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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): OCTOBER 21, 1994
------------------------
ITEL CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 1-5989 94-1658138
(State of Incorporation) (Commission File Number) (IRS Employer Identification No.)
</TABLE>
TWO NORTH RIVERSIDE PLAZA
SUITE 1900
CHICAGO, ILLINOIS 60606
(Address of principal executive offices) (Zip Code)
(312) 902-1515
(Registrant's telephone number)
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<PAGE> 2
ITEM 2. DISPOSITION OF ASSETS
Pursuant to a Purchase Agreement, dated as of June 23, 1994 (the "Purchase
Agreement"), Itel Corporation and Itel Rail Holdings Corporation (together
"Itel") agreed to sell, and SCAP Associates, L.L.C. ("SCAP") agreed to purchase
99.5% of Itel's remaining interests in Itel's fleet of railcars. In
consideration for such assets, SCAP paid approximately $35 million in cash and
$169.5 million in notes receivable. Closing of this transaction took place on
July 25, 1994 and the notes were paid on October 21 and 31, 1994. For a complete
description of the terms of the Purchase Agreement, reference is made to such
agreement, which is filed herewith as Exhibit 2.1 and incorporated herein by
reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro forma financial information.
(1) Pro forma condensed consolidated financial information (unaudited)
of the Itel Corporation (attached hereto as Exhibit 1).
(c)
2.1 Purchase Agreement, dated as of June 23, 1994, between Itel
Corporation, Itel Rail Holdings Corporation and SCAP Associates, L.L.C.
28.1 Press Release, dated June 24, 1994, issued by Itel Corporation.
28.2 Press Release, dated July 26, 1994, issued by Itel Corporation.
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
ITEL CORPORATION
Date: November 7, 1994 By /s/ JAMES E. KNOX
--------------------------------------
James E. Knox
Senior Vice President,
General Counsel and Secretary
<PAGE> 4
SUMMARIZED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION OF ITEL CORPORATION
Upon consummation of the Transaction, Itel Corporation ("Itel") will be
engaged in the distribution of wiring system products for the transmission of
power and voice, data and video communications through Anixter. Itel also will
have a 33% investment in ANTEC Corporation ("ANTEC") and a 9% investment in the
common stock of Santa Fe Energy Resources, Inc. The financing operations of
Signal Capital Corporation ("Signal Capital") and various other assets are being
held for sale. The acquired Signal Capital portfolio is being liquidated and no
material amounts of new loans or investments are being made by Signal Capital.
The following information sets forth, for the periods and at the dates
indicated, summarized unaudited pro forma condensed consolidated financial data
for Itel. Unaudited pro forma condensed consolidated financial information is
derived from the historical consolidated financial statements and notes thereto.
The unaudited pro forma condensed consolidated financial information of
Itel reflects (a) the condensed consolidated results of continuing operations as
if the following transactions had occurred on December 31, 1992 and (b) the
condensed consolidated balance sheet as if the sale of the rail car leasing
business ("Rail car leasing") occurred on June 30, 1994.
The transactions impacting pro forma financial information are:
(1) In July 1994, Itel sold substantially all its remaining interest
in its fleet of railcars for approximately $204.5 million.
(2) In May 1994, Itel sold 4.0 million shares of ANTEC common stock
for $82.8 million resulting in a pre-tax gain of $48.2 million reflected as
a non-recurring item.
The pro forma condensed consolidated financial information reflects: (1)
recognition of the impact of the sale of Rail car leasing; (2) recognition of
the impact of the sale of ANTEC common stock; and (3) the decrease of net
interest expense resulting from the assumed payment of Itel and subsidiary
senior bank loans with proceeds from the respective sales. The net gain on the
sale of ANTEC common stock is not reflected in the unaudited pro forma condensed
consolidated income statement for the six months ended June 30, 1994 results of
continuing operations.
The pro forma unaudited condensed consolidated financial information is not
necessarily indicative of the consolidated results of continuing operations as
they might have been if the sales had been consummated on the assumed date.
<PAGE> 5
ITEL CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
HISTORICAL ADD (DEDUCT)
-------------- ---------------------------------------- PRO FORMA
SIX MONTHS REDUCTION ----------
ENDED REDUCTION OF INTEREST SIX MONTHS
JUNE 30, OF EQUITY EXPENSE ENDED
1994 EARNINGS ON DEBT INCOME TAX JUNE 30,
AS REPORTED(A) IN ANTEC(B) PAYMENT(C) BENEFIT(D) 1994
-------------- ----------- ----------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues........................... $ 785,700 $ -- $ -- $ -- $ 785,700
Cost of operations................. (752,300) (752,300)
Amortization of goodwill........... (3,000) (3,000)
-------------- ----------- ----------- ---------- ----------
Operating income................... 30,400 -- -- -- 30,400
Interest expense and other, net.... (14,000) 7,500 (6,500)
Equity earnings in ANTEC........... 5,400 (2,100) 3,300
Non-recurring items................ 48,200 (48,200) --
Marketable equity securities
loss............................. (39,600) (39,600)
-------------- ----------- ----------- ---------- ----------
Income (loss) from continuing
operations before income taxes... 30,400 (50,300) 7,500 -- (12,400)
Income tax (expense) benefit....... (10,900) 15,900 5,000
-------------- ----------- ----------- ---------- ----------
Income (loss) from continuing
operations....................... $ 19,500 $ (50,300) $ 7,500 $ 15,900 $ (7,400)
=========== ========== ======= ======== =========
Income (loss) from continuing
operations per common and common
equivalent share................. $ 0.59 $ (0.22)
=========== =========
Weighted average common and common
equivalent shares................ 33,123 33,123
=========== =========
</TABLE>
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Notes:
(a) The historical condensed consolidated statement of operations for the six
months ended June 30, 1994 had already reflected the Rail car leasing
business as discontinued operations and ANTEC under the equity method of
accounting. Therefore, no reclassification adjustment is necessary.
(b) Reflects the decrease in equity earnings in ANTEC and elimination of the
gain resulting from the May 1994 sale of 4.0 million shares, or 20%, of
ANTEC common stock.
(c) Reflects the decrease in interest expense resulting from the assumed use of
excess cash to repay indebtedness of approximately $260 million at the
aggregate average historical rate of 5.80% at January 1, 1993. The excess
cash proceeds used are comprised of: (1) $177 million from the sale of Rail
car leasing and (2) $83 million from the sale of ANTEC common stock.
(d) Reflects income tax benefit related to the reversal of the gain on the sale
of ANTEC common stock offset slightly by lower interest expense from the
assumed payment of debt obligations.
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ITEL CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
ADD (DEDUCT)
HISTORICAL -------------------------------------------------------------------
------------ RECLASSIFY REDUCTION PRO FORMA
YEAR ENDED ANTEC REDUCTION OF INTEREST ------------
DECEMBER 31, RECLASSIFY UNDER OF EQUITY EXPENSE ON YEAR ENDED
1993 DISCONTINUED EQUITY EARNINGS IN DEBT INCOME TAX DECEMBER 31,
AS REPORTED OPERATIONS(A) METHOD(B) ANTEC(C) PAYMENT(D) EXPENSE(E) 1993
------------ ------------- ---------- ----------- ----------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues............. $ 1,909,200 $(153,000) $ (427,600) $ -- $ -- $ -- $ 1,328,600
Cost of operations... (1,729,800) 50,600 402,400 (1,276,800)
Amortization of
goodwill........... (21,500) 12,700 2,800 (6,000)
------------ ------------- ---------- ----------- ----------- ---------- ------------
Operating income..... 157,900 (89,700) (22,400) -- -- -- 45,800
Interest expense and
other, net......... (151,100) 92,200 5,000 12,800 (41,100)
Equity earnings in
ANTEC.............. -- 8,400 (2,000) 6,400
Non-recurring
items.............. 64,000 64,000
Marketable equity
securities loss.... (25,000) (25,000)
------------ ------------- ---------- ----------- ----------- ---------- ------------
Income from
continuing
operations before
income
taxes.............. 45,800 2,500 (9,000) (2,000) 12,800 -- 50,100
Income tax expense... (29,700) 5,400 9,000 (5,000) (20,300)
------------ ------------- ---------- ----------- ----------- ---------- ------------
Income from
continuing
operations......... $ 16,100 $ 7,900 $ -- $(2,000) $12,800 $ (5,000) $ 29,800
============ ============= ========== ============= ========= ========== ============
Preferred stock
dividends.......... $ (3,100) $ (3,100)
============ ============
Income from
continuing
operations per
common and common
equivalent share... $ 0.43 $ 0.89
============ ============
Weighted average
common and common
equivalent
shares............. 30,132 30,132
============ ============
</TABLE>
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Notes:
(a) Reflects the reclassification of the results of operations of Itel's Rail
car leasing business from continuing operations to discontinued operations.
(b) Reflects the reclassification of the results of operations of ANTEC from the
consolidated method to the equity method of accounting.
(c) Reflects the decrease in equity earnings in ANTEC resulting from the May
1994 sale of 4.0 million shares, or 20%, of ANTEC common stock.
(d) Reflects the decrease in interest expense resulting from the assumed use of
excess cash to repay indebtedness of approximately $260 million at the
aggregate average historical rate of 4.94% at January 1, 1993. The excess
cash proceeds used are comprised of: (1) $177 million from the sale of Rail
car leasing and (2) $83 million from the sale of ANTEC common stock.
(e) Reflects income tax expense related to the lower interest expense from the
assumed payment of debt obligations.
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ITEL CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
HISTORICAL ADD (DEDUCT)
-------------- ------------------------------- PRO FORMA
JUNE 30, RECORD ----------
1994 SALE OF RAIL USE OF JUNE 30,
AS REPORTED(A) CAR LEASING (B) PROCEEDS (C) 1994
-------------- --------------- ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Cash and equivalents...................... $ 61,200 $ 204,500 $ (204,500) $ 61,200
Accounts receivable, net.................. 292,500 292,500
Inventories, primarily finished goods..... 258,000 258,000
Other assets.............................. 6,100 6,100
-------------- --------------- ------------ ----------
Total current assets................. 617,800 204,500 (204,500) 617,800
Property, net............................. 30,300 30,300
Goodwill, net............................. 190,900 190,900
Discontinued Rail car leasing assets...... 1,145,400 (1,145,400) --
Discontinued and assets held for sale,
net..................................... 186,700 186,700
Marketable equity securities
available-for-sale, net................. 75,600 75,600
Investment in ANTEC....................... 56,100 56,100
Other assets.............................. 11,100 11,100
-------------- --------------- ------------ ----------
$2,313,900 $ (940,900) $ (204,500) $1,168,500
=========== ============ ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable.......................... $ 187,200 $ -- $ -- $ 187,200
Accrued expenses.......................... 68,000 68,000
-------------- --------------- ------------ ----------
Total current liabilities............ 255,200 -- -- 255,200
Income taxes payable, net, primarily
deferred................................ 127,000 (81,300) (28,000) 17,700
Discontinued Rail car leasing
liabilities............................. 1,064,600 (1,064,600) --
Other liabilities......................... 20,000 20,000
Long-term debt............................ 430,400 (176,500) 253,900
-------------- --------------- ------------ ----------
Total liabilities.................... 1,897,200 (1,145,900) (204,500) 546,800
Stockholders' equity...................... 416,700 205,000 621,700
-------------- --------------- ------------ ----------
$2,313,900 $ (940,900) $ (204,500) $1,168,500
=========== ============ ========= =========
</TABLE>
- - -------------------------
(a) The historical condensed consolidated balance sheet as of June 30, 1994 had
already reflected the Rail car leasing business as discontinued operations
and ANTEC under the equity method of accounting. Therefore, no
reclassification adjustment is necessary.
