UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
Commission file number 1-10720
Illinois Central Corporation
(Exact name of registrant as specified in its
charter)
Delaware 13-3545405
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
No.)
455 North Cityfront Plaza Drive,
Chicago, Illinois 60611-5504
(Address of principal executive offices)
Registrant's telephone number, including area code:
(312) 755-7500
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF
THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF
THE ACT:
Common Stock, par value $.001 per share
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to
file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes ..X.. No ....
Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will
not be contained, to the best of registrant's
knowledge, in definitive proxy or information
statements incorporated by reference in Part III of
this Form 10-K or any amendment to this
Form 10-K. [ ]
As of March 1, 1994, the aggregate market
value of the common stock held by non-affiliates of
the registrant was approximately $1,449 million.
For purposes of the foregoing statement only,
directors and executive officers of the registrant
have been assumed to be affiliates.
As of March 1, 1994, there were 42,615,839
shares of the registrant's common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Annual Report on Form 10-K
incorporates by reference information (to the
extent specific sections are referred to herein)
from the Registrant's Proxy Statement for its 1994
Annual Meeting of Stockholders.
<PAGE>
ILLINOIS CENTRAL CORPORATION
AND SUBSIDIARIES
FORM 10-K
Year Ended December 31, 1993
INDEX
PART I 10-K Page
Item 1. Business . . . . . . . . . . . . . . 3
Item 2. Properties . . . . . . . . . . . . . 12
Item 3. Legal Proceedings . . . . . . . . . 14
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . 17
Item 4A. Executive Officers of The Registrant 17
PART II
Item 5. Market for the Registrant's Common
Equity and Related Stockholder
Matters . . . . . . . . . . . . . 19
Item 6. Selected Financial Data. . . . . . . 19
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . 23
Item 8. Financial Statements and Supplementary
Data . . . . . . . . . . . . . . . 27
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure . . . . . . . 27
PART III
Item 10. Directors and Executive Officers of
the Registrant . . . . . . . . . . 28
Item 11. Executive Compensation . . . . . . . 28
Item 12. Security Ownership of Certain
Beneficial Owners and Management . 28
Item 13. Certain Relationships and Related
Transactions . . . . . . . . . . . 28
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K. . . . . . 28
SIGNATURES . . . . . . . . . . . . . . . . . . . 29
<PAGE>
PART I
Item 1. Business
BACKGROUND
Illinois Central Corporation (the "Company")
was incorporated under the laws of Delaware on
January 27, 1989. The Company, through its wholly-
owned subsidiary, Illinois Central Railroad Company
(the "Railroad"), traces its origin to 1851, when
the Railroad was incorporated as the nation's first
land grant railroad. Today, the Railroad operates
2,700 miles of main line track between Chicago and
the Gulf of Mexico, primarily carrying chemicals,
coal and paper north, with coal, grain and milled
grain products moving south along its lines. The
Railroad has been significantly downsized and
restructured from its peak of nearly 10,000 miles
of track operated in 13 states, rebuilding its main
line and converting to a single-track main line
with a centralized traffic control system and
divesting major east-west segments. In addition to
the Railroad, the Company's other direct subsidiary
conducts railroad related financing operations.
In 1989, the Company was acquired by The
Prospect Group, Inc. ("Prospect") by means of a
public tender offer that resulted in the Company
becoming highly leveraged. Prospect distributed
the stock of the Company to Prospect's stockholders
in 1990, and the Company again became publicly
owned. Improved operating performance, combined
with sales of non-operating assets and proceeds
from equity and lower-cost debt financings since
1990 have resulted in a substantial reduction in
the Company's leverage. Between December 31, 1989
and December 31, 1993, the Company reduced its debt
to capitalization ratio from 89% to approximately
50%.
The principal executive office of the Company
is located at 455 North Cityfront Plaza Drive,
Chicago, Illinois 60611-5504 and its telephone
number is (312) 755-7500.
GENERAL
The Company is in the midst of a four year
plan designed to increase its revenues and lower
its operating ratio and interest costs. The plan
is in sharp contrast to the Company's primary focus
for the four years ended December 31, 1992 of
significantly reducing costs and improving service
offerings.
With 1992 as its base, the plan will focus on
capitalizing on the Company's leading operating
ratio among Class I railroads (operating expenses
divided by operating revenues) which was 68.2% at
December 31, 1993. The components of the plan are:
- increase annual revenues by $100 million by
the end of 1996
- reduce the operating ratio by one percentage
point per year for a total of four (4) points
below the 1992 base
- reduce annual interest expense by $10 million
To accomplish this plan, revenues must grow
at a compounded rate of 4.3% per year while
operating expenses must not exceed a compounded
annual growth rate of 2.5% per year.
Management has identified the sources of
planned revenue growth as economic expansion, new
and expanded plants on line and market share
growth. Economic expansion is the combination of
industrial production improvement and freight rate
increases. Market share growth is volume gained
from competition, (i.e., other railroads,
trucklines and barges) facilitated by being a low
cost producer. See "Item 7. Management's
Discussion and Analysis of Financial Condition and
Results of Operations" for a discussion of the
progress made in 1993.
To foster achievement of these goals, the
Railroad reorganized its marketing and sales effort
(see below), restructured its safety and claims
group into a Risk Management Group and streamlined
the operating organization. The latter effectively
created teams of engineering, maintenance and
transportation experts who share the common goal of
moving trains safely and efficiently. As a result
of these changes, decision-making authority and
accountability are now at lower and more localized
levels, in line with the Company's systematic
efforts to examine and refine all aspects of its
service offering to customers.
COMMODITIES AND CUSTOMERS
The Railroad's customers are engaged in a
wide variety of businesses and ship a number of
different products that can be classified into
commodity groups: chemicals, coal, grain, paper,
grain mill and food products and other commodities.
In 1993, two customers accounted for approximately
7% and 6%, respectively, of revenues (no other
customer exceeded 5%) and the ten largest customers
accounted for approximately 37% of revenues.
In order to address more effectively the
diversity of the Company's customer base and move
toward attainment of the four year growth plan, the
Railroad's marketing department was re-organized in
1993 along major commodity groups. The new
business units are chemicals and bulk, grain and
grain mill, forest products, coal and coke and
metals, and intermodal. The formation of separate
units enables a fully integrated sales and
marketing effort. Specialization allows employees
to anticipate and respond to customer needs more
quickly, to attract customers who previously used
trucks or barges for their service needs, and to
establish business relationships with new shippers.
These new units work with current and prospective
customers to develop customized shipping solutions.
Management believes that this commitment to
improved customer service has enhanced relations
with shippers.
The formation of the Intermodal Business Unit
underscores the Company's commitment to intermodal
through long-term relationships with major
participants in this strategic market. By forming
a separate business unit, the Railroad has fully
integrated its intermodal hub operation with sales
and marketing for unmatched control of this highly
specialized, customer-oriented service.
In 1993, the Railroad invested in 800 new
trailers and upgraded facilities to position itself
for intermodal growth, dedicated its newest, state-
of-the-art terminal, just south of Chicago at the
intersections of major expressways, and initiated a
major expansion at the Memphis facility with
completion anticipated for the first quarter of
1994.
To enhance service within its corridor, the
Railroad entered into several joint operating
agreements in 1992 and 1993 with trucklines and
other intermodal carriers. Management anticipates
that these relationships will provide better
service to customers and seamless transportation of
goods for shippers and customers.
In 1993, approximately 75% of the Railroad's
freight traffic originated on its own lines, of
which approximately 29% was forwarded to other
carriers. Approximately 20% of the Railroad's
freight traffic was received from other carriers
for final delivery by the Railroad, and the balance
of approximately 5% represented bridge or through
traffic.
The respective percentage contributions by
principal commodity group to the Railroad's freight
revenues and revenue ton miles during the past five
years are set forth below:
<TABLE>
<CAPTION>
CONTRIBUTIONS TO TOTAL FREIGHT REVENUES BY COMMODITY GROUP
<S> <C> <C> <C> <C> <C>
COMMODITY
GROUP 1993 1992 1991 1990 1989
---- ---- ---- ---- ----
Chemicals.......................... 25.0% 24.3% 24.5% 25.3% 24.3%
Coal............................... 12.8 15.3 15.0 15.3 16.0
Grain.............................. 14.0 12.2 11.7 10.7 12.6
Paper.............................. 12.4 12.1 11.2 10.7 9.9
Grain mill & food products ........ 9.8 8.8 8.7 9.5 8.7
Intermodal......................... 5.4 5.4 5.2 5.0 4.6
All other ......................... 20.6 21.9 23.7 23.5 23.9
------ ------ ------ ------ ------
Total ............................. 100.0% 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ====== ======
</TABLE>
CONTRIBUTION TO REVENUE TON MILES BY COMMODITY GROUP(1)
COMMODITY GROUP 1993 1992 1991
Chemicals...................... 15.9% 15.1% 16.0%
Coal........................... 15.1 18.2 17.0
Grain.......................... 27.9 27.3 27.7
Paper.......................... 9.6 9.0 8.4
Grain mill & food products .... 9.9 9.0 8.3
Intermodal..................... 3.7 3.1 2.9
All other ..................... 17.9 18.3 19.7
------ ------ ------
Total.......................... 100.0% 100.0% 100.0%
====== ====== ======
- -------------------
(1) A new car tracking system installed in late 1990
affects the comparability of 1993's, 1992's and 1991's ton
mile data with that of the prior years, thus prior years
are not presented.
<PAGE>
Some of the elements contained in these commodity
groupings are as follows:
CHEMICALS ................... A wide variety of chemicals
and related products such
as chlorine, caustic soda,
potash, soda ash, vinyl
chloride monomer, carbon
dioxide, synthetic resins,
alcohols, glycols, styrene
monomer, plastics, sulfuric
acid, muriatic acid,
anhydrous ammonia,
phosphates, mixed
fertilizer compounds and
carbon blacks.
COAL......................... Bituminous and
metallurgical coal.
GRAIN ....................... Corn, wheat, soybeans,
sorghum, barley and oats.
PAPER........................ Pulpboard, fiberboard,
woodpulp, printing paper,
newsprint and scrap or
waste paper.
GRAIN MILL & FOOD PRODUCTS .. Products obtained by
processing grain and other
farm products such as feed,
soybean meal, corn syrup,
flour and middlings, animal
packinghouse by-products
(tallow), canned food, corn
oil, soybean oil, vegetable
oils, malt liquors, sugar
and molasses.
INTERMODAL................... A wide variety of products
shipped either in
containers or trailers on
specially designed cars.
OTHER........................ Pulpwood and chips, lumber
and other wood products;
sand, gravel and stone,
coke and petroleum
products, metallic ores and
other bulk commodities;
primary and scrap metals,
machinery and metal
products, appliances,
automobiles and parts,
transportation equipment
and farm machinery; glass
and clay products, ordnance
and explosives, rubber and
plastic products, and
general commodities.<PAGE>
<TABLE>
<CAPTION>
OPERATING STATISTICS
Set forth below is certain information relating to
the Railroad's freight traffic during the past five years:
<S> <C> <C> <C> <C>
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
Carloads (in thousands)......... 848 852 866 853 893
Freight train miles
(in thousands)(2)............. 5,659 5,149 5,445 5,496 5,974
Revenue ton miles of freight
traffic (in millions)(1) (3).. 20,334 18,734 19,357 NM NM
Revenue tons per carload........ 79.1 76.6 79.0 77.7 79.8
Average length of haul
(in miles).................... 293 284 286 270 246
Gross freight revenue per
ton mile(1) (4)............... $ .027 $ .029 $ .028 NM NM
Net freight ton miles per average
route mile (in millions)(1)... 7.5 6.8 7.0 NM NM
Gallons per ton mile(5)......... .00251 .00269 .00276 .00292 .00329
Active locomotives.............. 322 331 361 375 439
Track resurfacing (miles)....... 1,293 1,465 940 618 200
Percent resurfaced.............. 29.8% 32.0% 19.6% 12.7% 3.9%
Ties laid in replacement
(including switch ties)....... 323,764 296,536 255,283 240,968 55,346
Slow order miles................ 152.32 135.42 194.62 149.74 308.19
</TABLE>
- ----------------------
(1) Ton mile data for years subsequent to December
31, 1990, are not comparable with prior years
because of the installation of a new car
tracking system in late 1990. As a result, this
information is not meaningful (NM) for 1990 and
1989.
(2) Freight train miles equals the total number of
miles traveled by the Railroad's trains in the
movement of freight.
(3) Revenue ton miles of freight traffic equals the
product of the weight in tons of freight carried
for hire and the distance in miles between
origin and destination.
(4) Revenue per ton mile equals net freight revenue
divided by revenue ton miles of freight traffic.
(5) Gallons per ton mile equals the amount of fuel
required to move one ton of freight one mile.
<PAGE>
The following tables summarize operating
expense-to-revenue ratios of the Company for each of the
past four years, excluding the effect of the $8.9 million
pretax special charge in 1992. The ratios for 1989 are not
comparable to subsequent years because of the March 17,
1989, change in control and are not presented. The first
table analyzes the various components of operating expenses
based on the line items appearing on the income statements,
whereas the second table is based on functional groupings.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1993 1992 1991 1990
Operating ratio(1)............... 68.2% 70.7% 73.5% 75.4%
Labor and fringe benefits ratio.. 33.7 35.0 35.8 37.3
Leases and car hire ratio........ 12.4 12.9 14.0 14.8
Diesel fuel ratio................ 5.4 5.5 6.0 5.9
Materials and supplies ratio..... 6.5 6.0 5.7 4.8
Depreciation and amortization
ratio........................... 4.1 4.0 3.8 4.0
Other ratio...................... 6.1 7.3 8.2 8.6
1993 1992 1991 1990
Operating ratio(1)............... 68.2% 70.7% 73.5% 75.4%
Transportation ratio(2).......... 29.6 31.6 34.8 35.3
Maintenance of way ratio(3)...... 7.2 7.0 6.4 7.1
Maintenance of equipment ratio(4) 20.7 22.5 23.9 23.7
</TABLE>
- ---------------------------
(1) Operating ratio means the ratio of
operating expenses before special charge
over operating revenues.
(2) Transportation ratio means the ratio of
transportation expenses (such as expenses
of operating, servicing, inspecting,
weighing, assembling and switching
trains) over operating revenues.
(3) Maintenance of way ratio means the ratio
of maintenance of way expenses (such as
the expense of repairing, maintaining,
leasing, depreciating and retiring right-
of-way and trackage structures, buildings
and facilities) over operating revenues.
(4) Maintenance of equipment ratio means the
ratio of maintenance of equipment
expenses (such as the expense of
repairing, maintaining, leasing,
depreciating and retiring transportation
and other operating equipment) over
operating revenues.
<PAGE>
EMPLOYEES; LABOR RELATIONS
Railroad industry personnel are covered by
the Railroad Retirement System instead of Social
Security. Employer contribution rates under the
Railroad Retirement System are currently more than
double those in other industries, and may rise
further because of the increasing proportion of
retired employees receiving benefits relative to
the shrinking number of working employees.
Labor relations in the railroad industry are
subject to extensive governmental regulation under
the Railway Labor Act. Railroad industry personnel
are also covered by the Federal Employer's
Liability Act ("FELA") rather than by state no-
fault workmen's compensation systems. FELA is a
fault-based system, with compensation for injuries
determined by individual negotiation or litigation.
The Railroad is a party to several national
collective bargaining agreements which establish
the wages and benefits of its union workers -- 90%
of all Railroad employees. These agreements are
subject to renegotiation beginning November 1,
1994, however, cost of living allowance provisions
and other terms in each agreement continue until
new agreements are reached. Despite being part of
a national bargaining group, the Railroad has
expressed a desire to negotiate separate distinct
agreements with each of its unions on a local
basis. Management has been exploring that position
and has held several discussions with
representatives from most of its unions. It is too
early to determine if separate agreements will be
reached. Thus, the Railroad has not taken steps to
withdraw formally from the national bargaining
group. The following table shows the average
annual employment levels of the Railroad:
1993 1992 1991 1990 1989
Total employees.. 3,306 3,421 3,611 3,688 3,942
A significant portion of the decline from the
1992 level is the result of a separate agreement
between the Railroad and the United Transportation
Union, reached in November 1991. This agreement
permits the Railroad to reduce the size of all
crews on all trains operated. In accordance with
this agreement, 158 crew members were severed at a
cost of $9.6 million to date. No further dramatic
reductions in the current crew size of
approximately 2.75 at December 31, 1993 is
anticipated.
Management believes that additional jobs in
all areas may be eliminated over the next several
years primarily through attrition and retirements
though additional severances are possible.
REGULATORY MATTERS; FREIGHT RATES; ENVIRONMENTAL
Considerations
The Railroad is subject to significant
governmental regulation by the ICC and other
federal, state and local regulatory authorities
with respect to rates, service, safety and
operations.
The jurisdiction of the ICC encompasses,
among other things, rates charged for certain
transportation services, issuance of securities,
assumption of certain liabilities by railroads,
mergers or the acquisition of control of one
carrier by another carrier and extension or
abandonment of rail lines or services.
The Federal Railroad Administration, the
Occupational Safety and Health Administration and
certain state transportation agencies have
jurisdiction over railroad safety matters. These
agencies prescribe and enforce regulations
concerning car and locomotive safety equipment,
track safety standards, employee work conditions
and other operating practices.
The amount of coal transported by the
Railroad is expected to decline somewhat as the
Clean Air Act is fully implemented. Much of the
coal from mines currently served by the Railroad
will not meet the environmental standards of the
Clean Air Act without blending or installation of
air scrubbers. On the other hand, the Railroad
expects to participate in additional movements of
Western coal. Overall, management believes that
implementation of the Clean Air Act is unlikely to
have a material adverse effect on the results of
the Company.
The Company is and will continue to be
subject to extensive regulation under environmental
laws and regulations concerning, among other
things, discharges into the environment and the
handling, storage, transportation and disposal of
waste and hazardous materials. Inherent in the
operations and real estate activities of the
Railroad and other railroads is the risk of
environmental liabilities. As discussed in Item 3.
"Legal Proceedings," several properties on which
the Railroad currently or formerly conducted
operations are subject to governmental action in
connection with environmental degradation.
Additional expenditures by the Railroad may be
required in order to comply with existing and
future environmental and health and safety laws and
regulations or to address other sites which may be
discovered.
<PAGE>
Environmental regulations and remediation
processes are subject to future change and cannot
be determined at this time. Based on present
information, in the opinion of management, the
Company has adequate reserves for the costs of
environmental investigation and remediation.
However, there can be no assurance that
environmental conditions will not be discovered
which might individually or in the aggregate have a
material adverse effect on the Company's financial
condition.
COMPETITION
The Railroad faces intense competition for
freight traffic from motor, water, and pipeline
carriers and, to a lesser degree, from other
railroads. Competition with other railroads and
other modes of transportation is generally based on
the quality and reliability of the service provided
and the rates charged. Declining fuel prices
disproportionately benefit trucking operations over
railroad operations. The trucking industry
frequently is more cost and transit-time
competitive than railroads, particularly for
distances of less than 500 miles. While
deregulation of freight rates under the Staggers
Act has greatly increased the ability of railroads
to compete with each other and alternate forms of
transportation, changes in governmental regulations
(particularly changes to the Staggers Act) could
significantly affect the Company's competitive
position.
To a greater degree than other rail carriers
the Railroad is vulnerable to barge competition
because its main routes are parallel to the
Mississippi River system. The use of barges for
some commodities, particularly coal and grain,
sometimes represents a lower cost mode of
transportation. As a result, the Railroad's
revenue per ton-mile has generally been lower than
industry averages for these commodities. Barge
competition and barge rates are affected by
navigational interruptions from ice, floods and
droughts. These interruptions cause widely
fluctuating rates. The Railroad's ability to
maintain its market share of the available freight
has traditionally been affected by its response to
the navigational conditions on the river.
Most of the Railroad's operations are
conducted between points served by one or more
competing carriers. The consolidation in recent
years of major midwestern and eastern rail systems
has resulted in strong competition in the service
territory of the Railroad.
<PAGE>
LIENS ON PROPERTIES
Most of the locomotives and rail cars owned
by the Company's financing/leasing subsidiaries are
subject to liens. See Note 8 of Notes to
Consolidated Financial Statements.
LIABILITY INSURANCE
The Company is self-insured for the first $5
million of each loss. The Company carries $295
million of liability insurance per occurrence,
subject to an annual cap of $370 million in the
aggregate for all losses. This coverage is
considered by the Company's management to be
adequate in light of the Company's safety record
and claims experience.
<PAGE>
ITEM 2. PROPERTIES
- -------------------
PHYSICAL PLANT AND EQUIPMENT
System. As of December 31, 1993, the
Railroad's total system consisted of approximately
4,700 miles of track comprised of 2,700 miles of
main line, 300 miles of secondary main line and
1,700 miles of passing, yard and switching track.
The Railroad owns all of the track except for 190
miles operated by agreements over track owned by
other railroads.
Track Structures. During the five years
ended December 31, 1993, the Railroad has spent
$305.3 million on track structure to maintain its
rail lines, as follows ($ in millions):
Capital
Expenditures Maintenance Total
1993 ......... $ 50.3 $ 25.1 $ 75.4
1992 ......... 46.4 23.0 69.4
1991 ......... 36.3 20.7 57.0
1990 ......... 34.6 20.0 54.6
1989 ......... 19.1 29.8 48.9
------ ------ ------
Total......... $186.7 $118.6 $305.3
====== ====== ======
These expenditures concentrated primarily on
track roadway and bridge rehabilitation in 1993 and
1992. Approximately 1,300 miles and 1,400 miles of
road were resurfaced in 1993 and 1992,
respectively. Over the last two years, a total of
$8.4 million was spent to construct new or expanded
intermodal facilities in Chicago and Memphis.
Expenditures in 1991 and 1990 benefited from the
use of reclaimed rail, cross ties, ballast and
other track materials from the second main line
when the Railroad's double-track mainline was
converted to a single-track mainline with
centralized traffic control. Most reclaimed
material has now been used and future expenditures
will reflect the purchase of new materials. The
reduced number of miles of track and the general
good condition of the track structure should result
in future expenditures approximately equal to the
average of 1993 and 1992.
Fleet. The Railroad's fleet has undergone
significant rationalization and upgrading from its
peak in 1985 of 862 locomotives and 28,616 freight
cars. Over the last two years older, less
efficient locomotives were replaced with newer
larger horsepower and more efficient equipment. In
1993, the Company implemented a program to increase
ownership of freight cars and locomotives and
become less dependent on the leasing market as a
source of equipment.
Over the last three years the Company, through
wholly-owned financing/leasing subsidiaries, has
acquired a total of sixty-one (61) 15 to 16 year-
old SD-40-2 locomotives and 1,522 freight cars.
The 61 locomotives are leased to the Railroad for
seven and one-half years. Approximately 650 of the
cars acquired are leased to the Railroad as well.
The remaining cars are leased to other non-
affiliated railroads. When those leases expire,
the Railroad has first right of refusal to lease
the equipment. As these cars are leased to the
Railroad other leased equipment will be returned to
the independent, third-party lessors or short-term
car hire agreements will be terminated. In 1993,
the Railroad acquired 4 SD-40-2 locomotives and
also upgraded its highway trailer fleet with 800
newly built trailers which replaced 880 older
leased trailers.
The following is the overall fleet at December 31:
Total Units: 1993 1992 1991 1990 1989
---- ---- ---- ---- ----
Locomotives(1) 468 449 470 471 516
Freight cars.. 16,634 15,877 16,381 16,526 17,141
Work equipment. 745 902 881 934 1,000
Highway trailers .898 203 124 67 70
(2)
- -----------------------
(1) Approximately 100 locomotives need repair
before they can be returned to service. This
equipment is repaired if needed on an ongoing basis
or sold. In 1993 and 1992, the Railroad sold 23
and 66 surplus locomotives, respectively. The
active fleet is 322 as of December 31, 1993.
(2) Excludes trailers being accumulated for return
to lessors.
<PAGE>
The components of the fleet by subsidiary and in
total for 1993 and in total for 1992 are shown
below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Railroad
Leasing ------------------------------
Subsidiaries Long-Term 1993 1992
Description(1) Total Owned(2) Lease(3) Total Total Total
- -------------- ------------ -------- ---------- ------ ----- -----
Locomotives:
Multipurpose 61 223 84 307 368 352
Switching - 18 82 100 100 97
----- ----- ----- ----- ----- -----
Total 61 241 166 407 468 449
===== ===== ===== ===== ===== =====
Freight Cars:
Box (general service) 665 199 357 556 1,221 703
Box (special purpose) 857 1,928 725 2,653 3,510 2,345
Gondola - 945 149 1,094 1,094 1,046
Hopper (open top) - 1,611 3,344 4,955 4,955 5,397
Hopper (covered) - 2,418 1,359 3,777 3,777 3,574
Flat - 304 547 851 851 883
Other - 998 228 1,226 1,226 1,929
----- ----- ----- ------ ------ ------
Total 1,522 8,403 6,709 15,112 16,634 15,877
===== ===== ===== ====== ====== ======
Work equipment 704 41 745 745 902
===== ===== ====== ====== ======
Highway trailers(4) - 898 898 898 203
===== ===== ====== ====== ======
</TABLE>
(1) In addition, approximately 2,735 freight cars and 696
highway trailers were being used by the Railroad
under short-term car hire agreements.
(2) May be subject to Conditional Sales Agreements.
(3) Excludes equipment listed under Leasing Subsidiaries.
(4) Excludes trailers being accumulated for return to
lessor.
<PAGE>
Item 3. Legal Proceedings
- --------------------------
State of Alabama, et al. v. Alabama Wood
Treating Corporation, Inc., et al., S.D. Ala.
No. 85-0642-C
The State of Alabama and Alabama State Docks
("ASD") filed suit in 1985 seeking damages for
alleged pollution of land in Mobile, Alabama,
stemming from creosoting operations over
several decades. Defendants include the
Railroad, which owned the land until 1976,
Alabama Wood Treating Corporation, Inc., and
Reilly Industries, Inc. ("RII"), which leased
the land from the Railroad and conducted
creosote operations on the site. In December
1976, the Railroad sold the premises to ASD.
The complaint sought payment for the clean-up
cost together with punitive and other damages.
In 1986, ASD, RII and the Railroad agreed to
form a joint technical committee to clean the
site sharing equally the cost of clean-up, and
in October 1986, the court stayed further
proceedings in the suit. Under the agreement
the joint technical committee has spent
approximately $6.6 million and has been
authorized to expend up to a total of $6.9
million. The Railroad has contributed $2.2
million and has agreed to increase its
contribution to a total of $2.3 million.
Further clean-up activities are anticipated.
Under the agreement, if any party disagrees
with the amount determined by the joint
technical committee to be expended or
otherwise disagrees with any aspect of the
clean-up, such party may decline further
participation and recommence legal
proceedings. However, amounts already
contributed by any party will be credited
against that party's eventual liability and
may not be recovered from any other party.
Iselin Yard, Jackson, Tennessee
In 1991, the Iselin Rail Yard in Jackson,
Tennessee was placed on the Tennessee
Superfund list. In May 1993, the United
States Environmental Protection Agency ("EPA")
proposed to add a number of sites, including
Iselin Rail Yard to the National Priorities
List. The Railroad operated a rail yard and
locomotive repair facility at the site. The
shop facility was sold in 1986 and the rail
yard was sold in 1988. Trichloroethylene
("TCE") has been found in several municipal
water wells near the site. TCE is a common
component of solvents similar to those
believed to have been used at the Iselin shop.
In addition, concentrations of metals and
organic chemicals have been identified on the
surface of the site. No order has been issued
by any regulatory agency but the State of
Tennessee is monitoring work at the site. The
Railroad expects to cooperate with the
agencies and other Potentially Responsible
Parties to conduct any necessary studies and
clean-up activities. The Railroad has
commenced a remedial investigation and
feasibility study of the site.
<PAGE>
McComb, Mississippi
Elevated levels of lead and other soil
contamination has been discovered at the
Railroad's facility in McComb, Mississippi.
The site was used for many years for
sandblasting lead-based paint off freight
cars. The Railroad has commenced a formal
site investigation under the supervision of
the Mississippi Department of Environmental
Quality. The Remedial Investigation has
disclosed the presence of lead in the soil and
further testing of the surface and subsurface
soil and groundwater is underway to assess the
scope of the contamination. No order has been
issued by any regulatory agency. The Railroad
expects to cooperate with the State of
Mississippi to conduct any necessary studies
and clean-up activities.
Waste Oil Generation
The Railroad was notified in September 1992
that it had been identified as a Potentially
Responsible Party at a federal superfund site
in West Memphis, Arkansas. The Railroad is
alleged to have generated waste oil which was
collected by a waste oil refiner who in turn
disposed of sludge at the West Memphis
landfill. In December 1992, the successor to
the refiner initiated legal proceedings to
preserve testimony in anticipation of a future
contribution action against multiple
Potentially Responsible Parties including the
Railroad. Similar actions have been taken by
the EPA or third parties with respect to waste
oil allegedly generated by the Railroad and
disposed of in landfills at Livingston, LA,
Griffith, IN and Nashville, TN.
Based on information currently available, the
Railroad believes it has substantial defenses
to liability for any contamination at these
sites, and that any contribution to the
contamination by the Railroad was de minimis.
<PAGE>
Item 4. Submission of Matters to a Vote of
Security Holders
----------------------------------
No matters were submitted to a vote of
security holders during the Company's fourth
quarter.
Item 4A. Executive Officers of the Registrant
- ----------------------------------------------
The executive officers of the Company are
identified in the table below. Each executive
officer of the Company currently holds an identical
position with the Railroad. Executive officers of
the Company and the Railroad serve at the pleasure
of the respective Boards of Directors.
Name Age Position(s)
---- --- -----------
Gilbert H. Lamphere 41 Chairman of the Board
of Directors
E. Hunter Harrison 49 President and Chief
Executive Officer,
Director
Gerald F. Mohan 53 Senior Vice President -
Marketing
John D. McPherson 47 Vice President -
Operations
James M. Harrell 41 Vice President - Human
Resources
David C. Kelly 49 Vice President -
Maintenance
Ronald A. Lane 43 Vice President and
General Counsel and
Secretary
Dale W. Phillips 39 Vice President and
Chief Financial
Officer
John V. Mulvaney 43 Controller
BIOGRAPHICAL INFORMATION
The following sets forth the periods during
which the executive officers of the Company and the
Railroad have served as such and a brief account of
the business experience of such persons during the
past five years.
Mr. Lamphere was elected Chairman of the
Board of Directors of the Company and the Railroad
in February 1993. He has been a director of the
Company and the Railroad since 1989 and Chairman of
the Executive Committee of the Board since July
1990. Mr. Lamphere has been Co-Chairman and Chief
Executive Officer of The Noel Group, Inc. ("Noel"),
a diversified operating company since 1991, and a
director of Noel since March 1990. Mr. Lamphere
also is the Chairman, Chief Executive Officer and a
director of Prospect, for which he has served in
various capacities since becoming a director in
1983.
Mr. Harrison was appointed President, Chief
Executive Officer and a Director of the Company and
the Railroad in February 1993. He joined the
Company and the Railroad as Vice President and
Chief Transportation Officer in 1989. In November
1991 he was appointed Senior Vice President -
Transportation and was named Senior Vice President
- - Operations in July 1992. He was employed by
Burlington Northern Railway in various vice
presidential positions from 1985 to 1989.
Mr. Mohan was appointed Senior Vice President
- - Marketing of the Railroad in 1986. In April 1993
he was elected a Director of the Railroad. He was
appointed to his present position with the Company
in December 1989.
Mr. McPherson joined the Company and the
Railroad in his current position in July 1993.
Prior to joining the Company and the Railroad, he
held various positions with the Atchison, Topeka
and Santa Fe Railway Company from 1966 to 1993,
most recently as Assistant Vice President - Safety.
Mr. Harrell joined the Company and the
Railroad in his current position in 1992. He
served as Director of Labor Relations for The
Atchison, Topeka and Santa Fe Railway Company from
1989 to 1992. From 1974 to 1989 he held various
positions with The Atchison, Topeka and Santa Fe
Railway Company.
Mr. Kelly joined the Company and the Railroad
as Vice President and Chief Engineer in 1989. In
January 1994, he was appointed Vice President -
Maintenance. He served as Assistant Chief Engineer
- - Systems of CSX Transportation from 1987 to 1989.
Mr. Lane joined the Company and the Railroad
as Vice President and General Counsel and Secretary
in 1990. In April 1993 he was elected a Director
of the Railroad. He was previously employed by The
Atchison, Topeka and Santa Fe Railway Company and
Santa Fe Pacific Corporation serving as Assistant
Vice President - Personnel and Labor Relations,
1987 to 1990.
Mr. Phillips has been employed by the
Railroad since February 1988, serving as Director
of Taxes & Property Accounting from February to
October 1988, as Assistant Controller from October
1988 to April 1989, and Controller from April 1989
to April 1990. He was appointed to his present
position in the Company and the Railroad in April
1990. In April 1993 he was elected a Director of
the Railroad. Mr. Phillips also serves as a
director of Rail Association Insurance, Ltd.
Mr. Mulvaney joined the Company and the
Railroad as Controller in June 1990. He was
previously employed by Navistar International
Transportation Corp., serving as Director of
Accounting, 1987 to 1990.
No family relationship exists among the
officers of the Company or the Railroad.
<PAGE>
PART II
-------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
- --------------------------------------------------
The following table sets forth, for the
periods indicated, (i) the high and low sale prices
of the Common Stock as reported on the New York
Stock Exchange Composite Tape, adjusted for the
February 1992 3-for-2 stock split, and (ii) the per
share amount of dividends paid.
STOCK PRICE DIVIDENDS
HIGH LOW PER SHARE
1992
First Quarter.. $25.500 $21.083 $ -
Second Quarter. 24.875 20.250 .10
Third Quarter.. 22.375 16.500 .10
Fourth Quarter. 25.625 18.250 .15
1993
First Quarter.. $27.250 $23.625 $ .15
Second Quarter. 30.125 25.375 .15
Third Quarter.. 32.750 26.625 .17
Fourth Quarter. 36.000 29.250 .17
1994
First Quarter $38.625 $33.500 $ .21
(through March 1)
As of March 1, 1994, there were approximately
11,000 stockholders based on estimates of
beneficial ownership. The closing price of the
Common Stock as reported on the New York Stock
Exchange Composite Tape on March 1, 1994 was
$35.75 per share.
