<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
_X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1994
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-5989
ITEL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-1658138
- - -------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2 North Riverside Plaza
Suite 1900
Chicago, Illinois 60606
(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code: (312) 902-1515
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____
At July 31, 1994 there were 31,692,468 shares of Common Stock, $1.00 par value,
of the registrant outstanding.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEL CORPORATION
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, 1994 (UNAUDITED)
CONSOLIDATED SUPPLEMENTAL INFORMATION
------------------------------------ ------------------------------
JUNE 30, DECEMBER 31, ALL
1994 1993 ANIXTER OTHER
-------------- ---------------- ------- -----
(UNAUDITED)
<S> <C> <C> <C> <C>
Current assets:
Cash and equivalents $ 61,200 $ 29,900 $ 12,500 $ 48,700
Accounts receivable (net of
allowances for doubtful
accounts of $4,800 for
both periods) 292,500 230,200 291,900 600
Inventories, primarily
finished goods 258,000 240,300 258,000 -
Other assets 6,100 6,300 5,000 1,100
---------- ---------- --------- ---------
Total current assets 617,800 506,700 567,400 50,400
Property, at cost 60,900 54,700 58,700 2,200
Accumulated depreciation (30,600) (27,800) (28,400) (2,200)
---------- ---------- --------- ---------
Net property 30,300 26,900 30,300 -
Goodwill (net of accumulated
amortization of $42,500 and
$39,500, respectively) 190,900 193,900 190,900 -
Discontinued Rail car leasing assets 1,145,400 1,193,600 - 1,145,400
Discontinued and assets held
for sale, net 186,700 191,100 - 186,700
Marketable equity securities
available-for-sale (cost of
$75,600 and $163,000,
respectively) 75,600 126,400 - 75,600
Investment in ANTEC 56,100 84,100 - 56,100
Other assets 11,100 18,200 3,400 7,700
--------- --------- --------- ---------
$2,313,900 $2,340,900 $ 792,000 $1,521,900
========= ========= ======== =========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
Supplemental consolidating data are shown for Anixter and All other.
Transactions between Anixter and All other have been eliminated from the
consolidated columns.
2
<PAGE> 3
ITEL CORPORATION
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, 1994 (UNAUDITED)
CONSOLIDATED SUPPLEMENTAL INFORMATION
------------------------------------ -------------------------------
JUNE 30, DECEMBER 31, ALL
1994 1993 ANIXTER OTHER
-------------- ---------------- ------- -----
(UNAUDITED)
<S> <C> <C> <C> <C>
Current liabilities:
Accounts payable $ 187,200 $ 128,800 $160,600 $ 26,600
Accrued expenses 68,000 93,700 54,400 13,600
---------- ---------- -------- ----------
Total current liabilities 255,200 222,500 215,000 40,200
Income taxes, net, primarily deferred 127,000 102,200 (17,400) 144,400
Discontinued Rail car leasing liabilities 1,064,600 1,113,800 - 1,064,600
Other liabilities 20,000 20,300 16,000 4,000
Intercompany payable
(receivable) - - 51,100 (51,100)
Long-term debt - subsidiaries 262,900 188,300 262,900 -
- Corporate 167,500 288,500 - 167,500
---------- ---------- -------- ----------
Total liabilities 1,897,200 1,935,600 527,600 1,369,600
Stockholders' equity:
Common stock 32,200 33,000 300 31,900
Capital surplus 351,200 383,500 331,400 19,800
Retained earnings 40,600 22,400 (61,400) 102,000
Cumulative translation
adjustments (7,300) (9,900) (5,900) (1,400)
---------- ---------- -------- ----------
416,700 429,000 264,400 152,300
Unrealized losses on marketable
equity securities available-for sale
(net of deferred income tax benefit) - (23,700) - -
---------- ---------- -------- ----------
Total stockholders' equity 416,700 405,300 264,400 152,300
---------- ---------- -------- ----------
$2,313,900 $2,340,900 $792,000 $1,521,900
========== ========== ======== ==========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
Supplemental consolidating data are shown for Anixter and All other.
Transactions between Anixter and All other have been eliminated from the
consolidated columns.
3
<PAGE> 4
ITEL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE-MONTH PERIODS SIX-MONTH PERIODS
ENDED JUNE 30, ENDED JUNE 30,
----------------------- -----------------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 422,900 $ 328,200 $ 785,700 $ 626,500
Cost of operations (404,700) (314,700) (752,300) (601,400)
Amortization of goodwill (1,500) (1,400) (3,000) (2,800)
--------- ---------- --------- ---------
Operating income 16,700 12,100 30,400 22,300
Interest expense and other, net (6,300) (16,800) (14,000) (31,700)
Non-recurring item - ANTEC offering 48,200 - 48,200 -
Equity earnings in ANTEC 2,600 2,200 5,400 4,200
Marketable equity securities losses (34,400) - (39,600) -
--------- ---------- --------- ---------
Income (loss) from continuing
operations before income taxes 26,800 (2,500) 30,400 (5,200)
Income tax (expense) benefit (10,000) 800 (10,900) 1,700
--------- ---------- --------- ---------
Income (loss) from continuing
operations 16,800 (1,700) 19,500 (3,500)
Loss from discontinued
operations (net of related taxes) (400) (1,400) (1,300) (4,700)
--------- ---------- --------- ---------
Net income (loss) 16,400 (3,100) 18,200 (8,200)
Preferred stock dividends
and amortization - (1,500) - (3,000)
--------- ---------- --------- ---------
Income (loss) applicable to common stock $ 16,400 $ (4,600) $ 18,200 $ (11,200)
========= ========== ========= =========
Income (loss) per common and common
equivalent share:
Continuing operations $ .51 $ (.11) $ .59 $ (.23)
Net income (loss) $ .50 $ (.16) $ .55 $ (.39)
=========== ========== ========= =========
Weighted average common and
common equivalent shares 33,030 28,667 33,123 28,548
========== ========== ========= =========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
4
<PAGE> 5
ITEL CORPORATION
SUPPLEMENTAL CONDENSED STATEMENTS OF OPERATIONS
THREE-MONTH PERIODS ENDED JUNE 30,
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
ANIXTER ALL OTHER
-------------------------- -----------------------
1994 1993 1994 1993
----- ----- ----- -------
<S> <C> <C> <C> <C>
Revenues $422,900 $328,200 $ - $ -
Cost of operations (403,700) (313,000) (1,000) (1,700)
Amortization of goodwill (1,500) (1,400) - -
-------- -------- ---------- ----------
Operating income (loss) 17,700 13,800 (1,000) (1,700)
Interest expense and other, net (4,200) (6,000) (2,100) (10,800)
Non-recurring item - ANTEC offering - - 48,200 -
Equity earnings in ANTEC - - 2,600 2,200
Marketable equity securities loss - - (34,400) -
-------- -------- ---------- ----------
Income (loss) from continuing
operations before income taxes 13,500 7,800 13,300 (10,300)
Income tax (expense) benefit (6,200) (4,300) (3,800) 5,100
-------- -------- ---------- ----------
Income (loss) from continuing operations 7,300 3,500 9,500 (5,200)
Loss from discontinued operations (net
of related taxes) - - (400) (1,400)
-------- -------- ---------- ----------
Net income (loss) $ 7,300 $ 3,500 $ 9,100 $ (6,600)
======== ======== ========== ==========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
Supplemental consolidating data are shown for Anixter and All other.
Transactions between Anixter and All other have been eliminated from the
consolidated columns.
5
<PAGE> 6
ITEL CORPORATION
SUPPLEMENTAL CONDENSED STATEMENTS OF OPERATIONS
SIX-MONTH PERIODS ENDED JUNE 30,
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
ANIXTER ALL OTHER
-------------------------- ------------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 785,700 $ 626,500 $ - $ -
Cost of operations (750,200) (597,900) (2,100) (3,500)
Amortization of goodwill (3,000) (2,800) - -
--------- --------- --------- ---------
Operating income (loss) 32,500 25,800 (2,100) (3,500)
Interest expense and other, net (8,100) (10,900) (5,900) (20,800)
Non-recurring item - ANTEC offering - - 48,200 -
Equity earnings in ANTEC - - 5,400 4,200
Marketable equity securities losses - - (39,600) -
--------- --------- --------- ---------
Income (loss) from continuing
operations before income taxes 24,400 14,900 6,000 (20,100)
Income tax (expense) benefit (10,900) (8,000) - 9,700
--------- --------- --------- ---------
Income (loss) from continuing
operations 13,500 6,900 6,000 (10,400)
Loss from discontinued opera-
tions (net of related taxes) - - (1,300) (4,700)
--------- --------- --------- ---------
Net income (loss) $ 13,500 $ 6,900 $ 4,700 $ (15,100)
========= ========= ========= ==========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
Supplemental consolidating data are shown for Anixter and All other.
Transactions between Anixter and All other have been eliminated from the
consolidated columns.
6
<PAGE> 7
ITEL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX-MONTH PERIODS
ENDED JUNE 30,
-----------------------
1994 1993
------ ------
<S> <C> <C>
Operating activities:
Income (loss) from continuing operations $ 19,500 $ (3,500)
Adjustments to reconcile income (loss) from continuing operations
to net cash used by continuing operating activities:
Depreciation 4,400 3,900
Amortization of goodwill 3,000 2,800
Deferred income tax expense 10,700 (2,500)
Non-recurring item (48,200) -
Marketable equity securities losses 39,600 -
Other, net 500 6,300
Changes in assets and liabilities, net of effects of
acquisitions and asset purchases (60,400) (26,300)
---------- -----------
Net cash used by continuing operating activities (30,900) (19,300)
Discontinued operations, net 2,100 56,700
---------- -----------
Net cash provided (used) by operating activities (28,800) 37,400
Investing activities:
Sales of marketable equity securities 47,800 -
Purchases of property, net (7,700) (4,400)
Sale of (investment in) ANTEC 82,800 (8,600)
Receipts from and (advances to) Q-TEL 7,600 (19,000)
---------- -----------
Net investing activities 130,500 (32,000)
---------- -----------
Net cash provided before financing activities 101,700 5,400
Financing activities:
Borrowings 725,200 319,400
Reductions in borrowings (784,000) (331,300)
Proceeds from issuance of common stock 5,200 14,200
Purchases of treasury stock (13,200) -
Other, net (3,600) (6,500)
---------- -----------
Net financing activities (70,400) (4,200)
---------- -----------
Cash provided 31,300 1,200
Cash and equivalents at beginning of period 29,900 21,000
---------- -----------
Cash and equivalents at end of period $ 61,200 $ 22,200
========== ===========
Supplemental cash flow information:
Interest paid (including allocations to
discontinued operations) during the period $ 33,100 $ 48,600
========== ===========
Income taxes paid during the period $ 1,600 $ 2,200
========== ===========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
7
<PAGE> 8
ITEL CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation: The accompanying condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements included in Itel Corporation's ("Itel") Annual Report on Form 10-K
for the year ended December 31, 1993. The condensed consolidated financial
information furnished herein reflects all adjustments (consisting of normal
recurring accruals) which are, in the opinion of management, necessary for a
fair presentation of the condensed consolidated financial statements for the
periods shown.
Principles of consolidation: The condensed consolidated financial statements
include the accounts of Itel and its subsidiaries (collectively "the Company")
after elimination of intercompany transactions.
Reclassifications: The 1993 consolidated financial statements and related
notes have been reclassified to reflect ANTEC Corporation ("ANTEC") as an
equity investment (see Note 4) and to reflect the Company's investment in its
Rail car leasing business as discontinued operations (see Note 2).
NOTE 2. DISCONTINUED AND ASSETS HELD FOR SALE
On July 25, 1994, Itel sold substantially all its remaining interests in its
fleet of railcars for $35 million in cash and $169.5 million in notes
receivable for an aggregate purchase price of $204.5 million. The notes
receivable will not be due until the end of 1998 and interest can be deferred
until that time at the election of the obligors. The net gain from this
transaction is estimated to exceed $200 million.
The finance business of Signal Capital Corporation ("Signal Capital") has been
included as assets held for sale since acquisition in 1988. The finance
business is being liquidated and
8
<PAGE> 9
no material amounts of new loans or investments are being made by Signal
Capital. Since the date of acquisition, the portfolio has been reduced from
$1.44 billion to $165 million at June 30, 1994. Proceeds were used to repay
indebtedness.
NOTE 3. MARKETABLE EQUITY SECURITIES LOSSES
In the second quarter of 1994, the Company wrote down the value of its
investment in marketable equity securities by $34.4 million. Also in the first
quarter of 1994, the Company recorded a $5.2 million pre-tax loss on the sale
of its investment in Catellus Development Corporation ("Catellus").
NOTE 4. NON-RECURRING ITEM - ANTEC OFFERING
The non-recurring item reflects a $48 million pre-tax gain on the ANTEC Offering
relating to the May 1994 public offering of shares of common stock of ANTEC
(the "ANTEC Offering"). Itel provided deferred taxes relating to the
recognized pre-tax book gain. Itel sold 4.0 million shares of ANTEC common
stock at $21.75 per share. Net proceeds from the ANTEC Offering were
approximately $83 million. As a result of the ANTEC Offering, Itel's ownership
of ANTEC common stock was reduced from 53% to 33%.
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES
SALE OF RAIL CAR LEASING BUSINESS: On July 25, 1994, Itel sold substantially
all its remaining interests in its fleet of railcars for $35 million in cash
and $169.5 million in notes receivable for an aggregate purchase price of
$204.5 million. The notes receivable will not be due until the end of 1998 and
interest can be deferred until that time at the election of the obligors. The
net gain from this transaction is estimated to exceed $200 million. Results of
operations reflect the Rail car leasing business as discontinued operations.
ANTEC PUBLIC OFFERING: In May 1994, Itel completed a public offering of
shares of common stock of ANTEC. Itel sold 4.0 million shares at $21.75 per
share. Net proceeds from the ANTEC Offering were approximately $83 million.
As a result of the ANTEC Offering, Itel's ownership of ANTEC common stock was
reduced from 53% to 33%.
LIQUIDATION OF SIGNAL CAPITAL: Signal Capital has been classified as assets
held for sale since its acquisition in 1988. The finance business is being
liquidated and no material amounts of new loans or investments are being made
by Signal Capital. Since the date of acquisition the portfolio has been
reduced from $1.44 billion to $165 million at June 30, 1994, including a
reduction of approximately $10 million in 1994.
CASH FLOW: Consolidated net cash used by continuing operating activities was
($30.9) million for the first six months of 1994 compared to ($19.3) million
for the same period in 1993. Cash used by continuing operating activities
increased due primarily to increased working capital investment resulting from
sharply increased sales volume at Anixter Inc. ("Anixter"). Consolidated cash
provided (used) for net investing activities was $130.5 million for the first
six months of 1994 versus ($32.0) million for the same period in 1993.
Consolidated investing activities in 1994 include approximately $82.8 million
of proceeds from the ANTEC Offering and approximately $47.8 million from the
sale of the Company's
10
<PAGE> 11
investment in Catellus. The 1993 period reflects a $19.0 million investment in
Q-TEL S.A. de C.V. of Mexico ("Q-TEL"). Consolidated cash used for net
financing activities was ($70.4) million for the first six months of 1994 in
comparison to ($4.2) million for the first six months of 1993. The
consolidated net financing activities in the 1994 period reflect significant
repayment of subordinated and senior debt using proceeds from the ANTEC
Offering and the sale of the Company's investment in Catellus. Cash from
discontinued operations, net was $2.1 million for the first six months of 1994
versus $56.7 million for the same period in 1993. Cash from discontinued
operations in both periods reflects cash received principally from the
reduction of Signal Capital assets which are held for sale.
Based upon discussions with financial analysts and similar disclosures provided
by competitors of Itel's businesses, the Company considers operating income
before amortization of goodwill and operating income plus depreciation and
amortization of goodwill ("cash flow") to be meaningful and readily comparable
measures of Itel's relative performance. Cash flow of Anixter was $39.9
million and $32.5 million for the six months ended June 30, 1994 and 1993,
respectively.
FINANCINGS: In March 1994, the Company increased Anixter's secured revolving
line of credit to $345 million, lowered the interest rate spreads and extended
the expiration to 1997. The revolving line of credit is non-recourse to Itel
and may be extended for two additional one-year periods at the option of the
lenders.
DEBT MATURITIES AND REPAYMENTS: In the first six months of 1994, the Company
retired $100 million of the Corporate Term Loan. This loan is secured by the
Company's investments in the capital stock of Anixter, ANTEC and Signal Capital
and its investment in marketable equity securities.
In the first six months of 1994 and 1993, respectively, the Company retired
approximately $221 million and $75 million of the face value of subordinated
debt at Itel.
11
<PAGE> 12
NET OPERATING LOSS CARRYFORWARDS: To the extent of certain taxable income
realized by the Company, liquidity is enhanced by potential tax benefits. As
of December 31, 1993, the Company had cumulative net operating loss ("NOL")
carryforwards for Federal income tax purposes of approximately $345 million
expiring principally in 1995 through 2007, and investment tax-credit ("ITC")
carryforwards of approximately $16 million expiring in 1994 through 2001.
Certain of these carryforwards have not been examined by the Internal Revenue
Service and, therefore, may be subject to adjustment. The availability of NOL
and ITC carryforwards to reduce the Company's future Federal income tax
liability is subject to various limitations under the Internal Revenue Code of
1986, as amended.
The July sale of substantially all its remaining interests in its fleet of
railcars will generate a taxable gain for Federal income tax purposes of
approximately $500 million, which currently is expected to fully
exhaust the aforementioned carryovers (see Note 2 of the Notes to the
Condensed Consolidated Financial Statements).
OTHER LIQUIDITY CONSIDERATIONS: Certain debt agreements entered into by Itel's
subsidiaries contain various restrictions including restrictions on payments to
Itel. Such restrictions have not had nor are expected to have an adverse
impact on Itel's ability to meet its cash obligations.
CAPITAL EXPENDITURES AND ACQUISITIONS
Consolidated capital expenditures were $8.0 million and $5.0 million for the
first six months of 1994 and 1993, respectively.
12
<PAGE> 13
RESULTS OF OPERATIONS
On July 25, 1994, Itel sold substantially all its remaining interests in its
fleet of rail cars. Results of operations reflect the Rail car leasing
business as discontinued operations.
In May 1994, Itel sold in a public offering 4.0 million shares of common stock
of ANTEC. As a result of the ANTEC Offering, Itel's ownership of ANTEC common
stock was reduced from 53% to approximately 33%. Itel now reports ANTEC in its
consolidated financial statements as an equity investment.
QUARTER ENDED JUNE 30, 1994: Income from continuing operations for the second
quarter of 1994 was $16.8 million compared with a loss of ($1.7) million in the
second quarter of 1993. Results in 1994 include a $48.2 million pre-tax gain
on the ANTEC Offering and a ($34.4) million pre-tax charge associated with the
write-down of the Company's investment in marketable equity securities. Net
income (loss) was $16.4 million and ($3.1) million in the second quarter of
1994 and 1993, respectively.