(b) The sale of the Rail car leasing business reflects (1) the estimated total
cash proceeds after receipt of payment relating to a $169.5 million note
received as consideration at the time of sale, (2) the estimated net gain
and (3) the related estimated reduction of deferred taxes.
(c) Reflects the assumed payment of Itel Corporation and subsidiary bank loans
bearing interest at a floating rate and the estimated payment of income
taxes arising from the sale after utilization of net operating loss and
investment tax credit carryforwards.
<PAGE> 1
EXHIBIT 2.1
PURCHASE AGREEMENT
This Purchase Agreement (this "Agreement") is made and entered into as of
the 23rd day of June, 1994, by and among ITEL CORPORATION, a Delaware
corporation ("Itel"), ITEL RAIL HOLDINGS CORPORATION, a Delaware corporation
(the "Seller"), and SCAP ASSOCIATES L.L.C., a Delaware limited liability company
(the "Purchaser").
RECITALS
A. Seller is the holder of (i) 1,000 shares, which constitute all of the
issued and outstanding capital stock (separately and in the aggregate, the
"Shares") of Signal Capital Holdings Corporation, a Delaware corporation
("Signal Capital Holdings"), and (ii) certain beneficial interests in Railcar
Trust No. 1992-1, a Delaware business trust (the "Trust") organized under a
Second Amended and Restated Trust Agreement dated as of May 1, 1992 (the "Trust
Agreement").
B. Seller desires to sell to Purchaser, and Purchaser desires to acquire
from Seller, on the terms and conditions set forth in this Agreement, (i) 100 of
the Shares and (ii) Trust Interests representing in the aggregate a 30%
beneficial interest in the Trust (the "Acquired Trust Interests").
C. In connection with the purchase and sale of the Shares and the Acquired
Trust Interests, Seller will assign to Purchaser certain rights of Seller, and
Purchaser will assume certain obligations of Seller, under the Transaction
Documents (as defined below).
D. In connection with the purchase and sale of the Shares and the Acquired
Trust Interests, Purchaser will cause Signal Capital Holdings to redeem all of
the Shares not conveyed to Purchaser, as provided in this Agreement.
NOW THEREFORE, in consideration of and in reliance upon the terms,
covenants, and conditions contained in this Agreement and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set
forth below (capitalized terms used herein but not otherwise defined herein
shall have the meanings assigned to such terms in the Business Description
attached hereto as Schedule 3.3):
"Acquired Trust Interests" has the meaning set forth in Recital B
hereto.
"Acquisition Loan" shall mean the financings described in Section 6.5.
"Affected Party" has the meaning set forth in Section 8.1(e).
"Affiliate" of any person or entity shall mean any other person or
entity which, directly or indirectly, controls, is controlled by or is
under common control with such person or entity. A person or entity shall
be deemed to be "controlled by" any other person or entity if such other
person or entity possesses, directly or indirectly, power to direct or
cause the direction of the management and policies of such person or entity
whether by contract or otherwise.
"Assigned Rights" has the meaning set forth in Section 2.4.
"Assignment of Acquired Trust Interests" has the meaning set forth in
Section 2.5.
"Assignment Agreement" has the meaning set forth in Section 2.4.
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"Assumed Liabilities" has the meaning set forth in Section 2.2 hereto.
"Assumption Agreement" has the meaning set forth in Section 2.2.
"Business Description" has the meaning set forth in Section 3.3.
"Claim" has the meaning set forth in Section 9.2.
"Closing" has the meaning set forth in Section 2.3.
"Closing Date" has the meaning set forth in Section 2.3.
"Company" shall mean Itel Rail Corporation.
"Confidentiality Agreement" shall mean that certain Confidentiality
Agreement dated as of March 25, 1994 by and among the Company, General
Electric Railcar Service Corporation and the Purchaser.
"Eligible Assignee" has the meaning set forth in Section 5.5.
"Entities" shall mean, collectively, the Partnership (as defined
below), the Trust and the Company.
"FTC" shall mean the United States Federal Trade Commission.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"HSR Approval" shall mean the issuance of an FTC written notification
or order stating that the HSR Act waiting period has expired with respect
to the contemplated transfer of the Shares and the Acquired Trust Interests
or authorizing consummation of such transfer, or the expiration of the HSR
Act waiting period without FTC or Justice Department challenge of or
request for additional information with respect to such transfer.
"Indebtedness" shall mean all indebtedness for borrowed money or the
deferred purchase price of property or services, all obligations
(contingent or otherwise) under letters of credit and reimbursement
obligations associated therewith, all lease obligations (capital or
otherwise), all obligations under puts, calls, swaps, hedges and other
similar agreements, all guaranties, purchase commitments and other support
arrangements with respect to any of the foregoing obligations of other
persons and all other obligations that would be classified as indebtedness
on the face of (or in the notes to) a balance sheet prepared in accordance
with GAAP.
"Indemnified Liabilities" shall mean (a) all liabilities of Signal
Capital Holdings or the Company accruing or based on events occurring prior
to the Closing or on the transfer of the Shares by the Seller at the
Closing, (b) all liabilities of Signal Capital Holdings or the Company
based upon contracts, agreements or other instruments (other than the
Transaction Documents and the Related Documents), executed prior to the
conveyance of Shares to Purchaser pursuant to this Agreement, whether
accruing or based on events occurring prior to or after the Closing, (c)
all liabilities of the Trust accruing or based on events occurring prior to
the Closing, (d) all obligations under the Transaction Documents accruing
or based on events occurring prior to the Closing Date, and (e) any
liability that results in an offset against the Purchase Price or Early
Purchase Price payable under the Leases, to the extent that such liability
arises or results from any act or failure to act (whether before or after
Closing) of Itel, Seller or any of their Affiliates (including, prior to
the Closing, the Company and Signal Capital Holdings) that is not an
Assumed Liability, in each case excluding (i) the Trust Liabilities and
(ii) taxes for a period beginning on or after the Closing relating to the
68.5% Trust Interest held by Signal Capital Holdings.
"Indemnitee" has the meaning set forth in Section 9.2.
"Indemnitor" has the meaning set forth in Section 9.2.
"Itel" has the meaning set forth in the Preamble.
2
<PAGE> 3
"Itel Indemnitee" has the meaning set forth in Section 9.2.
"Justice Department" shall mean the United States Department of
Justice.
"Leases" shall mean (i) that certain Master Lease Agreement dated as
of June 1, 1992 between the Partnership and GE Capital Railcar Associates,
Inc., as lessee, as the same may be amended, supplemented and modified from
time to time, and (ii) that certain Capital Lease Agreement dated as of
June 1, 1992 between the Partnership and GE Capital Railcar Associates,
Inc., as lessee, as the same may be amended, supplemented and modified from
time to time.
"Lender" shall mean the bank or other institutional lender that
provides the financing described in Section 5.4.
"Lien" has the meaning set forth in Section 3.6.
"Losses" has the meaning set forth in Section 9.2.
"Note" has the meaning set forth in Section 2.1.
"Participation Agreement" shall mean that certain Participation
Agreement dated as of December 31, 1991 by and among Itel, the Company, the
Partnership, Itel Rail Funding Corporation, Rex Railways, Inc., General
Electric Railcar Leasing Services Corporation, GE Railcar Associates, Inc.
and General Electric Capital Corporation.
"Partnership" shall mean Railcar Associates L.P., a Delaware limited
partnership.
"Partnership Agreement" shall mean the Amended and Restated Agreement
of Limited Partnership of Railcar Associates, L.P. dated as of June 1,
1992.
"Permitted Assignee" shall mean a corporation, bank, insurance company
or other business entity that (a) has perpetual existence, (b) is organized
under the laws of the United States of America or any State thereof and (c)
is not the subject of any bankruptcy, insolvency, reorganization or other
similar proceeding.
"Pledge Agreement" has the meaning set forth in Section 2.1.
"Purchaser" has the meaning set forth in the Preamble.
"Purchaser Guaranty" has the meaning set forth in Section 2.1.
"Purchaser Indemnitee" has the meaning set forth in Section 9.2.
"Redemption Note" has the meaning set forth in Section 2.1.
"Related Documents" shall mean the Assignment Agreement, the
Assumption Agreement, the Assignment of Acquired Trust Interests, the Note,
the Redemption Note, the Pledge Agreement, the Purchaser Guaranty, the SCH
Guaranty, the Security Agreement and all other documents and agreements
required to be delivered at or prior to Closing pursuant to this Agreement.
"Retained Assets" has the meaning set forth in Section 5.8.
"Retained Trust Interests" has the meaning set forth in Section 5.7.
"SCH Guaranty" has the meaning set forth in Section 2.1.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Security Agreement" has the meaning set forth in Section 2.1.
"Seller" has the meaning set forth in the Preamble.
"Seller Affiliates" shall mean Itel Corporation, Itel Rail Corporation
and Rex Railways, Inc.
"Shares" has the meaning set forth in Recital A hereto.
3
<PAGE> 4
"Signal Capital Holdings" has the meaning set forth in Recital A
hereto.
"SPC Investor" shall mean Railcar Services Corporation.
"Tax Returns" shall mean all foreign, federal, state and local
returns, declarations or other information required by the appropriate tax
authorities.
"Taxes" shall mean any and all taxes (and associated interest and
penalties) imposed on any person or entity by any foreign, federal, state
or local taxing authority.
"Transaction Documents" shall mean the documents and agreements listed
in Schedule 1.1 hereto.
"Trust" has the meaning set forth in Recital A hereto.
"Trust Agreement" has the meaning set forth in Recital A hereto.
"Trust Interest" or "Trust Interests" shall mean beneficial interests
in the Trust.
"Trust Liabilities" shall mean all liabilities of the Trust for
payment of the Trust Notes, and all other liabilities of the Trust payable
from deposits into the Payment and Reserve Accounts established pursuant to
the Indenture under which the Trust Notes have been issued.