On February 10, 1994, the Board declared a
dividend of $.21 per share payable April 7, 1994,
to stockholders of record on March 24, 1994.
Prior to April 1992, the Company had not
previously paid cash dividends on its Common Stock.
See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -
Liquidity and Capital Resources," for a discussion
of the restrictions on the Railroad's ability to
transfer funds as dividends to the Company.
The Common Stock is listed on the New York
Stock Exchange, Inc. under the symbol "IC."
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------
The following table sets forth selected
historical consolidated financial data of the
Company for the four years ended December 31, 1993,
and for the period January 27, 1989 the date on
which the Company was incorporated, through
December 31, 1989, and selected historical
consolidated financial data of the Railroad as
predecessor of the Company for the period
January 1, 1989, through March 16, 1989, all
derived from the consolidated financial statements
of the Company which were audited by Arthur
Andersen & Co. This summary should be read in
conjunction with the consolidated financial
statements included elsewhere in this Report and
the schedules and notes thereto.
The purchase method of accounting was used to
record the assets acquired and liabilities assumed
by the Company in 1989.
<PAGE>
<TABLE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
($ in millions, except share data)
<CAPTION>
The Company Predecessor
Period Period
Years Ended December 31, 1/27/89 1/1/89
1993 1992 1991 1990 to 12/31/89 to 3/16/89
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data (1):
Revenues........................ $ 564.7 $ 547.4 $ 549.7 $ 544.2 $ 398.5 $ 148.5
Operating expenses before
special charge............... 385.2 387.0 404.1 410.4 318.7 143.1
Special charge.................. - 8.9 - - - -
Operating income................ 179.5 151.5 145.6 133.8 79.8 5.4
Other income, net............... 1.7 2.0 5.7 6.2 3.1 2.2
Interest expense, net........... (33.1) (43.6) (55.1) (71.4) (68.5) (8.3)
Income (loss) before income taxes,
extraordinary item and cumulative
effect of changes in accounting
principles................... 148.1 109.9 96.2 68.6 14.4 (0.7)
Provision (benefit) for income taxes 56.4 37.4 30.8 22.4 4.4 (0.4)
Income (loss) before extraordinary
item and cumulative effect of
changes in accounting priciples 91.7 72.5 65.4 46.2 10.0 (0.3)
Extraordinary item, net......... (23.4) - - - - -
Cumulative effect of changes in
accounting principles........ (0.1) 23.4 - - - -
Net income (loss)............... 68.2 95.9 65.4 46.2 10.0 (0.3)
Preferred stock dividends
requirements................. - - - 5.1 7.4 -
Income (loss) applicable to
common stock................ $ 68.2 $ 95.9 $ 65.4 $ 41.1 $ 2.6 $ (0.3)
Income (loss) per share (2):
Before extraordinary item and
accounting changes....... $ 2.14 $ 1.70 $ 1.64 $ 1.31 $ 0.09 $ (0.01)
Extraordinary item.......... (0.55) - - - - -
Accounting changes.......... - 0.55 - - - -
Income (loss) per share.. $ 1.59 $ 2.25 $ 1.64 $ 1.31 $ 0.09 $ (0.01)
Weighted average number of
common shares outstanding
(in thousands)(2).......... 42,680 42,600 39,830 31,460 28,278 21,623
Cash dividends declared per
common share............... $ 0.70 $ 0.50 - - - -
Operating ratio (3)........... 68.2% 70.7% 73.5% 75.4% 80.0% 96.4%
The Company
Years Ended December 31,
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Balance Sheet Data (1):
Total assets.................. $1,258.7 $1,206.1 $1,183.5 $1,152.0 $1,177.1
Long-term debt................ 360.3 367.3 413.5 486.1 537.8
Stockholders' equity.......... 377.4 338.8 260.3 128.4 10.9
Working capital (deficit)..... (32.4) (2.9) (3.4) (44.9) (72.8)
<PAGE>
The following notes are for both Income
Statement and Balance Sheet data:
(1) The purchase method of accounting was used to
record the assets acquired and liabilities assumed
by the Company in 1989. This accounting method
results in reduced depreciation expense in periods
subsequent to March 16, 1989. Accordingly, the
above summary financial data derived from the
financial statements of the Predecessor and of the
Company are not comparable in all material respects
since those financial statements report financial
positions, results of operations, and cash flows of
the separate entities on differing bases. The
Company's income statement data reflects the
operations of the Railroad from March 17, 1989.
(2) Amounts for the years 1991 and 1990 and the
period January 27, 1989 to December 31, 1989 have
been restated to give effect to a 3-for-2 stock
split effective in February 1992. Per share data
of the Predecessor is based on the weighted average
number of shares outstanding for the period.
(3) Operating ratio is the ratio of operating
expenses before special charge over operating
revenues.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ------------------------------------------------
GROWTH PLAN
For the four years ended December 31, 1992,
the Company's primary drivers were reducing costs
and improving service offerings. The result was
the best operating ratio among Class I railroads,
68.2% at December 31, 1993. While costs continue
to be scrutinized, a new direction was initiated in
1993. With 1992 as its base, a new plan was
outlined as follows:
- increase annual revenues by $100 million
by the end of 1996.
- reduce the operating ratio by one
percentage point per year for a total of
four (4) points below the 1992 base.
- reduce annual interest expense by $10
million.
To accomplish this plan, revenues must grow
at a compounded annual rate of 4.3% while operating
expenses must not exceed a compounded annual growth
rate of 2.5% per year.
Management has identified the sources of
planned revenue growth as economic expansion, new
and expanded plants on our line and market share
growth. Economic expansion is the combination of
industrial production improvement and freight rate
increases. Market share growth is volume gained
from competition i.e., other railroads, trucklines
and barges, facilitated by being a low cost
producer.
In 1993, the first year of the growth plan,
significant strides were made in accomplishing the
plan as total revenues increased 3.1%. Two major
unplanned events had an impact on revenues. In May
1993, the United Mine Workers began a strike
against several companies affecting six mines
served by the Railroad. As a result, approximately
35,000 carloads of coal were lost. The strike was
settled in December 1993, and full production
resumed in January 1994. Partially offsetting the
lost coal loads was a gain of approximately 15,000
carloads of grain and grain mill products. This
traffic was diverted to the Railroad as a result of
the flooding of the upper Mississippi River in July
and August 1993. Additionally, over 500 trains
from several other Class I railroads were detoured
over the Railroad's system. The result was a
significant increase in traffic density over the
Company's routes.
<PAGE>
Carloadings of paper recorded their fourth
consecutive annual increase (3% for 1993). The
increase was a result of the improved economy and
growth in recycling. In 1993, chemical traffic
increased 6%, reversing a two-year recessionary
trend. While not benefiting for the full year from
various truckline partnerships, intermodal traffic
grew at 15% in the second half of 1993 versus the
second half of 1992.
While 1993 revenue lagged behind the plan
compound rate of 4.3%, management believes the
Company is positioned well for 1994. The targeted
revenue growth in 1994 is 5%.
For 1993, the Company exceeded its operating
ratio goal. Actual improvement was 2.5 percentage
points and the full year operating ratio was 68.2%.
More efficient train crew and train scheduling
coupled with reduced costs contributed to this
achievement.
The tender offer for and retirement of the
Railroad's $145 million 14-1/8% Debentures, in the
second quarter of 1993, effectively resulted in the
achievement of the third goal of the growth plan as
interest expense, net declined $10.5 million in
1993 to $33.1 million. Interest expense, net is
expected to be below $30 million in 1994.
RESULTS OF OPERATIONS
The discussion below takes into account the
financial condition and results of operations of
the Company for the years presented in the
consolidated financial statements.
1993 COMPARED TO 1992
Revenues for 1993 increased from the prior
year by $17.3 million or 3.1% to $564.7 million.
The increase was a result of a 2.9% increase in
average gross freight revenue per carload,
resulting from an improved commodity mix and modest
rate increases. The 1993 revenue increase was
attributable in part to the gain in carloads when
the upper Mississippi River flooding affected barge
traffic and also disrupted rail operations of other
carriers which diverted traffic to the Company's
system. Additionally, chemical loads were up 6%
and paper was up 3%. Intermodal was up 5%,
reflecting the Company's commitment to increase
this aspect of operation, as evidenced by the new
Chicago-area intermodal facility and expansions in
Memphis. These gains were offset by lost carloads
of coal resulting from the United Mine Workers
strike of certain coal producers. For the year,
carloadings declined .5% (or 4,400 carloads) to
847,900 carloads.
Operating expenses for 1993 decreased $1.8
million, or .5% as compared to 1992, excluding the
special charge recorded in 1992. Labor expense
decreased $1.1 million as a result of on-going cost
control programs, including the reduction in train
crews, and an overall improvement in efficiency.
This decrease was accomplished despite the
additional expense incurred because of the flood-
related detours of other railroads' trains over the
Railroad's track and a 3% wage increase which was
effective July 1, 1993 for union employees. Fuel
expense reflects the increased traffic in 1993 and
1992 coupled with a total of $1.5 million for
increased fuel taxes resulting from the Omnibus
Budget Reconciliation Act of 1993 and for the costs
associated with fuel hedges. The more fuel
efficient locomotives acquired over the last two
years partially offset the rise in fuel costs.
Materials and supplies increased $3.6 million
primarily as a result of track material purchases.
The surplus from the single track project was
substantially depleted necessitating purchase of
new materials.
Operating income for 1993 increased 18.5%
($28.0 million) to $179.5 million compared to
$151.5 million for 1992, as a result of increased
revenues cited above and decreased expenses
(including the 1992 special charge). Excluding the
special charge, the increase in operating income
was 11.9% ($19.1 million).
Net interest expense decreased by 24.1% to
$33.1 million compared to $43.6 million in 1992.
The issuance of new notes at 6.75% to replace the
14-1/8% Senior Subordinated Debentures (the
"Debentures") and lower interest rates on floating
debt account for the reduced interest expense in
1993. The Debentures were retired via a tender
offer which resulted in an extraordinary loss of
$23.4 million, net of $12.6 million in tax
benefits. The extraordinary loss covers the costs
associated with the tender (i.e., premium on
repurchase, the write-off of unamortized financing
fees and debt discount and the costs associated
with calling the untendered Debentures).
See "Liquidity and Capital Resources" for
discussion of the impact of the
Omnibus Budget Reconciliation Act of 1993.
Effective January 1, 1993, the Company
adopted both the Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" ("SFAS
No. 106") and the Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for
Postemployment Benefits" ("SFAS No. 112"). SFAS
No. 106 requires that future costs associated with
providing postretirement benefits be recognized as
expense over the employees' requisite service
period. The pay-as-you-go method used prior to
1993 recognized the expense on a cash basis. SFAS
No. 112 establishes accounting standards for
employers who provide postemployment benefits and
clarifies when the expense is to be recognized. As
a result of adopting these two standards the
Company recorded a decrease to net income of
$84,000 (net of taxes of $46,000) as a cumulative
effect of changes in accounting principles. In
accordance with each standard, years prior to 1993
have not been restated.
For 1993, the adoption of these two standards
had no significant effect on income before
cumulative effect of changes in accounting
principles as compared to the Company's prior pay-
as-you-go method of accounting for such benefits.
The Company has no plans to fund these liabilities
and will continue to pay these costs on a pay-as-
you-go basis, as was done in prior years.
1992 COMPARED TO 1991
Revenues for 1992 decreased from the prior
year by $2.3 million or .4% to $547.4 million. The
decrease resulted from a 1.6% (or 13,900 carloads)
decrease in the number of freight carloads to
852,300, offset by a 1.1% increase in the average
gross revenue per carload. Net freight revenue ton
miles decreased 3.2% to 18.7 billion. Gross
freight revenue per thousand ton miles increased
2.7% to $28.89 from $28.12. The increase in
average revenue per carload was caused by an
improved commodity mix, in which a greater volume
of higher revenue per carload commodities was
hauled, and modest rate increases.
Operating expense for 1992 decreased by $8.2
million, or 2.0% as compared to 1991, even though
the Company recorded an $8.9 million pretax special
charge in 1992. Reductions in labor expense ($5.5
million), lease and car hire expense ($6.5
million), diesel fuel expense ($3.1 million) and a
favorable litigation settlement in the first
quarter more than offset the special charge. The
special charge covered certain organizational and
other expenses associated with the retirement of E.
L. Moyers, the Company's Chairman, President and
Chief Executive Officer until February 1993, as
well as various unrelated asset revaluations.
Operating income for 1992 increased by 4.1%
to $151.5 million compared to $145.6 million for
1991, as a result of decreased expenses cited above
offset by the aforementioned pretax special charge
and decreased revenues. Excluding the special
charge, the Company's 1992 operating income was
$160.4 million, an increase of $14.8 million
(10.2%) as compared to 1991. This increase is a
result of on-going cost reduction programs,
including the reduction in train crew sizes and the
overall emphasis on efficiency.
Net interest expense decreased by 20.9% from
$55.1 million to $43.6 million. The full year
effect of the August 1991 refinancing of the Series
K Mortgage Bonds and the repayment of approximately
$34.0 million of the Term Facility accounted for
approximately $4.0 million and $8.0 million,
respectively, in reduced interest expense for 1992.
Effective January 1, 1992, the Company
adopted SFAS No. 109, "Accounting for Income
Taxes." As a result, the Company recorded a $23.4
million ($.55 per share) reduction of its accrued
deferred income tax liabilities. The Company
elected to report this change as the cumulative
effect of change in accounting principle.
Therefore, prior period amounts have not been
restated.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING DATA:
1993 1992 1991
---- ---- ----
Cash flows provided by (used for):
Operating activities..... $124.3 $124.4 $ 63.1
Investing activities..... (89.0) (46.6)
(36.9)
Financing activities..... (59.2) (75.9) (7.0)
Net change in cash and
temporary cash
investments. $(23.9) $ 1.9 $ 19.2
======= ======= =======
Cash from operating activities was primarily
net income before depreciation, deferred taxes,
extraordinary item and the cumulative effect of
changes in accounting principles. A significant
source of cash in 1992 ($26.4 million) was the
realization of settlement proceeds with numerous
insurance carriers in connection with asbestos and
hearing loss casualty claims. Most of the
settlements were for prior claims but some cover
future claims related to prior periods. As part of
the settlements, the Railroad agreed to release the
carriers from liability for future hearing loss
claims. An additional $6.3 million was received in
1993.
During 1993, additions to property of $90.7
million included approximately $36.6 million for
track and bridge rehabilitation and approximately
$31.4 million for the purchase of 21 locomotives
and 1,522 freight cars. Expenditures exceeded
original estimates of $60 million as several
opportunities to acquire equipment were acted upon
in accordance with the Company's strategy of owning
more of its equipment. During 1992, additions to
property of $50.8 million included approximately
$46.4 million for track and bridge rehabilitation
including approximately $5 million for the
construction of a new intermodal facility in the
Chicago area. The funds for this new facility were
provided by advance rentals on a three-year lease
agreement for the Railroad's old intermodal yard in
Chicago by another railroad. The other railroad
also paid for an option to acquire the old yard for
cash at any time during the three-year lease
period. Proceeds from the sales of excess
materials generated by the single-track project
($4.1 million in 1992) partially offset the cost of
property additions. Property retirements and
removals unrelated to the single-track project
generated proceeds of $5.3 million and $3.5 million
in 1993 and 1992, respectively.
The Railroad anticipates that base capital
expenditures for 1994 will be approximately $60
million and will concentrate on track maintenance,
renewal of track structures such as bridges, and
upgrading the locomotive fleet. If additional
opportunities such as lease conversions or market-
driven expansions occur in 1994, the total capital
spending could be approximately $80 million. These
expenditures are expected to be met from current
operations or other available sources.
Over the last three years, management has
concentrated on reducing leverage, expanding
funding sources, lowering funding costs and
upgrading the debt ratings issued by the rating
services. During that time frame, the Railroad's
public debt has moved from being designated a
"Highly Leveraged Transaction" to being rated Baa3
by Moody's Investors Service ("Moody's") and BBB by
Standard & Poor's Corporation ("S&P"). Likewise,
the Railroad's debt has also gone from fully
collateralized to unsecured. A further step in
this process was the initiation of a public
commercial paper program in November 1993.
The commercial paper, issued by the Railroad,
is rated A2 by S&P, F2 by Fitch Investors Service,
Inc. ("Fitch") and P3 by Moody's and is supported
by a $100 million Revolver with the Railroad's bank
lending group. At December 31, 1993, $38.1 million
of commercial paper was outstanding with various
maturities. The interest rates ranged from 3.45%
to 3.75%. The Railroad views this program as a
significant long-term funding source and intends to
issue replacement notes as each existing issue
matures. Therefore, the $38.1 million is
classified as long-term.
Twice during 1993, the Railroad renegotiated
its lending arrangements with its bank lending
group and the private placement noteholders. In
April 1993, in connection with the Tender Offer for
the $145 million 14-1/8% Senior Subordinated
Debentures (the "Debentures") (see below), the
banks converted the previous Permanent Facility to
a $180 million Revolving Credit Facility due 1996
at LIBOR plus 100 basis points. The banks and the
holders of the $160 million senior secured notes
("Senior Notes") issued in 1991 agreed to release
all collateral and continue to lend on an unsecured
basis. In November 1993, the banks again modified
this arrangement in connection with the commercial
paper program. The new bank agreements consist of
a new $100 million Revolver, due 1996 and a $50
million 364-day facility due in October 1994 (the
"Bank Line"). The new Revolver will be used
primarily for backup for the commercial paper but
can be used for general corporate purposes. The
available amount is reduced by the outstanding
amount of commercial paper borrowings and any
letters of credit issued on behalf of the Railroad
under the facility. No amounts have been drawn
under the Revolver. The $100 million was limited
to $57.9 million because $38.1 million in
commercial paper was outstanding and $4.0 million
in letters of credit had been issued. The Bank
Line was structured as a 364-day renewal instrument
and the Company intends to renew it on an on-going
basis. The $40 million borrowed at December 31,
1993, has therefore been classified as long-term.
The Company's financing/leasing subsidiaries
have approximately $13.0 million in long-term
borrowing agreements which were used to acquire a
total of 61 locomotives during 1993 and 1991.
One subsidiary used a short-term bridge financing
of $21.7 million to acquire 1,522 box cars in
December 1993. Such borrowings are secured by the
equipment acquired. The bridge financing must be
repaid or refinanced prior to March 3, 1994. The
Company expects to refinance this debt with either
a seven-year floating or fixed rate term loan or a
combination revolving facility and term loan also
with a floating or fixed rate and a seven-year
term. The Company believes that its available
cash, cash generated by its operations and cash
available via commercial paper, the Revolver and
the Bank Line will be sufficient to meet
foreseeable liquidity requirements.
Various borrowings of the Company's
subsidiaries are governed by agreements which
contain financial and operating covenants. All
entities were in compliance with these covenant
requirements at December 31, 1993, and management
does not anticipate any difficulty in maintaining
such compliance.
In 1993, conditions in the financial markets
provided an opportunity for the Railroad to replace
its outstanding Debentures. As a result, the
Railroad initiated a tender offer for the
Debentures. The tender offer, costs associated
with calling the $10.3 million untendered portion
and the refinancing of the Permanent Facility Term
Loan resulted in a $23.4 million extraordinary
loss, net of $12.6 million in tax benefits.
In connection with the tender offer for the
Debentures, the Railroad issued $100 million of
6.75% non-callable, 10-year notes due 2003 (the
"Notes") and irrevocably placed funds with a
trustee to cover principal, a 6% premium and
interest through the first call date of October 1,
1994, for the untendered Debentures. Additionally,
the Railroad's bank lending group agreed to the
termination and replacement of the previous
Permanent Facility with a new $180 million
unsecured Revolving Credit Facility expiring
December 31, 1996 (see above). Likewise, the
Senior Note holders agreed to release all the
collateral specified in their original agreement
and continue on an unsecured basis.
The Company declared its eighth consecutive
quarterly cash dividend which was paid on January
6, 1994. The Board intends to continue a policy of
quarterly dividends. Future dividends may be
dependent on the Railroad's ability to pay cash
dividends to the Company. Certain covenants of the
Railroad's debt agreements restrict the level of
dividends it may pay to the Company. At December
31, 1993, approximately $76 million of Railroad
equity was free of such restrictions.
The Company has paid approximately $8
million, $10 million and $18 million in 1993, 1992
and 1991, respectively, for severance and lump sum
signing awards associated with the various
agreements signed in 1992 and 1991. The Company
anticipates that an additional $7 million will be
required in 1994 related to all such agreements.
These requirements are expected to be met from
current operating activities or other available
sources.
The Railroad has entered into various hedge
agreements designed to mitigate significant changes
in fuel prices. As a result, approximately 93% of
the Railroad's short-term diesel fuel requirements
through March 1995 and 46% through June 1995 are
protected against significant price changes.
Federal Deficit Reduction Package
On August 10, 1993, the Omnibus Budget
Reconciliation Act of 1993, which contains a
deficit reduction package, became law. Certain
aspects of the legislation increased taxes directly
affecting the Company. Most significantly, the new
law increased the maximum corporate federal income
tax rate from 34% to 35% retroactive to January 1,
1993. This change required the Company to record
additional deferred income tax expense of
approximately $3.1 million in the third quarter of
1993 to reflect the new tax rate's impact on net
deferred income tax liability as of January 1,
1993. The higher corporate rate did not
significantly affect the Company's cash flow.
In addition, the legislation increased the
federal tax on diesel fuels by 4.3 cents per gallon
effective October 1, 1993. This tax increased the
fuel expense of the Railroad, which purchases
approximately 4.3 million gallons of diesel fuel
each month, by $.5 million in 1993.
Other
The Railroad is and will continue to be
subject to extensive regulation under environmental
laws and regulations concerning, among other
things, discharges into the environment and the
handling, storage, transportation and disposal of
waste and hazardous materials. Inherent in the
operations and real estate activities of the
Railroad and other railroads is the risk of
environmental liabilities. Several properties on
which the Railroad currently or formerly conducted
operations are subject to governmental action in
connection with environmental damage. In the
opinion of management, the Company has adequate
reserves to cover the costs for investigation and
remediation. However, there can be no assurance
that environmental conditions will not be
discovered which might individually or in the
aggregate have a material adverse effect on the
Company's financial condition.
Recent Accounting Pronouncements
In May 1993, the Financial Accounting
Standards Board issued Statement of Financial
Accounting Standards No. 114, "Accounting by
Creditors for Impairment of a Loan" ("SFAS No.
114") and Statement of Financial Accounting
Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" ("SFAS
No. 115").
SFAS No. 114 requires that impaired loans be
measured based on the present value of expected
future cash flows discounted at the loan's
effective interest rate. This statement applies to
financial statements for fiscal years beginning
after December 31, 1994, with earlier adoption
encouraged. The Company is currently evaluating
the impact of this statement, if any, on its
reported results. Early adoption is not
anticipated.
SFAS No. 115 addresses the accounting and
reporting for investments in equity securities that
have readily determinable fair values and for all
investments in debt securities. This statement is
effective for fiscal years beginning after December
15, 1993. Adoption is not anticipated to have an
adverse impact on reported results.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
See Index to Consolidated Financial Statements on
page 33 of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENT WITH
ACCOUNTANTS IN ACCOUNTING
FINANCIAL DISCLOSURES
NONE
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.
The information required by these items is
incorporated by reference to the sections of the
Company's definitive proxy statement for its 1994
Annual Meeting of Stockholders (which is expected
to be filed with the Securities and Exchange
Commission on or before March 16, 1994) entitled
Nominees for Election as Class III Directors who
would hold office until 1997, Class I Directors
continuing in office until 1995, Class II Directors
continuing in office until 1996, Committees of the
Board of Directors, Compensation of Executive
Officers and Directors, and Ownership of Common
Stock and Certain Transactions-Certain
Transactions. However, the Compensation Committee
Report and the Performance Graph are specifically
NOT incorporated by reference.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a) 1. Financial Statements:
See Index to Consolidated Financial
Statements on page 34 of this Report.
2. Financial Statement Schedules:
See Index to Financial Statement Schedules
on page F-25 of this Report.
3. Exhibits:
See items marked with "*" on the Exhibit
Index beginning on page E-1 of this
Report. Items so marked identify
management contracts or compensatory plans
or arrangements as required by Item 14.
(b) 1. Reports on Form 8-K:
During the fourth quarter of 1993 the
Registrant filed with the Securities and
Exchange Commission the following reports
on Form 8-K on the dates indicated to
report the events described:
NONE
(c) Exhibits:
The response to this portion of Item 14 is
submitted as a separate section of this
Report. See Exhibit Index beginning on
page E-1.
(d) Financial Statement Schedules:
The response to this portion of Item 14 is
submitted as a separate section of this
Report.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly
caused this Report to be signed on its behalf by
the undersigned, there unto duly authorized.
ILLINOIS CENTRAL CORPORATION
By: DALE W. PHILLIPS
Dale W. Phillips
Vice President and Chief Financial Officer
Date: March 16, 1994
Pursuant to the requirements of the Securities
Exchange Act of 1934, this Report has been signed
by the following persons in the capacities and on
the dates indicated.
SIGNATURE TITLE(S) DATE
/s/ GILBERT H. LAMPHERE Chairman of the
Gilbert H. Lamphere Board and Director
March 16, 1994
/s/ E. HUNTER HARRISON President and Chief
E. Hunter Harrison Executive Officer
(principal executive
officer), Director
March 16, 1994
/s/ DALE W. PHILLIPS Vice President
Dale W. Phillips and Chief Financial
Officer (principal
financial officer)
March 16, 1994
/s/ JOHN V. MULVANEY Controller
John V. Mulvaney (principal accounting
officer)
March 16, 1994
/s/ THOMAS A. BARRON Director
Thomas A. Barron
March 16, 1994
Director
George D. Gould
/s/ WILLIAM B. JOHNSON Director
William B. Johnson
March 16, 1994
/s/ ALEXANDER P. LYNCH Director
Alexander P. Lynch
March 16, 1994
/s/ SAMUEL F. PRYOR, IV Director
Samuel F. Pryor, IV
March 16, 1994
/s/ F. JAY TAYLOR Director
F. Jay Taylor
March 16, 1994
Director
John V. Tunney
/s/ ALAN H. WASHKOWITZ Director
Alan H. Washkowitz
March 16, 1994
<PAGE>
ILLINOIS CENTRAL CORPORATION
AND SUBSIDIARIES
---------------------
---------------------------
F O R M 10-K
-------------
FINANCIAL STATEMENTS
SUBMITTED IN RESPONSE TO ITEM 8
<PAGE>
ILLINOIS CENTRAL CORPORATION
AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Public Accountants.... F-1
Consolidated Statements of Income for the three
years ended December 31, 1993............... F-2
Consolidated Balance Sheets at December 31, 1993
and 1993.................................... F-3
Consolidated Statements of Cash Flows for the three
years ended December 31, 1993......... F-4
Consolidated Statements of Stockholders' Equity and
Retained Income for the three years ended December
31, 1993........................... F-5
Notes to Consolidated Financial Statements for the
three years ended December 31, 1993......... F-6
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Illinois Central
Corporation:
We have audited the accompanying consolidated
balance sheets of Illinois Central Corporation (a
Delaware corporation) and subsidiaries as of
December 31, 1993 and 1992, and the related
consolidated statements of income, cash flows and
stockholders' equity and retained income for each
of the three years in the period ended December 31,
1993. These financial statements and the schedules
referred to below are the responsibility of the
Company's management. Our responsibility is to
express an opinion on these financial statements
and schedules based on our audits.
We conducted our audits in accordance with
generally accepted auditing standards. Those
standards require that we plan and perform the
audit to obtain reasonable assurance about whether
the financial statements are free of material
misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit
also includes assessing the accounting principles
used and significant estimates made by management,
as well as evaluating the overall financial
statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements
referred to above present fairly, in all material
respects, the financial position of Illinois
Central Corporation and subsidiaries as of December
31, 1993 and 1992, and the results of their
operations and their cash flows for each of the
three years in the period ended December 31, 1993,
in conformity with generally accepted accounting
principles.
As discussed in Note 9 to the consolidated
financial statements, effective January 1, 1993,
the Company changed its method of accounting for
postretirement health care and postemployment
benefits.
Our audits were made for the purpose of
forming an opinion on the basic financial
statements taken as a whole. The schedules listed
in the index to financial statement schedules
herein are presented for purposes of complying with
the Securities and Exchange Commission's rules and
are not part of the basic financial statements.
These schedules have been subjected to the auditing
procedures applied in the audits of the basic
financial statements and, in our opinion, fairly
state in all material respects the financial data
required to be set forth therein in relation to the
basic financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
Chicago, Illinois
January 19, 1994
<PAGE>
</TABLE>
<TABLE> ILLINOIS CENTRAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
($ in millions, except share data)
<CAPTION>
Years Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Revenues $ 564.7 $ 547.4 $ 549.7
Operating expenses:
Labor and fringe benefits 190.2 191.3 196.8
Leases and car hire 70.1 70.4 76.9
Diesel fuel 30.4 30.0 33.1
Materials and supplies 36.7 33.1 31.4
Depreciation and amortization 23.5 22.1 20.6
Other 34.3 40.1 45.3
Special charge - 8.9 -
--------- --------- ----------
Operating expenses 385.2 395.9 404.1
Operating income 179.5 151.5 145.6
Other income, net 1.7 2.0 5.7
Interest expense, net (33.1) (43.6) (55.1)
--------- --------- ----------
Income before income taxes, extraordinary
item and cumulative effect of changes in
accounting principles 148.1 109.9 96.2
Provision for income taxes 56.4 37.4 30.8
--------- --------- ----------
Income before extraordinary item and
cumulative effect of changes in
accounting principles 91.7 72.5 65.4
Extraordinary item, net (23.4) - -
Cumulative effect of changes in accounting
principles (0.1) 23.4 -
--------- --------- ----------
Net income $ 68.2 $ 95.9 $ 65.4
========= ========= ==========
Income per share:
Income before extraordinary item and
cumulative effect of changes in
accounting principles $ 2.14 $ 1.70 $ 1.64
Extraordinary item, net (0.55) - -
Cumulative effect of changes in accounting
principles - 0.55 -
--------- --------- ----------
Income per share $ 1.59 $ 2.25 $ 1.64
========= ========= ==========
Weighted average number of shares
of common stock and common stock
equivalents outstanding 42,679,683 42,600,107 39,830,182
</TABLE>
The following notes are an integral part of the consolidated financial
statements.
<PAGE>
<TABLE>
ILLINOIS CENTRAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
($ in millions)
<CAPTION>
ASSETS December 31, 1993 December 31, 1992
<S> <C> <C>
Current assets:
Cash and temporary cash investments $ 10.7 $ 34.6
Receivables, net of allowance for doubtful
accounts of $3.1 in 1993 and $2.6 in 1992 80.3 76.4
Materials and supplies, at average cost 20.1 18.8
Assets held for disposition 9.1 9.1
Deferred income taxes - current 22.8 24.2
Other current assets 3.6 2.1
------- -------
Total current assets 146.6 165.2
Investments 15.7 15.0
Properties:
Transportation:
Road and structures, including land 947.9 909.5
Equipment 118.1 75.2
Other, principally land 40.4 40.6
Total properties 1,106.4 1,025.3
Accumulated depreciation (20.9) (15.8)
------- -------
Net properties 1,085.5 1,009.5
Other assets 10.9 16.4
------- -------
Total assets $ 1,258.7 $ 1,206.1
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 24.3 $ 12.7
Accounts payable 54.4 53.7
Dividends payable 9.0 6.4
Income taxes payable 1.5 1.1
Casualty and freight claims 24.7 24.6
Employee compensation and vacations 15.8 16.3
Taxes other than income taxes 14.0 13.0
Accrued redundancy reserves 6.8 9.4
Other accrued expenses 28.5 30.9
------- -------
Total current liabilities 179.0 168.1
Long-term debt 360.3 367.3
Deferred income taxes 202.3 171.3
Other liabilities and reserves 139.7 160.6
Contingencies and commitments (Note 13)
Stockholders' equity:
Common stock, par value $.001, authorized 65,000,000
shares, 42,837,064 shares issued and 42,614,566
shares outstanding - -
Additional paid-in capital 164.2 160.9
Retained income 216.5 177.9
Treasury stock (222,498 shares) (3.3) -
------- -------
Total stockholders' equity 377.4 338.8
Total liabilities and stockholders' equity $ 1,258.7 $ 1,206.1
======= =======
</TABLE>
The following notes are an integral part of the consolidated financial
statements.
<PAGE>
<TABLE>
ILLINOIS CENTRAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
($ in millions)
<CAPTION>
Years Ended December 31,
<S> <C> <C> <C>
1993 1992 1991
Cash flows from operating activities :
Net income $ 68.2 $ 95.9 $ 65.4
Reconciliation of net income to net cash provided
by (used for) operating activities :
Extraordinary item, net 23.4 - -
Cumulative effect of changes in accounting
principles 0.1 (23.4) -
Depreciation and amortization 23.7 22.1 20.6
Deferred income taxes 31.9 21.4 20.4
Special charge - 8.9 -
Equity in undistributed earnings of affiliates,
net of dividends received (0.3) 0.2 (0.1)
Net gains on sales of real estate (0.8) (0.4) (0.7)
Cash changes in working capital (0.8) (15.8) (24.7)
Changes in other assets (1.4) 2.8 (3.0)
Changes in other liabilities and reserves (19.7) 12.7 (14.8)
------ ------ ------
Net cash provided by (used for) operating
activities 124.3 124.4 63.1
Cash flows from investing activities :
Additions to properties (90.7) (50.8) (49.9)
Proceeds from sales of real estate 1.5 1.3 1.8
Proceeds from single track sales - 4.1 16.3
Proceeds from equipment sales 3.8 2.2 1.3
Proceeds from sales of investments (0.4) 1.8 3.3
Other (3.2) (5.2) (9.7)
Net cash provided by (used for) investing ------ ------ ------
activities (89.0) (46.6) (36.9)
Cash flows from financing activities :
Proceeds from issuance of debt 370.8 0.9 178.0
Principal payments on debt (403.0) (61.7) (250.9)
Proceeds from issuance of Common Stock - - 63.1
Dividends paid (27.1) (14.8) -
Proceeds from exercise of stock options and warrants 0.5 0.2 3.4
Purchase of subsidiary's common stock (0.4) (0.5) (0.6)
Net cash provided by (used for) financing ------ ------ ------
activities (59.2) (75.9) (7.0)
------ ------ ------
Changes in cash and temporary cash investments (23.9) 1.9 19.2
Cash and temporary cash investments at beginning of year 34.6 32.7 13.5
------ ------ ------
Cash and temporary cash investments at end of year $ 10.7 $ 34.6 $ 32.7
====== ====== ======
Supplemental disclosure of cash flow information :
Cash paid during the year for:
Interest (net of amount capitalized) $ 39.3 $ 45.3 $ 55.7
====== ====== ======
Income taxes $ 10.9 $ 15.9 $ 15.7
====== ====== ======
</TABLE>
The following notes are an integral part of the consolidated financial
statements.
