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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
December 23, 1998
-----------------
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
EMONS TRANSPORTATION GROUP
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 0-5206 23-2441662
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(State of (Commission (IRS Employer
Incorporation) File Number) Identification No.)
96 South George Street, York, Pennsylvania 17401 (717) 771-1700
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(Address of principal executive offices) (Zip Code) (Telephone No.)
1
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Item 2. Acquisition or Disposition of Assets.
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On December 23, 1998, Emons Transportation Group, Inc. (the "Company"),
through a newly formed subsidiary, St. Lawrence & Atlantic Railroad (Quebec)
Inc., completed the acquisition of a 94 mile rail line (the "Sherbrooke Line")
from the Canadian National Railway Company ("CN") for Can $7 million pursuant to
the terms of an Asset Purchase Agreement dated November 25, 1998. The Sherbrooke
Line connects with CN's Halifax to Montreal main line at Ste. Rosalie, Quebec,
and the Company's St. Lawrence & Atlantic Railroad Company ("SLR") at the
Quebec/Vermont international border. The Company has a long standing commercial
relationship with CN in which the Company maintains a direct rail connection and
regularly interchanges rail traffic with CN.
Concurrent with the acquisition of the Sherbrooke Line, the Company also
entered into an Amended and Restated Loan Agreement with LaSalle National Bank,
providing for an additional Can$6.6 million seven year term loan and a U.S.$2
million three year term loan, to fund the acquisition and operation of the
Sherbrooke Line.
Item 7. Financial Statements and Exhibits.
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c. Exhibits.
Page in
Exhibit Sequentially
Number Exhibit Numbered Copy
- ------ ------- -------------
10 (a) Asset Purchase Agreement dated November 25, 1998
between St. Lawrence & Atlantic Railroad (Quebec)
Inc. and Canadian National Railway Company --
10 (b) Amended and Restated Loan and Security Agreement
dated as of December 21, 1998 among Emons
Transportation Group, Inc., Emons Industries, Inc.,
Emons Finance Corp., Maryland and Pennsylvania
Railroad Company, Emons Logistics Services, Inc.,
Maine Intermodal Transportation, Inc., Yorkrail,
Inc., St. Lawrence & Atlantic Railroad Company, Penn
Eastern Rail Lines, Inc., St. Lawrence & Atlantic
Railroad (Quebec) Inc., and SLR Leasing Corp., as the
Borrowers, and LaSalle National Bank, as the Lender --
99 (a) Press Release dated December 23, 1998 --
2
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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 hereunto duly authorized.
Date: January 7, 1999
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EMONS TRANSPORTATION GROUP, INC.
By: /s/ Scott F. Ziegler
--------------------
Scott F. Ziegler
Senior Vice President and
Chief Financial Officer
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ASSET PURCHASE AGREEMENT
CANADIAN NATIONAL RAILWAY COMPANY
AND
CHEMIN DE FER ST-LAURENT & ATLANTIQUE (QUEBEC) INC./
ST.LAWRENCE & ATLANTIC RAILROAD (QUEBEC) INC.
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ASSET PURCHASE AGREEMENT dated November 25, 1998.
B E T W E E N:
CHEMIN DE FER ST-LAURENT & ATLANTIQUE (QUEBEC) INC./
ST.LAWRENCE & ATLANTIC RAILROAD (QUEBEC) INC.
duly incorporated under the laws of Quebec (hereinafter called "SLQ" )
- and -
CANADIAN NATIONAL RAILWAY COMPANY
duly incorporated under the laws of Canada
(hereinafter called "CN" )
RECITALS:
- --------
A. The transactions contemplated by this Agreement involve the sale of certain
real and personal property comprising CN's Sherbrooke Line, as herein
defined, by CN to SLQ on the terms and subject to the conditions contained
in this Agreement, in consideration of the Purchase Price, as herein
defined, and the undertakings of SLQ specified in this Agreement and in the
other agreements referred to herein.
B. the parties will execute an Operating, Marketing and Interchange Agreement,
as herein defined;
C. At the Closing, as herein defined:
(1) CN will convey the Purchased Assets, as herein defined, to SLQ by
transfer or assignment, as appropriate and in the case of the
Purchased Assets that are immovable property by way of a notarial Deed
of Sale ;
(2) SLQ will pay to CN the Purchase Price;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the payments,
conveyances, and covenants herein, SLQ and CN hereby agree as follows:
ARTICLE 1 - DEFINITIONS
- -----------------------
1.1 Unless stated otherwise, the following terms shall, for the purposes of
this Agreement, have the respective meanings hereinafter specified:
(a) "Agency Orders" means orders of regulatory agencies disclosed in
Schedule H;
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2
(b) "Agreement" means this Agreement, including the Schedules hereto, for
the sale and purchase of the Purchased Assets;
(c) "Assumed Contracts" means all leases, licenses, contracts, agreements
and commitments by or with third parties affecting or relating to the
operation or ownership of the Sherbrooke Line, which are included in
the Purchased Assets as set forth and described in Paragraph 3.1 (d)
and are listed on Schedule E;
(d) "Commencement Date : December 1st, 1998 at 21:00 hours;
(e) "Closing" means the completion of the sale to and purchase by SLQ of
the Purchased Assets under this Agreement by the transfer and delivery
of documents of title and the payment of the Purchase Price therefor
as contemplated herein;
(f) "Closing Date" means the date on which Closing shall have occurred;
(g) "Employee Liabilities" means all employment liabilities owed to the
employees of CN employed in connection with the Sherbrooke Line (the
"Employees"), up to and including the Commencement Date, computed on
the basis that CN will have terminated such employees' employment
with CN on the Commencement Date, without notice and without cause,
including, without limitation, all accrued expense reimbursements,
salaries, benefits, vacation pay, pension and other benefits,
appropriate amounts for severance and termination pay under any
applicable collective bargaining agreement or legislation and for
termination without cause or notice at law and any other amount that
may be owed with regard to said Employee's employment for CN and/or
termination thereof;
(h) "Excluded Assets" means those CN assets listed on Schedule D;
(i) "Excluded Lands" means that real property listed on Schedule C;
(j) "Execution Date" means November 25, 1998;
(k) "Information binder" means the information supplied to SLQ as listed
in Schedule F;
(l) "Sherbrooke Line" means those portions of CN's lines of railway and
right of way, as follows:
(i) That part of Sherbrooke Subdivision situated in the Province of
Quebec extending from MP 15.8 to MP 109.45 representing
approximately 93.65 miles of rail; and
(ii) all connecting branch lines and spurs.
The Sherbrooke Line is geographically situated as shown on the maps
attached as Schedule A1 and is illustrated in detail on the maps of
the rails constituting Schedule A2;
(m) "Operating, Marketing and Interchange Agreement" means the agreement,
to be executed by SLQ and CN at Execution Date;
(n) Intentionally left blank.
(o) "Purchase Price" means the payment to be made by SLQ as provided in
Article 4;
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3
(p) "Purchased Assets" means those assets set forth and described in
Paragraphs 3.1, (a) - (e) inclusive;
(q) "Purchased Lands" means the lands and premises consisting of the
right-of-way of the Sherbrooke Line, including extra width right-of-
way, all real estate contiguous to the right-of-way or associated with
the rail operations thereon, including without limitation station
grounds and yards, the whole having a superficial area of
approximately 1,243 acres and as shown on Schedule A-2, but excluding
the Excluded Lands;
(r) "Right-of-Way Plans" means such right-of-way plans and associated
record plans maintained by CN's Land Management Department in the
ordinary course of business, on which maps and plans are recorded the
alignment of CN's right-of-way and other properties adjacent thereto,
and which are marked to classify CN's assets in two categories for
purposes hereof, specifically Purchased Assets and Excluded Assets.
1.2 The index and headings are inserted for convenience of reference only and
do not form a part of, and are not to be used in the construction or
interpretation of this Agreement or any portions thereof.
1.3 All reference to "dollars" or "$" or to any amount used in this Agreement
means the lawful currency of Canada;
1.4 All words, terms and phrases used in this Agreement shall be construed in
accordance with the generally applicable definition or meaning of such
words, terms and phrases in the railroad industry at the Commencement Date,
unless otherwise provided herein.
1.5 This Agreement shall be governed by and interpreted in accordance with the
laws of the Province of Quebec and the applicable laws of Canada.
ARTICLE 2 - SCHEDULES
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2.1 The following schedules are hereby incorporated into and constitute part of
this Agreement:
Schedule A - Map of Sherbrooke Line
Schedule B - Intentionally Left Blank
Schedule C - Excluded Lands
Schedule D - Excluded Assets
Schedule E - Assumed Contracts
Schedule F - Information Binder
Schedule G - Intentionally Left Blank
Schedule H - Orders of Regulatory Agencies
Schedule I - Pending Litigation
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ARTICLE 3 - SALE OF PURCHASED ASSETS
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3.1 PURCHASED ASSETS
----------------
On the terms and subject to the fulfillment of the conditions hereof, CN
hereby agrees to sell, transfer and assign to SLQ, and SLQ hereby agrees to
purchase and accept from CN, as at the Closing Date, all of CN's right,
title and interest in the following real and personal property comprising
CN's Sherbrooke Line, but excluding the Excluded Assets:
(a) the Purchased Lands;
(b) all other real property and appurtenances and operating rights now
held and used by CN in providing rail service on the Sherbrooke Line,
including without limitation, all attached railway works and
facilities, including without limitation subgrade, grade, rails, ties,
rail fastenings, ballast, other track structure and materials, track
inventory, trestles, bridges, culverts, signals, communication
facilities (radio towers, signal bungalows and base station radios;
excluding fibre optics and fibre optic right-of-way corridor as
defined in Section 18.1), buildings, crossing protection devices, and
other railway fixtures and appurtenances located on the Purchased
Lands;
(c) all those hand tools, in the engineering section buildings located on
the Purchased Lands, subject to ordinary wear and tear and such other
changes thereto as may occur in the ordinary course of business up to
the Closing Date;
(d) all leases, licenses, contracts, agreements and commitments by or with
third parties affecting or relating to the operation or ownership of
the Sherbrooke Line, whether or not known to CN (excluding CN's labour
agreements, interline traffic agreements and CN's interswitching
agreement with Quebec Southern Railway), including without limitation
CN's rights and obligations under those leases, licenses, contracts
and agreements listed in Schedule E, subject, however, to
(i) Section 3.4 in reference to confidential contracts;
(ii) the limitations set out in Section 7.2 on the assignment of
leases, licenses, contracts and agreements without consent; and
(iii) obligations or liabilities of CN arising out of or related to
events occurring or conditions existing on the Purchased Assets
prior to the Commencement Date or the operation of CN's
business thereon prior to the Commencement Date, and those that
accrue after the Commencement Date which are for benefits
received by CN;
(e) except as otherwise provided in this Agreement or in other agreements
referred to herein, all of the rights and benefits and all of the
duties and obligations associated with the Sherbrooke Line and the
operation of the railroad business thereon, to which SLQ shall hereby
succeed and assume.
3.2 PERMITTED ENCUMBRANCES
----------------------
Those parts of the Purchased Assets specified in Paragraphs 3.1(a) and (b)
shall, on the Closing Date, be free and clear of all mortgages,
encumbrances, charges and other third party rights or interests, with the
exception of the Assumed Contracts, Agency Orders, all other statutory
rights,
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5
duties obligations and liabilities, and the reservations and exceptions
appearing in the existing certificates of title in respect of the Purchased
Lands and any statutory exceptions.
3.3 MINES AND MINERALS
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Notwithstanding anything to the contrary herein contained, CN will exempt
and reserve to itself all of the oil, gas and other minerals on, in and
under the Purchased Lands, together with the right of access thereto,
provided however that said exemption, reservation and right do not
interfere with SLQ'S operations and business of the Sherbrooke Line.
3.4 CONFIDENTIAL CONTRACTS
----------------------
Confidential contracts entered into by CN, pursuant to the provisions of
the National Transportation Act, 1987 and the Canada Transportation Act,
1996, shall not be disclosed or assigned to SLQ as part of the Purchased
Assets; provided, however, that in respect of any confidential contract for
intraline traffic on the Sherbrooke Line, such confidential contract may be
assigned to SLQ with the prior written consent of the applicable customer.
If the prior written consent of such intraline customer is not obtained, CN
will pay to SLQ all rates and other compensation paid to CN by the customer
under such confidential contract, provided SLQ is prepared to and does
carry out the terms and conditions and assumes all responsibility for the
fulfillment of such confidential contract, provided however that such non
assignable confidential contracts shall be disclosed to SLQ.
3.5 TAXES
-----
SLQ shall be liable for and pay all applicable Federal and Provincial sales
tax (including any Goods and Services Tax, retail sales taxes and transfer
taxes) and all other taxes, duties, fees or other similar charges of any
jurisdiction properly payable in connection with the transfer of Purchased
Assets by CN to SLQ.
3.6 GOODS AND SERVICES TAX AND SALES TAX PROCEDURES FOR REAL PROPERTY
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Notwithstanding the foregoing, SLQ and CN agree that the purchase by SLQ of
those Purchased Assets that are real property within the meaning of
subsection 123 (1) of the Excise Tax Act (Canada) (the "GST Legislation"),
and Section 1 of the Quebec Sales Tax Act (the "QST Legislation") including
without limitation the Purchased Assets described in Paragraphs 3.1(a) and
(b) hereof, is governed by the provisions of paragraphs 221(2)(b) and
228(4)(a) of the GST Legislation and Sections 423 and 438 of the QST
Legislation. Accordingly, CN has no obligation to collect goods and
services tax and SLQ shall self-assess the goods and services tax to which
it is liable in respect of the purchase of such real property.
SLQ will hold harmless and indemnify CN from and against all liabilities,
claims and demands whatsoever in connection with SLQ failing to be a
recipient described in paragraph 221(2)(b) of the GST Legislation and
Section 423 of the QST Legislation, or failing to self-assess the goods and
services tax in respect of the purchase of such real property in the time
and manner contemplated by paragraph 228(4)(a) and subsection 228(6) of the
GST Legislation and by Sections 438 and 441 of the QST Legislation. This
indemnity shall survive the completion of this Agreement.
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6
3.7 NO WARRANTY OF TITLE
--------------------
Subject to the provisions of Sections 3.2 and 8.1, it is understood and
agreed that CN will convey the Lands to SLQ on Closing without warranty as
to the titles and without guarantee as to the compliance of the sold assets
with respect to any legislation, including legislation applicable to
environmental protection.
ARTICLE 4 - PURCHASE PRICE
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4.1 CONSIDERATION
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The consideration to be paid by SLQ to CN for the Purchased Assets shall
be:
(i) the sum of Seven Million Dollars ($7,000,000.00), payable as set out
herein;
(ii) SLQ's undertaking to abide by the contractual arrangements described
in the Operating, Marketing and Interchange Agreement, as well as the
contractual arrangements described herein;
(iii) The granting by SLQ to CN of perpetual running rights over the
Sherbrooke Line for the purpose of overhead traffic.
All payments shall be paid in the form of cash, certified cheque or the
equivalent unless otherwise specified.
4.2 DEPOSIT
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The parties acknowledge that SLQ has deposited with CN the initial deposit
amount of One Hundred Thousand Dollars ($100,000.00). SLQ shall deposit the
further sum of one Million Dollars ($1,000,000.00) with CN on execution of
this Agreement, and SLQ's total deposit of One Million One Hundred Thousand
Dollars ($1,100,000.00), plus any interest earned on that amount, will be
held by CN in accordance with the following terms and conditions:
(a) In the event of the termination of this Agreement pursuant to
Paragraphs 14.1 (a), (b), (d), (e), (f), or (h) hereof, SLQ's full
deposit of One Million One Hundred Thousand Dollars ($1,100,000.00),
together with any interest earned, shall be returned to SLQ.
(b) In the event of the termination of this Agreement pursuant to
Paragraphs 14.1(c) and (g) hereof, One Hundred Thousand Dollars
($100,000.00) of SLQ's full deposit shall be retained by CN as
liquidated damages and the remainder of the full deposit, together
with any interest earned thereon, shall be returned to SLQ.
(c) In the event of a dispute between SLQ and CN over the disbursement of
SLQ's deposit, CN shall continue to hold One Hundred Thousand Dollars
($100,000.00) of the deposit and any interest thereon pending the
final resolution of such dispute, and the remainder of the deposit,
with any interest earned thereon, shall be returned to SLQ.
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4.3 PURCHASE PRICE
--------------
The Purchase Price shall, subject to adjustments as provided for herein, be
paid by SLQ to CN in the manner set forth below:
(a) One Million One Hundred Thousand Dollars ($1,100,000.00) by way of
credit of the full deposit, as provided in Section 4.2, towards the
Purchase Price; and
(b) the balance of the Purchase Price, namely Five Million Nine Hundred
Thousand Dollars ($5,900,000.00) in cash, paid on the Closing Date, in
the manner provided in Section 5.2. The amount payable on the Closing
Date shall be reduced by any interest earned on the deposits made
pursuant to Section 4.2 until the Closing Date.
4.4 ADJUSTMENTS
-----------
The Purchase Price shall be adjusted effective as of the Closing Date in
respect of the following matters:
(a) real property taxes and utilities for the Purchased Lands and the
improvements on the Purchased lands;
(b) pre-payments or regularly scheduled payments made in advance or in
arrears under the Assumed Contracts, where such amounts are in excess
of One Thousand Dollars ($1,000.00);
(c) charges and allocation of revenues; and
(d) accrued interest on the deposit amount up to the Commencement Date.
The foregoing adjustments will be estimated by CN and SLQ at the Closing,
with a final reconciliation to be completed no later than 45 days following
the Closing.
4.5 ALLOCATION
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SLQ and CN agree to allocate the Purchase Price among the Purchased Assets,
as follows, and report the sale and purchase of the Purchased Assets for
all federal, provincial and local tax purposes, in a manner consistent with
such allocation:
i) Land $ 1.5M
ii) Railway Structure $ 5.3M
iii) Buildings $ 0.2M
4.6 EMPLOYEE LIABILITIES
--------------------
All Employee Liabilities shall be for the account of CN, including Employee
Liabilities owed to those Employees who may be offered and who may accept
employment with SLQ on or after the Closing Date. CN agrees to pay or
satisfy all Employee Liabilities and to indemnify and save harmless SLQ for
any liability that SLQ may incur after Closing in respect of any and all
Employee Liabilities.
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ARTICLE 5 - CLOSING
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5.1 CLOSING DATE AND PLACE
----------------------
The Execution of the Agreement shall take place at the offices of CN's
counsel in Montreal, Quebec on November 25, 1998 at 11:00 hours, or on such
other date and at such other time as may be mutually agreed.
5.2 PAYMENT OF FUNDS
----------------
As of the Closing Date, SLQ shall deliver the balance of the Purchase
Price, namely Five Million Nine Hundred Thousand Dollars ($5,900,000.00) to
the instrumenting notary, such amount to be held in trust until the
registration of the notarial Deed of Sale wherever necessary, without
adverse entries.
However from December 1/st/, 1998, interest on the full purchase price will
accrue to the benefit of CN and be payable by SLQ at the Closing Date.
5.3 EXECUTION OF AGREEMENTS
-----------------------
At or before November 25, 1998, or as otherwise mutually agreed, SLQ and CN
will execute and deliver the Operating, Marketing and Interchange
Agreement, together with such other executed documents as may be required
or necessary as set out herein.
5.4 CLOSING DOCUMENTS
-----------------
At the Closing, subject to the satisfaction of all conditions and
conditions precedent, CN shall execute and deliver to SLQ all registerable
instruments of transfer, assignments, bills of sale and other documents as
shall be necessary to effectively transfer to SLQ the Purchased Assets, and
shall deliver to SLQ possession thereof on Closing.
5.5 OPINION OF CN'S COUNSEL
-----------------------
At the Closing, CN shall deliver to SLQ the opinion of CN's counsel, dated
as of the Closing Date, in a form satisfactory to SLQ's counsel, to the
effect that the corporate existence, good standing, and authorization of CN
are as represented and warranted in Paragraph 8.1(a), and that the
execution, validity and enforceability of this Agreement are as represented
and warranted in Section 8.1(a).
5.6 OPINION OF SLQ'S COUNSEL
------------------------
At the Closing, SLQ shall deliver to CN the opinion of SLQ's counsel, dated
as of the Closing Date, to the effect that the corporate existence, good
standing and authorization of SLQ are as represented and warranted in
Paragraph 8.3(a), that the execution, validity and enforceability of this
Agreement are as represented and warranted in Paragraph 8.3(a), and that
SLQ holds a Certificate of Fitness, or such regulatory approval as
required, and has full power and authority to operate a railway as provided
in Paragraph 8.3(a).
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ARTICLE 6 - INVESTIGATION BY SLQ
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6.1 INFORMATION BINDER
------------------
CN has provided to SLQ the Information Binder, which contains descriptions
and historical data relating to the Sherbrooke Line and the results of
operations of the rail service along the Sherbrooke Line (See Schedule
"F"). The description and data in the Information Binder and in the books
and records of CN were prepared by CN in the ordinary course of business.
CN makes no warranty of completeness or accuracy of such descriptions and
data, which are being made available to SLQ for information purposes only.
6.2 INSPECTION OF LINE
------------------
SLQ understands that it is acquiring the Purchased Assets in "as is, where
is" condition. SLQ acknowledges that CN has provided a reasonable
opportunity to SLQ for inspection and review of the Sherbrooke Line prior
to the execution of this Agreement. SLQ represents that it has undertaken
such inspection and review of the Sherbrooke Line as SLQ deems appropriate
to SLQ's determination of the suitability of the Sherbrooke Line for SLQ's
operations. Prior to Closing, SLQ shall have a reasonable opportunity for
such further inspection and review as SLQ shall, in its sole discretion,
deem appropriate to confirm the suitability of the Sherbrooke Line for
SLQ's operations.
6.3 INSPECTION OF RECORDS AND ASSETS
--------------------------------
Subject to Section 3.4, CN has, between the date of the Agreement in
Principle and the date hereof, provided SLQ with reasonable opportunity,
during regular business hours, to inspect books, contracts, agreements,
plans, reports and records reflecting or relating to the Sherbrooke Line
and Purchased Assets, and SLQ represents that it has completed its due
diligence with respect thereto by Closing. At Closing, CN will turn over to
SLQ all original books, contracts, agreements, plans, reports and records
with respect to the Sherbrooke Line and the Purchased Assets, provided,
however, that SLQ agrees to make any such original records available to CN
under reasonable terms and conditions for use in any litigation or
investigation involving CN.
6.4 RIGHT-OF-WAY PLANS
------------------
SLQ shall acknowledge receipt, as at the Closing Date, of a copy of CN's
Right-of-way Plans covering the Sherbrooke Line, with such changes as have
been made by CN in the ordinary course of business. CN makes no warranty of
completeness, currency or accuracy of such Right-of-way Plans, which have
been provided to SLQ for informational purposes only. SLQ shall be
responsible for any costs associated with the provision of any information
or documentation requested by SLQ, including surveys, not in the possession
of CN or which CN cannot reasonably provide.
6.5 SURVEYS
-------
SLQ acknowledges that CN shall have no obligation with respect to any
survey, severance, and subdivision costs relating to the Sherbrooke Line
after the Closing Date. Any survey which SLQ may undertake shall be at
SLQ's risk and expense.
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10
6.6 CONFIDENTIALITY
---------------
CN and SLQ agree that:
(a) Each party will treat in confidence this Agreement, including all
documents, materials and other information relating to this
Agreement, and all documents, materials and other information which
it shall have obtained regarding the other party during the course
of the negotiations leading to the consummation of the transactions
contemplated hereby (whether obtained before or after the date of
this Agreement), the investigation provided for herein and the
preparation of this Agreement and all other related documents. The
obligation of each party to treat such agreements, documents,
materials and other information in confidence shall not apply to any
information which (i) was already lawfully in its possession prior
to the disclosure thereof by the other party, (ii) is known to the
public and did not become so known through any violation of a legal
obligation, (iii) became known to the public through no fault of
such other party, or (iv) is later lawfully acquired by such party
from other sources.
(b) This Agreement and any information obtained from CN shall be treated
as confidential and shall not be disclosed to any third party (other
than to a government or regulatory authority entitled to the
disclosure thereof by law and to each party's affiliates,
consultants or their respective representative, solicitors and
accountants) except in situations where a valid judicial decision
may order the Agreement to be disclosed either in whole or in part.
The parties submitting the Agreement to such governmental or
regulatory authority shall request the governmental or regulatory
authority to preserve the confidentiality of the business sensitive
portions of the Agreement.
(c) In the event the transaction contemplated herein is not completed
and this Agreement is terminated, each party will treat in
confidence all documents, materials and other information and
findings which it or any of its consultants, affiliates or their
respective representatives, solicitors and accountants shall have
obtained or made regarding the other party during the course of the
negotiations relating to this Agreement, the investigation of the
other party and the preparation of this Agreement and other
documents relating to this Agreement, and shall promptly return to
the other party all copies of non-public documents and materials
which may have been furnished in connection therewith.
(d) Other than as specified herein, neither of the parties hereto shall
make any public announcement or disclosure concerning this
Agreement, the transactions contemplated hereby or the information
required to be kept confidential hereunder to any party without the
prior written consent of the other party unless, in the written
opinion of counsel, such party is compelled by law to do so,
including pursuant to public disclosure requirements under
applicable securities legislation, and then only with prior written
notice to the other party, except that the parties acknowledge the
Emons Transportation Group Inc., an affiliate of the Purchaser, is
required pursuant to US securities law applicable to it to file a
copy of this Agreement with the SEC in electronic form. Both SLQ and
CN shall consult with each other and give each other the opportunity
to comment on the text of any announcement proposed to be made by it
in this regard.
6.7 RISK
----
The Purchased Assets shall be at the risk of CN until the Closing has been
completed.
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ARTICLE 7 - LEASES, LICENSES, CONTRACTS AND ORDERS
- --------------------------------------------------
7.1 ASSUMED CONTRACTS AND AGENCY ORDERS
-----------------------------------
It is understood and agreed that the Purchased Assets will be sold subject
to the Assumed Contracts and Agency Orders in effect on the Closing Date,
whether or not shown on the Right-of-way Plans and whether or not recorded
in the public land records. Subject to Section 3.4, CN represents that
Schedule E is a list of all leases, licenses, contracts and agreements
known to CN. CN represents and warrants that no contract not listed on
Schedule E will have a material adverse effect on SLQ's ability to operate
the Sherbrooke Line or to conduct its business.
7.2 BENEFITS AND OBLIGATIONS
------------------------
Subject to Paragraph 3.1(d) and Section 3.4, SLQ shall, to the extent
assignable, succeed to all of the rights and benefits and shall assume all
of the duties and obligations under the Assumed Contracts and Agency Orders
as and from the Commencement Date. CN agrees to indemnify and save
harmless SLQ against all claims or obligations associated with an Assumed
Contract and Agency Order to the extent such claim can be attributable to
an incident which occurred before the Commencement Date. To CN's
knowledge, such Assumed Contracts and Agency Orders will not have a
material adverse effect on SLQ's ability to operate the Sherbrooke Line in
substantially the same manner as operated by CN. To the extent that the
assignment of any agreement, contract, lease, commitment, or undertaking to
be assigned, as provided herein, shall require the consent of another party
thereto, this Agreement shall not constitute an agreement to assign the
same if an attempted assignment would constitute a breach thereof, but CN
agrees that it will use its best efforts to obtain the written consent of
the other parties to all material agreements, contracts, leases,
commitments, and undertakings to the assignment thereof, and if such
consent is not obtained, CN will cooperate with SLQ in any reasonable
arrangement designed to provide for SLQ the benefits under any such
material agreements, contracts, leases, commitments, and undertakings,
including enforcement at SLQ's cost of any and all rights of CN against
another party thereto arising out of the breach or cancellation thereof by
another party or otherwise. CN makes no representation with respect to the
effect of any failure to obtain any such consent to the transfer or
assignment of any such material leases, licenses, contracts, or orders on
SLQ's ability to operate the Sherbrooke Line. Nothing herein shall require
CN to make any payments to a lessor or other party to any such agreement or
to incur any legal or enforcement costs in furtherance of the objectives
described in this paragraph.
ARTICLE 8 - REPRESENTATIONS AND WARRANTIES
- ------------------------------------------
8.1 CN'S REPRESENTATIONS AND WARRANTIES
-----------------------------------
Subject to the fulfillment of matters set out in Article 9, CN undertakes,
represents and warrants to SLQ that:
(a) CN is a validly organized and existing corporation, and in good
standing, under the laws of Canada, with full power and authority to
enter into and perform all of its obligations under this Agreement
and the agreements referred to or set forth in the Schedules;
(b) On the Closing Date, subject to prior performance of the conditions
and conditions precedent set out in this Agreement, and subject only
to the Assumed Contracts, and Agency Orders, CN will have good and
valid title to all of the Purchased Assets, and CN's title and
interest in the Purchase Assets will be free and clear of adverse
claims;
<PAGE>
12
(c) CN is the sole and beneficial owner of the Purchased Assets and is
not a non-resident of Canada within the meaning and intent of the
Income Tax Act (Canada);
(d) On the Execution Date and as of the Closing Date, there is no
litigation pending nor, to the best knowledge of CN threatened,
including without limitation claims made by or on behalf of
aboriginal peoples, with respect to the Purchased Assets, other than
as disclosed in Schedule I;
(e) There is no material adverse change in the physical condition of the
Purchased Assets or the business conducted thereron between the date
of the Agreement in Principle and the Commencement Date, subject
always to ordinary wear and tear;
(f) CN will operate and manage the Sherbrooke Line up to the
Commencement Date, in the same manner that it has been operated
prior to the date hereof and as would a reasonably competent and
prudent owner of comparable assets;
(g) As of the Execution Date of this Agreement, the only Agency Orders
affecting the Sherbrooke Line are those set forth in Schedule H, and
CN shall advise SLQ of any additional such orders as of the
Commencement Date. CN makes no representation or warranty that any
or all of such orders will or will not be binding upon the operation
of SLQ;
(h) As of the Execution Date of this Agreement, to the best knowledge of
CN, the only Assumed Contracts affecting the Sherbrooke Line are
those set forth in Schedule E, all of the Assumed Contracts are
valid and subsisting, with no default existing thereunder, and CN
shall advise SLQ of any change as of the Commencement Date;
(i) Subject to Section 7.2, CN has good right and lawful authority to
assign the Assumed Contracts to SLQ;
(j) CN shall not, from the date of the Agreement in Principle, enter
into any new agreements relating to the Purchased Assets (except any
renewals of subsisting agreements on subsisting terms and
conditions), except upon such terms and conditions as may be
approved by SLQ in writing;
(k) As of the Execution Date and as of the Commencement Date, to the
best knowledge of CN, neither CN nor any person for whom in law CN
is responsible has caused or permitted any contaminant to be
disposed of on or under the Purchased Lands, other than oil, grease
and similar petroleum products inherent in a rail operation, and
that there are no pending claims or proceedings arising out of
alleged or actual violations of environmental laws or regulations on
or relating to the Sherbrooke Line. CN holds all permits and has
obtained all environmental authorizations required to possess the
Purchased Assets and for its operations. CN acts and continues to
act in compliance with all environmental obligations;
(l) As of the Execution Date and as of the Commencement Date, CN has not
received any complaint, order or direction remaining unremedied from
any competent authority concerning the use of the Sherbrooke Line,
or the non-compliance of the use of the Sherbrooke Line with any
applicable statute, law, bylaw, regulation or ordinance affecting
the same;
(m) As of Closing, all necessary corporate action will have been taken
by CN to validly approve, ratify, confirm and adopt this Agreement
and any agreement referred to or set forth in the Schedules, and to
authorize the execution and delivery of all documents
<PAGE>
13
contemplated or required herein and the performance of all acts and
consummation of all transactions on the part of CN to be done or
performed hereunder;
(n) Neither this Agreement nor any document to be delivered by CN, nor
any certificate, report, statement or other document furnished by CN
in connection with the negotiation of this Agreement, contains any
untrue statement of material fact or omits to state a material fact
necessary to make the statements contained herein or therein not
misleading;
(o) CN has sufficient title to the Purchased Assets used in the conduct
of its rail operations to conduct those operations in the manner in
which they are currently being conducted which titles are subject to
the Assumed Contracts to be assumed by SLQ, Permitted Encumbrances
and orders of regulatory authorities; and
(p) As of the Commencement Date, CN has complied in all material
respects with all applicable laws, rules, obligations, regulations
and orders relating to the Employees working on or for the
Sherbrooke Line including those relating to fees, contributions and
assessments to be paid by an employer in the normal course of
business and there are no outstanding amounts to be paid to the
Commission de la sante et de la securite du travail ("CSST") or any
Governmental body or agency with regard to CN employees who worked
on or for the Sherbrooke Line for which SLQ could be held liable.
8.2 DISCLAIMER
----------
SLQ acknowledges and agrees that the Purchased Assets are being sold and
purchased on an "as is, where is" basis and, subject to the express
representations and warranties given in Section 8.1, CN makes no further
representations or warranties to SLQ of any kind, character or nature,
whether express or implied, statutory or otherwise, with respect to the
Purchased Assets, including, without limitation, the design or condition of
the Sherbrooke Line and the Purchased Assets, their safety, their
compliance with governmental laws and regulations, their merchantability or
fitness for any particular purpose, the quality of the material or
workmanship or conformity to their intended use or marketability of title
to the lands.
8.3 SLQ'S REPRESENTATIONS AND WARRANTIES
------------------------------------
Subject to the fulfillment of matters set out in Article 9, SLQ undertakes,
represents and warrants to CN that:
(a) SLQ is a validly organized and existing corporation, and in good
standing under the laws of Canada, authorized to carry on business
as a railway in the Province of Quebec and holding a Certificate of
Fitness pursuant to the provisions of the Canada Transportation Act,
with full power and authority as of the Commencement Date to operate
a railway in accordance with the provisions of the Canada
Transportation Act, and to enter into and perform all of its
obligations under this Agreement and the agreements referred to or
set forth in the Schedules;
(b) SLQ is not a party to, bound or affected by or subject to any
indenture, mortgage, lease, agreement, instrument, charter or bylaw
provision, statute, rule, regulation, judgment, order, writ, decree
or law which would be violated, contravened, breached by or under
which default would occur as a result of the execution, delivery and
performance of this Agreement or any agreement referred to or set
forth in the Schedules, or the performance by it of any of the terms
of this Agreement or any such agreement;
<PAGE>
14
(c) As of the Execution Date, all necessary corporate action will have
been taken by SLQ to validly approve, ratify, confirm and adopt this
Agreement and any agreement referred to or set forth in the
Schedules, and to authorize the execution and delivery of all
documents contemplated or required herein and the performance of all
acts and consummation of all transactions on the part of SLQ to be
done or performed hereunder;
(d) SLQ will, during the term of the Operating, Marketing and
Interchange Agreement, or any renewal thereof, abide at all time
with the rules of the Association of American Railroads (AAR) and
adhere to standard AAR equipment maintenance standards and become
and remain a member of the Railway Association of Canada;
(e) SLQ will maintain and operate the Sherbrooke Line as an operating
line providing services to existing and future rail users, in
accordance with rail common carrier standards during the term of the
Operating, Marketing and Interchange Agreement, and as may be
prescribed from time to time by authorities having jurisdiction,
unless relieved from such standards by authorities having such
jurisdiction; and
(f) Neither this Agreement nor any document to be delivered by SLQ, nor
any certificate, report, statement or other document furnished by
SLQ in connection with the negotiation of this Agreement, contains
any untrue statement of material fact or omits to state a material
fact necessary to make the statements contained herein or therein
not misleading.
8.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
------------------------------------------
All undertakings, representations and warranties set out in Section 8.1 and
paragraphs 8.3(a), (b), (c) and (f), with the exception of Paragraphs
8.1(b) to (d) inclusive, (h), (k), (o), and (p) which shall survive forever
after the Closing Date, shall survive and shall continue in full force and
effect for the benefit of CN or SLQ, as the case may be, for a period of
two years after the Closing Date, after which time, if no claim shall have
been made prior to the expiry of the two-year period against a party with
respect to any incorrectness or with respect to any breach of any
undertaking, representation or warranty made by that party, that party
shall have no further liability with respect to the undertakings,
representations or warranties.
ARTICLE 9 - CONDITIONS PRECEDENT
- --------------------------------
9.1 MUTUAL CONDITIONS PRECEDENT
---------------------------
This Agreement is executed subject to each of the following mutual
conditions precedent being satisfied and/or performed:
(a) Approvals, consents, orders and authorizations of any persons or
governmental bodies having authority, including without limitation,
all registrations, recordings and filings with public authorities,
all agency orders, government and regulatory permits and licenses
and all other authorities required to enable SLQ to carry on the
operation of a railway line in the manner contemplated herein,
including the approval under the ICC Termination Act regarding the
existing trackage rights granted by St.Lawrence & Atlantic Railroad
Company to CN, if necessary;
(b) The issuance of a Certificate of Fitness, or such regulatory
approval as required, to SLQ in conformance with the provisions of
Paragraph 8.3(a);
<PAGE>
15
(c) Agreement being reached between SLQ and the trade unions that
represent the various scheduled employees involved in the operation
and maintenance of the Sherbrooke Line immediately prior to the
Commencement Date, setting out the terms and conditions of employment
of such employees;
(d) Agreement being reached between CN and the trade unions that represent
the various scheduled employees of CN involved in the operation and
maintenance of the Sherbrooke Line, settling any and all employment
security or similar issues;
(e) CN to notify SLQ of any material change in the business, affairs,
operations, assets, liabilities (contingent or otherwise) which are
material to the business of the Sherbrooke Line; and
(f) The physical condition of the Purchased Assets and state of the
business affairs and operations of the Sherbrooke Line not being
substantially and materially different from such physical condition
and state on the date of the updated Booklets.