Anixter's revenues during the second quarter of 1994 increased 29% to $422.9
million from $328.2 million in 1993 resulting from the continued growth of the
U.S. wiring systems business and continued penetration in the expansion
countries.
The Company's consolidated operating income increased 38% to $16.7 million from
$12.1 million in the second quarter of 1993 and consolidated operating income
before amortization of goodwill increased 35% to $18.2 million from $13.5
million in the second quarter of 1993. Anixter operating income before
amortization of goodwill increased 26% to $19.2 million from $15.2 million due
primarily to significantly improved volume and earnings in the U.S. and Canada.
13
<PAGE> 14
Consolidated net interest expense and other for the second quarter declined to
$6.3 million from $16.8 million in 1993 due primarily to the use of proceeds
from the continued monetization of Itel's non-core assets to significantly
reduce high-cost subordinated debt.
SIX MONTHS ENDED JUNE 30, 1994: Income from continuing operations for the
first six months of 1994 was $19.5 million compared with a loss of ($3.5)
million in the first six months of 1993. Results in 1994 include a $48.2
million pre-tax gain on the ANTEC Offering and a ($34.4) million pre-tax charge
associated with the write-down of the Company's investment in marketable equity
securities. Results in 1994 also include a pre-tax loss of ($5.2) million
relating to the sale of the Company's investment in Catellus. Net income
(loss) was $18.2 million and ($8.2) million in the first six months of 1994 and
1993, respectively.
Anixter's revenues during the first six months of 1994 increased 25% to $785.7
million from $626.5 million in 1993 resulting from the continued growth of the
U.S. wiring systems business and continued penetration in the expansion
countries.
The Company's consolidated operating income increased 36% to $30.4 million from
$22.3 million in the first six months of 1993 and consolidated operating income
before amortization of goodwill increased 33% to $33.4 million from $25.1
million in the first six months of 1993. Anixter operating income before
amortization of goodwill increased 24% to $35.5 million from $28.6 million due
primarily to significantly improved volume and earnings in the U.S. and Canada.
Consolidated net interest expense and other for the first six months declined
to $14.0 million from $31.7 million in 1993 due primarily to the use of
proceeds from the continued monetization of Itel's non-core assets to
significantly reduce high-cost subordinated debt.
14
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 (a) (i) Note, dated July 25, 1994, from SCAP
Associates, L.L.C. to Itel Rail Holdings
Corporation.
(ii) Guaranty of that Note, dated July 25, 1994,
in favor of Continental Bank and Itel Rail
Holdings Corporation, by Signal Capital
Holdings Corporation.
(b) (i) Note, dated July 25, 1994, from Signal
Capital Holdings Corporation to Itel Rail
Holdings Corporation.
(ii) Guaranty of that Note, dated July 25, 1994,
in favor of Continental Bank and Itel Rail
Holdings Corporation, by SCAP Associates,
L.L.C.
(c) Pledge and Security Agreement, dated July
25, 1994, by SCAP Associates, L.L.C., in
favor of Continental Bank as Collateral
agent for Continental Bank and Itel Rail
Holdings Corporation.
(b) Reports on Form 8-K
None
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ITEL CORPORATION
Date: August 12, 1994 By: /s/ Rod F. Dammeyer
------------------------------------
Rod F. Dammeyer
President and Chief Executive Officer
Date: August 12, 1994 By: /s/ John P. McNicholas, Jr.
------------------------------------
John P. McNicholas, Jr.
Vice President - Controller and
Chief Accounting Officer
<PAGE> 1
EXHIBIT 10.1(a)(i)
NOTE
$80,400,000
NEW YORK, NEW YORK
July 25, 1994
FOR VALUE RECEIVED, the undersigned ("Maker") promises to pay to the
order of ITEL RAIL HOLDINGS CORPORATION, a Delaware corporation ("Payee") at
its place of payment listed in Section 13 below, on or before December 1, 1998,
the sum of EIGHTY MILLION AND FOUR HUNDRED THOUSAND DOLLARS ($80,400,000.00)
plus interest thereon on the unpaid principal amount hereof from time to time
outstanding from July 1, 1994 until maturity (provided, that for purposes of
calculating the interest due hereunder the full amount of $80,400,000 shall be
deemed outstanding for the period of time, if any, from July 1, 1994 until the
date hereof, even if no amount has then been advanced hereunder), at the
Interest Rate (as defined below) from time to time in effect in accordance with
the terms hereof. This Note is a purchase money note and is executed and
delivered pursuant to that certain Purchase Agreement dated as of June 23, 1994
by and among Maker, Payee and Itel Corporation, a Delaware corporation (the
"Purchase Agreement") as a portion of the purchase price payable by Maker as
the purchaser under the Purchase Agreement. Certain capitalized terms used and
not defined herein shall have the meanings ascribed to such terms in the
Purchase Agreement. In consideration of the extension of credit evidenced by
this Note and of the transaction contemplated by the Purchase Agreement, Maker
hereby agrees as follows:
1. Interest Rate. Subject to the provisions of Section 2 below, the
principal amount outstanding (or deemed outstanding) from time to time under
this Note shall bear interest at a rate (the "Interest Rate") calculated as
follows:
(a) From July 1, 1994 to and including July 1, 1995 the Interest Rate
shall be a rate per annum equal to the rate from time to time announced by
Continental Bank, N.A. or its successor (the "Bank") as its "prime rate" (the
"Prime Rate").
(b) From and after July 2, 1995, the Interest Rate at any time shall
be a rate equal to the greater of (i) a rate per annum equal to the Prime Rate
in effect at such time, plus one and one-half percent (1-1/2%) and (ii) the
rate per annum in effect at such time (whether as a result of default or
otherwise) with respect to the Bank Loan (as defined below).
<PAGE> 2
(c) As used in this Note, the "Bank Loan" shall mean the loan, in the
original principal amount of $11,900,000, made by the Bank to Maker on the date
hereof, or any refinancing or replacement thereof which satisfies all of the
following conditions: (i) such loan is made by a reputable bank, insurance
company or other institutional lender, (ii) the principal amount of such loan
does not exceed an amount equal to the sum of $11,900,000, plus any accrued and
unpaid interest on the Bank Loan that has been added to principal in accordance
with the terms thereof, less any payments of principal made with respect to the
Bank Loan, and (iii) the maximum rate of interest payable on such loan prior to
default does not exceed the Prime Rate plus 2%.
2. Default Rate. Notwithstanding Section 1 above, after the
occurrence and during the continuance of an Event of Default hereunder, the
principal amount outstanding from time to time under this Note shall bear
interest at a rate (the "Default Rate equal to the greater of (i) two percent
(2%) per annum in excess of the Interest Rate that would otherwise be
applicable pursuant to Section 1(a) or Section 1(b)(i) hereof, and (ii) the
rate applicable under Section 1(b)(ii) hereof.
3. Certain Calculations; Limitation. The Interest Rate and the
Default Rate hereunder shall change when and as the Prime Rate changes, and
shall be computed, for the exact number of days elapsed, on the basis of a year
of 360 days. Notwithstanding any other provision of this Note, in no event
shall the Interest Rate or Default Rate hereunder exceed the maximum rate of
interest permitted under applicable law.
4. Payments of Interest; Maturity. Interest hereon shall be payable
semiannually for the first year on December 31, 1994 and June 30, 1995 and
monthly thereafter on the first day of each month (an "Interest Payment Date");
provided, that any unpaid interest may at Maker's election be added to
principal on such Interest Payment Date and shall thereafter bear interest at
the rates set forth above. All unpaid principal and accrued interest shall be
payable in full on December 1, 1998.
5. Security. This Note is secured by (i) a SCAP Pledge and
Security Agreement II of even date herewith (the "Pledge Agreement"), made by
Maker for the benefit of the Bank, as agent for Payee and the Bank and creating
a first security interest in certain shares of the common stock of Signal
Capital Holdings Corporation and (ii) an SCHC Guaranty II of even date herewith
(the "Guaranty") made by Signal Capital Holdings Corporation for the benefit of
Payee, and the Guaranty is secured by an SCHC Pledge and Security Interest II
of even date herewith (the "Security Agreement"). The Pledge Agreement, the
Guaranty and
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<PAGE> 3
the Security Agreement are collectively referred to herein as the "Collateral
Documents".
6. Prepayment. Maker shall have the right from time to time upon
10 days prior written notice to Payee to prepay this Note prior to the
expressed maturity hereof (together with all accrued and unpaid interest hereon
and all other amounts due hereunder), in whole but not in part, without premium
or penalty.
7. Representations and Warranties. Maker hereby represents and
warrants to Payee that:
(a) Maker is a limited liability company duly organized,
validly existing and in good standing under the law of the state of
Delaware.
(b) This Note and each of the Collateral Documents to which
Maker is a party has been duly authorized, executed and delivered by
Maker and constitutes the valid and legally binding obligation of
Maker, enforceable in accordance with its terms. Each of the
Collateral Documents to which Signal Capital Holdings Corporation is a
party has been duly authorized, executed and delivered by Signal
Capital Holdings Corporation and constitutes the valid and legally
binding obligation of Signal Capital Holdings Corporation, enforceable
in accordance with its terms
(c) The execution and delivery of this Note and the
Collateral Documents, and performance by Maker and Signal Capital
Holdings Corporation of their respective obligations hereunder and
thereunder, will not violate any provision of law.
(d) There are no outstanding judgments, actions or
proceedings pending before any court or governmental authority, bureau
or agency, with respect to or threatened against or affecting Maker.
(e) Maker has no assets other than cash and cash
equivalents, the Acquired Trust Interests, and the 110 Shares of
Signal Capital Holdings Corporation (the "Shares") and has no
liabilities, contingent or otherwise, other than the liabilities
assumed pursuant to the Purchase Agreement, this Note, the Bank Loan,
the guaranty by Maker of the Redemption Note of $89,100,000 issued by
Signal Capital Holdings Corporation to Payee, the guaranty by Maker of
the loan, in the original principal amount of $24,400,000, made by the
Bank to Signal Capital Holdings Corporation (together with the Bank
Loan, the "Acquisition Loan"), and accrued expenses to be paid from
the Bank Loan.
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<PAGE> 4
(f) Maker is not in default under, or in violation of any
term of, any agreement, ordinance, resolution, decree, bond, note,
indenture, order or judgment (including, without limitation, the
documents and agreements executed or delivered in connection with the
Bank Loan) to which it is a party or by which it is bound, or by which
any of the properties or assets owned by or used in the conduct of its
business is affected.
(g) Maker is not a party to or bound by, nor are any of the
properties or assets owned by it or used in the conduct of its
business affected by, any agreement, ordinance, resolution, decree,
bond, note, indenture, order or judgment, or subject to any charter or
other corporate restriction, which materially and adversely affects
its business assets or condition, financial or otherwise.
(h) All balance sheets, profit and loss statements and other
financial information of Maker heretofore furnished to Payee are true,
correct and complete and present fairly the financial condition of
Maker as at the dates thereof and for the periods covered thereby,
which financial condition has not materially adversely changed since
the date of the most recently dated balance sheet of Maker heretofore
furnished to Payee.
8. Financial Statements. Maker shall deliver to Payee:
(a) Annually, as soon as available, but in any event within
60 days after the last day of each of its fiscal years, consolidated
and consolidating balance sheets of Maker and its Subsidiaries, as at
such last day of the fiscal year, and consolidated and consolidating
statements of income and retained earnings and changes in financial
position, for such fiscal year, each prepared in accordance with
generally accepted accounting principles consistently applied, in
reasonable detail, such consolidated statements to be certified
without qualification by a firm of independent certified public
accountants satisfactory to Payee.
(b) As soon as available, but in any event within 30 days
after the end of each of Maker's first three fiscal quarterly periods,
the consolidated and consolidating balance sheets of Maker and its
Subsidiaries as of the last day of such quarter, and consolidated and
consolidating statements of income and retained earnings and changes
in financial position, for such quarter, all in reasonable detail,
each such statement to be certified by the chief financial, or
accounting, officer of Maker as having been prepared in accordance
with generally accepted accounting
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<PAGE> 5
principles consistently applied (subject to year-end audit
adjustments).
(c) Promptly after a written request therefor, such other
financial data or information as Payee may reasonably request from
time to time.
(d) At the same time as it delivers the financial statements
required under the provisions of Sections 8(a) and 8(b), a certificate
signed by a manager of Maker, to the effect that no Event of Default
hereunder or under any other agreement to which Maker or any
Subsidiary is a party or by which it is bound, or by which any of its
properties or assets may be affected, and no event which, with the
giving of notice or the lapse of time, or both, would constitute such
an Event of Default, has occurred and specifying in reasonable detail
the exceptions, if any, to such statement.
As used herein, the term "Subsidiary" or "Subsidiaries" means
and includes (1) Signal Capital Holdings Corporation, (2) Railcar
Trust No. 1992-1, a Delaware business trust (the "Trust") and (3) the
partnership in which the Trust has an interest (the "Partnership").
9. Affirmative Covenants. Maker will, and will cause each Subsidiary
to:
(a) maintain adequate insurance;
(b) duly pay and discharge all taxes or other claims which
might become a lien upon any of its property except to the extent that
such items are being contested in good faith and reserves satisfactory
to Payee have been established with respect thereto;
(c) maintain, preserve and keep its properties in good
repair, working order and condition, and make all reasonable repairs,
replacements, additions, betterments and improvements thereto;
(d) comply with all statutes, rules and regulations and
maintain its corporate existence, and perform its obligations under
and comply with the terms and conditions of the Transaction Documents;
(e) pay all stamp or issuance taxes, and all recording and
filing fees and other charges, if any, payable by reason of the
execution, delivery, issuance recording or filing of this Note and the
Collateral Documents under any applicable ordinance or statute now
existing or hereafter enacted, and
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Maker will at all times indemnify and hold harmless Payee against any
liability in respect thereof;
(f) permit Payee to make or cause to be made, at Maker's
expense, inspections and audits of any books, records and papers of
Maker and to make extracts therefrom at all such reasonable times and
as often as Payee may reasonably require;
(g) apply all dividends and other distribution received
from the Trust, and all other amounts , of any kind or nature,
received (directly or indirectly) with respect to the Trust Interests
or the Shares, to pay this Note, the Redemption Note and the
Acquisition Loan, with such payments to be applied (1) in the case of
payments with respect to the Acquired Trust Interests that are subject
to the First Security Agreement (as defined below), first to the Bank
Loan, second to the balance of the Acquisition Loan, third to this
Note and thereafter to the Redemption Note, and (2) with respect to
all other such payments received by Maker, first to the Bank Loan and
this Note, and second to the balance of the Acquisition Loan and the
Redemption Note, in each case pro rata (in accordance with the
respective aggregate principal and interest then outstanding to Payee,
on the one hand, and the Bank, on the other hand under this Note, the
Redemption Note and the Acquisition Loan), and in the case of payments
received by Signal Capital Holdings Corporation, first to the
Redemption Note and the balance of the Acquisition Loan other than the
Bank Loan, and second to the Bank Loan and this Note, in each case pro
rata (in accordance with the respective aggregate principal and
interest then outstanding to Payee, on the one hand, and the Bank, on
the other hand under this Note, the Redemption Note and the
Acquisition Loan); and
(h) cause all amounts received by the Trust and permitted
under the Transaction Documents to be distributed to the beneficiaries
thereof to be promptly so distributed and applied as provided in
Section 9(g) above.
10. Negative Covenants. Except with the consent in writing of Payee,
Maker will not, and will not permit any Subsidiary to:
(a) incur, or permit to exist, any indebtedness for borrowed
money, other than (i) as specified in Section 7(e) and (ii) with
respect to any Subsidiary, the liabilities arising under the
Transaction Documents, and (iii) with respect to Signal Capital
Holdings Corporation, indebtedness existing at the time of the
transfer of shares of Signal
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<PAGE> 7
Capital Holdings Corporation to Maker pursuant to the Purchase
Agreement;
(b) create, assume, or permit to exist, any mortgage, pledge,
lien or encumbrance of or upon, or security interest in, any of its
property or assets now owned or hereafter acquired except (i) the
liens created by the Collateral Documents; (ii) a lien created by
Maker in favor of the Bank (the "First Security Agreement"), securing
the Acquisition Loan; (iii) the liens created by the Transaction
Documents; (iv) liens for taxes or other governmental charges which
are not delinquent or which are being contested in good faith and for
which a reserve satisfactory to Payee shall have been established; (v)
liens (if any) on the assets of Signal Capital Holdings Corporation
existing at the time of the conveyance of shares in Signal Capital
Holdings Corporation to Maker pursuant to the Purchase Agreement; and
(vi) liens encumbering property acquired by Signal Capital Holdings
Corporation on or after the date hereof at the time such property is
acquired, but only so long as (A) recourse with respect to such
indebtedness is limited to the property securing such indebtedness and
neither Maker nor Signal Capital Holdings Corporation has any personal
liability in respect of such indebtedness and (B) such liens encumber
only the property that is subject thereto at the time such property is
acquired by Signal Capital Holdings Corporation, and do not encumber
any other property of Signal Capital Holdings Corporation;
(c) enter into any merger or consolidation or sell or lease
or otherwise dispose of any of its assets to a related or unrelated
party;
(d) lend or advance money, credit or property to or invest in
(by capital contribution, loan, purchase or otherwise) any firm,
corporation, or other person except investments in United States
Government obligations and certificates of deposits of any banking
institution with combined capital and surplus of at least
$500,000,000;
(e) assume, endorse, be or become liable for or guarantee the
obligations of any person, except (i) by the endorsement of negotiable
instruments for deposit or collection in the ordinary course of
business, (ii) as specified in Section 7(e) and (iii) with respect to
the Transaction Documents, as contemplated by the Purchase Agreement;;
(f) declare or pay any dividends on, or make any distribution
with respect to (upon liquidation or otherwise) its capital stock, or
purchase, redeem, retire or otherwise
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<PAGE> 8
acquire any of its capital stock at any time outstanding, except that
the foregoing shall not limit (1) any distributions by the Trust made
pro rata to its beneficiaries, provided that the entire amount of any
such distributions or dividends shall be applied to pay amounts due
under this Note and the Bank Loan in accordance with Section 9(g)
above or (2) the redemption of shares of Signal Capital Holdings
Corporation from Payee as contemplated by the Purchase Agreement;
(g) enter into any agreement or take any action (or cause
or permit the Trust to enter into any agreement or take any action)
which has the effect of amending, modifying, supplementing, waiving or
otherwise affecting any of the Transaction Documents, provided,
however, Signal Capital Holdings Corporation may agree with the bank
that it will consent to the transfer of the Acquired Trust Interests
and will exercise its rights under the Trust in a manner which will
require the consent of the holder of the Acquired Trust Interests; or
(h) engage in any activity other than the holding and
management of the Shares, the Trust Interests, the Trust assets, the
Partnership assets and the assets acquired pursuant to Section 5.9 of
the Purchase Agreement.
