UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
Commission file number 1-7092
Illinois Central Railroad Company
(Exact name of registrant as specified in its charter)
Delaware 36-2728842
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
455 North Cityfront Plaza Drive, Chicago, Illinois 60611-5504
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 755-7500
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on which
Title of each class so registered: each class is registered:
Illinois Central Railroad Company New York Stock Exchange
6-3/4% Notes, due May 15, 2003
Gulf, Mobile and Ohio Railroad Company New York Stock Exchange
5% Income Debentures,
Series A, due December 1, 2056
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes ..X.. No ....
As of March 2, 1995, there were 100 shares of the registrant's
common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
THE REGISTRANT IS A WHOLLY-OWNED SUBSIDIARY OF ILLINOIS CENTRAL
CORPORATION (SEC FILE NO. 1-10720) AND MEETS THE CONDITIONS SET FORTH IN
GENERAL INSTRUCTION J(1)(a) and (b) of form 10-K AND IS THEREFORE FILING
THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.
<PAGE>
ILLINOIS CENTRAL RAILROAD COMPANY
AND SUBSIDIARIES
FORM 10-K
Year Ended December 31, 1994
INDEX
PART I
10-K Page
Item 1. Business. . . . . . . . . . . . . 3
Item 2. Properties . . . . . . . . . . . . . . 11
Item 3. Legal Proceedings . . . . . . . . . . . 15
Item 4. Submission of Matters to a Vote of Security
Holders (A) . . 16
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters . . . . . . . . 16
Item 6. Selected Financial Data. (A). . . . . . . 16
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . 17
Item 8. Financial Statements and Supplementary Data. 23
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure. . . 23
PART III
Item 10. Directors and Executive Officers of the
Registrant (A) 23
Item 11. Executive Compensation (A). . . . . . . . 23
Item 12. Security Ownership of Certain Beneficial Owners and
Management (A) . . . . . . . . . . 23
Item 13. Certain Relationships and Related Transactions (A) 23
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K . . . . . . . . . . . 24
SIGNATURES. .. . . . . . . . . . . . 25
(A) Omitted or amended as the registrant is a wholly-owned subsidiary
of Illinois Central Corporation and meets the conditions set forth
in General Instruction J(1)(a) and (b) of Form 10-K and is,
therefore, filing this Form with the reduced disclosure format.
<PAGE>
PART I
Item 1. Business
Background
Illinois Central Railroad Company (the "Railroad"), traces its
origin to 1851, when the Railroad was incorporated as the nation's first
land grant railroad. Today, the Railroad operates 2,700 miles of main
line track between Chicago and the Gulf of Mexico, primarily carrying
chemicals, coal and paper north, with coal, grain and milled grain
products moving south along its lines. The Railroad has been
significantly downsized and restructured from its peak of nearly 10,000
miles of track operated in 13 states, rebuilding its main line and
converting to a single-track main line with a centralized traffic control
system and divesting major east-west segments. In addition to the
Railroad, the Railroad's other direct subsidiary conducts railroad related
financing operations. The Railroad is a wholly-owned subsidiary and a
principal asset of Illinois Central Corporation ("IC").
The principal executive office of the Railroad is located at 455
North Cityfront Plaza Drive, Chicago, Illinois 60611-5504 and its
telephone number is (312) 755-7500.
General - 1992 Four-Year Plan
In late 1992, the Railroad announced a four-year plan designed to
increase its revenues and lower its operating ratio and interest costs.
With 1992 as its base, the plan focuses on taking advantage of the
Railroad's leading operating ratio (operating expenses divided by
operating revenues) among Class I railroads. The components of the plan
are:
- increase annual revenues by $100 million by the end of 1996
- reduce the operating ratio by one percentage point per year for a
total of four (4) points below the 1992 base of 70.9%
- reduce annual interest expense by $10 million
To accomplish this plan management identified three sources of
planned revenue growth -- economic expansion, new and expanded plants on
line and market share growth. Economic expansion is the combination of
industrial production improvement and freight rate increases. Market
share growth is volume gained from competition, (i.e., other railroads,
trucklines and barges) facilitated by being a low cost producer. See
"Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations" for a discussion of the significant progress in
achieving these goals through 1994.
Having completed two years of the four-year plan, management is
developing a new five-year plan which uses 1994 as a base. The new plan
covers the period 1995 through 1999 and features $200 million in revenue
growth and a significantly lower operating ratio.
Commodities and Customers
The Railroad's customers are engaged in a wide variety of businesses
and ship a number of different products that can be classified into
commodity groups: chemicals, coal, grain, paper, grain mill and food
products and other commodities. In 1994, two customers accounted for
approximately 7% and 6%, respectively, of revenues (no other customer
exceeded 5%) and the ten largest customers accounted for approximately 37%
of revenues.
In 1994, approximately 74% of the Railroad's freight traffic
originated on its own lines, of which approximately 28% was forwarded to
other carriers. Approximately 17% of the Railroad's freight traffic was
received from other carriers for final delivery by the Railroad, and the
balance of approximately 9% represented bridge or through traffic.
In order to address more effectively the diversity of the Railroad's
customer base and attain the four-year growth plan, the Railroad's
marketing department was re-organized in 1993 along major commodity
groups. The Railroad now focuses on these units - chemicals and bulk,
grain and grain mill, forest products, coal and coke and metals, and
intermodal. The formation of separate units enables a fully integrated
sales and marketing effort. Specialization allows employees to anticipate
and respond to customer needs more quickly, to attract customers who
previously used trucks or barges for their service needs, and to establish
business relationships with new shippers. These new units work with
current and prospective customers to develop customized shipping
solutions. Management believes that this commitment to improved customer
service has enhanced relations with shippers. Further refinements to the
new marketing organization in 1994 included the hiring of a new Vice
President-Marketing and Sales with 33 years experience in the
transportation industry and a new Assistant Vice President for the
Chemicals unit.
The formation of the Intermodal Business Unit underscores the
Railroad's commitment to intermodal through long-term relationships with
major participants in this strategic market. In each of the three years
ended December 1994, the Railroad entered into joint operating agreements
with trucklines and other railroads. By forming a separate business unit
and entering into these agreements, the Railroad has fully integrated its
intermodal hub operation with sales and marketing for enhanced control of
this highly specialized and competitive service. Management anticipates
that the result will be better service to customers and seamless
transportation of goods for shippers and their customers.
To effectively compete in the intermodal market the Railroad has
acquired 900 trailers over the last two years, constructed its newest,
state-of-the-art terminal, just south of Chicago at the intersections of
major expressways and completed a major expansion at the Memphis facility.
To address the needs of the bulk chemical and intermodal markets a
bulk transfer facility (a storage track, easily accessible by truck, where
carloads of plastic pellets and other dry products can be stored in bulk
and transferred to truck for delivery) was opened in the Railroad's
Chicago intermodal facility in 1994. The 11 acre bulk facility, which can
be expanded if volume warrants, provides track capacity for 52 railcars
and is designed to serve customers in a five-state region. This transfer
facility concept may be expanded to other sites.
<PAGE>
The respective percentage contributions by principal commodity group
to the Railroad's freight revenues and revenue ton miles during the past
five years are set forth below:
Contributions to Total Freight Revenues by Commodity Group
Commodity
Group 1994 1993 1992 1991 1990
Chemicals 24.8% 25.0% 24.3% 24.5% 25.3%
Coal 15.2 12.8 15.3 15.0 15.3
Grain 10.2 14.0 12.2 11.7 10.7
Paper 12.2 12.4 12.1 11.2 10.7
Grain mill &
food products 8.5 9.8 8.8 8.7 9.5
Intermodal 6.6 5.4 5.4 5.2 5.0
All other 22.5 20.6 21.9 23.7 23.5
Total 100.0% 100.0% 100.0% 100.0% 100.0%
Contribution to Revenue Ton Miles by Commodity Group(1)
Commodity
Group 1994 1993 1992 1991
Chemicals 15.8% 15.9% 15.1% 16.0%
Coal 24.0 15.1 18.2 17.0
Grain 20.0 27.9 27.3 27.7
Paper 9.8 9.6 9.0 8.4
Grain mill &
food products 9.3 9.9 9.0 8.3
Intermodal 5.5 3.7 3.1 2.9
All other 15.6 17.9 18.3 19.7
Total 100.0% 100.0% 100.0% 100.0%
(1) A new car tracking system was installed in late 1990. As a
result pre-1991 ton mile data is not comparable, and therefore is not
presented.
<PAGE>
The principal elements of these commodity groupings are as
follows:
Chemicals A wide variety of chemicals and related products such as
chlorine, caustic soda, potash, soda ash, vinyl chloride
monomer, carbon dioxide, synthetic resins, alcohols,
glycols, styrene monomer, plastics, sulfuric acid,
muriatic acid, anhydrous ammonia, phosphates, mixed
fertilizer compounds and carbon blacks.
Coal Bituminous and metallurgical coal.
Grain Corn, wheat, soybeans, sorghum, barley and oats.
Paper Pulpboard, fiberboard, woodpulp, printing paper,
newsprint and scrap or waste paper.
Grain Mill
& Food
Products Products obtained by processing grain and other farm
products such as feed, soybean meal, corn syrup, flour
and middlings, animal packinghouse by-products (tallow),
canned food, corn oil, soybean oil, vegetable oils, malt
liquors, sugar and molasses.
Inter-
modal A wide variety of products shipped either in containers
or trailers on specially designed cars.
Other Pulpwood and chips, lumber and other wood products;
sand, gravel and stone, coke and petroleum products,
metallic ores and other bulk commodities; primary and
scrap metals, machinery and metal products, appliances,
automobiles and parts, transportation equipment and farm
machinery; glass and clay products, ordnance and
explosives, rubber and plastic products, and general
commodities.
<PAGE>
Operating Statistics
Set forth below is certain information relating to the
Railroad's freight traffic during the past five years:
1994 1993 1992 1991 1990
Carloads (in thousands) 915 848 852 866 853
Freight train miles
(in thousands)(2) 7,179 5,659 5,149 5,445 5,496
Revenue ton miles of
freight traffic
(in millions)(1),(3) 21,160 20,334 18,734 19,357 NM
Revenue tons per carload 76.3 79.1 76.6 79.0 77.7
Average length of haul
(in miles) 286 293 284 286 270
Gross freight revenue per
ton mile(1),(4) $ .027 $ .027 $ .029 $ .028 NM
Net freight ton miles
per average route
mile (in millions)(1) 7.9 7.5 6.8 7.0 NM
Gallons per ton mile(5) .00248 .00251 .00269 .00276 .00292
Active locomotives 328 322 331 361 375
Track resurfacing (miles)1,397 1,293 1,465 940 618
Percent resurfaced 33.0% 29.8% 32.0% 19.6% 12.7%
Ties laid in replacement
(including
switch ties) 346,994 323,764 296,536 255,283 240,968
Slow order miles 275.79 152.32 135.42 194.62 149.74
1 A new car tracking system was installed in 1990. As a result
pre-1991 ton mile data is not comparable, and therefore is not
meaningful (NM).
2 Freight train miles equals the total number of miles traveled
by the Railroad's trains in the movement of freight.
3 Revenue ton miles of freight traffic equals the product of the
weight in tons of freight carried for hire and the distance in
miles between origin and destination.
4 Revenue per ton mile equals net freight revenue divided by
revenue ton miles of freight traffic.
5 Gallons per ton mile equals the amount of fuel required to
move one ton of freight one mile.
<PAGE>
The following tables summarize operating expense-to-revenue
ratios of the Railroad for each of the past five years, excluding
the effect of the $8.9 million pretax special charge in 1992. The
first table analyzes the various components of operating expenses
based on the line items appearing on the income statements, whereas
the second table is based on Interstate Commerce Commission ("ICC")
functional groupings.
Ratio 1994 1993 1992 1991 1990
Operating(1) . . 67.6% 68.6% 70.9% 73.6% 75.4%
Labor and fringe
benefits 33.0 33.7 34.9 35.8 37.3
Leases and car hire 10.0 13.0 13.3 14.2 14.8
Diesel fuel 5.3 5.4 5.5 6.0 5.9
Materials and supplies 6.5 6.5 6.0 5.7 4.8
Depreciation and
amortization 4.2 4.0 3.9 3.8 4.0
Other 8.6 6.0 7.3 8.1 8.6
1994 1993 1992 1991 1990
Operating(1) 67.6% 68.6% 70.9% 73.6% 75.4%
Transportation(2) 28.9 29.6 31.6 34.8 35.3
Maintenance of way(3) 7.7 7.2 7.1 6.4 7.1
Maintenance of
equipment(4) 20.6 21.3 22.9 23.9 23.7
1 Operating ratio means the ratio of operating expenses before
special charge over operating revenues.
2 Transportation ratio means the ratio of transportation
expenses (such as expenses of operating, servicing,
inspecting, weighing, assembling and switching trains) over
operating revenues.
3 Maintenance of way ratio means the ratio of maintenance of way
expenses (such as the expense of repairing, maintaining,
leasing, depreciating and retiring right-of-way and trackage
structures, buildings and facilities) over operating revenues.
4 Maintenance of equipment ratio means the ratio of maintenance
of equipment expenses (such as the expense of repairing,
maintaining, leasing, depreciating and retiring transportation
and other operating equipment) over operating revenues.
Employees; Labor Relations
Railroad industry personnel are covered by the Railroad
Retirement System instead of Social Security. Employer
contribution rates under the Railroad Retirement System are
currently more than double those in other industries, and may rise
further because of the increasing proportion of retired employees
receiving benefits relative to the shrinking number of working
employees.
Labor relations in the railroad industry are subject to
extensive governmental regulation under the Railway Labor Act.
Railroad industry personnel are also covered by the Federal
Employer's Liability Act ("FELA") rather than by state no-fault
workmen's compensation systems. FELA is a fault-based system, with
compensation for injuries determined by individual negotiation or
litigation.
The Railroad is a party to several national collective
bargaining agreements which, until 1994, establish the wages and
benefits of its union workers -- 90% of all Railroad employees are
represented by a union. These agreements became subject to
renegotiation beginning November 1, 1994, when bargaining notices
were filed; however, cost of living allowance provisions and other
terms in each agreement continue until new agreements are reached.
Despite being part of the national bargaining group, the Railroad
has expressed a desire to negotiate separate distinct agreements
with each of its unions on a local basis. To date, discussions
with all eleven union organizations have been initiated. Three
unions, representing 29% of the Railroad's represented workforce
have ratified agreements which cover wages and work rule issues
through 1999. During the term of the agreements wages will rise
approximately 3%-4% per year on average. In reaching these
agreements approximately $.8 million was paid in signing bonuses.
It is too early to determine if separate agreements will be reached
with the other crafts. The following table shows the average annual
employment levels of the Railroad:
1994 1993 1992 1991 1990
Total employees. 3,250 3,306 3,421 3,611 3,688
A significant portion of the decline from the 1992 level is
the result of a separate agreement between the Railroad and the
United Transportation Union, reached in November 1991. This
agreement permits the Railroad to reduce the size of all crews on
all trains operated. In accordance with this agreement, 158 crew
members were severed at a cost of $9.6 million to date. The
current crew size of approximately 2.74 is not expected to change
dramatically.
Management believes that over the next several years attrition
and retirements would be the primary source of future declines in
employment levels. Increases in employment levels, particularly in
train operations, are possible in response to growth of business in
accordance with the four year plan.
Regulatory Matters; Freight Rates; Environmental Considerations
The Railroad is subject to significant governmental regulation
by the ICC and other federal, state and local regulatory
authorities with respect to rates, service, safety and operations.
The jurisdiction of the ICC encompasses, among other things,
rates charged for certain transportation services, issuance of
securities, assumption of certain liabilities by railroads, mergers
or the acquisition of control of one carrier by another carrier and
extension or abandonment of rail lines or services. Current
congressional proposals to eliminate the ICC are still unclear as
to what regulatory scheme might remain and thus the potential
impact of the proposals on the Railroad are unknown.
The Federal Railroad Administration, the Occupational Safety
and Health Administration and certain state transportation agencies
have jurisdiction over railroad safety matters. These agencies
prescribe and enforce regulations concerning car and locomotive
safety equipment, track safety standards, employee work conditions
and other operating practices.
The amount of Southern Illinois coal transported by the
Railroad is expected to decline somewhat as the Clean Air Act is
fully implemented. Much of the coal from mines in that area
currently served by the Railroad will not meet the environmental
standards of the Clean Air Act without blending with compliance
coal or installation of air scrubbers at point of use. On the
other hand, the Railroad expects to participate in additional
movements of Western coal and Southern Illinois coal which does
comply. Overall, management believes that implementation of the
Clean Air Act is unlikely to have a material adverse effect on the
results of the Railroad.
The Railroad is and will continue to be subject to extensive
regulation under environmental laws and regulations concerning,
among other things, discharges into the environment and the
handling, storage, transportation and disposal of waste and
hazardous materials. Inherent in the operations and real estate
activities of the Railroad and other railroads is the risk of
environmental liabilities. See Item 2. "Properties - Environmental
Conditions" for discussion of sites on which the Railroad currently
or formerly conducted operations that are subject to governmental
action in connection with environmental degradation. The EPA is
expected to propose regulations limiting locomotive emissions which
may significantly increase the purchase price or operating expense
of locomotives. Additional expenditures by the Railroad may be
required in order to comply with existing and future environmental
and health and safety laws and regulations or to address
contaminated sites which may be discovered.
Competition
The Railroad faces intense competition for freight traffic
from motor, water, and pipeline carriers and from other railroads.
Competition is generally based on the quality and reliability of
the service provided and the rates charged. Declining fuel prices
disproportionately benefit trucking operations over railroad
operations. The trucking industry frequently is more cost and
transit-time competitive than railroads, particularly for
distances of less than 500 miles. While deregulation of freight
rates under the Staggers Act has greatly increased the ability of
railroads to compete with each other and alternate forms of
transportation, changes in governmental regulations (particularly
changes to the Staggers Act) could significantly affect the
Railroad's competitive position.
To a greater degree than other rail carriers the Railroad is
vulnerable to barge competition because its main routes are
parallel to the Mississippi River system. The use of barges for
some commodities, particularly coal and grain, sometimes represents
a lower cost mode of transportation. As a result, the Railroad's
revenue per ton-mile has generally been lower than industry
averages for these commodities. Barge competition and barge rates
are affected by navigational interruptions from ice, floods and
droughts. These interruptions cause widely fluctuating rates. The
Railroad's ability to maintain its market share of the available
freight has traditionally been affected by its response to the
navigational conditions on the river.
All of the Railroad's operations are conducted between points
served by one or more competing carriers. The consolidation in
recent years of major midwestern and eastern rail systems has
resulted in strong competition in the service territory of the
Railroad. To date, such consolidations have not had a material
adverse impact on the Railroad's operation or financial results.
Liability Insurance
The Railroad is self-insured for the first $5 million of each
loss. The Railroad carries $295 million of liability insurance per
occurrence, subject to an annual cap of $395 million in the
aggregate for all losses. This coverage is considered by the
Railroad's management to be adequate in light of the Railroad's
safety record and claims experience.
<PAGE>
Item 2. Properties
Physical Plant and Equipment
System. As of December 31, 1994, the Railroad's total system
consisted of approximately 4,600 miles of track comprised of 2,700
miles of main line, 200 miles of secondary main line and 1,700
miles of passing, yard and switching track. The Railroad owns all
of the track except for 190 miles operated by agreements over track
owned by other railroads.
Track Structures. During the five years ended December 31,
1994, the Railroad has spent $348.7 million on track structure to
maintain its rail lines, as follows ($ in millions):
Capital
Expenditures Maintenance Total
1994 $ 63.2 $ 29.1 $ 92.3
1993 50.3 25.1 75.4
1992 46.4 23.0 69.4
1991 36.3 20.7 57.0
1990 34.6 20.0 54.6
Total $230.8 $117.9 $348.7
These expenditures concentrated primarily on track roadway and
bridge rehabilitation in 1994, 1993 and 1992. Approximately, 1,400
miles, 1,300 miles and 1,400 miles of road were resurfaced in 1994,
1993 and 1992, respectively. During 1994 and 1993, approximately
$11.4 million was spent to complete the conversion of 198 miles of
track, known as the Yazoo District, to a single track with
centralized traffic control ("CTC"). Over the last three years, a
total of $11.4 million was spent to construct new or expanded
intermodal facilities in Chicago and Memphis. Expenditures in 1991
and 1990 benefited from the use of reclaimed rail, cross ties,
ballast and other track materials from the second main line when
the Railroad's double-track mainline was converted to a single-
track mainline with CTC. Future capital expenditures for track
structure are expected to average $52 million to $60 million
annually.
Fleet. The Railroad's fleet has undergone significant
rationalization and upgrading from its peak in 1985 of 862
locomotives and 28,616 freight cars. Over the last two years
older, less efficient locomotives were replaced with newer larger
horsepower and more efficient equipment. In 1993, the Railroad
implemented a lease conversion program to increase ownership of
locomotives and freight cars to become less dependent on the
leasing market as a source of equipment. The program resulted in
118 locomotives and 4,228 freight cars either being acquired
outright or leased under more favorable lease terms by the
Railroad. As a result of the new lease terms, $24.7 million of
capital leases were recorded in 1994. Most of these leases
contain fixed price options whereby the equipment can be acquired
at or below fair market value.
Since 1992, the Railroad acquired 4 SD-40-2 locomotives and
also upgraded its highway trailer fleet with 900 newly built
trailers. Of this amount, 800 replaced 880 older leased trailers
and 100 were for expanded volume. The locomotives are leased to
the Railroad for seven and one-half years. Approximately 1,800 of
the cars acquired are leased to the Railroad as well. The
remaining cars are leased to other non-affiliated railroads. When
those leases expire, the Railroad has first right of refusal to
lease the equipment. As these cars are leased to the Railroad
other leased equipment will be returned to the independent, third-
party lessors or short-term car hire agreements will be terminated.
In 1995, the Railroad will replace 31 older smaller locomotives
with 20 new SD-70's with an option to acquire an additional 20 SD-
70's in 1996.
The Railroad has repaired and reconditioned approximately 173
cars at a cost of $2.9 million. This equipment is being leased on
a short-term basis to other carriers until the Railroad anticipates
it will need the equipment for its expansion.
<PAGE>
The following is the overall fleet at December 31:
Total Units: 1994 1993 1992 1991 1990
Locomotives(1) 417 468 449 470 471
Freight cars 16,178 15,112 15,877 16,381 16,526
Work equipment . 625 745 902 881 934
Highway trailers(2) 898 898 203 124 67
1 Approximately 89 locomotives need repair before they can
be returned to service. This equipment is repaired if
needed on an ongoing basis or sold. The Railroad sold
48, 23 and 66 surplus locomotives in 1994, 1993 and
1992, respectively. The active fleet is 328 as of
December 31, 1994.
2 Excludes trailers being accumulated for return to
lessors.
The components of the fleet for 1994 and in total for
1993 are shown below:
Long-Term 1994 1993
Description(1) Owned(2) Lease Total Total
Locomotives:
Multipurpose 224 101 325 368
Switching 50 42 92 100
Total 274 143 417 468
Freight Cars:
Box (general service) 235 1,227 1,462 556
Box (special purpose) 2,560 541 3,101 2,653
Gondola 935 427 1,362 1,094
Hopper (open top) 2,096 2,301 4,397 4,955
Hopper (covered) 2,792 940 3,732 3,777
Flat 251 529 780 851
Other 1,191 153 1,344 1,226
Total 10,060 6,118 16,178 15,112
Work Equipment 617 8 625 745
Highway trailers (3) - 898 898 898
1 In addition, approximately 1,744 freight cars were
being used by the Railroad under short-term car
hire agreements.
2 Includes 65 locomotives and 1,762 freight cars
under capital leases.
3 Excludes trailers being accumulated for return to
lessor.
<PAGE>
Environmental Conditions
The Railroad faces potential environmental cleanup costs
associated with approximately 20 contaminated sites and
various fueling facilities for which a total of $13 million
has been reserved as of December 31, 1994. The most
significant of those sites are described below.
Mobile, Alabama
The Railroad owned property in Mobile prior to 1976 upon
which a lessee conducted creosoting operations. The Alabama
Department of Environmental Management has determined that the
soil and groundwater are contaminated with creosote,
pentachlorophenol and possibly dioxins. The Railroad has been
participating in joint cleanup efforts with the current owner
and the Railroad's lessee. See Item 3. "Legal Proceedings."
Jackson, Tennessee
A rail yard in Jackson, Tennessee, formerly owned by the
Railroad has been placed on the federal and state "superfund"
list as a result of the discovery of Trichloroethylene (TCE)
in the adjacent municipal water well field. The Railroad
formerly operated a shop facility at the site and TCE is a
common component of solvents similar to those believed to have
been used in the shop. See Item 3. "Legal Proceedings."
McComb, Mississippi
The Railroad is conducting a site assessment of a
facility where car repairs were formerly performed to
determine the nature and extent of contamination, primarily
lead from removed paint, at the site. The study is being
conducted under the supervision of the Mississippi Department
of Environmental Quality.
Kegley, Illinois
Emergency response action has been taken by the Railroad
at this scene of a 1994 derailment in which about 22,000
gallons of TCE were released. The spill has been contained
by construction of an impervious wall extended into the
bedrock and encircling the site. The Railroad has enrolled
in Illinois' Pre-Notice Site Cleanup Program and is
voluntarily remediating the site. The Railroad believes the
shipper bears some responsibility for the release and has so
notified it.
East Hazel Crest, Illinois
In 1994 the Railroad learned that an underground fuel
line had leaked about 100,000 gallons of diesel fuel into the
soil and groundwater. The Railroad has constructed a
groundwater remediation system and enrolled the site in
Illinois' Pre-Notice Site Cleanup Program. See Item 3. "Legal
Proceedings."
Fueling Facilities
The Railroad has maintained fueling facilities at more
than 20 locations at various times from the 1950's to date.
Many of those sites are or may be contaminated with spilled
fuel. Those stations currently in use are equipped with drip
pans and treatment facilities and the Railroad has initiated
a program of rebuilding all fuel lines above ground.
Waste Oil Generation
The Railroad has been identified as a PRP at three sites
where waste oil was allegedly processed and disposed. In each
instance, the Railroad is alleged to have generated some of
the waste oil, and in each the Railroad believes any
contribution it may have made to the site contamination is de
minimis.
Item 3. Legal Proceedings
State of Alabama, et al. v. Alabama Wood Treating Corporation,
Inc., et al., S.D. Ala. No. 85-0642-C
The State of Alabama and Alabama State Docks ("ASD")
filed suit in 1985 seeking damages for alleged pollution of
land in Mobile, Alabama, stemming from creosoting operations
over several decades. Defendants include the Railroad, which
owned the land until 1976, Alabama Wood Treading Corporation,
Inc., and Reilly Industries, Inc. ("RII"), which leased the
land from the Railroad and conducted creosote operations on
the site. In December 1976, the Railroad sold the premises
to ASD. The complaint sought payment for the clean-up cost
together with punitive and other damages.
In 1986, ASD, RII and the Railroad agreed to form a
joint technical committee to clean the site, sharing equally
the cost of clean-up, and in October 1986 the court stayed
further proceedings in the suit. Under the agreement the
joint technical committee has spent approximately $6.8 million
and has been authorized to expend up to a total of $6.9
million. The Railroad has contributed $2.3 million. Further
clean-up activities are anticipated.
Under the agreement, if any party disagrees with the
amount determined by the joint technical committee to be
expended or otherwise disagrees with any aspect of the clean-
up, such party may decline further participation and
recommence legal proceedings. However, amounts already
contributed by any party will be credited against that party's
eventual liability and may not be recovered from any other
party.
In the Matter of Illinois Central Railroad, et al., Tennessee
Division of Superfund No. 94-0187
The Tennessee Department of Environmental and
Conservation has issued a Remedial Order requiring cleanup by
the Railroad and the current owners of a site in Jackson,
Tennessee. The Railroad operated a rail yard and locomotive
repair facility at the site. Trichloroethylene ("TCE") has
been found in several municipal water wells near the site.
TCE is a common component of solvents similar to those
believed to have been used at the shop. In addition,
concentrations of metals and organic chemicals have been
identified on the surface of the site. The Railroad has
commenced a remedial investigation and feasibility study of
the site, and expects to cooperate with the agency and other
Potentially Responsible Parties to conduct any necessary
clean-up activities.
People of the State of Illinois v. Illinois Central Railroad
No. 95 CH842 (Circuit Court of Cook County, Illinois)
On February 2, 1995, the State of Illinois filed a
Complaint for Injunction and Civil Penalties against the
Railroad relating to a release of diesel fuel from an
underground pipeline at the Railroad's Markham Yard facility
in East Hazel Crest, Illinois. The Complaint alleges that the
Railroad violated State water pollution statutes by allowing
diesel fuel to enter waters of the State and seeks for an
order compelling the Railroad to take necessary corrective
actions at the site and to pay a civil penalty.
Item 4. Submission of Matters to a Vote of Security Holders
Intentionally omitted. See Index page of this Report
for explanation.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters
All of the outstanding common stock of the Railroad (100
shares) is owned by IC and therefore is not traded on any
market. Various credit agreements limit the Railroad's
ability to pay cash dividends to IC. However, the Railroad
was able to declare $87.5 million in dividends in 1994, $36.0
million in dividends in 1993 and $12.8 million in dividends
in 1992. Of the $87.5 million declared in 1994, $60.0 million
will be paid in 1995 as requested by IC. At December 31,
1994, approximately $44.9 million of the Railroad's equity was
in excess of the limitation and available for dividend to IC.
Item 6. Selected Financial Data
Intentionally omitted. See Index page of this Report
for explanation.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Four-Year Growth Plan
With two years of the 1992 four-year growth plan
completed, the Railroad has achieved two key goals and is on
track in the third. Announced in the fall of 1992 the plan
was to reduce interest expense by $10 million annually and
lower the already lowest operating ratio in the industry to
66.9%, while raising total revenue $100 million. As of
December 31, 1994, the Railroad's interest expense had
declined from $43 million to $26 million well ahead of the
planned $10 million reduction. The operating ratio for 1994
was 67.6%. During the last two years revenues rose 3.1% and
5.2%, respectively, and at $594 million are 8.5% higher than
1992. This revenue growth was accomplished despite the impact
of two major unplanned events in 1993. In May 1993, the
United Mine Workers struck against several companies affecting
six mines served by the Railroad. As a result, approximately
35,000 carloads of coal were lost. The strike was settled in
December 1993, and full production resumed in January 1994.
Partially offsetting the lost coal loads was a gain of
approximately 15,000 carloads of grain and grain mill
products. This traffic was diverted to the Railroad as a
result of the flooding of the upper Mississippi River in July
and August 1993. Additionally, over 500 trains from several
other Class I railroads were detoured over the Railroad's
system. The result was a significant temporary increase in
traffic density over the Railroad's routes.
Contributing to 1994's gain in revenue was a resurgence
in chemical traffic and sharp growth in intermodal.
Intermodal traffic increased 53% benefiting from strength
across the board plus two partnerships with other carriers,
one of which was in effect for only the last half of 1994.
The tender offer for and retirement of $145 million 14-
1/8% debentures of the Railroad, in the second quarter of
1993, was the most significant contributor in the achievement
of the interest expense goal of the growth plan.
Having completed two years of the four-year plan,
management is developing a new five-year plan which uses 1994
as a base. The new plan covers the period 1995 through 1999
and features $200 million in revenue growth and a
significantly lower operating ratio.
Results of Operations
The discussion below takes into account the financial
condition and results of operations of the Railroad for the
years presented in the consolidated financial statements.
1994 Compared to 1993
Revenues for 1994 increased from the prior year by $29.2
million or 5.2% to $593.9 million. The increase was a result
of a 7.9% increase in carloadings partially offset by a 3.7%
decrease in the average freight revenue per carload. In 1994,
the Railroad experienced increased carloadings in intermodal
(53.0%), coal (22.6%), chemicals (3.6%) and paper (2.2%)
partially offset by decreased loadings in grain (12.5%) and
grain mill products (10.3%). The increase in intermodal
carloadings highlighted the Railroad's emphasis and commitment
in this area. For the year, carloadings increased over 67,000
to approximately 915,000 carloads.
Operating expenses for 1994 increased $14.4 million or
3.7%. Labor and fuel expenses increased reflecting the
increased loadings experienced in 1994 over 1993.
Depreciation expense was higher in 1994 because of the
Railroad's shift to ownership of equipment from leasing.
Other expenses, which include property and franchise taxes,
casualty and environmental accruals, joint facilities, net and
equipment related expenses, increased $16.9 million.
Partially offsetting the increased expenses was a $13.6
million decrease in lease and car hire expense which resulted
from the Railroad's shift from leasing to owning, more
effective turnaround of cars and lower export grain.
Operating income increased $14.8 million or 8.3% to
$192.4 million for the reasons cited above.
Net interest expense for 1994 decreased 18.2% ($5.8
million) to $26.0 million compared to $31.8 million in 1993.
The sales of accounts receivable under a revolving agreement
allowed the Railroad to utilize existing assets to obtain
funds rather than issuing additional debt. The expense
associated with this transaction is accounted for as Other
Income, Net, not Interest Expense and when coupled with
paydowns of other existing debt produced the decrease in
interest expense.
Net income was further affected by a $5.0 million after
tax gain on the favorable resolution of prior period tax
issues.
1993 Compared to 1992
Revenues for 1993 increased from the prior year by $17.3
million or 3.1% to $564.7 million. The increase was a result
of a 2.9% increase in average gross freight revenue per
carload, resulting from an improved commodity mix and modest
rate increases. The 1993 revenue increase was attributable
in part to the gain in carloads when the upper Mississippi
River flooding affected barge traffic and also disrupted rail
operations of other carriers who diverted traffic to the
Railroad's system. Additionally, chemical loads were up 6%
and paper was up 3%. Intermodal was up 5%, reflecting the
Railroad's commitment to increase this aspect of operation,
as evidenced by the new Chicago-area intermodal facility and
expansions in Memphis. These gains were offset by lost
carloads of coal resulting from the United Mine Workers strike
of certain coal producers. For the year, carloadings declined
.5% (or 4,400 carloads) to 847,900 carloads.
Operating expenses for 1993 decreased $1.1 million, or
.3% as compared to 1992, excluding the special charge recorded
in 1992. Labor expense decreased $1.1 million as a result of
on-going cost control programs, including the reduction in
train crews, and an overall improvement in efficiency. This
decrease was accomplished despite the additional expense
incurred because of the flood-related detours of other
railroads' trains over the Railroad's track and a 3% wage
increase which was effective July 1, 1993 for union employees.
Fuel expense reflects the increased traffic in 1993 and 1992
coupled with a total of $1.5 million for increased fuel taxes
resulting from the Omnibus Budget Reconciliation Act of 1993
and for the costs associated with fuel hedges. The more fuel
efficient locomotives acquired over the last two years
partially offset the rise in fuel costs. Materials and
supplies increased $3.6 million primarily as a result of track
material purchases. The surplus from the single track project
was substantially depleted necessitating purchase of new
materials.
Operating income for 1993 increased 18.2% ($27.3
million) to $177.6 million compared to $150.3 million for
1992, as a result of increased revenues cited above and
decreased expenses (including the 1992 special charge).
Excluding the special charge, the increase in operating income
was 11.6% ($18.4 million).
Net interest expense decreased by 25.9% to $31.8 million
compared to $42.9 million in 1992. The issuance of new notes
at 6.75% to replace the 14-1/8% Senior Subordinated Debentures
(the "Debentures") and lower interest rates on floating debt
account for the reduced interest expense in 1993. The
Debentures were retired via a tender offer which resulted in
an extraordinary loss of $23.4 million, net of $12.6 million
in tax benefits. The extraordinary loss covers the costs
associated with the tender (i.e., premium on repurchase, the
write-off of unamortized financing fees and debt discount and
the costs associated with calling the untendered Debentures).
In August 1993, the Omnibus Budget Reconciliation Act
of 1993 became law and increased the maximum corporate
federal income tax rate from 34% to 35%, retroactive to
January 1, 1993.
<PAGE>
Liquidity and Capital Resources
Operating Data:
1994 1993 1992
Cash flows provided by (used for):
Operating activities $195.6 $121.8 $124.1
Investing activities (77.0) (54.2) (45.5)
Financing activities (114.5) (85.1) (67.9)
Net change in cash and
temporary cash investments $ 4.1 $ (17.5) $ 10.7
Cash from operating activities in 1994 and 1993 was
primarily net income before depreciation, deferred taxes,
extraordinary item and the cumulative effect of changes in
accounting principles, and 1994 was also affected by the sales
of accounts receivable. A significant source of cash in 1993
and 1992 ($6.3 million and $26.4 million, respectively) was
the realization of settlement proceeds with numerous insurance
carriers in connection with asbestos and hearing loss casualty
claims. Most of the settlements were for prior claims but
some cover future claims related to prior periods. As part
of the settlements, the Railroad agreed to release the
carriers from liability for future hearing loss claims. Only
$.5 million was received in 1994.
During 1994, additions to property of $86.4 million
included approximately $44.7 million spent on track and bridge
rehabilitation, approximately $13.8 million on communications
and signal work (including the conversion to CTC on the Yazoo
district), approximately $22.5 million on equipment purchases
and betterments and approximately $3.0 million on expansion
and rehabilitation of intermodal facilities, primarily
Memphis. During 1993, additions to property of $57.1 million
included approximately $36.6 million for track and bridge
rehabilitation and approximately $.6 million for the purchase
of 4 locomotives. In 1994 and 1993 capital expenditures
exceeded original estimates as several opportunities to
acquire equipment were acted upon in accordance with the
Railroad's strategy of owning more of its equipment. During
1992, additions to property of $49.7 million included
approximately $46.4 million for track and bridge
rehabilitation including approximately $5 million for the
construction of a new intermodal facility in the Chicago area.
Proceeds from the sales of excess materials generated by the
single-track project ($4.1 million in 1992) partially offset
the cost of property additions. Property retirements and
removals unrelated to the single-track project generated
proceeds of $8.2 million, $5.3 million and $3.5 million in
1994, 1993 and 1992, respectively.
The Railroad anticipates that base capital expenditures
for 1995 will be approximately $65 million and will
concentrate on track maintenance and renewal of track
structures such as bridges. In February 1995, the Railroad
placed a $25.8 million order for 20 new SD70 locomotives to
be delivered in the fourth quarter of 1995, to upgrade the
locomotive fleet. If additional opportunities such as lease
conversions or market-driven expansions occur in 1995, the
total capital spending could be approximately $100 million to
$110 million. These expenditures are expected to be met from
current operations or other available sources.
Since 1990, management has concentrated on reducing
leverage, expanding funding sources, lowering funding costs
and upgrading the debt ratings issued by the rating services.
During 1994, several events continued this process. The
Railroad's commercial paper program was expanded. A total of
$100 million can be issued and outstanding under the program
which is supported by a $150 million Revolver with the
Railroad's bank lending group (see below). Standard & Poor's
Corporation ("S&P"), Moody's Investor Services ("Moody's") and
Fitch Investors Service ("Fitch") have rated the commercial
paper A2, P3 and F2, respectively. At December 31, 1994,
$15.0 million was outstanding. For the year the rates ranged
from 3.365% to 6.25%. The Railroad views this program as a
significant long-term funding source and intends to issue
replacement notes as each existing issue matures. Therefore,
commercial paper borrowing is classified as long-term.
In the first quarter of 1994, the Railroad entered into
a receivables purchase agreement to sell undivided percentage
interests in certain of its accounts receivable, with
recourse, to a financial institution. The agreement, which
expires March 1997, allows for sales of accounts receivable
up to a maximum of $50 million at any one time. The Railroad
services the accounts receivable sold under the agreement.
At December 31, 1994, $50 million in accounts receivable had
been sold pursuant to the agreement. The Railroad retains the
same exposure to credit loss as existed prior to the sale.
Costs related to the agreement vary in correlation with
changes in prevailing interest rates. These costs, which are
included in Other Income, Net, were $2.2 million for the year
ended December 31, 1994.
In November 1994, the Railroad concluded negotiations
with its bank lending group whereby the Railroad's $100
million Revolver was amended and restated to a $150 million
Revolver expiring in 1999. Fees and interest rates are
predicated on the Railroad's long-term credit ratings.
Currently, the annual fee is 25 basis points and borrowings
under this agreement are at LIBOR plus 50 basis points. This
amended facility replaced the $100 million revolver due in
1996 and a $50 million 364-day facility due in October 1994.
The new Revolver will be used primarily for backup for the
Railroad's commercial paper program but can be used for
general corporate purposes. The available amount is reduced
by the outstanding amount of commercial paper borrowings and
any letters of credit issued on behalf of the Railroad under
the facility. No amounts have been drawn under the Revolver.
At December 31, 1994, the $150 million was limited to $132.6
million because $15.0 million in commercial paper was
outstanding and $2.4 million in letters of credit had been
issued. Since April 1993, when a tender offer for the
Railroad's $145 million 14-1/8% Senior Subordinated Debentures
("Debentures") was completed, the agreements with the bank
groups and the $160 million senior secured notes ("Senior
Notes") issued in 1991 have been unsecured. The Senior Notes
are callable with a make-whole provision in April 1995. No
decision has been made to prepay these notes.
The Railroad believes that its available cash, cash
generated by its operations and cash available from the
facilities described above will be sufficient to meet
foreseeable liquidity requirements.
Various borrowings of the Railroad are governed by
agreements which contain financial and operating covenants.
All entities were in compliance with these covenant
requirements at December 31, 1994, and management does not
anticipate any difficulty in maintaining such compliance.
In 1993, a $23.4 million extraordinary loss, net of
$12.6 million in tax benefits, was incurred in connection with
the Railroad's tender offer for the Debentures and the costs
associated with calling the $10.3 million untendered portion.
In connection with the tender offer for the Debentures,
the Railroad issued $100 million of 6.75% non-callable, 10-
year notes due 2003 (the "Notes") and irrevocably placed funds
with a trustee to cover principal, a 6% premium and interest
through the first call date of October 1, 1994, for the
untendered Debentures. At December 31, 1994, the Railroad's
public debt was rated Baa3 by Moody's and BBB by S&P. On
March 2, 1995, Moody's changed their rating to Baa2 and raised
the commercial paper program to P2.
The Railroad has entered into various hedge agreements
designed to mitigate significant changes in fuel prices. As
a result, approximately 92% of the Railroad's short-term
diesel fuel requirements through March 1995 and 46% through
June 1995 are protected against significant price changes.
See Note 6 of the Notes to Consolidated Financial Statements.
Certain covenants of the Railroad's debt agreements
restrict the level of dividends it may pay to IC. The
Railroad paid dividends to IC of $42.5 million in 1994, $27.4
million in 1993 and $6.4 million in 1992. In 1994, the
Railroad declared a special $60 million dividend to IC, which
will be paid as requested in 1995, for IC's stock repurchase
program. At December 31, 1994, approximately $44.9 million
of Railroad equity was free of such restrictions. In January
1995, the Railroad declared and paid a regular dividend of
$13.3 million to IC.
The Railroad has paid approximately $6 million, $8
million and $10 million in 1994, 1993, and 1992, respectively,
for severance, lump sum signing awards and other costs
associated with the various agreements signed in 1994, 1992
and 1991. The Railroad anticipates that an additional $7
million will be required in 1995 related to all such
agreements. These requirements are expected to be met from
current operating activities or other available sources. As
the Railroad continues to negotiate with its operating unions
on a local level, agreements may be reached that require
significant lump sum payments. It is too early to determine
if separate agreements will be reached but management believes
available funding sources will be sufficient to meet any
required payments.
Environmental Liabilities
The Railroad's operations are subject to comprehensive
environmental regulation by federal, state and local
authorities. Compliance with such regulation requires the
Railroad to modify its operations and expend substantial
manpower and financial resources.
Under the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("Superfund"), and
similar state and federal laws, the Railroad is potentially
liable for the cost of clean-up of various contaminated sites.
The Railroad has been notified that it is a potentially
responsible party at sites ranging from those with hundreds
of potentially responsible parties to sites at which the
Railroad is primarily responsible. The Railroad generally
participates in the clean-up at sites where other substantial
parties share responsibility through cost-sharing
arrangements, but under Superfund and other similar laws the
Railroad can be held jointly and severally liable for all
environmental costs associated with such sites.
The Railroad is aware of approximately 20 contaminated
sites and various fueling facilities at which it is probably
liable for some portion of the clean-up. The Railroad paid
approximately $3.0 million in 1994 toward the investigation
and remediation of those sites, and anticipates similar
expenditures annually in the future. During 1994, the Railroad
spent an additional $.6 million remediating environmental
spills resulting from derailments and other operating
activities. Furthermore, recent amendments to the Clean Air
Act require the Environmental Protection Agency to promulgate
regulations restricting the level of pollutants in locomotive
emissions which could impose significant retrofitting
requirements, operational inefficiencies or capital
expenditures in the future.
For all known sites of environmental contamination where
Railroad loss or liability is probable, the Railroad has
recorded an estimated liability at the time when a reasonable
estimate of remediation cost and Railroad liability can first
be determined. Adjustments to initial estimates are recorded
as necessary based upon additional information developed in
subsequent periods. Estimates of the Railroad's potential
financial exposure for environmental claims or incidents are
necessarily imprecise because of the difficulty of determining
in advance the nature and extent of contamination, the varying
costs of alternative methods of remediation, the regulatory
clean-up standards which will be applied, and the appropriate
allocation of liability among multiple responsible parties.
At December 31, 1994, the Railroad estimated the probable
range of its estimated liability to be $13 million to $48
million, and in accordance with the provisions of SFAS No. 5
had a reserve of $13 million for environmental contingencies.
This amount is not reduced for potential insurance recoveries
or third-party contribution where the Railroad is primarily
liable.
The risk of incurring environmental liability in
connection with both past and current activities is inherent
in railroad operations. Decades-old railroad housekeeping
practices were not always consistent with contemporary
standards, historically the Railroad leased substantial
amounts of property to industrial tenants, and the Railroad
continues to haul hazardous materials which are subject to
occasional accidental release. Because the ultimate cost of
known contaminated sites cannot be definitively established
and because additional contaminated sites yet unknown may be
discovered or future operations may result in accidental
releases, no assurance can be given that the Railroad will not
incur material environmental liabilities in the future.
However, based on its assessments of the facts and
circumstances now known, management believes that it has
recorded adequate reserves for known liabilities and does not
expect future environmental charges or expenditures to have
a material adverse effect on the Railroad's financial
position, results of operations, cash flow or liquidity.
Recent Accounting Pronouncements
In May 1993, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan" ("SFAS No.
114"). SFAS No. 114 requires that impaired loans be
measured based on the present value of expected future cash
flows discounted at the loan's effective interest rate. This
statement applies to financial statements for fiscal years
beginning after December 31, 1994, with earlier adoption
encouraged. The Railroad is currently evaluating the impact,
if any, this statement will have on its reported results when
it is adopted in the first quarter of 1995.
Item 8. Financial Statements and Supplementary Data
See Index to Consolidated Financial Statements on page 27 of
this Report.
Item 9. Changes in and Disagreement with Accountants in
Accounting Financial Disclosures
NONE
<PAGE>
PART III
Items 10, 11, 12 and 13
Intentionally omitted. See the Index page of this
Report for explanation.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K
(a) 1. Financial Statements:
See Index to Consolidated Financial Statements
on page 27 of this Report.
2. Financial Statement Schedules:
See Index to Financial Statement Schedules on
page F-22 of this Report.
3. Exhibits:
See items marked with "*" on the Exhibit Index
beginning on page E-1 of this Report. Items so marked
identify management contracts or compensatory plans
or arrangements as required by Item 14.
(b) 1. Reports on Form 8-K:
During the fourth quarter of 1994 the Registrant filed
with the Securities and Exchange Commission the
following reports on Form 8-K on the dates indicated
to report the events described:
NONE
(c) Exhibits:
The response to this portion of Item 14 is submitted
as a separate section of this Report. See Exhibit
Index beginning on page E-1.