<PAGE>
<TABLE>
ILLINOIS CENTRAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity and Retained Income
<CAPTION>
Shares
(000's) Equity ($ in millions)
------- --------------------------------------------------
Additional Total
Common Common Paid-in Retained Treasury Stockholders'
Stock Stock Capital Income Stock Equity
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1990 23,712 $ - $ 90.6 $ 37.8 $ - $ 128.4
Issuance of Common Stock:
Exercise of warrants 965 - 3.3 3.3
Public stock offering 3,535 - 63.1 63.1
Exercise stock option 10 - 0.1 0.1
Repurchase restricted stock (17) - -
Net income 65.4 65.4
------- ------ ------- ------ ------- --------
Balance December 31, 1991 28,205 - 157.1 103.2 - 260.3
Issuance of Common Stock:
Stock split 3-for-2 14,102 - - -
Exercise stock option 17 - 0.2 0.2
Restricted stock awards 350 - 3.6 3.6
Dividends (21.2) (21.2)
Net income 95.9 95.9
------- ------ ------- ------ ------- --------
Balance December 31, 1992 42,674 - 160.9 177.9 - 338.8
Issuance of Common Stock:
Exercise stock option 50 - 0.5 0.5
Restricted stock awards 25 - 2.8 2.8
Stock Repurchased / Forfeited (134) (3.3) (3.3)
Dividends (29.6) (29.6)
Net income 68.2 68.2
------- ------ ------- ------ ------- --------
Balance December 31, 1993 42,615 $ - $ 164.2 $ 216.5 $ (3.3) $ 377.4
======= ====== ======= ====== ======= ========
</TABLE>
The following notes are an integral part of the consolidated financial
statements.
<PAGE>
1. THE COMPANY
Illinois Central Corporation, a holding
company, (hereinafter, the "Company") was
incorporated under the laws of Delaware. The
Company was formed originally for the purpose of
acquiring, through a wholly-owned subsidiary, the
outstanding common stock of Illinois Central
Transportation Company ("ICTC"). Following a
tender offer and several mergers, the Illinois
Central Railroad Company ("Railroad") is the
surviving corporation and the successor to ICTC and
now a wholly-owned subsidiary of the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include
the accounts of the Company and its subsidiaries.
Significant investments in affiliated companies are
accounted for by the equity method. Transactions
between consolidated companies have been eliminated
in the accompanying consolidated financial
statements.
PROPERTIES
Depreciation is computed by the straight-line
method and includes depreciation on properties
under capital leases. The depreciation rates for
the equipment owned by the Company's finance
subsidiary are based on estimated useful life and
anticipated salvage value. Lives used range from
18 to 20 years. At the Railroad, depreciation for
track structure, other road property, and equipment
is calculated using the composite method. In the
case of routine retirements, removal cost less
salvage recovery is charged to accumulated
depreciation. Expenditures for maintenance and
repairs are charged to operating expense.
The Interstate Commerce Commission ("ICC")
approves the depreciation rates used by the
Railroad. In 1991, the Railroad completed a study
which resulted in revised depreciation rates for
road properties (excluding track properties) and
equipment. The revised rates did not and will not
have a significant effect on operating results.
The approximate ranges of annual depreciation rates
for major property classifications are as follows:
Road properties .................1% - 8%
Transportation equipment ........1% - 7%
In 1989, the Company initiated a program to
convert approximately 500 miles of double track
main line to a single track main line, with a
centralized traffic control system. This program
was completed successfully in 1991.
REVENUES
Revenues are recognized based on services
performed and include estimated amounts relating to
movements in progress for which the settlement
process is not complete. Estimated revenue amounts
for movements in progress are not significant.
INCOME TAXES
Effective January 1, 1992, the Company adopted
the Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" ("SFAS No.
109"). Under SFAS No. 109, deferred income taxes
are accounted for on the asset and liability method
by applying enacted statutory tax rates to
differences ("temporary differences") between the
financial statement carrying amounts and the tax
bases of assets and liabilities. The resulting
deferred tax assets and liabilities represent taxes
to be collected or paid in the future when the
related assets and liabilities are recovered and
settled, respectively. See Note 10 for discussion
of the 1992 impact of adopting SFAS No. 109.
CASH AND TEMPORARY CASH INVESTMENTS
Cash in excess of operating requirements is
invested in certain funds having original
maturities of three months or less. These
investments are stated at cost, which approximates
market value.
INCOME PER SHARE
Income per common share of the Company is based
on the weighted average number of shares of common
stock and common stock equivalents outstanding for
the period. Dilution, which could result if all
outstanding common stock equivalents were
exercised, is not significant.
FUTURES, OPTIONS, CAPS, FLOORS AND FORWARD
CONTRACTS
In March 1990, the FASB issued Statement of
Financial Accounting Standards No. 105 "Disclosure
of Information about Financial Instruments with Off
Balance Sheet Risk and Financial Instruments with
Concentration of Credit Risk" ("SFAS 105").
Disclosures required by SFAS 105 are found in
various notes where the financial instruments or
related risks are discussed. See specifically
Notes 6, 7, 8, and 13.
CASUALTY AND FREIGHT CLAIMS
The Company accrues for injury and damage
claims outstanding based on actual claims filed and
estimates of claims incurred but not filed.
Estimated amounts expected to be settled within one
year are classified as current liabilities in the
accompanying Consolidated Balance Sheets.
EMPLOYEE BENEFIT PLANS
All employees of the Railroad are covered
under the Railroad Retirement Act. In addition,
management employees of the Railroad are covered
under a defined contribution plan. Contribution
costs of the plan are funded currently.
Mr. E. L. Moyers, former Chairman, President
and Chief Executive Officer ("Mr. Moyers") is
covered by a supplemental plan which is discussed
in Note 9.
Effective January 1, 1993, the Company adopted
both the Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" ("SFAS
No. 106") and the Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for
Postemployment Benefits" ("SFAS No. 112"). SFAS
No. 106 requires that future costs associated with
providing postretirement benefits be recognized as
expense over the employees' requisite service
period. The pay-as-you-go method used prior to
1993 recognized the expense on a cash basis. SFAS
No. 112 establishes accounting standards for
employers who provide postemployment benefits and
clarifies when the expense is to be recognized. In
accordance with the provisions of these standards,
years prior to 1993 have not been restated. See
Note 9 for discussion of the impact of adopting
SFAS No. 106 and SFAS No. 112.
RECLASSIFICATIONS
Certain items relating to prior years have
been reclassified to conform to the presentation in
the current year.
3. EXTRAORDINARY ITEM AND REFINANCING
The 1993 extraordinary loss resulted from the
retirement of the Railroad's 14-1/8% Senior
Subordinated Debentures (the "Debentures") and
refinancing the Permanent Facility. The loss was
$23.4 million, net of tax benefits of $12.6
million. The loss resulted from the premium paid,
the write-off of unamortized financing fees and
debt discount and costs associated with the calling
of the $10.3 million of Debentures not tendered.
The net proceeds of the 6.75% Notes (see Note 8),
borrowings under the $180 million Revolving Credit
Facility and other available cash were used to fund
the retirement of the Debentures.
<PAGE>
4. OTHER INCOME, NET
Other Income, Net consisted of the following
($ in millions):
Years Ended December 31,
1993 1992 1991
Income, net.............. $ 3.9 $ 3.8 $ 3.0
Net gains on real estate
sales................... .8 .4 .7
Net gain (loss) on disposal
of rolling stock........ (2.3) - -
Equity in undistributed
earnings of affiliates.. .5 .3 .4
Net gain on Series K..... - - 3.6
Other, net............... (1.2) (2.5) (2.0)
------ ------ ------
Other Income, Net....... $ 1.7 $ 2.0 $ 5.7
5. SUPPLEMENTAL CASH FLOW INFORMATION
Cash changes in components of working capital,
exclusive of Current Maturities of Long-Term Debt,
included in the Consolidated Statements of Cash
Flows were as follows ($ in millions):
Years Ended December 31,
1993 1992 1991
Receivables, net.... $ (3.9) $ 4.7 $ (2.6)
Materials and supplies (1.4) (3.2) (.6)
Other current assets.. (1.5) .3 1.0
Accounts payable... 1.1 (5.7) (5.0)
Income taxes payable 13.6 .5 (5.4)
Accrued redundancy
reserves............ (2.6) (11.0) (11.7)
Other current
liabilities......... (6.1) (1.4) (.4)
------- -------- --------
$ (.8) $ (15.8) $ (24.7)
Included in changes in Other Liabilities and
Reserves is approximately $6.3 million and $23.4
million for the years ended December 31, 1993 and
1992, respectively, reflecting proceeds from the
settlement of casualty claims with numerous
insurance carriers.
In 1993, the Railroad entered into a capital
lease for 200 covered hoppers. The lease expires
in 2003. See Note 7 for a recap of the present
value of the minimum lease payments.
In 1991, the Railroad retired several Long-
Term Debt obligations, most significantly its $150
million 15.5% Series K First Mortgage Bonds
("Series K"). These retirements resulted in non-
cash reductions of debt balances of $4.6 million.
Also, in 1991 the balance of a long term investment
was reduced by $2.5 million.
6. MATERIALS AND SUPPLIES
Materials and Supplies, valued using the
average cost method, consist of track material,
switches, car and locomotive parts and fuel. The
Railroad entered into various hedge agreements
designed to mitigate significant changes in fuel
prices. As a result, approximately 93% of the
short-term diesel fuel requirements through March
1995 and 46% through June 1995 are protected
against significant price changes based on the
average near-by contract for Heating Oil #2 traded
on the New York Mercantile Exchange.
7. LEASES
As of December 31, 1993, the Company leased
6,709 of its cars and 166 of its locomotives. The
majority of these leases have original terms of 15
years and expire between 1994 and 2001. Under the
terms of the majority of its leases, the Company
has the right of first refusal to purchase, at the
end of the lease terms, certain cars and
locomotives at fair market value. Other leases
include office and computer equipment, vehicles and
office facilities.
Net obligations under capital leases at
December 31, 1993 and 1992, included in the
Consolidated Balance Sheets are $5.4 million and
$.2 million, respectively.
At December 31, 1993, minimum rental payments
under capital and operating leases that have
initial or remaining noncancellable terms in excess
of one year were as follows ($ in millions):
Capital Operating
Leases Leases
1994 ............................$ .9 $ 34.6
1995 ............................ .9 28.4
1996 ............................ .8 19.3
1997 ............................ .8 7.8
1998 ............................ .8 4.2
Thereafter ...................... 3.1 17.4
---- ------
Total minimum lease payments... 7.3 $111.7
Less: Imputed interest .......... 1.9
Present value of minimum ----
payments..................... $5.4
Total rent expense applicable to
noncancellable operating leases amounted to $45.2
million in 1993, $46.2 million for 1992 and $48.5
million for 1991. Most of the leases provide that
the Company pay taxes, maintenance, insurance and
certain other operating expenses.
8. LONG-TERM DEBT AND INTEREST EXPENSE
Long-Term Debt at December 31, consisted of
the following ($ in millions):
<TABLE>
<CAPTION>
<S> <C> <C>
1993 1992
----- -----
Equipment obligations, due annually to 2000, 6.11% to 9.254%.. $ 13.0 $ 10.9
Debentures and other debt, due 1994 to 2056, 4.5% to 10.9% ... 10.8 11.3
Commercial Paper, at average interest rate 3.57%.............. 38.1 -
Bank Line, at average interest rate 3.49%..................... 40.0 -
Notes, due 2003, 6.75%........................................ 100.0 -
Senior Subordinated Debentures................................ - 145.0
Senior Notes, due 1998 to 2001, 10.02% and 10.4%.............. 159.8 160.0
Permanent Facility, at average interest rate in 1992
of 5.25% ................................................... - 47.6
Capitalized leases (Note 7) .................................. 4.9 .1
Unamortized premium (discount), net .......................... (6.3) (7.6)
------- -------
Total Long-Term Debt ............................ $360.3 $367.3
</TABLE>
At December 31, 1993, the aggregate annual
maturities and sinking fund requirements for debt
payments for 1994 through 1999 and thereafter are
$24.3 million (includes bridge financing of $21.7
million (see below)), $2.3 million, $80.6 million,
$2.7 million, $57.6 million, $61.2 million and
$155.9 million, respectively. The weighted-
average interest rate for 1993 and 1992 on total
debt excluding the effect of discounts, premiums
and related amortization was 9.1% and 10.8%,
respectively.
In November 1993, the Railroad initiated a
public commercial paper program. The commercial
paper is rated A2 by S&P, F2 by Fitch and P3 by
Moody's and is supported by a new $100 million
Revolver with the Railroad's bank lending group.
The Railroad views this program as a significant
long-term funding source and intends to issue
replacement notes as maturities occur. Therefore,
the $38.1 million outstanding at December 31, 1993
has been classified as long-term.
In connection with the commercial paper
program, the bank lending group agreed to replace
the $180 million Revolving Credit Facility (see
below) with (i) a new $100 million Revolver, due
1996 and (ii) a $50 million 364-day facility due
October 1994 ("Bank Line"). The new Revolver will
be used primarily for backup for the commercial
paper but can be used for general corporate
purposes. The available amount is reduced by the
outstanding amount of commercial paper borrowings
and any letters of credit issued on behalf of the
Railroad under the facility. No amounts have been
drawn under the Revolver. The $100 million was
limited to $57.9 million because $38.1 million in
commercial paper was outstanding and $4.0 million
in letters of credit had been issued. The Bank
Line was structured as a 364-day renewable
instrument and the Company intends to renew it on
an on-going basis. The $40 million outstanding at
December 31, 1993, has therefore been classified
as long-term.
The Company's financing/leasing subsidiaries
have approximately $13.0 million in long-term
borrowing agreements which were used to acquire a
total of 61 locomotives during 1993 and 1991.
Such borrowings are secured by equipment which is
leased to the Railroad. These agreements mature
in 1999 and 2000. One subsidiary used a short-
term bridge financing of $21.7 million to acquire
1,522 box cars in December 1993. The bridge
financing must be repaid or refinanced prior to
March 3, 1994. The Company expects to refinance
this debt with either a seven year floating or
fixed rate term loan or a combination revolving
facility and term loan also with a floating or
fixed rate. During April 1993, the Company and
the Railroad reached an agreement with its bank
lending group and the holders of the privately
placed $160 million Senior Secured Notes ("Senior
Notes") for a release of all collateral and those
instruments are now unsecured. The bank agreed to
replace the Permanent Facility with a $180 million
Revolving Credit Facility. This was done in
connection with the tender offer made by the
Railroad for all of the Debentures.
The tender offer was funded by issuance of
new $100 million 6.75% Notes, due 2003 (the
"Notes"), borrowing under a $180 million Revolving
Credit Facility negotiated with the banks which
replaced the Permanent Facility and cash on hand.
See Note 3 for discussion of the extraordinary
loss incurred upon tender for the Debentures. The
Railroad irrevocably placed $12.6 million on
deposit with a trustee to cover principal, a 6%
premium and interest through the first call date
of October 1, 1994, for the untendered Debentures.
The Notes (issued at a slight discount
1.071%) pay interest semiannually in May and
November and are covered by an Indenture. Of the
Senior Notes, $109.8 million bears interest at a
rate of 10.02% and $50 million at 10.4%.
Principal payments of $55 million are due in each
of 1998 and 1999, and $25 million in each of 2000
and 2001. The Senior Notes are governed by a Note
Purchase Agreement.
Various borrowings of the Company's
subsidiaries are governed by agreements which
contain certain affirmative and negative covenants
customary for facilities of this nature including
restrictions on additional indebtedness,
investments, guarantees, liens, distributions,
sales and leasebacks, and sales of assets and
capital stock. Some also require the Railroad to
satisfy certain financial tests, including a
leverage ratio, an earnings before interest and
taxes to interest charges ratio, debt service
coverage, and minimum consolidated tangible net
worth requirements. The Railroad may be required
to apply 100% of net after-tax proceeds of sales
aggregating $2.5 million or greater of certain
assets to reduce Revolver commitments. The
holders of the Senior Notes can elect to receive a
pro-rata share of after-tax proceeds.
Interest Expense, Net consisted of the
following ($ in millions):
Years Ended December 31,
1993 1992 1991
---- ---- ----
Interest expense........ $35.2 $46.2 $59.7
Less: Interest
capitalized..... .8 .6 .4
Interest income..... 1.3 2.0 4.2
----- ----- -----
Interest Expense, Net... $33.1 $43.6 $55.1
9. EMPLOYEE BENEFIT PLANS
Retirement Plans. All employees of the
Railroad are covered under the Railroad Retirement
Act. In addition, management employees of the
Railroad are covered under a defined contribution
plan. Contributions under the plan vest
immediately. Expenses relating to the defined
contribution plan were $.4 million for each of the
years ended December 31, 1993, 1992 and 1991.
Mr. Moyers is covered by a non-qualified,
unfunded supplemental retirement benefit agreement
which provides for a defined benefit payable
annually, commencing upon death, permanent
disability or retirement (with benefits arising
from retirement commencing upon his attaining age
65 and compliance with certain non-competition
agreements), in the amount of $250,000 per year
for a maximum of 15 years. In accordance with the
term of the agreement, no payments will be made
while Mr. Moyers is employed by another Class I
railroad. The present value of this agreement was
included in the 1992 special charge. See Note 15.
Postretirement Plans. In addition to the
Company's defined contribution plan for management
employees, the Company has three benefit plans
which provide some postretirement benefits to most
former full-time salaried employees and selected
former union represented employees. The medical
plan for salaried retirees is contributory, with
retiree contributions adjusted annually if
expected inflation rate exceeds 9.5%, and contains
other cost sharing features such as deductibles
and co-payments. The Company's contribution will
be fixed at the 1999 year end rate for all
subsequent years. Salaried retirees are covered
by a life insurance plan which provides a nominal
death benefit and is non-contributory. The
medical plan for locomotive engineers who retired
under a special early retirement program in 1987
provides non-contributory coverage until age 65.
All benefits under this plan terminate in 1998.
There are no plan assets and the Company will
continue to fund these benefits as claims are paid
as was done in prior years.
Postemployment Benefit Plans. The Company
provides certain postemployment benefits such as
long-term salary continuation and waiver of
medical and life insurance co-payments while on
long-term disability.
SFAS No. 106 and SFAS No.112. As
described in Note 2 effective January 1, 1993 the
Company adopted SFAS No. 106 and SFAS No. 112.
With respect to SFAS No. 106, the Company elected
to immediately recognize the transition asset
associated with adoption which resulted because
the Company had previously recorded an amount
under purchase accounting to reflect the estimated
liability for such benefits as of the acquisition
date of ICTC.
As a result of adopting these two standards,
the Company recorded a decrease to net income of
$84,000 (net of taxes of $46,000) as a cumulative
effect of changes in accounting principles ($ in
millions):
Postretirement Benefits (SFAS No. 106):
APBO at January 1, 1993:
Medical......................... $36.5
Life............................ 2.3
-----
Total APB................. 38.8
Liability previously recorded..... (40.3)
-----
Transition Asset.......... 1.5
Postemployment Benefits Obligation
at January 1, 1993 (SFAS 112)..... (1.6)
-----
Pre-tax Cumulative Effect of Changes
in Accounting Principles.......... (.1)
Related tax benefit.................. -
-----
Cumulative Effect of Changes
in Accounting Principles.......... $ (.1)
=====
Per Share Impact..................... $ -
=====
In accordance with each standard, years prior
to 1993 have not been restated. For 1993, the
adoption of these two standards had no significant
effect on income before cumulative effect of
changes in accounting principles as compared to
the Company's prior pay-as-you-go method of
accounting for such benefits.
<PAGE>
The accumulated postretirement benefit
obligations ("APBO") of the postretirement plans
were as follows ($ in millions):
January
December 31, 1993 1, 1993
Medical Life Total Total
Accumulated post-
retirement benefit
obligation:
Retirees....... $26.4 $ 2.4 $28.8 $33.4
Fully eligible
active plan
participants.. .7 - .7 .7
Other active plan
participants.. 4.7 - 4.7 4.7
----- ----- ----- -----
Total APBO.... $31.8 $ 2.4 34.2 38.8
Unrecognized net
gain.......... 5.0 -
Accrued liability
for post-
retirement
benefits....... $39.2 $38.8
===== =====
The weighted-average discount rate used in
determining the accumulated post-retirement
benefit obligation was 8.0% at January 1, 1993.
As a result of the Company's improved financial
condition and recognizing the overall shift in the
financial community, the Company lowered the
weighted-average discount rate to 7.25% as of
December 31, 1993. The change in rates resulted
in approximately $2.0 million actuarial loss. The
loss was offset by actual experience gains,
primarily fewer claims and lower medical rate
inflation, which resulted in a $5.0 million
unrecognized net gain as of December 31, 1993.
The components of the net periodic
postretirement benefits cost for 1993 were as
follows ($ in millions):
Service costs........................ $ .1
Interest costs....................... 3.0
Net amortization of Corridor excess.. -
-----
Net periodic postretirement
benefit costs...................... $ 3.1
The weighted-average annual assumed rate of
increase in the per capital cost of covered
benefits (e.g., health care cost trend rate) for
the medical plans is 14.0% for 1993 and is assumed
to decrease gradually to 6.25% by 2001 and remain
at that level thereafter. The health care cost
trend rate assumption normally has a significant
effect on the amounts reported; however, as
discussed, the plan limits annual inflation for
the Company's portion of such costs to 9.5% each
year. Therefore, an increase in the assumed
health care cost trend rates by one percentage
point in each year would have no impact on the
Company's accumulated postretirement benefit
obligation for the medical plans as of December
31, 1993, or the aggregate of the service and
interest cost components of net periodic
postretirement benefit expense in future years.
10. PROVISION FOR INCOME TAXES
Effective January 1, 1992, the Company
adopted the Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes"
("SFAS No. 109"). As a result, the Company
recorded a $23.4 million ($.55 per share)
reduction in its accrued net deferred income tax
liability as of January 1, 1992. The gain
recorded upon adoption could not be recognized
previously in accordance with SFAS No. 96 which
the Company had adopted in 1988.
The Company elected to report this change as
the cumulative effect of a change of accounting
principle. Therefore, prior year amounts were not
restated.
On August 10, 1993, the Omnibus Budget
Reconciliation Act of 1993, which contains a
deficit reduction package, became law. Certain
aspects of the Act directly affect the Company.
Most significantly, the new law increased the
maximum corporate federal income tax rate from 34%
to 35% retroactive to January 1, 1993. This
change required the Company to record additional
deferred income tax expense of approximately $3.1
million to reflect the new tax rate's impact on
net deferred income tax liability as of January 1,
1993. The higher corporate rate is not
anticipated to significantly affect the Company's
cash flow.
<PAGE>
The Provision for Income Taxes for continuing
operations consisted of the following ($ in
millions):
Years Ended December 31,
1993 1992 1991
---- ---- ----
Current income tax:
Federal............. $23.6 $14.4 $ 9.4
State............... .9 1.6 1.0
Deferred income taxes. 31.9 21.4 20.4
----- ----- -----
Provision for Income
Taxes............... $56.4 $37.4 $30.8
The effective income tax rates for the years
ended December 31, 1993, 1992 and 1991, were 38%,
34% and 32%, respectively. See Note 3 for the tax
benefits associated with the extraordinary loss.
The items which gave rise to differences
between the income taxes provided for continuing
operations in the Consolidated Statements of
Income and the income taxes computed at the
statutory rate are summarized below ($ in
millions):
<TABLE>
<CAPTION> Years Ended December 31,
<S> <C> <C> <C>
1993 1992 1991
---- ---- ----
Expected tax expense
computed at statutory rate...... $51.8 35% $37.4 34% $32.7 34%
Dividends received exclusion..... (.1) - (.1) - (.1) -
Impact of OBRA 1993 rate change.. 3.1 2 - - - -
State income taxes, net of
Federal tax effect ............. .6 - 1.0 1 .7 1
Benefits of net operating loss
carryforwards .................. - - - - (3.8) (4)
Other items, net ................ 1.0 1 (.9) (1) 1.3 1
----- -- ------ --- ----- ---
Provision for Income Taxes....... $56.4 38% $37.4 34% $30.8 32%
</TABLE>
Temporary differences between book and tax
income arise because the tax effects of
transactions are recorded in the year in which
they enter into the determination of taxable
income. As a result, the book provisions for
taxes differ from the actual taxes reported on the
income tax returns. The net results of such
differences are included in Deferred Income Taxes
in the Consolidated Balance Sheets.
The Company has an Alternative Minimum Tax
("AMT") carryforward credit of $.1 million at
December 31, 1993. This excess of AMT over
regular tax can be carried forward indefinitely to
reduce future U.S. Federal income tax liabilities.
At December 31, 1993, this credit was used to
reduce the recorded deferred tax liability.
At December 31, 1993, the Company, for tax
or financial statement reporting purposes, had no
net operating loss carryovers.
Deferred Income Taxes consisted of the
following ($ in millions):
December 31,
-----------------------
1993 1992
Deferred tax assets... $ 82.2 $ 114.4
Less: Valuation allowance. (2.2) (3.3)
Deferred tax assets,
net of valuation
allowance 80.0 111.1
Deferred tax liabilities. (259.5) (258.2)
--------- ---------
- -
Deferred Income Taxes.... $ (179.5) $ (147.1)
The valuation allowance is comprised of the
portion of state tax net operating loss
carryforwards expected to expire before they are
utilized and non-deductible expenses incurred with
the previous merger of wholly-owned subsidiaries.
Major types of deferred tax assets are:
reserves not yet deducted for tax purposes ($64.0
million) and safe harbor leases ($11.8 million).
Major types of deferred tax liabilities are:
accelerated depreciation ($206.2 million), land
basis differences ($10.3 million) and debt marked
to market ($2.1 million).
The Company and the Railroad have a tax
sharing agreement whereby the Railroad's federal
tax liability and combined state tax liabilities
(if any) are the lesser of (i) the Railroad's
separate consolidated liability as if it were not
a member of the Company's consolidated group or
(ii) the Company's consolidated liability computed
without regard to any other subsidiaries of the
Company. The Company and its financing/leasing
subsidiaries have a tax sharing agreement whereby
the subsidiary's federal income tax and state
income tax liabilities are determined on a
consolidated, or combined state income tax basis
as if it were not a member of the Company's
consolidated group, with no benefit for prior net
operating losses or credit carryovers from prior
years.
11. COMMON STOCK AND DIVIDENDS
The Company is authorized to issue
65,000,000 shares of Common Stock, par value
$.001. At December 31, 1993, there were
42,614,566 shares of Common Stock outstanding.
Each holder of Common Stock is entitled to one
vote per share in the election of directors and on
all matters submitted to a vote of stockholders.
Subject to the rights and preferences of
redeemable preferred stock, if any, each share of
Common Stock is entitled to receive dividends as
may be declared by the Board of Directors out of
funds legally available and to share ratably in
all assets available for distribution to
stockholders upon dissolution or liquidation. No
holder of Common Stock has any preemptive right to
subscribe for any securities of the Company. No
shares of preferred stock were outstanding at
December 31, 1993 and 1992.
On February 4, 1992, the Board of Directors
authorized a three-for-two stock split on Common
Stock. The split was in the form of a stock
dividend and was paid on February 28, 1992.
Fractional shares were settled for cash. A total
of 14,132,058 shares were issued from authorized
but unissued shares. In 1992, the Board of
Directors initiated a policy of quarterly
dividends on the Common Stock of the Company.
Future dividends may be dependent on the ability
of the Railroad to pay dividends to the Company.
Certain covenants of the Railroad's debt restrict
the level of dividends it may pay to the Company.
At December 31, 1993, approximately $76 million
was free of such restrictions.
The Company awarded 25,000 shares and
150,000 shares of restricted stock to eligible
employees of the Railroad in 1993 and 1992,
respectively. No cash payments are required by
the individuals. Shares awarded under the plans
may not be sold, transferred, or used as
collateral by the holders until the shares awarded
become free of the restrictions. Restrictions
lapse over a four-year period. All shares still
subject to restrictions will be forfeited and
returned to the plan if the employee's
relationship with the Railroad is terminated. A
total of 13,500 shares were forfeited in 1993. If
the employee becomes disabled, or dies, or a
change in control occurs during the vesting
period, the restrictions will lapse at that time.
The compensation expense resulting from the award
of restricted stock is valued at the closing
market price of the Company's Common Stock on the
date of the award, recorded as a reduction of
Stockholders' Equity, and charged to expense
evenly over the service period. Compensation
expense was $.8 million and $.5 million in 1993
and 1992, respectively.
In 1992, the Company awarded 200,000 shares
to Mr. Moyers as well. Of this amount, 133,000
were vested upon his retirement in 1993. The
remaining 67,000 were forfeited in 1993 when Mr.
Moyers was employed by another Class I railroad.
See Note 15.
12. COMPENSATION AND STOCK OPTIONS
Stock Purchase Plan. Under the Company's
1990 Stock Purchase Plan (the "Stock Plan"),
736,380 shares (post split) of Common Stock were
made available from shares held by Prospect for
sale to key employees and officers of the Company
other than Mr. Moyers, as determined by the
Company's Board of Directors. Shares so awarded
were sold at a price of $.10 per share (post
split)(which was Prospect's approximate original
per share cost for such stock as adjusted for the
3 for 2 stock split in February 1992). In
general, shares awarded pursuant to the Stock
Purchase Plan are restricted for a period of four
years and vest at a rate of 25% per year. At
December 31, 1993, only 130,313 shares are
restricted. All shares will vest prior to June
30, 1994, with 126,563 vesting on or before April
1, 1994. Unvested shares are subject to
repurchase by the Company at a price of $.267
per share upon the termination of the
participant's employment, other than as a result
of death or permanent disability. The unawarded
shares (63,270) and those repurchased in 1991 are
now classified as Treasury Stock.
Long-Term Incentive Plan. Under the
Company's 1990 Long-Term Incentive Plan (the
"Long-Term Incentive Plan") shares of Common Stock
are available for issuance upon the exercise of
incentive options that may be awarded by the
Compensation Committee to directors and selected
salaried employees of the Company and its
affiliates and to certain other individuals who
possess the potential to contribute to the future
success of the Company. The Compensation
Committee also has the authority under the Long-
Term Incentive Plan to award stock appreciation
rights, restricted stock and restricted stock
units, dividend equivalents and other stock-based
awards, and to determine the consideration to be
paid by the participant for any awards, any limits
on transfer of awards, and, within certain limits,
other terms of awards. In the case of options
(other than options granted to directors who are
not full-time employees of the Company ("Outside
Directors"), as described below) granted under the
Long-Term Incentive Plan, the Committee has the
power to determine the exercise price of the
option (which cannot be less than 50% of the fair
market value on the date of grant of the shares
subject to the option), the term of the option,
the time and method of exercise and whether the
options are intended to qualify as "incentive
stock options" pursuant to Section 422A of the
Internal Revenue Code.
Outside Directors of the Company also
participate in the Long-Term Incentive Plan and
are granted an option to purchase 15,000 shares of
Common Stock upon initial appointment or election.
In addition, Outside Directors as of November 1990
were granted options to purchase an additional
10,000 shares, which grants were approved at the
1991 Annual Meeting of Stockholders. Also on the
date of each Annual Meeting, each Outside Director
of IC who serves immediately prior to such date
and who will continue to serve after such date
(whether as a result of such director's re-
election or by reason of the continuation of such
director's term), will be granted an option to
purchase 1,500 shares of Common Stock. Options
granted to Outside Directors entitle such persons
to purchase Common Stock at the fair market value
of such Common Stock on the date the option was
granted. Options held by Outside Directors expire
10 years from the date of grant, or, if earlier,
one year following termination of service as a
director for any reason other than death or
disability. Such options become exercisable in
full six months after their date of grant.
At the 1993 Annual Meeting, the stockholders
authorized an additional one million shares to be
available for issuance under the Long-Term
Incentive Plan.
The following table summarizes the shares
available for award under the Incentive Plan for
the year ended December 31, 1993:
Reserved shares at
beginning of year........... 904,000
Options exercised............ (49,500)
Restricted stock awarded..... (25,000) (74,500)
-------- --------
Subtotal.................. 829,500
Increase in authorized shares. 1,000,000
Shares of restricted stock
forfeited.................... 80,500
Change in options outstanding
during year.................. (482,500)
---------
Shares available for award
at end of year............... 1,427,500
<PAGE>
The following table summarizes changes in
shares under option for the year ended December
31, 1993:
<TABLE>
<CAPTION>
Option
Outside Price Range
Directors Employees Total Per Share
--------- --------- ----- ------------------<S>
<C> <C> <C> <C>
Outstanding options
- - beginning of year..... 199,500 - 199,500 $ 8.000 to $22.750
Options - Granted....... 12,000 520,000 532,000 $24.875 to $31.250
- Exercised..... (49,500) - (49,500) $ 8.000 to $27.750
- Terminated.... - - -
------- ------- -------
Change during the year.. (37,500) 520,000 482,500
------- ------- -------
Outstanding options
- end of year.......... 162,000 520,000 682,000
</TABLE>
Last Date Exercisable 4-21-2003 11-23-2003
The Compensation Committee awarded stock
options to employees under the Long-Term Incentive
Plan for the first time in 1993. Awards, all at
fair market value, vest ratably over four years
and expire 10 years from date of grant.