11. Events of Default. If any one or more of the following events
("Events of Default") shall occur, the entire unpaid balance of the principal
of and interest on this Note shall immediately become due and payable upon
written notice to that effect given to Maker by Payee, except that in the case
of the occurrence of any Event of Default described in paragraph (f) of this
Section 11, no such notice shall be required:
(a) Failure to make any payment of principal or interest due
under this Note or the Redemption Note issued by Signal Capital
Holdings Corporation to Payee when due; or,
(b) Failure to observe any of the agreements of Maker
contained in Section 10 hereof, or failure of Signal Capital Holdings
Corporation to observe any of its agreements contained in Section 10
of the Redemption Note; or,
(c) Failure by the Maker or Signal Capital Holdings
Corporation to perform any other term, condition or covenant of the
Purchase Agreement, any of the Collateral Documents, this Note, the
Redemption Note or any other agreement, instrument or document
delivered pursuant hereto or thereto or in connection herewith or
therewith which shall remain
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<PAGE> 9
unremedied for a period of 30 days after notice thereof shall have
been given by Payee to Maker; or,
(d) All or any portion of the Acquisition Loan shall not be
paid when due and payable, upon maturity, by acceleration or
otherwise, or the holder of the Acquisition Loan or any of its agents
shall have taken any action (judicial or otherwise) to commence
enforcement, foreclosure, sale or other proceedings or to exercise any
other right or remedy with respect to any collateral securing the
Acquisition Loan, provided, however, during the first year of this
Note, maturity alone of the Acquisition Loan without any declaration
of default or acceleration or other action by the Bank shall not be an
Event of Default unless and until such condition continues for a total
of 180 days; or,
(e) Any representation or warranty of Maker contained in the
Purchase Agreement, any of the Collateral Documents, this Note, the
Redemption Note or in any certificate, statement or report made in
compliance with any of the foregoing, shall have been false in any
material respect when made; or,
(f) Maker or any Subsidiary or any endorser or guarantor
hereof shall make an assignment for the benefit of creditors, file a
petition in bankruptcy, be adjudicated insolvent or bankrupt, petition
or apply to any tribunal for the appointment of a receiver of any
trustee for it or a substantial part of its assets, or shall commence
any proceeding under any bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution, or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect; or if there
shall have been filed any such petition or application, or any such
proceeding shall have been commenced against it, which remains
undismissed for a period of thirty days or more, or Maker or any
Subsidiary or endorser or guarantor hereof by any act or omission
shall indicate its consent to approval of or acquiescence in any such
petition, application or proceeding or the appointment of a receiver
of or any trustee for it or any substantial part of any of its
properties, or shall suffer any such receivership or trusteeship to
continue undischarged for a period of thirty days or more; or
(g) Any judgment against Maker or any Subsidiary or any
attachment, levy or execution against any of its properties for any
amount shall remain unpaid, unstayed on appeal, undischarged, unbonded
or undismissed for a period of thirty days or more (other than any
such matters involving an amount not in excess of $100,000 in the
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<PAGE> 10
aggregate that relate solely to assets contributed to Signal Capital
Holdings Corporation pursuant to Section 5.9 of the Purchase Agreement
and for which neither Maker nor Signal Capital Holdings Corporation
has any recourse liability); or,
(h) Any of the Collateral Documents, or any lien or security
interest granted under any thereof, shall (except in accordance with
its terms), in whole or in part, terminate, cease to be effective, or
cease to be the legally valid, binding and enforceable obligation of
Maker or Signal Capital Holdings Corporation; or any lien or security
interest created or required to be created thereunder shall, in whole
or in part, fail to be created and maintained as a perfected first
priority lien or security interest, subject only to those exceptions
(if any) expressly permitted by this Note, the Redemption Note and the
Collateral Documents; or the Guaranty shall be accelerated pursuant to
the terms thereof;
(i) Without the prior written consent of Payee, Maker shall,
or shall enter into any agreement to, sell, assign, convey, pledge,
hypothecate or otherwise transfer to a related or unrelated party
(except pursuant to (1) the Collateral Documents and the First
Security Agreement and (2) agreements of sale and agreements to sell
pursuant to which all indebtedness under the Acquisition Loan, this
Note and the Redemption Note is to be paid in full) any of the
collateral that is subject to the lien of the Collateral Documents
(including, without limitation, any shares in Signal Capital Holdings
Corporation) or the Acquired Trust Interests, or Signal Capital
Holdings Corporation shall enter into any agreement to, sell, assign,
convey, pledge, hypothecate or otherwise transfer any beneficial
interest in the Trust to a related or unrelated party; or,
(j) Signal Capital Holdings Corporation shall, or shall
enter into any agreement to, issue any capital stock, or any option,
warrant or other right to acquire capital stock, or any instrument or
agreement convertible into or exchangeable for capital stock; other
than any such issuance with respect to common stock if after giving
effect to all such issuances (and assuming all exercises, conversions
and exchanges by persons other than Payee, but assuming no such
exercise, exchange or conversion by Payee) the shares subject to the
lien of the Pledge Agreement shall constitute not less than and not
more than 79% (both in terms of rights to dividends and distributions
and rights to vote, for the election of directors or otherwise) of the
capital stock of Signal Capital Holdings Corporation.
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<PAGE> 11
12. Remedies.
(a) In the event of the occurrence of any Event of Default,
Payee may, but shall not be required to exercise any right or remedy
available to Payee under the Purchase Agreement, this Note, any of the
Collateral Documents or applicable law (including but not limited to
the rights and remedies of a secured party under the Uniform
Commercial Code), and without limiting the generality of the
foregoing, may exercise all rights and remedies of Payee under the
Collateral Documents. Amounts received by Payee may be applied by
Payee to the payment of this Note and of any other liabilities, claims
or obligations of Maker to Payee under or in connection with this
Note, the Collateral Documents or the Purchase Agreement, in such
order as Payee may elect. Each and every right and remedy hereby
granted to Payee or allowed to it by law, shall be cumulative and not
exclusive the one of the other, and may be exercised by Payee from
time to time and as often as may be necessary. Payee may assign and
transfer this Note to any other person, firm or corporation and may
deliver and repledge the collateral security or any party thereof to
the assignee or transferee of this Note, who shall thereupon become
vested with all the powers and rights above given to Payee in respect
thereof, and Payee shall thereafter be forever released and discharged
of and from all responsibility or liability to Maker for or on account
of the collateral security so delivered.
(b) In the event that this Note is placed in the hands of an
attorney for collection by reason of any default hereunder, Maker
agrees to pay all reasonable attorney's fees, costs and other charges
in connection herewith. Maker promises to pay all expenses of any
nature as soon as incurred whether in or out of court and whether
incurred before or after this Note shall become due at its maturity
date or otherwise and costs which Payee may deem necessary or proper
in connection with the satisfaction of the indebtedness or the
administration, supervision, preservation, protection (including but
not limited to maintenance of adequate insurance) of or the
realization upon the collateral.
(c) Maker hereby waives presentment, demand for payment,
protest, notice of protest, notice of dishonor, and any or all other
notices or demands in connection with the delivery, acceptance,
performance, default, or enforcement of this Note, and consents to any
and all delays, extensions of time, renewals, releases of Maker and of
any security, waivers or modifications that may be granted or
consented to by Payee with regard to the time of payment or with
respect
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<PAGE> 12
to any other provisions of this Note and agrees that no such action or
failure to act on the part of Payee shall in any way affect or impair
the obligations of Maker or be construed as a waiver by Payee of, or
otherwise affect, its right to avail itself of any remedy hereunder
with the same force and effect as if Maker had expressly consented to
such action or inaction upon the party of Payee.
13. Payments. All payments by Maker on account of principal or
interest shall be made in lawful money of the United States of America in
immediately available funds. If any payment of principal or interest becomes
due on a day on which the banks in Chicago, Illinois or New York, New York, are
required or permitted by law to remain closed, such payment may be made on the
next succeeding business day on which such banks are open, and such extensions
shall be included in computing interest in connection with such payment. All
payment shall be made to the following account, or such other account as may
from time to time be designated in writing by Payee:
Name of Bank: PNC Bank, Delaware
Address: 300 Delaware Avenue, Wilmington DE 19801
ABA Number: 031100089
Name of Account: Itel Rail Holdings Corporation
Account Number: 5795135488
14. Miscellaneous.
(a) All agreements, representations and warranties made
herein shall survive the delivery of this Note. Maker waives trial by
jury, set-off and counterclaim of any nature or description in any
litigation in any court with respect to, in connection with, or
arising out of, this Note or any instruments or document delivered
pursuant hereto or the validity, protection, interpretation,
collection or enforcement hereof.
(b) No modification or waiver of or with respect to any
provision of this Note, or consent to any departure by Maker from any
of the terms or conditions hereof, shall in any event be effective
unless it shall be in writing and signed by Payee, and then such
waiver or consent shall be effective only in the specific instance and
for the purpose for which given. No notice to or demand on Maker in
any case shall, of itself, entitle it to any other or further notice
or demand in similar or other circumstances.
(c) Each and every right granted to Payee hereunder or under
any other document delivered hereunder or in connection herewith, or
allowed it by law or equity, shall
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<PAGE> 13
be cumulative and may be exercised from time to time. No failure on
the part of Payee or the holder of this Note to exercise, and no delay
in exercising, any right shall operate as a waiver thereof, nor shall
any single or partial exercise of any right preclude any other or
future exercise thereof or the exercise of any other right.
15. Notices. All notices, requests and other communications pursuant
to this Note shall be in writing, either by letter (delivered by hand or sent
by certified mail, return receipt requested) or telegram, addressed as follows:
(a) if to Maker: SCAP Associates L.L.C.
885 Third Avenue
Suite 2400
New York, New York 10022
Attention: Douglas H. Wolf
Facsimile Number: (212) 826-5617
and
(b) if to Payee: Itel Rail Holdings Corporation
200 West Ninth Street Plaza
Wilmington, Delaware 19801
Facsimile Number: (302) 658-0468
with a copy to: Itel Corporation
Two North Riverside Plaza
Chicago, Illinois 60606
Attention: General Counsel
Facsimile Number: (312) 902-1512
Any notice, request or communication hereunder shall be deemed to have been
given when deposited in the mails, postage prepaid, or in the case of
telegraphic notice, when delivered to the telegraph company, addressed as
aforesaid. Any party may change the person or address to whom or which the
notices are to be given hereunder, but any such notice shall be effective only
when actually received by the party to whom it is addressed.
16. Governing Law; Severability. This Note and the rights and
obligations of the parties hereunder shall be construed and interpreted in
accordance with the laws of the State of New York. The provisions of this Note
are severable and if any clause or provision shall be held invalid or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision, or part thereof,
in such jurisdiction and shall not in any manner affect such clause or
provision in any other jurisdiction, or any other clause or provision in this
Note in any jurisdiction.
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<PAGE> 14
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Note in New York, New York on this day of July, 1994.
SCAP ASSOCIATES L.L.C.
By ___________________________
(Title)
<PAGE> 1
EXHIBIT 10.1(a)(ii)
SCAP PLEDGE AND SECURITY AGREEMENT II
THIS PLEDGE AND SECURITY AGREEMENT, dated as of July 25, 1994, made by
SCAP ASSOCIATES, L.L.C., a Delaware limited liability corporation (the
"Grantor"), in favor of CONTINENTAL BANK, an Illinois banking corporation, as
collateral agent (together with any successor(s) thereto in such capacity, the
"Collateral Agent") for each of the Credit Parties (as defined below),
W I T N E S S E T H:
WHEREAS, it is a condition precedent to the making of the Loans under
the Term Loan Agreement (as defined below) that the Grantor execute and deliver
this Agreement; and
WHEREAS, it is a condition precedent to the consummation of the
transactions contemplated by the Purchase Agreement (as defined below) that the
Grantor execute and deliver this Agreement; and
WHEREAS, the Grantor has duly authorized the execution, delivery and
performance of this Agreement; and
NOW THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged, and in order to induce Continental (as defined
below) to make Loans pursuant to the Term Loan Agreement and IRHC (as defined
below) to consummate the transactions contemplated by the Purchase Agreement,
the Grantor agrees, for the benefit of each Credit Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
"Agreement" means this Agreement, as amended or otherwise
modified from time to time.
"Collateral" is defined in Section 2.1.
"Collateral Agent" is defined in the preamble.
<PAGE> 2
"Continental" means Continental Bank, an Illinois banking corporation.
"Credit Document" means the Term Loan Agreement and each other Loan
Document, the IRHC Notes and each other document relating thereto.
"Credit Obligor" means any Obligor under any Loan Document or any
obligor (other than IRHC or any of its affiliates) under the Purchase
Agreement, either IRHC Note or any document relating thereto.
"Credit Obligation" means any Obligation under any Loan Document or
any obligation of any Credit Obligor under the Purchase Agreement, either IRHC
Note or any related document.
"Credit Parties" means Continental and IRHC.
"Debtors" means the Grantor and SCHC.
"Distributions" means all stock dividends, dividends payable in trust
interests, liquidating dividends, shares of stock or trust interests resulting
from (or in connection with the exercise of) splits, reclassifications,
warrants, options, non-cash dividends, mergers, consolidations, and all other
distributions (whether similar or dissimilar to the foregoing) on or with
respect to any Pledged Interests or other securities constituting Collateral,
but shall not include Dividends.
"Dividends" means cash dividends and cash distributions with respect
to any Pledged Interests or other Pledged Property made in the ordinary course
of business and not a liquidating dividend.
"Grantor" is defined in the preamble.
"IRHC" means Itel Rail Holding Corporation, a Delaware corporation.
"IRHC Notes" means the IRHC/SCAP Note and the IRHC/SCHC Note.
"IRHC/SCAP Note" means the promissory note, dated as of July 25,
1994, made by the Grantor payable to the order of IRHC, as amended or otherwise
modified from time to time.
"IRHC/SCHC Note" means the promissory note, dated as of July 25, 1994,
made by SCHC payable to the order of IRHC, as amended or otherwise modified
from time to time.
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"Pledged Interest Issuer" means each Person identified in Item B of
Attachment 1 hereto as the issuer of the Pledged Interests identified opposite
the name of such Person.
"Pledged Interests" means all shares of capital stock or trust
interests of any Pledged Interest Issuer which are delivered by the Grantor to
the Collateral Agent as Pledged Property hereunder.
"Pledged Property" means all Pledged Interests and all other pledged
shares of capital stock, pledged trust interests, all other securities, and all
other instruments which are now being delivered by the Grantor to the
Collateral Agent or may from time to time hereafter be delivered by the Grantor
to the Collateral Agent for the purpose of pledge under this Agreement and all
proceeds of any of the foregoing.
"Purchase Agreement" means the Purchase Agreement, dated as of June
23, 1994, among the Grantor, IRHC and Itel Corporation, a Delaware corporation,
as amended or otherwise modified from time to time.
"SCHC" means Signal Capital Holdings Corporation, a Delaware
corporation.
"Secured Obligations" means, collectively, all obligations of the
Grantor now or hereafter existing under
(a) this Agreement;
(b) the Term Loan Agreement;
(c) the SCAP Guaranty II, and
(d) the IRHC/SCAP Note,
whether for principal, interest, costs, fees, expenses, or otherwise, howsoever
created, arising or evidenced, whether direct or indirect, absolute or
contingent or now or hereafter existing or due or to become due.
"Term Loan Agreement" means the Term Loan Agreement, dated as of July
25, 1994, among the Grantor, SCHC and Continental, as amended or otherwise
modified from time to time.
"U.C.C." means the Uniform Commercial Code as in effect in the State
of New York.
SECTION 1.2. Term Loan Agreement Definitions. Unless otherwise
defined herein or the context otherwise requires,
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terms used in this Agreement, including its preamble and recitals, have the
meanings provided in the Term Loan Agreement.
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or
in the Term Loan Agreement or the context otherwise requires, terms for which
meanings are provided in the U.C.C. are used in this Agreement, including its
preamble and recitals, with such meanings.
ARTICLE II
GRANT OF SECURITY INTEREST
SECTION 2.1. Grant of Security Interest. The Grantor hereby pledges,
hypothecates, assigns, charges, mortgages, delivers, and transfers to the
Collateral Agent for the benefit of each of the Credit Parties, and hereby
grants to the Collateral Agent for the benefit of each of the Credit Parties, a
continuing security interest in, all of the following property (the
"Collateral"):
(a) the issued and outstanding shares of capital stock or
trust interests of each Pledged Interest Issuer identified in
Attachment 1 hereto;
(b) all other shares or trust interest in any Pledged
Interest Issuer issued to the Grantor from time to time;
(c) all other Pledged Property, whether now or hereafter
delivered to the Collateral Agent in connection with this Agreement;
(d) all Dividends, Distributions, interest, and other
payments and rights with respect to any Pledged Property;
(e) all proceeds of any and all of the foregoing Collateral
(including, without limitation, proceeds which constitute property of
the types described in clauses (a) through (d) of this Section and, to
the extent not otherwise included, all payments under insurance
(whether or not the Collateral Agent is the loss payee thereof), or
any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing
Collateral.
SECTION 2.2. Security for Secured Obligations. This Agreement
secures the payment in full of all of the Secured Obligations.
SECTION 2.3. Delivery of Pledged Property. All certificates or
instruments (if any) representing or evidencing
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any Collateral, including all Pledged Interests, and all shares or trust
interests in any Pledged Interest Issuer issued to the Grantor from time to
time shall be delivered to and held by or on behalf of the Collateral Agent
pursuant hereto, shall be in suitable form for transfer by delivery, and shall
be accompanied by all necessary instruments of transfer or assignment, duly
executed in blank.
SECTION 2.4. Dividends on Pledged Interests. All Dividends shall be
paid directly to the Collateral Agent.
SECTION 2.5. Continuing Security Interest; Transfer. This Agreement
shall create a continuing security interest in the Collateral and shall
(a) remain in full force and effect until payment in full of
all Secured Obligations,
(b) be binding upon the Grantor and its successors,
transferees and assigns, and
(c) inure to the benefit of the Collateral Agent and each
Credit Party.
Without limiting the foregoing clause (c), any Credit Party may assign or
otherwise transfer (in whole or in part) any Secured Obligation held by it to
any other Person or entity, and such other Person or entity shall thereupon
become vested with all the rights and benefits in respect thereof granted to
such Credit Party under this Agreement or otherwise, subject, however, to any
contrary provisions in such assignment or transfer, and to the applicable
provisions of the relevant Credit Document. Upon the payment in full of all
Secured Obligations, the security interest granted herein shall terminate and
all rights to the Collateral shall revert to the Grantor. Upon any such
termination, the Collateral Agent will, at the Grantor's sole expense, deliver
to the Grantor, without any representations, warranties or recourse of any kind
whatsoever, all certificates and instruments representing or evidencing all
Pledged Interests, together with all other Collateral held by the Collateral
Agent hereunder, and execute and deliver to the Grantor such documents as the
Grantor shall reasonably request to evidence such termination.