9.2 MUTUAL WAIVER
-------------
Subject to the satisfaction and performance of SLQ's conditions, set out in
Article 10, and CN's conditions, set out in Article 11, and the mutual
conditions precedent set out in Section 9.1, this Agreement shall be in
full force and effect and binding on the parties, but otherwise it shall be
null and void without liability between the parties. It is acknowledged by
both parties that the conditions set out in Section 9.1 are for the benefit
of both CN and SLQ and may not be unilaterally waived by either CN or SLQ.
ARTICLE 10 - SLQ'S CONDITIONS
- -----------------------------
10.1 CONDITIONS
----------
The obligations of SLQ to complete the purchase of the Purchased Assets
under this Agreement shall be subject to the following conditions:
(a) all of the written representations and warranties of CN made in this
Agreement are true and correct in all material respects as of the
Closing;
(b) CN has performed or complied with, in all respects, all of its
obligations, covenants and agreements required under this Agreement to
be performed or complied with as of the Closing;
(c) SLQ being satisfied, in its sole discretion, with the investigation
conducted pursuant to Sections 6.1 to 6.3; and
10.2 FINANCING
---------
SLQ shall not be obligated to complete the purchase and sale of the
Purchased Assets under this Agreement if as a reason of unsettled
conditions in general financial markets it has not been able to conclude
financing for such acquisition.
<PAGE>
16
10.3 WAIVER BY SLQ
-------------
In the event that any of SLQ's conditions are not performed or satisfied at
or before the Closing and SLQ does not waive that condition in accordance
with this Section 10.3, this Agreement shall be null and void without
liability between the parties. It is acknowledged by both parties that the
conditions set forth in Section 10.1 are for the sole benefit of SLQ and
may be unilaterally waived by SLQ by notice in writing delivered to CN on
or before the Closing Date.
ARTICLE 11 - CN'S CONDITIONS
- ----------------------------
11.1 CONDITIONS
----------
The obligation of CN to complete the sale of the Purchased Assets under
this Agreement shall be subject to the following conditions:
(a) All of the written representations and warranties of SLQ made in this
Agreement are true and correct in all material respects as of the
Closing; and
(b) SLQ has performed or complied with, in all respects, all of its
obligations, covenants and agreements required under this Agreement to
be performed or complied with as of the Closing.
11.2 WAIVER BY CN
------------
In the event that any of CN's conditions are not performed or satisfied at
or before the Closing and CN does not waive that condition in accordance
with this Section 11.2, this Agreement shall be null and void without
liability between the parties. It is acknowledged by the parties that the
conditions set forth in Section 11.1 are for the sole benefit of CN and may
be unilaterally waived by CN by notice in writing delivered to SLQ on or
before Closing Date.
ARTICLE 12 - INDEMNITY
- ----------------------
12.1 CN shall indemnify, protect, defend and hold harmless SLQ, its officers,
agents and employees, from and against any and all liability of whatsoever
kind or degree, cost and expense arising out of or connected with any
personal injury, property loss or damage, occurring on or about the
Sherbrooke Line, or arising out of the use of the Sherbrooke Line or the
Purchased Assets, or any portion thereof, by parties other than SLQ, its
officers, agents and employees, or violation of any law or regulation and
relating to events occurring prior to the Commencement Date, except for any
such liability caused by the deliberate or negligent acts of SLQ, its
officers, agents or employees. SLQ shall indemnify, protect, defend and
hold harmless CN, its officers, agents and employees from and against any
and all liability of whatsoever kind or degree, cost and expense arising
out of or connected with any personal injury, property loss or damage,
occurring on or about the Sherbrooke Line, or arising out of the use of the
Sherbrooke Line or the Purchased Assets, or any portion thereof, by parties
other than CN, its officers, agents and employees, or violation of any law
or regulation and relating to events occurring on or subsequent to the
Commencement Date, except for any such liability caused by the deliberate
or negligent acts of the CN, its officers, agents or employees.
12.2 Effective as and from the Closing, each of CN and SLQ shall indemnify and
save harmless the other from and against any and all damage, loss or
liability of whatsoever kind or degree, cost and expense arising out of or
connected with any non-fulfillment of any covenant or agreement on the
<PAGE>
17
part of such party under this Agreement or any incorrectness in or breach
of any representation or warranty of such party contained in this Agreement
or any certificate or other document furnished by such party pursuant to
this Agreement.
12.3 The obligations of indemnification contained in Sections 12.1 and 12.2
above, in respect of the damage, loss or liability described therein, shall
be subject to the requirement that the party obligated to indemnify the
other party (the "Indemnifying Party") shall, in respect of any claim made
by any third party, be notified of all material particulars thereof and be
afforded an opportunity, at its sole expense, to resist, defend and
compromise the same provided that the Indemnifying Party shall not be
obligated to do so; and further provided that if the Indemnifying Party
does not assume the defense of that claim, the party to be indemnified may
defend against the claim in a manner it deems appropriate and may take such
action as may be reasonably prudent in the circumstances to settle any such
claim, the reasonable costs of such defense and other action to be at the
sole expense of the Indemnifying Party.
ARTICLE 13 - ENVIRONMENTAL MATTERS
- ----------------------------------
13.1 ACKNOWLEDGMENT OF ENVIRONMENTAL STATUS
--------------------------------------
SLQ hereby acknowledges that the Sherbrooke Line is, and has been, utilized
as active freight railway line. CN agrees to make available to SLQ all
environmental assessments, surveys and information currently in CN's
possession, and agrees to cooperate with SLQ with respect to any
environmental survey it may need to undertake. SLQ acknowledges receipt of
a Phase I Environmental Assessment in respect of the Sherbrooke Line. CN
makes no representation or warranty with respect to the accuracy or
completeness of said environmental assessment, survey and information.
13.2 SLQ AND CN'S INDEMNITIES
------------------------
(a) SLQ will:
(i) indemnify and hold harmless CN and its officers, directors,
agents, employees, parent corporation, subsidiaries, affiliates,
successors and assigns from all liability, costs, expenses, lawyers'
fees and costs, fines, penalties or civil judgments resulting from any
violation or claimed violation for which SLQ is responsible under the
Agreement or the Operating, Marketing and Interchange Agreement, of
any federal, provincial or local law, rules, regulation or ordinance
controlling track maintenance standards and soil, air, water, noise,
hazardous waste, solid waste or other pollution or relating to the
storage, transport, release or disposal of hazardous materials,
substances, wastes or other pollutants arising after the Commencement
Date and from any violations of this section; and
(ii) reimburse CN and its officers, directors, agents, employees,
parent corporation, subsidiaries, affiliates, successors and assigns
for all costs and expenses incurred by CN or its officers, directors,
agents, employees, parent corporation, subsidiaries, affiliates,
successors and assigns in eliminating or remedying such violations,
pollution or contamination for which SLQ is responsible under this
Agreement or the Operating, Marketing and Interchange Agreement.
(b) CN will:
(i) indemnify and hold harmless SLQ and its officers, directors,
agents, employees, parent corporation, subsidiaries, affiliates,
successors and assigns from all liability, costs,
<PAGE>
18
expenses, lawyers' fees and costs, fines, penalties or civil judgments
resulting from any violation or claimed violation of any federal,
provincial or local law, rules, regulation or ordinance controlling
track maintenance standards and soil, air, water, noise, hazardous
waste, solid waste or other pollution or relating to the storage,
transport, release or disposal of hazardous materials, substances,
wastes or other pollutants arising prior to the Commencement Date and
from any violations of this section; provided that the burden of proof
that such occurred prior to the Commencement Date shall rest with SLQ.
(ii) reimburse SLQ and its officers, directors, agents, employees,
parent corporation, subsidiaries, affiliates, successors and assigns
for all costs and expenses incurred by SLQ or its officers, directors,
agents, employees, parent corporation, subsidiaries, affiliates,
successors and assigns in eliminating or remedying the violations,
pollution or contamination set out in Paragraph 13.2(b)(i) hereof
provided that the burden of proof that such has occurred prior to the
Commencement Date shall rest with SLQ.
13.3 REMEDIATION BY CN
-----------------
In the event that as a result of the condition of the Sherbrooke Line or
occurrences prior to the Commencement Date a competent governmental
authority (the "Authority") requires all or a portion of the Sherbrooke
Line to be remediated in accordance with applicable environmental laws (the
"Remediated Lands"), CN shall, at its own expense, carry out the
remediation of the Remediated Lands required by an Authority to the extent
required under applicable environmental laws and consistent with the use of
the Sherbrooke Line as set out herein.
ARTICLE 14 - TERMINATION
- ------------------------
14.1 This Agreement and the consummation of the transactions contemplated by
this Agreement may be terminated prior to the Closing Date:
(a) by the mutual agreement of CN and SLQ at any time;
(b) by SLQ, if there has been a material failure of CN to comply with its
obligations under this Agreement, including the obligation to deliver
the opinions specified in Section 5.5, or a breach of CN's
representations and warranties at Closing that would have a material
adverse effect on the value of the Purchased Assets or SLQ's ability
to operate the Sherbrooke Line substantially in the manner previously
operated by CN;
(c) by CN, if there has been a material failure by SLQ to comply with its
obligations under this Agreement
(d) by either party, in the event of the issuance of any required approval
of any government agency having jurisdiction which imposes conditions
related to the operation of the Sherbrooke Line which are unacceptable
to either party;
(e) by either party, in the event there is a material adverse change in
the physical condition of the Purchased Assets or the business
conducted thereon between the date of the Agreement in Principle and
the Commencement Date which CN is not prepared to remedy and SLQ is
not prepared to waive;
(f) by either party, in the event one or more of the conditions precedent
specified in Section 9.1 are not fulfilled;
<PAGE>
19
(g) by CN, in the event one or more of the CN's conditions specified in
Section 11.1 are not fulfilled; and
(h) by SLQ, in the event one or more of the SLQ's conditions specified in
Section 10.1 are not fulfilled and/or if SLQ has not been able to
conclude the financing referred to at Section 10.2.
ARTICLE 15 - NOTICE
- -------------------
15.1 Any notice, request, demand or other document required or permitted under
this Agreement shall be in writing and shall be deemed to have been duly
given if personally delivered or sent by prepaid registered mail or if
transmitted by a form of recorded electronic communication,
(a) To CN at:
CANADIAN NATIONAL RAILWAY COMPANY
935, rue de La Gauchetiere ouest
11e etage
Montreal (Quebec)
H3B 2M9
Attention: Francois Hebert
Assistant Vice-President - Strategic and Financial
Planning
Telephone: (514) 399-4333
Facsimile: (514) 399-8823
(b) To St.Lawrence & Atlantic Railroad (Quebec) Inc. at:
ST.LAWRENCE & ATLANTIC RAILROAD (QUEBEC) INC.SLQ
416 Lewiston Junction Road
Auburn, Maine
USA 04210
Attention: President
Telephone: (207) 782-5680
Facsimile: (207) 782-5857
With copy to:
EMONS TRANSPORTATION GROUP INC.
96 South George Street
Suite 400
York, Pennsylvania
USA 17401
Attention: Chief Financial Officer
Telephone: (717) 771-1700
Facsimile: (717) 854-6275
15.2 Any writing given in the manner set out in Section 15.1 shall be deemed
given if and when personally delivered or if mailed in the manner therein
provided shall be deemed given ten business days after posting. Any notice
transmitted by a form of recorded electronic
<PAGE>
20
communication shall be deemed given and received on the date of
transmission if received during the normal business hours of the recipient
and on the first business day after its transmission if it is received
after the end of normal business hours on the date of transmission.
15.3 In the event of disruption or threatened disruption of regular mail
services by strike or threatened strike, all such notices, requests and
other communications shall be deemed to have been duly given only if
personally delivered in the manner provided in Section 15.1 or sent by
recorded electronic communication.
ARTICLE 16 - OPERATING LEASE
- ----------------------------
CN hereby grants to SLQ for the consideration set out herein, in respect of the
Purchased Assets, a right in the nature of a lease (the "Lease") to operate with
SLQ crews and locomotives over the Purchased Assets, upon the following terms
and conditions:
(a) The term of the Lease shall commence on the Commencement Date and shall
continue until the Closing Date; and
(b) Notwithstanding anything herein to the contrary, the terms of this
Agreement and of the Operating Marketing and Interchange Agreement shall
apply to the Purchased Assets during the term of the Lease.
ARTICLE 17 - GENERAL
- --------------------
17.1 FURTHER ACTION
--------------
Each of the parties shall take all actions as are within its power to
control, and use its best efforts to cause other actions to be taken which
are not within their power to control, so as to further comply with any
conditions set out in this Agreement.
17.2 EXPENSES
--------
All costs and expenses, including, without limitation, the fees and
disbursements of legal counsel, incurred in connection with this Agreement
and the transaction contemplated, shall be paid by the party incurring that
expense.
17.3 ENTIRE AGREEMENT
----------------
This Agreement and the Schedules constitute the entire agreement
between the parties and, except as stated, contain all of the
representations and warranties of the respective parties. There are no
verbal statements, representations, warranties, undertakings or agreements
between the parties. This Agreement may not be amended or modified in any
respect, except by written instrument executed by the parties.
17.4 TIME OF THE ESSENCE
-------------------
Time shall be of the essence of this Agreement.
<PAGE>
21
17.5 ASSIGNMENT
----------
Subject to the provisions of this Section 17.5, neither this Agreement
nor any rights or obligations under it shall be assignable by either party
without the prior written consent of the other party, such consent not to
be unreasonably withheld. CN consents to the assignment of this Agreement
to the LaSalle National Bank or other lender for the purposes of security
for financing the Sherbrooke Line, but such consent will not be deemed to
waive or modify in any respect any of the rights of CN or to relieve SLQ of
any of its obligations hereunder.
Subject thereto, this Agreement shall enure to the benefit of and be
binding on the parties and their respective successors, including any
successor by reason of amalgamation of any party, and permitted assigns.
17.6 INTERPRETATION
--------------
The provisions of this Agreement shall, where possible, be interpreted
in a manner necessary to sustain their legality and enforceability, and for
that purpose the provisions of this Agreement shall be read as if they
cover only the specific situation to which they are being applied. The
unenforceability of any provision of this Agreement in a specific situation
shall not affect the enforceability of that provision in other situations
or of other provisions of this Agreement.
17.7 COUNTERPARTS
------------
This Agreement may be executed in counterparts, each of which shall be
considered an original.
17.8 FURTHER ASSURANCES
------------------
The parties shall, with reasonable diligence, do all things and
provide all reasonable assurances as may be required to consummate the
transactions contemplated by this Agreement, and each party shall provide
those further documents or instruments required by any other party as may
be reasonably necessary or desirable to effect the purpose of this
Agreement and to carry out its provisions, whether before or after the
Closing Date.
17.9 APPLICABLE LAW
--------------
This Agreement shall be governed and interpreted in accordance with
the applicable laws of the Province of Quebec and Canada.
ARTICLE 18 - MISCELLANEOUS ITEMS
- --------------------------------
18.1 FIBRE OPTICS FACILITIES AND OTHER UTILITIES FACILITIES
------------------------------------------------------
CN reserves the exclusive right to locate on the Sherbrooke Line, without
charge to CN, an easement for those purposes described in Section II of
Schedule D and to retain for such purpose a right-of-way corridor through
the Sherbrooke Line (the "utility right-of-way corridor"). Revenues
derived from the use of the utility right-of-way corridor shall accrue
solely to CN. If CN exercises its right under this provision, CN will
provide SLQ with 30 days' written notice before undertaking any such work.
In no event, shall CN's use of the utility right-of-way corridor interfere
with SLQ's ability to provide uninterrupted rail service on or across the
Sherbrooke Line, or interfere with any utility lines or other than existing
use of the utility right-of-way corridor.
<PAGE>
22
If works to be performed by CN for the use of the utility right-of-way
corridor render it necessary to relocate the trackage of the Sherbrooke
Line or portions thereof in order for SLQ to continue to provide
uninterrupted rail service on the Sherbrooke Line, outside of the purchased
lands, CN shall not be entitled to commence such work unless or until it
has acquired for and on behalf of SLQ necessary contiguous land for the
relocation of the trackage in order for SLQ to continue to provide
uninterrupted rail service despite CN's work. Further, if such work or the
resulting facilities interfere with SLQ's ability to provide uninterrupted
rail service on or over the Sherbrooke Line, CN, or its successors or
assigns, shall bear all reasonable costs associated with any necessary
relocation of the trackage, if such relocation is performed by SLQ and all
costs if performed by CN or by a third party. CN shall retain an easement
in, under and across the Purchased Lands for the purpose of constructing,
maintaining, repairing, operating and relocating any fibre optic or utility
facilities. SLQ will not locate nor grant the right to any party other
than CN to locate any other fibre optic or other utility facilities on the
Sherbrooke Line, except for the purposes of a local network.
IN WITNESS WHEREOF the parties have executed this Agreement as of the day and
year first above written.
CHEMIN DE FER ST-LAURENT & ATLANTIQUE (QUEBEC)
INC./ST.LAWRENCE & ATLANTIC RAILROAD (QUEBEC) INC.
/s/ Robert Grossman
-----------------------------------------------
Robert Grossman, Chairman and CEO
_______________________________________________
CANADIAN NATIONAL RAILWAY COMPANY
/s/ Claude Mongeau
-----------------------------------------------
Claude Mongeau, Vice-President,
/s/ Francois C. Hebert
-----------------------------------------------
Francois C. Hebert, Assistant Vice-President
<PAGE>
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
Dated as of December 21, 1998
Among
EMONS TRANSPORTATION GROUP, INC.,
EMONS INDUSTRIES, INC.
EMONS FINANCE CORP.
MARYLAND AND PENNSYLVANIA RAILROAD COMPANY,
EMONS LOGISTICS SERVICES, INC.,
MAINE INTERMODAL TRANSPORTATION, INC.,
EMONS RAILROAD GROUP, INC.,
YORKRAIL, INC.,
ST. LAWRENCE & ATLANTIC RAILROAD COMPANY,
PENN EASTERN RAIL LINES, INC.
ST. LAWRENCE & ATLANTIC RAILROAD (QUEBEC) INC. and
SLR LEASING CORP.
as the Borrowers
and
LASALLE NATIONAL BANK
as the Lender
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TABLE OF CONTENTS
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PRELIMINARY STATEMENTS.......................................................................................... 1
AMENDMENT AND RESTATEMENT....................................................................................... 2
ARTICLE I. INTERPRETATION OF THIS AGREEMENT.............................................................. 2
1.1 Definitions................................................................................... 2
1.2 Accounting Terms.............................................................................. 25
1.3 Other Terms................................................................................... 25
1.4 Computation of Time Periods................................................................... 25
ARTICLE II. LOANS AND OTHER FINANCIAL ACCOMMODATIONS...................................................... 26
2.1 The A Term Loan Facility...................................................................... 26
(a) Amount of A Term Loan................................................................ 26
(b) Substitute A Term Note............................................................... 26
2.2 The B Term Loan Facility...................................................................... 26
(a) Amount of B Term Loan................................................................ 26
(b) B Term Note.......................................................................... 27
(c) B Term Loan Fee...................................................................... 27
2.3 The Canadian Term Loan Facility............................................................... 27
(a) Amount of Canadian Term Loan......................................................... 27
(b) Canadian Term Note................................................................... 27
2.4 Working Capital Loans......................................................................... 27
(a) Availability......................................................................... 27
(b) Substitute Working Capital Note...................................................... 28
2.5 Notice of Borrowing; Making the Loans; Loan Accounts.......................................... 28
2.6 Prepayments; Reserves......................................................................... 30
(a) Voluntary Prepayments................................................................ 30
(b) Reductions of the Available A Term Loan Amount and the Available
Canadian Term Loan Amount; Prepayments of Loans...................................... 31
(c) Mandatory Prepayment of Working Capital Loans........................................ 33
(d) Modification of Advance Rates and Eligibility Reserves............................... 33
2.7 Interest...................................................................................... 33
(i) Base Rate Loans............................................................. 33
(ii) Offshore Rate Loans......................................................... 34
(i) Base Rate Loans............................................................. 34
(ii) Offshore Rate Loans......................................................... 34
2.8 Prepayment Provisions; Breakage Costs......................................................... 34
2.9 Increased Costs; Increased Capital............................................................ 35
2.10 Payments and Computations..................................................................... 35
2.11 Taxes......................................................................................... 38
2.12 Borrowing Base................................................................................ 39
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2.13 Conversions................................................................................... 40
2.14 Fees.......................................................................................... 41
ARTICLE III. THE LETTER OF CREDIT SUBFACILITY.............................................................. 42
3.1 Obligation to Issue........................................................................... 42
3.2 Types and Amounts............................................................................. 42
3.3 Conditions.................................................................................... 42
3.4 Issuance of Letters of Credit................................................................. 43
(a) Request for Issuance................................................................. 43
(b) Issuance............................................................................. 43
(c) No Extension or Amendment............................................................ 43
3.5 Reimbursement Obligations; Duties of the Lender............................................... 43
(a) Reimbursement........................................................................ 43
(b) Duties of the Lender................................................................. 44
3.6 Payment of Reimbursement Obligations.......................................................... 44
3.7 Compensation for Letters of Credit............................................................ 44
(a) Letter of Credit Fees................................................................ 44
(b) Increased Capital.................................................................... 44
3.8 Indemnification; Exoneration.................................................................. 45
(a) Indemnification...................................................................... 45
(b) Assumption of Risk by Borrowers...................................................... 45
(c) Exoneration.......................................................................... 46
ARTICLE IV. PROPERTIES AND GUARANTY....................................................................... 46
4.1 Grant of Security Interest.................................................................... 46
4.2 Real Property Matters......................................................................... 47
4.3 Perfection and Protection of Security Interest................................................ 47
4.4 Location of Properties........................................................................ 48
4.5 Title to, Liens on, and Sale and Use of Properties............................................ 49
4.6 Access and Examination; Appraisals............................................................ 49
4.7 Intentionally Omitted......................................................................... 49
4.8 Collections and Concentration Account Arrangements............................................ 49
4.9 Equipment..................................................................................... 50
4.10 Contract Rights............................................................................... 51
4.11 Right to Cure................................................................................. 52
4.12 Power of Attorney............................................................................. 52
4.13 The Lender's Rights, Duties and Liabilities................................................... 53
4.14 The Guaranty.................................................................................. 53
(a) Guaranty Unconditional............................................................... 53
(b) Discharge Only Upon Payment In Full: Reinstatement In Certain Circumstances.......... 55
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(c) Waivers.............................................................................. 55
(d) Subrogation.......................................................................... 55
(e) Stay of Acceleration................................................................. 56
(f) Limitation on Canadian Term Loan Repayment Obligations............................... 56
(g) Right of Setoff...................................................................... 57
ARTICLE V. BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES............................................. 57
5.1 Books and Records............................................................................. 57
5.2 Financial Information......................................................................... 58
5.3 Notices to the Lender......................................................................... 60
ARTICLE VI. GENERAL WARRANTIES AND REPRESENTATIONS........................................................ 62
6.1 Authorization, Validity, and Enforceability of this Agreement and the Loan Documents.......... 62
6.2 Validity and Priority of Security Interest.................................................... 63
6.3 Organization and Qualification................................................................ 63
6.4 Corporate Name; Prior Transactions............................................................ 63
6.5 Subsidiaries and Affiliates................................................................... 64
6.6 Financial Statements.......................................................................... 64
6.7 Capitalization................................................................................ 64
6.8 Debt.......................................................................................... 64
6.9 Real Property; Leases......................................................................... 64
6.10 Proprietary Rights............................................................................ 65
6.11 Trade Names and Terms of Sale................................................................. 65
6.12 Litigation.................................................................................... 65
6.13 Restrictive Agreements........................................................................ 65
6.14 Labor Disputes................................................................................ 65
6.15 Environmental, Health and Safety Laws......................................................... 66
6.16 No Violation of Law........................................................................... 67
6.17 No Default.................................................................................... 67
6.18 ERISA......................................................................................... 67
6.19 Taxes......................................................................................... 69
6.20 Investment Act................................................................................ 69
6.21 Margin Securities............................................................................. 69
6.22 Benefit....................................................................................... 70
6.23 Industries Corporate Separateness............................................................. 70
6.24 Disclosure.................................................................................... 70
ARTICLE VII. AFFIRMATIVE AND NEGATIVE COVENANTS............................................................ 70
7.1 Taxes and Other Obligations................................................................... 71
7.2 Corporate Existence and Good Standing......................................................... 71
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7.3 Compliance with Law and Agreements............................................................ 71
7.4 Maintenance of Property....................................................................... 72
7.5 Insurance..................................................................................... 72
7.6 Condemnation.................................................................................. 73
7.7 Environmental, Health and Safety Laws......................................................... 73
7.8 ERISA......................................................................................... 74
7.9 Mergers, Consolidations or Sales.............................................................. 75
7.10 Restricted Junior Payments; Capital Change.................................................... 75
7.11 Transactions Affecting Properties or Obligations.............................................. 75
7.12 Guaranties.................................................................................... 75
7.13 Debt.......................................................................................... 75
7.14 Prepayment.................................................................................... 76
7.15 Transactions with Affiliates.................................................................. 76
7.16 Business Conducted............................................................................ 76
7.17 Liens......................................................................................... 76
7.18 Sale and Leaseback Transactions............................................................... 77
7.19 New Subsidiaries.............................................................................. 77
7.20 Restricted Investments........................................................................ 77
7.21 Capital Expenditures.......................................................................... 77
7.22 Change of Deposit Accounts.................................................................... 77
7.23 Minimum Fixed Charge Coverage Ratio........................................................... 78
7.24 Maximum Debt to Cash Flow Ratio............................................................... 78
7.25 Minimum Tangible Net Worth.................................................................... 78
7.26 Interest Expense Hedging Arrangements......................................................... 78
7.27 Corporate Governance.......................................................................... 79
7.28 Operating Leases.............................................................................. 80
ARTICLE VIII. CONDITIONS OF LENDING AND ISSUING LETTERS OF CREDIT........................................... 80
8.1 Conditions Precedent to the Effectiveness of this Agreement................................... 80
8.2 Conditions Precedent to Each Loan and the Issuance of Each Letter of Credit................... 81
ARTICLE IX. DEFAULT; REMEDIES............................................................................. 82
9.1 Events of Default............................................................................. 82
9.2 Remedies...................................................................................... 84
ARTICLE X. TERMINATION................................................................................... 86
ARTICLE XI. AMENDMENTS; ASSIGNMENTS; SUCCESSORS........................................................... 86
11.1 Amendments and Waivers........................................................................ 86
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11.2 Assignments; Participations................................................................... 87
ARTICLE XII. MISCELLANEOUS................................................................................. 88
12.1 Cumulative Remedies; No Prior Recourse to Properties of Borrower.............................. 88
12.2 No Implied Waivers............................................................................ 88
12.3 Severability.................................................................................. 88
12.4 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver......................... 89
12.5 Survival of Representations and Warranties.................................................... 90
12.6 Other Security and Guaranties................................................................. 90
12.7 Fees and Expenses............................................................................. 90
12.8 Notices....................................................................................... 91
12.9 Indemnity..................................................................................... 92
12.10 Waiver of Notices............................................................................. 93
12.11 Counterparts.................................................................................. 93
12.12 Captions...................................................................................... 93
12.13 Contribution.................................................................................. 93
12.14 Joint and Several Liability................................................................... 94
12.15 Confidentiality............................................................................... 94
12.16 Absence of Financial Assistance by SLQ........................................................ 95
12.17 Judgment Currency............................................................................. 95
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(CONTINUED)
EXHIBITS
EXHIBIT A - Form of Borrowing Base Certificate
EXHIBIT B - Form of Notice of Borrowing
EXHIBIT C - Form of Substitute A Term Note
EXHIBIT D - Form of B Term Note
EXHIBIT E - Form of Canadian Term Note
EXHIBIT F - Form of Substitute Working Capital Note
EXHIBIT G - Form of Notice of Conversion
EXHIBIT H - Form of Collection Account Agreement
EXHIBIT I - List of Closing Documents
SCHEDULES
1.1 - Permitted Liens
4.4 - List of Collateral Locations
4.8 - List of Collection Accounts
4.9 - List of Rolling Stock
6.4 - List of Prior Names
6.5 - Subsidiaries and Affiliates
6.7 - Capitalization
6.8 - Debt
6.9 - Leases; Real Property
6.10 - Proprietary Rights
6.11 - List of Trade Names
6.12 - Litigation
6.14 - Labor Matters
6.15 - Environmental Matters
6.18 - Employee Benefit Plans
6.19 - Tax Matters
7.18 - Sale Leasebacks
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<PAGE>
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
------------------------------------------------
This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (the "Agreement") is
---------
dated as of December 21, 1998 among LASALLE NATIONAL BANK (the "Lender") and
------
EMONS TRANSPORTATION GROUP, INC. ("Emons"), EMONS FINANCE CORP. ("Finance")
----- -------
EMONS INDUSTRIES, INC. ("Industries"), MARYLAND AND PENNSYLVANIA RAILROAD
----------
COMPANY ("MPA"), EMONS LOGISTICS SERVICES, INC. ("Logistics"), MAINE INTERMODAL
--- ---------
TRANSPORTATION, INC. ("MIT"), EMONS RAILROAD GROUP, INC. ("Railroad Group"),
--- --------------
YORKRAIL, INC. ("YKR"), ST. LAWRENCE & ATLANTIC RAILROAD COMPANY ("SLR"), PENN
--- ---
EASTERN RAIL LINES, INC. ("Penn Eastern"), SLR LEASING CORP. ("Leasing") and ST.
------------
LAWRENCE & ATLANTIC RAILROAD (QUEBEC) INC. ("SLQ"), (collectively referred to
---
herein as the "Borrowers" and all of the Borrowers except SLQ collectively
---------
referred to as the "U.S. Borrowers").
--------------
PRELIMINARY STATEMENTS:
----------------------
A. Lender and the U.S. Borrowers are parties to that certain Loan and
Security Agreement dated as of August 15, 1997 (as amended, the "Original
Agreement").
B. Leasing is a newly formed corporation organized under the laws of
Delaware and a wholly-owned subsidiary of SLR.
C. SLQ is a newly formed corporation organized under the laws of Quebec,
Canada, and a wholly-owned subsidiary of Railroad Group.
D. Lender and the U.S. Borrowers desire to amend and restate the Original
Agreement and join in Leasing and SLQ on the terms and conditions stated
hereunder in order to provide for, among other things, a loan to be made by
Lender to SLQ in connection with SLQ's acquisition of the Sherbrooke Short Line
Railroad located in Quebec, Canada (the "Sherbrooke Acquisition") and other
loans to the U.S. Borrowers to enable SLQ to finance certain capital
improvements and for other general corporate purposes of the U.S. Borrowers.
NOW THEREFORE, in consideration of the mutual conditions and agreements
set forth in this Agreement, and for good and valuable consideration, the
receipt of which is hereby acknowledged, the Borrowers and the Lender hereby
agree as follows:
AMENDMENT AND RESTATEMENT
-------------------------
Lender and U.S. Borrowers hereby agree that on the Effective Date, the
terms and provisions of the Original Agreement shall be and hereby are amended
and restated in their
<PAGE>
entirety by the terms and conditions of this Agreement and the terms and
provisions of the Original Agreement shall be superseded by this Agreement.
This Agreement is given in substitution for, and not as a payment of, the
obligations of U.S. Borrowers under the Original Agreement and is not intended
to constitute a novation or discharge of the Original Agreement. All principal
amounts outstanding and owing by U.S. Borrowers under the Term Note and Working
Capital Note (as such terms are defined in the Original Agreement) evidencing
the obligations under the Original Agreement as of the date hereof, shall
constitute outstanding Loans hereunder payable in accordance with the Substitute
A Term Note and the Substitute Working Capital Note.
ARTICLE I.
INTERPRETATION OF THIS AGREEMENT
1.1 Definitions. As used herein:
-----------
"A Term Loan Facility Termination Date" shall mean March 31, 2004.
-------------------------------------
"A Term Loan" means the Loan described in Section 2.1(a).
----------- --------------
"A Term Loan Facility" shall mean the credit facility provided under
--------------------
Section 2.1.
-----------
"AAR" shall mean the Association of American Railroads.
---
"Account Debtor" means each Person obligated in any way on or in
--------------
connection with an Account.
"Accounts" means, with respect to each Borrower, all of such
--------
Borrower's now owned or hereafter acquired or arising accounts, contract
rights, and any other rights to payment for the sale or lease of goods or
rendition of services, whether billed or accrued, whether or not they have
been earned by performance.
"Affiliate" means with respect to any Person: (i) any Person which,
---------
directly or indirectly, controls, is controlled by or is under common
control with such first Person; (ii) any Person which beneficially owns or
holds, directly or indirectly, ten percent (10.0%) or more of any class of
Voting Stock of such first Person; or (iii) any Person, ten percent (10.0%)
or more of any class of the Voting Stock (or if such Person is not a
corporation, ten percent (10.0%) or more of the equity interest) of which
is beneficially owned or held, directly or indirectly, by such first
Person. Control (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used herein, means the
possession, directly or indirectly, of the power in any form to direct or
cause the direction of the management and policies of the Person in
question.
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"Amended and Restated Railroad Pledge Agreement" shall mean that
----------------------------------------------
certain Amended and Restated Pledge Agreement which amends and restates the
Pledge Agreement dated as of August 15, 1997, executed by Railroad Group in
favor of Lender pursuant to which Railroad Group has pledged the shares of
the capital stock of YKR SLR, Penn Eastern and SLQ.
"Applicable Margin" shall mean, at any time of determination, with
-----------------
respect to the interest rate payable, to the extent applicable, on the A
Term Loan, the Canadian Term Loan and the Working Capital Loans and the
amount of L/C Fees and Non-Use Fees payable in connection with the Working
Capital Facility, the percentage set forth below for such Loan or fee, as
the case may be, opposite the applicable Debt to Cash Flow Ratio as at the
most recently ended quarter:
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DEBT TO CASH EURODOLLAR CDOR BASE NON-USE
------------ ---------- ---- ---- -------
FLOW RATIO RATE RATE RATE FEE L/C FEE
---------- ---- ---- ---- --- -------
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<S> <C> <C> <C> <C> <C>
LESS THAN 2.0 1.75% 1.75% 0% .25% 1.75%
-----------------------------------------------------------------
2.0 - 3.0 2.25% 2.25% 0% .375% 2.25%
-----------------------------------------------------------------
3.01 - 3.5 2.50% 2.50% 0% .50% 2.50%
-----------------------------------------------------------------
3.51 - 4.0 2.75% 2.75% .25% .50% 2.75%
-----------------------------------------------------------------
GREATER THAN 4.0 3.00% 3.00% .50% .50% 3.00%
-----------------------------------------------------------------
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The Applicable Margin shall be initially determined as if the Debt to Cash
Flow Ratio is 3.51 - 4.0, with such Applicable Margin remaining in effect
until Lender shall receive the audited financial statements for the Fiscal
Year ended June 30, 1999, as required under Section 5.2(a) at which time
Lender will determine the Applicable Margin based on such financial
statements and the Applicable Margin shall be determined by Lender from
time to time thereafter based upon the information set forth in subsequent
audited annual financial statements delivered pursuant to Section 5.2(a)
--------------
and unaudited financial statements delivered pursuant to Section 5.2(b) for
--------------
each fiscal quarter ended March 31, September 30 and December 31 (each a
"Determining Financial Statement"), in each case, together with a
certificate of the chief financial officer of Emons setting forth the
calculation of the Debt to Cash Flow Ratio as at the end of such quarter or
year, as the case may be. Except as hereinafter provided, any change in
the Applicable Margin shall take effect on the Business Day following the
Business Day of delivery to Agent of the applicable Determining Financial
Statement, and the Applicable Margin, as so determined, shall remain in
effect until the earlier of (i) the Business Day next following the
Business Day of delivery to the Lender of a subsequent Determining
Financial Statement evidencing a Debt to Cash Flow Ratio requiring either a
higher or lower Applicable Margin from that then in effect or (ii) the day
on which Emons fails to deliver to the Lender the applicable Determining
Financial Statement within the time provided by Section 5.2(a) or Section
-------------- -------
5.2(b), as the case may be, the Applicable Margin shall be deemed to be
------
based upon an assumed Debt to Cash Flow Ratio of greater than 4.0 and such
Applicable Margin shall be effective on the date such Determining Financial
Statement was required to have been delivered and shall remain in effect
until the
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Business Day following the Business Day of delivery to the Lender of a
Determining Financial Statement reflecting a Debt to Cash Flow Ratio for
which a lower Applicable Margin would be applicable. Notwithstanding any
other provision of this Agreement, no reduction to the Applicable Margin
shall be effective during any period that an Event of Default exists.
"Available A Term Loan Amount" means $7,296,956 as reduced from time
----------------------------
to time as provided in Section 2.6(b)(i).
-----------------
"Available B Term Loan Amount" means $2,000,000 as reduced from time
----------------------------
to time as provided hereunder.
"Available Canadian Term Loan Amount" means C$6,583,500, as reduced
-----------------------------------
from time to time as provided in Section 2.6(b)(ii).
------------------
"B Term Loan" means the Loan described in Section 2.2(a).
----------- --------------
"B Term Loan Facility" means the credit facility described in Section
-------------------- -------
2.2.
---
"B Term Loan Facility Termination Date" shall mean December 31, 2001.
-------------------------------------
"Bankruptcy Code" shall mean (i) Title 11 of the United States Code
---------------
(11 U.S.C. (S) 101 et seq.) in relation to the U.S. Borrowers or (ii) the
Bankruptcy and Insolvency Act of Canada in relation to SLQ, in each case,
as amended from time to time and any successor statute, and as the context
may require.