In 1993, Outside Directors exercised 7,500
options at $12.00 per share when the market price
was $25.625 per share, 7,500 options at $12.00 per
share when the market price was $27.875 per share
and a total of 34,500 options at prices ranging
from $8.000 per share to $27.750 per share when
the market price was approximately $33.00 per
share.
See Notes 11 and 15 for a discussion of the
restricted stock issued under the Long-Term
Incentive Plan.
13. CONTINGENCIES, COMMITMENTS AND CONCENTRATION
OF RISKS
The Company has unconditionally guaranteed
its finance subsidiary's $32.1 million
obligations.
The Company is self-insured for the first $5
million of each loss. The Company carries $295
million of liability insurance per occurrence,
subject to an annual cap of $370 million in the
aggregate for all losses. This coverage is
considered by the Company's management to be
adequate in light of the Company's safety record
and claims experience.
As of December 31, 1993, the Company had
$4.0 million of letters of credit outstanding as
collateral primarily for surety bonds executed on
behalf of the Company. Such letters of credit
expire in 1994 and are automatically renewable for
one year. The letters of credit reduced the
maximum amount that could be borrowed under the
Revolver (see Note 8).
The Company has guaranteed repayment of
certain indebtedness of a jointly owned company
aggregating $7.8 million. The Company's primary
share is $1.0 million; the remainder is a primary
obligation of other unrelated owner companies.
There are various regulatory proceedings,
claims and litigation pending against the Company.
While the ultimate amount of liability that
may result cannot be determined, in the opinion of
the Company's management, based on present
information, adequate provisions for liabilities
have been recorded. See "Management's Discussion
and Analysis - Other" for a discussion of
environmental matters.
14. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL
INSTRUMENTS
The following methods and assumptions were
used to estimate the fair value of each class of
financial instruments for which it is practicable
to estimate that value:
Cash and temporary cash investments. The
carrying amount approximates fair value because of
the short maturity of those instruments.
Investments. The Company has investments of
$10.3 million in 1993 and $11.1 million in 1992
for which there are no quoted market prices.
These investments are in joint railroad
facilities, railroad terminal associations,
switching railroads and other transportation
companies. For these investments, the carrying
amount is a reasonable estimate of fair value.
The Company's remaining investments ($5.4 million
in 1993 and $3.9 million in 1992) are accounted
for by the equity method.
Long-term debt. The fair value of the
Company's long-term debt is estimated based on the
quoted market prices for the same or similar
issues or on the current rates offered to the
Company for debt of the same remaining maturities.
Fuel hedge agreements. The fair value of
fuel hedging agreements is the estimated amount
that the Company would receive or pay to terminate
the agreements as of year end, taking into account
the current credit worthiness of the agreement
counterparties. At December 31, 1993 and 1992,
the fair value was a liability of $4.6 million and
less than $.1 million, respectively.
The estimated fair values of the Company's
financial instruments at December 31, are as
follows ($ in millions):
<TABLE>
<CAPTION> 1993 1992
--------------------- --------------------
<S> <C> <C> <C> <C>
Carrying Fair Carrying Fair
Amount Value Amount Value
Cash and temporary cash investments $ 10.7 $ 10.7 $ 34.6 $ 34.6
Investments........................ 10.3 10.3 11.1 11.1
Debt............................... (384.6) (406.0) (380.0) (430.1)
</TABLE>
15. SPECIAL CHARGE
In 1992, the Company recorded a pretax
special charge of $8.9 million as part of
operating expense. The special charge reduced Net
Income by $5.9 million or $.13 per share.
The special charge consisted of $7 million
for various costs associated with the retirement
of Mr. Moyers and the related organizational
changes. The costs associated with Mr. Moyers'
retirement include the present value of his
pension, accelerated vesting of a portion of his
restricted stock award and certain costs of a non-
competition agreement. The remaining $1.9 million
was for the disposition costs of railcars and a
building and its adjacent land.
<PAGE>
16. SELECTED QUARTERLY FINANCIAL DATA -
(UNAUDITED)($ IN MILLIONS, EXCEPT SHARES
DATA:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
1993 QUARTER QUARTER QUARTER QUARTER(a)
- ---- ------- ------- ------- ---------
<S> <C> <C> <C> <C>
Revenues...................... $142.7 $132.1 $147.4 $142.5
Operating income.............. 46.4 38.3 46.4 48.4
Income before extraordinary
item and cumulative effect
of changes in accounting
principles................... 24.0 19.9 21.5 26.3
Net income (loss)............. 23.9 (3.5) 21.5 26.3
Income per share:
Before extraordinary item
and cumulative effect...... $ .56 $ .47 $ .50 $ .61
Extraordinary item.......... - (.55) - -
Cumulative effect........... - - - -
------ ------ ------ ------
Net income (loss) per share. $ .56 $ (.08) $ .50 $ .61
1992
Revenues...................... $138.7 $129.9 $131.4 $147.4
Operating income.............. 42.6 36.7 36.5 35.7
Income before cumulative
effect of change in
accounting principle......... 21.1 16.9 17.6 16.9
Net income.................... 44.5 16.9 17.6 16.9
Income per share:
Before cumulative effect.... $ .50 $ .40 $ .41 $ .39
Cumulative effect........... .55 - - -
------ ------ ------ ------
Net income per share........ $ 1.05 $ .40 $ .41 $ .39
1991
Revenues...................... $138.0 $131.3 $139.8 $140.6
Operating income.............. 36.8 35.1 34.6 39.1
Net income.................... 15.3 13.7 17.6 18.8
Net income per share.......... $ .43 $ .35 $ .41 $ .45
</TABLE>
Per share amounts in 1991 have been restated
to reflect the 3-for-2 stock split that occurred
in February 1992.
- -----------------------
(a) Includes the special charge recorded in
the fourth quarter of 1992, see Note 15.<PAGE>
ILLINOIS CENTRAL CORPORATION
AND SUBSIDIARIES
--------------------
-----------------------------
F O R M 10-K
FINANCIAL STATEMENT SCHEDULES
SUBMITTED IN RESPONSE TO ITEM 14(a)
<PAGE>
ILLINOIS CENTRAL CORPORATION
AND SUBSIDIARIES
-------------
-------------
I N D E X
T O
FINANCIAL STATEMENT SCHEDULES
SUBMITTED IN RESPONSE TO ITEM 14(a)
Schedules for the three years ended
December 31, 1993:
II-Amounts receivable from related parties,
and underwriters, promoters and
employees other than related parties... F-26
III-Condensed financial information........ F-27
V-Property, plant and equipment.......... F-30
VI-Accumulated depreciation and amortization
of property, plant and equipment....... F-31
VII-Guarantees of securities of other
issuers............................... F-32
VIII-Valuation and qualifying accounts...... F-33
Pursuant to Rule 5.04 of General Rules of
Regulation S-X, all other schedules are omitted
because they are not required or because the
required information is set forth in the financial
statements or related notes thereto.
-------------
-------------
<PAGE>
ILLINOIS CENTRAL CORPORATION
AND SUBSIDIARIES
SCHEDULE II--AMOUNTS RECEIVABLE FROM RELATED
PARTIES, AND UNDERWRITERS, PROMOTERS, AND
EMPLOYEES OTHER THAN RELATED PARTIES
($ in millions)
Balance
at end
of
year
Balance -----------
at begin- Non-
Name of ning of Addi- Deduc- Curr- Curr-
Debtor year tions tions ent ent
- ------ --------- ----- ------ ---- -----
E. L. Moyers $.7 - - $.2 $.5
- -----------------
Pursuant to a four-year note dated May 15,
1992, bearing interest at the rate of 7.1%, Mr.
Moyers became indebted to the Company in the
principal amount of $1,000,000. In connection
with Mr. Moyers' decision to retire and resign
from the Board, Mr. Moyers repaid $238,500 of
principal and interest and the Compensation
Committee forgave an additional $200,000 principal
amount of the loan. The May 15, 1992 note was
cancelled in favor of a new note (the "Note") to
be repaid in four annual installments of principal
and interest, commencing on February 18, 1994.
The Note provides that unpaid principal, including
any accrued interest thereon, is to be accelerated
in the event of a breach of the non-competition
covenant contained in Mr. Moyers' consulting and
non-competition agreement with the Company. The
Note bears interest at a rate of 6.22% per annum
and is prepayable in whole or in part at any time.
Any unpaid principal, including any accrued
interest thereon, is to be forgiven in the event
of Mr. Moyers' death or disability.
<PAGE>
<TABLE>
ILLINOIS CENTRAL CORPORATION
AND SUBSIDIARIES
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION
Illinois Central Corporation--Parent Company
Condensed Statements of Income
($ in millions, except share data)
<CAPTION>
Years Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Operating expenses.................. $ 0.2 $ 0.3 $ 0.3
-------- -------- --------
Operating (loss).................... (0.2) (0.3) (0.3)
Other income (expense), net......... (1.3) (1.6) (1.3)
Interest income..................... - 0.4 1.0
-------- -------- --------
Income (loss) before taxes and
earnings of subsidiaries.......... (1.5) (1.5) (0.6)
Earnings of subsidiaries............ 69.1 97.0 65.8
Provision (benefit) for income taxes (0.6) (0.4) (0.2)
-------- -------- --------
Net income................... $ 68.2 $ 95.9 $ 65.4
-------- -------- --------
Income per share (a)......... $ 1.59 $ 2.25 $ 1.64
======== ======== ========
Weighted average number of shares
outstanding (thousands) (a)..... 42,679.7 42,600.1 39,830.2
</TABLE>
The Notes to Consolidated Financial Statements
beginning on page F-6 are an integral part of
this schedule.
(a) Reflects 3-for-2 stock split in February
1992.
<PAGE>
<TABLE>
ILLINOIS CENTRAL CORPORATION
AND SUBSIDIARIES
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION
Illinois Central Corporation--Parent Company
Condensed Balance Sheets
($ in millions)
<CAPTION>
December 31,
1993 1992
ASSETS
<S> <C> <C>
Current assets:
Cash and temporary cash investments.............. $ 1.3 $ 9.0
Receivables...................................... 16.0 7.5
Other current assets............................. 0.1 -
------- -------
Total current assets.......................... 17.4 16.5
Investments in subsidiaries......................... 375.1 332.1
Other assets........................................ 0.5 -
------- -------
Total assets.................................. $ 393.0 $ 348.6
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................. $ 6.3 $ 4.1
Dividends payable................................ 8.9 6.4
Income taxes payable............................. (1.9) (1.2)
Taxes other than income taxes.................... - 0.1
------- -------
Total current liabilities..................... 13.3 9.4
Deferred income taxes............................... 0.7 0.4
Other liabilities and reserves...................... 1.6 -
Contingencies and commitments
Stockholders' equity (a):
Common stock, par value $.001 authorized 65,000,000
shares: 42,837,064 shares issued and 42,614,566
shares outstanding............................. - -
Additional paid-in capital....................... 164.2 160.9
Retained income.................................. 216.5 177.9
Treasury stock (222,498 shares).................. (3.3) -
------- -------
Total stockholders' equity.................... 377.4 338.8
------- -------
Total liabilities and stockholders' equity.... $ 393.0 $ 348.6
======= =======
</TABLE>
The Notes to Consolidated Financial Statements
beginning on page F-6 are an integral part of
this schedule.
(a) Reflects 3-for-2 stock split in February
1992.
<PAGE>
<TABLE>
ILLINOIS CENTRAL CORPORATION
AND SUBSIDIARIES
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION
Illinois Central Corporation--Parent Company
Condensed Statements of Cash Flows
($ in millions)
<CAPTION>
Years Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................... $ 68.2 $ 95.9 $ 65.4
Reconciliation of net income to net cash
provided by operating activities:
Deferred income taxes..................... 0.3 0.3 (0.1)
Earnings of subsidiaries.................. (69.1) (97.0) (65.8)
Cash changes in working capital:
Receivables............................ 0.1 (0.4) (0.5)
Other current assets................... (0.1) - -
Accounts payable....................... 2.2 1.4 2.6
Income taxes payable................... (0.7) (1.0) (0.1)
Taxes other than income taxes.......... (0.1) 0.1 -
Changes in other assets................... (0.5) 0.1 (0.1)
Changes in other liabilities and reserves. 1.1 - -
------- ------- -------
Net cash provided by (used for)
operatint activities.................. 1.4 (0.6) 1.4
Cash flows from investing activities:
Capital contribution to subsidiaries......... (9.9) - (50.1)
Dividends received from subsidiaries......... 27.4 6.4 -
------- ------- -------
Net cash provided by (used for)
investint activities.................. 17.5 6.4 (50.1)
Cash flows from financing activities:
Proceeds from stock sale..................... - - 63.1
Dividends paid............................... (27.1) (14.8) -
Proceeds from exercise of stock options and
warrants................................... 0.5 0.2 3.4
------- ------- -------
Net cash provided by (used for)
financing activities................. (26.6) (14.6) 66.5
------- ------- -------
Changes in cash and temporary cash investments.. (7.7) (8.8) 17.8
Cash and temporary cash investments at beginning
of period..................................... 9.0 17.8 -
------- ------- -------
Cash and temporary cash investments at end of
period........................................ $ 1.3 $ 9.0 $ 17.8
======= ======= =======
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest (net of amount capitalized)...... $ - $ - $ -
======= ======= =======
Income taxes.......................... $ - $ - $ -
======= ======= =======
</TABLE>
The Notes to Consolidated Financial Statements
beginning on page F-6 are an integral part of
this schedule.
<PAGE>
<TABLE>
ILLINOIS CENTRAL CORPORATION
AND SUBSIDIARIES
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
($ in millions)
Year Ended December 31, 1993
<CAPTION>
Other
Balance at Charges Balance
Beginning Additions Debit (Credit) At End
Classification Of Year At Cost Retirements (1) Of Year
<S> <C> <C> <C> <C>
Road and structures,
including land........... $ 909.5 $ 50.3 $ 11.9 $ - $ 947.9
Equipment................... 75.2 46.1 4.5 1.3 118.1
Other, principally land..... 40.6 - 0.2 - 40.4
------- ------- ------- ------- -------
Total................. $1,025.3 $ 96.4 $ 16.6 $ 1.3 $1,106.4
======= ======= ======= ======= =======
Year Ended December 31, 1992
Other
Balance at Charges Balance
Beginning Additions Debit (Credit) At End
Classification Of Year At Cost Retirements (2) Of Year
Road and structures,
including land........... $ 864.9 $ 46.4 $ 8.0 $ 6.2 $ 909.5
Equipment................... 70.0 4.4 2.9 3.7 75.2
Other, principally land..... 40.7 - 0.1 - 40.6
------- ------- ------- ------- -------
Total................. $ 975.6 $ 50.8 $ 11.0 $ 9.9 $1,025.3
======= ======= ======= ======= =======
Year Ended December 31, 1991
Balance at Other Balance
Beginning Additions Charges At End
Classification Of Year At Cost Retirements Debit (Credit) Of Year
Road and structures,
including land........... $ 846.9 $ 36.3 $ 18.3 $ - $ 864.9
Equipment................... 57.8 13.6 1.4 - 70.0
Other, principally land..... 40.9 - 0.2 - 40.7
------- ------- ------- ------- -------
Total................. $ 945.6 $ 49.9 $ 19.9 $ - $ 975.6
======= ======= ======= ======= =======
</TABLE>
(1) Reclassification of properties from "Other
Assets."
(2) Reclassification of properties from "Assets
Held For Disposition."
<PAGE>
<TABLE>
ILLINOIS CENTRAL CORPORATION
AND SUBSIDIARIES
SCHEDULE VI -- ACCUMULATED DEPRECIATION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
($ in millions)
Year Ended December 31, 1993
<CAPTION>
Additions
Balance at Charged Other Balance
Beginning To Cost And Charges At End
Classification Of Year Expenses Retirements Debit (Credit) OfYear
<S> <C> <C> <C> <C> <C>
Road and structures,
including land............ $ 10.0 $ 18.9 $ 16.5 $ - $ 12.4
Equipment.................... 5.8 4.1 1.4 - 8.5
Other, principally land...... - - - - -
------ ----- ------ ------- ------
Total.................. $ 15.8 $ 23.0 $ 17.9 $ - $ 20.9
====== ===== ====== ======= ======
Year Ended December 31, 1992
Additions
Balance at Charged Other Balance
Beginning To Cost And Charges At End
Classification Of Year Expenses Retirements Debit (Credit) OfYear
Road and structures,
including land............ $ 3.7 $ 18.2 $ 11.9 $ - $ 10.0
Equipment.................... 3.6 3.2 1.0 - 5.8
Other, principally land...... - - - - -
------ ----- ------ ------- ------
Total.................. $ 7.3 $ 21.4 $ 12.9 $ - $ 15.8
====== ===== ====== ======= ======
Year Ended December 31, 1991
Additions
Balance at Charged Other Balance
Beginning To Cost And Charges At End
Classification Of Year Expenses Retirements Debit (Credit) OfYear
Road and structures,
including land............ $ 4.2 $ 17.5 $ 18.0 $ - $ 3.7
Equipment.................... 1.8 2.5 0.7 - 3.6
Other, principally land...... - - - - -
------ ----- ------ ------- ------
Total.................. $ 6.0 $ 20.0 $ 18.7 $ - $ 7.3
====== ===== ====== ======= ======
</TABLE>
<PAGE>
ILLINOIS CENTRAL CORPORATION
AND SUBSIDIARIES
SCHEDULE VII--GUARANTEES OF SECURITIES OF OTHER
ISSUERS
AS OF DECEMBER 31, 1993, 1992 AND 1991
($ IN MILLIONS)
Column A Column B Column C Column D
- -------- -------- -------- --------
Name of Title of Total Amount Nature of
Issuer of Issue of Guaranteed Guarantee
Securities Class of and
Guaranteed Securities Outstanding
by Person Guaranteed
for Which
Statement
is Filed
- ----------- ---------- ------------ --------
Terminal Refunding $7.8 Principal
Railroad and and
Association Improvement annual
of St. Mortgage 4% interest
Louis Bonds,
St. Louis Series "C",
due 7/1/2019
<PAGE>
<TABLE>
ILLINOIS CENTRAL CORPORATION
AND SUBSIDIARIES
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
($ in millions)
<CAPTION>
Year Ended December 31, 1993
Balance at Additions Payments Balance
Beginning Charged And At End
Classification Of Year To Expense (Charges) Of Year
<S> <C> <C> <C> <C>
Redundancy and guarantee reserves... $ 51.6 $ 1.8 $ 9.8 $ 43.6
Casualty and other reserves......... 67.4 18.8 23.9 62.3
Bad debt reserve.................... 2.6 2.0 1.5 3.1
Taxes............................... 3.3 - 1.1 2.2
------ ------ ------ ------
Total......................... $ 124.9 $ 22.6 $ 36.6 $ 110.9
====== ====== ====== ======
Year Ended December 31, 1992
Balance at Additions Payments Balance
Beginning Charged And At End
Classification Of Year To Expense (Charges) Of Year
Redundancy and guarantee reserves... $ 61.3 $ 2.1 $ 11.8 $ 51.6
Casualty and other reserves......... 60.4 21.3 14.3 67.4
Bad debt reserve.................... 5.1 1.9 4.4 2.6
Taxes............................... - 3.7 0.4 3.3
------ ------ ------ ------
Total......................... $ 126.8 $ 29.0 $ 30.9 $ 124.9
====== ====== ====== ======
Year Ended December 31, 1991
Balance at Additions Payments Balance
Beginning Charged And At End
Classification Of Year To Expense (Charges) Of Year
Redundancy and guarantee reserves... $ 84.0 $ - $ 22.7 $ 61.3
Casualty and other reserves......... 61.2 26.4 27.2 60.4
Bad debt reserve.................... 5.3 1.9 2.1 5.1
------ ------ ------ ------
Total......................... $ 150.5 $ 28.3 $ 52.0 $ 126.8
====== ====== ====== ======
</TABLE>
<PAGE>
ILLINOIS CENTRAL CORPORATION
AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Sequential
No. Descriptions Page No.
- ------- ------------ ----------
3.1 Articles of Incorporation of
Illinois Central Railroad
Company, as amended.
(Incorporated by reference to
Exhibit 3.1 to the
Registration Statement of
Illinois Central Railroad
Company on Form S-1. (SEC File
No. 33-29269))
3.2 By-Laws of Illinois Central
Railroad Company, as amended.
(Incorporated by reference to
Exhibit 3.2 to the
Registration Statement of
Illinois Central Railroad
Company on Form S-1. (SEC File
No. 33-29269))
3.3 Restated Articles of
Incorporation of Illinois
Central Corporation.
(Incorporated by reference to
Exhibit 3.1 to the Quarterly
Report of the Illinois Central
Corporation on Form 10-Q for
the three months ended
September 30, 1991. (SEC File
No. 1-10720))
3.4 By-Laws of Illinois Central
Corporation, as amended.
(Incorporated by reference to
Exhibit 3.4 to the
Registration Statement of
Illinois Central Corporation
and Illinois Central Railroad
Company on Form S-1. (SEC File
Nos. 33-36321 and 33-36321-
01))
3.5 Certificate of Retirement of
Illinois Central Corporation
(Incorporated by reference to
Exhibit 3.3 to the
Registration Statement of
Illinois Central Corporation and
Illinois Central Railroad
Company on Form S-1, as
amended. (SEC File No. 33-
40696 and Post-Effective
Amendments to Registration
Statement Nos. 33-36321 and
33-36321-01))
3.6 Certificate of Elimination of
Illinois Central Corporation.
(Incorporated by reference to
Exhibit 3.2 to the Quarterly
Report of the Illinois Central
Corporation on Form 10-Q for
the three months ended
September 30, 1991. (SEC File
No. 1-10720))
- --------------------
* Used herein to identify management contracts
or compensation plans or arrangements as required
by Item 14 of Form 10-K.
<PAGE>
ILLINOIS CENTRAL CORPORATION
AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Sequential
No. Descriptions Page No.
- ------- ------------ ----------
4.1 Form of 14-1/8% Senior
Subordinated Debenture
Indenture dated as of
September 15, 1989 (the
"Senior Subordinated Debenture
Indenture") between Illinois
Central Railroad Company and
United States Trust Company of
New York, Trustee (including
the form of 14-1/8% Senior
Subordinated Debenture
included as Exhibit A
therein). (Incorporated by
reference to Exhibit 4.1 to
the Registration Statement of
Illinois Central Railroad
Company on Form S-1, as
amended. (SEC File No. 33-
29269))
4.2 Restated Articles of
Incorporation of Illinois
Central Corporation (included
in Exhibit 3.3)
4.3 Form of the Amended and
Restated Revolving Credit and
Term Loan Agreement dated as
of September 22, 1989, and
amended and restated as of
July 23, 1991, among Illinois
Central Railroad Company and
the Banks named therein
(including the Form of the
Restated Revolving Credit
Note, the Form of the Restated
Term Note, the Form of the
Intercreditor Agreement, the
Form of the Security Agreement
and the Form of the Bond
Pledge Agreement included as
Exhibits A, B, G, H and I,
respectively, therein).
(Incorporated by reference to
Exhibit 4.1 to the Quarterly
Report of Illinois Central
Railroad Company on Form 10-Q
for the three months ended
September 30, 1991. (SEC File
No. 1-7092))
4.4 Amendment No. 1 dated as of
February 28, 1992, to the
Amended and Restated Revolving
Credit and Term Loan Agreement
dated as of September 22,
1989, and amended and restated
as of July 23, 1991, among
Illinois Central Railroad
Company and the Banks named
therein. (Incorporated by
reference to Exhibit 4.3 to
the Annual Report on Form 10-K
for the year ended December
31, 1991, for the Illinois
Central Railroad Company filed
March 12, 1992. (SEC File No.
1-7092))
4.5 Form of Guaranty dated as of
September 22, 1989, and
amended and restated as of
July 23, 1991, among Illinois
Central Corporation and the
Banks named therein that are
or may become parties to the
Amended and Restated Revolving
Credit and Term Loan Agreement
dated as of September 22,
1989, and amended and restated
as of July 23, 1991, among the
Illinois Central Railroad
Company and the Banks named
therein. (Incorporated by
reference to Exhibit 4.3 to
the Quarterly Report of
Illinois Central Corporation
on Form 10-Q for the three
months ended September 30,
1991. (SEC File No. 1-10720))
4.6 Form of Pledge Agreement dated
as of September 22, 1989, and
amended and restated as of
July 23, 1991, among Illinois
Central Corporation and the
Banks named therein that are
or may become parties to the
Amended and Restated Revolving
Credit and Term Loan Agreement
dated as of amended and restated
as of July 23, 1991, among the
Illinois Central Railroad
Company and the Banks named
therein and the Senior Note
Purchasers that are parties to
the Note Purchase Agreement
dated as of July 23, 1991.
(Incorporated by reference to
Exhibit 4.4 to the Quarterly
Report of Illinois Central
Corporation on Form 10-Q for
the three months ended
September 30, 1991. (SEC File
No. 1-10720))
4.7 Form Supplemental Indenture
dated July 23, 1991, between
Illinois Central Railroad
Company and Morgan Guaranty
Trust Company of New York
relating to First Mortgage
Adjustable Rate Bonds, Series
M. (Incorporated by reference
to Exhibit 4.2 to the
Quarterly Report of Illinois
Central Railroad Company on
Form 10-Q for the three months
ended September 30, 1991. (SEC
File No. 1-7092))
4.8 Form of Note Purchase
Agreement dated as of July 23,
1991, among Illinois Central
Railroad Company, as issuer,
and Illinois Central
Corporation, as guarantor, for
10.02% Guaranteed Senior
Secured Series A Notes due
1999 and for 10.4% Guaranteed
Senior Secured Series B Notes
due 2001 (including the Form
of Series A Note and Series B
Note included as Exhibits A-1
and A-2, respectively,
therein). (Incorporated by
reference to Exhibit 4.3 to
the Quarterly Report of the
Illinois Central Railroad
Company on Form 10-Q for the
three months ended September
30, 1991. (SEC File No.
1-7092))
4.9 Form of the Loan and Security
Agreement dated as of December
6, 1991, between IC Leasing
Corporation I and Hitachi
Credit America Corp.
(including the Form of the
Initial Funding Credit Note,
the Form of the Refurbishing
Credit Note, the Form of
Assignment of Lease and
Agreement, the Form of the
Pledge Agreement between IC
Financial Services Corporation
and Hitachi Credit America
Corp. and the Form of the
Guaranty Agreement between
Illinois Central Corporation
and Hitachi Credit America
Corp. included as Exhibits D,
E, F, G and H, respectively,
therein). (Incorporated by
reference to Exhibit 4.9 to
the Annual Report on Form 10-K
for the year ended December
31, 1991, for the Illinois
Central Corporation filed
March 12, 1992. (SEC File No.
1-10720))
4.10 Form of the Trust Agreement
dated as of March 30, 1993,
between IC Leasing Corporation
II and Wilmington Trust
Company. (Incorporated by
reference to Exhibit 4.10 to
the Current Report of Illinois
Central Corporation on Form 8-
K dated May 7, 1993. (SEC
File No. 1-10720))
4.11 Form of the Security Agreement
and Mortgage dated as of March
30, 1993, between IC Leasing
Trust II and UNUM Life
Insurance Company of America
(Including the Form of the
Promissory Note between IC
Leasing Trust II and UNUM
Life Insurance Company of
America included as Exhibit A,
therein). (Incorporated by
reference to Exhibit 4.11 to
the Current Report of Illinois
Central Corporation on Form 8-
K dated May 7, 1993. (SEC
File No. 1-10720))
4.12 Assignment of Lease and
Conveyance dated March 30,
1993, between IC Leasing
Corporation II and IC Leasing
Trust II. (Incorporated by
reference to Exhibit 4.12 to
the Current Report of Illinois
Central Corporation on Form 8-
K dated May 7, 1993. (SEC
File No. 1-10720))
4.13 Assignment of Lease and
Conveyance dated March 30,
1993, between IC Leasing Trust
II and UNUM Life Insurance
Company of America.
(Incorporated by reference to
Exhibit 4.13 to the Current
Report of Illinois Central
Corporation on Form 8-K dated
May 7, 1993. (SEC File No. 1-
10720))
4.14 Form of the Amended and
Restated Demand Promissory
Note between IC Leasing
Corporation III and The First
National Bank of Boston dated
December 3, 1993, and amended
and restated as of
January 3, 1994.
4.15 Form of the Guaranty dated as
of December 3, 1993, between
Illinois Central Corporation
and The First National Bank of
Boston.
<PAGE>
ILLINOIS CENTRAL CORPORATION
AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Sequential
No. Descriptions Page No.
- ------- ------------ ----------
4.16 Security Agreement dated as of
December 3, 1993, between IC
Leasing Corporation III and
The First National Bank of
Boston and Amendment No. 1 to
the Security Agreement dated
as of January 3, 1994.
4.17 Form of the Revolving Credit
Agreement dated as of October
27, 1993, among Illinois
Central Railroad Company and
the Banks named therein
(including the Form of the
Note, the Form of the
Competitive Bid Request, Form
of the Notice of Competitive
Bid Request, Form of the
Competitive Bid and Form of
the Competitive Bid
Accept/Reject Letter included
as Exhibits A, B-1, B-2, B-3
and B-4, respectively,
therein). (Incorporated by
reference to Exhibit 4.8 to
the Annual Report on Form 10-K
for the year ended
December 31, 1993, for
Illinois Central Railroad
Company filed March 16, 1994.
(SEC File No. 1-7092))
4.18 Form of the Amended and
Restated Revolving Credit
Agreement dated as of October
27, 1993, among Illinois
Central Railroad Company and
the Banks named therein
(including the Form of the
Note, the Form of the
Competitive Bid Request, Form
of the Notice of Competitive
Bid Request, Form of the
Competitive Bid and Form of
the Competitive Bid
Accept/Reject Letter included
as Exhibits A, B-1, B-2, B-3
and B-4, respectively,
therein). (Incorporated by
reference to Exhibit 4.8 to
the Annual Report on Form 10-K
for the year ended
December 31, 1993, for
Illinois Central Railroad
Company filed March 16, 1994.
(SEC File No. 1-7092))
ILLINOIS CENTRAL CORPORATION
AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Sequential
No. Descriptions Page No.
- ------- ------------ ----------
4.19 Form of Commercial Paper
Dealer Agreement between
Illinois Central Railroad
Company and Lehman Commercial
Paper, Inc. dated as of
November 19, 1993.
(Incorporated by reference to
Exhibit 4.10 to the Annual
Report on Form 10-K for the
year ended December 31, 1993
for Illinois Central Railroad
Company filed March 16, 1994.
(SEC File No. 1-7092))
4.20 Form of Issuing and Paying
Agency Agreement of the
Illinois Central Railroad
Company related to the
Commercial Paper Program
between Illinois Central
Railroad Company and Bank
America National Trust Company
dated as of November 19, 1993,
(including Exhibit A the Form
of Certificated Commercial
Paper Note included therein).
(Incorporated by reference to
Exhibit 4.11 to the Annual
Report on Form 10-K for the
year ended December 31, 1993
for Illinois Central Railroad
Company filed March 16, 1994.
(SEC File No. 1-7092))
10.1 * Form of supplemental
retirement and savings plan.
(Incorporated by reference to
Exhibit 10C to the
Registration Statement of
Illinois Central
Transportation Co. on Form 10
filed on October 7, 1988, as
amended. (SEC File No. 1-
10085))
<PAGE>
ILLINOIS CENTRAL CORPORATION
AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Sequential
No. Descriptions Page No.
- ------- ------------ ----------
10.2 * Form of management incentive
compensation plan.
(Incorporated by reference to
Exhibit 10D to the
Registration Statement of
Illinois Central
Transportation Co. on Form 10
filed on October 7, 1988, as
amended. (SEC File No. 1-
10085))
10.3 Consolidated Mortgage dated
November 1, 1949 between
Illinois Central Railroad
Company and Guaranty Trust
Company of New York, Trustee,
as amended. (Incorporated by
reference to Exhibit 10.8 to
the Registration Statement of
Illinois Central Railroad
Company on Form S-1, as
amended. (SEC File No. 33-
29269))
10.4 Form of indemnification
agreement dated as of January
29, 1991, between Illinois
Central Corporation and
certain officers and
directors. (Incorporated by
reference to Exhibit 10.9 to
the Annual Report on Form 10-K
for the year ended December
31, 1990, for the Illinois
Central Corporation filed on
April 1, 1991. (SEC File No.
1-10720))
10.5 * Form of IC 1990 Stock Purchase
Plan. (Incorporated by
reference to Exhibit 10.6 to
the Registration Statement of
Illinois Central Corporation
on Form 10 filed on January 5,
1990, as amended. (SEC File
No. 1-10720))
<PAGE>
ILLINOIS CENTRAL CORPORATION
AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Sequential
No. Descriptions Page No.
- ------- ------------ ----------
10.6 * Form of IC Long-Term Incentive
Option Plan. (Incorporated by
reference to Exhibit 10.17 to
the Registration Statement of
Illinois Central Corporation
and Illinois Central Railroad
Company on Form S-1. (SEC
File Nos. 33-36321 and 33-
36321-01))
10.7 * Amendments No. 1 and No. 2 to
the IC Long-Term Incentive
Plan. (Incorporated by
reference to the Proxy
Statement of Illinois Central
Corporation in connection with
its 1992 Annual Meeting of
Stockholders. (SEC File No. 1-
10720))
10.8 Railroad Locomotive Lease
Agreement between IC Leasing
Corporation I and Illinois
Central Railroad Company dated
as of September 5, 1991.
(Incorporated by reference to
Exhibit 10.9 to the Annual
Report on Form 10-K for the
year ended December 31, 1991
for the Illinois Central
Railroad Company filed March
12, 1992. (SEC File No. 1-
7092))
10.9 Railroad Locomotive Lease
Agreement between IC Leasing
Corporation II and Illinois
Central Railroad Company dated
as of January 14, 1993.
(Incorporated by reference to
Exhibit 10.6 to the Annual
Report on Form 10-K for the
year ended December 31, 1992,
for the Illinois Central
Railroad Company filed March
5, 1993. (SEC File No. 1-
7092))
<PAGE>
ILLINOIS CENTRAL CORPORATION
AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Sequential
No. Descriptions Page No.
