SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 15, 1996
Illinois Central Corporation
Exact name of Registrant as specified in its charter
Delaware 1-10720 13-3545405
(State or other (Commission (IRS Employer
jurisdiction File Number) Identification No.)
of incorporation)
455 North Cityfront Plaza Drive, Chicago, Illinois 60611-5504
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 755-7500
Item 5. Acquisition and Disposition of Assets
On January 17, 1996, the registrant announced a
definitive agreement for the acquisition of CCP Holdings, Inc.
("CCPH"). The purchase price will be approximately
$125 million in cash, and the assumption of approximately $14
million in net debt, and approximately $18 million of capitalized
lease obligations. The cash price is adjusted for any unscheduled
prepayments of long-term debt prior to closing. Additionally, the
actual purchase price is subject to various potential adjustments
for up to one year after the closing date. The application for the
required approval of the Surface Transportation Board (the "STB")
was filed January 31, 1996. On April 30, 1996, the STB announced
they had voted in favor of the acquisition. Formal written approval,
was issued May 13, 1996, and is effective June 13, 1996, after which
the transaction can be closed. The registrant expects the closing to
occur in late June or early July.
The registrant is purchasing the stock of CCPH (See
Exhibit 2) from CCPH's three stockholders and will account for the
acquisition using the purchase method of accounting. CCPH has two
principal operating subsidiaries - the Chicago Central and Pacific
Railroad ("CCPR") and the Cedar River Railroad ("CRR") - which
together comprise a Class II railroad system operating 850 miles of
road. CCPR operates from Chicago west to Omaha, Nebraska, with
connecting lines to Cedar Rapids and Sioux City, Iowa. CRR runs
from Waterloo, Iowa north to Albert Lea, Minnesota.
The audited consolidated financial statements of CCPH as
of and for the years ended December 31, 1995 and 1994 and the
unaudited consolidated financial statements of CCPH as of March 31,
1996 and for the three months ended March 31, 1996 and 1995 are
included herein. (See Index at page 4.)
The registrant expects to use its existing bank credit
lines and funds received from its operating subsidiary, the Illinois
Central Railroad Company (the "Railroad"). The Railroad expects to
use its existing bank lines, commercial paper or newly issued
medium-term notes to provide it the monies needed to dividend or
loan up to $100 million to the registrant for the acquisition.
In addition to the historical financial statements of
CCPH, included herein are unaudited Pro Forma condensed consolidated
financial statements of the registrant including CCPH for the periods
outlined in the Index to Pro Forma Financial Information on page F-21.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of businesses acquired
See Index at page 4
(b) Pro Forma financial information
See Index at page F-21
(c) Exhibits
See Exhibit Index at E-1.
SIGNATURE
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 hereto duly authorized.
ILLINOIS CENTRAL CORPORATION
John V. Mulvaney
Controller
Date: May 15, 1996
ILLINOIS CENTRAL CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
CCP HOLDINGS, INC.:
INTERIM:
Consolidated Statements of Income for the three months
ended March 31, 1996 and 1995 F-1
Consolidated Balance Sheets at March 31, 1996 and
December 31, 1995 F-2
Consolidated Statements of Cash Flows for the three months
ended March 31, 1996 and 1995 F-3
Notes to Consolidated Financial Statements F-4
YEAR END:
Report of Independent Public Accountants F-6
Consolidated Statements of Income for the years ended
December 31, 1995, 1994 and 1993 F-7
Consolidated Balance Sheets at December 31, 1995 and 1994 F-8
Consolidated Statements of Cash Flows for years ended
December 31, 1995, 1994 and 1993 F-9
Notes to Consolidated Financial Statements F-10
Index to Unaudited Pro Forma Financial Information F-21
CCP HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996 and 1995
(In 000'S)
(Unaudited)
1996 1995
REVENUES $21,614 $15,553
OPERATING EXPENSES:
Operating expenses excluding
depreciation and amortization 10,646 11,656
Depreciation and amortization 1,597 1,373
Total operating expenses 12,243 13,029
Income from operations 9,371 2,524
OTHER INCOME (EXPENSE):
Interest expense (768) (1,074)
Other income 228 140
Income before income taxes and
extraordinary item 8,831 1,590
PROVISION FOR INCOME TAXES:
Currently payable 1,620 90
Deferred taxes 1,897 548
Net Income $5,314 $952
======= =======
The accompanying notes are an integral part of these statements.
CCP HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(In 000'S)
(Unaudited)
MARCH 31, DECEMBER 31,
A S S E T S 1996 1995
CURRENT ASSETS:
Cash and cash equivalents $ 6,786 $ 15,799
Accounts receivable 16,004 15,883
Materials and supplies 2,968 2,893
Prepaid expenses 481 497
Deferred income tax asset 1,529 1,529
Total current assets 27,768 36,601
PROPERTY AND EQUIPMENT:
Road property 111,895 111,800
Equipment 38,344 38,443
150,239 150,243
Less: Accumulated depreciation (35,933) (34,577)
Net Property and Equipment 114,306 115,666
OTHER ASSETS 457 718
$142,531 $152,985
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
CURRENT LIABILITIES:
Accounts payable $ 17,979 $ 19,249
Income taxes payable 1,955 949
Deferred income 372 371
Current maturities of long-term debt 5,423 5,758
Current maturities of capital leases 973 937
Total current liabilities 26,702 27,264
LONG-TERM LIABILITIES:
Long-term debt, less current maturities 2,109 18,867
Capital leases, less current maturities 16,531 16,791
Deferred income tax liability 25,853 23,955
Other long-term obligations 3,210 3,210
Deferred rehabilitation grants 8,681 8,767
Total long-term liabilities 56,384 71,590
Total liabilities 83,086 98,854
STOCKHOLDERS' EQUITY:
Common stock, no par value; 80,000 shares
authorized, 7,600 shares issued and
outstanding 8 8
Retained earnings:
Balance, beginning of year 54,123 43,900
Net income for the year 5,314 11,933
Dividend paid - (1,710)
Balance, end of year 59,437 54,123
Total stockholders' equity 59,445 54,131
$142,531 $152,985
The accompanying notes are an integral part of these statements.
CCP HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 and 1995
(In 000's)
CASH FLOWS FROM OPERATING ACTIVITIES: 1996 1995
Income before extraordinary item $ 5,314 $ 952
Adjustments to reconcile income before
extraordinary item to net cash
provided by operating activities-
Depreciation and amortization 1,597 1,373
Net gain on sale of property and
equipment (52) (39)
Deferred income taxes 1,897 548
Change in assets and liabilities-
Accounts receivable (120) 217
Materials and supplies (75) (38)
Other current assets - 1,143
Prepaid expenses 16 (63)
Accounts payable (363) (322)
Income taxes payable 1,005 291
Accrued accounts payable (646) 1,771
Deferred income 1 10
Accued interest payable (261) (4)
Other balance sheet changes 94 2
Difference in book and cash capital 103 (118)
Net cash provided by operating activities 8,510 5,723
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from asset dispositions 241 153
Capital expenditures (447) (571)
Capital lease and note payments (224) (146)
Net cash used in investing activities (430) (564)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid - (1,710)
Debt retirement (17,093) (1,394)
Net cash used in financing activities (17,093) (3,104)
INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS (9,013) 2,055
CASH AND CASH EQUIVALENTS, beginning of year 15,799 3,783
CASH AND CASH EQUIVALENTS, end of year $ 6,786 $5,838
======= =======
SUPPLEMENTAL DISCLOSURES:
1996 1995
Schedule of noncash investing
and financing activities-
Capital lease financing $ - $ -
====== =======
Cash paid during the year for-
Interest $1,029 $1,078
Income taxes 615 141
====== =======
The accompanying notes are an integral part of these statements.
CCP HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996 and 1995
1. BASIS OF PRESENTATION:
CCP Holdings, Inc. (the Company) was founded in October 1993
to affect a restructuring of the Company's investment in railroads
and real property. This restructuring was accounted for as a
combination of enterprises under common control. Thus, there
was no effect on the carrying value of any of the operating
entities' assets and liabilities. The financial statements are
presented as if the restructuring occurred on January 1, 1993.
Interim Financial Statements
In the opinion of management, these interim financial statements reflect
all adjustments, consisting of normal recurring accruals, necessary to
present fairly the financial position, results of operations and cash flows
for the periods presented. Interim results are not necessarily indicative
of results for the full year. Certain 1995 amounts have been restated to
conform with the presentation used in the 1996 financial statements.
2. REFINANCING:
Included on other assets as of March 31, 1996 and December 31, 1995,
are refinancing costs of $698,000, net of accumulated amortization of
$623,000 and $380,000, respectively. These costs are being amortized
on a straight-line basis over the life of the loan. Amortization
expense for 1996 included $224,000 as two additional principal payments
in January and March totaling $15,000,000 were made.
3. REVOLVING LINE OF CREDIT:
In January 1993, one Railroad obtained a 3-year unsecured
$10,000,000 revolving line of credit with a bank group,
replacing the agreement previously in place. An amendment was
made in September 1995 extending the revolving line of credit
agreement to September 1998. Interest is at the bank's prime
rate plus 0.25% (8.75% at March 31, 1996) or LIBOR + 1.5%
(6.94% at December 31, 1996), as selected by the Company. The
interest rate is determined by the Railroad's ratio of Funded
Debt to Total Capitalization as defined in the agreement.
Based on the ratio, the interest rate will be between prime
and prime plus 0.5% or between libor plus 1.25% and libor plus
1.75%. A commitment fee of 0.25% per annum on the first $5
million in unused revolver and 0.125% on the unused portion
above $5 million is assessed quarterly. At March 31, 1996 and
December 31, 1995 no funds were borrowed under the facility and
the Railroad was in compliance with all covenants and ratios.
4. CONTINGENCY:
One Railroad is party to certain deferred compensation
agreements, the after-tax cost of which is to be funded by the
majority shareholder of the Company. Pursuant to terms of these
agreements, a total of 13% of the equity value of the Company
would be paid to certain railroad officers upon the sale of over
50% of the Company's stock.
5. SALE OF BUSINESS:
On January 17, 1996 the Company and its stockholders entered into
a definitive agreement to sell all the stock of the Company to
Illinois Central Corporation. The transaction requires Surface
Transportation Board ("STB") approval. On April 30, 1996, the STB
announced they had voted in favor of the acquisition. Formal written
approval was issued May 13, 1996, and is effective June 13, 1996, after
which the transaction can be closed. The Company expects the closing
to occur in late June or early July.