"Trust Notes" shall mean the Trust Notes issued under the Indenture
with Harris Trust and Savings Bank as trustee dated as of June 1, 1992.
ARTICLE II
PURCHASE AND SALE; REDEMPTION; CLOSING
2.1 Sale and Purchase; Redemption. On the Closing Date, Seller shall sell
and assign to Purchaser, and Purchaser shall acquire from Seller, (a) 100
Shares, (b) the Acquired Trust Interests and (c) the Assigned Rights. On the
Closing Date, in consideration for the sale of the Shares and the Acquired Trust
Interests, and the other agreements of Seller contained in this Agreement,
Purchaser shall (a) transfer to Seller the sum of $10,600,000 in cash, by wire
transfer of immediately available funds to a bank account designated by Seller,
(b) execute and deliver to Seller the Secured Promissory Note of Purchaser in
the principal amount of $80,400,000, in the form of Exhibit 2.1(b) hereto (the
"Note"), (c) execute and deliver to Seller and the Lender a Pledge and Security
Agreement in the form of Exhibit 2.1(c) hereto (the "Pledge Agreement") in favor
of the Lender, as agent for Seller and the Lender, creating a first Lien on the
Shares acquired by Purchaser as security for the Note, the Purchaser Guaranty
(as defined below) and the Acquisition Loan (on a pari passu basis), (d) cause
Signal Capital Holdings to execute and deliver to Seller a guaranty of the Note
in the form of Exhibit 2.1(d) hereto (the "SCH Guaranty"), (e) cause Signal
Capital Holdings to execute and deliver to Seller and the Lender an Assignment
and Security Agreement in the form of Exhibit 2.1(e) hereto (the "Security
Agreement") in favor of the Lender, as agent for Seller and the Lender, securing
the SCH Guaranty, the Redemption Note (as defined below) and the Acquisition
Loan (on a pari passu basis) and creating a first Lien on all of the Trust
Interests held by Signal Capital Holdings, (f) cause Signal Capital Holdings to
redeem from Seller 900 Shares and cause Signal Capital Holdings as consideration
for such redemption to transfer to Seller the sum of $24,400,000 in cash, by
wire transfer of immediately available funds to a bank account designated by
Seller and to execute and deliver to Seller the Secured Promissory Note of
Signal Capital Holdings in the principal amount of $89,100,000 in the form of
Exhibit 2.1(f) hereto (the "Redemption Note"), and (g) execute and deliver to
Seller a guaranty of the Redemption Note in the form of Exhibit 2.1(g) (the
"Purchaser Guaranty").
2.2 Assumption. At the Closing, pursuant to an Assumption Agreement
substantially in the form of Exhibit 2.2 hereto (the "Assumption Agreement"),
Purchaser shall assume and agree to perform, except and to the extent of
Seller's interest in the Retained Trust Interests, all obligations of Seller,
Itel and the Seller Affiliates (and Signal Capital Holdings, as successor to any
of the Seller Affiliates) under the Transaction Documents set forth in the
Assumption Agreement that (a) accrue or are based on events occurring from and
after the Closing (excluding that portion of such liabilities attributable to
periods prior to the Closing) or
4
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(b) are Trust Liabilities (collectively, the "Assumed Liabilities"); provided,
that the foregoing shall not obligate Purchaser to assume (i) the obligation to
pay the Trust Notes, or (ii) any other obligation with respect to which none of
Itel, Seller, any Seller Affiliate or Signal Capital Holdings, as successor to
any of the Seller Affiliates has or may have any liability, or (iii) any
obligation or liability under the Transaction Documents set forth in the
Assumption Agreement to the extent arising or resulting from any act or failure
to act (whether before or after Closing) of Itel, Seller or any of their
Affiliates (including, prior to the Closing, the Company and Signal Capital
Holdings) not related to such Transaction Documents.
2.3 Closing. The closing of the transactions contemplated hereby (the
"Closing") shall take place at the offices of Mayer, Brown and Platt, 190 South
LaSalle Street, Chicago, Illinois 60603 on June 30, 1994, or as soon as
practicable thereafter following the satisfaction or waiver of all conditions
precedent set forth in this Agreement. The date on which the Closing occurs is
referred to herein as the "Closing Date". If not all such transactions shall
occur at the Closing Date, then any transaction which does occur on the Closing
Date shall be rescinded without further action.
2.4 Assigned Rights. At the Closing, pursuant to an Assignment Agreement
substantially in the form of Exhibit 2.4 hereto (the "Assignment Agreement"),
Seller shall assign to Purchaser certain rights under the Transaction Documents
as set forth in the Assignment Agreement (the "Assigned Rights") that accrue or
are based on events occurring from and after the Closing (excluding any portion
of such rights (1) which is attributable to periods prior to the Closing, or (2)
which relates to the Retained Trust Interests, or (3) which relates to
Indemnified Liabilities).
2.5 Deliveries at Closing.
(a) At the Closing, in addition to any other documents required under this
Agreement, the Seller shall deliver or cause to be delivered to Purchaser or
Signal Capital Holdings the following:
(i) certificates evidencing the 100 Shares being acquired by Purchaser
and the 900 Shares being redeemed by Signal Capital Holdings, accompanied
by duly executed stock powers, executed in blank;
(ii) an Assignment of Beneficial Interests in Trust, in the form of
Exhibit 2.5(a), duly executed and delivered by Seller, assigning to
Purchaser the Acquired Trust Interests (the "Assignment of Acquired Trust
Interests");
(iii) counterparts of the Assignment Agreement and the Assumption
Agreement, duly executed and delivered by Seller;
(iv) duly executed and delivered resignations of each of the officers
and directors of Signal Capital Holdings effective as of the Closing Date;
(v) evidence, in form reasonably satisfactory to Purchaser, that all
consents, notices and other actions described in Schedule 3.13 and Sections
5.3 and 5.7 have been obtained, given and taken, as applicable;
(vi) originals (to the extent available, and otherwise copies) of all
incorporation documents, by-laws and minutes of Signal Capital Holdings,
together with copies of (and, where available, originals of) all
Transaction Documents, in each case certified by an appropriate officer as
complete and accurate; provided, however, that the Seller shall have the
right to retain copies of all such documents;
(vii) a certificate dated the Closing Date of Seller certifying as to
the satisfaction of the condition set forth in Section 6.1;
(viii) the opinions, dated the Closing Date, of James E. Knox, Esq,
General Counsel of Seller and Itel, and of Mayer, Brown & Platt, counsel to
Seller and Itel, with respect to the matters described in Schedule
2.5(a)(viii) hereto, in a form reasonably satisfactory to Purchaser;
(ix) a certificate of the secretaries or assistant secretaries of
Seller and Itel, certifying resolutions of the boards of directors of
Seller and Itel approving this Agreement and the transactions contemplated
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hereby (together with an incumbency and signature certificate regarding the
officer(s) signing on behalf of Seller and Itel);
(x) counterparts of the Security Agreement duly executed and delivered
by Seller;
(xi) counterparts of the Pledge Agreement duly executed and delivered
by Seller; and
(xii) the written consent of Seller to the appointment of the
designees of Purchaser as the directors of Signal Capital Holdings.
(b) At the Closing, in addition to any other documents required to be
delivered under this Agreement, Purchaser shall deliver or cause to be delivered
to Seller and Itel (or their designated agents) the following:
(i) the sum of $35,000,000, by wire transfer of immediately available
funds to a bank account designated by Seller, as provided in Section 2.1;
(ii) the duly executed and delivered Note and Redemption Note, payable
to the order of Seller in the aggregate principal amount of $169,500,000;
(iii) counterparts of the Pledge Agreement duly executed and delivered
by Purchaser and the Lender, as agent thereunder, together with evidence
that all deliveries required thereunder have been made;
(iv) counterparts of the Security Agreement duly executed and
delivered by Signal Capital Holdings and the Lender, as agent thereunder,
together with evidence that all deliveries required thereunder have been
made;
(v) a duly executed and delivered Purchaser Guaranty;
(vi) a duly executed and delivered SCH Guaranty;
(vii) a counterpart of the Assumption Agreement, duly executed and
delivered by Purchaser;
(viii) duly executed and delivered releases, in the form of Exhibit
2.5(b)(viii) hereto, in favor of all officers and directors of Signal
Capital Holdings;
(ix) a certificate dated the Closing Date of Purchaser certifying as
to the satisfaction of the condition contained in Section 7.1;
(x) an opinion, dated the Closing Date, of O'Melveny & Myers, counsel
to Purchaser, with respect to the matters described in Schedule 2.5(b)(x)
hereto, in a form reasonably satisfactory to Itel and Seller;
(xi) a certificate of the secretary or assistant secretary of the
Purchaser, certifying resolutions of the board of directors of Purchaser
approving this Agreement and the transactions contemplated hereby (together
with an incumbency and signature certificate regarding the officer(s)
signing on behalf of Purchaser);
(xii) evidence reasonably satisfactory to Seller and Itel of the
taking of the actions described in Section 5.9 hereof; provided, however,
Seller may elect to accept incomplete evidence subject to the obligation of
Purchaser to complete such evidence to the reasonable satisfaction of
Seller as provided in Section 5.10;
(xiii) copies (certified as true and complete by an authorized officer
of Purchaser) of such documents and agreements executed and delivered in
connection with the Acquisition Loan as Seller or Itel may request; and
(xiv) a certificate of the secretary or assistant secretary of Signal
Capital Holdings, certifying (a) resolutions of the board of directors of
Signal Capital Holdings providing for the redemption of the 900 Shares from
Seller and the cancellation of these Shares and approving the other
transactions contemplated by this Agreement (together with an incumbency
and signature certificate regarding the officer(s) signing on behalf of
Signal Capital Holdings and (b) that the 900 shares have been cancelled.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ITEL AND SELLER
To induce Purchaser to enter into this Agreement, to purchase the Shares
and the Acquired Trust Interests from Seller and to perform the other
obligations of Purchaser under this Agreement, Itel and the Seller hereby
jointly and severally represent and warrant to and for the benefit of Purchaser
and its agents, successors, assigns, transferees, officers, directors and
employees and each person, if any, who "controls" any of them within the meaning
of the Securities Act of 1933 as follows (provided, that the rights of any
person under this Article III are subject to Section 9.6 with respect to
Purchaser's assignees and transferees and shall be asserted only as provided in
Section 9.2):
3.1 Authorization, Execution and Delivery. Each of Itel and the Seller is a
corporation validly existing and in good standing under the laws of the State of
Delaware, and has all necessary corporate power and authority to execute,
deliver and perform this Agreement and the Related Documents to which it is a
party, and to perform its obligations hereunder and thereunder. This Agreement
and the Related Documents to which they respectively are parties, and the
transactions contemplated hereby and thereby, and the execution, delivery and
performance hereof and thereof by Itel and Seller (including the sale of the
Shares and the Acquired Trust Interests by Seller), have been duly and validly
authorized by the Boards of Directors of Itel and Seller and by all other
necessary corporate action on the part of Itel and Seller. This Agreement and
the Related Documents to which they respectively are parties constitute the
legal, valid and binding agreements of each of Itel and Seller, enforceable
against Itel and Seller in accordance with their respective terms.