- ------- ------------ ----------
10.10 * Form of Consulting and Non-
Competition Agreement between
Illinois Central Corporation
and Edward L. Moyers dated as
of February 18, 1993.
(Incorporated by reference to
Exhibit 10.10 to Annual Report
on Form 10-K for the year
ended December 31, 1992, for
the Illinois Central
Corporation filed March 5,
1993. (SEC File No. 1-10720))
10.11 * Form of the Note Agreement
between the Illinois Central
Corporation and Edward L.
Moyers dated February 18,
1993. (Incorporated by
reference to Exhibit 10.11 to
Annual Report on Form 10-K for
the year ended December 31,
1992, for the Illinois Central
Corporation filed March 5,
1993. (SEC File No. 1-
10720))
10.12 * Form of a Supplemental
Retirement Benefit Agreement
dated as of August 20, 1992
between Illinois Central
Corporation and Edward L.
Moyers. (Incorporated by
reference to Exhibit 10.3 to
the Quarterly Report of the
Illinois Central Corporation
on Form 10-Q for the three
month ended September 30,
1992. (SEC File No. 1-10720))
10.13 The Asset Sale Agreement
between Allied Railcar Company
and IC Leasing Corporation III
dated December 3, 1993,
(including the Bill of Sale
Agreement and Assumption of
Liabilities included as
Exhibits C and D,
respectively, therein).
ILLINOIS CENTRAL CORPORATION
AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Sequential
No. Descriptions Page No.
- ------- ------------ ----------
10.15 The Purchase Agreement between
IC Leasing Corporation III and
The First National Bank of
Maryland dated
December 29, 1993.
11 Computation of Income Per
Common Share
(Included at E-9)
21 Subsidiaries of Registrant
(Included at E-10)
24.1 Consent of Arthur Andersen & Co. (A)
---------------------
(A) Included herein but not reproduced.
<PAGE>
<TABLE>
ILLINOIS CENTRAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF INCOME PER COMMON SHARE
($ in millions, except share data)
<CAPTION>
Years Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Income before extraordinary item and
cumulative effect of changes in accounting
principles $ 91.7 $ 72.5 $ 65.4
Extraordinary item, net (23.4) - -
Cumulative effect of changes in accounting
principles (0.1) 23.4 -
---------- ---------- ----------
Net income $ 68.2 $ 95.9 $ 65.4
========== ========== ==========
Calculation of average number
of shares outstanding (1):
Primary:
Weighted average number of common shares
outstanding 42,560,082 42,508,910 39,776,916
Effect of shares issuable under stock
options 119,600 91,197 53,266
---------- ---------- ----------
42,679,682 42,600,107 39,830,182
========== ========== ==========
Fully diluted:
Weighted average number of common shares
outstanding 42,560,082 42,508,910 39,776,916
Effect of shares issuable under stock
options (2) 176,638 101,061 100,339
---------- ---------- ----------
42,736,720 42,609,971 39,877,255
========== ========== ==========
Income per common share:
Primary:
Before extraordinary item and cumulative
effect of changes in accounting
principles $ 2.14 $ 1.70 $ 1.64
Extraordinary item, net (0.55) - -
Cumulative effect of changes in accounting
principles - 0.55 -
---------- ---------- ----------
Net income $ 1.59 $ 2.25 $ 1.64
========== ========== ==========
Fully diluted:
Before extraordinary item and cumulative
effect of changes in accounting
principles $ 2.14 $ 1.70 $ 1.64
Extraordinary item, net (0.55) - -
Cumulative effect of changes in accounting
principles - 0.55 -
---------- ---------- ----------
Net income $ 1.59 $ 2.25 $ 1.64
========== ========== ==========
</TABLE>
(1) Shares for 1991 restated to reflect February
1992 3 for 2 stock split.
(2) Such items are included in primary
calculation. Additional shares represent
difference between average price of Common
Stock for the period and the end of period
price.
Exhibit 4.14
IC LEASING CORPORATION III
AMENDED AND RESTATED DEMAND PROMISSORY NOTE
$21,715,000
Dated as of: December 3, 1993
Amended and Restated as of: January 3, 1994
FOR VALUE RECEIVED, the undersigned, IC
LEASING CORPORATION III, a Nevada corporation
having its principal place of business and chief
executive office at 1077 East Sahara Avenue, Las
Vegas, Nevada 89193 (the "Borrower") hereby
absolutely and unconditionally promises to pay to
the order of THE FIRST NATIONAL BANK OF BOSTON, a
national banking association (hereinafter,
together with its successors in title and assigns,
called the "Bank"), at the Bank's head office at
100 Federal Street, Boston, Massachusetts 02110
(the "Head Office"), ON DEMAND AT ANY TIME, or, if
no demand is made prior thereto, on the Termination
Date (as defined below):
(a) the principal amount of TWENTY ONE
MILLION SEVEN HUNDRED FIFTEEN THOUSAND DOLLARS
($21,715,000), or, if less, the aggregate principal
amount outstanding hereunder on the date of
maturity (whether by demand, stated maturity, or
any earlier termination, by acceleration or
otherwise); and
(b) interest on the principal balance
outstanding hereunder from time to time from the
date hereof through and including the date on which
such principal amount is paid in full at such rates
and at such times as set forth herein.
This Note evidences the obligations of the
Borrower (a) to repay the principal amount of the
Loan made by the Bank to the Borrower hereunder,
(b) to pay interest, as herein provided, on the
principal amount hereof remaining unpaid from time
to time, and (c) to pay a closing fee of $10,000
payable to the Bank on January 3, 1994 (the
"Amendment Date") (which fee, together with the
closing fee of $50,000 paid to the Bank by the
Borrower on December 3, 1993 pursuant to
the terms of the Prior Note (as defined below),
shall be credited to any subsequent closing fee
payable by the Borrower to the Bank in connection
with any refinancing of this Note). Capitalized
terms which are used herein without definition
shall be defined as set forth in Section 8 hereof.
This Note has been issued as a replacement of,
and in exchange for (but does not evidence the
payment or satisfaction of) the Demand Promissory
Note issued by the Borrower to the Bank dated as of
December 3, 1993 (the "Prior Note").
The Borrower hereby agrees with the Bank as
follows:
Section 1. The Loan.
Section 1.1. Interest.
(a) Except as otherwise provided in Section
1.1(c) hereof, the unpaid principal amount of the
Loan shall bear interest from the date hereof to
but excluding the date on which such principal
amount is paid in full, at the following interest
rates: (a) during such periods as all or any
portion of the Loan shall be a Base Rate Amount,
said Base Rate Amount shall bear interest
(computed on the basis of the actual number of days
elapsed over a year of 365 or 366 days) at the rate
per annum equal to the Base Rate in effect from
time to time, and (b) during such periods as all or
any portion of the Loan shall be a Eurodollar Rate
Amount, said Eurodollar Rate Amount shall bear
interest (computed on the basis of the actual
number of days elapsed over a year of 360 days) at
a rate per annum equal to the Eurodollar Rate plus
three quarters of one percent (3/4%). Interest on
Base Rate Amounts and Eurodollar Rate Amounts shall
be due and payable in arrears on each Interest
Payment Date applicable to such Amount except as
otherwise provided in this Note.
(b) Upon notice given by the Borrower to the
Bank (a "Conversion Notice") (a) not later than
10:00 a.m.(Boston time) on the Business Day of any
proposed conversion in the case of any conversion
to a Base Rate Amount, and (b) not later than 11:00
a.m. (Boston time), three Business Days prior to
the date of any proposed conversion or continuation
in the case of any conversion to a Eurodollar Rate
Amount or any continuation of any Eurodollar Rate
Amount, the Borrower may convert, on any Business
Day, any Base Rate Amount or Eurodollar Rate Amount
into another Type of Amount available hereunder, or
continue any Eurodollar Rate Amount for an
additional Interest Period, provided that if any
conversion of a Eurodollar Rate Amount occurs other
than on the last day of the Interest Period
applicable with respect thereto, the Borrower shall
indemnify the Bank against any loss, cost or
expense incurred as result of such conversion in
accordance with the provisions of this Note. Each
such Conversion Notice shall be by telephone or in
writing, and shall specify (i) the date of such
conversion or continuation, (ii) the Types and
amounts of Amounts to be converted or continued,
and (iii) with respect to conversion into
Eurodollar Rate Amounts and continuation of
Eurodollar Rate Amounts, the duration of the
Interest Period(s) with respect thereto. Each
Amount so converted into or continued as a
Eurodollar Rate Amount shall be in an aggregate
principal amount of $5,000,000 or a larger integral
multiple of $1,000,000. If the Borrower shall not
have given notice in accordance with this Section
1.1(b) to continue any Eurodollar Rate Amount into
a subsequent Interest Period (and shall not have
not otherwise have given notice in accordance with
this Section 1.1(b) to convert such Eurodollar Rate
Amount into a Base Rate Amount), such Eurodollar
Rate Amount shall, at the end of the Interest
Period applicable thereto, automatically be
continued into a new Interest Period as a Base Rate
Amount.
(c) Overdue principal and (to the extent
permitted by applicable law) interest on the Loan
and all other overdue amounts payable hereunder
shall bear interest compounded monthly and payable
on demand at a rate per annum equal to 2% above the
Base Rate, as such rate is in effect from time to
time, until such amounts shall be paid in full (to
the extent permitted by law, after as well as
before judgment).
Section 1.2. Repayment and Prepayments.
(a) Upon demand by the holder hereof or, if
no demand is made prior thereto, on the Termination
Date, there shall become absolutely due and payable
by the Borrower hereunder (without regard to the
length of any Interest Period in effect), and the
Borrower hereby promises to pay to the holder
hereof, the balance (if any) of the principal
hereof then remaining unpaid, all of the unpaid
interest accrued hereon and all (if any)
other amounts payable on or in respect of this Note
and the indebtedness evidenced hereby, and all such
amounts shall be payable without presentment,
further demand, protest, notice of protest or any
other formalities of any kind, all of which are
hereby expressly and irrevocably waived by the
Borrower, provided that if the holder hereof makes
demand for payment hereunder after 12:00 noon
(Boston time) on any day, all amounts due hereunder
as provided above shall become absolutely due and
payable by the Borrower, and the Borrower hereby
promises to pay such amounts to the holder hereof,
on the next succeeding Business Day.
(b) The Borrower shall have the right at any
time to prepay the principal balance of this Note,
without premium or penalty (except as provided
below), in whole or in part, together with accrued
interest to the date of prepayment on the principal
amount prepaid, upon not less than three Business
Days' written, telegraphic or telephonic notice to
the Bank specifying the amount (not less than
$3,000,000 or a larger integral multiple
of $1,000,000) to be prepaid, provided that if any
prepayment or any repayment of the Loan or any
portion thereof shall be made with respect to a
Eurodollar Rate Amount on a day other than the last
day of the Interest Period applicable thereto, the
Borrower shall indemnify the Bank against any loss,
cost or expense incurred as a result of such
prepayment or repayment in accordance with the
provisions of Section 1.3 hereof. No amount repaid
or prepaid with respect to the Loan may be
reborrowed.
Section 1.3. Eurodollar Rate Amounts -
General Provisions.
(a) In the event, prior to the commencement
of any Interest Period relating to any Eurodollar
Rate Amount, the Bank shall determine that adequate
and reasonable methods do not exist for
ascertaining the Eurodollar Rate that would
otherwise determine the rate of interest to be
applicable to any Eurodollar Rate Amount
during such Interest Period, the Bank shall
forthwith give notice of such determination (which
shall be conclusive and binding on the Borrower) to
the Borrower. In such event (i) any Conversion
Notice with respect to Eurodollar Rate Amounts
shall be automatically withdrawn and shall be
deemed a notice for Base Rate Amounts, (ii) each
Eurodollar Rate Amount will automatically, on the
last day of the then current Interest Period
relating thereto, become a Base Rate Amount, and
(iii) the obligations of the Bank to convert any
Base Rate Amounts into Eurodollar Rate Amounts
shall be suspended until the Bank determines
that the circumstances giving rise to such
suspension no longer exist, whereupon the Bank
shall so notify the Borrower.
(b) Notwithstanding any other provisions
herein, if any present or future law, regulation,
treaty or directive or any change in the
interpretation or application thereof shall make it
unlawful for the Bank to make or maintain
Eurodollar Rate Amounts, the Bank shall forthwith
give notice of such circumstances to the Borrower
and thereupon (i) the obligations of the Bank to
convert any Base Rate Amounts to Eurodollar
Rate Amounts or continue any Eurodollar Rate
Amounts shall forthwith be suspended, and (ii) the
outstanding Eurodollar Rate Amounts, if any, shall
be converted automatically to Base Rate Amounts on
the last day of each Interest Period applicable to
such Eurodollar Rate Amounts or within such earlier
period as may be required by law. The Borrower
agrees promptly to pay the Bank the amount of any
costs incurred by the Bank in making any
conversion, including any interest or fees payable
by the Bank to lenders of funds obtained
by it in order to make or maintain Eurodollar Rate
Amounts hereunder.
(c) Anything herein to the contrary
notwithstanding and without duplication of any
other amounts payable hereunder, if, after the date
hereof, any change in any present or any future
applicable law, which expression, as used herein,
includes statutes, rules and regulations thereunder
and interpretations thereof by any competent court
or by any governmental or other regulatory body or
official charged with the administration or the
interpretation thereof and requests, directives,
instructions and notices at any time or from time
to time hereafter made upon or otherwise issued to
the Bank by any central bank or other fiscal,
monetary or other authority, (whether or not having
the force of law), shall:
(i) subject the Bank to any tax, levy,
impost, duty, charge, fee, deduction or withholding
of any nature with respect to Eurodollar Rate
Amounts or deposits obtained to fund Eurodollar
Rate Amounts (except for changes in the rate of tax
on the overall net income of the Bank imposed by
the jurisdiction in which the Head Office is
located); or
(ii) materially change the basis of
taxation of payments to the Bank on the principal
of, interest on or any other amounts payable in
respect of Eurodollar Rate Amounts (except for
changes in the rate of tax on the overall net
income of the Bank imposed by the jurisdiction in
which the Head Office is located); or
(iii) impose or increase or render
applicable any special deposit or reserve or
similar requirement (whether or not having the
force of law) against assets held by, or deposits
in or for the account of, or loans by an office of
the Bank with respect to Eurodollar Rate Amounts;
or
(iv) impose on the Bank any other condition
or requirement with respect to this Note,
Eurodollar Rate Amounts or any class of loans of
which any of the Eurodollar Rate Amounts form a
part, and the result of any of the foregoing is:
(A) to increase the cost to the Bank
attributable to the making, funding or
maintaining of Eurodollar Rate Amounts; or
(B) to reduce the amount of principal,
interest or other amount with respect to
Eurodollar Rate Amounts payable to the Bank
hereunder;
then, and in each such case, to the extent such
cost or reduction is not reflected in determining
the interest rate applicable to Eurodollar Rate
Amounts, the Borrower will, upon demand made by
the Bank at any time and from time to time as often
as the occasion therefor may arise, pay to the Bank
such additional amounts as will be sufficient to
compensate the Bank for such additional costs,
reduction, payment or foregone interest or other
sum.
(d) If the Borrower shall at any time (a)
repay or prepay or convert any Eurodollar Rate
Amount on a date other than the last day of
Interest Period with respect thereto (as a
consequence of acceleration pursuant to Section 6
hereof, a mandatory repayment or prepayment
required hereunder, an optional prepayment, a
conversion pursuant to Section 1.1(b) or
otherwise), or (b) for any reason fail to convert
or continue a Eurodollar Rate Amount on the date
specified therefor in a Conversion Notice
delivered by the Borrower to the Bank, the Borrower
shall indemnify the Bank, on demand made by the
Bank at any time and as often as the occasion
therefor may arise, against all losses, costs and
expenses which the Bank may at any time or from
time to time incur as a consequence of such
repayment, prepayment or failure to
convert or continue. The amount of such losses,
costs or expenses shall be an amount equal to the
remainder, if any, of:
(i) the total amount of interest which would
otherwise have accrued hereunder on the principal
so paid or not converted or continued at a rate
equal to the Eurodollar Rate during the period (the
"Reemployment Period") (A) in the case of any such
repayment or prepayment, beginning on the date of
such payment and ending on the last day of the
applicable Interest Period of the Eurodollar Rate
Amount so paid, or (B) in the case of any such
failure to convert or continue, beginning on the
date for the conversion or continuation that shall
have been requested in the Conversion Notice
relating thereto and ending on the date that would
have been the last day of the applicable Interest
Period of such Eurodollar Rate Amount had such
conversion or continuation been made; minus
(ii) an amount equal to the aggregate
interest to be earned by the Bank by reinvesting
the amount prepaid, repaid or not converted or
continued for the Reemployment Period at
the yield to maturity on a United States Treasury
security selected by the Bank approximately equal
in amount to the amount prepaid, repaid or not
converted or continued and having a maturity
approximately equal to the Reemployment
Period.
Section 2. Payments. All payments to be made
by the Borrower hereunder shall be made by the
Borrower in Dollars in immediately available funds
at the Head Office no later than 11:00 a.m. (Boston
time) on the date due. Except as otherwise
provided in the definition of the term "Interest
Period" with respect to Eurodollar Rate Amounts, if
any payment hereunder is required to be made on a
day which is not a Business Day, it shall be paid
on the next succeeding Business Day and interest
shall accrue during such extension. All payments
by the Borrower hereunder shall be made without
set-off or counterclaim and free and clear of and
without deduction for any taxes, levies, imposts,
duties, charges, fees, deductions, withholdings,
compulsory loans, restrictions or conditions of any
nature now or hereafter imposed or levied by any
country or any political subdivision thereof or
taxing or other authority therein unless the
Borrower is compelled by law to make such deduction
or withholding. If any such obligation is imposed
upon the Borrower with respect to any amount
payable by it hereunder, the Borrower agrees to pay
to the Bank on the date on which the said amount
becomes due and payable hereunder, such additional
amount as shall be necessary to enable the Bank to
receive the same net amount which then would have
been received on such date had no such obligation
been imposed upon the Borrower. The Borrower will
deliver promptly to the Bank certificates or other
valid vouchers for all taxes or other charges
deducted from or paid with respect to payments made
by the Borrower hereunder.
Section 3. Changes in Circumstances. If
after the date hereof the Bank determines that (a)
the introduction of, or any change in, or any
change in the interpretation of, any law or
regulation applicable to the Bank, or (b)
compliance by the Bank or its parent bank holding
company with any guideline, request or directive of
any governmental agency or authority (whether or
not having the force of law), has the effect of
reducing the return on the Bank's or such holding
company's capital as a consequence of the Loan
to a level below that which the Bank or such
holding company could have achieved but for such
adoption, change or compliance, the Bank may notify
the Borrower thereof. The Borrower agrees to pay
the Bank the amount of such reduction in the return
on capital as and when such reduction is
determined, upon presentation by the Bank of a
statement in the amount and setting forth the
Bank's calculation thereof, which statement shall
be deemed true and correct absent manifest error.
Section 4. Representations and Warranties.
The Borrower represents and warrants to the Bank on
the Amendment Date that: (a) it is duly organized,
validly existing, and in good standing under the
laws of its jurisdiction of incorporation and is
duly qualified and in good standing in every other
jurisdiction where it is doing business or where a
failure to qualify would have a Materially Adverse
Effect; (b) the execution, delivery and performance
by the Borrower of this Note and the other Loan
Documents to which it is a party (i) are within its
corporate authority, (ii) have been duly
authorized, and (iii) do not conflict with or
contravene its Charter Documents; (c) upon
execution and delivery thereof, this Note and each
of the other Loan Documents to which the Borrower
is a party shall constitute its legal, valid and
binding obligation, enforceable in accordance with
its terms; (d) there are no legal or other
proceedings or investigations pending
or threatened against the Borrower before any
court, tribunal or regulatory authority which
would, if adversely determined, alone or together,
have a Materially Adverse Effect; (e) the
execution, delivery, performance of its
obligations, and the exercise of its rights under
the Loan Documents to which it is a party
(i) do not require any Consent (other than Consents
of lessees of the Acquired Assets with respect to
which, if such Consents are not obtained prior to
the Amendment Date, all Losses (as defined in the
Acquisition Documents) are, to the best of the
Borrower's knowledge, indemnified against pursuant
to and in accordance with the Acquisition
Documents), and (ii) are not and will not be in
conflict with or prohibited or prevented by (A) any
Requirement of Law, or (B) any Charter Document,
corporate vote, minute or resolution, or (C) any
instrument, agreement or provision thereof, in each
case binding on it or affecting its property; (f)
the Borrower is not in violation of (i) any Charter
Document, corporate minute or resolution, (ii) any
instrument or agreement, in each case binding on it
or affecting its property, or (iii) any Requirement
of Law, in a manner which could have a Materially
Adverse Effect; (g) the Borrower used the proceeds
of Tranche A, immediately upon receipt thereof,
solely to finance in part the purchase of
certain rolling stock, leases, and related assets
(the "Acquired Assets") pursuant to the Acquisition
Documents (the "Acquisition"); (h) the Borrower
shall use the proceeds of Tranche B, immediately
upon receipt thereof, solely to finance in part the
purchase of the Maryland Lease, rolling stock
leased to ICR thereunder, and certain related
assets (the "Maryland Assets"), pursuant to the
Maryland Acquisition Documents (the "Maryland
Acquisition") (i) the Borrower shall not use the
proceeds of the Loan for the purchasing or carrying
of any "margin security" or "margin stock" within
the meanings of Regulations U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R.
Parts 221 and 224; (j) the amount of Tranche A
constituted no more than 80% of the purchase price
for the Acquired Assets, the balance of which
purchase price was paid on the Date of the
Acquisition from other funds of the Borrower, the
Borrower's sole shareholder and other affiliates of
the Borrower; (k) the amount of Tranche B
constitutes no more than 80% of the purchase price
of the Maryland Assets, the balance of which
purchase price is being paid on the Amendment
Date from other funds of the Borrower, the
Borrower's sole shareholder and other affiliates of
the Borrower; (l) the Borrower has no indebtedness
other than pursuant to this Note; (m) none of the
property, assets, income or revenue of the Borrower
(other than the Acquired Assets) is subject to any
liens, pledges, security interests, or other
encumbrances other than pursuant to the Security
Documents, (n) the Borrower has such title to the
Acquired Assets as the Borrower acquired from
Allied pursuant to the Acquisition Documents and
has granted no liens or other encumbrances on the
Acquired Assets other than pursuant to the Security
Documents.
Section 5. Security. The Obligations shall
continue to be secured by a blanket lien on and
security interests in all of the assets of the
Borrower, including without limitation, all
accounts receivable, contract rights, general
intangibles, inventory, chattel paper, real
property, rolling stock, plant and equipment,
pursuant to the terms of the Security Agreement.
The Obligations shall also continue to be
guaranteed by the Guarantor pursuant to the
Guaranty.
Section 6. Loans May Become Due Upon Certain
Events. If any of the following shall occur: (a)
any of the Loan Documents shall cease to be in full
force and effect, (b) either the Borrower or the
Guarantor (i) shall make an assignment for the
benefit of creditors, (ii) shall be adjudicated
bankrupt or insolvent, (iii) shall seek the
appointment of, or be the subject of an order
appointing, a trustee, liquidator or receiver as to
all or part of its assets, (iv) shall commence,
approve or consent to, or be the subject of any
case or proceeding under any bankruptcy,
reorganization, liquidation, insolvency, or similar
law ("Insolvency Laws") and, in the case of any
such involuntary case or proceeding under any
Insolvency Law, such case or proceeding is not
dismissed within forty-five (45) days following the
commencement thereof, or (v) shall be the subject
of an order for relief in an involuntary case or
proceeding under any Insolvency Laws, or (c) either
the Borrower or the Guarantor shall be unable to
pay its debts as they mature;
THEN, the entire unpaid principal amount of
the Loan, all interest accrued and unpaid thereon,
and all other amounts payable hereunder shall
automatically become forthwith due and payable,
without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived
by the Borrower. The foregoing provisions of this
Section 6 shall not limit or impair the Bank's
right to demand repayment of the Obligations
pursuant to the terms of this Note. No remedy
herein conferred upon the Bank is intended to be
exclusive of any other remedy and each and every
remedy shall be cumulative and in addition to every
other remedy hereunder, now or hereafter existing
at law or in equity or otherwise.
Section 7. Setoff. Regardless of the
adequacy of any collateral or guaranty for the
Obligations, any deposits or other sums credited by
or due from the Bank to the Borrower may be applied
to or set off against any principal, interest and
any other amounts then due from the Borrower to the
Bank at any time during the continuance of any
default under the Loan Documents without notice to
the Borrower, or compliance with any other
procedure imposed by statute or otherwise, all of
which are hereby expressly waived by the Borrower.
Section 8. Definitions. The following terms
shall have the meanings assigned to them below in
this Section 8 or in the provisions of this Note
referred to below:
Acquired Assets: See Section 4 hereof.
Acquisition: See Section 4 hereof.
Acquisition Documents: That certain Asset
Purchase Agreement, dated as of December 3, 1993,
by and between CRTC and Allied, the CFC Guaranty
referred to therein, the related Asset Sale
Agreement, dated as of December 3, 1993, by and
between Allied and the Borrower, and all other
agreements and documents required to be entered
into or delivered pursuant to any of such
agreements or in connection with the acquisition by
the Borrower of the Acquired Assets.
Allied: Allied Railcar Company, an Illinois
corporation.
Amendment Date: See the preamble hereof.
Amounts: Base Rate Amounts and Eurodollar
Rate Amounts (each of which shall be a Type of
Amount).
Assignment of Acquisition Documents: That
certain Collateral Assignment of Acquisition
Documents, dated as of December 3, 1993, between
the Borrower and the Bank, as the same may be
amended and in effect from time to time.
Bank: See the preamble hereof.
Bank of Maryland: The First National Bank of
Maryland.
Base Rate: The higher of (a) the annual rate
of interest announced from time to time by the Bank
at the Head Office, as the Bank's "base rate" and
(b) one-half of one percent (1/2%) above the
Federal Funds Effective Rate.
Base Rate Amounts: All or any portion of the
Loan bearing interest calculated by reference to
the Base Rate.
Borrower: See the preamble hereof.
Business Day: Any day on which banks in
Boston, Massachusetts, are open for business
generally and, in the case of Eurodollar Rate
Amounts, also a day which is a Eurodollar Business
Day.
CFC: Chrysler Financial Corporation.
Charter Documents: In respect of any entity,
the certificate or articles of incorporation or
organization and the by-laws of such entity, or
other constitutive documents of such entity.
Consent: In respect of any person or entity,
any permit, license or exemption from, approval,
consent of, registration or filing with any local,
state or federal governmental or regulatory agency
or authority, required under applicable laws.
Conversion Notice: See Section 1.1(b) hereof.
CRTC: Chrysler Rail Transportation
Corporation, a Delaware corporation.
Dollars or $: Dollars in lawful currency of
the United States of America.
Eurodollar Offered Rate: For any applicable
Interest Period, the rate per annum determined by
the Bank to be the rate per annum at which deposits
of dollars are offered to the Bank by prime banks
in the London interbank market at or about 10:00
a.m. local time in such interbank market, two
Business Days prior to the first day of such
Interest Period for a period equal to the duration
of such Interest Period in an amount substantially
equal to the Eurodollar Rate Amount to be converted
or continued by the Bank.
Eurodollar Business Day: Any day on which
dealings in dollar deposits in the Eurodollar
interbank markets may be transacted.
Eurodollar Rate: For any applicable Interest
Period, the interest rate per annum determined by
the Bank pursuant to the following formula:
Eurodollar Rate = Eurodollar Offered Rate*
1.00 - Eurodollar Reserve Percentage
*The components of the fraction to be rounded
upwards, if necessary, to the next highest 1/8th of
1%.
The Bank shall give the Borrower prompt notice (but
in any event no later than one Business Day prior
to the date of commencement of such Interest
Period) of the Eurodollar Rate determined for
such Interest Period, and absent manifest error,
each determination of the Eurodollar Rate by the
Bank shall be conclusive and binding for all
purposes hereof.
Eurodollar Rate Amount: All or any portion of
the Loan bearing interest calculated by reference
to the Eurodollar Rate.
Eurodollar Reserve Percentage: For any day
during an Interest Period with respect to a
Eurodollar Rate Amount, that percentage (expressed
as a decimal) which is in effect on such day under
Regulation D of the Board of Governors of the
Federal Reserve System (or any successor or similar
regulation relating to reserve requirements) for
determining the maximum reserve requirement for a
member bank of the Federal Reserve System in New
York City with deposits exceeding $1 billion in
respect of "Eurocurrency Liabilities" (as such term
is used in Regulation D) outstanding from time to
time, or in respect of any other category of
liabilities which might be incurred by such member
bank in any Eurodollar interbank market to fund
Eurodollar Rate Amounts. The Eurodollar Rate shall
be adjusted
automatically on and as of the effective date of
any change in the Eurodollar Reserve Percentage.
Federal Funds Effective Rate: For any day, a
fluctuating interest rate per annum equal to the
weighted average of the rates on overnight federal
funds transactions with members of the Federal
Reserve System arranged by federal funds brokers,
as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day that is a
Business Day, the average of the quotations for
such day on such transactions received by the Bank
from three funds brokers of recognized standing
selected by the Bank.
Guarantor: Illinois Central Corporation, a
Delaware corporation and owner of all of the issued
and outstanding capital stock of IC Financial
Services Corporation, a Delaware corporation and
owner of all of the issued and outstanding capital
stock of the Borrower.
Guaranty: That certain Guaranty, dated as of
December 3, 1993, from the Guarantor in favor of
the Bank, as the same may be amended and in effect
from time to time.
Head Office: See the preamble hereof.
ICR: Illinois Central Railroad Company, a
Delaware corporation, which is an affiliate of the
Borrower.
Insolvency Laws: See Section 6 hereof.
Interest Payment Date: As to any Amount, the
last day of the Interest Period applicable thereto,
and the Termination Date.
Interest Period: With respect to each Amount
(a) initially, the period commencing on the date
hereof and ending on the last day of one of the
periods set forth below, as selected by the
Borrower prior to the date hereof: (i) for any
Base Rate Amount, the last day of the calendar
month during which such Interest Period began and
(ii) for any Eurodollar Rate Amount, one (1),
two (2) or three (3) months; and (b) thereafter,
each period commencing on the last day of the next
preceding Interest Period applicable to such Amount
and ending on the last day of one of the periods
set forth above, as selected by such Borrower in a
Conversion Notice, provided that all of the
foregoing provisions relating to Interest Periods
are subject to the following:
(A) if any Interest Period with respect
to a Eurodollar Rate Amount would otherwise end on
a day that is not a Eurodollar Business Day, that
Interest Period shall be extended to the next
succeeding Eurodollar Business Day unless the
result of such extension would be to carry such
Interest Period into another calendar month, in
which event such Interest Period shall end on the
immediately preceding Eurodollar Business Day;
(B) if any Interest Period with respect
to a Base Rate Amount would end on a day that is
not a Business Day, that Interest Period shall end
on the next succeeding Business Day;
(C) any Interest Period relating to
Eurodollar Rate Loan that begins on the last
Eurodollar Business Day of a calendar month (or on
a day for which there is no numerically
corresponding day in the calendar month
at the end of such Interest Period) shall end on
the last Eurodollar Business Day of a calendar
month;
(D) any Interest Period relating to
Eurodollar Rate Amount that would otherwise extend
beyond the Termination Date shall end on the
Termination Date; and
(E) in the case of such Amounts which
constitute Tranche A on the date hereof, such
Amounts shall continue to bear interest with
reference to the applicable interest rates for such
Amounts and for the applicable Interest Periods
elected by the Borrower with respect thereto under
the terms of the Prior Note and the Borrower shall
pay interest on the applicable Interest Payment
Dates with respect thereto as provided herein.
Loan: Collectively, Tranche A and Tranche B.
Loan Documents: This Note and the Security
Documents, in each case as from time to time
amended or supplemented.
Maryland Acquisition: See Section 4 hereof.
Maryland Acquisition Documents: The Bill of
Sale and Assignment from Bank of Maryland to the
Borrower, dated as of December 31, 1993, and all
other agreements and documents required to be
entered into or delivered in connection with the
acquisition by the Borrower of the Maryland Assets.
Maryland Assets: See Section 4 hereof.
Maryland Lease: The Equipment Lease
Agreement, dated as of October 20, 1980, by and
between Bank of Maryland as lessor and ICR as
lessee, with respect to certain rolling stock.
Materially Adverse Effect: Any materially
adverse effect on the financial condition or
business operations or prospects of the Borrower,
or any material impairment of the ability of the
Borrower to perform its obligations hereunder or
under any of the other Loan Documents to which it
is a party, or any material impairment of validity
or enforceability of any of the Loan Documents.
Obligations: All indebtedness, obligations
and liabilities of the Borrower to the Bank,
existing on the date hereof or arising hereafter,
direct or indirect, joint or several, absolute or
contingent, matured or unmatured, liquidated or
unliquidated, secured or unsecured, arising or
incurred under this Note or any of the other Loan
Documents or in respect of the Loan, or other
instruments at any time evidencing any thereof.
Prior Note: See the preamble hereof.
Requirement of Law: In respect of any person
or entity, any law, treaty, rule, regulation or
determination of an arbitrator, court, or other
governmental authority, in each case applicable to
or binding upon such person or entity or affecting
any of its property.
Security Agreement: That certain Security
Agreement, dated as of December 3, 1993, between
the Borrower and the Bank, as amended as of the
date hereof by an amendment in form and substance
satisfactory to the Bank, and as the same may be
further amended and in effect from time to time.
Security Documents: Collectively, the
Guaranty, the Security Agreement, the Assignment of
Acquisition Documents, and any and all instruments
and documents required to be delivered pursuant
thereto, in each case as amended and in effect from
time to time.
Termination Date: March 3, 1994 or such
earlier date on which the Loan may become due and
payable pursuant to the terms hereof.
Tranche A: The initial demand loan in the
principal amount of $18,350,000 made to the
Borrower by the Bank which was evidenced by the
Prior Note and which is, from and after the date
hereof, evidenced by this Note.
Tranche B: The additional demand loan in the
principal amount of $3,365,000 made to the Borrower
by the Bank and evidenced by this Note.
Type: As to any Amount, its nature as a Base
Rate Amount or a Eurodollar Rate Amount.