If the transaction receives final regulatory approval and closes, the
deferred compensation payments discussed in Note 4 would be
required. The expense and related tax benefit would be recorded
in the Company's statement of income in the period in which the
transaction occurs. The required capital contribution from the
majority shareholder also would be recorded and would approximately
equal the net of tax amount of the deferred compensation payments,
thus the net impact on stockholders' equity would be immaterial.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
CCP Holdings, Inc.:
We have audited the accompanying consolidated balance sheets
of CCP HOLDINGS, INC. (a Delaware corporation) and its
subsidiaries, as of December 31, 1995 and 1994, and the
related consolidated statements of income and cash flows for
each of the years in the three year period ended December 31,
1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these financial statements 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 CCP Holdings, Inc. as of December 31, 1995 and
1994, and the results of their operations and their cash flows
for the three years ended December 31, 1995, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
January 19, 1996
CCP HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 and 1993
(In 000'S)
1995 1994 1993
REVENUES $76,039 $60,483 $66,372
OPERATING EXPENSES:
Operating expenses excluding
depreciation and amortization 47,449 45,338 47,599
Depreciation and amortization 5,529 5,347 5,214
Total operating expenses 52,978 50,685 52,813
Income from operations 23,061 9,798 13,559
OTHER INCOME (EXPENSE):
Interest expense (4,077) (4,487) (4,633)
Other income 870 450 2,959
Income before income taxes and
extraordinary item 19,854 5,761 11,885
PROVISION FOR INCOME TAXES:
Currently payable 3,958 487 827
Deferred taxes 3,963 2,012 3,830
Income before extraordinary item 11,933 3,262 7,228
EXTRAORDINARY ITEM - - 8,940
NET INCOME FOR THE YEAR $11,933 $ 3,262 $16,168
======= ======= =======
The accompanying notes are an integral part of these statements.
CCP HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS-DECEMBER 31, 1995 and 1994
(In 000'S)
A S S E T S 1995 1994
CURRENT ASSETS:
Cash and cash equivalents $ 15,799 $ 3,783
Accounts receivable 15,883 10,819
Materials and supplies 2,893 2,956
Prepaid expenses 497 517
Deferred income tax asset 1,529 1,075
Other investments - 1,433
Total current assets 36,601 20,583
PROPERTY AND EQUIPMENT:
Road property 111,800 108,357
Equipment 38,443 37,888
150,243 146,245
Less: Accumulated depreciation (34,577) (29,323)
Net Property and Equipment 115,666 116,922
OTHER ASSETS 718 838
$152,985 $138,343
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
CURRENT LIABILITIES:
Acccounts payable $ 10,855 $ 5,215
Income taxes payable 949 769
Employee compensation and vacations 2,750 2,254
Taxes other than income taxes 1,519 1,453
Other accrued expenses 4,496 4,383
Current maturities of long-term debt 5,758 5,806
Current maturities of capital leases 937 650
Total current liabilities 27,264 20,530
LONG-TERM LIABILITIES:
Long-term debt, less current maturities 18,867 24,455
Capital leases, less current maturities 16,791 17,729
Deferred income tax liability 23,955 19,542
Other long-term obligations 3,210 3,210
Deferred rehabilitation grants 8,767 8,969
Total long-term liabilities 71,590 73,905
Total liabilities 98,854 94,435
STOCKHOLDERS' EQUITY
Common stock, no par value; 80,000 shares
authorized, 7,600 shares issued and
outstanding 8 8
Retained earnings:
Balance, beginning of year 43,900 40,638
Net income for the year 11,933 3,262
Dividend paid (1,710) -
Balance, end of year 54,123 43,900
Total stockholders' equity 54,131 43,908
$152,985 $138,343
The accompanying notes are an integral part of these statements.
CCP HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995, 1994 and 1993
(In 000's)
CASH FLOWS FROM OPERATING ACTIVITIES: 1995 1994 1993
Income before extraordinary item $11,933 $ 3,262 $ 7,228
Adjustments to reconcile income before
extraordinary item to net cash
provided by operating activities-
Depreciation and amortization 5,529 5,347 5,214
Amortization of deferred partial debt
forgiveness - - (74)
Net gain on sale of property and
equipment (285) (198) (66)
Recognition of deferred interest income - - (183)
Deferred income taxes 3,963 2,012 3,830
Change in assets and liabilities-
Accounts receivable (5,065) 613 589
Materials and supplies 63 295 (542)
Prepaid expenses 20 319 88
Accounts payable 5,640 (536) (2,539)
Income taxes payable 178 760 (2,118)
Employee compensation and vacation 496 151 (416)
Taxes other than income taxes 66 - 161
Other accrued expenses 113 (794) (342)
Other long-term obligations - (199) 94
Net cash provided by operating
activities 22,651 11,032 10,924
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and
equipment 390 7,520 468
Expenditures on construction in progress
and property and equipment (4,570) (13,714) (4,871)
Other assets - (151) (10)
Maintenance allowance on capital lease - - 200
Net Investments in Equity Securities 1,433 (1,433) -
Net cash used in investing activities (2,747) (7,778) (4,213)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt and capital leases (6,463) (6,330) (35,530)
Increase in long-term debt 176 1,701 35,604
Refinancing costs (23) - (654)
Deferred rehabilitation grants 132 626 480
Redemption of preferred stock - - (12,000)
Dividends paid (1,710) - -
Net cash used in financing activities (7,888) (4,003) (12,100)
INCREASE(DECREASE) IN CASH & CASH EQUIVALENTS 12,016 (749) (5,389)
CASH AND CASH EQUIVALENTS, beginning of year 3,783 4,532 9,921
CASH AND CASH EQUIVALENTS, end of year $15,799 $ 3,783 $ 4,532
======= ======= =======
SUPPLEMENTAL DISCLOSURES:
1995 1994 1993
Schedule of noncash investing
and financing activities-
Capital lease financing $ - $ - $ 2,699
====== ======= =======
Cash paid during the year for-
Interest $4,167 $ 4,487 $ 4,671
Income taxes 3,434 187 3,598
====== ======= =======
The accompanying notes are an integral part of these statements.
CCP HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 and 1994
1. DESCRIPTION OF BUSINESS:
CCP Holdings, Inc. (the Company) was founded in October, 1993
to affect a restructuring of the Company's investment in
railroads and real property. This restructuring was accounted
for as a combination of enterprises under common control.
Thus, there was no effect on the carrying value of any of the
operating entities' assets and liabilities. The financial
statements are presented as if the restructuring occurred on
January 1, 1993.
At December 31, 1995, the Company has four wholly-owned
subsidiaries, two of which are railroads and two of which are
real estate management companies. The railroads operate in
the states of Illinois, Iowa, Minnesota and Nebraska.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the Company and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Revenue Recognition
Freight revenue for the Railroads is recognized in proportion
to the completion of a line-haul on the Railroad's line.
Cash and Cash Equivalents
Cash and cash equivalents consist of highly liquid debt instruments
purchased with a maturity of three months or less, including
commercial paper, repurchase agreements and treasury bills.
Materials and Supplies
Materials and supplies are stated at the lower of weighted
average cost or net realizable value.
Other Investments
Other investments at December 31, 1994 consist of equity securities
and are stated at the lower of aggregate cost or market based on
quoted market prices. These equity securities were sold in 1995.
Property and Equipment
Property and equipment on the books of the subsidiaries are
stated at cost. Depreciation is computed using the
straight-line method. Road property and equipment include the
following categories of assets, with the indicated useful lives:
Description Asset Life
Road property 15-46 years
Bridges 25-46 years
Rolling stock 5-15 years
Equipment 5-12 years
===========
The straight-line, composite method of depreciation is used
for certain road property. When an asset is retired, its
cost, less any proceeds from sale, is charged to accumulated
depreciation. For extraordinary retirements, however, the cost
and related depreciation are removed from the accounts and a
gain or loss is recognized.
Income Taxes
The Company files a consolidated income tax return. A tax
allocation agreement arrangement exists whereby each
affiliated company's income tax is an amount equal to that
which would have resulted had each filed its own income tax return.
Income taxes are accounted for under the provisions of
Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," which requires the liability
method for computing deferred income taxes.
Deferred income taxes result as the Company recognizes certain
income and expense items in different years for financial and
tax reporting purposes. Deferred income tax assets and
liabilities are classified in accordance with the
classification of the assets and liabilities to which they
relate. Temporary differences that give rise to deferred
income taxes are (a) tax depreciation in excess of
depreciation for financial reporting purposes and (b) reserves
for potential liabilities related to litigation, nonvested
vacation and self-insured medical claims, among others, which
will not be deductible for tax purposes until future periods.
Interest Rate Risk Management
One of the Railroads uses derivative financial instruments,
specifically interest rate swaps and interest rate caps to
manage the interest rate risk on its Term Notes Payable (See
Note 5). In January, 1993, the Railroad entered into a 3-year
swap, which expires in January, 1996, whereby the floating
rate on a notional amount of $17,500,000 was exchanged for a
fixed libor rate of 5.03%. In March, 1995, the notional
amount on this swap was reduced to $12,500,000. In March,
1995, the Railroad entered into a 2-year interest rate cap
agreement commencing January, 1996, with the cap libor rate at
9.15% on a notional amount of $10,000,000, replacing a
previous 2-year cap which expired January, 1995. The fees
paid by the Railroad for interest rate caps are capitalized
and amortized to interest expense over the period covered by
the agreement.
Industry Concentration
Although the Railroads' accounts receivable include a number
of railroads and customers within various industries, a large
portion of the Railroads' rail traffic is attributable to
customers operating in the coal and grain industries. The
Railroads regularly grant trade credit to customers. In
addition, the Railroads grant trade credit to railroads
through the routine interchange of traffic.
Use of Estimates
The process of preparing financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and
expenses. Actual results could differ from those estimates.
3. DEBT AND EQUITY RESTRUCTURINGS AND REFINANCING:
In 1993, one Railroad repaid the balance on its note payable
to its senior lender. As a result, the gain of $8,940,000 has
been recorded as an extraordinary item on the statement of
income. The extraordinary gain is the result of recognizing
the remaining amount of deferred partial debt forgiveness.
In 1993, one Railroad redeemed the 1,000 shares of Series B
convertible value building preferred stock then outstanding
for $12,000,000.
Included in other assets as of December 31, 1995 and 1994, are
refinancing costs of $698,000 and $675,000, respectively, net
of accumulated amortization of $380,000 and $259,000, respectively.
These costs are being amortized on a straight-line basis over the
life of the loan. Amortization expense totaled $121,000, $135,000
and $124,000 in 1995, 1994 and 1993, respectively.
4. REVOLVING LINE OF CREDIT:
In January, 1993, one Railroad obtained a 3-year unsecured
$10,000,000 revolving line of credit with a bank group,
replacing the agreement previously in place. An amendment was
made in September, 1995 extending the revolving line of credit
agreement to September, 1998. Interest is at the bank's prime
rate plus 0.25% (9.00% at December 31, 1995) or LIBOR + 1.5%
(7.37% at December 31, 1995), as selected by the Company. The
interest rate is determined by the Railroad's ratio of Funded
Debt to Total Capitalization as defined in the agreement.
Based on the ratio, the interest rate will be between prime
and prime plus 0.5% or between libor plus 1.25% and libor plus
1.75%. A commitment fee of 0.25% per annum on the first $5
million in unused revolver and 0.125% on the unused portion
above $5 million is assessed quarterly. At December 31, 1995
and 1994 the Railroad was in compliance with all covenants and
ratios required to borrow funds under the facility.