3.2 Governmental Consents. Based on the representations and warranties of
Purchaser set forth in Sections 4.6, 4.7 and 4.8, no consent, approval,
authorization or qualification of, registration or filing with, or notice to,
any governmental or regulatory authority, agency, department, commission, board,
bureau, body or instrumentality is required for the execution, delivery or
performance (including the sale of the Shares and the Acquired Trust Interests
by Seller as contemplated herein) of, or compliance by Itel or Seller with, this
Agreement or the Related Documents to which they respectively are parties, or
the consummation by Itel or Seller of any other transaction contemplated under
this Agreement or any of the Related Documents.
3.3 Business Description. The Business Description attached to this
Agreement as Schedule 3.3, as it may from time to time be amended or
supplemented by Itel or Seller (as so amended or supplemented, the "Business
Description") does not as of the date hereof, and will not at the Closing Date,
or, in the case of information specified to be as of a particular date, as of
such date, contain any untrue statement of a material fact and as of the date
hereof does not and will not on the Closing Date, omit to state a material fact
necessary in order to make the statements contained therein, in the light of the
circumstances under which they were made, not misleading.
3.4 Transaction Documents. All copies of the Transaction Documents
delivered by Seller to Purchaser are true and correct copies. All such
Transaction Documents are valid, binding and, as amended or modified to date,
are in full force and effect. There are no (a) effective amendments or
modifications to any of the Transaction Documents or (b) other effective
agreements between Seller and/or any affiliate of Seller and any other person
or, to the knowledge of Seller, between the other parties to the Transaction
Documents, relating to the transactions contemplated therein that, in the case
of either (a) or (b) above, would have a material adverse effect on the rights
or obligations of the Purchaser with respect to the transactions contemplated by
this Agreement or the Transaction Documents. There has been no default of Seller
or, to the knowledge of Seller, any other party to the Transaction Documents of
their respective obligations under the Transaction Documents that would have a
material adverse effect on the rights or obligations of the Purchaser with
respect to the transactions contemplated by this Agreement. As of the Closing,
the Trust will not be a party to, nor will any of its property be bound by, any
indenture, mortgage, deed of trust, loan agreement or other contract, agreement
or instrument other than the Transaction Documents.
3.5 Trust Balance Sheet; Material Adverse Change. The balance sheet of the
Trust dated as of March 31, 1994 (together with any notes thereto), true and
complete copies of which have been delivered to Purchaser, has been prepared in
accordance with GAAP and reflects all adjustments (consisting of normal
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recurring accruals) which are, in the opinion of management, necessary for a
fair presentation of the condensed consolidated balance sheet of the Trust.
Since the date of such balance sheet, there has not been any increase in the
debt of the Trust or any material adverse change in the Trust's deficit or
results of operations of the Trust; or any material loss or interference with
its business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental action,
order or decree; or any development involving a prospective material adverse
change, in or having a material adverse affect on the general affairs,
management, financial position or results of operations of the Trust or the
Partnership, otherwise than as set forth or contemplated in the Business
Description; provided, however, that Seller makes no representation or warranty
as to any such development that is the result of market or general industry
conditions or trends.
3.6 Title. (a) Seller has good and valid title to the Shares and the
Acquired Trust Interests, and Signal Capital Holdings has good and valid title
to all of the Trust Interests held by it, in each case free and clear of all
liens, encumbrances and defects.
(b) Each of Signal Capital Holdings and the Trust and the entities
consolidated therewith for financial reporting purposes (including the
Partnership) has good and valid title to all personal property, owned by it as
reflected on the balance sheets provided by Seller pursuant to Sections 3.20 and
3.5, respectively, in each case free and clear of all liens, encumbrances and
defects (collectively, "Liens") except (i) Liens described in the Business
Description and (ii) any "Permitted Itel Encumbrances", as defined in the
Participation Agreement.
3.7 Signal Capital Holdings and the Company. Each of Signal Capital
Holdings and the Company is validly existing as a corporation in good standing
under the laws of the State of Delaware, with power and authority (corporate and
other) to own its properties and conduct its business, and has been duly
qualified as a foreign corporation for the transaction of business and is in
good standing under the laws of each other jurisdiction in which it owns or
leases properties, or conducts any business, so as to require such
qualification, or is subject to no material liability or disability by reason of
the failure to be so qualified in any such jurisdiction; and each subsidiary of
the Company is validly existing in good standing under the laws of its
jurisdiction of organization.
3.8 The Trust. The Trust has been duly organized and is validly existing as
a statutory business trust under the laws of the State of Delaware, with all
requisite power and authority to own its properties and conduct its business and
to execute and deliver the Transaction Documents to which it is a party and to
consummate the transactions contemplated thereby; and has been duly qualified
for the transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties or conducts any
business, so as to require such qualification, or is subject to no material
liability or disability by reason of a failure to be so qualified in any such
jurisdiction.
3.9 The Partnership. The Partnership is a duly formed and validly existing
limited partnership in good standing under the laws of the State of Delaware,
with power and authority to own its properties and assets and to conduct its
business, and has been duly qualified for the transaction of business and is in
good standing under the laws of each other jurisdiction in which it owns or
leases properties, or conducts any business, so as to require such
qualification, or is subject to no material liability or disability by reason of
a failure to be so qualified in any such jurisdiction.
3.10 The Shares. Signal Capital Holdings has an authorized capitalization
as set forth in the balance sheet provided by Seller pursuant to Section 3.20
and all of the issued shares of capital stock of Signal Capital Holdings have
been duly and validly authorized and issued, are fully paid and non-assessable.
There are no preemptive rights to purchase in respect of the Shares, the
Acquired Trust Interests or any other equity securities of Signal Capital
Holdings, the Trust or the Partnership. All of the issued and outstanding common
stock of Signal Capital Holdings is (or at the Closing will be) owned by Seller.
All of the issued and outstanding common stock of the Company is owned by Signal
Capital Holdings.
3.11 The Trust Interests. Capital contributions have been made to the Trust
as set forth in the Business Description, and all the beneficial interests in
the Trust have been duly and validly authorized and issued, are fully paid and
(except as set forth in the Transaction Documents) non-assessable and conform to
the
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description contained in the Business Description. All of the issued and
outstanding beneficial interests in the Trust are owned as set forth in the
Business Description.
3.12 Interests in Partnership. Capital contributions have been made to the
Partnership as set forth in the Business Description, and all the issued limited
partnership interests of the Partnership have been duly and validly authorized
and issued, are fully paid and (except as set forth in the Transaction
Documents) non-assessable and conform to the description contained in the
Business Description. All of the limited partnership interests in the
Partnership are owned as set forth in the Business Description.
3.13 No Violations. Subject to the receipt of the consents, the giving of
the notices and the taking of the other actions described in Schedule 3.13, none
of the execution, delivery or performance (including the sale of the Shares and
the Acquired Trust Interests by Seller) of this Agreement or the Related
Documents, or the consummation of the transactions herein or therein
contemplated, will conflict with or result in a breach or violation of any of
the terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which Itel, Seller, Signal Capital Holdings or any Entity is a party or by which
Itel, Seller, Signal Capital Holdings or any Entity is bound or to which any of
the property or assets of Itel, Seller, Signal Capital Holdings or any of the
Entities is subject, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or by-laws or other governing
document of Itel, Seller, Signal Capital Holdings or any Entity or (based on the
representations and warranties of Purchaser set forth in Sections 4.6, 4.7 and
4.8) any statute or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over Itel, Seller, Signal Capital Holdings or
any Entity or any of their properties. All representations and warranties set
forth in this Section 3.13 as to Signal Capital Holdings are limited to actions
by, through or under persons or entities other than Purchaser or its Affiliates
for the time period ending immediately prior to the Closing, except that Itel
and the Seller further represent and warrant that the redemption of the Shares
and the other actions contemplated by this Agreement will not (i) conflict with
or result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which Signal Capital Holdings is a
party prior to the conveyance of Shares to Purchaser or by which Signal Capital
Holdings is bound or to which any of the property or assets of Signal Capital
Holdings is subject prior to the conveyance of Shares to Purchaser, or (ii)
result in any violation of the provisions of the Certificate of Incorporation or
by-laws or other governing document of Signal Capital Holdings or of any order
of any court or governmental agency or body having jurisdiction over Signal
Capital Holdings or any of its properties, in each case as in effect prior to
the conveyance of Shares to Purchaser.
3.14 Litigation. (a) There are no legal or governmental proceedings pending
to which Signal Capital Holdings, the Trust or the Partnership is a party or of
which any property of Signal Capital Holdings, the Company, the Trust or the
Partnership is the subject which are not Indemnified Liabilities and which, if
determined adversely to any of them, would be reasonably likely, individually or
in the aggregate, to have a material adverse effect on the consolidated
financial position, owners' equity or results of operations of any of them; and,
to the best of the knowledge of Itel and Seller, no such proceedings are
threatened or contemplated by governmental authorities or threatened by others.
(b) There is no action, suit or proceeding against, or investigation of,
Itel, Seller, Signal Capital Holdings or any of the Entities pending or, to the
best knowledge of Itel and the Seller, threatened, before any court,
administrative agency or other tribunal which (i) asserts the invalidity of this
Agreement or the Shares or the Acquired Trust Interests, (ii) seeks to prevent
the sale of the Shares or the Acquired Trust Interests or the consummation of
any of the transactions contemplated by this Agreement or the Related Documents,
or (iii) could, either individually or in the aggregate, materially and
adversely affect the performance by Itel or Seller of its obligations under, or
the validity or enforceability of this Agreement or the Shares, the Acquired
Trust Interests or the Related Documents.
(c) There is no action, suit or proceeding against, or investigation of,
the Trust, the Partnership, the lessee under the Leases or any Affiliate of such
lessee pending or, to the best knowledge of Itel and the Seller, threatened,
before any court, administrative agency or other tribunal which could give rise
to an offset against any rent, option purchase price or other amount payable
under the Leases.
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3.15 Investment Company Act. None of Itel, Seller, Signal Capital Holdings
or any of the Entities currently is, or currently is required to be, and the
consummation of the transactions contemplated by this Agreement will not require
Itel or Seller to be, registered as an investment company or a company
controlled by an investment company within the meaning of the Investment Company
Act of 1940, as amended (the "1940 Act").