(d) Financial Statement Schedules:
The response to this portion of Item 14 is submitted
as a separate section of this Report.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, there unto duly
authorized.
Illinois Central Railroad Company
By: /s/ DALE W. PHILLIPS
Dale W. Phillips
Vice President and Chief Financial Officer
Date: March 8, 1995
Pursuant to the requirements of the Securities Exchange
Act of 1934, this Report has been signed by the following
persons in the capacities and on the dates indicated.
Signature Title(s) Date
/s/GILBERT H. LAMPHERE Chairman of the March 8, 1995
Gilbert H. Lamphere of the Board and
Director
/s/E. HUNTER HARRISON President and March 8, 1995
E. Hunter Harrison Chief Executive
Officer (principal
executive officer)
Director
/s/DALE W. PHILLIPS Vice President March 8, 1995
Dale W. Phillips and Chief Financial
Officer (principal
financial officer)
Director
/s/JOHN V. MULVANEY Controller March 8, 1995
John V. Mulvaney (principal accounting
officer)
/s/RONALD A. LANE Director March 8, 1995
Ronald A. Lane
/s/JOHN D. MCPHERSON Director March 8, 1995
John D. McPherson
/s/GERALD F. MOHAN Director March 8, 1995
Gerald F. Mohan
<PAGE>
ILLINOIS CENTRAL RAILROAD COMPANY
AND SUBSIDIARIES
F O R M 10-K
FINANCIAL STATEMENTS
SUBMITTED IN RESPONSE TO ITEM 8
<PAGE>
ILLINOIS CENTRAL RAILROAD COMPANY
AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Public Accountants F-1
Consolidated Statements of Income for the three years ended
December 31, 1994 F-2
Consolidated Balance Sheets at December 31, 1994 and 1993 F-3
Consolidated Statements of Cash Flows for the
three years ended December 31, 1994 F-4
Consolidated Statements of Stockholder's Equity and Retained
Income for the three years ended December 31, 1994 F-5
Notes to Consolidated Financial Statements for
the three years ended December 31, 1994 F-6
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Illinois Central Railroad Company:
We have audited the accompanying consolidated balance
sheets of Illinois Central Railroad Company (a Delaware
corporation) and subsidiaries as of December 31, 1994 and 1993,
and the related consolidated statements of income, cash flows and
stockholder's equity and retained income for each of the three
years in the period ended December 31, 1994. These financial
statements and the schedule referred to below are the
responsibility of the Railroad's management. Our responsibility
is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the financial
position of Illinois Central Railroad Company and subsidiaries as
of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
As discussed in Notes 10 and 11 to the consolidated
financial statements, effective January 1, 1992, and January 1,
1993, the Railroad changed its methods of accounting for income
taxes and for postretirement health care and postemployment
benefits, respectively.
Our audits were made for the purpose of forming an
opinion on the basic financial statements taken as a whole. The
schedule listed in the index to financial statement schedules
herein is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the
auditing procedures applied in the audits of the basic financial
statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 17, 1995
<PAGE>
ILLINOIS CENTRAL RAILROAD COMPANY AND SUBSIDIARIES
Consolidated Statements of Income
($ in millions)
Years Ended December 31,
1994 1993 1992
Revenues $593.9 $564.7 $547.4
Operating expenses:
Labor and fringe benefits 196.2 190.2 191.3
Leases and car hire 59.5 73.1 72.6
Diesel fuel 31.5 30.4 30.0
Materials and supplies 38.6 36.7 33.1
Depreciation and amortization 24.9 22.8 21.4
Other 50.8 33.9 39.8
Special charge - - 8.9
Operating expenses 401.5 387.1 397.1
Operating income 192.4 177.6 150.3
Other income, net 4.5 2.8 3.6
Interest expense, net (26.0) (31.8) (42.9)
Income before income taxes,
extraordinary item and cumulative
effect of changes in accounting
principles 170.9 148.6 111.0
Provision for income taxes 58.2 56.6 37.7
Income before extraordinary item and
cumulative effect of changes
in accounting principles 112.7 92.0 73.3
Extraordinary item, net - (23.4) -
Cumulative effect of changes
in accounting principles - (0.1) 23.7
Net income $112. 7 $68.5 $97.0
The following notes are an integral part of the consolidated
financial statements.
<PAGE>
ILLINOIS CENTRAL RAILROAD COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
($ in millions)
ASSETS
December 31, 1994 December 31, 1993
Current assets:
Cash and temporary cash
investments $12.2 $8.1
Receivables, net of allowance
for doubtful accounts of $2.1
in 1994 and $3.1 in 1993 43.6 84.6
Materials and supplies, at
average cost 15.7 20.1
Assets held for disposition 9.1 9.1
Deferred income taxes - current 21.8 22.8
Other current assets 3.1 3.6
Total current assets 105.5 148.3
Investments 13.3 14.5
Properties:
Transportation:
Road and structures, including land 994.9 947.9
Equipment 114.6 71.7
Other, principally land 40.8 40.4
Total properties 1,150.3 1,060.0
Accumulated depreciation (25.9) (19.3)
Net properties 1,124.4 1,040.7
Other assets 15.2 10.2
Total assets $1,258.4 $1,213.7
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term debt $9.7 $1.1
Accounts payable 55.6 51.7
Dividends payable 60.0 15.0
Income taxes payable 0.5 3.5
Casualty and freight claims 24.9 24.7
Employee compensation and vacations 16.5 15.8
Taxes other than income taxes 16.2 13.9
Accrued redundancy reserves 6.8 6.8
Other accrued expenses 31.6 28.4
Total current liabilities 221.8 160.9
Long-term debt 297.6 347.3
Deferred income taxes 213.9 200.6
Other liabilities and reserves 132.7 138.1
Contingencies and commitments (Note 13)
Stockholder's equity:
Common stock authorized, issued and
outstanding 100 shares, $1 par value - -
Additional paid-in capital 129.1 128.6
Retained income 263.3 238.2
Total stockholder's equity 392.4 366.8
Total liabilities and stockholder's
equity $1,258.4 $1,213.7
The following notes are an integral part of the consolidated
financial statements.
<PAGE>
ILLINOIS CENTRAL RAILROAD COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
($ in millions)
Years Ended December 31,
1994 1993 1992
Cash flows from operating
activities:
Net income $112.7 $68.5 $97.0
Reconciliation of net
income to net cash
provided by (used for)
operating activities:
Extraordinary item, net - 23.4 -
Cumulative effect of changes
in accounting principles - 0.1 (23.7)
Depreciation and
amortization 24.9 22.8 21.4
Deferred income taxes 14.3 31.9 20.7
Special charge - - 8.9
Equity in undistributed
earnings of affiliates,
net of dividends received (0.4) (0.3) 0.2
Net gains on sales of real
estate (2.0) (0.8) (0.4)
Cash changes in working
capital 51.0 (3.1) (15.6)
Changes in other assets (4.3) (0.9) 2.8
Changes in other liabilities
and reserves (0.6) (19.8) 12.8
Net cash provided by
operating activities 195.6 121.8 124.1
Cash flows from investing activities :
Additions to properties (86.4) (57.1) (49.7)
Proceeds from sales of real
estate 3.8 1.5 1.3
Proceeds from single track
sales - - 4.1
Proceeds from equipment sales 4.4 3.8 2.2
Proceeds from sales of
investments 1.6 0.8 1.8
Other (0.4) (3.2) (5.2)
Net cash (used for) investing
activities (77.0) (54.2) (45.5)
<PAGE>
Cash flows from financing activities :
Proceeds from issuance of
debt 113.0 304.6 -
Principal payments on debt (159.2) (400.0) (61.0)
Net proceeds (payments)
Commercial Paper (23.1) 38.1 -
Dividends paid (42.5) (27.4) (6.4)
Purchase of subsidiary's common
stock (2.7) (0.4) (0.5)
Net cash (used for) financing
activities (114.5) (85.1) (67.9)
Changes in cash and temporary
cash investments 4.1 (17.5) 10.7
Cash and temporary cash
investments at beginning of
period 8.1 25.6 14.9
Cash and temporary cash
investments at end of period $12.2 $8.1 $25.6
Supplemental disclosure of cash
flow information:
Cash paid during the year for:
Interest (net of amount
capitalized) $27.9 $38.3 $44.3
Income taxes $46.9 $10.9 $15.9
The following notes are an integral part of the consolidated
financial statements.
<PAGE>
ILLINOIS CENTRAL RAILROAD COMPANY AND SUBSIDIARIES
Consolidated Statements of Stockholder's Equity and Retained Income
Total
Additional Stock
Common Common Paid-In Retained holder's
Share Stock Capital Income Equity
Balance December 31, 1991 100 $- $122.2 $121.5 $243.7
Capital contribution 3.6 3.6
Dividends (12.8) (12.8)
Net income 97.0 97.0
Balance December 31, 1992 100 - 125.8 205.7 331.5
Capital contribution 2.8 2.8
Dividends (36.0) (36.0)
Net income 68.5 68.5
Balance December 31, 1993 100 - 128.6 238.2 366.8
Capital contribution 0.5 0.5
Dividends (87.6) (87.6)
Net income 112.7 112.7
Balance December 31, 1994 100 $- $129.0 $263.4 $392.4
The following notes are an integral part of the consolidated
financial statements.
<PAGE>
ILLINOIS CENTRAL RAILROAD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The Railroad
Illinois Central Corporation, a holding company,
(hereinafter, "IC") was formed originally for the purpose of
acquiring, through a wholly-owned subsidiary, the outstanding
common stock of Illinois Central Transportation Company ("ICTC").
Following a tender offer and several mergers, the Illinois
Central Railroad Company ("Railroad") is the surviving
corporation and the successor to ICTC and now a wholly-owned
subsidiary of the IC.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of
the Railroad and its subsidiaries. Significant investments in
affiliated companies are accounted for by the equity method.
Transactions between consolidated companies have been eliminated
in the accompanying consolidated financial statements.
Properties
Depreciation is computed by the straight-line method and
includes depreciation on properties under capital leases.
Depreciation for track structure, other road property, and
equipment is calculated using the composite method. In the case
of routine retirements, removal cost less salvage recovery is
charged to accumulated depreciation. Expenditures for maintenance
and repairs are charged to operating expense.
The Interstate Commerce Commission ("ICC") approves the
depreciation rates used by the Railroad. The approximate ranges
of annual depreciation rates for major property classifications
are as follows:
Road properties 1% - 8%
Transportation equipment 1% - 7%
Revenues
Revenues are recognized based on services performed and
include estimated amounts relating to movements in progress for
which the settlement process is not complete. Estimated revenue
amounts for movements in progress are not significant.
Income Taxes
Income per share is omitted as the Railroad is a wholly-owned
subsidiary of IC.
Cash and Temporary Cash Investments
Cash in excess of operating requirements is invested in
certain funds having original maturities of three months or less.
These investments are stated at cost, which approximates market
value.
Income Per Share
Income per common share of the Railroad is based on the
weighted average number of shares of common stock and common
stock equivalents outstanding for the period. Dilution, which
could result if all outstanding common stock equivalents were
exercised, is not significant.
Futures, Options, Caps, Floors and Forward Contracts
In March 1990, the FASB issued Statement of Financial
Accounting Standards No. 105 "Disclosure of Information about
Financial Instruments with Off Balance Sheet Risk and Financial
Instruments with Concentration of Credit Risk" ("SFAS 105").
Disclosures required by SFAS 105 are found in various notes where
the financial instruments or related risks are discussed. See
specifically Notes 6, 7, 8, 9 and 13.
Derivatives
The Railroad has only limited involvement with derivative
financial instruments and does not use them for trading purposes.
Specifically, the Railroad has entered into various diesel fuel
commodity collar and swap agreements with the objective of
mitigating significant changes in fuel prices. Premiums paid for
the purchase of these agreements are amortized to fuel expense
over the terms of the agreements. Unamortized premiums are
included in Other Assets in the Consolidated Balance Sheets.
Amounts receivable or payable under the collar and swap
agreements are accrued as increases or decreases to Diesel Fuel
Expense. See Note 6.
Casualty Claims
The Railroad accrues for injury and damage claims based on
actuarially determined estimates of the ultimate costs associated
with asserted claims and claims incurred but not reported.
Estimated amounts expected to be settled within one year are
classified as current liabilities in the accompanying
Consolidated Balance Sheets.
Employee Benefit Plans
All employees of the Railroad are covered under the Railroad
Retirement Act. In addition, management employees of the
Railroad are covered under a defined contribution plan.
Contribution costs of the plan are funded currently.
Mr. E. L. Moyers, the Railroad's former Chairman, President
and Chief Executive Officer ("Mr. Moyers") is covered by a
supplemental plan which is discussed in Note 10.
Effective January 1, 1993, the Railroad adopted both the
Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions"
("SFAS No. 106") and the Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment
Benefits" ("SFAS No. 112"). See Note 10 for discussion of the
impact of SFAS No. 106 and SFAS No. 112.
Reclassifications
Certain items relating to prior years have been reclassified
to conform to the presentation in the current year.
3. Extraordinary Item and Refinancing
The 1993 extraordinary loss resulted from the retirement of
the Railroad's 14-1/8% Senior Subordinated Debentures (the
"Debentures") and refinancing the Permanent Facility. The loss
was $23.4 million, net of tax benefits of $12.6 million. The
loss resulted from the premium paid, the write-off of unamortized
financing fees and debt discount and costs associated with the
calling of the $10.3 million of Debentures not tendered. The net
proceeds of the 6.75% Notes (see Note 8), borrowings under the
$180 million Revolving Credit Facility and other available cash
were used to fund the retirement of the Debentures.
<PAGE>
4. Other Income, Net
Other Income, Net consisted of the following ($ in millions):
Years Ended December 31,
1994 1993 1992
Rental income, net $ 3.3 $ 3.9 $ 3.8
Net gains on real estate sales 2.0 .8 .4
Net gain (loss) on disposal
of rolling stock .2 (2.3) -
Equity in undistributed earnings
of affiliates .7 .5 .3
Receivable sales (see Note 9) (2.2) - -
Other, net .5 (.1) (.9)
Other Income, Net $ 4.5 $ 2.8 $ 3.6
5. Supplemental Cash Flow Information
Cash changes in components of working capital, exclusive of
Current Maturities of Long-Term Debt, included in the
Consolidated Statements of Cash Flows were as follows ($ in
millions):
Years Ended December 31,
1994 1993 1992
Receivables, net $41.1 $ (5.5) $ 1.9
Materials and supplies 4.4 (1.4) (3.2)
Other current assets .4 (1.5) .4
Accounts payable 6.6 (1.7) (3.7)
Income taxes payable (3.0) 13.9 1.5
Accrued redundancy reserves - (2.6) (11.0)
Other current liabilities 1.5 (4.3) (1.5)
$51.0 $ (3.1) $ (15.6)
Included in changes in Other Liabilities and Reserves is
approximately $6.3 million and $23.4 million for the years ended
December 31, 1993 and 1992, respectively, reflecting the
settlement of casualty claims with numerous insurance carriers.
The Railroad entered into capital leases of $24.7 million
covering 65 locomotives and 1,623 freight cars in 1994 and 200
freight cars in 1993 in the amount of $4.4 million. See Note 7
for a recap of the present value of the minimum lease payments.
6. Materials and Supplies
Materials and Supplies, valued using the average cost
method, consist of track material, switches, cars and locomotive
parts and fuel.
As of December 31, 1994, the Railroad was a party to four
diesel fuel collar agreements under which the Railroad receives
or makes monthly payments based on the monthly average near-by
contract price for Heating Oil #2 traded on the New York
Mercantile Exchange (the "Contract Price"), which was $.486 per
gallon for December 1994. Under the agreements, the Railroad
receives or makes monthly payments on notional amounts based on
the excess of the Contract Price over $.60 per gallon or when the
Contract Price is below an amount averaging approximately $.51,
respectively. As of December 31, 1994, the agreements covered
notional quantities amounting to 4,000,000 gallons through March
1995 and 2,000,000 gallons for the period April 1995 through June
1995, or approximately 92% and 46%, respectively, of the
Railroad's monthly diesel fuel requirements.
7. Leases
As of December 31, 1994, the Railroad leased 7,880 of its
cars and 208 of its locomotives. These leases generally have
original terms of 15 years and expire between 1995 and 2003.
Under the terms of the majority of its leases, the Railroad has
the right of first refusal to purchase, at the end of the lease
term, certain cars and locomotives at or below fair market value.
The Railroad also leases office and computer equipment, vehicles
and office facilities.
Net obligations under capital leases at December 31, 1994
and 1993, included in the Consolidated Balance Sheets are $27.9
million and $5.4 million, respectively.<PAGE>
At December 31, 1994, minimum rental payments under capital
and operating leases that have initial or remaining
noncancellable terms in excess of one year were as follows ($ in
millions):
Capital Operating
Leases Leases
1995 $11.2 $ 34.3
1996 13.9 31.1
1997 2.0 19.1
1998 1.5 9.7
1999 1.5 7.5
Thereafter 2.6 18.4
Total minimum lease payments 32.7 $120.1
Less: Imputed interest 4.8
Present value of
minimum payments $27.9
Total rent expense applicable to noncancellable operating
leases amounted to $48.8 million in 1994, $47.9 million in 1993
and $48.4 million for 1992. Most of the leases provide that the
Railroad pay taxes, maintenance, insurance and certain other
operating expenses.
<PAGE>
8. Long-Term Debt and Interest Expense
Long-Term Debt at December 31, consisted of the following ($
in millions):
1994 1993
Debentures and other debt, due
1995 to 2056, 4.5% to 10.9% $ 10.5 $ 10.8
Commercial Paper, at average
interest rate 4.72% in 1994 and
3.57% in 1993 15.0 38.1
Bank Line, at average interest
ratio of 4.02% in 1994 and of
3.49% in 1993 - 40.0
Notes, due 2003, 6.75% 100.0 100.0
Senior Notes, due 1998 to 2001,
10.02% and 10.4% 159.8 159.8
Capitalized leases (Note 7) 18.5 4.9
Unamortized (discount) (6.2) (6.3)
Total Long-Term Debt $297.6 $347.3
At December 31, 1994, the aggregate annual maturities and
sinking fund requirements for debt payments for 1995 through 2000
and thereafter are $9.7 million, $27.9 million, $1.7 million, $56.1
million, $56.2 million, $25.8 million and $129.9 million,
respectively. The weighted-average interest rate for 1994 and 1993
on total debt excluding the effect of discounts, premiums and
related amortization was 8.8% and 9.1%, respectively.
In November 1993, the Railroad initiated a public commercial
paper program. The commercial paper is rated A2 by S&P, P3 by
Moody's and F2 by Fitch and is supported by a new $150 million
Revolver with the Railroad's bank lending group due 1999. The
Railroad pays an annual fee of 25 basis points on the Revolver and
LIBOR plus 50 basis points for any borrowings. The Revolver
replaced both a $50 million Bank Line which expired in October 1994
and the former $100 million revolver with the banks due 1996. The
Railroad views commercial paper as a significant long-term funding
source and intends to issue replacement notes as maturities occur.
Therefore, the $15.0 million outstanding at December 31, 1994 has
been classified as long-term.
The Revolver will be used primarily as backup for the
commercial paper but can be used for general corporate purposes.
The available amount is reduced by the outstanding amount of
commercial paper borrowings and any letters of credit issued on
behalf of the Railroad under the facility. No amounts have been
drawn under the Revolver. The $150 million was limited to $132.6
million because $15.0 million in commercial paper was outstanding
and $2.4 million in letters of credit had been issued.
The $100 million 6.75% Notes ("Notes") (issued at a slight
discount 1.071%) pay interest semiannually in May and November and
are covered by an Indenture. Of the $160 million Senior Notes
("Senior Notes"), $109.8 million bears interest at a rate of 10.02%
and $50 million at 10.4%. Principal payments of $55 million, $54.8
million, $25 million and $25 million are due in 1998, 1999, 2000
and 2001, respectively. The Senior Notes are governed by a Note
Purchase Agreement and are subject to prepayment beginning in April
1995.
Various borrowings of the Railroad are governed by agreements
which contain certain affirmative and negative covenants customary
for facilities of this nature including restrictions on additional
indebtedness, investments, guarantees, liens, distributions, sales
and leasebacks, and sales of assets and capital stock. Some also
require the Railroad to satisfy certain financial tests, including
a leverage ratio, an earnings before interest and taxes to interest
charges ratio, debt service coverage, and minimum consolidated
tangible net worth requirements.
<PAGE>
Interest Expense, Net consisted of the following ($ in
millions):
Years Ended December 31,
1994 1993 1992
Interest expense $28.9 $33.8 $45.1
Less:
Interest capitalized 1.4 .8 .6
Interest income 1.5 1.2 1.6
Interest Expense, Net $26.0 $31.8 $42.9
9. Sales of Accounts Receivable
In 1994, the Railroad entered into a revolving agreement to
sell undivided percentage interests in certain of its accounts
receivable, with recourse, to a financial institution. The
agreement, which expires March 1997, allows for sales of accounts
receivable up to a maximum of $50 million at any one time. The
Railroad services the accounts receivable sold under the agreement.
At December 31, 1994, $50 million in accounts receivable had been
sold pursuant to the agreement. The Railroad retains the same
exposure to credit loss as existed prior to the sale. Costs
related to the agreement vary in correlation with changes in
prevailing interest rates. These costs, which are included in
Other Income, Net, were $2.2 million for 1994.
10. Employee Benefit Plans
Retirement Plans. All employees of the Railroad are covered
under the Railroad Retirement Act. In addition, management
employees of the Railroad are covered under a defined contribution
plan. Contributions under the plan vest immediately. Expenses
relating to the defined contribution plan were $.5 million, $.4
million and $.4 million for the years ended December 31, 1994,
1993 and 1992, respectively.
Mr. Moyers is covered by a non-qualified, unfunded supplemental
retirement benefit agreement which provides for a defined benefit
payable annually, commencing upon death, permanent disability or
retirement (with benefits arising from retirement commencing upon
his attaining age 65 and compliance with certain non-competition
agreements), in the amount of $250,000 per year for a maximum of 15
years. In accordance with the term of the agreement, no payments
will be made while Mr. Moyers is employed by another Class I
railroad. The present value of this agreement was included in the
1992 special charge. See Note 15.
Postretirement Plans. In addition to the Railroad's defined
contribution plan for management employees, the Railroad has three
benefit plans which provide some postretirement benefits to most
former full-time salaried employees and selected former union
represented employees. The medical plan for salaried retirees is
contributory, with retiree contributions adjusted annually if
expected inflation rate exceeds 9.5%, and contains other cost
sharing features such as deductibles and co-payments. The
Railroad's contribution will be fixed at the 1999 year end rate for
all subsequent years. Salaried retirees are covered by a life
insurance plan which provides a nominal death benefit and is non-
contributory. The medical plan for locomotive engineers who
retired under a special early retirement program in 1987 provides
non-contributory coverage until age 65. All benefits under this
plan terminate in 1998. There are no plan assets and the Railroad
funds these benefits as claims are paid.
Postemployment Benefit Plans. The Railroad provides certain
postemployment benefits such as long-term salary continuation and
waiver of medical and life insurance co-payments while on long-term
disability.
SFAS No. 106 and SFAS No.112. As described in Note 2 effective
January 1, 1993 the Railroad adopted SFAS No. 106 and SFAS No. 112.
With respect to SFAS No. 106, the Railroad elected to immediately
recognize the transition asset associated with adoption which
resulted because the Railroad had previously recorded an amount
under purchase accounting to reflect the estimated liability for
such benefits as of the acquisition date of ICTC. SFAS No. 106
requires that future costs associated with providing postretirement
benefits be recognized as expense over the employees' requisite
service period.
<PAGE>
As a result of adopting these two standards, the Railroad
recorded a decrease to net income of $84,000 (net of taxes of
$46,000) as a cumulative effect of changes in accounting principles
($ in millions):
Postretirement Benefits (SFAS No. 106):
APBO at January 1, 1993:
Medical $36.5
Life 2.3
Total APB 38.8
Liability previously recorded (40.3)
Transition Asset 1.5
Postemployment Benefits Obligation
at January 1, 1993 (SFAS 112) (1.6)
Pre-tax Cumulative Effect of Changes
in Accounting Principles (.1)
Related tax benefit -
Cumulative Effect of Changes
in Accounting Principles $ (.1)
Per Share Impact $ -
In accordance with each standard, years prior to 1993 have not
been restated. The adoption of these two standards had no
significant effect on income before cumulative effect of changes in
accounting principles as compared to the Railroad's prior pay-as-
you-go method of accounting for such benefits.
The accumulated postretirement benefit obligations ("APBO") of
the postretirement plans were as follows ($ in millions):
December 31,
1994 1993
Medical Life Total Total
Accumulated postretirement
benefit obligation:
Retirees $15.7 $ 2.0 $17.7 $28.8
Fully eligible active
plan participants .6 - .6 .7
Other active plan
participants . 3.3 - 3.3 4.7
Total APBO $19.6 $ 2.0 21.6 34.2
Unrecognized net gain 18.9 5.0
Accrued liability for
postretirement benefits $40.5 $39.2
The weighted-average discount rate used in determining the
accumulated post-retirement benefit obligation was 7.25% at
December 31, 1993. As a result of the rise in general interest
rates in 1994 on high quality investment vehicles, the Railroad
increased the weighted-average discount rate to 8.5% as of December
31, 1994. The change in rates resulted in approximately $2.2
million actuarial gain. The actuarial gain along with actual
experience gains, primarily fewer claims and lower medical rate
inflation, resulted in a total $18.9 million unrecognized net gain
as of December 31, 1994. In accordance with SFAS No. 106, the
excess gain is subject to $1.3 million annual amortization based on
an amortization period of approximately 13 years.
The components of the net periodic postretirement benefits cost
were as follows ($ in millions):
Years Ending
December 31,
1994 1993
Service costs $ .2 $ .1
Interest costs 2.4 3.0
Net amortization of
excess gain (.1) -
Net periodic postretirement
benefit costs $ 2.5 $ 3.1
The weighted-average annual assumed rate of increase in the per
capita cost of covered benefits (e.g., health care cost trend
rate) for the medical plans is 13.0% for 1995 and is assumed to
decrease gradually to 6.25% by 2001 and remain at that level
thereafter. The health care cost trend rate assumption normally
has a significant effect on the amounts reported; however, as
discussed, the plan limits annual inflation for the Railroad's
portion of such costs to 9.5% each year. Therefore, an increase
in the assumed health care cost trend rates by one percentage
point in each year would have no impact on the Railroad's
accumulated postretirement benefit obligation for the medical
plans as of December 31, 1994, or the aggregate of the service
and interest cost components of net periodic postretirement
benefit expense in future years.
11. Provision for Income Taxes
Effective January 1, 1992, the Railroad adopted the Statement
of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS No. 109"). As a result, the Railroad recorded a
$23.7 million reduction in its accrued net deferred income tax
liability as of January 1, 1992. The gain recorded upon adoption
could not be recognized previously in accordance with SFAS No. 96
which the Railroad had adopted in 1988. The Railroad elected to
report this change as the cumulative effect of a change of
accounting principle.
On August 10, 1993, the Omnibus Budget Reconciliation Act of
1993 became law and increased the maximum corporate federal income
tax rate from 34% to 35% retroactive to January 1, 1993. This
change required the Railroad to record additional deferred income
tax expense of approximately $3.1 million in 1993 to reflect the
new tax rate's impact on net deferred income tax liability as of
January 1, 1993. In 1994, a $5.0 million tax benefit was
recorded to reflect the favorable resolution of prior-period tax
issues associated with the former parent of ICTC.
<PAGE>
The Provision for Income Taxes for continuing operations
consisted of the following ($ in millions):
Years Ended December 31,
1994 1993 1992
Current income tax:
Federal $39.9 $23.8 $15.4
State 4.0 .9 1.6
Deferred income taxes 14.3 31.9 20.7
Provision for Income Taxes $58.2 $56.6 $37.7
The effective income tax rates for the years ended December 31,
1994, 1993 and 1992, were 34%, 38% and 34%, respectively. See
Note 3 for the tax benefits associated with the 1993
extraordinary loss.
The items which gave rise to differences between the income taxes
provided for continuing operations in the Consolidated Statements
of Income and the income taxes computed at the statutory rate are
summarized below ($ in millions):
Years Ended December 31,
1994 1993 1992
Expected tax expense
computed at statutory
rate $59.8 35% $52.0 35% $37.7 34%
Dividends received
exclusion (.3) - (.1) - (.1) -
Impact of OBRA 1993
rate change - - 3.1 2 - -
State income taxes,
net of Federal tax
effect 3.6 2 .6 - 1.0 1
Favorable resolution
of prior period tax
issues (5.0) (3) - - - -
Other items, net .1 - 1.0 1% (.9) (1)
Provision for
Income Taxes $58.2 34% $56.6 38% $37.7 34%
Temporary differences between book and tax income arise because
the tax effects of transactions are recorded in the year in which
they enter into the determination of taxable income. As a
result, the book provisions for taxes differ from the actual
taxes reported on the income tax returns. The net results of such
differences are included in Deferred Income Taxes in the
Consolidated Balance Sheets.
<PAGE>
At December 31, 1994, the Railroad, for tax or financial
statement reporting purposes, had no Federal net operating loss
carryovers.
Deferred Income Taxes consisted of the following ($ in millions):
December 31,
1994 1993
Deferred tax assets $ 71.0 $ 82.2
Less: Valuation allowance (1.8) (2.2)
Deferred tax assets,
net of valuation allowance 69.2 80.0
Deferred tax liabilities (261.3) (259.5)
Deferred Income Taxes $(192.1) $(179.5)
The valuation allowance is comprised of the portion of state
tax net operating loss carryforwards expected to expire before they
are utilized and non-deductible expenses incurred with the previous
merger of wholly-owned subsidiaries.
Major types of deferred tax assets are: reserves not yet
deducted for tax purposes ($56.0 million) and safe harbor leases
($11.3 million). Major types of deferred tax liabilities are:
accelerated depreciation ($216.6 million), land basis differences
($10.1 million) and debt marked to market ($2.0 million).
IC and the Railroad have a tax sharing agreement whereby the each
Railroad's federal income tax and state income tax liabilities are
determined on a separate Railroad income tax basis as if it were
not a member of the IC's consolidated group, with no benefit for
prior net operating losses or credit carryovers from prior years.
12. Equity and Restrictions on Dividends
Certain covenants of the Railroad's debt agreements restrict
the level of dividends it may pay to IC. The Railroad paid
dividends to IC of $42.5 million in 1994, $27.4 million in 1993 and
$6.4 million in 1992. In 1994, the Railroad declared a special $60
million dividend to IC, which will be paid as requested by IC in 1995,
for IC's stock repurchase program. At December 31, 1994,
approximately $44.9 million of Railroad equity was free of such
restrictions. In January 1995, the Railroad declared and paid a
regular dividend of $13.3 million to IC.
For the years ended December 31, 1994, 1993 and 1992, IC made capital
contributions of $.5 million, $2.8 million and $3.6 million, respectively,
to the Railroad which was equivalent to the vested portion of the
restricted IC Common Stock granted to various Railroad employees.
Such restricted stock vests in equal installments through 1996.
13. Contingencies, Commitments and Concentration of Risks
The Railroad is self-insured for the first $5 million of each
loss. The Railroad carries $295 million of liability insurance per
occurrence, subject to an annual cap of $395 million in the
aggregate for all losses. This coverage is considered by the
Railroad's management to be adequate in light of the Railroad's
safety record and claims experience.
As of December 31, 1994, the Railroad had $2.4 million of
letters of credit outstanding as collateral primarily for surety
bonds executed on behalf of the Railroad. Such letters of credit
expire in 1995 and are automatically renewable for one year. The
letters of credit reduced the maximum amount that could be borrowed
under the Revolver (see Note 8).
The Railroad has guaranteed repayment of certain indebtedness
of a jointly owned Railroad aggregating $7.8 million. The
Railroad's primary share is $1.0 million; the remainder is a
primary obligation of other unrelated owner companies.
The Railroad has agreed to acquire 20 new SD-70 locomotives for
a total cost of $25.8 million with delivery expected in October
1995.
There are various regulatory proceedings, claims and litigation
pending against the Railroad. While the ultimate amount of
liability that may result cannot be determined, in the opinion of
the Railroad's management, based on present information, adequate
provisions for liabilities have been recorded. See "Management's
Discussion and Analysis - Liquidity and Capital Resources -
Environmental Liabilities" for a discussion of environmental
matters.
14. Disclosures about Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments for which it is
practicable to estimate that value:
Cash and temporary cash investments. The carrying amount
approximates fair value because of the short maturity of those
instruments.
Certain Investments in Debt and Equity Securities. Effective
January 1, 1994, the Railroad adopted the Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investment in
Debt and Equity Securities"("SFAS No. 115"). SFAS No. 115 expands
the use of fair value accounting for certain investments in debt
and equity securities but retains the use of the amortized cost
method for investments in debt securities that the reporting
enterprise has the positive intent and ability to hold to maturity.
All of the investments are temporary and held for less than 90
days. They are included in the Consolidated Balance Sheet as part
of Cash and Temporary Cash Investments. For the periods presented
below, all investments were in U.S. Corporate demand notes. It is
the intent of the Railroad to hold all debt securities to maturity,
therefore, the following is provided in accordance with SFAS No.
115 ($ in millions):
12-31-94 1-1-94
Aggregate fair value $8.4 $4.6
Gross unrealized holding gains - -
Gross unrealized holding losses - -
Amortized cost 8.4 4.6
Investments. The Railroad has investments of $8.6 million in
1994 and $9.1 million in 1993 for which there are no quoted market
prices. These investments are in joint railroad facilities,
railroad terminal associations, switching railroads and other
transportation companies. For these investments, the carrying
amount is a reasonable estimate of fair value. The Railroad's
remaining investments ($4.7 million in 1994 and $5.4 million in
1993) are accounted for by the equity method.
Long-term debt. The fair value of the Railroad's long-term
debt is estimated based on the quoted market prices for the same or
similar issues or on the current rates offered to the Railroad for
debt of the same remaining maturities.
Derivatives. The fair value of diesel fuel collar and swap
agreements is the estimated amount that the Railroad would receive
or pay to terminate the agreements as of year end, taking into
account the current credit worthiness of the agreement
counterparties.
The estimated fair values of the Railroad's financial
instruments at December 31, are as follows ($ in millions):
1994 1993
Carrying Fair Carrying Fair
Amount Value Amount Value
Cash and temporary
cash investments $ 12.2 $ 12.2 $ 8.1 $ 8.1
Investments 8.6 8.6 9.1 9.1
Accounts payable
(derivatives) (.1) (.4) (.5) (4.6)
Debt (307.3) (308.6) (348.4) (368.9)
15. Special Charge
In 1992, the Railroad recorded a pretax special charge of $8.9
million as part of operating expense. The special charge reduced
Net Income by $5.9 million or $.13 per share.
The special charge consisted of $7 million for various costs
associated with the retirement of Mr. Moyers and the related
organizational changes. The costs associated with Mr. Moyers'
retirement include the present value of his pension, accelerated
vesting of a portion of his restricted stock award and certain
costs of a non-competition agreement. The remaining $1.9 million
was for the disposition costs of railcars and a building and its
adjacent land.
<PAGE>
16. Selected Quarterly Financial Data - (Unaudited) ($ in
millions):
First Second Third Fourth
1994 Quarter Quarter Quarter Quarter(a)
Revenues $147.5 $145.2 $146.7 $154.5
Operating income 48.6 44.1 43.8 55.9
Net income 26.9 24.7 25.1 36.0
1993
Revenues $142.7 $132.1 $147.4 $142.5
Operating income 45.9 37.8 45.9 48.0
Income before
extraordinary
item and cumulative
effect of changes in
accounting principles 24.1 19.9 21.6 26.4
Net income (loss) 24.0 (3.5) 21.6 26.4
1992
Revenues $138.7 $129.9 $131.4 $147.4
Operating income 42.4 36.3 36.2 35.4
Income before cumulative
effect of change in
accounting principle 21.3 17.2 17.7 17.1
Net income 45.0 17.2 17.7 17.1
(a) Includes the special charge recorded in the fourth quarter
of 1992, see Note 15.
<PAGE>
ILLINOIS CENTRAL RAILROAD COMPANY
AND SUBSIDIARIES
F O R M 10-K
FINANCIAL STATEMENT SCHEDULES
SUBMITTED IN RESPONSE TO ITEM 14(a)
<PAGE>
ILLINOIS CENTRAL RAILROAD COMPANY
AND SUBSIDIARIES
I N D E X
T O
FINANCIAL STATEMENT SCHEDULES
SUBMITTED IN RESPONSE TO ITEM 14(a)
Schedules for the three years ended December 31, 1994:
II-Valuation and qualifying accounts .. . . . .F-23
Pursuant to Rule 5.04 of General Rules of Regulation S-X, all other
schedules are omitted because they are not required or because the
required information is set forth in the financial statements or
related notes thereto.
<PAGE>
ILLINOIS CENTRAL RAILROAD COMPANY
AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
($ in millions)
Balance At Additions Payments Balance
Beginning Charged And At End
Of Year To Expense (Charges) Of Year
Year Ended December 31, 1994
Classification
Redundancy and guarantee
reserve $43.6 $1.8 $7.2 $38.2
Casualty and other
reserves 62.3 16.9 17.5 61.7
Environmental 11.9 4.4 3.0 13.3
Bad debt reserve 3.1 1.9 2.9 2.1
Taxes 2.2 - 0.4 1.8
Total $123.1 $25.0 $31.0 $117.1
Year Ended December 31, 1993
Redundancy and guarantee
reserve $51.6 $1.8 $9.8 $43.6
Casualty and other
reserves 67.4 18.8 23.9 62.3
Environmental 9.9 2.9 0.9 11.9
Bad debt reserve 2.6 2.0 1.5 3.1
Taxes 3.3 - 1.1 2.2
Total $134.8 $25.5 $37.2 $123.1
Year Ended December 31, 1992
Redundancy and guarantee
reserve $61.3 $2.1 $11.8 $51.6
Casualty and other
reserves 60.4 21.3 14.3 67.4
Environmental 10.1 2.3 2.5 9.9
Bad debt reserve 5.1 1.9 4.4 2.6
Taxes - 3.7 0.4 3.3
Total $136.9 $31.3 $33.4 $134.8
<PAGE>
ILLINOIS CENTRAL CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Sequetial
No. Descriptions No.
3.1 Articles of Incorporation of Illinois Central
Railroad Company, as amended. (Incorporated
by reference to Exhibit 3.1 to the
Registration Statement of Illinois Central
Railroad Company on Form S-1. (SEC File No.
33-29269))
3.2 By-Laws of Illinois Central Railroad Company,
as amended. (Incorporated by reference to
Exhibit 3.2 to the Registration Statement of
Illinois Central Railroad Company on Form S-
1. (SEC File No. 33-29269))
4.1 Form of 14-1/8% Senior Subordinated Debenture
Indenture dated as of September 15, 1989 (the
"Senior Subordinated Debenture Indenture")
between Illinois Central Railroad Company and
United States Trust Railroad of New York,
Trustee (including the form of 14-1/8% Senior
Subordinated Debenture included as Exhibit A
therein). (Incorporated by reference to
Exhibit 4.1 to the Registration Statement of
Illinois Central Railroad Company on Form S-
1, as amended. (SEC File No. 33-29269))
4.2 Form of Pledge Agreement dated as of
September 22, 1989, and amended and restated
as of July 23, 1991, among Illinois Central
Corporation and the Banks named therein that
are or may become parties to the Amended and
Restated Revolving Credit and Term Loan
Agreement dated as of September 22, 1989, and
amended and restated as of July 23, 1991,
among the Illinois Central Railroad Company
and the Banks named therein and the Senior
Note Purchasers that are parties to the Note
Purchase Agreement dated as of July 23, 1991.
(Incorporated by reference to Exhibit 4.4 to
the Quarterly Report of Illinois Central
Corporation on Form 10-Q for the three months
ended September 30, 1991. (SEC File No. 1-
10720))
* Used herein to identify management contracts
on compensation plans or arrangements as
required by Item 14 of Form 10-K.
<PAGE>
4.3 Form of Note Purchase Agreement dated as of
July 23, 1991, among Illinois Central
Railroad Company, as issuer, and Illinois
Central Railroad Company, as guarantor, for
10.02% Guaranteed Senior Secured Series A
Notes due 1999 and for 10.4% Guaranteed
Senior Secured Series B Notes due 2001
(including the Form of Series A Note and
Series B Note included as Exhibits A-1 and A-
2, respectively, therein). (Incorporated by
reference to Exhibit 4.3 to the Quarterly
Report of the Illinois Central Railroad
Company on Form 10-Q for the three months
ended September 30, 1991. (SEC File No. 1-
7092))
4.4 Form of Commercial Paper Dealer Agreement
between Illinois Central Railroad Company and
Lehman Commercial Paper, Inc. dated as of
November 19, 1993. (Incorporated by reference
to Exhibit 4.10 to the Annual Report on Form
10-K for the year ended December 31, 1993 for
Illinois Central Railroad Company filed March
16, 1994. (SEC File No. 1-7092))
4.5 Form of Issuing and Paying Agency Agreement
of the Illinois Central Railroad Company
related to the Commercial Paper Program
between Illinois Central Railroad Company and
Bank America National Trust Railroad dated as
of November 19, 1993, (including Exhibit A
the Form of Certificated Commercial Paper
Note included therein). (Incorporated by
reference to Exhibit 4.11 to the Annual
Report on Form 10-K for the year ended
December 31, 1993 for Illinois Central
Railroad Company filed March 16, 1994. (SEC
File No. 1-7092))
4.6 Toronto Dominion Credit Agreement
(Incorporated by reference to Exhibit 4.1 to
the Quarterly Report of the Illinois Central
Railroad Company on Form 10-Q for the three
months ended March 31, 1994. (SEC File No. 1-
7092))
4.7 Form of Receivables Purchase Agreement dated
as of March 29, 1994, between Illinois
Central Railroad Company and Golden Gate
Funding Corporation. (Incorporated by
reference to Exhibit 4.2 to the Quarterly
Report of the Illinois Central Railroad
Company on Form 10-Q for the three months
ended March 31, 1994. (SEC File No. 1-7092))
4.8 Form of Note Purchase Agreement dated as of
May 1, 1993, between Illinois Central
Railroad Company and The First National Bank
of Boston (Incorporated by reference to
Exhibit 4.1 to the Registration Statement on
Form S-3 of Illinois Central Railroad
Company. (Sec. File No. 33-61410))
4.9 Form of Second Amended and Restated Revolving
Credit Agreement dated as of April 2, 1993,
amended and restated as of October 27, 1993
and further amended and restated as of
November 1, 1994, among Illinois Central
Railroad Company and the Banks named
therein. (A)
4.10 Form of Lease Agreement dated as of July 1,
1994, between IC Leasing Corporation III and
Illinois Central Railroad Company. (A)
4.11 Form of Lease Agreement dated as of July 1,
1994, between IC Leasing Corporation III
and Waterloo Railway Company. (A)
4.12 Form of Option Agreement dated as of
July 1, 1994, between IC Leasing Corporation
III and Illinois Central Railroad Company. (A)
4.13 Form of Option Agreement dated as of
July 1, 1994, between IC Leasing Corporation
III and Illinois Central Railroad Company. (A)
10.1 * Form of supplemental retirement and savings
plan. (Incorporated by reference to Exhibit
10C to the Registration Statement of Illinois
Central Transportation Co. on Form 10 filed
on October 7, 1988, as amended. (SEC File
No. 1-10085))
10.2 Form of indemnification agreement dated as of
January 29, 1991, between Illinois Central
Corporation and certain officers and
directors. (Incorporated by reference to
Exhibit 10.9 to the Annual Report on Form 10-
K for the year ended December 31, 1990, for
the Illinois Central Corporation filed on
April 1, 1991. (SEC File No. 1-10720))
10.3 Railroad Locomotive Lease Agreement between
IC Leasing Corporation I and Illinois Central
Railroad Company dated as of September 5,
1991. (Incorporated by reference to Exhibit
10.9 to the Annual Report on Form 10-K for
the year ended December 31, 1991 for the
Illinois Central Railroad Company filed March
12, 1992. (SEC File No. 1-7092))
10.4 Railroad Locomotive Lease Agreement between
IC Leasing Corporation II and Illinois
Central Railroad Company dated as of January
14, 1993. (Incorporated by reference to
Exhibit 10.6 to the Annual Report on Form 10-
K for the year ended December 31, 1992, for
the Illinois Central Railroad Company filed
March 5, 1993. (SEC File No. 1-7092))
10.5* Form of the Illinois Central Railroad Company
Executive Performance Compensation Program
(Incorporated by reference to Exhibit 10.1 to
the Quarterly Report of the Illinois Central
Railroad Company on Form 8-K dated as of July
29, 1994. (SEC File No. 1-7092))
10.6* Form of the Illinois Central Railroad Company
Supplemental Executive Retirement Plan
(Incorporated by reference to Exhibit 10.2 to
the Report of the Illinois Central Railroad
Company on Form 8-K dated as of July 29,
1994. (SEC File No. 1-7092))
10.7* Form of the Illinois Central Railroad Company
Executive Deferred Compensation Plan
(Incorporated by reference to Exhibit 10.3 to
the report of the Illinois Central Railroad
Company on Form 8-K dated as of July 29,
1994. (SEC File No. 1-7092))
10.8 Form of Illinois Central Railroad Company
Performance Compensation Program
(Incorporated by reference to Exhibit 10.4 to
the report of the Illinois Central Railroad
Company on Form 8-K dated as of July 29,
1994. (SEC File No. 1-7092))
21 Subsidiaries of Registrant (Included at E-11)
Exhibit 21
ILLINOIS CENTRAL RAILROAD COMPANY
Subsidiaries of the Registrant
as of December 31, 1994
Name Place of Incorporation
Subsidiaries included in the financial statements,
which are 100% owned:
Chicago Intermodal Company Delaware
Kensington and Eastern Railroad Company Illinois
Mississippi Valley Corporation Delaware
Waterloo Railway Company Delaware
EXHIBIT 4.9
SECOND AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
among
Illinois Central Railroad Company
and
The First National Bank of Boston,
Bank of America Illinois,
The Chase Manhattan Bank, N.A.,
The Toronto Dominion Bank,
Deposit Guaranty National Bank,
Kleinwort Benson Limited,
The Mitsubishi Trust and Banking Corporation,
and certain other lenders
dated as of April 2, 1993
amended and restated as of October 27, 1993
and
further amended and restated as of November 1, 1994
TABLE OF CONTENTS
Page
1. DEFINITIONS 1
2. THE LOANS AND LETTERS OF CREDIT 19
2.1. Commitments 19
2.2. Notes; Repayment of Loans 21
2.3. Prepayments 22
2.4. Loans 23
2.5. Competitive Bid Procedure 24
2.6. Standby Borrowing Procedures 27
2.7. Method of Certain Prepayments and Repayments 27
2.8. Conversion and Continuation of Standby Borrowings 28
2.9. Interest on Loans 29
2.10. Interest on Overdue Amounts 30
2.11. Letters of Credit 30
2.12. Effects of Drawings 31
2.13. Letter of Credit Loan Obligations Absolute 31
2.14. Banks' Obligations in Respect of Letters of Credit 32
2.15. Existing Letters of Credit 33
2.16. Pro Rata Treatment 33
2.17. Existing Loans 33
3. CERTAIN GENERAL PROVISIONS AND FEES 34
3.1. Additional Costs and Expenses 34
3.2. Indemnification 38
3.3. Illegality or Impossibility 38
3.4. Bank Certificates 39
3.5. Payments to be Free of Deductions 40
3.6. Interest Limitation 41
3.7. Facility Fee 41
3.8. Agent's Fee 41
3.9. Letter of Credit Fee 41
3.10. Amendment Fee 42
4. CLOSING; PAYMENTS AND COMPUTATIONS 42
4.1. Closing 42
4.2. Use of Proceeds 42
4.3. Payments 42
4.4. Computations 43
4.5. Banks' Obligations 43
4.6. Reference Banks 43
5. REPRESENTATIONS AND WARRANTIES 43
5.1. Existence and Good Standing, Etc 43
5.2. Power; Consents; Absence of Conflict with other
Agreements, Laws, Etc 44
5.3. Binding Effect of Documents 44
5.4. Financial Statements; Solvency 45
5.5. Title to Properties 45
5.6. No Adverse Changes 45
5.7. Litigation 45
5.8. No Adverse Provisions 46
5.9. Compliance with Other Instruments, Laws; etc. 46
5.10. Tax Status 46
5.11. Location of Office 47
5.12. Disclosure 47
5.13. Employee Benefit Plans 47
5.14. Business 48
5.15. Capitalization 48
5.16. Holding Company and Investment Company Acts 49
5.17. Certain Transactions 49
5.18. Environmental Compliance 49
5.19. Liens 51
5.20. Administrative Agent as Senior Debt Agent 51
5.21. Fiscal Year 51
5.22. No Default 51
5.23. Insurance 51
5.24. Regulation U 52
6. EFFECTIVE DATE; CONDITIONS TO EFFECTIVENESS 52
6.1. Delivery of Documents 52
6.2. Representations and Warranties 52
6.3. No Default 52
6.4. Intentionally Omitted 52
6.5. Proceedings and Documents 52
6.6. Legal Opinions 53
6.7. Financial Condition 53
6.8. Delivery of Charter and Other Documents 53
6.9. Amendment Fee, Etc. 53
6.10. Closing Certificate 53
6.11. Original Credit Agreement 53
6.12. ICC Filings 54
7. CONDITIONS OF BORROWING 54
7.1. Representations and Warranties 54
7.2. No Default 54
7.3. Legality 54
7.4. Borrowing Notice; Competitive Bid Request 54
8. AFFIRMATIVE COVENANTS 55
8.1. Punctual Payment 55
8.2. Records and Accounts 55
8.3. Financial Statements, Certificates and
Information 55
8.4. Business and Legal Existence 57
8.5. Payment of Taxes 57
8.6. Inspection of Properties and Books 58
8.7. Notice of Litigation 58
8.8. Notice of Default 58
8.9. Compliance with Law, Etc 58
8.10. Insurance 59
8.11. Employee Benefit Plans 59
8.12. Environmental Compliance 59
8.13. Intentionally Omitted 60
8.14. Intentionally Omitted 60
8.15. Maintenance of Property 60
8.16. Further Assurances 60
9 NEGATIVE COVENANTS 60
9.1. Indebtedness 60
9.2. Liens 62
9.3. Investments 63
9.4. Distributions 64
9.5. Merger, Consolidation and Sale of Assets 64
9.6. Sale-Leasebacks 65
9.7. Business 65
9.8. Fiscal Year 65
9.9. Consolidated Tangible Net Worth 65
9.10. Debt to Capitalization Ratio 66
9.11. Consolidated EBIT Coverage 66
9.12. Transactions with Affiliates 66
10. EVENTS OF DEFAULT; ACCELERATION 66
11. NOTICE AND WAIVERS OF DEFAULT 69
11.1. Notice of Default 69
11.2. Waivers of Default 69
12. REMEDIES ON DEFAULT, ETC 69
12.1. Rights of Banks 69
12.2. Set-off 70
13. THE AGENTS 70
13.1. Appointment; Co-Agent 70
13.2. Delegation of Duties 71
13.3. Exculpatory Provisions 71
13.4. Reliance by Agents 71
13.5. Notice of Default 72
13.6. Non-Reliance on Agents and Other Banks 72
13.7. Indemnification 73
13.8. Individual Capacity 73
13.9. Successor 73
14. PARTIES IN INTEREST 74
15. ASSIGNMENTS; PARTICIPATIONS 74
16. EXPENSES; INDEMNITY 77
17. SURVIVAL OF COVENANTS, ETC 78
18. NOTICES 78
19. MISCELLANEOUS 79
20. ENTIRE AGREEMENT, ETC 79
21. CONSENTS, AMENDMENTS, WAIVERS, ETC 79
22. CERTAIN TRANSITIONAL ARRANGEMENTS 80
22.1. Return of Prior Notes 80
22.2. Certain Bank of America Letters of Credit 80
22.3. Allocation of Previously Accrued Interest and
Fees 80
Exhibits:
Exhibit A - Form of Note
Exhibit B-1 - Form of Competitive Bid Request
Exhibit B-2 - Form of Notice of Competitive Bid Request
Exhibit B-3 - Form of Competitive Bid
Exhibit B-4 - Form of Competitive Bid Accept/Reject Letter
Exhibit C - Form of Opinions
Exhibit D - Form of Closing Certificate
Exhibit E - Form of Compliance Certificate
Exhibit F - Form of Administrative Questionnaire
Exhibit G - Form of Assignment and Acceptance
Schedules:
Schedule 1.1 - Commitment Percentages
Schedule 1.2 - Intermodal Facilities
Schedule 2.15 - Existing Letters of Credit
Schedule 5.2 - Consents
Schedule 5.15 - Subsidiaries
Schedule 5.18 - Environmental Matters
Schedule 9.1 - Existing Indebtedness and Liens
SECOND AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
This SECOND AMENDED AND RESTATED REVOLVING
CREDIT AGREEMENT, initially dated as of April 2, 1993,
amended and restated as of October 27, 1993, and
further amended and restated as of November 1, 1994,
among Illinois Central Railroad Company, a Delaware
corporation (the "Borrower"), The First National Bank
of Boston ("FNBB"), Bank of America Illinois
(successor to Continental Bank N.A.) ("BofA"), The
Chase Manhattan Bank, N.A., The Toronto Dominion Bank,
Cayman Islands Branch, Deposit Guaranty National Bank,
Kleinwort Benson Limited, The Mitsubishi Trust and
Banking Corporation, and such other lenders as may
become parties to this Agreement from time to time in
accordance with the provisions hereof (each, a "Bank",
and collectively, the "Banks"), The First National
Bank of Boston as administrative agent for the Banks
(the "Administrative Agent") and as competitive bid
agent for the Banks (the "Competitive Bid Agent") and
Bank of America Illinois as co-agent for the Banks
(the "Co-Agent").