Section 9. Notices. Except as otherwise
specified herein, all notices and other
communications made or required to be given
pursuant to this Note shall be in writing
and shall be either delivered by hand or mailed by
United States first-class mail, postage prepaid, or
sent by telex or telecopy confirmed by letter,
addressed as follows:
(a) if to the Borrower, at 455 North
Cityfront Plaza Drive, Chicago, Illinois
60611-5504, Attn: Chief Financial Officer, or such
other address for notice as the Borrower shall last
have furnished in writing to the person giving the
notice; and
(b) if to the Bank, at 100 Federal Street,
Boston, Massachusetts 02110, Attn: Transportation
Division, 01-08-01, or such other address for
notice as the Bank shall last have furnished in
writing to the person giving the notice.
Any notice so addressed shall be deemed to
have been duly given or made and to have become
effective (i) if delivered by hand to an officer of
the party to which it is directed, at the time of
the receipt thereof by such officer, (ii) if sent
by first-class mail, postage prepaid, on the
earlier of (A) the fifth Business Day following the
mailing thereof, or (B) the date of its receipt, if
a Business Day, or if not a Business Day, the next
succeeding Business Day, or (iii) if sent by telex
or telecopy, at the time of dispatch thereof, if in
normal business hours in the state or country where
received or otherwise at the opening of business on
the next succeeding Business Day.
Section 10. Miscellaneous. The Borrower
agrees to indemnify and hold harmless the Bank
against all claims and losses of every kind arising
out of this Note and the other Loan Documents,
except to the extent directly caused by the gross
negligence or willful misconduct of the Bank. The
Borrower shall pay to the Bank promptly on demand
all reasonable legal costs, fees and expenses
incurred by the Bank in connection with the
preparation, negotiation, execution, amendment,
administration or enforcement of this Note and all
of the other Loan Documents. This Note shall be
binding upon and inure to the benefit of each party
hereto and its successors and assigns, but the
Borrower may not assign its rights or obligations
hereunder. This Note may not be amended or waived
except by a written instrument signed by the
Borrower and the Bank, and any such amendment or
waiver shall be effective only for the specific
purpose given. No failure or delay by the Bank to
exercise any right hereunder shall operate as a
waiver thereof, nor shall any single or partial
exercise of any right, power or privilege preclude
any other right, power or privilege. The
provisions of this Note are several and if any one
provision hereof shall be held invalid or
unenforceable in whole or in part in any
jurisdiction, such invalidity or unenforceability
shall affect only such provision in such
jurisdiction. This Note expresses the entire
understanding of the parties with respect to the
transactions contemplated hereby. This Note is a
contract under the internal laws of the
Commonwealth of Massachusetts and shall be
construed in accordance therewith and governed
thereby, and shall take effect as A sealed
instrument. The Borrower agrees that any suit for
the enforcement of this Note and the other Loan
Documents to which it is a party may be brought in
the courts of the Commonwealth of Massachusetts or
any federal court sitting therein and consents to
the nonexclusive jurisdiction of such court and to
service of process in any such suit being made upon
the Borrower by mail at the address specified in
Section 9 hereof. The Borrower hereby waives any
objection that it may now or hereafter have to the
venue of any such suit or any such court or that
such suit was brought in an inconvenient court.
The Borrower hereby irrevocably waives notice of
acceptance, presentment, notice of nonpayment,
protest, notice of protest, suit and all other
conditions precedent in connection with the
delivery, acceptance, collection and/or enforcement
of this Note or any collateral or security
therefor. The Borrower hereby agrees, at the
Borrower's own expense, to execute and deliver,
from time to time, any and all further, or other,
instruments, and to perform such acts, as the Bank
may reasonably request to effect the transactions
contemplated by this Note and to provide to the
Bank the benefits of all rights, authorities and
remedies conferred upon the Bank by the terms of
this Note.
IN WITNESS WHEREOF, this Note has been duly
executed by the undersigned as of the day and in
the year first above written.
IC LEASING CORPORATION III
By:
Title:
Exhibit 4.15
GUARANTY
GUARANTY, dated as of December 3, 1993, by
ILLINOIS CENTRAL CORPORATION, a Delaware
corporation, (the "Guarantor") in favor of THE
FIRST NATIONAL BANK OF BOSTON, a national banking
association (the "Bank").
WHEREAS, the Bank, subject to the terms and
conditions contained in the Demand Note referred to
below, has agreed to make a demand loan to IC
Leasing Corporation III, a Nevada corporation and
wholly-owned subsidiary of the Guarantor (the
"Company"); and
WHEREAS, the Company has executed and
delivered to the Bank a Demand Promissory Note,
dated as of December 3, 1993 (as amended and in
effect from time to time, the "Demand Note"), in
order to evidence the Company's obligations to the
Bank in respect of such demand loan;
and
WHEREAS, the Guarantor expects to receive
substantial direct and indirect benefits from the
extensions of credit to the Company by the Bank
pursuant to the Demand Note (which benefits are
hereby acknowledged); and
WHEREAS, it is a condition precedent to the
Bank's agreement to make the demand loan to the
Company that the Guarantor execute and deliver to
the Bank a guaranty substantially in the form
hereof; and
WHEREAS, the Guarantor wishes to guaranty the
Company's obligations to the Bank under or in
respect of the Demand Note as provided herein;
NOW, THEREFORE, the Guarantor hereby agrees
with the Bank as follows:
1. Definitions. The term "Obligations" and
all other capitalized terms used herein without
definition shall have the respective meanings
provided therefor in the Demand Note.
2. Guaranty of Payment and Performance. The
Guarantor hereby guarantees to the Bank the full
and punctual payment when due (whether at stated
maturity, by required pre-payment, by acceleration
or otherwise), as well as the performance, of all
of the Obligations including all such which would
become due but for the operation of the automatic
stay pursuant to Section 362(a) of the Federal
Bankruptcy Code and the operation of Section 502(b)
and 506(b) of the Federal Bankruptcy Code. This
Guaranty is an absolute, unconditional and
continuing guaranty of the full and punctual
payment and performance of all of the Obligations
and not of their collectibility only and is in no
way conditioned upon any requirement that the Bank
first attempt to collect any of the Obligations
from the Company or resort to any collateral
security or other means of obtaining payment.
Should the Company default in the payment or
performance of any of the Obligations, the
obligations of the Guarantor hereunder with respect
to such Obligations in default shall become
immediately due and payable to the Bank, without
demand or notice of any nature, all of which are
expressly waived by the Guarantor. Payments by the
Guarantor hereunder may be required by the Bank on
any number of occasions.
3. Guarantor's Agreement to Pay Enforcement
Costs, Etc. The Guarantor further agrees, as the
principal obligor and not as a guarantor only, to
pay to the Bank, on demand, all reasonable costs
and expenses (including reasonable court costs and
legal expenses) incurred or expended by the Bank in
connection with the Obligations, this Guaranty and
the enforcement thereof, together with interest on
amounts recoverable under this Section 3 from the
time when such amounts become due until payment,
whether before or after judgment, at the rate of
interest for overdue principal set forth in the
Demand Note, provided that if such interest exceeds
the maximum amount permitted to be paid under
applicable law, then such interest shall be reduced
to such maximum permitted amount.
4. Waivers by Guarantor; Bank's Freedom to
Act. The Guarantor agrees that the Obligations
will be paid and performed strictly in accordance
with their respective terms, regardless of any law,
regulation or order now or hereafter in effect in
any jurisdiction affecting any of such terms or the
rights of the Bank with respect thereto. The
Guarantor waives promptness, diligences,
presentment, demand, protest, notice of acceptance,
notice of any Obligations incurred and all other
notices of any kind, all defenses which may be
available by virtue of any valuation, stay,
moratorium law or other similar law now or
hereafter in effect, any right to require the
marshalling of assets of the Company or any other
entity or other person primarily or secondarily
liable with respect to any of the Obligations, and
all suretyship defenses generally. Without
limiting the generality of the foregoing, the
Guarantor agrees to the provisions of any
instrument evidencing, securing or otherwise
executed in connection with any of the Obligations
and agrees that the obligations of the Guarantor
hereunder shall not be released or discharged, in
whole or in part, or otherwise affected by (a) the
failure of the Bank to assert any claim or demand
or to enforce any right or remedy against the
Company or any other entity or other person
primarily or secondarily liable with respect to
any of the Obligations; (b) any extensions,
compromise, refinancing, consolidation or renewals
of any of the Obligations; (c) any change in the
time, place or manner of payment of any of the
Obligations or any rescissions, waivers,
compromise, refinancing, consolidation, amendments
or modifications of any of the terms or provisions
of the Demand Note, the other Loan Documents or any
other agreement evidencing, securing or otherwise
executed in connection with any of the Obligations;
(d) the addition, substitution or release of any
entity or other person primarily or secondarily
liable for any of the Obligations; (e) the adequacy
of any rights which the Bank may have against any
collateral security or other means of obtaining
repayment of any of the Obligations; (f) the
impairment of any collateral securing any of the
Obligations, including without limitation the
failure to perfect or preserve any rights which the
Bank might have in such collateral security or the
substitution, exchange, surrender, release, loss or
destruction of any such collateral security; or (g)
any other act or omission which might in any manner
or to any extent vary the risk of the Guarantor or
otherwise operate as a release or discharge of the
Guarantor, all of which may be done without notice
to the Guarantor. To the fullest extent permitted
by law, the Guarantor hereby expressly waives
any and all rights or defenses arising by reason of
(i) any "one action" or "anti-deficiency" law which
would otherwise prevent the Bank from bringing any
action, including any claim for a deficiency, or
exercising any other right or remedy (including any
right of set-off), against the Guarantor before or
after the Bank's commencement or completion of any
foreclosure action, whether judicially, by exercise
of power of sale or otherwise, or (ii) any other
law which in any other way would otherwise require
any election of remedies by the Bank.
5. Unenforceability of Obligations Against
Company. If for any reason the Company has no
legal existence or is under no legal obligation to
discharge any of the Obligations, or if any of the
Obligations have become irrecoverable from the
Company by reason of the Company's insolvency,
bankruptcy or reorganization or by other operation
of law or for any other reason, this Guaranty shall
nevertheless be binding on the Guarantor to the
same extent as if the Guarantor at all times had
been the principal obligor on all such Obligations.
In the event that acceleration of the time for
payment of any of the Obligations is stayed upon
the insolvency, bankruptcy or reorganization of the
Company, or for any other reason, all such amounts
otherwise subject to acceleration under the terms
of the Demand Note, the Security Documents or any
other agreement evidencing, securing or otherwise
executed in connection with any Obligation shall be
immediately due and payable by the Guarantor.
6. Subrogation; Subordination.
6.1. Waiver of Rights Against Company.
Until the final payment and performance in full of
all of the Obligations, the Guarantor shall not
exercise any rights against the Company arising as
a result of payment by the Guarantor hereunder, by
way of subrogation, reimbursement, restitution,
contribution or otherwise, and will not prove any
claim in competition with the Bank in respect of
any payment hereunder in any bankruptcy, insolvency
or reorganization case or proceedings of any
nature; the Guarantor will not claim any setoff,
recoupment or counterclaim against the Company in
respect of any liability of the Guarantor to the
Company; and the Guarantor waives any benefit of
and any right to participate in any collateral
security which may be held by the Bank.
6.2. Subordination. The payment of any
amounts due with respect to any indebtedness of the
Company now or hereafter owed to the Guarantor is
hereby subordinated to the prior payment in full of
all of the Obligations. The Guarantor agrees that,
after the occurrence of any default in the payment
or performance of any of the Obligations, the
Guarantor will not demand, sue for or otherwise
attempt to collect any such indebtedness of the
Company to the Guarantor until all of the
Obligations shall have been paid in full. If,
notwithstanding the foregoing sentence, the
Guarantor shall collect, enforce or receive any
amounts in respect of such indebtedness, such
amounts shall be collected, enforced and received
by the Guarantor as trustee for the Bank and be
paid over to the Bank on account of the Obligations
without affecting in any manner the liability of
the Guarantor under the other
provisions of this Guaranty.
6.3. Provisions Supplemental. The
provisions of this Section 6 shall be supplemental
to and not in derogation of any rights and remedies
of the Bank under any separate subordination
agreement which the Bank may at any time and from
time to time enter into with the Guarantor.
7. Security; Setoff. The Guarantor grants
to the Bank, as security for the full and punctual
payment and performance of all of the Guarantor's
obligations hereunder, a continuing lien on and
security interest in all securities or other
property belonging to the Guarantor now or
hereafter held by the Bank and in all deposits
(general or special, time or demand, provisional or
final) and other sums credited by or due from the
Bank to the Guarantor or subject to withdrawal by
the Guarantor. Regardless of the adequacy of any
collateral security or other means of obtaining
payment of any of the Obligations, the Bank is
hereby authorized at any time (and from time to
time) during the continuance of any default under
the Loan Documents, upon prior notice to the
Guarantor and to the fullest extent permitted by
law, to set off and apply such deposits and other
sums against the obligations of the Guarantor under
this Guaranty, whether or not the Bank shall have
made any demand under this Guaranty and although
such obligations may be contingent or unmatured.
8. Further Assurances. The Guarantor agrees
that it will from time to time, at the request of
the Bank, provide to the Bank the Guarantor's most
recent audited and unaudited balance sheets and
related statements of income and changes in
financial condition (prepared on a consolidated
basis with the Guarantor's subsidiaries, if any)
and such other information relating to the business
and affairs of the Guarantor as the Bank may
reasonably request. The Guarantor also agrees to
do all such things and execute all such documents
as the Bank may consider necessary or desirable to
give full effect to this Guaranty and to perfect
and preserve the rights and powers of the Bank
hereunder. The Guarantor acknowledges and confirms
that the Guarantor itself has established its own
adequate means of obtaining from the Company on a
continuing basis all information desired by the
Guarantor concerning the financial condition of the
Company and that the Guarantor will look to the
Company and not to the Bank in order for the
Guarantor to keep adequately informed of changes in
the Company's financial condition.
9. Termination; Reinstatement. This
Guaranty shall remain in full force and effect
until the Bank is given written notice of the
Guarantor's intention to discontinue this Guaranty,
notwithstanding any intermediate or temporary
payment or settlement of the whole or any part of
the Obligations. No such notice shall be effective
unless received and acknowledged by an officer of
the Bank at the address of the Bank for notices set
forth in Section 9 of the Demand Note. No such
notice shall affect any rights of the Bank
hereunder, including without limitation the rights
set forth in Section 4 and 6, with respect to any
Obligations incurred prior or accrued to the receipt
of such notice or any Obligations incurred or accrued
pursuant to any contract or commitment in existence
prior to such receipt, and all checks, drafts,
notes, instruments (negotiable or otherwise) and
writings made by or for the account of the Company
and drawn on the Bank or any of its agents
purporting to be dated on or before the date of
receipt of such notice, although presented to and
paid or accepted by the Bank after that date, shall
form part of the Obligations. This Guaranty shall
continue to be effective or be reinstated,
notwithstanding any such notice, if at any time any
payment made or value received with respect to any
Obligation is rescinded or must otherwise be
returned by the Bank upon the insolvency,
bankruptcy or reorganization of the Company, or
otherwise, all as though such payment had not been
made or value received.
10. Successors and Assigns. This Guaranty
shall be binding upon the Guarantor, its successors
and assigns, and shall inure to the benefit of and
be enforceable by the Bank and its successors,
transferees and assigns. Without limiting the
generality of the foregoing sentence, the Bank may
assign or otherwise transfer the Demand Note, the
Security Documents or any other agreement or note
held by it evidencing, securing or otherwise
executed in connection with the Obligations
(provided that the Bank shall not assign or
transfer any Security Document without also
assigning or transferring the Demand Note), or sell
participations in any interest therein, to any
other entity or other person, and such other entity
or other person shall thereupon become vested, to
the extent set forth in the agreement evidencing
such assignment, transfer or participation, with
all the rights in respect thereof granted to the
Bank herein.
11. Amendments and Waivers. No amendment or
waiver of any provision of this Guaranty nor
consent to any departure by the Guarantor therefrom
shall be effective unless the same shall be in
writing and signed by the Bank. No failure on the
part of the Bank to exercise, and no delay in
exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or
partial exercise of any right hereunder preclude
any other or further exercise thereof or the
exercise of any other right.
12. Notices. All notices and other
communications called for hereunder shall be made
in writing and, unless otherwise specifically
provided herein, shall be deemed to have been duly
made or given when delivered by hand or mailed
first class, postage prepaid, or, in the case of
telegraphic or telexed notice, when transmitted,
answer back received, addressed as follows: if to
the Guarantor, at the address set forth beneath its
signature hereto, and if to the Bank, at
the address for the Bank set forth in Section 9 of
the Demand Note, or at such address as either party
may designate in writing to the other.
13. Governing Law; Consent to Jurisdiction.
THE GUARANTY IS INTENDED TO TAKE EFFECT AS A SEALED
INSTRUMENT AND SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS. The Guarantor agrees that any suit
for the enforcement of this Guaranty may be brought
in the courts of the Commonwealth of Massachusetts
or any federal court sitting therein and consents
to the nonexclusive jurisdiction of such court and
to service of process in any such suit being made
upon the Guarantor by mail at the address specified
by reference in Section 12. The Guarantor hereby
waives any objection that it may now or hereafter
have to the venue of any such suit or any such
court or that such suit was brought in an
inconvenient court.
14. Waiver of Jury Trial. THE GUARANTOR
HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH
RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY
DISPUTE IN CONNECTION WITH THIS GUARANTY, ANY
RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE
OF ANY OF SUCH RIGHTS OR OBLIGATIONS. The
Guarantor (a) certifies that neither the Bank nor
any representative, agent or attorney of the Bank
has represented, expressly or otherwise, that the
Bank would not, in the event of litigation, seek to
enforce the foregoing waivers and (b) acknowledges
that, in entering into the Demand Note, the
Security Documents and any and all other documents,
agreements or instruments executed in connection
therewith to which the Bank is a party, the Bank is
relying upon, among other things, the waivers and
certifications contained in this Section 14.
15. Miscellaneous. This Guaranty constitutes
the entire agreement of the Guarantor with respect
to the matters set forth herein. The rights and
remedies herein provided are cumulative and not
exclusive of any remedies provided by law or any
other agreement, and this Guaranty shall be in
addition to any other guaranty of or collateral
security for any of the Obligations. The
invalidity or unenforceability of any one or more
sections of this Guaranty shall not affect the
validity or enforceability of its remaining
provisions. Captions are for the ease of reference
only and shall not affect the meaning of the
relevant provisions. The meanings of all defined
terms used in this Guaranty shall be equally
applicable to the singular and plural forms of the
terms defined.
IN WITNESS WHEREOF, the Guarantor has caused
this Guaranty to be executed and delivered as of
the date first above written.
ILLINOIS CENTRAL CORPORATION
By:____________________________
Title:
Address:
455 North Cityfront Plaza Drive
Chicago, Illinois 60611-5504
Attn: Chief Financial Officer
Telex:_____________________
EXHIBIT 4.16
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of December
3, 1993, is between IC LEASING CORPORATION III (the
"Borrower"), a Nevada corporation having its
principal place of business and chief executive
office at One East First Street, Reno, Nevada 89501
and THE FIRST NATIONAL BANK OF BOSTON (the "Bank")
pursuant to that certain Demand Promissory Note,
dated as of December 3, 1993, among the Borrower
and the Bank as the same may be amended, restated,
modified or supplemented from time to time (such
agreement, as in effect from time to time, the
"Demand Note"). Capitalized terms which are used
herein without definition and which are defined in
the Demand Note shall have the same meanings herein
as in the Demand Note.
Section 1. GRANT OF SECURITY INTEREST. To
secure the due and prompt payment and performance
by the Borrower of the Obligations (as defined
below), the Borrower hereby pledges, assigns and
grants to the Bank, a continuing security interest
in and lien on all properties, assets and rights of
the Borrower of every kind and nature, wherever
located, now owned or hereafter acquired or
arising, and all proceeds and products thereof,
whether derived from voluntary or involuntary
disposition or otherwise, including, without
limiting the generality of the foregoing, all
goods, accounts, including all accounts receivable,
contract rights, including, without limitation, all
rights of the Borrower under the Acquisition
Documents and all rights of the Borrower under
leases of equipment and other personal property,
rights to the payment of money including tax refund
claims, insurance proceeds and tort claims, chattel
paper, documents, instruments, general intangibles,
the Borrower's operating certificates from the
Interstate Commerce Commission, securities,
together with all income therefrom, increases
thereunder and proceeds thereof, patents,
trademarks, trade names, copyrights, engineering
drawings, service marks, customer lists, books and
records, furniture, fixtures, rolling stock of
every kind and description, locomotives, rail, ties
and capital improvements thereon, equipment,
maintenance of way equipment, inventory and all
other capital assets, raw materials, work in
progress, and real property and interests in and
rights in, on or over real property, including
railbeds, yards and maintenance areas (all such
properties, assets and rights hereinafter sometimes
called, collectively, the "Collateral").
Section 2. OBLIGATIONS SECURED. The
Collateral hereunder constitutes and will
constitute continuing security for all of the
indebtedness, obligations and liabilities of the
Borrower to the Bank and any institutional lender
who becomes a participant in or holder of any of
the obligations comprising the Obligations (as
defined below) under the Demand Note and the other
Loan Documents, in each case as such instrument is
originally executed on the date hereof or as
modified, amended, restated, supplemented or
extended hereafter, whether such Obligations are
now existing or hereafter arising, joint or
several, direct or indirect, absolute or
contingent, due or to become due, matured or
unmatured, liquidated or unliquidated, arising by
contract, operation of law or otherwise, and all
obligations of the Borrower to the Bank arising out
of any extension, refinancing or refunding of any
of the foregoing obligations (hereinafter
collectively referred to as the "Obligations").
Section 3. PRO RATA SECURITY; APPLICATION OF
PROCEEDS OF COLLATERAL. All amounts owing with
respect to the Obligations shall be secured pro
rata by the Collateral without distinction as to
whether some Obligations are then due and payable
and other Obligations are not then due and payable.
Upon any realization upon the Collateral by the
Bank, whether by receipt of insurance
proceeds pursuant to Section 4(g) hereof or upon
foreclosure and sale of all or part of the
Collateral pursuant to Section 8 hereof or
otherwise, the Borrower agrees that the proceeds
thereof shall be applied (i) first, to the payment
of expenses incurred with respect to maintenance
and protection of the Collateral pursuant to
Section 4 hereof and of expenses incurred pursuant
to Section 12 hereof with respect to the sale of or
realization upon any of the Collateral or the
perfection, enforcement or protection of the rights
of the Bank (including reasonable attorneys' fees
and expenses of every kind); (ii) second, to all
amounts of interest, expenses and fees outstanding
which constitute the Obligations; (iii) third, to
all amounts of principal outstanding under the
Obligations; and (iv) fourth, the balance, if any,
shall be returned to the Borrower or the person or
entity entitled thereto and the Borrower shall
remain liable for any deficiency in the payment of
the Obligations. The Borrower agrees that all
amounts received with respect to any of the
Obligations, whether by realization on the
Collateral or otherwise, shall be applied to the
payment of the Obligations in accordance with the
provisions of this Section 3.
Section 4. REPRESENTATIONS AND COVENANTS OF
THE BORROWER.
(a) Real Property. The Borrower represents
and warrants to the Bank that the real property
listed in Schedule 4(a) hereto constitutes all of
the real property which the Borrower owns or
leases. The Borrower agrees to notify the Bank of
any other real property which the Borrower may
hereafter acquire or lease. The Borrower agrees
that it shall, upon request by the Bank, execute
and deliver to the Bank mortgages and other
instruments, as referred to in paragraph (n) below
of this Section 4, and file the same in the
appropriate recording offices with respect to the
real property listed on Schedule 4(a) hereto and at
such times as any mortgagable right, title or
interest is acquired in the future by the Borrower
in any other real property. All such mortgages and
other instruments shall secure all of the
Obligations pro rata and shall be on terms and
conditions satisfactory to the Bank as evidenced by
its written consent thereto.
(b) Rolling Stock. The Borrower represents
and warrants to the Bank, that the Rolling Stock
(as defined in this Section 4(b)) listed on
Schedule 4(b) hereto constitutes all of the Rolling
Stock, including markings thereon and serial
numbers thereof, which the Borrower owns or leases.
The Borrower agrees not to change any markings or
serial numbers on any of the Rolling Stock listed
on Schedule 4(b) hereto until after the Borrower
has given notice in writing to the Bank of its
intention to make such change. The Borrower agrees
to notify the Bank of any other Rolling Stock which
the Borrower may hereafter acquire or lease. The
Borrower agrees that it shall execute and deliver
to the Bank supplemental security agreements and
other instruments, as referred to in paragraph (i)
below of this Section 4, and file the same in the
appropriate recording offices (i) with respect to
the Rolling Stock listed on Schedule 4(b) hereto,
(ii) at such times as any assignable right, title
or interest is acquired in the future by the
Borrower in any other Rolling Stock and (iii) at
such times as any change is made in one or more of
the markings or serial numbers on any of the
Rolling Stock listed on Schedule 4(b) hereto or on
any other Rolling Stock owned or leased by the
Borrower. All such supplemental security
agreements and other instruments shall secure all
of the Obligations pro rata and shall be on terms
and conditions satisfactory to the Bank as
evidenced by its written consent thereto. The term
"Rolling Stock" as used herein means all rolling
stock of every kind and description, locomotives
and all other rail cars.
(c) Patents, Trademarks, Copyrights. The
Borrower represents and warrants to the Bank, that
as of the date hereof, except as set forth on
Schedule 4(c) hereto, it has no right, title or
interest in any patent, trademark registrations,
copyright registrations or service mark
registrations, or in any pending applications for
the same and agrees promptly to furnish to the Bank
written notice of each such patent, trademark,
copyright or service mark registrations, or any
applications for same, in which it may hereafter
acquire any right, title or interest. The Borrower
shall, on request by the Bank, execute, acknowledge
and deliver all such documents and instruments as
the Bank may reasonably require to confirm the
Bank's security interest in and to any such patent,
trademark or service mark registrations, or
application for the same as part of the Collateral
hereunder and appoints the Bank as the Borrower's
attorney-in-fact to execute and file the same.
(d) Location of Chief Executive Office and
Principal Place of Business. The Borrower
represents and warrants to the Bank that the
location of its chief executive office (as such
term is used in Paragraph 5(c) of the Official
Comment to Section 9-103 of the UCC, as hereinafter
defined) is One East First Street, Reno, Nevada
89501 and that the location where its books and
records are kept is 455 North Cityfront Plaza
Drive, Chicago, Illinois 60611. The Borrower
further represents that attached hereto as Schedule
4(d) is a true and correct list of all localities
where property comprising a part of the Collateral
(other than interests in real property set forth in
Schedule 4(a) hereto and Rolling Stock set forth in
Schedule 4(b) hereto) is located. The Borrower
agrees that it shall not change the location of its
chief executive office or location where books and
records are kept or the location of any property
comprising a part of the Collateral other than
changes in the location of Rolling Stock unless it
shall have (i) given the Bank at least thirty (30)
days' advance written notice of such change, and
(ii) filed in all necessary jurisdictions such
UCC-3 financing statements or other documents as
may be necessary to continue without impairment or
interruption the perfection and priority of the
liens on the Collateral in favor of the Bank
pursuant to the Security Documents.
(e) Ownership of Collateral.
(i) The Borrower represents and warrants to
the Bank that, except as set forth on Schedule 4(e)
attached hereto, it is the owner of the Collateral
(other than the Acquired Assets) free from any
adverse lien, security interest or encumbrance;
and, as to the Acquired Assets, the Borrower has
acquired such title thereto as the Borrower
acquired from Allied pursuant to the Acquisition
Documents, and has granted no liens or other
encumbrances on the Acquired Assets other than
pursuant hereto.
(ii) Except for the security interest herein
granted and the title matters referred to in clause
(i) above, the Borrower shall be the owner of the
Collateral free of any lien, security interest or
encumbrance and the Borrower shall defend the same
against all claims and demands of all persons or
entities at any time claiming the same or any
interest therein adverse to the Bank. The Borrower
shall not pledge, mortgage or create or suffer to
exist a security interest in the Collateral in
favor of any person or entity other than the Bank.
(f) Sale or Disposition of Collateral. The
Borrower shall not sell or offer to sell or
otherwise transfer the Collateral or any interest
therein except for sales of inventory and the lease
of Collateral in the ordinary course of business.
(g) Insurance. The Borrower shall have and
maintain or cause to be maintained at all times
with respect to the Collateral such insurance
against risks customarily insured against by
companies engaged in similar businesses to that of
the Borrower, in amounts, containing such terms, in
such forms, for such periods and written by such
companies as are satisfactory to the Bank, such
insurance to be payable to the Bank and to the
Borrower as its interests may appear, and all such
property insurance to name the Bank as loss payee
and additional insured. All policies of insurance
shall provide for thirty (30) days' written minimum
cancellation notice to the Bank. In the event of
the Borrower's failure to provide and maintain
insurance as herein provided, the Bank may, at its
option, provide such insurance, and the Borrower
hereby promises to pay to the Bank on demand the
amount of any disbursements made by the Bank for
such purpose. The Borrower shall, within five
Business Days after the date hereof, furnish to the
Bank certificates or other evidence satisfactory to
the Bank of compliance with the foregoing insurance
provisions. After the occurrence and during the
continuance of any failure by the Borrower to pay
to the Bank the Obligations on demand or upon the
occurrence of any event set forth in clauses (a)
through (c) of Section 6 of the Demand Note or if
the Borrower fails to obtain or maintain insurance
as required herein, the Bank may act as attorney
for the Borrower in obtaining, adjusting, settling
and canceling such insurance and endorsing any
drafts; and any amounts collected or received under
any such policies shall be applied by the Bank to
the Obligations in accordance with the provisions
of Section 3 hereof or, at the option of the Bank,
the same may be released to the Borrower, but such
application or release shall not cure or waive any
default hereunder and no amount so released shall
be deemed a payment on any Obligation secured
hereby.
(h) Maintenance of Collateral. The Borrower
shall keep the Collateral or shall cause the
Collateral to be kept in good order and repair and
shall not use the Collateral in violation of law or
any policy of insurance thereon. The Bank may, at
any reasonable time, upon written notice to the
Borrower inspect the Collateral, wherever located.
The Borrower shall pay or cause to be paid promptly
when due all taxes and assessments upon the
Collateral, upon the use and operation of the
Collateral and upon this Agreement, except those
taxes and assessments as are being in good faith
appropriately contested by the Borrower and for
which adequate reserves have been established. In
its discretion, after the occurrence and during the
continuance of any failure by the Borrower to pay
to the Bank the Obligations on demand or upon the
occurrence of any event set forth in clauses (a)
through (c) of Section 6 of the Demand Note, or if
the Borrower fails to discharge unpaid taxes or
encumbrances or pay filing fees, the Bank may make
repairs of the Collateral, discharge taxes and
other encumbrances at any time levied or placed on
the Collateral which remain unpaid in violation of
this Agreement and pay any necessary filing fees.
The Borrower agrees to reimburse the Bank on demand
for any and all expenditures so made and, until
paid, the amount thereof shall be an Obligation
secured by the Collateral. The Bank shall have no
obligation to the Borrower to make any such
expenditures, nor shall the making thereof relieve
the Borrower of any default.
(i) Creation and Perfection of Lien. The
Borrower represents and warrants to the Bank, and
covenants with the Bank, that this Agreement
creates a valid security interest in the Collateral
as security for the payment and performance of the
Obligations. Upon the filing and recording of this
Agreement with the Interstate Commerce Commission
(the "ICC") in accordance with Section 11303 of
Title 49 of the United States Code and the rules
and regulations thereunder, and upon the filing of
UCC-1 financing statements in the form attached
hereto as Exhibit A (the "Financing Statements")
under the Uniform Commercial Code as the same may
be in effect from time to time in the States of
Illinois and Nevada, or in any other jurisdiction
whose Uniform Commercial Code would govern the
perfection or priority of security interests in the
Collateral (the "UCC"), naming the Borrower as
debtor and the Bank as secured party, such security
interest shall be perfected under the UCC and the
Interstate Commerce Act of 1887, as amended
("ICA"), and such security interest shall be prior
to all other liens. To the best of the Borrower's
knowledge, after due inquiry, no further filings,
recordings or other actions are or will be
necessary to maintain the priority of such security
interest other than the filing of UCC continuation
statements within six months prior to the
expiration of a period of five years after the
original filing. This Agreement and all documents
to be filed herewith are in appropriate form for
filing with the ICC.
(j) No Further Actions. Except for the
filings referred to in paragraph (i) above no
authorization, approval or other action by, and no
notice of filing with, any governmental authority
or regulatory body or other person or entity that
has not been received, taken or made is required
(i) for the granting by the Borrower of the
security interest granted hereby or for the
execution, delivery or performance of this
Agreement by the Borrower, (ii) for the maintenance
of the security interest hereunder (including, to
the best of the Borrower's knowledge, after due
inquiry, the first priority nature of such
security interest), or (iii) for the exercise by
the Bank of the rights or the remedies with respect
to the Collateral pursuant to this Agreement.
(k) Accounts Receivable. The Borrower shall
keep or cause to be kept separate records of
accounts receivable, which such records shall be
complete and accurate in all material respects and,
from time to time upon the request of the Bank,
shall deliver to the Bank with respect to each
account receivable lists setting forth the name,
address, face value, and date of invoice of each
debtor obligated on such account receivable.
(l) Government Contracts. The Borrower agree
that from time to time at the Bank's request, it
shall execute all such documents, and take all such
actions, as the Bank may reasonably deem necessary
or proper to perfect the Bank's security interest
in any Collateral consisting of the Borrower's
rights to monies due or to become due under any
contracts or agreements with or orders from the
United States government or any agency or
department thereof.
(m) Securities. The Borrower agrees that it
shall forthwith deliver and pledge to the Bank
hereunder, all certificates representing securities
which the Borrower shall acquire, whether by
purchase, stock dividend, distribution of capital
or otherwise, along with stock powers or other
appropriate instruments of assignment with respect
thereto, duly executed in blank.