3.16 Tax Returns and Payments. (a) Except as disclosed on Schedule 3.16
annexed hereto, all Tax Returns required by law to have been filed by, or with
respect to the activities of, Signal Capital Holdings, the Company and the Trust
with any taxing authority having jurisdiction, have been properly and timely
filed and all such Tax Returns are correct, accurate and complete in all
material respects. True and complete copies of all Tax Returns actually filed by
Signal Capital Holdings, the Company and the Trust for all taxable periods
beginning on or after January 1, 1992 and due to be filed (including extensions)
on or before the date hereof have been made available to Purchaser. In the case
of Signal Capital Holdings' and the Company's federal income tax returns, pro
forma separate company Forms 1120 with information as included in Itel's
Consolidated returns have been made available in lieu of actually filed returns.
Except as set forth on Schedule 3.16, all Taxes shown to be due on such Tax
Returns have been paid or have been adequately provided for in the Financial
Statements previously provided to Purchaser. Except as set forth on Schedule
3.16, the Taxes shown on such Tax Returns currently reflect the Taxes due in
respect of the periods covered by such Tax Returns in all material respects.
(b) Assessments, Audits and Extensions. Schedule 3.16 sets forth (i) the
taxable periods for which federal, state, local or foreign income Tax Returns
filed by Signal Capital Holdings, the Company and the Trust have been or are
being audited by any taxing authority having jurisdiction, (ii) the states,
localities or countries of such audits, (iii) the status of such audits, and
(iv) the results of such audits. True and complete copies of any examination or
audit reports have been made available to Purchaser. Except as provided on
Schedule 3.16, all deficiencies proposed as a result of any audits have been
paid or finally settled or adequately provided for and no deficiencies have been
proposed in the course of pending audits. Except as disclosed on Schedule 3.16,
no waivers or extensions of applicable statutes of limitation with respect to
Taxes have been requested, or granted by or with respect to Signal Capital
Holdings, the Company or the Trust. Except as set forth in Schedule 3.16, no
state of facts exist or has existed that would constitute grounds for the
assessment of any further liability for Taxes against or result in the
requirement of the payment of additional Taxes with respect to periods for which
an audit is in process or any unaudited period.
(c) Nothing in this Section or in any other section of this Agreement shall
be construed as a representation or warranty as to the Tax Returns required to
be filed or the Taxes required to be paid for any period beginning on or after
the Closing.
3.17 No Brokers. Neither Seller nor Itel has employed any investment
banker, broker, finder or intermediary in connection with the transactions
contemplated hereby who might be entitled to a fee or other commission from
Purchaser upon consummation of the transactions contemplated hereby.
3.18 Other Offers. None of Itel, Seller or any of the Entities, nor any
affiliate of any of them, nor any person authorized or employed by any of the
foregoing has, directly or indirectly, sold or offered for sale or disposed of,
or attempted or offered to sell or dispose of, any Shares or Trust Interests or
any securities that are substantially similar to the Shares or the Trust
Interests, or solicited offers to buy any Shares or Trust Interests or similar
security from, or otherwise approached or negotiated with respect thereto with,
any person or persons other than the Purchaser. Based on the representations and
warranties of Purchaser set forth in Sections 4.6, 4.7 and 4.8, the offering and
sale of the Shares and the Acquired Trust Interests to the Purchaser is exempt
from the registration requirements of the Securities Act.
3.19 Trustee Consents. The consents given or proposed to be given as of the
date of this Agreement by the Trust to the sale or agreement to sell railcars
owned by the Partnership are described in Schedule 3.19 and true and correct
copies of such consents have been furnished to Purchaser.
3.20 Signal Capital Holdings Pro Forma Balance Sheet; Material Adverse
Change. The pro forma balance sheet of Signal Capital Holdings dated as of March
31, 1994 (together with any notes thereto),
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adjusted to show the effects of the Seller's Reorganization as defined in
Section 5.7 as if such Seller's Reorganization had taken place on such date,
true and complete copies of which have been delivered to Purchaser, has been
prepared in accordance with GAAP and reflects all adjustments (consisting of
normal recurring accruals) which are, in the opinion of management, necessary
for a fair presentation of the condensed consolidated balance sheet of Signal
Capital Holdings adjusted as indicated above. Since the date of such balance
sheet, there has not been any increase in the debt of Signal Capital Holdings or
any material adverse change in the matters shown on the pro forma balance sheet
or as to these matters any development involving a prospective material adverse
change in, or having a material adverse affect on the general affairs,
management, financial position, owners' equity or results of operations of
Signal Capital Holdings, otherwise than as set forth or contemplated in this
Agreement or in the Business Description; provided, however, that Seller makes
no representation and warranty as to any such development that is the result of
market or general industry conditions or trends.
3.21 Assignability of Assigned Rights. Itel and the Seller intend and
believe that all of the Assigned Rights are assignable to Purchaser and will be
validly assigned at the Closing. To the extent that any of the Assigned Rights
are not validly assigned to Purchaser at the Closing, Itel and the Seller shall
take such action after the Closing as may be required to make the benefits of
such Assigned Rights available to Purchaser, and shall indemnify Purchaser
against any and all Losses arising or resulting from the failure of Itel and
Seller to validly assign such Assigned Rights to Seller or otherwise make the
benefits of such Assigned Rights available to Purchaser.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
To induce Itel and Seller to enter into this Agreement, to sell the Shares
and the Acquired Trust Interests to Purchaser and to perform the other
obligations of Itel and Seller under this Agreement, Purchaser hereby represents
and warrants to and for the benefit of Itel and Seller and their respective
agents, successors, assigns, transferees, officers, directors and employees and
each person, if any, who "controls" any of them within the meaning of the
Securities Act of 1933 as follows (provided, that the rights of any person under
this Article IV are subject to Section 9.6 and shall be asserted only as
provided in Section 9.2):
4.1 Authorization, Execution and Delivery. Purchaser is a limited liability
company validly existing and in good standing under the laws of the State of
Delaware, and has all necessary corporate power and authority to execute,
deliver and perform this Agreement and the Related Documents to which it is a
party, and to perform its obligations hereunder and thereunder. This Agreement
and the Related Documents to which it is a party, and the transactions
contemplated hereby and thereby, and the execution, delivery and performance
hereof and thereof by Purchaser and Signal Capital Holdings (with respect to the
SCH Guaranty, the Security Agreement, the Redemption Note and the other Related
Documents to be executed by Signal Capital Holdings), including the purchase of
the Shares and the Acquired Trust Interests by Purchaser and the redemption and
cancellation of the 900 Shares by Signal Capital Holdings, have been duly and
validly authorized by the Board of Directors of Purchaser and Signal Capital
Holdings and by all other necessary corporate action on the part of Purchaser
and Signal Capital Holdings. This Agreement and the Related Documents constitute
the legal, valid and binding agreements of Purchaser and Signal Capital
Holdings, enforceable against Purchaser and Signal Capital Holdings in
accordance with their respective terms.
4.2 Governmental Consents. Based on the representations and warranties of
Itel and Seller set forth in Section 3.18, no consent, approval, authorization
or qualification of, registration or filing with, or notice to, any governmental
or regulatory authority, agency, department, commission, board, bureau, body or
instrumentality is required for the execution, delivery or performance
(including the purchase of the Shares and the Acquired Trust Interests by
Purchaser and the redemption and cancellation of the 900 Shares by Signal
Capital Holdings as contemplated herein) of, or compliance by Purchaser with,
this Agreement or the Related Documents to which it is a party, or the
consummation by Purchaser of any other transaction contemplated under this
Agreement or any of the Related Documents. Purchaser's assets and revenues, and
the ownership of
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the shares and other interests (if any) in Purchaser, are such that no HSR
Approval is required with respect to this Agreement or the consummation of the
transactions contemplated hereby.
4.3 Title; Liens, Etc. At the completion of the Closing, and for so long
thereafter as any portion of the Indebtedness evidenced by the Note remains
unpaid:
(a) the 100 Shares will be owned by Purchaser free and clear of any
Lien (other than the Pledge Agreement) arising by, through or under
Purchaser or otherwise arising after the conveyance of the Shares to
Purchaser;
(b) all of the Acquired Trust Interests will be owned by the Purchaser
free and clear of any Lien (other than a Lien created by Purchaser in favor
of the Lender securing the Acquisition Loan) arising by, through or under
Purchaser or otherwise arising after the conveyance of the Acquired Trust
Interests to Purchaser;
(c) all of the Trust Interests owned by Signal Capital Holdings at the
time of the conveyance of the Shares to Purchaser will be owned by Signal
Capital Holdings free and clear of any Lien arising by, through or under
Purchaser or otherwise arising after the conveyance of the Shares to
Purchaser (other than the Lien of the Security Agreement created by Signal
Capital Holdings);
(d) (i) Purchaser will have no Indebtedness other than the Note, the
Purchaser Guaranty and the Acquisition Loan and (ii) Signal Capital
Holdings will have no Indebtedness arising by, through or under Purchaser
or otherwise arising after the conveyance of the Shares to Purchaser other
than the Acquisition Loan, the Redemption Note and the SCH Guaranty.
4.4 No Violations. None of the execution, delivery or performance
(including the purchase of the Shares and the Acquired Trust Interests by
Purchaser and the redemption of the Shares and the issuance of the Redemption
Note and the SCH Guaranty) of this Agreement or the Related Documents, or the
consummation of the transactions herein or therein contemplated, will conflict
with or result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which Purchaser or Signal Capital
Holdings is a party or by which Purchaser or Signal Capital Holdings is bound or
to which any of the property or assets of Purchaser or Signal Capital Holdings
is subject, nor will such action result in any violation of the provisions of
the Certificate of Incorporation or by-laws or other governing document of
Purchaser or Signal Capital Holdings or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction over
Purchaser or Signal Capital Holdings or any of their properties. The
representations and warranties set forth in this Section 4.4 as to Signal
Capital Holdings are based on the representations and warranties of the Seller
set forth in Sections 3.7, 3.13, and 3.20.
4.5 Litigation. (a) There are no legal or governmental proceedings pending
to which Purchaser is a party or of which any property of Purchaser is the
subject which, if determined adversely to Purchaser, would be reasonably likely,
individually or in the aggregate, to have a material adverse effect on the
consolidated financial position, stockholders' equity or results of operations
of Purchaser; and, to the best of Purchaser's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened by others.
(b) There is no action, suit or proceeding against, or investigation of,
Purchaser pending or, to the best knowledge of Purchaser, threatened, before any
court, administrative agency or other tribunal which (i) asserts the invalidity
of this Agreement or any of the Related Documents, (ii) seeks to prevent the
purchase of the Shares or the Acquired Trust Interests or the consummation of
any of the transactions contemplated by this Agreement or the Related Documents,
(iii) could, either individually or in the aggregate, materially and adversely
affect the performance by Purchaser of its obligations under, or the validity or
enforceability of this Agreement or the Related Documents.