WHEREAS, pursuant to that certain Amended and
Restated Revolving Credit Agreement, dated as of April
2, 1993 and amended and restated as of October 27,
1993 (the "Original Credit Agreement"), the Banks (as
defined therein) made a revolving credit facility and
a competitive bid revolving credit facility available
to the Borrower for the purposes described therein;
and
WHEREAS, the Borrower has requested and the
Banks have agreed, subject to the terms and conditions
contained herein, to amend and restate the Original
Credit Agreement to increase the Revolving Credit
Commitment Amount (as defined in the Original Credit
Agreement), extend the Revolving Credit Commitment
Termination Date (as defined in the Original Credit
Agreement) and to make certain other changes to the
Original Credit Agreement;
NOW, THEREFORE, the Borrower, the Banks, the
Administrative Agent, the Competitive Bid Agent and
the Co-Agent hereby agree as follows.
1. DEFINITIONS. (a) The following terms
shall have the meanings assigned to them below in this
1 or in the provisions of this Agreement referred to
below:
"Administrative Agent" - see preamble.
"Affected Bank" - see 3.1(d).
"Affiliate" - in relation to any particular
Person, any other Person which, directly or
indirectly, controls, or is controlled by, or is under
common control with, such Person. For purposes of
this definition, "control" (including, with
correlative meanings, the terms "controlled by" and
"under common control with") shall mean the power,
directly or indirectly, to (a) vote 10% or more of the
outstanding stock having ordinary voting power for the
election of directors of such Person, or (b) direct
the management or policies of such Person, whether by
contract or otherwise.
"Agent's Fee" - see 3.8.
"Agent's Fee Letter" - see 3.8.
"Agents" - the Administrative Agent and the
Competitive Bid Agent.
"Agreement" - this Second Amended and Restated
Revolving Credit Agreement, with all Exhibits and
Schedules hereto, as originally executed, or if this
Second Amended and Restated Revolving Credit Agreement
is amended or supplemented from time to time, as so
amended or supplemented.
"Amendment Fee" - see 3.10.
"Applicable Margin" - with respect to any period
commencing on an Interest Rate Adjustment Date and
ending on the day prior to the next succeeding
Interest Rate Adjustment Date, if the Rating (as
defined below) in effect on the first day of such
period is equal to:
(a) "BB" or less or "Ba2" or less (as applicable)
or if no Rating is available, then during such period
the Applicable Margin shall be, with respect to (i)
Base Rate Loans, 0.25% per annum, (ii) Eurodollar
Standby Loans, 0.875% per annum, (iii) C/D Rate Loans,
1.00% per annum, and (iv) the Facility Fee, 0.50% per
annum;
(b) "BB+" or "Ba1" (as applicable), then during
such period the Applicable Margin shall be, with
respect to (i) Base Rate Loans, 0% per annum, (ii)
Eurodollar Standby Loans, 0.625% per annum, (iii) C/D
Rate Loans, 0.75% per annum, and (iv) the Facility
Fee, 0.30% per annum;
(c) "BBB-" or "Baa3" (as applicable), then during
such period the Applicable Margin shall be, with
respect to (i) Base Rate Loans, 0% per annum, (ii)
Eurodollar Standby Loans, 0.50% per annum, (iii) C/D
Rate Loans, 0.625% per annum, and (iv) the Facility
Fee, 0.25% per annum;
(d) "BBB" or "Baa2" (as applicable), then during
such period the Applicable Margin shall be, with
respect to (i) Base Rate Loans, 0% per annum, (ii)
Eurodollar Standby Loans, 0.375% per annum, (iii) C/D
Rate Loans, 0.50% per annum, and (iv) the Facility
Fee, 0.1875% per annum;
(e) "BBB+" or "Baa1" (as applicable), then during
such period the Applicable Margin shall be, with
respect to (i) Base Rate Loans, 0% per annum, (ii)
Eurodollar Standby Loans, 0.30% per annum, (iii) C/D
Rate Loans, 0.425% per annum, and (iv) the Facility
Fee, 0.15% per annum; or
(f) "A-" or "A3" (as applicable), then during such
period the Applicable Margin shall be, with respect to
(i) Base Rate Loans, 0% per annum, (ii) Eurodollar
Standby Loans, 0.25% per annum,, (iii) C/D Rate Loans,
0.375% per annum, and (iv) the Facility Fee, 0.15% per
annum; or
(g) "A" or higher or "A2" or higher (as
applicable), then during such period the Applicable
Margin shall be, with respect to (i) Base Rate Loans,
0% per annum, (ii) Eurodollar Standby Loans, 0.25% per
annum, (iii) C/D Rate Loans, 0.375% per annum, and
(iv) the Facility Fee, 0.15% per annum.
For purposes of the foregoing, the "Rating" in effect
from time to time shall be the lower of the rating by
Moody's or by S&P of the Rated Debt, provided that (i)
if either Moody's or S&P shall not have in effect a
Rating for the Rated Debt (other than because such
rating agency shall no longer be in the business of
rating corporate debt obligations), the Rating shall
be deemed to be the Rating of the other rating agency
in respect of Rated Debt, (ii) if both Moody's and S&P
shall not have in effect a Rating for the Rated Debt
(other than because such rating agencies shall no
longer be in the business of rating corporate debt
obligations or because no Rated Debt shall be
outstanding), then no Rating shall be deemed to be
available for purposes of determining the Applicable
Margin, (iii) if the rating system of Moody's or S&P
shall change, or if either such rating agency shall
cease to be in the business of rating corporate debt
obligations, or if no Rated Debt shall be outstanding,
then the Borrower and the Banks shall negotiate in
good faith to amend the references to specific ratings
in this definition of Applicable Margin to reflect
such changed rating system, the non-availability of
ratings from such rating agency, or the repayment of
all Rated Debt outstanding, as applicable, and (iv) to
determine the lower of the rating of Rated Debt by
Moody's and by S&P, the S&P ratings set forth in the
chart below shall be deemed to be equivalent to the
Moody's rating set forth opposite such S&P rating:
S&P Moody's
A A2
A- A3
BBB+ Baa1
BBB Baa2
BBB- Baa3
BB+ Ba1
BB Ba2
"Assessment Rate" - for any Interest Period, the net
annual assessment rate (rounded upwards, if necessary,
to the next highest 1/100th of 1%) charged by the
Federal Deposit Insurance Corporation (or any
successor) for such Corporation's (or such
successor's) insuring of time deposits made in dollars
at offices of FNBB in the United States of America
during the most recent period for which such rate has
been determined prior to the commencement of such
Interest Period.
"Assignment and Acceptance" - see 15.
"Balance Sheet Date" - December 31, 1993.
"Bank List" - see 15(c).
"Bank(s)" - see preamble.
"Banks' Special Counsel" - Bingham, Dana & Gould of
Boston, Massachusetts, or such other counsel as may be
approved by the Majority Banks.
"Base Rate" - for any day, a fluctuating rate per
annum (rounded upwards, if necessary, to the next 1/8
of 1%) equal to the greater of (a) the rate of
interest announced from time to time by the
Administrative Agent at its Head Office as its "base
rate", as in effect on such day, or (b) the sum of the
Federal Funds Effective Rate in effect on such day
plus 1/2%. In the event that at any time the rate
determined as provided in clause (b) above exceeds the
rate determined as provided in clause (a) above, on
each such occasion, the rate set forth in clause (b)
shall apply only to Base Rate Loans borrowed hereunder
no more than five Business Days prior to the date such
rate set forth in clause (b) exceeded the rate set
forth in clause (a) above. For purposes of this
Agreement, any change in the Base Rate due to a change
in the Administrative Agent's "base rate" or the
Federal Funds Effective Rate shall be effective on the
effective date of such change in the Administrative
Agent's "base rate" or the Federal Funds Effective
Rate, as applicable. If the Administrative Agent
shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to
ascertain the Federal Funds Effective Rate for any
reason, including, without limitation, the inability
or failure of the Administrative Agent to obtain
sufficient bids or publications in accordance with the
terms hereof, the Base Rate shall be the
Administrative Agent's "base rate" as in effect at the
applicable time until the circumstances giving rise to
such inability no longer exist.
"Base Rate Borrowing" - a Borrowing comprised of Base
Rate Loans.
"Base Rate Loan" - any Standby Loan bearing interest
at a rate determined by reference to the Base Rate in
accordance with the provisions of 2 hereof.
"BofA" - see preamble.
"Borrower" - see preamble.
"Borrowing" - a group of Loans of a single Type made
by the Banks (or, in the case of a Competitive
Borrowing, by the Bank or Banks whose Competitive Bids
have been accepted by the Borrower pursuant to 2.5
hereof) on a single date and as to which a single
Interest Period is in effect, or a borrowing hereunder
consisting of Letter(s) of Credit issued by the Letter
of Credit Bank.
"Borrowing Notice" - see 2.6.
"Business Day" - any day (other than a Saturday or
Sunday) on which commercial banks are open for the
conduct of normal banking business in each of Boston,
Massachusetts and New York, New York, provided that in
the case of any transactions related to Eurodollar
Loans, a Business Day also shall be a day on which
dealings in dollar deposits in the Eurodollar
interbank markets may be transacted.
"C/D Rate" - for any applicable Interest Period, the
interest rate per annum determined by the
Administrative Agent pursuant to the following
formula:
C/D Rate = Domestic C/D Rate* + Assessment
1.00 - C/D Reserve Percentage Rate
The components of the fraction to be rounded upwards,
if necessary, to the next highest 1/8th of 1%.
The Administrative Agent shall give the Borrower and
the Banks prompt notice (but in any event no later
than one Business Day prior to the date of
commencement of such Interest Period) of the C/D Rate
determined for such Interest Period, and absent
manifest error, each determination of the C/D Rate by
the Administrative Agent shall be conclusive and
binding for all purposes hereof.
"C/D Rate Borrowing" - a Borrowing comprised of C/D Rate
Loans.
"C/D Rate Loans" - any Standby Loans bearing interest
at a rate determined by reference to the C/D Rate in
accordance with the provisions of 2 hereof.
"C/D Reserve Percentage" - for any day during an
Interest Period with respect to a C/D Rate Loan, that
percentage (expressed as a decimal) which is in effect
on such day, as prescribed by the Board of Governors
of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement,
including, without limitation, any marginal,
emergency, supplemental, special or other reserves,
for a member bank of the Federal Reserve System in New
York City with deposits exceeding $1 billion in
respect of new non-personal time deposits in dollars
in New York City having a maturity comparable to the
Interest Period for such C/D Rate Loan and in an
amount of $100,000 or more. The C/D Rate shall be
adjusted automatically on and as of the effective date
of any change in the C/D Reserve Percentage.
"CERCLA" - see 5.18(a)(i).
"Charter" - with respect to any Person other than an
individual, such Person's articles of organization,
certificate of incorporation, statute, constitution,
joint venture or partnership agreement or other
charter documents, in each case as amended and in
effect from time to time.
"Co-Agent" - see preamble.
"Code" - the Internal Revenue Code of 1986, as amended
and in effect from time to time.
"Commitment" - the agreement of each Bank, subject to
the terms and conditions of this Agreement, to make
Standby Loans to the Borrower hereunder and to
participate in Letters of Credit.
"Competitive Bid" - an offer by a Bank to make a
Competitive Loan pursuant to 2.5 hereof.
"Competitive Bid Accept/Reject Letter" - a
notification made by the Borrower to the Competitive
Bid Agent pursuant to 2.5(d) hereof in the form of
Exhibit B-4 attached hereto.
"Competitive Bid Agent" - see preamble.
"Competitive Bid Rate" - as to any Competitive Bid
made by a Bank pursuant to 2.5 hereof, (i) in the case
of a Eurodollar Loan, the Margin, and (ii) in the case
of a Fixed Rate Loan, the fixed rate of interest
offered by the Bank making such Competitive Bid.
"Competitive Bid Request" - a request made pursuant to
2.5(a) hereof in the form of Exhibit B-1 attached
hereto.
"Competitive Borrowing" - a borrowing consisting of a
Competitive Loan or concurrent Competitive Loans from
the Bank or Banks whose Competitive Bids for such
Borrowing have been accepted by the Borrower under the
bidding procedure described in 2.5 hereof.
"Competitive Loan" - a loan from a Bank to the
Borrower pursuant to the bidding procedure described
in 2.5 hereof. Each Competitive Loan shall be a
Eurodollar Competitive Loan or a Fixed Rate Loan.
"Compliance Certificate" - see 8.3(f).
"Consolidated" or "consolidated" - with reference to
any term used in this Agreement, the relevant figures
for a Person and its Subsidiaries on a consolidated
basis determined in accordance with Generally Accepted
Accounting Principles.
"Consolidated EBIT" - for any fiscal period of the
Borrower, the sum of (a) Consolidated Net Income of
the Borrower and its Subsidiaries for such period
before provisions for federal and state income taxes,
minus (b) the aggregate amount of all extraordinary
gains included in the calculation of Consolidated Net
Income of the Borrower and its Subsidiaries for such
period, plus (c) Consolidated Interest Charges of the
Borrower and its Subsidiaries for such period, all as
determined in accordance with Generally Accepted
Accounting Principles. For purposes only of
calculating Consolidated EBIT under 9.11 hereof, in
the determination of Consolidated Net Income any
extraordinary loss (net of taxes) calculated in
accordance with Generally Accepted Accounting
Principles occurring as a result of the premium and
charges incurred in connection with the repurchase of
Subordinated Debentures shall be disregarded.
"Consolidated Funded Debt" - as at any date of
determination, an amount equal to the sum (without
duplication) of (a) all consolidated Indebtedness of
the Borrower and its Subsidiaries, plus
(b) Consolidated Rental Obligations, in each case as
such amounts are outstanding or would be calculated on
the date as of which Consolidated Funded Debt is to be
determined and determined in accordance with Generally
Accepted Accounting Principles.
"Consolidated Interest Charges" - for any fiscal
period, the consolidated expenses of the Borrower and
its Subsidiaries paid or accrued for such period for
interest on Indebtedness (including the current
portion thereof) which are deducted in the calculation
of Consolidated Net Income for such period, net of
consolidated interest income, if any, all as
determined in accordance with Generally Accepted
Accounting Principles.
"Consolidated Net Income" - the consolidated net
income of the Borrower and its Subsidiaries for any
period as determined in accordance with Generally
Accepted Accounting Principles.
"Consolidated Rental Obligations" - with respect to
the Borrower and its Subsidiaries, an amount equal to
the sum (without duplication) of (a) the net present
value (calculated at a discount rate of 10%) of the
minimum future consolidated rental payments due over
the term of all of such Persons' operating leases of
real or personal property which extend for a term of
twelve or more months and may not be terminated prior
to the stated maturity thereof, plus (b) the net
present value (calculated at a discount rate of 10%)
of the minimum cost to terminate (including rental
payments until termination thereof) any such leases
which may be terminated.
"Consolidated Tangible Net Worth" - with respect to
the Borrower and its Subsidiaries, the result of (a)
the capital accounts (including common stock,
preferred stock and other paid in capital, but
excluding treasury stock) of the Borrower and its
Subsidiaries on a consolidated basis, plus (b) the
earned surplus and capital surplus of the Borrower and
its Subsidiaries, in each case as reflected in the
Borrower's consolidated books of account as of the
date Consolidated Tangible Net Worth is to be
determined, minus (c) the net book value of all assets
of the Borrower and its Subsidiaries which would be
treated as intangibles under Generally Accepted
Accounting Principles, including, without limitation,
such items as goodwill, trademarks, trade names,
service marks, brand names, copyrights, patents and
licenses, and rights with respect to the foregoing,
minus (d) all amounts representing write-ups in the
consolidated book value of any assets of the Borrower
or its Subsidiaries resulting from a revaluation
thereof subsequent to the Balance Sheet Date, in each
case as determined in accordance with Generally
Accepted Accounting Principles.
"Consolidated Total Assets" - all assets of the
Borrower and its Subsidiaries determined on a
consolidated basis in accordance with Generally
Accepted Accounting Principles.
"convert", "conversion" and "converted" - conversion
of any Loan into a Loan of another Type pursuant to
2.8 hereof.
"Conversion Notice" - see 2.8.
"Debenture Indenture" - the Indenture, dated as of
September 15, 1989, between the Borrower and United
States Trust Company of New York, as Trustee, pursuant
to which the Borrower issued the Subordinated
Debentures, in the form thereof previously delivered
to the Administrative Agent.
"Default(s)" - any event which with notice or lapse of
time or notice and lapse of time will become an Event
of Default.
"Distribution" - the payment by any Person of any
dividends, distributions or other payments to its
shareholders as such, other than distributions or
allocations of common stock of such Person; the
declaration or payment of any dividend on or in
respect of any shares of any class of capital stock of
any Person, other than dividends payable solely in
shares of common stock of such Person; or the purchase
or other retirement of any shares of any class of
capital stock of any Person, directly or indirectly,
through a Subsidiary or otherwise, other than solely
through the issuance of the capital stock of such
Person; the return of capital by any Person to its
shareholders as such; or any other distribution on or
in respect of any shares of any class of capital stock
of any Person.
"Domestic C/D Rate" - with respect to any C/D Rate
Loan for any Interest Period, the rate per annum
determined by the Administrative Agent to be the
arithmetic average (rounded upwards, if necessary, to
the next highest 1/8th of 1%) of the prevailing rates
per annum bid at 10:00 a.m. (Boston time) (or as soon
thereafter as practicable) on the first day of any
Interest Period by two or more New York certificate of
deposit dealers of recognized standing for the
purchase at face value from each Reference Bank of its
certificates of deposit in an amount comparable to the
C/D Rate Loan to be made or converted by the Banks to
which such Interest Period applies and having a
maturity comparable to such Interest Period.
"Effective Date" - see 6.
"Eligible Assignee" - any bank, insurance company or
other financial institution that the Administrative
Agent and the Borrower may approve, provided that
neither the Borrower's approval nor the Administrative
Agent's approval shall be unreasonably withheld.
"Employee Benefit Plan" - any employee benefit plan
within the meaning of 3(3) of ERISA maintained or
contributed to by the Borrower or any ERISA Affiliate,
other than a Multiemployer Plan.
"Environmental Laws" - see 5.18(a)(i).
"ERISA" - the Employee Retirement Income Security Act
of 1974, any successor statute of similar import, and
the rules and regulations thereunder, as amended from
time to time.
"ERISA Affiliate" - any Person which is treated as a
single employer with the Borrower under 414 of the
Code.
"ERISA Reportable Event" - a reportable event with
respect to a Guaranteed Pension Plan within the
meaning of 4043 of ERISA and the regulations
promulgated thereunder as to which the requirement of
notice has not been waived.
"Eurodollar Borrowing" - a Borrowing comprised of
Eurodollar Loans.
"Eurodollar Competitive Borrowing" - a Competitive
Borrowing comprised of Eurodollar Competitive Loans.
"Eurodollar Competitive Loan" - any Competitive Loan
bearing interest at a rate determined by reference to
the Eurodollar Rate in accordance with the provisions
of 2.5 hereof.
"Eurodollar Loan" - any Eurodollar Competitive Loan or
Eurodollar Standby Loan.
"Eurodollar Offered Rate" - for any applicable
Interest Period, the rate per annum determined by the
Administrative Agent to be the arithmetic average
(rounded upwards, if necessary to the next highest
1/8th of 1%) of the respective rates per annum at
which deposits of dollars are offered to each
Reference Bank by prime banks in the London interbank
market at or about 10:00 a.m. local time in such
interbank market, two Business Days prior to the first
day of such Interest Period for a period equal to the
duration of such Interest Period in an amount
substantially equal to the Eurodollar Loan to be
loaned by one or more Banks (in the case of a
Eurodollar Competitive Loan) or to be loaned or
converted by the Banks (in the case of a Eurodollar
Standby Loan).
"Eurodollar Rate" - for any applicable Interest
Period, the interest rate per annum determined by the
Administrative Agent pursuant to the following
formula:
Eurodollar Rate = Eurodollar Offered Rate*
1.00 - Eurodollar Reserve Percentage
*The components of the fraction to be rounded upwards,
if necessary, to the next highest 1/8th of 1%.
The Administrative Agent shall give the Borrower and
the Banks (in the case of a Eurodollar Standby Loan)
or the applicable Banks (in the case of a Eurodollar
Competitive Loan) prompt notice (but in any event no
later than one Business Day prior to the date of
commencement of such Interest Period) of the
Eurodollar Rate determined for such Interest Period,
and absent manifest error, each determination of the
Eurodollar Rate by the Administrative Agent shall be
conclusive and binding for all purposes hereof.
"Eurodollar Reserve Percentage" - for any day during
an Interest Period with respect to a Eurodollar Loan,
that percentage (expressed as a decimal) which is in
effect on such day under Regulation D of the Board of
Governors of the Federal Reserve System (or any
successor or similar regulation relating to reserve
requirements) for determining the maximum reserve
requirement for a member bank of the Federal Reserve
System in New York City with deposits exceeding $1
billion in respect of "Eurocurrency Liabilities" (as
such term is used in Regulation D) outstanding from
time to time, or in respect of any other category of
liabilities which might be incurred by such member
bank in any Eurodollar interbank market to fund
Eurodollar Loans. The Eurodollar Rate shall be
adjusted automatically on and as of the effective date
of any change in the Eurodollar Reserve Percentage.
"Eurodollar Standby Borrowing" - a Standby Borrowing
comprised of Eurodollar Standby Loans.
"Eurodollar Standby Loan" - any Standby Loan bearing
interest at a rate determined by reference to the
Eurodollar Rate in accordance with the provisions of
2 hereof.
"Event(s) of Default" - see 10.
"Facility Fee" - see 3.7.
"Federal Funds Effective Rate" - for any day, a
fluctuating interest rate per annum equal to the
weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published
for such day (or, if such day is not a Business Day,
for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so
published for any day which is a Business Day, the
average of the quotations for such day on such
transactions received by the Administrative Agent from
three Federal funds brokers of recognized standing
selected by it.
"Fixed Rate Borrowing" - a Borrowing comprised of
Fixed Rate Loans.
"Fixed Rate Loan" - any Competitive Loan bearing
interest at a fixed percentage rate per annum
(expressed in the form of a decimal to no more than
four decimal places) specified by the Bank making such
Loan in its Competitive Bid.
"FNBB" - see preamble.
"Generally Accepted Accounting Principles" - generally
accepted accounting principles which are (a)
consistent with the principles promulgated or adopted
by the Financial Accounting Standards Board and its
predecessors, and (b) such that a certified public
accountant would, insofar as the use of accounting
principles is pertinent, be in a position to deliver
an unqualified opinion as to financial statements in
which such principles have been properly applied,
provided that if any changes in generally accepted
accounting principles with which the Borrower's
independent certified public accountants concur result
in a change in the method of calculation of any of the
financial covenants, standards or terms contained in
this Agreement, the Borrower and the Banks agree to
amend such provisions to reflect such changes in
generally accepted accounting principles so that the
criteria for evaluating the consolidated financial
condition of the Borrower and its Subsidiaries shall
be the same after such changes as if such changes had
not been made.
"Guaranteed Pension Plan" - any employee pension
benefit plan within the meaning of 3(2) of ERISA
maintained or contributed to by the Borrower or any
ERISA Affiliate the benefits of which are guaranteed
on termination in full or in part by the PBGC pursuant
to Title IV of ERISA, other than a Multiemployer Plan.
"Hazardous Substances" - see 5.18(a)(ii).
"HAZMAT" - see 5.18(a)(i).
"Head Office" - the head office of the Administrative
Agent, which is presently located at 100 Federal
Street, Boston, Massachusetts 02110.
"Indebtedness" - (a) all debt and similar monetary
obligations, whether direct or indirect (including,
without limitation, obligations under capitalized
leases); (b) all Indebtedness of others secured by any
mortgage, pledge, security interest, lien, charge, or
other encumbrance existing on property owned or
acquired subject thereto, whether or not the
Indebtedness secured thereby shall have been assumed;
(c) all guarantees, endorsements and other contingent
obligations, whether direct or indirect, in respect of
Indebtedness of others, including any obligation to
supply funds to or in any manner to invest in,
directly or indirectly, the debtor, to purchase
Indebtedness, or to assure the owner of Indebtedness
against loss, through an agreement to purchase goods,
supplies, or services for the purpose of enabling the
debtor to make payment of the Indebtedness held by
such owner or otherwise; and (d) the obligations to
reimburse the issuer in respect of any letters of
credit.
"Indemnified Party" - see 16.
"Independent Accountant(s)" - a firm of nationally
recognized independent public accountants selected on
behalf of the Borrower by its Board of Directors,
which is "independent" as that term is defined in Rule
2-01 of Regulation S-X promulgated by the Securities
and Exchange Commission.
"Initial 1989 Closing Date" - September 26, 1989.
"Interest Payment Date" - with respect to any Loan,
the last day of the Interest Period applicable thereto
and, in the case of a Eurodollar Loan with an Interest
Period of more than three months duration or a Fixed
Rate Loan or a C/D Rate Loan with an Interest Period
of more than 90 days duration, each day that would
have been an Interest Payment Date for such Loan had
successive Interest Periods of three months duration
or 90 days duration, as the case may be, been
applicable to such Loan and, in addition, the date of
any conversion of a Standby Loan to a Standby Loan of
a different Type.
"Interest Period" - (a) as to any Eurodollar Standby
Borrowing, the period commencing on the date of such
Borrowing or on the last day of the immediately
preceding Interest Period applicable to such
Borrowing, as the case may be, and ending on the
numerically corresponding day (or, if there is no
numerically corresponding day, on the last day) in the
calendar month that is 1, 2, 3 or 6 months thereafter
or, if each of the Banks shall so agree and advise the
Administrative Agent with respect to any particular
requested Interest Period, 9 or 12 months thereafter,
in each case as the Borrower may elect, (b) as to any
Eurodollar Competitive Borrowing, the period
commencing on the date of such Borrowing and ending on
the numerically corresponding day (or, if there is no
numerically corresponding day, on the last day) in the
calendar month that is between 1 and 12 months
(inclusive) thereafter, as the Borrower may elect and
as specified in the Competitive Bids in which the
offer to make the Eurodollar Competitive Loans
comprising such Borrowing were extended, (c) as to any
C/D Rate Borrowing, a period of 30, 60, 90 or 180 days
thereafter or, if each of the Banks shall so agree and
advise the Administrative Agent with respect to any
particular requested Interest Period, 270 or 360 days
thereafter, in each case as the Borrower may elect,
commencing on the date of such Borrowing or on the
last day of the immediately preceding Interest Period
applicable to such Borrowing, as the case may be, (d)
as to any Base Rate Borrowing, the period commencing
on the date of such Borrowing or on the last day of
the immediately preceding Interest Period applicable
to such Borrowing, as the case may be, and ending on
the next succeeding first Business Day of January,
April, July or October or, if earlier, on the
Revolving Credit Commitment Termination Date or the
date of prepayment or conversion of such Borrowing and
(e) as to any Fixed Rate Borrowing, the period
commencing on the date of such Borrowing and ending on
the date specified in the Competitive Bids in which
the offer to make the Fixed Rate Loans comprising such
Borrowing were extended, which shall not be earlier
than 7 days after the date of such Borrowing or later
than 360 days after the date of such Borrowing;
provided, however, that if any Interest Period would
end on a day other than a Business Day, such Interest
Period shall be extended to the next succeeding
Business Day or, in the case of Eurodollar Loans only,
adjusted in accordance with the then prevailing
practice in the London interbank market.
Notwithstanding the provisions of clauses (a) and (c)
above, with respect to one Eurodollar Standby Loan or
one C/D Rate Loan during each calendar quarter, the
Interest Period with respect thereto may, at the
Borrower's request made in accordance with the terms
hereof, end on any date which is not (A) with respect
to such Eurodollar Standby Loan, the first, second,
third, sixth, ninth or twelfth monthly anniversary of
the date on which such Interest Period began or (B)
with respect to such C/D Rate Loan, 30, 60, 90, 180,
270 or 360 days after the date on which such Interest
Period began, so long as such date occurs less than
three months or 90 days, as applicable, after the date
on which such Interest Period began (subject, in the
case of Eurodollar Standby Loans, to the availability
of deposits in United States Dollars in the relevant
amount for an Interest Period of such length in the
Eurodollar interbank market and subject, in the case
of C/D Rate Loans, to the availability of deposits in
United States Dollars in the relevant amount for an
Interest Period of such length in the applicable
certificate of deposit market), provided, that, (i)
the Borrower may only request such an Interest Period
once during any calendar quarter and (ii) such
Interest Period must end on the last day of such
calendar quarter (or if such date is not a Business
Day, the next succeeding Business Day unless, with
respect to Eurodollar Standby Loans, such Business Day
falls in another calendar month, in which case such
Interest Period shall end on the next preceding
Business Day). Interest shall accrue from and
including the first day of any Interest Period to but
excluding the last day of such Interest Period.
"Interest Period Termination Date" - the last day of
any Interest Period, provided that if any Interest
Period Termination Date falls on a day which is not a
Business Day, such Interest Period shall be adjusted
as provided herein.
"Interest Rate Adjustment Date" - the Effective Date
and thereafter each date occurring 5 Business Days
after the Administrative Agent receives evidence
satisfactory to it that the Rating has changed.
"Intermodal Facilities" - those assets of the Borrower
and its Subsidiaries described on Schedule 1.2 hereto.
"Investments" - the aggregate of all expenditures made
for the acquisition of stock (except redemptions or
repurchases by a corporation of any shares of its
capital stock) or Indebtedness of any Person, all
loans, advances, capital contributions to any Person
and all guarantees (or other commitments as described
under Indebtedness) of obligations of, any Person,
except accounts receivable arising in the ordinary
course of business. In determining the aggregate
amount of Investments outstanding at any particular
time, (a) the amount of any Investment represented by
a guarantee shall be taken at not less than the
aggregate amount of the obligations guaranteed and
still outstanding, (b) there shall be included as an
Investment all interest accrued with respect to
Indebtedness constituting an Investment unless and
until such interest is paid, (c) there shall be
deducted in respect of each such Investment any amount
received as a return of capital, (d) there shall not
be deducted in respect of any Investment any amounts
received as earnings on such Investment, whether as
dividends, interest or otherwise, except that accrued
interest included as provided in the foregoing clause
(b) may be deducted when paid, and (e) there shall not
be deducted from the aggregate amount of Investments
any decrease in the value thereof.
"Letter(s) of Credit" - any standby letter(s) of
credit issued from time to time pursuant to the terms
hereof by the Letter of Credit Bank for the account of
the Borrower.
"Letter of Credit Bank" - with respect to any Letter
of Credit issued hereunder, either FNBB or BofA, as
the Borrower may select, in such Person's capacity as
issuer of such Letter of Credit.
"Letter of Credit Fee" - see 3.9.
"Lien" - any mortgage, lien, charge, security interest
or other encumbrance of any kind upon any property or
assets of any character, or upon the income or profits
therefrom, any conditional sale or other title
retention agreement, device or arrangement (including
capitalized leases), or any sale, assignment, pledge
or other transfer for security of any accounts,
general intangibles or chattel paper, with or without
recourse.
"Loan(s)" - individually, any Competitive Loan or
Standby Loan and, collectively, all Competitive Loans
and Standby Loans.
"Loan Documents" - collectively, this Agreement, the
Notes and the Agent's Fee Letter, in each case as
amended and in effect from time to time.
"Majority Banks" - as of any date, (i) those Banks
having Revolving Credit Commitments on such date (or,
if the Revolving Credit Commitments shall have
terminated pursuant to 10 hereof or otherwise, holding
Loans outstanding on such date and shares of the
Maximum Drawing Amount of Letters of Credit as of such
date) representing at least 66-2/3% of the Revolving
Credit Commitment Amount on such date, or, if the
Revolving Credit Commitments shall have terminated
pursuant to 10 hereof or otherwise, of the sum of (A)
the aggregate principal amount of the Loans
outstanding on such date plus (B) the aggregate
Maximum Drawing Amount of all Letters of Credit as of
such date or, (ii) for purposes of acceleration of the
Loans and all other amounts owing under this Agreement
and the other Loan Documents pursuant to 10 hereof,
those Banks whose Loans outstanding on such date plus
whose share of the aggregate Maximum Drawing Amount of
all Letters of Credit as of such date add up to at
least 66-2/3% of the sum of the aggregate principal
amount of Loans outstanding on such date plus the
aggregate Maximum Drawing Amount of all Letters of
Credit on such date.
"Margin" - as to any Eurodollar Competitive Loan, the
margin (expressed as a percentage rate per annum in
the form of a decimal to no more than four decimal
places) to be added to or subtracted from the
Eurodollar Rate in order to determine the interest
rate applicable to such Loan, as specified in the
Competitive Bid relating to such Loan.
"Material Subsidiary" - each of Chicago Intermodal
Company, Waterloo Railway Company, and, from and after
the Effective Date, any other Subsidiary of the
Borrower (a) with total assets having a fair market
value, as at any date of determination, in excess of
$5,000,000, or (b) which is material to the business,
assets or financial condition of the Borrower and its
Subsidiaries, taken as a whole.
"Maximum Drawing Amount" - as at any date of
determination, with respect to any Letter of Credit,
the maximum amount which the beneficiary thereof may
draw under such Letter of Credit as at such date
pursuant to the terms of such Letter of Credit, plus
any amounts previously drawn thereunder and not yet
reimbursed by the Borrower, whether from the proceeds
of Loans or otherwise.
"Moody's" - Moody's Investors Service, Inc.
"Multiemployer Plan" - any multiemployer plan within
the meaning 3(37) of ERISA maintained or contributed
to by the Borrower or any ERISA Affiliate.
"non-Affected Bank(s)" - as at any date of
determination, those Banks which are not Affected
Banks.
"Nonessential Property" - Relieved Track Materials,
Intermodal Facilities, and any other property of the
Borrower and its Subsidiaries which is not used, or
which the Borrower reasonably believes will not be
used, in the current or planned operation of the rail
lines of the Borrower and its Subsidiaries.
"Note(s)" - see 2.2(a).
"1991 Note Purchase Agreement" - that certain Note
Purchase Agreement, dated as of July 23, 1991, as
amended by that certain Amendment and Consent, dated
as of April 1, 1993, among the Borrower, the Parent
and the purchasers of the 1991 Senior Notes, as in
effect from time to time.
"Obligations" - all indebtedness, payment obligations
and liabilities of the Borrower to the Banks, whether
existing on the date of this Agreement or arising
thereafter, direct or indirect, joint or several,
absolute or contingent, matured or unmatured,
liquidated or unliquidated, secured or unsecured,
arising by contract, operation of law or otherwise,
arising or incurred under this Agreement, the Notes,
the Agent's Fee Letter, in respect of Loans made or
otherwise, or under other instruments at any time
evidencing any thereof.
"Officer's Certificate" - a certificate signed by any
one of the President, Treasurer or Chief Financial
Officer (or comparable officer) of the Person on whose
behalf the certificate is executed.
"Original Closing Date" - the Original Closing Date as
defined in the Original Credit Agreement.
"Original Credit Agreement" - see preamble.
"Parent" - Illinois Central Corporation, a Delaware
corporation which is the owner of all of the issued
and outstanding capital stock of the Borrower.
"PBGC" - the Pension Benefit Guaranty Corporation
created by 4002 of ERISA and any successor entity or
entities having similar responsibilities.
"Person" - any individual, corporation, partnership,
trust, unincorporated association, joint stock company
or other legal entity or organization, and any
government or agency or political subdivision thereof.
"Rated Debt" - the 1993 Senior Notes.
"RCRA" - see 5.18(a)(i).
"Reemployment Period" - see 3.2(a).
"Reference Bank(s)" - collectively, all of FNBB, BofA
and The Chase Manhattan Bank, N.A., and individually,
any of such Persons.
"Relieved Track Materials" -the Borrower's surplus
track materials resulting from the conversion from
double track to single track main line.
"Revolving Credit Commitment" - with respect to each
Bank, the commitment of such Bank hereunder as set
forth on Schedule 1.1 attached hereto, as such Bank's
Revolving Credit Commitment may be permanently
terminated or reduced from time to time pursuant to
the terms of this Agreement. The Revolving Credit
Commitments shall automatically terminate on the
Revolving Credit Commitment Termination Date.
"Revolving Credit Commitment Amount" - the aggregate
amount of Revolving Credit Commitments, as in effect
from time to time.
"Revolving Credit Commitment Percentage" - with
respect to each Bank, the percentage set forth
opposite its name on Schedule 1.1 attached hereto with
respect to Standby Loans and Letters of Credit (as
such percentage on such schedule is adjusted by the
Administrative Agent from time to time to reflect
assignments and reallocations made pursuant to 3.1(d),
3.5(c) and 15 hereof).
"Revolving Credit Commitment Termination Date" - that
date upon which the Revolving Credit Commitments
terminate, which shall be the earlier to occur of the
following dates: (a) November 1, 1999, or (b) such
other date on which the Revolving Credit Commitments
terminate or are terminated pursuant to the terms of
this Agreement.
"SARA" - see 5.18(a)(i).
"S&P" - Standard & Poors Corporation.
"Section 9.3(e) Investments" - see 9.3(e).
"Senior Debt Agreements" - collectively, the 1991 Note
Purchase Agreement and the Senior Debt Indenture.
"Senior Debt Indenture" - The Indenture, dated as of
May 1, 1993, between the Borrower and FNBB, as
Trustee, together with all the exhibits and schedules
attached thereto, in the form thereof delivered to the
Administrative Agent prior to the Effective Date, as
in effect from time to time.
"Senior Notes" - collectively, the 1991 Senior Notes
and the 1993 Senior Notes.
"1991 Senior Notes" - the promissory notes in the
original aggregate principal amount of $160,000,000
issued by the Borrower pursuant to the 1991 Note
Purchase Agreement.
"1993 Senior Notes" - the promissory notes in the
aggregate principal amount of $100,000,000 issued by
the Borrower pursuant to the Senior Debt Indenture.
"Standby Borrowing" - a borrowing consisting of
simultaneous Standby Loans from each of the Banks.
"Standby Loans" - the revolving credit loans made by
the Banks to the Borrower pursuant to 2.1 hereof.
Each Standby Loan shall be a Eurodollar Standby Loan,
a C/D Rate Loan or a Base Rate Loan.
"Start Date" - July 23, 1991.
"Subordinated Debentures" - the Borrower's senior
subordinated debentures due 2001 in the original
aggregate principal amount of $145,000,000 issued by
the Borrower pursuant to the Debenture Indenture, in
the form thereof previously delivered to the
Administrative Agent.
"Subordinated Debt" - Indebtedness of the Borrower in
an aggregate principal amount not to exceed
$72,500,000 evidenced by the Subordinated Debentures.
"Subsidiary" - in relation to any particular Person,
any corporation, association or other business entity,
a majority (by number of votes) of the outstanding
voting stock of which is at the time owned or
controlled by such Person, or by one or more
Subsidiaries of such Person or by such Person and one
or more Subsidiaries of such Person and which properly
would be included in such Person's consolidated
balance sheet.
"Total Capitalization" - as at any date of
determination, an amount equal to the sum of (a)
Consolidated Funded Debt plus (b) Consolidated
Tangible Net Worth, in each case determined in
accordance with Generally Accepted Accounting
Principles.
"Type" - when used in respect of any Loan or
Borrowing, shall refer to the Rate by reference to
which interest on such Loan or on the Loans comprising
such Borrowing is determined. For purposes hereof,
"Rate" shall include the Eurodollar Rate, the C/D
Rate, the Base Rate and the Fixed Rate.
(b) All terms of an accounting character not
specifically defined herein shall have the meanings
assigned thereto by Generally Accepted Accounting
Principles. All terms not specifically defined herein
which are defined in the Uniform Commercial Code as in
effect in the State of New York shall have the same
meanings herein as therein. Each reference herein to
a particular Person (including, without limitation,
the Administrative Agent and each Bank) shall include
a reference to such Person's successors and permitted
assigns. The words "herein", "hereof", "hereunder"
and words of like import shall refer to this Agreement
as a whole and not to any particular Section or
subdivision of this Agreement.
2. THE LOANS AND LETTERS OF CREDIT.
2.1. Commitments. (a) Subject to the terms and
conditions and relying upon the representations and
warranties herein set forth, each Bank agrees,
severally and not jointly, to make Standby Loans to
the Borrower, at any time and from time to time on and
after the date hereof and until the Revolving Credit
Commitment Termination Date, in an aggregate principal
amount at any time outstanding not to exceed such
Bank's Revolving Credit Commitment minus the amount by
which the Competitive Loans outstanding at such time
shall be deemed to have used such Revolving Credit
Commitment pursuant to 2.16 hereof, minus such Bank's
pro rata participation in Letters of Credit
outstanding, subject, however, to the conditions that
(i) at no time shall (A) the sum of (x) the
outstanding aggregate principal amount of all Standby
Loans made by all Banks plus (y) the outstanding
aggregate principal amount of all Competitive Loans
made by all Banks plus (z) the aggregate Maximum
Drawing Amount of all Letters of Credit outstanding
exceed (B) the Revolving Credit Commitment Amount and
(ii) at all times the outstanding aggregate principal
amount of all Standby Loans made by each Bank shall
equal such Bank's Revolving Credit Commitment
Percentage of the outstanding aggregate principal
amount of all Standby Loans made pursuant to 2.6
hereof. The Revolving Credit Commitment Amount may be
terminated or reduced from time to time pursuant to
this 2.1. Within the foregoing limits, the Borrower
may borrow, pay or prepay and reborrow hereunder, on
and after the Effective Date and prior to the
Revolving Credit Commitment Termination Date, subject
to the terms, conditions and limitations set forth
herein.