(n) Further Assurances By the Borrower. The
Borrower agrees to execute and deliver to the Bank
from time to time at its request all documents and
instruments, including financing statements,
supplemental security agreements, notices of
assignments under the United States Assignment of
Claims Act and under similar or local statutes and
regulations, and to take all action as the Bank may
reasonably deem necessary or proper to perfect or
otherwise protect the security interest and lien
created hereby.
Section 5. POWER OF ATTORNEY. (a) The
Borrower acknowledges the Bank's right, to the
extent permitted by applicable law, singly to
execute and file financing or continuation
statements and similar notices required by
applicable law, and amendments thereto, concerning
the Collateral without execution by the Borrower.
A carbon, photographic or other reproduction of
this Agreement or any financing statement covering
the Collateral or any part thereof shall be
sufficient as a financing statement where permitted
by law.
(b) The Borrower hereby irrevocably appoints
the Bank as its attorney-in-fact, effective at all
times subsequent to the occurrence of any failure
by the Borrower to pay to the Bank the Obligations
on demand or the occurrence of any event set forth
in clauses (a) through (c) of Section 6 of the
Demand Note and during the continuance thereof,
with full authority in the place and stead of the
Borrower and in the name of the Borrower or
otherwise, to take any action and to execute any
instrument which the Bank may deem necessary or
advisable to accomplish the purpose of this
Agreement, including, without limitation, the power
and right (i) to endorse the Borrower's name on any
checks, notes, acceptances, money orders, drafts,
filings or other forms of payment or security that
may come into the Bank's possession and (ii) to do
all other things which the Bank then determines to
be necessary to carry out the terms of this
Agreement. The power conferred on the Bank
hereunder is solely to protect the Bank's interests
in the Collateral and shall not impose any duty
upon the Bank to exercise such power.
Section 6. SECURITIES AS COLLATERAL. (a)
Upon the occurrence and during the continuance of
any failure by the Borrower to pay to the Bank the
Obligations on demand or upon the occurrence of any
event set forth in clauses (a) through (c) of
Section 6 of the Demand Note, the Bank may, at any
time, transfer to itself or any nominee any
securities constituting Collateral, receive any
income thereon and hold such income as additional
Collateral or apply it to the Obligations. If the
Bank so elects to exercise its right herein and
gives notice of such election or direction to the
Borrower, upon the occurrence and during the
continuance of any failure by the Borrower to pay
to the Bank the Obligations on demand or upon the
occurrence of any event set forth in clauses (a)
through (c) of Section 6 of the Demand Note, the
Bank may vote any or all of the securities
constituting Collateral possessing voting rights
(whether or not the same shall have been
transferred into its name or the name of its
nominee or nominees) and give all consents, waivers
and ratifications in respect of the securities
constituting Collateral and otherwise act with
respect thereto as though it were the outright
owner thereof, the Borrower hereby irrevocably
constituting and appointing the Bank the proxy and
attorney-in-fact of the Borrower, with full power
of substitution, to do so. So long as the Borrower
has not failed to pay to the Bank the Obligations
on demand or no event set forth in clauses (a)
through (c) of Section 6 of the Demand Note has
occurred and is continuing, the Borrower shall be
entitled to receive all cash dividends paid in
respect of the securities, to vote the securities
and to give consents, waivers and ratifications in
respect of the securities, provided that no vote
shall be cast, or consent, waiver or ratification
given or action taken which would be inconsistent
with or violate any provisions of the Demand Note,
any other Security Document or this Agreement.
(b) Any sums paid upon or in respect of any
of the securities, upon the liquidation or
dissolution of the issuer thereof, shall be paid
over to the Bank to be held by it as security for
the Obligations; and in case any distribution of
capital or property shall be made on or in respect
of any of the securities pursuant to the
recapitalization or reclassification of the capital
of the issuer thereof or pursuant to the
reorganization of such issuer, the property so
distributed shall be delivered to the Bank to be
held by it as security for the Obligations. All
sums of money paid and property distributed in
respect of the securities upon such a liquidation,
dissolution, recapitalization or reclassification
which are received by the Borrower shall, until
paid or delivered to the Bank, be held in trust for
the Bank as security for the Obligations.
Section 7. ACCOUNTS RECEIVABLE. So long as
the Borrower has not failed to pay to the Bank the
Obligations on demand or no event set forth in
clauses (a) through (c) of Section 6 of the Demand
Note has occurred and is continuing, the Borrower
shall continue to collect payment from debtors on
accounts receivable of the Borrower, obligors on
accounts, chattel paper and general intangibles of
the Borrower, obligors on instruments for which the
Borrower is an obligee and lessees and conditional
vendees under agreements governing the leasing or
selling by conditional sale of Collateral by the
Borrower. After the occurrence and during the
continuance of any failure by the Borrower to pay
to the Bank the Obligations on demand or upon the
occurrence of any event set forth in clauses (a)
through (c) of Section 6 of the Demand Note, the
Bank may require the Borrower to notify such
debtors, obligors, lessees or conditional venders
of the Bank's security interest. Upon the making
of such a request by the Bank, the Borrower shall
hold, as trustee for the Bank, the proceeds
received from such collection and shall turn the
same over to the Bank, or to such other bank as may
be approved by the Bank, immediately upon receipt
of such proceeds and in the identical form
received. After the occurrence and during the
continuance of any failure by the Borrower to pay
to the Bank the Obligations on demand or upon the
occurrence of any event set forth in clauses (a)
through (c) of Section 6 of the Demand Note, the
Bank may require the Borrower to notify such
account debtors and obligors that payment thereof
is to be made directly to the Bank, and, if the
Borrower does not promptly so notify such account
debtors and obligors, the Bank may itself without
further notice to or demand upon the Borrower, so
notify such account debtors or obligors. The
making of such a request or the giving of any such
notification shall not affect the duties of the
Borrower described above with respect to proceeds
received by the Borrower. The Bank shall apply the
proceeds of such collection received by the Bank to
the Obligations in accordance with Section 3 of
this Agreement. The application of the proceeds of
such collection shall be conditional upon final
payment in cash or solvent credits of the items
giving rise to them. If any item is not so paid,
the Bank in its discretion, whether or not such
item is returned, may either reverse any credit
given for the item or charge it to any deposit
account maintained by the Borrower with the Bank.
Section 8. REMEDIES. Upon the occurrence and
during the continuance of any failure by the
Borrower to pay to the Bank the Obligations on
demand or upon the occurrence and during the
continuance of any event set forth in clauses (a)
through (c) of Section 6 of the Demand Note, to the
fullest extent permitted by applicable law, in
addition to the remedies set forth elsewhere in
this Agreement:
(i) The Bank shall have, in addition to all
other rights and remedies given it by any
instrument or other agreement evidencing, or
executed and delivered in connection with, any of
the Obligations and otherwise allowed by law, the
rights and remedies of a secured party under the
UCC and the rights and remedies of a secured party
holding a security interest in collateral pursuant
to the ICA, and, without limiting the generality of
the foregoing, the Bank may, without (to the
fullest extent permitted by law) demand of
performance or advertisement or notice of intention
to sell or of time or place of sale or of
redemption or other notice or demand whatsoever,
(except that the Bank shall give to the Borrower at
least ten (10) days' notice of the time and place
of any proposed sale or other disposition), all of
which are hereby expressly waived to the fullest
extent permitted by law, sell at public or private
sale or otherwise realize upon, in the City of
Boston, Massachusetts, or elsewhere, the whole or
from time to time any part of the Collateral in or
upon which the Bank shall have a security interest
or lien hereunder, or any interest which the
Borrower may have therein, and after deducting
from the proceeds of sale or other disposition of
the Collateral all expenses (including all
reasonable expenses for legal services and
disbursements) as provided in Section 12 hereof,
shall apply the residue of such proceeds toward the
payment of the Obligations in accordance with
Section 3 of this Security Agreement (without
duplication for any expenses paid in accordance
with the previous sentence hereof), the Borrower
remaining liable for any deficiency remaining
unpaid after such application. If notice of any
sale or other disposition is required by law to be
given to the Borrower or the Bank, the Borrower and
the Bank hereby agree that a notice given as
hereinbefore provided shall be reasonable notice of
such sale or other disposition. The Borrower also
agrees to assemble the Collateral at such place or
places as the Bank reasonably shall designate by
written notice. At any such sale or other
disposition the Bank may itself, and any other
person or entity owed any Obligation may itself,
purchase the whole or any part of the Collateral
sold, free from any right of redemption on the part
of the Borrower, which right is hereby waived and
released to the fullest extent permitted by law.
(ii) Furthermore, without limiting the
generality of any of the rights and remedies
conferred upon the Bank under Section 8(i) hereof,
the Bank to the fullest extent permitted by law may
enter upon the premises of the Borrower, exclude
the Borrower therefrom and take immediate
possession of the Collateral, either personally or
by means of a receiver appointed by a court
therefor, using all necessary force to do so, and
may, at its option, use, operate, manage and
control the Collateral in any lawful manner and may
collect and receive all rents, income, revenue,
earnings, issues and profits therefrom, and may
maintain, repair, renovate, alter or remove the
Collateral as the Bank may determine in its
discretion, and any such monies so collected or
received by the Bank shall be applied to, or may be
accumulated for application upon, the Obligations
in accordance with Section 3 of this Agreement.
(iii) The Bank agrees that it will give
notice to the Borrower of any enforcement action
taken by it pursuant to this Section 8 promptly
after commencing such action.
(iv) The Borrower recognizes that the Bank
may be unable to effect a public sale of the
securities by reason of certain prohibitions
contained in the Securities Act of 1933, as
amended, and may be compelled to resort to one or
more private sales thereof to a restricted group of
purchasers consistent with all applicable laws.
The Borrower agrees that any such private sales may
be at prices and other terms less favorable to the
Borrower than if sold at public sales and that such
private sales shall not by reason thereof be deemed
not to have been made in a commercially reasonable
manner. The Bank shall be under no obligation to
delay a sale of any of the securities for the
period of time necessary to permit the issuer of
such securities to register such securities for
public sale under the Securities Act of 1933, as
amended, even if the issuer would agree to do so.
Section 9. MARSHALLING. The Bank shall not
be required to marshal any present or future
security for (including but not limited to this
Agreement and the Collateral subject to the
security interest created hereby), or guaranties
of, the Obligations or any of them, or to resort to
such security or guaranties in any particular
order; and all of their rights hereunder and in
respect of such securities and guaranties shall be
cumulative and in addition to all other rights,
however existing or arising. To the extent that it
lawfully may, the Borrower hereby agrees that it
will not invoke any law relating to the marshalling
of collateral which might cause delay in or impede
the enforcement of the Bank's rights under this
Agreement or under any other instrument evidencing
any of the Obligations or under which any of the
Obligations is outstanding or by which any of the
Obligations is secured or guaranteed and, to the
extent that it lawfully may, the Borrower hereby
irrevocably waives the benefits of all such laws.
Except as otherwise provided by applicable law, the
Bank shall have no duty as to the collection or
protection of the Collateral or any income thereon,
nor as to the preservation of rights against prior
parties, nor as to the preservation of any rights
pertaining thereto beyond the safe custody thereof.
Section 10. BORROWER'S OBLIGATIONS NOT
AFFECTED. To the extent permitted by law, the
obligations of the Borrower under this Security
Agreement shall remain in full force and effect
without regard to, and shall not be impaired by (a)
any bankruptcy, insolvency, reorganization,
arrangement, readjustment, composition, liquidation
or the like of the Borrower, to the extent
permitted by law; (b) any exercise or nonexercise,
or any waiver, by the Bank of any right, remedy,
power or privilege under or in respect of any of
the Obligations or any security therefor (including
this Agreement); (c) any amendment to or
modification of this Agreement or any instrument
evidencing any of the Obligations or pursuant to
which any of them were issued, other than in the
specific instance and for the specific purpose for
which such amendment or modification was given; (d)
any amendment to or modification of any instrument
or agreement (other than this Agreement) securing
any of the Obligations; or (e) the taking of
additional security for or any guaranty of any of
the Obligations or the release or discharge or
termination of any security or guaranty for any of
the Obligations; and whether or not the Borrower
shall have notice or knowledge of any of the
foregoing.
Section 11. NO WAIVER. No failure on the
part of the Bank to exercise, and no delay in
exercising, any right, remedy or power hereunder
shall operate as a waiver thereof, nor shall any
single or partial exercise by the Bank of any
right, remedy or power hereunder preclude any other
or future exercise of any other right, remedy or
power. Each and every right, remedy and power
hereby granted to the Bank or the future holders of
any of the Obligations or allowed to any of them by
law or other agreement, including, without
limitation, the Demand Note or any other Security
Document, shall be cumulative and not exclusive of
any other, and, subject to the provisions of this
Agreement, may be exercised by the Bank or the
future holders of any of the Obligations from time
to time.
Section 12. EXPENSES. The Borrower agrees to
pay, on demand, all reasonable costs and expenses
(including reasonable attorneys' fees and expenses
for legal services of every kind) of the Bank
incidental to the sale of, or realization upon, any
of the Collateral or in any way relating to the
perfection, enforcement or protection of the rights
of the Bank hereunder; and the Bank may at any time
apply to the payment of all such costs and expenses
all monies of the Borrower or other proceeds
arising from its possession or disposition of all
or any portion of the Collateral.
Section 13. CONSENTS, AMENDMENTS, WAIVERS.
Any term of this Agreement may be amended, and the
performance or observance by the Borrower of any
term of this Agreement may be waived (either
generally or in a particular instance and either
retroactively or prospectively) only by a written
instrument signed by the Borrower and the Bank.
Section 14. GOVERNING LAW. Except as
otherwise required by the laws of any jurisdiction
in which any Collateral is located, this Agreement
shall be deemed to be a contract under seal and
shall for all purposes be governed by and construed
in accordance with the laws of The Commonwealth of
Massachusetts.
Section 15. PARTIES IN INTEREST. All terms
of this Agreement shall be binding upon and inure
to the benefit of and be enforceable by the
respective successors and assigns of the parties
hereto, provided that the Borrower may not assign
or transfer its rights hereunder without the prior
written consent of the Bank.
Section 16. COUNTERPARTS. This Agreement and
any amendment hereof may be executed in several
counterparts and by each party on a separate
counterpart, each of which when so executed and
delivered shall be an original, but all of which
together shall constitute one instrument. In
proving this Agreement it shall not be necessary to
produce or account for more than one such
counterpart signed by the party against whom
enforcement is sought.
Section 17. TERMINATION. Upon the
indefeasible payment in full of the Obligations,
this Agreement shall terminate and the Borrower
shall be entitled to the return, at the Borrower's
expense, of such Collateral in the possession or
control of the Bank as has not theretofore been
disposed of pursuant to the provisions hereof.
Section 18. NOTICES. Except as otherwise
expressly provided herein, all notices and other
communications made or required to be given
pursuant to this Agreement shall be given in
accordance with Section 9 of the Demand Note.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have
caused these presents to be duly executed as an
instrument under seal by their authorized
representatives as of the date first written above.
IC LEASING CORPORATION III
By:______________________________
Title:
THE FIRST NATIONAL BANK OF BOSTON
By:______________________________
Title:
<PAGE>
IC LEASING CORPORATION III
AMENDMENT NO. 1 to SECURITY AGREEMENT
This AMENDMENT AGREEMENT NO. 1, dated as of
January 3, 1994, is between IC LEASING CORPORATION
III (the "Borrower") and THE FIRST NATIONAL BANK OF
BOSTON (the "Bank").
WHEREAS, the Borrower and the Bank are parties
to that certain Security Agreement dated as of
December 3, 1993 (the "Security Agreement"); and
WHEREAS, the Borrower and the Bank wish to
amend the schedule of Rolling Stock (as defined in
the Security Agreement) as provided in the Security
Agreement;
NOW THEREFORE, the parties hereto hereby agree
as follows:
Item 1. CAPITALIZED TERMS. Capitalized terms
which are used herein without definition and which
are defined in the Security Agreement shall have
the same meanings herein as in the Security
Agreement.
Item 2. AMENDMENT TO SECURITY AGREEMENT. (a)
The preamble to the Security Agreement is hereby
amended by deleting therefrom the address "One East
First Street, Reno, Nevada 89501" and substituting
therefor the address "1077 East Sahara Avenue, Las
Vegas, Nevada 89193".
(b) Section 4(d) of the Security Agreement is
hereby amended by deleting therefrom the address
"One East First Street, Reno, Nevada 89501" and
substituting therefor the address "1077 East Sahara
Avenue, Las Vegas, Nevada 89193".
(c) Schedule 4(b) to the Security Agreement is
hereby amended by deleting such schedule in its
entirety and substituting therefor the Schedule
4(b) attached hereto.
(d) Except as expressly set forth herein, the
Security Agreement shall be unaffected hereby and
shall continue in full force and effect.
Item 3. REPRESENTATIONS AND WARRANTIES. The
Borrower confirms to the Bank that the
representations and warranties of the Borrower set
forth in Item 4 of the Security Agreement are true
and correct on and as of the date hereof, as if
made herein.
Item 4. MISCELLANEOUS PROVISIONS. Except as
otherwise required by the laws of any jurisdiction
in which the Collateral is located, this Amendment
shall be deemed to be a contract under seal and
shall for all purposes be governed by and construed
in accordance with the laws of the Commonwealth of
Massachusetts. This Amendment may be executed in
several counterparts and by each party on a
separate counterpart, each of which when so
executed and delivered shall be an original, but
all of which together shall constitute one
instrument. In proving this Amendment it shall not
be necessary to produce or account for more than
one such counterpart signed by the party against
whom enforcement is sought.
IN WITNESS WHEREOF, the parties hereto have
caused these presents to be duly executed as an
instrument under seal by their authorized
representatives as of the date first written above.
IC LEASING CORPORATION III
By:
_________________________________
Title:
THE FIRST NATIONAL BANK OF BOSTON
By:
_________________________________
Title:
EXHIBIT 10.13
ALLIED RAILCAR COMPANY
ASSET SALE AGREEMENT
This ASSET SALE AGREEMENT is made as of December 3, 1993
by and between ALLIED RAILCAR COMPANY, an Illinois corporation
("Seller"), and IC Leasing Corporation III, a Nevada
corporation ("Buyer").
Buyer desires to purchase from Seller, and Seller
desires to sell to Buyer, certain assets of Seller, on the
terms and conditions set forth in this Agreement.
ACCORDINGLY, Seller and Buyer agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms.
(a) The following terms have the meanings specified in
this Section 1.1 for all purposes of this Agreement:
"CRTC" means Chrysler Rail Transportation Corporation,
a Delaware corporation.
"CRTC Agreement" means the Asset Purchase Agreement
dated as of December 3, 1993 between CRTC and Seller, a copy
of which is attached to this Agreement as Exhibit A.
"CRTC Closing" means the Closing defined in the CRTC
Agreement.
"Claims Administration Agreement" means the Claims
Administration Agreement dated the date hereof among, inter
alia, Buyer and Seller.
"Closing" means the completion of the purchase of the
Purchased Assets and the assumption of the Assumed Obligations
by Buyer.
"Closing Date" means the date at which Closing occurs.
"Purchased Assets" means those Assets listed on Exhibit
B to this Agreement.
(b) Capitalized terms not defined in this Agreement
shall have the meanings provided in the CRTC Agreement as in
effect on the date hereof.
ARTICLE 2
PURCHASE OF PURCHASED ASSETS AND CLOSING
2.1 Transfer of Purchased Assets.
On the terms and subject to the conditions set forth in
this Agreement, including without limitation Section 2.9,
Seller shall sell, assign, convey or otherwise transfer to
Buyer, without recourse, representation or warranty, except as
otherwise expressly provided herein, and Buyer shall purchase
and acquire on the Closing Date:
(a) All of the right, title and interest of Seller in
and to the Purchased Assets, including all such right, title
and interest acquired or to be acquired pursuant to the CRTC
Agreement;
and
(b) All rights of Seller under the CRTC Agreement and
under the CFC Guaranty to the extent those rights pertain to
the Purchased Assets, including without limitation rights with
respect to Records and Warranties, the representations and
warranties of CRTC under and pursuant to the CRTC Agreement,
the covenants of CRTC under the CRTC Agreement and the
indemnification obligations of CRTC under the CRTC Agreement.
Buyer acknowledges
that the assignment of rights under the CRTC Agreement is
subject to Section 10.4 of the CRTC Agreement.
2.2 Excluded Assets.
(a) Buyer is not acquiring any interest in any CRTC
assets excluded by Section 2.2 of the CRTC Agreement.
(b) Buyer is not acquiring any interest in rights of
Seller under the CRTC Agreement to the extent those rights
pertain to Assets other than Purchased Assets.
2.3 Purchase Price.
(a) Subject to the purchase price adjustments contained
in Section 2.4 hereof, Buyer shall pay to Seller for the
Purchased Assets twenty-two million, nine hundred seventy-five
thousand, two hundred eighty-eight and 20/100 dollars
($22,975,288.20) (the "Purchase Price").
(b) In accordance with the terms and conditions of this
Agreement, at Closing Buyer shall pay to Seller the Purchase
Price in cash by wire transfer of immediately available funds
in accordance with the wire transfer instructions delivered to
Buyer from Seller at least one business day prior to Closing.
2.4 Adjustments to Purchase Price.
(a) Buyer agrees that there shall not be any
adjustment to the Purchase Price in the event that any Railcar
included in the Purchased Assets is a Destroyed Railcar under
the CRTC Agreement and further agrees that its sole
compensation for the acquisition of any Railcar which is such
a Destroyed Railcar shall be the right to receive amounts
received or receivable by Seller under Section 2.4 of the CRTC
Agreement. Any such amounts received by Seller prior to
Closing shall be paid or credited to Buyer at Closing, and any
such amounts received by Seller after Closing shall be
promptly paid over to Buyer.
(b) The Purchase Price shall be decreased by an
amount equal to $2,250 multiplied by the number (if any) of
Railcars listed on Schedule 4.5 to the CRTC Agreement and
included in the Purchased Assets. Such adjustment may be
effected by a refund of a portion of the Purchase Price within
10 days after Closing.
2.5 Assumption of Obligations.
On the Closing Date Buyer shall assume and thereafter
pay, perform and discharge all liabilities, obligations and
duties of Seller with respect to the Purchased Assets,
including without limitation all obligations of Seller under
the CRTC Agreement with respect to the Purchased Assets and
all obligations assumed by Seller with respect to the
Purchased Assets under the CRTC Agreement (the "Assumed
Obligations"). It is acknowledged and agreed that (i) Buyer
shall be deemed to be a "Purchaser" as defined in Section 10.4
of the CRTC Agreement and (ii) to the extent any provision of
the Agreement related to any rights or Assets assigned to or
liabilities, obligations or duties assumed by, Buyer pursuant
to this Agreement, Buyer shall be subject to and bound by the
provisions of the CRTC Agreement as if it were a party to such
Agreement, including without limitation, Sections 2.6
(Allocation of Revenues and Expenses), Section 2.9 (Restricted
Assets), Article VIII (Survival; Indemnification) and Article
X (Miscellaneous). This provision is intended to be for the
benefit of CRTC and may be directly enforced by CRTC.
2.6 Allocation of Revenues and Expenses .
(a) Buyer agrees to the allocation between Seller and
CRTC of revenues and expenses under Section 2.6 of the CRTC
Agreement with respect to the Purchased Assets and agrees that
such allocation to Seller shall be for the account of Buyer.
(b) Any revenue and expenses of Seller attributable to
the Purchased Assets and allocable to the period prior to the
Closing Date shall be for the account of Buyer, and Buyer
shall have the right to receive all such revenue and shall be
obligated to pay all such expenses.
2.7 Closing.
The Closing shall take place at the offices of Schiff
Hardin & Waite, 7200 Sears Tower, Chicago, Illinois 60606,
simultaneously with the CRTC Closing, but in any event not
later than December 31, 1993. The term "Closing Date" means
the date on which the Closing occurs.
2.8 Deliveries at Closing.
(a) At Closing Seller shall deliver to Buyer (i) such
Purchased Assets and such bills of sale, endorsements and
instruments of conveyance, transfer and assignment as are
necessary to transfer to Buyer all of the right, title and
interest of Seller in and to the Purchased Assets (including
all of the right, title and interest acquired by Seller from
CRTC) in accordance with this Agreement and (ii) all other
instruments and documents which are expressly required pursuant
to this Agreement to be executed and delivered by Seller at the Closing.
(b) At Closing Buyer shall deliver to Seller (i) the
Purchase Price, (ii) such assumption agreements or other
instruments necessary or appropriate to effect Buyer's
assumption of the Assumed Obligations and (iii) all other
instruments and documents which are expressly required pursuant
to this Agreement to be executed and delivered by Buyer at the
Closing.
(c) Seller and Buyer acknowledge that at the time of
Closing the Railcars are in the possession of Lessees or at
various locations on the railroad interchange system and that
physical delivery at Closing is not practicable. Accordingly
Buyer and Seller agree that each Railcar shall be deemed
delivered from Seller to Buyer under this Agreement, without
any further action by Seller or Buyer, on the earlier of (i)
the first day that such Railcar is present in any of the
states listed on Schedule 2.8 or (ii) December 31, 1994. This
provision shall have no effect on title, risk of loss or any
other rights and obligations with respect to the Railcars, all
of which shall pass from Seller to Buyer at the Closing (or as
otherwise provided by Section 2.9). Buyer agrees that Seller
shall have no liability or obligation to Buyer for any Losses
to buyer which arise out of or relate to this Section 2.8(c).
2.9 Restricted Assets.
In the event that any Purchased Assets are Restricted
Assets, Buyer shall have all the rights and obligations of
Seller with respect to such Restricted Assets under Section
2.9 of the CRTC Agreement. Seller hereby assigns such rights
to Buyer, and Buyer hereby assumes such obligations.
<PAGE>
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
IT IS THE INTENT AND AGREEMENT OF THE PARTIES HERETO
THAT THE PURCHASED ASSETS ARE BEING SOLD ON AN "AS IS", "WHERE
IS", "WITH ALL FAULTS" BASIS AND WITHOUT ANY REPRESENTATIONS
OR WARRANTIES EXCEPT AS EXPRESSLY PROVIDED IN THIS ARTICLE 3.
Subject to the foregoing, Seller hereby represents and
warrants to Buyer:
3.1 Corporate Status. Seller is a corporation
validly existing and in good standing under the laws of the
State of Illinois. Seller has the corporate power and
corporate authority to own and lease the Purchased Assets owned
or leased by it.
3.2 Authority; Binding Effect. Seller has the
corporate power and corporate authority to execute and deliver
this Agreement and the other instruments and agreements
required or contemplated herein to be executed and delivered
by it at the Closing, to perform its obligations hereunder and
thereunder, and to consummate the transactions provided for
herein and therein, and all corporate action of Seller
necessary for the making and performance of this Agreement and
such other instruments and agreements by it has been
duly taken. The execution, delivery and performance of this
Agreement and such other instruments and agreements by Seller,
and the consummation by Seller of the transactions
contemplated hereby and thereby, do not and will not (i) (A)
contravene any provisions of the Articles of Incorporation or
by-laws of Seller, (B) result in any material breach of or
material default (or an event which, with notice or lapse of
time or both, would constitute a material default) under, or
the cancellation of, or the creation of any lien (other than
Permitted Liens) under, any Assumed Contract, (C) result in
any material breach of or material defaults (or an
event which, with notice or lapse of time or both, would
constitute a material default) under, or the cancellation of
or the creation of any lien under, any other material
mortgage, indenture, contract, agreement or other instrument
to which Seller is a party except for such breaches, defaults,
cancellations or liens which would not materially adversely
affect Seller's ability to perform its obligations hereunder,
or (D) result in any violation by Seller of any law, rule or
regulation applicable to it which violation would materially
adversely effect Seller's ability to perform its obligations
hereunder, (ii) result in any violation by Seller of any
judgment, injunction or decree of any court or governmental
authority applicable to Seller which violation would
materially adversely affect Seller's ability to perform its
obligations hereunder, or (iii) require any Governmental
Filing to be made or obtained by Seller except for filings
made and obtained prior to the date hereof, any Governmental
Filings that may be required to be made as a result of the
specific regulatory status of Buyer or as a result of any
other facts that relate to the business or activities in which
Buyer is or proposes to be engaged, and Governmental Filings
the failure of which to make or obtain would not have a
material adverse effect on Seller's ability to perform its
obligations hereunder. This Agreement has been duly executed
and delivered by Seller and the other instruments and
agreements required or contemplated herein to be executed and
delivered by Seller at the Closing will be duly executed and
delivered by Seller at the Closing. This Agreement
constitutes, and at the Closing each of such other instruments
and agreements will constitute, the valid and binding
obligations of Seller, enforceable against Seller in
accordance with their terms.
3.3 Consents From Third Parties. No Consents are
required to be obtained by Seller under the Assumed Contracts
for the consummation by Seller of the transactions
contemplated by this Agreement.
3.4 Title to Purchased Assets. Seller has such title
to the Purchased Assets as Seller acquired from CRTC at the
CRTC Closing and has granted no liens or other encumbrances on
the Purchased Assets, nor allowed any other liens or
encumbrances arising by, through or under Seller to attach to
the Purchased Assets.
3.5 Litigation. There is no material action, suit,
formal governmental investigation or other proceeding pending
or, to Seller's knowledge, threatened against Seller, at law
or in equity, before any federal, state or municipal court,
administrative agency or arbitrator which materially adversely
affects the Purchased Assets or the Assumed Obligations and is
reasonably likely to be adversely determined in a manner which
would be material to the Purchased Assets, or which would
materially impair Seller's ability to perform this Agreement
or the other instruments and documents to be executed and
delivered by Seller at the Closing.
3.6 Brokers. Except for Buyer's arrangements with
Railroad Financial Corporation which do not require any
payment by Seller, there is no broker or finder or other
Person who has any valid claim against any of the parties to
this Agreement for a commission or brokerage fee or the like
in connection with this Agreement or the transactions
contemplated hereby as a result of any agreement of or action
taken by Seller.
<PAGE>
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller that:
4.1 Corporate Status. Buyer is a corporation validly
existing and in good standing under the laws of the State of
Nevada. Buyer has the corporate power and corporate authority
to own or lease its properties and assets and the Purchased
Assets that it will acquire at the Closing and to carry on its
business in the manner in which such business is now being
conducted and will be conducted by Buyer after the Closing.
4.2 Authority; Binding Effect. Buyer has the
corporate power and corporate authority to execute and deliver
this Agreement and the other instruments and agreements
required or contemplated herein to be executed and delivered
by it at the Closing, to perform its obligations hereunder and
thereunder and to consummate the transactions provided for
herein and therein, and all corporate action of Buyer
necessary for the making and performance of this Agreement and
such other instruments and agreements by Buyer has been duly
taken. The execution, delivery and performance of this
Agreement and such other instruments and agreements by Buyer,
and the consummation by Buyer of the transactions contemplated
hereby and thereby, do not and will not (i)(A) contravene any
provisions of the Articles of Incorporation or By-laws of
Buyer, (B) result in any material breach of or material
default (or an event which, with notice or lapse of time or
both, would constitute a material default) under, or the
cancellation of, any material mortgage, indenture, contract,
Agreement or other instrument to which Buyer is a party except
for such breaches, defaults or cancellations which would not
materially adversely affect Buyer's ability to perform its
obligations hereunder, or (C) result in any violation by Buyer
of any law, rule or regulation applicable to Buyer which
violation would materially adversely affect Buyer's ability to
perform its obligations hereunder, (ii) result in any
violation by Buyer of any judgment, injunction or decree of
any court or governmental authority applicable to Buyer which
violation would materially adversely affect Buyer's ability to
perform its obligations hereunder or (iii) require any
Governmental Filing to be made or obtained by Buyer except for
Governmental Filings made or obtained prior to the date
hereof, state or local sales tax filings and Governmental
Filings the failure of which to make or obtain would not have
a material adverse effect on Buyer's ability to perform its
obligations hereunder. This Agreement has been duly executed
and delivered by Buyer and the other instruments and
agreements required or contemplated herein to be executed and
delivered by Buyer at the Closing will be duly executed and
delivered by Buyer at the Closing. This Agreement
constitutes, and at the Closing each of such other instruments
and agreements will constitute, the valid and binding
obligations of Buyer enforceable against Buyer in accordance
with their terms.
4.3 Brokers. Except for Buyer's arrangements with
Railroad Financial Corporation which do not require any
payment by Seller, there is no broker or finder or other
Person who has any valid claim against any of the parties to
this Agreement for a commission or brokerage fee or the like
in connection with this Agreement or the transactions
contemplated hereby as a result of any agreement of or action
taken by Buyer or any of its Affiliates.
4.4 Litigation. There is no material action, suit,
formal governmental investigation or other proceeding pending
or, to Buyer's knowledge, threatened against Buyer, at law or
in equity, before any federal, state or municipal court,
administrative agency or arbitrator which if adversely
determined would materially impair Buyer's ability to perform
this Agreement or the other instruments and documents to be
executed and delivered by Buyer at the Closing.
ARTICLE 5
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to purchase the Purchased
Assets and assume the Assumed Obligations are subject to the
fulfillment, at or before the Closing, of each of the
following conditions, any one or more of which may be waived
by Buyer:
5.1 Representations, Warranties, Covenants. The
representations and warranties of Seller contained in Article
3 of this Agreement shall be true and correct in all material
respects as of the Closing Date as through such
representations and warranties were made as of the Closing
Date. Seller shall have performed and complied in all
material respects with all covenants and agreements required
by this Agreement to be performed or complied with by it at or
prior to the Closing Date.
5.2 Proceedings. No party to this Agreement shall be
subject to any order, stay, injunction or decree of any court
of competent jurisdiction in the United States restraining or
prohibiting the consummation of the transactions contemplated
hereby.
5.3 Bill of Sale and Assignment. Seller shall have
delivered to Buyer a Bill of Sale and Assignment (the "Bill of
Sale and Assignment"), duly executed by Seller, in the form
attached to this Agreement as Exhibit C.
5.4 Instruments of Conveyance. Seller shall have
duly executed and delivered to Buyer any other assignments or
other instruments of conveyance with respect to the Purchased
Assets reasonably determined to be necessary by Buyer and its
counsel.
5.5. Legal Opinion. Buyer shall have received a legal
opinion of McLachlan, Rissman & Doll, counsel to Seller, with
respect to the matters set forth in Sections 3.1 and 3.2.