4.6 Investigation. (a) Purchaser has made its own independent decision to
enter this Agreement and the Related Documents to which it is a party following
its own independent examination and investigation and without any reliance on
Seller or Itel, except for those representations and warranties of Seller and
Itel
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contained in ARTICLE III of this Agreement. Purchaser acknowledge that it is
familiar with the assets, business, prospects and financial condition of Signal
Capital Holdings, the Trust and the Partnership, has had the opportunity to ask
questions regarding the assets, business, prospects and financial condition of
Signal Capital Holdings, the Trust and the Partnership, and has been furnished
with such information regarding the foregoing as it has requested.
(b) PURCHASER ACKNOWLEDGES THAT EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES OF SELLER AND ITEL CONTAINED IN ARTICLE III OF THIS AGREEMENT, SELLER
AND ITEL HAVE MADE NO REPRESENTATION OR WARRANTY REGARDING THE ASSETS, BUSINESS,
PROSPECTS OR FINANCIAL CONDITION OF SIGNAL CAPITAL HOLDINGS, THE TRUST OR THE
PARTNERSHIP, AND THAT SELLER IS TRANSFERRING THE SHARES AND THE ACQUIRED TRUST
INTERESTS WITHOUT ANY REPRESENTATION OR WARRANTY AS TO MERCHANTABILITY OR
FITNESS FOR ANY PARTICULAR PURPOSE AND WITHOUT ANY IMPLIED WARRANTIES
WHATSOEVER.
(c) WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, PURCHASER
ACKNOWLEDGES THAT SELLER AND ITEL HAVE MADE NO REPRESENTATION OR WARRANTY
REGARDING ANY MATTER RELEVANT TO THE RECEIPT OR NON-RECEIPT BY THE PARTNERSHIP
OF ANY "ADDITIONAL RENT" UNDER EITHER OF THE LEASES, AND PURCHASER HEREBY WAIVES
AND RELEASES ALL CLAIMS, RIGHTS, ACTIONS AND CAUSES OF ACTION, OF ANY KIND OR
NATURE, KNOWN OR UNKNOWN, NOW EXISTING OR HEREAFTER ARISING, THAT COULD AT ANY
TIME BE BROUGHT AGAINST SELLER OR ITEL RELATING TO THE RECEIPT OR NON-RECEIPT BY
THE PARTNERSHIP OF ANY "ADDITIONAL RENT" UNDER EITHER OF THE LEASES.
4.7 Purchase for Investment; Securities Act. Purchaser is acquiring the
Shares and the Acquired Trust Interests for investment for its own account and
not with a view to the distribution thereof. Purchaser acknowledges that the
Shares and the Acquired Trust Interests are not subject to an effective
registration statement under the Securities Act, and that, accordingly, neither
the Shares nor the Acquired Trust Interests, nor any interest in this Agreement,
may be transferred, unless in a transaction exempt from the requirements of the
Securities Act and otherwise permitted by applicable law.
4.8 Experience; Financial Capability. Purchaser has such knowledge and
experience in business and financial matters as to be capable of evaluating the
merits and the risks of the investment contemplated to be made pursuant to this
Agreement, and has the financial capability to bear the risks of such
investment.
4.9 No Brokers. Purchaser has not employed any investment banker, broker,
finder or intermediary in connection with the transactions contemplated hereby
who might be entitled to a fee or other commission from Seller upon consummation
of the transactions contemplated hereby.
4.10 No Default. On the Closing Date, after giving effect to the
transaction contemplated by this Agreement, no event or condition will have
occurred and be continuing which constitutes, or which with the passing of time
or the giving of notice, or both, would constitute, an Event of Default under
any of the Related Documents.
4.11 Balance Sheet; Material Adverse Change. The balance sheet of Purchaser
dated as of June 23, 1994 (together with the notes thereto), true and complete
copies of which have been delivered to Itel and Seller, has been prepared in
accordance with GAAP and fairly presents the financial condition of Purchaser as
of such date. Since the date of such balance sheet, there has not been any
change in the equity capital or long term debt of Purchaser or any material
adverse change, or any development involving a prospective material adverse
change, in or having a material adverse affect on the general affairs,
management, financial position, owners' equity or results of operations of the
Purchaser.
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ARTICLE V
CERTAIN COVENANTS
5.1 Efforts to Close. Subject to the terms and conditions hereof, Purchaser
and Seller each agree to use their commercially reasonable efforts to take all
action required of them to fulfill their respective obligations under the terms
of this Agreement and to facilitate the consummation of the transactions
contemplated hereby.
5.2 Certain Actions by Signal Capital Holdings and the Entities. Seller
agrees that until the Closing or the termination of this Agreement in accordance
with Section 8.1 hereof, except as contemplated by this Agreement (including,
without limitation, Section 5.7), Seller will not, without the consent of
Purchaser:
(a) cause Signal Capital Holdings or any of the Entities to take any
action, or enter into or authorize any contract or transaction, other than
in the ordinary course of business and consistent with past practice;
(b) cause Signal Capital Holdings or any of the Entities to enter into
any new transactions or arrangements with Seller or any Affiliate of
Seller;
(c) modify the governing documents of Signal Capital Holdings or any
of the Entities;
(d) cause any of the Entities or Signal Capital Holdings to incur,
assume or guaranty any Indebtedness;
(e) cause Signal Capital Holdings or any of the Entities to issue any
capital stock or purchase or redeem any capital stock; or
(f) cause any interest in the Trust or the Partnership, or any of the
assets of either of them, to be transferred to any person or entity other
than Signal Capital Holdings or a directly or indirectly wholly-owned
subsidiary of Signal Capital Holdings.
5.3 Required Consents. Itel and Seller shall use their commercially
reasonable efforts to obtain the consents described in Schedule 3.13, and the
opinion of counsel required pursuant to Section 6.1 of the Trust Agreement in
connection with Seller's Reorganization described in Section 5.7 and the sale of
the Acquired Trust Interests to Purchaser. In order to facilitate the
Purchaser's efforts to obtain the Acquisition Loan, such consents under the
Trust Agreement shall extend to all future transfers of the Trust Interests as
well as to the transactions contemplated by this Agreement.
5.4 Financing. Purchaser shall use its commercially reasonable efforts to
(a) obtain as promptly as practicable commitments from responsible lenders for
the Acquisition Loan, and (b) satisfy all conditions precedent to the
availability of funds under such commitments.
5.5 Certain Actions by Itel. If, prior to the third anniversary of the
Closing Date, Itel proposes to enter into any transaction after which the
consolidated net worth of Itel would be less than $200,000,000, then, prior to
entering any agreement to enter into such a transaction, Itel shall notify
Purchaser in writing thereof (if not previously so notified) and, if requested
by Purchaser, shall arrange alternative means of providing for the obligations
of Itel set forth in this Agreement (which may include, by way of example,
arrangements such as the assumption of such obligations by another party,
insurance, surety bonds or the creation of an escrow), in each case with a
party, in an amount and upon terms and conditions reasonably satisfactory to
Purchaser; provided, that any assumption of the obligations of Itel under this
Agreement by any entity having a consolidated net worth of $200,000,000 or more
(an "Eligible Assignee") shall be deemed to satisfy the requirements of this
Section 5.5.
5.6 Inspection. Each of Itel, Seller and Purchaser agrees to provide the
other upon reasonable notice at reasonable times on or after the Closing Date
with access to its records (to the extent it shall have retained any records in
accordance with its customary procedures) reasonably related to the status and
history of the transactions contemplated by this Agreement and subject to proper
safeguards to preserve and protect the confidentiality and/or proprietary nature
of any such materials.
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5.7 Seller's Reorganization. The parties acknowledge and Seller agrees,
prior to the Closing, that Seller shall cause such actions to be taken so that
at the Closing Signal Capital Holdings shall have no assets other than (i) a
68.5% Trust Interest, (ii) $75,000 in cash or cash equivalents and (iii)
goodwill and any other asset which cannot be transferred or removed. The actions
contemplated by this Section 5.7 may include, without limitation, (x) the
transfer of assets, including, without limitation, a 1/2% Trust Interest (the
"Retained Trust Interests") or stock of subsidiaries, by dividend, liquidation
or otherwise, from direct or indirect subsidiaries of Signal Capital Holdings to
other such subsidiaries, Seller or Affiliates of Seller and (y) the merger of
direct or indirect subsidiaries of Signal Capital Holdings into other such
subsidiaries and the merger of various subsidiaries of the Company into the
Company and the merger of the Company into Signal Capital Holdings.
5.8 Assistance by Purchaser. From and after the Closing, the Purchaser
agrees to take such action (at the sole cost and expense of Itel and Seller) as
Itel or Seller may request to assist Itel or Seller in collecting, enforcing or
otherwise realizing upon any assets, claims or rights of Signal Capital Holdings
or its subsidiaries, other than the 68.5% Trust Interest and the $75,000 in cash
described in clause (ii) of Section 5.7 (the "Retained Assets"), including,
without limitation, rights under the Transaction Documents other than the 68.5%
Trust Interest, arising, accruing or relating to events, conditions or periods
prior to the Closing. Purchaser shall promptly deliver to Seller and Itel the
original of any mail or communication, and shall promptly deliver to Seller any
moneys, checks or other instruments of payment, received by Buyer relating to
any of the Retained Assets.
5.9 Actions by Purchaser at the Closing. At the Closing, immediately
following the conveyance to Purchaser and redemption by Signal Capital Holdings
of the Shares and the conveyance to Purchaser of the Acquired Trust Interests,
Purchaser shall take such actions (including, without limitation, the
contribution of cash and/or property to Signal Capital Holdings) as may be
required so that Signal Capital Holdings has the ability to pay any Taxes for
any period beginning on or after the Closing relating to the 68.5% Trust
Interest held by Signal Capital Holdings assuming the exercise of the Purchase
Options under the Leases without consideration of any financings (including
those contemplated by this Agreement) or Tax deductions arising therefrom.
5.10 Actions by Purchaser after the Closing. If Seller should elect
pursuant to Section 2.5(b)(xii) to accept less than complete evidence of the
taking of the actions described in Section 5.9, Purchaser shall complete such
evidence to the reasonable satisfaction of Seller within 6 months of the
Closing.
5.11 Utilization of SPC Investor. As long as the stock of the SPC Investor
owned by the stockholders of the SPC Investor is subject to forfeiture for the
failure to provide services relating to the Trust, Purchaser shall and shall
cause Signal Capital Holdings to furnish to the SPC Investor all information
from the Trust not directly furnished to the SPC Investor and, to the extent
that time permits and the holder of the Trust Interests can take any action in
relation to the business of the Trust, seek the advice of the SPC Investor on
such action. Purchaser shall and shall cause Signal Capital Holdings to cause
any subsequent holder of Trust Interests to enter into an agreement to the
effect of this Section 5.11.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser under this Agreement are subject to the
satisfaction of the following conditions precedent on or before the Closing
Date, any one or more of which may be waived at the option of Purchaser:
6.1 Representations and Warranties Correct. The representations and
warranties of Seller contained herein or in any Related Document shall have been
accurate, true and correct in all material respects on and as of the date of
this Agreement, and (except as contemplated by this Agreement) shall also be
accurate, true and correct in all material respects on and as of the Closing
Date.