SECTION 2.6. Security Interest Absolute. All rights of the
Collateral Agent and the Credit Parties and the security interests granted to
the Collateral Agent hereunder, and all obligations of the Grantor hereunder,
shall be absolute and unconditional, irrespective of
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(a) any lack of validity or enforceability of the Term Loan
Agreement, any IRHC Note or any other Credit Document,
(b) the failure of the Collateral Agent or any Credit Party
(i) to assert any claim or demand or to enforce any
right or remedy against either Debtor, any other Credit
Obligor or any other Person under the provisions of the Term
Loan Agreement, either IRHC Note or any other Credit Document
or otherwise, or
(ii) to exercise any right or remedy against any
other guarantor of, or collateral securing, any Secured
Obligations,
(c) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Secured Obligations or any
other extension, compromise or renewal of any Secured Obligation,
(d) any reduction, limitation, impairment or termination of
any Secured Obligations for any reason, including any claim of waiver,
release, surrender, alteration or compromise, and shall not be subject
to (and the Grantor hereby waives any right to or claim of) any
defense or setoff, counterclaim, recoupment or termination whatsoever
by reason of the invalidity, illegality, nongenuineness, irregularity,
compromise, unenforceability of, or any other event or occurrence
affecting, any Secured Obligations,
(e) any amendment to, rescission, waiver, or other
modification of, or any consent to departure from, any of the terms of
the Term Loan Agreement, either IRHC Note or any other Credit
Document,
(f) any addition, exchange, release, surrender, or
non-perfection of any collateral (including the Collateral), or any
amendment to or waiver or release of or addition to or consent to
departure from any guaranty, for any of the Secured Obligations, or
(g) any other circumstances which might otherwise constitute
a defense available to, or a legal or equitable discharge of, either
Debtor, any other Credit Obligor, any surety or any guarantor.
SECTION 2.7. Grantor Remains Liable. Anything herein to the contrary
notwithstanding, (a) the Grantor shall remain
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liable under any contracts and agreements included in the Collateral to the
extent set forth therein to perform all of its duties and obligations
thereunder to the same extent as if this Agreement had not been executed, (b)
the exercise by the Collateral Agent or any Credit Party of any of the rights
hereunder shall not release the Grantor from any of its duties or obligations
under any contracts and agreements included in the Collateral, and (c) neither
the Collateral Agent nor any Credit Party shall have any obligation or
liability under any contracts and agreements included in the Collateral by
reason of this Agreement, nor shall the Collateral nor any Credit Party be
obligated to perform any of the obligations or duties of the Grantor thereunder
or to take any action to collect or enforce any claim for payment assigned
hereunder.
SECTION 2.8. Waiver of Subrogation. The Grantor hereby irrevocably
waives any claim or other rights which it may now or hereafter acquire against
either Debtor or any other Credit Obligor that arise from the existence,
payment, performance or enforcement of the Grantor's obligations under this
Agreement or any other Credit Document, including any right of subrogation,
reimbursement, exoneration or indemnification, any right to participate in any
claim or remedy of the Collateral Agent or either Credit Party against either
Debtor or any other Credit Obligor or any collateral which the Collateral Agent
or either Credit Party now has or hereafter acquires, whether or not such
claim, remedy or right arises in equity, or under contract, statute or common
law, including the right to take or receive from either Debtor or any other
Credit Obligor, directly or indirectly, in cash or other property or by set-off
or in any manner, payment or security on account of such claim or other rights.
If any amount shall be paid to the Grantor in violation of the preceding
sentence and the Secured Obligations shall not have been paid in cash in full,
such amount shall be deemed to have been paid to the Grantor for the benefit
of, and held in trust for, the Collateral Agent, and shall forthwith be paid to
the Collateral Agent for the benefit of the Credit Parties to be credited and
applied upon the Secured Obligations, whether matured or unmatured. The
Grantor acknowledges that it will receive direct and indirect benefits from the
financing and other arrangements contemplated by the Term Loan Agreement and
the Purchase Agreement and that the waiver set forth in this Section is
knowingly made in contemplation of such benefits.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties. The Grantor represents
and warrants unto the Collateral Agent and each Credit Party, as at the date
hereof and of each subjection of
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any Pledged Interest to the lien hereof, as set forth in this Article.
SECTION 3.1.1. Ownership, No Liens, etc. The Grantor is the legal
and beneficial owner of, and has good and marketable title to (and has full
right and authority to pledge and assign) such Collateral, free and clear of
all liens, security interests, options, or other charges or encumbrances,
except as permitted by the Loan Documents and the IRHC Notes. No effective
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording office, except as permitted
by the Loan Documents and the IRHC Notes.
SECTION 3.1.2. Valid Security Interest. The execution and delivery
of this Agreement, together with (a) in the case of Collateral in which a
security interest may be perfected by possession, the delivery of such
Collateral to the Collateral Agent, or (b) in the case of Collateral in which a
security interest may be perfected by filing financing statements, the filing
in the appropriate filing offices of the financing statements which have been
delivered to the Collateral Agent, are or will be effective to create a valid,
perfected, first priority security interest in all of the Collateral, and all
proceeds thereof, as security for the Secured Obligations. No other filing or
other action is necessary to perfect or protect such Security Interest.
SECTION 3.1.3. As to Pledged Interests. In the case of any Pledged
Interests constituting such Collateral, all of such Pledged Interests are duly
authorized and validly issued, fully paid, and non-assessable.
SECTION 3.1.4. Authorization, Approval, etc. No authorization,
approval, or other action by, and no notice to or filing with, any governmental
authority, regulatory body or any other Person is required either
(a) for the pledge by the Grantor of any Collateral pursuant
to this Agreement or for the execution, delivery, and performance of
this Agreement by the Grantor, or
(b) for the exercise by the Collateral Agent of the voting or
other rights provided for in this Agreement, or, except with respect
to any Pledged Interests, as may be required in connection with a
disposition of such Pledged Interests by laws affecting the offering
and sale of securities generally, the remedies in respect of the
Collateral pursuant to this Agreement.
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SECTION 3.1.5. Compliance with Laws. The Grantor is in compliance
with the requirements of all applicable laws (including, without limitation,
the provisions of the Fair Labor Standards Act), rules, regulations and orders
of every governmental authority, the non-compliance with which might materially
adversely affect the business, properties, assets, operations, condition
(financial or otherwise) or prospects of the Grantor or the value of the
Collateral or the worth of the Collateral as collateral security.
ARTICLE IV
COVENANTS
SECTION 4.1. Protect Collateral; Further Assurances, etc.
(a) The Grantor will not sell, assign, transfer, pledge, or encumber
in any other manner the Collateral (except if and to the extent permitted by
the Credit Documents). The Grantor will warrant and defend the right and
title herein granted unto the Collateral Agent in and to the Collateral (and
all right, title, and interest represented by the Collateral) against the
claims and demands of all Persons whomsoever. The Grantor agrees that at any
time, and from time to time, at the expense of the Grantor, the Grantor will
promptly execute and deliver all further instruments, and take all further
action, that may be necessary or desirable, or that the Collateral Agent may
reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Collateral Agent to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral.
(b) Without limiting the generality of the foregoing, the Grantor
will execute such financing or continuation statements, or amendments thereto,
and such other instruments or notices, as may be necessary or desirable, or as
the Collateral Agent may request, in order to perfect and preserve the security
interests granted or purported to be granted hereby.
(c) The Grantor hereby authorizes the Collateral Agent to file one or
more financing or continuation statements, and amendments thereto, relative to
all or any part of the Collateral without the signature of the Grantor where
permitted by law. A carbon, photographic or other reproduction of this
Agreement or any financing statement covering the Collateral or any part
thereof shall be sufficient as a financing statement where permitted by law.
(d) The Grantor will furnish to the Collateral Agent from time to
time statements and schedules further identifying and describing the Collateral
and such other reports in connection
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with the Collateral as the Collateral Agent may reasonable request, all in
reasonable detail.
SECTION 4.2. Stock Powers, Transfer Instruments, etc. The Grantor
agrees that any Pledged Interests (and any other shares of capital stock or
trust interests constituting Collateral) that are evidenced by certificates and
are delivered by the Grantor pursuant to this Agreement will be accompanied by
duly executed undated blank stock powers, or other equivalent instruments of
transfer acceptable to the Collateral Agent. The Grantor will, from time to
time upon the request of the Collateral Agent, promptly deliver to the
Collateral Agent such stock powers, instruments, and similar documents,
satisfactory in form and substance to the Collateral Agent, with respect to the
Collateral as the Collateral Agent may reasonably request and will, from time
to time upon the request of the Collateral Agent after the occurrence of any
Event of Default, promptly transfer any Pledged Interests or other securities
constituting Collateral into the name of any nominee designated by the
Collateral Agent.
SECTION 4.3. Continuous Security Agreement. The Grantor will, at all
times, keep pledged to the Collateral Agent pursuant hereto all Pledged
Interests and all other securities constituting Collateral, all Dividends and
Distributions with respect thereto, and all other Collateral and other
securities, instruments, proceeds, and rights from time to time received by or
distributable to the Grantor in respect of any Collateral.
SECTION 4.4. Voting Rights; Dividends, etc. The Grantor agrees:
(a) promptly upon receipt thereof by the Grantor and without
any request therefor by the Collateral Agent, to deliver (properly
endorsed where required hereby or requested by the Collateral Agent)
to the Collateral Agent all Dividends, Distributions, all interest,
all principal, all other cash payments, and all proceeds of the
Collateral, all of which shall be held by the Collateral Agent as
additional Collateral for use in accordance with Section 6.3; and
(b) after any Event of Default shall have occurred and be
continuing and the Collateral Agent has notified the Grantor of the
Collateral Agent's intention to exercise its voting power under this
Section 4.4(b)
(i) the Collateral Agent may exercise (to the
exclusion of the Grantor) the voting power and all other
incidental rights of ownership with respect to any Pledged
Interests or other securities constituting
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Collateral and the Grantor hereby grants the Collateral
Agent an irrevocable proxy, exercisable under such
circumstances, to vote the Pledged Interests and such other
Collateral, and
(ii) promptly to deliver to the Collateral Agent
such additional proxies and other documents as may be
necessary to allow the Collateral Agent to exercise such
voting power.
All Dividends, Distributions, interest, principal, cash payments, and proceeds
which may at any time and from time to time be held by the Grantor but which
the Grantor is then obligated to deliver to the Collateral Agent, shall, until
delivery to the Collateral Agent, be held by the Grantor separate and apart
from its other property in trust for the Collateral Agent. The Collateral
Agent agrees that unless an Event of Default shall have occurred and be
continuing and the Collateral Agent shall have given the notice referred to in
Section 4.4(b), the Grantor shall have the exclusive voting power with respect
to any shares of capital stock or trust interests (including any of the Pledged
Interests) constituting Collateral and the Collateral Agent shall, upon the
written request of the Grantor, promptly deliver such proxies and other
documents, if any, as shall be reasonably requested by the Grantor which are
necessary to allow the Grantor to exercise voting power with respect to any
such securities (including any of the Pledged Interests) constituting
Collateral; provided, however, that no vote shall be cast, or consent, waiver,
or ratification given, or action taken by the Grantor that would impair any
Collateral or be inconsistent with or violate any provision of the Term Loan
Agreement, any IRHC Note or any other Credit Document (including this
Agreement).
SECTION 4.5. Offices. The Grantor shall keep its chief place of
business and chief executive office and the office where it keeps its records
concerning the Collateral at its offices at 885 Third Avenue, Suite 2400, New
York, New York, or, upon 30 days' prior written notice to the Collateral Agent,
at such other locations in a jurisdiction where all action required by Section
4.1(b) shall have been taken with respect to the Collateral. The Grantor will
hold and preserve such records and will permit representatives of the
Collateral Agent at any time during normal business hours to inspect and make
abstracts from such records.
SECTION 4.6. Transfers and Other Liens. The Grantor shall not:
(a) Sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral.
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(b) Create or suffer to exist any lien, security interest or
other charge or encumbrance upon or with respect to any of the
Collateral to secure Debt of any person or entity, except as permitted
by the Credit Documents.
SECTION 4.7. Additional Undertakings. The Grantor will not, without
the prior written consent of the Collateral Agent take or omit to take any
action the taking or the omission of which would result in any impairment or
alteration of Collateral.
ARTICLE V
THE COLLATERAL AGENT
SECTION 5.1. Collateral Agent Appointed Attorney-in-Fact. The
Grantor hereby irrevocably appoints the Collateral Agent the Grantor's
attorney-in-fact, with full authority in the place and stead of the Grantor and
in the name of the Grantor or otherwise, from time to time in the Collateral
Agent's discretion, to take any action and to execute any instrument which the
Collateral Agent may deem necessary or advisable to accomplish the purposes of
this Agreement, including without limitation:
(a) after the occurrence and continuance of an Event of
Default, to ask, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause
(a) above; and
(c) to file any claims or take any action or institute any
proceedings which the Collateral Agent may deem necessary or desirable
for the collection of any of the Collateral or otherwise to enforce
the rights of the Collateral Agent with respect to any of the
Collateral.
The Grantor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 5.2. Collateral Agent May Perform. If the Grantor fails to
perform any agreement contained herein, the Collateral Agent may itself
perform, or cause performance of, such agreement, and the expenses of the
Collateral Agent incurred in
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connection therewith shall be payable by the Grantor pursuant to Section 6.4.
SECTION 5.3. Collateral Agent Has No Duty. The powers conferred on
the Collateral Agent hereunder are solely to protect its interest in the
Collateral and shall not impose any duty on it to exercise any such powers.
Except for the reasonable care of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Collateral Agent
shall have no duty as to any Collateral or responsibility for (a) ascertaining
or taking action with respect to calls, conversions, exchanges, maturities,
tenders or other matters relative to any Pledged Property, whether or not the
Collateral Agent has or is deemed to have knowledge of such matters, or (b)
taking any necessary steps to preserve rights against prior parties or any
other rights pertaining to any Collateral.
SECTION 5.4. Reasonable Care. The Collateral Agent is required to
exercise reasonable care in the custody and preservation of any of the
Collateral in its possession; provided, however, the Collateral Agent shall be
deemed to have exercised reasonable care in the custody and preservation of any
of the Collateral, if it takes such action for that purpose as the Grantor
reasonably requests in writing at times other than upon the occurrence and
during the continuance of any Event of Default, but failure of the Collateral
Agent to comply with any such request at any time shall not in itself be deemed
a failure to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall have
occurred and be continuing:
(a) The Collateral Agent may exercise in respect of the
Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a
secured party on default under the U.C.C. (whether or not the U.C.C.
applies to the affected Collateral) and also may, without notice
except as specified below, sell the Collateral or any part thereof in
one or more parcels at public or private sale, at any of the
Collateral Agent's offices or elsewhere, for cash, on credit or for
future delivery, and upon such other terms as the Collateral Agent may
deem commercially reasonable. The Grantor agrees that, to the extent
notice of sale shall be required by law, at least ten days' prior
notice to the Grantor of the time and place of any public sale or the
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time after which any private sale is to be made shall constitute
reasonable notification. The Collateral Agent shall not be obligated
to make any sale of Collateral regardless of notice of sale having
been given. The Collateral Agent may adjourn any public or private
sale from time to time by announcement at the time and placed fixed
therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned.
(b) The Collateral Agent may
(i) transfer all or any part of the Collateral into
the name of the Collateral Agent or its nominee, with or
without disclosing that such Collateral is subject to the lien
and security interest hereunder,
(ii) notify the parties obligated on any of the
Collateral to make payment to the Collateral Agent of any
amount due or to become due thereunder,
(iii) enforce collection of any of the Collateral
by suit or otherwise, and surrender, release or exchange all
or any part thereof, or compromise or extend or renew for any
period (whether or not longer than the original period) any
obligations of any nature of any party with respect thereto,
(iv) endorse any checks, drafts, or other writings
in the Grantor's name to allow collection of the Collateral,
(v) take control of any proceeds of the Collateral,
and
(vi) execute (in the name, place and stead of the
Grantor) endorsements, assignments, stock powers and other
instruments of conveyance or transfer with respect to all or
any of the Collateral.
SECTION 6.2. Compliance with Restrictions. The Grantor agrees that
in any sale of any of the Collateral whenever an Event of Default shall have
occurred and be continuing, the Collateral Agent is hereby authorized to comply
with any limitation or restriction in connection with such sale as it may be
advised by counsel is necessary in order to avoid any violation of applicable
law (including compliance with such procedures as may restrict the number of
prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications, and restrict such prospective bidders
and purchasers to persons who will represent and agree
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that they are purchasing for their own account for investment and not with a
view to the distribution or resale of such Collateral), or in order to obtain
any required approval of the sale or of the purchaser by any governmental
regulatory authority or official, and the Grantor further agrees that such
compliance shall not result in such sale being considered or deemed not to have
been made in a commercially reasonable manner, nor shall the Collateral Agent
be liable nor accountable to the Grantor for any discount allowed by the reason
of the fact that such Collateral is sold in compliance with any such limitation
or restriction.
SECTION 6.3. Application of Proceeds. All cash proceeds received by
the Collateral Agent in respect of any sale of, collection from, or other
realization upon, all or any part of the Collateral shall, be held by the
Collateral Agent to be applied (after payment of any amounts payable to the
Collateral Agent pursuant to Section 6.4) in whole or in part by the Collateral
Agent against, all or any part of the Secured Obligations in such order as the
Collateral Agent shall elect. Any surplus of such cash or cash proceeds held
by the Collateral Agent and remaining after payment in full of all the Secured
Obligations, shall be paid over to the Grantor or to whomsoever may be lawfully
entitled to receive such surplus.
SECTION 6.4. Indemnity and Expenses. The Grantor hereby indemnifies
and holds harmless the Collateral Agent from and against any and all claims,
losses, and liabilities arising out of or resulting from this Agreement
(including enforcement of this Agreement), except claims, losses, or
liabilities resulting from the Collateral Agent's gross negligence or wilful
misconduct. Upon demand, the Grantor will pay to the Collateral Agent the
amount of any and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which the
Collateral Agent may incur in connection with:
(a) the administration of this Agreement, the Term Loan
Agreement, either IRHC Note and each other Loan Document;
(b) the custody, preservation, use, or operation of, or the
sale of, collection from, or other realization upon, any of the
Collateral;
(c) the exercise or enforcement of any of the rights of the
Collateral Agent hereunder; or
(d) the failure by the Grantor to perform or observe any of
the provisions hereof.