5. LONG-TERM DEBT:
Long-term debt at December 31, 1995 and 1994 consists of debt
on the books of the Railroads and one real estate management
company as follows (in 000's):
1995 1994
Term Notes Payable, interest currently at
LIBOR + 1.75% or Prime + 0.5%, quarterly
installments of interest and $1,250 in
principal through maturity on January 31,
2000 (see below) $21,250 $26,250
Interest-free loans from government for
rehabilitation projects, payable in various
installments through August, 1997, secured
by the related road property (see below) 652 820
Installment note payable, with imputed
interest at 10%, payable in installments
through May, 1996 28 118
Promissory Note, interest at 8%, quarterly
installments of interest and principal
through maturity on August 3, 1997, secured
by a first mortgage on the related track
structure 465 722
Interest-free loans from governmental
agencies and a shippers' association for
rehabilitation projects completed in
1994, payable either in annual install-
ments or in various installments based
on annual revenue carloads originated
and terminated on the line through
July 1, 2006, secured by the related
road property (see below) 1,884 1,956
Promissory Note, interest at 7.25%, quarterly
installment of interest and principal through
maturity on June 1, 2001, secured by a first
mortgage on the related office building. 346 395
T O T A L $24,625 $30,261
Less- Current maturities 5,758 5,806
Long-term portion $18,867 $24,455
======= =======
Long-term debt maturities as follows(in 000's):
Year Amount
1996 $ 5,758
1997 5,444
1998 5,449
1999 5,395
2000 1,590
2001 and thereafter 989
$24,625
=======
The Term Notes Payable represents notes payable to a bank group.
While unsecured, the Term Notes require the Railroad to comply
with various ratios and covenants, including, among other things,
limitations on new debt, dividends and asset sales. At December
31, 1995 and 1994 the Railroad was in compliance with all
covenants and ratios required to borrow funds under the
facility. Additional terms and conditions require the Railroad
to limit the exposure to interest rate risk by hedging at least
50% of the outstanding balance of the Term Notes (see Note 2).
The loans from the government and a shippers' association will
become immediately due and payable in the event of abandonment
of any of the rehabilitated lines, discontinued use of the
track structure for rail freight services or the filing for
bankruptcy or insolvency.
6. CAPITAL LEASES:
One Railroad has entered into a capital lease for 650 covered
hoppers, with interest at 11.5%, payable in monthly
installments beginning at $285 per car in 1991, increasing in
1993 to $300 per car and in 1995 to $330 per car through 2005.
Beginning in December 1999, and continuing through December
2005, the Company has the option to purchase the cars at
$8,000 each per terms contained in the capital lease agreement.
The Railroad has also entered into a capital lease for 100
covered hoppers, with interest at 11.5%, payable in monthly
installments beginning at $285 per car in 1993, increasing in
1995 to $300 per car and in 1997 to $330 per car through
December 2006. At the expiration of the lease on December
2006, the Company has the option to purchase the cars at
$4,100 to $7,300 each per terms contained in the capital lease
agreement. Future minimum lease payments on capital leases at
December 31, 1995 are as follows: (in 000's)
1996 $ 2,934
1997 2,970
1998 2,970
1999 3,337
2000 2,772
2001 and thereafter 15,201
Total minimum lease payments 30,184
Less amount representing interest 12,456
Present value of future minimum
lease payments 17,728
Less current maturities 937
Long-term capital lease
obligation $16,791
=======
The covered hoppers have been included in property and equipment
on the accompanying balance sheet at the net present value at
the inception of the leases which totaled $18,928,000, net of
$4,425,000 of amortization at December 31, 1995.
7. OPERATING LEASES:
One Railroad leases various rolling stock, other equipment and
office space under operating leases with initial noncancelable
lease terms in excess of one year. Total rental expense for all
operating leases amounted to $3,830,000, $3,506,000 and
$3,747,000 in 1995, 1994 and 1993, respectively.
Future minimum lease payments on operating leases at December
31, 1995, are as follows (in 000's):
1996 $ 3,681
1997 1,415
1998 1,273
1999 821
2000 760
2001 and thereafter 4,440
Total minimum lease payments $12,390
=======
8. INCOME TAXES:
The provision for income taxes from continuing operations
consisted of the following (in 000's):
1995 1994 1993
Federal
Current $ 3,292 $ 426 $ 783
Deferred 3,369 1,710 3,256
6,661 2,136 4,039
State
Current 666 61 44
Deferred 594 302 574
1,260 363 618
$ 7,921 $ 2,499 $ 4,657
======= ======= =======
The following summarizes the estimated tax effect of significant
cumulative temporary differences that are included in the net
deferred income tax liability (in thousands):
1995 1994
Property and equipment $ 26,411 $ 23,829
Federal alternative minimum tax
credit carryforwards (1,395) (3,119)
State alternative minimum tax
credit carryfowards (759) (132)
State net operating loss
carryforwards (298) (1,036)
Reserves and accruals (1,713) (1,303)
Other items, net 184 228
Net deferred tax liability $ 22,430 $ 18,467
======== ========
As of December 31, 1995, the Company has net operating loss
carryforwards for state income tax purposes totaling
approximately $4,936,000. Additionally, the Company has
alternative minimum tax credit carryforwards of approximately
$1,395,000 for federal income tax purposes and $759,000 for
state income tax purposes.
The Company has not provided any valuation allowances against
deferred income tax assets as management believes that the
deferred tax assets will be realized based on estimates of
future taxable income, future reversals of existing taxable
temporary differences, or available tax planning strategies.
The reconciliation of the federal statutory income tax rate to
the effective income tax rate follows:
1995 1994 1993
Federal statutory rate 34.0% 34.0% 34.0%
State income taxes,
net of federal benefit 4.8 4.8 4.8
Other, net 1.1 4.6 0.4
Effective tax rate 39.9% 43.4% 39.2%
===== ===== =====
9. GRANTS AND REIMBURSEMENTS FROM GOVERNMENTAL AGENCIES:
The Railroads receive grants and reimbursements from governmental
agencies to rehabilitate portions of their track structure.
These grants and reimbursements do not represent a future
liability of the Railroads unless the Railroads abandon the
rehabilitated track structure within a period of ten years after
the rehabilitation. As the Railroads do not intend to abandon
this track, the amounts of these grants have been deferred and
are being amortized as a noncash offset to depreciation expense
over the useful life of the related road property.
In 1995, one Railroad signed a three-year $3,887,082 contract
with the Iowa Department of Transportation to replace 27.5 miles
of jointed rail with continuously welded rail. The work will
take place on certain portions of the line between Tara, Iowa,
and LeMars, Iowa, in annual segments of 5.5, 11.0 and 11.0 miles
in 1995, 1996 and 1997, respectively. The 1995 work was
completed as scheduled. The project is partially funded by a
state/federal grant of 20% of the project cost, a state 0%
interest loan of 28.4% of the project cost, a shipper association
0% interest loan of 8.4% of the project costs with the remaining
43.2% of the project cost paid directly by the Railroad. The
contract does contain contingency amounts related to the cost of
the rail. Any cost overrun, other than the rail contingency
written into the contract, is the Railroad's responsibility.
10. CONTINGENCIES:
One Railroad is a defendant in certain lawsuits resulting from
railroad operations. Management believes that adequate
provision has been made in the financial statements for any
expected liabilities which may result from the disposition of
such lawsuits. While it is possible that some of the foregoing
matters may be settled at a cost greater than that provided
for, it is the opinion of management that the ultimate
liability, if any, will not be material to the Company's
financial position or results of operations.
During 1993, one Railroad negotiated a new 10-year
transportation contract and favorably resolved a contingency.
Accordingly, in 1993, the accrual of $3,500,000 for this
contingency was eliminated and reversed into revenue.
One Railroad is party to certain deferred compensation
agreements, the after-tax cost of which is to be funded by the
majority stockholder of the Company. Pursuant to terms of these
agreements, a total of 13% of the equity value of the Company
would be paid to certain railroad officers upon the sale of over
50% of the Company's stock.
11. EMPLOYEE BENEFITS:
Employees retiring from one Railroad upon or after attaining
age 60 who had an employment relationship with the previous
owner and operator of the line at the date the Railroad
commenced operations and who have rendered at least 30 years
of continuous service are entitled to postretirement medical
benefits to age 65. These benefits are subject to
deductibles, co-insurance provisions and other limitations.
The Railroad may amend or change the plan periodically subject
to its union labor agreements.
The liability recorded for accumulated postretirement benefit
costs is approximately $3,210,000. The plan is currently unfunded;
the Railroad anticipates funding future claims with the Railroad's
operating cash flows.
Assumptions used in accounting for the postretirement benefit
plans as of December 31, 1995, 1994 and 1993, are as follows:
1995 1994 1993
Discount rate 5.69% 7.5% 6.25%
Annual turnover rate 3.36% 0.99% 0.99%
Average annual claim cost
per retiree $5,840 $5,546 $5,207
====== ====== ======
In 1995, 1994 and 1993, health care costs are assumed to
increase by 10% per year. This rate of increase is assumed to
decrease by 1% every third year until reaching 4%, when the rate
of increase is assumed to remain constant.
The expense for postretirement medical benefits for 1995, 1994
and 1993 was $133,000, $17,000 and $442,000, respectively. The
Railroad is using the corridor approach and therefore has
recognized only a portion of the actuarial gain as of December
31, 1995 in determining the net periodic pension cost. Cash
payments for benefits relating to these years totaled $133,000,
$216,000 and $339,000, respectively. The periodic expense for
postretirement medical benefits included the following
components:
1995 1994 1993
Service cost for benefits earned
during the year $151,000 $184,000 $285,000
Interest cost on accumulated
post retirement benefit cost 222,000 213,000 211,000
Change in assumptions (191,000) (630,000) (54,000)
Unrecognized Actuarial (Loss)Gain (49,000) 250,000 -
Total expense $133,000 $ 17,000 $442,000
======== ======== ========
Based on the December 31, 1995 calculation, a 1% per year
additional increase in health care costs above these assumptions
would increase the recorded liability for accumulated
postretirement benefit costs by approximately $288,000.
12. SUBSEQUENT EVENT:
On January 17, 1996 the Company and its stockholders entered into
a definitive agreement to sell all the stock of the Company to
Illinois Central Corporation. The transaction will require U.S.
Department of Transportation approval. The sale of stock will
not close until regulatory approval has been obtained. The
regulatory review process is expected to take between three and
nine months.
If the transaction receives regulatory approval and closes, the
deferred compensation payments discussed in Note 10 would be
required. The expense and related tax benefit would be recorded
in the Company's statement of income in the period in which the
transaction occurs. The required capital contribution from the
majority shareholder also would be recorded and would
approximately equal the net of tax amount of the deferred
compensation payments, thus the net impact on stockholders'
equity would be immaterial.
ILLINOIS CENTRAL CORPORATION AND SUBSIDIARIES
INDEX TO PRO FORMA FINANCIAL INFORMATION
Pro Forma Financial Information P-1
Pro Forma Condensed Consolidated Statement of Income for
the Three Months Ended March 31, 1996 P-2
Notes to Pro Forma Condensed Consolidated Statements of
Income for the Three Months Ended March 31, 1996 P-3
Pro Forma Condensed Consolidated Balance Sheet at
March 31, 1996 P-4
Notes to Pro Forma Condensed Consolidated Balance Sheet
at March 31, 1996 P-5
Pro Forma Condensed Consolidated Statement of Income for
the year Ended December 31, 1995 P-6
Notes to Pro Forma Condensed Consolidated Statement of
Income for the year Ended December 31, 1995 P-7
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated
statements of income of Illinois Central Corporation and
Subsidiaries ("IC") for the twelve months ended December 31, 1995
and the three months ended March 31, 1996 (the "Pro Forma Income
Statements") and the pro forma condensed consolidated balance sheet
of IC as of March 31, 1996 (the "Pro Forma Balance Sheet") (together
the "Pro Forma Statements") were prepared to illustrate the
estimated effects of the acquisition of CCP Holdings, Inc. ("CCPH")
by IC (the "Acquisition"). The Pro Forma Statements reflect the use
of the purchase method of accounting. The Pro Forma Income
Statements assume that the Acquisition occurred as of January 1,
1995 and January 1, 1996, respectively. The Pro Forma Balance Sheet
assumes that the Acquisition occurred on March 31, 1996. The total
purchase cost, including fees and expenses, has been allocated to
the assets and liabilities of CCPH based on their book values as no
studies, evaluations or other investigations have occurred or will
be conducted until closing.