(b) The Borrower may at any time prior to the
Revolving Credit Commitment Termination Date, (i)
terminate the Revolving Credit Commitments in full by
giving three Business Days' prior written notice
thereof to the Administrative Agent, repaying in full
the Notes, and depositing with the Administrative
Agent in pledge, as provided in 10 hereof, cash or
other readily marketable securities acceptable to the
Administrative Agent in an amount equal to the
aggregate Maximum Drawing Amount of all Letters of
Credit then outstanding pursuant to pledge agreements
in form and substance satisfactory to the
Administrative Agent, as collateral security for the
Borrower's Obligations hereunder (which agreements
shall provide that upon the expiration, undrawn, of
each Letter of Credit, cash in an amount equal to the
undrawn portion of the Maximum Drawing Amount of such
Letter of Credit shall be returned to the Borrower),
or (ii) reduce the Revolving Credit Commitment Amount
in part by $5,000,000 or a larger integral multiple of
$1,000,000 by giving three Business Days' prior
written notice thereof to the Administrative Agent,
repaying the amount, if any, by which the sum of the
aggregate unpaid principal amount of all Loans
outstanding plus the aggregate Maximum Drawing Amount
of all Letters of Credit outstanding exceeds the then
reduced Revolving Credit Commitment Amount, together
with all interest accrued on principal amounts repaid,
and, as necessary, depositing with the Administrative
Agent, as described above, collateral in the amount,
if any, by which the aggregate Maximum Drawing Amount
of all Letters of Credit then outstanding exceeds the
then reduced Revolving Credit Commitment Amount,
provided that in no event shall the Revolving Credit
Commitment Amount be reduced to an amount less than
$15,000,000 unless it is terminated pursuant to this
2.1(b) and, provided further that no such reduction
shall be made which would reduce the Revolving Credit
Commitment Amount to an amount less than the aggregate
principal amount of the Competitive Loans outstanding.
The Administrative Agent shall promptly notify each
Bank of the contents of each notice concerning the
Revolving Credit Commitments. Upon the effective date
of any such reduction, the amount of each Bank's
Revolving Credit Commitment shall be reduced pro rata.
Subject to the provisions of 3.2 hereof, any
termination or reduction may be effected by the
Borrower without penalty. No termination of the
Revolving Credit Commitments or reduction of the
Revolving Credit Commitment Amount shall be subject to
reinstatement.
(c) The aggregate principal amount of all Loans
outstanding on the Revolving Credit Commitment
Termination Date, plus all accrued and unpaid interest
thereon, shall be due and payable in full on such
date.
2.2. Notes; Repayment of Loans. (a) The obligation
of the Borrower to repay the Loans made pursuant to
this Agreement and to pay interest thereon, as set
forth in this Agreement, shall be evidenced by
separate restated promissory notes of the Borrower
substantially in the form of Exhibit A attached hereto
with appropriate insertions (each, singly, a "Note",
and collectively, the "Notes"), dated as of the
Effective Date or the date the applicable payee Bank
becomes a party to this Agreement, as the case may be,
and payable to the order of such payee Bank in a
principal amount stated to be the lesser of (i) the
Revolving Credit Commitment Amount, or (ii) the
aggregate principal amount of Loans at any time
advanced by such payee Bank and outstanding hereunder.
On or promptly after the occurrence of the Effective
Date, each of the Banks shall return to the Borrower
the Note issued by the Borrower under the Original
Credit Agreement for cancellation.
(b) The Borrower agrees to pay the outstanding
principal balance of each Standby Loan on the
Revolving Credit Commitment Termination Date. The
Borrower agrees to pay the outstanding balance of each
Competitive Loan on the last day of the Interest
Period applicable to such Competitive Loan and on the
Revolving Credit Commitment Termination Date. Each
Loan shall bear interest from the date of the
Borrowing of which such Loan is a part on the
outstanding principal balance thereof as set forth in
2.9 hereof.
(c) Each Bank shall, and is hereby authorized by the
Borrower to, maintain, in accordance with its usual
practice, records evidencing the indebtedness of the
Borrower to such Bank hereunder from time to time,
including the amounts and Types of and the Interest
Periods applicable to the Loans made by such Bank from
time to time and the amounts of principal and interest
paid to such Bank from time to time in respect of such
Loans.
(d) The entries made in the records maintained
pursuant to paragraph (c) of this 2.2 and in the Bank
List maintained by the Administrative Agent pursuant
to 15(c) hereof shall be prima facie evidence of the
existence and amounts of the obligations of the
Borrower to which such entries relate; provided,
however, that the failure of any Bank or the
Administrative Agent to maintain or to make any entry
in such records or the Bank List, as applicable, or
any error therein shall not in any manner affect the
obligation of the Borrower to repay the Loans in
accordance with the terms of this Agreement.
2.3. Prepayments. (a) The Borrower shall have the
right at any time prior to the Revolving Credit
Commitment Termination Date to prepay any Standby
Borrowing, without premium or penalty (except as
provided in clause (B) below), in whole or in part,
together with accrued interest to the date of
prepayment on the principal amount prepaid, upon not
less than three Business Days' written, telegraphic or
telephonic notice to the Administrative Agent,
provided that (A) each partial prepayment shall be in
the aggregate principal amount of $5,000,000 or a
larger integral multiple of $1,000,000, and (B) if any
prepayment or any repayment of any Eurodollar Standby
Loan or C/D Rate Loan shall be made on any day other
than the applicable Interest Period Termination Date,
the Borrower shall indemnify the Banks against any
loss, cost or expense incurred as a result of such
prepayment or repayment in accordance with the
provisions of 3.2 hereof. The Administrative Agent
shall promptly notify each Bank of the contents of
each prepayment notice. Subject to the borrowing
limitations set forth in 2.1(a) hereof, amounts
prepaid prior to the Revolving Credit Commitment
Termination Date may be reborrowed. The Borrower
shall not have any right to prepay any Competitive
Borrowing.
(b) If at any time prior to the Revolving Credit
Commitment Termination Date the sum of the aggregate
principal amount of all Loans outstanding plus the
aggregate Maximum Drawing Amount of all Letters of
Credit outstanding exceeds the Revolving Credit
Commitment Amount, the Borrower shall immediately make
such payments of principal of the Loans (for
application first to Standby Loans, then to
Competitive Loans) to the Administrative Agent for the
accounts of the Banks in the amount of such excess,
together with all interest accrued on such principal
amounts repaid; and, if after giving effect to such
repayments of the Loans the aggregate Maximum Drawing
Amount of Letters of Credit outstanding then exceeds
the Revolving Credit Commitment Amount, the Borrower
then shall immediately deposit with the Administrative
Agent, as collateral security for the Obligations
pursuant to pledge agreements satisfactory in form and
substance to the Administrative Agent, cash in the
amount of such excess portion (if any) of such Maximum
Drawing Amount. In addition to all other payments
required by this 2.3(b), in the event of any reduction
of the Revolving Credit Commitment Amount pursuant to
2.1(b) hereof, the Borrower shall pay to the
Administrative Agent, for the accounts of the Banks,
the Facility Fee accrued to the effective date of each
such reduction on the amount of such reduction, as
well as the full indemnity required, in the case of a
prepayment of Eurodollar Loans and C/D Rate Loans, by
the provisions of 3.2 hereof.
(c) Each partial prepayment of Standby Loans made
pursuant to this 2.3 shall be allocated among all of
the Banks in proportion (as nearly as practicable) to
the respective unpaid principal amount of each Bank's
Standby Loans, with adjustments to the extent
practical to equalize any prior payments not exactly
in proportion.
2.4. Loans. (a) Each Standby Loan shall be made as
part of a Borrowing consisting of Loans made by the
Banks ratably in accordance with their Revolving
Credit Commitments. Each Standby Loan shall be made
in accordance with the procedures set forth in 2.6
hereof and each Competitive Loan shall be made in
accordance with the procedures set forth in 2.5
hereof. The Loans comprising any Borrowing shall be
(i) in the case of Competitive Loans, in an aggregate
principal amount which is an integral multiple of
$1,000,000 and not less than $10,000,000, and (ii) in
the case of Standby Loans, in an aggregate principal
amount which is an integral multiple of $1,000,000 and
not less than $5,000,000.
(b) Each Competitive Borrowing shall be comprised
entirely of Eurodollar Competitive Loans or Fixed Rate
Loans and each Standby Borrowing shall be comprised
entirely of Eurodollar Standby Loans, C/D Rate Loans
or Base Rate Loans, as the Borrower may request
pursuant to 2.5 or 2.6 hereof, as applicable.
Borrowings of more than one Type may be outstanding at
the same time; provided, however, that the Borrower
shall not be entitled to request any Borrowing which,
if made, would result in an aggregate of more than ten
separate Eurodollar Standby Loans and C/D Rate Loans
of any Bank being outstanding hereunder at any one
time. For purposes of the foregoing, Loans having
different Interest Periods, regardless of whether they
commence on the same date, shall be considered
separate Loans.
(c) Subject to 2.7 hereof, each Bank shall make each
Loan to be made by it hereunder on the proposed date
of Borrowing thereof by wire transfer of immediately
available funds to the Administrative Agent at its
Head Office, not later than 1:00 p.m., Boston time,
and upon satisfaction of the applicable conditions set
forth in this Agreement and upon receipt from the
Banks of the amount to be advanced by such Banks, on
the date of the proposed Borrowing, the Administrative
Agent shall credit the amounts so received in
immediately available funds to the Borrower's account
maintained with the Administrative Agent at the Head
Office. Competitive Loans shall be made by the Bank
or Banks whose Competitive Bids therefor are accepted
pursuant to 2.5 hereof, in the amounts so accepted and
Standby Loans shall be made by the Banks pro rata in
accordance with 2.16 hereof. Unless the
Administrative Agent shall have received notice from
a Bank prior to the date of any Borrowing that such
Bank will not make available to the Administrative
Agent such Bank's portion of such Borrowing, the
Administrative Agent may assume that such Bank has
made such portion available to the Administrative
Agent on the date of such Borrowing in accordance with
this paragraph (c) and the Administrative Agent may,
in reliance upon such assumption, make available to
the Borrower on such date a corresponding amount. If
and to the extent that such Bank shall not have made
such portion available to the Administrative Agent,
such Bank and the Borrower severally agree to repay to
the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon,
for each day from the date such amount is made
available to the Borrower until the date such amount
is repaid to the Administrative Agent at (i) in the
case of the Borrower, the interest rate applicable at
the time to the Loans comprising such Borrowing and
(ii) in the case of such Bank, the Federal Funds
Effective Rate. If such Bank shall repay to the
Administrative Agent such corresponding amount, such
amount shall constitute such Bank's Loan as part of
such Borrowing for purposes of this Agreement.
(d) Notwithstanding any other provision of this
Agreement, the Borrower shall not be entitled to
request any Borrowing if the Interest Period requested
with respect thereto would end after the Revolving
Credit Commitment Termination Date.
2.5. Competitive Bid Procedure. (a) In order to
request Competitive Bids, the Borrower shall hand
deliver or telecopy (or communicate by telephone with
prompt confirmation in writing) to the Competitive Bid
Agent (with a copy to the Administrative Agent if
different than the Competitive Bid Agent) a duly
completed Competitive Bid Request in the form of
Exhibit B-l attached hereto, to be received by the
Competitive Bid Agent (and the Administrative Agent if
different than the Competitive Bid Agent), (i) in the
case of a Eurodollar Competitive Borrowing, not later
than 10:30 a.m., Boston time, four Business Days
before a proposed Competitive Borrowing and (ii) in
the case of a Fixed Rate Borrowing, not later than
10:30 a.m., Boston time, one Business Day before a
proposed Competitive Borrowing. No C/D Rate Loan or
Base Rate Loan shall be requested in, or made pursuant
to, a Competitive Bid Request. A Competitive Bid
Request that does not conform substantially to the
format of Exhibit B-1 attached hereto may be rejected
in the Competitive Bid Agent's sole discretion, and
the Competitive Bid Agent shall promptly notify the
Borrower of such rejection by telecopier (or by
telephone with prompt confirmation in writing). Such
request shall in each case refer to this Agreement and
specify (w) whether the Borrowing then being requested
is to be a Eurodollar Borrowing or a Fixed Rate
Borrowing, (x) the date of such Borrowing (which shall
be a Business Day), (y) the aggregate principal amount
thereof which shall be in a minimum principal amount
of $10,000,000 and in an integral multiple of
$1,000,000, and (z) the Interest Period with respect
thereto (which may not end after the Revolving Credit
Commitment Termination Date). Promptly after its
receipt of a Competitive Bid Request that is not
rejected as aforesaid, the Competitive Bid Agent shall
invite by telecopier (in the form set forth in Exhibit
B-2 attached hereto) the Banks to bid, on the terms
and conditions of this Agreement, to make Competitive
Loans pursuant to the Competitive Bid Request.
(b) Each Bank may, in its sole discretion, make one
or more Competitive Bids to the Borrower responsive to
a Competitive Bid Request. Each Competitive Bid by a
Bank must be received by the Competitive Bid Agent via
telecopier, in the form of Exhibit B-3 attached
hereto, (i) in the case of a Eurodollar Competitive
Borrowing, not later than 10:00 a.m., Boston time,
three Business Days before a proposed Competitive
Borrowing and (ii) in the case of a Fixed Rate
Borrowing, not later than 10:00 a.m., Boston time, on
the day of a proposed Competitive Borrowing. Multiple
bids will be accepted by the Competitive Bid Agent.
Competitive Bids that do not conform substantially to
the format of Exhibit B-3 may be rejected by the
Competitive Bid Agent, and the Competitive Bid Agent
shall notify the Bank making such nonconforming bid
of such rejection as soon as practicable. Each
Competitive Bid shall refer to this Agreement, give
the identity of the Bank making the bid, and specify
(x) the principal amount (which shall be in a minimum
principal amount of $5,000,000 and in an integral
multiple of $1,000,000 and which may equal, but not
exceed, the entire principal amount of the Competitive
Borrowing requested by the Borrower) of the
Competitive Loan or Loans that the Bank is willing to
make to the Borrower, (y) the Competitive Bid Rate or
Rates at which the Bank is prepared to make the
Competitive Loan or Loans and (z) the Interest Period
and the last day thereof. If any Bank shall elect not
to make a Competitive Bid, such Bank shall so notify
the Competitive Bid Agent by telecopier (i) in the
case of Eurodollar Competitive Loans, not later than
10:00 a.m., Boston time, three Business Days before a
proposed Competitive Borrowing, and (ii) in the case
of Fixed Rate Loans, not later than 10:00 a.m., Boston
time, on the day of a proposed Competitive Borrowing;
provided, however, that failure by any Bank to give
such notice shall not cause such Bank to be obligated
to make any Competitive Loan as part of such
Competitive Borrowing. A Competitive Bid submitted by
a Bank pursuant to this paragraph (b) shall be
irrevocable. Each Competitive Bid may be greater than
the Revolving Credit Commitment of the Bank giving the
bid but may not exceed the Revolving Credit Commitment
Amount less (i) all outstanding Loans and (ii) the
aggregate Maximum Drawing Amount of all Letters of
Credit outstanding.
(c) The Competitive Bid Agent shall promptly notify
the Borrower by telecopier (or by telephone promptly
confirmed in writing by telecopier) of all the
Competitive Bids made, the Competitive Bid Rate and
the principal amount of each Competitive Loan in
respect of which a Competitive Bid was made and the
identity of the Bank that made each Competitive Bid.
The Competitive Bid Agent shall send a copy of all
Competitive Bids to the Borrower for its records as
soon as practicable after completion of the bidding
process set forth in this 2.5.
(d) The Borrower may in its sole and absolute
discretion, subject only to the provisions of this
paragraph (d), accept or reject any Competitive Bid
referred to in paragraph (c) above. The Borrower
shall notify the Competitive Bid Agent by telephone,
confirmed by telecopier in the form of a Competitive
Bid Accept/Reject Letter, whether and to what extent
it has decided to accept or reject any of or all the
Competitive Bids referred to in paragraph (c) above,
(x) in the case of a Eurodollar Competitive Borrowing,
not later than 11:00 a.m., Boston time, three Business
Days before a proposed Competitive Borrowing, and (y)
in the case of a Fixed Rate Borrowing, not later than
11:00 a.m., Boston time, on the day of the proposed
Competitive Borrowing; provided, however, that (i) the
failure by the Borrower to give such notice shall be
deemed to be a rejection of all the Competitive Bids
referred to in paragraph (c) above, (ii) the Borrower
shall not accept a Competitive Bid made at a
particular Competitive Bid Rate if the Borrower has
decided to reject a Competitive Bid made at a lower
Competitive Bid Rate, (iii) the aggregate amount of
the Competitive Bids accepted by the Borrower shall
not exceed the principal amount specified in the
Competitive Bid Request, (iv) if the Borrower shall
accept a Competitive Bid or Competitive Bids made at
a particular Competitive Bid Rate but the amount of
such Competitive Bid or Competitive Bids shall cause
the total amount of Competitive Bids to be accepted by
the Borrower to exceed the amount specified in the
Competitive Bid Request, then the Borrower shall
accept a portion of such Competitive Bid or
Competitive Bids in an amount equal to the amount
specified in the Competitive Bid Request less the
amount of all other Competitive Bids accepted with
respect to such Competitive Bid Request, which
acceptance, in the case of multiple Competitive Bids
at such Competitive Bid Rate, shall be made pro rata
in accordance with the amount of each such Competitive
Bid at such Competitive Bid Rate, and (v) except
pursuant to clause (iv) above, no Competitive Bid
shall be accepted for a Competitive Loan unless such
Competitive Loan is in a minimum principal amount of
$10,000,000 and an integral multiple of $1,000,000;
provided further, however, that if a Competitive Loan
must be in an amount less than $10,000,000 because of
the provisions of clause (iv) above, such Competitive
Loan may be for a minimum of $1,000,000 or any
integral multiple thereof, and in calculating the pro
rata allocation of acceptances of portions of multiple
Competitive Bids at a particular Competitive Bid Rate
pursuant to clause (iv) the amounts shall be rounded
to integral multiples of $1,000,000 in a manner which
shall be in the discretion of the Borrower. A notice
given by the Borrower pursuant to this paragraph (d)
shall be irrevocable.
(e) The Competitive Bid Agent shall promptly notify
each bidding Bank whether or not its Competitive Bid
has been accepted (and if so, in what amount and at
what Competitive Bid Rate) by telecopy sent by the
Competitive Bid Agent, and each successful bidding
Bank will thereupon become bound, subject to the other
applicable conditions hereof, to make the Competitive
Loan in respect of which its Competitive Bid has been
accepted. The Competitive Bid Agent shall also
promptly notify the Administrative Agent (if different
than the Competitive Bid Agent) of the Competitive
Bids that have been accepted, the amounts thereof and
the Competitive Bid Rates applicable thereto.
(f) If the Competitive Bid Agent shall elect to
submit a Competitive Bid in its capacity as a Bank, it
shall submit such bid directly to the Borrower one
quarter of an hour earlier than the latest time at
which the other Banks are required to submit their
bids to the Competitive Bid Agent pursuant to
paragraph (b) above. The Competitive Bid Agent will
in no event disclose the terms of any Bank's
Competitive Bid to any other Bank; provided that
following the acceptance or rejection of Competitive
Bids submitted in response to any Competitive Bid
Request, the Competitive Bid Agent may at the request
of any Bank disclose information as to the range of
the Competitive Bid Rates at which Competitive Bids
were submitted or accepted.
(g) All notices required by this 2.5 shall be given
in accordance with 18 hereof.
2.6. Standby Borrowing Procedures. In order to
request a Standby Borrowing, the Borrower shall hand
deliver or telecopy (or communicate by telephone with
prompt confirmation in writing) to the Administrative
Agent a duly completed notice of a Standby Borrowing
(a "Borrowing Notice") (a) in the case of a Eurodollar
Standby Borrowing or a C/D Rate Borrowing, not later
than 11:00 a.m., Boston time, three Business Days
before a proposed Borrowing, and (b) in the case of a
Base Rate Borrowing, not later than 10:00 a.m., Boston
time, on the day of a proposed Borrowing. Each
Borrowing Notice shall be irrevocable and shall in
each case specify (i) whether the Standby Borrowing
then being requested is to be a Eurodollar Standby
Borrowing, a C/D Rate Borrowing or a Base Rate
Borrowing; (ii) the date of such Borrowing (which
shall be a Business Day) and the amount thereof, which
shall be in a minimum principal amount of $5,000,000
and in an integral multiple of $1,000,000; and (iii)
if such Borrowing is to be a Eurodollar Standby
Borrowing or a C/D Rate Borrowing, the Interest Period
with respect thereto. If no election as to the Type
of Borrowing is specified in any such Borrowing
Notice, then the requested Borrowing shall be a Base
Rate Borrowing. If no Interest Period with respect to
any Eurodollar Standby Borrowing or C/D Rate Borrowing
is specified in any such Borrowing Notice, then the
Borrower shall be deemed to have selected an Interest
Period of one month's duration, in the case of a
Eurodollar Standby Borrowing, or 30 days' duration, in
the case of a C/D Rate Borrowing. The Administrative
Agent shall promptly advise the Banks of any notice
given pursuant to this 2.6 and of each Bank's portion
of the requested Borrowing.
2.7. Method of Certain Prepayments and Repayments.
The Borrower may prepay any Standby Loan in accordance
with 2.3(a) hereof with the proceeds of a Competitive
Borrowing or repay any Competitive Loan in accordance
with 2.2(b) hereof with the proceeds of a Standby
Borrowing; provided, however, that (i) if the
principal amount extended by a Bank in such Borrowing
is greater than the principal amount extended by such
Bank in the Borrowing being prepaid, in the case of
Standby Loans, or repaid, in the case of Competitive
Loans, then such Bank shall pay such difference to the
Administrative Agent for distribution to the Banks
described in (ii) below, (ii) if the principal amount
extended by a Bank in the Borrowing being prepaid, in
the case of Standby Loans, or repaid, in the case of
Competitive Loans, is greater than the principal
amount being extended by such Bank in such Borrowing,
the Administrative Agent shall return the difference
to such Bank out of amounts received pursuant to (i)
above, and (iii) to the extent any Bank fails to pay
the Administrative Agent amounts due from it pursuant
to (i) above, any Loan or portion thereof being
prepaid, in the case of Standby Loans, or repaid, in
the case of Competitive Loans with such amounts shall
not be deemed so prepaid or repaid, as applicable, in
accordance with 2.3(a) or 2.2(b) hereof, as
applicable, and, in each case, shall be payable by the
Borrower at the applicable time provided for in this
Agreement.
2.8. Conversion and Continuation of Standby
Borrowings. The Borrower shall have the right at any
time upon prior irrevocable notice (a "Conversion
Notice") to the Administrative Agent (i) not later
than 10:00 a.m., Boston time, on the Business Day of
the proposed conversion, to convert any Eurodollar
Standby Borrowing or C/D Rate Borrowing into a Base
Rate Borrowing, and (ii) not later than 11:00 a.m.,
Boston time, three Business Days prior to conversion
or continuation, to convert any Base Rate Borrowing or
Eurodollar Standby Borrowing into a C/D Rate Borrowing
or to convert any Base Rate Borrowing or C/D Rate
Borrowing into a Eurodollar Standby Borrowing or to
continue any C/D Rate Borrowing as a C/D Rate
Borrowing or any Eurodollar Standby Borrowing as a
Eurodollar Standby Borrowing for an additional or
different permissible Interest Period, subject in each
case to the following:
(a) each conversion or continuation shall be made
pro rata among the Banks in accordance with the
respective principal amounts of the Standby Loans
comprising the converted or continued Standby
Borrowing;
(b) if less than all the outstanding principal
amount of any Standby Borrowing shall be converted or
continued, the aggregate principal amount of any such
Standby Borrowing converted or continued shall be an
integral multiple of $1,000,000 and not less than
$5,000,000;
(c) if any Eurodollar Standby Borrowing or C/D Rate
Borrowing is converted at a time other than the end of
the Interest Period applicable thereto, the Borrower
shall pay, upon demand, any amounts due to the Banks
pursuant to 3.2 hereof; and
(d) no Interest Period may be selected for any
Standby Borrowing that would end after the Revolving
Credit Commitment Termination Date.
Each notice pursuant to this 2.8 shall be by hand
delivery or telecopier (or by telephone with prompt
confirmation in writing), shall be irrevocable and
shall refer to this Agreement and specify (i) the
identity and amount of the Standby Borrowing that the
Borrower requests be converted or continued, (ii)
whether such Standby Borrowing is to be converted to
or continued as a Eurodollar Standby Borrowing, a C/D
Rate Borrowing or a Base Rate Borrowing, (iii) if such
notice requests a conversion, the date of such
conversion (which shall be a Business Day) and (iv) if
such Standby Borrowing is to be converted to or
continued as a Eurodollar Standby Borrowing or a C/D
Rate Borrowing, the Interest Period with respect
thereto. If no Interest Period is specified in any
such notice with respect to any conversion to or
continuation as a Eurodollar Standby Borrowing or a
C/D Rate Borrowing, the Borrower shall be deemed to
have selected an Interest Period of one month's
duration, in the case of a Eurodollar Standby
Borrowing, or 30 days duration, in the case of a C/D
Rate Borrowing. The Administrative Agent shall advise
the other Banks of any notice given pursuant to this
2.8 and of each Bank's portion of any converted or
continued Standby Borrowing. If the Borrower shall
not have given notice in accordance with this 2.8 to
continue any Standby Borrowing into a subsequent
Interest Period (and shall not otherwise have given
notice in accordance with this 2.8 to convert such
Standby Borrowing), such Standby Borrowing shall, at
the end of the Interest Period applicable thereto
(unless repaid pursuant to the terms hereof),
automatically be continued into a new Interest Period
as a Base Rate Borrowing.
2.9. Interest on Loans. (a) Subject to the
provisions of 2.10 hereof, the Loans comprising each
Eurodollar Borrowing shall bear interest (computed on
the basis of the actual number of days elapsed over a
year of 360 days) at a rate per annum equal to (i) in
the case of each Eurodollar Standby Loan, the
Eurodollar Rate for the Interest Period in effect for
such Borrowing plus the Applicable Margin from time to
time in effect and (ii) in the case of each Eurodollar
Competitive Loan, the Eurodollar Rate for the Interest
Period in effect for such Borrowing plus the Margin
offered by the Bank making such Loan and accepted by
the Borrower pursuant to 2.5 hereof.
(b) Subject to the provisions of 2.10 hereof, the
Loans comprising each C/D Rate Borrowing shall bear
interest (computed on the basis of the actual number
of days elapsed over a year of 360 days) at a rate per
annum equal to the C/D Rate for the Interest Period in
effect for such Borrowing plus the Applicable Margin
from time to time in effect.
(c) Subject to the provisions of 2.10 hereof, the
Loans comprising each Base Rate Borrowing shall bear
interest (computed on the basis of the actual number
of days elapsed over a year of 365 or 366 days) at a
rate per annum equal to the Base Rate in effect for
such Borrowing plus the Applicable Margin from time to
time in effect.
(d) Subject to the provisions of 2.10 hereof, each
Fixed Rate Loan shall bear interest at a rate per
annum (computed on the basis of the actual number of
days elapsed over a year of 360 days) equal to the
fixed rate of interest offered by the Bank making such
Loan and accepted by the Borrower pursuant to 2.5
hereof.
(e) Interest on each Loan shall be payable in
arrears on each Interest Payment Date applicable to
such Loan except as otherwise provided in this
Agreement. The applicable Eurodollar Rate, C/D Rate
or Base Rate for each Interest Period or day within an
Interest Period, as the case may be, shall be
determined by the Administrative Agent, and such
determination shall be conclusive absent manifest
error. The Administrative Agent shall promptly advise
the Borrower and each Bank, as appropriate, of such
determination.
2.10. Interest on Overdue Amounts. Overdue principal
and (to the extent permitted by applicable law)
interest on the Loans and all other overdue amounts
payable hereunder, whether Facility Fee, Agent's Fee
or otherwise, shall bear interest compounded monthly
and payable on demand at a rate per annum equal to 2%
above the rate otherwise applicable to Base Rate
Loans, as such rate is in effect from time to time,
until such amounts shall be paid in full (to the
extent permitted by law, after as well as before
judgment).
2.11. Letters of Credit. Subject to the terms and
conditions set forth in this Agreement, upon written
request of the Borrower to the Administrative Agent
with a copy to the Letter of Credit Bank in accordance
with this 2.11, the Letter of Credit Bank, at its
option, may issue, with pro rata participation by all
of the Banks, at any time prior to the Revolving
Credit Commitment Termination Date, and subject to the
satisfaction of the conditions precedent set forth in
7 hereof, Letters of Credit in such form as the
Borrower and the Letter of Credit Bank may agree for
the account of the Borrower, provided that at no time
shall the aggregate Maximum Drawing Amount of all
Letters of Credit outstanding exceed $50,000,000, and
provided further that at no time shall the sum of the
aggregate principal amount of all Loans outstanding
plus the aggregate Maximum Drawing Amount of all
Letters of Credit outstanding exceed the Revolving
Credit Commitment Amount. Each such request shall be
in writing and shall be received by the Administrative
Agent at least five Business Days prior to the
proposed date of issuance. The Administrative Agent
shall promptly notify each Bank of the contents of
each such request. In addition, the Administrative
Agent shall give written confirmation by telecopy to
the Letter of Credit Bank no later than two Business
Days prior to the requested date of issuance of each
Letter of Credit as to the availability under the
Letter of Credit facility herein to issue such Letter
of Credit and shall enclose with such confirmation a
copy of the Borrowing Notice received pursuant to 7.4
hereof. The expiry dates, amounts and beneficiaries
of the Letters of Credit will be as agreed by the
Borrower and the Letter of Credit Bank. The Letter of
Credit Bank shall send to the Administrative Agent for
distribution to the Banks copies of all Letters of
Credit issued hereunder as soon as reasonably
practicable after the issuance thereof. The Borrower
may request, and the Letter of Credit Bank, upon terms
and conditions approved by the Borrower, shall issue,
with pro rata participation by all of the Banks,
substitute Letters of Credit for the Letters of Credit
to reflect reductions in the amount of the Borrower's
obligations supported by such Letters of Credit. Each
Letter of Credit issued by the Letter of Credit Bank
hereunder shall identify: (i) the dates of issuance
and expiry of such Letter of Credit, (ii) the amount
of such Letter of Credit (which shall be a sum
certain), (iii) the beneficiary and account party of
such Letter of Credit, and (iv) the drafts and other
documents necessary to be presented to the Letter of
Credit Bank upon drawing thereunder. No Letter of
Credit issued hereunder shall expire after the earlier
of (A) the first anniversary of its date of issuance,
or (B) the Revolving Credit Commitment Termination Date.
2.12. Effects of Drawings. The Borrower hereby
promises to pay the Administrative Agent for the
account of the Letter of Credit Bank in immediately
available funds no later than the second Business Day
after each drawing the amount of such drawing under
Letters of Credit, plus interest thereon at an annual
rate equal to the Base Rate plus the Applicable Margin
with respect to Base Rate Loans. Each Bank agrees
that on the third Business Day after any such drawing,
such Bank will immediately make available to the
Administrative Agent for the account of the Letter of
Credit Bank at the Administrative Agent's Head Office,
in Federal or other immediately available funds, its
ratable share of any such drawing, plus any interest
which shall have accrued thereon, provided that each
Bank's obligation shall be reduced by its pro rata
share of any reimbursement by the Borrower in respect
of such drawing pursuant to this 2.12. The obligation
of the Borrower under this Agreement to reimburse the
Letter of Credit Bank in respect of drawings under
Letters of Credit shall be Obligations of the Borrower
hereunder which shall be due and payable
simultaneously with all other Obligations hereunder.
Section 2.13 hereof shall govern the Borrower's
obligations with respect to drawings under Letters of
Credit.
2.13. Letter of Credit Loan Obligations Absolute. (a)
The obligation of the Borrower to reimburse the Letter
of Credit Bank as provided hereunder in respect of
drawings under Letters of Credit shall rank pari passu
with the obligation of the Borrower to repay the Loans
hereunder, and shall be absolute and unconditional
under any and all circumstances. Without limiting the
generality of the foregoing, the Borrower's obligation
to reimburse the Letter of Credit Bank in respect of
drawings under Letters of Credit shall not be subject
to any defense based on the non-application or
misapplication by the beneficiary of the proceeds of
any such payment or the legality, validity, regularity
or enforceability of the Letters of Credit or any
other document whatsoever. The Letter of Credit Bank
may accept or pay any draft presented to it under any
Letter of Credit regardless of when drawn or made and
whether or not negotiated, if such draft, accompanying
certificate or documents and any transmittal advice
are presented on or before the expiry date of the
Letter of Credit, or any renewal or extension thereof
then in effect. Furthermore, neither the Letter of
Credit Bank nor any of its correspondents shall be
responsible, as to any document presented under a
Letter of Credit which appears to be regular on its
face, and appears on its face to conform to the terms
of the Letter of Credit, for the validity or
sufficiency of any signature or endorsement, for delay
in giving any notice or failure of any instrument to
bear adequate reference to the Letter of Credit, or
for failure of any person to note the amount of any
draft on the reverse of the Letter of Credit.
(b) Any action, inaction or omission on the part of
the Letter of Credit Bank or any of its correspondents
under or in connection with any Letter of Credit or
the related instruments, documents or property, if in
good faith and in conformity with such laws,
regulations or customs as are applicable, shall be
binding upon the Borrower and shall not place the
Letter of Credit Bank or any of its correspondents
under any liability to the Borrower, in the absence of
(i) gross negligence or willful misconduct by the
Letter of Credit Bank or its correspondents or (ii)
the failure by the Letter of Credit Bank to pay under
a Letter of Credit after presentation of a draft and
documents strictly complying with such Letter of
Credit. The Letter of Credit Bank's rights, powers,
privileges and immunities specified in or arising
under this Agreement are in addition to any heretofore
or at any time hereafter otherwise created or arising,
whether by statute or rule of law or contract. All
Letters of Credit issued hereunder will, except to the
extent otherwise expressly provided, be governed by
the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of
Commerce, Publication No. 500, and any subsequent
revisions thereof.
2.14. Banks' Obligations in Respect of Letters of
Credit. Each Bank agrees with the Letter of Credit
Bank and the other Banks that its obligation to
participate in Letters of Credit and to reimburse the
Letter of Credit Bank for its ratable share of all
drawings under Letters of Credit as provided in 2.12
hereof shall not be affected in any way by any
circumstances (other than the gross negligence or
willful misconduct of the Letter of Credit Bank),
including, without limitation:
(a) any modification or amendment of, or any
consent, waiver, release or forbearance with respect
to, any of the terms of this Agreement or any other
instrument or document referred to herein;
(b) the existence of any Default or Event of
Default, or the termination of the Revolving Credit
Commitments pursuant to 10 in connection with any
Event of Default; or
(c) any change of any kind whatsoever in the
financial position or creditworthiness of the
Borrower.
2.15. Existing Letters of Credit. The Borrower agrees
that with respect to each letter of credit listed and
described on Schedule 2.15 attached hereto, for the
period commencing on the Effective Date and ending on
the first to occur of the expiration, undrawn, of such
letter of credit or the date all reimbursement
obligations with respect to such letter of credit have
been satisfied in full, such letter of credit shall be
a Letter of Credit for all purposes of this Agreement,
and the Borrower hereby affirms its liability with
respect to the reimbursement obligations thereunder as
provided herein. The Borrower hereby promises to pay
all Letter of Credit Fees (as defined in the Original
Credit Agreement) which have accrued under the
Original Credit Agreement up to and including the day
prior to the Effective Date on the next date such
payment would have been due under the Original Credit
Agreement. The Borrower hereby further agrees that
from and after the Effective Date the Letter of Credit
Fees payable with respect to each letter of credit
listed and described on Schedule 2.15 attached hereto
shall be calculated and payable in accordance with 3.9
hereof. The Banks affirm their pro rata participation
in such Letters of Credit.
2.16. Pro Rata Treatment. Except as required under
3.3 hereof, each Standby Borrowing, each payment or
prepayment of principal of any Standby Borrowing, each
payment of interest on the Standby Loans, each payment
of the Facility Fee, each reduction of the Revolving
Credit Commitments and each refinancing of any
Borrowing with a Standby Borrowing of any Type, shall
be allocated pro rata among the Banks in accordance
with their respective Revolving Credit Commitments
(or, if such Revolving Credit Commitments shall have
expired or been terminated, in accordance with the
respective principal amounts of their outstanding
Standby Loans). Each payment of principal of any
Competitive Borrowing shall be allocated pro rata
among the Banks participating in such Borrowing in
accordance with the respective principal amounts of
their outstanding Competitive Loans comprising such
Borrowing. Each payment of interest on any
Competitive Borrowing shall be allocated pro rata
among the Banks participating in such Borrowing in
accordance with the respective amounts of accrued and
unpaid interest on their outstanding Competitive Loans
comprising such Borrowing. For purposes of
determining the available Revolving Credit Commitments
of the Banks at any time, each outstanding Competitive
Borrowing shall be deemed to have utilized the
Revolving Credit Commitments of the Banks (including
those Banks which shall not have made Loans as part of
such Competitive Borrowing) pro rata in accordance
with such respective Revolving Credit Commitments.
Each Bank agrees that in computing such Bank's portion
of any Borrowing to be made hereunder, the
Administrative Agent may, in its discretion, round
each Bank's percentage of such Borrowing to the next
higher or lower whole dollar amount.
2.17. Existing Loans. On and as of the Effective
Date (i) all Loans (if any) outstanding under (and as
defined in) the Original Credit Agreement shall
constitute Loans outstanding under this Agreement,
(ii) each Base Rate Amount outstanding under (and as
defined in) the Original Credit Agreement shall
constitute a Base Rate Loan outstanding hereunder,
shall bear interest from and after the Effective Date
at the rate of interest for Loans comprising each Base
Rate Borrowing as set forth in 2.9(c) hereof and all
interest accrued with respect to such Base Rate
Amount, including all interest accrued prior to the
Effective Date, shall be payable by the Borrower on
the next Interest Payment Date for such Base Rate
Borrowing hereunder, (iii) each C/D Rate Amount
outstanding under (and as defined in) the Original
Credit Agreement shall constitute a C/D Rate Loan
outstanding hereunder with the same Interest Period as
was applicable to such C/D Rate Amount, shall bear
interest from and after the Effective Date at the rate
of interest for Loans comprising each C/D Rate
Borrowing as set forth in 2.9(b) hereof and all
interest accrued with respect to such C/D Rate Amount,
including all interest accrued prior to the Effective
Date, shall be payable by the Borrower on the next
Interest Payment Date for such C/D Rate Borrowing
hereunder, (iv) each Eurodollar Rate Amount
outstanding under (and as defined in) the Original
Credit Agreement shall constitute a Eurodollar Standby
Loan outstanding hereunder with the same Interest
Period as was applicable to such Eurodollar Rate
Amount, shall bear interest from and after the
Effective Date at the rate of interest for Loans
comprising each Eurodollar Borrowing as set forth in
2.9(a) hereof and all interest accrued with respect to
such Eurodollar Rate Amount, including all interest
accrued prior to the Effective Date, shall be payable
by the Borrower on the next Interest Payment Date for
such Eurodollar Rate Borrowing hereunder and (v) each
Competitive Loan outstanding under (and as defined in)
the Original Credit Agreement shall constitute a
Competitive Loan outstanding hereunder from the same
Bank or Banks which made such Competitive Loan under
the Original Credit Agreement, with the same Interest
Period as was applicable to such Competitive Loan
under the Original Credit Agreement and such
Competitive Loan shall bear interest from and after
the Effective Date at the rate of interest determined
for such Competitive Loan under the Original Credit
Agreement and all interest accrued with respect to
such Competitive Loan, including all interest accrued
prior to the Effective Date, shall be payable by the
Borrower on the next Interest Payment Date for such
Competitive Loan hereunder. The obligations of the
Borrower with respect to all such Loans shall be
subject to and governed by the applicable terms and
provisions of this Agreement and the other Loan
Documents. The Borrower hereby promises to pay to the
Administrative Agent on the Effective Date, for the
accounts of the Banks, the Facility Fee (as defined in
the Original Credit Agreement) accrued to the
Effective Date.
3. CERTAIN GENERAL PROVISIONS AND FEES.
3.1. Additional Costs and Expenses. (a) Anything
herein to the contrary notwithstanding and without
duplication of any other amounts payable hereunder,
if, after (x) the Effective Date, in the case of any
Standby Loan or any obligation to make Standby Loans
or (y) the date of the related Competitive Bid, in the
case of any Competitive Loan, any change in any
present law or any future applicable law (which
expression, as used herein, includes statutes, rules
and regulations thereunder and interpretations thereof
by any competent court or by any governmental or other
regulatory body or official charged with the
administration or the interpretation thereof and
requests, directives, instructions and notices at any
time or from time to time hereafter made upon or
otherwise issued to any of the Banks or the
Administrative Agent by any central bank or other
fiscal, monetary or other authority, whether or not
having the force of law) shall:
(i) subject any Bank to any tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature
with respect to such Bank's commitment to lend
Eurodollar Standby Loans or C/D Rate Loans or such
Bank's portion of the Eurodollar Loans or C/D Rate
Loans or Fixed Rate Loans (except for changes in the
rate of tax on the overall net income of such Bank
imposed by the jurisdiction in which such Bank's
principal executive office is located); or
(ii) materially change the basis of taxation of
payments to any Bank of the principal of, interest on
or any other amounts payable in respect of the
Eurodollar Loans or C/D Rate Loans or Fixed Rate Loans
(except for changes in the rate of tax on the overall
net income of such Bank imposed by the jurisdiction in
which such Bank's principal executive office is
located); or
(iii) impose or increase or render applicable any
special deposit or reserve or similar requirement
(whether or not having the force of law) against
assets held by, or deposits in or for the account of,
or loans and commitments to lend Eurodollar Loans or
C/D Rate Loans or Fixed Rate Loans hereunder by an
office of any Bank; or
(iv) impose on any Bank any other condition or
requirement with respect to this Agreement, such
Bank's commitment or such Bank's portion of the
Eurodollar Loans or C/D Rate Loans or Fixed Rate Loans
or any class of loans of which any of the Eurodollar
Loans or C/D Rate Loans or Fixed Rate Loans form a
part,
and the result of any of the foregoing is
(A) to increase the cost to any Bank
attributable to the making, funding or maintaining of
Eurodollar Loans or C/D Rate Loans or Fixed Rate
Loans; or
(B) to reduce the amount of principal,
interest or other amount with respect to Eurodollar
Loans or C/D Rate Loans or Fixed Rate Loans payable to
any Bank hereunder;
then, and in each such case, to the extent such cost
or reduction is not reflected in determining the
interest rate applicable to Eurodollar Loans or C/D
Rate Loans or Fixed Rate Loans, the Borrower will,
within 30 days after demand made by such Bank at any
time and from time to time as often as the occasion
therefor may arise, pay to such Bank such additional
amounts as will be sufficient, in the good faith
opinion of such Bank, to compensate such Bank for such
additional cost or reduction.
(b) If, after (x) the Effective Date, in the case of
any Standby Loan or any obligation to make Standby
Loans or (y) the date of the related Competitive Bid,
in the case of any Competitive Loan, any change in any
present law or governmental rule, regulation, policy,
guideline (including, without limitation, any change
in the risk-based capital guidelines set forth in the
Federal Register, Vol. 4, No. 17, dated January 27,
1989) or directive (whether or not having the force of
law) or the interpretation thereof by a court or
governmental authority with appropriate jurisdiction,
or any future law or governmental rule, regulation,
policy, guideline or directive (whether or not having
the force of law) or the interpretation thereof by a
court or governmental authority with appropriate
jurisdiction, imposes or increases or renders
applicable any requirement regarding capital adequacy
(whether or not having the force of law), or otherwise
affects the amount of capital required to be
maintained by any Bank or any corporation controlling
any Bank (or the amount of capital that a court or
governmental authority with appropriate jurisdiction
expects any such Bank or corporation to maintain) and
such Bank in good faith determines that the amount of
such capital required is increased by or based upon
the existence of the credit facilities or commitments
established hereunder or any Loans made pursuant
hereto or upon agreements or loans of the type
contemplated hereby, then such Bank may notify the
Borrower of such fact. To the extent that the costs
of such increased capital requirements are not
reflected in the Base Rate, Eurodollar Rate, C/D Rate,
or Fixed Rate, as applicable, the Borrower and such
Bank shall thereafter attempt to negotiate in good
faith an adjustment to the compensation payable
hereunder which will adequately compensate such Bank
in light of these circumstances. If the Borrower and
such Bank are unable to agree to such adjustment
within 30 days of the day on which the Borrower
receives such notice, then commencing on the effective
date of any such change, the fees payable hereunder
shall increase by an amount certified to the Borrower
pursuant to 3.4 hereof which will, in such Bank's
reasonable determination, provide adequate
compensation, provided that the Borrower shall not be
liable (pursuant to either 3.1(a) or 3.1(b) hereof) to
any Bank for any costs incurred more than 90 days
prior to receipt by the Borrower of the notice from
such Bank referred to in such sections.
(c) If any Bank has demanded compensation under
3.1(a), the Borrower may, by giving at least five
Business Days' prior notice to such Bank through the
Administrative Agent, elect to convert all C/D Rate
Loans or Eurodollar Loans or Fixed Rate Loans, as the
case may be, lent by such Bank into Base Rate Loans or
into Eurodollar Loans or C/D Rate Loans or Fixed Rate
Loans (whichever Type is not affected by the
circumstances giving rise to such demand for
compensation) having an Interest Period equal to that
of the Eurodollar Loan or C/D Rate Loan or Fixed Rate
Loan then outstanding and affected by such election,
unless and until such Bank notifies the Borrower that
such circumstances no longer apply.
(d) Within 30 days after (i) any Bank has demanded
compensation from the Borrower pursuant to either
3.1(a) or 3.1(b) hereof, or (ii) the Borrower is
required to make a deduction or withholding for the
account of any Bank pursuant to 3.5(c) hereof, or
(iii) there shall have occurred a change in law with
respect to any Bank as a consequence of which it shall
have become unlawful for such Bank to make a Loan on
the date of any applicable Borrowing, as described in
6.4, and 7.3 hereof (any such Bank described in the
foregoing clauses (i), (ii) or (iii) is hereinafter
referred to as an "Affected Bank"), the Borrower may
request that the Non-Affected Banks acquire all, but
not less than all, of the Affected Bank's outstanding
Loans and assume all, but not less than all, of the
Affected Bank's Commitment. If the Borrower so
requests, the Non-Affected Banks may elect to acquire
all or any portion of the Affected Bank's outstanding
Loans and to assume all or any portion of the Affected
Bank's Commitment. If the Non-Affected Banks do not
elect to acquire and assume all of the Affected Bank's
outstanding Loans and Commitment, the Borrower may
designate a replacement bank or banks, which must be
satisfactory to the Administrative Agent, to acquire
and assume that portion of the outstanding Loans and
Commitment of the Affected Bank not being acquired and
assumed by the Non-Affected Banks. The provisions of
15 hereof shall apply to all reallocations pursuant to
this 3.1(d), and the Affected Bank and any Non-
Affected Banks and/or replacement banks which are to
acquire the Loans and Commitment of the Affected Bank
shall execute and deliver to the Administrative Agent,
in accordance with the provisions of 15 hereof, such
Assignments and Acceptances and other instruments,
including, without limitation, Notes, as are required
pursuant to 15 to give effect to such reallocations.
Any Non-Affected Banks and/or replacement banks which
are to acquire the Loans and Commitment of the
Affected Bank shall be deemed to be Eligible Assignees
for all purposes of 15. On the effective date of the
applicable Assignments and Acceptances, the Borrower
shall pay to the Affected Bank all interest accrued on
its Loans up to but excluding such date, along with
any fees payable to such Affected Bank hereunder up to
but excluding such date.