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6.2 Performance of Agreements. Seller shall have performed all material
obligations of Seller under this Agreement, including without limitation the
consents to be obtained pursuant to Section 5.3, and the Related Documents to be
performed by Seller on or before the Closing Date.
6.3 No Injunction. On the Closing Date there shall be no effective
injunction, writ, preliminary injunction, temporary restraining order or other
order of any nature issued by a court of competent jurisdiction directing that
the transactions provided for herein or any of them not be consummated as so
provided.
6.4 Closing Deliveries. Purchaser shall have received all of the
agreements, documents and items specified in Section 2.5(a), executed by Seller
and the other parties thereto.
6.5 Financing. Purchaser and Signal Capital Holdings shall have each
obtained a loan from a bank or other institutional lender, on terms and
conditions consistent with this Agreement and otherwise on current market terms
and conditions, in the principal amount, respectively, of $11,000,000 and
$25,300,000, the net proceeds of which loans are available to make the cash
payments at Closing required by Section 2.1 hereof.
6.6 Required Consents, Etc. Purchaser shall have received reasonably
satisfactory evidence that the consents, notices and other actions described in
Schedule 3.13 have been obtained, given or taken, as applicable.
6.7 No Material Adverse Change. Since the date of this Agreement there
shall not have been any material adverse change in the assets, business or
financial condition of Signal Capital Holdings, the Trust or the Partnership,
except as contemplated by this Agreement (including, without limitation, Section
5.7).
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligations of Seller under this Agreement are subject to the
satisfaction of the following conditions precedent on or before the Closing
Date, any one or more of which may be waived at the option of Seller:
7.1 Representations and Warranties Correct. The representations and
warranties of Purchaser contained herein or in any Related Document shall have
been accurate, true and correct in all material respects on and as of the date
of this Agreement, and (except as contemplated by this Agreement) shall also be
accurate, true and correct in all material respects on and as of the Closing
Date.
7.2 Performance of Agreements. Seller shall have performed all material
obligations of Seller under this Agreement and the Related Documents to be
performed by Seller on or before the Closing Date.
7.3 No Injunction. On the Closing Date there shall be no effective
injunction, writ, preliminary injunction, temporary restraining order or other
order of any nature issued by a court of competent jurisdiction directing that
the transactions provided for herein or any of them not be consummated as so
provided.
7.4 Closing Deliveries. Seller shall have received all of the agreements,
documents and items specified in Section 2.5(b).
7.5 No Default. No event or condition shall have occurred and be continuing
which constitutes, or which with the passing of time or the giving of notice, or
both, would constitute, an Event of Default under any of the Related Documents.
7.6 Required Consents; Etc. Seller and Itel shall have received reasonably
satisfactory evidence that the consents, notices and other actions described in
Schedule 3.13 have been obtained, given or taken, as applicable.
7.7 No Material Adverse Change. Since the date of this Agreement there
shall not have been any material adverse change in the assets, business or
financial condition of Purchaser, except as contemplated by this Agreement
(including, without limitation, Section 6.5).
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ARTICLE VIII
TERMINATION
8.1 Termination. This Agreement may be terminated at any time on or prior
to the Closing Date:
(a) by the mutual consent of Seller and Purchaser;
(b) by Seller or by Purchaser, if the Closing shall not have taken
place on or before July 21, 1994;
(c) by Purchaser, if there shall have been a material breach of any
covenant or representation or other agreement of Seller hereunder, and such
breach shall not have been remedied within ten (10) business days after
receipt by Seller of a notice in writing from Purchaser specifying the
breach and requesting such be remedied;
(d) by Seller, if there shall have been a material breach of any
covenant or representation or other agreement of Purchaser hereunder, and
such breach shall not have been remedied within ten (10) business days
after receipt by Purchaser of notice in writing from Seller specifying the
breach and requesting such be remedied; or
(e) by either Purchaser or Seller (the "Affected Party"), if the
Affected Party concludes, based on the advice of its counsel, that events
since November 16, 1993 have materially adversely changed the financial
consequences to such Affected Party of closing under this Agreement.
8.2 Effect of Termination. If this Agreement is terminated pursuant to
Section 8.1, all obligations and agreements of the parties hereunder shall
terminate, except that (a) no such termination shall relieve any party from
liability for any prior willful breach of this Agreement and (b) in the case of
any termination pursuant to Section 8.1(e), if the events giving rise to any
termination of this Agreement by an Affected Party were not due to the acts or
omissions of the other party or such other party's stockholders, employees,
agents or contractors, then the Affected party shall reimburse the other party
for such other party's expenses incurred in connection with this Agreement, up
to a maximum of $500,000.
ARTICLE IX
MISCELLANEOUS
9.1 Survival. The representations and warranties of Seller, Itel and
Purchaser contained in this Agreement, the indemnity of Seller and Itel set
forth in Sections 9.2(a)(i) and (ii) and the indemnity of Purchaser contained in
Section 9.2(b)(ii) shall survive the Closing for all claims for which a Notice
of Claim is submitted prior to the third anniversary of the Closing Date;
provided, that the representations and warranties contained in Section 3.6 and
the indemnity of Seller and Itel set forth in Sections 9.2(a)(i) and (ii) as it
relates to such representations and warranties shall survive, without limit as
to time, the Closing and the representations and warranties contained in Section
4.3 and the indemnification of Purchaser set forth in Section 9.2(b)(ii) as it
relates to such representations and warranties shall survive the Closing,
without limitation as to time, for all claims for which a Notice of Claim is
submitted prior to the date on which all amounts due under the Note are paid in
full. Notwithstanding the foregoing, the indemnities of Seller and Itel set
forth in Section 9.2(a)(iii) and the indemnities of Purchaser set forth in
Section 9.2(b)(i) shall survive, without limit as to time, the Closing Date and
termination of this Agreement.
9.2 Indemnification; Limitations of Liability. (a) If the Closing occurs,
Itel and the Seller will jointly and severally indemnify and hold harmless the
Purchaser, Signal Capital Holdings and their respective agents, successors,
assigns, transferees, officers, directors and employees, and each person, if
any, who "controls" any of them within the meaning of the Securities Act (each a
"Purchaser Indemnitee"), from and against any and all losses, claims, damages or
liabilities ("Losses") incurred or suffered by any Purchaser Indemnitee, to the
extent arising out of or based upon (i) an untrue statement or alleged untrue
statement of a material fact contained in the Business Description or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading or
(ii) any misrepresentation or breach of warranty, covenant or agreement made or
to be performed by Itel or the Seller
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pursuant to this Agreement or any Related Document, or (iii) any Liability; and
will reimburse each Purchaser Indemnitee for any legal or other expenses
reasonably incurred by it in connection with investigating or defending such
action or claim as such expenses are incurred. Subject to Section 4.6(c) and,
with respect to Purchaser's assignees and transferees, Section 9.6, each
Purchaser Indemnitee shall be entitled to rely on the information provided in
the Business Description and the representations and warranties provided by Itel
and Seller herein, without conducting any independent investigation of the
matters covered thereby, and any independent investigation conducted by a
Purchaser Indemnitee shall not affect or mitigate Itel's or Seller's
indemnification obligation hereunder.
(b) If the Closing occurs, the Purchaser will indemnify and hold harmless
Itel, the Seller, and their respective agents, successors, assigns, officers,
directors and employees, and each person, if any, who "controls" any of them
within the meaning of the Securities Act (each an "Itel Indemnitee"), from and
against any and all Losses incurred or suffered by any Itel Indemnitee, to the
extent arising out of or based upon (i) any Assumed Liability; or (ii) any
misrepresentation or breach of any warranty, covenant or agreement made or to be
performed by Purchaser pursuant to this Agreement or any Related Document, and
will reimburse each Itel Indemnitee for any legal or other expenses reasonably
incurred by it in connection with investigating or defending such action or
claim as such expenses are incurred. Each Itel Indemnitee shall be entitled to
rely on the representations and warranties provided by Purchaser herein, without
conducting any independent investigation of the matters covered thereby, and any
independent investigation conducted by an Itel Indemnitee shall not affect or
mitigate Purchaser's indemnification obligation hereunder.
(c) Promptly upon learning thereof, any party entitled to indemnification
hereunder (the "Indemnitee") shall notify the party liable for such
indemnification (the "Indemnitor") in writing of any Loss which the Indemnitee
has determined has given or could give rise to a claim for indemnification under
Section 9.2(a) or Section 9.2(b), as the case may be. Such notice (a "Notice of
Claim") shall specify in reasonable detail, so far as the Indemnitee is able to
do so, the nature and any particulars of any such claim giving rise to a right
of indemnification (including the amount thereof, so far as the Indemnitee is
able to do so). The delay or failure of the Indemnitee to give such notice shall
not relieve the Indemnitor of any liability it may have hereunder to the
Indemnitee except to the extent the Indemnitor is actually prejudiced thereby.
(d) With respect to any claim, suit, action or proceeding (a "Claim") by a
third party or any judgment in favor of a third party that could give rise to
indemnification under this Section 9.2, the Indemnitor shall have the right (but
not the obligation) to defend (in the name of the Indemnitee, if necessary), at
its own expense with attorneys of its own selection (which attorneys shall be
reasonably satisfactory to the Indemnitee), any such Claim, and the Indemnitee
shall not settle any such Claim without the Indemnitor's written consent;
provided, that if any Indemnitor is not defending such Claim within thirty (30)
days after having been afforded the opportunity to so in accordance with this
Section, then the Indemnitee shall have the right to reasonably defend the Claim
in such manner as it may deem appropriate at the cost and expense of the
Indemnitor, and the Indemnitor shall promptly reimburse the Indemnitee therefor
in accordance with this Section 9.2, and the Indemnitor's consent to any
proposed settlement shall not be unreasonably withheld. Notwithstanding the
assumption by the Indemnitor of the defense of any Claim as provided in this
paragraph, the Indemnitee shall be permitted to participate in the defense of
such Claim and to employ counsel at its own expense (subject to the right of the
Indemnitor to control and direct such defense), in which case the Indemnitor
shall not be liable to the Indemnitee for any legal expenses of such other
counsel or any other expenses, in each case incurred by the Indemnitee, in
connection with the defense thereof, other than reasonable costs of
investigation undertaken at the request of the Indemnitor or counsel to the
Indemnitor in connection with the defense of the claim. The Indemnitee shall
make available (or ensure that any relevant affiliate makes available) to the
Indemnitor or its representatives access to all personnel, records and other
materials reasonably required by them for their use in connection with any Claim
and shall cooperate with the Indemnitor in connection with all such Claims as
reasonably required by the Indemnitor. If the Indemnitor does not assume the
defense of any Claim, then any failure of the Indemnitee to defend shall not
relieve the Indemnitor of its obligations hereunder; provided that the
Indemnitee shall have given the Indemnitor notice of its intention not to defend
and afford the Indemnitor the opportunity to assume the defense within such
period as may be reasonable (taking into consideration when determining whether
such period is reasonable,
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the time when notice was given to the Indemnitee by the Indemnitor that such
Indemnitor did not intend to assume the defense thereof).
