Accumulated depreciation (829) (748)
------------ ------------
Net property and equipment 1,447 1,452
Lease contracts receivable 40 42
Trade receivables, net 65 64
Other assets 20 14
Cash 4 3
------------ -----------
$1,576 $1,575
============ ===========
Liabilities and Stockholders' Equity
Liabilities:
Debt $ 866 $ 802
Deferred income taxes 299 287
Accounts payable and accrued expenses 69 78
------------ ------------
Total liabilities 1,234 1,167
------------ ------------
Commitments and contingencies:
Stockholders' equity:
Common stock, par value $.50 per share;
authorized: 30,000,000 shares; issued
and outstanding; 13,268,733 shares at
June 30, 1999 and 15,372,903 shares at
September 30, 1998 7 8
Capital in excess of par value - 57
Retained earnings 343 354
Cumulative translation adjustment (8) (11)
------------ ------------
Total stockholders' equity 342 408
------------ ------------
$1,576 $1,575
============ ===========
</TABLE>
/(1)/Derived from XTRA Corporation's audited September 30, 1998 financial
statements.
The accompanying notes are an integral part of these consolidated financial
statments.
4
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(Millions of dollars, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
-------------------- --------------------
1999 1998 1999 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Revenues $ 111 $ 112 $ 343 $ 342
Operating expenses
Depreciation on rental equipment 38 38 114 113
Rental equipment operating expenses 29 29 85 83
Selling and administrative expense 11 11 32 33
Revenue equipment writedown - - 25 -
Restructuring costs - - 13 -
----- ----- ----- -----
78 78 269 229
----- ----- ----- -----
Operating income 33 34 74 113
Interest expense 15 14 43 44
----- ----- ----- -----
Income from operations before provision
for income taxes and unusual item 18 20 31 69
Unusual item: costs related to terminated merger - - 1 -
----- ----- ----- -----
Pretax income 18 20 30 69
Provision for income taxes 7 8 12 28
----- ----- ----- -----
Net income $ 11 $ 12 $ 18 $ 41
===== ===== ===== =====
Basic earnings per common share $0.85 $0.80 $1.26 $2.69
Basic common shares outstanding 13.2 15.3 14.2 15.3
Diluted earnings per common share $0.85 $0.80 $1.26 $2.68
Diluted common shares outstanding 13.2 15.4 14.2 15.4
Cash dividends declared per share $ - $0.22 $ - $0.64
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions of dollars)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
1999 1998
------- --------
<S> <C> <C>
Cash flows from operations:
Net Income $ 18 $ 41
Add non-cash income and expense items:
Depreciation and amortization, net 112 113
Restructuring costs and revenue equipment writedown 38 -
Deferred income taxes, net 12 24
Bad debt expense 3 4
Add other cash items:
Net change in receivables, other assets,
payables and accrued expenses (21) (10)
Cash receipts from lease contracts receivable 19 19
Recovery of property and equipment, net book value 17 20
------ -------
Total cash provided from operations 198 211
------ -------
Cash used for investment activities:
Additions to property and equipment (171) (129)
------ -------
Total cash used for investing activities (171) (129)
------ -------
Cash flows from financing activities:
Borrowings of long-term debt 75 -
Payments of long-term debt (39) (45)
Borrowings (payments) of revolving credit
agreements, net 28 (29)
Repurchase of common stock (90) -
Options exercised and related tax benefits - 5
Dividends paid - (10)
------ -------
Total cash used for financing activities (26) (79)
------ -------
Net increase in cash 1 3
Cash at beginning of period 3 4
------ -------
Cash at end of period $ 4 $ 7
====== =======
Total interest paid $ 51 $ 53
Total net income taxes paid $ 2 $ 3
</TABLE>
The accompanying notes are integral part of these consolidated financial
statements.
6
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Nine months ended June 30, 1998 and 1999
(Millions of dollars)
(Unaudited)
<TABLE>
<CAPTION>
Common
Stock Capital in Cumulative Total
$ 0.50 Excess of Retained Translation Stockholders
Par Value Par Value Earnings Adjustment Equity
------------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1997 $ 8 $ 52 $ 304 $ (4) $ 360
Comprehensive income:
Net income - - 41 - 41
Foreign currency translation adjustment - - - (4) (4)
Total comprehensive income 37
Common stock cash dividends
declared at $.64 per share - - (10) - (10)
Options exercised and related tax benefits - 5 - - 5
------------ ------------ ----------- ------------ -------------
Balance at June 30, 1998 $ 8 $ 57 $ 335 $ (8) $ 392
============ ============ =========== ============ =============
Balance at September 30, 1998 $ 8 $ 57 $ 354 $ (11) $ 408
Comprehensive Income:
Net income - - 18 - 18
Foreign currency translation adjustment - - - 3 3
Total comprehensive Income 21
Shares granted under restricted stock plan,
forfeitures, options exercised, and
related tax benefits, net - 3 - - 3
Common stock repurchased (1) (60) (29) - (90)
------------ ------------ ----------- ------------ -------------
Balance at June 30, 1999 $ 7 $ - $ 343 $ (8) $ 342
============ ============ =========== ============ =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) The consolidated financial statements include the accounts of XTRA
Corporation and its wholly-owned subsidiaries (the "Company"). All material
intercompany accounts and transactions have been eliminated. Certain
amounts in prior period financial statements have been reclassified to be
consistent with the current period's presentation.
(2) The effective income tax rates used in the interim financial statements are
estimates of the fiscal years' rates. The effective income tax rate for
fiscal 1998 was 40%. For the nine months ended June 30, 1999 the Company
recorded a provision for income taxes using an estimated effective income
tax rate of 40%. The Company's effective income tax rate for fiscal 1998
and its estimated effective income tax rate for fiscal 1999 are higher than
the statutory U.S. Federal income tax rate due primarily to state income
taxes.
(3) The Company's long-term debt includes a current portion of $99 million at
June 30, 1999 and $72 million at September 30, 1998.
During the third quarter, the Company issued $75 million of Medium-term
Notes. The Medium-term Notes included $65 million with a weighted average
interest rate of 6.6% and a weighted average life of 9 years and $10
million of three-year floating rate notes with an interest rate based on
the London Interbank Offered Rate (LIBOR) plus 61 basis points. At June 30,
1999, the Company has $457 remaining available under the $604 million shelf
registration for future debt issuance.
Effective June 30, 1999, the Company amended and restated its Revolving
Credit Agreement with bank commitments totaling $225 million. Pricing is
dependent on the Company's credit ratings and the rate is based on a fixed
spread over the LIBOR interest rate. At June 30, 1999, the Company had $74
million remaining available under the Revolving Credit Agreement.
(4) In fiscal 1999, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income," (SFAS 130), which
requires companies to report all non-owner changes in equity during a
period in a financial statement for the period in which they are
recognized. The Company has chosen to disclose Comprehensive Income, which
encompasses net income and foreign currency translation adjustments, in the
Consolidated Statements of Stockholders' Equity.
(5) XTRA recorded one-time charges during the second quarter of fiscal 1999 for
establishing a Shared Service Center, restructuring its marine container
operations and recording additional depreciation to adjust a portion of its
marine container fleet to realizable value. These charges were $4 million,
$9 million and $25 million, respectively.
The Company is consolidating its financial, accounting, human resources,
and information technology operations into a Shared Service Center located
in St. Louis, Missouri to achieve cost savings and efficiencies. The
Company anticipates that the
8
<PAGE>
transition to the Shared Service Center will be substantially complete by the
end of fiscal 1999. Approximately $2 million of the total charge of $4 million
is related to severance payments and the remainder is provided for the
consolidation of existing facilities. During the third quarter, approximately $1
million was charged to this reserve, related to the consolidation of existing
facilities and severance payments.
XTRA agreed to outsource the management of its international container leasing
business effective June 1, 1999 and recorded a restructuring charge of
approximately $9 million related to the costs of closing its XTRA International
offices. Approximately half of the charge is for severance payments and the
remainder is primarily for the write-off of non-revenue assets. During the third
quarter, approximately $3 million for the write off of capitalized software and
hardware and $1 million for employee severance costs were charged against the
reserve.
Additionally, the Company has identified a number of older and less desirable
marine containers that it intends to sell over the next twelve months, and as a
result recorded a depreciation charge during the second quarter of fiscal 1999
of $25 million to writedown the containers to their estimated net realizable
value. Through June 30, 1999 approximately 5000 containers of the approximate
20,000 that were identified as held for disposal have been sold.
A summary of the Company's restructuring charge activity through June 30, 1999,
follows:
<TABLE>
Reserve as
established in Reserve
the second Reserve balance at
quarter activity June 30, 1999
------------ ---------- ---------------
<S> <C> <C> <C>
Shared Service Center Transition $ 4 $ 1 $ 3
Shut Down of XTRA International 9 4 5
----------- -------- ------------
Total $ 13 $ 5 $ 8
=========== ======== ============
</TABLE>
Excluding these charges and the one-time unusual charge of $1 million related to
the terminated merger made in the first quarter of fiscal 1999, net income and
diluted earnings per share would have been $41 million and $2.90 per share for
the nine months ended June 30, 1999.
9
<PAGE>
(6) XTRA Corporation's assets consist substantially of the aggregate assets,
liabilities, earnings and equity of XTRA, Inc., a wholly-owned direct
subsidiary. In addition, XTRA Corporation generally guarantees the debt of
XTRA, Inc. The condensed consolidated financial data for XTRA, Inc.
included in the consolidated financial information of the Company is
summarized below:
<TABLE>
<CAPTION>
Selected Balance Sheet Data: June 30, September 30,
- ---------------------------- 1999 1998
(Millions of dollars) -------- -------------
<S> <C> <C>
Net property and equipment $1,447 $1,452
Receivables, net 105 106
Other assets 20 17
------ ------
Total assets $1,572 $1,575
====== ======
Debt $ 866 $ 802
Deferred income taxes 299 287
Other liabilities 69 84
------ ------
$1,234 $1,173
------ ------
Stockholders' equity 338 402
------ ------
Total liabilities and stockholders' equity $1,572 $1,575
====== ======
</TABLE>
<TABLE>
<CAPTION>
Selected Income Statement Data:
- -------------------------------
(Millions of dollars)
Three Months Ended June 30,
1999 1998
----------- -----------
<S> <C> <C>
Revenues $111 $112
Pretax income 18 20
Net income 11 12
Nine Months Ended June 30,
1999 1998
----------- -----------
Revenues $343 $342
Pretax income 34 68
Net income 22 41
</TABLE>
10
<PAGE>
(7) The following table provides a reconciliation of the numerators and
denominators of the basic and diluted earnings per share computations, as
required by SFAS 128:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
------------------------- --------------------------------
1999 1998 1999 1998
------------ ---------- ------------- ------------
<S> <C> <C> <C> <C>
Net income (in millions) (numerator) $ 11 $ 12 $ 18 $ 41
========== ======== ========== ==========
Computation of Basic Shares Outstanding (in
thousands, except per share amounts)
Weighted average number of basic common
shares outstanding (denominator) 13,192 15,321 14,160 15,301
========== ======== =========== ==========
Basic earnings per common share $ 0.85 $ 0.80 $ 1.26 $ 2.69
========== ======== ============ ==========
Computation of Diluted Shares Outstanding
(in thousands, except per share amounts)
Weighted average common shares outstanding 13,192 15,321 14,160 15,301
Common stock equivalents for diluted common
shares outstanding 7 65 5 71
---------- -------- ------------ ----------
Weighted average number of diluted common
shares outstanding (denominator) 13,199 15,386 14,165 15,372
========== ======== ============ ==========
Diluted earnings per common share $ 0.85 $ 0.80 $ 1.26 $ 2.68
========== ======== ============ ==========
</TABLE>
(8) In January 1995 and November 1996, the Board of Directors authorized the
repurchase of $100 million of the Company's common stock at each date,
establishing total authorizations to repurchase $200 million of common
stock. For the nine months ended June 30, 1999, the Company repurchased
approximately 2.2 million shares for approximately $90 million, which
represents 14% of the total shares outstanding at the beginning of the
year. As of June 30, 1999, the Company had approximately $31 million of
authorization remaining under the overall $200 million stock repurchase
authorization.
Subsequent to June 30, 1999, the Company repurchased 117,000 shares of its
common stock for an additional $5 million.
11
<PAGE>
XTRA CORPORATION AND SUBSIDIARIES
---------------------------------
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
-------------------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
----------------------------------------------
The discussion below contains certain forward-looking statements, including
estimates of economic and industry conditions, equipment utilization, and
capital expenditures. Actual results may vary from those contained in such
forward-looking statements. See "Cautionary Statements for Purposes of the 'Safe
Harbor' Provisions of the Private Securities Litigation Act of 1995" contained
in Part II, Item 5.
XTRA leases, primarily on an operating basis, freight transportation
equipment including over-the-road trailers, marine containers, intermodal
trailers, chassis, and domestic containers. XTRA's equipment utilization, lease
rates, and therefore, profitability, are impacted by the supply of and demand
for available equipment, the level of economic activity in North America, world
trade activity, the actions of its competitors, and other factors in the freight
transportation industry. Utilization and profitability are usually seasonally
lower in the second and third fiscal quarters than in the first and fourth
fiscal quarters. In general, the Company's receivable collection experience has
been good. However, industry downturns tend to lengthen the collection period of
certain receivables.
The Company's pretax profits have been cyclical, principally due to the
variability of the Company's revenues and the high percentage of fixed costs. To
moderate this cyclicality, the Company attempts to maintain a balance between
the amount of equipment leased on a per diem and term basis and maintains a mix
of various types of freight transportation equipment available for lease. The
Company has historically maintained a high proportion of its debt at fixed rates
to reduce the impact of fluctuations in interest rates.
XTRA's marine container leasing operation reduces XTRA's dependence on the
North American transportation industry. Although the marine container business
is international, substantially all transactions are denominated in U.S.
dollars.
The Three Months Ended June 30, 1999
- ------------------------------------
Versus the Three Months Ended June 30, 1998:
- --------------------------------------------
Revenues and Changes in Business Conditions
- -------------------------------------------
Revenues are a function of lease rates and working units; the latter
depends on fleet size and equipment utilization. Utilization, the ratio of
revenue-earning units to the total fleet, is derived from billing information,
usage reports and other information from customers, assumptions based on
historical experience, and equipment inventories taken at Company depots, and is
an approximation. Utilization is impacted by the supply of, and demand for,
available equipment, the level of economic activity in North America, and world
trade activity.
12
<PAGE>
The following table sets forth the Company's average equipment
utilization (dollar-weighted by net investment in equipment), average fleet size
in units, and average net investment in revenue equipment for the three months
ended June 30, 1999 and 1998. The Company's fleet size and average net
investment include equipment owned by the Company, equipment leased-in from
third parties under operating and capital leases, and equipment leased to third
parties under finance leases.
The Three Months Ended June 30, 1999
- ------------------------------------
Versus the Three Months Ended June 30, 1998
- -------------------------------------------
(Millions of dollars)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
1999 1998
-------- --------
<S> <C> <C>
XTRA Lease
- ----------
Utilization 84% 89%
Units 85,000 78,000
Net investment in equipment $ 861 $ 730
XTRA Intermodal:
- ----------------
Utilization 74% 79%
Units 54,000 54,000
Net investment in equipment $ 267 $ 286
Total North America:
- --------------------
Utilization 82% 86%
Units 139,000 132,000
Net investment in equipment $ 1,128 $ 1,016
International:
- --------------
Utilization 69% 82%
Units 160,000 165,000
Net investment in equipment $ 335 $ 402
Consolidated:
- -------------
Utilization 78% 84%
Units 299,000 297,000
Net investment in equipment $ 1,463 $ 1,418
</TABLE>
13
<PAGE>
Revenues decreased by 1% or $1 million for the three months ended June 30,
1999 versus the same period a year ago. The Company's average equipment
utilization declined from 84% in the third quarter of fiscal year 1998 to 78% in
the third quarter of fiscal 1999. Average net investment in equipment increased
by $45 million from the same quarter of the prior year due primarily to an
increase in the over-the-road fleet which was partially offset by a decline in
the net investment in the marine container and intermodal equipment fleets.
The Company's North American revenues increased $4 million from the same
quarter a year ago due to strong levels of domestic freight leading to more
working units, as well as an improvement in over-the-road lease rates. The
Company's North American utilization averaged 82% in the third quarter of fiscal
1999, as compared to 86% in the comparable prior year period. XTRA Lease's
revenues increased $6 million from the comparable prior year quarter due to an
increase in over the road trailer working units as well as an improvement in
over the road lease rates. XTRA Lease's utilization averaged 84% on a larger
total fleet size in the current quarter, compared to 89% in the comparable prior
quarter. XTRA Intermodal's revenues decreased $2 million from the third quarter
of fiscal 1998 primarily due to fewer working units. XTRA Intermodal's
utilization averaged 74% in the third quarter of fiscal 1999, compared to 79% in
the same period of 1998.
The Company's North American over-the-road trailer fleet averaged 83,000
units, or 58% of average net investment in equipment in the third quarter of
fiscal year 1999, compared to 76,000 units, or 51% of average net investment in
equipment, in the comparable prior year period. The Company continues to
downsize its North American intermodal trailer fleet as the railroads shift
toward more domestic container usage. XTRA's intermodal trailer fleet averaged
21,000 units, or 9% of average net investment in equipment in the third quarter
of 1999, versus 23,000 units, or 11% of average net investment in equipment, in
the comparable prior year period.
International revenues decreased $5 million from the same quarter of the
prior year, primarily due to fewer working units and, to a lesser extent, to
lower average lease rates. Equipment utilization declined to 69% from 82% in the
comparable prior year period. The Company's international fleet averaged 160,000
units, or 23% of average net investment in equipment in the third quarter of
1999 versus 165,000 units, or 28% of average net investment, in the comparable
prior year period.
Operating Expenses
- ------------------
Total operating expenses were approximately the same in the three months
ended June 30, 1999 as in the same period of fiscal 1998. In North America, a
decline in rental equipment operating expense was offset by higher depreciation
on rental equipment. At XTRA International, higher storage and repositioning
costs were offset by lower depreciation costs.
14
<PAGE>
Interest Expense
- ----------------
For the three months ended June 30, 1999, interest expense increased 7% or
$1 million from the same period of fiscal 1998 due to higher average net debt
outstanding.
Provision for Income Taxes
- --------------------------
The effective income tax rates used in the interim financial statements are
estimates of the fiscal years' rates. The effective income tax rate for fiscal
1998 was 40%. For the three months ended June 30, 1999, the Company has recorded
a provision for income taxes using an estimated effective income tax rate of
40%. The Company's effective income tax rate for fiscal 1998 and its estimated
effective income tax rate for fiscal 1999 are higher than the statutory U.S.
Federal income tax rate due primarily to state income taxes.
The Nine Months Ended June 30, 1999
- -----------------------------------
Versus the Nine months Ended June 30, 1998:
- -------------------------------------------
Revenues
- --------
The following table sets forth the Company's average equipment utilization
(dollar-weighted by net investment in equipment), average fleet size in units,
and average net investment in revenue equipment for the nine months ended
June 30, 1999 and 1998. The Company's fleet size and average net investment
include equipment owned by the Company, equipment leased-in from third parties
under operating and capital leases, and equipment leased to third parties under
finance leases.
15
<PAGE>
The Nine Months Ended June 30, 1999
Versus the Nine Months Ended June 30, 1998
(Millions of dollars)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
1999 1998
-------- --------
<S> <C> <C>
XTRA Lease
- ----------
Utilization 86% 90%
Units 83,000 78,000
Net investment in equipment $ 828 $ $727
XTRA Intermodal:
- ---------------
Utilization 79% 81%
Units 54,000 54,000
Net investment in equipment $ 272 $ 293
Total North America:
- -------------------
Utilization 84% 88%
Units 137,000 132,000
Net investment in equipment $ 1,100 $ 1,020
International:
- --------------
Utilization 71% 83%
Units 162,000 164,000
Net investment in equipment $ 360 $ 407
Consolidated:
- -------------
Utilization 81% 86%
Units 299,000 296,000
Net investment in equipment $ 1,460 $ 1,427
</TABLE>
Revenues increased by $1 million to $343 million for the nine months ended
June 30, 1999 over the same period a year ago. The Company's average equipment
utilization declined from 86% in the first nine months of fiscal year 1998 to
81% in the first nine months of fiscal 1999. Average net investment in equipment
increased by $33 million from the same period of the prior year due primarily to
an increase in the net investment in over-the-road trailers, which was partially
offset by a decline in the net investment in the marine container and intermodal
equipment fleets.
The Company's North American revenues increased $13 million from the same
period a year ago due to strong levels of domestic freight leading to an
improvement in lease rates and more working units. The Company's North American
utilization averaged 84% in the first nine months of fiscal 1999, as compared to
88% in the comparable prior year period. XTRA Lease's
16
<PAGE>
revenues increased $15 million from the comparable nine months of fiscal 1998
due to an improvement in lease rates as well as more over-the-road trailer
working units. XTRA Lease's utilization averaged 86% on a larger average fleet
size for the first nine months of fiscal 1999, compared to 90% for the first
nine months of fiscal 1998. XTRA Intermodal's revenues decreased $2 million from
the first nine months of fiscal 1988 due to a lower number of working units.
XTRA Intermodal's utilization averaged 79% in the first nine months of fiscal
1999 compared to 81% for the first nine months of 1998.
The Company's North American over-the-road trailer fleet averaged 81,000
units, or 56% of average net investment in equipment in the first nine months of
fiscal year 1999, compared to 76,000 units, or 50% of average net investment in
equipment, in the comparable prior year period. The Company continues to
downsize its North American intermodal trailer fleet as the railroads shift
toward more domestic container usage. XTRA's intermodal trailer fleet averaged
22,000 units, or 10% of average net investment in equipment in the first nine
months of 1999, versus 23,000 units, or 11% of average net investment in
equipment, in the comparable prior year period.
International revenues decreased $12 million from the same period of the
prior year, primarily due to fewer working units. Equipment utilization declined
to 71% from 83% in the comparable prior year period. Marine container lease
rates in the first nine months of the fiscal year 1999 show a slight decline
compared to the comparable prior year period and continue to be at low levels
for the Company and the industry as a whole. The Company's average international
fleet size was 162,000 units , or 25% of average net investment in equipment in
the first nine months of 1999, versus 164,000 units, or 29% of average net
investment in equipment, in the comparable prior year period.
Operating Expenses
- ------------------
Total operating expenses, excluding one time charges, increased by 1% or $2
million for the nine months ended June 30, 1999 from the same period of fiscal
1998. Rental equipment operating expense increased by 2% or $2 million due
primarily to higher storage and repositioning expenses at XTRA International.
Depreciation on rental equipment increased by 1% or $1 million which was offset
by a decline of $1 million in selling and administrative expenses.