(e) The provisions of 3.1(b) hereof concerning
increased capital requirements shall apply to Letters
of Credit issued hereunder.
3.2. Indemnification. If the Borrower shall at any
time (a) repay or prepay or convert any principal of
any Fixed Rate Loan, Eurodollar Loan or C/D Rate Loan
on a date other than the Interest Period Termination
Date with respect thereto (as a consequence of
acceleration pursuant to 10 hereof, a mandatory
repayment or prepayment required hereunder, an
optional prepayment, a conversion pursuant to 3.1(c)
or otherwise), or (b) for any reason fail to borrow,
convert or continue a Fixed Rate Loan, Eurodollar Loan
or C/D Rate Loan on the date specified therefor in a
Borrowing Notice or a Conversion Notice delivered by
the Borrower to the Administrative Agent (whether as
a result of a failure to satisfy any condition
precedent set forth in 6 or 7 hereof, or otherwise),
the Borrower shall indemnify the applicable payee
Banks, on demand made by such Banks at any time and as
often as the occasion therefor may arise, against all
losses, costs or expenses which such Banks may at any
time or from time to time incur as a consequence of
such repayment, prepayment or failure to borrow. The
amount of such losses, costs or expenses shall be an
amount equal to the remainder, if any, of:
(i) the total amount of interest which would
otherwise have accrued hereunder on the principal so
paid, not borrowed or converted at a rate equal to the
interest rate which otherwise would have been
applicable to such principal less the Applicable
Margin during the period (the "Reemployment Period")
(A) in the case of any such repayment or prepayment,
beginning on the date of such payment and ending on
the applicable Interest Period Termination Date of the
Loan so paid, or (B) in the case of any such failure
to borrow or convert, beginning on the date for the
Borrowing or conversion that shall have been requested
in the Borrowing Notice or the Conversion Notice
relating thereto and ending on the date that would
have been the applicable Interest Period Termination
Date of such Loan had such Borrowing or conversion
been made; minus
(ii) an amount equal to the aggregate interest to be
earned by the applicable payee Banks by reinvesting
the amount prepaid, repaid or not borrowed or
converted for the Reemployment Period at the yield to
maturity on a United States Treasury security selected
by the Administrative Agent equal in amount to the
amount prepaid, repaid or not borrowed or converted
and having a maturity approximately equal to the
Reemployment Period.
3.3. Illegality or Impossibility. Notwithstanding
any other provision of this Agreement, if (a) the
introduction of, any change in, or any change in the
interpretation of, any law or regulation applicable to
any Bank shall make it unlawful, or any central bank
or other governmental authority having jurisdiction
thereof shall assert that it is unlawful for such Bank
to perform its obligations in respect of Eurodollar
Loans, or (b) if the Administrative Agent shall
reasonably determine with respect to C/D Rate Loans or
Eurodollar Rate Loans, that (i) by reason of
circumstances affecting the Eurodollar interbank
market, adequate and reasonable methods do not exist
for ascertaining the Eurodollar Rate which would
otherwise be applicable during any Interest Period, or
(ii) by reason of circumstances affecting the United
States market in certificates of deposit, adequate and
reasonable methods do not exist for ascertaining the
C/D Rate which would otherwise be applicable during
any Interest Period, or (iii) deposits of United
States Dollars in the relevant amount for the relevant
Interest Period are not available to one or more of
the Reference Banks in the Eurodollar interbank
market, or (iv) certificates of deposit of the
relevant amount and for the relevant Interest Period
are not available to one or more of the Reference
Banks in the United States market for certificates of
deposits, or (v) the Eurodollar Rate does not or will
not accurately reflect the cost to one or more of the
Reference Banks of obtaining or maintaining the
applicable Eurodollar Loan during any Interest Period,
or (vi) the C/D Rate does not or will not accurately
reflect the cost to any one or more of the Reference
Banks of obtaining or maintaining the applicable C/D
Rate Loan during any Interest Period, then the
Administrative Agent shall promptly give telephonic,
telex or cable notice of such determination to the
Borrower and the Banks (which notice shall be
conclusive and binding upon the Borrower and the
Banks). Before giving any notice to the
Administrative Agent pursuant to this section, a
Reference Bank shall designate a different lending
office if such designation will avoid the need for
giving such notice and will not, in the judgment of
such Bank, be otherwise disadvantageous to such Bank.
Upon such notification by the Administrative Agent,
the obligation of such affected Reference Bank and any
other similarly affected Banks to make or maintain
Eurodollar Loans and/or C/D Rate Loans, as applicable,
shall be suspended until the Administrative Agent
determines that such circumstances no longer exist,
and such Bank's or Banks' outstanding Eurodollar Loans
and/or C/D Rate Loans shall continue to bear interest
at the applicable interest rate until the next
Interest Period Termination Date if lawful (or, if
such continued status is not lawful, until the date of
receipt of such notification by the Borrower), and
thereafter shall be deemed converted to Base Rate
Loans in equal principal amounts. In such event, all
payments and prepayments of principal which otherwise
would have been applied to repay such converted Loans
of such Bank shall instead be applied to repay the
Base Rate Loans resulting from such conversion.
3.4. Bank Certificates. A certificate signed by an
officer of any Bank or the Administrative Agent,
setting forth any additional amount required to be
paid by the Borrower to such Bank or to the
Administrative Agent for the accounts of the Banks
under 3.1 or 3.2 hereof and the basis therefor, shall
be delivered by such Bank or the Administrative Agent
to the Borrower in connection with each demand made at
any time by such Bank or the Administrative Agent upon
the Borrower under any of such sections, and each such
certificate shall constitute conclusive evidence, in
the absence of manifest error, of the additional
amount required to be paid by the Borrower to such
Bank or the Administrative Agent. Each such
certificate shall set forth in reasonable detail any
reasonable averaging or attribution methods used by
such Bank in connection with the calculation of such
additional amount. A claim by any Bank or the
Administrative Agent for all or any part of any
additional amount required to be paid by the Borrower
under 3.1 or 3.2 hereof may be made at any time and
from time to time as often as the occasion therefor
may arise.
3.5. Payments to be Free of Deductions. (a) All
payments by the Borrower under this Agreement shall be
made without set-off or counterclaim, and free and
clear of and without deduction for any taxes, levies,
imposts, duties, charges, fees, deductions,
withholdings, compulsory loans, restrictions or
conditions of any nature now or hereafter imposed or
levied by any country or any political subdivision
thereof or taxing or other authority therein unless
the Borrower is compelled by law to make such
deduction or withholding. If any such obligation is
imposed upon the Borrower with respect to any amount
payable by it to or for the account of any Bank
hereunder, the Borrower will pay to the Administrative
Agent for the account of such Bank on the date on
which such amount becomes due and payable hereunder
and in United States dollars, such additional amount
as shall be necessary to enable such Bank to receive
the same net amount which it would have received on
such due date had no such obligation been imposed upon
the Borrower, provided that the Borrower shall not be
obligated to make such payment for the account of any
Bank if (i) such Bank has failed to comply with 3.5(b)
hereof, or (ii) such Bank is not entitled to exemption
from deduction or withholding of United States Federal
income tax for any reason other than a change in
United States law or regulations or any applicable tax
treaty. If the Borrower shall be required by law to
make such deduction or withholding, the Borrower will
deliver to the Administrative Agent tax receipts or
other appropriate evidence of payment.
(b) Each Bank that is not incorporated under the
laws of the United States or a state thereof agrees
that (to the extent it has not already done so prior
to the Effective Date) it will deliver to the Borrower
on the Effective Date two duly completed and accurate
originals of a valid United States Internal Revenue
Service Form 4224 or Form 1001 or any successor form
thereto indicating that such Bank is entitled to
receive payments under this Agreement, including fees,
without deduction or withholding of any United States
federal income taxes. Subject to any change in
applicable laws or regulations, such Bank undertakes
to deliver to the Borrower, upon request, two duly
completed and accurate originals of Form 1001 or Form
4224, or successor form, on or before the date that
any such form expires or becomes obsolete, indicating
that such Bank is entitled to receive payments under
this Agreement without deduction or withholding of any
United States federal income taxes.
(c) Within 30 days after the date on which the
Borrower is required to make a deduction or
withholding for the account of a Bank pursuant to
3.5(a) hereof, the Borrower may replace such Bank in
accordance with the terms of 3.1(d) hereof.
3.6. Interest Limitation. Notwithstanding any other
term of this Agreement or the Notes or any other
document referred to herein or therein, the maximum
amount of interest which may be charged to or
collected from any Person liable hereunder or under
any Note shall be absolutely limited to, and shall in
no event exceed, the maximum amount of interest which
could lawfully be charged or collected under
applicable law (including, to the extent applicable,
the provisions of 5197 of the Revised Statutes of the
United States of America, as amended, 12 U.S.C.
Section 85, as amended), so that the maximum of all
amounts constituting interest under applicable law,
howsoever computed, shall never exceed as to any
Person liable therefor such lawful maximum, and any
term of this Agreement or the Notes or any other
document referred to herein or therein which could be
construed as providing for interest in excess of such
lawful maximum shall be and hereby is made expressly
subject to and modified by the provisions of this
section.
3.7. Facility Fee. For the period commencing on the
Effective Date and ending on the Revolving Credit
Commitment Termination Date, the Borrower promises to
pay to the Administrative Agent, for the accounts of
the Banks in accordance with their Revolving Credit
Commitment Percentages, a facility fee at a rate per
annum equal to the Applicable Margin in effect from
time to time during each calendar quarter on the daily
average amount during each calendar quarter or portion
thereof of the Revolving Credit Commitment Amount,
whether used or unused (and whether or not the
conditions set forth in 7 hereof shall have been
satisfied) (the "Facility Fee"). The Facility Fee
shall be payable quarterly in arrears on the first day
of each January, April, July and October of each year
for the immediately preceding calendar quarter or
portion thereof then ended, commencing on January 1,
1995, with a final payment on the Revolving Credit
Commitment Termination Date.
3.8. Agent's Fee. The Borrower promises to pay to
the Administrative Agent for its own account an
agent's fee (the "Agent's Fee") in the amounts and at
the times provided in that certain letter agreement,
dated as of the date hereof, between the Borrower and
the Administrative Agent (the "Agent's Fee Letter").
3.9. Letter of Credit Fee. The Borrower shall pay to
the Administrative Agent for the account of the Letter
of Credit Bank a fee in respect of each Letter of
Credit issued by it pursuant to 2.11 hereof calculated
at the rate of 0.125% per annum on the daily average
Maximum Drawing Amount of each such Letter of Credit,
payable quarterly in arrears during the term of such
Letter of Credit, commencing upon the last day of the
quarter in which such Letter of Credit was issued, and
upon the Revolving Credit Commitment Termination Date.
The Borrower shall also pay to the Administrative
Agent for the accounts of the Banks (including FNBB if
the Letter of Credit Bank is FNBB and BofA if the
Letter of Credit Bank is BofA) in accordance with
their Revolving Credit Commitment Percentages a fee in
respect of each such Letter of Credit calculated at
the rate per annum equal to the Applicable Margin in
effect from time to time during such quarter with
respect to Eurodollar Standby Loans on the daily
average Maximum Drawing Amount thereof, payable
quarterly in arrears during the term of such Letter of
Credit, commencing upon the last day of the quarter
in which such Letter of Credit was issued, and upon
the Revolving Credit Commitment Termination Date (the
foregoing fees are referred to collectively as the
"Letter of Credit Fee"). In addition (but without
duplication), the Borrower shall pay to the
Administrative Agent for the account of the Letter of
Credit Bank (upon presentation by the Letter of Credit
Bank to the Administrative Agent, and in turn by the
Administrative Agent to the Borrower, of an invoice
documenting such fees) the Letter of Credit Bank's
standard processing, negotiating, amendment and
administrative fees, as determined in accordance with
the Letter of Credit Bank's customary fees and charges
for similar facilities.
3.10. Amendment Fee. In consideration of the Banks'
agreement, subject to the terms and conditions set
forth herein, to make Standby Loans to the Borrower
and to participate in Letters of Credit issued for the
account of the Borrower, pursuant to this amendment
and restatement of the Original Credit Agreement, the
Borrower hereby agrees to pay to the Administrative
Agent, on the Effective Date, for the accounts of the
Banks in accordance with their Revolving Credit
Commitment Percentages, an amendment fee (the
"Amendment Fee") in the amount of $150,000.
4. CLOSING; PAYMENTS AND COMPUTATIONS.
4.1. Closing. The closing of the transactions
contemplated by this Agreement shall occur on November
1, 1994, or such other date (which in no event shall
be later than November 30, 1994) agreed upon by the
Borrower and the Administrative Agent.
4.2. Use of Proceeds. The Borrower covenants and
agrees that the proceeds of the Loans shall be used
for working capital and general corporate purposes,
including, without limitation, back-up liquidity for
the Borrower's commercial paper program.
4.3. Payments. All payments hereunder (whether of
principal, interest, Facility Fee, Agent's Fee,
Amendment Fee, Letter of Credit Fee or otherwise)
shall be made by the Borrower in United States dollars
to the Administrative Agent in immediately available
funds at the Head Office no later than 11:00 a.m.
(Boston time) on the date due. Upon receipt by the
Administrative Agent of any such payment of principal,
interest or fees (other than fees or expenses to be
retained by the Administrative Agent for its own
account pursuant to the terms of this Agreement or
fees to be retained by FNBB in its capacity as Letter
of Credit Bank for its own account), the
Administrative Agent shall remit promptly (and in any
event on the same day) to each Bank its pro rata (or
otherwise applicable) share of such payment, as
provided in 2.16 hereof.
4.4. Computations. All computations of interest in
respect of Base Rate Loans, overdue interest and fees
payable hereunder (including the Facility Fee) shall
be based on a 365/366-day year and the actual number
of days elapsed. All computations of interest
payable hereunder in respect of Fixed Rate Loans, C/D
Rate Loans and Eurodollar Loans shall be based on a
360-day year and the actual number of days elapsed.
Whenever a payment hereunder or under the Notes
becomes due on a day which is not a Business Day, the
due date for such payment shall be extended to the
next succeeding Business Day and interest and all
applicable fees shall accrue during each such
extension.
4.5. Banks' Obligations. The failure or refusal of
any of the Banks at any time to make available to the
Administrative Agent the amount of the Standby Loans
to be made by such Bank at such time shall not relieve
any other Bank from its obligations hereunder to make
Standby Loans in the amount of its Revolving Credit
Commitment Percentage of the Standby Loans requested,
but no Bank shall be responsible for the failure of
any other Bank to make the Standby Loans to be made by
such other Bank. The Banks' obligations hereunder
shall be several and not joint.
4.6. Reference Banks. Each Reference Bank agrees to
use its best efforts to furnish quotations to the
Administrative Agent as contemplated hereby. If any
Reference Bank does not furnish a timely quotation for
any reason other than those set forth in 3.3 hereof,
the Administrative Agent shall determine the relevant
interest rate on the basis of the quotation or
quotations furnished by the remaining Reference Bank
or Reference Banks. If any Reference Bank does not
furnish a timely quotation for any of the reasons set
forth in 3.3, the provisions of 3.3 shall apply.
5. REPRESENTATIONS AND WARRANTIES. The Borrower
represents and warrants to the Banks that, after
giving effect to the satisfaction of each of the
conditions precedent set forth in 6 hereof (other than
6.2 hereof):
5.1. Existence and Good Standing, Etc. (a) Each of
the Borrower and its Subsidiaries is a corporation
duly organized, validly existing and in good standing
under the laws of the jurisdiction of its
incorporation, and has adequate corporate power and
authority to own its property and to conduct its
business as presently conducted.
(b) Each of the Borrower and its Subsidiaries is
qualified to do business and in good standing in each
jurisdiction in which the nature of such Person's
business and property owned or held under lease make
such qualification necessary, except for jurisdictions
in which the failure to qualify will have no material
adverse effect on the business, assets or financial
condition of the Borrower and its Subsidiaries, taken
as a whole, or on the Borrower's ability to perform
its obligations under the Loan Documents.
5.2. Power; Consents; Absence of Conflict with Other
Agreements, Laws, Etc. (a) The Borrower has adequate
corporate power and authority to enter into each of
the Loan Documents, to perform, observe and comply
with all of its agreements and obligations under each
of such documents, and to make the borrowings
contemplated by this Agreement.
(b) The execution and delivery by the Borrower of
the Loan Documents, the performance by the Borrower of
all of its agreements and obligations under each of
such documents and the making by the Borrower of the
borrowings contemplated by this Agreement have been
duly authorized by all necessary corporate action by
the Borrower, and do not and will not (i) violate any
provision of its Charter or bylaws (each as in effect
from time to time), (ii) conflict with, result in a
breach of any term, condition or provision of,
constitute a default under, or result in the creation
of any Lien upon any of its property under, any
agreement, trust deed, indenture, mortgage or other
instrument to which the Borrower or any of its
Subsidiaries is a party or by which the Borrower or
any of its Subsidiaries or any of their property is
bound or affected, (iii) violate or contravene any
provision of any law, regulation, order, ruling or
interpretation thereunder (including, without
limitation, Regulations G, T, U or X of the Board of
Governors of the Federal Reserve System) or any
decree, order or judgment of any court or governmental
or regulatory authority, bureau, agency or official
(all as in effect from time to time and applicable to
it), (iv) require any waivers, consents or approvals
by any of its creditors which have not been obtained,
(v) require any consents or approvals by any of its
shareholders (except such as will be duly obtained on
or prior to the Effective Date and will be in full
force and effect on and as of such date), or (vi)
require any approval, consent, order, authorization or
license by, or giving notice to, or taking any other
action with respect to, any governmental or regulatory
authority or agency under any provision of any
applicable law, except those approvals, consents,
orders, authorizations and actions which are listed
and described on Schedule 5.2 attached hereto, each of
which has been obtained or taken or will be obtained
or taken prior to the Effective Date.
5.3. Binding Effect of Documents. The Borrower has
duly executed and delivered each of the Loan
Documents, and, assuming that each of the
Administrative Agent and the Banks has duly executed
and delivered this Agreement, each of the Loan
Documents is in full force and effect. The agreements
and obligations of the Borrower contained in each of
the Loan Documents constitute its legal, valid and
binding obligations, enforceable against it in
accordance with the respective terms and provisions
hereof and thereof, except as enforceability may be
limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting
generally the enforcement of creditors' rights, and
except to the extent that enforceability is subject to
general principles of equity (regardless of whether
such enforceability is considered in a proceeding in
equity or at law).
5.4. Financial Statements; Solvency. Each of (a) the
consolidated balance sheet of the Borrower and its
Subsidiaries as at the Balance Sheet Date, and the
related statements of income, retained earnings and
cash flows, certified by the Borrower's Independent
Accountants, and (b) the unaudited consolidated
balance sheet of the Borrower and its Subsidiaries as
at June 30, 1994, and the related statements of
income, retained earnings and cash flows, have been
prepared in conformity in all material respects with
Generally Accepted Accounting Principles applied on a
basis consistent with prior periods (except as
disclosed therein, and except, as to the June 30, 1994
financial statements, for the lack of footnotes and
year-end adjustments), and (subject to the foregoing
exceptions) fairly and accurately present the
financial condition, assets and liabilities of the
Borrower and its Subsidiaries as at the dates thereof
and for the periods then ended. There are no material
liabilities, contingent or otherwise, of the Borrower
or any of its Subsidiaries as of such date which are
not disclosed on said balance sheets and the related
notes thereto.
(b) The Borrower (both before and after giving
effect to the transactions contemplated hereby) is
solvent, has assets having a fair value in excess of
the amount required to pay its probable liabilities on
its existing debts as they become absolute and
matured, and has, and will have access to, adequate
capital for the conduct of its business and the
ability to pay its debts from time to time incurred in
connection therewith as such debts mature.
5.5. Title to Properties. The Borrower and its
Subsidiaries own all of the assets reflected in the
consolidated balance sheet of the Borrower and its
Subsidiaries as at the Balance Sheet Date or acquired
since that date (except assets sold or otherwise
disposed of in the ordinary course of business since
that date, and except those assets listed and
described on Schedule 9.1 attached hereto), subject in
each case to no Liens except those permitted by 9.2
hereof.
5.6. No Adverse Changes. Since June 30, 1994, there
has not been any materially adverse change in the
business, assets, financial condition or results of
operations of the Borrower and its Subsidiaries, taken
as a whole.
5.7.Litigation. Except as disclosed in the Parent's
Form 10-Q for the quarter ended June 30, 1994, as of
the Effective Date, there is no restraining order,
injunction, claim, action, suit, proceeding or
investigation of any kind pending or, to the best
knowledge of the Borrower, threatened against or
affecting, the Borrower or any of the Borrower's
Subsidiaries before any court, tribunal, governmental
or regulatory authority, commission, administrative
agency or board in which there is a significant
possibility of an adverse decision which would,
either by itself or taken together with other such
matters, materially adversely affect the business,
assets or financial condition of the Borrower and its
Subsidiaries, taken as a whole or which questions the
validity or enforceability of this Agreement or any of
the other Loan Documents. As of the Effective Date,
the actions, suits or proceedings described in the
Parent's Form 10-Q referred to above, either
individually or in the aggregate, are not expected to
materially adversely affect the business, assets or
financial condition of the Borrower and its
Subsidiaries or question the validity or
enforceability of this Agreement or the other Loan
Documents.
5.8.No Adverse Provisions. Neither the Borrower nor
any of its Subsidiaries is subject to any charter,
corporate or other legal restriction, or any judgment,
decree, order, rule or regulation which in the
judgment of the Borrower's officers has or is expected
in the future to have a materially adverse effect on
the business, assets or financial condition of the
Borrower and its Subsidiaries, taken as a whole, or on
the Borrower's ability to perform its obligations
under the Loan Documents. Neither the Borrower nor
any of its Subsidiaries is a party to any contract or
agreement which in the judgment of the Borrower's
officers has or is expected to have a materially
adverse effect on the Borrower's ability to perform
its obligations under the Loan Documents.
5.9.Compliance with Other Instruments, Laws, Etc.
Neither the Borrower nor any of its Subsidiaries is
violating any provision of its Charter or by-laws, any
agreement, contract or instrument by which it or any
of its properties is bound, or any decree, order,
judgment, statute, license, rule or regulation
applicable to it, in a manner which could result in
the imposition of substantial penalties or materially
adversely affect the business, assets or financial
condition of the Borrower and its Subsidiaries, taken
as a whole.
5.10.Tax Status. Each of the Borrower and the
Borrower's Subsidiaries has (a) made or filed all
material federal and state tax returns, reports and
declarations required by any jurisdiction to which it
is subject, (b) paid all taxes and other governmental
assessments and charges, as shown or determined to be
due on such tax returns, reports and declarations,
except for taxes the amount, applicability or validity
of which is currently being contested by it in good
faith by appropriate proceedings and with respect to
which it has set aside on its books reserves
reasonably deemed by it to be adequate therefor, and
(c) set aside on its books provisions reasonably
adequate for the payment of all taxes for periods
subsequent to the periods to which such returns,
reports or declarations apply. There are no unpaid
taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction.
5.11.Location of Office. The Borrower's chief
executive office and the location where its books and
records are kept is 455 North Cityfront Plaza Drive,
Chicago, Illinois 60611-5504.
5.12.Disclosure. The representations and warranties
made by the Borrower in this Agreement or by the
Borrower or the Parent in any agreement, instrument,
document, certificate, statement or letter furnished
to the Banks on behalf of the Borrower in connection
with any of the transactions contemplated by the Loan
Documents did not, taken as a whole, together with all
other information provided by or on behalf of the
Borrower in connection with the transactions
contemplated herein contain, when made, any untrue
statement of a material fact or omit to state a
material fact necessary in order to make the
statements contained herein or therein not misleading.
Except as previously disclosed in writing to the
Banks, there is no fact known to the Borrower
(excluding general economic and political conditions
affecting business generally) which materially
adversely affects, or which is reasonably likely in
the future to materially adversely affect, the
business, assets or financial condition of the
Borrower and its Subsidiaries, taken as a whole.
5.13.Employee Benefit Plans.
(a)In General. Each Employee Benefit Plan has been
maintained and operated in compliance in all material
respects with the provisions of ERISA and, to the
extent applicable, the Code, including but not limited
to the provisions thereunder respecting prohibited
transactions. The Borrower has heretofore delivered
to the Agent the most recently completed annual
report, Form 5500, with all required attachments, and
actuarial statement required to be submitted under
103(d) of ERISA, with respect to each Guaranteed
Pension Plan.
(b)Guaranteed Pension Plans. The Borrower and its
ERISA Affiliates have fulfilled their obligations
under the minimum funding standards of ERISA and the
Code with respect to each Guaranteed Pension Plan, and
neither the Borrower nor any ERISA Affiliate has
failed to make any contribution to any Guaranteed
Pension Plan which has resulted or could reasonably be
expected to result in the imposition of a Lien under
302(f) of ERISA. No waiver of an accumulated funding
deficiency or extension of amortization periods has
been received with respect to any Guaranteed Pension
Plan. No liability to the PBGC (other than required
insurance premiums, all of which have been paid) has
been incurred by the Borrower or any ERISA Affiliate
with respect to any Guaranteed Pension Plan, and there
has not been any ERISA Reportable Event (other than an
Event as to which the requirement of 30 days notice
has been waived), or any other event or condition
which presents a material risk of termination of any
Guaranteed Pension Plan by the PBGC. Based on the
latest valuation of each Guaranteed Pension Plan
(which in each case occurred within twelve months of
the date of this representation) and on the actuarial
methods and assumptions employed for that valuation,
the aggregate benefit liabilities of all such
Guaranteed Pension Plans within the meaning of 4001 of
ERISA did not exceed the aggregate value of the assets
of all such Plans by more than $5,000,000,
disregarding for this purpose the benefit liabilities
and assets of any Guaranteed Pension Plan with assets
in excess of benefit liabilities.
(c)Multiemployer Plans. Neither the Borrower nor any
ERISA Affiliate has incurred any material liability
(including secondary liability) to any Multiemployer
Plan as a result of a complete or partial withdrawal
from such Multiemployer Plan under 4201 of ERISA or as
a result of a sale of assets described in 4204 of
ERISA. Neither the Borrower nor any ERISA Affiliate
has been notified that any Multiemployer Plan is in
reorganization or insolvent under and within the
meaning of 4241 or 4245 of ERISA or that any
Multiemployer Plan intends to terminate or has been
terminated under 4041A of ERISA.
5.14.Business. Each of the Borrower and its
Subsidiaries enjoys peaceful and undisturbed
possession under all leases which are material to the
Borrower and its Subsidiaries, taken as a whole, of
real or personal property of which any Person is
lessee, subject to the rights of sublessees and other
parties lawfully in possession in the ordinary course
of business, none of which contains any unusual or
burdensome provision which would be reasonably likely
materially adversely to affect or to impair the
operations of the Borrower and its Subsidiaries, taken
as a whole, and all such leases which are material to
the operations of the Borrower and its Subsidiaries,
taken as a whole, are valid and subsisting and in full
force and effect. Each of the Borrower and its
Subsidiaries has rights with respect to all of the
material patents, trademarks, permits, service marks,
trade names, copyrights, licenses and franchises, and
shall have obtained assignments of all other rights of
whatever nature, necessary for the present and planned
future conduct of its business, without any known
conflict with the rights of others which might result
in a material adverse effect on the business, assets
or financial condition of the Borrower and its
Subsidiaries, taken as a whole. Each of the Borrower
and its Subsidiaries owns, leases or has the right to
use all properties, franchises, rights and licenses,
and employs employees, in an amount and manner
sufficient to conduct railroad operations as now
conducted and as proposed to be conducted, without any
conflict with the rights of others.
5.15.Capitalization. (a) The Parent is the record and
beneficial owner, free and clear of all Liens, of all
of the issued and outstanding capital stock of the
Borrower. All shares of such capital stock have been
validly issued and are fully paid and nonassessable,
and no rights to subscribe to additional shares have
been granted or exist.
(b)Schedule 5.15 attached hereto sets forth a true,
accurate and complete list as of the Effective Date of
all of the Subsidiaries of the Borrower and other
Persons in which the Borrower has an equity
investment, the jurisdiction of organization of such
Subsidiaries, the organizational form of such
Subsidiaries, the percentage equity interest of the
Borrower (or its Subsidiaries) in such Subsidiaries,
and the amount and nature of the investment by the
Borrower (or its Subsidiaries) in such Subsidiaries.
5.16.Holding Company and Investment Company Acts.
Neither the Borrower nor any of its Subsidiaries is a
"holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of a "holding
company", as such terms are defined in the Public
Utility Holding Company Act of 1935; nor is any of
such Persons a "registered investment company" or an
"affiliated company" or a "principal underwriter" of
a "registered investment company", as such terms are
defined in the Investment Company Act of 1940, as
amended.
5.17.Certain Transactions. None of the officers or
directors of the Borrower or its Subsidiaries is
presently a party to any transaction with the Borrower
or its Subsidiaries or any other Person which is
directly or indirectly controlled (as defined in the
definition of Affiliate in 1(a) hereof) by the Parent
(other than for services as employees, officers and
directors), including, without limitation, any
contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for
rental of real or personal property to or from, or
otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the
Borrower, any corporation, partnership, trust or other
entity in which any officer, director, or any such
employee has a substantial interest or is an officer,
director, trustee or partner.
5.18.Environmental Compliance. (a) The Borrower has
taken all appropriate steps to investigate the past
and present condition and usage of its and its
Subsidiaries' properties and the operations conducted
thereon and, based upon such diligent investigation,
has determined that:
(i)except as set forth on Schedule 5.18 attached
hereto, none of the Borrower, its Subsidiaries or, to
the best of the Borrower's knowledge, any lessee of
its properties is in violation, or alleged violation,
of any judgment, decree, order, law, license, rule or
regulation pertaining to environmental matters,
including without limitation those arising under the
Resource Conservation and Recovery Act ("RCRA"), the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980 as amended ("CERCLA"), the
Superfund Amendments and Reauthorization Act of 1986
("SARA"), the Federal Clean Water Act, the Federal
Clean Air Act, the Toxic Substances Control Act, the
Hazardous Materials Transportation Act ("HAZMAT"), or
any state or local statute, regulation, ordinance,
order or decree relating to health, safety or the
environment (hereinafter "Environmental Laws"), which
violation would have a material adverse effect on the
business, assets or financial condition of the
Borrower and its Subsidiaries, taken as a whole;
(ii)except as set forth in Schedule 5.18 attached
hereto, none of the Borrower or its Subsidiaries has
received written notice from any third party including
without limitation any federal, state or local
governmental authority, (A) that any one of them has
been identified by the United States Environmental
Protection Agency as a potentially responsible party
under CERCLA with respect to a site listed on the
National Priorities List, 40 C.F.R. Part 300 Appendix
B (1986); (B) that any hazardous waste as defined by
42 U.S.C. 6903(5), any hazardous substances as defined
by 42 U.S.C. 9601(14), any pollutant or contaminant as
defined by 42 U.S.C. 9601(33) and any toxic substance,
oil or hazardous materials or other chemicals or
substances regulated by any Environmental Laws
("Hazardous Substances") which any one of them has
generated, transported or disposed of has been found
at any site at which a federal, state or local agency
or other third party has conducted or has ordered that
the Borrower or any of its Subsidiaries conduct a
remedial investigation, removal or other response
action pursuant to any Environmental Law; or (C) that
it is or shall be a named party to any claim, action,
cause of action, complaint (contingent or otherwise),
legal or administrative proceeding arising out of any
third party's incurrence of costs, expenses, losses or
damages of any kind whatsoever in connection with the
release of Hazardous Substances which, in the case of
each of (A) or (B), the effect of which, or in the
case of (C) above, if adversely determined to the
Borrower, would have a material adverse effect on the
Borrower and its Subsidiaries, taken as a whole;
(iii)except as set forth on Schedule 5.18 attached
hereto and to the best knowledge of the Borrower: (A)
no portion of the property of the Borrower or its
Subsidiaries has been used for the handling,
manufacturing, processing, storage or disposal of
Hazardous Substances except in accordance with
applicable Environmental Laws or where non- compliance
with applicable Environmental Laws would not have a
material adverse effect on the Borrower and its
Subsidiaries, taken as a whole; and no underground
tank or other underground storage receptacle for
Hazardous Substances is located on such properties;
(B) in the course of any activities conducted by the
Borrower, its Subsidiaries or lessees of its
properties, no Hazardous Substances have been
generated or are being used on such properties except
in accordance with applicable Environmental Laws or
where non-compliance with applicable Environmental
Laws would not have a material adverse effect on the
Borrower and its Subsidiaries, taken as a whole;
(C) there have been no releases (i.e. any past or
present releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting,
escaping, disposing or dumping) or threatened releases
of Hazardous Substances on, upon, into or from the
properties of the Borrower or its Subsidiaries, which
releases would have a material adverse effect on the
financial condition of the Borrower and its
Subsidiaries, taken as a whole; and (D) in addition,
any Hazardous Substances that have been generated on
the properties of the Borrower or any of its
Subsidiaries have been transported or disposed of in
accordance with applicable laws and regulations by
transporters and to disposal facilities, which, to the
best knowledge of the Borrower (without independent
inquiry), are operating in compliance in all material
respects with applicable permits and laws;
(iv)none of the properties of the Borrower or any of
its Subsidiaries are or shall be subject to any
applicable environmental cleanup responsibility law or
environmental restrictive transfer law or regulation
by virtue of the transactions set forth herein and
contemplated hereby; and
(v)each of the Borrower and its Subsidiaries is in
material compliance with HAZMAT and the regulations
thereunder (49 C.F.R. Parts 100 to 199).
5.19.Liens. (a) No valid mortgages, chattel
mortgages, assignments, statements of assignment,
security agreements or deeds of trust have been filed
by any person or persons with respect to any part of
the property or assets of the Borrower or any of the
Borrower's Subsidiaries except for mortgages and
security agreements which are otherwise permitted by
the provisions of 9.2 hereof.
(b)No valid financing statement which names the
Borrower or any of the Borrower's Subsidiaries as a
debtor, or encumbers or attempts to encumber any of
the material assets or a material portion of the
assets of any of such Persons, has been filed in any
jurisdiction in the United States or any State thereof
pursuant to Article 9 of the Uniform Commercial Code
of any State, and none of the Borrower or any of the
Borrower's Subsidiaries has signed any financing
statement or any security agreement authorizing any
secured party thereunder to file any such financing
statement in any such jurisdiction, other than
financing statements with respect to Liens (including,
without limitation, capitalized leases) permitted by
9.2 hereof and financing statements filed for
protective purposes only by lessors under operating
leases with respect to which the Borrower is lessee.
5.20.Administrative Agent as Senior Debt Agent. The
Administrative Agent is the "Senior Debt Agent" under
the Debenture Indenture.
5.21.Fiscal Year. Each of the Borrower and its
Material Subsidiaries has a fiscal year which is the
twelve months ending on December 31 of each calendar
year.
5.22.No Default. No Default or Event of Default
exists at the delivery of this Agreement.
5.23.Insurance. All policies of insurance owned or
held by the Borrower and its Subsidiaries are
maintained with financially sound and reputable
insurance companies, funds or underwriters and are of
the kinds and cover such risks and are in such amounts
and with such deductibles and exclusions as are
consistent with the prudent business practice of
similarly structured and similarly capitalized
companies of similar size in the Borrower's industry.
All such policies are in full force and effect; are
sufficient for compliance by the Borrower and its
Subsidiaries with all requirements of law and of all
agreements to which such Persons are parties; are
valid, outstanding and enforceable policies of
insurance; and coverage thereunder will not be reduced
by, or terminate or lapse by reason of, the
transactions contemplated by or referred to in this
Agreement.
5.24.Regulation U. No proceeds of the Loans shall be
used for the purpose of purchasing or carrying any
"margin security" or "margin stock", as such terms are
used in Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System.
6.EFFECTIVE DATE; CONDITIONS TO EFFECTIVENESS. This
Agreement shall not become effective and the Original
Credit Agreement shall remain in full force and effect
unless and until the date (the "Effective Date"),
which must be no later than the date specified as the
latest permitted closing date under 4.1 hereof, that
each of the conditions precedent specified in this 6
is satisfied.
6.1.Delivery of Documents. (a) This Agreement shall
have been duly and properly authorized, executed and
delivered by the Borrower, the Administrative Agent,
the Competitive Bid Agent and the Banks.
(b)Each of the Notes shall have been duly and properly
authorized, executed and delivered by the Borrower and
shall be in full force and effect.
(c)Executed original counterparts of each of the Loan
Documents shall have been furnished to the
Administrative Agent.
6.2.Representations and Warranties. The
representations and warranties contained herein shall
have been correct as of the date on which made and
shall also be correct at and as of the Effective Date
except to the extent that the facts upon which such
representations and warranties are based may have
changed as a result of transactions permitted or
contemplated hereby.
6.3.No Default. On the Effective Date there shall
exist no Default or Event of Default, and no Default
or Event of Default shall result from consummation of
the transactions on the Effective Date.
6.4.Intentionally omitted.
6.5.Proceedings and Documents. All corporate,
governmental and other proceedings in connection with
the transactions contemplated by the Loan Documents
and all instruments and documents incident thereto
shall be reasonably satisfactory in substance and in
form to the Banks and to the Banks' Special Counsel,
and the Banks and such counsel shall have received all
information and such counterpart originals or
certified or other copies of such documents as the
Banks or such counsel may reasonably request.
6.6.Legal Opinions. The Banks shall have received
written opinions addressed to the Banks from counsel
to the Borrower in the form of Exhibits C-l and C-2
attached hereto. The Banks shall have received a
favorable written opinion of Hopkins & Sutter,
special counsel to the Borrower, which is satisfactory
to the Banks in all respects, with respect to
Interstate Commerce Commission matters. The Borrower
hereby instructs all such counsel to deliver such
opinions to the Banks.
6.7.Financial Condition. The Banks shall have
received the financial statements referred to in 5.4
hereof.
6.8.Delivery of Charter and Other Documents. The
Administrative Agent shall have received from the
Borrower copies, certified by a duly authorized
officer of the Borrower to be true and complete as of
the Effective Date of each of (a) the Charter of the
Borrower as in effect on such date, (b) the bylaws of
the Borrower in effect on such date, (c) the
resolutions of the Board of Directors of the Borrower
authorizing the execution and delivery by the Borrower
of each of the Loan Documents and its performance of
all of its agreements and obligations under each of
such documents and the borrowings and other
transactions contemplated by this Agreement, and (d)
an incumbency certificate giving the name, title, and
bearing a specimen signature of each individual who
shall be authorized to sign, in its name and on its
behalf, each of the Loan Documents, and to make
application for the Loans, and to give notices and to
take other action on its behalf under the Loan
Documents.
6.9.Amendment Fee, Etc. The Administrative Agent
shall have received the Amendment Fee as provided in
3.10 hereof and all fees payable to the Administrative
Agent on the Effective Date as provided in the Agent's
Fee Letter.
6.10.Closing Certificate. (a) The Borrower shall have
delivered a closing certificate substantially in the
form of Exhibit D attached hereto, and such closing
certificate shall be in full force and effect.
(b)The Administrative Agent shall have executed this
Agreement signifying to the Borrower and the Banks
(i) that it has received satisfactory evidence that
the closing conditions set forth in this 6 have been
satisfied and (ii) that the Effective Date shall have
occurred.
6.11.Original Credit Agreement. All fees, including
the Facility Fee (as defined in the Original Credit
Agreement), expenses and other amounts payable
pursuant to the Original Credit Agreement, excluding
all outstanding Loans (as defined in the Original
Credit Agreement), accrued interest thereon and
accrued and unpaid Letter of Credit Fees (as defined
in the Original Credit Agreement), shall have been
paid in full.
6.12. ICC Filings. The Borrower shall have filed or
caused to be filed with the Interstate Commerce
Commission a notice of exemption under 49 C.F.R. 1175
which complies with the provisions of such regulations
and which seeks an exemption from the requirements of
49 U.S.C. 11301 for implementation of the provisions
of this Agreement and such exemption shall have become
effective.
7.CONDITIONS OF BORROWING. The obligation of the
Banks to make any Loans, and the obligation of the
Letter of Credit Bank, with the pro rata participation
of the Banks, to issue any Letters of Credit, is
subject to the satisfaction of the following
conditions precedent:
7.1.Representations and Warranties. The
representations and warranties contained in this
Agreement shall have been correct in all material
respects as of the date on which made and shall also
be correct in all material respects at and as of the
date of the applicable Borrowing with the same effect
as if made at and as of such time, except to the
extent that the facts upon which such representations
and warranties are based may have changed as a result
of transactions permitted or contemplated hereby.
7.2No Default. At the time of the applicable
Borrowing, there shall exist no Default or Event of
Default, and no Default or Event of Default shall
result from consummation of the applicable Borrowing.
7.3.Legality. (i) In the case of the obligation to
make any Loans, no change in applicable law shall have
occurred as a consequence of which it shall have
become and continue to be unlawful for the applicable
Banks to make such a Loan on such occasion, provided
that those Banks to whom such change in law is not
applicable shall continue to be obligated to make
Loans hereunder, notwithstanding the fact that one or
more other Banks are affected by such change in law;
within 30 days after any Bank fails to make a Loan as
a result of this section, the Borrower may replace
such Bank in accordance with the terms of 3.1(d)
hereof; and (ii) in the case of the obligation to
issue a Letter of Credit, no change in applicable law
shall have occurred as a consequence of which it shall
have become and continue to be unlawful for the Letter
of Credit Bank to issue a Letter of Credit.
7.4.Borrowing Notice; Competitive Bid Request. The
Borrower shall have delivered a Competitive Bid
Request in accordance with the provisions of 2.5
hereof, or a Borrowing Notice in accordance with the
provisions of 2.6 hereof, or, if the Borrower is
requesting the issuance of a Letter of Credit, a
request for such issuance in accordance with the
provisions of 2.11 hereof. The Borrowing Notice,
Competitive Bid Request or request for the issuance of
a Letter of Credit, as the case may be, shall
constitute a certification by the Borrower that the
conditions set forth in this 7.4 will be satisfied as
of the date of the applicable Borrowing.
8.AFFIRMATIVE COVENANTS. The Borrower hereby
covenants and agrees that, so long as the Loans or the
Notes are outstanding, any amounts are owing pursuant
to this Agreement, or the Banks have any Commitment to
make Loans hereunder:
8.1.Punctual Payment. The Borrower will duly and
punctually pay or cause to be paid the principal of
and interest on the Loans, the Facility Fee, the
Agent's Fee, the Letter of Credit Fee and all other
amounts from time to time owing hereunder or under the
other Loan Documents, all in accordance with the terms
of this Agreement and the other Loan Documents.
8.2.Records and Accounts. The Borrower will and will
cause each of its Subsidiaries to keep true records
and books of account in which proper entries will be
made in accordance with Generally Accepted Accounting
Principles and to maintain adequate accounts and
reserves for all taxes (including income taxes), all
depreciation, depletion, obsolescence and amortization
of its properties, all contingencies and all other
reserves in accordance with Generally Accepted
Accounting Principles.
8.3.Financial Statements, Certificates and
Information. The Borrower will furnish to the Banks:
(a)As soon as practicable and, in any event, within 90
days after the end of each fiscal year of the
Borrower, consolidated balance sheets of the Borrower
and its Subsidiaries as at the end of such fiscal
year, consolidated statements of income and
consolidated statements of retained earnings and cash
flow of the Borrower and its Subsidiaries for the
fiscal year then ended, each setting forth in
comparative form the figures for the previous fiscal
year, all in reasonable detail, prepared in accordance
with Generally Accepted Accounting Principles,
accompanied by a report and unqualified opinion of the
Borrower's Independent Accountants (who shall be
reasonably satisfactory to the Banks), which report
and opinion shall have been prepared in accordance
with generally accepted auditing standards. In
addition, the Borrower will obtain from such
Independent Accountants and deliver to the Banks
within said period of 90 days the certified statement
of such Independent Accountants that they have read a
copy of this Agreement and that, in making the
examination necessary for said certification,
performing activities within the normal scope of their
audit and without further inquiry, they have obtained
no knowledge of any Default or Event of Default then
existing, or, if such accountants shall have obtained
knowledge of any then existing Default or Event of
Default, they shall disclose in such statement any
such Default or Event of Default.
(b)As soon as practicable and, in any event, within 45
days after the end of each fiscal quarter in each
fiscal year of the Borrower, consolidated balance
sheets of the Borrower and its Subsidiaries as at the
end of such fiscal quarter, and consolidated
statements of income and consolidated statements of
retained earnings and cash flow of the Borrower and
its Subsidiaries for the portion of the fiscal year
then ended, each in reasonable detail, prepared in
accordance with Generally Accepted Accounting
Principles applied on a basis consistent with prior
periods except as otherwise specified, subject to
year-end audit adjustment, and certified on behalf of
the Borrower by an Officer's Certificate.
(c)As soon as practicable and, in any event, within 45
days after the end of each fiscal quarter in each
fiscal year of the Borrower, financial and operating
statistics of the Borrower and its Subsidiaries as at
the end of such fiscal quarter, in reasonable detail
and in such form as shall be satisfactory to the
Administrative Agent, which, to the extent such
statistics are in the form of financial statements,
have been prepared in accordance with Generally
Accepted Accounting Principles applied on a basis
consistent with prior periods except as otherwise
disclosed therein, along with an analysis, in
reasonable detail, of the variances, if any, of such
financial and operating statistics from the
projections for such fiscal quarter previously
furnished to the Banks, in each case certified on
behalf of the Borrower by an Officer's Certificate.
(d)Promptly upon receipt thereof, copies of all
management letters which are submitted to the Borrower
by its Independent Accountants in connection with any
annual or interim audit of the books of the Borrower
made by such accountants.
(e)As soon as practicable but, in any event, within 15
Business Days after the issuance thereof, copies of
such other financial statements, reports and notices
as the Borrower shall send to its bondholders,
noteholders or other lenders and copies of all reports
filed by the Borrower with the Securities and Exchange
Commission and the Interstate Commerce Commission or
any similar or corresponding governmental commission,
department or agency substituted for either of the
foregoing, federal or state.
(f)Within the time periods provided in paragraphs (a)
and (b) above a certificate substantially in the form
of Exhibit E attached hereto (a "Compliance
Certificate").
(g)No later than 30 days after the end of each fiscal
year of the Borrower, projections of the financial and
operating performance of the Borrower and its
Subsidiaries on a monthly basis for the next
succeeding fiscal year, as well as forecasts of the
Borrower and its Subsidiaries' projected compliance
with the covenants contained in 9 hereof on a
quarterly basis for such next fiscal year, and
projections of such performance on an annual basis for
each of the four following fiscal years. The Borrower
agrees that it will cause such projections and
forecasts to be amended from time to time as necessary
in light of events affecting operations.
(h)With reasonable promptness, such other data as any
Bank may reasonably request.
All confidential information and documents concerning
the Borrower and its Subsidiaries supplied by the
Borrower to the Banks shall be held in confidence by
the Banks and the Banks shall not disclose such
information and documents, except the Borrower hereby
authorizes the Banks to disclose any information
obtained pursuant to this Agreement or the other Loan
Documents to participants and potential participants
as provided in 15(e) hereof, to legal counsel for the
Banks, to consultants of the Banks who have agreed to
be bound by the confidentiality provisions of this
Agreement, to employees of and agents for the Banks in
their ongoing business, and to any independent
auditors of the Banks and to all appropriate
governmental regulatory authorities or courts to the
extent requested or subpoenaed, but only to the extent
permitted by applicable laws and regulations,
including those applying to classified material. Upon
receipt of a request to disclose any information to
governmental authorities or courts other than
governmental bank examiners and independent auditors
of the Banks, the Banks will notify the Borrower, to
the extent permitted by applicable law and
regulations, of such request and, to the extent
practicable, permit the Borrower to seek a protective
order with respect thereto.