"Base Rate" means the rate announced from time to time by the Lender
---------
at its principal office in Chicago, Illinois as its prime rate. The "prime
rate" is one of several base rates that serve as a basis upon which
effective rates of interest are calculated for loans making reference
thereto and may not be the lowest of the Lender's rates. Each interest
rate based on the Base Rate shall be adjusted simultaneously with any
change in the Base Rate.
"Base Rate Loan" means a Loan which bears interest as provided in
--------------
Section 2.7.
-----------
"Benefit Plan" shall mean a defined benefit plan as defined in Section
------------
3(35) of ERISA (other than a Multiemployer Plan) in respect of which any
Borrower or any ERISA Affiliate is or within the immediately preceding six
(6) years was an "employer" as defined in Section 3(5) of ERISA.
"Borrowing" means a borrowing consisting of Loans of the same type
---------
made on the same day by the Lender.
"Borrowing Base" shall mean, at any time of determination, an amount
--------------
equal to eighty percent (80%) of the actual amount (after deduction of such
Eligibility Reserves
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as the Lender deems proper and necessary) of Eligible Receivables of the
U.S. Borrowers plus the lesser of (i) 80% of SLQ's Eligible Receivables and
----
(ii) the aggregate amount of the SLQ Intercompany Obligations at such time.
"Borrowing Base Certificate" means, with respect to any date, a
--------------------------
certificate of the chief financial officer or treasurer of each U.S.
Borrower substantially in the form of EXHIBIT A attached hereto and made a
---------
part hereof setting forth a schedule of the net realizable value of all
accounts receivable of the U.S. Borrowers and SLQ to the extent Accounts of
SLQ are to be included in the Borrowing Base, as at the close of business
on the last day of the preceding month, all in such detail as shall be
reasonably satisfactory to the Lender.
"Business Day" shall mean any day, excluding Saturday, Sunday and any
------------
day that is a legal holiday under the laws of each of the States of
Pennsylvania, Illinois, and with respect to the Canadian Term Loan, in each
of the Province of Quebec, Canada and Ontario, Canada, or is a day on which
banking institutions in any of such states or in each of the Province of
Quebec, Canada and Ontario,Canada, as the case may be, are required or
authorized by law or other governmental action to close.
"Canadian Dollars" or "C$" shall mean lawful money and legal tender of
---------------- --
Canada.
"Canadian National" means Canadian National Railway Company, a
-----------------
corporation organized under the laws of Canada.
"Canadian National Note" means that certain Subordinated Non-
----------------------
Negotiable Promissory Note dated as of May 19, 1989 in the original
principal amount of $1,500,000 executed by SLR and payable to and for the
benefit of Canadian National to be amended and restated by Third Amended
Promissory Note in accordance that certain letter agreement from Canadian
National to SLR dated August 21, 1997.
"Canadian Term Loan" means the Loan described in Section 2.3(a).
------------------ --------------
"Canadian Term Loan Facility" means the credit facility described in
---------------------------
Section 2.3.
-----------
"Canadian Term Loan Termination Date" shall mean December 31, 2005.
-----------------------------------
"Canadian Term Loan Repayment Obligations" shall have the meaning set
----------------------------------------
forth in Section 12.14.
-------------
"Capital Expenditures" shall mean with respect to any Person, for any
--------------------
period, the aggregate of all expenditures, whether paid in cash or accrued
as liabilities during that period and including that portion of Capital
Leases that is capitalized on the balance sheet of such Person during such
period that, in conformity with GAAP, are required to be included in or
reflected by the property, plant or equipment or similar fixed asset
accounts reflected in the combined and consolidated balance sheet of such
Person
-5-
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(including equipment which is purchased simultaneously with the trade-in of
existing equipment owned by such Person to the extent of the gross amount
of such purchase price less the book value of the equipment being traded in
at such time), but excluding expenditures made in connection with the
replacement or restoration of assets, to the extent reimbursed or financed
from insurance proceeds paid on account of the loss of or damage to the
assets being replaced or restored, or from awards of compensation arising
from the taking by condemnation of eminent domain of such assets being
replaced.
"Capital Lease" shall mean, as applied to any Person, any lease of any
-------------
property (whether real, personal or mixed) by that Person as lessee that,
in conformity with GAAP, is accounted for as a capital lease on the balance
sheet of such Person.
"Capital Stock" means any and all shares, interests, participations or
-------------
other interests in (however designated) corporate stock, including, without
limitation, shares of preferred or preference stock.
"Capital Stock Prepayment" shall have the meaning ascribed to it in
------------------------
Section 2.6.
-----------
"Cash Flow Period" shall mean each full Fiscal Year of Emons.
----------------
"Cash Interest Expense" means, with respect to any Person, for any
---------------------
period, total interest expense, whether paid or accrued (including the
interest component of Capital Leases), of such Person, including, without
limitation, all commissions, discounts and other fees and charges owed with
respect to letters of credit and net costs under Interest Rate Contracts,
but excluding, however, interest expense not payable in cash (including
amortization of discount), all as determined in conformity with GAAP.
"CDOR Rate" means, with respect to each Interest Period, the rate of
---------
interest which is the rate based on an average rate applicable to Canadian
Dollars bankers' acceptances for a term equivalent to the term of such
Interest Period appearing on the "Reuters Screen CDOR Page" (as defined in
the International Swap and Derivatives Association, Inc. definitions as
amended from time to time) at approximately 10:00 a.m., (Toronto time), two
Business Days before the first day of such Interest Period or if such day
is not a Business Day, then on the immediately preceding Business Day
(rounded upward to the nearest multiple of 1/16 of 1% per anum, if such
average is not such a multiple);
provided, however, that if any such rate does not appear on the Reuters
Screen CDOR Page as contemplated above, then the CDOR Rate on the relevant
date shall be the rate for the relevant term referred to above applicable
to Canadian Dollars bankers' acceptances for a term equivalent to the term
of such Interest Period quoted by the Toronto office of ABN AMRO Bank
Canada as of 10:00 a.m., (Toronto time), on such date, or if such relevant
date is not a Business Day, then on the immediately preceding Business Day.
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"Closing Date" shall mean the date upon which all of the conditions
------------
precedent set forth in Article VIII hereof are fulfilled with respect to
------------
any Loans outstanding under the A Term Loan Facility and any Loans or
Letters of Credit outstanding under the Working Capital Facility, and any
Loans initially requested by the U.S. Borrowers under the B Term Loan
Facility and by SLQ under the Canadian Term Loan Facility.
"Closing Fee" has the meaning specified in Section 2.14.
----------- ------------
"Code" shall mean the Internal Revenue Code of 1986, as amended.
----
"Collateral" shall have the meaning ascribed to it in Section 4.1.
---------- -----------
"Collection Account" shall mean each depository account maintained by
------------------
any Borrower for the collection of Accounts and other proceeds of the
Properties of such Borrowers securing its Obligations hereunder and any
Third Party Collateral.
"Collection Account Agreements" shall have the meaning ascribed to it
-----------------------------
in Section 4.8.
-----------
"Contaminant" shall mean any waste, pollutant, hazardous substance,
-----------
toxic substance, hazardous waste, special waste, petroleum or petroleum-
derived substance or waste, or any constituent of any such substance or
waste.
"Contract Rights" means, with respect to each Borrower, all of such
---------------
Borrower's right, title and interest in, to and under any and all contracts
and all other agreements relating to such Borrower's business or its
Property, whether such contracts or agreements are currently in effect or
executed by such Borrower after the date hereof, together with any and all
extensions, modifications, amendments and renewals thereof, any and all
payments or rents to be paid to such Borrower under any such contracts and
agreements, and all benefits and advantages to be derived therefrom.
Contract Rights shall, include, without limitation, any and all rights of
such Borrower under any leases or subleases (whether as a lessor/sublessor
or lessee/sublessee) to which such Borrower is a party and all rents
payable by any lessees/sublessees under such leases or subleases and all
claims for money due or to become due to such Borrower under agreements,
bills and loans and any security related thereto, including without
limitation, such agreements pursuant to which such Borrower purchased any
Property and all rights and claims of such Borrower now or hereafter
existing: (i) under any insurance, indemnities, warranties, and guarantees
provided for or arising out of or in connection with any of the foregoing
agreements; (ii) for any damages arising out of or for breach or default
under or in connection with any of the foregoing agreements; (iii) to all
other amounts from time to time paid or payable under or in connection with
any of the foregoing agreements; or (iv) to exercise or enforce any and all
covenants, remedies, powers and privileges thereunder.
"Conversion Date" shall have the meaning ascribed to it in Section
--------------- -------
2.13(a).
-------
-7-
<PAGE>
"Credit Facility" means any of the A Term Loan Facility, the B Term
---------------
Loan Facility, the Canadian Term Loan Facility or the Working Capital
Facility.
"Debt" means, with respect to any Borrower, all liabilities,
----
obligations and indebtedness of such Borrower and its Subsidiaries on a
consolidated basis to any Person, of any kind or nature, now or hereafter
owing, arising, due or payable, howsoever evidenced, created, incurred,
acquired or owing, whether primary, secondary, direct, contingent, fixed or
otherwise, without duplication and without regard to intercompany accounts,
and including, without in any way limiting the generality of the foregoing:
(i) such Borrower's or any Subsidiary's liabilities and obligations to
trade creditors; (ii) all of the Obligations; (iii) all of such Borrower's
obligations for borrowed money; (iv) all obligations and liabilities of any
Person (other than obligations to repay grant funding which are not due and
payable and obligations under operating leases) secured by any Lien on such
Borrower's or any Subsidiary's Property, even though such Borrower or such
Subsidiary shall not have assumed or become liable for the payment thereof;
provided, however, that all such obligations and liabilities which are
-------- -------
limited in recourse to such Property shall be included in Debt only to the
extent of the value of such Property as shown on a consolidated balance
sheet of such Borrower and its Subsidiaries prepared in accordance with
GAAP; (v) all obligations or liabilities created or arising under any
Capital Lease or conditional sale or other title retention agreement with
respect to Property used or acquired by such Borrower or any Subsidiary,
even if the rights and remedies of the lessor, seller or lender thereunder
are limited to repossession of such Property; provided, however, that all
-------- -------
such obligations and liabilities which are limited in recourse to such
Property shall be included in Debt only to the extent of the value of such
Property as shown on a consolidated balance sheet of such Borrower and its
Subsidiaries prepared in accordance with GAAP; (vi) all accrued Plan
liabilities; (vii) all obligations and liabilities under Guaranties; and
(viii) deferred taxes. Notwithstanding the foregoing, for purposes of
calculating or determining Debt, if one or more of any Borrower or any
Subsidiary are jointly and severally liable for the entire amount of any
liability, obligation or indebtedness or any Borrower or any Subsidiary is
a guarantor of any liability, obligation or indebtedness of any other
Borrower or Subsidiary, such liability, obligation or indebtedness shall
only be included in determining Debt for the Borrowers on a consolidated
basis as the Debt of the Borrower or Subsidiary, as the case may be, that
is primarily liable therefor. Amounts properly counting toward the
limitation on operating leases set forth in Section 7.28 shall not be
------------
included in this definition of Debt.
"Debt to Cash Flow Ratio" means with respect to Emons on a combined
-----------------------
and consolidated basis at any time of determination, the ratio of (a)
Funded Indebtedness of the Emons at such time on a consolidated basis to
(b) EBITDA of Emons on a consolidated basis for the 12 consecutive month
period ended at such time.
"Default" means any event or condition which, with notice, the passage
-------
of time or both, would constitute an Event of Default.
-8-
<PAGE>
"Default Rate" means a per annum interest rate equal to the sum of (a)
------------
the Base Rate in effect from time to time plus (b) two percent (2.00%).
----
Each Default Rate shall be adjusted simultaneously with any change in the
applicable interest rate.
"Demand Deposit Account" shall have the meaning ascribed to it in
----------------------
Section 2.5(e).
--------------
"DOL" shall mean the United States Department of Labor and any
---
successor department or agency.
"Effective Date" shall have the meaning set forth in Section 8.1.
-------------- -----------
"EBITDA" shall mean with respect to any Person, for any period, the
------
sum of the amounts for such period, of (i) Net Income, plus (ii)
----
depreciation and amortization expense, plus (iii) Cash Interest Expense,
----
plus (iv) federal and state income taxes, plus (v) extraordinary losses as
---- ----
determined in accordance with GAAP which have been included in the
determination of Net Income, minus (vi) extraordinary gains as determined
-----
in accordance with GAAP which have been included in the determination of
Net Income.
"Eligibility Reserves" shall mean, as of any date of determination,
--------------------
such amounts as the Lender, in its reasonable credit judgment, may from
time to time establish against the gross amounts of Eligible Receivables of
any of the U.S. Borrowers and, to the extent that SLQ Intercompany
Obligations are outstanding, SLQ to reflect contingencies or risks which
may affect the Properties of such Borrowers or any Third Party Collateral,
the business or financial condition of any of the Borrowers, or the
security of the Loans made hereunder.
"Eligible Receivables" shall mean, with respect to each Borrower,
--------------------
those Accounts that when scheduled to the Lender, and at all times
thereafter, do not violate the negative covenants and other provisions of
this Agreement and do satisfy the affirmative covenants and other
provisions of this Agreement and that the Lender, in its reasonable credit
judgment, deems to be Eligible Receivables. No Account shall be an
Eligible Receivable if:
(i) it is due or unpaid, more than ninety (90) days, after the
date that the original invoice was issued or such account otherwise
became due with respect to the sale or services giving rise thereto;
or
(ii) it arises out of a transaction not in the ordinary course
of such Borrower's business or to a Person which is an Affiliate of
such Borrower or controlled by an Affiliate of such Borrower; or
-9-
<PAGE>
(iii) any warranty contained in this Agreement with respect to
such Eligible Receivable or any warranty contained in this Agreement
with respect to such Account has been breached; or
(iv) the Account Debtor is also a supplier or creditor of such
Borrower and the Account is or may become subject to any right of
setoff by the Account Debtor, and that Account Debtor has not entered
into an agreement with the Lender with respect to the waiver of rights
of setoff which is acceptable to the Lender; or the Account Debtor has
disputed liability with respect to it, or made any claim with respect
to any other Account due from such Account Debtor to any of the
Borrowers, in each case, the Account shall be ineligible to the extent
of such dispute, claim, and/or setoff as and when it arises; or
(v) the Account Debtor has filed a petition for bankruptcy or
any other petition for relief under the Bankruptcy Code, made an
assignment for the benefit of creditors, or if any petition or other
application for relief under the Bankruptcy Code has been filed
against the Account Debtor, or if the Account Debtor has failed,
suspended its business operations, become insolvent, or suffered a
receiver or a trustee to be appointed for any of its assets or
affairs; or
(vi) the Account is owed by an Account Debtor outside the
continental United States or Canada, unless the payment of the Account
is secured by a letter of credit or an acceptance on terms acceptable
to the Lender; or
(vii) the Lender believes, in its reasonable credit judgment
exercised in Good Faith, that collection of such Account is insecure
or that such Account may not be paid by reason of the Account Debtor's
financial inability to pay; or
(viii) the Account Debtor is the United States of America or any
other Governmental Authority, unless such Borrower assigns its right
to payment of such Account to the Lender, pursuant to the Assignment
of Claims Act of 1940, as amended (31 U.S.C. (S) 3727) or similar
procedure if required in the applicable jurisdiction; or
(ix) the services, the performance of which has given rise to
such Account, have not been performed by such Borrower and accepted by
the Account Debtor; or
(x) the Account is owing from an Account Debtor where 25% or
more of all Accounts owing from such Account Debtor are ineligible as
a result of the criteria in clause (i) above.
----------
"Environmental Laws" means all federal, state, provincial and local
------------------
laws, rules, regulations, ordinances, programs, permits, guidance, orders
and consent decrees relating to health, safety, hazardous substances, and
environmental matters applicable to any one
-10-
<PAGE>
or more of the Borrowers and/or their business and Property (whether or not
owned by it) but in each case solely to the extent of having the force of
law and when used herein means Environmental Laws solely as in effect and
as interpreted and enforced as of or prior to the date hereof unless
expressed to the contrary with the use of such term herein. Such laws and
regulations include but are not limited to the Resource Conservation and
Recovery Act, 42 U.S.C. (S) 6901 et seq., as amended; the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. (S) 6901
et seq., as amended; the Toxic Substances Control Act, 15 U.S.C. (S) 2601
et seq., as amended; the Clean Water Act, 42 U.S.C. (S) 466 et seq., as
amended; the Clean Air Act, 46 U.S.C. (S) 7401 et seq., as amended; state
and federal lien and environmental cleanup programs; and U.S. Department of
Transportation regulations; the Canadian Environmental Protection Act,
R.S.C. ch. E-10, the Transportation of Dangerous Goods Act of 1992, R.S.C.
ch. T-19.01, and the Environmental Quality Act, R.S.Q., Q-2.
"Environmental Lien" shall mean a Lien in favor of any Governmental
------------------
Authority for (i) any liability under federal, state or provincial
environmental laws or regulations, or (ii) damages arising from, or costs
incurred by such Governmental Authority in response to, a Release or
threatened Release of a Contaminant into the environment.
"Equipment" means, with respect to each Borrower, all of such
---------
Borrower's now owned and hereafter acquired machinery, equipment,
furniture, furnishings, fixtures, and other tangible personal property
(except Inventory), including, without limitation, Rolling Stock, motor
vehicles, aircraft, railroad ties, rail track, ballast, bridges, tools,
switches, main switches, branch switches, spur switches, industrial
switches, terminals, superstructures, road beds, trestles, culverts,
viaducts, depots, stations, stockyards, warehouses, elevators, car houses,
engine houses, freight houses, machine shops, other shops, turntables, fuel
stations, water stations, signals, communication test instruments and other
communication equipment, interlocking plants, telegraph lines, telephone
lines, cable wires, wireless facilities, fences, docks and trade fixtures,
and office equipment, as well as all of such types of property leased by
such Borrower and all of such Borrower's rights and interests with respect
thereto under such leases (including, without limitation, options to
purchase); together with all present and future additions and accessions
thereto, replacements therefor, component and auxiliary parts and supplies
used or to be used in connection therewith, and all substitutes for any of
the foregoing, and all manuals, drawings, instructions, warranties and
rights with respect thereto; wherever any of the foregoing is located.
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as amended from time to time, and any successor statute.
"ERISA Affiliate" shall mean any (i) corporation which is a member of
---------------
the same controlled group of corporations (within the meaning of Section
414(b) of the Code) as the Borrowers, or (ii) partnership or other trade or
business (whether or not incorporated) under common control (within the
meaning of Section 414(c) of the Code) with the Borrowers, or (iii) member
of the same affiliated service group (within the meaning of
-11-
<PAGE>
Section 414(m) of the Code) as the Borrowers, any corporation described in
clause (i) above or any partnership or trade or business described in
----------
clause (ii) above.
-----------
"Eurocurrency Liabilities" has the meaning assigned to that term in
------------------------
Regulation D.
"Eurodollar Rate" means, for the Interest Period for each Offshore
---------------
Rate Loan of the U.S. Borrowers which is to bear interest at the Eurodollar
Rate, an interest rate per annum equal to the rate per annum obtained by
dividing (i) the average (rounded upward to the nearest whole multiple of
1/16 of 1% per annum, if such average is not such a multiple) of the rates
per annum at which deposits in Dollars are offered by the principal office
of ABN Amro Holdings, Inc. in London, England to prime banks in the London
interbank market at 11:00 a.m. (London time) three Business Days before the
first day of such Interest Period in an amount substantially equal to
Lender's Offshore Rate Loan comprising part of such Borrowing and for a
period equal to such Interest Period by (ii) a percentage equal to 100%
minus the Eurodollar Rate Reserve Percentage for such Interest Period. The
Eurodollar Rate for the Interest Period for each Offshore Rate Loan
comprising part of the same Borrowing shall be determined by the Lender two
Business Days before the first day of such Interest Period.
"Eurodollar Rate Reserve Percentage" for the Interest Period for any
----------------------------------
Offshore Rate Loan which is based on the Eurodollar Rate, means the reserve
percentage applicable during such Interest Period (or if more than one such
percentage shall be so applicable, the daily average of such percentages
for those days in such Interest Period during which any such percentage
shall be so applicable) under regulations issued from time to time by the
Federal Reserve Board for determining the maximum reserve requirement
(including, without limitation, any emergency, supplemental or other
marginal reserve requirement) for the Lender with respect to liabilities or
assets consisting of or including Eurocurrency Liabilities having a term
equal to such Interest Period.
"Excess Cash Flow" shall mean, for any Cash Flow Period, an amount
----------------
equal to (i) Net Income of Emons on a combined and consolidated basis for
such period, plus (ii) depreciation, amortization of intangibles, non-cash
----
interest, non-cash amortization of discount and other non-cash charges
(including deferred taxes) included in the determination of Net Income of
Emons on a combined and consolidated basis for such period, minus (iii)
-----
non-cash credits to Net Income of Emons on a combined and consolidated
basis for such period, minus (iv) Capital Expenditures of Emons on a
-----
combined and consolidated basis net of purchase money and Capital Lease
obligations with respect thereto, to the extent permitted hereunder and
made during such period, minus (v) all mandatory reductions of the
-----
Available A Term Loan Amount, the Available B Term Loan Amount and the
Available Canadian Term Loan Amount, and during such period pursuant to
Section 2.6 hereof, minus (vi) all payments required or permitted hereunder
----------- -----
and made during such period in respect of other Funded Indebtedness (other
than under the Working Capital Facility), minus (vii) gains included in the
-----
determination of Net Income of Emons on a combined and consolidated basis
for such period, repre-
-12-
<PAGE>
senting transactions in which Emons or any of its consolidated Subsidiaries
received Net Cash Proceeds of Sale which are paid to the Lender in
accordance with Section 2.6 hereof.
-----------
"Event of Default" shall mean any of the events listed in Section 9.1.
---------------- -----------
"Federal Reserve Board" shall mean the Board of Governors of the
---------------------
Federal Reserve System and any successor thereto.
"Fiscal Year" shall mean the fiscal year of Emons, which shall be the
-----------
twelve-month period ending on the last day of June, or such other period as
Emons may designate and the Lender shall approve in writing.
"Fixed Charge Coverage Ratio" shall mean, for any period, the ratio of
---------------------------
(i) EBITDA minus federal, provincial and state income taxes actually
-----
payable during such period, minus Capital Expenditures of Emons on a
-----
combined and consolidated basis net of purchase money obligations
including, without limitation, low interest rate or no interest rate loans
from Governmental Authorities, grant funding and Capital Lease obligations
with respect thereto, to the extent permitted hereunder and made during the
period for which the Fixed Charge Coverage Ratio is to be calculated, to
(ii) Fixed Charges during the period for which the Fixed Charge Coverage
Ratio is to be calculated.
"Fixed Charges" shall mean with respect to any Person, for any period,
-------------
the amounts for such period of (i) Cash Interest Expense, plus (ii) the
----
scheduled reductions of the Available A Term Loan Amount, the Available B
Term Loan Amount and the Available Canadian Term Loan Amount (which shall
not include mandatory reductions attributable to Excess Cash Flow) and
scheduled and mandatory payments under other Funded Indebtedness other than
the Canadian National Note (including the principal component of Capital
Lease obligations).
"FRA" shall mean the United States Department of Transportation, the
---
Federal Railroad Administration and every other state, federal or
provincial agency having jurisdiction over the condition, maintenance,
repair or safety of Rolling Stock.
"Funded Indebtedness" shall mean, at any time of determination,
-------------------
without duplication, all Debt and Guaranties of Debt by the Borrowers at
such time except for Debt described in clauses (i), (ii) (except for the
Debt represented by the Loans which shall be included in this definition of
Funded Indebtedness), (vi) and (viii) of the Definition of Debt.
"Funding Date" means the date any Loan under the A Term Loan Facility,
------------
the B Term Loan Facility, the Canadian Term Loan Facility or the Working
Capital Facility is made hereunder.
-13-
<PAGE>
"GAAP" shall mean generally accepted accounting principles set forth
----
in the rules, regulations, statements, opinions and pronouncements of the
American Institute of Certified Public Accountants and of the Financial
Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the accounting profession), which,
subject to Section 5.1, are applicable to the circumstances as of the date
-----------
of determination.
"General Intangibles" shall, with respect to each Borrower, mean and
-------------------
include all of such Borrower's now owned and hereafter acquired choses in
action, causes of action and all other intangible personal property of
every kind and nature (other than Accounts), including, without limitation,
corporate and other business records, inventions, designs, patents, patent
applications, service marks, trademarks, trademark applications, trade
names, trade secrets, goodwill, registrations, copyrights, licenses,
franchises, customer lists, reversions from any Benefit Plan, tax refunds,
tax refund claims, rights and claims against carriers, shippers,
franchisees, lessors and lessees, and rights to indemnification, business
interruption insurance and proceeds thereof, property, casualty or any
similar type of insurance and any proceeds thereof, proceeds of insurance
covering the lives of key employees on which such Borrower is beneficiary,
and any loan, letter of credit, guarantee, claim, and any security interest
or other security held by or granted to such Borrower to secure payment of
any of the foregoing or by an Account Debtor of any of the Accounts.
"Good Faith" shall mean honesty in fact in the conduct or transaction
----------
concerned, without regard to whether standards which might be deemed
commercially reasonable have been observed.
"Government Acts" shall have the meaning ascribed to it in Section
--------------- -------
3.8(a).
------
"Governmental Authority" shall mean any nation or government, any
----------------------
federal, state, provincial, city, town, municipality, county, local or
other political subdivision thereof or thereto and any department,
commission, board, bureau, instrumentality, agency or other entity
(including any such entity under the laws of Quebec, Canada) exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
"Guaranty" means, with respect to any Person, all obligations of such
--------
Person which in any manner directly or indirectly guarantee or assure, or
in effect guarantee or assure, the payment or performance of any
indebtedness, dividend or other obligation of any other Person (the
"guaranteed obligations"), or to assure or in effect assure the holder of
the guaranteed obligations against loss in respect thereof, including,
without limitation, any such obligations incurred through an agreement,
contingent or otherwise: (a) to purchase the guaranteed obligations or any
property constituting security thereof; (b) to advance or supply funds for
the purchase or payment of the guaranteed obligations or to maintain a
working capital or other balance sheet condition; (c) to lease property or
to purchase any debt or equity securities or other property or services.
-14-
<PAGE>
"Indemnitees" shall have the meaning ascribed to it in Section 12.9.
----------- ------------
"Interest Period" means, for each Offshore Rate Loan, the period
---------------
commencing on the date of such Loan or the conversion thereof and ending on
the last day of the period selected by the Borrower to which such Loan has
been made pursuant to the provisions below. The duration of each such
Interest Period shall be one, two, three or six months as the Borrowers
may select, upon notice received by the Lender in accordance with Section
-------
2.5(a) or Section 2.13, as the case may be; provided, however, that:
------ ------------ -------- -------
(i) whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding
Business Day; provided, however, that if such extension would cause
-------- -------
the last day of such Interest Period to occur in the next following
calendar month, the last day of such Interest Period shall occur on
the next preceding Business Day; and
(ii) no Borrower shall select an Interest Period for any Loan
that ends after the applicable Termination Date for the Credit
Facility under which such Loan is made.
"Interest Rate Contracts" shall mean interest rate insurance product
-----------------------
agreements providing interest rate protection.
"Inventory" shall mean and include with respect to each Borrower, such
---------
Person's now owned and hereafter acquired goods, materials, supplies,
merchandise and other personal property furnished under any contract of
service or intended for sale or lease, including, without limitation, rail,
ties, fuel, oil, grease, wheels, brake shoes and other locomotive and
railcar replacement parts and all raw materials, work in process, finished
goods and materials, parts and supplies of any kind, nature or description
which are used or consumed in such Borrower's business or are or might be
used in connection with the manufacture, packing, shipping, advertising,
selling or finishing of such goods, merchandise and other personal
property, or are used in connection with the provision of services in such
Borrower's business, all returned or repossessed goods now, or at any time
or times hereafter, in the possession or under the control of such Borrower
or Lender, and all documents of title or documents representing the same.
"IRS" shall mean the Internal Revenue Service, or any successor
---
thereto.
"L/C Fees" shall have the meaning set forth in Section 3.7.
-------- -----------
"Letter of Credit" shall mean a letter of credit issued by the Lender
----------------
for the account of any Borrower pursuant to Article III.
-----------
-15-
<PAGE>
"Letter of Credit Obligations" shall mean, at any particular time, the
----------------------------
sum of (i) the Reimbursement Obligations at such time, plus (ii) the
----
aggregate maximum amount available for drawing under the Letters of Credit
at such time, plus (iii) the aggregate maximum amount available for drawing
----
under Letters of Credit which have been requested but not yet been issued,
in each case, as determined by the Lender.
"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
----
assignment, deposit arrangement, security interest, encumbrance for the
payment of money, lien (statutory or other), preference, priority or other
security agreement or preferential arrangement of any kind or nature
whatsoever, including, without limitation, any conditional sale or other
title retention agreement, the interest of a lessor under a capital lease,
any financial lease having substantially the same economic effect as any of
the foregoing and the filing of any financing statement (other than a
financing statement filed by a "true" lessor pursuant to (S) 9-408 of the
Code or other comparable law of any jurisdiction) naming the owner of the
asset to which such Lien relates as debtor under the Code or other
comparable law of any jurisdiction.
"Loan" shall mean a loan under the A Term Loan Facility, the B Term
----
Loan Facility, the Canadian Term Loan Facility or the Working Capital
Facility.
"Loan Account" shall have the meaning ascribed to it in Section
------------ -------
2.5(e).
------
"Loan Documents" shall mean this Agreement and all other agreements,
--------------
instruments and documents, including, without limitation, any other
security agreements, notes, warrants, guaranties, mortgages, deeds of
trust, deeds of hypothec, subordination agreements, pledges, powers of
attorney, consents, assignments, collateral assignments, letter agreements,
contracts, notices, leases, amendments, financing statements, letter of
credit applications and reimbursement agreements, and all other writings
heretofore, now, or hereafter executed by or on behalf of any of the
Borrowers or any of their Affiliates and delivered to the Lender in
connection with or relating to this Agreement (including, without
limitation, any Interest Rate Contract entered into by any Borrower with
Lender or any Affiliate of Lender), together with all agreements,
instruments and documents referred to therein or contemplated thereby, in
each case, as amended from time to time.
"Mandatory Prepayment" shall have the meaning ascribed to it in
---------------------
Section 2.6(b).
--------------
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
------------------
Section 4001(a)(3) of ERISA which is, or within the immediately preceding
six (6) years was, contributed to by either a Borrower or an ERISA
Affiliate.
"Net Cash Proceeds of Capital Stock Issuance" shall mean with respect
-------------------------------------------
to each Fiscal Year the cash proceeds (including any notes received as
consideration and any other non-cash consideration which are converted to
cash or cash equivalents) received by Emons from the sale or issuance of
Emons Capital Stock, net of the costs of such sale
-16-
<PAGE>
or issuance provided that amounts received by Emons in connection with the
exercise of options to purchase Emons Capital Stock by employees of Emons
and its Subsidiaries up to $10,000 in the aggregate for any Fiscal Year,
shall not be included in Net Cash Proceeds of Capital Stock Issuance.
"Net Cash Proceeds of Sale" shall mean with respect to each Fiscal
-------------------------
Year the Net Proceeds of Sale in excess of $100,000 in the aggregate
received by the Borrowers and their Subsidiaries in the aggregate during
such Fiscal Year in cash or equivalents readily convertible into cash.
"Net Income" shall mean with respect to any Person, for any period,
----------
the net earnings (or loss) after taxes of such Person for such period taken
as a single accounting period determined in conformity with GAAP.
"Net Proceeds of Sale" shall mean proceeds (including insurance
--------------------
proceeds and any notes received as consideration and any other non cash
consideration) received by any Borrower or its Subsidiaries from the sale,
lease, assignment, casualty, condemnation or other disposition outside of
the ordinary course of business of any Property of such Person net of the
costs of sale, lease, assignment or other disposition, taxes paid or
payable as a result thereof, amounts applied to the repayment of other Debt
secured by a Lien on the asset disposed of and amounts permitted to be used
under this Agreement, and in fact used, in the case of casualty or
condemnation, within 180 days of receipt, to purchase or lease a
replacement asset.
"Net Worth" shall mean with respect to any Person, as at any date of
---------
determination, the amount by which total assets of such Person exceed total
liabilities of such Person.
"Non-Use Fee" shall have the meaning set forth in Section 2.14(b).
----------- ----------------
"Notes" shall mean each and every Substitute A Term Note, B Term Note,
-----
Canadian Term Note and Working Capital Note and any other note or notes
executed by a Borrower pursuant to this Agreement, as any of the foregoing
has been or may be amended, modified, extended and renewed from time to
time.
"Notice of Borrowing" shall mean a notice substantially in the form of
-------------------
EXHIBIT B attached hereto and made a part hereof.
---------
"Notice of Conversion" shall have the meaning provided in Section
-------------------- -------
2.13(a).
-------
"Obligations" shall mean and include all loans, advances, debts,
-----------
liabilities, obligations, covenants and duties owing to the Lender, any
Affiliate of the Lender, including the Canadian Term Loan Repayment
Obligations and the U.S. Loan Repayment Obligations, any Indemnitee or any
of their respective successors and assigns, from or assumed by any Borrower
of any kind or nature, present or future, whether or not
-17-
<PAGE>
evidenced by any note, guaranty or other instrument, whether arising under
this Agreement, any Interest Rate Contract entered into with the Lender or
any Affiliate of Lender, or under any other Loan Document, whether or not
for the payment of money, whether arising by reason of an extension of
credit, opening or amendment of a letter of credit (or payment of any draft
drawn thereunder), loan, guaranty, indemnification, foreign exchange or
interest rate swap transactions or in any other manner, whether direct or
indirect (including those acquired by assignment), absolute or contingent,
due or to become due, now existing or hereafter arising
and however acquired. The term includes, without limitation, all interest,
charges, expenses, fees, attorneys' fees and disbursements and paralegals'
fees, any other sums chargeable to Borrowers under this Agreement or any
other Loan Document.
"Offshore Rate Loan" means a Loan or portion thereof which bears
------------------
interest as provided in Section 2.7.
-----------
"Original Agreement" has the meaning set forth in the Preamble hereto.
------------------
"Other Taxes" shall have the meaning ascribed to it in Section
----------- -------
2.11(b).
-------
"Participating Lender" means any Person who shall have been granted
--------------------
the right by Lender to participate in the financing provided pursuant to
this Agreement and who shall have entered into a participation agreement
with Lender.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
----
Person succeeding to the functions thereof.
"Pending Loans" shall mean, at any time, the aggregate principal
-------------
amount of all Working Capital Loans requested in any Notice(s) of Borrowing
previously received by the Lender but not yet advanced at such time.
"Permitted Liens" means the Liens reflected on SCHEDULE 1.1 attached
--------------- ------------
hereto and incorporated herein by this reference and any of the following
Liens created after the date hereof:
(i) Liens for taxes not yet payable;
(ii) statutory Liens for taxes in an amount not to exceed
$100,000 provided that the payment of such taxes which are due and
payable is being contested in Good Faith and by proper proceedings
diligently pursued, and that reserves or other appropriate provision,
if any, as shall be required by GAAP shall have been made therefor and
that a stay of enforcement of any such Lien is in effect;
(iii) Liens in favor of the Lender;
-18-
<PAGE>
(iv) Liens upon Equipment granted or assumed in connection with
the acquisition of such Equipment by a Borrower after the date hereof
(including, without limitation, pursuant to Capital Leases), provided,
--------
that (a) the cost of each such acquisition constitutes a Capital
Expenditure permitted by Section 7.21 (including Capital Expenditures
------------
made with grant funding and Debt permitted by Section 7.13(d), (b) the
Debt incurred to finance each such acquisition is permitted by Section
-------
7.13, and (c) each such Lien attaches only to the Equipment acquired
----
with the Debt secured thereby;
(v) deposits under workmen's compensation, unemployment
insurance, social security and other similar laws, or to secure the
performance of bids, tenders or contracts (other than for the
repayment of borrowed money) or to secure indemnity, performance or
other similar bonds for the performance of bids, tenders or contracts
(other than for the repayment of borrowed money) or to secure
statutory obligations or surety or appeal bonds, or to secure
indemnity, performance or other similar bonds in the ordinary course
of business;
(vi) Liens which arise by operation of law under Article 2 of
the UCC or Articles 1740 and 1741 of the Quebec Civil Code in favor of
unpaid sellers of goods or prepaying buyers of goods, or liens in
items of any accompanying documents or proceeds of either arising by
operation of law under Article 4 of the UCC in favor of a collecting
bank; and
(vii) Liens arising by operation of law securing the claims or
demands of materialmen, mechanics, carriers, warehousemen, landlords
and other like Persons, provided that the payment thereof is not at
--------
the time required by Section 7.1.
-----------
"Person" shall mean and include any person, employee, individual, sole
------
proprietorship, partnership, joint venture, trust, limited liability
company, unincorporated organization, association, corporation,
institution, entity, party or Governmental Authority.
"Plan" shall mean an employee benefit plan defined in Section 3(3) of
----
ERISA in respect of which any Borrower or an ERISA Affiliate is, or within
the immediately preceding six (6) years was, an "employer" as defined in
Section 3(5) of ERISA.
"Property" shall mean, with respect to any Borrower or any Subsidiary,
--------
any real or personal property, plant, building, facility, structure,
equipment or unit, or other asset owned, leased or operated by such Person
and any of its Subsidiaries, including, without limitation, such Person's
Equipment and Inventory.