One-time Charges Included in Operating Expenses
- -----------------------------------------------
XTRA recorded one-time charges during the second quarter of fiscal 1999 for
establishing a Shared Service Center, restructuring its marine container
operations and recording additional depreciation to adjust a portion of its
marine container fleet to realizable value. These charges were $4 million, $9
million and $25 million, respectively.
The Company is consolidating its financial, accounting, human resources,
and information technology operations into a Shared Service Center located in
St. Louis, Missouri to achieve cost savings and efficiencies. The Company
anticipates that the transition to the Shared Service Center will be
substantially complete by the end of fiscal 1999. Approximately $2
17
<PAGE>
million of the total charge of $4 million is related to severance payments and
the remainder is provided for the consolidation of existing facilities. During
the third quarter, approximately $1 million was charged to this reserve, related
to the consolidation of existing facilities and severance payments.
XTRA agreed to outsource the management of its international container
leasing business effective June 1, 1999 to Textainer Equipment Management
Limited, a major equipment lessor. The agreement allows the Company to achieve
economies of scale by having its fleet managed by a quality container lessor
with a significantly larger fleet and cost effective infrastructure. XTRA
recorded a restructuring charge of approximately $9 million related to the costs
of closing its XTRA International offices. Approximately half of the charge is
for severance payments and the remainder is primarily for the write-off of non-
revenue assets. During the third quarter, approximately $3 million was charged
to the reserve for the write off of capitalized software and hardware and $1
million for employee severance costs were charged against the reserve.
Additionally, the Company has identified a number of older and less
desirable marine containers that it intends to sell over the next twelve months,
and as a result recorded a depreciation charge during the second quarter of
fiscal 1999 of $25 million to writedown the containers to their estimated net
realizable value. Through June 30, 1999, approximately 5000 containers of the
aproximate 20,000 that were identified as held for disposal have been sold. The
Company does not currently anticipate making any further investment in the
international container business.
Interest Expense
- ----------------
Interest expense decreased by 2% or $1 million for the nine months ended
June 30, 1999 from the same period of fiscal 1998, due primarily to lower
average interest rates.
Unusual Item: Costs Related to Terminated Merger
- -------------------------------------------------
During the first quarter of fiscal 1999, XTRA recorded approximately $1
million as an unusual item on the income statement. These costs represent the
balance of expenses related to the terminated merger with Wheels MergerCo.
Excluding this unusual charge and the one-time charges included in
operating expenses recorded in the second quarter of fiscal 1999, net income and
diluted earnings per share would have been $41 million and $2.90 per share for
the nine months ended June 30, 1999.
Provision for Income Taxes
- --------------------------
The effective income tax rates used in the interim financial statements are
estimates of the fiscal years' rates. The effective income tax rate for fiscal
1998 was 40%. For the nine months ended June 30, 1999 the Company has recorded a
provision for income taxes using an estimated effective income tax rate of 40%.
The Company's effective income tax rate for fiscal 1998 and its estimated
effective income tax rate for fiscal 1999 are higher than the statutory U.S.
Federal income tax rate primarily due to state income taxes.
18
<PAGE>
Share Repurchases
- -----------------
In January 1995 and November 1996, the Board of Directors authorized the
repurchase of $100 million of the Company's common stock at each date,
establishing total authorizations to repurchase $200 million of common stock.
For the nine months ended June 30, 1999, the Company repurchased approximately
2.2 million shares for approximately $90 million. From July 1, 1999 through
August 11, 1999, the Company repurchased an additional 117,000 shares of its
common stock for an additional $5 million. As of August 11, 1999, the Company
has $26 million of authorization remaining under the $200 million stock
repurchase authorization.
Total shares repurchased in 1999 represent approximately 15% of the total
shares outstanding at the beginning of the fiscal year.
Liquidity and Capital Resources
- -------------------------------
During the nine months ended June 30, 1999, the Company generated cash
flows from operations of $198 million. During the same period, XTRA invested
$171 million in property and equipment and repurchased $90 million of common
stock. Net debt outstanding (debt less cash) increased $63 million.
Capital spending through the nine months ending June 30, 1999 is $196
million, of which $25 million represents equipment that was obtained through an
operating lease. As of June 30, 1999, committed capital expenditures for revenue
equipment for fiscal 1999 amounted to $257 million. Any additional capital
expenditures for the remainder of fiscal year 1999 will likely be modest.
Committed capital expenditures for fiscal 2000 amount to $29 million. The
Company may purchase additional equipment during fiscal 2000, depending upon
business conditions.
Effective June 30, 1999, the Company amended and restated its Revolving
Credit Agreement with bank commitments totaling $225 million. Pricing is
dependent on the Company's credit ratings and the rate is based on a fixed
spread over the LIBOR interest rate. As of August 11, 1999, the Company had $61
million of unused credit available under the Revolving Credit Agreement.
The Company has issued $75 million of Medium Term Notes to date in fiscal
1999. Of these Medium Term Notes, $65 million were issued at a fixed price with
a weighted average interest rate of 6.6% and a weighted life of 9 years and $10
million of three year floating rate notes were issued at one month LIBOR plus 61
basis points. As of August 11, 1999, XTRA, Inc. had $457 million available for
future issuance under its $604 million shelf registration.
On June 7, 1999, the Company closed a $50 million, 10 year tax-oriented
lease financing agreement with Bank of America. The proceeds of this financing
will be available to fund equipment purchases during the remainder of the fiscal
year. As of August 11, 1999, $47 million has been funded.
19
<PAGE>
Year 2000
- ---------
The Company has completed an assessment of year 2000 risks at each of its
operating divisions. Detailed action plans were developed for critical
operational systems, purchased software, hardware components, and critical third
parties.
Critical operational systems that were custom designed for their specific
business functions have been modified and tested for year 2000 compliance. These
modified systems have been installed and are currently being used in the day to
day business operations of the Company. A plan for purchased software and
hardware components is in process to ensure that the following actions are
taken, if necessary:
. Packaged software is upgraded to a year 2000 compliant version
. Operating system upgrades for certain hardware components
. Replacement of certain hardware components
It is anticipated that the plan for purchased software and hardware will be
completed by each operating division by November 1, 1999. After completion, a
final comprehensive simulation will be conducted to ensure that all integration
of components in the information systems infrastructure is year 2000 compliant
and fully operational.
The Company is also in the process of contacting critical vendors,
suppliers, and customers with whom the Company does business for a statement
regarding their year 2000 readiness. This communication process is expected to
be completed during the fourth quarter. Based on the responses already received,
the Company is not aware of any third party's year 2000 problems that would have
a material adverse impact on the Company. Upon completion of this assessment,
the Company will determine whether contingency plans should be put into place
and what the costs of those plans will be. At this point, the Company has not
identified any required contingency plans that would require material
expenditures to be made.
In total, the Company expects to expend $1 million for its year 2000
efforts, which encompass assessing, modifying, and testing its internal
information systems.
While the Company does not believe that the year 2000 matters discussed
above will have a material impact in its business, financial conditions, or
results of operations, no assurances can be given as to what extent the Company
may be affected by such matters. The unavailability of the Company's internal
information systems for a sustained period of time or disruptions in the economy
generally resulting from year 2000 issues could have a materially adverse effect
on the Company.
Federal Motor Carrier Safety Regulation
- ---------------------------------------
The Company's over-the-road and intermodal equipment is subject to various
Federal and state licensing and operating regulations as well as to various
industry standards. The Federal Highway Administration (the "FHWA") published a
rule, effective June 1, 1999 to amend the Federal Motor Carrier Safety
Regulations. The rule requires that motor carriers engaged in
20
<PAGE>
interstate commerce install retroreflective tape or reflex reflectors on the
sides and rear of all trailers that (i) were manufactured prior to December 1,
1993, (ii) have an overall width of 80 inches or more and (iii) have a gross
vehicle weight rating of 10,000 lbs. or more. The FHWA has mandated that motor
carriers complete the installation within two years of the effective date of the
rule. The Company's over-the-road and intermodal trailers are impacted by the
rule, although the number of trailers ultimately impacted will depend upon the
ongoing disposition or conversion to off-road use, thereby decreasing the number
of trailers that will be effected. The Company currently believes that the cost
of complying with the regulation will amount to approximately $5 million. The
cost to install the reflective tape will be capitalized and depreciated over the
average remaining life of the trailers impacted by this regulation.
21
<PAGE>
ITEM 3 - QUANTITATIVE AND QUALITATIVE
-------------------------------------
DISCLOSURES ABOUT MARKET RISK
-----------------------------
At June 30, 1999, there were no material changes in the market rate risks
reported in the Company's Form 10-K for the fiscal year ended September 30,
1998.
22
<PAGE>
Part II - OTHER INFORMATION
---------------------------
Item 5 - Other Matters
- ----------------------
CAUTIONARY STATEMENTS FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The foregoing Management's Discussion and Analysis of Financial Condition
and Results of Operations contains certain forward-looking statements, including
estimates of economic and industry conditions, equipment utilization, and
capital expenditures. In addition, the Company may occasionally make forward-
looking statements and estimates such as forecasts and projections of the
Company's future performance or statements of management's plans and objectives.
These forward-looking statements may be contained in, among other things, SEC
filings and press releases made by the Company and in oral statements made by
the officers of the Company. Actual results could differ materially from those
contained in such forward-looking statements. Therefore, no assurances can be
given that the results in such forward-looking statements will be achieved.
Important factors that could cause the Company's actual results to differ from
those contained in such forward-looking statements include, among others, the
factors mentioned below.
VARIABLE REVENUES AND OPERATING RESULTS
- ---------------------------------------
The Company's revenues may vary significantly from period to period while a high
percentage of its operating costs are fixed. As a result of the variability of
the Company's revenues and the Company's limited ability to reduce its fixed
operating costs, the Company's profitability may be cyclical and subject to
significant fluctuation from period-to-period. The Company's revenues are a
function of lease rates and working units; the latter depends on fleet size and
equipment utilization (the ratio of revenue earning equipment to the total
fleet). Some of the factors which affect lease rates and working units are
competition, economic conditions and world trade activity, the supply of and
demand for available equipment, aggressive purchasing of equipment by the
Company's customers and competitors leading to an excess supply of equipment and
reduced lease rates and utilization, shifting traffic trends in the industry,
severe adverse weather conditions, strikes by transportation unions and other
factors in the freight transportation industry. The Company's fixed costs
include depreciation, a portion of rental equipment operating expenses and
selling and administrative expenses.
AVAILABILITY OF NEW EQUIPMENT
- -----------------------------
New equipment is built to the Company's specifications and reflects industry
standards and customer needs. The Company obtains new equipment from a number of
manufacturers. Certain of these manufacturers have consolidated and, in the
process, eliminated manufacturing facilities. These manufacturers are, in turn
dependent on the prompt delivery and supply of the components required to
assemble the trailers, chassis and containers. Historically, delivery times have
varied
23
<PAGE>
from three to fifteen months from when the order is placed, and there can be no
assurance that equipment will be available at the times or of the types needed
by the Company. In addition, it is difficult to accurately predict demand for
the Company's equipment in future periods. As a result, the Company's
performance in a given period may be adversely affected because of its inability
to quickly increase fleet size to take advantage of unexpectedly strong demand
due to extended back orders.
COMPETITION
- -----------
Leasing transportation equipment is a highly competitive business and is
affected by factors related to the transportation market. Lease terms and lease
rates, as well as availability, condition and size of equipment and customer
service are all important factors to the lessee. The Company has many
competitors, some of which have leasing fleets that are larger in size than the
Company's leasing fleet and some of which have greater resources. Various types
of transportation equipment compete for freight movement. Over-the-road
trailers, intermodal trailers, marine and domestic containers and railroad
rolling stock are all potential vehicles for the movement of freight.
CUSTOMER CONSOLIDATION
- ----------------------
Certain industries in which the Company competes, including trucking and
shipping, are in the process of consolidation. As a result of this
consolidation, the Company's customers may be better able to manage their
equipment requirements and may seek increased efficiencies through direct
ownership of equipment. In such event, the ratio of leased equipment to owned
equipment may decrease, which could reduce the overall market for the Company's
services.
AVAILABILITY OF CAPITAL
- -----------------------
The acquisition of new equipment, both for growth as well as replacement of
older equipment, requires significant capital. In addition, in the past, the
Company has grown its fleet through acquisitions of other companies such as
Strick Lease, Inc. and Matson Leasing Company, Inc., requiring additional
capital. The Company plans to continue to pursue acquisition opportunities.
Historically, the Company generally has had available a variety of sources to
finance such expenditures and acquisitions at favorable rates and terms.
However, the availability of such capital depends heavily upon prevailing market
conditions, the Company's capital structure, and its credit ratings. No
assurances can be given that the Company will be able to obtain sufficient
financing on terms that are acceptable to it to fund its operations and capital
expenditures or to enable the Company to take advantage of favorable acquisition
opportunities.
YEAR 2000 RISKS
- ---------------
The risks posed to the Company by Year 2000 problems are difficult to quantify
with certainty. Although the Company believes that its efforts to address the
year 2000 issue will allow it to successfully avoid any material adverse effect
on its operations or financial condition, it recognizes that failing to resolve
these issues on a timely basis could cause business disruption, increased costs,
loss of business, and other similar risks. These effects could be enhanced if
coupled with third party or infrastructure failures. The timing and current
estimated costs related to the year 2000 could differ from current expectations.
Some of the factors that could impact the Company's year 2000 efforts include
the retention of qualified information services personnel, the readiness of
third parties, and the Company's ability to respond to unforeseen year 2000
complications.
24
<PAGE>
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
- --- --------
Exhibit No. Description
- ----------- -----------
4.1 Amended and Restated Credit Agreement, dated as of June
30, 1999, among XTRA, Inc., Bank of America National Trust
and Savings Association and Each of the Other Financial
Institutions From Time to Time Parties Hereto, as Banks
with Bank of America National Trust and Savings
Association as Administrative Agent and BankBoston, N.A.,
as Syndication Agent, and The First National Bank of
Chicago, as Documentation Agent
12.1 Statement of the calculation of earnings to fixed charges
for the nine months ended June 30, 1999 and 1998 for XTRA
Corporation
12.2 Statement of the calculation of earnings to fixed charges
for the nine months ended June 30, 1999 and 1998 for XTRA,
Inc.
27 Financial Data Schedule
(b) Reports on Form 8-K
- --- -------------------
On August 9, 1999, a Current Report on Form 8-K was filed by the Company to
disclose certain financial information under item 5, "Other Events", for the
third fiscal quarter ended June 30, 1999.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
XTRA CORPORATION
------------------------------------------
(Registrant)
Date: August 13, 1999 /s/ Michael J. Soja
--------------- ------------------------------------------
Michael J. Soja
Vice President and Chief Financial Officer
Date: August 13, 1999 /s/ Thomas S. McHugh
--------------- -----------------------------------------
Controller
26
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description
- ----------- -----------
4.1 Amended and Restated Credit Agreement, dated as of June 30,
1999, among XTRA, Inc., Bank of America National Trust and
Savings Association and Each of the Other Financial Institutions
From Time to Time Parties Hereto, as Banks with Bank of America
National Trust and Savings Association as Administrative Agent
and BankBoston, N.A., as Syndication Agent, and The First
National Bank of Chicago, as Documentation Agent
12.1 Statement of the calculation of earnings to fixed charges for
the nine months ended June 30, 1999 and 1998 for XTRA
Corporation
12.2 Statement of the calculation of earnings to fixed charges for
the nine months ended June 30, 1999 and 1998 for XTRA, Inc.
27 Financial Data Schedule
27
<PAGE>
EXHIBIT 4.1
AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF JUNE 30, 1999
AMONG
XTRA, INC.,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
and
EACH OF THE OTHER FINANCIAL INSTITUTIONS
FROM TIME TO TIME PARTIES HERETO,
as Banks
with
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Administrative Agent
BANKBOSTON, N.A.,
as Syndication Agent
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Documentation Agent
BANC OF AMERICA SECURITIES LLC,
as Sole Lead Arranger
and Book Manager
<PAGE>
Page
TABLE OF CONTENTS
-----------------
Page
----
1. DEFINITIONS.............................................................. 2
1.1 Defined Terms..................................................... 2
1.2 Other Interpretive Provisions.....................................15
1.3 Accounting Principles.............................................16
2. THE CREDIT FACILITIES....................................................16
2.1 Amounts and Terms of Commitments..................................16
(a) The Revolving Credit.........................................16
(b) The Term Out Credit..........................................16
2.2 Notes.............................................................16
2.3 Procedure for Borrowing...........................................17
2.4 Conversion and Continuation Elections.............................17
2.5 Voluntary Termination or Reduction of Commitment..................19
2.6 Prepayments.......................................................19
(a) Optional Prepayments.........................................19
(b) Mandatory Prepayment Upon Change of Control..................19
2.7 Repayment.........................................................20
(a) The Revolving Credit.........................................20
(b) The Term Out Credit..........................................20
2.8 Interest..........................................................20
2.9 Fees..............................................................21
(a) Arrangement, Agency Fees.....................................21
(b) Utilization Fee and Non-Use Fee..............................21
2.10 Computation of Interest...........................................21
2.11 Payments by the Company...........................................22
2.12 Payments by the Banks to the Administrative Agent.................22
3. TAXES, YIELD PROTECTION AND ILLEGALITY...................................23
3.1 Taxes.............................................................23
3.2 Illegality........................................................24
3.3 Increased Costs and Reduction of Return...........................25
3.4 Funding Losses....................................................26
3.5 Inability to Determine Rates......................................26
3.6 Certificates of Banks.............................................27
3.7 Substitution of Banks.............................................27
3.8 Survival..........................................................27
4. CONDITIONS PRECEDENT.....................................................27
4.1 Conditions of Initial Loans.........................................27
4.2 Conditions to All Borrowings........................................28
i
<PAGE>
Page
(a) Notice.......................................................28
(b) Continuation of Representations and Warranties...............28
(c) No Existing Default..........................................28
5. REPRESENTATIONS AND WARRANTIES...........................................29
5.1 Corporate Existence and Good Standing.............................29
5.2 Corporate Power; Consent; Absence of Conflict with
Other Agreements..................................................29
5.3 Title to Properties...............................................29
5.4 Financial Statements..............................................30
5.5 Holding Company and Investment Company Acts.......................30
5.6 Litigation........................................................30
5.7 No Materially Adverse Contracts...................................31
5.8 Compliance with Other Instruments; Laws...........................31
5.9 Taxes.............................................................31
5.10 No Default........................................................31
5.11 Use of Proceeds...................................................31
5.12 ERISA.............................................................31
5.13 Licenses and Approval.............................................32
5.14 Condition of Assets...............................................32
5.15 Subsidiaries......................................................32
5.16 Full Disclosure...................................................32
5.17 Year 2000 Compliance..............................................32
6. AFFIRMATIVE COVENANTS....................................................33
6.1 Punctual Payment..................................................33
6.2 Financial Statements..............................................33
6.3 Notification of Defaults and Event of Default.....................34
6.4 Conduct of Business...............................................34
6.5 Taxes.............................................................34
6.6 Maintenance of Properties.........................................35
6.7 Maintenance of Insurance..........................................35
6.8 Records and Accounts..............................................35
6.9 Inspection........................................................35
6.10 Notice of Litigation..............................................35
6.11 Pension Plan......................................................36
6.12 Depreciation Schedule.............................................36
6.13 Perform Obligations...............................................37
6.14 Comply with ERISA.................................................37
6.15 Environmental Compliance..........................................37
6.16 Debt Rating.......................................................37
6.17 Year 2000 Compliance..............................................37
7. CERTAIN NEGATIVE COVENANTS...............................................38
7.1 Liens.............................................................38
ii
<PAGE>
Page
7.2 Maximum Secured Equipment Indebtedness of Company.................39
7.3 Maximum Equipment Indebtedness....................................39
7.4 Consolidated Leverage Ratio.......................................39
7.5 Consolidated Cash Flow Coverage Ratio.............................39
7.6 Investments in the Parent.........................................39
7.7 Mergers, Acquisitions, etc........................................39
7.8 Changes in Business...............................................41
7.9 ERISA.............................................................41
8. EVENTS OF DEFAULT: ACCELERATION..........................................41
9. NOTICE AND WAIVERS OF DEFAULT............................................43
9.1 Notice of Default.................................................43
9.2 Waivers of Default................................................43
10. REMEDIES ON DEFAULT......................................................43
10.1 Rights of Banks...................................................43
10.2 Setoff: Sharing...................................................44
(a) Set-off....................................................44
(b) Sharing....................................................44
11. THE ADMINISTRATIVE AGENT.................................................44
11.1 Appointment and Authorization.....................................45
11.2 Delegation of Duties..............................................45
11.3 Liability of Administrative Agent.................................45
11.4 Reliance by Administrative Agent..................................45
11.5 Notice of Default.................................................46
11.6 Credit Decision...................................................46
11.7 Indemnification of Administrative Agent...........................47
11.8 Agents in Individual Capacity.....................................47
11.9 Successor Administrative Agent....................................47
11.10 Withholding Tax...................................................48
11.11 Syndication Agent and Documentation Agent.........................49
12. ASSIGNMENT; PARTICIPATION................................................49
12.1 Assignments.......................................................49
12.2 Participations....................................................50
13. CONSENT TO JURISDICTION; WAIVER OF TRIAL BY JURY.........................51
14. BINDING ACT..............................................................51
15. FEES AND EXPENSES; INDEMNITY.............................................52
15.1 Costs and Expenses................................................52
iii
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Page
15.2 Company Indemnification...........................................52
16. REMEDIES CUMULATIVE......................................................52
17. FURTHER ASSURANCES.......................................................53
18. SURVIVAL OF COVENANTS....................................................53
19. SEVERABILITY.............................................................53
20. NOTICE...................................................................53
21. GOVERNING LAW............................................................54
22. MISCELLANEOUS............................................................54
23. ENTIRE AGREEMENT.........................................................55
24. CONSENTS, AMENDMENTS AND WAIVERS.........................................55
25. OPTIONAL INCREASE IN COMMITMENTS.........................................56
iv
<PAGE>
EXHIBITS
--------
EXHIBIT A Form of Promissory Note
EXHIBIT B Form of Notice of Borrowing
EXHIBIT C Form of Notice of Conversion/Continuation
EXHIBIT D List of Closing Documents
EXHIBIT E Form of Compliance Certificate
EXHIBIT F Form of Assignment and Acceptance Agreement
viii
<PAGE>
SCHEDULES
---------
Schedule 1.1(A) Applicable Margin; Non-Use Fee; Utilization Fee
Schedule 1.1(B) Commitments and Pro Rata Shares
Schedule 5.12 Plans
Schedule 5.15 Subsidiaries
Schedule 6.12 Depreciation Schedule
Schedule 20 Eurodollar and Domestic Lending Offices; Addresses for
Notices
ix
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
-------------------------------------
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of June 30, 1999, is
among the Company, the Banks and the Agents.