The unaudited Pro Forma Statements have been presented
for informational purposes only, are not indicative of what IC's
actual results of operations or financial conditions would have been
had the Acquisition occurred as of January 1,1995 or January 1,
1996, respectively or at March 31, 1996 and do not purport to
indicate IC's consolidated results of operations for any future date
or period or financial position at any future date.
The unaudited pro forma adjustments are based upon
available information and upon certain assumptions. The unaudited
Pro Forma Statements and the accompanying notes should be read in
conjunction with the selected historical consolidated financial
statements of IC and CCPH, including the notes thereto. IC's
financial statements are contained in its Form 10-Q for the three
months ended March 31, 1996 (File No. 1-10720) filed with the
Commission on May 10, 1996 and its Annual Report on Form 10-K
for the year ended December 31, 1995 (File No. 1-10720) filed with
the Commission on March 11, 1996. CCPH's financial statements are
filed beginning on F-1.
ILLINOIS CENTRAL CORPORATION AND SUBSIDIARIES
Pro Forma Condensed Consolidated Statement of Income
Three Months Ended March 31, 1996
($ in millions)
(Unaudited)
Adjustments/
IC CCPH Eliminations Pro Forma
Revenues $ 162.3 $ 21.6 $ $ 183.9
Operating expenses 102.0 12.2 .8 (1)
(1.7) (2) 113.3
Operating income 60.3 9.4 .9 70.6
Interest expense, net (7.7) (.8) .3 (3)
(1.9) (4) (10.1)
Other income, net .3 .2 .5
Income before income taxes 52.9 8.8 (.7) 61.0
Provision for income taxes 19.8 3.5 (.3) (5) 23.0
Net income $ 33.1 $ 5.3 $ (.4) $ 38.0
Income per share $ .54 $ .61
Weighted average number of shares
of common stock and common stock
equivalents outstandind 61,742,614 61,742,614
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated
Statement of Income.
ILLINOIS CENTRAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1996
The following is a summary of the adjustments/eliminations reflected in
the unaudited Pro Forma Condensed Consolidated Statement of Income for
the three months ended March 31, 1996.
1) Amortization of Goodwill calculated on the difference between
the price of $125 million and the book value of stockholders'
equity ($54.1 million) on January 1, 1996 as adjusted for the
amortization of acquisition liability for severances and
amortized over 25 years. Actual Goodwill will be determined
following the closing of the acquisition and the complete
valuation of the assets and liabilities existing upon closing.
The amortization period of 25 years is based on preliminary
evaluation of asset lives and could change.
2) Reduction to operating expenses reflecting revised operating
policies and procedures, reduced employment levels and lower
materials expense as a result of management's operating plan,
offset by increased other tax expense. Amount does not include
$4.5 million in one-time severances.
3) Elimination of CCPH's interest expense on the portion of the
beginning debt balance assumed paid off with cash available
on January 1, 1996, of approximately $15.8 million.
4) Increased interest expense caused by the additional
borrowings required to finance the acquisition.
Approximately $100 million will be financed at IC's
subsidiary, Illinois Central Railroad Company. Approximately
$25 million will be financed by IC using its bank lines.
5) Reflects the tax effects of Pro Forma adjustments.
ILLINOIS CENTRAL CORPORATION AND SUBSIDIARIES
Pro Forma Condensed Consolidated Balance Sheet
as of March 31, 1996
($ in millions)
(Unaudited)
Adjustments/
IC CCPH Eliminations Pro Forma
Cash and cash equivalents $ 11.1 $ 6.8 $ (5.0) (2) $ 12.9
Other current assets 102.9 21.0 (.2) (4) 123.7
Investments 13.3 - 13.3
Properties, net 1,292.6 114.3 1,406.9
Goodwill 77.1 (1)
4.5 81.6
Other assets 15.3 .4 15.7
Total assets $ 1,435.2 $ 142.5 $ 76.4 $1,654.1
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities $ 189.1 $ 26.7 $ 4.5 (3) $
(1.3) (2)
(.2) (4) 218.8
Long-term debt 387.4 21.9 136.5 (1)
(3.7) (2) 542.1
Deferred taxes 252.7 25.8 278.5
Other liabilities 114.9 8.7 123.6
Stockholders' equity 491.1 59.4 (59.4) (1) 491.1
Total liabilities and
stockholders' equity $ 1,435.2 $ 142.5 $ 76.4 $1,654.1
See accompanying Notes to the Unaudited Pro Forma Condensed Consolidated
Balance Sheet.
ILLINOIS CENTRAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1996
The following is a summary of the adjustments/eliminations
reflected in the unaudited Pro Forma Condensed Consolidated Balance Sheet.
1) Reflects the acquisition of 100% of the stock of CCP.
2) Assumes CCP's cash is used to reduce acquired bank debt.
3) Reflects anticipated severance costs of $4.5 million.
4) Eliminates intercompany car hire balances at March 31, 1996.
ILLINOIS CENTRAL CORPORATION AND SUBSIDIARIES
Pro Forma Condensed Consolidated Statement of Income
Year Ended December 31, 1995
($ in millions)
(Unaudited)
Adjustments/
IC CCPH Eliminations Pro Forma
Revenues $ 643.8 $ 76.0 $ $ 719.8
Operating expenses 413.3 53.0 3.4 (1)
(6.9) (2) 462.8
Operating income 230.5 23.0 3.5 257.0
Interest expense, net (29.5) (4.1) .3 (3)
(7.4) (4) (40.7)
Other income, net (.2) .9 .7
Income before income taxes 200.8 19.8 (3.6) 217.0
Provision for income taxes 71.0 7.9 (1.3) (5) 77.6
Income before extraordinary
item, net $ 129.8 $ 11.9 $ (2.3) $ 139.4
Income per share before
extraordinary item $ 2.06 $ 2.22
Weighted average number of shares
of Common Stock and Common Stock
equivalents outstanding 62,885,121 62,885,121
See accompanying Notes to the Unaudited Pro Forma Condensed Consolidated
Statement of Income.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31, 1995
The following is a summary of the adjustments/eliminations reflected in
the unaudited Pro Forma Condensed Consolidated Statement of Income for
the year ended December 31, 1995.
1) Amortization of Goodwill calculated on the difference between
the price of $125 million and the book value of stockholders'
equity ($43.9 million) on January 1, 1995 as adjusted for
the amortization of acquisition liability for severances
and amortized over 25 years. Actual Goodwill will be
determined following the closing of the acquisition and the
complete valuation of the assets and liabilities existing
upon closing. The amortization period of 25 years is based
on preliminary evaluation of asset lives and could change.
2) Reduction to operating expenses reflecting revised operating
policies and procedures, reduced employment levels and lower
materials expense as a result of management's operating plan,
offset increased other tax expense. Amount does not include
$4.5 million in one-time severances.
3) Elimination of CCPH's interest expense on the portion of the
beginning debt balance assumed paid off with cash available
on January 1, 1995, of approximately $3.8 million.
4) Increased interest expense caused by the additional
borrowings required to finance the acquisition.
Approximately $100 million will be financed at IC's
subsidiary, Illinois Central Railroad Company. Approximately
$25 million will be financed by IC using its bank lines.
5) Reflects the tax effects of Pro Forma adjustments.
ILLINOIS CENTRAL CORPORATION & SUBSIDIARIES
EXHIBIT INDEX
Exhibit Index Description Sequential Page No.
2 Stock Purchase Agreement (A)
23.1 Consent of Arthur Andersen LLP (A)
(A) Included herein but not reproduced
EXHIBIT 2
EXECUTION COPY
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of January 17, 1996,
among ILLINOIS CENTRAL CORPORATION, a Delaware corporation (the
"Buyer"), CCP HOLDINGS, INC., a Delaware corporation (the
"Corporation"), DONALD R. WOOD, JR. ("Wood") and LYLE D. REED ("Reed"),
and the ANN L. and WALTER A. DREXEL REVOCABLE TRUST and the REED
CHARITABLE REMAINDER UNITRUST (each, a "Trust Seller" and,
collectively, the "Trust Sellers") and R. KEVIN TROUT, JOHN A. ADAIR
and GREGORY L. AMYS (each a "Phantom Stock Unit Holder" and
collectively, the "Phantom Stock Unit Holders"). Wood and Reed are
each an "Individual Seller" and, collectively, the "Individual
Sellers." The Individual Sellers and the Trust Sellers are sometimes
hereinafter referred to, collectively, as the "Sellers" and,
individually, as a "Seller."
W I T N E S S E T H:
WHEREAS, the Sellers collectively own 7,600 shares (the
"Shares") of common stock, par value $1.00 per share, of the
Corporation (the "Common Stock"), which are all of the issued and
outstanding shares of capital stock of the Corporation, with each
Seller owning the number of Shares set forth opposite its name on
Schedule 1 hereto; and
WHEREAS, on the terms and subject to the conditions set
forth in this Agreement, the Sellers desire to sell or cause to be sold
to the Buyer, and the Buyer desires to acquire, all of the Shares.
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements hereinafter contained, the parties hereto do hereby
agree as follows:
ARTICLE I
DEFINITION OF CERTAIN TERMS
In addition to terms defined elsewhere in this Agreement,
the following terms used herein shall have the following meanings
assigned to them herein, unless the context otherwise dictates:
"Agreement" shall mean this Stock Purchase Agreement,
together with all schedules attached hereto, as the same may be amended
and in effect from time to time.
"Benefit Plans" shall have the meaning ascribed thereto in
Section 4.14(a) hereof.
"Business Day" shall mean any day which is not a Saturday
or a Sunday or a national banking holiday.
"Buyer" shall mean Illinois Central Corporation, a Delaware
corporation and its successors and permitted assigns.
"Buyer Capital Expenditures Amount" shall have the meaning
ascribed thereto in Section 2.3(b)(v)(B) hereof.
"Buyer Capital Expenditures Difference" shall have the
meaning ascribed thereto in Section 2.3(b)(v)(B) hereof.
"Buyer Net Working Capital Amount" shall have the meaning
ascribed thereto in Section 2.3(a)(v)(B) hereof.
"Buyer Net Working Capital Difference" shall have the
meaning ascribed thereto in Section 2.3(a)(v)(B) hereof.
"Buyer Parties" shall have the meaning ascribed thereto in
Section 9.1 hereof and "Buyer Party" shall mean any one of them.
"Buyer's Purchase Price Adjustment Amount" shall have the
meaning ascribed thereto in Section 7.3(e) hereof.
"Capital Expenditure Amount" shall mean, as of any date of
determination, the aggregate dollar amount of materials, labor,
purchase services and additives capitalized by the Corporation (and not
in inventory) in accordance with the Corporation's past practice and in
accordance with GAAP applied on a consistent basis from the date hereof
until the Closing Date in respect of capital projects, whether in
process or completed, not to exceed $5,263,000.
"Capital Expenditures Dispute Fees" shall have the meaning
ascribed thereto in Section 2.3(b)(iv) hereof.