"Proprietary Rights" means, with respect to each Borrower, all of such
------------------
Borrower's now owned and hereafter arising or acquired: licenses,
franchises, permits, patents, patent rights, copyrights, works which are
the subject matter of copyrights,
-19-
<PAGE>
trademarks, service marks, trade secrets, trade names, trade styles,
patent, trademark and service mark applications, and all licenses and
rights related to any of the foregoing, including, without limitation,
those patents, trademarks, service marks and copyrights set forth on
SCHEDULE 6.10 attached hereto and incorporated herein by this reference,
-------------
and all other rights under any of the foregoing, all extensions, renewals,
reissues, divisions, continuations, and continuations-in-part of any of the
foregoing, and all rights to sue for past, present and future infringement
of any of the foregoing.
"Reaffirmation of Emons Pledge Agreement" shall mean that certain
---------------------------------------
Reaffirmation of Emons Pledge Agreement, dated of even date herewith,
reaffirming the Stock Pledge Agreement dated as of August 15, 1997,
executed by Emons in favor of the Lender pursuant to which Pledge Agreement
Emons has pledged the shares of the capital stock of Industries, MPA,
Finance, Logistics, MIT and Railroad Group.
"Real Property" shall have the meaning provided in Section 4.2.
------------- -----------
"Real Property Security Documents" shall have the meaning provided in
--------------------------------
Section 4.2.
-----------
"Regulation D" shall mean Regulation D of the Federal Reserve Board as
------------
in effect from time to time.
"Regulation U" shall mean Regulation U of the Federal Reserve Board as
------------
in effect from time to time.
"Regulation X" shall mean Regulation X of the Federal Reserve Board as
------------
in effect from time to time.
"Reimbursement Obligations" shall mean the reimbursement or repayment
-------------------------
obligations of the U.S. Borrowers to the Lender pursuant to Section 3.5 or
-----------
pursuant to Letter of Credit Reimbursement Agreements with respect to
Letters of Credit.
"Release" shall mean any release, spill, emission, leaking, pumping,
-------
injection, deposit, disposal, discharge, dispersal, leaching or migration
into the indoor or outdoor environment or into or out of any Property,
including the movement of Contaminants through or in the air, soil, surface
water, groundwater or Property.
"Remedial Action" shall mean actions required to (i) clean up, remove,
---------------
treat or in any other way address Contaminants in the indoor or outdoor
environment; (ii) prevent the Release or threat of Release or minimize the
further Release of Contaminants so they do not migrate or endanger or
threaten to endanger public health or welfare or the indoor or outdoor
environment; or (iii) perform pre-remedial studies and investigations and
post-remedial monitoring and care.
-20-
<PAGE>
"Reportable Event" shall mean any of the events described in Section
----------------
4043 of ERISA.
"Restricted Investment" means, with respect to any Borrower, any
---------------------
acquisition of property by such Borrower or any of its Subsidiaries in
exchange for cash or other property, whether in the form of an acquisition
of stock, debt security, or other indebtedness or obligation, or the
purchase or acquisition of any other property, or by loan, advance, capital
contribution, or subscription, except acquisitions of the following: (i)
fixed assets to be used in the business of such Borrower or a Subsidiary,
so long as the acquisition costs thereof constitute Capital Expenditures
permitted hereunder; (ii) goods held for use in the provision of services
by such Borrower or a Subsidiary in the ordinary course of business; (iii)
current assets arising from the rendition of services in the ordinary
course of business of such Borrower or a Subsidiary; (iv) direct
obligations of the United States of America, or any agency thereof, or
obligations guaranteed by the United States of America, provided that such
--------
obligations mature within one year from the date of acquisition thereof;
(v) certificates of deposit maturing within one year from the date of
acquisition, bankers' acceptances, Eurodollar bank deposits, or overnight
bank deposits, in each case issued or created by Lender or an affiliate of
Lender, or by a bank or trust company organized under the laws of the
United States or Canada or any state thereof having capital and surplus
aggregating at least $100,000,000; and (vi) commercial paper given the
highest rating by a national credit rating agency and maturing not more
than 90 days from the date of creation thereof.
"Restricted Junior Payment" shall mean (i) any dividend or other
-------------------------
distribution, direct or indirect, on account of any shares of any class of
capital stock of any of the Borrowers now or hereafter outstanding, except
a dividend payable solely in shares of the issuer, (ii) any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition
for value, direct or indirect, of any shares of any class of capital stock
of the Borrowers now or hereafter outstanding, and (iii) any payment made
to redeem, purchase, repurchase or retire, or to obtain the surrender of or
any outstanding warrants, options or other rights to acquire shares of any
class of capital stock of any of the Borrowers now or hereafter outstanding
(other than the issuance of common stock) upon the exercise of any such
warrants, options or rights to acquire such stock.
"Rolling Stock" shall mean any gondola, boxcar, tanker, locomotive or
-------------
railcar of any type.
"SEC" shall mean the Securities and Exchange Commission and any
---
successor agency.
"Securities" shall mean any stock, shares, voting trust certificates,
----------
partnership interests (whether general or limited), bonds, debentures,
notes or other evidences of indebtedness, secured or unsecured,
convertible, subordinated or otherwise, or in general any instruments
commonly known as "securities", whether certificated or uncertificated, or
any certificates of interest, shares, or participation in temporary or
interim certificates
-21-
<PAGE>
for the purchase or acquisition of, or any right to subscribe to, purchase
or acquire any of the foregoing, but shall not include the Notes or any
other evidence of the Obligations.
"Sherbrooke Acquisition" has the meaning set forth in the Preliminary
----------------------
Statements of this Agreement.
"Sherbrooke Acquisition Documents" shall mean all of the agreements,
--------------------------------
instruments and documents evidencing or executed in connection with the
Sherbrooke Acquisition.
"SLR Pledge Agreement" shall mean that certain Stock Pledge Agreement
--------------------
of even date herewith executed by SLR in favor of the Lender pursuant to
which SLR has pledged the shares of capital stock of Leasing.
"SLQ Concentration Account" shall mean the account maintained at the
-------------------------
Toronto office of ABN AMRO Bank Canada, into which collections of Accounts
of SLQ and other cash proceeds of the Property of SLQ may be deposited or
transferred on a daily basis which account is subject to a Collection
Account Agreement or otherwise as described in Section 4.8.
-----------
"SLQ Intercompany Obligations" shall mean, at any time of
----------------------------
determination, the outstanding amount of the "Obligations" as defined in
and as further described in that certain Reimbursement and Discretionary
Advance Agreement dated of even date herewith between SLQ, Emons, Railroad
Group and SLR.
"Subordinated Indebtedness" shall mean (i) the indebtedness due under
-------------------------
the Canadian National Note, and (ii) with respect to any Borrower that
portion of any unsecured Funded Indebtedness of such Borrower that is
incurred on terms and conditions approved in writing by the Lender and is
subordinated, in a manner approved in writing by the Lender, as to right
and time of payment of principal and interest thereon to any and all of the
Obligations.
"Subsidiary" means any corporation or other entity of which more than
----------
fifty percent (50.0%) of the voting power of the outstanding securities or
interests of any class or classes, is at the time, directly or indirectly
through one or more intermediaries, owned by one or more of the Borrowers
and/or one or more of their Subsidiaries.
"Substitute A Term Note" shall have the meaning ascribed to it in
----------------------
Section 2.1(b).
--------------
"Substitute Working Capital Note" shall have the meaning ascribed to
-------------------------------
it in Section 2.4(b).
"Taxes" shall have the meaning ascribed to it in Section 2.11(a).
----- ---------------
-22-
<PAGE>
"Termination Event" shall mean (i) a Reportable Event with respect to
-----------------
any Benefit Plan; (ii) the withdrawal of any Borrower or any ERISA
Affiliate from a Benefit Plan during a plan year in which such Borrower or
such ERISA Affiliate was a "substantial employer" as defined in Section
4001(a)(2) of ERISA; (iii) the imposition of an obligation on such Borrower
or any ERISA Affiliate under Section 4041 of ERISA to provide affected
parties written notice of intent to terminate a Benefit Plan in a distress
termination described in Section 4041(c) of ERISA; (iv) the institution
by the PBGC of proceedings to terminate a Benefit Plan; (v) any event or
condition which might constitute grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any
Benefit Plan; or (vi) the partial or complete withdrawal of such Borrower
or any ERISA Affiliate from a Multiemployer Plan.
"Third Party Collateral" shall mean any property of any Person, other
----------------------
than a Borrower, which, pursuant to the terms of any of the Loan Documents,
secures the payment and performance of any portion of the Obligations.
"UCC" means the Uniform Commercial Code (or any successor statute) of
---
the State of Pennsylvania or Illinois or of any other state the laws of
which are required by Section 9-103 thereof to be applied in connection
with the issue of perfection of security interests.
"U.S. Borrower Guaranty" has the meaning set forth in Section 4.14.
---------------------- ------------
"U.S. Borrowers" has the meaning set forth in the Preamble hereto.
--------------
"U.S. Concentration Account" shall mean the account maintained at the
--------------------------
Lender's office in Chicago, into which collections of Accounts of the U.S.
Borrowers and other cash proceeds of Collateral and Third Party Collateral
may be deposited or transferred on a daily basis pursuant to the terms of
the applicable Collection Account Agreements or otherwise as described in
Section 4.8.
-----------
"U.S. Dollars" and "$" shall mean the lawful money of the United
------------ -
States of America.
"U.S. Loan Repayment Obligations" has the meaning set forth in Section
------------------------------- -------
12.14.
-----
"Voting Stock" means securities of any class or classes of a
------------
corporation, the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors (or
Persons performing similar functions).
"Working Capital Amount" shall mean at any time of determination an
----------------------
amount equal to the lesser of (i) the Working Capital Commitment at such
time or (ii) the amount of the Borrowing Base at such time.
-23-
<PAGE>
"Working Capital Commitment" shall mean $2,000,000, as such amount may
--------------------------
be reduced from time to time pursuant to Section 2.6 or Section 9.2 of this
----------- -----------
Agreement.
"Working Capital Facility" shall mean the credit facility provided
------------------------
under Section 2.4.
-----------
"Working Capital Loans" shall have the meaning ascribed to it in
---------------------
Section 2.4(a).
--------------
"Working Capital Termination Date" shall mean August 15, 2000.
--------------------------------
1.2 Accounting Terms. Any accounting terms used in this Agreement
----------------
which are not specifically defined shall have the meanings customarily
given them in accordance with GAAP.
1.3 Other Terms. All other terms contained in this Agreement shall,
-----------
unless the context indicates otherwise, have the meanings provided for by
the UCC to the extent the same are defined therein.
1.4 Computation of Time Periods. For purposes of this Agreement, in
---------------------------
the computation of periods of time from a specified date to a later
specified date, unless otherwise specified, the word "from" means "from and
including" and the words "to" and "until" each means "to and including."
ARTICLE II.
LOANS AND OTHER FINANCIAL ACCOMMODATIONS
2.1 The A Term Loan Facility.
------------------------
(a) Amount of A Term Loan. Subject to the terms and conditions
---------------------
of this Agreement and in reliance upon the representations and
warranties of the Borrowers herein set forth, the Lender hereby agrees
to continue the Term Loan (as defined in the Original Agreement)
(defined herein as the "A Term Loan") in an amount equal to $7,296,956
-----------
and on the other terms and conditions set forth in this Agreement and
the other Loan Documents. The amount of any voluntary reductions of
the outstanding A Term Loan as described in Section 2.6(a) may be
--------------
reborrowed by the U.S. Borrowers, subject to the satisfaction of the
other terms and conditions hereof, provided that at no time will the
Lender be obligated to make any A Term Loan if after giving effect to
such Loan, the aggregate outstanding amount of the A Term Loan shall
exceed the Available A Term Loan Amount at such time; and provided,
further, that at any time the A Term Loan has been repaid in full, no
further amounts may be reborrowed under the A Term Loan Facility. As
of the Effective Date, Term Loans (as such term is defined in the
Original Agreement) outstanding under the Original Agreement shall be
deemed to be A Term Loans outstanding under this Agreement.
-24-
<PAGE>
(b) Substitute A Term Note. The U.S. Borrowers shall execute
----------------------
and deliver to Lender a promissory note, substantially in the form of
EXHIBIT C attached hereto and made a part hereof (the "Substitute A
--------- ------------
Term Note"), to evidence the A Term Loan. The Substitute A Term Note
---------
shall supersede the Term Note executed pursuant to the Original
Agreement.
2.2 The B Term Loan Facility.
------------------------
(a) Amount of B Term Loan. Subject to the terms and conditions
---------------------
of this Agreement and in reliance upon the representations and
warranties of the Borrowers herein set forth, the Lender hereby agrees
to make to the U.S. Borrowers on the Closing Date a term loan (the "B
-
Term Loan") in an amount equal to $2,000,000. Upon satisfaction of
---------
the applicable conditions set forth in Article VIII hereof, the Lender
------------
shall make the Available B Term Loan Amount available to the U.S.
Borrowers by transferring same day funds equal to the B Term Loan to
an account designated in writing by Emons, on behalf of the U.S.
Borrowers. Initially, the B Term Loan shall be made as a Base Rate
Loan. The amount of any voluntary reductions of the outstanding B Term
Loan as described in Section 2.6(a) may not be reborrowed. The B
--------------
Term Loan shall be repaid in full by the U.S. Borrowers by the B
Term Loan Facility Termination Date.
(b) B Term Note. The U.S. Borrowers shall execute and deliver
-----------
to Lender a promissory note, substantially in the form of EXHIBIT D
---------
attached hereto and made a part hereof (the "B Term Note"), to
-----------
evidence the B Term Loan.
(c) B Term Loan Fee. The U.S. Borrowers shall pay an additional
---------------
fee with respect to the B Term Loan on each date set forth below in an
amount equal to the percentage opposite such date of the total
outstanding principal amount of the B Term Loan on such date, if any:
Date Percentage
---- ----------
June 30, 1999 .25%
December 31, 1999 .50%
June 30, 2000 .50%
December 31, 2000 .75%
June 30, 2001 .75%
December 31, 2001 1.00%
2.3 The Canadian Term Loan Facility.
-------------------------------
(a) Amount of Canadian Term Loan. Subject to the terms and
----------------------------
conditions of this Agreement and in reliance upon the representations
and warranties of the Borrowers herein set forth, the Lender hereby
agrees to make
-25-
<PAGE>
to SLQ on the Closing Date a term loan (the "Canadian Term Loan") in
------------------
an amount equal to C$6,583,500 to be disbursed in Canadian Dollars.
Upon satisfaction of the applicable conditions set forth in Article
-------
VIII hereof, the Lender shall make the proceeds of the Canadian Term
----
Loan Amount available to SLQ by transferring same day funds to an
account designated in writing by Emons, on behalf of the SLQ. The
Canadian Term Loan shall be repaid in the manner set forth in Section
-------
2.6(b)(ii).
----------
(b) Canadian Term Note. SLQ shall execute and deliver to Lender
------------------
a promissory note, substantially in the form of EXHIBIT E attached
---------
hereto and made a part hereof (the "Canadian Term Note"), to evidence
------------------
the Canadian Term Loan.
2.4 Working Capital Loans.
---------------------
(a) Availability.
------------
(i) Subject to the terms and conditions of this Agreement
and in reliance upon the representations and warranties of the
Borrowers herein set forth, the Lender hereby agrees to continue
to make revolving credit loans ("Working Capital Loans") to the
---------------------
U.S. Borrowers from time to time during the period from the
Closing Date to the Working Capital Termination Date, in an
amount which shall not exceed, in the aggregate at any time
outstanding, the amount, if any, by which the Working Capital
Amount at such time exceeds the sum of (A) the aggregate Letter
of Credit Obligations at such time plus (B) the aggregate amount
----
of the Pending Loans at such time. As of the Effective Date,
Working Capital Loans outstanding under the Original Agreement
shall be deemed to be outstanding as Working Capital Loans under
this Agreement.
(ii) From the Closing Date to the Working Capital
Termination Date and subject to all of the terms and conditions
of this Agreement, Working Capital Loans may be voluntarily
prepaid pursuant to Section 2.6(a), and any amounts so prepaid,
--------------
together with the amount of mandatory prepayments made pursuant
to Section 2.6(c), may be reborrowed, up to the amount available
--------------
under this Section 2.4(a) at the time of such Borrowing.
--------------
(iii) Working Capital Loans made on any Funding Date which
constitute Offshore Rate Loans shall be in the aggregate minimum
amount of $100,000.00 and integral multiples of $10,000 in excess
of that amount. Working Capital Loans made on any Funding Date
which constitute Base Rate Loans shall be in the aggregate
minimum amount of $25,000.00 and integral multiples of $5,000 in
excess of that amount.
-26-
<PAGE>
(b) Substitute Working Capital Note. The U.S. Borrowers shall
-------------------------------
execute and deliver to Lender a promissory note substantially in the
form of EXHIBIT F attached hereto and made a part hereof (the
---------
"Substitute Working Capital Note") to evidence the Working Capital
Loans.
2.5 Notice of Borrowing; Making the Loans; Loan Accounts.
----------------------------------------------------
(a) Each Loan shall be made on notice, given by Emons on behalf
of the U.S. Borrowers or SLQ, as the case may be, to the Lender in
writing, including, by telecopy, not later than 11:00 a.m. (Chicago
time) on (A) the third Business Day prior to the date of the proposed
Borrowing, in the case of a request for an Offshore Rate Loan, and (B)
the Business Day of the proposed Borrowing, in the case of a request
for a Base Rate Loan. Each such notice of a borrowing (a "Notice of
---------
Borrowing") shall be substantially in the form of EXHIBIT B attached
--------- ---------
hereto. Any Notice of Borrowing must specify the requested (i) date
of such Loan, (ii) type of Loan, (iii) aggregate amount of such Loan,
(iv) applicable Interest Period for each such Loan if such Loan is an
Offshore Rate Loan, and (v) the account or accounts to which the
proceeds of such Loan are to be disbursed. The original of each
Notice of Borrowing given by telecopy shall be sent to the Lender by
mail for receipt within five (5) days after the applicable Funding
Date. Upon fulfillment of the applicable conditions set forth in
Article VIII, the Lender will make such funds available to the U.S.
------------
Borrowers or SLQ, as the case may be, in such deposit account
maintained with the Lender as Emons, on behalf of the U.S. Borrowers
or SLQ, as the case may be, shall designate.
(b) Anything in paragraph (a) above to the contrary
-------------
notwithstanding,
(i) if the Lender shall, at least one Business Day before
the date of any requested Borrowing, notify the U.S. Borrowers or
SLQ, as the case may be, that the introduction of or any change
in or in the interpretation of any law or regulation makes it
unlawful, or that any central bank or other Governmental
Authority makes it unlawful, for the Lender to perform its
obligations hereunder to make Offshore Rate Loans; or
(ii) if the Lender is unable, after reasonable efforts,
due to prevailing market conditions, to provide timely
information for the determination of the Eurodollar Rate or CDOR
Rate, as the case may be, or is otherwise unable to determine the
Eurodollar Rate or the CDOR Rate at any time, or
(iii) if the Lender has reasonably determined that the
Eurodollar Rate or CDOR Rate is inadequate to compensate the
Lender,
-27-
<PAGE>
then, in any such event, the right of the Borrowers to select Offshore
Rate Loans shall be suspended until the Lender shall notify the
Borrowers that the circumstances causing such suspension no longer
exist; and (A) in the case of any Offshore Rate Loans bearing interest
at the Eurodollar Rate, each such Offshore Rate Loan shall be a Base
Rate Loan, and (B) in the case of any Offshore Rate Loans bearing
interest at the CDOR Rate, all such Offshore Rate Loans shall
thereafter accrue interest at a rate to be negotiated in good faith by
SLQ and the Lender.
(c) Each Notice of Borrowing shall be irrevocable and binding on
the Borrowers. In the case of any requested Offshore Rate Loans, the
requesting Borrower shall indemnify the Lender against any loss,
reasonable cost or expense incurred by the Lender as a result of any
failure to fulfill on or before the date specified in such Notice of
Borrowing for such Loan the applicable conditions set forth in Article
-------
VIII, including, without limitation, any loss (including loss of
----
anticipated profits of which the Lender shall supply to such Borrower
reasonable calculations), cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by the
Lender to fund the requested Loan, as a result of such failure, is not
made on such date.
(d) Emons, on behalf of the U.S. Borrowers and SLQ, shall notify
the Lender in writing of the names of the officers and employees
authorized to request any Loans on behalf of the U.S. Borrowers and
SLQ, and shall provide the Lender with a specimen signature of each
such officer or employee. The Lender shall be entitled to rely
conclusively on such officer's or employee's authority to request a
Loan on behalf of the U.S. Borrowers or SLQ, until the Lender receives
written notice to the contrary. The Lender shall have no duty to
verify the authenticity of the signature appearing on any written
Notice of Borrowing.
(e) The Lender shall establish or cause to be established on its
books in the name of the U.S. Borrowers and SLQ an account (each, a
"Loan Account") to evidence Loans made to the U.S. Borrowers and SLQ,
------------
respectively. In the case of the U.S. Borrowers, the Lender will
credit or cause to be credited to a commercial account for each of the
U.S. Borrowers (each a "Demand Deposit Account") maintained by Emons
----------------------
on behalf of each of the U.S. Borrowers at Lender's Chicago, Illinois
office, the amount of any sums advanced as Loans hereunder. Any
amounts credited to each such Demand Deposit Account, and advanced to
the U.S. Borrowers as a Loan pursuant to this Agreement will be
debited to such U.S. Borrower's Loan Account and result in an increase
in the principal balance outstanding in the applicable Loan Account in
the amount thereof. In the case of SLQ, Lender shall disburse the
Canadian Term Loan as directed by Emons on behalf of SLQ as follows:
(i) an amount equal to C$5,900,010 shall be disbursed to the trust
account of Ogilvy Renault, escrow agent, maintained at the Royal Bank
of Canada in Montreal, Quebec and (ii) an
-28-
<PAGE>
amount equal to C$683,490 shall be disbursed to an account of SLQ at
the Toronto office of ABN AMRO Bank Canada; both such amounts will be
debited to SLQ's Loan Account and result in an increase in the
principal balance outstanding in SLQ's Loan Account. The Lender is
hereby authorized, at its option, either (A) to endorse the date and
amount of each Loan made by it and each repayment or prepayment of
principal of Loans made with respect to the applicable Note on the
schedule annexed to and constituting a part of the Note or (B) to
record such Loans, repayments and prepayments in its books and
records, such schedule or such books and records, as the case may be,
constituting prima facie evidence, absent manifest error, of the
accuracy of the information contained therein.
2.6 Prepayments; Reserves.
---------------------
(a) Voluntary Prepayments. (i) The U.S. Borrowers may at any
---------------------
time prepay the Working Capital Loans in whole or in part, subject to
Section 2.8, and (ii) upon not less than three (3) Business Days'
-----------
prior written or telephonic notice confirmed promptly in writing to
the Lender, at any time and from time to time, the U.S. Borrowers may,
prepay the A Term Loan or the B Term Loan or SLQ may prepay the
Canadian Term Loan, in each case, in whole or in part, without premium
or penalty (except as provided in Section 2.8), in an aggregate
-----------
minimum amount of $50,000 and integral multiples of $10,000 in excess
of that amount; provided, however, that the U.S. Borrowers may prepay
-------- -------
the A Term Loan or the B Term Loan and SLQ may prepay the Canadian
Term Loan in full without regard to such minimum amount. Any notice
of prepayment given to the Lender under this Section 2.6(a) shall
--------------
specify the date of prepayment, the aggregate principal amount of the
prepayment and which Loans such prepayment is to be applied against.
In the absence of such notice Lender shall apply prepayments in
accordance with Section 2.10(e). To the extent that any voluntary
---------------
prepayment is made against the A Term Note, such voluntary prepayments
shall be applied to the installments due under the A Term Note in the
order of maturity until paid in full and, subject to the other terms
and conditions of this Agreement, such voluntary prepayments of the A
Term Loan may be reborrowed pursuant to Section 2.5 hereof. Notice of
-----------
prepayment having been delivered as provided herein, the principal
amount of the Loans specified in such notice shall become due and
payable on the prepayment date.
(b) Reductions of the Available A Term Loan Amount and the
------------------------------------------------------
Available Canadian Term Loan Amount; Prepayments of Loans.
---------------------------------------------------------
(i) Reductions of the Available A Term Loan Amount. The
----------------------------------------------
Available A Term Loan Amount shall be reduced on each of the
dates set forth below by the dollar amount set forth opposite
such date, and to the extent that the outstanding principal
amount of the A Term Loan on such
-29-
<PAGE>
date shall exceed the Available A Term Loan Amount on such date,
the U.S. Borrowers shall immediately pay the amount of such
excess:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
DATE AMOUNT OF REDUCTION
---- -------------------
-----------------------------------------------------------------
<S> <C>
12/31/98, 3/31/99, 6/30/99 $150,000
-----------------------------------------------------------------
9/30/99, 12/31/99, 3/31/00, 6/30/00 $275,000
-----------------------------------------------------------------
9/30/00, 12/31/00, 3/31/01, 6/30/01 $300,000
-----------------------------------------------------------------
9/30/01, 12/31/01, 3/31/02, 6/30/02 $387,500
-----------------------------------------------------------------
9/30/02, 12/31/02, 3/31/03, 6/30/03 $425,000
-----------------------------------------------------------------
9/30/03, 12/31/03 $475,000
-----------------------------------------------------------------
3/31/04 $346,956
-----------------------------------------------------------------
</TABLE>
(ii) Reductions of the Available Canadian Term Loan
----------------------------------------------
Amount. The Available Canadian Term Loan Amount shall be reduced
------
on each of the dates set forth below by the amount set forth
opposite such date and to the extent that the outstanding
principal amount of the Canadian Term Loan on such date shall
exceed the Available Canadian Term Loan Amount on such date, SLQ
shall immediately pay the amount of such excess in Canadian
Dollars:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
DATE AMOUNT OF REDUCTION
---- -------------------
-----------------------------------------------------------------
<S> <C>
3/31/04 C$135,520
-----------------------------------------------------------------
6/30/04 C$731,500
-----------------------------------------------------------------
9/30/04, 12/31/04, 3/31/05, 6/30/05 C$938,245
-----------------------------------------------------------------
9/30/05, 12/31/05 C$981,750
-----------------------------------------------------------------
</TABLE>
(iii) Additional Reductions. In addition to the reductions
---------------------
described above, within two (2) Business Days after the receipt
by any Borrower of any Net Cash Proceeds of Sale, such Borrower
shall make a mandatory prepayment of the Loans for which it is
primarily liable in an amount equal to such Net Cash Proceeds of
Sale a calculation of which shall be set forth in an officers'
certificate delivered by Emons on behalf of such Borrower to the
Lender concurrently with such payment (each such payment, a "Net
---
Proceeds Prepayment"). Further, upon the receipt of any Net Cash
-------------------
Proceeds of Capital Stock Issuance, Emons, on behalf of the U.S.
Borrowers, shall make a mandatory prepayment of the Loans for
which the U.S. Borrowers are obligated hereunder, without premium
or penalty except as provided in Section 2.8, in an amount equal
-----------
to the outstanding principal amount of the B Term Loan at such
times plus 50% of such net cash proceeds, if any, in excess of
----
$3,000,000, such to be set forth in an officers' certificate
delivered by Emons on behalf of the Borrowers to the Lender
concurrently with such payment and to be made as of the date of
such officers' certificate (each such payment, a "Capital Stock
-------------
Prepayment"). In addition, within one hundred and twenty (120)
----------
-30-
<PAGE>
days after the end of each Cash Flow Period, the U.S. Borrowers
and SLQ shall make a mandatory prepayment, without premium or
penalty except as provided in Section 2.8, in an amount equal to
-----------
50% of any Excess Cash Flow for such Cash Flow Period (each such
payment, an "Excess Cash Prepayment," which together with all
----------------------
other Excess Cash Prepayments, Net Proceeds Prepayments and
Capital Stock Prepayments shall be referred to collectively as
"Mandatory Prepayments"); provided, however, that, except after
---------------------
the occurrence or during the continuance of an Event of Default
SLQ shall not be required to make a Mandatory Prepayment which
results in the repayment or greater than 25% of the Available
Canadian Term Loan Amount prior to December 21, 2003. The U.S.
Borrowers and SLQ shall give the Lender not less than three (3)
Business Days' prior written notice of the date on which each
such Mandatory Prepayment will be made (which date shall be no
later than the date on which such Mandatory Prepayment becomes
due and payable pursuant to this Section 2.6(b)) and, with
--------------
respect to Excess Cash Prepayments, such notice shall be
accompanied by the audited or preliminary audited annual
financial statements of Emons on a combined and consolidated
basis for such Cash Flow Period, together with a computation of
Excess Cash Flow for such Cash Flow Period. Each Mandatory
Prepayment remitted by the U.S. Borrowers shall be applied first
to repay the B Term Loan until the B Term Loan is paid in full
and next to the A Term Loan to installments or reductions due in
the inverse order of maturity until paid in full, then to the
Working Capital Loans outstanding and each Mandatory Prepayment
remitted by SLQ shall be applied to the Canadian Term Loan, to
installments in the inverse order of maturity until paid in full;
provided, however, that any Excess Cash Flow Payment attributable
to Excess Cash Flow allocable to SLQ shall only be applied to the
Canadian Term Loan. The Available A Term Loan Amount, the
Available B Term Loan Amount or, as the case may be, the
Available Canadian Term Loan Amount, shall be permanently reduced
by the amount of each Mandatory Prepayment. In addition, at the
Lender's option the Working Capital Commitment shall be
permanently reduced on a dollar for dollar basis by the amount of
such Mandatory Prepayments in excess of those applied to the B
Term Loan, the A Term Loan and the Canadian Term Loan.
(c) Mandatory Prepayment of Working Capital Loans. The U.S.
---------------------------------------------
Borrowers shall make prepayments of Working Capital Loans to the
extent necessary such that the sum of (i) the aggregate principal
amount of the Working Capital Loans outstanding at any time, plus (ii)
----
the aggregate Letter of Credit Obligations at such time, plus (iii)
----
the aggregate Pending Loans at such time, does not exceed the Working
Capital Amount at such time.
-31-
<PAGE>
(d) Modification of Advance Rates and Eligibility Reserves.
------------------------------------------------------
Borrowers agree that the Lender shall have the right, at any time and
from time to time, at the discretion of the Lender, exercised in its
reasonable credit judgment and in Good Faith, (i) to reduce or
otherwise modify the advance rates applied to Eligible Receivables as
specified in the definitions of "Borrowing Base," (ii) to add
additional restrictions which exclude particular types of Accounts
from Eligible Receivables, and (iii) to establish Eligibility
Reserves, increase the amount thereof and add additional types of
Eligibility Reserves. The Borrowers expressly acknowledge that the
above referenced reductions, restrictions and additions may have the
effect of reducing the credit available under this Agreement.
2.7 Interest. The U.S. Borrowers shall pay interest on the unpaid
--------
principal amount of all Loans other than the Canadian Term Loan and SLQ
shall pay interest on the unpaid principal amount of the Canadian Term Loan
from the date of such Loan until such principal amount shall be paid in
full, at the following intervals and at the following rates per annum:
(a) With respect to Loans under the A Term Loan Facility, the
Canadian Term Loan Facility and the Working Capital Facility,
(i) Base Rate Loans. If such Loan is a Base Rate Loan, a
---------------
rate per annum equal to the Applicable Margin at the time of
determination plus the Base Rate in effect from time to time,
----
payable, in arrears, on the last day of each calendar quarter and
on the date such Base Rate Loan shall be paid in full; and
(ii) Offshore Rate Loans. If such Loan is an Offshore Rate
-------------------
Loan, a rate per annum equal at all times during the Interest
Period for such Loan to, in the case of any A Term Loan or
Working Capital Loan, the Eurodollar Rate, and in the case of a
Canadian Term Loan, the CDOR Rate, for such Interest Period, in
each case, plus the Applicable Margin at the time of
----
determination, payable, in either such event, in arrears, on the
last day of each Interest Period (provided that if such Interest
Period exceeds three months, on the last day of the third month
and on the last day of such Interest Period), or, if earlier, on
the date such Offshore Rate Loan shall be paid in full;
(b) With respect to Loans under the B Term Loan Facility,
(i) Base Rate Loans. If such Loan is a Base Rate Loan, a
---------------
rate per annum equal to the Base Rate in effect from time to time
plus 0.50% payable, in arrears, on the last day of each calendar
quarter and on the date such Base Rate Loan shall be paid in
full; and
-32-
<PAGE>
(ii) Offshore Rate Loans. If such Loan is an Offshore
-------------------
Rate Loan, a rate PER ANNUM equal at all times during the
Interest Period for such Loan to the Eurodollar Rate for
such Interest Period plus 3.0%, payable, in arrears, on the
last day of each Interest Period (provided that if such
Interest Period exceeds three months, on the last day of the
third month and on the last day of such Interest Period),
or, if earlier, on the date such Offshore Rate Loan shall be
paid in full;
provided, however, that, from and after the occurrence of an Event of
-------- -------
Default and unless and until such Event of Default is cured or waived,
(i) the Borrowers shall not be entitled to elect that any portion of
any Loan be an Offshore Rate Loan (in the case of the Canadian Term
Loan, such Loan shall then accrue interest at a rate to be negotiated
in good faith by SLQ and the Lender); and (ii) in the case of the A
Term Loan, the B Term Loan and the Working Capital Loan, the U.S.
Borrowers shall pay interest on the Loans for which they are liable on
the unpaid principal amount thereof at the Default Rate, such interest
being payable on demand.
2.8 Prepayment Provisions; Breakage Costs. The Borrowers shall
-------------------------------------
have no right to voluntarily prepay any principal amount of any Loans
other than Base Rate Loans. If the Borrowers repay any Offshore Rate
Loan prior to the last day of the applicable Interest Period for any
reason, such Borrower or Borrowers shall pay to the Lender the amount
of any cost, loss (including loss of anticipated profits) or expense
incurred by the Lender as a result of the repayment of an Offshore
Rate Loan prior to the last day of the Interest Period applicable to
such Loan including, without limitation, any cost or expense incurred
by Lender by reason of the liquidation and reemployment of deposits or
other funds acquired by the Lender to fund the Offshore Rate Loan.
2.9 Increased Costs; Increased Capital. In the event that the
----------------------------------
Lender determines that compliance with any United States or Canadian
(including any state, political subdivision, provincial, territory or
possession thereof) or other foreign law, regulation, treaty,
directive or guideline, currently or hereafter in effect, or the
interpretation or application thereof, or the compliance with any
request, guideline or directive (whether or not having the force of
law) from any United States, Canadian or foreign central bank or any
other Governmental Authority:
(a) imposes, modifies or holds applicable any reserve,
special deposit, compulsory loan or similar requirement against,
or imposes any other conditions with respect to assets held by,
or deposits or other liabilities in or for the account of,
advances or loans by, or other credit or commitment therefor
extended by, or any other acquisition of funds by, any office of
the Lender which is not otherwise included or accounted for in
any determination of the Eurodollar Rate or CDOR Rate or any
interest payable hereunder; or
(b) affects or would affect the amount of capital required
or expected to be maintained by the Lender or any corporation
controlling the Lender and the
-33-
<PAGE>
Lender determines that the amount of such capital is increased by
or based upon the existence of the Lender's obligations to make,
maintain or fund the Offshore Rate Loans;
and the result is to increase (as reasonably determined by the Lender)
the cost to the Lender of (i) agreeing to make, making, funding,
renewing or maintaining the Offshore Rate Loans hereunder, or (ii)
agreeing to maintain, or its maintenance of, the Working Capital
Commitment hereunder, or to reduce any amount receivable in respect of
any of the foregoing, or to reduce (as determined by the Lender) the
rate of return on the Lender's or such controlling corporation's
capital (taking into account the policies of the Lender or corporation
with regard to capital), then, in any such case, the U.S. Borrowers
and SLQ agree to pay, on account of the Loans for which they are
liable, to the Lender upon the Lender's demand any additional amount
as may be necessary to compensate fully the Lender for such additional
cost, reduced amount receivable, or reduced rate of return as
reasonably deter mined by the Lender to place the Lender in the same
economic position as if such compliance had not occurred. The Lender
will promptly notify the Borrowers, in writing, of the occurrence of
any of the events described in this Section 2.9.
-----------
2.10 Payments and Computations.
-------------------------
(a) All payments of principal, interest, Reimbursement
Obligations and fees hereunder and under the Notes payable to the
Lender shall be made without condition or reservation of right
and in same day funds in the same currency as the currency in
which such amount is outstanding and delivered to the Lender not
later than 1:00 p.m. (Chicago time) on the date due to such
account of the Lender as the Lender may designate; and funds
received by the Lender after that time shall be deemed to have
been paid on the next succeeding Business Day.
(b) Each of the Borrowers hereby authorizes the Lender and,
unless the Borrowers have arranged for another means of payment
satisfactory to the Lender, the Lender shall, if and to the
extent any payment is due by such Borrower hereunder, to charge
from time to time against any or all of such Borrower's accounts
with the Lender any amount so due from such Borrower(s). The
Lender shall notify the Borrowers of any such charge; provided,
however, that the failure to give such notice shall not limit or
otherwise affect the obligation of the Borrowers to make any
payment when due hereunder.
(c) All computations of interest calculated on the basis of
the Base Rate shall be made by the Lender on the basis of a year
of 365 or 366 days as applicable, and all calculations of all
other interest and fees shall be calculated on the basis of a
year of 360 days, in each case, for the actual number of days
(including the first day but excluding the last day) occurring in
the period for which such interest or fees are payable. Each
determination by the Lender of an interest rate hereunder shall
be conclusive and binding for all purposes, absent
-34-
<PAGE>
manifest error. For the purposes of the Interest Act (Canada) and
disclosure thereunder, whenever interest to be paid hereunder is
to be calculated on the basis of a year of 360 days or any other
period of time that is less than a calendar year, the yearly rate
of interest to which the rate determined pursuant to such
calculation is equivalent is the rate so determined multiplied by
the actual number of days in the calendar year in which the same
is to be ascertained and divided by either 360 or such other
period of time, as the case may be.