WHEREAS, the Company and certain Banks have previously entered into that
certain Credit Agreement dated as of June 30, 1995, as amended (such Credit
Agreement, without giving effect to the amendment and restatement thereof
contemplated hereby, being hereinafter referred to as the "Original Credit
Agreement");
WHEREAS, upon the terms and subject to the conditions set forth herein, the
Company, the Banks and the Agents have agreed to enter into this Agreement, in
order, among other things, to (i) amend and restate the Original Credit
Agreement in its entirety; (ii) re-evidence, ratify and confirm the Obligations
of Borrowers outstanding on the date hereof under the Original Credit Agreement,
which Obligations shall be repayable hereafter in accordance with the respective
terms and provisions hereof; and (iii) set forth the terms and conditions under
which the Banks will from time to time hereafter make further loans and
extensions of credit to or for the account of the Company; and
WHEREAS, it is the intention of the Company, the Banks and the Agents that
this Agreement not constitute a novation;
NOW, THEREFORE, in consideration of the mutual agreements contained herein,
the parties hereto agree as follows:
1.A AMENDMENT AND RESTATEMENT OF ORIGINAL CREDIT AGREEMENT; NO NOVATION.
(a) Subject to the terms and conditions of this Agreement and in reliance
upon the representations and warranties of the Company set forth herein and in
the other Loan Documents, effective as of the date hereof, the Original Credit
Agreement is hereby amended and restated in its entirety and, from and after the
date hereof, all references herein to "hereunder," "hereof," "herein" or words
of like import shall mean and be a reference to the Original Credit Agreement,
as amended hereby.
(b) It is expressly understood and agreed by each of the parties hereto
that (i) the Obligations (as such term is defined herein) include all
"Obligations" (as defined in the Original Credit Agreement) owing on the date
hereof (the "Original Obligations"), (ii) the Original Obligations shall be
payable hereafter in accordance with the respective terms and provisions hereof
and (iii) that this Agreement (x) merely re-evidences, ratifies and confirms the
Original Obligations and (y) is in no way intended and shall not be deemed or
construed to constitute a novation of the Original Credit Agreement.
1. DEFINITIONS.
1
<PAGE>
1.1 Defined Terms. The following terms have the following meanings:
"Acquired Equipment Indebtedness" means, with respect to any specified
Person, all Secured Equipment Indebtedness of such specified Person that was
incurred by another Person either (a) prior to the acquisition by such specified
Person of the Transportation Equipment, or leases thereof, securing such Secured
Equipment Indebtedness, or (b) prior to the acquisition by such specified Person
of the obligor with respect to such Secured Equipment Indebtedness (but, in each
case, only to the extent that at the time of such acquisition, such Secured
Equipment Indebtedness does not exceed the fair value of the Transportation
Equipment, or leases thereof, securing such Indebtedness). "Acquired Equipment
Indebtedness" shall also include all extensions, renewals and refinancings of
such Secured Equipment Indebtedness, but, in each case, only to the extent that
the principal amount thereof does not exceed the outstanding principal amount of
such Secured Equipment Indebtedness immediately prior to such extension, renewal
or refinancing.
"Adjusted Base Rate" means, for any day, an interest rate per annum equal
to the sum of (a) the Base Rate and (b) the Applicable Margin, in each case for
such day.
"Adjusted Eurodollar Rate" means, for any day during any Interest Period,
with respect to Eurodollar Loans comprising part of the same Borrowing, a rate
of interest per annum equal to the sum of (a) the Eurodollar Rate in effect for
such Interest Period, (b) the Reserve Charge in effect for such day, and (c) the
Applicable Margin in effect for such day.
"Administrative Agent" means BofA, in its capacity as administrative agent
for the Banks hereunder, and any successor administrative agent appointed
pursuant to Section 11.9.
"Administrative Agent-Related Persons" means BofA and any successor agent
appointed pursuant to Section 11.9, together with their respective affiliates
(including, in the case of BofA, the Arranger), and the officers, directors,
employees, agents and attorneys-in-fact of such Persons and affiliates.
"Administrative Agent's Payment Office" means the address for payments set
forth on Schedule 20 in relation to the Administrative Agent, or such other
address as the Administrative Agent may from time to time specify hereunder.
"Agents" means, collectively, the Administrative Agent, the Syndication
Agent and the Documentation Agent.
"Agreement" means this Credit Agreement.
"Applicable Margin" means, for any day with respect to any Revolving Loan
or Term Out Loan, as the case may be, the respective percentages set forth on
Schedule 1.1(A) corresponding to the Type of such Loan and the higher on such
day of the Company's Debt Ratings; provided, that if, at any time, neither of
the Rating Agencies rates the Company's long-term senior unsecured debt, then
the respective percentages set forth in Column V of Schedule 1.1(A) shall be
used to determine the Applicable Margin. Notwithstanding the foregoing, at any
time that the Company's Debt Ratings
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differ by more than one level, then, if at such time, (a) the Company maintains
an Investment Grade Rating of such debt from both of the Rating Agencies, the
rating level immediately below the higher of such two ratings shall be used to
determine the Applicable Margin, or (b) the Company maintains an Investment
Grade Rating of such debt from either but not both, or from neither of the
Rating Agencies, the lower of such two ratings shall be used to determine the
Applicable Margin. Any change in the Applicable Margin resulting from a change
in a rating of the Company's Debt Rating shall become effective one Business Day
after the effective date of such change.
"Arranger" means Banc of America Securities, LLC, a Delaware limited
liability company.
"Assignee" has the meaning specified in subsection 12.1(a).
"Assignment and Acceptance" has the meaning specified in subsection
12.1(a).
"Attorney Costs" means and includes all reasonable fees and disbursements
of any law firm or other external counsel, the reasonable allocated cost of
internal legal services and all reasonable disbursements of internal counsel.
"BofA" means Bank of America National Trust and Savings Association, a
national banking association.
"Balance Sheet Date" means September 30, 1998.
"Bank" means each of the financial institutions listed on the signature
pages hereto and each other financial institution which from time to time
becomes a party hereto pursuant to subsection 12.1(a).
"Base Rate" means, for any day, the higher for such day of: (a) the rate of
interest in effect for such day as publicly announced from time to time by BofA
in San Francisco, California, as its "reference rate"; and (b) 0.50% per annum
above the Federal Funds Rate for such day. The "reference rate" is a rate set by
BofA based upon various factors including BofA's costs and desired return,
general economic conditions and other factors, and is used as a reference point
for pricing some loans, which may be priced at, above, or below such announced
rate. Any change in the reference rate announced by BofA shall take effect at
the opening of business on the day specified in the public announcement of such
change.
"Base Rate Loan" means a Loan that bears interest based on the Adjusted
Base Rate.
"Borrowing" means (i) a borrowing under Section 2 consisting of Loans of
the same Type (and in the case of Eurodollar Loans, having the same Interest
Period) made to the Company on the same day by the Banks, or (ii) one or more
Borrowings converted or continued by the Borrower under Section 2 on the same
day into a Borrowing of Loans of the same Type (and in the case of Eurodollar
Loans, having the same Interest Period).
"Borrowing Date" means, with respect to a Borrowing, the day on which such
Borrowing occurs.
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"Business Day" means any day on which commercial banking institutions in
Boston, Massachusetts; San Francisco, California; Chicago, Illinois; and New
York, New York, are each open for the transaction of banking business; and, if
the applicable Business Day relates to any Eurodollar Loan, means such a day on
which dealings are carried on in the London dollar interbank market.
"Capital Adequacy Regulation" means any guideline, request or directive of
any central bank or other Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.
"Capitalized Lease" means any lease with respect to which the obligations
of the lessee thereunder are required to be capitalized and included in
determining total liabilities of such lessee, in accordance with Financial
Accounting Standard No. 13 of the Financial Accounting Standards Board as in
effect on the Balance Sheet Date.
"Cash" means, with respect to any Person, cash and cash equivalents of such
Person, in each case as determined in accordance with GAAP.
"Cash Flow" means, for any period, the sum of (a) Cash Flow From Continuing
Operations for such period, (b) Interest Charges for such period, and (c)
payments in respect of Lease Obligations (other than any such payments in
respect of obligations under Capitalized Leases) for such period, all as
determined in accordance with GAAP.
"Cash Flow From Continuing Operations" means, for any period (a) cash flow
from continuing operations for such period minus (b) the aggregate amount of the
cash portion of all charges as extraordinary items of expense (if any) made
during such period, all determined in accordance with GAAP.
"Cash Requirements" means, for any period, the sum of (a) Interest Charges
(excluding imputed interest, accrued original issue discount and interest
payable in kind) for such period, (b) payments (excluding optional prepayments)
due and payable in respect of Lease Obligations (other than such Obligations
under Capitalized Leases) for such period, and (c) scheduled payments of
principal on long-term Indebtedness (including current maturities of long-term
Indebtedness) due and payable pursuant to any document relating to the borrowing
of money or the obtaining of credit (including any such principal payments in
respect of Lease Obligations under Capitalized Leases) for such period, all as
determined in accordance with GAAP.
"Change of Control" means (a) the acquisition by any Person of beneficial
ownership (within the meaning of the Securities Exchange Act of 1934 and the
rules thereunder as in effect on the date hereof of the Securities and Exchange
Commission) of 50% or more of the outstanding common stock of the Parent
entitled to vote generally in the election of directors; or (b) individuals who,
as of the date hereof, constitute the Board of Directors of the Parent (the
"Incumbent Board") cease for any reason to constitute at least a majority of
such board; provided, that any individual
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becoming a director subsequent to the date hereof whose election, or nomination
for election by the Parent's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board.
"Change of Control Prepayment Date" has the meaning specified in subsection
2.6(b).
"Closing Date" means the date on which all conditions precedent set forth
in Section 4.1 are satisfied or waived by all Banks (or, in the case of
subsection 4.1(b)(iii), by the Person entitled to receive such payment) and the
initial Loans are made hereunder.
"Code" means the Internal Revenue Code of 1986.
"Collateral Trustee" has the meaning specified in Section 7.1.
"Commitment" means an amount equal to TWO HUNDRED TWENTY-FIVE MILLION AND
NO/100THS DOLLARS ($225,000,000), as such amount may be reduced from time to
time pursuant to Section 2.5 and increased pursuant to Section 25.
"Company" means XTRA, Inc., a Maine corporation.
"Compliance Certificate" has the meaning specified in subsection 6.2(a).
"Consolidated" or "consolidated" means, with reference to each such term,
that term as applied to the accounts of the Person in question and its
Subsidiaries consolidated in accordance with GAAP, after eliminating all
intercompany items.
"Controlled Group" means, collectively, all members of a controlled group
of corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Company, are treated as a single
employer under Section 414(b), 414(c) or 414(m) of the Code and Section
4001(a)(2) of ERISA.
"Conversion/Continuation Date" means any date on which, under Section 2.4,
the Company (a) converts Loans of one Type to another Type, or (b) continues as
Loans of the same Type, but with a new Interest Period, Loans having Interest
Periods expiring on such date.
"Debt Rating" means the respective ratings assigned to the Company's long-
term senior unsecured debt by the Rating Agencies.
"Default" means any event or circumstance which, with the giving of notice,
the lapse of time, or both, would (if not cured or otherwise remedied during
such time) constitute an Event of Default.
"Documentation Agent" means The First National Bank of Chicago, a national
banking association, in its capacity as documentation agent for the Banks
hereunder.
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"Eligible Assignee" means (a) a commercial bank organized under the laws of
the United States, or any state thereof, and having a combined capital and
surplus of at least $100,000,000; (b) a commercial bank organized under the laws
of any other country which (unless the Company shall otherwise consent thereto)
is a member of the Organization for Economic Cooperation and Development, or a
political subdivision of any such country, and having a combined capital and
surplus of at least $100,000,000, provided that such bank is acting through a
branch or agency located in the United States; and (c) a Person that is
primarily engaged in the business of commercial banking and that is (i) a
Subsidiary of a Bank, (ii) a Subsidiary of a Person of which a Bank is a
Subsidiary, or (iii) a Person of which a Bank is a Subsidiary.
"Environmental Matter" means a release of any Hazardous Material into the
environment or the generation, treatment, storage or disposal of any Hazardous
Material.
"Environmental Laws" means, collectively, all environmental, health and
safety laws, regulations, resolutions, and ordinances applicable to the Company
or any of its Subsidiaries or any of their respective assets or properties,
including: (a) all regulations, resolutions, ordinances, decrees, and other
similar documents and instruments of all courts and Governmental Authorities,
whether issued by environmental regulatory agencies or otherwise, and (b) all
laws, regulations, resolutions, ordinances and decrees relating to Environmental
Matters.
"Environmental Liability" means any liability under any applicable law for
any release of a Hazardous Material caused by the seeping, spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing of Hazardous Material into the environment, and
any liability for the costs of any clean-up or other remedial action, including
costs arising out of security fencing, alternative water supplies, temporary
evacuation and housing and other emergency assistance undertaken by any
environmental regulatory body having jurisdiction over the Company or any of its
Subsidiaries to prevent or minimize any actual or threatened release by the
Company or any of its Subsidiaries of any Hazardous Material into the
environment.
"Environmental Proceeding" means any judgment, action, proceeding or
investigation pending before any court or Governmental Authority, including, any
environmental regulatory body, with respect to or threatened against or
affecting the Company or any of its Subsidiaries or relating to the assets or
liabilities of any of them, including, in respect of any "facility" owned,
leased or operated by any of them under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, or under any
state, local or municipal statute, ordinance or regulation in respect thereof,
in connection with any release of any Hazardous Material into the environment,
or with the generation, storage or disposal of any Hazardous Material.
"Equipment Indebtedness" means, with respect to any Person, (a) all
Indebtedness of such Person minus (b) Indebtedness of such Person secured by a
lien on all or any part of the real property (including improvements thereon)
owned by such Person; provided, that Indebtedness of such Person described in
clause (b) above shall be excluded only to the extent that the amount of such
Indebtedness does not exceed the greater of the cost or appraised value of the
real property and improvements securing such Indebtedness, at the time such
Indebtedness was incurred.
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"ERISA" means the Employee Retirement Income Security Act of 1974.
"Eurodollar Rate" means, for any Interest Period, with respect to
Eurodollar Loans comprising part of the same Borrowing, the rate of interest per
annum (rounded upward to the next 1/16 of 1%) at which BofA would offer dollar
deposits for such Interest Period, in an amount approximately equal to BofA's
Eurodollar Loan comprising part of such Borrowing, to major banks in the
eurodollar market at or about 11:00 a.m. (London time) two Business Days prior
to the commencement of such Interest Period.
"Eurodollar Loan" means a Loan that bears interest based on the Adjusted
Eurodollar Rate.
"Event of Default" has the meaning specified in Section 8.
"FRB" means the Board of Governors of the Federal Reserve System, and any
Governmental Authority succeeding to any of its principal functions.
"Fee Letter" means the letter agreement dated June 14, 1999, among the
Company, the Arranger and the Administrative Agent.
"Federal Funds Rate" means, for any day, the rate set forth in the weekly
statistical release designated as H.15(519), or any successor publication,
published by the Federal Reserve Bank of New York (including any such successor,
"H.15(519)") on the immediately preceding Business Day opposite the caption
"Federal Funds (Effective)"; or, if for any relevant day such rate is not so
published on any such preceding Business Day, the rate for such day will be the
arithmetic mean as determined by the Administrative Agent of the rates for the
last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New
York City time) on that day by each of three leading brokers of Federal funds
transactions in New York City selected by the Administrative Agent.
"GAAP" means generally accepted accounting principles which (a) are the
principles promulgated or adopted by the Financial Accounting Standards Board
and its predecessors, in effect on the Balance Sheet Date; (b) are such that a
certified public accountant would, insofar as the use of accounting principles
is pertinent, be in a position to deliver an unqualified opinion as to financial
statements in which such principles as in effect on the Balance Sheet Date have
been properly applied; and (c) are applied on a basis consistent with prior
periods; provided that for purposes of the financial statements required to be
delivered pursuant to Section 6.2, and for purposes of Section 6.8, GAAP shall
mean generally accepted accounting principles, as in effect from time to time.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
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"Guaranty" means the Guaranty dated as of June 30, 1995, executed and
delivered by the Parent for the benefit of the Agents and the Banks.
"Guaranty Ratification" means the Ratification and Confirmation of even
date herewith, executed and delivered by the Parent for the benefit of the
Agents and the Banks.
"Hazardous Material" means any substance (i) the presence of which requires
or may hereafter require notification, investigation or remediation under any
federal, state or local statute, regulation, or rule, ordinance, order, action
or policy; (ii) which is or becomes defined as a "hazardous waste", "hazardous
material" or "hazardous substance" or "controlled industrial waste" or
pollutant" or "contaminant" under any present or future federal, state or local
statute, regulation, rule or ordinance or amendments thereto, including the
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
section 9601 et seq.) and any applicable local statutes and the regulations
promulgated thereunder; (iii) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and is
or becomes regulated by any Governmental Authority; (iv) the presence of which
would endanger the public health or the environment; (v) without limitation,
which contains gasoline, diesel fuel or other petroleum hydrocarbons or volatile
organic compounds; (vi) without limitation, which contains polychlorinated
biphenyls (PCBs) or asbestos or urea formaldehyde foam insulation; or (vii)
without limitation, which contains or emits radioactive particles, waves or
material, including radon gas.
"Indebtedness" means, with respect to any Person, (a) the principal amount
of all indebtedness of such Person (i) for borrowed money, (ii) for the deferred
purchase price of property, unless the price thereof was payable in full within
twelve months from the date on which the obligation was created, or (iii)
evidenced by notes, bonds or other instruments; (b) all Lease Obligations of
such Person; and (c) all guaranties and other contingent obligations of such
Person in respect of all indebtedness referred to in the foregoing clauses (a)
and (b) of any other Person.
"Indemnified Liabilities" has the meaning specified in subsection 15.2.
"Indemnified Person" has the meaning specified in subsection 15.2.
"Independent Accountant" means a firm of independent public accountants of
national reputation selected by the Company or the Parent, as the case may be,
which is "independent" as that term is defined in Rule 2-01 of Regulation S-X
promulgated by the Securities and Exchange Commission.
"Interest Charges" means, for any period, all expenses (net of any interest
income earned during such period) accrued for interest (including imputed
interest, accrued original issue discount and interest payable in kind) on all
Indebtedness for such period (including Indebtedness consisting of Lease
Obligations in respect of Capitalized Leases, but excluding Indebtedness
consisting of Lease Obligations other than Capitalized Leases), all as
determined in accordance with GAAP.
"Interest Payment Date" means, as to any Loan other than a Base Rate Loan,
the last day of each Interest Period applicable to such Loan and, as to any Base
Rate Loan, the last Business Day of each calendar quarter; provided, that if any
Interest Period for a Eurodollar Loan exceeds three
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<PAGE>
months, the date that falls three months after the beginning of such Interest
Period and after each Interest Payment Date thereafter is also an Interest
Payment Date.
"Interest Period" means, as to any Eurodollar Loan, the period commencing
on the Borrowing Date of such Loan or on the Conversion/Continuation Date on
which the Loan is converted into or continued as a Eurodollar Loan, and ending
on the date one, two, three or six months thereafter, as selected by the Company
in its Notice of Borrowing or Notice of Conversion/Continuation; provided that:
(i) if any Interest Period would otherwise end on a day that is not a
Business Day, that Interest Period shall be extended to the following
Business Day unless the result of such extension would be to carry such
Interest Period into another calendar month, in which event such Interest
Period shall end on the preceding Business Day;
(ii) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month in which such Interest Period would end) shall
end on the last Business Day of the calendar month in question;
(iii) no Interest Period for any Revolving Loan shall extend beyond
the Term Out Date; and no Interest Period for any Term Out Loan shall
extend beyond the Termination Date; and
(iv) no Interest Period applicable to a Term Out Loan, or any portion
thereof, shall extend beyond any date upon which is due any scheduled
principal payment in respect of such Loan unless, in each case, the
aggregate principal amount of such Loan represented by Base Rate Loans, or
by Eurodollar Loans having Interest Periods that will expire on or before
such date, equals or exceeds the amount of such principal payment.
"Investment" means any loans, capital contributions, advances, transfers of
assets (other than transfers for fair value as determined by the transferring
Person in good faith) and any purchases and other acquisitions for consideration
of evidences of Indebtedness, capital stock or other securities. With respect
to a parent corporation's investment in a consolidated Subsidiary, "Investment"
shall also include any retained earnings of such Subsidiary reflected on the
consolidated balance sheet of such parent and its Subsidiaries.
"Investment Grade Rating" means, on any day with respect to the Company's
long-term senior unsecured debt, a rating (a) of Baa3 or above, if rated by
Moody's, (b) of BBB- or above, if rated by S&P and (c) comparable to the
foregoing ratings, if rated by another nationally recognized rating agency
acceptable to the Banks.
"IRS" means the Internal Revenue Service, and any Governmental Authority
succeeding to any of its principal functions.
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"Lending Office" means, as to any Bank, the office or offices of such Bank
specified as its "Lending Office" or "Domestic Lending Office" or "Eurodollar
Lending Office", as the case may be, on Schedule 20, or such other office or
offices as such Bank may from time to time notify the Company and the
Administrative Agent.
"Lease Obligation" means, with respect to any Person, all rental
obligations of such Person under leases of property (other than electronic data
processing, computer and similar equipment and leases of real property) either
(a) which are Capitalized Leases, or (b) if not Capitalized Leases, which are
leases of equipment which had an initial term of more than three (3) years
(including any renewal terms at the option of the lessor thereof). The amount of
Lease Obligations shall be equal to the aggregate value of rentals payable
(other than rentals consisting of taxes, indemnities, maintenance items,
replacements and other similar charges which are in addition to the basic
financial rent for the use of the property) by the lessee thereof during the
remaining term thereof, including periods of renewal at the option of the
lessor, discounted to present value using the lessee's "incremental borrowing
rate at the inception of the lease" in accordance with Financial Accounting
Standard No. 13 of the Financial Accounting Standards Board in effect on the
Balance Sheet Date.
"Liabilities" means, with respect to any Person at any date as of which the
amount thereof shall be determined, an amount equal (without duplication) to (a)
all liabilities of such Person determined in accordance with GAAP plus (b) all
Indebtedness of such Person plus (c) the aggregate amount of such Person's
reimbursement obligations in respect of letters of credit minus (d) the
aggregate deferred income tax liability of such Person.
"Liens" has the meaning assigned to such term in Section 7.1.
"Loan" means an extension of credit by a Bank to the Company under Section
2, including each Revolving Loan and Term Out Loan, and may be a Base Rate Loan
or Eurodollar Loan (each, a "Type" of Loan).
"Loan Documents" means, collectively, this Agreement, the Notes, the Fee
Letter, the Guaranty Ratification, the Guaranty and such other documents as the
parties thereto designate in writing to be Loan Documents.
"Majority Banks" means, at any time, Banks holding at such time at least
51% of the then aggregate unpaid principal amount of the Loans, or, if no such
principal amount is then outstanding, Banks then having at least 51% of the
Commitments.