8.4.Business and Legal Existence. The Borrower will
and will cause each of its Material Subsidiaries to
keep in full force and effect its legal existence
(except as permitted by 9.5 hereof) and good standing
under the laws of its jurisdiction of incorporation,
maintain its qualification to do business in each
state in which the failure to qualify would have a
material adverse effect on the business, assets or
financial condition of such Person and maintain all
rights, licenses, leases and franchises reasonably
necessary and material to the conduct of its business.
8.5.Payment of Taxes. The Borrower will and will
cause each of its Subsidiaries promptly to pay and
discharge all lawful state and federal taxes,
assessments and governmental charges or levies imposed
upon it or upon its income or profit or upon any
property belonging to it, unless such tax, assessment,
charge or levy shall not at the time be due and
payable or can be paid thereafter without penalty, or
if the validity thereof shall currently be contested
in good faith by appropriate proceedings and adequate
reserves with respect to such tax, assessment, charge
or levy shall have been established in accordance with
Generally Accepted Accounting Principles.
8.6.Inspection of Properties and Books. The Borrower
will and will cause each of its Subsidiaries to permit
the Banks and any designated representatives to visit
and inspect any of the properties of the Borrower and
its Subsidiaries to examine the books of account (and
to make copies thereof and extracts therefrom), and to
discuss the affairs, finances and accounts of the
Borrower and its Subsidiaries with, and to be advised
as to the same by, their officers, all at such
reasonable times as the Majority Banks may reasonably
request.
8.7.Notice of Litigation. The Borrower will and will
cause each of its Subsidiaries promptly to notify the
Banks of the issuance of any restraining order or
injunction or the commencement of any claim, action,
suit, proceeding or investigation of any kind against
any of the Borrower or any of its Subsidiaries in
which there is a reasonable likelihood of an adverse
decision which would either by itself or taken
together with other such matters, materially adversely
affect the business, assets or financial condition of
the Borrower and its Subsidiaries, taken as a whole,
or which question the validity or enforceability of
this Agreement or the other Loan Documents.
8.8.Notice of Default. If the Borrower or any of its
Subsidiaries shall at any time obtain knowledge of the
existence of any Default or Event of Default, the
Borrower shall, within two Business Days of the
occurrence of such Default or Event of Default,
deliver to the Banks a certificate entitled "notice of
default", specifying the nature and period of
existence thereof and what action the Borrower
proposes to take with respect thereto.
8.9.Compliance with Law, Etc. The Borrower will and
will cause each of its Subsidiaries to (a) comply with
all provisions of its Charter and by-laws and all
laws, rules, regulations, orders, writs, judgments,
injunctions, decrees or awards to which it is or
becomes subject and noncompliance with which would
have a material adverse effect on the business,
assets, financial condition or operations of the
Borrower and its Subsidiaries, taken as a whole, or on
the ability of the Borrower to fulfill its obligations
under this Agreement or the other Loan Documents; and
(b) promptly obtain, maintain, apply for renewal, and
not allow to lapse, any authorization, consent,
approval, license or order for, and accomplish any
filing or registration with, any court or judicial,
administrative or governmental authority or any other
Person which is or becomes necessary in order that it
perform in all material respects all of its
obligations under this Agreement, the other Loan
Documents and in order that the same are valid and
binding and effective in accordance with their terms.
8.10.Insurance. The Borrower will and will cause each
of its Subsidiaries to maintain at all times insurance
with financially sound and reputable insurance
companies, funds or underwriters against such risks
and contingencies and in such amounts and with such
deductions and exclusions as are consistent with the
prudent business practice of similarly structured and
similarly capitalized companies of similar size in the
Borrower's industry.
8.11.Employee Benefit Plans. Neither the Borrower nor
any ERISA Affiliate will:
(a)engage in any "prohibited transaction" within the
meaning of 406 of ERISA or 4975 of the Code which
could result in a material liability for the Borrower;
or
(b)permit any Guaranteed Pension Plan to incur an
"accumulated funding deficiency", as such term is
defined in 302 of ERISA, whether or not such
deficiency is or may be waived; or
(c)fail to contribute to any Guaranteed Pension Plan
to an extent which, or terminate any Guaranteed
Pension Plan in a manner which, could result in the
imposition of a lien or encumbrance on the assets of
the Borrower pursuant to 302(f) or 4068 of ERISA; or
(d)permit or take any action which would result in the
aggregate benefit liabilities (with the meaning of
4001 of ERISA) of all Guaranteed Pension Plans
exceeding the value of the aggregate assets of such
Plans, disregarding for this purpose the benefit
liabilities and assets of any such Plan with assets in
excess of benefit liabilities, by more than
$10,000,000.
The Borrower will (i) promptly upon the request of the
Administrative Agent, furnish to the Administrative
Agent a copy of the most recent actuarial statement
required to be submitted under 103(d) of ERISA and
Annual Report, Form 5500, with all required
attachments, in respect of each Guaranteed Pension
Plan and (ii) promptly upon receipt or dispatch,
furnish to the Administrative Agent any notice, report
or demand sent or received in respect of a Guaranteed
Pension Plan under 302, 4041, 4042, 4043, 4063, 4065,
4066 and 4068 of ERISA, or in respect of a
Multiemployer Plan, under 4041A, 4202, 4219, 4242, or
4245 of ERISA.
8.12.Environmental Compliance. The Borrower will and
will cause each of its Subsidiaries to comply with all
Environmental Laws, including, without limitation,
those concerning the establishment and maintenance of
underground tanks and other underground storage
receptacles or the transportation of hazardous
materials, except where noncompliance with such
Environmental Laws would not have a material adverse
effect on the business, assets or financial condition
of the Borrower and its Subsidiaries, taken as a
whole, and will, upon receipt of any notice of
material non-compliance or knowledge of material non-
compliance, promptly send copies of such notice or
communicate its knowledge of such non-compliance to
the Administrative Agent.
8.13.Intentionally omitted.
8.14.Intentionally omitted.
8.15.Maintenance of Property. The Borrower will and
will cause each of its Subsidiaries to maintain and
keep the material real and personal properties used or
deemed by it to be useful in its business in good
repair, working order or condition for its intended
use, and make or cause to be made all needful and
proper repairs thereto and replacements thereof. The
Borrower will and will cause each of its Subsidiaries
to maintain the operation of its rail lines in a
manner sufficient to conduct railroad operations at a
level of performance which is in all material respects
equivalent or superior to the operation of such lines
prior to the Effective Date and in a manner consistent
with good railroad operating procedures.
8.16.Further Assurances. The Borrower will cooperate
with the Banks and execute such further instruments
and documents as the Banks shall reasonably request to
carry out to their satisfaction the transactions
contemplated by this Agreement and the other Loan
Documents.
9.NEGATIVE COVENANTS. The Borrower covenants and
agrees that, so long as the Loans or the Notes are
outstanding, or any amounts are owing pursuant to this
Agreement, or the Banks have any Commitment to make
Loans hereunder:
9.1.Indebtedness. The Borrower will not and will not
permit any of its Subsidiaries to create, incur,
assume, guarantee, agree to purchase or repurchase,
provide funds in respect of, or otherwise become or be
or remain liable with respect to, any Indebtedness of
any type whatsoever owed to any Person, other than:
(a)Indebtedness evidenced by the Notes and any other
Indebtedness incurred pursuant to this Agreement;
(b)Indebtedness evidenced by the Senior Notes or
otherwise incurred pursuant to the Senior Debt
Agreements;
(c)Subordinated Debt;
(d)Indebtedness incurred in the ordinary course of
business and not incurred through the borrowing of
money or the obtaining of credit or the leasing of
property, except that unsecured credit on an open
account basis customarily extended in connection with
purchases of goods or services in the ordinary course
of business shall be permitted;
(e)Indebtedness in respect of taxes, including
withholding and payroll taxes, assessments,
governmental charges, and claims for labor, materials
or supplies and liabilities under employee benefit
plans, including pension plans, to the extent that
payment thereof is not yet due or to the extent that
the amount, applicability or validity of such
Indebtedness is being contested by the applicable
Person in good faith by appropriate proceedings
diligently pursued and adequate reserves therefor are
being maintained in accordance with Generally Accepted
Accounting Principles;
(f)Indebtedness in respect of attachments or similar
proceedings, judgments or awards which have been in
force for less than the applicable period for taking
an appeal so long as execution is not levied
thereunder, or in respect of which the applicable
Person shall at the time in good faith be prosecuting
an appeal or proceedings for review and in respect of
which a stay of execution shall have been obtained
pending such appeal or review;
(g)purchase money Indebtedness for real or personal
property purchased by the Borrower or any Subsidiary
of the Borrower for use in the ordinary course of such
Person's business, but only to the extent that such
Indebtedness does not exceed 100% of the fair market
value of the property so purchased as at the date of
purchase, and Indebtedness in respect of capitalized
leases and operating leases to the extent that such
Indebtedness is not prohibited by the other covenants
contained herein;
(h)Indebtedness existing on the Effective Date, as
listed and described on Schedule 9.1 attached hereto,
and any renewals, extensions or refinancings of such
Indebtedness, provided that such renewals, extensions
or refinancings shall not increase (i) the amount of
collateral securing such Indebtedness, (ii) the
aggregate amount of such Indebtedness, or (iii) if
such Indebtedness is renewed, extended or refinanced
prior to the maturity thereof, the aggregate annual
debt service requirement during the period prior to
the original maturity thereof with respect thereto;
(i)Indebtedness of the Borrower arising under an
accounts receivable financing facility entered into by
the Borrower on terms and conditions, and pursuant to
documentation, in form and substance satisfactory to
the Majority Banks if, at the time the Borrower enters
into such facility, the Revolving Credit Commitment
Amount then and thereafter in effect is permanently
reduced by an amount equal to the aggregate credit
available under such accounts receivable financing
facility; and
(j)Indebtedness in addition to the Indebtedness
permitted by clauses (a) through (i) above, provided
that after giving effect thereto, the Borrower is not
in violation of 9.10 hereof.
9.2.Liens. The Borrower will not and will not permit
any of its Subsidiaries to create, incur, assume or
permit to exist any Lien on any property or asset of
any of such Persons, other than:
(a)Liens for taxes or assessments or governmental
charges or levies if payment shall not at the time be
required to be made in accordance with 8.5 hereof;
(b)Liens in respect of property or assets of the
Borrower or any of its Subsidiaries (i) under workers'
compensation, unemployment or other insurance, old age
pensions or other Social Security benefits or other
similar laws or similar legislation, (ii) in
connection with surety, appeal and similar bonds
incidental to the conduct of litigation, and (iii) in
connection with bid, performance or similar bonds
which do not exceed in the aggregate $5,000,000;
mechanics', laborers', materialmen's and similar liens
not then delinquent or which are being contested in
good faith by appropriate proceedings; and Liens
incidental to the conduct of the business of the
Borrower and its Subsidiaries which were not incurred
in connection with the borrowing of money or the
obtaining of advances or credit, all of which Liens
permitted by this paragraph (b) do not in the
aggregate materially detract from the value of the
property of the Borrower and its Subsidiaries or
materially impair the use thereof in the operation of
the business of the Borrower and its Subsidiaries;
(c)Liens in respect of judgments or awards the
Indebtedness with respect to which shall be permitted
pursuant to 9.1(f) hereof;
(d)encumbrances and liens consisting of easements,
rights of way, general real estate taxes not yet due
and payable, municipal and zoning restrictions,
restrictions on the use of real property and defects
and irregularities in the title thereto, landlord's or
lessor's liens under leases to which the Borrower or
any of its Subsidiaries is a party, and other minor
liens or encumbrances none of which interferes
materially with the use of the property so encumbered
in the ordinary conduct of the business of the
Borrower and its Subsidiaries and which do not
individually or in the aggregate have a material
adverse effect on the business of the Borrower and its
Subsidiaries, taken as a whole;
(e)Liens securing the purchase price of purchase money
Indebtedness permitted by 9.1(g) hereof, provided that
such Liens are limited solely to the property so
purchased (and the proceeds thereof) and Liens in
respect of capitalized leases, the Indebtedness with
respect to which is permitted by 9.1(g) hereof,
provided that such Liens are limited solely to the
property subject to such capitalized leases;
(f)Liens on certain property of the Borrower and its
Subsidiaries which are existing on the Effective Date,
as listed and described on Schedule 9.1 attached
hereto and Liens on the same property securing
renewals, extensions and refinancings of the
Indebtedness described in 9.1(h) thereof subject to
all the provisos contained therein;
(g)Liens on accounts receivable of the Borrower that
are the subject of, and that secure, the accounts
receivable financing facility referred to in 9.1(i)
hereof; and
(h)Liens which would not otherwise be permitted by
clauses (a) through (g) hereof securing Indebtedness (or other
obligations) of the Borrower and its Subsidiaries
permitted under 9.1 hereof, provided that after giving
effect thereto the aggregate principal amount of
Indebtedness (and other such obligations) secured by
such Liens permitted by this clause (h) does not
exceed 10% of Consolidated Tangible Net Worth at the
time of the incurrence thereof;
provided, that, in any event, the aggregate amount of
Indebtedness and other obligations secured by Liens
permitted under this 9.2 (other than Liens provided
for in clauses (a), (b), and (d) of this 9.2) shall
not at any time exceed 20% of Consolidated Total
Assets.
9.3.Investments. The Borrower will not and will not
permit any of its Subsidiaries to make, or permit to
exist, directly or indirectly, any Investments in any
Person, other than:
(a)trade or customer accounts or notes receivable for
inventory sold or services rendered in the ordinary
course of business;
(b)obligations issued or guaranteed as to principal
and interest by the United States of America and
having a maturity of not more than one year from the
date of acquisition;
(c)deposits with or certificates of deposit issued by
any Bank, or any other bank whose commercial paper is
rated not less than prime-one or A-1 or their
equivalents by Moody's or S&P or their successors and
having capital and unimpaired surplus of at least
$500,000,000, and written agreements under which any
Bank or any other bank described in this 9.3(c) sells
and agrees to repurchase marketable direct obligations
of the United States of America;
(d)commercial paper or finance company paper which is
rated not less than prime-one or A-1 or their
equivalents by Moody's or S&P or their successors; and
(e)Investments in Subsidiaries of the Borrower and
other Persons as such Investments are in existence on
the Effective Date and reflected on Schedule 5.15
attached hereto, plus (x) only while Section 8.13 of
the 1991 Note Purchase Agreement remains in effect,
additional cash Investments in an aggregate amount not
to exceed $1,500,000 in any calendar year during the
term of this Agreement in such Subsidiaries of the
Borrower and such other Persons referred to above in
this 9.3(e), plus (y) only while Section 8.13 of the
1991 Note Purchase Agreement remains in effect, other
Investments not exceeding $2,500,000 in aggregate
amount at any time, plus (z) only from and after such
time as Section 8.13 of the 1991 Note Purchase
Agreement no longer remains in effect, other
Investments in Subsidiaries of the Borrower and any
other Persons, including (without limitation)
Investments consisting of guarantees (or other
commitments as described under Indebtedness), provided
that, from and after such time as Section 8.13 of the
1991 Note Purchase Agreement no longer remains in
effect, (i) the aggregate outstanding amount of all
Investments made pursuant to the foregoing provisions
of this 9.3(e) ("Section 9.3(e) Investments") shall
not exceed 10% of Consolidated Tangible Net Worth at
any time; for purposes of determining compliance with
the limitation set forth in this clause (i) of this
9.3(e), the calculation of the aggregate outstanding
amount at any time of Section 9.3(e) Investments shall
exclude such portion of the outstanding Section 9.3(e)
Investments as shall have been effectively funded (but
only to the extent so effectively funded), directly or
indirectly, by other Section 9.3(e) Investments made
concurrently with (or within thirty (30) days before)
the making of such Section 9.3(e) Investments so to be
excluded; and (ii) after giving effect to the Section
9.3(e) Investments, the Borrower is not in violation
of 9.9 hereof.
9.4.Distributions. The Borrower will not, directly or
indirectly, make any Distribution if any Default or
Event of Default has occurred and is continuing or
would result from such Distribution.
9.5.Merger, Consolidation and Sale of Assets. The
Borrower will not and will not permit its Subsidiaries
to become a party to any merger or consolidation other
than mergers or consolidations of any Subsidiary of
the Borrower into the Borrower (so long as the
Borrower is the surviving corporation) or of any
Subsidiary of the Borrower into any other Subsidiary
of the Borrower, or otherwise take any action looking
to the dissolution or liquidation of any such Person
(other than the Borrower's Subsidiaries which are not
Material Subsidiaries). The Borrower will not and
will not permit its Subsidiaries to sell, lease or
otherwise dispose of any substantial assets (including
without limitation, any capital stock of Subsidiaries)
of any such Person which do not constitute
Nonessential Property except for (a) assets routinely
sold in the ordinary course of business for fair and
reasonable value in a manner consistent with past
practice, both as to type of property sold and
aggregate amount sold, (b) other assets to the extent
that the aggregate net book value (at the time of
disposition thereof) of all assets (including shares
of capital stock) disposed of by the Borrower and its
Subsidiaries subsequent to the Start Date under this
clause (b) plus the aggregate net book value (at the
time of disposition thereof) of all assets (including
shares of capital stock) then proposed to be disposed
of pursuant to this clause (b) does not, at the time
of any such disposition, exceed 10% of Consolidated
Tangible Net Worth as of the end of the most recently
completed fiscal year of the Borrower and (c) accounts
receivable sold on a nonrecourse basis and otherwise
in a manner does not result in the incurrence of any
Indebtedness (other than as permitted by 9.1(i)
hereof).
9.6.Sale-Leasebacks. The Borrower will not and will
not permit any of its Subsidiaries to enter into any
sale-leaseback transactions as seller-lessee without
the prior written consent of the Majority Banks (which
consent shall not be unreasonably withheld) unless (a)
the sale is permitted under 9.5 hereof, (b) the
Indebtedness and Liens (if any) incurred or created
in connection therewith would be permitted to be
incurred or created under 9.1 and 9.2 hereof,
respectively, and (c) no Default or Event of Default
has occurred and is continuing and none would result
therefrom.
9.7.Business. The Borrower will not and will not
permit its Subsidiaries to engage in any line of
business not substantially similar to the businesses
such Persons were conducting on the date hereof.
9.8.Fiscal Year. The Borrower will not change its
fiscal year without the prior written consent of the
Majority Banks.
9.9.Consolidated Tangible Net Worth. The Borrower
will not permit Consolidated Tangible Net Worth at any
time to be less than the sum of (a) $277,000,000, plus
(b) 50% of cumulative positive Consolidated Net Income
for each fiscal quarter of the Borrower in which the
Borrower had a positive Consolidated Net Income
beginning with the quarter commencing on January 1,
1994 and ending on the date as of which the
calculation is made, with no deductions for any fiscal
quarter of the Borrower in which the Borrower had a
consolidated net loss, plus (c) 100% of the proceeds
of each issuance of the Borrower's capital stock after
the Balance Sheet Date and 100% of proceeds from each
equity capital contribution made by the Parent to the
Borrower after the Balance Sheet Date. For purposes
of this 9.9 only, on any date of determination (but
only from and after such time as Section 8.13 of the
1991 Note Purchase Agreement no longer remains in
effect) the Consolidated Tangible Net Worth shall be
computed by subtracting from the Consolidated Tangible
Net Worth of the Borrower and its Subsidiaries as
determined in accordance with the definition thereof
contained in 1 hereof the aggregate amount of Section
9.3(e) Investments outstanding on such date,
calculated as provided in clause (i) of 9.3(e) hereof.
9.10.Debt to Capitalization Ratio. The Borrower will
not permit the ratio of (a) Consolidated Funded Debt
to (b) Total Capitalization to exceed at any time
during the periods set forth in the following chart
the ratio set forth opposite the applicable period:
Period Ratio
Effective Date - 12/31/94 0.60 to 1
1/1/95 and thereafter 0.55 to 1
9.11.Consolidated EBIT Coverage. As at the end of any
fiscal quarter, commencing with the end of the fiscal
quarter ending in December of 1994, the Borrower will
not permit the ratio of Consolidated EBIT (for such
fiscal quarter and the three preceding fiscal
quarters, taken as a single period) as at the end of
such fiscal quarter (for such fiscal quarter and the
three preceding fiscal quarters, taken as a single
period) to Consolidated Interest Charges for the same
period to be less than 3.35 to 1.00.
9.12.Transactions with Affiliates. The Borrower will
not, and will not permit any of its Subsidiaries to,
engage in any transaction with an Affiliate of the
Borrower or any of its Subsidiaries (other than the
Borrower or any of its Subsidiaries) on terms less
favorable to the Borrower or such Subsidiary (as the
case may be) than would have been obtainable in an
arms-length transaction unless such transaction is an
Investment which is permitted under 9.3 hereof.
10.EVENTS OF DEFAULT; ACCELERATION. If any of the
following events ("Events of Default") shall occur:
(a)if the Borrower shall default in the payment of any
principal under the Notes when the same shall become
due and payable, whether at maturity or at any date
fixed for payment or prepayment or by declaration or
otherwise, or if the Borrower shall fail to reimburse
the Letter of Credit Bank by the second Business Day
after any drawing under a Letter of Credit; or
(b)if the Borrower shall default in the payment of any
interest, fee or other charge hereunder or under the
Notes or any other Loan Document within three Business
Days of the date when the same shall become due and
payable, whether at maturity or at any date fixed for
payment or prepayment or by declaration or otherwise;
or
(c)if the Borrower shall default in the performance of
or compliance with any of the covenants contained in
8 or 9 hereof (other than 8.3, 8.6, 8.12, or 8.15
hereof);
(d)if the Borrower shall default in the performance of
or compliance with any material term, covenant or
agreement contained herein or in the other Loan
Documents (other than those specified in clauses (a),
(b) and (c) above, but including those listed in the
parenthetical in clause (c) above), and such default
shall not have been remedied within 30 days after
written notice of such default shall have been given
to the Borrower by the Administrative Agent (which
notice shall be given on the direction of the Majority
Banks);
(e)if any representation or warranty herein, or in any
certificate or other writing at any time delivered to
the Banks pursuant hereto or in connection herewith,
shall prove to have been false or incorrect in any
material respect on the date as of which made;
(f)if the Borrower or any of its Material Subsidiaries
shall (i) fail to pay at maturity, or within any
applicable period of grace, Indebtedness in an
aggregate principal amount in excess of $1,000,000, or
(ii) fail to observe or perform any term, covenant or
agreement contained in any agreement by which it is
bound evidencing or securing Indebtedness in an
aggregate principal amount in excess of $10,000,000
for such period of time as would permit the holder or
holders thereof or of any obligations issued
thereunder to accelerate the maturity thereof; or
(g)if the Borrower or any of its Material
Subsidiaries shall fail generally to pay its debts or
make a general assignment for the benefit of
creditors, or if any order for relief is entered in
respect of any such Person under any bankruptcy,
reorganization, arrangements, insolvency, readjustment
of debt, dissolution or liquidation or similar law of
any jurisdiction, now or hereafter in effect; or
(h)if any order is entered in any proceeding by or
against the Borrower or any of its Material
Subsidiaries decreeing or permitting the dissolution
or split-up of such Person or the winding up of its
affairs; or
(i)if any petition or application for the appointment
of a liquidator or receiver or custodian (or similar
official) of the Borrower or any of its Material
Subsidiaries or of any substantial part of the assets
of any such Person is filed by any such Person; or any
such petition or application is filed against any such
Person and such Person approves thereof, consents
thereto or acquiesces therein, or if any proceeding or
case relating to any such Person under any bankruptcy,
reorganization, arrangement, insolvency, readjustment
of debt, dissolution or liquidation or similar law of
any jurisdiction is commenced by any such Person; or
if any such proceeding or case is commenced against
any such Person and such proceeding or case remains
undismissed for a period of forty-five days; or
(j)if there shall remain in force, undischarged,
unsatisfied and unstayed, for more than thirty
consecutive days, any final judgment against the
Borrower or any of its Subsidiaries which, together
with such other outstanding final judgments against
such Persons, exceeds in the aggregate $3,000,000; or
(k)if any judicial lien or attachment on the property
of the Borrower or any of its Subsidiaries in an
amount of $5,000,000 or greater shall not be released,
discharged, bonded or provided for to the satisfaction
of the Banks within thirty days after such lien or
attachment shall have come into existence; or
(l)if any Loan Document shall be cancelled,
terminated, revoked or rescinded otherwise than in
accordance with the express prior written agreement,
consent or approval of the Majority Banks, or any
action at law, suit in equity or other legal
proceeding to cancel, revoke or rescind any Loan
Document shall be commenced by or on behalf of the
Borrower; or any court or any other governmental or
regulatory authority or agency of competent
jurisdiction shall make a determination that, or shall
issue a judgment, order, decree or ruling to the
effect that any one or more of the Loan Documents or
any one or more of the obligations of the Borrower or
any Subsidiary of the Borrower under any one or more
of the Loan Documents are illegal, invalid or
unenforceable in accordance with the terms thereof;
(m)with respect to any Guaranteed Pension Plan, an
ERISA Reportable Event shall have occurred and such
event reasonably could be expected to result in
liability of the Borrower to the PBGC or the Plan in
an aggregate amount exceeding $10,000,000 and such
event in the circumstances occurring reasonably could
constitute grounds for the termination of such Plan by
the PBGC or for the appointment by the appropriate
United States District Court of a trustee to
administer such Plan; or a trustee shall have been
appointed by the United States District Court to
administer such Plan; or the PBGC shall have
instituted proceedings to terminate such Plan; or
(n)if the Parent shall at any time cease to own all of
the outstanding capital stock of the Borrower or shall
at any time create, incur, or permit to exist any Lien
on any shares of capital stock of the Borrower;
then (A) if such event is an Event of Default
specified in clauses (g), (h) or (i) of this 10 with
respect to the Borrower, automatically the Revolving
Credit Commitments shall immediately terminate and the
Loans (with accrued interest thereon) and all other
amounts owing under this Agreement and the other Loan
Documents shall immediately become due and payable,
and (B) if such event is any other Event of Default,
then at the direction of the Majority Banks, the
Administrative Agent shall terminate the Revolving
Credit Commitments and by written notice to the
Borrower, declare all amounts owing with respect to
this Agreement and the other Loan Documents to be due
and payable, whereupon the same shall forthwith mature
and become immediately due and payable, together with
interest thereon and all other amounts then owing
thereunder and under this Agreement, without
presentment, demand, protest or notice, all of which
are hereby waived. If any Letters of Credit are
outstanding upon the occurrence of an Event of
Default, the Administrative Agent may demand that cash
or other readily marketable securities acceptable to
it in an amount equal to the Maximum Drawing Amount of
all then outstanding Letters of Credit be deposited
with the Administrative Agent in pledge pursuant to
pledge agreements in form and substance satisfactory
to the Administrative Agent, as collateral security
for the Borrower's Obligations hereunder (which
agreements shall provide that upon the expiration,
undrawn, of each Letter of Credit, cash in an amount
equal to the undrawn portion of the Maximum Drawing
Amount of such Letter of Credit shall be returned to
the Borrower). The Borrower agrees to make such
deposit with the Administrative Agent immediately upon
such demand.
11.NOTICE AND WAIVERS OF DEFAULT.
11.1.Notice of Default. If any Person shall give any
notice or take any other action in respect of a
claimed default (whether or not constituting an Event
of Default) under this Agreement or the Notes, or
under any other note, evidence of indebtedness,
indenture or other obligation for borrowed money in an
aggregate principal amount exceeding $1,000,000 as to
which the Borrower or any of its Subsidiaries is an
obligor, whether as principal or surety, the Borrower
shall forthwith, after obtaining knowledge thereof,
give written notice thereof to the Banks, describing
the notice or action and the nature of the claimed
default.
11.2.Waivers of Default. Except as otherwise
specified in 21 hereof, any Default or Event of
Default specified in 10 hereof may be waived only upon
the written consent of the Majority Banks. Any
Default or Event of Default waived pursuant hereto
shall be deemed to have been cured and not to be
continuing during the period for which such waiver is
applicable; but no such waiver shall extend to or
affect any subsequent like default or impair any
rights arising therefrom.
12.REMEDIES ON DEFAULT, ETC.
12.1.Rights of Banks. In case any one or more of the
Events of Default specified in 10 shall have occurred
and be continuing, and whether or not all amounts
owing with respect to the Notes have been declared due
and payable pursuant to 10, each Bank, if owed any
amount with respect to its Note, may proceed to
protect and enforce its rights by suit in equity,
action at law and/or other appropriate proceeding,
whether for the specific performance of any covenant
or agreement contained in this Agreement or its Note,
or in aid of any right granted pursuant hereto or
thereto subject to any requirement herein that the
Majority Banks or the Administrative Agent concur
therewith, and, if such amount shall have become due,
by declaration or otherwise, each Bank may proceed to
enforce the payment thereof or any other legal or
equitable right of such Bank.
12.2.Set-off. Subject to the provisions of this 12,
regardless of the adequacy of any collateral, during
the continuance of an Event of Default, any deposits
or other sums credited by or due from any Bank to the
Borrower may be set off against any and all
liabilities then due, of the Borrower to such Bank
hereunder. Each Bank agrees with the other Banks that
if an amount to be set off is to be applied to any
Indebtedness of the Borrower to such Bank, whether
Indebtedness evidenced by any of the Notes or due
under this Agreement or otherwise arising, such amount
shall be applied ratably to all such Indebtedness
(except to the extent not permitted by the terms of
any agreement or instrument evidencing the same).
Each Bank further agrees with the other Banks that if
such Bank shall both (i) receive from the Borrower or
from any other source whatsoever, whether by voluntary
payment, exercise of the right of set-off,
counterclaim, cross action, or enforcement of any
claim evidenced by the Notes or this Agreement, or by
proof thereof in bankruptcy, reorganization,
liquidation, receivership or similar proceedings, or
otherwise, and (ii) retain and apply to the payment of
the amounts owing with respect to the Notes or of any
amounts due to such Bank under this Agreement, any
amount which is in excess of its ratable portion of
the payments received by all of the Banks, then such
Bank will make such disposition and arrangements with
the other Banks with respect to such excess, either by
way of distribution until the amount of such excess
has been exhausted, assignment of claims, subrogation
or otherwise, as shall result in each such Bank
receiving in respect of its Notes and the amounts due
such Bank under this Agreement its ratable share of
all such payments as provided in 2.16. Each Bank will
give written notice to the Borrower promptly after any
exercise of its rights under this 12.2.
13.THE AGENTS.
13.1.Appointment; Co-Agent. Each Bank hereby
irrevocably designates and appoints FNBB as the
Administrative Agent and the Competitive Bid Agent of
such Bank under this Agreement and each Bank hereby
irrevocably authorizes FNBB as the Administrative
Agent and the Competitive Bid Agent to take such
action on its behalf under the provisions of this
Agreement and to exercise such powers and perform such
duties as are expressly delegated to the
Administrative Agent and the Competitive Bid Agent by
the terms hereof, together with such other powers as
are reasonably incidental thereto. Notwithstanding
any provision to the contrary elsewhere in this
Agreement, the Agents shall not have any duties or
responsibilities, except those expressly set forth
herein or therein, or any fiduciary relationship with
any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities
shall be read into this Agreement or otherwise exist
against the Agents. Only each of the Agents shall
have any rights, duties or responsibilities as agent
for the Banks under this Agreement and the other Loan
Documents. The Co-Agent shall have no such rights,
duties or responsibilities. Any reference to an agent
for the Banks in, or in connection with, any Loan
Document shall be a reference to the Administrative
Agent or the Competitive Bid Agent, as applicable.
13.2.Delegation of Duties. Each of the Agents may
execute any of its duties under this Agreement by or
through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters
pertaining to such duties. Neither of the Agents
shall be responsible for the negligence or misconduct
of any agents or attorneys-in-fact selected by it with
reasonable care.
13.3.Exculpatory Provisions. Neither of the Agents
nor any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates shall be (a) liable
for any action lawfully taken or omitted to be taken
by it or such Person under or in connection with this
Agreement (except for its or such Person's own gross
negligence or willful misconduct), or (b) responsible
in any manner to any of the Banks for any recitals,
statements, representations or warranties made by the
Borrower or any officer thereof contained in this
Agreement or any other Loan Document, or in any
certificate, report, statement or other document
referred to or provided for in, or received by such
Agent under or in connection with, this Agreement or
any other Loan Document, or for the value, validity,
effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan
Document or for any failure of the Borrower to perform
its obligations hereunder or thereunder. Neither of
the Agents shall be under any obligation to any Bank
to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan
Document or to inspect the properties, books or
records of the Borrower.
13.4.Reliance by Agents. Each of the Agents shall be
entitled to rely, and shall be fully protected in
relying, upon any Note, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message,
statement, order or other document or conversation
believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal
counsel (including, without limitation, counsel to the
Borrower), independent accountants and other experts
selected by such Agent. Each of Agents may deem and
treat the named payee of any Note as the owner thereof
for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have
been delivered to the such Agent. Each of the Agents
shall be fully justified in failing or refusing to
take action under this Agreement and the Notes unless
it shall first receive such advice or concurrence of
the Majority Banks as it deems appropriate and it
shall first be indemnified to its satisfaction by the
Banks against any and all liability and expense which
may be incurred by it by reason of taking or
continuing to take any such action. Each of the
Agents shall in all cases be fully protected in
acting, or in refraining from acting, under this
Agreement and the Notes in accordance with a request
of the Majority Banks, and such request and any action
taken or failure to act pursuant thereto shall be
binding upon all the Banks and all future holders of
the Notes.
13.5.Notice of Default. Neither of the Agents shall
be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default
hereunder unless the such Agent has received notice
from a Bank or the Borrower or, in the case of the
Competitive Bid Agent, from the Administrative Agent,
referring to this Agreement, describing such Default
or Event of Default and stating that such notice is a
"notice of default". In the event that the
Administrative Agent receives such a notice, the
Administrative Agent shall give notice thereof to the
Banks and consult with the Banks with respect to the
action to be taken. The Administrative Agent shall
take such action with respect to such Default or Event
of Default as shall be reasonably directed by such of
the Banks, provided that unless and until the
Administrative Agent shall have received such
directions, the Administrative Agent may (but shall
not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or
Event of Default as it shall deem advisable in the
best interests of the Banks.
13.6.Non-Reliance on Agents and Other Banks. Each
Bank expressly acknowledges that neither of the Agents
nor any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates has made any
representations or warranties to it and that no act by
either of the Agents hereinafter taken, including any
review of the affairs of the Borrower, shall be deemed
to constitute any representation or warranty by such
Agent to any Bank. Each Bank represents to each of
the Agents that it has, independently and without
reliance upon such Agent or any other Bank, and based
on such documents and information as it has deemed
appropriate, made its own appraisal of and
investigation into the business, operations, property,
financial and other condition and credit-worthiness of
the Borrower, and made its own decision to make its
loans hereunder and enter into this Agreement. Each
Bank also represents that it will, independently and
without reliance upon either of the Agents or any
other Bank, and based on such documents and
information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under
this Agreement, and to make such investigation as it
deems necessary to inform itself as to the business,
operations, property, financial and other condition
and credit-worthiness of the Borrower. Except for
notices, reports and other documents expressly
required to be furnished to the Banks by the Agents
hereunder, the Agents shall not have any duty or
responsibility to provide any Bank with any credit or
other information concerning the business, operations,
property, financial and other condition or credit-
worthiness of the Borrower which may come into the
possession of either of the Agents or any of its
officers, directors, employees, agents, attorneys-in-
fact or affiliates.
13.7.Indemnification. The Banks agree to indemnify
each of the Agents in its capacity as such (to the
extent not reimbursed by the Borrower, and without
limiting the obligation of the Borrower to do so), pro
rata based on the amount of the Obligations
outstanding hereunder at the time the event giving
rise to the indemnification obligation occurs, from
and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind
whatsoever which may at any time (including, without
limitation, at any time following the payment of the
Notes) be imposed on, incurred by or asserted against
such Agent in any way relating to or arising out of
this Agreement, or any documents contemplated by or
referred to herein or the transactions contemplated
hereby or any action taken or omitted by the such
Agent under or in connection with any of the
foregoing, provided that no Bank shall be liable for
the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements
resulting solely from such Agent's gross negligence or
willful misconduct. The agreements in this subsection
shall survive the payment of the Notes and all other
amounts payable hereunder.
13.8.Individual Capacity. Each of the Agents and its
affiliates may make loans to, accept deposits from and
generally engage in any kind of business with the
Borrower as though such Agent were not an Agent
hereunder. With respect to the Loans made or renewed
by it and any Note issued to it, each of the Agents
shall have the same rights and powers under this
Agreement as any Bank and may exercise the same as
though it were not an Agent, and the terms "Bank" and
"Banks" shall include each of the Agents in its
individual capacity.
13.9.Successor. Either of the Agents may resign as an
Agent upon ten days' notice to the Banks and the
Borrower, and either of the Agents may be removed by
the Majority Banks upon ten days' notice to the Banks,
the Administrative Agent, the Competitive Bid Agent
and the Borrower. Upon such resignation or removal,
the Majority Banks shall appoint from among the Banks
a successor agent in the applicable capacity for the
Banks, which successor agent shall consent to serve as
the administrative agent or competitive bid agent, as
applicable, hereunder and shall be approved by the
Borrower (such approval not to be unreasonably
withheld), whereupon such successor agent shall
succeed to the rights, powers and duties of the
Administrative Agent or Competitive Bid Agent, as
applicable, and the term "Administrative Agent" or
"Competitive Bid Agent," as applicable, shall mean
such successor agent effective upon its appointment,
and the former Agent's rights, powers and duties as an
Agent shall be terminated, without any other or
further act or deed on the part of the former Agent or
any of the parties to this Agreement or any holders of
the Notes. After any retiring Agent's resignation
hereunder as an Agent, the provisions of this 13 shall
inure to its benefit as to any actions taken or
omitted to be taken by it while it was an Agent under
this Agreement.
14.PARTIES IN INTEREST. All the terms of this
Agreement and the other Loan Documents shall be
binding upon and inure to the benefit of and be
enforceable by the respective successors and assigns
of the parties hereto and thereto, provided that the
Borrower shall not assign or transfer its rights
hereunder.
15.ASSIGNMENTS; PARTICIPATIONS. (a) Except as
provided herein, any Bank may assign to one or more
Eligible Assignees all or a portion of its interests,
rights and obligations under this Agreement
(including, without limitation, all or a portion of
its Revolving Credit Commitment Percentage and its
Commitment to make Standby Loans and to participate in
Letters of Credit hereunder, if any, and/or all or any
portion of any Loans at the time owing to it and the
Notes held by it); provided, however, that (i) the
Administrative Agent shall have given its prior
written consent, which consent shall not be
unreasonably withheld or delayed, (ii) the Borrower
shall have given its prior written consent, which
consent shall not be unreasonably withheld or delayed,
(iii) each such assignment shall be of a constant, and
not a varying, percentage of all the assigning Bank's
rights and obligations with respect to its Revolving
Credit Commitment Percentage and its Commitment
hereunder or with respect to the Loans owing to it and
the Notes held by it, as the case may be, (iv) the
amount of the assigning Bank's portion of the
Revolving Credit Commitment Amount subject to each
such assignment (determined as of the date of the
Assignment and Acceptance with respect to such
assignment) shall in no event be less than
$10,000,000, or if the assigning Bank's entire
Commitment is less than $10,000,000, such Bank's
entire Commitment, provided that the assignee is an
existing Bank, (v) the assignee, if it shall not
already be a Bank, shall deliver to the Administrative
Agent and the Competitive Bid Agent an administrative
questionnaire in the form of Exhibit F attached
hereto, and (vi) the parties to such assignment shall
execute and deliver to the Administrative Agent, for
notation in the Bank List, an Assignment and
Acceptance, substantially in the form of Exhibit G
hereto (the "Assignment and Acceptance"), together
with any Note or Notes subject to such assignment, and
together with payment by the Eligible Assignee to the
Administrative Agent for its own account of an
assignment administration fee in the amount of $2,500.
Upon such execution, delivery, acceptance and
notation, from and after the effective date specified
in each Assignment and Acceptance, which effective
date shall be at least five Business Days after the
execution thereof or such earlier date as the
Administrative Agent, the assigning Bank and the
assignee bank may choose, (x) the assignee thereunder
shall be a party hereto and, to the extent provided in
such Assignment and Acceptance, have the rights and
obligations of a Bank hereby, provided that such
assignee shall have no greater rights than the
assigning Bank under 3.1, and (y) the assigning Bank
shall, to the extent provided in such assignment, be
released from its obligations under this Agreement,
other than confidentiality requirements.
(b)By executing and delivering an Assignment and
Acceptance, the parties to such assignment thereunder
confirm to and agree with each other and the other
parties hereto as follows: (i) other than the
representation and warranty that it is the legal and
beneficial owner of the interest being assigned
thereby free and clear of any adverse claim, the
assigning Bank makes no representation or warranty and
assumes and shall have no responsibility with respect
to any statements, warranties or representations made
in or in connection with this Agreement or the
execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or
any other instrument or document furnished pursuant
hereto; (ii) the assigning Bank makes no
representation or warranty and assumes and shall have
no responsibility with respect to the financial
condition of the Borrower or the performance or
observance by the Borrower of any of its obligations
under this Agreement or any other instrument or
document furnished pursuant hereto; (iii) such
assignee confirms that it has received a copy of this
Agreement, together with copies of the financial
statements referred to in 5.4 and the most recent
financial statements delivered pursuant to 8.4 and
such other documents and information as it has deemed
appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance;
(iv) such assignee will, independently and without
reliance upon the assigning Bank, either of the Agents
or any other Bank and based on such documents and
information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or
not taking action under this Agreement; (v) such
assignee confirms that it is an Eligible Assignee;
(vi) such assignee appoints and authorizes the
Administrative Agent to take such action as agent on
its behalf and to exercise such powers under this
Agreement as are delegated to the Administrative Agent
by the terms hereof, together with such powers as are
reasonably incidental thereto; (vii) such assignee
appoints and authorizes the Competitive Bid Agent to
take such action as agent on its behalf and to
exercise such powers under this Agreement as are
delegated to the Competitive Bid Agent by the terms
hereof, together with such powers as are reasonably
incidental thereto; and (viii) such assignee agrees
that it will perform in accordance with their terms
all of the obligations which by the terms of this
Agreement are required to be performed by it as a
Bank.
(c)The Administrative Agent shall maintain a copy of
each Assignment and Acceptance delivered to it and a
bank list or similar list for the notation of the
names and addresses of the Banks and the Revolving
Credit Commitment Percentage of, and principal amount
of the Loans owing to, the Banks from time to time
(the "Bank List"). The entries in the Bank List shall
be conclusive, in the absence of manifest error, and
the Borrower, the Administrative Agent and the Banks
may treat each person whose name is noted in the Bank
List as a Bank hereunder for all purposes of this
Agreement. The Bank List shall be available for
inspection by the Borrower or the Banks at any
reasonable time and from time to time upon reasonable
prior notice.
(d)Upon its receipt of an Assignment and Acceptance
executed by the parties to such assignment, together
with any Note or Notes subject to such assignment and
the written consent of the Borrower to such
assignment, the administrative questionnaire referred
to above, and the $2,500 fee referred to above, the
Administrative Agent shall (i) note the information
contained therein in the Bank List, and (ii) give
prompt notice thereof to the Borrower and the Banks.
Within five Business Days after receipt of such
notice, the Borrower, at its own expense, shall
execute and deliver to the Administrative Agent, in
exchange for the surrendered Note or Notes, a new Note
or Notes to the order of such Eligible Assignee(s) in
an amount equal to the amount assumed by such Eligible
Assignee(s) pursuant to such Assignment and Acceptance
and, if the assigning Bank has retained some portion
of its obligations hereunder, a new Note or Notes to
the order of the assigning Bank in an amount equal to
the amount retained by it hereunder. Such new Note or
Notes shall be in an aggregate principal amount equal
to the aggregate principal amount of the surrendered
Note or Notes, shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be
in the form of the assigned Notes. The surrendered
Note or Notes shall be cancelled and returned to the
Borrower.
(e)Each Bank may without the consent of the Borrower
or the Administrative Agent sell participations to one
or more banks or other entities in all or a portion of
its rights and obligations under this Agreement
(including, without limitation, all or a portion of
its Commitment hereunder and the Loans owing to it and
the Note held by it); provided, however, that the only
rights granted to the participant pursuant to such
participation arrangements with respect to waivers,
amendments or modifications of the Loan Documents
shall be the rights to approve waivers, amendments, or
modifications which require the consent of all of the
Banks as provided in 21 hereof. The Borrower further
agrees that a Bank may disclose information obtained
by such Bank pursuant to this Agreement to
participants or potential participants in the Loans,
provided that such participants agree to be bound by
the confidentiality requirements hereunder.
(f)Anything contained in this 15 to the contrary
notwithstanding, any Bank may at any time pledge all
or any portion of its interest and rights under this
Agreement (including all or any portion of its Note)
to any of the twelve Federal Reserve Banks organized
under 4 of the Federal Reserve Act, 12 U.S.C. 341. No
such pledge or the enforcement thereof shall release
the pledgor Bank from its obligations hereunder or
under any of the other Loan Documents.
16.EXPENSES; INDEMNITY. (a) Whether or not the
transaction contemplated hereby shall be consummated,
the Borrower will pay (1) the out-of-pocket costs of
the Administrative Agent of (i) preparing, copying and
distributing this Agreement and the other Loan
Documents, (ii) syndicating the credit facility
provided herein, including, without limitation, the
out-of-pocket costs of preparing, copying and
distributing all necessary documentation with respect
thereto, (iii) any transfer taxes, documentary taxes,
assessments or charges made by any governmental
authority by reason of the execution and delivery of
the Loan Documents (the Borrower hereby agreeing to
indemnify the Banks with respect thereto); (2) the
reasonable fees, expenses and disbursements of the
Banks' Special Counsel and the reasonable allocated
costs of staff counsel for the Administrative Agent,
incurred in connection with the preparation of this
Agreement and the other Loan Documents or in
connection with amendments, modifications, approvals,
consents or waivers hereto or thereto; (3) all
reasonable costs and expenses (including reasonable
attorneys' fees and costs and the reasonable allocated
costs of staff counsel) incurred or sustained by the
Administrative Agent, the Competitive Bid Agent and
the Banks in connection with the exercise, protection
or enforcement of any of the Administrative Agent's,
Competitive Bid Agent's or the Banks' rights,
remedies, powers or privileges under this Agreement
and the other Loan Documents or the administration
thereof after the occurrence and during the
continuance of an Event of Default; and (4) all
reasonable costs and expenses (including reasonable
attorney's fees and costs) incurred or sustained by
the Agents and the Banks and their respective
shareholders, directors, agents, officers,
Subsidiaries and affiliates (each an "Indemnified
Party") in connection with any litigation, proceeding
or dispute, whether arising hereunder or otherwise, in
any way related to the Agents' and the Banks'
relationship with the Borrower or any of its
Subsidiaries hereunder, other than as directly caused
by the gross negligence or willful misconduct of any
Indemnified Party. In any investigation, proceeding
or litigation, or the preparation therefor, the Agents
and the Banks shall be entitled to select their own
counsel (which counsel shall be reasonably
satisfactory to the Borrower) and, in addition to the
foregoing indemnity, the Borrower agrees to pay
promptly the reasonable fees and expenses of one such
counsel except to the extent that such fees and
expenses are the result of the gross negligence or
willful misconduct of either of the Agents or the
Banks. The Borrower will not, without the prior
written consent of the Agents and the Banks, settle or
compromise any such investigation, proceeding or
litigation if such settlement or compromise requires
an admission of either of the Agents' or the Banks'
wrongdoing and neither the Agents nor the Banks nor
any other Indemnified Party will settle or compromise
any such investigation, proceeding or litigation
without the prior written consent of the Borrower if
the Borrower is required to indemnify the Agents or
the Banks or such other Indemnified Party therefor.