"Capital Expenditures Disputed Items Notice" shall have the
meaning ascribed thereto in Section 2.3(b)(ii) hereof.
"Capital Program" shall mean the Corporation's 1996 Capital
Program, a copy of which has previously been supplied to the Buyer.
"Chicago Central" shall mean Chicago Central & Pacific
Railroad Company, a Delaware corporation and its successors and
assigns.
"Claim Notice" shall have the meaning ascribed thereto in
Section 9.4(a) hereof.
"Cleanup" shall mean all actions required by Environmental
Laws to clean-up, remove, treat, dispose or remediate Hazardous
Substances.
"Closing" shall mean the sale by the Sellers to the Buyer
of the Shares and the payment by the Buyer to the Sellers of the
Purchase Price for the Shares.
"Closing Date" shall mean the date on which the Closing
occurs, or such other date as may be agreed upon by the parties hereto.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Common Stock" shall have the meaning ascribed thereto in
the preamble hereto.
"Confidential Information" shall have the meaning ascribed
thereto in Section 6.7(a) hereof.
"Confidentiality Agreement" shall have the meaning ascribed
thereto in Section 6.7(b) hereof.
"Contract Action" shall have the meaning ascribed thereto
in Section 6.2 hereof.
"Corporation" shall mean CCP Holdings, Inc., a Delaware
corporation and its successors and permitted assigns.
"Current Assets" shall mean, at any date of determination,
the aggregate amount of all current assets (excluding cash and cash
equivalents determined in accordance with GAAP) of the Corporation and
its Subsidiaries at such date, determined in accordance with the
applicable books and records of the Corporation and its Subsidiaries
and in accordance with GAAP, consistently applied.
"Current Liabilities" shall mean, at any date of
determination, the aggregate amount of all current liabilities
(including as a current liability any Medicare taxes due by the
Corporation in connection with the Total Phantom Stock Payment, but
excluding the current portion of all Funded Indebtedness) of the
Corporation and its Subsidiaries at such date, determined in accordance
with the applicable books and records of the Corporation and its
Subsidiaries and in accordance with GAAP, consistently applied.
"Damages" shall have the meaning ascribed thereto in
Section 9.1 hereof.
"Deferred Compensation Phantom Stock Unit Plans" shall
mean, collectively, the separate Deferred Compensation Phantom Stock
Unit Plans effective October 20, 1993, among Chicago Central, Wood and
each of the Phantom Stock Unit Holders and "Deferred Compensation
Phantom Stock Unit Plan" shall mean any one of them.
"DOT" shall mean the United States Department of
Transportation or any successor governmental agency or authority.
"DOT Approval" shall mean a final order of the DOT
approving, exempting or otherwise authorizing the consummation of the
transactions contemplated by this Agreement.
"DOT Filings" shall have the meaning ascribed thereto in
Section 6.11 hereof.
"Environmental Laws" shall mean all applicable federal,
state and local laws, regulations, rules and ordinances which regulate,
relate to or impose liability or standards of conduct concerning
Hazardous Substances, including, without limitation, the following:
CERCLA, 42 U.S.C. Sect 9601; RCRA, 42 U.S.C. Sect 6901; and TSCA, 15 U.S.C.
Sect 2601; each as amended from time to time.
"ERISA" shall have the meaning ascribed thereto in Section
4.14(a) hereof.
"Escrow Agreement" shall mean the form of Escrow Agreement
agreed upon by the Sellers, the Phantom Stock Unit Holders, the Buyer
and the Escrow Bank, as the same may be amended and in effect from time
to time.
"Escrow Bank" shall mean any national bank or trust company
having a combined capital and surplus of at least $5,000,000,000.
"Escrow Indemnification Amount" shall mean an amount equal
to $5,000,000.
"Escrow Percentage" shall mean with respect to any Seller
Escrow Party a fraction the numerator of which is (i) in the case of a
Seller the amount received by such Seller pursuant to Section 2.4(d)
and (ii) in the case of a Phantom Stock Unit Holder the amount received
by such Phantom Stock Unit Holder pursuant to Section 2.5(b) and in
both cases the denominator of which of the aggregate amounts of
payments pursuant to Sections 2.4(d) and 2.5(b).
"Estimated Capital Expenditure Amount" shall have the
meaning ascribed thereto in Section 7.2(g) hereof.
"Estimated Net Working Capital Amount" shall have the
meaning ascribed thereto in Section 7.2(g) hereof.
"Estimated Tax Exposure" shall have the meaning ascribed
thereto in Section 6.16 hereof.
"Final Capital Expenditures Determination Amount" shall
have the meaning ascribed thereto in Section 2.3(b)(v) hereof.
"Final Monthly Financial Statement" shall mean (i) if the
Closing Date occurs after the twentieth day of a calendar month, the
Monthly Financial Statement for the last full calendar month
immediately preceding the Closing Date or (ii) if the Closing Date
occurs on or before the twentieth day of a calendar month, the Monthly
Financial Statement for the month prior to the last full calendar month
immediately preceding the Closing Date.
"Final Net Working Capital Determination Amount" shall have
the meaning ascribed thereto in Section 2.3(a)(v) hereof.
"Financial Statements" shall mean, collectively, the 1994
Financial Statements, the Unaudited Financial Statements, the 1995
Financial Statements and the Final Monthly Financial Statement.
"Funded Indebtedness" shall mean any indebtedness of the
Corporation and its Subsidiaries for borrowed money which under GAAP is
shown on the balance sheet as a liability (including, without
limitation, capitalized lease obligations).
"GAAP" shall mean generally accepted accounting principles.
"Hazardous Substances" shall mean all substances defined as
such in the National Oil and Hazardous Substances Pollution Contingency
Plan, 40 C.F.R. Section 300.5, or defined as hazardous substances,
hazardous wastes, solid wastes or toxic substances by, or regulated as
such under, any Environmental Laws and shall include, without
limitation, polychlorinated biphenyls, petroleum and petroleum-derived
products, and any waste, substance, material, pollutant or contaminant
the presence, disposal, release or threatened release of which on, onto
or from the Properties may give rise to a Cleanup.
"Indemnification Percentage" shall mean a fraction the
numerator of which is $5,000,000 and the denominator of which is the
sum of $6,000,000 and the Estimated Tax Exposure.
"Indemnified Party" shall have the meaning ascribed thereto
in Section 9.4 hereof.
"Indemnifying Party" shall have the meaning ascribed
thereto in Section 9.4 hereof.
"Independent Accountant" shall have the meaning ascribed
thereto in Section 2.3(a)(iv) hereof.
"Independent Tax Accountant" shall mean a nationally
recognized independent accounting firm selected by Arthur Andersen LLP
and Deloitte & Touche, LLP.
"Individual Phantom Stock Payments" shall have the meaning
ascribed thereto in Section 2.5(b) hereof.
"Individual Phantom Stock Unit Holders Escrow Contribution"
shall mean with respect to any Phantom Stock Unit Holder an amount
which is the product of the Total Escrow Contribution and such Phantom
Stock Unit Holders Escrow Percentage.
"Individual Seller" and "Individual Sellers" shall have the
respective meaning ascribed thereto in the preamble hereto.
"Initial Capital Expenditures Determination" shall have the
meaning ascribed thereto in Section 2.3(b)(i) hereof.
"Initial Net Working Capital Determination" shall have the
meaning ascribed thereto in Section 2.3(a)(i) hereof.
"Initial Threshold Amount" shall have the meaning ascribed
thereto in Section 9.1 hereof.
"IRS" shall mean the Internal Revenue Service or any
successor governmental agency or authority.
"Knowledge" shall mean (a) with respect to any Seller, the
actual knowledge of such Seller, (b) with respect to the Corporation,
the actual knowledge of the directors and officers of the Corporation
and (c) with respect to the Buyer, the actual knowledge of the
directors and officers of the Buyer.
"Lien" shall mean any security interest, mortgage, lien,
pledge, charge, claim or other encumbrance of any nature whatsoever.
"Major Customers" shall have the meaning ascribed thereto
in Section 4.23 hereof.
"Material Adverse Effect" shall mean a material adverse
effect on the assets, business, operations or financial condition of
the Corporation and its Subsidiaries, taken as a whole.
"Material Damages" shall have the meaning ascribed thereto
in Section 9.1 hereof.
"Monthly Financial Statement" shall have the meaning
ascribed thereto in Section 6.13 hereof.
"Net Working Capital" shall mean, at any date of
determination, Current Assets at such date less Current Liabilities at
such date.
"Net Working Capital Dispute Fees" shall have the meaning
ascribed thereto in Section 2.3(a)(iv) hereof.
"Net Working Capital Disputed Items Notice" shall have the
meaning ascribed thereto in Section 2.3(a)(ii) hereof.
"1995 Financial Statements" shall have the meaning ascribed
thereto in Section 6.13 hereof.
"1994 Financial Statements" shall have the meaning ascribed
thereto in Section 4.6 hereof.
"1992 Tax Audit" shall mean the audit, currently pending,
by the IRS of the Corporation's federal income tax return for the
fiscal year ended December 31, 1992.
"Non-Competition Agreement" shall mean the form of Non-
Competition Agreement, agreed upon by the Sellers and the Buyer, as the
same may be amended and in effect from time to time.
"Notice Period" shall have the meaning ascribed thereto in
Section 9.4(a) hereof.
"Objection Response" shall have the meaning ascribed
thereto in Section 6.2 hereof.
"Person" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
"Phantom Stock Unit Holders" shall have the meaning
ascribed thereto in the preamble hereto.
"Phantom Stock Unit Holders Indemnification Amount" shall
mean an amount equal to the Total Phantom Stock Unit Holders Escrow
Contribution multiplied by the Indemnification Percentage.
"Phantom Stock Unit Holders Purchase Price Adjustment
Amount" shall mean an amount equal to the Total Phantom Stock Unit
Holders Escrow Contribution multiplied by the Purchase Price Adjustment
Percentage.
"Phantom Stock Unit Holders Tax Amount" shall mean an
amount equal to the Total Phantom Stock Unit Holders Escrow
Contribution multiplied by the Tax Percentage.
"Prime Rate" shall mean the rate of interest publicly
announced by the Escrow Bank from time to time as its "prime rate."
"Pro Rata Portion" shall mean, with respect to any Seller,
a fraction, the numerator of which shall be the number of Shares set
forth opposite such Seller's name on Schedule 1 hereto, and the
denominator of which shall be 7,600.
"Property" and "Properties" shall have the respective
meanings ascribed thereto in Section 4.13(a) hereof.
"Proposed Action Notice" shall have the meaning ascribed
thereto in Section 6.2 hereof.
"Proposed Capital Expenditures Adjustment" shall have the
meaning ascribed thereto in Section 2.3(b)(iv).
"Proposed Net Working Capital Adjustment" shall have the
meaning ascribed thereto in Section 2.3(a)(iv) hereof.
"Purchase Price" shall have the meaning ascribed thereto in
Section 2.2 hereof.
"Purchase Price Adjustment Amount" shall mean an amount
equal to $1,000,000.
"Purchase Price Adjustment Percentage" shall mean a
fraction the numerator of which is $1,000,000 and the denominator of
which is the sum of $6,000,000 and the Estimated Tax Exposure.
"Reed" shall have the meaning ascribed thereto in the
preamble hereto.
"Release" shall mean any release, spill, emission,
discharge, leaking, pumping, injection, deposit, disposal, dispersal or
leaching into the environment.