"Material Adverse Effect" means, with respect to any Person, a material
adverse change in, or a material adverse effect upon, the operations, business,
properties or condition (financial or otherwise) of such Person and its
Subsidiaries taken as a whole.
"Moody's" means Moody's Investors Services, Inc. or any successor thereto
performing the same function.
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"Multi-employer Plan" means a "Multi-employer Plan" as defined in Section
4001(a)(3) of ERISA with respect to which the Company or any other member of a
Controlled Group is making, or is obligated to make, contributions or has made,
or been obligated to make, contributions.
"Net Book Value" means, with respect to Transportation Equipment of any
Person, (a) in the case of Transportation Equipment owned by such Person and
leased by such Person as lessor under leases the rentals from which are carried
as a finance lease receivable on the balance sheet of such Person in accordance
with GAAP, the sum of (i) the net amounts carried as receivables on the balance
sheet of such Person in respect of such leases, and (ii) the residual value of
all Transportation Equipment subject to such leases, all computed in accordance
with GAAP; (b) in the case of other Transportation Equipment owned by such
Person, the initial cost of the Transportation Equipment to such Person as
carried on the balance sheet of such Person depreciated by such Person in
accordance with GAAP and in accordance with the depreciation schedule for such
Transportation Equipment set forth on Schedule 6.12; (c) in the case of
Transportation Equipment leased by such Person as lessee under a Capitalized
Lease, the amount shown on the asset side of the balance sheet of such Person in
accordance with Financial Accounting Standard No. 13 adopted by the Financial
Accounting Standards Board, as in effect on the Balance Sheet Date in respect of
such Transportation Equipment; and (d) in the case of Transportation Equipment
leased by a Person as lessee under a lease which is not a Capitalized Lease but
which is included as a Lease Obligation under this Agreement, the amount of such
Lease Obligation.
"Net Income" means, for any period, the net income or loss, as the case may
be, for such period after eliminating all extraordinary items of income, as
determined in accordance with GAAP.
"Net Worth" means, at any date as of which the amount thereof shall be
determined with respect to any Person, the sum of the following amounts which
would be set forth on a balance sheet of such Person on such date, in each case
as determined in accordance with GAAP: (a) the par value (or values stated on
the books of such Person) of the capital stock of all classes of such Person,
other than capital stock held in the treasury of such Person, plus (b) the
amount of the surplus, whether capital or earned, of such Person, minus (c) the
amount which would be carried in the asset side of such balance sheet of such
Person in respect of goodwill, trade names, trademarks, patents, unamortized
debt issuance expense and other intangibles, minus (d) any increase in the net
book value of fixed assets arising from a revaluation thereof after September
30, 1998.
"Non-Use Fee" has the meaning specified in Section 2.9(b).
"Note" means a promissory note executed by the Company in favor of a Bank,
in substantially the form of Exhibit A.
"Notice of Borrowing" means a notice in substantially the form of Exhibit
B.
"Notice of Conversion/Continuation" means a notice in substantially the
form of Exhibit C.
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"Obligations" means all unsatisfied indebtedness, obligations and
liabilities of the Company to any Bank, Agent or Indemnified Person, arising or
incurred under this Agreement or in respect of the Loans made or any notes or
other instruments at any time evidencing any of the foregoing, whether direct or
indirect, joint or several, absolute or contingent, matured or unmatured,
liquidated or unliquidated, secured or unsecured, arising by contract, operation
of law or otherwise.
"Original Obligations" has the meaning specified in subsection 1.A(b).
"Original Credit Agreement" has the meaning specified in the Premises
hereof.
"Other Taxes" means any present or future stamp or documentary taxes or
similar levies which arise from the execution, delivery or registration of, or
otherwise with respect to, this Agreement or any other Loan Documents.
"Parent" means XTRA Corporation, a Delaware corporation.
"Participant" has the meaning specified in subsection 12.2.
"PBGC" means the Pension Benefit Guaranty Corporation, created by Section
4002 of ERISA, and any Governmental Authority succeeding to any of its
principal functions under ERISA.
"Person" means any individual, corporation (including a business trust),
partnership, trust, unincorporated association, joint stock company or other
legal entity or organization and any government or agency or political
subdivision thereof.
"Plan" means, at any time, an employee pension benefit plan as defined in
Section 3(2) of ERISA (including Multi-employer Plans) that at such time is
either: (a) maintained by any member of a Controlled Group, or (b) maintained
pursuant to a collective bargaining agreement or any other arrangement under
which more than one employer makes contributions and to which any member of a
Controlled Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions.
"Pro Rata Share" means, as to any Bank, the percentage amount (expressed as
a decimal, rounded to the eighth decimal place) set forth on Schedule 1.1(B)
with respect to such Bank.
"Purchase Money Equipment Indebtedness" means, with respect to any Person,
all Indebtedness of such Person which is Secured Equipment Indebtedness and
which is incurred to finance the purchase of Transportation Equipment if such
Indebtedness (a) shall have been incurred within one hundred and eighty (180)
days of the acquisition of such Transportation Equipment by the Person whose
Purchase Money Equipment Indebtedness is being determined and (b) does not
exceed in principal amount the initial cost of such Transportation Equipment and
shall include all extensions, renewals and refinancings of such Indebtedness not
in excess of the principal amount thereof outstanding immediately prior to such
extension, renewal or refinancing. The initial cost of Transportation Equipment
may include, in addition to the purchase price thereof and the purchase price of
all accessories and equipment installed thereon, all freight, delivery and
handling charges,
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excise, sales and use taxes and all other amounts which may be capitalized and
included in the cost of the equipment under GAAP.
"Rating Agencies" means Moody's and S&P (or any other nationally recognized
rating agency acceptable to the Administrative Agent and the Banks that may be
substituted for Moody's or S&P).
"Requirement of Law" means, as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon such Person
or any of its assets or to which such Person or any of its assets is subject.
"Reserve Charge" means, for any day for any Interest Period, with respect
to Eurodollar Loans comprising part of the same Borrowing, a percentage amount
equal to the difference of (a) a fraction (expressed as a percentage) the
numerator of which is the Eurodollar Rate (expressed as a decimal) and the
denominator of which is one minus the Reserve Rate, minus (b) the Eurodollar
Rate (as so expressed).
"Reserve Rate" means, for any day for any Interest Period, the maximum
reserve percentage (expressed as a decimal, rounded upward to the next 1/100th
of 1%) in effect on such day (whether or not applicable to any Bank) under
regulations issued from time to time by the FRB for determining the maximum
reserve requirement (including any emergency, supplemental or other marginal
reserve requirement) with respect to Eurocurrency funding (currently referred to
as "Eurocurrency liabilities").
"Revolving Loan" has the meaning specified in subsection 2.1(a).
"S&P" means Standard & Poor's Ratings Services, a division of The McGraw-
Hill Companies, Inc., or any successor thereto performing the same function.
"Secured Equipment Indebtedness" means, with respect to any Person, all
Indebtedness which is secured by any Lien on the Transportation Equipment of
such Person or on leases by such Person of any such Transportation Equipment and
includes all Lease Obligations. Transportation Equipment which is subject to a
lease or contract which is included as a Lease Obligation is deemed to secure
the Indebtedness evidenced thereby.
"Secured Indebtedness" means, with respect to any Person, all Indebtedness
which is secured by any Lien on any asset of such Person or on any lease by such
Person of any such assets, and includes all Lease Obligations of such Person.
"Subsidiary" of a Person means any corporation, association, partnership,
limited liability company, joint venture or other business entity of which more
than 50% of the voting stock, membership interests or other equity interests (in
the case of Persons other than corporations), is owned or controlled directly or
indirectly by such Person, or one or more of the Subsidiaries of such Person, or
a combination thereof.
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"Syndication Agent" means BankBoston, N.A., in its capacity as syndication
agent for the Banks hereunder.
"Taxes" means any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Bank and the Agents, taxes imposed on such
Person's net income and franchise taxes imposed on such Person, except in a
jurisdiction in which such Person is not doing any business except making loans
to the Company hereunder.
"Term Out Date" means June 30, 2001; provided, that upon (a) written
request of the Company to the Administrative Agent not later than thirty (30)
days prior to the date set forth above and (b) the prior written consent of each
of the Banks (such consent to be given in the sole discretion of such Bank), the
Term Out Date shall be such later date as the Banks and the Company may agree
upon.
"Term Out Loan" has the meaning specified in subsection 2.1(b).
"Termination Date" means the fifth anniversary of the Term Out Date.
"Transportation Equipment" means containers, trucks, tractors, trailers,
chassis, cranes, portable ramps, lifting equipment, railroad rolling stock,
modular office units and mobile office trailers, and includes all accessories
and attachments thereto.
"Type" has the meaning specified in the definition of "Loan."
"United States" and "U.S." each mean the United States of America.
"Utilization Fee" means, at any time, the then applicable Utilization Fee,
determined as set forth on Schedule 1.1(A).
"Welfare Plan" means, with respect to any member of a Controlled Group at
any time, an employee welfare benefit plan as defined in Section 3(1) of ERISA
that is maintained for the employees of such member at such time.
1.2 Other Interpretive Provisions.
(a) The meanings of defined terms are equally applicable to the singular
and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar words refer to
this Agreement as a whole and not to any particular provision of this Agreement;
and subsection, Section, Schedule and Exhibit references are to this Agreement
unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments, documents,
agreements, certificates, indentures, notices and other writings, however
evidenced.
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(ii) The term "including" is not limiting and means "including without
limitation."
(iii) In the computation of periods of time from a specified date to
a later specified date, the word "from" means "from and including"; the
words "to" and "until" each mean "to but excluding", and the word "through"
means "to and including"
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall be
deemed to include all exhibits and schedules thereto, subsequent amendments,
restatements and other modifications thereof, and supplements thereto, but only
to the extent such amendments and other modifications are not prohibited by the
terms of any Loan Document, and (ii) references to any statute or regulation are
to be construed as including all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting the statute or
regulation.
(e) The captions and headings of this Agreement are for convenience of
reference only and shall not affect the interpretation of this Agreement.
(f) This Agreement and other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar matters. All
such limitations, tests and measurements are cumulative and shall each be
performed in accordance with their terms.
(g) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by respective counsel to the Agents,
the Banks and the Company and are the products of all parties. Accordingly,
they shall not be construed against any Agent or Bank merely because of such
Person's involvement in their preparation.
(h) As used in the definition of the term "Applicable Margin" and Section
2.9, the term "rating" shall include "preliminary" or "indicative" senior debt
ratings or their equivalents.
1.3 Accounting Principles. Unless the context otherwise clearly requires,
all accounting terms not expressly defined herein shall be construed, and all
financial computations required under this Agreement shall be made, in
accordance with GAAP.
2. THE CREDIT FACILITIES.
2.1 Amounts and Terms of Commitments.
--------------------------------
(a) The Revolving Credit. Each Bank severally agrees, on the terms and
conditions set forth herein, upon request of the Company to make loans to the
Company (each such loan, a "Revolving Loan") from time to time on any Business
Day during the period from the Closing Date to the Term Out Date, in an
aggregate outstanding amount not to exceed at any time such Bank's Pro Rata
Share of the Commitment; provided, that, after giving effect to any Borrowing of
Revolving Loans, the aggregate outstanding amount of the Revolving Loans shall
not exceed the Commitment
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in effect at such time. Within the limits of each Bank's Pro Rata Share of the
Commitment, and subject to the other terms and conditions hereof, the Company
may borrow under this subsection 2.1(a), prepay under Section 2.6 and reborrow
under this subsection 2.1(a).
(b) The Term Out Credit. Each of the Banks severally agrees, on the terms
and conditions set forth herein, upon not less than five Business Days' prior
written notice from the Company to the Administrative Agent (which shall
promptly notify each Bank of its receipt of such notice and of the amount of
such Bank's Pro Rata Share of the aggregate principal amount of the Term Out
Loans requested), to convert, on the Term Out Date, all or any portion of each
Revolving Loan outstanding in favor of such Bank on such date into a term loan
in an equal amount (each such converted Revolving Loan, a "Term Out Loan"), so
long as on such date the aggregate amount of all (or the same portion) of the
outstanding Revolving Loans of each of the other Banks shall also be so
converted. Term Out Loans which are subsequently repaid or prepaid by the
Company may not be reborrowed.
2.2 Notes. The Loans made by each Bank shall be evidenced by one or more
Notes. Each Bank shall record in its records or, at its option, endorse on the
schedules annexed to its Note(s), the date, amount and maturity of each Loan
made by it and the amount of each payment of principal made by the Company with
respect thereto. Each Bank is irrevocably authorized by the Company to endorse
its Note(s) and each Bank's record shall be rebuttable presumptive evidence of
the principal amount owing and unpaid on such Note(s); provided, that the
failure of a Bank to make, or an error in making, a notation thereon with
respect to any Loan shall not limit or otherwise affect the obligations of the
Company hereunder or under any such Note to such Bank.
2.3 Procedure for Borrowing.
(a) Each Borrowing (including any Borrowing on the Closing Date) shall be
made upon the Company's irrevocable written notice delivered to the
Administrative Agent in the form of a Notice of Borrowing, which notice must be
received by the Administrative Agent prior to 9:00 a.m. (San Francisco time),
(i) three Business Days prior to the requested Borrowing Date, in the case of
Eurodollar Loans; and (ii) on the requested Borrowing Date, in the case of Base
Rate Loans, specifying:
(A) the amount of the Borrowing, which shall be in an aggregate
minimum amount of $5,000,000 or any multiple of $1,000,000 in excess
thereof (and the respective portions, if any, thereof comprised of
Revolving Loans or Term Out Loans);
(B) the requested Borrowing Date, which shall be a Business Day;
(C) the Type of Loans comprising the Borrowing; and
(D) the duration of the Interest Period applicable to any Eurodollar
Loans included in such notice. If the Notice of Borrowing fails to specify
the duration of the Interest Period for any Borrowing comprised of
Eurodollar Loans, such Interest Period shall be one month.
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(b) The Administrative Agent will promptly notify each Bank of its receipt
of any Notice of Borrowing and of the amount of such Bank's Pro Rata Share of
that Borrowing.
(c) Each Bank will make the amount of its Pro Rata Share of each Borrowing
available to the Administrative Agent for the account of the Company at the
Administrative Agent's Payment Office by 11:00 a.m. (San Francisco time) on the
Borrowing Date requested by the Company in funds immediately available to the
Administrative Agent. The proceeds of all such Loans will then be made available
to the Company by the Administrative Agent by wire transfer in accordance with
written instructions provided to the Administrative Agent by the Company of like
funds as received by the Administrative Agent.
(d) After giving effect to any Borrowing, there may not be more than ten
(10) different Interest Periods in effect.
2.4 Conversion and Continuation Elections.
(a) The Company may, upon irrevocable written notice to the Administrative
Agent in accordance with subsection 2.4(b):
(i) elect, as of any Business Day, in the case of Base Rate Loans, or
as of the last day of the applicable Interest Period, in the case of
Eurodollar Loans, to convert any such Loans (or any part thereof in an
amount not less than $5,000,000, or that is in an integral multiple of
$1,000,000 in excess thereof) into Loans of the other Type; or
(ii) elect, as of the last day of the applicable Interest Period, to
continue as Eurodollar Loans for another Interest Period any Eurodollar
Loans having Interest Periods expiring on such day (or any part thereof in
an amount not less than $5,000,000, or that is in an integral multiple of
$1,000,000 in excess thereof);
provided, that if at any time the aggregate amount of Eurodollar Loans in
respect of any Borrowing is reduced, by payment, prepayment, or conversion of
part thereof to less than $1,000,000, such Eurodollar Loans shall automatically
convert into Base Rate Loans, and on and after such date the right of the
Company to continue such Loans as, and convert such Loans into, Eurodollar
Loans, as the case may be, shall terminate.
(b) The Company shall deliver a Notice of Conversion/Continuation to be
received by the Administrative Agent not later than 9:00 a.m. (San Francisco
time) at least (i) three Business Days in advance of the Conversion/Continuation
Date, if the Loans are to be converted into or continued as Eurodollar Loans;
and (ii) on the Conversion/Continuation Date, if the Loans are to be converted
into Base Rate Loans, specifying:
(A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of Loans to be converted or continued (and
the respective portions, if any, thereof comprised of Revolving Loans or
Term Out Loans);
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(C) the Type of Loans resulting from the proposed conversion or
continuation; and
(D) other than in the case of conversions into Base Rate Loans, the
duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable to Eurodollar
Loans, the Company has failed to select timely a new Interest Period to be
applicable to such Loans, or if any Default or Event of Default then exists, the
Company shall be deemed to have elected to convert such Loans into Base Rate
Loans effective as of the expiration date of such Interest Period.
(d) The Administrative Agent will promptly notify each Bank of its receipt
of a Notice of Conversion/Continuation, or, if no timely notice is provided by
the Company, the Administrative Agent will promptly notify each Bank of the
details of any automatic conversion. All conversions and continuations shall be
made ratably according to the respective outstanding principal amounts of the
Loans held by each Bank with respect to which the notice was given.
(e) Unless the Majority Banks otherwise agree, during the existence of a
Default or Event of Default, the Company may not elect to have a Loan converted
into or continued as a Eurodollar Loan.
(f) After giving effect to any conversion or continuation of Loans, there
may not be more than ten (10) different Interest Periods in effect.
2.5 Voluntary Termination or Reduction of Commitment. The Company may,
upon not less than five Business Days' prior notice to the Administrative Agent
(which shall promptly notify each Bank thereof), terminate the Commitment, or
permanently reduce the Commitment by an aggregate minimum amount of $5,000,000
or any multiple of $1,000,000 in excess thereof; unless, after giving effect
thereto and to any prepayments of Revolving Loans made on the effective date
thereof, the then-outstanding principal amount of the Revolving Loans would
exceed the amount of the Commitment then in effect. Once reduced in accordance
with this Section 2.5, the Commitment may not be increased. Any reduction of the
Commitment shall be applied to each Bank according to its Pro Rata Share.
2.6 Prepayments.
(a) Optional Prepayments. Subject to Section 3, the Company may, at any
time or from time to time, upon not less than (a) in the case of Base Rate
Loans, one Business Day's irrevocable notice to the Administrative Agent, and
(b) in the case of Eurodollar Loans, three Business Days' irrevocable notice to
the Administrative Agent (which shall in each case promptly notify each Bank
thereof), ratably prepay Loans in whole or in part, in minimum amounts of
$1,000,000 or any multiple of $100,000 in excess thereof. Such notice of
prepayment shall specify the date and amount of such prepayment, whether the
Loans to be prepaid are Revolving Loans or Term Out Loans, and the Type(s) of
Loans to be prepaid. The Administrative Agent will promptly
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notify each Bank of its receipt of any such notice, and of such Bank's Pro Rata
Share of such prepayment. If such notice is given by the Company, the Company
shall make such prepayment and the payment amount specified in such notice shall
be due and payable on the date specified therein, together, if such prepayment
is a prepayment of Eurodollar Loans, with accrued interest to each such date on
the amount prepaid and any amounts required pursuant to Section 3. Optional
prepayments of Term Out Loans shall be applied on a pro rata basis to remaining
scheduled installments of principal thereon.
(b) Mandatory Prepayment Upon Change of Control. No later than the date
of the occurrence of any Change of Control, the Company shall give written
notice thereof to the Administrative Agent accompanied by a certificate of the
president of the Company specifying the nature of such Change of Control and the
date on which such Change of Control occurred. Such notice shall (a) contain the
written, irrevocable offer of the Company to prepay in full all Obligations of
the Company (including, without limitation, all Obligations under Section 3
hereof) on a date (the "Change of Control Prepayment Date") specified in such
notice (which date shall in no event be later than the date which is five(5)
Business Days after the date such Change of Control shall have occurred), (b)
state that, unless the Company receives written notice to the contrary from the
Administrative Agent at the direction of the Majority Banks not later than one
Business Day prior to the Change of Control Prepayment Date, the Company's offer
to prepay under this Section 2.6(b) shall be deemed to have been accepted by the
Administrative Agent at the direction of the Majority Banks, (c) state the
outstanding principal amount under each of the Notes as of the date of such
notice and (d) contain such additional information as the Administrative Agent
or any Bank shall reasonably request. If the Company does not receive written
notice from the Administrative Agent on or before the Business Day preceding the
Change of Control Prepayment Date, of the election of the Administrative Agent
at the direction of the Majority Banks not to accept the offer of the Company to
prepay as described above, all Obligations shall become immediately due and
payable by the Company on the Change of Control Prepayment Date.
2.7 Repayment.
(a) The Revolving Credit. Unless and to the extent such Loans are
converted on such date to Term Out Loans pursuant to subsection 2.1(c), the
Company shall repay to the Banks on the Term Out Date the aggregate principal
amount of Revolving Loans outstanding on such date.
(b) The Term Out Credit. The Company shall repay the Term Out Loans in
twenty (20) substantially equal installments on the last Business Day of each
consecutive calendar quarter, commencing with the first such date to occur after
the Term Out Date, with a final installment on the Termination Date in an amount
necessary to repay in full the then outstanding principal amount of the Term Out
Loans, plus all accrued and unpaid interest thereon.
2.8 Interest.
(a) Each Loan shall bear interest on the outstanding principal amount
thereof from the applicable Borrowing Date at a rate per annum equal to the
Adjusted Eurodollar Rate or the Adjusted
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Base Rate, as the case may be (and subject to the Company's right to convert to
other Types of Loans under Section 2.4).
(b) Interest on each Loan shall be paid in arrears on each Interest
Payment Date. Interest shall also be paid on the date of any prepayment of
Eurodollar Loans under Section 2.6 for the portion of the Eurodollar Loans so
prepaid and upon payment (including prepayment) in full of the Loans and also,
during the existence of any Event of Default, interest shall be paid on demand
of the Administrative Agent at the request or with the consent of the Majority
Banks.
(c) Notwithstanding subsection (a) of this Section 2.8, if any amount of
principal of or interest on any Loan, or any other amount payable hereunder or
under any other Loan Document is not paid in full when due (whether at stated
maturity, by acceleration, demand or otherwise), the Company agrees to pay
interest on such unpaid principal or other amount, from the date such amount
becomes due until the date such amount is paid in full, and after as well as
before any entry of judgment thereon to the extent permitted by law, payable on
demand, at a fluctuating rate per annum equal to the interest rate otherwise
applicable hereunder plus two percent (2%).
(d) Anything herein to the contrary notwithstanding, the obligations of
the Company to any Bank hereunder shall be subject to the limitation that
payments of interest shall not be required for any period for which interest is
computed hereunder, to the extent (but only to the extent) that contracting for
or receiving such payment by such Bank would be contrary to the provisions of
any law applicable to such Bank limiting the highest rate of interest that may
be lawfully contracted for, charged or received by such Bank, and in such event
the Company shall pay such Bank interest at the highest rate permitted by
applicable law.
2.9 Fees.
(a) Arrangement, Agency Fees. The Company shall pay all of the fees
payable under the Fee Letter as and when such fees become due and payable
pursuant to the terms thereof.