(e) Notwithstanding any other provision of this Section, no Indemnitor
shall settle any Claim without the consent of the Indemnitees if such settlement
would (i) involve an admission by the Indemnitee of criminal liability or (ii)
otherwise materially adversely affect the Indemnitee or its subsidiaries.
(f) The Seller and the Purchaser agree that any payment made under this
Section 9.2 shall be deemed to be an adjustment to the purchase price and
treated accordingly.
(g) If the indemnification provided for in this Section 9.2 is unavailable
to or insufficient to hold harmless an Indemnitee in respect of any Losses with
respect to which such indemnification is applicable on its face, then each
Indemnitor, in lieu of indemnifying such Indemnitee, shall contribute to the
amount paid or payable by such Indemnitee as a result of such Losses in such
proportion as is appropriate to reflect the relative fault of and the relative
benefits received by the parties hereto.
(h) Notwithstanding any other provision of this Agreement to the contrary,
neither the Seller nor Itel will have any liability with respect to the
representations and warranties contained in Article III of this Agreement other
than those in Sections 3.1, 3.2, 3.4 and 3.6(a) until the aggregate amount of
Losses for which it would be liable (but for this clause) exceeds $2,500,000,
and then only to the extent that such Losses exceed such amount.
(i) Nothing in this Article IX shall limit the ability of either party to
seek the enforcement of, or damages for the failure of the other party to
perform under any provisions of, Section 2.1 or Article V of this Agreement.
(j) It is the intent of the parties that each Purchaser Indemnitee and Itel
Indemnitee, other than the parties hereto, shall be considered to be third party
beneficiaries of the indemnification provided by this Section 9.2.
9.3 Expenses. Except as otherwise specifically provided herein, each party
hereto will bear, or cause to be borne, without liability to any other party,
its costs and expenses in connection with the transactions contemplated hereby
(whether or not consummated), including (without limitation) attorneys',
consultants', brokers', accountants', finders' and financial advisors' fees and
expenses and any other similar charges; provided, that Seller shall bear any
sales, use, documentary, value added or transfer tax or assessment payable in
connection with the transfer of the Shares and the Acquired Trust Interests to
Purchaser pursuant to this Agreement.
9.4 Amendments; Waivers. This Agreement may be amended, modified or
supplemented, but only in writing signed by each of the parties hereto. No
waiver of any provision hereof shall be effective unless in writing and signed
by the party giving such waiver. No waiver with respect to any matter or event
shall extend to other matters or events, whether or not similar to the matter or
event waived.
9.5 Notices. Any notice, request, instruction or other document to be given
hereunder by a party hereto shall be in writing and shall be deemed to have been
given, (a) when received if given in person or by courier or a courier service,
(b) on the date of transmission if sent by telex, facsimile or other wire
transmission or (c) three business days after being deposited in the mail,
certified or registered mail, postage prepaid:
(a) If to Purchaser, addressed as follows:
SCAP Associates L.L.C.
885 Third Avenue, Suite 2400
New York, New York 10022
Attention: Douglas H. Wolf
Facsimile No.: (212) 826-5617
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with a copy to:
O'Melveny & Myers
Citicorp Center
54th Floor
153 East 53rd Street
New York, New York 10022-4611
Attention: Perry A. Lerner
Facsimile No.: (212) 326-2061
(b) If to the Seller, addressed as follows:
Itel Rail Holdings Corporation
Two North Riverside Plaza
Chicago, Illinois 60606
Attention: James E. Knox
Facsimile No.: (312) 902-1573
with a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: Richard S. Millard
Facsimile No.: (312) 701-7711
9.6 Assignment; Successors.
(a) This Agreement may not be assigned without the written consent of
the other parties hereto.
(b) No transfer shall be made of any Trust Interests by Purchaser or
Signal Capital Holdings without requiring that the transferee (i) execute
an agreement with Seller in the form of the Assumption Agreement for the
period beginning with such transfer and to the extent of the transferee's
interest in the Trust Interests, and (ii) agree to obtain a corresponding
agreement from any subsequent transferee as a condition to any further
transfer.
(c) Notwithstanding Section 9.6(a) above, after the Closing Purchaser
may assign its rights under this Agreement to any Permitted Assignee,
provided, that (i) such Permitted Assignee executes and delivers to Seller
an agreement in the form of the Assumption Agreement for the period
beginning with such assignment and to the extent of the Permitted
Assignee's interest in the Trust Interests and makes representations and
warranties to Purchaser (which shall in turn assign them to Seller), with
respect to such Permitted Assignee, to the same effect as those set forth
in Sections 4.1, 4.2 and 4.4 through 4.6 hereof with respect to Purchaser,
and (ii) following such assignment and after giving effect thereto, no
event or condition shall have occurred and be continuing which constitutes,
or which with the passing of time or the giving of notice, or both, would
constitute, an Event of Default under any of the Related Documents.
(d) Notwithstanding Section 9.6(a) above, after the Closing either or
both of Seller and/or Itel may assign its rights under this Agreement to
any person or entity, and any such assignment to an Eligible Assignee that
assumes in writing the obligations of Itel and Seller under this Agreement
shall operate to release Itel and Seller from all liability hereunder with
respect to such obligations.
(e) Subject to the foregoing, this Agreement (including the
representations, warranties, covenants, agreements an indemnification
obligations contained herein) shall be binding upon and inure to the
benefit of the successors to the parties hereto.
9.7 No Third Party Beneficiaries. Except as otherwise expressly provided in
this Agreement, this Agreement is solely for the benefit of the parties hereto
and no provision of this Agreement shall be deemed to confer upon any third
party any remedy, claim, liability, reimbursement, cause of action or other
right.
20
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9.8 Severability. If any provision of this Agreement shall be held invalid,
illegal or unenforceable, the validity, legality or enforceability of the other
provisions hereof shall not be affected thereby, and there shall be deemed
substituted for the provision at issue a valid, legal and enforceable provision
as similar as possible to the provision at issue.
9.9 Entire Understanding. This Agreement and the Related Documents together
set forth the entire understanding of the parties hereto and supersede any and
all prior agreements, arrangements and understandings among the parties with
respect to the subject matter hereof. To the extent that the provisions of any
Related Document are inconsistent with the description thereof in this
Agreement, and except as otherwise provided in any Related Documents, the terms
of such Related Documents shall control. Notwithstanding anything to the
contrary above, the Confidentiality Agreement shall remain in full force and
effect in accordance with its terms.
9.10 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the law of the State of New York, without regard to principles
of conflicts of law.
9.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original but which together shall
constitute one and the same agreement.
9.12 Captions. Section captions are for convenient reference only and shall
not affect the construction or interpretation of this Agreement.
9.13 Exclusivity. Until the first to occur of (a) the Closing or (b) the
termination of this Agreement in accordance with Article VIII, Seller shall not
sell, offer to sell, solicit an offer to purchase or accept any offer to
purchase the Shares or the Acquired Trust Interests or any interest in the
Partnership or the Trust or the property of the either of them, and Purchaser or
its permitted assignee(s) shall have the sole and exclusive right, during the
period described in this Section 9.13, to purchase the Shares and the Acquired
Trust Interests on the terms and conditions set forth in this Agreement.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed and delivered as of the date first written above by their duly
authorized representatives.
Seller: ITEL RAIL HOLDINGS CORPORATION
By:
--------------------------------
Name:
Its:
Itel: ITEL CORPORATION
By:
--------------------------------
Name:
Its:
Purchaser: SCAP ASSOCIATES L.L.C.
By:
--------------------------------
Name:
Its:
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EXHIBIT 28.1
ITEL HAS AGREEMENT TO SELL REMAINING RAILCAR INTERESTS
CHICAGO, June 24, 1994 -- Itel Corporation (NYSE: ITL) announced today that
an agreement has been reached to sell substantially all its remaining interests
in its fleet of railcars to a newly formed corporation owned by private
investors.
Itel's interests are in a trust which holds the rights to the fleet's
residual value on the expiration of the 12-year leases executed in 1992. The
agreement is subject to contingencies, including the completion of the
purchaser's arrangements for bank loans for the cash portion of the purchase
price. There can be no assurance that these contingencies will be met.
The transaction will involve the direct sale of a 30% interest in the Trust
and the sale of stock of a subsidiary holding a 68 1/2% interest in the trust
(after the other assets of the subsidiary have been removed), and the redemption
by that subsidiary of the remainder of its stock. The transaction will trigger a
taxable gain to Itel of approximately $500 million, of which approximately 80%
will be covered by Itel's existing NOLs and tax credits, which will essentially
be exhausted by this transaction.
Upon the closing, which is scheduled for the third quarter of this year,
Itel will receive from the purchaser and the acquired company cash of $35
million and notes totaling $169.5 million. The cash portion of the purchase
price is being borrowed by the purchaser and the acquired company from a bank
pursuant to short-term loans. There can be no assurance that these loans can be
refinanced or otherwise paid when they become due. The bank will have a sole
lien on the 30% trust interest being acquired by the purchaser and a prorata
lien with Itel on the stock of the acquired company and its 68 1/2% trust
interest.
The notes to be received by Itel will not be due until the end of 1998, and
payment of principal and interest can be deferred until that time at the
election of the obligors. These notes will be backed by the same resources as
the bank loans, subject to the prior or prorata claims of the bank. There can be
no assurance that these notes will not be accelerated by defaults on the bank
loans or otherwise.
The timing of the recognition of the net gain for financial reporting
purposes from this transaction, which is estimated to exceed $200 million, is
yet to be determined.
<PAGE> 1
EXHIBIT 28.2
ITEL COMPLETES SALE OF REMAINING RAILCAR INTERESTS
CHICAGO, July 26, -- Itel Corporation (NYSE:ITL) today reported that the
previously announced sale of the company's remaining railcar interests has been
completed.
On June 24, the company said it had reached an agreement to sell the
interests for $35 million in cash and $169.5 million in notes.
Itel Corporation, headquartered in Chicago, is involved primarily in
providing wiring systems and products for data, voice, multimedia and energy
networks through Anixter. Itel also owns 33 percent of ANTEC.