The covenants of this 16 shall survive payment or
satisfaction of payment of amounts owing with respect
to this Agreement or the Notes.
(b)The Borrower covenants and agrees to indemnify and
hold harmless each Indemnified Party and each
Indemnified Party's successors and assigns, from and
against all damages, losses, settlement payments,
obligations, liabilities, claims, suits, penalties,
assessments, citations, directives, demands,
judgments, actions, causes of action, costs and
expenses (including without limitation the fees and
disbursements of counsel and environmental
consultants) incurred, suffered, sustained or required
to be paid by an Indemnified Party and arising under
any Environmental Law, or otherwise related to
environmental or Hazardous Substance matters in
connection with the transactions contemplated by this
Agreement, except any of the foregoing which result
from the gross negligence or willful misconduct of the
Indemnified Party. The Agents and the Banks shall
have the right to employ separate counsel and to
participate in the defense and investigation of any
claim, action or proceeding, and the Borrower shall
bear the expense of such counsel. The covenant of
this 16(b) shall survive payment or satisfaction of
payment of amounts owing with respect to the Notes or
any other Loan Document.
17.SURVIVAL OF COVENANTS, ETC. All covenants,
agreements, representations and warranties made herein
and in any certificates or other papers delivered by
or on behalf of the Borrower pursuant hereto shall
survive any investigation made by the Banks and the
making by the Banks of the Loans, as herein
contemplated, and shall continue in full force and
effect so long as the Loans or other amounts due under
this Agreement or the Notes remains outstanding and
unpaid. All representations and warranties contained
in any certificate or other document delivered to the
Banks at any time by or on behalf of the Borrower
pursuant hereto or in connection with the transactions
contemplated hereby shall constitute representations
and warranties by the Borrower hereunder.
18.NOTICES. Except as otherwise specified herein, all
notices and other communications made or required to
be given pursuant to this Agreement shall be in
writing and shall be either delivered by hand or
mailed by United States first-class mail, postage
prepaid, or sent by telex or telecopy confirmed by
letter, addressed as follows:
(a)if to the Borrower, at 455 North Cityfront Plaza
Drive, Chicago, Illinois 60611-5504, Attn: Chief
Financial Officer, or such other address for notice as
the Borrower shall last have furnished in writing to
the Person giving the notice;
(b)if to FNBB, or the Administrative Agent or the
Competitive Bid Agent, at 100 Federal Street, Boston,
Massachusetts 02110, Attn: Transportation Division,
01-08-01, or such other address for notice as such
Bank or the Administrative Agent shall last have
furnished in writing to the Person giving the notice;
(c)if to any Bank other than FNBB, at the address for
notice for such Bank set forth on the signature pages
hereto or at such other address as such Bank shall
last have furnished in writing to the Person giving
the notice.
Except for Notices of Borrowing, any notice so
addressed shall be deemed to have been duly given or
made and to have become effective (i) if delivered by
hand to an officer of the party to which it is
directed, at the time of the receipt thereof by such
officer, (ii) if sent by first-class mail, postage
prepaid, on the earlier of (A) the fifth Business Day
following the mailing thereof, or (B) the date of its
receipt, if a Business Day, or if not a Business Day,
the next succeeding Business Day, or (iii) if sent by
telex or telecopy, at the time of dispatch thereof, if
in normal business hours in the state or country where
received or otherwise at the opening of business on
the next succeeding Business Day.
19.MISCELLANEOUS. This Agreement shall for all
purposes be construed in accordance with and governed
by the internal laws of the State of Illinois, without
regard to principles of conflicts-of-laws or choice of
law doctrines. The rights and remedies herein
expressed are cumulative and not exclusive of any
other rights which the Banks would otherwise have.
Any instruments required by any of the provisions
hereof to be in the form annexed hereto as an exhibit
shall be substantially in such form with such changes
therefrom, if any, as may be approved by the Majority
Banks and the Borrower. The captions in this
Agreement are for convenience of reference only and
shall not define or limit the provisions hereof. This
Agreement or any amendment may be executed in separate
counterparts, each of which when so executed and
delivered shall be an original, but all of which
together shall constitute one instrument. In proving
this Agreement, it shall not be necessary to produce
or account for more than one such counterpart.
20.ENTIRE AGREEMENT, ETC. This Agreement and any
other documents executed in connection herewith or
therewith express the entire understanding of the
parties with respect to the transactions contemplated
hereby. Neither this Agreement nor any term hereof
may be changed, waived, discharged or terminated
orally or in writing, except as provided in 21 hereof.
21.CONSENTS, AMENDMENTS, WAIVERS, ETC. Except as
otherwise expressly provided in this 21, any action to
be taken or any consent or approval required or
permitted by this Agreement or any other Loan Document
to be given by the Banks may be given, and any term of
this Agreement or any other Loan Document may be
amended and the performance or observance by the
Borrower or any other person of any of the terms
thereof and any Default or Event of Default (as
defined in any of the above-referenced documents or
instruments) may be waived (either generally or in a
particular instance and either retroactively or
prospectively) with, but only with, the written
consent of the Majority Banks; provided, however, that
no such consent or amendment which affects the rights,
duties or liabilities of the Administrative Agent
shall be effective without the written consent of the
Administrative Agent and no such consent or amendment
which affects the rights, duties or liabilities of the
Competitive Bid Agent shall be effective without the
written consent of the Competitive Bid Agent.
Notwithstanding the foregoing, no amendment, waiver or
consent shall do any of the following: (a) increase
the principal amount of any Loans (or subject any Bank
to any additional obligations), or reduce the
principal of or interest on any Loan or any fees
payable hereunder, or extend or postpone any date
fixed for any payment in respect of principal of, or
interest on, the Loans, or any fees payable hereunder,
without the prior written consent of each Bank
affected thereby, or (b) change the definition of
"Majority Banks" or aggregate Revolving Credit
Commitment Percentage or number of Banks which shall
be required for the Banks or any of them to take any
action under the Loan Documents, or amend 16 or this
21, or change the Revolving Credit Commitment
Percentage of any Bank (except pursuant to 15 hereof)
or extend or postpone any date fixed for the reduction
of the Revolving Credit Commitment Amount, without the
prior written consent of all of the Banks. No waiver
shall extend to or affect any obligation not expressly
waived or impair any right consequent thereon. No
course of dealing or delay or omission on the part of
the Banks in exercising any right shall operate as a
waiver thereof or otherwise be prejudicial thereto.
No notice to or demand upon the Borrower shall entitle
the Borrower to other or further notice or demand in
similar or other circumstances.
22.CERTAIN TRANSITIONAL ARRANGEMENTS.
22.1. Return of Prior Notes. Promptly after the
Effective Date, the Banks who were parties to the
Original Credit Agreement will cancel and return to
the Borrower the promissory notes previously delivered
by the Borrower to the Banks pursuant to (and as
defined in) the Original Credit Agreement.
22.2. Certain Bank of America Letters of Credit For
purposes of this Agreement, any Letters of Credit
previously issued under the Original Credit Agreement
by Bank of America National Trust and Savings
Association as a Letter of Credit Bank thereunder
which remain outstanding on the Effective Date shall
be deemed to have been issued by BofA as a Letter of
Credit Bank hereunder, and the provisions of this
Agreement, including without limitation, 2.15 hereof,
shall apply thereto.
22.3. Allocation of Previously Accrued Interest and
Fees. Pursuant to 2.15 and 2.17 hereof, all accrued
and unpaid interest (if any) and Letter of Credit Fees
(as defined in the Original Credit Agreement)
attributable to periods prior to the Effective Date
shall be payable on the dates such amounts would have
been due under the Original Credit Agreement. Such
amounts shall be payable to the Administrative Agent
for the respective accounts of the Persons entitled
thereto under the Original Credit Agreement, according
to their applicable shares of such amounts as provided
in the Original Credit Agreement (any provisions of
4.3 hereof to the contrary notwithstanding).
[Remainder of page intentionally left blank.]
Signed and delivered, as of the date set forth at the
beginning of this Agreement by the Borrower, the
Banks, the Administrative Agent and the Competitive
Bid Agent.
ILLINOIS CENTRAL RAILROAD COMPANY
By:
Title: Vice President and
Chief Financial Officer
THE FIRST NATIONAL BANK OF BOSTON, as Administrative
Agent and Competitive Bid Agent
By:
Title: Vice President
BANK OF AMERICA ILLINOIS, as Co-Agent
By:
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By:
Title: Vice President
BANK OF AMERICA ILLINOIS
By:
Title: Vice President
Address:Bank of America Illinois
231 South LaSalle Street, 10J
Chicago, Illinois 60697
Attention: Sheryl Ellerin
THE CHASE MANHATTAN BANK, N.A.
By:
Title: Vice President
Address: The Chase Manhattan Bank N.A.
One Chase Manhattan Plaza - 5th Floor
New York, New York 10081
Attention: Francis M. Cox, III, Vice President
THE TORONTO DOMINION BANK, CAYMAN ISLANDS BRANCH
By:
Title:
Address: The Toronto Dominion Bank
70 West Madison Street,
Suite 5430
Chicago, Illinois 60602-4227
Attention: Dylan T. MacKenzie,
Managing Director
and to:
The Toronto Dominion Bank
Transportation Division
31 West 52nd Street - 22nd Floor
New York, New York 10019
Attention: Thomas Westdyk
with copies of financial statements and Compliance
Certificates also sent to:
Manager, Credit Administration
The Toronto Dominion Bank
909 Fannin Street
Houston, Texas 77010
Attention: Jorge Garcia
DEPOSIT GUARANTY NATIONAL BANK
By:
Title: Senior Vice President
Address: Deposit Guaranty National Bank
One Deposit Guaranty Plaza
11th Floor
Jackson, Mississippi 39205
Attention: Anthony Thomas,
Senior Vice President
KLEINWORT BENSON LIMITED
By:
Title: Senior Vice President
Address: Kleinwort Benson Limited
Three First National Plaza - Suite 1390
Chicago, Illinois 60602
Attention: Kenneth Hamilton,
Senior Vice President
THE MITSUBISHI TRUST AND BANKING CORPORATION
By:
Title: Deputy General Manager
Address: The Mitsubishi Trust and
Banking Corporation
801 South Figueroa - Suite 2400
Los Angeles, California 90017
Attention: Rex A. Olson, Assistant Vice President,
Finance and Investment
The undersigned hereby acknowledges it has withdrawn
from the foregoing Agreement, and consents and
agrees to the transition arrangements described in
Section 22 thereof:
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
By:
Title: Vice President
EXHIBIT 4.10
RAILROAD LEASE AGREEMENT
RAILROAD LEASE AGREEMENT ("Agreement") dated as of July 1,
1994, between IC LEASING CORPORATION III, a Nevada corporation ("ICL")
with an office at 6900 Westcliff Drive, Las Vegas, Nevada 89128, as
lessor, and ILLINOIS CENTRAL RAILROAD COMPANY, a Delaware corporation
("Lessee") with an office at, 455 North Cityfront Plaza Drive, Chicago,
Illinois 60611, as lessee.
1. DELIVERY AND ACCEPTANCE OF UNITS.
A. ICL agrees to lease to Lessee, and Lessee agrees to lease from
ICL, those certain railroad cars described in the lease schedules executed
by the parties concurrently herewith or hereafter and made a part of this
Agreement. The word "Schedule" as used herein means any such lease
schedule executed concurrently herewith and any additional lease schedules
hereafter executed and all amendments thereto, and the term "Schedules"
means all thereof. Each Schedule shall be a separate lease and shall
incorporate therein all of the terms and conditions of this Agreement to
the same extent as if the provisions hereof were set forth in full
therein. Each Schedule shall set forth a description of the Units covered
thereby, including such facts as the number of Units of each type, road
numbers, term throughout which the Unit or Units shall remain in Lessee's
service (the "Lease Term"), the delivery location (the "Delivery Point"),
the rental rate and charges for each Unit, and such other information as
may be desired by both parties, including any variation from the terms of
this Agreement. In the event of any conflict between this Agreement and
any Schedule, the Schedule shall control with respect to the Units subject
to such Schedule. The railroad cars listed on the Schedules are sometimes
herein individually referred to as a "Unit" and collectively referred to
as the "Units;" the Units listed on any particular Schedule are
hereinafter referred to as a "Group of Units."
B. ICL will, at its own expense, deliver the Units to Lessee at
the Delivery Point, and within the time period, specified in the Schedule
with respect thereto in a condition suitable for immediate use by Lessee.
Upon completion of delivery of one or more Units to be delivered as of a
specified date to the Delivery Point, Lessee will have a right to inspect
each Unit and Lessee will accept all such Units so delivered on the first
day (the "Acceptance Date") when all such Units have been so delivered and
are in the condition required by the Schedule. Upon delivery of the Units
to, and acceptance thereof by Lessee, ICL shall lease to Lessee and Lessee
shall lease from ICL such Units for the rental and on and subject to the
terms and conditions herein set forth. Upon delivery and acceptance of
one or more Units, ICL and Lessee shall execute a certificate in the form
of Exhibit A hereto indicating the Acceptance Date as to such Units.
Lessee retains the right to reject any Unit not conforming to the
foregoing requirements and shall notify ICL of Lessee's rejection of such
Unit and the specific reason therefor.
2. COMPENSATION.
A. Lessee agrees to pay ICL the rent in the amounts and on the
dates specified in the Schedule for each Unit. The first payment for
any Unit shall be a prorated amount for the period from the Acceptance
Date with respect to such Unit to the end of the payment period for the
applicable Lease Term in which the Acceptance Date occurs. If any of the
rent payment dates falls on a Saturday, Sunday or legal holiday, the rent
shall be due on the next succeeding business day. The term "business day"
as used herein means a calendar day, excluding Saturdays, Sundays and any
other day on which banking institutions in Chicago, Illinois or Las Vegas,
Nevada are authorized or obligated to remain closed. All payments to be
made to ICL hereunder shall be made at such place within the United States
of America as ICL shall specify in writing, but in the absence of such
specification, shall be made to ICL at 6900 Westcliff Drive, Las Vegas,
Nevada 89128. In the event ICL notifies Lessee in writing that the right
to receive rents has been assigned in accordance with Section 14 hereof,
Lessee shall make payment in the manner designated in such notice or as
otherwise designated in writing by such assignee.
B. Lessee will, on demand, pay to ICL interest at the lower of
18% per annum or the maximum rate permitted by applicable law on any
payment of rent not paid within 5 days of the due date for any period
during which such rent is overdue.
C. This Agreement is a net lease and Lessee's obligation to pay
rent and other amounts payable hereunder shall be absolute and
unconditional under any and all circumstances and, except as herein
specifically provided, Lessee shall not be entitled to any abatement of
rent or reduction thereof or setoff against rent, including, but not
limited to, abatements, reductions or setoffs due to any existing or
future claims of Lessee against ICL under this Agreement or otherwise;
nor, except as otherwise expressly provided herein, shall this lease
terminate, or the respective obligations of ICL or Lessee be otherwise
affected, by reason of any defect in or damage to or loss or destruction
of all or any of the Units from whatsoever cause or Lessee's inability to
use the Units as a result of condemnation, it being the intention of the
parties that the rents and other amounts payable by Lessee hereunder shall
continue to be payable in all events unless the obligation to pay the same
shall be terminated pursuant to Section 7 or 18 hereof.
3. TERM. The term of this Agreement with respect to each Unit shall
commence on the Acceptance Date with respect to such Unit and shall
continue, unless otherwise terminated by any other provision hereof, for
the period specified as the Lease Term in the applicable Schedule.
4. DISCLAIMER. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS
AGREEMENT, ICL NEITHER MAKES, NOR SHALL BE DEEMED TO HAVE MADE, AND LESSEE
HEREBY EXPRESSLY WAIVES ANY WARRANTY OR REPRESENTATION, EITHER EXPRESS OR
IMPLIED, AS TO THE UNITS, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OR
REPRESENTATION AS TO THE DESIGN, QUALITY OR CONDITION OF THE UNITS OR ANY
WARRANTY OF MERCHANTABILITY OR FITNESS OF THE UNITS FOR ANY PARTICULAR
PURPOSE OR AS TO ANY OTHER MATTER RELATING TO THE UNITS OR ANY PART
THEREOF. LESSEE CONFIRMS THAT IT HAS SELECTED THE UNITS ON THE BASIS OF
ITS OWN JUDGEMENT AND EXPRESSLY DISCLAIMS RELIANCE UPON ANY STATEMENTS,
REPRESENTATIONS OR WARRANTIES MADE BY ICL, AND LESSEE ACKNOWLEDGES THAT
ICL IS NOT A MANUFACTURER OR VENDOR OF ANY OF THE UNITS. ICL NEITHER
MAKES NOR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY AS
TO THE ACCOUNTING TREATMENT TO BE ACCORDED TO THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR, EXCEPT AS PROVIDED IN SECTION 13
HEREOF, AS TO ANY TAX CONSEQUENCES AND/OR TAX TREATMENT THEREOF.
5. REPRESENTATIONS AND WARRANTIES.
A. Lessee represents and warrants that (a) Lessee is a duly
organized, validly existing corporation in good standing under the laws
of the state of its incorporation and is duly qualified to do business in
all jurisdictions in which qualification is required in order for it to
carry out the transactions contemplated by this Agreement; (b) Lessee has
full corporate power, authority and legal right to execute, deliver and
perform this Agreement, and the execution, delivery and performance hereof
has been duly authorized by all necessary corporate action of Lessee; and
(c) there is no action, suit or proceeding (or, to the knowledge of
Lessee, investigation) by or before any court, arbitrator, administrative
agency or other governmental authority pending or to the knowledge of
Lessee threatened against Lessee which involves the Units or the
transactions contemplated by this Agreement.
B. ICL represents and warrants that (a) ICL is a duly organized,
validly existing corporation in good standing under the laws of the state
of its incorporation and is duly qualified to do business in all
jurisdictions in which qualification is required in order for it to carry
out the transactions contemplated by this Agreement; (b) ICL has full
corporate power, authority and legal right to execute, deliver and perform
this Agreement, and the execution, delivery and performance hereof has
been duly authorized by all necessary corporate action of ICL; and (c)
there is no action, suit or proceeding (or, to the knowledge of ICL,
investigation) by or before any court, arbitrator, administrative agency
or other governmental authority pending or to the knowledge of ICL
threatened against ICL which involves the Units or the transactions
contemplated by this Agreement.
6. USE AND MAINTENANCE; RECORD KEEPING.
A. So long as the Units shall be leased hereunder and until the
Units are returned to ICL in accordance with the provisions of Sections
16 or 18 hereof, Lessee shall, at its own cost and expense, maintain and
keep the Units in good order, condition and repair, ordinary wear and tear
excepted, utilizing the same standards and care as it does with all
similar equipment it owns or leases. Lessee shall not modify any Unit in
any material respect without the prior written approval of ICL, which
shall not be unreasonably withheld. Any parts installed or replacements
made by Lessee upon any Unit pursuant to its obligation to maintain and
keep the Units in good order, condition and repair under this Section
shall be considered accessions to such Units and title thereto shall be
immediately vested in ICL without cost or expense to ICL.
B. Lessee shall perform all record keeping functions related to
the registration, use, and maintenance of the Units in accordance with all
applicable laws and regulations. At the reasonable request of ICL, Lessee
shall provide ICL with access on Lessee's premises (in the same manner and
subject to the same conditions as apply to ICL's inspection rights under
Section 8) to such information and such other information relating to the
Units as is regularly maintained by Lessee. Lessee shall not be
responsible to maintain records for longer than its customary retention
period with respect thereto or the applicable Lease Term, whichever is
longer.
7. CASUALTY OCCURRENCE.
A. Lessee agrees to notify ICL within 30 days of it having
determined that any Unit has become worn out, lost, stolen, destroyed or,
in the opinion of Lessee, irreparably damaged (including, without
limitation, a determination by Lessee that the repair cost for a Unit
exceeds its Casualty Value), from any cause whatsoever (any such
occurrence or determination being hereinafter called a "Casualty
Occurrence"). On the next succeeding rental payment date following the
date of such notice, Lessee will pay to ICL the rental payment for such
Unit due on such date (together with any other unpaid rentals for such
Unit) plus a sum equal to the Casualty Value for such Unit as of such
rental payment date. The term "Casualty Value" as used herein for any
Unit shall mean, at any time, the casualty value set forth for such time
on the Schedule for each Unit.
B. Upon (and not until) payment of all sums required to be paid
pursuant to Section 7.A hereof in respect of any Unit, the obligation to
pay rent for such Unit accruing subsequent to the payment date shall
terminate.
C. ICL appoints Lessee as its agent to dispose of any Unit
suffering a Casualty Occurrence at the best price obtainable on an "as is,
where is" basis. If Lessee shall have previously paid the Casualty Value
of such Unit to ICL pursuant hereto, Lessee shall be entitled to the
proceeds of such sale, including without limitation proceeds paid by a
railroad as settlement for destruction of such Unit, to the extent such
proceeds do not exceed the then Casualty Value of such Unit. If Lessee
shall have previously paid the Casualty Value of a Unit to ICL pursuant
hereto, Lessee shall be entitled to proceeds that are paid to Lessee by
insurance companies as a result of a Casualty Occurrence with respect to
such Unit to the extent such proceeds do not exceed the then Casualty
Value of such Unit. ICL shall receive and Lessee shall pay to ICL any
proceeds that are paid by insurance companies as a result of a Casualty
Occurrence to the extent such proceeds exceed the then Casualty Value of
such Unit.
8. INSPECTION. ICL shall, at its sole cost and expense, at any
reasonable time during normal business hours and without interfering with
Lessee's operations, have the right to enter the premises of Lessee for
the purpose of inspecting the Units to ensure Lessee's compliance with its
obligations hereunder. ICL shall enter and occupy Lessee's property at
its sole risk and shall be subject at all times to Lessee's operating and
safety requirements. Any injury, death or property damage arising out of
such entry, occupancy and inspection shall be the entire responsibility
of ICL and ICL will indemnify and hold harmless Lessee from any and all
such liabilities. ICL will obtain permission from a local Lessee
operations officer 48 hours before entry and such permission shall be
granted subject to the above. As a condition to any such entry, Lessee
may require that ICL or its agent execute a release of liabilities in
favor of Lessee in form and substance satisfactory to Lessee. In
addition, ICL shall have the right by its agents to inspect Lessee's
records with respect to the Units at such reasonable times as ICL may
request during the continuance of this Agreement.
9. PROHIBITION OF LIENS; MARKING OF UNITS.
A. Lessee, at its own expense, will promptly pay or cause to be
paid, or otherwise satisfy and discharge, any and all sums claimed by any
party by, through or under Lessee or its successors or assigns which, if
unpaid, might become a lien upon any Unit, but shall not be required to
pay or discharge any such claim so long as the validity thereof shall be
contested in good faith and by appropriate legal proceedings in any
reasonable manner and the nonpayment thereof does not in Lessee's
reasonable judgment materially adversely affect the title, property or
rights of ICL created or purported to be created hereunder; provided,
however, that this covenant will not be breached by reason of the
existence of liens for taxes, assessments or governmental charges or
levies, in each case so long as not due and delinquent, or undetermined
or inchoate materialmen's, mechanics', workmen's, repairmen's or other
like liens arising in the ordinary course of business and, in each case,
not delinquent.
B. Lessee shall, at its own expense, mark the Units as soon as
possible after delivery with the marks and numbers designated in the
Schedule. Lessee shall not remove the existing words on the side of each
Unit, or if so removed it will replace, the words "LEASED FROM IC LEASING
CORPORATION III AND SUBJECT TO A SECURITY INTEREST RECORDED WITH THE
INTERSTATE COMMERCE COMMISSION." Lessee shall not perform any other
remarking or renumbering of the Units except with the express written
consent of ICL.
10. TAXES. Lessee will be responsible for the filing of all tax
returns and will pay all taxes, assessments and other governmental charges
levied upon or in respect of the Units, this Agreement or the use of the
Units under this Agreement, including, but not limited to, all ad valorem
or property taxes, levies, tariffs, all license or registration fees,
assessments, fines, penalties and interest and all sales, use or similar
taxes payable with respect to the Units, this Agreement or the use of the
Units under this Agreement and all payments to be made by Lessee hereunder
will be free of any expense to ICL as to any of the foregoing.
Notwithstanding the foregoing or the provisions of Section 13 hereof,
Lessee shall not be responsible for or pay any income taxes, franchise
taxes, privilege taxes, value added taxes, gross receipts taxes or any
similar taxes which are measured by reference to ICL's income, capital,
net worth, retained earnings or investments or any fines, penalties or
interest thereon and shall not be responsible for the filing of any tax
returns relative to any such taxes.
Lessee will be under no obligation to pay any taxes or other charges
referred to in the preceding paragraph for which it is responsible
hereunder so long as Lessee in good faith and by appropriate legal or
administrative proceedings is contesting the validity or amount thereof
and the nonpayment thereof does not, in ICL's reasonable judgment,
materially adversely affect the title, property or rights of ICL, or the
security interest of any assignee, in or to any Unit. Such contest will
be brought in the name of Lessee, if permissible; if not permissible, ICL,
at Lessee's sole cost and expense, will bring the contest in ICL's own
name. ICL will reasonably cooperate with Lessee and take any actions
reasonably required to permit and prosecute such a contest. Lessee and
ICL shall each reasonably cooperate with the other in providing necessary
tax information to the other party relating to the Units and the use
thereof.
11. INSURANCE. Lessee will, at all times prior to the return of the
Units to ICL, at its own expense, cause to be carried and maintained (i)
property insurance in respect of the Units and (ii) public liability
insurance with respect to third party personal injury and property damage,
in each case against such risks and in such amounts as is consistent with
prudent industry practice, but in any event, against such risks and in
such amounts customarily insured against by Lessee in respect to similar
equipment owned or leased by it. Such policies of insurance shall name
ICL as an additional insured party thereunder with respect to the Units.
Lessee will provide to ICL, upon request, a statement of the insurance
maintained pursuant to this Section.
12. INDEMNITIES. Lessee agrees to indemnify and hold ICL harmless from
and against all losses, damages, injuries, liabilities, claims and demands
whatsoever (whether as a result of damage to the Units or injury to third
parties or their property), regardless of the cause thereof, and any
expense in connection therewith (including legal fees), arising out of the
use or operation of the Units during the term of this Agreement unless
such claim for loss or damage was caused by ICL's negligence, bad faith
or wilful misconduct. The indemnities contained in this Section 12 shall
survive the expiration or termination of the Lease Term and return of the
Units with respect to all events, facts, conditions or other circumstances
occurring or existing prior to such expiration or termination.
13. SPECIAL TAX INDEMNITIES.
A. ICL has calculated the rent hereunder based in part on the
assumption that it will be entitled to depreciation deductions
("Depreciation Deductions") under Section 168(a) of the Internal Revenue
Code of 1986 as it may be amended hereafter (the "Code") for each Unit in
an amount determined by using the method described in Section 168(b) (1)
of the Code; an applicable recovery period of seven (7) years; and the
half-year convention described in Section 168(d)(l) of the Code.
B. Lessee represents and warrants that:
(i) No Unit will be "limited use property" within the
meaning of Internal Revenue Service Procedure 76-30;
(ii) Lessee has not taken and will not claim any Depreciation
Deductions in respect of the Units in connection with the filing of its
Federal, state or local income tax returns;
(iii) The Units will not be used predominantly outside the
United States within the meaning of Section 168 (g)(1)(A) of the Code; and
(iv) At all times during the Lease Term, none of the Units
will constitute "public utility property" within the meaning of Section
167(1)(3)(A) of the Code.
C. If as a result of any act (other than acts required under this
Agreement) or failure to act by Lessee, any sublessee, or any user or
person in possession of any Unit, or as a result of any breach, inaccuracy
or incorrectness of any representation, warranty, covenant or agreement
of Lessee hereunder, ICL shall lose, shall not have or shall lose the
right to claim or shall not have substantial authority (within the meaning
of Section 6662 of the Code and the regulations promulgated thereunder)
for claiming, or there shall be disallowed, recalculated or recaptured all
or any portion of the Depreciation Deductions (herein each of such events
shall be referred to as an "Indemnity Event"), then in connection with
each such occasion, Lessee agrees to pay from time to time upon demand an
amount which (after deduction of all taxes, if any, required to be paid
by ICL in respect of the receipt of said indemnity amount under the laws
of any Federal, state or local government or taxing authority) shall be
equal to the sum of the amount of net additional income taxes paid or
payable by ICL in consequence of the occurrence of an Indemnity Event plus
any interest or penalty which is assessed in connection with the foregoing
(taking into account the deductibility of state and local taxes and
interest for federal income tax purposes).
D. Lessee shall not be required to pay the amount specified in
Section 13.C if the Indemnity Event shall result solely because of the
occurrence of any of the following events:
(i) Lessee is required by the terms hereof to pay and shall
have paid the loss amount pursuant to Section 7.A hereof;
(ii) There is a transfer or other disposition by ICL of any
interest in this Agreement or the Units for Federal income tax purposes;
(iii) There is an amendment to, or change in the Code, any
Treasury Regulation promulgated thereunder, any published Revenue Ruling
or other document of the United States Treasury or Internal Revenue
Service, any applicable state or local statutes, regulations, or similar
documents, including without limitation, the rate of tax under the laws
of the United States or any state or locality therein on the taxable
income of ICL, which is effective on or after the effective date of this
Agreement; or
(iv) ICL fails to claim in a timely and proper manner the
Depreciation Deductions or fails to have sufficient gross income within
the meaning of Section 61(a) of the Code to benefit from the Depreciation
Deductions (after taking into account carry backs and carry overs
allowable by law).
14. ASSIGNMENT; SUBLEASE; SUBORDINATION.
A. So long as Lessee shall not be in default under this
Agreement, Lessee may sublease the Units to others, provided, however,
that the rights of any such sublessee shall be subject and subordinate to,
and any such sublease shall be made expressly subject and subordinate to,
all of the terms of this Agreement. In addition, before Lessee enters
into any such sublease, Lessee must obtain ICL's prior approval. ICL
agrees that such approval shall not be unreasonably withheld and that such
determination shall be given within 5 business days from the date of such
request. Lessee may make subleases of less than 6 months duration without
ICL's consent. No sublease of any Unit shall in any way discharge or
diminish any of Lessee's obligations to ICL hereunder, including, but not
limited to, the payments due to ICL pursuant to Section 2 of this
Agreement.
B. This Agreement and the Schedules shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and assigns. ICL may sell, assign, transfer, grant security
interests in or otherwise dispose of all or any part of its right, title
and interest in any Unit or Units, this Agreement (including, without
limitation, any Schedule) or any of the foregoing to any security trustee
or secured party (each herein a "Lease Assignee"). Upon delivery of a
notice of assignment to Lessee, ICL as used herein with respect to such
Schedule and Units shall mean such Lease Assignee. Lessee shall consent
to and acknowledge in writing, upon receipt of notice of assignment, such
assignment of this Agreement as to such Schedule and Units by ICL or any
Lease Assignee. ICL agrees that the rights of any Lease Assignee shall
be subject to all of the terms and conditions of this Agreement.
C. Upon written notice to Lessee from any owner, security trustee
or secured party under any lease or financing agreement entered into by
ICL in connection with any Group of Units, all rent with respect to such
Units shall be paid directly to such party and such Units shall be
returned to such party upon completion or termination of this Agreement.
Any assignment of this Agreement or any Schedule by ICL or any Lease
Assignee to any security trustee or secured party shall not subject that
security trustee or secured party to any of ICL's or such Lease Assignee's
obligations hereunder.
15. COMPLIANCE WITH REGULATIONS. Lessee shall, at its own expense and
for the benefit of ICL, comply with all governmental laws, regulations and
requirements, with the Association of American Railroads ("AAR")
Interchange Rules and with the rules and regulations of the Federal
Railway Administration (in each case as in effect on the date hereof) with
respect to the use, maintenance, and operation of the Units. Lessee shall
be responsible for obtaining all necessary railroad permissions, approvals
and consents for use of the Units and shall bear all risk of failure to
obtain such permissions, approvals and consents, or of cancellation
thereof. ICL shall take all actions reasonably requested by Lessee in
order to assist Lessee in obtaining such permissions, approvals or
consents. Lessee may, at its own expense and in good faith, contest the
validity or application of any such law or rule in any reasonable manner
which does not, in the reasonable opinion of ICL, materially adversely
affect the property or rights of ICL under this Agreement.
16. RETURN OF UNITS. Upon the expiration or earlier termination of
this Agreement with respect to any Unit, Lessee will, at its own cost and
expense, at the request of ICL, deliver possession of such Unit to ICL
upon such tracks of Lessee as ICL may reasonably designate taking into
account, among other things, Lessee's storage capacity, security and
access, or, in the absence of such designation, as Lessee may select and
permit ICL to store such Unit on such tracks for a period not exceeding
120 days. Lessee will move each Unit once at any time within such 120 day
period from such storage location to any reasonable destination or
interchange point within the continental United States on railroad lines
operated by Lessee, f.o.b., all as directed by ICL upon not less than 15
days prior written notice to Lessee. Lessee shall not be obligated to
move any Unit more than once at the request of ICL, after which Lessee
will have no further obligation with respect to any Unit so moved and such
Unit will be deleted from this Agreement. During any such storage period
Lessee will permit ICL or any person designated by ICL, at their own risk,
to inspect the Units; provided, however, that Lessee will not be liable,
except in the case of gross negligence of Lessee or of its employees or
agents, for any injury to, or the death of, any person exercising the
rights of inspection granted under this sentence. Lessee shall be
responsible for the Units in accordance with the terms of this Agreement
until such time as each Unit is delivered pursuant to ICL's disposition
instructions but in no event shall such responsibility extend beyond the
storage period. The Units shall be delivered free from all charges and
liens except those which may result from an act or omission of ICL, in the
condition specified in Section 6 hereof. If any Unit is not in the
condition required hereby, Lessee shall be liable to ICL for any and all
reasonable cleaning, repair and servicing costs required to place such
Unit in proper condition, including the cost to transport such Unit to a
repair facility. In the event that any Unit is not delivered and/or
stored as hereinabove provided within 30 days of the date of the
expiration or earlier termination of this Agreement with respect to such
Unit, Lessee will pay to ICL an amount equal to the daily equivalent of
the rental then in effect for such Unit for each day after the expiration
or termination date of this Agreement with respect to such Unit until such
Unit is delivered and stored as instructed by ICL; provided, however, that
such amount shall increase to 125% of such daily equivalent effective 90
days after the expiration or termination of this Agreement with respect
to such Unit.
17. POSSESSION AND USE. So long as Lessee shall not be in default
under this Agreement, neither ICL nor anyone claiming by, through or under
ICL shall interfere with the possession, use or quiet enjoyment of the
Units in accordance with the terms of this Agreement and in the manner
customarily used in the railroad freight business.
18. DEFAULT.
A. The occurrence of any of the following events shall be an
Event of Default by Lessee:
(i) The nonpayment by Lessee of any sum required herein to
be paid to ICL by Lessee within thirty (30) days after the due date;
(ii) Lessee shall fail to maintain the insurance required by
Section 11;
(iii) The breach by Lessee of any other term, covenant, or
condition of this Agreement, which is not cured within thirty (30) days
of Lessee's receipt of written notice from ICL;
(iv) Lessee becomes insolvent or fails generally to pay its
debts as such debts become due, or causes or suffers an order for relief
to be entered against it under applicable federal or state bankruptcy law,
or makes an assignment for the benefit of creditors or applies for or
consents to the appointment of a custodian, trustee or receiver for Lessee
or for the major part of its property; or
(v) Any representation or warranty made by Lessee herein or
in any other document delivered to ICL by Lessee related to this Agreement
shall have been false or incorrect in any material respect on the date
when made and such breach or default shall continue for a period of thirty
(30) days after Lessee's receipt of written notice from ICL of such
default.
B. Upon the occurrence of any Event of Default, ICL may:
(i) Proceed by any lawful means to terminate this Agreement
and recover damages for loss of the bargain and not as a penalty any
unpaid rent that accrued on or before the occurrence of the Event of
Default plus with respect to each Unit an amount equal to the difference
between the aggregate rent to be received hereunder for the unexpired
Lease Term with respect to such Unit and the then aggregate rental value
of such Unit for such unexpired term; or
(ii) Terminate Lessee's right to possession and use of the
Units without terminating this Agreement, whereupon all rights and
interest of Lessee in the Units shall terminate and thereupon ICL may
enter upon any premises where the Units may be located, take possession
of them and henceforth hold, possess and enjoy the same free from any
right of Lessee, and ICL shall nevertheless have the right to recover from
Lessee any and all rent and other amounts which are then due or which
hereinafter become due under this Agreement; or
(iii) Proceed by any lawful means to enforce performance by
Lessee of this Agreement.
Notwithstanding the foregoing, ICL shall not terminate this Agreement or
the Lessee's right to possession and use with respect to any Group of
Units without providing at least 60 days prior written notice to the
Lessee. ICL shall use reasonable efforts to mitigate damages. Lessee
shall bear the costs and expenses, including without limitation reasonable
attorneys' fees, incurred by ICL in connection with the exercise of its
remedies pursuant to this Section 18.B. No remedy referred to in this
Section 18.B is intended to be exclusive but each shall be cumulative and
in addition to any other remedy otherwise available to ICL at law or in
equity.
19. GOVERNING LAW. The terms of this Agreement and all rights and
obligations hereunder shall be governed by the laws of the State of
Nevada. This Agreement contains all of the terms and conditions agreed
to between the parties, and no other prior agreements, oral or otherwise,
concerning the subject matter of this Agreement, shall be deemed to exist
or bind either party hereto. The terms of this Agreement and the rights
and obligations of the parties may be changed only by a writing executed
by both parties.
20. FORCE MAJEURE. Neither party hereto shall be deemed to be in
breach or in violation of this Agreement if either is prevented from
performing any of its obligations hereunder (except for obligations to pay
money) for any reason beyond its reasonable control, including, without
limitation, acts of God, riots, fires, storms, public disturbances, or any
regulation of any federal, state or local government or any agency
thereof.
21. RECORDING. Lessee, at its own expense, will cause this Agreement
and any assignment hereof or memoranda thereof to be filed with the
Interstate Commerce Commission in accordance with 49 U.S.C. Section 11303.
Lessee will from time to time do and perform any other act and will
execute, acknowledge, deliver, file, register, record (and will refile,
reregister, deposit and redeposit or rerecord whenever required) any and
all further instruments required by law or reasonably requested by ICL for
the purpose of proper protection, to ICL's satisfaction, of ICL's rights
in the Units, or for the purpose of carrying out the intention of this
Agreement and any assignments thereof and Lessee will promptly furnish to
ICL evidence of the doing of all such acts which may be required under
this Section 21, and an opinion or opinions of counsel for Lessee with
respect thereto reasonably satisfactory to ICL.
22. EXECUTION. This Agreement may be executed in several counterparts,
such counterparts together constituting but one and the same instrument,
but the counterpart delivered to ICL shall be deemed to be the original
and all other counterparts shall be deemed duplicates thereof. Although
for convenience this Agreement is dated as of the date first set forth
above, the actual date of execution hereof by each of the parties hereto
is the date stated in the acknowledgment hereto annexed with respect to
that party's execution.
23. FURTHER ASSURANCES. Lessee will, at its expense, promptly and duly
execute and deliver to ICL such further documents and assurances and take
such further action as ICL may from time to time reasonably request in
order to more effectively carry out the intent and purpose of this
Agreement and to establish and protect the rights, interests and remedies
created or intended to be created in favor of ICL hereunder, including,
without limitation, the execution, delivery, recordation and filing of
documents with the Interstate Commerce Commission, and the execution and
filing of Uniform Commercial Code financing statements in the appropriate
jurisdictions. To the extent permitted by applicable law, Lessee hereby
authorizes ICL to file any such financing statements without signature of
Lessee.
<PAGE>
24. NOTICES. All notices and other communications provided for in this
Agreement or relating hereto shall be in writing and shall be delivered
in person to an officer of the recipient or shall be mailed by registered
or certified mail or reputable overnight courier to the recipient at its
respective address first above shown or at any other address of which the
sender receives notice from the other party hereto as the address to be
used for notices hereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the 1st day of July, 1994.
IC LEASING CORPORATION III ILLINOIS CENTRAL RAILROAD COMPANY
By: By:
Title: Title:
STATE OF ____________ )
) ss.
COUNTY OF ____________ )
On this day of ____________, 199__, before me personally
appeared , to me personally known, who being duly
sworn, says that such person is of IC Leasing
Corporation III and that the foregoing Railroad Lease Agreement and
Schedule No. 1 was signed on behalf of said corporation by authority of
its board of directors, and such person acknowledged that the execution
of the foregoing instruments was the free act and deed of such
corporation.
[notarial seal]
Notary Public
STATE OF ____________ )
) ss.
COUNTY OF ____________ )
On this day of ____________, 199___, before me personally
appeared to me personally known, who being duly sworn,
says that such person is of Illinois Central Railroad
Company and that the foregoing Railroad Lease Agreement and Schedule No. 1
was signed on behalf of said corporation by authority of its board of
directors, and such person acknowledged that the execution of the
foregoing instruments was the free act and deed of such corporation.
[notarial seal]
Notary Public
EXHIBIT A
DELIVERY AND ACCEPTANCE CERTIFICATE
TO: IC Leasing Corporation III, a Nevada corporation (herein called
"ICL")
Reference is hereby made to that certain Railroad Lease Agreement
(the "Lease") dated as of July 1, 1994 between ICL and Illinois Central
Railroad Company (hereinafter called "Lessee") and Schedule ____ ("the
"Schedule") dated as of ____________, 199___ between ICL and Lessee.
Capitalized terms used herein and otherwise not defined herein shall have
the meanings given them in the Lease to the extent the same are defined
therein. Lessee hereby certifies that __ of the Cars identified in the
Schedule have been delivered to the Lessee as required in the Lease, and
that the Cars have been inspected and accepted by the Lessee as
satisfactory on . The Lessee understands that you
are relying on the foregoing certification.
Dated .
ILLINOIS CENTRAL RAILROAD
COMPANY
By:
Title:
Accepted by:
IC LEASING CORPORATION III
By:
Title:
Date:
SCHEDULE
IC Leasing Corporation III ("ICL") hereby leases the following
railroad cars to Illinois Central Railroad Company ("Lessee") pursuant to
that certain Railroad Lease Agreement dated as of July 1, 1994 between ICL
and Lessee (the "Master Lease"). This Schedule is executed pursuant to
the terms of the Master Lease and the Master Lease is hereby made a part
hereof. The terms of the Master Lease, except to the extent inconsistent
herewith, are incorporated herein by reference.
(1) Number of Units: 364
(2) Description: Boxcars
(3) Unit Marks and Numbers: See annexed Exhibit I to this Schedule.
(4) Delivery Point: As mutually agreed by ICL and Lessee
(5) Acceptance Date: The Units have been delivered, inspected and
accepted by Lessee and the Acceptance Date shall be deemed to be
July 1, 1994.
(6) Lease Term: Period commencing with the Acceptance Date as to the
Units and ending on August 1, 1997.
(7) Per Unit Rental: Rent for each Unit subject to the Master Lease
shall be paid at the rate of $335 per Car per month, with such rent
to be payable monthly in arrears on the first day of each following
month, commencing with the installment due August 1, 1994.
(8) Casualty Value of Units: See annexed Exhibit II to this Schedule.
(9) Renewal Option: Unless either party has given the other at least
60 days prior written notice of its intent not to renew this
Schedule, this Schedule and the Lease Term shall be automatically
renewed at the expiration of Lease Term and each renewal term
thereof for an additional term of one year. Each renewal term shall
be subject to all of the terms of this Schedule; provided, however,
that the Casualty Value during each renewal term shall be equal to
$12,610 unless another amount is otherwise mutually agreed upon
between ICL and the Lessee.
(10) Prior Leases: Certain of the Units referred to in this Schedule are
subject to existing leases in favor of third parties (each, a "Prior
Lease") and during the term of each such Prior Lease (i) solely as
between the Lessee and ICL, the Lessee shall be entitled to the
benefit of all rights and remedies of ICL under such Prior Lease
(including without limitation, the right to receive all rents, car-
hire payments and other amounts due thereunder) and shall take such
actions as may be required to cause the performance of all
obligations of ICL under such Prior Lease (provided, however, that
the rights of the Lessee with respect to the Prior Leases shall be
subject to the Railcar Management Agreement dated as of December 3,
1993 (the "Management Agreement") by and between Interail, Inc. and
ICL and nothing in the Master Lease or this Schedule is intended or
shall be deemed to be an assignment of the rights and obligations
of ICL under the Management Agreement or any Prior Lease), and (ii)
the Master Lease and this Schedule shall be subject to the terms of
such Prior Lease and no action shall be required under the Master
Lease or this Schedule which will in any way be inconsistent with
or interfere with the possession, use or quiet enjoyment of the
Units in accordance with the terms of such Prior Lease. ICL hereby
irrevocable constitutes and appoints the Lessee the true and lawful
attorney of ICL during the term of each Prior Lease with full power
of substitution, in the name of ICL, or otherwise, and on behalf of
and for the benefit of the Lessee, to exercise any and all of ICL's
rights and remedies with respect to each Prior Lease, including
without limitation, to collect, assert or enforce any claim or other
right of ICL thereunder, to endorse with the name of ICL any checks
or other instruments received in respect of such Prior Lease or any
such claim or other right, in each case for the benefit of the
Lessee, to institute, prosecute or compromise any and all actions
with respect thereto, and to do all such other acts and things in
relation thereto which the Lessee shall deem desirable. ICL further
agrees that it will at any time and from time to time, at the
request of the Lessee, execute and deliver to the Lessee all such
other and further instruments and take such other action as the
Lessee may reasonably request to more effectively provide the Lessee
with the benefits (but subject to the obligations) of the Prior
Leases.
IN WITNESS WHEREOF, the parties have executed this Schedule
as of the 1st day of July, 1994.
IC LEASING CORPORATION III ILLINOIS CENTRAL RAILROAD
COMPANY
By: By:
Title: Title:
Date: Date:
EXHIBIT 4.11
RAILROAD LEASE AGREEMENT
RAILROAD LEASE AGREEMENT ("Agreement") dated as of July 1,
1994, between IC LEASING CORPORATION III, a Nevada corporation ("ICL")
with an office at 6900 Westcliff Drive, Las Vegas, Nevada 89128, as
lessor, and WATERLOO RAILWAY COMPANY, a Delaware corporation ("Lessee")
with an office at, 455 North Cityfront Plaza Drive, Chicago, Illinois
60610, as lessee.
1. DELIVERY AND ACCEPTANCE OF UNITS.
A. ICL agrees to lease to Lessee, and Lessee agrees to lease from
ICL, those certain railroad cars described in the lease schedules executed
by the parties concurrently herewith or hereafter and made a part of this
Agreement. The word "Schedule" as used herein means any such lease
schedule executed concurrently herewith and any additional lease schedules
hereafter executed and all amendments thereto, and the term "Schedules"
means all thereof. Each Schedule shall be a separate lease and shall
incorporate therein all of the terms and conditions of this Agreement to
the same extent as if the provisions hereof were set forth in full
therein. Each Schedule shall set forth a description of the Units covered
thereby, including such facts as the number of Units of each type, road
numbers, term throughout which the Unit or Units shall remain in Lessee's
service (the "Lease Term"), the delivery location (the "Delivery Point"),
the rental rate and charges for each Unit, and such other information as
may be desired by both parties, including any variation from the terms of
this Agreement. In the event of any conflict between this Agreement and
any Schedule, the Schedule shall control with respect to the Units subject
to such Schedule. The railroad cars listed on the Schedules are sometimes
herein individually referred to as a "Unit" and collectively referred to
as the "Units;" the Units listed on any particular Schedule are
hereinafter referred to as a "Group of Units."