"Remaining Purchase Price" shall have the meaning ascribed
thereto in Section 2.4(d) hereof.
"Revised Capital Expenditures Determination" shall have the
meaning ascribed thereto in Section 2.3(b)(iv) hereof.
"Revised Net Working Capital Determination" shall have the
meaning ascribed thereto in Section 2.3(a)(iv) hereof.
"Scheduled Capital Expenditure Amount" shall mean, as of
any date of determination, the cumulative dollar amount of materials,
labor, purchase services and additives required to have been
capitalized by the Corporation (and not in inventory) in respect of
capital projects, whether in process or completed, and as set forth on
Schedule 6.2 hereof.
"Seller" and "Sellers" shall have the respective meaning
ascribed thereto in the preamble hereto.
"Seller Capital Expenditures Amount" shall have the meaning
ascribed thereto in Section 2.3(b)(v)(A) hereof.
"Seller Capital Expenditures Difference" shall have the
meaning ascribed thereto in Section 2.3(b)(v)(A) hereof.
"Seller Escrow Parties" shall mean, collectively, the
Sellers and the Phantom Stock Unit Holders, and "Seller Escrow Party"
shall mean any one of them.
"Seller Net Working Capital Amount" shall have the meaning
ascribed thereto in Section 2.3(a)(v)(A) hereof.
"Seller Net Working Capital Difference" shall have the
meaning ascribed thereto in Section 2.3(a)(v)(A) hereof.
"Sellers' Agent" shall have the meaning ascribed thereto in
Section 11.14 hereof.
"Sellers' Tax Estimate" shall have the meaning ascribed
thereto in Section 6.16 hereof.
"Shares" shall have the meaning ascribed thereto in the
preamble hereto.
"Subsidiaries" shall mean, collectively, (i) Chicago
Central, (ii) Cedar River Railroad Corporation, an Iowa corporation,
(iii) Iron Horse Properties, Inc., a Delaware corporation, and
(iv) Missouri River Bridge Company, a Delaware corporation, and their
respective successors and permitted assigns, and "Subsidiary" shall
mean any one of them.
"Tax Percentage" shall mean a fraction the numerator of
which is the Estimated Tax Exposure and the denominator of which is the
sum of $6,000,000 and the Estimated Tax Exposure.
"Tax Returns" shall mean any return, report, information
return or other document (including any related or supporting
information) filed or required to be filed with any governmental body
in connection with the determination, assessment, collection or
administration of any Taxes.
"Taxes" shall mean all taxes, however denominated,
including any interest, penalties or additions to tax that may become
payable in respect thereof, imposed by any governmental body which
taxes shall include, without limiting the generality of the foregoing,
all income taxes, payroll and employee withholding taxes, unemployment
insurance, social security, sales and use taxes, excise taxes,
franchise taxes, gross receipts taxes, occupation taxes, real and
personal property taxes, stamp taxes, transfer taxes, workers'
compensation taxes and other obligations of the same or a similar
nature, whether arising before, on or after the Closing, and "Tax"
shall mean any one of them.
"Total Phantom Stock Unit Holders Escrow Contribution"
shall mean the aggregate amount of all Individual Phantom Stock Unit
Holders Escrow Contributions.
"Total Escrow Contribution" shall mean the amount which is
the sum of the Escrow Indemnification Amount, the Estimated Tax
Exposure and the Purchase Price Adjustment Amount.
"Total Phantom Stock Payments" shall mean the aggregate
amount due and payable by the Corporation to the Phantom Stock Unit
Holders under the Deferred Compensation Phantom Stock Unit Plans.
"Transferred Employee" shall have the meaning ascribed
thereto in Section 6.15(c).
"Trust Seller" and "Trust Sellers" shall have the
respective meanings ascribed thereto in the preamble hereto.
"Unaudited Financial Statement Working Capital Amount"
shall mean an amount equal to -$899,000 (expressed as a negative
number).
"Unaudited Financial Statements" shall have the meaning
ascribed thereto in Section 4.6 hereof.
"Wood" shall have the meaning ascribed thereto in the
preamble hereto.
ARTICLE II
PURCHASE AND SALE OF SHARES; DEFERRED
COMPENSATION PHANTOM STOCK UNIT PLAN ARRANGEMENTS
SECTION 2.1 Purchase and Sale of Shares. Upon the terms
and subject to the conditions set forth in this Agreement, at the
Closing, the Sellers agree to sell, convey, assign, transfer and
deliver or cause to be sold, conveyed, assigned, transferred and
delivered to the Buyer, and the Buyer shall purchase, accept and
acquire, the Shares in exchange for the Purchase Price (as hereinafter
defined).
SECTION 2.2 Purchase Price. The purchase price to be paid
by the Buyer to the Sellers for the Shares shall be an amount equal to
the sum of (i) one hundred twenty-four million eight hundred seventy-
five thousand dollars ($124,875,000), (ii) if cash and cash equivalents
as of the Business Day immediately preceding the Closing Date exceed
$10,000,000 plus the amount of such excess, or if cash and cash
equivalents are less than $10,000,000 as of such date, minus the amount
of such difference, (iii) if Funded Indebtedness as of the Business Day
immediately preceding the Closing Date is less than $42,572,526, plus
the amount of such difference, or if Funded Indebtedness is more than
$42,572,526 as of such date, minus the amount of such excess, (iv) if
the Estimated Net Working Capital Amount exceeds the Unaudited
Financial Statement Working Capital Amount, plus the amount of such
excess, or if the Estimated Net Working Capital Amount is less than the
Unaudited Financial Statement Working Capital Amount, minus the amount
of such difference, and (v) if the Estimated Capital Expenditure Amount
exceeds the Scheduled Capital Expenditure Amount, plus the amount of
such excess, or if the Estimated Capital Expenditure Amount is less
than the Scheduled Capital Expenditure Amount, minus the amount of such
difference, subject to adjustment as provided in Section 2.3 (in the
aggregate, as so adjusted the "Purchase Price").
SECTION 2.3 Post-Closing Adjustment. In addition to the
portion of the Purchase Price due at Closing (as set forth in Section
2.4 hereof), the following amounts shall be payable as an adjustment to
the Purchase Price after the Closing Date as set forth below in this
Section 2.3.
(a) Net Working Capital. There shall be an
adjustment with respect to Net Working Capital as follows:
(i) Calculation of Net Working Capital.
Within 30 days after the Closing Date, the
Buyer shall deliver to the Sellers' Agent a
calculation of Net Working Capital as of the
Closing Date (the "Initial Net Working Capital
Determination") prepared by Arthur Andersen LLP
and determined in accordance with the
applicable books and records of the Corporation
and its Subsidiaries and in accordance with
GAAP, consistently applied.
(ii) Disputed Items Notice. If the
Sellers' Agent delivers written notice (the
"Net Working Capital Disputed Items Notice") to
the Buyer within 30 days after delivery of the
Initial Net Working Capital Determination,
stating that the Sellers' Agent objects to the
Initial Net Working Capital Determination and
specifying in detail the basis for such
objection, the Buyer and the Sellers' Agent
shall attempt to resolve and finally determine
the amount of Net Working Capital as of the
Closing Date within 15 days of the Net Working
Capital Disputed Items Notice.
(iii) Conclusive Presumption. If the
Sellers' Agent shall not have delivered the Net
Working Capital Disputed Items Notice to the
Buyer within 30 days after delivery of the
Initial Net Working Capital Determination, the
amount of Net Working Capital, as specified in
the Initial Net Working Capital Determination,
shall be conclusively presumed to be true and
correct and shall be binding upon the parties
hereto for purposes of determining any amounts
due hereunder and final payment pursuant to
paragraph (v) of this Section 2.3(a) shall not
be delayed or disputed.
(iv) Dispute Resolution; Payment of
Fees and Expenses. If the Buyer and the
Sellers' Agent shall be unable to agree upon
the amount of Net Working Capital as of the
Closing Date within 15 days after delivery of
the Net Working Capital Disputed Items Notice,
Price Waterhouse LLP (the "Independent
Accountant") shall review the disputed items
and make a determination as to the amount of
Net Working Capital as of the Closing Date (the
"Revised Net Working Capital Determination").
At the time of the submission of the dispute to
the Independent Accountant, each of the Buyer
and the Sellers' Agent shall submit in writing
to the other and to the Independent Accountant
a final proposed amount of Net Working Capital
as of the Closing Date (the "Proposed Net
Working Capital Adjustment"). The Revised Net
Working Capital Determination shall be made
within 30 days after the submission of the
dispute to the Independent Accountant and shall
be binding upon the parties. The fees, costs
and expenses of the Independent Accountant with
respect to this Section 2.3(a) (the "Net
Working Capital Dispute Fees") shall be borne
as follows: (i) in the event that the
difference between the Revised Net Working
Capital Determination and the Buyer's Proposed
Net Working Capital Adjustment exceeds the
difference between the Revised Net Working
Capital Determination and the Sellers' Proposed
Net Working Capital Adjustment, the Buyer shall
bear and pay all of the Net Working Capital
Dispute Fees; (ii) in the event that the
difference between the Revised Net Working
Capital Determination and the Sellers' Proposed
Net Working Capital Adjustment exceeds the
difference between the Revised Net Working
Capital Determination and the Buyer's Proposed
Net Working Capital Adjustment, the Sellers
shall bear and pay all of the Net Working
Capital Dispute Fees; and (iii) if the
difference between the Revised Net Working
Capital Determination and the Buyer's Proposed
Net Working Capital Adjustment is equal to the
difference between the Revised Net Working
Capital Determination and the Sellers' Proposed
Net Working Capital Adjustment, the Buyer and
the Sellers shall each bear and pay one-half of
the Net Working Capital Dispute Fees. The
Revised Net Working Capital Determination shall
be final and binding on the parties for
purposes of determining any adjustments to the
Purchase Price and final payment pursuant to
paragraph (v) of this Section 2.3(a) shall not
be delayed or disputed.
(v) Final Payment Regarding Adjustment
Amount. Within five business days after the
final determination of Net Working Capital as
of the Closing Date (the "Final Net Working
Capital Determination Amount") pursuant to this
Section 2.3(a):
(A) In the event that the
Final Net Working Capital
Determination Amount is greater
than the Estimated Net Working
Capital Amount (such difference
being hereinafter referred to as
the "Seller Net Working Capital
Amount"), the Buyer shall instruct
the Escrow Bank, in accordance with
the terms of the Escrow Agreement,
to pay to each Seller Escrow Party
its Escrow Percentage of the Seller
Net Working Capital Amount,
together with interest on such
amount from the Closing Date to the
date of payment at the Prime Rate
per annum, compounded daily on the
basis of a 365-day year. In the
event the amounts held under the
Escrow Agreement to pay the Seller
Net Working Capital Amount are less
than the amount required to pay the
Seller Net Working Capital Amount
in full giving effect to
disbursements made pursuant to
Section 2.4(b)(v)(A) (such
difference being hereinafter
referred to as the "Seller Net
Working Capital Difference"), then,
in addition to amounts paid
pursuant to the immediately
preceding sentence, the Buyer shall
pay to each Seller Escrow Party its
Escrow Percentage of the Seller Net
Working Capital Difference by wire
transfer, together with interest
thereon at the Prime Rate per
annum, compounded daily on the
basis of a 365-day year.