5.6 CRTC Closing. The CRTC Closing shall have
occurred as contemplated by the CRTC Agreement.
5.7 Claims Administration Agreement. Seller shall
have duly executed and delivered the Claims Administration
Agreement.
ARTICLE 6
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller to consummate the transfer of
the Purchased Assets are subject to the fulfillment, at or
before the Closing, of each of the following conditions, any
one or more of which may be waived by Seller:
6.1 Representations, Warranties, Covenants. The
representations and warranties of Buyer contained in Article
4 of this Agreement shall be true and correct in all material
respects as of the Closing Date as though such representations
and warranties were made as of the Closing Date. Buyer shall
have performed and complied in all material respects with all
covenants and agreements required by this Agreement to be
performed or complied with by it at or prior to the Closing
Date.
6.2 Proceedings. No party to this Agreement shall be
subject to any order, stay, injunction or decree of any court
of competent jurisdiction in the United States restraining or
prohibiting the consummation of the transactions contemplated
hereby.
6.3 Assumption of Liabilities. Buyer shall have
delivered to Seller a Delegation and Assumption of Liabilities
(the "Assumption of Liabilities") duly executed by Buyer, in
the form
attached to this Agreement as Exhibit D.
6.4. Legal Opinion. Seller shall have received a legal
opinion of Schiff Hardin & Waite, counsel to Buyer, with
respect to the matters set forth in Sections 4.1 and 4.2.
6.5 CRTC Closing. The CRTC Closing shall have
occurred as contemplated by the CRTC Agreement.
ARTICLE 7
COVENANTS
7.1 Notice of Proceedings; Agreement to Defend.
(a) Each party to this Agreement will notify the
other promptly in writing upon (i) such party's becoming aware
of any order, judgment or decree restraining or enjoining the
consummation of this Agreement or the transactions
contemplated hereby or any complaint seeking such an order,
judgment or decree or (ii) such party's receiving any notice
from any governmental authority of its intention (A) to
institute an investigation into, or institute a suit or
proceeding to restrain or enjoin, the consummation of this
Agreement or the transactions contemplated hereby or (B) to
nullify or render ineffective this Agreement or such
transactions if consummated.
(b) In the event any Person brings a suit or
claim, or commences an action, investigation or other
proceeding, which either challenges the validity or legality
of this Agreement or the transactions contemplated by this
Agreement or any instrument or document contemplated hereby,
or seeks damages in connection with such transactions, the
parties agree to consult and to cooperate with each other and
use all reasonable efforts to defend against such suit, claim,
action, investigation or other proceeding and, in the event an
injunction or other order is issued in connection with any of
the foregoing, to use all reasonable efforts to have such
injunction lifted or such order set aside so that the
transactions contemplated by this Agreement and the
instruments and documents contemplated hereby may proceed.
7.2 Consummation of Agreement. Subject to the
provisions of Article 9 of this Agreement, Buyer and Seller
shall use all reasonable efforts to fulfill and perform all
conditions and obligations on their respective parts to be
fulfilled and performed under this Agreement, and to cause the
transactions contemplated by this Agreement to be fully
carried out.
7.3 Consents and Filings. Buyer and Seller shall
give or cause to be given all required notices and use all
reasonable efforts to obtain as soon as possible all licenses,
permits,
consents, approvals, authorizations, qualifications and orders
of governmental authorities as may be required or desired in
order to enable Seller and Buyer to perform their respective
obligations under this Agreement.
7.4 Records. Seller shall deliver to Buyer the
Records pertaining to the Purchased Assets as promptly as
practicable (or a copy of such Records), but in no event later
than 10 days after receipt of such Records from CRTC.
ARTICLE 8
SURVIVAL; INDEMNIFICATION
8.1 Survival. All representations and warranties,
covenants and agreements contained in this Agreement or in the
certificates of Buyer and Seller to be delivered at the
Closing, the Bill of Sale and Assignment and the Assumption of
Liabilities (the "Other Documents") shall survive and not be
affected in any respect by the Closing or by any investigation
conducted by any party hereto and any information which any
party may receive.
8.2 Indemnification. The parties shall indemnify
each other as set forth below:
(a) Seller hereby agrees to indemnify and hold harmless
Buyer from, and to reimburse Buyer for, any and all losses,
damages, liabilities and claims, and fees, costs and expenses
of any kind related thereto, including reasonable attorneys'
fees ("Losses") which are the direct result of (i) the breach
as of the Closing Date of any representation or warranty of
Seller contained in Article 3 of this Agreement, (ii) the
breach by Seller of or failure by Seller to perform any of its
obligations contained in this Agreement or any of the Other
Documents or (iii) any failure by Seller to pay or discharge
when due any liability or obligation of Seller that is not
assumed by Buyer in or pursuant to this Agreement or any of
the Other Documents.
(b) Buyer hereby agrees to indemnify and hold harmless
Seller from any and all Losses which are the direct result of
(i) the breach as of the Closing Date of any representation or
warranty of Buyer contained in Article 4 of this Agreement,
(ii) the breach by Buyer of or failure by Buyer to perform any
of its obligations contained in this Agreement or any of the
Other Documents, (iii) any failure by Buyer to pay or
discharge any liability or obligation assumed by it in or
pursuant to this Agreement or any of the Other Documents or
(iv) any failure by Buyer to pay or discharge any other
liabilities, obligations and duties (and asserted liabilities,
obligations or duties) whether fixed, contingent or otherwise,
accruing, arising, incurred or to be performed after the
Closing Date in any way associated with, relating to or
arising out of ownership or operation of the Purchased Assets
after Closing.
(c) As promptly as reasonably practicable after Buyer
or Seller shall receive any notice of, or otherwise become
aware of, the commencement of any action, suit or proceeding,
the assertion of any claim, the occurrence of any event, the
existence of any fact or circumstance or the incurrence of any
Loss, for which indemnification is provided for by this
Section 8.2 (an "Indemnified Event"), the party entitled to
indemnification (an "Indemnified Party") shall give written notice
(an "Indemnification Claim") to the party from which
indemnification is sought (an "Indemnifying Party") describing
in reasonable detail the basis of such Indemnification Claim.
If the Indemnifying Party is not so notified by the
Indemnified Party within 30 calendar days after the date of an
executive officer of the Indemnified Party's receipt of notice
of, or an executive officer of the Indemnified Party's
becoming aware of, any Indemnification Event, the Indemnifying
Party shall be relieved of liability hereunder to any
Indemnified Party in respect of such Indemnification Event, or
the facts or circumstances giving rise thereto, to the extent,
(but only to the extent) the Indemnified Party is actually
prejudiced or damaged thereby. If such Indemnification Claim
involves the claim of any third party, the Indemnifying Party
shall be entitled to participate in, and assume sole control
over, the defense and settlement of such claim; provided,
however, that (i) the Indemnified Party shall be entitled to
participate in the defense of such claim and to employ counsel
at its own expense to assist in the handling of such claim;
(ii) the Indemnifying Party shall thereafter consult with the
Indemnified Party upon Indemnified Party's reasonable request
for such consultation from time to time with respect to such
claim; and (iii) the Indemnifying Party shall obtain the prior
written approval of the Indemnified Party, which shall not be
unreasonably withheld or delayed, before entering into any
settlement of such claim or ceasing to defend against such
claim, if as a result of such settlement injunctive or other
equitable relief would be imposed against the Indemnified
Party. After written notice by the Indemnifying Party to the
Indemnified Party of its election to assume control of the
defense of any such claim, the Indemnifying Party shall not be
liable to such Indemnified Party hereunder for any legal
expenses subsequently incurred by such Indemnified Party in
connection therewith. If the Indemnifying Party does not
assume sole control over the defense or settlement of such
claim as provided in this Section 8.2(c) within a reasonable
period of time, the Indemnified Party shall have the right to
defend and, upon obtaining the written consent of the
Indemnifying Party which shall not be unreasonably withheld or
delayed, settle the claim in such manner as it may deem
appropriate, and the Indemnifying Party shall promptly
reimburse the Indemnified Party therefor in accordance with
Section 8.2(a) or (b), as appropriate. The Indemnifying Party
shall not be liable under this Section 8.2 for any settlement
or compromise effected without its consent (provided the
Indemnifying Party has not breached its obligations under this
Section 8.2).
(d) In the event of any Indemnification Claim
involving the claim of any third party, the Indemnified Party
shall cooperate (and shall cause its Affiliates to cooperate)
in all reasonable respects with the Indemnifying Party in the
defense of any such claim under this Section 8.2. Without
limiting the generality of the foregoing, the Indemnified
Party shall furnish the Indemnifying Party with such
documentary or other evidence as is then in its or any of its
Affiliates' possession as may reasonably be requested by the
Indemnifying Party for the purpose of defending against any
such claim.
(e) Upon payment of any amount pursuant to any
Indemnification Claim, the Indemnifying Party shall be
subrogated, to the extent of such payment, to all of the
Indemnified Party's rights of recovery against any third party
(other than any Affiliate or permitted assignee) with respect
to the matters to which such Indemnification Claim relates.
ARTICLE 9
TERMINATION
9.1 Mutual Agreement. This Agreement may be
terminated at any time prior to the Closing by the written
agreement of Seller and Buyer.
9.2 Unilateral Termination. This Agreement may be
terminated by Buyer or Seller giving notice of termination to
the other at any time after December 31, 1993, if the Closing
has not occurred by that date.
9.3 Effect of Termination. Except for the terms of
Sections 10.2 and 10.7 hereof, which shall survive any
termination of this Agreement, upon the termination of this
Agreement pursuant to this Article 9, this Agreement shall
forthwith become null and void, and no party hereto or any of
its officers, directors, employees, agents, consultants,
stockholders or principals shall have any rights, liabilities
or obligations hereunder or with respect hereto; provided,
however, that nothing contained in this Article 9 shall
relieve any party from liability for any willful failure to
comply with any covenant or agreement contained herein (and
the terms of Article 8 hereof shall apply to any such
failure).
<PAGE>
ARTICLE 10
MISCELLANEOUS
10.1 Exclusivity of Representations; Reliance on
Representations. (a) THE REPRESENTATIONS AND WARRANTIES MADE
BY SELLER IN THIS AGREEMENT ARE IN LIEU OF AND ARE EXCLUSIVE
OF ALL OTHER REPRESENTATIONS AND WARRANTIES, INCLUDING,
WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR
OF FITNESS FOR A PARTICULAR PURPOSE AND ANY OTHER IMPLIED
WARRANTIES OF SELLER. SELLER HEREBY DISCLAIMS ANY SUCH OTHER
OR IMPLIED REPRESENTATIONS OR WARRANTIES, NOTWITHSTANDING THE
DELIVERY OR DISCLOSURE TO BUYER OR ANY OF ITS OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES OF ANY
DOCUMENTATION OR OTHER INFORMATION BY SELLER OR ANY OTHER
PERSON IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
(b) Buyer represents to Seller that in making its
decision to enter into this Agreement and purchase the
Purchased Assets, it is not relying on any information
provided or statements made by Seller or any of its agents,
representatives, employees or Affiliates other than the
specific representations and warranties made by Seller in this
Agreement.
10.2 Expenses. Except as expressly contemplated by
this Agreement, each party hereto shall bear all of its
expenses incurred in connection with the transactions
contemplated by this Agreement, including, without limitation,
accounting and legal fees incurred in connection herewith.
Buyer shall pay, or reimburse Seller for, (i) any sales, use,
transfer, stamp, documentary, recording, registration or
similar Taxes arising from the transfer of the Purchased
Assets to Buyer and (ii) any filing or recording fees in
connection with the transfer of the Purchased Assets to Buyer.
Buyer and Seller agree to cooperate in order to minimize any
Taxes that may be applicable to the transfer of Purchased
Assets.
10.3 Bulk Sales Laws. Buyer hereby waives compliance
with the provisions of any applicable bulk sales law. Seller
agrees to indemnify and hold harmless Buyer from any loss,
liability, cost or expense which may result from
non-compliance with any applicable bulk sales law.
10.4 Further Assurances. From time to time prior to,
at and after the Closing Date, each party hereto will execute
all such instruments and take all such actions as any other
party, being advised by counsel, shall reasonably request in
connection with carrying out and effectuating the intent and
purpose hereof and all transactions and things contemplated by
this Agreement, including, without limitation, the execution
and delivery of any and all confirmatory and other instruments
in addition to those to be delivered on the Closing Date, and
any and all actions which may reasonably be necessary or
desirable to complete the transactions contemplated hereby.
10.5 Notices. Notices and other communications
provided for herein shall be in writing (which shall include
notice by facsimile transmission) and shall be delivered or
mailed (or if by facsimile communications equipment of the
sending party hereto, delivered by such equipment), addressed
as follows:
If to Seller:
Allied Railcar Company
6 West Hubbard, Suite 500
Chicago, Illinois 60610
Attention: President
Fax: 312-222-1470
If to Buyer:
IC Leasing Corporation III
1 East First Street
Reno, Nevada 89501
Attention: President
or to such other address as a party may from time to time
designate in writing in accordance with this Section. All
notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be
deemed to have been given on the date of receipt, provided
that any notice or communication that is received other than
during regular business hours of the recipient shall be deemed
to have been given at the opening of business on the next
business day of the recipient.
10.6 Captions. The captions of Articles and Sections
of this Agreement are for convenience only and shall not
control or affect the meaning or construction of any of the
provisions of this Agreement.
10.7 Law Governing. This Agreement shall be governed
by and construed and enforced in accordance with the laws of
the State of Illinois (without regard to the conflicts of law
principles thereof).
10.8 Waiver of Provisions. The terms, covenants,
representations, warranties and conditions of this Agreement
may be waived only by a written instrument executed by the
party waiving compliance. The failure of any party at any
time or times to require performance of any provisions of this
Agreement shall in no manner affect the right of such party at
a later date to enforce the same. No waiver by any party of
any condition or the breach of any provision, term, covenant,
representation or warranty contained in this agreement,
whether by conduct or otherwise, in any one or more instances
shall be deemed to be or construed as a further or continuing
waiver of any such condition or of the breach of any other
provision, term, covenant, representation, or warranty of this
Agreement.
10.9 Counterparts. This Agreement may be executed in
several counterparts, and all counterparts so executed shall
constitute one agreement, binding on the parties hereto,
notwithstanding that the parties are not signatories to the
same counterpart.
10.10 Entire Agreement; Amendment. This Agreement
constitutes the entire agreement among the parties or their
Affiliates with respect to the matters contained herein and
supersedes and cancels any and all prior agreements relating
to such matters between them and may not be amended or
modified except in a writing signed by Buyer and Seller.
10.11 No Third Party Beneficiary. Except as provided
in Section 2.5 and Section 10.13, this Agreement is not
intended and shall not be construed to confer upon any Person
other than the parties thereto and their permitted assigns any
rights or remedies hereunder.
10.12 Severability. If any provision of this Agreement
is held to be unenforceable for any reason, it shall be
adjusted rather than voided, if possible, in order to achieve
the intent
of the parties to the extent possible. In any event, all
other provisions of this Agreement shall be deemed valid and
enforceable to the full extent possible.
10.13 Assignment. Either party may assign its rights
under this Agreement, but any assignment shall not affect the
obligations of the assignor. Seller may assign its rights
under this Agreement to a source of financing for the Assets;
upon receiving notice of such assignment, Buyer agrees not to
consent to any amendment to this Agreement or any waiver of
Buyer's obligations under this Agreement without the consent
of such assignee and agrees that such assignee may enforce
this Agreement on behalf of Seller.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed by their duly authorized
officers, all as of the date and year first written above.
ALLIED RAILCAR COMPANY
By__________________________
Title:
IC LEASING CORPORATION III
By_____________________________
Title:
Exhibit 10.15
PURCHASE AGREEMENT
This Agreement is entered into as of December
______, 1993 between The First National Bank of
Maryland, a national banking association ("Seller")
and IC Leasing Corporation III, a Nevada
corporation ("Purchaser").
RECITALS
WHEREAS, Seller owns two hundred seventy-seven
70-ton 50-foot 6-inch Class XM boxcars, described
more fully on Exhibit A attached hereto (the
"Equipment"). Each unit of Equipment is herein
designated a "Unit";
WHEREAS, Seller and Illinois Central Railroad
Company, a Delaware corporation, ("Lessee") entered
into a Equipment Lease Agreement dated October 20,
1980, pursuant to which Lessee presently leases
the Equipment from Seller, a copy of which is
attached hereto as Exhibit B (the "Equipment
Lease"). Capitalized terms used herein but not
defined herein shall have the meanings ascribed to
them in the Equipment Lease; and
WHEREAS, Seller desires to sell and assign to
Purchaser and Purchaser desires to purchase and
assume from Seller the Equipment and the Equipment
Lease, at the price and on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the
premises and the following mutual agreements the
parties hereto hereby agree as follows:
1. Sale and Assignment of Equipment and
Equipment Lease.
1.01 Transfer of Equipment and Equipment
Lease. On the Closing Date (as hereinafter
defined), Seller agrees to sell and assign to
Purchaser, and Purchaser agrees to purchase and
assume from Seller, all of Seller's right, title
and interest in and to the Equipment and the
Equipment Lease. Lessee shall retain possession of
the Equipment under the terms of the Equipment
Lease which, except as hereinafter provided,
shall remain in full force and effect. Units
sustaining a Casualty Occurrence prior to the
Closing Date, shall not be acquired by Purchaser.
1.02 Warranties and Other Rights. Seller
hereby agrees to sell and assign to Purchaser all
of the warranties with respect to the Equipment
obtained by Seller from others which are
assignable.
1.03 Assumption of Rights and Obligations
Under Equipment Lease. Upon the consummation of
the transactions contemplated by this Agreement,
Purchaser shall (i) be entitled to receive all
rents, collections, interests and other sums on
account of the Equipment Lease (ii) assume, perform
and discharge all of the obligations and duties of
Seller with respect to the Equipment Lease and
(iii) exercise all other incidences of ownership of
the Equipment under the Equipment Lease.
1.04 Purchase Price. In
consideration for the sale and assignment of the
Equipment and the Equipment Lease, Purchaser does
hereby promise to pay to Seller the sum of $15,186
per Unit (the "Purchase Price") on December 31,
1993, by Federal Reserve wire transfer to such bank
account as Seller may direct.
1.05 Closing. The closing of the
purchase and sale of the Equipment and the
Equipment Lease shall occur at 10:00 a.m. Chicago
time at the principal office of the Seller on
December 31, 1993 or such other time or place as
the parties shall mutually agree (the "Closing
Date").
2. Representations, Warranties and Covenants
of Seller.
2.01 Concerning the Equipment and
Equipment Lease. Seller represents and warrants
that the sale of the Equipment and Equipment Lease
does not violate or infringe the patent, trademark,
trade name or other rights of any party.
2.02 Title. Seller represents and
warrants that except for the interest of the
Lessee under the Equipment Lease, Seller has good
and marketable title to the Equipment, free and
clear of all liens, claims, charges, security
interests, encumbrances and rights of third parties
of any type or description arising by or through
Seller or its affiliates.
2.03 Notices. Seller represents and
warrants that Seller has not received any notice
from any governmental authority that any
investigation has been commenced or is contemplated
respecting any failure of the Equipment to comply
with any laws, rules, regulations or orders.
2.04 Equipment Lease. The Equipment
Lease attached hereto as Exhibit B is a true and
complete copy of the Equipment Lease and there are
no amendments or other agreements relating to the
Equipment Lease. Seller agrees that concurrent
with the consummation of the transactions
contemplated by this Agreement and payment by
Lessee of any Basic Rents then outstanding under
the Equipment Lease, Seller shall have no further
rights with respect to the Equipment Lease and
Lessee shall be released from all obligations and
liabilities to Seller under the Equipment Lease,
except as provided in Sections 10.02 and 14.02 of
the Equipment Lease.
2.05 Other Agreements. Seller
represents and warrants that except for the
Equipment Lease, this Agreement and the documents
to be delivered pursuant hereto, there are no
agreements of any kind relating to the Equipment or
any part thereof which Seller has entered into and
which will be binding upon Purchaser after the
Closing Date.
2.06 Bill of Sale and Assignment. On
the Closing Date, the "Bill of Sale and Assignment"
(as hereinafter defined) shall have been duly
authorized, executed and delivered by Seller and
shall be valid and effective to transfer and assign
good and marketable title to the Equipment and
Seller's interest in the Equipment Lease to
Purchaser, free and clear of all liens, claims,
charges, security interests, encumbrances and
rights of third parties of any type or description
arising by or through Seller or its affiliates.
2.07 Documents Furnished. Seller
represents and warrants that it will deliver to
Purchaser on the Closing Date, copies of all
material agreements and instruments currently in
its possession received by it (except the Purchase
Agreement, drafts of documents, correspondence and
legal opinions) in connection with Seller's
acquisition of the Equipment, including, without
limitation, all written notices, appraisals,
inspection reports, maintenance records, invoices,
purchase orders, original equipment specifications,
drawings and certificates of acceptance.
2.08 Organization and Existence. Seller
represents and warrants that it is a national
banking association duly and validly organized and
existing in good standing under the laws of the
State of Maryland and is duly qualified to own its
properties and carry on its business in each
jurisdiction where the failure to so qualify would
be materially adverse to Seller or its business.
2.09 Power and Authority. Seller
represents and warrants that Seller has the power
and authority to execute and deliver this Agreement
and the Bill of Sale and Assignment (as hereinafter
defined) (collectively, the "Transaction
Documents") and to perform, when due, its
obligations hereunder and thereunder. Seller has
the power and authority to deliver all other
documents delivered by Seller in connection with
the closing of this Purchase Agreement.
2.10 Authorizations. Seller represents
and warrants that the execution and delivery of the
Transaction Documents by Seller and the performance
by Seller, when due, of its obligations hereunder
and thereunder, have been duly authorized by all
necessary action and do not violate or conflict
with, or, with or without the giving of notice, the
passage of time or both, constitute a default
under, any provision of Seller's instruments of
organization, any law, order, writ, injunction,
decree, rule or regulation of any court,
administrative agency or any other governmental
authority or any agreement or other document or
instrument to which Seller is a party or by which
Seller is, or may be, bound.
2.11 Enforceability. Seller represents
and warrants that the Transaction Documents
constitute the valid and binding obligations of
Seller and are enforceable against it in accordance
with their respective terms. There is no action,
suit, proceeding or investigation at law or in
equity pending or, to the knowledge of Seller,
threatened before or by any court, public board or
body, against or affecting Seller wherein an
unfavorable decision, ruling or finding would
adversely affect the ability of Seller to perform
its obligations under the Transaction Documents.
2.12 Disclaimer. EXCEPT AS EXPRESSLY SET
FORTH HEREIN, SELLER MAKES NO REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, AS TO THE CONDITION
OF THE EQUIPMENT, ITS VALUE, DESIGN,
MERCHANTABILITY, FITNESS FOR USE OR FITNESS FOR A
PARTICULAR PURPOSE, AS TO THE QUALITY OF MATERIAL
OR WORKMANSHIP OR CONFORMITY TO SPECIFICATIONS OF
ANY PURCHASE ORDER, AS TO THE ABSENCE OF LATENT OR
OTHER DEFECTS WHETHER OR NOT DISCOVERABLE OR AS TO
ANY OTHER MATTER RELATING TO THE EQUIPMENT.
2.13 Brokerage Fees. No person or entity
acting on Seller's behalf has any claim for a
brokerage commission, finder's fee or other like
payment in connection with this Agreement or the
transactions contemplated by this Agreement.
3. Representations, Warranties and Covenants
of Purchaser.
Purchaser represents and warrants to, and
agrees with, Seller as follows:
3.01 Organization and Existence.
Purchaser is a corporation duly and validly
organized and existing under the laws of the State
of Nevada and is duly qualified to own its
properties and carry on its business in each
jurisdiction where the failure to be so qualified
would be materially adverse to Purchaser or its
business.
3.02 Power and Authority. Purchaser has
the power and authority to execute and deliver or
accept, as the case may be, the Transaction
Documents and to pay and perform, when due, its
obligations hereunder and thereunder.
3.03 Authorization. The execution and
delivery or acceptance, as the case may be, of the
Transaction Documents by Purchaser and the payment
and performance by Purchaser, when due, of its
obligations hereunder and thereunder, have been
duly authorized by all necessary action of
Purchaser and do not violate or conflict with, or,
with or without the giving of notice, the passage
of time or both, constitute a default under, any
provision of Purchaser's instruments of
organization, any law, order, writ, injunction,
decree, rule or regulation of any court,
administrative agency or any other governmental
authority or any agreement or other document or
instrument to which Purchaser is a party or by
which Purchaser is, or may be, bound.
3.04 Enforceability. The Transaction
Documents constitute the valid and binding
obligations of Purchaser, enforceable against it in
accordance with their respective terms. There is
no action, suit, proceeding or investigation at law
or in equity pending or, to the knowledge of
Purchaser, threatened before or by any court,
public board or body, against or affecting the
Purchaser wherein an unfavorable decision, ruling
or finding would adversely affect the ability of
Purchaser to perform its obligations under the
Transaction Documents.
3.05 Broker Fees. No person or
entity acting on Purchaser's behalf has any claim
for a brokerage commission, finder's fee or other
like payment in connection with this Agreement or
the transactions contemplated by this Agreement.
4. Certain Taxes and Charges.
4.01 Payment. Purchaser agrees to pay,
when due, all sales and other taxes due upon the
transactions contemplated hereby.
4.02 Contest. Each party may in good
faith (at its expense) contest in any reasonable
manner the imposition of any of the foregoing taxes
but only to the extent that such contest neither
affects adversely, nor threatens to affect
adversely, the other party's interest in the
Equipment nor exposes the other party to any
liability.
5. Indemnification.
5.01 Indemnification by Seller. Seller
agrees to indemnify Purchaser and to protect,
defend and hold Purchaser harmless, from and
against any and all loss, cost, damage, injury or
expense, including, without limitation, reasonable
attorneys' fees, wheresoever and howsoever arising
which Purchaser may incur for, or by reason of (i)
the breach of any of the warranties or
representations of Seller contained in any of the
Transaction Documents, (ii) a breach by Seller of
any of the warranties or agreements of Seller
contained in any of the Transaction Documents, or
(iii) any claim in any way relating to or arising
or alleged to arise out of the ownership of the
Equipment prior to the Closing Date, except for
claims with respect to which Purchaser indemnifies
Seller pursuant to the Equipment Lease. In the
event any claim for indemnification hereunder
arises on account of a claim or action made or
instituted by a third person against Purchaser,
Purchaser shall notify Seller promptly after the
receipt of notice by Purchaser that such claim was
made or that such action was commenced. Seller
shall be entitled to participate in the defense of
any such claim or action by counsel of its own
choosing and at its expense. Any such claim or
action shall not be settled without Seller's prior
written consent, unless Seller shall deny
Purchaser's right to indemnification.
5.02 Indemnification by Purchaser.
Purchaser agrees to indemnify Seller and to
protect, defend and hold Seller harmless, from and
against any and all loss, cost, damage, injury or
expense, including, without limitation, reasonable
attorneys' fees, wheresoever and howsoever arising
which Seller may incur for, or by reason of (i) the
breach of any of the warranties or representations
of Purchaser contained in any of the Transaction
Documents, (ii) a breach by Purchaser of any of the
warranties or agreements of Purchaser contained in
any of the Transaction Documents, or (iii) any
claim in any way relating to or arising or alleged
to arise out of the ownership of the Equipment or
assignment of the Equipment Lease after the Closing
Date. In the event any claim for indemnification
hereunder arises on account of a claim or action
made or instituted by a third person against
Seller, Seller shall notify Purchaser promptly
after the receipt of notice by Seller that such
claim was made or that such action was commenced.
Purchaser shall be entitled to participate in the
defense of any such claim or action by counsel of
its own choosing and at its expense. Any such
claim or action shall not be settled without
Purchaser's prior written consent, unless Purchaser
shall deny Seller's right to indemnification.
6. Purchaser's Conditions Precedent.
Purchaser's obligation to consummate the
transactions contemplated by this Agreement are
subject to the following conditions precedent:
6.01 Representations and Warranties of
Seller. All representations and warranties of
Seller set forth herein shall be true and correct
on the Closing Date as if then made.
6.02 Compliance. Seller shall have
performed and complied in all material respects
with all obligations and agreements required in
this Agreement to be performed or complied with by
it prior to the Closing Date.
6.03 No Injunctions. There shall not be
in effect any injunction or restraining order
issued by a court of competent jurisdiction, or
other governmental body having jurisdiction,
against the consummation of the transactions
contemplated by this Agreement.
6.04 Delivery of Transaction Documents.
Seller shall have delivered to Purchaser (i) an
executed copy of the bill of sale and assignment in
the form attached hereto as Exhibit C (the "Bill of
Sale and Assignment"); (ii) the opinion of
Seller's internal legal counsel, in such form as
may be acceptable to Purchaser as to the matters
set forth in Sections 2.08, 2.09, 2.10 and the
first sentence of Section 2.11 hereof and (iii)
written notice of the assignment of the Equipment
Lease to Purchaser in the form attached hereto as
Exhibit D in accordance with Section 20 of the
Equipment Lease (the "Notice to Lessee"), executed
by Seller and Lessee.
7. Seller's Conditions Precedent. Seller's
obligation to consummate the transactions
contemplated by this Agreement are subject to the
following conditions precedent:
7.01 Representations and Warranties of
Purchaser. All representations and warranties of
Purchaser set forth herein shall be true and
correct on the Closing Date as if then made.
7.02 Compliance. Purchaser shall have
performed and complied in all material respects
with all obligations and agreements required in
this Agreement to be performed or complied with by
it prior to the Closing Date.
7.03 No Injunctions. There shall not be
in effect any injunction or restraining order
issued by a court of competent jurisdiction, or
other governmental body having jurisdiction,
against the consummation of the transactions
contemplated by this Agreement.
7.04 Delivery of Opinion and Purchase
Price. Purchaser shall have delivered to Seller
(i) the opinion of Purchaser's internal legal
counsel, in such form as may be acceptable to
Seller as to the matters set forth in Section 3.01,
3.02, 3.03 and the first sentence of Section 3.04
hereof and (ii) the Purchase Price for each Unit
accepted by Purchaser hereunder.
7.05 Notice to Lessee. Seller shall have
received from Lessee the Notice to Lessee, executed
by Lessee.
8. Miscellaneous.
8.01 Transaction Costs and Legal Fees.
Each party shall bear its own expenses (including
legal fees) relating to the transaction
contemplated by this Agreement.
8.02 Survival. The representations,
warranties and agreements made herein shall survive
the execution and delivery of this Agreement and
the consummation of the transactions described
herein.
8.03 Successors and Assigns. This
Agreement shall be binding upon, and inure to the
benefit of, the parties hereto and their respective
successors and assigns.
8.04 Notices. Any notice, request or
other communication required or permitted to be
given under any of the provisions of this Agreement
shall be given in writing and shall be deemed given
the date the same is actually received by the party
to whom it is addressed, provided that if such
notice is mailed by certified or registered mail,
return receipt requested, postage prepaid and
addressed to the party for which it is intended,
such mailed notice shall be deemed received 3 days
after the mailing date. All notices shall be sent
to the parties at the addresses set forth below:
(a) If to Seller, addressed to:
The First National Bank of Maryland
P.O. Box 17086
Baltimore, Maryland 21203
Attention: Transportation and
Leasing Group
(b) If to Purchaser, addressed to:
IC Leasing Corporation III
1077 East Sahara Avenue
Las Vegas, Nevada 89193
Attention: President
8.05 Governing Law. This Agreement shall
be governed by and interpreted under the laws of
the State of Illinois applicable to contracts made
and to be performed therein, without giving effect
to the principles of conflict of laws thereof.
8.06 Captions. Captions used herein are
inserted for reference purposes only and shall not
affect the interpretation or construction of this
Agreement.
8.07 Counterparts. This Agreement may be
executed in one or more counterparts, each of which
shall be deemed an original, but all of which
together shall constitute one and the same
agreement.
8.08 Entire Agreement. This Agreement
(including the executed counterparts of the
exhibits hereto) represents the entire agreement
between the parties and it supersedes all prior
agreements or understandings with respect to the
subject matter hereof. This Agreement may be
amended or varied only by writing, of even or
subsequent date, executed by Seller and Purchaser.
8.09 Course of Dealing. No course of
dealing between Seller and Purchaser, nor any delay
in exercising any rights or remedies hereunder or
otherwise shall operate as a waiver of any of the
rights and remedies of Seller or Purchaser.
8.10 Severability. The invalidity or
unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of
any other provision.
8.11 Further Assurances. Each of
Purchaser and Seller agree to execute and deliver
to the other all such further instruments and
documents as may reasonably be requested by the
other in order fully to carry out the intent, and
to accomplish the purposes of, the transactions
referred to herein.
IN WITNESS WHEREOF, Seller and Purchaser have
executed this Agreement as of December , 1993.
SELLER:
THE FIRST NATIONAL BANK
OF MARYLAND
By:
Title:
PURCHASER:
IC LEASING CORPORATION III
By:
Title:
Exhibit 21
ILLINOIS CENTRAL CORPORATION
SUBSIDIARIES OF THE REGISTRANT
AS OF DECEMBER 31, 1993
Name Place of Incorporation
Subsidiaries included
in the financial
statements, which
are 100% owned:
Illinois Central
Railroad Company Delaware
IC Financial Services
Corporation Delaware
Subsidiaries that are
100% owned by Illinois
Central Railroad Company:
Chicago Intermodal Company Delaware
Kensington and Eastern
Railroad Company Illinois Mississippi Valley
Corporation Delaware
Waterloo Railroad Company Delaware
Subsidiaries that are 100%
owned by IC Financial
Services Corporation:
IC Leasing Corporation I Nevada
IC Leasing Corporation II Nevada
IC Leasing Corporation III Nevada
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
ILLINOIS CENTRAL CORPORATION
As independent public accountants, we hereby
consent to the incorporation of our report dated
January 19, 1994 included in the Company's Annual
Report on Form 10-K for the year ended December 31,
1993, into Illinois Central Corporation's
previously filed Form S-8 Registration Statements
File Nos. 33-41052 and 33-51924.
ARTHUR ANDERSEN & CO.
Chicago, Illinois
March 16, 1994