(b) Utilization Fee and Non-Use Fee. The Company shall pay to the
Administrative Agent for the account of each Bank:
(i) the applicable Utilization Fee per annum on the total amount of
Loans outstanding for each calendar quarter during the period from the
Closing Date to the Term-Out Date in the which the average outstanding
aggregate principal balance of the Loans exceeds 33 1/3% of the Commitment
in effect for such calendar quarter; and
(ii) a fee (the "Non-Use Fee") for the period from the Closing Date
to the Term Out Date at the per annum rate set forth on Schedule 1.1(A)
corresponding to the higher of the Company's Debt Ratings on such Bank's
Pro Rata Share of the Commitment;
provided, that, if at any time, neither of the Rating Agencies rates the
Company's long-term senior unsecured debt, then the respective percentages set
forth in Column V of Schedule 1.1(A) shall be used to determine the Utilization
Fee and Non-Use Fee, respectively. Notwithstanding the
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foregoing, at any time that the Company's Debt Ratings differ by more than one
level, then, if at such time, (a) the Company maintains an Investment Grade
Rating of such debt from both of the Rating Agencies, the rating level
immediately below the higher of such two ratings shall be used to determine the
Utilization Fee and Non-Use Fee respectively and (b) the Company maintains an
Investment Grade Rating of such debt from either but not both, or from neither
of the Rating Agencies, the lower of such two ratings shall be used to determine
the Utilization Fee and Non-Use Fee, respectively. Any change in the Utilization
Fee and Non-Use Fee resulting from a change in a Debt Rating shall become
effective one Business Day after the effective date of such change. The
Utilization Fee and Non-Use Fee shall in each case be calculated for the number
of actual days elapsed in the then ending quarter, and computed on the actual
number of days elapsed and a year of 360 days, except that the Utilization Fee
for the first calendar quarter shall be calculated for the period beginning with
the Closing Date. The Utilization Fee and Non-Use Fee shall in each case be
payable in arrears on or before the fifth (5th) Business Day following the last
day of each calendar quarter, and if the Term Out Date occurs on any day other
than the last day of a calendar quarter, on or before the fifth (5/th/)Business
Day following the Term Out Date.
2.10 Computation of Interest.
(a) All computations of interest for Base Rate Loans when the Base Rate is
determined by BofA's "reference rate" shall be made on the basis of a year of
365 or 366 days, as the case may be, and actual days elapsed. All other
computations of interest shall be made on the basis of a 360-day year and actual
days elapsed. Interest and fees shall accrue during each period during which
interest or such fees are computed from the first day thereof to the last day
thereof.
(b) Each determination of an interest rate by the Administrative Agent
shall be conclusive and binding on the Company and the Banks in the absence of
manifest error.
2.11 Payments by the Company.
(a) All payments to be made by the Company shall be made without set-off,
recoupment or counterclaim. Except as otherwise expressly provided herein, all
payments by the Company shall be made to the Administrative Agent for the
account of the Banks at the Administrative Agent's Payment Office, and shall be
made in dollars and in immediately available funds, no later than 12:00 noon
(San Francisco time) on the date specified herein. The Administrative Agent will
promptly distribute to each Bank its Pro Rata Share (or other applicable share
as expressly provided herein) of such payment in like funds as received. Any
payment received by the Administrative Agent later than 12:00 noon (San
Francisco time) may be deemed by the Administrative Agent to have been received
on the following Business Day, in which case any applicable interest or fee
shall continue to accrue. The Administrative Agent shall be entitled to debit
any general account of the Company with the Administrative Agent in the amount
of any payment to be made by the Company when due in order to effect timely
payment thereof; provided, however, that the Administrative Agent shall promptly
notify the Company that its account has been so debited.
(b) Subject to the provisions set forth in the definition of "Interest
Period" herein, whenever any payment of principal, interest or fees is due on a
day other than a Business Day, such
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payment shall be made on the following Business Day, and such extension of time
shall in such case be included in the computation of interest or fees, as the
case may be.
(c) Unless the Administrative Agent receives notice from the Company prior
to the date on which any payment is due to the Banks that the Company will not
make such payment in full as and when required, the Administrative Agent may
assume that the Company has made such payment in full to the Administrative
Agent on such date in immediately available funds and the Administrative Agent
may (but shall not be so required), in reliance upon such assumption, distribute
to each Bank on such due date an amount equal to the amount then due such Bank.
If and to the extent the Company has not made such payment in full to the
Administrative Agent, each Bank shall repay to the Administrative Agent on
demand such amount distributed to such Bank, together with interest thereon at
the Federal Funds Rate for each day from the date such amount is distributed to
such Bank until the date repaid.
2.12 Payments by the Banks to the Administrative Agent.
(a) Unless the Administrative Agent receives notice from a Bank on or
prior to the Closing Date or, with respect to any Borrowing after the Closing
Date, no later than 10:00 a.m. (San Francisco time) on the date of such
Borrowing, that such Bank will not make available as and when required hereunder
to the Administrative Agent for the account of the Company the amount of that
Bank's Pro Rata Share of the Borrowing, the Administrative Agent may assume that
such Bank has made such amount available to the Administrative Agent in
immediately available funds on the Borrowing Date and the Administrative Agent
may (but shall not be so required), in reliance upon such assumption, make
available to the Company on such date a corresponding amount. If any Bank shall
not have made its full amount available to the Administrative Agent in
immediately available funds to the extent required by the terms of this
Agreement and the Administrative Agent in such circumstances has made available
to the Company such amount, such Bank shall on the Business Day following such
Borrowing Date make such amount available to the Administrative Agent, together
with interest at the Federal Funds Rate for each day from the date such amount
was made available by the Administrative Agent to the Company until the date on
which such Bank makes such amount available to the Administrative Agent. A
notice of the Administrative Agent submitted to any Bank with respect to amounts
owing under this subsection (a) shall be conclusive, absent manifest error. If
such amount is so made available, such payment to the Administrative Agent shall
constitute such Bank's Loan on the date of Borrowing for all purposes of this
Agreement. If such amount is not made available to the Administrative Agent on
the Business Day following the Borrowing Date, the Administrative Agent will
notify the Company of such failure to fund and, upon demand by the
Administrative Agent, the Company shall pay such amount to the Administrative
Agent for the Administrative Agent's account, together with interest thereon for
each day elapsed since the date of such Borrowing, at a rate per annum equal to
the interest rate applicable at the time to the Loans comprising such Borrowing.
(b) The failure of any Bank to make any Loan on any Borrowing Date shall
not relieve any other Bank of any obligation hereunder to make a Loan on such
Borrowing Date, but no Bank shall be responsible for the failure of any other
Bank to make the Loan to be made by such other Bank on any Borrowing Date.
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3. TAXES, YIELD PROTECTION AND ILLEGALITY
--------------------------------------
3.1 Taxes.
(a) Any and all payments by the Company to any Bank or the Administrative
Agent under this Agreement or any other Loan Document shall be made free and
clear of, and without deduction or withholding for, any Taxes, unless the
Company is required by law to make such deduction or withholding. In addition,
the Company shall pay all Other Taxes.
(b) The Company agrees to indemnify and hold harmless each Bank and the
Administrative Agent for the full amount of Taxes or Other Taxes (including any
Taxes imposed by any jurisdiction on amounts payable under this Section) paid by
such Bank or the Administrative Agent and any liability (including penalties,
interest, additions to tax and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted; provided, that the Company shall have the right to contest, reasonably
and in good faith to the appropriate Governmental Authorities, whether such
Taxes or Other Taxes were correctly or legally asserted if the Company has set
aside on its books provisions reasonably adequate for the payment of such Taxes
or Other Taxes. Payment under this indemnification shall be made within thirty
(30) days after the date any Bank or the Administrative Agent makes written
demand therefor.
(c) If the Company shall be required by law to deduct or withhold any Taxes
from or in respect of any sum payable hereunder to any Bank or the
Administrative Agent, then:
(i) the sum payable shall be increased as necessary so that after
making all required deductions and withholdings (including deductions and
withholdings applicable to additional sums payable under this Section) such
Bank or the Administrative Agent, as the case may be, receives an amount
equal to the sum it would have received had no such deductions or
withholdings been made;
(ii) the Company shall make such deductions and withholdings; and
(iii) the Company shall pay the full amount deducted or withheld to
the relevant taxing authority or other authority in accordance with
applicable law.
Each Bank agrees that if, after the payment by the Company of any such
additional amount, any amount identifiable as a part thereof is subsequently
recovered or used as a credit by such Bank, such Bank shall reimburse the
Company to the extent of the amount so recovered or used. A certificate of any
officer of such Bank setting forth the amount of such Tax or recovery or use and
the basis therefor shall, in the absence of manifest error, be conclusive.
(d) The provisions of subsections (a), (b) and (c) of this Section 3.1
shall not apply to any Bank which fails to comply with the provisions of Section
11.10 hereof.
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(e) Within thirty (30) days after the date of any payment by the Company of
Taxes or Other Taxes, the Company shall furnish the Administrative Agent the
original or a certified copy of a receipt evidencing payment thereof, or other
evidence of payment satisfactory to the Administrative Agent or the relevant
Bank, as the case may be.
(f) If the Company is required to pay additional amounts to any Bank or the
Administrative Agent pursuant to subsection (c) of this Section, then such Bank
shall use reasonable efforts (consistent with legal and regulatory restrictions)
to change the jurisdiction of its Lending Office so as to eliminate any such
additional payment by the Company which may thereafter accrue, if such change in
the judgment of such Bank is not otherwise disadvantageous to such Bank.
3.2 Illegality.
(a) If any Bank determines that the introduction of any Requirement of Law,
or any change in any Requirement of Law, or in the interpretation or
administration of any Requirement of Law, has made it unlawful, or that any
central bank or other Governmental Authority has asserted that it is unlawful,
for any Bank or its applicable Lending Office to make Eurodollar Loans, then, on
notice thereof by such Bank to the Company through the Administrative Agent, any
obligation of such Bank to make Eurodollar Loans shall be suspended until such
Bank notifies the Administrative Agent and the Company that the circumstances
giving rise to such determination no longer exist.
(b) If a Bank determines that it is unlawful to maintain any Eurodollar
Loan, the Company shall, upon its receipt of notice of such fact and demand from
such Bank (with a copy to the Administrative Agent), prepay in full such
Eurodollar Loans of Bank then outstanding, together with interest accrued
thereon and amounts required under Section 3.4, either on the last day of the
Interest Period thereof, if such Bank may lawfully continue to maintain such
Eurodollar Loans to such day, or immediately, if such Bank may not lawfully
continue to maintain such Eurodollar Loan. If the Company is required to so
prepay any Eurodollar Loan, then concurrently with such prepayment, the Company
shall borrow from the affected Bank, in the amount of such repayment, a Base
Rate Loan.
(c) If the obligation of any Bank to make or maintain Eurodollar Loans has
been so terminated or suspended, the Company may elect, by giving notice to such
Bank through the Administrative Agent that all Loans which would otherwise be
made by such Bank as Eurodollar Loans shall be instead Base Rate Loans.
(d) Before giving any notice to the Agent under this Section, the affected
Bank shall designate a different Lending Office with respect to its Eurodollar
Loans if such designation will avoid the need for giving such notice or making
such demand and will not, in the judgment of the Bank, be illegal or otherwise
disadvantageous to the Bank.
3.3 Increased Costs and Reduction of Return.
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(a) If any Bank determines that, due to either (i) the introduction of or
any change in or in the interpretation of any law or regulation or (ii) the
compliance by such Bank with any guideline or request from any central bank or
other Governmental Authority (whether or not having the force of law), there
shall be any increase in the cost to such Bank of agreeing to make or making,
funding or maintaining any Eurodollar Loans (which increase is not otherwise
reflected in amounts payable by the Company hereunder), then the Company shall
be liable for, and shall from time to time, upon demand (with a copy of such
demand to be sent to the Administrative Agent), pay to the Administrative Agent
for the account of such Bank, additional amounts as are sufficient, in the good
faith judgment of such Bank, to compensate such Bank for such increased costs.
(b) If any Bank shall have determined that (i) the introduction of any
Capital Adequacy Regulation, (ii) any change in the interpretation or
administration of any Capital Adequacy Regulation by any central bank or other
Governmental Authority charged with the interpretation or administration thereof
or (iii) compliance by such Bank (or its Lending Office) or any corporation
controlling such Bank with any Capital Adequacy Regulation, affects or would
affect the amount of capital required or expected to be maintained by such Bank,
such Bank shall promptly after its determination of such occurrence give notice
to the Company of (a) the occurrence thereof, and (b) the additional amount
payable by the Company which in such Bank's reasonable determination will
compensate such Bank or such corporation controlling such Bank for such
reduction and, subject to the further terms of this paragraph, such amount shall
be due and payable by the Company to such Bank at the time of such notice. If,
at the time of notice to the Company that amounts are due under this subsection
3.3(b), the Company and such Bank disagree as to the amounts payable, then the
Company and such Bank shall thereafter attempt to negotiate in good faith an
adjustment to the compensation payable hereunder which will adequately
compensate such Bank for such reduction. If the Company and such Bank are
unable to agree to such adjustment, then, unless the Commitments shall have been
terminated or any amount on which adjustments are to be made under this
subsection 3.3(b) has been prepaid in full, as the case may be, commencing on
the thirty first (31st) day following such notice (but not earlier than the
effective date of such introduction, change or compliance), the fees payable
hereunder shall increase by an amount which will, in such Bank's reasonable
determination, compensate such Bank for such reduction, such Bank's
determination of such amount to be conclusive and binding on the Company, absent
manifest error. In determining such amount, such Bank or such corporation
controlling such Bank may use any reasonable methods of averaging, allocating or
attributing such reduction among their respective customers.
3.4 Funding Losses. The Company shall reimburse each Bank and hold each
Bank harmless from any loss or expense which such Bank may sustain or incur as a
consequence of:
(a) the failure of the Company to borrow, continue or convert a Loan
after the Company has given (or is deemed to have given) a Notice of
Borrowing or a Notice of Conversion/ Continuation; or
(b) the prepayment or other payment (including after acceleration
thereof) of a Eurodollar Loan on a day prior to the last day of the
relevant Interest Period;
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including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Eurodollar Loans or from fees payable to
terminate the deposits from which such funds were obtained.
3.5 Inability to Determine Rates. If the Administrative Agent determines
that for any reason adequate and reasonable means do not exist for determining
the Eurodollar Rate for any requested Interest Period with respect to a proposed
Eurodollar Loan, or that the Adjusted Eurodollar Rate applicable pursuant to
subsection 2.8(a) for any requested Interest Period with respect to a proposed
Eurodollar Loan does not adequately and fairly reflect the cost to the Banks of
funding such Loan, the Administrative Agent will promptly so notify the Company
and each Bank. Thereafter, the obligation of the Banks to make or maintain
Eurodollar Loans hereunder shall be suspended until the Administrative Agent
upon the instruction of the Majority Banks revokes such notice in writing. Upon
receipt of such notice, the Company may revoke any Notice of Borrowing or Notice
of Conversion/Continuation then submitted by it. If the Company does not revoke
such Notice, the Banks shall make, convert or continue the Loans, as proposed by
the Company, in the amount specified in the applicable notice submitted by the
Company, but such Loans shall be made, converted or continued as Base Rate Loans
instead of Eurodollar Loans.
3.6 Certificates of Banks. Any Bank claiming reimbursement or
compensation under this Section 3 shall deliver to the Company (with a copy to
the Administrative Agent) a certificate setting forth in reasonable detail the
amount payable to such Bank hereunder and such certificate shall be conclusive
and binding on the Company in the absence of manifest error.
3.7 Substitution of Banks. Upon the receipt by the Company from any Bank
(an "Affected Bank") of a notice pursuant to Section 3.2 that it is unlawful for
such Bank to maintain Eurodollar Loans, or of a claim by such Bank for
compensation under Section 3.3, the Company may: (i) request one or more of the
other Banks to acquire and assume all or part of such Affected Bank's Loans and
Commitment; or (ii) designate a replacement bank or other financial institution.
Any such designation of a replacement bank or other financial institution under
this Section 3.7 shall be subject to the prior written consent of the
Administrative Agent (which consent shall not be unreasonably withheld).
Nothing in this Section 3.7 is intended or shall be deemed to require any
Affected Bank to accept less than payment in full of the aggregate then
outstanding principal balance of the Loans made by such Affected Bank (together
with then accrued interest and fees payable with respect thereto and all other
amounts payable to such Bank hereunder) in connection with the replacement of
such Affected Bank by any other Person hereunder.
3.8 Survival. The agreements and obligations of the Company in this
Section 3 shall survive the payment of all other Obligations and the termination
of this Agreement.
4. CONDITIONS PRECEDENT
--------------------
4.1 Conditions of Initial Loans. The obligation of each Bank to make its
initial Loan hereunder is subject to the following conditions precedent:
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(a) the Administrative Agent has received on or before the Closing Date all
of the following, in form and substance satisfactory to the Administrative Agent
and each Bank, and in sufficient copies for each Bank:
(i) Credit Agreement and Notes. This Agreement duly executed by each
party hereto and the Notes, duly executed by the Company;
(ii) Other Documents. Each of the other documents described on
Exhibit D hereto, in each case in form and substance satisfactory to the
Administrative Agent and each of the Banks;
(iii) Payment of Fees. Evidence of payment by the Company of all
accrued and unpaid fees, costs and expenses under this Agreement and the
other Loan Documents, to the extent then due and payable on the Closing
Date;
(iv) Officer's Certificate. A certificate signed by the Chief
Financial Officer or Treasurer of the Company, dated as of the Closing
Date, stating that:
(1) the representations and warranties contained in Section 5 are
true and correct on and as of such date, as though made on and as of
such date;
(2) no Default or Event of Default exists or would result from
the initial Borrowing; and
(3) there has not occurred since September 30,1998, any material
adverse change in the assets, liabilities (actual or contingent),
operations, business, properties, condition (financial or otherwise)
or prospects of the Parent, the Company and their respective
Subsidiaries taken as a whole; and
(v) Other Documents. Such other approvals, opinions, documents or
materials as any Bank may reasonably request.
4.2 Conditions to All Borrowings. The obligation of each Bank to make any
Loan to be made by it (including its initial Loan) or to continue or convert any
Loan (whether under subsection 2.1(c) or Section 2.4) is in each case subject to
the satisfaction of the following conditions precedent on the relevant Borrowing
Date or on the Term Out Date or, except in the case of conversions and
continuations of Loans under Section 2.4, with respect to which the condition
set forth in paragraph (b) below shall not apply, the Conversion/Continuation
Date, as the case may be:
(a) Notice. The Administrative Agent shall have received (with, in the
case of the initial Loan only, a copy for each Bank) a Notice of Borrowing,
Notice of Conversion/Continuation or other notice, as applicable;
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(b) Continuation of Representations and Warranties. The representations
and warranties in Section 5 shall be true and correct in all material respects
on and as of such Borrowing Date, or on and as of the Term Out Date, as the case
may be, with the same effect as if made on and as of such date, except to the
extent that the facts upon which such representations and warranties are based
may be changed by transactions permitted or contemplated hereby or such
representations and warranties expressly refer to an earlier date, in which case
they shall be true and correct as of such earlier date; and
(c) No Existing Default. No Default or Event of Default shall exist or
shall result from such Borrowing or continuation or conversion.
Each Notice of Borrowing and Notice of Conversion/Continuation submitted by the
Company hereunder, and any notice submitted by the Company pursuant to
subsection 2.1(c), shall constitute a representation and warranty by the Company
hereunder, as of the date of each such notice and as of each Borrowing Date or
Conversion/Continuation Date, as the case may be, that the applicable conditions
in this Section 4.2 are satisfied.
5. REPRESENTATIONS AND WARRANTIES.
------------------------------
The Company represents and warrants to the Agents and each Bank that:
5.1 Corporate Existence and Good Standing. The Company and each of its
Subsidiaries, (a) are corporations duly organized, validly existing and in good
standing under the laws of the respective jurisdictions in which they are
incorporated, (b) have corporate power to own their property and conduct their
respective businesses as now conducted and as presently contemplated, and (c)
are duly qualified to do business and in good standing as foreign corporations
in each jurisdiction where the conduct of their business or the nature of their
assets require such qualification and as to which the failure so to be qualified
could singly or in the aggregate reasonably be expected to have a Material
Adverse Effect on the Company.
5.2 Corporate Power; Consent; Absence of Conflict with Other Agreements.
The execution, delivery and performance of this Agreement and the other Loan
Documents by the Company and the borrowings and transactions contemplated
hereby:
(a) are within the corporate powers of the Company, have been duly
authorized by all necessary corporate action, and do not and will not contravene
any provision of law applicable to it or any contractual restriction binding on
or affecting it;
(b) do not require any approval or consent of, or filing with, any
Governmental Authority bearing on the validity of such documents and borrowings
which is required by law or regulation of any Governmental Authority, except for
those which have been duly obtained or made and are in full force and effect,
and are not in contravention of the terms of the Company's charter documents or
by-laws, or any amendment thereof, and are not in contravention of the terms of
the charter documents or by-laws, or any amendment thereof, of any Subsidiary of
the Company;
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(c) will not conflict with or result in any breach or contravention of or
the creation of any lien (other than Liens permitted under Section 7.1) under
any document to which the Company or any of its Subsidiaries is a party or by
which the Company or any Subsidiary is bound and which is material to the
Company and its Subsidiaries taken as a whole; and
(d) are and will be duly executed, valid and legally binding obligations of
the Company and are and will be enforceable in accordance with their respective
terms, except as limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or affecting generally the enforcement of creditors'
rights.
5.3 Title to Properties. The Company and each of its Subsidiaries have
good and valid title to all properties, assets and rights of every name and
nature now purported to be owned by the Company or such Subsidiary which are
material to the business of the Company and its Subsidiaries, on a consolidated
basis, free from all defects, liens, charges and encumbrances whatsoever, other
than statutory and other similar non-consensual liens and insubstantial defects
in title which do not materially detract from the value, or impair the use of,
the affected properties, and liens permitted under Section 7.1. The Company and
each of its Subsidiaries possess all patents, patent applications, patent
licenses, copyrights, trademarks, service marks and trade names and rights with
respect to the foregoing necessary for the conduct of the respective businesses
of the Company and its Subsidiaries substantially as now conducted without any
known conflict with the rights of others except conflicts which are not in the
aggregate material to the business of the Company and its Subsidiaries, on a
consolidated basis.