(B) In the event that the
Final Net Working Capital
Determination Amount is less than
the Estimated Net Working Capital
Amount (such difference being
hereinafter referred to as the
"Buyer Net Working Capital
Amount"), the Seller's Agent shall
instruct the Escrow Bank, in
accordance with the terms of the
Escrow Agreement, to pay to the
Buyer the Buyer Net Working Capital
Amount, together with interest on
such amount from the Closing Date
to the date of payment at the Prime
Rate per annum, compounded daily on
the basis of a 365-day year. In
the event the amounts held under
the Escrow Agreement to pay the
Buyer Net Working Capital Amount
are less than the amount required
to pay the Buyer Net Working
Capital Amount in full giving
effect to disbursements made
pursuant to Section 2.4(b)(v)(B)
(such difference being hereinafter
referred to as the "Buyer Net
Working Capital Difference"), then,
in addition to amounts paid
pursuant to the immediately
preceding sentence, each Seller
Escrow Party shall pay to the Buyer
its Escrow Percentage of the Buyer
Net Working Capital Difference by
wire transfer, together with
interest thereon at the Prime Rate
per annum, compounded daily on the
basis of a 365-day year.
(vi) In the event of default by the
Buyer or the Sellers, as the case may be, in
the payment when due of any sum owing pursuant
to paragraph (v) of this Section 2.3(a), the
amount so owing shall become immediately due
and payable with interest from the Closing date
at the Prime Rate plus two percent (2%) per
annum, compounded daily on the basis of a 365-
day year.
(b) Capital Expenditures. There shall be an
adjustment with respect to the Capital Expenditure Amount
as follows:
(i) Calculation of Capital
Expenditures. Within 30 days after the Closing
Date, the Buyer shall deliver to the Sellers'
Agent a calculation of the Capital Expenditure
Amount as of the Closing Date (the "Initial
Capital Expenditures Determination") prepared
by Arthur Andersen LLP and determined in
accordance with the applicable books and
records of the Corporation and its Subsidiaries
and in accordance with GAAP, consistently
applied.
(ii) Disputed Items Notice. If the
Sellers' Agent delivers written notice (the
"Capital Expenditures Disputed Items Notice")
to the Buyer within 30 days after delivery of
the Initial Capital Expenditures Determination,
stating that the Sellers' Agent objects to the
Initial Capital Expenditures Determination and
specifying in detail the basis for such
objection, the Buyer and the Sellers' Agent
shall attempt to resolve and finally determine
the Capital Expenditure Amount as of the
Closing Date within 15 days of the Capital
Expenditures Disputed Items Notice.
(iii) Conclusive Presumption. If the
Sellers' Agent shall not have delivered the
Capital Expenditures Disputed Items Notice to
the Buyer within 30 days after delivery of the
Initial Capital Expenditures Determination, the
Capital Expenditure Amount, as specified in the
Initial Capital Expenditures Determination,
shall be conclusively presumed to be true and
correct and shall be binding upon the parties
hereto for purposes of determining any amounts
due hereunder and final payment pursuant to
paragraph (v) of this Section 2.3(b) shall not
be delayed or disputed.
(iv) Dispute Resolution; Payment of
Fees and Expenses. If the Buyer and the
Sellers' Agent shall be unable to agree upon
the Capital Expenditure Amount as of the
Closing Date within 15 days after delivery of
the Capital Expenditures Disputed Items Notice,
the Independent Accountant shall review the
disputed items and make a determination as to
the Capital Expenditure Amount as of the
Closing Date (the "Revised Capital Expenditures
Determination"). At the time of the submission
of the dispute to the Independent Accountant,
each of the Buyer and the Sellers' Agent shall
submit in writing to the other and to the
Independent Accountant a final proposed Capital
Expenditure Amount as of the Closing Date (the
"Proposed Capital Expenditures Adjustment").
The Revised Capital Expenditures Determination
shall be made within 30 days after the
submission of the dispute to the Independent
Accountant and shall be binding upon the
parties. The fees, costs and expenses of the
Independent Accountant with respect to this
Section 2.3(b) (the "Capital Expenditures
Dispute Fees") shall be borne as follows: (i)
in the event that the difference between the
Revised Capital Expenditures Determination and
the Buyer's Proposed Capital Expenditures
Adjustment exceeds the difference between the
Revised Capital Expenditures Determination and
the Sellers' Proposed Capital Expenditures
Adjustment, the Buyer shall bear and pay all of
the Capital Expenditures Dispute Fees; (ii)
in the event that the difference between the
Revised Capital Expenditures Determination and
the Sellers' Proposed Capital Expenditures
Adjustment exceeds the difference between the
Revised Capital Expenditures Determination and
the Buyer's Proposed Capital Expenditures
Adjustment, the Sellers shall bear and pay all
of the Capital Expenditures Dispute Fees; and
(iii) if the difference between the Revised
Capital Expenditures Determination and the
Buyer's Proposed Capital Expenditures
Adjustment is equal to the difference between
the Revised Capital Expenditures Determination
and the Sellers' Proposed Capital Expenditures
Adjustment, the Buyer and the Sellers shall
each bear and pay one-half of the Capital
Expenditures Dispute Fees. The Revised Capital
Expenditures Determination shall be final and
binding on the parties for purposes of
determining any adjustments to the Purchase
Price and final payment pursuant to paragraph
(v) of this Section 2.3(b) shall not be delayed
or disputed.
(v) Final Payment Regarding Adjustment
Amount. Within five business days after the
final determination of the Capital Expenditure
Amount as of the Closing Date (the "Final
Capital Expenditures Determination Amount")
pursuant to this Section 2.3(b):
(A) In the event that the
Final Capital Expenditures
Determination Amount is greater
than the Estimated Capital
Expenditures Amount (such
difference being hereinafter
referred to as the "Seller Capital
Expenditures Amount"), the Buyer
shall instruct the Escrow Bank, in
accordance with the terms of the
Escrow Agreement, to pay to each
Seller Escrow Party its Escrow
Percentage of the Seller Capital
Expenditures Amount, together with
interest on such amount from the
Closing Date to the date of payment
at the Prime Rate per annum,
compounded daily on the basis of a
365-day year. In the event the
amounts held under the Escrow
Agreement to pay the Seller Capital
Expenditures Amount are less than
the amount required to pay the
Seller Capital Expenditures Amount
in full giving effect to
disbursements made pursuant to
Section 2.4(a)(v)(A) (such
difference being hereinafter
referred to as the "Seller Capital
Expenditures Difference"), then, in
addition to amounts paid pursuant
to the immediately preceding
sentence, the Buyer shall pay to
each Seller Escrow Party its Escrow
Percentage of the Seller Capital
Expenditures Difference by wire
transfer, together with interest
thereon at the Prime Rate per
annum, compounded daily on the
basis of a 365-day year.
(B) In the event that the
Final Capital Expenditures
Determination Amount is less than
the Estimated Capital Expenditures
Amount (such difference being
hereinafter referred to as the
"Buyer Capital Expenditures
Amount"), the Sellers' Agent shall
instruct the Escrow Bank, in
accordance with the terms of the
Escrow Agreement, to pay to the
Buyer the Buyer Capital
Expenditures Amount, together with
interest on such amount from the
Closing Date to the date of payment
at the Prime Rate per annum,
compounded daily on the basis of a
365-day year. In the event the
amounts held under the Escrow
Agreement to pay the Buyer Capital
Expenditures Amount are less than
the amount required to pay the
Buyer Capital Expenditures Amount
in full giving effect to
disbursements made pursuant to
Section 2.4(a)(v)(B) (such
difference being hereinafter
referred to as the "Buyer Capital
Expenditures Difference"), then, in
addition to amounts paid pursuant
to the immediately preceding
sentence, each Seller Escrow Party
shall pay to the Buyer its Escrow
Percentage of the Buyer Capital
Expenditure Difference by wire
transfer, together with interest
thereon at the Prime Rate per
annum, compounded daily on the
basis of a 365-day year.
(vi) In the event of default by the
Buyer or the Sellers, as the case may be, in
the payment when due of any sum owing pursuant
to paragraph (v) of this Section 2.3(b), the
amount so owing shall become immediately due
and payable with interest from the Closing date
at the Prime Rate plus two percent (2%) per
annum, compounded daily on the basis of a 365-
day year.
(c) From and after the Closing Date, the Buyer
shall, and shall cause the Corporation to, provide all
information, access to information and cooperation
reasonably requested by the Sellers' Agent to permit the
Sellers' Agent to fulfill the Sellers' obligations under
this Section 2.3.
SECTION 2.4 Payment of Purchase Price.
(a) At the Closing, the Buyer shall deliver and
deposit with the Escrow Bank, to be held in accordance with
the terms of the Escrow Agreement, an aggregate amount
equal to the Escrow Indemnification Amount less the Phantom
Stock Unit Holders Indemnification Amount.
(b) At the Closing, the Buyer shall deliver and
deposit with the Escrow Bank, to be held in accordance with
the terms of the Escrow Agreement, an amount equal to the
Estimated Tax Exposure less the Phantom Stock Unit Holders
Tax Amount.
(c) At the Closing, the Buyer shall deliver and
deposit with the Escrow Bank, to be held in accordance with
the terms of the Escrow Agreement, an aggregate amount
equal to the Purchase Price Adjustment Amount less the
Phantom Stock Unit Holders Purchase Price Amount.
(d) At the Closing, the Buyer shall pay to the
Sellers the Purchase Price less (i) the Escrow
Indemnification Amount less the Phantom Stock Unit Holders
Indemnification Amount, (ii) the Estimated Tax Exposure
less the Phantom Stock Unit Holders Tax Amount and (iii)
the Purchase Price Adjustment Amount less the Phantom Stock
Unit Holders Purchase Price Adjustment Amount (the
"Remaining Purchase Price"), with each Seller receiving an
amount equal to the Remaining Purchase Price multiplied by
such Seller's Pro Rata Portion. Such amount shall be paid
to each Seller by wire transfer to the account designated
by such Seller in writing to the Buyer at least two (2)
Business Days prior to the Closing Date.
SECTION 2.5. Deferred Compensation Phantom Stock Unit
Plan Arrangements.
(a) At the Closing, Wood shall pay to Chicago Central an
amount equal to 60% of the Total Phantom Stock Payment.
(b) At the Closing, Chicago Central shall pay to each
Phantom Stock Unit Holder an amount equal to the Total Phantom
Stock Payment multiplied by the percentage set forth opposite
their name on Schedule 2.5 (the "Individual Phantom Stock
Payments").
(c) At the Closing, each of the Phantom Stock Unit
Holders shall deliver and deposit with the Escrow Bank, to be
held in accordance with the terms of the Escrow Agreement an
amount equal to the Individual Phantom Stock Unit Holders Escrow
Contribution, of which (i) an amount equal to the Individual
Phantom Stock Unit Holders Escrow Contribution multiplied by the
Indemnification Percentage shall be deposited in the
Indemnification Escrow Account created under the Escrow
Agreement, (ii) an amount equal to the Individual Phantom Stock
Unit Holders Escrow Contribution multiplied by the Tax Percentage
shall be deposited in the Tax Exposure Escrow Account created
under the Escrow Agreement, and (iii) an amount equal to the
Individual Phantom Stock Unit Holders Escrow Contribution
multiplied by the Purchase Price Adjustment Percentage shall be
deposited in the Purchase Price Adjustment Account created under
the Escrow Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
SECTION 3.1. Representations and Warranties of Individual
Sellers. Each of the Individual Sellers represents and warrants to
Buyer that as of the date hereof:
(a) Such Individual Seller has all requisite legal
capacity to enter into this Agreement and to perform its obligations
under this Agreement. This Agreement has been duly executed and
delivered by such Individual Seller and, assuming due authorization,
execution and delivery by the other parties hereto, constitutes the
legal, valid and binding obligation of such Individual Seller
enforceable against such Individual Seller in accordance with its
terms, except as such enforceability may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or
similar laws affecting creditor's rights generally and general
principles of equity.