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ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Amendments, etc. No amendment to or waiver of any
provision of this Agreement nor consent to any departure by the Grantor
herefrom shall in any event be effective unless the same shall be in writing
and signed by the Grantor and the Collateral Agent, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which it is given.
SECTION 7.2. Protection of Collateral. The Collateral Agent may from
time to time, at its option, perform any act which the Grantor agrees hereunder
to perform and which the Grantor shall fail to perform after being requested in
writing so to perform (it being understood that no such request need be given
after the occurrence and during the continuance of an Event of Default) and the
Collateral Agent may from time to time take any other action which the
Collateral Agent reasonably deems necessary for the maintenance, preservation
or protection of any of the Collateral or of its security interest therein.
SECTION 7.3. Addresses for Notices. All notices and other
communications provided to any party pursuant to this Agreement shall be in
writing (including telecopy) and addressed, delivered or transmitted to such
party at its address or telecopy number set forth below or at such other
address or telecopy number as may be designated by such party in a notice to
the other party or parties:
Collateral Agent:
Continental Bank
231 South LaSalle Street
Chicago, Illinois 60697
Telephone: 312-828-8912
Telecopy: 312-828-3864
Attention: L. Dustin Vincent, III
Vice President
Continental:
Continental Bank
231 South LaSalle Street
Chicago, Illinois 60697
Telephone: 312-828-8912
Telecopy: 312-828-3864
Attention: L. Dustin Vincent, III
Vice President
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IRHC:
Itel Rail Holdings Corporation
200 West Ninth Street Plaza
Wilmington, Delaware 19801
Telephone: 302-655-8894
Telecopy: 302-658-0468
Attention: Secretary
with a copy to:
Itel Rail Holdings Corporation
2 North Riverside Plaza
Suite 1900
Chicago, Illinois 60606
Telephone: 312-902-1515
Telecopy: 312-902-1512
Attention: General Counsel
The Grantor:
SCAP
885 Third Avenue
Suite 2400
New York, New York 10022
Telephone: 212-751-4110
Telecopy: 212-826-5617
Attention: Douglas H. Wolf
Any notice, if mailed and properly addressed with postage prepaid or if
properly addressed and sent by pre-paid courier service, shall be deemed given
when received; any notice, if transmitted by telecopy, shall be deemed given
when transmitted with electronic confirmation of receipt.
SECTION 7.4. Section Captions. Section captions used in this
Agreement are for convenience of reference only, and shall not affect the
construction of this Agreement.
SECTION 7.5. Severability. Wherever possible each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
SECTION 7.6. Governing Law, Entire Agreement, etc. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE
SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR
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<PAGE> 18
COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
NEW YORK. THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS CONSTITUTE THE ENTIRE
UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER
HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT
THERETO.
SECTION 7.7. Forum Selection and Consent to Jurisdiction. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
ORAL OR WRITTEN) OR ACTIONS OF THE COLLATERAL AGENT, ANY CREDIT PARTY OR THE
GRANTOR WITH RESPECT HERETO SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE
COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE
COLLATERAL AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE GRANTOR HEREBY EXPRESSLY AND
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK
AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY
AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH
LITIGATION. THE GRANTOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS
BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT
THE STATE OF NEW YORK. THE GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR
HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF SUCH LITIGATION BROUGHT IN ANY
SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE GRANTOR HAS OR
HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS
PROPERTY, THE GRANTOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS AGREEMENT.
SECTION 7.8. Waiver of Jury Trial. THE COLLATERAL AGENT AND THE
GRANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
THE COLLATERAL AGENT, ANY CREDIT PARTY OR THE GRANTOR WITH RESPECT HERETO. THE
GRANTOR ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER CREDIT
DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE COLLATERAL AGENT ENTERING INTO THIS
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<PAGE> 19
AGREEMENT AND EACH SUCH OTHER CREDIT PARTY ENTERING INTO SUCH CREDIT DOCUMENT.
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<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective representatives thereunto
duly authorized as of the day and year first above written.
SCAP ASSOCIATES, L.L.C.
By:_________________________________
Title:
CONTINENTAL BANK, as Collateral Agent
By:__________________________________
Title:
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<PAGE> 21
ATTACHMENT 1
to
Pledge and Security
Agreement
Pledged Interests
Pledged Interest Issuer Interests
- - ------------------------ ----------------------------
Signal Capital Holdings 100% of the Grantor's shares
of
Corporation common stock of Signal
Capital
Holdings Corporation
<PAGE> 1
EXHIBIT 10.1(b)(i)
REDEMPTION NOTE
$89,100,000 NEW YORK, NEW YORK
July 25, 1994
FOR VALUE RECEIVED, the undersigned ("Maker") promises to pay to the
order of ITEL RAIL HOLDINGS CORPORATION, a Delaware corporation ("Payee") at
its place of payment listed in Section 13 below, on or before December 1, 1998,
the sum of EIGHTY-NINE MILLION AND ONE HUNDRED THOUSAND DOLLARS
($89,100,000.00) plus interest thereon on the unpaid principal amount hereof
from time to time outstanding from July 1, 1994 until maturity (provided, that
for purposes of calculating the interest due hereunder the full amount of
$89,100,000 shall be deemed outstanding for the period of time, if any, from
July 1, 1994 until the date hereof, even if no amount has then been advanced
hereunder), at the Interest Rate (as defined below) from time to time in effect
in accordance with the terms hereof. This Redemption Note is a purchase money
note and is executed and delivered pursuant to that certain Purchase Agreement
dated as of June 23, 1994 by and among SCAP Associates L.L.C., Payee and Itel
Corporation, a Delaware corporation (the "Purchase Agreement") as a portion of
the redemption price payable by Maker in respect of certain shares in Maker
held by Payee, all as provided in the Purchase Agreement. Certain capitalized
terms used and not defined herein shall have the meanings ascribed to such
terms in the Purchase Agreement. In consideration of the extension of credit
evidenced by this Redemption Note and of the transaction contemplated by the
Purchase Agreement, Maker hereby agrees as follows:
1. Interest Rate. Subject to the provisions of Section 2 below, the
principal amount outstanding (or deemed outstanding) from time to time under
this Redemption Note shall bear interest at a rate (the "Interest Rate")
calculated as follows:
(a) From July 1, 1994 to and including July 1, 1995, the Interest
Rate shall be a rate per annum equal to the rate from time to time announced by
Continental Bank, N.A. or its successor (the "Bank") as its "prime rate" (the
"Prime Rate").
(b) From and after July 2, 1995, the Interest Rate at any time shall
be a rate equal to the greater of (i) a rate per annum equal to the Prime Rate
in effect at such time, plus one and one- half (1-1/2%) and (ii) the rate per
annum in effect at such time (whether as a result of default or otherwise) with
respect to the Bank Loan (as defined below).
(c) As used in this Redemption Note, the "Bank Loan" shall mean the
loan, in the original principal amount of $24,400,000, made by the Bank to
Maker on the date hereof, or any refinancing
<PAGE> 2
or replacement thereof which satisfies all of the following conditions:
(i) such loan is made by a reputable bank, insurance company or other
institutional lender, (ii) the principal amount of such loan does not exceed an
amount equal to the sum of $24,400,000, plus any accrued and unpaid interest on
the Bank Loan that has been added to principal in accordance with the terms
thereof, less any payments of principal made with respect to the Bank Loan, and
(iii) the maximum rate of interest payable on such loan prior to default does
not exceed the Prime Rate plus 2%.
2. Default Rate. Notwithstanding Section 1 above, after the
occurrence and during the continuance of an Event of Default hereunder, the
principal amount outstanding from time to time under this Redemption Note shall
bear interest at a rate (the "Default Rate equal to the greater of (i) two
percent (2%) per annum in excess of the Interest Rate that would otherwise be
applicable pursuant to Section 1(a) or Section 1(b)(i) hereof, and (ii) the
rate applicable under Section 1(b)(ii) hereof.
3. Certain Calculations; Limitation. The Interest Rate and the
Default Rate hereunder shall change when and as the Prime Rate changes, and
shall be computed, for the exact number of days elapsed, on the basis of a year
of 360 days. Notwithstanding any other provision of this Redemption Note, in
no event shall the Interest Rate or Default Rate hereunder exceed the maximum
rate of interest permitted under applicable law.
4. Payments of Interest; Maturity. Interest hereon shall be payable
semiannually for the first year on December 31, 1994 and June 30, 1995 and
monthly thereafter on the first day of each month (an "Interest Payment Date");
provided, that any unpaid interest may at Maker's election be added to
principal on such Interest Payment Date and shall thereafter bear interest at
the rates set forth above. All unpaid principal and accrued interest shall be
payable in full on December 1, 1998.
5. Security. This Redemption Note is secured by (i) a SCAP Guaranty
II of even date herewith (the "Guaranty") made by SCAP Associates, L.L.C. for
the benefit of Payee and (ii) an SCHC Pledge and Security Agreement II, of even
date herewith, made by Maker for the benefit of the Bank, as agent for Payee
and the Bank, (the "Security Agreement") and creating a first security interest
in certain beneficial interests in Railcar Trust No. 1992-1, a Delaware
business trust (the "Trust"), and the Guaranty is secured by a SCAP Pledge and
Security Agreement II of even date herewith (the "Pledge Agreement"). The
Guaranty, the Security Agreement and the Pledge Agreement are collectively
referred to herein as the "Collateral Documents".
6. Prepayment. After compliance by SCAP Associates, L.L.C. with its
obligations under Section 5.10 of the Purchase
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<PAGE> 3
Agreement, Maker shall have the right from time to time upon 10 days
prior written notice to Payee to prepay this Redemption Note prior to the
expressed maturity hereof (together with all accrued and unpaid interest hereon
and all other amounts due hereunder), in whole but not in part, without premium
or penalty.
7. Representations and Warranties. Maker hereby represents and
warrants to Payee that:
(a) [Intentionally Omitted]
(b) This Redemption Note and each of the Collateral Documents to which
Maker is a party has been duly authorized, executed and delivered by Maker
and constitutes the valid and legally binding obligation of Maker,
enforceable in accordance with its terms. Each of the Collateral Documents
to which SCAP Associates, L.L.C. is a party has been duly authorized,
executed and delivered by SCAP Associates, L.L.C. and constitutes the valid
and legally binding obligation of SCAP Associates, L.L.C., enforceable in
accordance with its terms.
(c) The execution and delivery of this Redemption Note and the
Collateral Documents, and performance by Maker and SCAP Associates, L.L.C.
of their respective obligations hereunder and thereunder, will not violate
any provision of law.
(d) [Intentionally Omitted]
(e) Since the conveyance of shares in Maker to SCAP Associates L.L.C.
pursuant to the Purchase Agreement, Maker has not acquired any assets other
than cash and cash equivalents, the Trust Interests, and the assets
acquired pursuant to Section 5.9 of the Purchase Agreement and has not
incurred any liabilities, contingent or otherwise, which are not
Indemnified Liabilities within the meaning of the Purchase Agreement, other
than Liabilities under the Transaction Documents, this Redemption Note, the
Bank Loan, the guaranty by Maker of the Note of $80,400,000 issued by SCAP
Associates, L.L.C., to Payee (the "SCAP Note"), the guaranty by Maker of
the loan, in the original principal amount of $11,900,000 made by the Bank
to SCAP Associates, L.L.C. (together with the Bank Loan, the "Acquisition
Loan"), and accrued expenses to be paid from the Bank Loan.
(f) Since the conveyance of shares in Maker to SCAP Associates L.L.C.
pursuant to the Purchase Agreement, there has not occurred any default by
Maker under, or any violation by Maker of, any term of, any agreement,
ordinance, resolution, decree, bond, note, indenture, order
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<PAGE> 4
or judgment (including, without limitation, the documents and
agreements executed or delivered in connection with the Acquisition Loan)
to which Maker is a party or by which it is bound, or by which any of the
properties or assets owned by or used in the conduct of its business is
affected, except that certain acknowledgements and consents in connection
with the transfer of assets to Maker as provided by Section 5.9 of the
Purchase Agreement have been applied for but have not yet been received.
(g) Maker is not a party to or bound by, nor are any of the properties
or assets owned by it or used in the conduct of its business affected by,
any agreement, ordinance, resolution, decree, bond, note, indenture, order
or judgment executed since the conveyance of shares in Maker to SCAP
Associates L.L.C. pursuant to the Purchase Agreement, or subject to any
charter or other corporate restriction arising since the conveyance of
shares in Maker to SCAP Associates L.L.C. pursuant to the Purchase
Agreement, which in either case materially and adversely affects its
business assets or condition, financial or otherwise.
8. Financial Statements. Maker shall deliver to Payee:
(a) Annually, as soon as available, but in any event within 60 days
after the last day of each of its fiscal years, consolidated and
consolidating balance sheets of Maker and its Subsidiaries, as at such last
day of the fiscal year, and consolidated and consolidating statements of
income and retained earnings and changes in financial position, for such
fiscal year, each prepared in accordance with generally accepted accounting
principles consistently applied, in reasonable detail, such consolidated
statements to be certified without qualification by a firm of independent
certified public accountants satisfactory to Payee.
(b) As soon as available, but in any event within 30 days after the
end of each of Maker's first three fiscal quarterly periods, the
consolidated and consolidating balance sheets of Maker and its Subsidiaries
as of the last day of such quarter, and consolidated and consolidating
statements of income and retained earnings and changes in financial
position, for such quarter, all in reasonable detail, each such statement
to be certified by the chief financial, or accounting, officer of Maker as
having been prepared in accordance with generally accepted accounting
principles consistently applied (subject to year-end audit adjustments).
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<PAGE> 5
(c) Promptly after a written request therefor, such other financial
data or information as Payee may reasonably request from time to time.
(d) At the same time as it delivers the financial statements required
under the provisions of Sections 8(a) and 8(b), a certificate signed by the
president and the chief financial, or chief accounting, officer of Maker,
to the effect that no Event of Default hereunder or under any other
agreement to which Maker or any Subsidiary is a party or by which it is
bound, or by which any of its properties or assets may be affected, and no
event which, with the giving of notice or the lapse of time, or both, would
constitute such an Event of Default, has occurred and specifying in
reasonable detail the exceptions, if any, to such statement.
As used herein, the term "Subsidiary" or "Subsidiaries" means and
includes (1) the Trust and (2) the partnership in which the Trust has an
interest (the "Partnership").
9. Affirmative Covenants. Maker will, and will cause each Subsidiary
to:
(a) maintain adequate insurance;
(b) duly pay and discharge all taxes or other claims which might
become a lien upon any of its property except to the extent that such items
are being contested in good faith and reserves satisfactory to Payee have
been established with respect thereto;
(c) maintain, preserve and keep its properties in good repair, working
order and condition, and make all reasonable repairs, replacements,
additions, betterments and improvements thereto;
(d) comply with all statutes, rules and regulations and maintain its
corporate existence, and perform its obligations under and comply with the
terms and conditions of the Transaction Documents;
(e) pay all stamp or issuance taxes, and all recording and filing fees
and other charges, if any, payable by reason of the execution, delivery,
issuance recording or filing of this Note and the Collateral Documents
under any applicable ordinance or statute now existing or hereafter
enacted, and Maker will at all times indemnify and hold harmless Payee
against any liability in respect thereof;
(f) permit Payee to make or cause to be made, at Maker's expense,
inspections and audits of any books,
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<PAGE> 6
records and papers of Maker and to make extracts therefrom at all such
reasonable times and as often as Payee may reasonably require;
(g) apply all distribution received from the Trust, and all other
amounts, of any kind or nature, received (directly or indirectly) with
respect to the Trust Interests, first to pay this Redemption Note and the
Bank Loan, and second to pay the SCAP Note and the balance of the
Acquisition Loan, with such payments to be applied in each case pro rata
(in accordance with the respective aggregate principal and interest then
outstanding to Payee, on the one hand, and the Bank, on the other hand
under this Redemption Note, the SCAP Note and the Acquisition Loan); and
(h) cause all amounts received by the Trust and permitted under the
Transaction Documents to be distributed to the beneficiaries thereof to be
promptly so distributed and applied as provided in Section 9(g) above.
10. Negative Covenants. Except with the consent in writing of Payee,
Maker will not, and will not permit any Subsidiary to:
(a) incur, or permit to exist, any indebtedness for borrowed money,
other than (i) as specified in Section 7(e), (ii) the liabilities arising
under the Transaction Documents and (iii) with respect to Maker,
indebtedness existing at the time of the transfer of shares in Maker to
SCAP Associates L.L.C. pursuant to the Purchase Agreement;
(b) create, assume, or permit to exist, any mortgage, pledge, lien
or encumbrance of or upon, or security interest in, any of its property or
assets now owned or hereafter acquired except (i) the liens created by the
Collateral Documents; (ii) the liens created by the Transaction Documents;
(iii) liens for taxes or other governmental charges which are not
delinquent or which are being contested in good faith and for which a
reserve satisfactory to Payee shall have been established; (iv) liens (if
any) existing at the time of the conveyance of shares in Maker to SCAP
Associates L.L.C. pursuant to the Purchase Agreement; and (v) liens
encumbering property acquired by Maker on or after the date hereof at the
time such property is acquired, but only so long as (A) recourse with
respect to such indebtedness is limited to the property securing such
indebtedness and Maker has no personal liability in respect of such
indebtedness and (B) such liens encumber only the property that is subject
thereto at the time such property is acquired by Maker, and do not encumber
any other property of Maker;
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<PAGE> 7
(c) enter into any merger or consolidation or sell or lease or
otherwise dispose of any of its assets to a related or unrelated party;
(d) lend or advance money, credit or property to or invest in (by
capital contribution, loan, purchase or otherwise) any firm, corporation,
or other person except investments in United States Government obligations
and certificates of deposits of any banking institution with combined
capital and surplus of at least $500,000,000;
(e) assume, endorse, be or become liable for or guarantee the
obligations of any person, except (i) by the endorsement of negotiable
instruments for deposit or collection in the ordinary course of business,
(ii) as specified in Section 7(e), and (iii) with respect to the
Transaction Documents, as contemplated by the Purchase Agreement;
(f) declare or pay any dividends on, or make any distribution with
respect to (upon liquidation or otherwise) its capital stock, or purchase,
redeem, retire or otherwise acquire any of its capital stock at any time
outstanding, except that the foregoing shall not limit (1) any
distributions by the Trust made pro rata to its beneficiaries, provided
that the entire amount of any such distributions shall be applied to pay
amounts due under this Redemption Note, the SCAP Note and the Acquisition
Loan in accordance with Section 9(g) above, or (2) the redemption of shares
of Maker from Payee as contemplated by the Purchase Agreement;
(g) enter into any agreement or take any action (or cause or permit
the Trust to enter into any agreement or take any action) which has the
effect of amending, modifying, supplementing, waiving or otherwise
affecting any of the Transaction Documents; provided, however, Maker may
agree with the Bank that it will consent to the transfer of the Acquired
Trust Interests and will exercise its rights under the Trust in a manner
which will require the consent of the holder of the Acquired Trust
Interests; or
(h) engage in any activity other than the holding and management of
the Shares, the Trust Interests, the Trust assets, the Partnership assets
and the assets acquired pursuant to Section 5.9 of the Purchase Agreement.