5.4 Financial Statements. The Company has furnished to the Banks the
following: (a) (i) consolidated balance sheet as of September 30, 1998 and
related consolidated statements of operations, stockholders' equity and cash
flows of the Parent and its Subsidiaries for the fiscal year then ended, all
certified by the Parent's Independent Accountant, (ii) consolidating balance
sheet as of September 30, 1998 and related consolidating statement of operations
of the Parent and its Subsidiaries, (iii) consolidated and consolidating balance
sheets as of September 30, 1998 of the Company and its Subsidiaries, and related
statements of operations; and (b) as of March 31, 1999 or for the quarterly
fiscal period then ended (i) a consolidated balance sheet and related
consolidated statements of operations, stockholders' equity and cash flows of
the Parent and its Subsidiaries, (ii) a consolidating balance sheet and
consolidating related statement of operations of the Parent and its Subsidiaries
for the portion of the fiscal year then ended, and (iii) consolidated and
consolidating balance sheets and statements of operations of the Company and its
Subsidiaries. The balance sheets, statements of operations, stockholders'
equity and cash flows described above (i) have been prepared in conformity with
GAAP applied on a consistent basis throughout the periods specified, except
where such principles are inconsistent with the applicable provisions of
regulatory authorities having jurisdiction in the premises (and such exception
has been noted to the Banks and explained in reasonable detail in the applicable
statements), and (ii) present fairly the financial position of the Parent and
its Subsidiaries and the Company and its Subsidiaries as of the dates thereof,
subject, with respect to unaudited statements, to year end audit adjustments.
5.5 Holding Company and Investment Company Acts. Neither the Company nor
any of its Subsidiaries is a "registered holding company, or a "subsidiary
company" of a "registered
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holding company", or an "affiliate" of a "registered holding company" or of a
"subsidiary company" of a "registered holding company", as each of such terms is
defined in the Public Utility Holding Company Act of 1935. Neither the Company
nor any of its Subsidiaries is a "registered investment company" or an
"affiliated company" or a "principal underwriter" of a "registered investment
company", as each of such terms is defined in the Investment Company Act of
1940.
5.6 Litigation. There is no action, suit, investigation or proceeding
pending, or to the knowledge of any officer of any of such Persons, threatened
against the Parent or any of its Subsidiaries, before any court or
administrative agency which, by itself or taken together with other such
litigation, involves an amount not covered by insurance material to the Parent
and the Company, and their Subsidiaries, on a consolidated basis, nor is any
substantial basis for any such litigation known to exist.
5.7 No Materially Adverse Contracts. Neither the Parent, the Company, nor
any of their respective Subsidiaries, is subject to any indenture, bond, note,
agreement or charter, corporate or other legal restriction, or any judgment,
decree, order, rule, ordinance, resolution or regulation which could singly or
in the aggregate reasonably be expected to have a Material Adverse Effect on the
Parent. Neither the Parent, the Company, nor any of their respective
Subsidiaries, is a party to any contract or agreement which has had, or could
reasonably be expected to have, a Material Adverse Effect on the Parent.
5.8 Compliance with Other Instruments; Laws. Neither the Parent, the
Company, nor any of their respective Subsidiaries, is in violation of any
provision of its charter documents or by-laws or any document by which it or any
of its properties may be bound, or any decree, order, judgment, or, to the
knowledge of any officer of any of such Persons, any statute, license, rule or
regulation, in each case in a manner which could reasonably be expected to,
singly or in the aggregate, (i) result in the imposition of substantial
penalties material to the Parent, the Company and their respective Subsidiaries,
taken as a whole, or (ii) have a Material Adverse Effect on the Parent.
5.9 Taxes. All federal, state and other tax returns of the Parent, the
Company and each of their Subsidiaries required by law to be filed have been
filed, and all federal, state and other taxes, assessments and other
governmental charges upon each of such Persons or their properties which are due
and payable have been paid. The Parent has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods for which such returns have been filed to the extent such provisions are
required by GAAP.
5.10 No Default. No Default or Event of Default exists at the delivery of
this Agreement.
5.11 Use of Proceeds. The proceeds of all Loans will be used by the
Company for working capital, capital expenditures and other general corporate
purposes. No portion of the Loans is to be or will be used for the purpose of
purchasing or carrying any "margin security" or "margin stock" of an issuer as
such terms are used in Regulations G and U of the Board of Governors of the
Federal Reserve System, 12 C.F.R. 207 and 221, in violation of such Regulations
G and U.
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5.12 ERISA. Except as set forth in Schedule 5.12, neither the Parent, the
Company nor any of their respective Subsidiaries (i) has or maintains, or has
during the past five years maintained or established, any Plan or Welfare Plan,
or (ii) is, or during the past five years has been, a participating employer in
any Plan under which more than one employer makes contributions described in
Sections 4063 and 4064 of ERISA or a Multi-employer Plan. All such Plans and
Welfare Plans so scheduled have been maintained, operated and funded in all
material respects in compliance with the requirements of ERISA, the Code and
applicable law. The Parent, the Company and each of their respective
Subsidiaries have funded all of their respective obligations to any Multi-
employer Plans.
5.13 Licenses and Approval. Each of the Company and its Subsidiaries has
all necessary licenses, permits and governmental authorizations, including,
licenses, permits and authorizations relating to Environmental Matters, to own
and operate its properties and to carry on its business as now conducted, except
where the failure to do so could not singly or in the aggregate reasonably be
expected to have a Material Adverse Effect on the Company and could not
reasonably be expected to have an adverse effect on the enforceability of any of
the Loan Documents.
5.14 Condition of Assets. All of the respective assets of the Company
and its Subsidiaries which are reasonably necessary for the operation of the
business of the Company and its Subsidiaries, taken as a whole, are in good
working condition, ordinary wear and tear excepted, and are able to serve the
function for which they are currently being used.
5.15 Subsidiaries. Except for certain inactive Subsidiaries, Schedule
5.15 attached hereto correctly identifies all Subsidiaries of the Parent and the
Company. All of the issued and outstanding shares of the capital stock of each
such Subsidiary are duly issued and outstanding, fully paid and non-assessable
and, except for directors' qualifying shares and shares issued solely for the
purpose of satisfying local requirements concerning the minimum number of
shareholders, are owned by the Parent, the Company or a Subsidiary thereof free
and clear of any mortgage, pledge, lien, encumbrance, charge or restriction on
transfer.
5.16 Full Disclosure. None of the financial statements nor any balance
sheet, nor any certificate, opinion, or any other statement made or furnished in
writing to the Administrative Agent or any Bank by or on behalf of the Parent,
the Company or any of their respective Subsidiaries in connection with this
Agreement or the transactions contemplated herein, contains any untrue statement
of a material fact, or omits to state, under the circumstances in which made, a
material fact necessary in order to make the statements contained therein or
herein not misleading, as of the date such statement was made. There are no
facts known to the Company which singly or in the aggregate have, or could
reasonably be expected now or in the foreseeable future to have, a Material
Adverse Effect on the Parent, which fact was required to be and was not set
forth in the Parent's reports and filings, if any, filed with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934.
5.17 Year 2000 Compliance. The Company has (i) initiated a review and
assessment of all areas within its and each of its Subsidiaries' business and
operations (including those affected by suppliers, vendors and customers) that
could reasonably be expected to affect in any material
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respect by the "Year 2000 Problem" (that is, the risk that computer applications
used by the Company or any of its Subsidiaries (or suppliers, vendors and
customers) may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December 31,
1999), (ii) developed a plan and time line for addressing the Year 2000 Problem
on a timely basis, and (iii) to date, implemented that plan substantially in
accordance with that timetable. Based on the foregoing, the Company reasonably
believes that all computer applications (including those of its suppliers,
vendors and customers) that are material to its or any of its Subsidiaries'
business and operations are reasonably expected on a timely basis to be able to
perform properly date-sensitive functions for all dates before and after January
1, 2000 (that is, be "Year 2000 compliant"), except to the extent that any
failures to do so singly or in the aggregate could not reasonably be expected to
have a Material Adverse Effect.
6. AFFIRMATIVE COVENANTS.
---------------------
The Company covenants and agrees that, so long as any portion of the
Commitments remains outstanding or until such date as the Loans and all other
Obligations have been paid and satisfied in full, whichever shall later occur,
it will and each of its Subsidiaries will:
6.1 Punctual Payment. Duly and punctually pay or cause to be paid
principal and interest and all other sums due under this Agreement and the Notes
in accordance with the terms hereof and thereof.
6.2 Financial Statements. Furnish to the Banks:
(a) as soon as practicable and in any event within ninety (90) days after
the end of each of the first three quarterly periods of each fiscal year of the
Parent and the Company, financial statements of the type set forth in subsection
5.4(b) hereof for each of the Company and the Parent as of the end of each of
such quarterly periods or for the respective fiscal periods then ended and for
the period from the beginning of the current fiscal year to the end of such
period, setting forth in comparative form the figures for the corresponding
periods of the previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP, subject to changes resulting from audit and year-end
adjustments, and certified by the principal financial officers of the Parent and
the Company, who shall also provide a certificate and covenant compliance
worksheet in the form of Exhibit E as to the computations evidencing compliance
by the Company with Sections 7.2 through 7.5 (the "Compliance Certificate");
(b) as soon as practicable and in any event within 120 days after the end
of each fiscal year of the Parent and the Company, audited financial statements
of the type set forth in subsection 5.4(a) hereof as of the end of such year and
for the fiscal year then ended, setting forth in comparative form the figures
for the previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP and, with respect to the Parent, such consolidated balance sheets and
statements, and with respect to the Parent and its Subsidiaries, such
consolidating balance sheets and statements accompanied by a report and opinion
of the Independent Accountant, which report and opinion shall have been prepared
in accordance with generally accepted auditing standards, and all such financial
statements in all cases shall be certified by the principal financial officer of
the Parent or the Company, as the
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case may be; provided, that at any time that the assets of the Company and its
consolidated Subsidiaries comprise less than 85% of the consolidated assets of
the Parent and its Subsidiaries (including the Company and its Subsidiaries),
the Company shall furnish to the Bank, within the time period set forth above,
the consolidated audited financial statements as described above in this Section
6.2(b) for the Company and its Subsidiaries, accompanied by a report and opinion
of the Independent Accountant, which report and opinion shall have been prepared
in accordance with generally accepted auditing standards, and all such financial
statements shall be certified by the principal financial officer of the Company.
(c) promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent by the Parent, the
Company or any Subsidiary to stock holders, and of all regular and periodic
reports filed by the Parent, the Company or any Subsidiary with any securities
exchange or with the Securities and Exchange Commission or any Governmental
Authority succeeding to any or all of the functions of said Commission; and
(d) from time to time any such information regarding the financial and
other affairs of the Parent, the Company, or any of their respective
Subsidiaries as may reasonably be requested by any Bank, including, copies of
all letters issued by the Independent Accountant or other management consultants
with respect to any material inadequacies in the Company's internal control
systems, and copies of the corporate documents of the Company and each of the
Subsidiaries.
At the time of each delivery of financial statements pursuant to subsection
6.2(b), the Company shall furnish a statement of the Independent Accountant
addressed to the Administrative Agent and the Banks that such accountant has
caused the provisions of this Agreement to be reviewed, and that such accountant
has no knowledge of the existence of any Default or Event of Default, or if such
accountant has such knowledge, specifying the nature and period of existence
thereof and reasons therefor. At the time of each delivery of financial
statements pursuant to subsections 6.2(a) and (b), respectively, the Company
shall furnish the Banks a Compliance Certificate evidencing compliance with the
covenants described therein as of the end of the fiscal period covered by such
financial statements which shall include a certification to the effect that no
Default or Event of Default exists, or, if such cannot be so certified,
specifying in reasonable detail the exceptions, if any, to such statement.
6.3 Notification of Defaults and Event of Default. If the Company or any
of its Subsidiaries shall at any other time obtain knowledge of the existence of
any Default or Event of Default, the Company shall forthwith deliver to the
Administrative Agent (for prompt transmittal to the Banks) a certificate
specifying the nature and period of existence thereof and what action the
Company proposes to take with respect thereto.
6.4 Conduct of Business. Cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence, corporate
rights and franchises; effect and maintain its foreign qualifications,
licensing, domestication or authorization, except as terminated by its Board of
Directors in the exercise of its reasonable judgment; use its best efforts to
comply with all applicable laws, and not become obligated under any contract or
binding arrangement which, at the
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time it was entered into, could singly or in the aggregate have a Material
Adverse Effect on the Company.
6.5 Taxes. Duly pay and discharge, or cause to be paid and discharged,
before the same shall become in arrears, all taxes, assessments and other
governmental charges imposed upon it and its properties, sales and activities,
or any part thereof, or upon the income or profits therefrom, as well as all
claims for labor, materials, or supplies which if unpaid might by law become a
lien or charge upon any of its property, except such of those items as are being
in good faith appropriately contested by it, if in such case the Company shall
have set aside on its books reserves deemed by it to be adequate with respect to
such tax, assessment, or other charge.
6.6 Maintenance of Properties. Maintain and keep the properties used or
deemed by it to be useful in its business in good repair, working order and
condition, and make or cause to be made all necessary and proper repairs thereto
and replacements thereof.
6.7 Maintenance of Insurance. Maintain with financially sound and
reputable insurers, insurance with respect to properties and business of the
Company and its Subsidiaries against such casualties and contingencies and in
such types and amounts as shall be in accordance with sound business practices
for companies in similar businesses similarly situated.
6.8 Records and Accounts. Keep true records and books of account in
which full, true and correct entries will be made in accordance with GAAP and
with the requirements of regulatory authorities having jurisdiction in the
premises and maintain adequate accounts and reserves for all taxes (including
income taxes), all depreciation, depletion, obsolescence and amortization of its
properties, all other contingencies, and all other proper reserves.
6.9 Inspection.
(a) Permit any officer designated by any Bank, at such Bank's expense, to
visit and inspect any of its properties and to examine its books of account and
discuss the affairs, finances and accounts of the Company or any Subsidiary with
its officers, all at such reasonable times, in a reasonable manner and as often
as such Bank may reasonably request.
(b) All confidential information and documents concerning the Parent, the
Company, or any of their respective Subsidiaries supplied by the Company to such
Bank pursuant to the terms of this Agreement shall be held in confidence by such
Bank and such Bank shall not disclose such information and documents, except the
Company hereby authorizes such Bank to disclose any information obtained
pursuant to this Agreement (i) to any other Bank or to the Administrative Agent,
(ii) to any bank regulatory authority, (iii) to any independent auditor or
counsel or participant or potential assignee or potential participant of such
Bank, provided that the independent auditor or counsel or participant or
potential assignee or potential participant enters into a confidentiality
agreement with the Company substantially similar to such Bank's agreement in
this subsection 6.9(b), and (iv) to all other appropriate Governmental
Authorities to the extent required of such Bank by law or subpoena, but only to
the extent permitted by applicable laws and regulations, including those
applying to classified material. Upon receipt of a notice of any requirement to
disclose any
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information to any such Governmental Authority, such Bank will promptly notify,
unless prohibited by applicable law and regulations, the Company of such notice,
and unless otherwise required by law, will not disclose such information until
the Company has been afforded an opportunity to contest the requirement of such
disclosure.
6.10 Notice of Litigation. Promptly notify the Administrative Agent (for
prompt transmittal to the Banks) of the commencement of any litigation against
the Parent, the Company or any of their respective Subsidiaries which could
singly or in the aggregate have a Material Adverse Effect on the Parent.
6.11 Pension Plan.
(a) Maintain, operate and administer all Plans in all material respects in
accordance with the requirements of ERISA, the Code and applicable law.
(b) Fund and cause each of its Subsidiaries to fund any Plan, if maintained
by the Company or any of its Subsidiaries, as required by the provisions of
Section 302 of ERISA and Section 412 of the Code, or, if the Plan is maintained
by a third party or is a Multi-employer Plan, make payments to such third party
or Multi-employer Plan in the amounts and at the times required by applicable
law. The Company and each of its Subsidiaries will deliver to the Administrative
Agent (for prompt transmittal to the Banks), copies of any request for waiver
from the funding standards or extension of the amortization periods required by
303 and 304 of ERISA or 412 of the Code promptly following the date on which the
request is submitted to the Internal Revenue Service.
(c) Upon request made by any Bank, send to such Bank copies of all Forms
5500, Forms 5500-R and/or Forms 5500-C relating to a Plan or Welfare Plan (with
the exception of Multi-employer Plans) together with all attachments thereto,
including any actuarial statement required to be made under 103(d) of ERISA
promptly following the date on which such Form is filed with the Internal
Revenue Service.
(d) Furnish to the Administrative Agent forthwith upon filing or receipt,
as the case may be (i) a copy of the Company report, or any demand sent or
received by the Company or any of its Subsidiaries under Section 4041, 4042,
4043, 4063, 4065, 4066, or 4068 of ERISA; (ii) a statement of the action, if
any, which the Company or such Subsidiary proposes to take with respect to such
Company report, or demand sent or received by the Company or such Subsidiary
under Section 4041, 4042, 4043, 4063, 4065, 4066 or 4068 of ERISA; (iii) a copy
of all correspondence with the PBGC, the Secretary of Labor or any
representative of the IRS with respect to any Plan, relating to an actual or
threatened change or development which could reasonably be expected to be
materially adverse to the Company or any of its Subsidiaries; (iv) copies of all
actuarial valuations received by the Company with respect to any Plan: and (v)
copies of any notices of Plan termination filed by any Plan Administrator (as
those terms are used in ERISA) with the PBGC and of any notices from PBGC to the
Company with respect to the intent of the PBGC to institute involuntary
termination proceedings.
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(e) Cause any Plan maintained by the Company or any of its Subsidiaries to
pay all benefits guaranteed by the PBGC when due, except where the obligation to
pay such benefits is being contested in good faith by the Company or any of its
Subsidiaries.
6.12 Depreciation Schedule. For purposes of calculation of all of the
financial covenants contained in this Agreement, the Company will, and will
cause the Parent and each of the Company's Subsidiaries to, (a) calculate
depreciation on such Person's Transportation Equipment and all other depreciable
assets in accordance with the depreciation schedules for such assets set forth
in Schedule 6.12, and (b) with respect to depreciable assets acquired from and
after the Closing Date, calculate depreciation for such assets in accordance
with depreciation schedules similar to those set forth in Schedule 6.12 for
similar assets.
6.13 Perform Obligations. Pay and discharge all of its obligations and
liabilities, including, all material taxes, assessments and governmental
charges upon its income and properties, when due, unless and only to the extent
that such obligations, liabilities, taxes, assessments and governmental charges
shall be contested in good faith and by appropriate proceedings diligently
conducted and that, to the extent required by GAAP then in effect, proper and
adequate book reserves relating thereto are established and maintained by the
Company, or, as the case may be, by the appropriate Subsidiary or the Parent.
6.14 Comply with ERISA. Comply with all applicable provisions of ERISA
now or hereafter in effect with respect to the Plans, Welfare Plans and
Multi-employer Plans set forth on Schedule 5.12 and all other Plans, Welfare
Plans and Multi-employer Plans hereafter established unless and only to the
extent that such compliance is contested in good faith and by appropriate
proceedings diligently conducted and that, to the extent required by GAAP then
in effect, proper and adequate book reserves relating thereto are established
and maintained by the Company, or, as the case may be, by the appropriate
Subsidiary or the Parent. The Company shall promptly notify the Administrative
Agent of the establishment or assumption of any Plans, Welfare Plans and Multi-
employer Plans in addition to the plans set forth on Schedule 5.12, and upon
such notification, such plans shall be deemed to be included on such Schedule.
6.15 Environmental Compliance. If any claim is made, or any obligation
arises, under any Environmental Law, the Parent, the Company or such Subsidiary
shall, if such claim or obligation could singly or in the aggregate reasonably
be expected to have a Material Adverse Effect on the Company, undertake any
required removal or containment so as to comply with such Environmental Law or
contest such claim or obligation in good faith by appropriate proceedings
diligently conducted and, to the extent required by GAAP then in effect,
establish and maintain proper and adequate book reserves with respect thereto.
6.16 Debt Rating. Notify the Administrative Agent, by telephone,
facsimile, telex or cable, in each case confirmed, immediately in the manner
specified in Section 20, of any change in the rating of the Company's long-term
senior unsecured debt by Moody's or S&P (or any other applicable rating agency)
within five (5) Business Days of such change.
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6.17 Year 2000 Compliance. The Company will promptly notify the Bank in
the event the Company discovers or determines that any computer application
(including those of its suppliers, vendors and customers) that is material to
its or any of its Subsidiaries' business and operations will not be Year 2000
Compliant, except to the extent that any such failures singly or in the
aggregate could not reasonably be expected to have a Material Adverse Effect.
7. CERTAIN NEGATIVE COVENANTS.
--------------------------
The Company covenants and agrees that, so long as any portion of the
Commitments remains outstanding, or until such date as the Loans and all other
Obligations have been paid and satisfied in full, whichever shall later occur,
the following covenants will be complied with:
7.1 Liens. The Company shall not create or permit to exist any mortgage,
charge, pledge, deed of trust, financing lease under which the Company is the
lessee, security interest or other similar consensual encumbrance ("Liens") on
any of its property, whether owned at the date hereof or hereafter acquired,
other than:
(a) Liens on Transportation Equipment, securing Acquired Equipment
Indebtedness;
(b) Liens on Transportation Equipment, securing Purchase Money Equipment
Indebtedness, but only on the Transportation Equipment in respect of which such
Purchase Money Equipment Indebtedness was incurred;
(c) Liens on real property;
(d) Liens incurred, or deposits made, in the ordinary course of business
(i) in connection with workmen's compensation, unemployment insurance, social
security and other like laws, or (ii) to secure the performance of letters of
credit, bids, tenders, sales contracts, leases, statutory obligations, surety
appeal and performance bonds and other similar obligations not incurred in
connection with Indebtedness, or (iii) in connection with the opening of
commercial letters of credit naming the Company as account party;
(e) Liens on Transportation Equipment securing Lease Obligations; provided,
that no such Lease Obligations shall arise out of the sale and leaseback of
Transportation Equipment unless the sale and leaseback in question is entered
into prior to, at the time of or within 180 days of the acquisition of the
Transportation Equipment being sold and leased back; and provided, further, that
the leasing of Transportation Equipment which has been remanufactured so that it
is the substantial equivalent of new equipment shall be considered the leasing
of new equipment and not of used equipment which was remanufactured and
subsequently sold and leased back; and
(f) Liens to secure Indebtedness and other obligations which are not
referred to as permitted Liens in subsections (a), (b), (c), (d) or (e) above;
provided, that the aggregate principal amount of Indebtedness and other
obligations secured thereby at any one time outstanding shall not exceed three
percent (3%) of the Net Worth of the Company and its consolidated Subsidiaries;
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unless, prior to or simultaneously with the granting of any such Lien not
referred to in (a) through (f) above, the Company shall have executed and
delivered to a Collateral Trustee (as hereinafter defined), a security agreement
and such other documents as the Collateral Trustee may reasonably request, each
in form and substance reasonably satisfactory to the Administrative Agent,
granting to the Collateral Trustee a Lien on the assets of the Company subject
to such Lien, such Lien to be for the equal and ratable benefit of the
Administrative Agent and the Banks and such other holder or holders of
Indebtedness with which the Company has agreed to permit such holders to share
in such Lien. Such security agreement and other documents may provide, at the
option of the Company, that the Lien granted to the Collateral Trustee
thereunder shall terminate upon the termination of all other Liens for the
benefit of such other holder or holders of Indebtedness. The Collateral Trustee
shall be such Person as may be selected by the Company, or any holder of
Indebtedness to whom the Company has specifically granted the right to select
such Collateral Trustee, and who shall be entitled to act without qualification
or who, if required, shall qualify to act as such under the Trust Indenture Act
of 1939.