(d) Whenever any payment hereunder shall be stated to be
due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day, and such extension of
time shall in such case be included in the computation of payment
of interest or the Non-Use Fee, as the case may be; provided,
--------
however, if such extension would cause payment of interest on or
-------
principal of Offshore Rate Loans to be made in the next following
calendar month, such payment shall be made on the next preceding
Business Day.
(e) Prior to the occurrence of an Event of Default, except
as otherwise directed by the U.S. Borrowers or SLQ (and
notwithstanding any other application thereof by the Lender on
its books, which application may be made in the Lender's
discretion), any payments received by the Lender from the U.S.
Borrowers shall be applied as follows: first, to pay interest due
-----
in respect of Working Capital Loans; second, to pay interest due
------
in respect of the B Term Loan and the A Term Loan (in that
order); third, to pay the outstanding principal of the Working
-----
Capital Loans which constitute Base Rate Loans; fourth, to pay
------
the outstanding principal of the Working Capital Loans which
constitute Offshore Rate Loans (in the order of their maturity);
fifth, to pay the outstanding principal of any portion of the B
-----
Term Loan and the A Term Loan (in that order) which constitute
Base Rate Loans; sixth, to pay the outstanding principal of any
-----
portion of the B Term Loan and the A Term Loan (in that order)
which constitute Offshore Rate Loans; seventh, to provide cash
-------
collateral in respect of Letter of Credit Obligations; and
eighth, to the payment of any other Obligation due to the Lender.
------
Any payments received from SLQ by the Lender, prior to an Event
of Default, unless otherwise directed by SLQ shall be applied to
the Canadian Term Loan, first to any accrued interest which is
due, then to pay the outstanding principal amount in respect
thereof in order of maturity. During the existence of an Event of
Default, the Lender may apply any payments received by the
Borrowers to the Obligations for which they are liable in any
manner determined by the Lender in its discretion. No checks,
drafts or other instruments received by the Lender shall
constitute final payment to the Lender for the accounts of the
Lender unless and until such item or payment has actually been
collected. All items or amounts which are delivered to the Lender
by or on behalf of any Borrower or any Account Debtor on account
of partial or full payment or otherwise as proceeds of any of the
Properties of such Borrower or Third Party Collateral (including
any items or amounts which may have been deposited to the U.S.
Borrower Concentration Account or the SLQ Concentration Account)
may,
-35-
<PAGE>
during the existence of an Event of Default, from time to time in
the Lender's discretion, be released to the Borrowers or may be
applied by the Lender towards payment of the Obligations for
which such Borrower is liable, whether or not then due as
provided in the foregoing terms of this subsection.
Notwithstanding anything to the contrary herein, (i) solely for
purposes of determining the occurrence of an Event of Default,
all cash, checks, instruments and other items of payment shall be
deemed received upon actual receipt by the Lender, unless the
same is subsequently dishonored for any reason whatsoever, (ii)
for purposes of determining whether, under Sections 2.4 and 3.2,
------------ ---
there is availability for Working Capital Loans or Letters of
Credit and for purposes of interest calculation hereunder, (A)
all cash and collected funds shall be deemed to have been applied
against the Obligations on the Business Day which Lender shall
have received, prior to 1:00 p.m. (Chicago time), such funds, and
(B) all checks, instruments and other items of payment shall be
deemed to have been applied against the Obligations on the second
(2nd) Business Day after the Business Day on which the Lender
shall have received, prior to 1:00 p.m. (Chicago time), such
items of payment. The foregoing apportionment of payments is
solely for the purpose of determining the obligations of the
Borrowers hereunder and, notwithstanding such apportionment,
Lender may on its books and records allocate payments received by
it in a manner different from that contemplated hereby. No such
different allocation shall alter the rights and obligations of
the Borrowers under this Agreement determined in accordance with
the apportionments contemplated by this subsection (e). To the
--------------
extent that any of the Borrowers make a payment or payments to
the Lender, including, without limitation, proceeds of the
Accounts, other Properties of such Borrower or Third Party
Collateral for the Borrowers' benefit, which payment(s) or
proceeds or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, state or federal law, common law or
equitable cause then, to the extent of such payment or proceeds
received, the Obligations or part thereof intended to be
satisfied shall be revived and continue in full force and effect,
as if such payment or proceeds had not been received by the
Lender.
(f) Each Borrower hereby authorizes the Lender, and the
Lender may, in its discretion, charge to each Borrower at any
time when due all or any portion of any of the Obligations for
which it is liable (and interest, if any, thereon), including but
not limited to any costs and expenses of the Lender relating
thereto for which such Borrower is liable pursuant to the terms
of this Agreement or any other Loan Document, by charging Emons'
Demand Deposit Account or any other bank account of any Borrower
liable for such Obligation maintained with the Lender; provided,
--------
however, that the provisions of this subsection (f) shall not
------- --------------
affect such Borrower's obligation to pay when due all amounts
payable by such Borrower under this Agreement, or any other Loan
Document, whether or not there are sufficient funds therefor in
the Demand Deposit Account or any such other bank account of such
Borrower.
-36-
<PAGE>
2.11 Taxes.
-----
(a) Any and all payments by each of the Borrowers hereunder
shall be made, in accordance with Section 2.10, free and clear of
------------
and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding taxes imposed on the
---------
Lender's income, and franchise taxes imposed on the Lender, by
the jurisdiction under the laws of which the Lender is organized
or any political subdivision thereof and excluding also any net
income taxes imposed on the Lender as a result of its present or
former connection with Canada or any province or any political
subdivision thereof other than a connection arising from the
Lender having executed, delivered or performed its obligations,
received payment under or enforced this Agreement (all such
nonexcluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as
"Taxes"). If any of the Borrowers shall be required by law to
-----
deduct any Taxes from or in respect of any sum payable hereunder
to the Lender, (i) the sum payable shall be increased as may be
necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this
Section 2.11) the Lender receives an amount equal to the sum it
------------
would have received had no such deductions been made, (ii) such
Borrower shall make such deductions with respect to Obligations
for which they are liable and (iii) such Borrower shall pay the
full amount so deducted to the relevant taxing authority or other
appropriate authority in accordance with applicable law.
(b) In addition, each Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies which arise from any payment
made hereunder or under the Notes for which such Borrower is
liable or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement or the Notes for which
such Borrower is liable (but specifically excluding, any taxes
due as a result of any assignment or participation made by the
Lender as permitted by the terms of Section 11.2 hereof)
(hereinafter referred to as "Other Taxes").
-----------
(c) The U.S. Borrowers, in respect of the U.S. Loan
Repayment Obligations, and SLQ, in respect of the Canadian Term
Loan Repayment Obligations, agree to indemnify the Lender for the
full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction
on amounts payable under this Section 2.11) paid by the Lender
------------
and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto. Any amounts due from
any of the U.S. Borrower or SLQ as the case may be in accordance
with the foregoing indemnification shall be paid to the Lender
within thirty (30) days from the date the Lender makes written
demand therefor. Notwithstanding the foregoing, however, the
Lender agrees that it shall not pay any Taxes or Other Taxes if
it has received written notice from any Borrower that such
Borrower is contesting the same and for so long as such
-37-
<PAGE>
Borrower continues to contest the same in accordance with the
terms of Section 7.1 provided that such failure to pay does not
-----------
adversely affect the Lender's ability to obtain or maintain a
perfected security interest in any of such Borrower's Property or
any of the Lender's rights and remedies hereunder.
(d) Within 30 days after the date of any payment of Taxes,
the Borrower making such payment will furnish to the Lender, at
its address referred to on the signature page hereto, the
original or a certified copy of a receipt evidencing payment
thereof. In respect of any payment hereunder or under the Notes,
the relevant Borrower will furnish to the Lender, upon the
Lender's request therefor, and as to such Taxes and taxing
authorities specifically designated in such request and
respecting which no receipt is delivered by such Borrower, a
certificate from each appropriate taxing authority or an opinion
of counsel acceptable to the Lender, in either case, stating that
such payment is exempt from or not subject to such Taxes.
(e) Without prejudice to the survival of any other
agreement of the Borrowers hereunder, the agreements and
obligations of the Borrowers contained in this Section 2.11 shall
------------
survive the payment in full of principal and interest hereunder
and under the Notes.
2.12 Borrowing Base. The Borrowing Base shall be calculated by
--------------
Emons on behalf of the Borrowers, giving effect to reserves
historically provided by the Borrowers, and such calculations shall be
set forth in a Borrowing Base Certificate delivered to the Lender by
Emons on behalf of the Borrowers in accordance with Section 5.2(i) and
--------------
Article VIII. The Lender shall have the right to review, confirm and
------------
adjust, from time to time, in its reasonable credit judgment, the
values ascribed by the U.S. Borrowers and SLQ to Eligible Receivables,
and the reserves therefor, in any Borrowing Base Certificate, such
adjustments to include, without limitation, reductions for such
reserves as the Lender deems proper and reasonable.
2.13 Conversions.
-----------
(a) On the terms and subject to the conditions of this
Agreement and provided that no Event of Default shall have
occurred and be continuing, upon written notice, including by
telecopy, given by Emons on behalf of the U.S. Borrowers or SLQ,
as the case may be, to the Lender in substantially the form of
EXHIBIT G attached hereto and made a part hereof (the "Notice of
--------- ---------
Conversion"), the U.S. Borrowers or SLQ, as the case may be and
----------
to the extent applicable in light of the Base Rate not being
available under the Canadian Term Loan, may (i) convert all or
any portion of the A Term Loan, the B Term Loan or any Working
Capital Loan which is an Offshore Rate Loan bearing interest at
the Eurodollar Rate to a Base Rate Loan upon expiration of the
applicable Interest Period, (ii) continue any Offshore Rate Loan
as an Offshore Rate Loan upon the expiration of the applicable
Interest Period, or (iii) convert any Base Rate Loan
-38-
<PAGE>
to an Offshore Rate Loan bearing interest at the Eurodollar Rate
at any time (any such date on which any Loan is to be converted
being referred to herein as a "Conversion Date"). Such Notice of
---------------
Conversion shall be delivered to the Lender prior to 1:00 p.m.
(Chicago time) three (3) Business Days prior to the proposed
Conversion Date if conversion to, or continuation of, an Offshore
Rate Loan is requested, and prior to 11:00 a.m. (Chicago time) on
the proposed Conversion Date if conversion to a Base Rate Loan is
requested. Each proposed Conversion Date shall be a Business Day.
The original of each Notice of Conversion given to the Lender by
telecopy shall be sent to the Lender by regular mail within five
(5) days of the applicable Conversion Date.
(b) If the U.S. Borrowers or SLQ as the case may be and to
the extent applicable in light of the Base Rate not being
available under the Canadian Term Loan, shall fail to give notice
of the duration of the proposed Interest Period with respect to a
proposed conversion of (i) an outstanding Base Rate Loan or (ii)
a continuation of an Offshore Rate Loan, such Borrower shall be
deemed not to have elected to convert the Base Rate Loan or
continue the Offshore Rate Loan as the case may be. If the U.S.
Borrowers shall fail to give a timely and complete Notice of
Conversion with respect to an outstanding Offshore Rate Loan in
accordance with this Section 2.13, such Borrower shall be deemed
------------
to have elected to convert such outstanding Offshore Rate Loan to
a Base Rate Loan on the last day of the applicable Interest
Period. If SLQ shall fail to give a timely and complete Notice of
Conversion with respect to an outstanding Offshore Rate Loan in
accordance with this Section 2.13, SLQ shall be deemed to have
------------
elected to continue such outstanding Offshore Rate Loan and to
have elected an Interest Period of one month.
(c) Any Notice of Conversion given or deemed to have been
given pursuant to this Section 2.13 shall be irrevocable.
------------
(d) If an Event of Default has occurred and is
continuing, each Offshore Rate Loan bearing interest at the
Eurodollar Rate shall be converted to a Base Rate Loan at the end
of the then applicable Interest Period and each Offshore Rate
Loan bearing interest at the CDOR Rate shall be converted to an
Offshore Rate Loan at the CDOR Rate having an Interest Period of
one month. If the Lender shall be unable to determine the
Eurodollar Rate or CDOR Rate or shall have deemed the Eurodollar
Rate or CDOR Rate to be inadequate or unfair (as provided in
Section 2.5(b)) then (i) each Offshore Rate Loan bearing interest
--------------
at the Eurodollar Rate shall be converted to a Base Rate Loan at
the end of the applicable Interest Period, and (ii) each Offshore
Rate Loan bearing interest at the CDOR Rate shall bear interest
at a rate to be negotiated in good faith by the Lender and SLQ.
If the making or maintaining of Offshore Rate Loans shall be
unlawful, impossible, inadequate or unfair (as provided in
Section 2.5(b)) then (x), all Offshore Rate Loans bearing
--------------
interest at the Eurodollar Rate outstanding shall be converted
into Base Rate Loans (A) the last day of the Interest Period or
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<PAGE>
Interest Periods applicable to such Loans if the Lender may
lawfully continue to maintain and fund such Loans until such day,
or (B) immediately, if the Lender may not lawfully continue to
fund and maintain such Loans and (y) Offshore Rate Loans bearing
interest at the CDOR Rate shall bear interest at a rate
negotiated in good faith between Lender and SLQ.
(e) Notwithstanding any provision in this Agreement to the
contrary, Borrowers shall have no more than five (5) different
Interest Periods outstanding for Offshore Rate Loans at any time.
2.14 Fees.
----
(a) The U.S. Borrowers shall pay to the Lender a closing
fee in the amount of Sixty-Two Thousand Seven Hundred Fifty
Dollars ($62,750) (the "Closing Fee") which shall be fully earned
-----------
and non-refundable and payable on the Closing Date.
(b) As additional compensation for Lender's costs and risks
in making the Working Capital Loans available to the U.S.
Borrowers, U.S. Borrowers agree to pay to Lender in arrears, on
the first Business Day of each calendar quarter prior to the
Working Capital Termination Date and on the Working Capital
Termination Date, a fee for U.S. Borrowers' non-use of available
funds under the Working Capital Facility (the "Non-Use Fee") in
-----------
an amount equal to the per anum rate shown in the definition of
Applicable Margin (calculated on the basis of a 360 day year for
actual days elapsed) on the difference between (i) $2,000,000 and
(ii) the respective daily averages of the amount of the Working
Capital Loans outstanding during the period for which the Non-Use
Fee is due.
ARTICLE III.
THE LETTER OF CREDIT SUBFACILITY
3.1 Obligation to Issue. Subject to the terms and conditions of
-------------------
this Agreement, and in reliance upon the representations and
warranties of the Borrowers herein set forth, the Lender hereby agrees
to issue for the account of any U.S. Borrower through such of the
Lender's branches as it and the U.S. Borrowers may jointly agree, one
or more Letters of Credit in accordance with this Article III, from
-----------
time to time during the period commencing on the Closing Date and
ending at least thirty (30) days prior to the Working Capital
Termination Date.
3.2 Types and Amounts. The Lender shall not have any
-----------------
obligation to issue any Letter of Credit at any time:
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<PAGE>
(a) if the aggregate maximum amount then available for drawing
under Letters of Credit, after giving effect to the issuance of the
requested Letter of Credit, shall exceed any limit imposed by law or
regulation upon the Lender;
(b) if, after giving effect to the issuance of the requested
Letter of Credit, the sum of the aggregate Letter of Credit
Obligations, plus the aggregate principal amount of the Working
----
Capital Loans outstanding, plus the aggregate Pending Loans, would
----
exceed the Working Capital Amount at such time; or
(c) which has an expiration date (A) more than one year after
the date of issuance or (B) after the thirtieth (30th) day preceding
the date specified in the definition of "Working Capital Termination
Date".
3.3 Conditions. In addition to being subject to the satisfaction of
----------
the conditions contained in Article VIII, the obligation of the Lender to
------------
issue any Letter of Credit is subject to the satisfaction in full of the
following conditions:
(a) the applicable U.S. Borrower shall have delivered to the
Lender at such times and in such manner as the Lender may prescribe a
Letter of Credit application and such other documents and materials as
may be required pursuant to the terms thereof and the terms of the
proposed Letter of Credit shall be satisfactory to the Lender; and
(b) as of the date of issuance no order, judgment or decree of
any court, arbitrator or Governmental Authority shall purport by its
terms to enjoin or restrain the Lender from issuing the Letter of
Credit and no law, rule or regulation applicable to the Lender and no
request or directive (whether or not having the force of law) from any
Governmental Authority with jurisdiction over the Lender shall
prohibit or request that the Lender refrain from the issuance of
letters of credit generally or the issuance of the requested Letter of
Credit.
3.4 Issuance of Letters of Credit.
-----------------------------
(a) Request for Issuance. The applicable U.S. Borrower shall
--------------------
give the Lender at least five (5) Business Days' prior written notice
of any requested issuance of a Letter of Credit under this Agreement;
such notice shall be irrevocable and shall specify the stated amount
of the Letter of Credit requested, the effective date (which day shall
be a Business Day) of issuance of such requested Letter of Credit, the
date on which such requested Letter of Credit is to expire (which date
shall be a Business Day), the purpose for which such Letter of Credit
is to be issued, and the Person for whose benefit the requested Letter
of Credit is to be issued.
(b) Issuance. Subject to the terms and conditions of this
--------
Article III, and provided that the applicable conditions set forth in
-----------
Article VIII hereof have
------------
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<PAGE>
been satisfied, the Lender shall, on the requested date, issue a
Letter of Credit on behalf of any U.S. Borrower in accordance with the
Lender's usual and customary business practices.
(c) No Extension or Amendment. The Lender shall not extend or
-------------------------
amend any Letter of Credit unless the requirements of Section 3.3 and
-----------
this Section 3.4 are met as though a new Letter of Credit was being
-----------
requested and issued and any amounts due under Section 3.7 are paid.
-----------
3.5 Reimbursement Obligations; Duties of the Lender.
-----------------------------------------------
(a) Reimbursement. Notwithstanding any provisions to the
-------------
contrary in any Letter of Credit Reimbursement Agreement:
(i) the U.S. Borrowers shall reimburse the Lender for any
drawings under a Letter of Credit issued by it no later than 1:00
p.m. (Chicago time) on the date of such drawing; and
(ii) any Reimbursement Obligation with respect to any Letter
of Credit shall bear interest from the date of the relevant
drawing under the pertinent Letter of Credit until the date paid
in full at the interest rate applicable to Base Rate Loans at the
time an Event of Default exists.
(b) Duties of the Lender. Any action taken or omitted to be
--------------------
taken by the Lender under or in connection with any Letter of Credit,
if taken or omitted in the absence of willful misconduct or
recklessness, shall not put the Lender under any resulting liability
to any Borrower. In determining whether to pay under any Letter of
Credit, the Lender shall have no obligation relative to the U.S.
Borrowers other than to confirm that any documents required to have
been delivered under such Letter of Credit appear to comply on their
face, with the requirements of such Letter of Credit. The Lender shall
notify the applicable U.S. Borrower upon the occurrence of a draw
under any Letter of Credit.
3.6 Payment of Reimbursement Obligations. The U.S. Borrowers agree
------------------------------------
to pay to the Lender the amount of all Reimbursement Obligations, interest
and other amounts payable to the Lender under or in connection with any
Letter of Credit immediately when due, irrespective of any claim, set-off,
defense or other right which the U.S. Borrowers or any of their
Subsidiaries may have at any time against the Lender or any other Person.
3.7 Compensation for Letters of Credit.
----------------------------------
(a) Letter of Credit Fees. As a condition precedent to issuing
---------------------
or extending any Letter of Credit, the U.S. Borrowers shall pay to the
Lender a fee (the "L/C Fee") in an amount equal to the Applicable
-------
Margin for Letters of Credit multiplied by the face amount of the
Letter of Credit to be issued or
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<PAGE>
extended and then multiplied by a fraction, the numerator of which is
the number of days from the issue date (or extension date) of such
Letter of Credit through but not including the expiry date (or new
expiry date) of such Letter of Credit and the denominator of which
shall be 365. In addition, if any Letter of Credit has a period longer
than one (1) year or if any Letter of Credit is renewed so that it
does not expire until after the first anniversary of its issuance, the
U.S. Borrowers shall pay to the Lender on each anniversary of the date
such Letter of Credit is issued until such Letter of Credit expires or
is terminated, an amount equal to (i) the Applicable Margin for
Letters of Credit multiplied by (ii) the face amount of such Letter of
-------------
Credit then outstanding, multiplied by (ii) a fraction, the numerator
-------------
of which shall be the number of days in the in the succeeding twelve
(12) month period prior to the stated expiration date of such Letter
of Credit, and the denominator of which shall be 365.
(b) Increased Capital. If either (i) the introduction of or any
-----------------
change in or in the interpretation of any law or regulation or (ii)
compliance by the Lender with any guideline or request from any
central bank or other Governmental Authority (whether or not having
the force of law) affects or would affect the amount of capital
required or expected to be maintained by it or any corporation
controlling it and the Lender determines, on the basis of reasonable
allocations, that the amount of such capital is increased by or is
based upon its issuance or maintenance of, or commitment to issue, the
Letters of Credit then, upon demand by the Lender, the U.S. Borrowers
shall immediately pay to Lender, from time to time as specified by the
Lender, additional amounts sufficient to compensate the Lender
therefor. A certificate as to such amounts submitted to the U.S.
Borrowers by the Lender shall, in the absence of manifest error, be
conclusive and binding for all purposes.
3.8 Indemnification; Exoneration.
----------------------------
(a) Indemnification. In addition to amounts payable as
---------------
elsewhere provided in this Article III, the U.S. Borrowers hereby
-----------
agree to protect, indemnify, pay and save the Lender harmless from and
against any and all claims, demands, liabilities, damages, losses,
costs, charges and expenses (including reasonable attorneys' fees)
which the Lender may incur or be subject to as a consequence, direct
or indirect, of (i) the issuance of any Letter of Credit other than as
a result of the Lender's recklessness or willful misconduct, as
determined by a court of competent jurisdiction or (ii) the failure of
the Lender to honor a drawing under a Letter of Credit as a result of
any act or omission, whether rightful or wrongful, of any present or
future de jure or de facto Governmental Authority (all such acts or
omissions herein called "Government Acts").
---------------
(b) Assumption of Risk by Borrowers. As between the U.S.
-------------------------------
Borrowers and the Lender, the U.S. Borrowers assume all risks of the
acts and omissions of, or misuse of the Letters of Credit by, the
respective beneficiaries
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<PAGE>
of the Letters of Credit. In furtherance and not in limitation of the
foregoing, subject to the provisions of the Letter of Credit
applications, the Lender shall not be responsible absent gross
negligence or willful misconduct of the Lender: (i) for the form,
validity, sufficiency, accuracy, genuineness or legal effect of any
document submitted by any party in connection with the application for
and issuance of the Letters of Credit, even if it should in fact prove
to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (ii) for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or
assign a Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, which may prove to be invalid
or ineffective for any reason; (iii) for failure of the beneficiary of
a Letter of Credit to comply duly with conditions required in order to
draw upon such Letter of Credit; (iv) for errors, omissions,
interruptions or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telex or otherwise, whether or not they be
in cipher; (v) for errors in interpretation of technical terms; (vi)
for any loss or delay in the transmission or otherwise of any document
required in order to make a drawing under any Letter of Credit or of
the proceeds thereof; (vii) for the misapplication by the beneficiary
of a Letter of Credit of the proceeds of any drawing under such Letter
of Credit; and (viii) for any consequences arising from causes beyond
the control of the Lender including, without limitation, any
Government Acts. None of the above shall affect, impair, or prevent
the vesting of any of the Lender's rights or powers under this Section
-------
3.8.
---
(c) Exoneration. In furtherance and extension and not in
-----------
limitation of the specific provisions hereinabove set forth, any
action taken or omitted by the Lender under or in connection with the
Letters of Credit or any related certificates, if taken or omitted in
Good Faith, shall not put the Lender under any resulting liability to
the U.S. Borrowers or relieve the U.S. Borrowers of any of their
obligations hereunder to any such Person.
ARTICLE IV.
PROPERTIES AND GUARANTY
4.1 Grant of Security Interest.
--------------------------
(a) To secure the prompt, complete, payment and performance of
all Obligations, each U.S. Borrower hereby grants to the Lender a
continuing security interest in, lien on, assignment of, and right of
set off against all of such U.S. Borrower's right, title and interest
in any of the following property, whether now owned or existing or
hereafter acquired or arising and regardless of where located:
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<PAGE>
(i) all Accounts, Contract Rights, letters of credit,
chattel paper, instruments, notes, documents, and documents of
title;
(ii) General Intangibles;
(iii) Inventory;
(iv) Equipment;
(v) all moneys, investment property, Securities and other
property of any kind of such U.S. Borrower (including, without
limitation, any sums at any time on deposit in any Collection
Account or the U.S. Borrower Concentration Account), provided,
that the security interest granted hereunder in the capital stock
of SLQ owned by Railroad Group shall be limited as provided in
the Amended and Restated Railroad Pledge Agreement;
(vi) all of such U.S. Borrower's deposit accounts,
credits, and balances with and other claims against the Lender or
any of its affiliates or any other financial institution with
which such U.S. Borrower maintains deposits (including, without
limitation, the U.S. Borrower Concentration Account and the
Collection Accounts);
(vii) all books, records and other property relating to or
referring to any of the foregoing, including, without limitation,
all books, records, ledger cards, data processing records,
computer software and other property and general intangibles at
any time evidencing or relating to any of the foregoing; and
(viii) all accessions to, substitutions for and
replacements, products and proceeds of any of the foregoing,
including, but not limited to, proceeds of any insurance
policies, claims against third parties, and condemnation or
requisition payments with respect to all or any of the foregoing.
All of the foregoing, together with all other property of the U.S.
Borrowers in which the Lender may at any time be granted a Lien to
secure the Obligations, is herein collectively referred to as the
"Collateral."
----------
(b) All of the Obligations shall be secured by all of the
Collateral.
4.2 Real Property Matters. As additional security for the
---------------------
Obligations for which it is liable hereunder, each U.S. Borrower agrees
from time to time hereafter to execute, deliver and/or cause to be recorded
such mortgages, deeds of trust, leasehold mortgages, leasehold deeds of
trust and other security documents reasonably requested
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<PAGE>
by the Lender (collectively, the "Real Property Security Documents")
--------------------------------
relating to all of such Borrower's right, title and interest in all of
those easements, rights-of-way, plots, pieces or parcels of land now or
hereafter owned, leased or otherwise acquired by such Borrower, the
improvements situated thereon and other rights relating thereto
(collectively, the "Real Property"). The Real Property Security Documents
-------------
shall be in form and substance reasonably satisfactory to the Lender and
grant valid and perfected Liens on the Real Property to the Lender.
4.3 Perfection and Protection of Security Interest.
----------------------------------------------
(a) The U.S. Borrowers shall, at their expense, perform all
steps reasonably requested by the Lender at any time to perfect,
maintain, protect, and enforce its Liens in the Collateral including,
without limitation: (i) executing and filing financing or continuation
statements, and amendments thereof, in form and substance satisfactory
to the Lender; (ii) delivering to the Lender the original certificates
of title for all motor vehicles of the U.S. Borrowers with the
Lender's security interest properly endorsed thereon; (iii) delivering
to the Lender the originals of all instruments, documents, and chattel
paper, and all other Collateral of which the Lender determines it
should have physical possession in order to perfect and protect the
Lender's security interest therein, duly endorsed or assigned to the
Lender without restriction; (iv) delivering to the Lender warehouse
receipts covering any portion of the Collateral located in warehouses
and for which warehouse receipts are issued; (v) delivering to the
Lender all letters of credit on which any U.S. Borrower is named
beneficiary; (vi) the filing and recordation with the U.S. Surface
Transportation Board of this Agreement (or a memorandum thereof) and
any other agreement under which any Person other than the Borrowers
shall use any Rolling Stock; and (vii) taking such other steps as are
deemed necessary by the Lender to maintain and protect its Liens. To
the extent permitted by applicable law, the Lender may file, without
any Borrower's signature, one or more financing statements disclosing
its Liens. Each U.S. Borrower agrees that a carbon, photographic,
photostatic, or other reproduction of this Agreement or of a financing
statement is sufficient as a financing statement.
(b) If any Collateral is at any time in the possession or
control of any warehouseman, bailee or any agent of any of the U.S.
Borrowers, then such Borrower shall notify the Lender thereof and
shall notify such Person of the Lender's security interest in such
Collateral and, upon the Lender's request, instruct such Person to
hold all such Collateral for the Lender's account subject to the
Lender's instructions. If at any time significant operations of any
of the U.S. Borrower's business is operated on or any significant
Collateral is located on any premises that are not owned by a U.S.
Borrower, then such Borrower shall use Good Faith efforts to obtain,
at the request of the Lender, attornment agreements in form and
substance satisfactory to the Lender with the owner or lessor of such
premises.
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<PAGE>
(c) From time to time, each U.S. Borrower shall, upon the
Lender's request, execute and deliver confirmatory written instruments
pledging to the Lender the Collateral, but any such Borrower's failure
to do so shall not affect or limit the Lender's security interest or
the Lender's other rights in and to the Collateral. So long as the
Working Capital Commitment is in effect or any of the Obligations
remain outstanding, the Lender's Liens shall continue in full force
and effect in all Collateral.
4.4 Location of Properties. Each Borrower represents and warrants to
----------------------
Lender that as of the date hereof: (a) SCHEDULE 4.4 attached hereto and
------------
incorporated herein by this reference is a correct and complete list of
such Borrower's chief executive office, head of office, the location of its
books and records, the locations of the Properties of such Borrower, and
the locations of all of its other places of business; and (b) SCHEDULE 4.4
------------
attached hereto correctly identifies any of such facilities and locations
that are not owned by such Borrower and to the best of such Borrower's
knowledge, sets forth the names of the owners and lessors or sublessors of
such facilities and locations. Such Borrower covenants and agrees that it
will not maintain its Properties at any location other than those listed
for it on SCHEDULE 4.4 attached hereto, and it will not otherwise change or
------------
add to any of such locations, unless it gives the Lender at least five (5)
days' prior written notice thereof and executes any and all financing
statements and other documents that the Lender requests in connection
therewith.
4.5 Title to, Liens on, and Sale and Use of Properties. Each
--------------------------------------------------
Borrower represents and warrants to the Lender and agrees with the Lender
that: (a) all the Properties of such Borrower are and will continue to be
owned by such Borrower (whether by fee, leasehold, easement, right-of-way
or otherwise) free and clear of all Liens whatsoever, except for Permitted
Liens; (b) the Lender's Liens on the Properties of such Borrower will not
be subject to any Lien which is prior in right of prepayment, other than
the obligations to pay taxes with respect to real property (which taxes
shall be paid when due); (c) such Borrower will use, store, and maintain
its Properties with all reasonable care and will use its Properties for
lawful purposes only; (d) upon the Lender's request, Accounts for any
material amounts (as determined by the Lender) due from any Governmental
Authority shall be duly assigned or hypothecated, as the case may be, to
the Lender in full compliance with the Federal Assignment of Claims Act (31
U.S.C.A. (S) 3727 et seq.) or similar statute, if applicable, and (e) such
Borrower will not, without the Lender's prior written approval, sell, or
dispose of or permit the sale or disposition of any of its Properties,
except for sales of Inventory in the ordinary course of business, and
Equipment as permitted by Section 4.9; provided, however, that Lender's
-----------
approval of the sale of the non-essential real estate Properties of such
Borrower shall not be unreasonably withheld or delayed, and provided that
the Net Cash Proceeds thereof are prepaid, if required under Section
-------
2.6(b). The inclusion of proceeds in the Properties of such Borrower
------
subject to the Liens of Lender shall not be deemed to constitute the
Lender's consent to any sale or other disposition of such Properties except
as expressly permitted herein.
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<PAGE>
4.6 Access and Examination; Appraisals. The Lender may at all
----------------------------------
reasonable times (and at any time when a Default or Event of Default
exists) have access to, examine, audit, make extracts from, copy and
inspect each Borrower's records, files, and books of account and the
Properties of such Borrower, and discuss such Borrower's affairs with such
Borrower's officers and management. Each Borrower will deliver to the
Lender any instrument necessary for the Lender to obtain records from any
service bureau maintaining records for such Borrower. Whenever a Default
or Event of Default exists, such Borrower shall, at its expense and upon
the Lender's request, provide the Lender with appraisals or updates thereof
of any or all of the Properties of such Borrower from an appraiser, and
prepared on a basis satisfactory to the Lender.
4.7 Intentionally Omitted.
---------------------
4.8 Collections and Concentration Account Arrangements. All
--------------------------------------------------
collections of Accounts of the Borrowers and other proceeds of Properties
of the Borrowers shall be deposited directly into or maintained in one of
the Collection Accounts described on Schedule 4.8 under arrangements
------------
established by the Borrowers and acceptable to the Lender. The Collection
Accounts shall be maintained on terms acceptable to the Lender, subject to
agreements in substantially the form attached hereto and made a part hereof
as EXHIBIT H ("Collection Account Agreements") among the applicable
--------- -----------------------------
Borrower, the Lender and the applicable financial institution at which such
account is maintained, to the effect that such financial institution shall
remit all amounts deposited in the applicable Collection Account, on a
daily basis or as the Lender may direct to either the U.S. Borrower
Concentration Account in the case of collections of the U.S. Borrowers, or
the SLQ Concentration Account in the case of collections of SLQ, as the
case may be. At all times during the term of this Agreement and
notwithstanding the termination of this Agreement, until all of the
Obligations shall have been fully paid and satisfied, each Borrower shall
continue to deposit, or cause to be deposited, directly into a Collection
Account or the U.S. Borrower Concentration Account or the SLQ Concentration
Account, as the case may be, all collections of Accounts and other proceeds
of Properties of such Borrower; provided, however that Finance may maintain
-------- -------
an operating account with First Union Bank of Delaware in Wilmington,
Delaware provided that the amount on deposit in such account at no time
--------
exceeds $15,000.
4.9 Equipment. Each Borrower represents and warrants to the Lender
---------
and agrees with the Lender that all of the Equipment owned or leased by
such Borrower is and will be used or held for use in such Borrower's
business (which includes the lease of such equipment to third parties from
time to time), and is and will be fit for such purposes. Each Borrower
will use the Equipment in a careful and proper manner and will comply with
and conform to all governmental laws, rules and regulations relating
thereto. Without limitation to the foregoing, each Borrower will (i) to
the extent applicable to such Borrower, cause all Equipment to be used in
compliance with all rules of AAR and FRA and (ii) will not permit any items
of Equipment to be used outside the continental United States or Canada.
Each Borrower shall keep and maintain its Equipment in good operating
condition and repair (ordinary wear and tear excepted) and
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<PAGE>
shall make all necessary replacements thereof so that the condition and
operating efficiency thereof will at all times be maintained and preserved,
reasonable wear and tear excepted. Each Borrower will cause such item of
Equipment which constitutes Rolling Stock to be maintained in conformance
with all rules and regulations of AAR and FRA, to the extent applicable
and, if mandated, modified so that it will qualify for unrestricted
interchange in the United States or Canada and remain suitable for its
intended use. Each Borrower shall promptly inform the Lender of any
material additions to or deletions from the Equipment. No Borrower shall
permit any Equipment to become a fixture to real property or an accession
to other personal property, unless the Lender has a valid and perfected
Lien in such real or personal property. Each Borrower will cause each item
of Rolling Stock owned by such Borrower to be kept marked and numbered with
the identifying mark and number set forth in SCHEDULE 4.9 hereto. No
------------
Borrower will place or permit any such item of Rolling Stock to be placed
in operation or exercise any control or dominion over the same until such
number shall have been so marked on both sides thereof and will replace or
cause to be replaced promptly any such name and words which may be removed,
defaced, obliterated or destroyed. No Borrower will change or permit to be
changed the identifying mark or number of any item of Rolling Stock unless
and until a statement of new mark and/or number or numbers to be
substituted therefor shall have been filed, recorded and deposited by such
Borrower in all public offices where this Agreement shall have been filed,
recorded and deposited. Except for occasional sales of Equipment, the
proceeds of which represent the fair market value therefor and do not
exceed $100,000 in the aggregate for all the Borrowers during any Fiscal
Year, the Borrowers shall not, without the Lender's prior written consent,
sell, lease as a lessor, or otherwise dispose of any of the Equipment.
4.10 Contract Rights. Each Borrower shall fully perform all of its
---------------
material obligations under each material contract to which it is a party
and shall enforce all of its rights and remedies thereunder as it deems
appropriate in its business judgment; provided, however, that such Borrower
-------- -------
shall not take any action or fail to take any action with respect to its
Contract Rights which, in such Borrower's business judgment, exercised in
Good Faith, would result in a waiver or other loss of any material right or
remedy of such Borrower thereunder. Without limiting the generality of the
foregoing, such Borrower shall take all action necessary or appropriate to
permit, and shall not take any action which would have any material adverse
effect upon, the full enforcement of all indemnification rights under its
Contract Rights. Except in the ordinary course of business and consistent
with past practices, no Borrower shall, without the Lender's prior written
consent, modify, amend, supplement, compromise, satisfy, release, or
discharge any of its Contract Rights, any collateral securing the same, any
Person liable directly or indirectly with respect thereto, or any agreement
relating to any of its Contract Rights or the collateral therefor. Each
Borrower shall notify the Lender in writing, promptly after such Borrower
becomes aware thereof, of any event or fact which could give rise to a
claim by it for indemnification under any of its Contract Rights, and shall
diligently pursue such right and report to the Lender on all further
developments with respect thereto. If an Event of Default exists and the
Borrowers have not cured or are unable to cure such Event of Default, then
the Lender may directly enforce any material right
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in any Contract Rights of any of the Borrowers in its own or such
Borrower's name and may enter into such settlements or other agreements
with respect thereto as the Lender determines. In any suit, proceeding or
action brought by the Lender under any Contract Rights for any sum owing
thereunder or to enforce any provision thereof, each Borrower shall
indemnify and hold the Lender harmless from and against all expense, loss
or damage suffered by reason of any defense, setoff, counterclaims,
recoupment, or reduction of liability whatsoever of the obligor thereunder
arising out of a breach by any Borrower of any obligation thereunder or
arising out of any other agreement, indebtedness or liability at any time
owing from any Borrower to or in favor of such obligor or its successors.