11. Events of Default. If any one or more of the following events
("Events of Default") shall occur, the entire unpaid balance of the principal
of and interest on this Redemption Note shall immediately become due and
payable upon written notice to that effect given to Maker by Payee, except that
in the case of
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the occurrence of any Event of Default described in paragraph (f) of
this Section 11, no such notice shall be required:
(a) Failure to make any payment of principal or interest due under
this Redemption Note or the Scap Note when due; or,
(b) Failure to observe any of the agreements of Maker contained in
Section 10 hereof, or failure of SCAP Associates L.L.C. to observe any of
its agreements contained in Section 10 of the SCAP Note; or,
(c) Failure by the Maker or SCAP Associates, L.L.C. to perform any
other term, condition or covenant of the Purchase Agreement, any of the
Collateral Documents, this Redemption Note, the SCAP Note or any other
agreement, instrument or document delivered pursuant hereto or thereto or
in connection herewith or therewith which shall remain unremedied for a
period of 30 days after notice thereof shall have been given by Payee to
Maker; or,
(d) All or any portion of the Acquisition Loan shall not be paid when
due and payable, upon maturity, by acceleration or otherwise, or the holder
of the Acquisition Loan or any of its agents shall have taken any action
(judicial or otherwise) to commence enforcement, foreclosure, sale or other
proceedings or to exercise any other right or remedy with respect to any
collateral securing the Acquisition Loan; provided, however, during the
first year of this Redemption Note, maturity alone of the Acquisition Loan
without any declaration of default or acceleration or other action by the
Bank shall not be an Event of Default unless and until such condition
continues for a total of 180 days; or,
(e) Any representation or warranty of SCAP Associates L.L.C. or Maker
contained in the Purchase Agreement, any of the Collateral Documents, this
Redemption Note, the SCAP Note or in any certificate, statement or report
made in compliance with any of the foregoing, shall have been false in any
material respect when made; or,
(f) SCAP Associates L.L.C., Maker or any Subsidiary or any endorser or
guarantor hereof shall make an assignment for the benefit of creditors,
file a petition in bankruptcy, be adjudicated insolvent or bankrupt,
petition or apply to any tribunal for the appointment of a receiver of any
trustee for it or a substantial part of its assets, or shall commence any
proceeding under any bankruptcy, reorganization, arrangement, readjustment
of debt, dissolution, or liquidation law or statute of any jurisdiction,
whether now or hereafter in effect; or if
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there shall have been filed any such petition or application, or any
such proceeding shall have been commenced against it, which remains
undismissed for a period of thirty days or more, or SCAP Associates L.L.C.,
Maker or any Subsidiary or endorser or guarantor hereof by any act or
omission shall indicate its consent to approval of or acquiescence in any
such petition, application or proceeding or the appointment of a receiver
of or any trustee for it or any substantial part of any of its properties,
or shall suffer any such receivership or trusteeship to continue
undischarged for a period of thirty days or more; or
(g) Any judgment against SCAP Associates L.L.C., Maker or any
Subsidiary or any attachment, levy or execution against any of its
properties for any amount shall remain unpaid, unstayed on appeal,
undischarged, unbonded or undismissed for a period of thirty days or more
(other than any such matters involving an amount not in excess of $100,000
in the aggregate that relate solely to assets contributed to Maker pursuant
to Section 5.9 of the Purchase Agreement and for which neither Maker nor
SCAP Associates L.L.C. has any recourse liability); or,
(h) Any of the Collateral Documents, or any lien or security interest
granted under any thereof, shall (except in accordance with its terms), in
whole or in part, terminate, cease to be effective, or cease to be the
legally valid, binding and enforceable obligation of Maker or SCAP
Associates L.L.C.; or any lien or security interest created or required to
be created thereunder shall, in whole or in part, fail to be created and
maintained as a perfected first priority lien or security interest, subject
only to those exceptions (if any) expressly permitted by this Redemption
Note, the SCAP Note and the Collateral Documents; or the Guaranty shall be
accelerated pursuant to the terms thereof; or,
(i) without the prior written consent of Payee, SCAP Associates,
L.L.C., shall, or shall enter into any agreement to, sell, assign, convey,
pledge, hypothecate or otherwise transfer to a related or unrelated party
(except pursuant to (1) the Collateral Documents and the lien created by
SCAP Associates, L.C.C., in favor of the Bank and encumbering only the
Acquired Trust Interests and (2) agreements of sale or agreements to sell
pursuant to which all indebtedness under the Acquisition Loan, this Note
and the SCAP Note is to be paid in full) any of the collateral that is
subject to the lien of the Collateral Documents (including, without
limitation, any shares in Maker) or any of the Acquired Trust Interests, or
Maker shall, or shall enter into any agreement to, sell, assign, convey,
pledge, hypothecate or
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<PAGE> 10
otherwise transfer any beneficial interest in the Trust to a related or
unrelated party; or,
(j) Maker shall, or shall enter into any agreement to, issue any
capital stock, or any option, warrant or other right to acquire capital
stock, or any instrument or agreement convertible into or exchangeable for
capital stock; other than any such issuance with respect to common stock if
after giving effect to all such issuances (and assuming all exercises,
conversions and exchanges by persons other than Payee, but assuming no such
exercise, exchange or conversion by Payee) the shares subject to the lien
of the Pledge Agreement shall constitute not less than and not more than
79% (both in terms of rights to dividends and distributions and rights to
vote, for the election of directors or otherwise) of the capital stock of
Maker.
12. Remedies.
(a) In the event of the occurrence of any Event of
Default, Payee may, but shall not be required to exercise any right or
remedy available to Payee under the Purchase Agreement, this Redemption
Note, any of the Collateral Documents or applicable law (including but not
limited to the rights and remedies of a secured party under the Uniform
Commercial Code), and without limiting the generality of the foregoing, may
exercise all rights and remedies of Payee under the Collateral Documents.
Amounts received by Payee may be applied by Payee to the payment of this
Redemption Note and of any other liabilities, claims or obligations of
Maker to Payee under or in connection with this Redemption Note, the
Collateral Documents or the Purchase Agreement, in such order as Payee may
elect. Each and every right and remedy hereby granted to Payee or allowed
to it by law, shall be cumulative and not exclusive the one of the other,
and may be exercised by Payee from time to time and as often as may be
necessary. Payee may assign and transfer this Redemption Note to any other
person, firm or corporation and may deliver and repledge the collateral
security or any party thereof to the assignee or transferee of this
Redemption Note, who shall thereupon become vested with all the powers and
rights above given to Payee in respect thereof, and Payee shall thereafter
be forever released and discharged of and from all responsibility or
liability to Maker for or on account of the collateral security so
delivered.
(b) In the event that this Redemption Note is placed in the hands of an
attorney for collection by reason of any default hereunder, Maker agrees to
pay all reasonable attorney's fees, costs and other charges in connection
herewith. Maker promises to pay all expenses of any nature
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as soon as incurred whether in or out of court and whether incurred
before or after this Redemption Note shall become due at its maturity date
or otherwise and costs which Payee may deem necessary or proper in
connection with the satisfaction of the indebtedness or the administration,
supervision, preservation, protection (including but not limited to
maintenance of adequate insurance) of or the realization upon the
collateral.
(c) Maker hereby waives presentment, demand for payment, protest,
notice of protest, notice of dishonor, and any or all other notices or
demands in connection with the delivery, acceptance, performance, default,
or enforcement of this Redemption Note, and consents to any and all delays,
extensions of time, renewals, releases of Maker and of any security,
waivers or modifications that may be granted or consented to by Payee with
regard to the time of payment or with respect to any other provisions of
this Redemption Note and agrees that no such action or failure to act on
the part of Payee shall in any way affect or impair the obligations of
Maker or be construed as a waiver by Payee of, or otherwise affect, its
right to avail itself of any remedy hereunder with the same force and
effect as if Maker had expressly consented to such action or inaction upon
the party of Payee.
13. Payments. All payments by Maker on account of principal or interest
shall be made in lawful money of the United States of America in
immediately available funds. If any payment of principal or interest
becomes due on a day on which the banks in Chicago, Illinois or New York,
New York, are required or permitted by law to remain closed, such payment
may be made on the next succeeding business day on which such banks are
open, and such extensions shall be included in computing interest in
connection with such payment. All payment shall be made to the following
account, or such other account as may from time to time be designated in
writing by Payee:
Name of Bank: PNC Bank, Delaware
Address: 300 Delaware Avenue, Wilmington DE 19801
ABA Number: 031100089
Name of Account: Itel Rail Holdings Corporation
Account Number: 5795135488
14. Miscellaneous.
(a) All agreements, representations and warranties made herein shall
survive the delivery of this Redemption Note. Maker waives trial by jury,
set-off and counterclaim of any nature or description in any litigation in
any court with respect to, in connection with, or arising out of, this
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<PAGE> 12
Redemption Note or any instruments or document delivered pursuant
hereto or the validity, protection, interpretation, collection or
enforcement hereof.
(b) No modification or waiver of or with respect to any provision of
this Redemption Note, or consent to any departure by Maker from any of the
terms or conditions hereof, shall in any event be effective unless it shall
be in writing and signed by Payee, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which
given. No notice to or demand on Maker in any case shall, of itself,
entitle it to any other or further notice or demand in similar or other
circumstances.
(c) Each and every right granted to Payee hereunder or under any other
document delivered hereunder or in connection herewith, or allowed it by
law or equity, shall be cumulative and may be exercised from time to time.
No failure on the part of Payee or the holder of this Redemption Note to
exercise, and no delay in exercising, any right shall operate as a waiver
thereof, nor shall any single or partial exercise of any right preclude any
other or future exercise thereof or the exercise of any other right.
15. Notices. All notices, requests and other communications pursuant to
this Redemption Note shall be in writing, either by letter (delivered
by hand or sent by certified mail, return receipt requested) or telegram,
addressed as follows:
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(a) if to Maker: Signal Capital Holdings Corporation
c/o SCAP Associates L.L.C.
885 Third Avenue
Suite 2400
New York, New York 10022
Attention: Douglas H. Wolf
Facsimile Number: (212) 826-5617
and
(b) if to Payee: Itel Rail Holdings Corporation
200 West Ninth Street Plaza
Wilmington, Delaware 19801
Facsimile Number: (302) 658-0468
with a copy to: Itel Corporation
Two North Riverside Plaza
Chicago, Illinois 60606
Attention: General Counsel
Facsimile Number: (312) 902-1512
Any notice, request or communication hereunder shall be deemed to have
been given when deposited in the mails, postage prepaid, or in the case of
telegraphic notice, when delivered to the telegraph company, addressed as
aforesaid. Any party may change the person or address to whom or which the
notices are to be given hereunder, but any such notice shall be effective only
when actually received by the party to whom it is addressed.
16. Governing Law; Severability. This Redemption Note and the rights
and obligations of the parties hereunder shall be construed and interpreted in
accordance with the laws of the State of New York. The provisions of this
Redemption Note are severable and if any clause or provision shall be held
invalid or unenforceable in whole or in part in any jurisdiction, then such
invalidity or unenforceability shall affect only such clause or provision, or
part thereof, in such jurisdiction and shall not in any manner affect such
clause or provision in any other jurisdiction, or any other clause or provision
in this Redemption Note in any jurisdiction.
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IN WITNESS WHEREOF, the undersigned has executed and delivered this Note
in New York, New York on this ________ day of July, 1994.
SIGNAL CAPITAL HOLDINGS
CORPORATION
By ___________________________
(Title)
<PAGE> 1
EXHIBIT 10.1(b)(ii)
SCAP GUARANTY II
THIS GUARANTY, dated as of July 25, 1994, made by SCAP ASSOCIATES,
L.L.C., a Delaware limited liability company (the "Guarantor"), in favor of
CONTINENTAL BANK, an Illinois banking corporation ("Continental") and ITEL RAIL
HOLDINGS CORPORATION ("IRHC", and together with Continental, the "Credit
Parties"),
W I T N E S S E T H:
WHEREAS, it is a condition precedent to the making of the Loans under
the Term Loan Agreement (as defined below), that the Guarantor execute and
deliver this Guaranty; and
WHEREAS, it is a condition precedent to the consummation of the
transactions contemplated by the Purchase Agreement (as defined below), that
the Guarantor execute and deliver this Guaranty; and
WHEREAS, the Guarantor has duly authorized the execution, delivery and
performance of this Guaranty; and
NOW, THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged, and in order to induce Continental to make the
Loans pursuant to the Term Loan Agreement and IRHC to consummate the
transactions contemplated by the Purchase Agreement, the Guarantor agrees, for
the benefit of the Credit Parties, as follows:
ARTICLE I.
DEFINITIONS
SECTION A. Certain Terms. The following terms (whether or not
underscored) when used in this Guaranty, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
"Credit Document" means the Term Loan Agreement and each other Loan
Document, the IRHC Notes and each other document relating thereto.
"Credit Obligor" means any Obligor under any Loan Document or any
obligor (other than IRHC) under either IRHC Note or any document relating
thereto.
<PAGE> 2
"Credit Obligation" means any Obligation under any Loan Document or any
obligation of any Credit Obligor under either IRHC Note or any related
document.
"Credit Parties" is defined in the preamble.
"Debtor" means Signal Capital Holdings Corporation, a Delaware
corporation.
"Guaranteed Obligations" means, collectively,
(a) the Obligations of the Debtor under the Term Loan Agreement;
(b) the Obligations of the Debtor under the SCHC Guaranty II; and
(c) the obligations of the Debtor under the IRHC/SCHC Note.
in each case, whether for principal, interest, fees, expenses or
otherwise (including all such amounts which would become due but for the
operation of the automatic stay under Section 362(a) of the United States
Bankruptcy Code, 11 U.S.C. Section 362(a)), and the operation of Sections
502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C. Section
502(b) and Section 506(b).
"Guarantor" is defined in the preamble.
"Guaranty" means this Guaranty, as amended or otherwise modified from time
to time.
"IRHC Notes" means the IRHC/SCAP Note and the IRHC/SCHC Note.
"IRHC/SCAP Note" means the promissory note, dated as of July 25, 1994,
made by the Guarantor payable to the order of IRHC, as amended or otherwise
modified from time to time.
"IRHC/SCHC Note" means the promissory note, dated as of July 25, 1994,
made by the Debtor payable to the order of IRHC, as amended or otherwise
modified from time to time.
"Purchase Agreement" means the Purchase Agreement, dated as of June 23,
1994, among the Guarantor, IRHC, and Itel Corporation, a Delaware corporation,
as amended or otherwise modified from time to time.
"Term Loan Agreement" means the Term Loan Agreement, dated as of July 25,
1994, among the Guarantor, the Debtor and Continental, as amended or otherwise
modified from time to time.
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<PAGE> 3
SECTION 1.2. Term Loan Agreement Definitions. Unless otherwise
defined herein or the context otherwise requires, terms used in this Guaranty,
including its preamble and recitals, have the meanings provided in the Term
Loan Agreement.
ARTICLE II.
GUARANTY PROVISIONS
SECTION 2.1. Guaranty. The Guarantor hereby absolutely,
unconditionally and irrevocably
a. guarantees the full and punctual payment when due, whether at
stated maturity, by required prepayment, declaration, acceleration, demand
or otherwise, of all Guaranteed Obligations, and
b. indemnifies and holds harmless each Credit Party for any and all
costs and expenses (including reasonable attorney's fees and expenses) incurred
by either Credit Party, as the case may be, in enforcing any rights under this
Guaranty.
This Guaranty constitutes a guaranty of payment when due and not of
collection, and the Guarantor specifically agrees that it shall not be
necessary or required that either Credit Party exercise any right, assert any
claim or demand or enforce any remedy whatsoever against the Debtor or any
other Credit Obligor before or as a condition to the obligations of the
Guarantor hereunder.
SECTION 2.2. Guaranty Absolute, etc. This Guaranty shall in all
respects be a continuing, absolute, unconditional and irrevocable guaranty of
payment, and shall remain in full force and effect until all Guaranteed
Obligations and all obligations of the Guarantor hereunder shall have been paid
in full. The Guarantor guarantees that the Guaranteed Obligations will be paid
strictly in accordance with the terms of the Term Loan Agreement and the IRHC
Notes and each other Credit Document under which they arise, as the case may
be, regardless of any law, regulation or order now or hereafter in effect in
any jurisdiction affecting any of such terms or the rights of the Credit
Parties with respect thereto. The liability of the Guarantor under this
Guaranty shall be absolute, unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the Term
Loan Agreement, either IRHC Note or any other Credit Document;
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<PAGE> 4
(b) the failure of either Credit Party
(i) to assert any claim or demand or to enforce any right or
remedy against the Debtor, any other Credit Obligor or any other
Person (including any other guarantor) under the provisions of the
Term Loan Agreement, either IRHC Note, any other Credit Document or
otherwise, or
(ii) to exercise any right or remedy against any other
guarantor of, or collateral securing, any Credit Obligations of the
Debtor or any other Credit Obligor;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Credit Obligations of the Debtor or any
other Credit Obligor, or any other extension, compromise or renewal of any
Credit Obligation of the Debtor or any other Credit Obligor;
(d) any reduction, limitation, impairment or termination of the Credit
Obligations of the Debtor or any other Credit Obligor for any reason,
including any claim of waiver, release, surrender, alteration or
compromise, and shall not be subject to (and the Guarantor hereby waives
any right to or claim of) any defense or setoff, counterclaim, recoupment
or termination whatsoever by reason of the invalidity, illegality,
nongenuineness, irregularity, compromise, unenforceability of, or any other
event or occurrence affecting, the Credit Obligations of the Debtor, any
other Credit Obligor or otherwise;
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Term Loan Agreement,
either IRHC Note or any other Credit Document;
(f) any addition, exchange, release, surrender or nonperfection of any
collateral, or any amendment to or waiver or release or addition of, or
consent to departure from, any other guaranty, held by either Credit Party
securing any of the Credit Obligations of the Debtor or any other Credit
Obligor; or
(g) any other circumstance which might otherwise constitute a defense
available to, or a legal or equitable discharge of, the Debtor, any other
Credit Obligor, any surety or any guarantor.
SECTION 2.3 Reinstatement, etc. The Guarantor agrees that this
Guaranty shall continue to be effective or be reinstated, as the case may be,
if at any time any payment (in whole or in part)
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of any of the Guaranteed Obligations is rescinded or must otherwise be
restored by either Credit Party, upon the insolvency, bankruptcy or
reorganization of the Debtor, any other Credit Obligor or otherwise, as though
such payment had not been made.