7.2 Maximum Secured Equipment Indebtedness of Company. The Company shall
not permit Secured Equipment Indebtedness (including Lease Obligations) of the
Company to exceed 15% of the Net Worth of the Company at the end of any fiscal
quarter.
7.3 Maximum Equipment Indebtedness. The Company shall not permit the
Equipment Indebtedness (less Secured Equipment Indebtedness) of the Company to
exceed 90% of Net Book Value of the Company's Transportation Equipment (less the
Net Book Value of Equipment which secures or is subject to leases which secure
Secured Equipment Indebtedness) plus the amount of its Cash, in each case as of
the end of each fiscal quarter.
7.4 Consolidated Leverage Ratio. The Parent shall not permit the ratio of
Consolidated Liabilities of the Parent and its Subsidiaries to Consolidated Net
Worth of the Parent and its Subsidiaries to exceed (a) 4.50 to 1.00 at any time
prior to the Term Out Date and (b) 4.00 to 1.00 at any time on or after the Term
Out Date.
7.5 Consolidated Cash Flow Coverage Ratio. The Company shall not permit
the ratio of (a) Consolidated Cash Flow of the Company and its Subsidiaries for
the four (4) fiscal quarters ending on the last day of any fiscal quarter to (b)
the Consolidated Cash Requirements of the Company and its Subsidiaries for the
four (4) fiscal quarters ending on the last day of such fiscal quarter to be
less than 1.25 to 1.00.
7.6 Investments in the Parent. The Company shall not acquire any of the
capital stock of the Parent except for the purpose of the immediate retirement
of any such capital stock.
7.7 Mergers, Acquisitions, etc.
(a) Neither the Parent, the Company nor any of their Subsidiaries shall
consolidate with or merge into any other corporation or convey, transfer or
lease its properties and assets substantially as an entirety to any Person, and
neither the Parent, the Company nor any of their Subsidiaries shall permit any
Person to consolidate with or merge into the Parent, the Company or any of their
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Subsidiaries, as the case may be, or convey, transfer or lease its properties
and assets substantially as an entirety to the Parent, the Company or any of
their Subsidiaries, as the case may be, unless:
(i) in case the Parent, the Company or any of their Subsidiaries, as
the case may be, shall consolidate with or merge into another corporation
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, the corporation formed by such consolidation or
into which the Parent or the Company or any of their Subsidiaries, as the
case may be, is merged or the Person which acquires by conveyance or
transfer, or which leases, the properties and assets of the Parent or the
Company or any of their Subsidiaries, as the case may be, substantially as
an entirety shall be a corporation organized and existing under the laws of
the United States of America, any State thereof or the District of Columbia
and shall expressly assume, by an instrument, executed and delivered to the
Administrative Agent, in form reasonably satisfactory to the Administrative
Agent and its counsel, in the case of the Company, the due and punctual
payment of the principal of (and premium,if any) and interest on the Notes
and the performance and observance of every covenant of this Agreement on
the part of the Company to be performed or observed and, in the case of the
Parent, the due and punctual performance of the Guaranty and the
performance and observance of every covenant in the Guaranty to be
performed or observed by the Parent;
(ii) immediately after giving effect to such transaction and treating
any Indebtedness which becomes an obligation of the Company or a Subsidiary
or of the Parent or a Subsidiary as a result of such transaction as having
been incurred by the Company, the Parent or such Subsidiary at the time of
such transaction, no Event of Default, and no event which, after notice or
lapse of time or both, would become an Event of Default, shall have
happened and be continuing;
(iii) as a result of any such consolidation or merger or conveyance,
transfer or lease none of the properties or assets of the Company, the
Parent or a Subsidiary would become subject to a Lien, which would not be
permitted by this Agreement; and
(iv) the Company or the Parent, as the case may be, has delivered to
the Administrative Agent a certificate executed by its President or any of
its Vice Presidents and its Secretary, any of its Assistant Secretaries,
its Clerk or any of its Assistant Clerks and an opinion of counsel
reasonably satisfactory to the Administrative Agent addressed to the Banks,
each stating that all conditions precedent herein provided for relating to
such consolidation, merger, conveyance, transfer or lease have been
complied with.
(b) Upon any consolidation by the Company or the Parent, as the case may
be, with or merger by the Company or the Parent, as the case may be, into any
other corporation or any conveyance, transfer or lease of the properties and
assets of the Company or the Parent, as the case may be, substantially as an
entirety in accordance with this Section 7.7, the successor corporation formed
by such consolidation or into which the Company or the Parent, as the case may
be, is merged or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company or the Parent, as the case may be, under this Agreement and the
other Loan Documents, as the case may be, with the same effect as if such
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successor corporation had been named as the Company or the Parent, as the case
may be, herein; provided, that neither the Company, nor the Parent, and
thereafter, except in the case of a lease, the predecessor corporation shall be
relieved of their respective obligations and covenants under this Agreement or
any other Loan Document, as the case may be.
(c) The provisions of subsections 7.7(a) and (b) shall not apply to a
concurrent merger of the Company into the Parent or a concurrent merger of the
Parent into the Company, provided that each of the following conditions are met:
(i) the Company gives the Administrative Agent no less than five (5) Business
Days prior written notice of such merger; (ii) the merger involves no Persons
other than the Company and the Parent; (iii) immediately after giving effect to
such Merger, no Event of Default, and no event which, after notice, or lapse of
time, or both, would become an Event of Default, shall have happened and be
continuing; (iv) as the result of such merger or consolidation, none of the
properties or assets of the Company, the Parent or any of their respective
Subsidiaries would become subject to a Lien which would not be permitted by this
Agreement; and (v) the Company delivers to the Administrative Agent a
certificate executed by its President or any of its Vice Presidents and its
Secretary stating that all conditions of this subsection 7.7(d) relating to such
merger have been complied with. The succeeding corporation of such merger shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company and the Parent under this Agreement or any other Loan Document, with
the same effect as if such successor corporation had been named as the Company
and the Parent; provided, that neither the Company nor the Parent, and
thereafter, any predecessor corporation, if any, shall be relieved of their
respective obligations and covenants under this Agreement, the Notes or the
Guaranty.
7.8 Changes in Business. The Company will not, and it will not permit any
of its Subsidiaries, to make any material change in its business, or in the
nature of its operations, or liquidate or dissolve itself (or suffer any
liquidation or dissolution).
7.9 ERISA. The Company shall not directly or indirectly, and will not
permit any member of any Controlled Group, to directly or indirectly enter into
any new Plan, Welfare Plan or Multi-employer Plan without complying with the
notification obligations contained in Section 6.14 hereof.
8. EVENTS OF DEFAULT: ACCELERATION.
-------------------------------
Any of the following shall constitute an "Event of Default":
(a) the Company shall default in any payment of any principal amount
outstanding hereunder or under any Notes when due and payable, whether at
maturity or at any date fixed for payment or prepayment or by declaration or
otherwise; or
(b) the Company shall fail to pay any interest with respect to principal
outstanding hereunder, or any fee pursuant to the terms of Section 2.9, within
five (5) Business Days after the date due and payable, whether at maturity or at
any date fixed for payment or prepayment or by declaration or otherwise, other
than due to a failure of the Administrative Agent to charge an account of the
Company having a sufficient credit balance; or
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(c) there shall be a default in the performance of or compliance with any
covenant in Section 7 hereof; or
(d) the Company shall default in the performance of or compliance with any
term contained herein (other than those referred to above in this Section 8),
and such default shall not have been remedied within thirty (30) Business Days
after the occurrence thereof; or
(e) any representation or warranty made in writing by or on behalf of the
Company herein, in any other Loan Document or in connection with any of the
transactions contemplated hereby shall prove to have been false or incorrect in
any material respect on the date as of which made; or
(f) the Parent, the Company or any of their respective Subsidiaries shall
default (as principal or guarantor or other surety) in the payment of any
principal or premium, if any, of, or interest or fees on, any other Indebtedness
to any Bank, or any other Indebtedness in respect of borrowed money in an
aggregate principal amount of $10,000,000 or more (which default is in payment
thereof at its stated maturity or shall result in such Indebtedness becoming or
being declared due prior to the scheduled maturity thereof) or if the Parent,
the Company or any of their respective Subsidiaries shall fail to comply (and
such failure to comply has not been cured or waived) with any of the terms of
any document evidencing any such Indebtedness or any mortgage, pledge,
assignment, indenture or other document relating thereto, and as a consequence
of any of the foregoing, the holder of such Indebtedness shall have the right to
declare all amounts payable with respect thereto to be due and payable by reason
of such default prior to the scheduled maturity thereof or demand payment of all
amounts payable in respect of any Indebtedness payable on demand; or
(g) if the Parent, the Company or any of their respective Subsidiaries
makes an assignment for the benefit of creditors, or petitions or applies for
the appointment of a liquidator or receiver of or for any of such Persons, or of
any substantial part of the respective assets thereof, or commences any
proceeding relating to any of such Persons under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation or
similar law of any jurisdiction, now or hereafter in effect; or
(h) if any such petition or application is filed or any such proceeding is
commenced against the Parent, the Company or any of their respective
Subsidiaries, and any of such Persons indicates its approval thereof, consents
thereto or acquiesces therein, or any such petition, application or proceeding
remains undischarged for thirty (30) days, or an order is entered appointing any
such liquidator or receiver, or adjudicating the Parent, the Company or any of
their respective Subsidiaries bankrupt or insolvent, or approving a petition in
any such proceeding; or
(i) any order is entered in any proceeding by or against the Parent, the
Company or any of their respective Subsidiaries decreeing or permitting the
dissolution or split-up of any of such Persons or the winding-up of the affairs
of any of such Persons; or
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(j) there shall be in force, undischarged, unsatisfied and unstayed, for
more than thirty (30) days, whether or not consecutive, any final judgment (from
which all appeals have been taken and determined or as to which all time for the
taking of appeals has lapsed) in excess of $1,000,000 in the aggregate against
the Parent, the Company or any of their respective Subsidiaries; or
(k) any representation or warranty made in writing by or on behalf of the
Parent in the Guaranty, in any other Loan Document or in connection with any of
the transactions contemplated hereby or thereby shall prove to have been false
or incorrect in any material respect on the date as of when made, or if the
Parent shall default in respect of any of its obligations under the Guaranty or
if the Guaranty shall cease to be in full force and effect without the prior
written consent of the Banks; or
(l) the Parent shall at any time own, beneficially, and of record, less
than a majority of all of the issued and outstanding shares of capital stock of
the Company having ordinary voting rights for the election of directors.
9. NOTICE AND WAIVERS OF DEFAULT.
-----------------------------
9.1 Notice of Default. If any Person shall give any notice or take any
other action in respect of a claimed default (whether or not constituting an
Event of Default) under this Agreement or any other document as to which the
Parent, the Company or any of their respective Subsidiaries is a party or
obligor, whether as principal or surety, the Company shall forthwith give
written notice thereof to the Administrative Agent (which shall promptly give
notice thereof to each of the Banks), describing the notice or action and the
nature of the claimed default.
9.2 Waivers of Default. Any Default or Event of Default may be waived as
provided in Section 24. Any Default or Event of Default so waived shall be
deemed to have been cured and to be not continuing; but no such waiver shall
extend to or affect any subsequent like default or impair any rights arising
therefrom.
10. REMEDIES ON DEFAULT.
-------------------
10.1 Rights of Banks. If any Event of Default occurs, the Administrative
Agent shall at the request of, or may with the consent of, the Majority Banks,
(a) declare the Commitment of each Bank to make Loans to be terminated,
whereupon such Commitments shall be terminated;
(b) declare the unpaid principal amount of all outstanding Loans, all
interest accrued and unpaid thereon, and all other amounts owing or payable
hereunder or under any other Loan Document to be immediately due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by the Company; and
(c) exercise on behalf of itself and the Banks all rights and remedies
available to it and the Banks under the Loan Documents or applicable law;
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provided, that upon the occurrence of any event specified in subsection (g), (h)
or (i) of Section 8, the obligation of each Bank to make Loans shall
automatically terminate and the unpaid principal amount of all outstanding Loans
and all interest and other amounts as aforesaid shall automatically become due
and payable without further act of the Administrative Agent or any Bank.
10.2 Setoff: Sharing.
(a) Set-off. In addition to any rights and remedies of the Banks provided
by applicable law, if an Event of Default exists or the Loans have been
accelerated, each Bank is authorized at any time and from time to time, without
prior notice to the Company, any such notice being waived by the Company to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held by,
and other indebtedness at any time owing by, such Bank to or for the credit or
the account of the Company against any and all Obligations owing to such Bank,
now or hereafter existing, irrespective of whether or not the Administrative
Agent or such Bank shall have made demand under this Agreement or any Loan
Document and although such Obligations may be contingent or unmatured. Each
Bank agrees promptly to notify the Company and the Administrative Agent after
any such set-off and application made by such Bank; provided, that the failure
to give such notice shall not affect the validity of such set-off and
application.
(b) Sharing. If, other than as expressly provided elsewhere herein, any
Bank shall obtain on account of the Loans made by it any payment (whether
voluntary, involuntary, through the exercise of any right of set-off, or
otherwise) in excess of its Pro Rata Share, such Bank shall immediately (a)
notify the Administrative Agent of such fact, and (b) purchase from the other
Banks such participations in the Loans made by them as shall be necessary to
cause such purchasing Bank to share the excess payment pro rata with each of
them; provided, that if all or any portion of such excess payment is thereafter
recovered from the purchasing Bank, such purchase shall to that extent be
rescinded and each other Bank shall repay to the purchasing Bank the purchase
price paid therefor, together with an amount equal to such paying Bank's ratable
share (according to the proportion of (i) the amount of such paying Bank's
required repayment to (ii) the total amount so recovered from the purchasing
Bank) of any interest or other amount paid or payable by the purchasing Bank in
respect of the total amount so recovered. The Company agrees that any Bank so
purchasing a participation from another Bank may, to the fullest extent
permitted by law, exercise all its rights of payment (including the right of
set-off, but subject to this Section 10) with respect to such participation as
fully as if such Bank were the direct creditor of the Company in the amount of
such participation. The Administrative Agent will keep records (which shall be
conclusive and binding in the absence of manifest error) of participations
purchased under this Section 10.2(b) and will in each case notify the Banks
following any such purchases or repayments.
11. THE ADMINISTRATIVE AGENT.
------------------------
11.1 Appointment and Authorization. Each Bank hereby irrevocably (subject
to Section 11.9) appoints, designates and authorizes the Administrative Agent to
take such action on its behalf under the provisions of this Agreement and each
other Loan Document and to exercise such powers and perform such duties as are
expressly delegated to it by the terms of this Agreement or any other
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Loan Document, together with such powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary contained elsewhere in this
Agreement or in any other Loan Document, the Administrative Agent shall not have
any duties or responsibilities, except those expressly set forth herein, nor
shall the Administrative Agent have or be deemed to have any fiduciary
relationship with any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the
Administrative Agent.
11.2 Delegation of Duties. The Administrative Agent may execute any of
its duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agent or attorney-in-
fact that it selects with reasonable care.
11.3 Liability of Administrative Agent. None of the Administrative
Agent-Related Persons shall (i) be liable for any action taken or omitted to be
taken by any of them under or in connection with this Agreement or any other
Loan Document or the transactions contemplated hereby (except for its own gross
negligence or willful misconduct), or (ii) be responsible in any manner to any
of the Banks for any recital, statement, representation or warranty made by the
Parent, the Company or any of their respective Subsidiaries, or any officer
thereof, contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Administrative Agent under or in connection with, this
Agreement or any other Loan Document, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document, or for any failure of the Company or any other party to any Loan
Document to perform its obligations hereunder or thereunder. No Administrative
Agent-Related Person shall be under any obligation to any Bank to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions (other than delivery to the Administrative Agent of
the documents described in subsections 4.1(b)(i), (ii) and (iv)) of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of the Parent, the Company or any of their respective Subsidiaries.
11.4 Reliance by Administrative Agent.
(a) The Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to the
Company), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the
Majority Banks as it deems appropriate and, if it so requests, it shall first be
indemnified to its satisfaction by the Banks against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. The Administrative Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement or any other Loan
Document in accordance with a request or consent
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of the Majority Banks (or when expressly required hereby or thereby, all the
Banks) and such request and any action taken or failure to act pursuant thereto
shall be binding upon all of the Banks.
(b) For purposes of determining compliance with the conditions specified in
Section 4.1, each Bank that has executed this Agreement shall be deemed to have
consented to, approved or accepted or to be satisfied with, each document or
other matter either sent by the Administrative Agent to such Bank for consent,
approval, acceptance or satisfaction, or required thereunder to be consented to
or approved by or acceptable or satisfactory to such Bank.
11.5 Notice of Default. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default,
except with respect to defaults in the payment of principal, interest and fees
required to be paid to the Administrative Agent for the account of the Banks,
unless the Administrative Agent shall have received written notice from a Bank
or the Company referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". The
Administrative Agent will promptly notify the Banks of its receipt of any such
notice. The Administrative Agent shall take such action with respect to such
Default or Event of Default as may be requested by the Majority Banks in
accordance with Section 10.1; provided, that unless and until the Administrative
Agent has received any such request, the Administrative Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable or in the
best interest of the Banks.
11.6 Credit Decision. Each Bank acknowledges that none of the
Administrative Agent-Related Persons has made any representation or warranty to
it, and that no act by the Administrative Agent hereinafter taken, including any
review of the affairs of the Parent, the Company and their respective
Subsidiaries, shall be deemed to constitute any representation or warranty by
any Administrative Agent-Related Person to such Bank. Each Bank represents to
the Administrative Agent that it has, independently and without reliance upon
any Administrative Agent-Related Person and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition and creditworthiness of the Parent, the Company and their
respective Subsidiaries, and all applicable bank regulatory laws relating to the
transactions contemplated hereby, and made its own decision to enter into this
Agreement and to extend credit to the Company hereunder. Each Bank also
represents that it will, independently and without reliance upon any
Administrative Agent-Related Person and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
analysis, appraisals and decisions in taking or not taking action under this
Agreement and the other Loan Documents, and to make such investigations as it
deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition and creditworthiness of the Company.
Except for notices, reports and other documents expressly herein required to be
furnished to the Banks by the Administrative Agent, the Administrative Agent
shall not have any duty or responsibility to provide any Bank with any credit or
other information concerning the business, prospects, operations, property,
financial and other condition or creditworthiness of the Parent, the Company, or
any of their respective Subsidiaries, which may come into the possession of any
of the Administrative Agent-Related Persons.
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<PAGE>
11.7 Indemnification of Administrative Agent. Whether or not the
transactions contemplated hereby are consummated, the Banks shall indemnify upon
demand the Administrative Agent-Related Persons (to the extent not reimbursed by
or on behalf of the Company and without limiting the obligation of the Company
to do so), pro rata, from and against any and all Indemnified Liabilities;
provided, that no Bank shall be liable for the payment to the Administrative
Agent-Related Persons of any portion of such Indemnified Liabilities to the
extent resulting from such Person's gross negligence or willful misconduct.
Without limitation of the foregoing, each Bank shall reimburse the
Administrative Agent upon demand for its ratable share of any costs or out-of-
pocket expenses (including Attorney Costs) incurred by the Administrative Agent
in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that the Administrative
Agent is not reimbursed for such expenses by or on behalf of the Company. The
undertaking in this Section 11.7 shall survive the payment of all Obligations
hereunder and the resignation or replacement of the Administrative Agent.
11.8 Agents in Individual Capacity. Each of the Agents and its affiliates
may make loans to, issue letters of credit for the account of, accept deposits
from, acquire equity interests in and generally engage in any kind of banking,
trust, financial advisory, underwriting or other business with the Parent, the
Company and their respective Subsidiaries as though such Person were not an
Agent hereunder and without notice to or consent of the other Agent or the
Banks. The Banks acknowledge that, pursuant to such activities, each Agent and
its affiliates may receive information regarding the Parent, the Company or
their respective Subsidiaries (including information that may be subject to
confidentiality obligations in favor of any of such Persons) and acknowledge
that such Agent shall be under no obligation to provide such information to
them. With respect to their respective Loans, the Syndication Agent and the
Documentation Agent shall have the same rights and powers under this Agreement
and the other Loan Documents as any other Bank and may exercise the same as
though such Persons were not an Agent or an affiliate of an Agent, as the case
may be.
11.9 Successor Administrative Agent. The Administrative Agent may resign
as Administrative Agent upon 30 days' notice to the Banks and the Company. If
the Administrative Agent resigns under this Agreement, the Majority Banks shall
appoint from among the Banks a successor administrative agent for the Banks,
which successor administrative agent shall be approved by the Company. If no
successor administrative agent is appointed prior to the effective date of the
resignation of the Administrative Agent, the Administrative Agent may appoint,
after consulting with the Banks and the Company, a successor administrative
agent from among the Banks. Upon the acceptance of its appointment as successor
administrative agent hereunder, such successor administrative agent shall
succeed to all the rights, powers and duties of the retiring Administrative
Agent and the term "Administrative Agent" shall mean such successor
administrative agent and the retiring Administrative Agent's appointment, powers
and duties as Administrative Agent shall be terminated. After any retiring
Administrative Agent's resignation hereunder as Administrative Agent, the
provisions of this Section 11 and Section 15 shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was Administrative Agent
under this Agreement. If no successor
46
<PAGE>
agent has accepted appointment as Administrative Agent by the date which is
thirty (30) days following a retiring Administrative Agent's notice of
resignation, the retiring Administrative Agent's resignation shall nevertheless
thereupon become effective and the Banks shall perform all of the duties of the
Administrative Agent hereunder until such time, if any, as the Majority Banks
appoint a successor agent as provided for above.
11.10 Withholding Tax.
(a) If any Bank is a "foreign corporation, partnership or trust" within the
meaning of the Code and such Bank claims exemption from, or a reduction of, U.S.
withholding tax under Section 1441 or 1442 of the Code, such Bank agrees with
and in favor of the Administrative Agent, to deliver to the Administrative
Agent:
(i) if such Bank claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, properly completed IRS
Forms 1001 and W-8 before the payment of any interest in the first calendar
year and before the payment of any interest in each third succeeding
calendar year during which interest may be paid under this Agreement;
(ii) if such Bank claims that interest paid under this Agreement is
exempt from United States withholding tax because it is effectively
connected with a United States trade or business of such Bank, two properly
completed and executed copies of IRS Form 4224 before the payment of any
interest is due in the first taxable year of such Bank and in each
succeeding taxable year of such Bank during which interest may be paid
under this Agreement, and IRS Form W-9; and
(iii) such other form or forms as may be required under the Code or
other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
Such Bank agrees to promptly notify the Administrative Agent of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Bank claims exemption from, or reduction of, withholding tax
under a United States tax treaty by providing IRS Form 1001 and such Bank sells,
assigns, grants a participation in, or otherwise transfers all or part of the
Obligations of the Company to such Bank, such Bank agrees to notify the
Administrative Agent of the percentage amount in which it is no longer the
beneficial owner of Obligations of the Company to such Bank. To the extent of
such percentage amount, the Administrative Agent will treat such Bank's IRS Form
1001 as no longer valid.