All such obligations of any Borrower shall be and remain enforceable only
against such Borrower and shall not be enforceable against the Lender.
Notwithstanding any provision hereof to the contrary, each of the Borrowers
shall at all times remain liable to observe and perform all of its duties
and obligations under its Contract Rights, and the Lender's exercise of any
of its rights with respect to the Properties of each Borrower shall not
release any Borrower from any of such duties and obligations. The Lender
shall not be obligated to perform or fulfill any of a Borrower's duties or
obligations under its Contract Rights or to make any payment thereunder, or
to make any inquiry as to the nature or sufficiency of any payment or
property received by it thereunder or the sufficiency of performance by any
party thereunder, or to present or file any claim, or to take any action to
collect or enforce any performance, any payment of any amounts, or any
delivery of any property. Notwithstanding any provision in this Section
-------
4.10 to the contrary, provided no Event of Default has occurred and is
----
continuing, the Lender shall not be permitted to waive or release on behalf
of any Borrower any rights that any Borrower may have (whether at law or in
equity) against any other party to its Contract Rights.
4.11 Right to Cure. The Lender may, in its discretion and at any time
-------------
after at least ten (10) days prior written notice, for any Borrower's
account and at such Borrower's expense, pay any amount not being disputed
by such Borrower in Good Faith or do any act required of such Borrower
hereunder or reasonably requested by the Lender to preserve, protect,
maintain or enforce the Obligations, the Properties of such Borrower or the
Lender's Liens therein, and which such Borrower fails to pay or do,
including, without limitation, payment of any judgment against such
Borrower, any insurance premium, any warehouse charge, any landlord's
claim, and any other Lien upon or with respect to the Properties of such
Borrower. All payments that the Lender makes under this Section 4.11 and
------------
all out-of-pocket costs and expenses that the Lender pays or incurs in
connection with any action taken by it hereunder shall be payable on
demand. Any payment made or other action taken by the Lender under this
Section 4.11 shall be without prejudice to any right to assert an Event of
------------
Default hereunder and to proceed thereafter as herein provided.
4.12 Power of Attorney. Each Borrower hereby appoints the Lender and
-----------------
the Lender's designees as such Borrower's attorney, with power to send
requests for verification of accounts to customers or account debtors and
after an Event of Default has occurred and as long as such Event of Default
is continuing: (a) to endorse such
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Borrower's name on any checks, notes, acceptances, money orders, or other
forms of payment or security that come into the Lender's possession; (b) to
sign such Borrower's name on any invoice, bill of lading, or other document
of title relating to any Properties of such Borrower, on drafts against
customers, on assignments of Accounts, on notices of assignment, financing
statements and other public records; (c) to notify the post office
authorities to change the address for delivery of such Borrower's mail to
an address designated by the Lender and to receive, open and dispose of all
mail addressed to such Borrower; and (d) to do all things necessary to
carry out this Agreement. Each Borrower ratifies and approves all acts of
such attorney. Neither the Lender nor the attorney will be liable for any
acts or omissions or for any error of judgment or mistake of fact or law
except to the extent of the Lender's gross negligence or willful
misconduct. This power, being coupled with an interest, is irrevocable
until this Agreement has been terminated and the Obligations have been
fully satisfied.
4.13 The Lender's Rights, Duties and Liabilities. Each Borrower
-------------------------------------------
assumes all responsibility and liability arising from or relating to the
use, sale or other disposition of the Properties of such Borrower except
for liability resulting from the Lender's or any of its respective
attorney's gross negligence or willful misconduct. The Lender and its
officers, directors, employees, and agents shall not be liable or
responsible in any way for the safekeeping of any of the Properties of such
Borrower except to the extent of the Lender's gross negligence or willful
misconduct with respect thereto, or for any loss or damage thereto, or for
any diminution in the value thereof, or for any act of default of any
warehouseman, carrier, forwarding agency or other person whomsoever, all of
which shall be at such Borrower's sole risk. The Obligations shall not be
affected by any failure of the Lender to take any steps to perfect its
Liens or to collect or realize upon the Properties of such Borrower, nor
shall loss of or damage to the Properties of such Borrower release any
Borrower from any of the Obligations. After the occurrence of and during
the continuance of a Default or Event of Default, the Lender may (but shall
not be required to), without notice to or consent from any of the
Borrowers, sue upon or otherwise collect, extend the time for payment of,
modify or amend the terms of, compromise or settle for cash, credit, or
otherwise upon any terms, grant other indulgences, extensions, renewals,
compositions, or releases, and take or omit to take any other action with
respect to the Properties of such Borrower, any security therefor, any
agreement relating thereto, any insurance applicable thereto, or any Person
liable directly or indirectly in connection with any of the foregoing,
without discharging or otherwise affecting the liability of such Borrower
for the Obligations or under this Agreement or any other agreement now or
hereafter existing between the Lender and such Borrower.
4.14 The Guaranty. Subject to Section 4.14(f) hereof, each of the
------------ ---------------
U.S.
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Borrowers hereby unconditionally guarantees the full and punctual payment
when due (whether at stated maturity, upon acceleration or otherwise) of
the Canadian Term Loan Repayment Obligations (the obligations of each of
the U.S. Borrowers under this Section 4.14 referred to in this Loan
------------
Agreement as the "Guaranty"). Upon failure by SLQ to pay punctually when
due any of the Canadian Term Loan Repayment Obligations, each of the U.S.
Borrowers agrees that it shall forthwith on demand pay the amount not so
paid at the place and in the manner specified in the relevant Loan
Document, as the case may be. This Guaranty is a guaranty of payment and
not of collection. The U.S. Borrowers shall be jointly and severally liable
for the Canadian Term Loan Repayment Obligations under this Guaranty.
(a) Guaranty Unconditional. Subject to Section 4.14(f) and
---------------------- ---------------
Section 12.13, hereof, the obligations of each of the U.S. Borrowers
-------------
hereunder shall be unconditional and absolute and, without limiting
the generality of the foregoing, shall not be released, discharged or
otherwise affected by any of the following, whether occurring before
or after receipt by the Lender of notice of termination of this
Guaranty:
(i) any extension, renewal, settlement, compromise, waiver
or release in respect of any obligation of SLQ under any of the
Loan Documents, by operation of law or otherwise or any
obligation of any other guarantor of any of the Canadian Term
Loan Repayment Obligations;
(ii) any modification or amendment of or supplement to any
other Loan Document;
(iii) any release, nonperfection or invalidity of any direct
or indirect security for any obligation of SLQ under any Loan
Document, or any obligations of any other guarantor of any of the
Canadian Term Loan Repayment Obligations;
(iv) any change in the corporate existence, structure or
ownership of SLQ or any other guarantor of any of the Canadian
Term Loan Repayment Obligations, or any insolvency, bankruptcy,
reorganization or other similar proceeding affecting SLQ, or any
other guarantor of the Canadian Term Loan Repayment Obligations,
or its assets or any resulting release or discharge of any
obligation of SLQ, or any other guarantor of any of the Canadian
Term Loan Repayment Obligations;
(v) the existence of any claim, setoff or other rights
which the U.S. Borrowers may have at any time against SLQ, any
other guarantor of any of the Canadian Term Loan Repayment
Obligations, the Lender or
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any other Person, whether in connection herewith or any unrelated
transactions;
(vi) any invalidity or unenforceability relating to or
against SLQ, or any other guarantor of any of the Canadian Term
Loan Repayment Obligations, for any reason related to the Loan
Documents or any provision of applicable law or regulation
purporting to prohibit the payment by SLQ, or any other guarantor
of the Canadian Term Loan Repayment Obligations, of the principal
of or interest or any other amount payable by SLQ under the Loan
Documents;
(vii) any failure or omission to enforce any right, power
or remedy with respect to the Canadian Term Loan Repayment
Obligations or any part thereof or any agreement relating
thereto, or any collateral securing the Canadian Term Loan
Repayment Obligations or any part thereof;
(viii) any failure or omission to enforce any right, power
or remedy with respect to the Canadian Term Loan Repayment
Obligations or any part thereof or any agreement relating
thereto, or any collateral securing the Canadian Term Loan
Repayment Obligations or any part thereof;
(ix) the application of payments received from any source
to the payment of indebtedness other than the Canadian Term Loan
Repayment Obligations, any part thereof or amounts which are not
covered by this Guaranty even though the Lender might lawfully
have elected to apply such payments to any part or all of the
Canadian Term Loan Repayment Obligations or to amounts which are
not covered by this Guaranty; or
(x) any other act or omission to act or delay of any kind
by SLQ, any other guarantor of the Canadian Term Loan Repayment
Obligations, the Lender, or any other person or any other
circumstance whatsoever which might, but for the provisions of
this paragraph, constitute a legal or equitable discharge of any
U.S. Borrower's obligations hereunder.
(b) Discharge Only Upon Payment In Full: Reinstatement In
-----------------------------------------------------
Certain Circumstances. The obligations of each of the U.S. Borrowers
---------------------
hereunder shall remain in full force and effect until all Canadian
Term Loan Repayment Obligations shall have been paid in full. If at
any time any payment of the principal of or interest or any other
amount payable by SLQ or any other party on account of the Canadian
Term Loan Repayment Obligations is rescinded or must be otherwise
restored or returned upon the insolvency, bankruptcy or reorganization
of SLQ or otherwise, the obligations of each of the U.S.
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Borrowers hereunder with respect to such payment shall be reinstated
as though such payment had been due but not made at such time.
(c) Waivers. Each of the U.S. Borrowers irrevocably waives
-------
notice of acceptance hereof, presentment, demand, protest, the benefit
of any statutes of limitations and, to the fullest extent permitted by
law, any notice not provided for herein, as well as any requirement
that at any time any action be taken by any person against SLQ, any
other guarantor of the Canadian Term Loan Repayment Obligations, any
other person or any collateral securing the Canadian Term Loan
Repayment Obligations.
(d) Subrogation. Each of the U.S. Borrowers hereby waives and
-----------
agrees not to assert any right, claim or cause of action, including,
without limitation, a claim for subrogation, reimbursement,
indemnification or otherwise, against SLQ arising out of or by reason
of this Guaranty or the obligations hereunder, including, without
limitation, the payment or securing or purchasing of any of the
Canadian Term Loan Repayment Obligations by any of the U.S. Borrowers
unless and until the Canadian Term Loan Repayment Obligations are paid
in full.
(e) Stay of Acceleration. If acceleration of the time for
--------------------
payment of any amount payable by SLQ under any of the Loan Documents
is stayed upon the insolvency, bankruptcy or reorganization of SLQ,
all such amounts otherwise subject to acceleration under the terms of
the Loan Documents shall nonetheless be payable by each of the U.S.
Borrowers hereunder forthwith on demand by the Lender.
(f) Limitation on Canadian Term Loan Repayment Obligations.
------------------------------------------------------
(i) It is the intention of each of the U.S. Borrowers and
the Lender that each U.S. Borrower's obligations under this
Guaranty shall be, but not in excess of, as of any date, the
greater of the following (such greater amount determined
hereunder being the relevant U.S. Borrower's "Maximum
Liability"): (i) the aggregate amount of all monies received by
the U.S. Borrower from SLQ during the term of this Agreement
(whether by loan, capital infusion or other means other than by
way of repayment of the SLQ Intercompany Obligations), or (ii)
the maximum amount (such amount being the U.S. Borrower's
"Alternative Limitation") not subject (but for the provisions of
this Section 4.14(f)) to avoidance under the Bankruptcy Code. To
---------------
that end, but as to the Alternative Limitation of each U.S.
Borrower, only to the extent such obligations would otherwise be
subject to avoidance under the Bankruptcy Code if such U.S.
Borrower is not deemed to have received valuable consideration,
fair value or reasonably equivalent value for its obligations
under this Guaranty, such U.S. Borrower's obligations hereunder
shall be reduced to that amount
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<PAGE>
which, after giving effect thereto, would not render such U.S.
Borrower insolvent, or leave such U.S. Borrower with an
unreasonably small capital to conduct its business, or cause such
U.S. Borrower to have incurred debts (or intended to have
incurred debts) beyond its ability to pay such debts as they
mature, at the time such obligations are deemed to have been
incurred under the Bankruptcy Code. As used herein, the terms
"insolvent" and "unreasonably small capital" shall likewise be
determined in accordance with the Bankruptcy Code. This Section
-------
4.14(f) with respect to the Alternative Limitation of such U.S.
-------
Borrower is intended solely to preserve the rights of the Lender
hereunder to the maximum extent not subject to avoidance under
the Bankruptcy Code, and none of the U.S. Borrowers nor any other
person or entity shall have any right or claim under this Section
-------
4.14(f) with respect to the Alternative Limitation, except to the
-------
extent necessary so that the obligations of the U.S. Borrowers
hereunder shall not be rendered voidable under the Bankruptcy
Code.
(ii) Each of the U.S. Borrowers agrees that the Canadian
Term Loan Repayment Obligations may at any time and from time to
time exceed the Maximum Liability of each U.S. Borrower, and may
exceed the aggregate Maximum Liability of the other U.S.
Borrowers, without impairing this Guaranty or affecting the
rights and remedies of the Lender hereunder. Nothing in this
Section 4.14(f) shall be construed to increase any U.S.
---------------
Borrower's obligations hereunder beyond its Maximum Liability.
(iii) Nothing in this Section 4.14(f) shall affect any U.S.
---------------
Borrower's joint and several liability for the entire amount of
the Canadian Term Loan Repayment Obligations (up to such U.S.
Borrower's Maximum Liability). Each of the U.S. Borrowers
covenants and agrees that its right to receive any contribution
under this Guaranty from any non-paying U.S. Borrower shall be
subordinate and junior in right of payment to all the Canadian
Term Loan Repayment Obligations.
(g) Right of Setoff. Without limiting the rights of the Lender
---------------
under applicable law, each U.S. Borrower authorizes the Lender to
apply or offset any sums standing to the credit of such U.S. Borrower
with any office, branch, subsidiary or affiliate of the Lender to the
payment when due of any amount owing by the U.S. Borrowers under this
Guaranty.
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<PAGE>
ARTICLE
BOOKS AND RECORDS;
FINANCIAL INFORMATION; NOTICES
5.1 Books and Records. Each Borrower shall maintain, at all times,
-----------------
correct and complete books, records and accounts in which complete, correct
and timely entries are made of its transactions in a manner necessary to
insure that the audited financial statements required to be delivered
pursuant to Section 5.2(a) shall be prepared in accordance with GAAP,
--------------
consistently applied and in accordance with the accounting rules of the AAR
as they relate to the settlement of interline accounts. Each Borrower
shall, by means of appropriate entries, reflect in such accounts and in all
financial statements proper liabilities and reserves for all taxes and
proper provision for depreciation and amortization of its Property and bad
debts, all in accordance with GAAP. Each Borrower shall maintain at all
times books and records pertaining to the Properties of such Borrower in
such detail, form and scope as the Lender shall reasonably require,
including, but not limited to, records of (a) all payments received and all
credits and extensions granted with respect to the Accounts; and (b) all
other dealings affecting the Properties of such Borrower.
5.2 Financial Information. Each Borrower shall promptly furnish to
---------------------
the Lender all such financial information as the Lender shall reasonably
request, and notify its auditors and accountants that the Lender is
authorized to obtain such information directly from them. Without limiting
the foregoing, the Borrowers will furnish to the Lender, in such detail as
the Lender shall request, the following:
(a) As soon as available, but in any event not later than ninety
(90) days after the close of each Fiscal Year, a copy of the unaudited
consolidating and the audited consolidated balance sheets, related
statements of income and operations, shareholders' equity (only for
consolidated statements) and cash flows for Emons and its consolidated
Subsidiaries for such Fiscal Year, and the accompanying notes thereto,
setting forth in each case in comparative form figures for the
previous Fiscal Year and the budgeted figures for the current Fiscal
Year, all in reasonable detail, fairly presenting the financial
position and the results of operations of Emons and its consolidated
Subsidiaries as at the date thereof and for the Fiscal Year then
ended, and prepared in accordance with GAAP. Such statements shall be
examined in accordance with generally accepted auditing standards by
and accompanied by a report thereon unqualified as to scope of
independent certified public accountants selected by Emons and
reasonably satisfactory to the Lender.
(b) As soon as available, but in any event not later than forty-
five (45) days after the close of each fiscal quarter other than the
fourth quarter of a Fiscal Year, a copy of the unaudited consolidating
and consolidated balance sheets of Emons and its consolidated
Subsidiaries as at the end of such quarter, and the related
consolidating and consolidated statements of income and operations,
and
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cash flows for Emons and its consolidated Subsidiaries for the
last month of such quarter and for the period from the
beginning of the Fiscal Year to the end of such quarter,
together with the accompanying notes thereto, all in
reasonable detail, setting forth in each case in comparative
form the budgeted figures for the current Fiscal Year, fairly
presenting the financial position and results of operation of
Emons and its consolidated Subsidiaries as at the date thereof
and for such periods, prepared in accordance with GAAP. Such
statements shall be certified to be correct by the chief
financial or accounting officer of each Borrower, subject to
normal year-end adjustments.
(c) As soon as available, but in any event not later
than thirty (30) days after the end of each month except the
last month of each fiscal quarter, consolidated and
consolidating unaudited balance sheets of Emons and its
consolidated Subsidiaries as at the end of such month, and
consolidated and consolidating unaudited statements of income
and expenses for Emons and its consolidated Subsidiaries for
such month and for the period from the beginning of the Fiscal
Year to the end of such month, all in reasonable detail,
setting forth in each case in comparative form figures the
budgeted figures for the current Fiscal Year, fairly
presenting the financial position and results of operation of
Emons and its consolidated Subsidiaries as at the date thereof
and for such periods, and prepared in accordance with GAAP.
Such statements shall be certified to be correct by the chief
financial or accounting officer of each Borrower, subject to
normal year-end adjustments.
(d) With each of the audited financial statements
delivered pursuant to Section 5.2(a), a certificate of the
--------------
independent certified public accountants that examined such
statement to the effect that they have reviewed and are
familiar with this Agreement and that, in examining such
financial statements, they did not become aware of any fact or
condition which then constituted a Default or Event of
Default, except for those, if any, described in reasonable
detail in such certificate.
(e) With each of the audited financial statements
delivered pursuant to 5.2(a) and the unaudited financial
statements delivered pursuant to Section 5.2(b), a certificate
--------------
of the chief executive or chief financial officer of each
Borrower (i) setting forth in reasonable detail the
calculations required to establish that such Borrower was in
compliance with its covenants set forth in Sections 7.21,
-------------
Section 7.23, Section 7.24, Section 7.25 and Section 7.28
------------ ------------ ------------ ------------
during the period covered in such financial statements and as
at the end thereof, and (ii) stating that, except as explained
in reasonable detail in such certificate, (A) all of the
representations and warranties of such Borrower contained in
this Agreement and the other Loan Documents are correct and
complete as at the date of such certificate as if made at such
time, (B) such Borrower is, at the date of such certificate,
in compliance with all of its covenants and agreements in this
Agreement and the other Loan Documents, and (C) no Default or
Event of Default then exists or existed during
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the period covered by such financial statements. If such
certificate discloses that a representation or warranty is not
correct or complete, or that a covenant has not been complied
with, or that a Default or Event of Default existed or exists,
such certificate shall set forth what action such Borrower has
taken or proposes to take with respect thereto.
(f) No sooner than sixty (60) days prior to the
beginning of each Fiscal Year and no later than thirty (30)
days after the commencement of such Fiscal Year, consolidated
and consolidating projected balance sheets, statements of
income and expense, and statements of cash flow for each
Borrower as at the end of and for each month of such Fiscal
Year.
(g) Within forty-five (45) days after the end of each
fiscal quarter, a report of the Capital Expenditures of each
Borrower for the Fiscal Year to date ending with such quarter.
(h) Promptly after the filing thereof, copies of any
all proxy statements, financial statements, materials or
reports (including, without limitation, Forms 10K, 10Q and 8K)
which any Borrower files with the SEC or makes available to
its stockholders.
(i) Within thirty (30) days after the end of each
month, a Borrowing Base Certificate and an accounts receivable
aging report as of the end of such month.
(j) Such additional information as the Lender may from
time to time reasonably request regarding the financial and
business affairs of any Borrower or any Subsidiary, including,
without limitation, projections of future operations on both a
consolidated and consolidating basis.
5.3 Notices to the Lender. Each of the Borrowers shall
---------------------
notify the Lender in writing of the following matters at the following
times:
(a) Immediately after becoming aware thereof, any
Default or Event of Default.
(b) Immediately after becoming aware thereof, the
assertion by a holder or holders of Debt in an outstanding
principal amount in excess of $100,000 in the aggregate at any
one time that a default exists with respect thereto or that
any Borrower is not in compliance with the terms thereof, or
the threat or commencement by such holder of any enforcement
action because of such asserted default or non-compliance.
(c) Immediately after becoming aware thereof, any
material adverse change in any Borrower's Property, business,
operations, or condition (financial
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or otherwise) or any material and continuing decrease in the
Borrowers' Accounts.
(d) Immediately after becoming aware thereof, any
pending or threatened action, suit, proceeding, or
counterclaim by any Person, or any pending or threatened
investigation by a Governmental Authority, which may
materially and adversely affect the Properties of such
Borrower, the repayment of the Obligations, the Lender's
rights under the Loan Documents, or any Borrower's Property,
business, operations, or condition (financial or otherwise);
provided, however, the Borrowers shall not be required to
-------- -------
notify the Lender of actions or proceedings filed against
Industries involving damages from the ingestion of
diethylstilbestrol ("DES"), but will deliver a status report
with each statement delivered pursuant to Section 5.2(a) and
Section 5.2(b) setting forth the number of pending DES claims
at such time and the availability of insurance coverage for
such claims.
(e) Immediately after becoming aware thereof, any
pending or threatened strike, work stoppage, material unfair
labor practice claim, or other material labor dispute
affecting any Borrower or any Subsidiary.
(f) Immediately after becoming aware thereof, any
violation of any law, statute, regulation, or ordinance of
Governmental Authority applicable to any Borrower, any
Subsidiary, or their respective properties which may
materially and adversely affect the Properties of such
Borrower, the repayment of the Obligations, the Lender's
rights under the Loan Documents, or any Borrower's Property,
business, operations, or condition (financial or otherwise).
(g) Immediately after becoming aware thereof, any
violation by any Borrower or any Subsidiary of any
Environmental Law or, immediately upon its receipt thereof,
any notice that any Borrower or any Subsidiary receives
asserting that such Borrower or any Subsidiary is or may be
(i) liable to any Person as a result of the Release or
threatened Release of any Contaminant into the environment;
(ii) subject to investigation by a Governmental Authority
evaluating whether any Remedial Action is needed to respond to
the Release or threatened Release of any Contaminant into the
environment; (iii) subject to any judicial or administrative
proceeding alleging a violation of any Environmental Law; (iv)
subject to any new or proposed changes to any health or safety
law or any Environmental Law that could have a material
adverse effect on the operations of such Borrower; (v) in
violation of any Environmental Law or health and safety law;
or (vi) that its compliance with any health or safety law or
Environmental Law is being investigated.
(h) Any change in any Borrower's name, state of
incorporation, or form of organization, at least ten (10) days
prior thereto.
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(i) Any Termination Event with respect to a Plan
within fifteen (15) days after any Borrower knows or has
reason to know thereof, and any other Reportable Event, within
forty (40) days after any Borrower knows or has reason to know
thereof, in each case accompanied by any materials required to
be filed with the PBGC with respect thereto; immediately after
the receipt by any Borrower or any ERISA Affiliate of any
notice concerning the imposition of any withdrawal liability
under Title IV of ERISA with respect to a Benefit Plan or a
Multiemployer Plan; within ten (10) days after any Borrower or
any ERISA Affiliate fails to make a required installment or
any other required payment under Section 412 of the Code on or
before the due date for such installment or payment, a
notification of such failure; the establishment of any Plan
not existing at the Closing Date, or any increase in the
benefits of any existing Plan or the commencement of
contributions by any Borrower to any Plan to which such
Borrower was not contributing at the Closing Date, within
fifty-five (55) days after the end of the fiscal quarter in
which such event occurs; within fifteen (15) days after any
Borrower or an ERISA Affiliate knows or has reason to know (i)
a Multiemployer Plan has been terminated, (ii) the
administration or plan sponsor of a Multiemployer Plan intends
to terminate a Multiemployer Plan or (iii) the PBGC has
instituted or will institute proceedings under Section 4042 of
ERISA to terminate a Multiemployer Plan; within forty-five
(45) days after any Borrower or an ERISA Affiliate knows or
has reason to know that a prohibited transaction (defined in
Section 406 of ERISA and Section 4975 of the Code) has
occurred; immediately after filing with the IRS a funding
waiver request for any Plan, in each case accompanied by a
copy of such request and, subsequent thereto, copies of all
communications received by any Borrower or an ERISA Affiliate
with respect to such request; or immediately after becoming
aware thereof, any other event or condition regarding a Plan
or any Borrower's or an ERISA Affiliate's compliance with
ERISA which may materially and adversely affect any Borrower's
Property, business, operation, or condition (financial or
otherwise).
(j) Any derailment or accident involving any of the
Borrowers' Property resulting in property damage or liability
in excess of $100,000.
Each notice given under this Section shall describe the subject matter
thereof in reasonable detail, and shall set forth the action that the
Borrowers have taken or propose to take with respect thereto.
ARTICLE VI.
GENERAL WARRANTIES AND REPRESENTATIONS
Each Borrower warrants and represents to Lender that all of such
Borrower's representations and warranties contained in this Agreement and the
other Loan Documents are true at the time of the Borrowers' execution of this
Agreement, and shall survive the execution, delivery and acceptance hereof by
the parties hereto and the closing of the transactions described
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herein or related hereto. Each request for a Loan or a Letter of Credit
hereunder shall constitute a representation and warranty by each Borrower, with
the same effect as a certificate delivered by such Borrower in writing, that all
of the representations and warranties made herein (other than representations
and warranties which expressly speak as of a certain date), are true and correct
in all respects. Each Borrower, only with respect to such Borrower, warrants and
represents to Lender that:
6.1 Authorization, Validity, and Enforceability of this
---------------------------------------------------
Agreement and the Loan Documents. Such Borrower has the corporate power
--------------------------------
and authority to execute, deliver and perform this Agreement and the
other Loan Documents, to incur the Obligations, and to grant to the
Lender, Liens upon, and security interests in, the Properties of such
Borrower. Such Borrower has taken all necessary corporate action
(including, without limitation, obtaining approval of its stockholders,
if necessary) to authorize its execution, delivery, and performance of
this Agreement and the other Loan Documents. No consent, approval, or
authorization of, or declaration or filing with, any Governmental
Authority, and no consent of any other Person, is required in
connection with such Borrower's execution, delivery, and performance of
this Agreement and the other Loan Documents, except for those already
duly obtained. Each of this Agreement and the other Loan Documents has
been duly executed and delivered by such Borrower, and constitutes the
legal, valid and binding obligation of such Borrower, enforceable
against it in accordance with its terms. Such Borrower's execution,
delivery, and performance of this Agreement and the other Loan
Documents do not and will not conflict with, or constitute a violation
or breach of, or constitute a default under, or result in the creation
or imposition of any Lien upon the Property of such Borrower or any of
its Subsidiaries by reason of the terms of (a) any contract, mortgage,
Lien, lease, agreement, indenture, or instrument to which such Borrower
or any of its Subsidiaries is a party or which is binding upon it or
its Property, (b) any judgment, law, statute, rule or governmental
regulation applicable to such Borrower or any of its Subsidiaries, or
(c) the Certificate of Incorporation or By-laws of such Borrower or any
of its Subsidiaries.
6.2 Validity and Priority of Security Interest. To the best
------------------------------------------
of such Borrower's knowledge, the provisions of this Agreement and the
other Loan Documents create legal and valid Liens on all the Properties
of such Borrower in the Lender's favor, and upon filing of the
financing statements, mortgages and deeds of hypothec referenced on the
closing list with the appropriate filing offices and the delivery of
the "Pledged Shares" to the Lender as contemplated by the Pledge
Agreements, such Liens constitute perfected and continuing Liens on all
the Properties of such Borrower, having priority over all other Liens
on the Properties of such Borrower except for Permitted Liens, and
enforceable against such Borrower and all third parties; provided
however, that the Lender's Lien on the Capital Stock of SLQ which is
owned by Railroad Group, shall be limited to extent set forth in the
Amended and Restated Railroad Pledge Agreement.
6.3 Organization and Qualification. As of the date hereof,
------------------------------
except as set forth on Schedule 6.5, such Borrower (a) is duly
incorporated and organized and validly existing in good standing under
the laws of the jurisdiction of its incorporation, (b) is
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qualified to do business as a foreign corporation and is in good
standing in all jurisdictions where the failure of such Borrower to
qualify to do business would have a material adverse effect on such
Borrower's ability to collect its Accounts or otherwise conduct its
business or own or lease Property in such jurisdiction, and (c) has all
requisite power and authority to conduct its business and to own its
Property.
6.4 Corporate Name; Prior Transactions. Such Borrower has
----------------------------------
not during the past five (5) years prior to the Closing Date, been
known by or used any other corporate or fictitious name, or been a
party to any merger or consolidation, or acquired all or substantially
all of the assets of any Person, or acquired any of its property
outside of the ordinary course of business, except as set forth on
SCHEDULE 6.4 attached hereto and incorporated herein by this reference.
------------
6.5 Subsidiaries and Affiliates. SCHEDULE 6.5 attached
--------------------------- ------------
hereto and incorporated herein by this reference is as of the date
hereof, a correct and complete list of the name and relationship to
such Borrower of each and all of such Borrower's Subsidiaries and other
Affiliates.
6.6 Financial Statements. Emons, on behalf of the
--------------------
Borrowers, has delivered to the Lender audited balance sheets and the
related statements of income and operations, shareholders equity and
cash flow for the Fiscal Year ended June 30, 1998 and the unaudited
balance sheets and the related statements of income and operations,
shareholders equity and cash flow for the Fiscal Year to date period
ended September 30, 1998 for Emons and its consolidated Subsidiaries.
All such financial statements have been prepared in accordance with
GAAP and present accurately and fairly in all material respects each of
such entities' financial position as at the dates thereof and its
results of operations for the periods then ended. Since June 30, 1998,
there has been no event or circumstance which is likely to have a
material adverse affect on the financial condition or operations of the
businesses of such entities.
6.7 Capitalization. As of the date hereof, to the best of
--------------
such Borrower's knowledge, based solely on a review of copies of
reports on Schedule 13D which have been delivered to Emons, no
shareholder of Emons owns more than five percent (5%) of the issued and
outstanding shares of stock in Emons except as set forth on SCHEDULE
--------
6.7 attached hereto and incorporated herein by this reference. As of
---
the date hereof, each of the Borrower's authorized capital stock and
the number of shares validly issued and outstanding are set forth on
SCHEDULE 6.7 attached hereto and such issued shares are all fully paid
------------
and non-assessable, and all of the outstanding stock of Industries,
MPA, Finance, Logistics, MIT and Railroad Group are owned beneficially
and of record by Emons and all of the outstanding capital stock of YKR,
SLR, Penn Eastern and SLQ is owned beneficially and of record by
Railroad Group.
6.8 Debt. Except for Loans under the A Term Loan Facility
----
and the Working Capital Facility, and after giving effect to the making
of the B Term Loan and the Canadian Term Loan to be made on the Closing
Date, such Borrower has no Debt,
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except (a) the Obligations, (b) Debt set forth on SCHEDULE 6.8 attached
------------
hereto, (c) trade payables and other contractual obligations arising in
the ordinary course of business and (d) Debt permitted under Section
7.13.
6.9 Real Property; Leases. As of the date hereof, SCHEDULE
--------------------- --------
6.9 attached hereto and incorporated herein by this reference sets
---
forth a correct and complete list of all real property owned by such
Borrower (whether by fee, leasehold easement, right-of-way or
otherwise), all leases and subleases of real or personal property by
such Borrower as lessee or sublessee, and all leases and subleases of
real or personal property by such Borrower as lessor or sublessor, in
each case where such property is necessary or useful in any material
respect in the conduct of such Borrower's business. To the best of such
Borrower's knowledge, each of such leases and subleases is valid and
enforceable in accordance with its terms and is in full force and
effect, and no default by any party to any such lease or sublease which
is material to the business or operations of such Borrower exists.
6.10 Proprietary Rights. As of the date hereof, SCHEDULE
------------------ --------
6.10 attached hereto and incorporated herein by this reference sets
----
forth a correct and complete list of all of the Proprietary Rights.
None of such Proprietary Rights is subject to any licensing agreement
or similar arrangement except as set forth on SCHEDULE 6.10 attached
-------------
hereto. To the best of such Borrower's knowledge, none of the
Proprietary Rights infringes on or conflicts with any other Person's
property, and no other Person's property infringes on or conflicts with
the Proprietary Rights.
6.11 Trade Names and Terms of Sale. As of the date hereof,
-----------------------------
all trade names or styles under which such Borrower will create
Accounts, or to which instruments in payment of Accounts may be made
payable, are listed on SCHEDULE 6.11 attached hereto and incorporated
-------------
herein by this reference.
6.12 Litigation. Except as set forth on SCHEDULE 6.12
---------- -------------
attached hereto and incorporated herein by this reference, there is no
pending or (to the best of such Borrower's knowledge) threatened,
action, suit, proceeding, or counterclaim by any Person, or
investigation by any Governmental Authority, or any basis for any of
the foregoing, which may materially and adversely affect any material
portion of the Properties of such Borrower, the repayment of the
Obligations, the Lender's rights under the Loan Documents, or the
Borrowers' Property, business, operations, or condition (financial or
otherwise), taken as a whole.
6.13 Restrictive Agreements. Such Borrower is not a party to
----------------------
any contract or agreement, and is not subject to any charter or other
corporate restriction, which affects its ability to execute, deliver,
and perform its obligations under the Loan Documents and repay the
Obligations or which materially and adversely affects or, insofar as
such Borrower can reasonably foresee, could materially and adversely
affect, such Borrower's Property, business, operations, or condition
(financial or otherwise), or would in any respect materially and
adversely affect the Properties of such Borrower, the repayment
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of the Obligations, the Lender's rights under the Loan Documents, or
such Borrower's Property, business, operations, or condition (financial
or otherwise), taken as a whole.
6.14 Labor Disputes. As of the date hereof, except as set
--------------
forth on SCHEDULE 6.14, there is no collective bargaining agreement or
--------------
other labor contract covering employees of such Borrower or any of its
Subsidiaries; no such collective bargaining agreement or other labor
contract is scheduled to expire during the term of this Agreement and,
to the best of such Borrower's knowledge, no union or other labor
organization is seeking to organize, or to be recognized as, a
collective bargaining unit of employees of such Borrower or any of its
Subsidiaries or for any similar purpose. There is no pending or (to the
best of such Borrower's knowledge) threatened, strike, work stoppage,
material unfair labor practice claim, or other material labor dispute
against or affecting such Borrower, or any of its Subsidiaries or their
respective employees.
6.15 Environmental, Health and Safety Laws. Except as
-------------------------------------
disclosed on SCHEDULE 6.15 attached hereto and incorporated herein by
-------------
this reference, (a) the operations of such Borrower comply in all
material respects with all applicable Environmental Laws and health and
safety requirements of law; (b) such Borrower has obtained all
environmental, health and safety permits necessary for its operation,
and all such permits are in good standing and such Borrower is in
compliance with all terms and conditions of such permits; (c) neither
such Borrower nor any of its present Property or operations, or to the
best of such Borrower's knowledge, its past Property or operations, are
subject to any order from or agreement with any Governmental Authority
or private party respecting (i) any Environmental Laws or any health or
safety requirements of law, (ii) any Remedial Action or (iii)
liabilities and costs arising from the Release or threatened Release of
a Contaminant into the environment; (d) none of the operations of such
Borrower is subject to any judicial or administrative proceeding
alleging a violation of any Environmental Laws or any health or safety
requirement of law; (e) none of the present or, to the best of the
Borrower's knowledge, past operations of such Borrower's predecessor in
interest is the subject of any investigation by any Governmental
Authority evaluating whether any Remedial Action is needed to respond
to a Release or threatened Release of a Contaminant into the
environment; (f) such Borrower has not filed any notice under any
requirement of law indicating past or present treatment, storage or
disposal of a hazardous waste, as that term is defined under 40 CFR
Part 261 or any state equivalent; (g) such Borrower has not filed any
notice under any applicable requirement of law reporting a Release of a
Contaminant into the environment; (h) to the best of such Borrower's
knowledge, there is not now, nor has there ever been on or in such
Borrower's Property (i) any generation, treatment, recycling, storage
or disposal of any hazardous waste, as that term is defined under 40
CFR Part 281 or any federal, State, or provincial equivalent, (ii) any
underground storage tanks or surface impoundments, (iii) any asbestos-
containing material, (iv) any polychlorinated biphenyls (PCB) used in
hydraulic oils, electrical transformers or other equipment; (i) such
Borrower has not entered into any negotiations or agreements with any
Person (including, without limitation, the prior owner of such
Borrower's Property) relating to any
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Remedial Action or environmentally related claim; (j) such Borrower has
not received any notice or claim to the effect that it is or may be
liable to any Person as a result of the Release or threatened Release
of a Contaminant into the environment; (k) such Borrower has no
material contingent liability in connection with any Release or
threatened Release of any Contaminants into the environment; (l) to the
best of such Borrower's knowledge, no Environmental Lien has attached
to any Property of such Borrower; (m) to the best of such Borrower's
knowledge, such Property does not contain any asbestos-containing
material; and (n) none of the products that such Borrower manufactures,
distributes or sells, or, to the best of its knowledge, has ever had
manufactured, distributed or sold, contains asbestos-containing
material.