SECTION 2.4. Waiver, etc. The Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Credit Obligations of the Debtor or any other Credit Obligor and this Guaranty
and any requirement that either Credit Party protect, secure, perfect or insure
any security interest or Lien, or any property subject thereto, or exhaust any
right or take any action against the Debtor, any other Credit Obligor or any
other Person (including any other guarantor) or entity or any collateral
securing the Credit Obligations of the Debtor or any other Credit Obligor, as
the case may be.
SECTION 2.5. Waiver of Subrogation. The Guarantor hereby irrevocably
waives any claim or other rights which it may now or hereafter acquire against
the Debtor or any other Credit Obligor that arise from the existence, payment,
performance or enforcement of the Guarantor's obligations under this Guaranty
or any other Credit Document, including any right of subrogation,
reimbursement, exoneration, or indemnification, any right to participate in any
claim or remedy of either Credit Party against the Debtor or any other Credit
Obligor or any collateral which either Credit Party now have or hereafter
acquire, whether or not such claim, remedy or right arises in equity, or under
contract, statute or common law, including the right to take or receive from
the Debtor or any other Credit Obligor, directly or indirectly, in cash or
other property or by set-off or in any manner, payment or security on account
of such claim or other rights. If any amount shall be paid to the Guarantor in
violation of the preceding sentence and the Guaranteed Obligations shall not
have been paid in cash in full, such amount shall be deemed to have been paid
to the Guarantor for the benefit of, and held in trust for, the Credit Parties,
and shall forthwith be paid to the Credit Parties to be credited and applied
upon the Guaranteed Obligations, whether matured or unmatured. The Guarantor
acknowledges that it will receive direct and indirect benefits from the
financing and other arrangements contemplated by the Term Loan Agreement and
the Purchase Agreement and that the waiver set forth in this Section is
knowingly made in contemplation of such benefits.
SECTION 2.6. Successors, Transferees and Assigns; Transfers of Notes,
etc. This Guaranty shall:
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<PAGE> 6
(a) be binding upon the Guarantor, and its successors, transferees
and assigns; and
(b) inure to the benefit of and be enforceable by the Credit Parties
and, to the extent permitted by the Term Loan Agreement and the IRHC/SCHC
Note, their respective successors, transferees and assigns.
Without limiting the generality of clause (b), each Credit Party may
assign or otherwise transfer (in whole or in part) any Credit Obligation held
by it to any other Person or entity, and such other Person or entity shall
thereupon become vested with all rights and benefits in respect thereof granted
to either Credit Party under any Credit Document (including this Guaranty), the
IRHC Notes or otherwise, subject, however, to the applicable restrictions on
transfer in the relevant Credit Document.
ARTICLE III.
MISCELLANEOUS PROVISIONS
SECTION 3.1. Binding on Successors, Transferees and Assigns;
Assignment of Guaranty. In addition to, and not in limitation of, Section 2.7,
this Guaranty shall be binding upon the Guarantor and its successors,
transferees and assigns and shall inure to the benefit of and be enforceable by
the Credit Parties and their respective successors and assigns (to the full
extent provided pursuant to Section 2.7); provided, however, that the Guarantor
may not assign any of its obligations hereunder without the prior written
consent of both Credit Parties.
SECTION 3.2. Amendments, etc. No amendment to or waiver of any
provision of this Guaranty, nor consent to any departure by the Guarantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Guarantor and the Credit Parties, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
SECTION 3.3. Addresses for Notices. All notices and other
communications provided to any party pursuant to this Guaranty shall be in
writing (including telecopy) and addressed, delivered or transmitted to such
party at its address or telecopy number set forth below or at such other
address or telecopy number as may be designated by such party in a notice to
the other party or parties:
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<PAGE> 7
Continental:
Continental Bank
231 South LaSalle Street
Chicago, Illinois 60697
Telephone: 312-828-8912
Telecopy: 312-828-3824
Attention: L. Dustin Vincent, III
Vice President
IRHC:
Itel Rail Holdings Corporation
210 West Ninth Street Plaza
Wilmington, Delaware 19801
Telephone: 302-655-8894
Telecopy: 302-658-0468
Attention: Secretary
with a copy to:
IRHC:
Itel Rail Holdings Corporation
2 North Riverside Plaza
Suite 1900
Chicago, Illinois 60606
Telephone: 312-902-1515
Telecopy: 312-902-1512
Attention: General Counsel
The Guarantor:
SCAP Associates, L.L.C.
885 Third Avenue
Suite 2400
New York, New York 10022
Telephone: 212-751-4110
Telecopy: 212-826-5617
Attention: Douglas H. Wolf
Any notice, if mailed and properly addressed with postage prepaid or if
properly addressed and sent by pre-paid courier service, shall be deemed given
when received; any notice, if transmitted by telecopy, shall be deemed given
when transmitted with electronic confirmation of receipt.
SECTION 3.4. No Waiver; Remedies. In addition to, and not in
limitation of, Section 2.3 and Section 2.5, no failure on the part of either
Credit Party to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the
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<PAGE> 8
exercise of any other right. The remedies herein provided are cumulative and
not exclusive of any remedies provided by law.
SECTION 3.5. Section Captions. Section captions used in this Guaranty
are for convenience of reference only, and shall not affect the construction of
this Guaranty.
SECTION 3.6. Setoff. In addition to, and not in limitation of, any
rights of the Credit Parties under applicable law, the Credit Parties shall,
upon the occurrence of any Event of Default (as defined in the Term Loan
Agreement) or an Event of Default (as defined under the IRHC Notes), have the
right to appropriate and apply to the payment of the obligations of the
Guarantor owing to it hereunder, whether or not then due, and the Guarantor
hereby grants to the Credit Parties a continuing security interest in, any and
all balances, credits, deposits, accounts or moneys of the Guarantor then or
thereafter maintained with the Credit Parties.
SECTION 3.7. Severability. Wherever possible each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
SECTION 3.8. Governing Law. THIS GUARANTY SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH INTERNAL LAWS OF THE STATE OF NEW YORK. FOR
PURPOSES OF ANY ACTION OR PROCEEDING INVOLVING THIS GUARANTY, THE GUARANTOR
HEREBY EXPRESSLY SUBMITS TO THE JURISDICTION OF ALL FEDERAL AND STATE COURTS
LOCATED IN THE STATE OF NEW YORK.
SECTION 3.9. Waiver of Jury Trial. THE GUARANTOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS GUARANTY. THE GUARANTOR ACKNOWLEDGES AND AGREES THAT IT
HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE CREDIT PARTIES ENTERING INTO THE
TERM LOAN AGREEMENT AND THE IRHC NOTES, RESPECTIVELY.
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<PAGE> 9
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its representative thereunto duly authorized as of
the date first above written.
SCAP ASSOCIATES, L.L.C.
By:____________________________
Title:
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<PAGE> 1
EXHIBIT 10.1(c)
[EXECUTION COPY]
SCAP PLEDGE AND SECURITY AGREEMENT II
THIS PLEDGE AND SECURITY AGREEMENT, dated as of July 25, 1994, made by
SCAP ASSOCIATES, L.L.C., a Delaware limited liability corporation (the
"Grantor"), in favor of CONTINENTAL BANK, an Illinois banking corporation, as
collateral agent (together with any successor(s) thereto in such capacity, the
"Collateral Agent") for each of the Credit Parties (as defined below),
W I T N E S S E T H:
WHEREAS, it is a condition precedent to the making of the Loans under
the Term Loan Agreement (as defined below) that the Grantor execute and deliver
this Agreement; and
WHEREAS, it is a condition precedent to the consummation of the
transactions contemplated by the Purchase Agreement (as defined below) that the
Grantor execute and deliver this Agreement; and
WHEREAS, the Grantor has duly authorized the execution, delivery and
performance of this Agreement; and
NOW THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged, and in order to induce Continental (as defined
below) to make Loans pursuant to the Term Loan Agreement and IRHC (as defined
below) to consummate the transactions contemplated by the Purchase Agreement,
the Grantor agrees, for the benefit of each Credit Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
"Agreement" means this Agreement, as amended or otherwise modified
from time to time.
"Collateral" is defined in Section 2.1.
"Collateral Agent" is defined in the preamble.
<PAGE> 2
"Continental" means Continental Bank, an Illinois banking corporation.
"Credit Document" means the Term Loan Agreement and each other Loan
Document, the IRHC Notes and each other document relating thereto.
"Credit Obligor" means any Obligor under any Loan Document or any
obligor (other than IRHC or any of its affiliates) under the Purchase
Agreement, either IRHC Note or any document relating thereto.
"Credit Obligation" means any Obligation under any Loan Document or
any obligation of any Credit Obligor under the Purchase Agreement, either IRHC
Note or any related document.
"Credit Parties" means Continental and IRHC.
"Debtors" means the Grantor and SCHC.
"Distributions" means all stock dividends, dividends payable in trust
interests, liquidating dividends, shares of stock or trust interests resulting
from (or in connection with the exercise of) splits, reclassifications,
warrants, options, non-cash dividends, mergers, consolidations, and all other
distributions (whether similar or dissimilar to the foregoing) on or with
respect to any Pledged Interests or other securities constituting Collateral,
but shall not include Dividends.
"Dividends" means cash dividends and cash distributions with respect
to any Pledged Interests or other Pledged Property made in the ordinary course
of business and not a liquidating dividend.
"Grantor" is defined in the preamble.
"IRHC" means Itel Rail Holding Corporation, a Delaware corporation.
"IRHC Notes" means the IRHC/SCAP Note and the IRHC/SCHC Note.
"IRHC/SCAP Note" means the promissory note, dated as of July 25,
1994, made by the Grantor payable to the order of IRHC, as amended or otherwise
modified from time to time.
"IRHC/SCHC Note" means the promissory note, dated as of July 25, 1994,
made by SCHC payable to the order of IRHC, as amended or otherwise modified
from time to time.
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"Pledged Interest Issuer" means each Person identified in Item B of
Attachment 1 hereto as the issuer of the Pledged Interests identified opposite
the name of such Person.
"Pledged Interests" means all shares of capital stock or trust
interests of any Pledged Interest Issuer which are delivered by the Grantor to
the Collateral Agent as Pledged Property hereunder.
"Pledged Property" means all Pledged Interests and all other pledged
shares of capital stock, pledged trust interests, all other securities, and all
other instruments which are now being delivered by the Grantor to the
Collateral Agent or may from time to time hereafter be delivered by the Grantor
to the Collateral Agent for the purpose of pledge under this Agreement and all
proceeds of any of the foregoing.
"Purchase Agreement" means the Purchase Agreement, dated as of June
23, 1994, among the Grantor, IRHC and Itel Corporation, a Delaware corporation,
as amended or otherwise modified from time to time.
"SCHC" means Signal Capital Holdings Corporation, a Delaware
corporation.
"Secured Obligations" means, collectively, all obligations of the
Grantor now or hereafter existing under
(a) this Agreement;
(b) the Term Loan Agreement;
(c) the SCAP Guaranty II, and
(d) the IRHC/SCAP Note,
whether for principal, interest, costs, fees, expenses, or otherwise, howsoever
created, arising or evidenced, whether direct or indirect, absolute or
contingent or now or hereafter existing or due or to become due.
"Term Loan Agreement" means the Term Loan Agreement, dated as of July
25, 1994, among the Grantor, SCHC and Continental, as amended or otherwise
modified from time to time.
"U.C.C." means the Uniform Commercial Code as in effect in the State
of New York.
SECTION 1.2. Term Loan Agreement Definitions. Unless otherwise
defined herein or the context otherwise requires,
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terms used in this Agreement, including its preamble and recitals, have the
meanings provided in the Term Loan Agreement.
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or
in the Term Loan Agreement or the context otherwise requires, terms for which
meanings are provided in the U.C.C. are used in this Agreement, including its
preamble and recitals, with such meanings.
ARTICLE II
GRANT OF SECURITY INTEREST
SECTION 2.1. Grant of Security Interest. The Grantor hereby pledges,
hypothecates, assigns, charges, mortgages, delivers, and transfers to the
Collateral Agent for the benefit of each of the Credit Parties, and hereby
grants to the Collateral Agent for the benefit of each of the Credit Parties, a
continuing security interest in, all of the following property (the
"Collateral"):
(a) the issued and outstanding shares of capital stock or
trust interests of each Pledged Interest Issuer identified in
Attachment 1 hereto;
(b) all other shares or trust interest in any Pledged
Interest Issuer issued to the Grantor from time to time;
(c) all other Pledged Property, whether now or hereafter
delivered to the Collateral Agent in connection with this Agreement;
(d) all Dividends, Distributions, interest, and other
payments and rights with respect to any Pledged Property;
(e) all proceeds of any and all of the foregoing Collateral
(including, without limitation, proceeds which constitute property of
the types described in clauses (a) through (d) of this Section and, to
the extent not otherwise included, all payments under insurance
(whether or not the Collateral Agent is the loss payee thereof), or
any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing
Collateral.
SECTION 2.2. Security for Secured Obligations. This Agreement
secures the payment in full of all of the Secured Obligations.
SECTION 2.3. Delivery of Pledged Property. All certificates or
instruments (if any) representing or evidencing
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<PAGE> 5
any Collateral, including all Pledged Interests, and all shares or trust
interests in any Pledged Interest Issuer issued to the Grantor from time to
time shall be delivered to and held by or on behalf of the Collateral Agent
pursuant hereto, shall be in suitable form for transfer by delivery, and shall
be accompanied by all necessary instruments of transfer or assignment, duly
executed in blank.
SECTION 2.4. Dividends on Pledged Interests. All Dividends shall be
paid directly to the Collateral Agent.
SECTION 2.5. Continuing Security Interest; Transfer. This Agreement
shall create a continuing security interest in the Collateral and shall
(a) remain in full force and effect until payment in full of
all Secured Obligations,
(b) be binding upon the Grantor and its successors,
transferees and assigns, and
(c) inure to the benefit of the Collateral Agent and each
Credit Party.
Without limiting the foregoing clause (c), any Credit Party may assign or
otherwise transfer (in whole or in part) any Secured Obligation held by it to
any other Person or entity, and such other Person or entity shall thereupon
become vested with all the rights and benefits in respect thereof granted to
such Credit Party under this Agreement or otherwise, subject, however, to any
contrary provisions in such assignment or transfer, and to the applicable
provisions of the relevant Credit Document. Upon the payment in full of all
Secured Obligations, the security interest granted herein shall terminate and
all rights to the Collateral shall revert to the Grantor. Upon any such
termination, the Collateral Agent will, at the Grantor's sole expense, deliver
to the Grantor, without any representations, warranties or recourse of any kind
whatsoever, all certificates and instruments representing or evidencing all
Pledged Interests, together with all other Collateral held by the Collateral
Agent hereunder, and execute and deliver to the Grantor such documents as the
Grantor shall reasonably request to evidence such termination.
SECTION 2.6. Security Interest Absolute. All rights of the
Collateral Agent and the Credit Parties and the security interests granted to
the Collateral Agent hereunder, and all obligations of the Grantor hereunder,
shall be absolute and unconditional, irrespective of
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(a) any lack of validity or enforceability of the Term Loan
Agreement, any IRHC Note or any other Credit Document,
(b) the failure of the Collateral Agent or any Credit Party
(i) to assert any claim or demand or to enforce any
right or remedy against either Debtor, any other Credit
Obligor or any other Person under the provisions of the Term
Loan Agreement, either IRHC Note or any other Credit Document
or otherwise, or
(ii) to exercise any right or remedy against any
other guarantor of, or collateral securing, any Secured
Obligations,
(c) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Secured Obligations or any
other extension, compromise or renewal of any Secured Obligation,
(d) any reduction, limitation, impairment or termination of
any Secured Obligations for any reason, including any claim of waiver,
release, surrender, alteration or compromise, and shall not be subject
to (and the Grantor hereby waives any right to or claim of) any
defense or setoff, counterclaim, recoupment or termination whatsoever
by reason of the invalidity, illegality, nongenuineness, irregularity,
compromise, unenforceability of, or any other event or occurrence
affecting, any Secured Obligations,
(e) any amendment to, rescission, waiver, or other
modification of, or any consent to departure from, any of the terms of
the Term Loan Agreement, either IRHC Note or any other Credit
Document,
(f) any addition, exchange, release, surrender, or
non-perfection of any collateral (including the Collateral), or any
amendment to or waiver or release of or addition to or consent to
departure from any guaranty, for any of the Secured Obligations, or
(g) any other circumstances which might otherwise constitute
a defense available to, or a legal or equitable discharge of, either
Debtor, any other Credit Obligor, any surety or any guarantor.
SECTION 2.7. Grantor Remains Liable. Anything herein to the contrary
notwithstanding, (a) the Grantor shall remain
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liable under any contracts and agreements included in the Collateral to the
extent set forth therein to perform all of its duties and obligations
thereunder to the same extent as if this Agreement had not been executed, (b)
the exercise by the Collateral Agent or any Credit Party of any of the rights
hereunder shall not release the Grantor from any of its duties or obligations
under any contracts and agreements included in the Collateral, and (c) neither
the Collateral Agent nor any Credit Party shall have any obligation or
liability under any contracts and agreements included in the Collateral by
reason of this Agreement, nor shall the Collateral nor any Credit Party be
obligated to perform any of the obligations or duties of the Grantor thereunder
or to take any action to collect or enforce any claim for payment assigned
hereunder.
SECTION 2.8. Waiver of Subrogation. The Grantor hereby irrevocably
waives any claim or other rights which it may now or hereafter acquire against
either Debtor or any other Credit Obligor that arise from the existence,
payment, performance or enforcement of the Grantor's obligations under this
Agreement or any other Credit Document, including any right of subrogation,
reimbursement, exoneration or indemnification, any right to participate in any
claim or remedy of the Collateral Agent or either Credit Party against either
Debtor or any other Credit Obligor or any collateral which the Collateral Agent
or either Credit Party now has or hereafter acquires, whether or not such
claim, remedy or right arises in equity, or under contract, statute or common
law, including the right to take or receive from either Debtor or any other
Credit Obligor, directly or indirectly, in cash or other property or by set-off
or in any manner, payment or security on account of such claim or other rights.
If any amount shall be paid to the Grantor in violation of the preceding
sentence and the Secured Obligations shall not have been paid in cash in full,
such amount shall be deemed to have been paid to the Grantor for the benefit
of, and held in trust for, the Collateral Agent, and shall forthwith be paid to
the Collateral Agent for the benefit of the Credit Parties to be credited and
applied upon the Secured Obligations, whether matured or unmatured. The
Grantor acknowledges that it will receive direct and indirect benefits from the
financing and other arrangements contemplated by the Term Loan Agreement and
the Purchase Agreement and that the waiver set forth in this Section is
knowingly made in contemplation of such benefits.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties. The Grantor represents
and warrants unto the Collateral Agent and each Credit Party, as at the date
hereof and of each subjection of
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any Pledged Interest to the lien hereof, as set forth in this Article.