(c) If any Bank claiming exemption from United States withholding tax by
filing IRS Form 4224 with the Administrative Agent grants a participation in all
or part of the Obligations of the Company to such Bank, such Bank agrees to
undertake sole responsibility for complying with the withholding tax
requirements imposed by Sections 1441 and 1442 of the Code.
47
<PAGE>
(d) If any Bank is entitled to a reduction in the applicable withholding
tax, the Administrative Agent may withhold from any interest payment to such
Bank an amount equivalent to the applicable withholding tax after taking into
account such reduction. If the forms or other documentation required by
subsection (a) of this Section 11.10 are not delivered to the Administrative
Agent, then the Administrative Agent may withhold from any interest payment to
such Bank not providing such forms or other documentation an amount equivalent
to the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the United States or
other jurisdiction asserts a claim that the Administrative Agent did not
properly withhold tax from amounts paid to or for the account of any Bank
(because the appropriate form was not delivered, was not properly executed, or
because such Bank failed to notify the Administrative Agent of a change in
circumstances which rendered the exemption from, or reduction of, withholding
tax ineffective, or for any other reason that does not constitute gross
negligence or wilful misconduct on the part of the Administrative Agent) such
Bank shall indemnify the Administrative Agent fully for all amounts paid,
directly or indirectly, by the Administrative Agent as tax or otherwise,
including penalties and interest, and including any taxes imposed by any
jurisdiction on the amounts payable to the Administrative Agent under this
Section 11.10, together with all costs and expenses (including Attorney Costs).
The obligation of the Banks under this subsection shall survive the payment of
all Obligations and the resignation or replacement of the Administrative Agent.
11.11 Syndication Agent and Documentation Agent. Neither the
Syndication Agent nor the Documentation Agent shall have or be deemed to have
any fiduciary relationship with any Bank. Each Bank acknowledges that it has not
relied, and will not rely, on the Syndication Agent or the Documentation Agent
in deciding to enter into this Agreement or in taking or not taking action
hereunder.
12. ASSIGNMENT; PARTICIPATION.
12.1 Assignments.
(a) Any Bank may, with the written consent of the Company (at all times
other than during the existence of an Event of Default) and the Administrative
Agent, which consents shall not be unreasonably withheld, at any time assign and
delegate to one or more Eligible Assignees (provided that no written consent of
the Company or the Administrative Agent shall be required in connection with any
assignment and delegation by a Bank to an Eligible Assignee that is an affiliate
of such Bank) (each an "Assignee") all, or any ratable part of all, of the
Loans, the Commitment and the other rights and obligations of such Bank
hereunder, in a minimum amount of $10,000,000; provided that the Company and the
Administrative Agent may continue to deal solely and directly with such Bank in
connection with the interest so assigned to an Assignee until (i) written notice
of such assignment, together with payment instructions, addresses and related
information with respect to the Assignee, shall have been given to the Company
and the Administrative Agent by such Bank and the Assignee; (ii) such Bank and
its Assignee shall have delivered to the Company and the Administrative Agent an
Assignment and Acceptance in substantially the form of Exhibit F ("Assignment
and Acceptance"), together with any Note or Notes subject to such assignment,
and
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<PAGE>
(iii) the assignor Bank or Assignee has paid to the Administrative Agent a
processing fee in the amount of $3,500. From and after the date that the
Administrative Agent notifies the assignor Bank that it has received (and
provided its consent with respect to) an executed Assignment and Acceptance and
payment of the above-referenced processing fee, (i) the Assignee thereunder
shall be a party hereto and, to the extent that rights and obligations hereunder
have been assigned to it pursuant to such Assignment and Acceptance, shall have
the rights and obligations of a Bank under the Loan Documents, and (ii) the
assignor Bank shall, to the extent that rights and obligations hereunder and
under the other Loan Documents have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Loan Documents.
(b) Within five (5) Business Days after its receipt of notice by the
Administrative Agent that it has received an executed Assignment and Acceptance
and payment of the processing fee (and provided that it consents to such
assignment in accordance with subsection 12.1(a)), the Company shall execute and
deliver to the Administrative Agent, a new Note evidencing such Assignee's
assigned Loans and Commitment and, if the assignor Bank has retained a portion
of its Loans and Commitment and so requests, a replacement Note evidencing such
retained Loans and Commitment (such Notes to be in substitution for, but not in
payment of, the Note held by such Bank). Immediately upon payment of the
processing fee under the Assignment and Acceptance, this Agreement shall be
deemed to be amended to the extent, but only to the extent, necessary to reflect
the addition of the Assignee and the resulting adjustment of the Commitments
arising therefrom. The Commitment allocated to each Assignee shall reduce such
Commitment of the assigning Bank pro tanto.
12.2 Participations. Any Bank may at any time sell to one or more
commercial banks or other Persons not affiliates of the Company (a
"Participant") participating interests in any Loans, the Commitment of that Bank
and the other interests of that Bank (the "originating Bank") hereunder and
under the other Loan Documents; provided, that (i) the originating Bank's
obligations under this Agreement shall remain unchanged, (ii) the originating
Bank shall remain solely responsible for the performance of such obligations,
(iii) the Company and the Administrative Agent shall continue to deal solely and
directly with the originating Bank in connection with the originating Bank's
rights and obligations under this Agreement and the other Loan Documents, and
(iv) no Bank shall transfer or grant any participating interest under which the
Participant has rights to approve any amendment to, or any consent or waiver
with respect to, this Agreement or any other Loan Document, except to the extent
such amendment, consent or waiver would require unanimous consent of the Banks
as described in the first proviso to Section 24. In the case of any such
participation, the Participant shall not have any rights under this Agreement,
or any other Loan Documents, and all amounts payable by the Company hereunder
shall be determined as if such Bank had not sold such participation, except that
if amounts outstanding under this Agreement are due and unpaid, or shall have
been declared or shall have become due and payable upon the occurrence of an
Event of Default, each Participant shall be deemed to have the right of set-off
in respect of its participating interest in amounts owing under this Agreement
to the same extent as if the amount of its participating interest were owing
directly to it as a Bank under this Agreement.
49
<PAGE>
Notwithstanding any other provision in this Agreement, any Bank may at any
time create a security interest in, or pledge, all or any portion of its rights
under and interest in this Agreement and any Note held by it in favor of any
Federal Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury
Regulation 31 CFR (S)203.14, and such Federal Reserve Bank may enforce such
pledge or security interest in any manner permitted under applicable law.
13. CONSENT TO JURISDICTION; WAIVER OF TRIAL BY JURY.
(a) The Company hereby irrevocably submits to the jurisdiction of any
Illinois state or federal court sitting in Chicago, Illinois over any action or
proceeding arising out of or relating to this Agreement or any other Loan
Document and the Company hereby irrevocably agrees that all claims in respect of
such action or proceeding may be heard and determined in such Illinois state or
federal court. Service of copies of the summons and complaint and any other
process in any action or proceeding may be made to the Company by mailing or
delivering a copy of such process to the Company at the Company's address as
specified in Section 20 hereof. The Company agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Nothing in this Section 13 shall affect the right of the
Administrative Agent or any Bank to serve legal process in any other manner
permitted by law or affect the right of the Administrative Agent or any Bank to
bring any action or proceeding against the Company or its property in the courts
of any other jurisdictions.
(c) Each Agent, each Bank and the Company hereby waive all rights to trial
by jury in any action, suit, proceeding or counterclaim arising out of or
relating to this Agreement or any other Loan Document.
14. BINDING ACT.
This Agreement shall become effective when it shall have been executed by
all of the parties hereto and the conditions precedent set forth in Section 4.1
shall have been satisfied, and shall be binding upon and inure to the benefit of
the Company, the Banks and the Administrative Agent and their respective
successors and assigns, except that the Company shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Banks and any attempted assignment without such consent shall be
void.
15. FEES AND EXPENSES; INDEMNITY.
15.1 Costs and Expenses. The Company shall:
(a) whether or not the transactions contemplated hereby are consummated,
pay or reimburse the Administrative Agent and the Arranger within five Business
Days after demand for all costs and expenses incurred by such Persons in
connection with the development, preparation, delivery, administration and
execution of, and any amendment, supplement, waiver or modification to (in each
case, whether or not consummated), this Agreement, any Loan Document and any
other
50
<PAGE>
documents prepared in connection herewith or therewith, and the consummation of
the transactions contemplated hereby and thereby, including reasonable Attorney
Costs incurred by the Administrative Agent with respect thereto; and
(b) pay or reimburse the Administrative Agent, the Arranger and each Bank
within five Business Days after demand for all costs and expenses (including
Attorney Costs) incurred by them in connection with the enforcement, attempted
enforcement, or preservation of any rights or remedies under this Agreement or
any other Loan Document during the existence of an Event of Default or after
acceleration of the Loans (including in connection with any "workout" or
restructuring regarding the Loans, and including in any insolvency proceeding or
appellate proceeding).
15.2 Company Indemnification. Whether or not the transactions
contemplated hereby are consummated, the Company shall indemnify and hold the
Administrative Agent-Related Persons, and each Bank and each of its respective
officers, directors, employees, counsel, agents and attorneys-in-fact (each, an
"Indemnified Person") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including reasonable Attorney Costs) of any
kind or nature whatsoever which may at any time (including at any time following
repayment of the Loans and the termination, resignation or replacement of the
Administrative Agent or replacement of any Bank) be imposed on, incurred by or
asserted against any such Person in any way relating to or arising out of this
Agreement or any document contemplated by or referred to herein, or the
transactions contemplated hereby, or any action taken or omitted by any such
Person under or in connection with any of the foregoing, including with respect
to any investigation, litigation or proceeding (including any insolvency
proceeding or appellate proceeding) related to or arising out of this Agreement
or the Loans or the use of the proceeds thereof, whether or not any Indemnified
Person is a party thereto (all the foregoing, collectively, the "Indemnified
Liabilities"); provided, that the Company shall have no obligation hereunder to
any Indemnified Person with respect to Indemnified Liabilities to the extent
resulting from the gross negligence or willful misconduct of such Indemnified
Person. The agreements in this Section 15.2 shall survive payment of all other
Obligations and termination of this Agreement.
16. REMEDIES CUMULATIVE.
Each and every right granted to the Banks and the Administrative Agent
hereunder or under any other document delivered hereunder or in connection
herewith, or allowed them by law or equity, shall be cumulative and may be
exercised from time to time. No failure on the part of any Bank or the
Administrative Agent to exercise, and no delay in exercising, any right shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right preclude any other or future exercise thereof or the exercise of any other
right. The due payment and performance of the Company's Obligations under this
Agreement shall be without regard to any counterclaim, right of offset or any
other claim whatsoever which the Company may have against the Banks and the
Administrative Agent and without regard to any other obligation of any nature
whatsoever which the Banks and the Administrative Agent may have to the Company,
and no such counterclaim (other than any compulsory counterclaims) or offset
shall be asserted by the Company in any action, suit or
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<PAGE>
proceeding instituted by the Administrative Agent or any Bank for payment or
performance of the Company's Obligations.
17. FURTHER ASSURANCES.
At any time and from time to time, upon the request of any Bank or the
Administrative Agent, the Company shall execute, deliver and acknowledge or
cause to be executed, delivered and acknowledged, such further documents and do
such other acts and things as such Bank or the Administrative Agent may
reasonably request in order to fully effect the purposes of this Agreement, the
other Loan Documents and any other documents delivered pursuant hereto or in
connection with the Loans.
18. SURVIVAL OF COVENANTS.
All covenants, agreements, representations and warranties made herein and
in any document delivered by or on behalf of the Company pursuant hereto are
material and shall be deemed to have been relied upon by the Administrative
Agent and the Banks, notwithstanding any investigation heretofore or hereafter
made by the Administrative Agent or the Banks, and shall survive the making by
the Banks of the Loans as herein contemplated and shall continue in full force
and effect so long as any Obligations remain outstanding and unpaid. All
statements contained in any certificate or other document delivered to the
Administrative Agent or the Banks at any time by or on behalf of the Company
pursuant hereto or in connection with the transactions contemplated hereby shall
constitute representations and warranties by the Company hereunder.
19. SEVERABILITY.
The provisions of this Agreement are severable, and if any clause or
provision hereof shall be held invalid or unenforceable in whole or in part in
any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction and shall not in
any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision in this Agreement in any jurisdiction.
20. NOTICE.
(a) All notices, requests and other communications shall be in writing
(including, unless the context expressly otherwise provides, by facsimile
transmission, provided that any matter transmitted by the Company by facsimile
(i) shall be immediately confirmed by a telephone call to the recipient at the
number specified on Schedule 20, and (ii) shall be followed promptly by delivery
of a hard copy original thereof) and mailed, faxed or delivered, to the address
or facsimile number specified for notices on Schedule 20; or, as directed to the
Company or the Administrative Agent, to such other address as shall be
designated by such party in a written notice to the other parties, and as
directed to any other party, at such other address as shall be designated by
such party in a written notice to the Company and the Administrative Agent.
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(b) All such notices, requests and communications shall, when transmitted
by overnight delivery, or faxed, be effective when delivered for overnight
(next-day) delivery, or transmitted in legible form by facsimile machine,
respectively, or if mailed, upon the third Business Day after the date deposited
into the U.S. mail, or if delivered, upon delivery; except that notices pursuant
to Section 2 or Section 11 shall not be effective until actually received by the
Administrative Agent.
(c) Any agreement of the Administrative Agent and the Banks herein to
receive certain notices by telephone or facsimile is solely for the convenience
and at the request of the Company. The Administrative Agent and the Banks shall
be entitled to rely on the authority of any Person purporting to be a Person
authorized by the Company to give such notice and the Administrative Agent and
the Banks shall not have any liability to the Company or other Person on account
of any action taken or not taken by the Administrative Agent or the Banks in
reliance upon such telephonic or facsimile notice. The obligation of the Company
to repay the Loans shall not be affected in any way or to any extent by any
failure by the Administrative Agent and the Banks to receive written
confirmation of any telephonic or facsimile notice or the receipt by the
Administrative Agent and the Banks of a confirmation which is at variance with
the terms understood by the Administrative Agent and the Banks to be contained
in the telephonic or facsimile notice.
21. GOVERNING LAW.
-------------
This Agreement shall for all purposes be construed in accordance with, and
governed by, the internal substantive laws of the State of Illinois, without
regard to the conflicts of law provisions thereof.
22. MISCELLANEOUS.
-------------
The rights and remedies herein expressed are cumulative and not exclusive
of the other rights which the Banks would otherwise have. Any documents required
by any of the provisions hereof to be in the form annexed hereto as an exhibit
shall be substantially in such form with such changes therefrom, if any, as may
be approved by the Majority Banks and the Company. The captions in this
Agreement are for convenience of reference only and shall not define or limit
the provisions hereof. This Agreement, and any amendment, consent or waiver
executed and delivered hereunder or in connection herewith or with any other
Loan Document, may be executed in separate counterparts, each of which when so
executed and delivered shall be an original, but all of which together shall
constitute one document. In proving this Agreement, it shall not be necessary to
produce or account for more than one Agreement, executed by each of the parties
hereto.
23. ENTIRE AGREEMENT.
----------------
This Agreement and any other documents executed in connection herewith
express the entire understanding of the parties with respect to the transactions
contemplated hereby. Neither this Agreement nor any term hereof may be changed,
waived, discharged or terminated orally or in writing, except as provided in
Section 24.
24. CONSENTS, AMENDMENTS AND WAIVERS.
--------------------------------
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<PAGE>
No amendment or waiver of any provision of this Agreement or any other Loan
Document, and no consent with respect to any departure by the Company therefrom,
shall be effective unless the same shall be in writing and signed by the
Majority Banks (or by the Administrative Agent at the written request of the
Majority Banks) and the Company (or, in the case of the Guaranty, the Parent)
and acknowledged by the Administrative Agent, and then any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, that no such waiver, amendment, or consent
shall, unless in writing and signed by all of the Banks and the Company (or, in
the case of the Guaranty, the Parent)and acknowledged by the Administrative
Agent, do any of the following:
(a) increase or extend the Commitment of any Bank (or reinstate any
Commitment terminated pursuant to Section 10.1);
(b) postpone or delay any date fixed by this Agreement or any other Loan
Document for any payment of principal, interest, fees or other amounts due to
the Banks (or any of them) hereunder or under any other Loan Document;
(c) reduce the principal of, or the rate of interest specified herein on
any Loan, or (subject to clause (ii) below) any fees or other amounts payable
hereunder or under any other Loan Document;
(d) change the percentage of the Commitments or of the aggregate unpaid
principal amount of the Loans which is required for the Banks or any of them to
take any action hereunder; or
(e) amend this Section 24, or Section 10, or any provision herein providing
for consent or other action by all Banks;
(f) release, amend or otherwise modify the Guaranty;
and, provided, further, that (i) no amendment, waiver or consent shall, unless
in writing and signed by the Administrative Agent in addition to the Majority
Banks or all the Banks, as the case may be, affect the rights or duties of the
Administrative Agent under this Agreement or any other Loan Document, and (ii)
the Fee Letter may be amended, or rights or privileges thereunder waived, in a
writing executed by the parties thereto.
25. OPTIONAL INCREASE IN COMMITMENTS. The Company may, from time to time prior
to Term Out Date, by means of a letter to the Administrative Agent substantially
in the form of Exhibit G, request that the Commitment be increased by (a)
increasing the Pro Rata Share of the Commitment of one or more Banks which have
agreed to such increase and/or (b) adding one or more commercial banks or other
Persons as a party hereto with a Pro Rata Share in an amount agreed to by any
such commercial bank or other Person; provided that (i) no commercial bank or
other Person shall be added as a party hereto without the written consent of the
Administrative Agent (which consent shall not be unreasonably withheld or
delayed); and (ii) in no event shall the
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Commitment exceed $250,000,000 without the written consent of all Banks. Any
increase in the Commitment pursuant to this Section 25 shall be effective three
Business Days after the date on which the Administrative Agent has received and
accepted the applicable increase letter in the form of Annex 1 to Exhibit G (in
the case of an increase in the Commitment of an existing Bank) or assumption
letter in the form of Annex 2 to Exhibit G (in the case of the addition of a
commercial bank or other Person as a new Bank). The Administrative Agent shall
promptly notify the Company and the Banks of any increase in the amount of the
Commitment pursuant to this Section 25 and of the Pro Rata Share of each Bank
after giving effect thereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed and delivered by its duly authorized officer as of the day and
year first above written.
XTRA, INC.
By: /s/ Christopher P. Joyce
---------------------------------
Name: Christopher P. Joyce
Title: Vice President
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, individually, as a Bank,
and as Administrative Agent
By: /s/ R. Peter Dales
--------------------------------
Name: R. Peter Dales
Title: Vice President
<PAGE>
BANKBOSTON, N.A., individually, as a Bank,
and as Syndication Agent
By: /s/ Michael J. Blake
---------------------------------
Name: Michael J. Blake
Title: Director
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO,
individually, as a Bank, and as
Documentation Agent
By: /s/ Cory M. Helfand
---------------------------------
Name: Cory M. Helfand
Title: Vice President
<PAGE>
FLEET BANK, N.A.
By: /s/ John Topolovec
-------------------------------
Name: John Topolovec
Title: Assistant Vice President
<PAGE>
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Alison A. Mason
--------------------------------
Name: Alison A. Mason
Title: Vice President
<PAGE>
ABN AMRO BANK N.V.
By: /s/ Thomas J. O'Bryant
----------------------------------
Name: Thomas J. O'Bryant
Title: Senior Vice President
By: /s/ David J. Thomas
----------------------------------
Name: David J. Thomas
Title: Group Vice President
<PAGE>
Exhibit 12.1
XTRA CORPORATION
STATEMENT OF THE CALCULATION OF EARNINGS TO FIXED CHARGES
For the nine months ended June 30, 1999 and 1998
(Millions of dollars)
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
EARNINGS
Pretax income $ 30 $ 69
Add: Fixed charges (below) 43 44
------ ------
$ 73 $ 113
====== ======
FIXED CHARGES $ 43 $ 44
====== ======
Ratio of Earnings to Fixed Charges 1.7 2.6
====== ======
</TABLE>
Note: For purposes of computing the ratio of earnings to fixed charges,
earnings represent income from operations before taxes plus fixed
charges. Fixed charges for operations consist of interest on indebtedness
and the portion of rental expense, which represents interest.
Exclusive of the $39 million of one-time charges recorded in the nine
months ended June 30, 1999, the ratio of earnings to fixed charges would
have been 2.6.
1
<PAGE>
Exhibit 12.2
XTRA, INC.
STATEMENT OF THE CALCULATION OF EARNINGS TO FIXED CHARGES
For the nine months ended March 31, 1999 and 1998
(Millions of dollars)
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
EARNINGS
Pretax income $ 34 $ 68
Add: Fixed charges (below) 43 44
------ ------
$ 77 $ 112
====== ======
FIXED CHARGES $ 43 $ 44
====== ======
Ratio of Earnings to Fixed Charges 1.8 2.5
====== ======
</TABLE>
Note: For purposes of computing the ratio of earnings to fixed charges,
earnings represent income from operations before taxes plus fixed
charges. Fixed charges for operations consist of interest on indebtedness
and the portion of rental expense, which represents interest.
Exclusive of the $35 million of one-time charges recorded in the nine
months ended June 30, 1999, the ratio of earnings to fixed charges would
have been 2.6.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the consolidated condensed financial statements of XTRA Corporation for the
period ended June 30, 1999 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 4,000,000
<SECURITIES> 0
<RECEIVABLES> 82,000,000
<ALLOWANCES> 17,000,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,276,000,000
<DEPRECIATION> 829,000,000
<TOTAL-ASSETS> 1,576,000,000
<CURRENT-LIABILITIES> 0
<BONDS> 866,000,000
0
0
<COMMON> 7,000,000
<OTHER-SE> 335,000,000
<TOTAL-LIABILITY-AND-EQUITY> 1,576,000,000
<SALES> 0
<TOTAL-REVENUES> 343,000,000
<CGS> 0
<TOTAL-COSTS> 269,000,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43,000,000
<INCOME-PRETAX> 30,000,000
<INCOME-TAX> 12,000,000
<INCOME-CONTINUING> 18,000,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,000,000
<EPS-BASIC> 1.26
<EPS-DILUTED> 1.26
</TABLE>