6.16 No Violation of Law. Such Borrower is not in violation of
-------------------
any law, statute, regulation, ordinance, judgment, order, or decree
applicable to it which violation would in any respect materially and
adversely affect the Properties of such Borrower, the repayment of the
Obligations, the Lender's rights under the Loan Documents, or such
Borrower's Property, business, operations, or condition (financial or
otherwise), taken as a whole.
6.17 No Default. Such Borrower is not in default with respect
----------
to any note, indenture, loan agreement, mortgage, lease, deed, or other
agreement to which such Borrower is a party or by which it is bound,
which default would materially and adversely affect the Properties of
such Borrower, the repayment of the Obligations, any Lender's rights
under the Loan Documents, or such Borrower's Property, business,
operations, or condition (financial or otherwise), taken as a whole.
6.18 ERISA.
-----
(a) Neither such Borrower nor any of its ERISA Affiliates
has or contributes to any Plan other than those listed on
SCHEDULE 6.18 attached hereto and incorporated herein by this
-------------
reference.
(b) Except as provided on SCHEDULE 6.18 attached hereto,
-------------
none of such Borrower's Benefit Plans has been terminated or
partially terminated or is insolvent or in reorganization, nor
have any proceedings been instituted to terminate or reorganize
any Plan.
(c) Neither such Borrower nor any of its ERISA Affiliates
has withdrawn from any Multiemployer Plan in a complete or
partial withdrawal, nor has a condition occurred which if
continued would result in a complete or partial withdrawal.
(d) Neither such Borrower nor any of its ERISA Affiliates
has incurred any withdrawal liability, including contingent
withdrawal liability, to any Benefit Plan pursuant to Title IV of
ERISA as of December 31, 1997.
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<PAGE>
(e) Neither such Borrower nor any of its ERISA Affiliate
has any liability to the PBGC other than for required insurance
premiums which have been paid when due.
(f) No Reportable Event has occurred with respect to a
Benefit Plan.
(g) No Benefit Plan has an "accumulated funding deficiency"
(whether or not waived) as defined in Section 302 of ERISA or in
Section 412 of the Code.
(h) Except as provided on SCHEDULE 6.18 attached hereto, to
-------------
the best of such Borrower's knowledge each Plan is in substantial
compliance with ERISA, and neither any Borrower nor any of its
ERISA Affiliates has received any notice asserting that a Plan is
not in compliance with ERISA.
(i) Except as provided on SCHEDULE 6.18 attached hereto,
-------------
each Plan which is intended to be a qualified Plan has been
determined by the IRS to be qualified under Section 401(a) of the
Code as currently in effect and neither such Borrower nor any of
its ERISA Affiliates knows or has reason to know why each such
plan should not continue to be so qualified, and each trust
related to such Plan has been determined to be exempt from
federal income tax under Section 501(a) of the Code.
(j) Except as provided on SCHEDULE 6.18 attached hereto,
-------------
neither such Borrower nor any of its ERISA Affiliates maintains
or contributes to any employer welfare benefit plan within the
meaning of Section 3(1) of ERISA which provides lifetime benefits
to retirees.
(k) Neither such Borrower nor any of its ERISA Affiliates
has failed to make a required installment under subsection (m) of
Section 412 of the Code or any other payment required under
Section 412 of the Code on or before the due date for such
installment or other payment.
(l) Neither such Borrower nor any of its ERISA Affiliates
is required to provide security to a Benefit Plan under Section
401(a)(29) of the Code due to a Plan amendment that results in an
increase in current liability for the plan year.
(m) To the best of Borrower's knowledge, neither such
Borrower, nor any of its ERISA Affiliates, nor any other "party-
in-interest" or "disqualified person" has engaged in a
"prohibited transaction," as such terms are defined in Section
4975 of the Code and Section 406 of ERISA, in connection with any
Plan or any other employee benefit plan to which the Borrower or
any of its ERISA Affiliates is, or within the immediately
preceding six (6) years was, an "employer" as defined in Section
3(5) of ERISA or has taken or failed to take any action which
would constitute or result in a Termination Event.
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<PAGE>
(n) To the best of Borrower's knowledge, neither such
Borrower nor any of its ERISA Affiliates has failed to comply
with the health care continuation coverage requirements of
Section 4980B of the Code in respect of employees and former
employees of such Borrower or such ERISA Affiliate and their
dependant and beneficiaries which alone or in the aggregate would
subject such Borrower or such ERISA Affiliate to any material
liability.
(o) To the best knowledge of such Borrower or any of its
ERISA Affiliates after due inquiry, the consummation of the
transactions contemplated by the Acquisition shall not result in
any liability to any Borrower or any ERISA Affiliates under any
employment-related agreement, contract or arrangement, whether
written or oral, including without limitation, any severance pay
agreement. The liability of any Borrower or any of its ERISA
Affiliates to make payments to any employee on account of
termination of employment under individual employment or
severance agreements does not in the aggregate give rise to any
material liability to the Borrower or such ERISA Affiliate.
6.19 Taxes. Except as set forth on SCHEDULE 6.19, such Borrower
----- -------------
has filed all tax returns and other reports which it was required by
law to file on or prior to the date hereof and has paid all taxes
assessments, fees, and other governmental charges, and penalties and
interest, if any, against it or its Property, income, or franchise,
that are due and payable except where the failure to do so could not,
individually or in the aggregate, have a material adverse effect on the
business, operations, properties, assets or condition (financial or
otherwise) of such Borrower.
6.20 Investment Act. Such Borrower is not an "investment company"
--------------
nor an "affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended (15 U.S.C. ss. 80(a)(l), et
seq.). The making of Loans under the A Term Loan Facility, the B Term
Loan Facility, the Canadian Term Loan Facility or the Working Capital
Facility, and other financial accommodations hereunder by the Lender,
the application of the proceeds and repayment thereof by the Borrowers
and the consummation of the other transactions contemplated by this
Agreement and the Loan Documents do not violate any provisions of such
Act or any rule, regulation or order issued by the Securities and
Exchange Commission thereunder.
6.21 Margin Securities. Such Borrower does not own any "margin
-----------------
security" (as that term is defined in Regulations U and X) and the
proceeds of Loans under the A Term Loan Facility, the B Term Loan
Facility, the Canadian Term Loan Facility and the Working Capital
Facility, and the other financial accommodations made pursuant to this
Agreement will be used only for the purposes contemplated hereunder.
None of the transactions contemplated by this Agreement, or the Loan
Documents will violate Regulations U or X. None of the Loans under the
A Term Loan Facility, the B Term Loan Facility, the Canadian Term Loan
Facility or the Working Capital Facility or the other financial
accommodations hereunder have been or will be used, directly or
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indirectly, for the purpose of purchasing or carrying any margin
security, for the purpose of reducing or retiring any Debt or other
Person's indebtedness which was originally incurred to purchase or
carry any margin security, or for any other purpose which might cause
any such loan or other financial accommodation to be considered a
"purpose credit" within the meaning of Regulation U or X. Such Borrower
will neither take nor permit any agent acting on its behalf to take any
action which might cause any transaction, obligation or right created
by this Agreement, or any document or instrument delivered pursuant
hereto, to violate any regulation of the Federal Reserve Board.
6.22 Benefit. Each of the Borrowers will benefit, directly or
-------
indirectly, from the Credit Facilities as a result of the synergistic
operations of their respective businesses.
6.23 Industries Corporate Separateness. Since August 1, 1992, and
---------------------------------
to the best knowledge of such Borrower prior to that date, there have
been no transfers of property or property rights (including money) by
Industries to, or to Industries by, any of the other Borrowers without
adequate consideration and the observance of "corporate formalities"
other than the distribution by Industries of dividends to Emons in
accordance with applicable corporate law and, after giving effect
thereto, Industries retained sufficient capital for its operations and
to pay known liabilities. "Corporate formalities" as used herein, with
respect to any transaction, includes the adoption of appropriate
authorizing resolutions, evidencing such transaction by customary
documentation, executed and delivered by duly authorized officers, and
compliance with the terms and conditions set forth in such
documentation. Industries has not and does not commingle its assets,
liabilities or business functions with those of the other Borrowers.
Industries has at all times maintained separate accounting and
corporate records and has had regular board of director meetings and
shareholder meetings as contemplated by its Articles of Incorporation
and By-laws. Industries now holds (and has held at all times) itself
out as a separate corporation and not as a division of any other
Borrower, nor has Industries represented or conducted its affairs at
any time in a manner which would cause other Persons to believe that
any other Borrower is part of or a division of Industries. Industries
maintains bank accounts separate and apart from the other Borrowers and
is billed for and pays its own expenses or pays its pro rata share of
common expenses on a fair and equitable allocation basis. To the extent
Industries is included in the consolidated financial statements of
Emons and the other Borrowers, the existence and ownership of
Industries has been adequately disclosed in footnotes.
6.24 Disclosure. Neither this Agreement nor any document or
----------
statement furnished to the Lender by or on behalf of any Borrower or in
contemplation of this Agreement or in connection herewith contains any
untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements contained herein or therein
not materially misleading.
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ARTICLE VII.
AFFIRMATIVE AND NEGATIVE COVENANTS
Each U.S. Borrower covenants that, so long as any of the Obligations remain
outstanding or the Working Capital Commitment is in effect, and SLQ covenants
that so long as any of the obligations under the Canadian Term Loan Repayment
Obligations remain outstanding unless the Lender shall otherwise consent in
writing:
7.1 Taxes and Other Obligations. Such Borrower shall, and shall cause
---------------------------
each of its Subsidiaries to (a) file when due all tax returns and other
reports which it is required to file (taking into account any allowed
extensions), (b) pay, or provide for the payment, when due, of all taxes,
fees, assessments and other governmental charges against it or upon its
Property, income and franchises, make all required withholding and other
tax deposits, and establish adequate reserves for the payment of all such
items, and provide to the Lender, upon request, satisfactory evidence of
its timely compliance with the foregoing and (c) pay when due all claims of
materialmen, mechanics, carriers, warehousemen, landlords and other like
Persons, and all other indebtedness owed by it and perform and discharge in
a timely manner all other obligations undertaken by it; provided, however,
-------- -------
that such Borrower and its Subsidiaries need not pay any tax, fee,
assessment, governmental charge, or Debt, or discharge any other
obligation, that any of them is contesting in Good Faith by appropriate
proceedings diligently pursued, and for which adequate reserves are
maintained, so long as no Lien, other than a Permitted Lien, results from
such non-payment.
7.2 Corporate Existence and Good Standing. Such Borrower shall, and
-------------------------------------
shall cause each of its Subsidiaries to, maintain its corporate existence
and its qualification and good standing in all jurisdictions necessary to
conduct its business and own its Property, and shall obtain and maintain
all licenses, permits, franchises and governmental authorizations necessary
to conduct its business and own its Property.
7.3 Compliance with Law and Agreements. Such Borrower shall, and
----------------------------------
shall cause each of its Subsidiaries to, comply with the terms and
provisions of each judgment, law, statute, rule, and governmental
regulation applicable to it and each contract, mortgage, lien, lease,
indenture, order, instrument, agreement, or document to which it is a party
or by which it is bound, the failure to comply with which, whether
considered individually or when aggregated with all other failures, is
likely to have a material adverse effect on the ability of such Borrower to
perform its obligations under this Agreement, or on the business,
operations, properties or condition (financial or otherwise) of such
Borrower, taken as a whole; provided, however, that such Borrower shall
-------- -------
have the right to contest the imposition of such laws, rules, regulations,
court orders, decrees and governmental agency orders if such contest is
made in Good Faith and diligently pursued by proper proceedings, adequate
reserves with respect thereto have been established in accordance with
GAAP, and such contest could not reasonably be expected to have a material
adverse affect on the ability of such Borrower to perform its
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obligations under this Agreement, or the business, operations, properties
or condition (financial or otherwise) of such Borrower, taken as a whole.
7.4 Maintenance of Property. Such Borrower shall, and shall cause
-----------------------
each of its Subsidiaries to, maintain all of its Property necessary and
useful in its business in good operating condition and repair, ordinary
wear and tear excepted.
7.5 Insurance.
---------
(a) Such Borrower shall maintain, and shall cause each of its
Subsidiaries to maintain, with financially sound and reputable
insurers, insurance against loss or damage by fire with extended
coverage; public liability and third party property damage; and such
other hazards or of such other types as is customary for Persons
engaged in the same or similar business, as the Lender shall
reasonably specify, in amounts, and under policies reasonably
acceptable to the Lender.
(b) Such Borrower shall cause the Lender to be named in each
such policy as secured party or mortgagee and lender's loss payee or
additional insured, as appropriate, in a manner acceptable to the
Lender. Each policy of insurance shall contain a clause or endorsement
requiring the insurer to give not less than thirty (30) days' prior
written notice to the Lender in the event of cancellation of the
policy for any reason whatsoever and a clause or endorsement stating
that the interest of the Lender shall not be impaired or invalidated
by any act or neglect of such Borrower, any of its Subsidiaries, or
the owner of any premises for purposes more hazardous than are
permitted by such policy. All premiums for such insurance shall be
paid by such Borrower or its Subsidiaries, or by others for their
account, when due, and certificates of insurance and, if requested,
photocopies of the policies shall be delivered to the Lender. If such
Borrower fails to procure (or cause to be procured) such insurance or
to pay (or cause to be paid) the premiums therefor when due, the
Lender may (but shall not be required to) do so and such amounts shall
be due and payable on demand.
(c) Such Borrower shall promptly notify the Lender of any
material loss, damage, or destruction to the Properties of such
Borrower or arising from its use, whether or not covered by insurance.
In the absence of any Default or Events of Default, such Borrower
shall have the right to determine, whether and to what extent such
proceeds shall be used for repair or replacement. If, however, any
Default or Event of Default shall be continuing, the Lender may
determine, in its sole discretion, whether the proceeds shall be used
for repair or replacement. If neither an Event of Default nor a
Default exists, such Borrower or its Subsidiary, as the case may be,
may negotiate a settlement regarding such proceeds with the applicable
insurance company and the Lender shall forward such proceeds to the
applicable Borrower. If, however, an Event of Default or a Default
exists, the Lender shall collect the insurance proceeds directly and
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neither such Borrower nor its Subsidiary, as the case may be, shall
enter into any settlement agreement with the applicable insurance
company without the prior written consent of Lender, which consent
shall not be unreasonably withheld. Any insurance proceeds paid to any
Borrower not used to replace the property which suffered the casualty
giving rise to the payment of such insurance proceeds within 180 days
of receipt of such proceeds by such Borrower, shall be required to be
paid to the Lender as a Mandatory Prepayment in accordance with
Section 2.6(b).
-------------
(d) If an Event of Default shall exist, Lender may, and if a
decision to not rebuild or replace is made, the Lender shall, apply
the proceeds of insurance to the payment of the Obligations of which
such Borrower is liable as set forth in Section 2.10(e).
--------------
7.6 Condemnation. Such Borrower shall, immediately upon learning of
------------
the institution of any proceeding for the condemnation or other taking of
any of its Property or the Property of any of its Subsidiaries, which has a
material and adverse effect on the operations of such Borrower, notify the
Lender of the pendency of such proceeding. Any condemnation proceeds paid
to any Borrower which have not been used to replace the property which was
condemned within 180 days of receipt of such proceeds by such Borrower,
shall be paid to the Lender and treated as a Mandatory Prepayment in
accordance with Section 2.6(b). If an Event of Default shall exist at the
-------------
time such Borrower receives any condemnation proceeds, Lender may require
that all such condemnation proceeds be applied to the payment of the
Obligations as set forth in Section 2.10(e).
---------------
7.7 Environmental, Health and Safety Laws. Such Borrower shall, and
-------------------------------------
shall cause each of its Subsidiaries to, conduct its business in compliance
in all material respects with all health and safety laws and Environmental
Laws applicable to it, including, without limitation, those relating to the
generation, handling, use, storage, and disposal of hazardous and toxic
wastes and substances. Such Borrower shall, and shall cause each of its
Subsidiaries to, take prompt and appropriate action to respond to any non-
compliance with health and safety laws and Environmental Laws and shall
regularly report to the Lenders on such response. Without limiting the
generality of the foregoing, whenever such Borrower gives notice to the
Lender pursuant to Section 5.3(g), such Borrower shall, at the Lender's
-------------
request and such Borrower's expense (a) cause an independent environmental
engineer acceptable to the Lender to conduct such tests of the site where
the noncompliance or alleged non-compliance with Environmental Laws has
occurred and prepare and deliver to the Lender a report setting forth the
results of such tests, a proposed plan for responding to any environmental
problems described therein, and an estimate of the costs thereof, and (b)
provide to the Lender a supplemental report of such engineer whenever the
scope of the environmental problems, or the response thereto or the
estimated costs thereof, shall change.
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<PAGE>
7.8 ERISA.
-----
(a) For each Plan adopted by such Borrower or any of its ERISA
Affiliate, such Borrower or such ERISA Affiliate shall (i) use its
best efforts to seek and receive a determination letter from the IRS
that such Plan is qualified under Section 401(a) of the Code (unless
such Plan is a master or prototype plan), and (ii) from and after the
adoption of any such Plan, use its best efforts to cause such Plan to
be qualified under Section 401(a) of the Code and to be administered
in all material respects in accordance with the requirements of ERISA
and Section 401(a) of the Code, and (iii) not take any action which
would cause such Plan not to be qualified under Section 401(a) of the
Code or not to be administered in all material respects in accordance
with the requirements of ERISA and Section 401(a) of the Code.
(b) Such Borrower shall not, and shall not permit any of its
ERISA Affiliates, to:
(i) Engage in any transaction for which an exemption is
not available or has not been previously obtained from the DOL in
connection with which such Borrower or any ERISA Affiliate could
be subject to either a civil penalty assessed pursuant to Section
502(i) of ERISA or tax imposed by Section 4975 of the Code;
(ii) Permit to exist any accumulated funding deficiency
(whether or not waived), as defined in Section 302 of ERISA and
Section 412 of the Code;
(iii) Fail to pay timely required contributions or annual
installments due with respect to any waived funding deficiency to
any Benefit Plan;
(iv) Fail to make any payments to any Multiemployer Plan
which such Borrower or any ERISA Affiliate may be required to
make under any agreement relating to such Multiemployer Plan, or
any law pertaining thereto;
(v) Terminate or permit an ERISA Affiliate to terminate a
Benefit Plan or withdraw or partially withdraw from, or permit an
ERISA Affiliate to withdraw or partially withdraw from, any
Multiemployer Plan and fail to pay any liability of such Borrower
or an ERISA Affiliate under Title IV of ERISA;
(vi) Fail to pay any required installment under subsection
(m) of Section 412 of the Code or any other payment required
under
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<PAGE>
Section 412 of the Code on or before the due date for such
installment or other payment; or
(vii) Amend a Benefit Plan resulting in an increase in
current liability for the plan year such that such Borrower
or an ERISA Affiliate is required to provide security to
such Benefit Plan under Section 401(a)(29) of the Code.
7.9 Mergers, Consolidations or Sales. Neither such Borrower
--------------------------------
nor any of its Subsidiaries shall enter into any transaction of merger,
reorganization, or consolidation, or transfer, sell, assign, lease, or
otherwise dispose of all or any material part of its Property, or wind
up, liquidate or dissolve, or agree to do any of the foregoing, except
for sales of Equipment as otherwise permitted hereunder.
7.10 Restricted Junior Payments; Capital Change. Neither such
------------------------------------------
Borrower nor any of its Subsidiaries shall (a) directly or indirectly
declare or make, or incur any liability to make, any Restricted Junior
Payment, except dividends to a Borrower by a Subsidiary wholly owned by
such Borrower or by one or more other Subsidiaries that are wholly
owned by such Borrower or (b) make any change in its capital structure
which could adversely affect the repayment of the Obligations.
7.11 Transactions Affecting Properties or Obligations. Neither
------------------------------------------------
such Borrower nor any of its Subsidiaries shall enter into any
transaction which materially and adversely affects the Properties of
such Borrower or such Borrower's ability to repay the Obligations.
7.12 Guaranties. Neither such Borrower nor any of its
----------
Subsidiaries shall make, issue, or become liable on any Guaranty,
except (a) Guaranties in favor of the Lender, (b) Guaranties by one
Borrower of the obligations of another Borrower provided the incurrence
of such obligations are otherwise permitted under this Agreement, and
(c) a guaranty of the Canadian National Note given by Emons.
7.13 Debt. Neither such Borrower nor any of its Subsidiaries
----
shall incur or maintain any Debt, other than: (a) the Obligations; (b)
trade payables and contractual obligations to suppliers, customers and
others incurred in the ordinary course of business; (c) Debt incurred
to finance the purchase of Equipment constituting Capital Expenditures
permitted by Section 7.21, so long as (i) the aggregate principal
------------
amount of such Debt incurred in any Fiscal Year (regardless of when the
same becomes due and payable) shall be included in the determination of
Capital Expenditures for such Fiscal Year for purposes of Section 7.21,
------------
(ii) the rate at which interest accrues on such Debt does not exceed
the market rate of interest for similar transactions at such time, and
(iii) such Debt would not, after giving effect to such Debt on a pro
forma basis, cause any Default or Event of Default; (d) with the
Lender's prior written consent, not to be unreasonably withheld, no
interest or low interest Debt incurred to any Governmental Authority to
rehabilitate or construct railroad structures and related facilities
and (e) Debt permitted
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<PAGE>
under Section 7.15 and other Debt existing on the Closing Date and
------------
reflected on SCHEDULE 6.8 hereof.
------------
7.14 Prepayment. Neither such Borrower nor any of its
----------
Subsidiaries shall voluntarily prepay any Funded Indebtedness, except
the Obligations in accordance with the terms hereof.
7.15 Transactions with Affiliates. Except as set forth below,
----------------------------
neither such Borrower nor any of its respective Subsidiaries shall
sell, transfer, distribute, or pay any money or its Property,
including, but not limited to, any fees or expenses of any nature
(including, but not limited to, any fees or expenses for management
services), to any Affiliate of any Borrower, or lend or advance money
or its Property to any Affiliate of any Borrower, or invest in (by
capital contribution or otherwise) or purchase or repurchase any stock
or indebtedness, or any of its Property, of any Affiliate of any
Borrower, or become liable on any Guaranty of the indebtedness,
dividends, or other obligations of any Affiliate of any Borrower except
(a) actual expenses incurred and approved in advance in writing by the
Lender; (b) reimbursement of actual and reasonable out-of-pocket
expenses incurred by employees or directors of such Borrower in the
ordinary course of such Borrower's business; (c) Guaranties in favor of
the Lender; (d) Guaranties with respect to any wholly owned Subsidiary
of any Borrower or its Subsidiaries; (e) any transactions, consistent
with past practices and intercompany indebtedness, among Emons,
Finance, MPA, Logistics, MIT, Railroad Group, SLR, YKR, Penn Eastern,
SLQ or any other entity which becomes a subsidiary of a Borrower,
provided that the capital stock of such entity is pledged to the Lender
as collateral security for the performance of the Obligations and such
subsidiary becomes a borrower under this Agreement and provided further
that any loans or advances or other credit support provided by any U.S.
Borrower to SLQ must be evidenced by documentation satisfactory to the
Lender and secured by all Property of SLQ and all rights of a U.S.
Borrower with respect thereto shall have been assigned to the Lender as
part of the Collateral for all of the Obligations, (f) any payments due
from any Borrower to another Borrower in accordance with the terms of
any tax sharing agreement by and among the Borrowers as in effect on
the date hereof and (g) using the proceeds of the B Term Loan, up to a
$2,000,000 capital contribution by Railroad Group to SLQ.
7.16 Business Conducted. Neither such Borrower nor any of its
------------------
Subsidiaries shall engage, directly or indirectly, in any line of
business other than the businesses in which such Borrower or such
Subsidiary is engaged on the Closing Date.
7.17 Liens. Neither such Borrower nor any of its Subsidiaries
-----
shall create, incur, assume, or permit to exist any Lien on any
Property now owned or hereafter acquired by any of them, except
Permitted Liens.
7.18 Sale and Leaseback Transactions. Except for the sale and
-------------------------------
leaseback with respect to the locomotives listed on SCHEDULE 7.18
-------------
hereto which sale and leaseback shall be made on terms reasonably
satisfactory to Lender, neither such Borrower nor any of
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<PAGE>
its Subsidiaries shall directly or indirectly, enter into any
arrangement with any Person providing for such Borrower or such
Subsidiary to lease or rent Property that such Borrower or such
Subsidiary has or will sell or otherwise transfer to such Person
without the prior written consent of the Lender.
7.19 New Subsidiaries. Neither such Borrowers nor any of its
----------------
Subsidiaries shall, directly or indirectly, organize or acquire any
Subsidiary unless such Subsidiary becomes a Borrower under this
Agreement and such Borrower shall have pledged the stock of such
Subsidiary as collateral to secure the Obligations.
7.20 Restricted Investments. Neither such Borrower nor any of
----------------------
its Subsidiaries shall make any Restricted Investment other than (a)
acquisitions of assets and operations of similar businesses provided
the aggregate purchase price for such acquisitions does not exceed
$2,500,000 in the aggregate from the date of the Original Agreement
through the term of this Agreement, provided that after giving effect
to such acquisitions no Default or Event of Default exists, (b)
intercompany transactions permitted under Section 7.15(e) and Section
--------------- -------
7.15(g) and (c) capital contributions by Emons to Finance from time to
-------
time. Amounts expended by such Borrower in connection with the
Sherbrooke Acquisition shall not be deemed Restricted Investments for
the purpose of measuring the Borrowers' compliance with this Section
-------
7.20.
----
7.21 Capital Expenditures. Neither such Borrower nor any of its
--------------------
Subsidiaries shall make or incur any Capital Expenditure if, after
giving effect thereto, the aggregate amount of all Capital Expenditures
by all Borrowers and their Subsidiaries on a consolidated basis would
exceed $2,100,000 during each Fiscal Year ending June 30, 1999 and June
30, 2000, $2,200,000 for the Fiscal Year ending June 30, 2001,
$2,300,000 for the Fiscal Year ending June 30, 2002, $2,400,000 for the
Fiscal Year ending June 30, 2003 and $2,500,000 for the Fiscal Year
ending June 30, 2004 and Fiscal Years thereafter; in each case, net of
any Capital Expenditures funded with grants provided by a Governmental
Authority or Debt permitted under Section 7.13(d). Amounts constituting
---------------
Restricted Investments and counting towards the limitation contained in
Section 7.20 shall not be counted as Capital Expenditures for the
------------
purposes of the limitations set forth in this Section 7.21.
------------
7.22 Change of Deposit Accounts. Neither such Borrower nor any
--------------------------
of its Subsidiaries shall establish any deposit account, other than
those deposit accounts described on SCHEDULE 4.8 attached hereto and
------------
incorporated herein by this reference, with any bank or other financial
institution other than Lender, unless such Borrower shall have (i)
notified the Lender thereof in writing at least ten (10) days prior
thereto and (ii) delivered a Collection Account Agreement or similar
agreement to the Lender covering such account; provided, however, that
-------- -------
Finance may maintain an operating account with Corestates Bank in
Wilmington, Delaware provided that the amount on deposit at any time
does not exceed $15,000.
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<PAGE>
7.23 Minimum Fixed Charge Coverage Ratio. Emons and its
-----------------------------------
Subsidiaries on a combined and consolidated basis shall at all times
maintain a Fixed Charge Coverage Ratio, as determined as of the last
day of each fiscal quarter during the applicable Fiscal Year set forth
below for the twelve month period ending on such day, of at least the
ratio set forth opposite the applicable period below:
Fiscal Year Minimum Ratio
----------- -------------
1999 1.05 to 1.00
2000 1.15 to 1.00
2001 and thereafter 1.25 to 1.00
7.24 Maximum Debt to Cash Flow Ratio. Emons and its
-------------------------------
Subsidiaries on a combined and consolidated basis shall at all times
maintain a Debt to Cash Flow Ratio of at least the ratio set out below
opposite the determination date set forth below:
Determination Date Maximum Ratio
------------------ -------------
June 30, 1999 4.00 to 1.00
September 30, 1999 4.00 to 1.00
December 31, 1999 3.50 to 1.00
March 31, 1999 3.50 to 1.00
June 30, 1999 3.50 to 1.00
Fiscal Year 2000 3.25 to 1.00
Fiscal Year 2001 3.00 to 1.00
Fiscal Year 2002 2.25 to 1.00
Thereafter 2.00 to 1.00
7.25 Minimum Tangible Net Worth. Emons and its Subsidiaries on a
--------------------------
combined and consolidated basis shall at all times maintain Tangible
Net Worth as determined as of the last day of each calendar quarter, of
at least $5,113,033 plus 50% of positive net income of the Borrowers
accrued after the closing date of the Original Agreement until such
date of determination.
7.26 Interest Expense Hedging Arrangements. (i) The U.S.
-------------------------------------
Borrowers shall maintain the hedging arrangement currently in place
with respect to the A Term Loan in accordance with its terms and (ii)
with respect to the Canadian Term Loan, by January 31, 1999, SLQ shall
enter into and cause to be maintained an Interest Rate Contract,
including an interest rate cap or similar interest expense hedging
arrangement with a financial institution having assets of at least One
Hundred Million Dollars ($100,000,000) and otherwise acceptable to the
Lender with respect to a notional principal amount of at least one half
of the Available Canadian Term Loan Amount at such time which
effectively caps the CDOR Rate applicable to the Canadian Term Loan
Amount at a rate not greater than 8% per annum, and promptly provide
the Lender with written notification that such arrangement is in place,
including the details of such arrangement
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<PAGE>
and the name of the counter-parties. Upon Lender's request, Borrower
shall promptly provide Lender with a true copy of such Interest Rate
Contract or the Interest Rate Contract currently in place with respect
to the A Term Loan. Nothing in this Section 7.26 shall require the
------------
Borrowers to purchase an Interest Rate Contract from the Lender or one
of its Affiliates or require the Lender or any of its Affiliates to
provide such an Interest Rate Contract.
7.27 Corporate Governance. Each of Industries and Finance and
--------------------
SLQ shall:
(a) Maintain its own corporate books, records and accounts
separate and apart from the corporate books, records and accounts
of any other Borrower;
(b) Act solely in its corporate name and solely through its
board of directors and its duly authorized officers and agents;
(c) Refrain from holding out to creditors that it is a
division of any other Borrower;
(d) Refrain from using the letterhead of any other Borrower
in the conduct of its business;
(e) Prepare its own budgets and financial statements,
separate and apart from any other Borrower provided, however,
-------- -------
that if any such financial statements are prepared on a
consolidated basis, such financial statements shall clearly
disclose that none of the assets of a Borrower will be available
to satisfy or pay the obligations of any other Borrower except as
expressly provided by contract;
(f) Maintain its own bank accounts, separate and distinct
from the bank accounts of any other Borrower or any Affiliate,
and refrain from commingling its funds and/or other property with
the funds and/or other property of any other Borrower or any
Affiliate;
(g) Cause all corporate formalities to be observed,
including, without limitation, (i) the preparation of appropriate
corporate resolutions authorizing each material transaction in
which it engages, if such resolutions are appropriate, (ii) the
holding of separate and distinct Board of Directors meetings from
meetings of the Board of Directors of any other Borrower and the
meetings of the board of directors of any Affiliate, and (iii)
the holding of separate and distinct annual shareholders'
meetings from the annual shareholders' meetings of any other
Borrower and the annual shareholders' meetings of any Affiliate;
(h) Be at all times adequately capitalized so as to be able
to conduct its business; and
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<PAGE>
(i) Refrain from paying its expenses using funds or other
property of any other Borrower or any Affiliate other than its
pro rata share of common expenses allocated on a fair and
equitable basis.
7.28 Operating Leases. Neither such Borrower nor any Subsidiary
----------------
shall incur or continue obligations for operating leases which, when
aggregated with the obligations for operating leases of all of the
Borrowers and their Subsidiaries, exceeds at any time outstanding
$10,000,000 calculated as at the end of each Fiscal Year on a present
value basis for the term of such obligations remaining in excess of one
year from the date of determination, discounted at a rate of 8.5%. The
calculation of operating lease obligations shall be net of obligations
under operating leases which are subject to subleases where the
applicable sublessee has a credit profile satisfactory to Lender and
assumes all obligations of the applicable Borrower under such operating
leases.
ARTICLE VIII.
CONDITIONS OF LENDING AND ISSUING LETTERS OF CREDIT
8.1 Conditions Precedent to the Effectiveness of this
--------------------------------------------------
Agreement. This Agreement shall become effective, and the Lender shall
---------
be obligated (i) to maintain the A Term Loan and to maintain the Loans
made and Letters of Credit issued under the Working Capital Facility
under the conditions set forth herein and (ii) to make the initial
Loans under the B Term Loan Facility and the Canadian Term Loan
Facility under the conditions set forth herein; on the date on which
the following conditions have been satisfied in a manner satisfactory
to the Lender (such date to be the "Effective Date" of this Agreement):
(a) Each of the Borrowers shall have performed and complied
with all covenants, agreements and conditions contained herein
which are required to be performed or complied with by such
Borrower before or on the Funding Date for the B Term Loan, the
Canadian Term Loan and any Working Capital Loans requested by
such Borrower or the issuance of any Letters of Credit requested
by such Borrower (including, without limitation, the execution
and delivery of the Substitute A Term Note, the B Term Note, the
Canadian Term Note and the Substitute Working Capital Note).
(b) The Lender shall have received a certificate dated the
Closing Date and signed by the president or a vice president and
the chief financial officer or treasurer of each Borrower
certifying that the conditions specified in this Section 8.1 have
-----------
been fulfilled.
(c) The Borrower shall have caused all items on the List of
Closing Documents attached hereto and made a part hereof as
EXHIBIT I which are not elsewhere identified in this Article
--------- -------
VIII, to be delivered to the Lender, all such
----
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<PAGE>
items to be in form and substance satisfactory to the Lender, and
to be executed by all parties thereto when the nature of such
items so requires.
(d) All proceedings taken in connection with the execution
of this Agreement, the Notes, all other Loan Documents and all
documents and papers relating thereto shall be satisfactory to
the Lender. The Lender shall have received copies of such
documents and papers as the Lender may reasonably request in
connection therewith, all in form and substance satisfactory to
the Lender.
(e) The Borrowers shall have paid to the Lender the Closing
Fee as well as all costs and expenses incurred as of the Closing
Date which the Borrowers are obligated to pay pursuant to the
terms of Section 12.7 hereof.
------------
The acceptance by any Borrower of any Loan made on the Closing Date
shall be deemed to be a representation and warranty made by such
Borrower to the effect that all of the conditions to the making of such
Loan set forth in this Section 8.1 have been satisfied, with the same
-----------
effect as delivery to the Lender of a certificate signed by the
president and chief financial officer of such Borrower, dated the
Closing Date, to such effect.
8.2 Conditions Precedent to Each Loan and the Issuance of Each
----------------------------------------------------------
Letter of Credit. The obligation of the Lender to make each Loan
----------------
including the initial Loans under the B Term Loan Facility and the
Canadian Term Loan Facility on the Closing Date or to make any Working
Capital Loans or issue any Letter of Credit, shall be subject to the
satisfaction of further conditions precedent that on the date of any
such extension of credit:
(a) With respect to a request for Working Capital Loans,
the Borrowers shall be in compliance with Section 5.2(i), and the
Lender shall have received a Borrowing Base Certificate and a
duly executed Notice of Borrowing, or telecopy or telex notice in
lieu thereof, as and when required pursuant to Section 2.5(a);
--------------
and
(b) the following statements shall be true, and the
acceptance by any Borrower of any extension of credit shall be
deemed to be a statement to the effect set forth in clauses (i)
-----------
and (ii), with the same effect as the delivery to the Lender of a
----
certificate signed by the president and chief financial officer
of such Borrower, dated the date of such extension of credit,
stating that:
(i) The representations and warranties contained in
this Agreement and the other Loan Documents are correct in
all material respects on and as of the date of such
extension of credit as though made on and as of such date,
subject only to such exceptions as are not material and
adverse to Lender, except to the extent that the Lender has
been
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<PAGE>
notified by a Borrower that any representation or warranty
is not current or correct and has explicitly waived such
representation or warranty; and
(ii) No event has occurred and is continuing, or would
result from such extension of credit, which constitutes a
Default or an Event of Default; and
(c) the Lender shall have received such other approvals,
opinions or documents as it may reasonably request in Good Faith.
ARTICLE IX.