B. ICL will, at its own expense, deliver the Units to Lessee at
the Delivery Point, and within the time period, specified in the Schedule
with respect thereto in a condition suitable for immediate use by Lessee.
Upon completion of delivery of one or more Units to be delivered as of a
specified date to the Delivery Point, Lessee will have a right to inspect
each Unit and Lessee will accept all such Units so delivered on the first
day (the "Acceptance Date") when all such Units have been so delivered and
are in the condition required by the Schedule. Upon delivery of the Units
to, and acceptance thereof by Lessee, ICL shall lease to Lessee and Lessee
shall lease from ICL such Units for the rental and on and subject to the
terms and conditions herein set forth. Upon delivery and acceptance of
one or more Units, ICL and Lessee shall execute a certificate in the form
of Exhibit A hereto indicating the Acceptance Date as to such Units.
Lessee retains the right to reject any Unit not conforming to the
foregoing requirements and shall notify ICL of Lessee's rejection of such
Unit and the specific reason therefor.
2. COMPENSATION.
A. Lessee agrees to pay ICL the rent in the amounts and on the
dates specified in the Schedule for each Unit. The first payment for
any Unit shall be a prorated amount for the period from the Acceptance
Date with respect to such Unit to the end of the payment period for the
applicable Lease Term in which the Acceptance Date occurs. If any of the
rent payment dates falls on a Saturday, Sunday or legal holiday, the rent
shall be due on the next succeeding business day. The term "business day"
as used herein means a calendar day, excluding Saturdays, Sundays and any
other day on which banking institutions in Chicago, Illinois or Las Vegas,
Nevada are authorized or obligated to remain closed. All payments to be
made to ICL hereunder shall be made at such place within the United States
of America as ICL shall specify in writing, but in the absence of such
specification, shall be made to ICL at 6900 Westcliff Drive, Las Vegas,
Nevada 89128. In the event ICL notifies Lessee in writing that the right
to receive rents has been assigned in accordance with Section 14 hereof,
Lessee shall make payment in the manner designated in such notice or as
otherwise designated in writing by such assignee.
B. Lessee will, on demand, pay to ICL interest at the lower of
18% per annum or the maximum rate permitted by applicable law on any
payment of rent not paid within 5 days of the due date for any period
during which such rent is overdue.
C. This Agreement is a net lease and Lessee's obligation to pay
rent and other amounts payable hereunder shall be absolute and
unconditional under any and all circumstances and, except as herein
specifically provided, Lessee shall not be entitled to any abatement of
rent or reduction thereof or setoff against rent, including, but not
limited to, abatements, reductions or setoffs due to any existing or
future claims of Lessee against ICL under this Agreement or otherwise;
nor, except as otherwise expressly provided herein, shall this lease
terminate, or the respective obligations of ICL or Lessee be otherwise
affected, by reason of any defect in or damage to or loss or destruction
of all or any of the Units from whatsoever cause or Lessee's inability to
use the Units as a result of condemnation, it being the intention of the
parties that the rents and other amounts payable by Lessee hereunder shall
continue to be payable in all events unless the obligation to pay the same
shall be terminated pursuant to Section 7 or 18 hereof.
3. TERM. The term of this Agreement with respect to each Unit shall
commence on the Acceptance Date with respect to such Unit and shall
continue, unless otherwise terminated by any other provision hereof, for
the period specified as the Lease Term in the applicable Schedule.
4. DISCLAIMER. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS
AGREEMENT, ICL NEITHER MAKES, NOR SHALL BE DEEMED TO HAVE MADE, AND LESSEE
HEREBY EXPRESSLY WAIVES ANY WARRANTY OR REPRESENTATION, EITHER EXPRESS OR
IMPLIED, AS TO THE UNITS, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OR
REPRESENTATION AS TO THE DESIGN, QUALITY OR CONDITION OF THE UNITS OR ANY
WARRANTY OF MERCHANTABILITY OR FITNESS OF THE UNITS FOR ANY PARTICULAR
PURPOSE OR AS TO ANY OTHER MATTER RELATING TO THE UNITS OR ANY PART
THEREOF. LESSEE CONFIRMS THAT IT HAS SELECTED THE UNITS ON THE BASIS OF
ITS OWN JUDGEMENT AND EXPRESSLY DISCLAIMS RELIANCE UPON ANY STATEMENTS,
REPRESENTATIONS OR WARRANTIES MADE BY ICL, AND LESSEE ACKNOWLEDGES THAT
ICL IS NOT A MANUFACTURER OR VENDOR OF ANY OF THE UNITS. ICL NEITHER
MAKES NOR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY AS
TO THE ACCOUNTING TREATMENT TO BE ACCORDED TO THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR, EXCEPT AS PROVIDED IN SECTION 13
HEREOF, AS TO ANY TAX CONSEQUENCES AND/OR TAX TREATMENT THEREOF.
5. REPRESENTATIONS AND WARRANTIES.
A. Lessee represents and warrants that (a) Lessee is a duly
organized, validly existing corporation in good standing under the laws
of the state of its incorporation and is duly qualified to do business in
all jurisdictions in which qualification is required in order for it to
carry out the transactions contemplated by this Agreement; (b) Lessee has
full corporate power, authority and legal right to execute, deliver and
perform this Agreement, and the execution, delivery and performance hereof
has been duly authorized by all necessary corporate action of Lessee; and
(c) there is no action, suit or proceeding (or, to the knowledge of
Lessee, investigation) by or before any court, arbitrator, administrative
agency or other governmental authority pending or to the knowledge of
Lessee threatened against Lessee which involves the Units or the
transactions contemplated by this Agreement.
B. ICL represents and warrants that (a) ICL is a duly organized,
validly existing corporation in good standing under the laws of the state
of its incorporation and is duly qualified to do business in all
jurisdictions in which qualification is required in order for it to carry
out the transactions contemplated by this Agreement; (b) ICL has full
corporate power, authority and legal right to execute, deliver and perform
this Agreement, and the execution, delivery and performance hereof has
been duly authorized by all necessary corporate action of ICL; and (c)
there is no action, suit or proceeding (or, to the knowledge of ICL,
investigation) by or before any court, arbitrator, administrative agency
or other governmental authority pending or to the knowledge of ICL
threatened against ICL which involves the Units or the transactions
contemplated by this Agreement.
6. USE AND MAINTENANCE; RECORD KEEPING.
A. So long as the Units shall be leased hereunder and until the
Units are returned to ICL in accordance with the provisions of Sections
16 or 18 hereof, Lessee shall, at its own cost and expense, maintain and
keep the Units in good order, condition and repair, ordinary wear and tear
excepted, utilizing the same standards and care as it does with all
similar equipment it owns or leases. Lessee shall not modify any Unit in
any material respect without the prior written approval of ICL, which
shall not be unreasonably withheld. Any parts installed or replacements
made by Lessee upon any Unit pursuant to its obligation to maintain and
keep the Units in good order, condition and repair under this Section
shall be considered accessions to such Units and title thereto shall be
immediately vested in ICL without cost or expense to ICL.
B. Lessee shall perform all record keeping functions related to
the registration, use, and maintenance of the Units in accordance with all
applicable laws and regulations. At the reasonable request of ICL, Lessee
shall provide ICL with access on Lessee's premises (in the same manner and
subject to the same conditions as apply to ICL's inspection rights under
Section 8) to such information and such other information relating to the
Units as is regularly maintained by Lessee. Lessee shall not be
responsible to maintain records for longer than its customary retention
period with respect thereto or the applicable Lease Term, whichever is
longer.
7. CASUALTY OCCURRENCE.
A. Lessee agrees to notify ICL within 30 days of it having
determined that any Unit has become worn out, lost, stolen, destroyed or,
in the opinion of Lessee, irreparably damaged (including, without
limitation, a determination by Lessee that the repair cost for a Unit
exceeds its Casualty Value), from any cause whatsoever (any such
occurrence or determination being hereinafter called a "Casualty
Occurrence"). On the next succeeding rental payment date following the
date of such notice, Lessee will pay to ICL the rental payment for such
Unit due on such date (together with any other unpaid rentals for such
Unit) plus a sum equal to the Casualty Value for such Unit as of such
rental payment date. The term "Casualty Value" as used herein for any
Unit shall mean, at any time, the casualty value set forth for such time
on the Schedule for each Unit.
B. Upon (and not until) payment of all sums required to be paid
pursuant to Section 7.A hereof in respect of any Unit, the obligation to
pay rent for such Unit accruing subsequent to the payment date shall
terminate.
C. ICL appoints Lessee as its agent to dispose of any Unit
suffering a Casualty Occurrence at the best price obtainable on an "as is,
where is" basis. If Lessee shall have previously paid the Casualty Value
of such Unit to ICL pursuant hereto, Lessee shall be entitled to the
proceeds of such sale, including without limitation proceeds paid by a
railroad as settlement for destruction of such Unit, to the extent such
proceeds do not exceed the then Casualty Value of such Unit. If Lessee
shall have previously paid the Casualty Value of a Unit to ICL pursuant
hereto, Lessee shall be entitled to proceeds that are paid to Lessee by
insurance companies as a result of a Casualty Occurrence with respect to
such Unit to the extent such proceeds do not exceed the then Casualty
Value of such Unit. ICL shall receive and Lessee shall pay to ICL any
proceeds that are paid by insurance companies as a result of a Casualty
Occurrence to the extent such proceeds exceed the then Casualty Value of
such Unit.
8. INSPECTION. ICL shall, at its sole cost and expense, at any
reasonable time during normal business hours and without interfering with
Lessee's operations, have the right to enter the premises of Lessee for
the purpose of inspecting the Units to ensure Lessee's compliance with its
obligations hereunder. ICL shall enter and occupy Lessee's property at
its sole risk and shall be subject at all times to Lessee's operating and
safety requirements. Any injury, death or property damage arising out of
such entry, occupancy and inspection shall be the entire responsibility
of ICL and ICL will indemnify and hold harmless Lessee from any and all
such liabilities. ICL will obtain permission from a local Lessee
operations officer 48 hours before entry and such permission shall be
granted subject to the above. As a condition to any such entry, Lessee
may require that ICL or its agent execute a release of liabilities in
favor of Lessee in form and substance satisfactory to Lessee. In
addition, ICL shall have the right by its agents to inspect Lessee's
records with respect to the Units at such reasonable times as ICL may
request during the continuance of this Agreement.
9. PROHIBITION OF LIENS; MARKING OF UNITS.
A. Lessee, at its own expense, will promptly pay or cause to be
paid, or otherwise satisfy and discharge, any and all sums claimed by any
party by, through or under Lessee or its successors or assigns which, if
unpaid, might become a lien upon any Unit, but shall not be required to
pay or discharge any such claim so long as the validity thereof shall be
contested in good faith and by appropriate legal proceedings in any
reasonable manner and the nonpayment thereof does not in Lessee's
reasonable judgment materially adversely affect the title, property or
rights of ICL created or purported to be created hereunder; provided,
however, that this covenant will not be breached by reason of the
existence of liens for taxes, assessments or governmental charges or
levies, in each case so long as not due and delinquent, or undetermined
or inchoate materialmen's, mechanics', workmen's, repairmen's or other
like liens arising in the ordinary course of business and, in each case,
not delinquent.
B. Lessee shall, at its own expense, mark the Units as soon as
possible after delivery with the marks and numbers designated in the
Schedule. Lessee shall not remove the existing words on the side of each
Unit, or if so removed it will replace, the words "LEASED FROM IC LEASING
CORPORATION III AND SUBJECT TO A SECURITY INTEREST RECORDED WITH THE
INTERSTATE COMMERCE COMMISSION." Lessee shall not perform any other
remarking or renumbering of the Units except with the express written
consent of ICL.
10. TAXES. Lessee will be responsible for the filing of all tax
returns and will pay all taxes, assessments and other governmental charges
levied upon or in respect of the Units, this Agreement or the use of the
Units under this Agreement, including, but not limited to, all ad valorem
or property taxes, levies, tariffs, all license or registration fees,
assessments, fines, penalties and interest and all sales, use or similar
taxes payable with respect to the Units, this Agreement or the use of the
Units under this Agreement and all payments to be made by Lessee hereunder
will be free of any expense to ICL as to any of the foregoing.
Notwithstanding the foregoing or the provisions of Section 13 hereof,
Lessee shall not be responsible for or pay any income taxes, franchise
taxes, privilege taxes, value added taxes, gross receipts taxes or any
similar taxes which are measured by reference to ICL's income, capital,
net worth, retained earnings or investments or any fines, penalties or
interest thereon and shall not be responsible for the filing of any tax
returns relative to any such taxes.
Lessee will be under no obligation to pay any taxes or other charges
referred to in the preceding paragraph for which it is responsible
hereunder so long as Lessee in good faith and by appropriate legal or
administrative proceedings is contesting the validity or amount thereof
and the nonpayment thereof does not, in ICL's reasonable judgment,
materially adversely affect the title, property or rights of ICL, or the
security interest of any assignee, in or to any Unit. Such contest will
be brought in the name of Lessee, if permissible; if not permissible, ICL,
at Lessee's sole cost and expense, will bring the contest in ICL's own
name. ICL will reasonably cooperate with Lessee and take any actions
reasonably required to permit and prosecute such a contest. Lessee and
ICL shall each reasonably cooperate with the other in providing necessary
tax information to the other party relating to the Units and the use
thereof.
11. INSURANCE. Lessee will, at all times prior to the return of the
Units to ICL, at its own expense, cause to be carried and maintained (i)
property insurance in respect of the Units and (ii) public liability
insurance with respect to third party personal injury and property damage,
in each case against such risks and in such amounts as is consistent with
prudent industry practice, but in any event, against such risks and in
such amounts customarily insured against by Lessee in respect to similar
equipment owned or leased by it. Such policies of insurance shall name
ICL as an additional insured party thereunder with respect to the Units.
Lessee will provide to ICL, upon request, a statement of the insurance
maintained pursuant to this Section.
12. INDEMNITIES. Lessee agrees to indemnify and hold ICL harmless from
and against all losses, damages, injuries, liabilities, claims and demands
whatsoever (whether as a result of damage to the Units or injury to third
parties or their property), regardless of the cause thereof, and any
expense in connection therewith (including legal fees), arising out of the
use or operation of the Units during the term of this Agreement unless
such claim for loss or damage was caused by ICL's negligence, bad faith
or wilful misconduct. The indemnities contained in this Section 12 shall
survive the expiration or termination of the Lease Term and return of the
Units with respect to all events, facts, conditions or other circumstances
occurring or existing prior to such expiration or termination.
13. SPECIAL TAX INDEMNITIES.
A. ICL has calculated the rent hereunder based in part on the
assumption that it will be entitled to depreciation deductions
("Depreciation Deductions") under Section 168(a) of the Internal Revenue
Code of 1986 as it may be amended hereafter (the "Code") for each Unit in
an amount determined by using the method described in Section 168(b) (1)
of the Code; an applicable recovery period of seven (7) years; and the
half-year convention described in Section 168(d)(l) of the Code.
B. Lessee represents and warrants that:
(i) No Unit will be "limited use property" within the
meaning of Internal Revenue Service Procedure 76-30;
(ii) Lessee has not taken and will not claim any Depreciation
Deductions in respect of the Units in connection with the filing of its
Federal, state or local income tax returns;
(iii) The Units will not be used predominantly outside the
United States within the meaning of Section 168 (g)(1)(A) of the Code; and
(iv) At all times during the Lease Term, none of the Units
will constitute "public utility property" within the meaning of Section
167(1)(3)(A) of the Code.
C. If as a result of any act (other than acts required under this
Agreement) or failure to act by Lessee, any sublessee, or any user or
person in possession of any Unit, or as a result of any breach, inaccuracy
or incorrectness of any representation, warranty, covenant or agreement
of Lessee hereunder, ICL shall lose, shall not have or shall lose the
right to claim or shall not have substantial authority (within the meaning
of Section 6662 of the Code and the regulations promulgated thereunder)
for claiming, or there shall be disallowed, recalculated or recaptured all
or any portion of the Depreciation Deductions (herein each of such events
shall be referred to as an "Indemnity Event"), then in connection with
each such occasion, Lessee agrees to pay from time to time upon demand an
amount which (after deduction of all taxes, if any, required to be paid
by ICL in respect of the receipt of said indemnity amount under the laws
of any Federal, state or local government or taxing authority) shall be
equal to the sum of the amount of net additional income taxes paid or
payable by ICL in consequence of the occurrence of an Indemnity Event plus
any interest or penalty which is assessed in connection with the foregoing
(taking into account the deductibility of state and local taxes and
interest for federal income tax purposes).
D. Lessee shall not be required to pay the amount specified in
Section 13.C if the Indemnity Event shall result solely because of the
occurrence of any of the following events:
(i) Lessee is required by the terms hereof to pay and shall
have paid the loss amount pursuant to Section 7.A hereof;
(ii) There is a transfer or other disposition by ICL of any
interest in this Agreement or the Units for Federal income tax purposes;
(iii) There is an amendment to, or change in the Code, any
Treasury Regulation promulgated thereunder, any published Revenue Ruling
or other document of the United States Treasury or Internal Revenue
Service, any applicable state or local statutes, regulations, or similar
documents, including without limitation, the rate of tax under the laws
of the United States or any state or locality therein on the taxable
income of ICL, which is effective on or after the effective date of this
Agreement; or
(iv) ICL fails to claim in a timely and proper manner the
Depreciation Deductions or fails to have sufficient gross income within
the meaning of Section 61(a) of the Code to benefit from the Depreciation
Deductions (after taking into account carry backs and carry overs
allowable by law).
14. ASSIGNMENT; SUBLEASE; SUBORDINATION.
A. So long as Lessee shall not be in default under this
Agreement, Lessee may sublease the Units to others, provided, however,
that the rights of any such sublessee shall be subject and subordinate to,
and any such sublease shall be made expressly subject and subordinate to,
all of the terms of this Agreement. In addition, before Lessee enters
into any such sublease, Lessee must obtain ICL's prior approval. ICL
agrees that such approval shall not be unreasonably withheld and that such
determination shall be given within 5 business days from the date of such
request. Lessee may make subleases of less than 6 months duration without
ICL's consent. No sublease of any Unit shall in any way discharge or
diminish any of Lessee's obligations to ICL hereunder, including, but not
limited to, the payments due to ICL pursuant to Section 2 of this
Agreement.
B. This Agreement and the Schedules shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and assigns. ICL may sell, assign, transfer, grant security
interests in or otherwise dispose of all or any part of its right, title
and interest in any Unit or Units, this Agreement (including, without
limitation, any Schedule) or any of the foregoing to any security trustee
or secured party (each herein a "Lease Assignee"). Upon delivery of a
notice of assignment to Lessee, ICL as used herein with respect to such
Schedule and Units shall mean such Lease Assignee. Lessee shall consent
to and acknowledge in writing, upon receipt of notice of assignment, such
assignment of this Agreement as to such Schedule and Units by ICL or any
Lease Assignee. ICL agrees that the rights of any Lease Assignee shall
be subject to all of the terms and conditions of this Agreement.
C. Upon written notice to Lessee from any owner, security trustee
or secured party under any lease or financing agreement entered into by
ICL in connection with any Group of Units, all rent with respect to such
Units shall be paid directly to such party and such Units shall be
returned to such party upon completion or termination of this Agreement.
Any assignment of this Agreement or any Schedule by ICL or any Lease
Assignee to any security trustee or secured party shall not subject that
security trustee or secured party to any of ICL's or such Lease Assignee's
obligations hereunder.
15. COMPLIANCE WITH REGULATIONS. Lessee shall, at its own expense and
for the benefit of ICL, comply with all governmental laws, regulations and
requirements, with the Association of American Railroads ("AAR")
Interchange Rules and with the rules and regulations of the Federal
Railway Administration (in each case as in effect on the date hereof) with
respect to the use, maintenance, and operation of the Units. Lessee shall
be responsible for obtaining all necessary railroad permissions, approvals
and consents for use of the Units and shall bear all risk of failure to
obtain such permissions, approvals and consents, or of cancellation
thereof. ICL shall take all actions reasonably requested by Lessee in
order to assist Lessee in obtaining such permissions, approvals or
consents. Lessee may, at its own expense and in good faith, contest the
validity or application of any such law or rule in any reasonable manner
which does not, in the reasonable opinion of ICL, materially adversely
affect the property or rights of ICL under this Agreement.
16. RETURN OF UNITS. Upon the expiration or earlier termination of
this Agreement with respect to any Unit, Lessee will, at its own cost and
expense, at the request of ICL, deliver possession of such Unit to ICL
upon such tracks of Lessee as ICL may reasonably designate taking into
account, among other things, Lessee's storage capacity, security and
access, or, in the absence of such designation, as Lessee may select and
permit ICL to store such Unit on such tracks for a period not exceeding
120 days. Lessee will move each Unit once at any time within such 120 day
period from such storage location to any reasonable destination or
interchange point within the continental United States on railroad lines
operated by Lessee, f.o.b., all as directed by ICL upon not less than 15
days prior written notice to Lessee. Lessee shall not be obligated to
move any Unit more than once at the request of ICL, after which Lessee
will have no further obligation with respect to any Unit so moved and such
Unit will be deleted from this Agreement. During any such storage period
Lessee will permit ICL or any person designated by ICL, at their own risk,
to inspect the Units; provided, however, that Lessee will not be liable,
except in the case of gross negligence of Lessee or of its employees or
agents, for any injury to, or the death of, any person exercising the
rights of inspection granted under this sentence. Lessee shall be
responsible for the Units in accordance with the terms of this Agreement
until such time as each Unit is delivered pursuant to ICL's disposition
instructions but in no event shall such responsibility extend beyond the
storage period. The Units shall be delivered free from all charges and
liens except those which may result from an act or omission of ICL, in the
condition specified in Section 6 hereof. If any Unit is not in the
condition required hereby, Lessee shall be liable to ICL for any and all
reasonable cleaning, repair and servicing costs required to place such
Unit in proper condition, including the cost to transport such Unit to a
repair facility. In the event that any Unit is not delivered and/or
stored as hereinabove provided within 30 days of the date of the
expiration or earlier termination of this Agreement with respect to such
Unit, Lessee will pay to ICL an amount equal to the daily equivalent of
the rental then in effect for such Unit for each day after the expiration
or termination date of this Agreement with respect to such Unit until such
Unit is delivered and stored as instructed by ICL; provided, however, that
such amount shall increase to 125% of such daily equivalent effective 90
days after the expiration or termination of this Agreement with respect
to such Unit.
17. POSSESSION AND USE. So long as Lessee shall not be in default
under this Agreement, neither ICL nor anyone claiming by, through or under
ICL shall interfere with the possession, use or quiet enjoyment of the
Units in accordance with the terms of this Agreement and in the manner
customarily used in the railroad freight business.
18. DEFAULT.
A. The occurrence of any of the following events shall be an
Event of Default by Lessee:
(i) The nonpayment by Lessee of any sum required herein to
be paid to ICL by Lessee within thirty (30) days after the due date;
(ii) Lessee shall fail to maintain the insurance required by
Section 11;
(iii) The breach by Lessee of any other term, covenant, or
condition of this Agreement, which is not cured within thirty (30) days
of Lessee's receipt of written notice from ICL;
(iv) Lessee becomes insolvent or fails generally to pay its
debts as such debts become due, or causes or suffers an order for relief
to be entered against it under applicable federal or state bankruptcy law,
or makes an assignment for the benefit of creditors or applies for or
consents to the appointment of a custodian, trustee or receiver for Lessee
or for the major part of its property; or
(v) Any representation or warranty made by Lessee herein or
in any other document delivered to ICL by Lessee related to this Agreement
shall have been false or incorrect in any material respect on the date
when made and such breach or default shall continue for a period of thirty
(30) days after Lessee's receipt of written notice from ICL of such
default.
B. Upon the occurrence of any Event of Default, ICL may:
(i) Proceed by any lawful means to terminate this Agreement
and recover damages for loss of the bargain and not as a penalty any
unpaid rent that accrued on or before the occurrence of the Event of
Default plus with respect to each Unit an amount equal to the difference
between the aggregate rent to be received hereunder for the unexpired
Lease Term with respect to such Unit and the then aggregate rental value
of such Unit for such unexpired term; or
(ii) Terminate Lessee's right to possession and use of the
Units without terminating this Agreement, whereupon all rights and
interest of Lessee in the Units shall terminate and thereupon ICL may
enter upon any premises where the Units may be located, take possession
of them and henceforth hold, possess and enjoy the same free from any
right of Lessee, and ICL shall nevertheless have the right to recover from
Lessee any and all rent and other amounts which are then due or which
hereinafter become due under this Agreement; or
(iii) Proceed by any lawful means to enforce performance by
Lessee of this Agreement.
Notwithstanding the foregoing, ICL shall not terminate this Agreement or
the Lessee's right to possession and use with respect to any Group of Cars
without providing at least 60 days prior written notice to the Lessee.
ICL shall use reasonable efforts to mitigate damages. Lessee shall bear
the costs and expenses, including without limitation reasonable attorneys'
fees, incurred by ICL in connection with the exercise of its remedies
pursuant to this Section 18.B. No remedy referred to in this Section 18.B
is intended to be exclusive but each shall be cumulative and in addition
to any other remedy otherwise available to ICL at law or in equity.
19. GOVERNING LAW. The terms of this Agreement and all rights and
obligations hereunder shall be governed by the laws of the State of
Nevada. This Agreement contains all of the terms and conditions agreed
to between the parties, and no other prior agreements, oral or otherwise,
concerning the subject matter of this Agreement, shall be deemed to exist
or bind either party hereto. The terms of this Agreement and the rights
and obligations of the parties may be changed only by a writing executed
by both parties.
20. FORCE MAJEURE. Neither party hereto shall be deemed to be in
breach or in violation of this Agreement if either is prevented from
performing any of its obligations hereunder (except for obligations to pay
money) for any reason beyond its reasonable control, including, without
limitation, acts of God, riots, fires, storms, public disturbances, or any
regulation of any federal, state or local government or any agency
thereof.
21. RECORDING. Lessee, at its own expense, will cause this Agreement
and any assignment hereof or memoranda thereof to be filed with the
Interstate Commerce Commission in accordance with 49 U.S.C. Section 11303.
Lessee will from time to time do and perform any other act and will
execute, acknowledge, deliver, file, register, record (and will refile,
reregister, deposit and redeposit or rerecord whenever required) any and
all further instruments required by law or reasonably requested by ICL for
the purpose of proper protection, to ICL's satisfaction, of ICL's rights
in the Units, or for the purpose of carrying out the intention of this
Agreement and any assignments thereof and Lessee will promptly furnish to
ICL evidence of the doing of all such acts which may be required under
this Section 21, and an opinion or opinions of counsel for Lessee with
respect thereto reasonably satisfactory to ICL.
22. EXECUTION. This Agreement may be executed in several counterparts,
such counterparts together constituting but one and the same instrument,
but the counterpart delivered to ICL shall be deemed to be the original
and all other counterparts shall be deemed duplicates thereof. Although
for convenience this Agreement is dated as of the date first set forth
above, the actual date of execution hereof by each of the parties hereto
is the date stated in the acknowledgment hereto annexed with respect to
that party's execution.
23. FURTHER ASSURANCES. Lessee will, at its expense, promptly and duly
execute and deliver to ICL such further documents and assurances and take
such further action as ICL may from time to time reasonably request in
order to more effectively carry out the intent and purpose of this
Agreement and to establish and protect the rights, interests and remedies
created or intended to be created in favor of ICL hereunder, including,
without limitation, the execution, delivery, recordation and filing of
documents with the Interstate Commerce Commission, and the execution and
filing of Uniform Commercial Code financing statements in the appropriate
jurisdictions. To the extent permitted by applicable law, Lessee hereby
authorizes ICL to file any such financing statements without signature of
Lessee.
24. NOTICES. All notices and other communications provided for in this
Agreement or relating hereto shall be in writing and shall be delivered
in person to an officer of the recipient or shall be mailed by registered
or certified mail or reputable overnight courier to the recipient at its
respective address first above shown or at any other address of which the
sender receives notice from the other party hereto as the address to be
used for notices hereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the 1st day of July, 1994.
IC LEASING CORPORATION III WATERLOO RAILWAY COMPANY
By: By:
Title: Title:
STATE OF ____________ )
) ss.
COUNTY OF ____________ )
On this day of ____________, 199__, before me personally
appeared , to me personally known, who being duly
sworn, says that such person is of IC Leasing
Corporation III and that the foregoing Railroad Lease Agreement and
Schedule No. 1 was signed on behalf of said corporation by authority of
its board of directors, and such person acknowledged that the execution
of the foregoing instruments was the free act and deed of such
corporation.
[notarial seal]
Notary Public
STATE OF ____________ )
) ss.
COUNTY OF ____________ )
On this day of ________, 199_, before me personally appeared
to me personally known, who being duly sworn, says that
such person is of Waterloo Railway Company and that
the foregoing Railroad Lease Agreement and Schedule No. 1 was signed on
behalf of said corporation by authority of its board of directors, and
such person acknowledged that the execution of the foregoing instruments
was the free act and deed of such corporation.
[notarial seal]
Notary Public
EXHIBIT A
DELIVERY AND ACCEPTANCE CERTIFICATE
TO: IC Leasing Corporation III, a Nevada corporation (herein called
"ICL")
Reference is hereby made to that certain Railroad Leasing Agreement
(the "Lease") dated as of July 1, 1994 between ICL and Waterloo Railway
Company (hereinafter called "Lessee") and Schedule ____ (the "Schedule")
dated as of ____________, 199___ between ICL and Lessee. Capitalized
terms used herein and otherwise not defined herein shall have the meanings
given them in the Lease to the extent the same are defined therein.
Lessee hereby certifies that ____ of the Cars identified in the Schedule
have been delivered to the Lessee as required in the Lease, and that the
Cars have been accepted by the Lessee as satisfactory on
. The Lessee understands that you are relying on the foregoing
certification.
Dated .
WATERLOO RAILWAY COMPANY
By:
Title:
Accepted by:
IC LEASING CORPORATION III
By:
Title:
Date:
SCHEDULE 1
IC Leasing Corporation III ("ICL") hereby leases the following
railroad cars to Waterloo Railway Company ("Lessee") pursuant to that
certain Railroad Lease Agreement dated as of July 1, 1994 between ICL and
Lessee (the "Master Lease"). This Schedule is executed pursuant to the
terms of the Master Lease and the Master Lease is hereby made a part
hereof. The terms of the Master Lease, except to the extent inconsistent
herewith, are incorporated herein by reference.
(1) Number of Units: 1158
(2) Description: Boxcars
(3) Unit Marks and Numbers: See annexed Exhibit I to this Schedule.
(4) Delivery Point: As mutually agreed by ICL and Lessee
(5) Acceptance Date: The Units have been delivered, inspected and
accepted by the Lessee and the Acceptance Date shall be deemed to
be July 1, 1994.
(6) Lease Term: Period commencing with the Acceptance Date as to the
Units and ending on August 1, 1997.
(7) Per Unit Rental: Rent for each Unit subject to the Master Lease
shall be paid at the rate of $415 per Car per month, with such rent
to be payable monthly in arrears on the first day of each following
month, commencing with the installment due August 1, 1994.
(8) Casualty Value of Units: See annexed Exhibit II to this Schedule.
(9) Renewal Option: Unless either party has given the other at least
60 days prior written notice of its intent not to renew this
Schedule, this Schedule and the Lease Term shall be automatically
renewed at the expiration of Lease Term and each renewal term
thereof for an additional term of one year. Each renewal term shall
be subject to all of the terms of this Schedule; provided, however,
that the Casualty Value during each renewal term shall be equal to
$15,970 unless another amount is otherwise mutually agreed upon
between ICL and the Lessee.
(10) Prior Leases: Certain of the Units referred to in this Schedule are
subject to existing leases in favor of third parties (each, a "Prior
Lease") and during the term of each such Prior Lease (i) solely as
between the Lessee and ICL, the Lessee shall be entitled to the
benefit of all rights and remedies of ICL under such Prior Lease
(including without limitation, the right to receive all rents, car-
hire payments and other amounts due thereunder) and shall take such
actions as may be required to cause the performance of all
obligations of ICL under such Prior Lease (provided, however, that
the rights of the Lessee with respect to the Prior Leases shall be
subject to the Railcar Management Agreement dated as of December 3,
1993 (the "Management Agreement") by and between Interail, Inc. and
ICL and nothing in the Master Lease or this Schedule is intended or
shall be deemed to be an assignment of the rights and obligations
of ICL under the Management Agreement or any Prior Lease), and (ii)
the Master Lease and this Schedule shall be subject to the terms of
such Prior Lease and no action shall be required under the Master
Lease or this Schedule which will in any way be inconsistent with
or interfere with the possession, use or quiet enjoyment of the
Units in accordance with the terms of such Prior Lease. ICL hereby
irrevocable constitutes and appoints the Lessee the true and lawful
attorney of ICL during the term of each Prior Lease with full power
of substitution, in the name of ICL, or otherwise, and on behalf of
and for the benefit of the Lessee, to exercise any and all of ICL's
rights and remedies with respect to each Prior Lease, including
without limitation, to collect, assert or enforce any claim or other
right of ICL thereunder, to endorse with the name of ICL any checks
or other instruments received in respect of such Prior Lease or any
such claim or other right, in each case for the benefit of the
Lessee, to institute, prosecute or compromise any and all actions
with respect thereto, and to do all such other acts and things in
relation thereto which the Lessee shall deem desirable. ICL further
agrees that it will at any time and from time to time, at the
request of the Lessee, execute and deliver to the Lessee all such
other and further instruments and take such other action as the
Lessee may reasonably request to more effectively provide the Lessee
with the benefits (but subject to the obligations) of the Prior
Leases.
IN WITNESS WHEREOF, the parties have executed this Schedule
as of the 1st day of July 1994.
IC LEASING CORPORATION III WATERLOO RAILWAY COMPANY
By: By:
Title: Title:
Date: Date:
EXHIBIT 4.12
OPTION AGREEMENT
THIS OPTION AGREEMENT (this "Agreement") is made as of July
1, 1994 by and between IC Leasing Corporation III, a Nevada corporation
("Leasing"), and Illinois Central Railroad Company, a Delaware corporation
("ICR").
W I T N E S S E T H:
WHEREAS, Leasing has acquired 364 railcars more specifically
described on Exhibit A attached hereto (the "Cars"), which Cars are leased
by Leasing to ICR pursuant to that certain Railroad Lease Agreement dated
as of July 1, 1994 between Leasing and ICR (as amended, modified or
supplemented from time to time, the "Lease"); and
WHEREAS, ICR desires to obtain an option to acquire the Cars,
and Leasing desires to obtain an option to sell the Cars, in each case
upon the termination or expiration of the Lease with respect to the Cars
and on the terms and subject to the conditions set forth below;
NOW, THEREFORE, in consideration of the premises and the
following mutual agreements, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree as follows:
1. Definitions.
1.1. Definitions. Unless the context otherwise requires, the
following terms shall have the meanings set forth below:
"Business Day" shall mean a calendar day, excluding Saturdays,
Sundays and any other day on which banking institutions in Chicago,
Illinois or Las Vegas, Nevada are authorized or obligated to remain
closed.
"Closing Date" shall mean the earlier of (i) the date on which
the Lease Term or any renewal term under the Lease with respect to
the Cars expires and is not renewed, (ii) the date on which the
Lease with respect to the Cars is terminated pursuant to Section 18
of the Lease and (iii) the date on which ICR's right to possession
and use of the Cars is terminated pursuant to Section 18 of the
Lease; provided, however, that if such day is not a Business Day,
then the Closing Date shall be deemed to be the immediately
succeeding Business Day.
"Equipment" shall mean the Cars subject to the Lease on the
Closing Date.
"Purchase Price" shall mean, with respect to any Car, the net
book value of Car as reflected on the books of the Leasing as of the
Closing Date, determined in accordance with generally accepted
accounting principles; provided, however that depreciation shall be
determined on a straight line basis over a period of no more than
twenty (20) years.
2. Options.
2.1 Grant of Options.
(a) Leasing hereby grants to ICR, upon the terms and
conditions set forth in this Agreement, an exclusive option (the "Purchase
Option") to purchase all (but not less than all) of the Equipment from
Leasing on the Closing Date.
(b) ICR hereby grants to Leasing, upon the terms and
conditions set forth in this Agreement, an exclusive option (the "Put
Option"; the Purchase Option and the Put Option are sometimes herein
referred to, collectively, as the "Options") to require ICR to purchase
all (but not less than all) of the Equipment from Leasing on the Closing
Date.
2.2. Manner of Exercise of Options.
(a) ICR shall have the right to exercise the Purchase Option
by giving written notice to Leasing of its election to exercise such
Option in the manner herein provided not less than 15 days or more than
60 days prior to the Closing Date.
(b) Leasing shall have the right to exercise the Put Option
by giving written notice to ICR of its election to exercise such Option
in the manner herein provided not less than 15 days or more than 60 days
prior to the Closing Date.
(c) If any party shall fail to exercise an Option in the
manner and in the time period set forth in this Section 2.2 therefor, such
Option shall automatically terminate and be of no further force and
effect.
3. Purchase and Sale of Equipment.
3.1. Sale and Purchase. If an Option is exercised in
accordance with the provisions of Section 2, then, subject to the terms
and conditions set forth in this Agreement, Leasing shall sell to ICR, and
ICR shall purchase from Leasing, all (but not less than all) of the
Equipment on the Closing Date for consideration equal to the sum of the
Purchase Price for all of the Equipment.
3.2. Purchase Price. The Purchase Price shall be paid in
immediately available funds by wire transfer to such account as Leasing
shall identify to ICR in writing not less than five Business Days prior
to the Closing Date.
3.3. Closing of Purchase and Sale. If an Option is
exercised, then, upon satisfaction of the conditions set forth in Section
4 on the Closing Date, Leasing shall cause good and marketable title to
the Equipment to be conveyed to ICR, or to ICR's assignee, nominee or
successor, as the case may be, by a bill of sale in a form reasonably
satisfactory to ICR (the "Bill of Sale"), free and clear of all claims,
liens, security interests, other encumbrances and rights of third parties
of any type or description.
3.4. Time and Place of Closing. The closing of any purchase
and sale of Equipment contemplated hereby shall take place on the Closing
Date at 10:00 a.m., Chicago time, at the offices of ICR in Chicago,
Illinois. The Equipment purchased pursuant to any Option shall be deemed
to be delivered in Illinois.
4. Closing Conditions.
4.1 ICR's Closing Conditions. ICR's obligation to
consummate the purchase contemplated by this Agreement is subject to the
execution by Leasing and receipt by ICR on the Closing Date of a duly
executed Bill of Sale and all such other documents, agreements,
assignments, conveyances, instruments of transfer, termination agreements,
releases and certificates, in each case in form and substance reasonably
satisfactory to ICR, as ICR may reasonably request to evidence or effect
the sale of the Equipment to ICR as contemplated by this Agreement and the
release and termination of all claims, liens, security interests, other
encumbrances and rights of third parties in the Equipment.
4.2 Leasing's Closing Conditions. Leasing's obligation to
consummate the sale contemplated by this Agreement is subject to the
receipt by Leasing on the Closing Date of the Purchase Price for the
Equipment to be purchased.
5. Miscellaneous.
5.1. Notices. Any notices or other communications required
or permitted hereby shall be given in writing by personal delivery, by
overnight courier, by facsimile transmission or other similar written form
of electronic transmission, or by registered or certified mail, return
receipt requested, postage prepaid, as follows:
(i) If to Leasing:
IC Leasing Corporation III
6900 Westcliff Drive
Las Vegas, Nevada 89128
Attention: ____________________
(ii) If to ICR:
Illinois Central Railroad Company
455 North Cityfront Plaza Drive
Chicago, Illinois 60611-5504
Attention: ____________________
or at such other address as such party shall hereafter furnish to the
other party in writing and such notice shall be conclusively deemed to be
received when so delivered, sent, transmitted or mailed.
5.2. Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof
and supersedes all prior written or oral agreements and understandings
between the parties hereto relating to the subject matter hereof.
5.3. Successors and Assigns; Severability. This Agreement
shall be binding upon and inure to the benefit of Leasing and ICR and
their respective successors and assigns. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision.
5.4. Governing Law. This Agreement shall be governed by and
interpreted under the laws of the State of Illinois applicable to
contracts made and to be performed therein, without giving effect to the
principles of conflict of laws thereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first written above.
IC LEASING CORPORATION III
By:
Name:
Title:
ILLINOIS CENTRAL RAILROAD COMPANY
By:
Name:
Title:
EXHIBIT 4.13
OPTION AGREEMENT
THIS OPTION AGREEMENT (this "Agreement") is made as of July
1, 1994 by and between IC Leasing Corporation III, a Nevada corporation
("Leasing"), and Illinois Central Railroad Company, a Delaware corporation
("ICR").
W I T N E S S E T H:
WHEREAS, Leasing has acquired 1158 railcars more specifically
described on Exhibit A attached hereto (the "Cars"), which Cars are leased
by Leasing to Waterloo Railway Company, a Delaware corporation ("WRC") and
wholly owned subsidiary of ICR, pursuant to that certain Railroad Lease
Agreement dated as of July 1, 1994 between Leasing and WRC (as amended,
modified or supplemented from time to time, the "Lease"); and
WHEREAS, ICR desires to obtain an option to acquire the Cars,
and Leasing desires to obtain an option to sell the Cars, in each case
upon the termination or expiration of the Lease with respect to the Cars
and on the terms and subject to the conditions set forth below;
NOW, THEREFORE, in consideration of the premises and the
following mutual agreements, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree as follows:
1. Definitions.
1.1. Definitions. Unless the context otherwise requires, the
following terms shall have the meanings set forth below:
"Business Day" shall mean a calendar day, excluding Saturdays,
Sundays and any other day on which banking institutions in Chicago,
Illinois or Las Vegas, Nevada are authorized or obligated to remain
closed.
"Closing Date" shall mean the earlier of (i) the date on which
the Lease Term or any renewal term under the Lease with respect to
the Cars expires and is not renewed, (ii) the date on which the
Lease with respect to the Cars is terminated pursuant to Section 18
of the Lease and (iii) the date on which WRC's right to possession
and use of the Cars is terminated pursuant to Section 18 of the
Lease; provided, however, that if such day is not a Business Day,
then the Closing Date shall be deemed to be the immediately
succeeding Business Day.
"Equipment" shall mean the Cars subject to the Lease on the
Closing Date.
"Purchase Price" shall mean, with respect to any Car, the net
book value of Car as reflected on the books of the Leasing as of the
Closing Date, determined in accordance with generally accepted
accounting principles; provided, however that depreciation shall be
determined on a straight line basis over a period of no more than
twenty (20) years.
2. Options.
2.1 Grant of Options.
(a) Leasing hereby grants to ICR, upon the terms and
conditions set forth in this Agreement, an exclusive option (the "Purchase
Option") to purchase all (but not less than all) of the Equipment from
Leasing on the Closing Date.
(b) ICR hereby grants to Leasing, upon the terms and
conditions set forth in this Agreement, an exclusive option (the "Put
Option"; the Purchase Option and the Put Option are sometimes herein
referred to, collectively, as the "Options") to require ICR to purchase
all (but not less than all) of the Equipment from Leasing on the Closing
Date.
2.2. Manner of Exercise of Options.
(a) ICR shall have the right to exercise the Purchase Option
by giving written notice to Leasing of its election to exercise such
Option in the manner herein provided not less than 15 days or more than
60 days prior to the Closing Date.
(b) Leasing shall have the right to exercise the Put Option
by giving written notice to ICR of its election to exercise such Option
in the manner herein provided not less than 15 days or more than 60 days
prior to the Closing Date.
(c) If any party shall fail to exercise an Option in the
manner and in the time period set forth in this Section 2.2 therefor, such
Option shall automatically terminate and be of no further force and
effect.
3. Purchase and Sale of Equipment.
3.1. Sale and Purchase. If an Option is exercised in
accordance with the provisions of Section 2, then, subject to the terms
and conditions set forth in this Agreement, Leasing shall sell to ICR, and
ICR shall purchase from Leasing, all (but not less than all) of the
Equipment on the Closing Date for consideration equal to the sum of the
Purchase Price for all of the Equipment.
3.2. Purchase Price. The Purchase Price shall be paid in
immediately available funds by wire transfer to such account as Leasing
shall identify to ICR in writing not less than five Business Days prior
to the Closing Date.
3.3. Closing of Purchase and Sale. If an Option is
exercised, then, upon satisfaction of the conditions set forth in Section
4 on the Closing Date, Leasing shall cause good and marketable title to
the Equipment to be conveyed to ICR, or to ICR's assignee, nominee or
successor, as the case may be, by a bill of sale in a form reasonably
satisfactory to ICR (the "Bill of Sale"), free and clear of all claims,
liens, security interests, other encumbrances and rights of third parties
of any type or description.
3.4. Time and Place of Closing. The closing of any purchase
and sale of Equipment contemplated hereby shall take place on the Closing
Date at 10:00 a.m., Chicago time, at the offices of ICR in Chicago,
Illinois. The Equipment purchased pursuant to any Option shall be deemed
to be delivered in Illinois.
4. Closing Conditions.
4.1 ICR's Closing Conditions. ICR's obligation to
consummate the purchase contemplated by this Agreement is subject to the
execution by Leasing and receipt by ICR on the Closing Date of a duly
executed Bill of Sale and all such other documents, agreements,
assignments, conveyances, instruments of transfer, termination agreements,
releases and certificates, in each case in form and substance reasonably
satisfactory to ICR, as ICR may reasonably request to evidence or effect
the sale of the Equipment to ICR as contemplated by this Agreement and the
release and termination of all claims, liens, security interests, other
encumbrances and rights of third parties in the Equipment.
4.2 Leasing's Closing Conditions. Leasing's obligation to
consummate the sale contemplated by this Agreement is subject to the
receipt by Leasing on the Closing Date of the Purchase Price for the
Equipment to be purchased.
5. Miscellaneous.
5.1. Notices. Any notices or other communications required
or permitted hereby shall be given in writing by personal delivery, by
overnight courier, by facsimile transmission or other similar written form
of electronic transmission, or by registered or certified mail, return
receipt requested, postage prepaid, as follows:
(i) If to Leasing:
IC Leasing Corporation III
6900 Westcliff Drive
Las Vegas, Nevada 89128
Attention: ____________________
(ii) If to ICR:
Illinois Central Railroad Company
455 North Cityfront Plaza Drive
Chicago, Illinois 60611-5504
Attention: ____________________
or at such other address as such party shall hereafter furnish to the
other party in writing and such notice shall be conclusively deemed to be
received when so delivered, sent, transmitted or mailed.
5.2. Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof
and supersedes all prior written or oral agreements and understandings
between the parties hereto relating to the subject matter hereof.
5.3. Successors and Assigns; Severability. This Agreement
shall be binding upon and inure to the benefit of Leasing and ICR and
their respective successors and assigns. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision.
5.4. Governing Law. This Agreement shall be governed by and
interpreted under the laws of the State of Illinois applicable to
contracts made and to be performed therein, without giving effect to the
principles of conflict of laws thereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first written above.
IC LEASING CORPORATION III
By:
Name:
Title:
ILLINOIS CENTRAL RAILROAD COMPANY
By:
Name:
Title:
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 12200
<SECURITIES> 0
<RECEIVABLES> 43600
<ALLOWANCES> 2100
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<PP&E> 1150300
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0
0
<OTHER-SE> 392400
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<OTHER-EXPENSES> (4500)
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<INTEREST-EXPENSE> 26000
<INCOME-PRETAX> 170900
<INCOME-TAX> 58200
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<CHANGES> 0
<NET-INCOME> 112700
<EPS-PRIMARY> 0
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</TABLE>