SECTION 3.1.1. Ownership, No Liens, etc. The Grantor is the legal
and beneficial owner of, and has good and marketable title to (and has full
right and authority to pledge and assign) such Collateral, free and clear of
all liens, security interests, options, or other charges or encumbrances,
except as permitted by the Loan Documents and the IRHC Notes. No effective
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording office, except as permitted
by the Loan Documents and the IRHC Notes.
SECTION 3.1.2. Valid Security Interest. The execution and delivery
of this Agreement, together with (a) in the case of Collateral in which a
security interest may be perfected by possession, the delivery of such
Collateral to the Collateral Agent, or (b) in the case of Collateral in which a
security interest may be perfected by filing financing statements, the filing
in the appropriate filing offices of the financing statements which have been
delivered to the Collateral Agent, are or will be effective to create a valid,
perfected, first priority security interest in all of the Collateral, and all
proceeds thereof, as security for the Secured Obligations. No other filing or
other action is necessary to perfect or protect such Security Interest.
SECTION 3.1.3. As to Pledged Interests. In the case of any Pledged
Interests constituting such Collateral, all of such Pledged Interests are duly
authorized and validly issued, fully paid, and non-assessable.
SECTION 3.1.4. Authorization, Approval, etc. No authorization,
approval, or other action by, and no notice to or filing with, any governmental
authority, regulatory body or any other Person is required either
(a) for the pledge by the Grantor of any Collateral pursuant
to this Agreement or for the execution, delivery, and performance of
this Agreement by the Grantor, or
(b) for the exercise by the Collateral Agent of the voting or
other rights provided for in this Agreement, or, except with respect
to any Pledged Interests, as may be required in connection with a
disposition of such Pledged Interests by laws affecting the offering
and sale of securities generally, the remedies in respect of the
Collateral pursuant to this Agreement.
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SECTION 3.1.5. Compliance with Laws. The Grantor is in compliance
with the requirements of all applicable laws (including, without limitation,
the provisions of the Fair Labor Standards Act), rules, regulations and orders
of every governmental authority, the non-compliance with which might materially
adversely affect the business, properties, assets, operations, condition
(financial or otherwise) or prospects of the Grantor or the value of the
Collateral or the worth of the Collateral as collateral security.
ARTICLE IV
COVENANTS
SECTION 4.1. Protect Collateral; Further Assurances, etc. (a) The
Grantor will not sell, assign, transfer, pledge, or encumber in any other
manner the Collateral (except if and to the extent permitted by the Credit
Documents). The Grantor will warrant and defend the right and title herein
granted unto the Collateral Agent in and to the Collateral (and all right,
title, and interest represented by the Collateral) against the claims and
demands of all Persons whomsoever. The Grantor agrees that at any time, and
from time to time, at the expense of the Grantor, the Grantor will promptly
execute and deliver all further instruments, and take all further action, that
may be necessary or desirable, or that the Collateral Agent may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable the Collateral Agent to exercise
and enforce its rights and remedies hereunder with respect to any Collateral.
(b) Without limiting the generality of the foregoing, the Grantor
will execute such financing or continuation statements, or amendments thereto,
and such other instruments or notices, as may be necessary or desirable, or as
the Collateral Agent may request, in order to perfect and preserve the security
interests granted or purported to be granted hereby.
(c) The Grantor hereby authorizes the Collateral Agent to file one or
more financing or continuation statements, and amendments thereto, relative to
all or any part of the Collateral without the signature of the Grantor where
permitted by law. A carbon, photographic or other reproduction of this
Agreement or any financing statement covering the Collateral or any part
thereof shall be sufficient as a financing statement where permitted by law.
(d) The Grantor will furnish to the Collateral Agent from time to
time statements and schedules further identifying and describing the Collateral
and such other reports in connection
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with the Collateral as the Collateral Agent may reasonable request, all in
reasonable detail.
SECTION 4.2. Stock Powers, Transfer Instruments, etc. The Grantor
agrees that any Pledged Interests (and any other shares of capital stock or
trust interests constituting Collateral) that are evidenced by certificates and
are delivered by the Grantor pursuant to this Agreement will be accompanied by
duly executed undated blank stock powers, or other equivalent instruments of
transfer acceptable to the Collateral Agent. The Grantor will, from time to
time upon the request of the Collateral Agent, promptly deliver to the
Collateral Agent such stock powers, instruments, and similar documents,
satisfactory in form and substance to the Collateral Agent, with respect to the
Collateral as the Collateral Agent may reasonably request and will, from time
to time upon the request of the Collateral Agent after the occurrence of any
Event of Default, promptly transfer any Pledged Interests or other securities
constituting Collateral into the name of any nominee designated by the
Collateral Agent.
SECTION 4.3. Continuous Security Agreement. The Grantor will, at all
times, keep pledged to the Collateral Agent pursuant hereto all Pledged
Interests and all other securities constituting Collateral, all Dividends and
Distributions with respect thereto, and all other Collateral and other
securities, instruments, proceeds, and rights from time to time received by or
distributable to the Grantor in respect of any Collateral.
SECTION 4.4. Voting Rights; Dividends, etc. The Grantor agrees:
(a) promptly upon receipt thereof by the Grantor and without
any request therefor by the Collateral Agent, to deliver (properly
endorsed where required hereby or requested by the Collateral Agent)
to the Collateral Agent all Dividends, Distributions, all interest,
all principal, all other cash payments, and all proceeds of the
Collateral, all of which shall be held by the Collateral Agent as
additional Collateral for use in accordance with Section 6.3; and
(b) after any Event of Default shall have occurred and be
continuing and the Collateral Agent has notified the Grantor of the
Collateral Agent's intention to exercise its voting power under this
Section 4.4(b)
(i) the Collateral Agent may exercise (to the
exclusion of the Grantor) the voting power and all other
incidental rights of ownership with respect to any Pledged
Interests or other securities constituting
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Collateral and the Grantor hereby grants the Collateral Agent
an irrevocable proxy, exercisable under such circumstances, to
vote the Pledged Interests and such other Collateral, and
(ii) promptly to deliver to the Collateral Agent
such additional proxies and other documents as may be
necessary to allow the Collateral Agent to exercise such
voting power.
All Dividends, Distributions, interest, principal, cash payments, and proceeds
which may at any time and from time to time be held by the Grantor but which
the Grantor is then obligated to deliver to the Collateral Agent, shall, until
delivery to the Collateral Agent, be held by the Grantor separate and apart
from its other property in trust for the Collateral Agent. The Collateral
Agent agrees that unless an Event of Default shall have occurred and be
continuing and the Collateral Agent shall have given the notice referred to in
Section 4.4(b), the Grantor shall have the exclusive voting power with respect
to any shares of capital stock or trust interests (including any of the Pledged
Interests) constituting Collateral and the Collateral Agent shall, upon the
written request of the Grantor, promptly deliver such proxies and other
documents, if any, as shall be reasonably requested by the Grantor which are
necessary to allow the Grantor to exercise voting power with respect to any
such securities (including any of the Pledged Interests) constituting
Collateral; provided, however, that no vote shall be cast, or consent, waiver,
or ratification given, or action taken by the Grantor that would impair any
Collateral or be inconsistent with or violate any provision of the Term Loan
Agreement, any IRHC Note or any other Credit Document (including this
Agreement).
SECTION 4.5. Offices. The Grantor shall keep its chief place of
business and chief executive office and the office where it keeps its records
concerning the Collateral at its offices at 885 Third Avenue, Suite 2400, New
York, New York, or, upon 30 days' prior written notice to the Collateral Agent,
at such other locations in a jurisdiction where all action required by Section
4.1(b) shall have been taken with respect to the Collateral. The Grantor will
hold and preserve such records and will permit representatives of the
Collateral Agent at any time during normal business hours to inspect and make
abstracts from such records.
SECTION 4.6. Transfers and Other Liens. The Grantor shall not:
(a) Sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral.
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(b) Create or suffer to exist any lien, security interest or
other charge or encumbrance upon or with respect to any of the
Collateral to secure Debt of any person or entity, except as permitted
by the Credit Documents.
SECTION 4.7. Additional Undertakings. The Grantor will not, without
the prior written consent of the Collateral Agent take or omit to take any
action the taking or the omission of which would result in any impairment or
alteration of Collateral.
ARTICLE V
THE COLLATERAL AGENT
SECTION 5.1. Collateral Agent Appointed Attorney-in-Fact. The
Grantor hereby irrevocably appoints the Collateral Agent the Grantor's
attorney-in-fact, with full authority in the place and stead of the Grantor and
in the name of the Grantor or otherwise, from time to time in the Collateral
Agent's discretion, to take any action and to execute any instrument which the
Collateral Agent may deem necessary or advisable to accomplish the purposes of
this Agreement, including without limitation:
(a) after the occurrence and continuance of an Event of
Default, to ask, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause
(a) above; and
(c) to file any claims or take any action or institute any
proceedings which the Collateral Agent may deem necessary or desirable
for the collection of any of the Collateral or otherwise to enforce
the rights of the Collateral Agent with respect to any of the
Collateral.
The Grantor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 5.2. Collateral Agent May Perform. If the Grantor fails to
perform any agreement contained herein, the Collateral Agent may itself
perform, or cause performance of, such agreement, and the expenses of the
Collateral Agent incurred in
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connection therewith shall be payable by the Grantor pursuant to Section 6.4.
SECTION 5.3. Collateral Agent Has No Duty. The powers conferred on
the Collateral Agent hereunder are solely to protect its interest in the
Collateral and shall not impose any duty on it to exercise any such powers.
Except for the reasonable care of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Collateral Agent
shall have no duty as to any Collateral or responsibility for (a) ascertaining
or taking action with respect to calls, conversions, exchanges, maturities,
tenders or other matters relative to any Pledged Property, whether or not the
Collateral Agent has or is deemed to have knowledge of such matters, or (b)
taking any necessary steps to preserve rights against prior parties or any
other rights pertaining to any Collateral.
SECTION 5.4. Reasonable Care. The Collateral Agent is required to
exercise reasonable care in the custody and preservation of any of the
Collateral in its possession; provided, however, the Collateral Agent shall be
deemed to have exercised reasonable care in the custody and preservation of any
of the Collateral, if it takes such action for that purpose as the Grantor
reasonably requests in writing at times other than upon the occurrence and
during the continuance of any Event of Default, but failure of the Collateral
Agent to comply with any such request at any time shall not in itself be deemed
a failure to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall have
occurred and be continuing:
(a) The Collateral Agent may exercise in respect of the
Collateral, in addition to other rights and remedies provided
for herein or otherwise available to it, all the rights and
remedies of a secured party on default under the U.C.C.
(whether or not the U.C.C. applies to the affected Collateral)
and also may, without notice except as specified below, sell
the Collateral or any part thereof in one or more parcels at
public or private sale, at any of the Collateral Agent's
offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Collateral Agent
may deem commercially reasonable. The Grantor agrees that, to
the extent notice of sale shall be required by law, at least
ten days' prior notice to the Grantor of the time and place of
any public sale or the
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time after which any private sale is to be made shall
constitute reasonable notification. The Collateral Agent
shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The
Collateral Agent may adjourn any public or private sale from
time to time by announcement at the time and placed fixed
therefor, and such sale may, without further notice, be made
at the time and place to which it was so adjourned.
(b) The Collateral Agent may
(i) transfer all or any part of the Collateral into
the name of the Collateral Agent or its nominee, with or
without disclosing that such Collateral is subject to the lien
and security interest hereunder,
(ii) notify the parties obligated on any of the
Collateral to make payment to the Collateral Agent of any
amount due or to become due thereunder,
(iii) enforce collection of any of the Collateral
by suit or otherwise, and surrender, release or exchange all
or any part thereof, or compromise or extend or renew for any
period (whether or not longer than the original period) any
obligations of any nature of any party with respect thereto,
(iv) endorse any checks, drafts, or other writings
in the Grantor's name to allow collection of the Collateral,
(v) take control of any proceeds of the Collateral,
and
(vi) execute (in the name, place and stead of the
Grantor) endorsements, assignments, stock powers and other
instruments of conveyance or transfer with respect to all or
any of the Collateral.
SECTION 6.2. Compliance with Restrictions. The Grantor agrees that
in any sale of any of the Collateral whenever an Event of Default shall have
occurred and be continuing, the Collateral Agent is hereby authorized to comply
with any limitation or restriction in connection with such sale as it may be
advised by counsel is necessary in order to avoid any violation of applicable
law (including compliance with such procedures as may restrict the number of
prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications, and restrict such prospective bidders
and purchasers to persons who will represent and agree
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that they are purchasing for their own account for investment and not with a
view to the distribution or resale of such Collateral), or in order to obtain
any required approval of the sale or of the purchaser by any governmental
regulatory authority or official, and the Grantor further agrees that such
compliance shall not result in such sale being considered or deemed not to have
been made in a commercially reasonable manner, nor shall the Collateral Agent
be liable nor accountable to the Grantor for any discount allowed by the reason
of the fact that such Collateral is sold in compliance with any such limitation
or restriction.
SECTION 6.3. Application of Proceeds. All cash proceeds received by
the Collateral Agent in respect of any sale of, collection from, or other
realization upon, all or any part of the Collateral shall, be held by the
Collateral Agent to be applied (after payment of any amounts payable to the
Collateral Agent pursuant to Section 6.4) in whole or in part by the Collateral
Agent against, all or any part of the Secured Obligations in such order as the
Collateral Agent shall elect. Any surplus of such cash or cash proceeds held
by the Collateral Agent and remaining after payment in full of all the Secured
Obligations, shall be paid over to the Grantor or to whomsoever may be lawfully
entitled to receive such surplus.
SECTION 6.4. Indemnity and Expenses. The Grantor hereby indemnifies
and holds harmless the Collateral Agent from and against any and all claims,
losses, and liabilities arising out of or resulting from this Agreement
(including enforcement of this Agreement), except claims, losses, or
liabilities resulting from the Collateral Agent's gross negligence or wilful
misconduct. Upon demand, the Grantor will pay to the Collateral Agent the
amount of any and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which the
Collateral Agent may incur in connection with:
(a) the administration of this Agreement, the Term Loan
Agreement, either IRHC Note and each other Loan Document;
(b) the custody, preservation, use, or operation of, or the
sale of, collection from, or other realization upon, any of the
Collateral;
(c) the exercise or enforcement of any of the rights of the
Collateral Agent hereunder; or
(d) the failure by the Grantor to perform or observe any of
the provisions hereof.
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ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Amendments, etc. No amendment to or waiver of any
provision of this Agreement nor consent to any departure by the Grantor
herefrom shall in any event be effective unless the same shall be in writing
and signed by the Grantor and the Collateral Agent, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which it is given.
SECTION 7.2. Protection of Collateral. The Collateral Agent may from
time to time, at its option, perform any act which the Grantor agrees hereunder
to perform and which the Grantor shall fail to perform after being requested in
writing so to perform (it being understood that no such request need be given
after the occurrence and during the continuance of an Event of Default) and the
Collateral Agent may from time to time take any other action which the
Collateral Agent reasonably deems necessary for the maintenance, preservation
or protection of any of the Collateral or of its security interest therein.
SECTION 7.3. Addresses for Notices. All notices and other
communications provided to any party pursuant to this Agreement shall be in
writing (including telecopy) and addressed, delivered or transmitted to such
party at its address or telecopy number set forth below or at such other
address or telecopy number as may be designated by such party in a notice to
the other party or parties:
Collateral Agent:
Continental Bank
231 South LaSalle Street
Chicago, Illinois 60697
Telephone: 312-828-8912
Telecopy: 312-828-3864
Attention: L. Dustin Vincent, III
Vice President
Continental:
Continental Bank
231 South LaSalle Street
Chicago, Illinois 60697
Telephone: 312-828-8912
Telecopy: 312-828-3864
Attention: L. Dustin Vincent, III
Vice President
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IRHC:
Itel Rail Holdings Corporation
200 West Ninth Street Plaza
Wilmington, Delaware 19801
Telephone: 302-655-8894
Telecopy: 302-658-0468
Attention: Secretary
with a copy to:
Itel Rail Holdings Corporation
2 North Riverside Plaza
Suite 1900
Chicago, Illinois 60606
Telephone: 312-902-1515
Telecopy: 312-902-1512
Attention: General Counsel
The Grantor:
SCAP
885 Third Avenue
Suite 2400
New York, New York 10022
Telephone: 212-751-4110
Telecopy: 212-826-5617
Attention: Douglas H. Wolf
Any notice, if mailed and properly addressed with postage prepaid or if
properly addressed and sent by pre-paid courier service, shall be deemed given
when received; any notice, if transmitted by telecopy, shall be deemed given
when transmitted with electronic confirmation of receipt.
SECTION 7.4. Section Captions. Section captions used in this
Agreement are for convenience of reference only, and shall not affect the
construction of this Agreement.
SECTION 7.5. Severability. Wherever possible each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
SECTION 7.6. Governing Law, Entire Agreement, etc. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE
SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR
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COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
NEW YORK. THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS CONSTITUTE THE ENTIRE
UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER
HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT
THERETO.
SECTION 7.7. Forum Selection and Consent to Jurisdiction. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
ORAL OR WRITTEN) OR ACTIONS OF THE COLLATERAL AGENT, ANY CREDIT PARTY OR THE
GRANTOR WITH RESPECT HERETO SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE
COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE
COLLATERAL AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE GRANTOR HEREBY EXPRESSLY AND
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK
AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY
AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH
LITIGATION. THE GRANTOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS
BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT
THE STATE OF NEW YORK. THE GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR
HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF SUCH LITIGATION BROUGHT IN ANY
SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE GRANTOR HAS OR
HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS
PROPERTY, THE GRANTOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS AGREEMENT.
SECTION 7.8. Waiver of Jury Trial. THE COLLATERAL AGENT AND THE
GRANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
THE COLLATERAL AGENT, ANY CREDIT PARTY OR THE GRANTOR WITH RESPECT HERETO. THE
GRANTOR ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER CREDIT
DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE COLLATERAL AGENT ENTERING INTO THIS
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AGREEMENT AND EACH SUCH OTHER CREDIT PARTY ENTERING INTO SUCH CREDIT DOCUMENT.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective representatives thereunto
duly authorized as of the day and year first above written.
SCAP ASSOCIATES, L.L.C.
By:______________________________
Title:
CONTINENTAL BANK, as Collateral Agent
By: ______________________________
Title:
-21-
<PAGE> 21
ATTACHMENT 1
to Pledge and Security
Agreement
Pledged Interests
Pledged Interest Issuer Interests
Signal Capital Holdings 100% of the
Grantor's shares of
Corporation common stock of
Signal Capital
Holdings Corporation