DEFAULT; REMEDIES
9.1 Events of Default. It shall constitute an event of default
-----------------
("Event of Default") if any one or more of the following shall occur
----------------
for any reason:
(a) any failure to pay the principal of or interest or
premium on any of the Obligations (including, without limitation,
the Reimbursement Obligations) when due, whether upon demand or
otherwise;
(b) any representation or warranty made by any Borrower in
this Agreement, any of the other Loan Documents, any financial
statement, or any certificate furnished by such Borrower or any
Subsidiary at any time to the Lender shall prove to be untrue in
any material respect as of the date on which made;
(c) any failure by any of the Borrowers to comply with any
of the covenants set forth in Article VII of this Agreement
-----------
except for the covenants set forth in Sections 7.1, 7.2, 7.3,
------------ --- ---
7.4, 7.7 and 7.8;
---- --- ---
(d) any failure by any Borrower to comply with any of the
other covenants and agreements contained in this Agreement
(including, without limitation, Sections 7.1, 7.2, 7.3, 7.4, 7.7
------------ --- --- --- ---
and 7.8), the other Loan Documents, or any other agreement
---
entered into at any time to which any Borrower or any Subsidiary
and the Lender are party, for more than twenty (20) days after
notice of such failure by the Lender to such Borrower; provided,
--------
however, that no such grace period shall apply, and an Event of
-------
Default shall exist promptly upon such failure to comply, if such
failure to comply may not, in the Lender's reasonable
determination, be cured by such Borrower during such grace
period; or if any such agreement, instrument or document shall
terminate (other than in accordance with its terms or the terms
hereof or with the written consent of the Lender) or become void
or unenforceable without the written consent of the Lender;
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<PAGE>
(e) default shall occur with respect to any Debt for
borrowed money or any indebtedness for borrowed money of any
Subsidiary (other than the Obligations) in an outstanding
principal amount in excess of $100,000 or under any agreement
or instrument under or pursuant to which any such Debt or
indebtedness may have been issued, created, assumed, or
guaranteed by any Borrower or any Subsidiary, and such default
shall continue for more than the period of grace, if any,
therein specified, if the effect thereof (with or without the
giving of notice or further lapse of time or both) is to
accelerate, or to permit the holders of any such Debt or
indebtedness to accelerate, the maturity of any such Debt; or
any such Debt or indebtedness shall be declared due and
payable or be required to be prepaid (other than by a
regularly scheduled required prepayment) prior to the stated
maturity thereof;
(f) any Borrower or any Subsidiary shall (i) file a
voluntary petition in bankruptcy or file a voluntary petition
or an answer or otherwise commence any action or proceeding
seeking reorganization, arrangement or readjustment of its
debts or for any other relief under the federal Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency
act or law, state or federal, now or hereafter existing, or
consent to, approve of, or acquiesce in, any such petition,
action or proceeding; (ii) apply for or acquiesce in the
appointment of a receiver, assignee, liquidator, sequestrator,
custodian, trustee or similar officer for it or for all or any
part of its Property; (iii) make an assignment for the benefit
of creditors; (iv) take any corporate action in furtherance of
any of the foregoing or (v) be unable generally to pay its
debts as they become due;
(g) an involuntary petition shall be filed or an
action or proceeding otherwise commenced seeking
reorganization, arrangement or readjustment of any Borrower's
or any Subsidiary's debts or for any other relief under the
federal Bankruptcy Code, as amended, or under any other
bankruptcy or insolvency act or law, provincial, state or
federal, now or hereafter existing and such petition, action
or proceeding is not dismissed within sixty (60) days
thereafter;
(h) a receiver, assignee, liquidator, sequestrator,
custodian, trustee or similar officer for any Borrower or any
Subsidiary or for all or any part of their Property shall be
appointed; or a warrant of attachment, execution or similar
process shall be issued against any part of the Property of
any Borrower or any Subsidiary;
(i) any Borrower or any Subsidiary shall file a
certificate of dissolution under applicable state law or shall
be liquidated, dissolved or wound-up or shall commence or have
commenced against it any action or proceeding for dissolution,
winding-up or liquidation, or shall take any corporate action
in furtherance thereof;
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<PAGE>
(j) all or any material part of the Property of any
Borrower or any Subsidiary shall be nationalized, expropriated
or condemned, seized or otherwise appropriated, or custody or
control of such Property or of any Borrower or any Subsidiary
shall be assumed by any Governmental Authority or any court of
competent jurisdiction at the instance of any Governmental
Authority, except where contested in Good Faith by proper
proceedings diligently pursued where a stay of enforcement is
in effect;
(k) any guaranty of, subordination to, or security
for, the Obligations shall be terminated, revoked or declared
void or invalid;
(l) one or more final judgments for the payment of
money aggregating in excess of $100,000 shall be rendered
against any Borrower which is not discharged in full or stayed
within thirty (30) days from the date of entry thereof unless
such judgments are (i) covered by such Borrower's liability
insurance as confirmed in writing by the insurance company
carrying such insurance, or (ii) the subject of an obligation
of any Person (other than a Borrower or any Affiliate of any
Borrower) to indemnify such Borrower against whom such
judgment is rendered provided the terms of such
--------
indemnification and the creditworthiness of the indemnitor are
satisfactory to the Lender in its sole discretion;
(m) any event occurs which materially and adversely
affects the operations and financial condition of the U.S.
Borrowers, taken as a whole, or SLQ; or
(n) any Environmental Lien shall attach to any
Property of any Borrower or any Borrower or any Subsidiary
becomes subject to any liabilities, costs, expenses, damages,
fines or penalties, which is likely to have a material adverse
effect on the financial condition of the U.S. Borrowers, taken
as a whole, or SLQ arising out of or relating to (i) the
release at any location of any Contaminant into the
environment, or the incurrence of remediation costs in
response thereto, or (ii) any violation of any Environmental
Laws.
9.2 Remedies.
--------
(a) If an Event of Default exists, the Lender may
without notice to or demand on any Borrower, do one or more of
the following at any time or times and in any order: (i)
reduce the amount of the Working Capital Commitment, and (ii)
restrict the amount of or refuse to make Working Capital
Loans. If an Event of Default exists, the Lender may, without
notice to or demand on any Borrower, do one or more of the
following, in addition to the actions described in the
preceding sentence, at any time or times and in any order: (i)
terminate the Working Capital Commitment and (ii) declare any
or all Obligations to be immediately due and payable
(provided, however that upon the occurrence of any
-------- -------
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Event of Default described in Sections 9.1(f), 9.1(g), 9.1(h),
--------------- ------ ------
or 9.1(i), all Obligations shall automatically become
------
immediately due and payable without notice or demand of any
kind); and (iii) pursue its other rights and remedies under
the Loan Documents and applicable law.
(b) If an Event of Default exists: (i) the Lender
shall have, in addition to all other rights, the rights and
remedies of a secured party under the UCC and under all other
applicable laws of the Province of Quebec, Canada; (ii) the
Lender may, at any time, take possession of the Properties of
such Borrower and keep such Properties on the premises of each
Borrower, at no cost to the Lender, or remove any part of it
to such other place or places as the Lender may desire, or
each Borrower shall, upon the Lender's demand, at such
Borrower's cost, assemble the Properties of such Borrower
owned by it and make it available to the Lender at a place
reasonably convenient to the Lender; and (iii) the Lender may
sell and deliver any Properties of each Borrower at public or
private sales, for cash, upon credit or otherwise, at such
prices and upon such terms as the Lender deems advisable, in
its sole discretion, and may, if the Lender deems it
reasonable, postpone or adjourn any sale of the Properties of
any Borrower by an announcement at the time and place of sale
or of such postponed or adjourned sale without giving a new
notice of sale. Without in any way requiring notice to be
given in the following manner, each Borrower agrees that any
notice by the Lender of sale, disposition or other intended
action hereunder or in connection herewith, whether required
by the UCC or otherwise, shall constitute reasonable notice to
such Borrower if such notice is mailed by registered or
certified mail, return receipt requested, postage prepaid, or
is delivered personally against receipt, at least five (5)
days prior to such action to such Borrower's address specified
in or pursuant to Section 12.8. If any Properties of any of
------------
the Borrowers are sold on terms other than payment in full at
the time of sale, no credit shall be given against the
Obligations until the Lender receives payment, and if the
buyer defaults in payment, the Lender may resell the
Properties of such Borrower without further notice to any
Borrower. In the event the Lender seeks to take possession of
all or any portion of the Properties of such Borrower by
judicial process, each Borrower irrevocably waives: (i) the
posting of any bond, surety or security with respect thereto
which might otherwise be required; (ii) any demand for
possession prior to the commencement of any suit or action to
recover the Properties of such Borrower; and (iii) any
requirement that the Lender retain possession and not dispose
of any such Properties until after trial or final judgment.
Each Borrower agrees that the Lender has no obligation to
preserve rights to the Properties of such Borrower or marshall
any such Properties for the benefit of any Person. The Lender
is hereby granted a license or other right to use, without
charge, each Borrower's labels, patents, copyrights, name,
trade secrets, trade names, trademarks, and advertising
matter, or any similar property, in completing production of,
advertising or selling any of the Properties of such Borrower,
and each Borrower's rights under all licenses and all
franchise agreements shall inure to the Lender's benefit. The
proceeds of sale
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of Collateral owned by the U.S. Borrowers shall be applied by
Lender against the principal and/or interest of any Loans
and/or any other Obligations for which the U.S. Borrowers are
liable and the proceeds of sale of Property owned by SLQ shall
be applied by Lender only against the Canadian Term Loan
Repayment Obligations, whether or not then due, in such order
of application as the Lender may determine. The Lender will
return any excess to the Borrowers or such other Person as
shall be legally entitled thereto and the Borrowers shall
remain liable for any deficiency.
(c) After the occurrence and during the continuance of
an Event of Default, each of the Borrowers hereby waives all
rights to notice and hearing prior to the exercise by the
Lender of the Lender's rights to repossess the Properties of
such Borrower without judicial process or to replevy, attach
or levy upon such Properties without notice or hearing.
ARTICLE X.
TERMINATION
With respect to the U.S. Borrowers, this Agreement shall terminate at
such time as all of the Obligations have been indefeasibly paid and satisfied in
full and the Working Capital Commitment shall have been terminated, unless
earlier terminated as provided herein and this Agreement shall terminate in
respect of SLQ at such time as all Canadian Term Loan Repayment Obligations
shall have been terminated.
ARTICLE XI.
AMENDMENTS; ASSIGNMENTS; SUCCESSORS
11.1 Amendments and Waivers. No amendment or modification of
----------------------
any provision of this Agreement shall be effective without the written
agreement of the Lender and the Borrowers, and no termination or waiver
of any provision of this Agreement, or consent to any departure by any
Borrower therefrom, shall in any event be effective without the written
concurrence of the Lender, which the Lender shall have the right to
grant or withhold at its sole discretion. Any waiver or consent shall
be effective only in the specific instance and for the specific purpose
for which it was given. No notice to or demand on any Borrower in any
case shall entitle such Borrower to any other or further notice or
demand in similar or other circumstances.
11.2 Assignments; Participations.
---------------------------
(a) With the consent of (i) in the case of Working
Capital Loans, the A Term Loan and the B Term Loan, the U.S.
Borrowers which will not be unreasonably withheld or delayed
and (ii) in the case of the Canadian Term Loan, SLQ which will
not be unreasonably withheld, the Lender shall have the right
at
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any time to assign to one or more commercial banks or other
financial institutions all or a portion of its Working Capital
Commitment, the Loans owing to it and the Notes held by it.
The Lender may also grant participations in all or any part of
its rights and obligations under this Agreement (including,
without limitation, all or any part of the Working Capital
Commitment and the Loans, as applicable) to one or more other
Persons; provided, however, that (i) any such disposition
-------- -------
shall not, without the consent of the applicable U.S. Borrower
or SLQ, require such Borrower to file a registration statement
with the Securities and Exchange Commission or apply to
qualify the Loans under the blue sky law of any state; and
(ii) Lender shall make and receive all payments for the
account of its participant and shall retain exclusively, and
shall continue to exercise exclusively, all rights of approval
and administration available hereunder with respect to the
Working Capital Commitment and the Loans even after giving
effect to the sale of any such participation, and Lender shall
make such arrangements with its participants as may be
necessary to accomplish the foregoing. No holder of a
participation in all or any part of the Loans shall be a
"lender" for any purpose under this Agreement; provided,
--------
however, that each holder of a participation shall have the
-------
rights of increased capital as the Lender (including any right
to receive payment) under Sections 2.9, 3.7 and 12.7;
-------- --- --- ----
provided, further, that all requests for any such payments
-------- -------
shall be made by a participant through the Lender. The right
of each holder of a participation to receive payment under
Sections 2.9, 3.7 and 12.7 and shall be limited to the lesser
------------ --- ----
of (i) the amounts actually incurred by such holder for which
payment is provided under such Sections and (ii) the amounts
that would have been payable under such Sections by the U.S.
Borrowers or SLQ to the Lender granting the participation to
such holder had such participation not been granted.
(b) It is expressly agreed that, in connection with
prospective offers for the sale and transfer of any assignment
or any participation pursuant to this Section 11.2, Lender may
------------
provide to such prospective assignees and participants such
information pertaining to any Borrower as Lender may deem
appropriate provided that, prior to any such disclosure of
--------
non-public information, such proposed assignee or participant
shall agree in writing (under the same terms and conditions
outlined in Section 12.15 hereof) to preserve the
-------------
confidentiality of any confidential information relating to
the Borrowers received by it from the Lender.
(c) Notwithstanding the foregoing provisions of this
Section 11.2, Lender may at any time sell, assign, transfer,
------------
or negotiate all or any part of its rights and obligations
under this Agreement to any Affiliate of Lender.
(d) This Agreement and the other Loan Documents shall
be binding upon the parties hereto and their respective
successors and assigns (including, without limitation, a
receiver, trustee or debtor-in-possession of any Borrower) and
shall inure to the benefit of the parties hereto and the
successors and permitted assigns of the Lender. In the event
of any such transfer or assignment,
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the rights and privileges conferred upon the Lender shall
automatically extend to and be vested in such transferee or
assignee, all subject to the terms and conditions hereof.
Neither the rights of any of the Borrowers' nor any interest
therein hereunder may be assigned without the written consent
of the Lender.
ARTICLE XII.
MISCELLANEOUS
12.1 Cumulative Remedies; No Prior Recourse to Properties of
-------------------------------------------------------
Borrower. The enumeration herein of the Lender's rights and remedies is
--------
not intended to be exclusive, and such rights and remedies are in
addition to and not by way of limitation of any other rights or
remedies that the Lender may have under the UCC or other applicable
law. The Lender shall have the right, in its sole discretion, to
determine which rights and remedies are to be exercised and in which
order. The exercise of one right or remedy shall not preclude the
exercise of any others, all of which shall be cumulative. The Lender
may, without limitation, proceed directly against any Borrower to
collect the Obligations without any prior recourse to the Properties of
such Borrower.
12.2 No Implied Waivers. No act, failure or delay by the
------------------
Lender shall constitute a waiver of any of its rights and remedies. No
single or partial waiver by the Lender of any provision of this
Agreement or any other Loan Document, or of breach or default hereunder
or thereunder, or of any right or remedy which the Lender may have,
shall operate as a waiver of any other provision, breach, default,
right or remedy or of the same provisions, breach, default, right or
remedy on a future occasion. No waiver by the Lender shall affect its
rights to require strict performance of this Agreement.
12.3 Severability. If any provision of this Agreement shall
------------
be prohibited or invalid, under applicable law, it shall be ineffective
only to such extent, without invalidating the remainder of this
Agreement.
12.4 Governing Law; Choice of Forum; Service of Process;
---------------------------------------------------
Jury Trial Waiver.
-----------------
(a) THIS AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS
AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE
WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICT OF LAWS
PROVISIONS) OF THE STATE OF ILLINOIS.
(b) SUBJECT ONLY TO THE EXCEPTION IN THE NEXT
SENTENCE, EACH BORROWER AND THE LENDER HEREBY AGREE TO THE
EXCLUSIVE JURISDICTION OF THE FEDERAL COURT OF THE NORTHERN
DISTRICT OF ILLINOIS AND WAIVE ANY OBJECTION BASED ON VENUE OR
FORUM NON CONVENIENS WITH RESPECT TO ANY ACTION INSTITUTED
THEREIN, AND AGREE THAT ANY DISPUTE
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<PAGE>
CONCERNING THE RELATIONSHIP BETWEEN THE LENDER AND ANY
BORROWER OR THE CONDUCT OF ANY PARTY IN CONNECTION WITH THIS
AGREEMENT OR OTHERWISE SHALL BE HEARD ONLY IN THE COURTS
DESCRIBED ABOVE. NOTWITHSTANDING THE FOREGOING THE LENDER
SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST
ANY BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION THE LENDER DEEMS NECESSARY OR APPROPRIATE IN
ORDER TO REALIZE ON ITS PROPERTY OTHER SECURITY FOR ANY OF THE
OBLIGATIONS.
(c) EACH BORROWER HEREBY WAIVES PERSONAL SERVICE OF
ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE
OF PROCESS MAY BE MADE BY REGISTERED MAIL (RETURN RECEIPT
REQUESTED) DIRECTED TO SUCH BORROWER AT ITS ADDRESS SET FORTH
IN SECTION 12.8 AND SERVICE SO MADE SHALL BE DEEMED TO BE
------------
COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO
DEPOSITED IN THE U.S. MAILS. EACH BORROWER HEREBY CONSENTS TO
SERVICE OF PROCESS AS AFORESAID.
(d) EACH OF THE BORROWERS AND THE LENDER HEREBY WAIVE
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION (I) ARISING UNDER THIS AGREEMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR (II) IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR
ANY OF THEM IN RESPECT TO THIS AGREEMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED, IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO, IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE. THE LENDER
AND EACH BORROWER HEREBY AGREE AND CONSENT THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY
COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO
TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) NOTHING IN THIS SECTION 12.4 SHALL AFFECT THE
------------
RIGHT OF THE LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR AFFECT THE RIGHT OF THE LENDER TO BRING
ANY ACTION OR PROCEEDING AGAINST ANY
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<PAGE>
BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION.
12.5 Survival of Representations and Warranties. All of the
------------------------------------------
Borrowers' representations, and warranties contained in this Agreement
shall survive the execution, delivery, and acceptance thereof by the
parties, notwithstanding any investigation by the Lender or any of its
respective agents.
12.6 Other Security and Guaranties. The Lender, may, without
-----------------------------
notice or demand and without affecting any Borrower's obligations
hereunder, from time to time: (a) take from any Person and hold
collateral (other than the Collateral) for the payment of all or any
part of the Obligations and exchange, enforce or release such
collateral or any part thereof; and (b) accept and hold any endorsement
or guaranty of payment of all or any part of the Obligations and
release or substitute any Borrower or any such endorser or guarantor,
or any Person who has given any Lien in any other collateral as
security for the payment of all or any part of the Obligations, or any
other Person in any way obligated to pay all or any part of the
Obligations.
12.7 Fees and Expenses. The U.S. Borrowers shall pay to the
-----------------
Lender on demand all costs and expenses that Lender pays or incurs in
connection with the negotiation, preparation, consummation,
administration, enforcement, and termination of this Agreement and the
other Loan Documents to the extent they relate to the U.S. Repayment
Obligations, and SLQ shall pay to the Lender on demand all such costs
and expenses so paid or incurred in connection with this Agreement and
the other Loan Documents to the extent that they relate to the Canadian
Term Loan Repayment Obligations, including, without limitation in all
cases but in respect of SLQ subject to the foregoing: (a) reasonable
attorneys' and paralegals' fees and disbursements of counsel to the
Lender and any Participating Lender; (b) reasonable costs and expenses
(including reasonable attorneys' and paralegals' fees and
disbursements) for any amendment, supplement, waiver, consent, or
subsequent closing in connection with the Loan Documents and the
transactions contemplated thereby; (c) costs and expenses of lien and
title searches; (d) taxes, fees and other charges for recording any
mortgages, filing financing statements and continuations, and other
actions to perfect, protect, and continue the Lender's Liens; (e) sums
paid or incurred to pay any amount or take any action required of any
Borrower under the Loan Documents that any Borrower fails to pay or
take; (f) reasonable costs of inspections, and verifications of the
Properties of any Borrower, including, without limitation, due
diligence appraisals, travel, lodging, and meals for inspections of the
Properties of any Borrower and any Borrower's operations by the
Lender's agents up to one (1) time during any Fiscal Year and whenever
an Event of Default exists; (g) costs and expenses (which shall not
exceed the Lender's costs and expenses customarily charged to other
customers) of forwarding loan proceeds, collecting checks and other
items of payment, and establishing and maintaining the U.S. Borrower
Concentration Account or the SLQ Concentration Account; (h) costs and
expenses of preserving and protecting the Properties of the Borrowers;
and (i) costs and expenses (including attorneys' and paralegals' fees
and disbursements) paid or incurred to obtain
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<PAGE>
payment of the Obligations, enforce the Lender's Liens, sell or
otherwise realize upon the Properties of the Borrowers, and otherwise
enforce the provisions of the Loan Documents, or to defend any claims
made or threatened against the Lender arising out of the transactions
contemplated hereby (including without limitation, preparations for and
consultations concerning any such matters). The foregoing shall not be
construed to limit any other provisions of the Loan Documents regarding
costs and expenses to be paid by any of the Borrowers. All of the
foregoing costs and expenses may be paid as described in Section
-------
2.10(b).
-------
12.8 Notices. Except as otherwise provided herein, all
-------
notices, demands and requests that any party is required or elects to
give to any other party shall be in writing, or by a telecommunications
device capable of creating a written record, and any such notice shall
become effective (a) upon personal delivery thereof, (b) on the
Business Day following the Business Day on which it was delivered to an
overnight mail or courier service with charges prepaid, (c) five (5)
days after it shall have been mailed by United States mail, first
class, certified or registered, with postage prepaid, or (d) in the
case of notice by such a telecommunications device upon acknowledgement
of receipt when properly transmitted, in each case addressed with
respect to each party as set forth below:
If to the Lender: LaSalle National Bank
135 South LaSalle Street
Chicago, Illinois 60603
Attn: Terri Maurer
Telephone: 312-904-5482
Telecopy: 312-606-8423
with a copy to: Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606-6404
Attention: Victoria A. Gilbert, Esq.
Telephone: 312-876-8000
Telecopy: 312-876-7934
If to any Borrower: c/o Emons Transportation Group, Inc.
96 South George Street, Suite 400
York, Pennsylvania 17401
Attention: Scott F. Ziegler
Telephone: 717-771-1718
Telecopy: 717-854-6275
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<PAGE>
with a copy to: Anderson Kill & Olick
1251 Avenue of the Americas
New York, N.Y. 10020-1182
Attention: Michael W. Stamm, Esq.
Telephone: 212-278-1000
Telecopy: 212-278-1733
or to such other address as each party may designate for itself by like
notice. Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other communication to the
persons designated above to receive copies shall not adversely affect
the effectiveness of such notice, demand, request, consent, approval,
declaration or other communication. Any notices, demands or consents
required or permitted to be given to or by any of the Borrowers will be
valid and binding on such Borrower if given to or by, as the case may
be, Emons.
12.9 Indemnity. The U.S. Borrowers agree, and to the extent
---------
attributable to the Canadian Term Loan Repayment Obligations, SLQ
agrees to (a) reimburse the Lender for any costs and expenses
(including, without limitation, reasonable attorneys' and paralegals'
fees and expenses) incurred by the Lender in defending any suit brought
against it by any Borrower or any other Person in connection with the
transactions contemplated by this Agreement or the Loan Documents, and
(b) indemnify and hold the Lender, and its officers, directors,
employees, attorneys and agents (collectively, the "Indemnitees")
-----------
harmless from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever incurred by the
Indemnitees, whether direct, indirect or consequential, as a result of
or arising from or relating to any proceeding by any Person, whether
threatened or initiated, asserting any claim for legal or equitable
remedy against any Person under any statute or regulation (including,
without limitation, any federal or state securities or commercial laws
or under any common law or equitable cause or otherwise, including any
liability and costs under Environmental Laws or common law principles
arising from or in connection with the past, present or future
operations of the U.S. Borrowers or SLQ, as the case may be, or their
predecessors in interest, or the past, present or future environmental
condition of the U.S. Borrowers, or, as the case may be, SLQ's
Property, the presence of asbestos-containing materials at or on such
Property, or the release or threatened release of any contaminant into
the environment from such Property), in any way arising from or in
connection with the negotiation, preparation, execution, delivery,
enforcement, performance and administration of this Agreement or any
other document executed in connection herewith, provided that the
--------
Borrowers shall have no obligation hereunder with respect to
indemnified liabilities arising from the gross negligence or willful
misconduct of any Indemnitee seeking such indemnification. To the
extent that the indemnity set forth in this Section 12.9 may be
------------
unenforceable because it is violative of any law or public policy, such
Borrower shall pay the maximum portion of any indemnity of which it is
liable which it is permitted to pay under applicable law. Any
Indemnitee will promptly notify the Borrowers of the commencement of
any legal proceeding which may give rise to any indemnified liability
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<PAGE>
under the foregoing indemnity and shall permit the Borrowers to
participate in the defense of such Indemnitee in any such proceeding.
The foregoing indemnity shall survive the payment of the Obligations
and the termination of this Agreement. All of the foregoing fees, costs
and expenses shall be part of the Obligations, payable upon demand, and
secured by the Properties of such Borrower.
12.10 Waiver of Notices. Unless otherwise expressly provided
-----------------
herein, each Borrower waives presentment, protest and notice of demand
or dishonor and protest as to any instrument, as well as any and all
other notices to which it might otherwise be entitled. No notice to or
demand on any Borrower which the Lender may elect to give shall entitle
such Borrower to any or further notice or demand in the same, similar
or other circumstances.
12.11 Counterparts. This Agreement may be executed in any
------------
number of counterparts, and by the Lender and each of the Borrowers in
separate counterparts, each of which shall be an original, but all of
which shall together constitute one and the same agreement.
12.12 Captions. The captions contained in this Agreement are
--------
for convenience only, are without substantive meaning and should not be
construed to modify, enlarge, or restrict any provision.
12.13 Contribution. To the extent that any of the U.S.
------------
Borrowers shall, under the terms of this Agreement or any Note or any
other Loan Document, make a payment of a portion of the Obligations
which, taking into account all other concurrent payments of the
Obligations by the U.S. Borrowers collectively, shall exceed the amount
which such U.S. Borrower has actually received under the Credit
Facilities or would have otherwise paid if each U.S. Borrower had paid
the aggregate Obligations satisfied by such payments in the same
proportion as such U.S. Borrower's Net Worth immediately prior to such
payments bore to the aggregate amount of all the U.S. Borrowers' Net
Worth immediately prior to such payment; then such U.S. Borrower shall
be entitled to contribution from, and be reimbursed by, the other U.S.
Borrowers for the amount of such excess, pro rata based on their
respective Net Worth immediately prior to such payment. This agreement
regarding contribution is intended to define the relative rights of the
U.S. Borrowers, and nothing set forth in this Section 12.13 is intended
-------------
to or shall impair the obligations of the U.S. Borrowers, jointly and
severally, to pay the Obligations as and when the same shall become due
and payable in accordance with this Agreement and the Notes.
12.14 Joint and Several Liability. The obligations of the U.S.
---------------------------
Borrowers to repay the Working Capital Loans, the A Term Loan and the B
Term Loan (the "U.S. Loan Repayment Obligations") and all other amounts
due under and in connection with such Loans shall be joint and several
obligations of the U.S. Borrowers and not SLQ. Each U.S. Borrower shall
be liable for the full amount of the U.S. Loan Repayment Obligations
with the rights of contribution and reimbursement against the other
U.S.
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<PAGE>
Borrowers under Section 12.13. The obligations to repay the Canadian
-------------
Term Loan and all other amounts due under and in connection with the
Canadian Term Loan (the "Canadian Term Loan Repayment Obligations")
shall be the direct liability of SLQ. The U.S. Borrowers shall be
liable for the Canadian Term Loan Repayment Obligations to the extent
set forth in the Guaranty contained in Section 4.14.
------------
12.15 Confidentiality. The Lender hereby agrees that it will
---------------
use reasonable efforts to keep confidential any information from time
to time supplied to it by any Borrower under this Agreement unless such
information was already known to the Lender on a nonconfidential basis
at the time it was received or was obtained from a third party on a
nonconfidential basis, or was, is or becomes publicly available;
provided, however, that nothing herein shall affect the disclosure of
-------- -------
any such information to: (a) the extent required by statute, rule,
regulation or judicial process; (b) provided that all such persons
agree to keep such information confidential in accordance with this
Section 12.15 (i) counsel for the Lender or to its accountants; (ii)
-------------
bank examiners and auditors; and (iii) any transferee or prospective
transferee of any Note; or (c) any other Person in connection with any
litigation to which the Lender is a party; provided, further, that the
-------- -------
Lender hereby agrees that it will notify the Borrowers in writing of
any request for information under clauses (a) and (c) above or with
respect to any other request for information not enumerated in this
Section 12.15 at least five (5) Business Days before complying with any
-------------
such request, unless such notice is specifically prohibited by
applicable law, court order or governmental authority. If the terms of
any request for information subject to the last proviso of the
preceding sentence do not provide a reasonably sufficient time to give
the Borrowers five (5) Business Days' notice, the Lender will use its
best efforts to seek additional time for compliance in order to permit
such notice and in any event will notify the Borrowers of such request
as soon as practicable.
12.16 Absence of Financial Assistance by SLQ. For greater
--------------------------------------
certainty, the parties hereto acknowledge and agree that
notwithstanding anything to the contrary in this Agreement or any other
Loan Documents (i) the Obligations of the U.S. Borrowers under this
Agreement and any other Loan Documents are solely those of the U.S.
Borrowers and not SLQ (which shall have no liability therefor), (ii)
none of the provisions of this Agreement or any other Loan Documents
are intended to result in SLQ furnishing any form of "financial
assistance" (including, without limitation, by giving security) within
the meaning of Section 123.66 of the Companies Act (Quebec) to or for
the benefit of the U.S. Borrowers, (iii) any indemnities or other
amounts owing under Section 12.7 or 12.9 hereof for which the U.S.
Borrowers and SLQ may be deemed to be jointly and severally liable
shall instead constitute the several obligations of the U.S. Borrowers
and shall not be obligations of SLQ and (iv) under no circumstances
shall SLQ be required by the terms of this Agreement or any other Loan
Documents to provide "financial assistance" to any of the U.S.
Borrowers (as such term may be interpreted by a court of competent
jurisdiction in Quebec in considering the application of Section 123.66
of the Companies Act (Quebec)).
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<PAGE>
12.17 Judgment Currency. (a) If for the purposes of obtaining
-----------------
judgment in any court it is necessary to convert all or any part of the
Obligations or any other amount due to the Lender hereunder or under
any security in respect of the obligations of any of the Borrowers
hereunder in any currency (the "Original Currency") into another
currency (the "Other Currency") such Borrower, to the fullest extent
that it may effectively do so, agrees that the rate of exchange used
shall be that at which, in accordance with normal banking procedures,
the Lender could purchase the Original Currency with the Other Currency
at its principal offices in Chicago on a Business Day on which the
Lender is open for the transaction of its banking business at such
offices immediately preceding the day on which any such judgment, or
any relevant part thereof, is paid or otherwise satisfied.
(b) The obligations of any of the Borrowers in respect of
any sum due in the Original Currency from such Borrower to the Lender
hereunder or under any security in respect of such Borrower's
obligations hereunder shall, notwithstanding any judgment in any Other
Currency, be discharged only to the extent that on the Business Day
following receipt by the Lender of any sum adjudged to be so due in
such Other Currency or of any other sum in any Other Currency the
Lender may, in accordance with its normal banking procedures, purchase
the Original Currency with such Other Currency. If the amount of the
Original Currency so purchased is less than the sum originally due to
the Lender in the Original Currency, such Borrower shall, as a separate
obligation and notwithstanding any such judgment, indemnify the Lender
against such loss, and if the amount of the Original Currency so
purchased exceeds the sum originally due to the Lender, the Lender
shall remit such excess to the such Borrower.
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<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
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<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement on the
date first above written.
EMONS TRANSPORTATION GROUP, INC.
By: /s/ Scott F. Ziegler
-----------------------------------
Name: Scott F. Ziegler
Title: Senior V.P. and Chief Financial Officer
EMONS INDUSTRIES, INC.
/s/ Scott F. Ziegler
By: -----------------------------------
Name: Scott F. Ziegler
Title: Senior V.P. and Chief Financial Officer
MARYLAND AND PENNSYLVANIA RAILROAD
COMPANY
/s/ Scott F. Ziegler
By: -----------------------------------
Name: Scott F. Ziegler
Title: Senior V.P. and Chief Financial Officer
EMONS LOGISTICS SERVICES, INC.
By: /s/ Scott F. Ziegler
-----------------------------------
Name: Scott F. Ziegler
Title: Senior V.P. and Chief Financial Officer
MAINE INTERMODAL TRANSPORTATION, INC.
/s/ Scott F. Ziegler
By: -----------------------------------
Name: Scott F. Ziegler
Title: Senior V.P. and Chief Financial Officer
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<PAGE>
EMONS RAILROAD GROUP, INC.
/s/ Scott F. Ziegler
By: -----------------------------------
Name: Scott F. Ziegler
Title: Senior V.P. and Chief Financial Officer
YORKRAIL, INC.
/s/ Scott F. Ziegler
By: -----------------------------------
Name: Scott F. Ziegler
Title: Senior V.P. and Chief Financial Officer
ST. LAWRENCE & ATLANTIC RAILROAD COMPANY
/s/ Scott F. Ziegler
By: -----------------------------------
Name: Scott F. Ziegler
Title: Senior V.P. and Chief Financial Officer
SLR LEASING CORP.
/s/ Scott F. Ziegler
By: -----------------------------------
Name: Scott F. Ziegler
Title: Senior V.P. and Chief Financial Officer
PENN EASTERN RAIL LINES, INC.
/s/ Scott F. Ziegler
By: -----------------------------------
Name: Scott F. Ziegler
Title: Senior V.P. and Chief Financial Officer
EMONS FINANCE CORP.
/s/ Amy S. Weaver
By: -----------------------------------
Name: Amy S. Weaver
Title: President
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<PAGE>
ST. LAWRENCE & ATLANTIC RAILROAD (QUEBEC) INC.
/s/ Scott F. Ziegler
By: -----------------------------------
Name: Scott F. Ziegler
Title: Senior V.P. and Chief Financial Officer
LASALLE NATIONAL BANK
/s/ Terri A. Maurer
By: -----------------------------------
Name: Terri A. Maurer
Title: Vice President
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<PAGE>
FOR IMMEDIATE RELEASE CONTACT: ROBERT GROSSMAN
www.emonstransportation.com 717/771-1701
THE NEILSON/HETRICK GROUP
717/263-3449
EMONS TRANSPORTATION GROUP, INC.
COMPLETES PURCHASE OF RAIL LINE IN
QUEBEC, CANADA FROM CANADIAN NATIONAL
York, Pennsylvania; December 23, 1998... Emons Transportation Group, Inc.,
(Nasdaq/SmallCap: EMON) today announced that, subject to making certain filings
relating to its financing, it has completed the acquisition of a 94-mile rail
line in Quebec, Canada, through a newly formed subsidiary, the St. Lawrence &
Atlantic Railroad (Quebec) Inc. ("SLQ") for Can$7,000,000. On July 23, 1998,
Emons announced an Agreement In Principle to acquire this rail line, designated
as the "Sherbrooke Line", from Canadian National ("CN").
The Sherbrooke Line connects with CN's Halifax-to-Montreal main line at
Ste. Rosalie, Quebec, and Emons' New England operations, the St. Lawrence &
Atlantic Railroad Company ("SLR"), at the Quebec/Vermont international border.
Based on current levels of business, SLQ will handle about 23,000 carloads of
freight in the first 12 months of operations, as well as 10,000 to 12,000
intermodal trailers and containers traveling between SLR and CN. On an
annualized basis, it is expected that this new rail operation will increase
Emons' revenues by 20% to 25%. Emons has purchased ten 2,000 horsepower
locomotives in connection with this transaction, as well as certain other
equipment and materials. As a result of this transaction closing later than
anticipated, SLQ began operating the line on December 1, 1998, under an interim
agreement with CN.
Emons further announced that this acquisition was financed by LaSalle
National Bank of Chicago. The Company's existing loan agreement with LaSalle was
amended to include funding for this transaction, which includes a Can$6.6
million seven-year term loan, and a U.S. $2 million three-year term loan.
Borrowing under this facility will bear interest at variable rates based, at the
Company's option, on either LaSalle's prime rate or the EURODOLLAR rate with
respect to U.S. borrowings and CDOR rate with respect to Canadian borrowings.
Page 1 of 2
<PAGE>
Robert Grossman, Chairman and Chief Executive Officer, commented, "It is
particularly gratifying to have completed this acquisition, since it is in line
with our goal of making contiguous or nearby rail acquisitions to strengthen our
existing rail franchises in the New England and Mid-Atlantic regions. Our New
England/Quebec rail franchise will be expanded to 260 contiguous main line miles
by the acquisition of this rail line. We believe there will be many synergies
between SLQ and SLR from both a cost and business development viewpoint. We are
very hopeful that we will be able to grow SLQ's business and continue to grow
SLR's business as a result of this transaction."
Mr. Grossman concluded, "We expect to continue our two-tier strategy of
internal growth and selective acquisitions. This is the fourth, but most
significant in terms of size, acquisition that Emons has completed in the past
year."
Emons Transportation Group, Inc., is a freight transportation and
distribution services Company serving the Mid-Atlantic and Northeast regions
through its Pennsylvania and New England/Quebec operations. Emons currently owns
five short line railroads, operates rail/truck transfer facilities and a rail
intermodal terminal, and provides its customers with warehousing and logistics
services for the movement and storage of their freight.
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This press release contains forward-looking statements regarding future events
and the future performance of Emons that involve risks and uncertainties that
could cause actual results to differ materially. Those risks and
uncertainties include, but are not limited to, economic conditions, customer
demand, increased competition in the relevant market, and others. We refer
you to the documents that Emons files from time to time with the Securities
and Exchange Commission, such as the Company's Form 10-K, Form 10-Q, and Form
8-K reports, which contain additional important factors that could cause its
results to differ from its current expectations and the forward-looking
statements contained in this press release.
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