(b) Such Individual Seller is the beneficial and
record owner of the number of Shares set forth beside its name on
Schedule 1 attached hereto and has good and marketable title to such
Shares, free and clear of any Liens, except as set forth on Schedule
3.1(b). Such Individual Seller has the legal right to sell and deliver
the Shares pursuant to this Agreement. The Shares being sold to the
Buyer by such Individual Seller at the Closing include all of the
Shares owned beneficially or of record by such Individual Seller, and
such Individual Seller owns no other securities of the Corporation.
Except as set forth on Schedule 3.1(b), the Shares to be sold by such
Individual Seller are not subject to any proxy, voting trust agreement
or other contract, agreement, arrangement, commitment or understanding
restricting or otherwise relating to the voting, dividend rights or
disposition of the Shares. Except as set forth on Schedule 3.1(b),
such Individual Seller has not issued (and is not committed to issue)
any option, warrant or other right to subscribe for or purchase any
capital stock of the Corporation or securities convertible into or
exchangeable for any capital stock of the Corporation. Upon delivery
of and payment for the Shares held by such Individual Seller, and
assuming the Buyer purchases the Shares in good faith and without
notice of any adverse claim, the Buyer will acquire valid and
unencumbered title to the Shares being sold by such Individual Seller,
free and clear of any Liens other than Liens which may arise from any
acts or omissions by, or the status of or any facts pertaining to, the
Buyer.
(c) Except as set forth on Schedule 3.1(c), the
execution and delivery of this Agreement, and the consummation of the
transactions contemplated hereby, by such Individual Seller do not and
will not violate, conflict with, result in a breach of, or constitute a
default or result in or permit any acceleration of any obligation under
(i) any law, ordinance or governmental rule or regulation to which such
Individual Seller is subject, (ii) any judgment, order, writ,
injunction, decree or award of any court, arbitrator or governmental or
regulatory official, body or authority which is applicable to such
Individual Seller, or (iii) any mortgage, indenture, agreement,
contract, commitment, lease, license, or other instrument or document,
oral or written, to which such Individual Seller is a party, or by
which any of the Shares of such Individual Seller may be bound, except
where a waiver with respect thereto has been or will, prior to Closing,
be obtained or except for such violation, default or conflict that
could not reasonably be expected to materially affect the ability of
such Individual Seller to consummate the transactions provided for in
this Agreement.
(d) Except as set forth on Schedule 3.1(d), neither
the execution and delivery by such Individual Seller, nor the
consummation by such Individual Seller of the transactions contemplated
by this Agreement, requires the consent or approval of, or the giving
of advance notice by such Individual Seller to, or the registration by
such Individual Seller with, or the taking of any other action by such
Individual Seller in respect of, any federal, state or local
governmental authority, and the execution, delivery and performance of
this Agreement by such Individual Seller will not result in the
creation of any Lien upon any of the Shares owned by such Individual
Seller.
(e) There is no injunction, order or decree of any
court or administrative agency or any action or proceeding pending or,
to such Individual Seller's Knowledge, threatened against such
Individual Seller to restrain or prohibit the consummation of the
transactions contemplated hereby.
(f) Such Individual Seller has not employed or
retained any broker, agent, finder or other party, or incurred any
obligation for brokerage fees, finder's fees or commissions with
respect to the transactions contemplated by this Agreement, or
otherwise dealt with anyone purporting to act in the capacity of a
finder or broker with respect thereto whereby the Corporation or its
Subsidiaries, or the Sellers, or the Buyer may be obligated to pay such
a fee or commission.
SECTION 3.2. Representations and Warranties of Trust
Sellers. Each of the Trust Sellers represents and warrants to the
Buyer that as of the date hereof:
(a) Such Trust Seller has all requisite legal
capacity to enter into this Agreement and to perform its obligations
under this Agreement. This Agreement has been duly executed and
delivered by such Trust Seller and, assuming due authorization,
execution and delivery by the other parties hereto, constitutes the
legal, valid and binding obligation of such Trust Seller enforceable
against such Trust Seller in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar laws affecting
creditor's rights generally and general principles of equity.
(b) Such Trust Seller is the beneficial and record
owner of the number of Shares set forth beside its name on Schedule 1
attached hereto and has good and marketable title to such Shares, free
and clear of any Liens, except as set forth on Schedule 3.2(b). Such
Trust Seller has the legal right to sell and deliver the Shares
pursuant to this Agreement. The Shares being sold to the Buyer by such
Trust Seller at the Closing include all of the Shares owned
beneficially or of record by such Trust Seller, and such Trust Seller
owns no other securities of the Corporation. Except as set forth on
Schedule 3.2(b), the Shares to be sold by such Trust Seller are not
subject to any proxy, voting trust agreement or other contract,
agreement, arrangement, commitment or understanding restricting or
otherwise relating to the voting, dividend rights or disposition of the
Shares. Except as set forth on Schedule 3.2(b), such Trust Seller has
not issued (and is not committed to issue) any option, warrant or other
right to subscribe for or purchase any capital stock of the Corporation
or securities convertible into or exchangeable for any capital stock of
the Corporation. Upon delivery of and payment for the Shares held by
such Trust Seller, and assuming the Buyer purchases the Shares in good
faith and without notice of any adverse claim, the Buyer will acquire
valid and unencumbered title to the Shares being sold by such Trust
Seller, free and clear of any Liens other than Liens which may arise
from any acts or omissions by, or the status of or any facts pertaining
to, the Buyer.
(c) Except as set forth on Schedule 3.2(c), the
execution and delivery of this Agreement, and the consummation of the
transactions contemplated hereby, by such Trust Seller do not and will
not violate, conflict with, result in a breach of, or constitute a
default or result in or permit any acceleration of any obligation under
(i) any law, ordinance or governmental rule or regulation to which such
Trust Seller is subject, (ii) any judgment, order, writ, injunction,
decree or award of any court, arbitrator or governmental or regulatory
official, body or authority which is applicable to such Trust Seller,
or (iii) any mortgage, indenture, agreement, contract, commitment,
lease, license, or other instrument or document, oral or written, to
which such Trust Seller is a party, or by which any of the Shares of
such Trust Seller may be bound, except where a waiver with respect
thereto has been or will, prior to Closing, be obtained or except for
such violation, default or conflict that could not reasonably be
expected to materially affect the ability of such Trust Seller to
consummate the transactions provided for in this Agreement.
(d) Except as set forth on Schedule 3.2(d), neither
the execution and delivery by such Trust Seller, nor the consummation
by such Trust Seller of the transactions contemplated by this
Agreement, requires the consent or approval of, or the giving of
advance notice by such Trust Seller to, or the registration by such
Trust Seller with, or the taking of any other action by such Trust
Seller in respect of, any federal, state or local governmental
authority, and the execution, delivery and performance of this
Agreement by such Trust Seller will not result in the creation of any
Lien upon any of the Shares owned by such Trust Seller.
(e) There is no injunction, order or decree of any
court or administrative agency or any action or proceeding pending or,
to such Trust Seller's Knowledge, threatened against such Trust Seller
to restrain or prohibit the consummation of the transactions
contemplated hereby.
(f) Such Trust Seller has not employed or retained
any broker, agent, finder or other party, or incurred any obligation
for brokerage fees, finder's fees or commissions with respect to the
transactions contemplated by this Agreement, or otherwise dealt with
anyone purporting to act in the capacity of a finder or broker with
respect thereto whereby the Corporation or its Subsidiaries, or the
Sellers, or the Buyer may be obligated to pay such a fee or commission.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
REGARDING THE CORPORATION
The Corporation and each of the Sellers represents and
warrants to the Buyer that as of the date hereof:
SECTION 4.1 Organization; Good Standing; Corporate Power.
The Corporation is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware, has the
corporate power to enter into this Agreement and to perform its
obligations hereunder, has the corporate power to own its properties
and carry on its business as the same is now being conducted, and is,
or on the Closing Date will be, duly qualified to do business as a
foreign corporation in each jurisdiction in which the nature of its
business or properties makes such qualification necessary, except where
the failure to be so qualified could not reasonably be expected to have
a Material Adverse Effect. Each of the Subsidiaries is a corporation
duly incorporated, validly existing and in good standing under the laws
of its respective jurisdiction of incorporation, has the corporate or
other power to own its properties and carry on its business as the same
is now being conducted and each is, or on the Closing Date will be,
duly qualified to do business as a foreign corporation in each
jurisdiction in which the nature of its business or properties makes
such qualification necessary, except where the failure to be so
qualified could not reasonably be expected to have a Material Adverse
Effect. True, correct and complete copies of the Certificate of
Incorporation and Bylaws of the Corporation and each of the
Subsidiaries have previously been delivered to the Buyer.
SECTION 4.2 Authorization. The execution and delivery of
this Agreement by the Corporation has been duly authorized by all
necessary corporate action. This Agreement has been duly executed and
delivered by the Corporation and, assuming due authorization, execution
and delivery by the other parties hereto, constitutes the legal, valid
and binding obligation of the Corporation enforceable against the
Corporation in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or similar laws affecting creditor's rights
generally and general principles of equity.
SECTION 4.3 Capitalization. The authorized capital stock
of the Corporation consists of 10,000 shares of Common Stock, of which
7,600 shares of Common Stock, constituting the Shares, are outstanding.
The Shares have been validly issued, are fully-paid and non-assessable
and have not been issued in violation of any preemptive or other
similar rights of stockholders. There are no outstanding options,
warrants, rights, agreements, contracts, calls, commitments or demands
of any character obligating the Corporation to issue any authorized but
unissued shares of capital stock or other securities of the
Corporation, or to redeem any shares of capital stock or other
securities of the Corporation, nor are there any securities convertible
into or evidencing the right to purchase any other shares of capital
stock or other securities of the Corporation.
SECTION 4.4 Subsidiaries. Except as set forth on Schedule
4.4 hereto, the Corporation does not own, directly or indirectly, any
capital stock or other equity securities of any corporation or have any
direct or indirect equity or ownership interest in any business entity.
The Corporation has good and marketable title to all outstanding shares
of the capital stock of each of its Subsidiaries, free and clear of any
Liens. There are no outstanding options, warrants, rights, agreements,
contracts, calls, commitments or demands of any character obligating
any of the Subsidiaries to issue any authorized but unissued shares of
capital stock or other securities of any of the Subsidiaries nor are
there any securities convertible into or evidencing the right to
purchase any other shares of capital stock or other securities of any
of the Subsidiaries. Between the date hereof and the Closing Date, no
shares of capital stock of any Subsidiary will be issued to any Person.
SECTION 4.5 Violation or Conflict. Except as set forth on
Schedule 4.5, the execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby, by the
Corporation do not and will not violate, conflict with, result in a
breach of, or constitute a default or result in or permit any
acceleration of any obligation under (a) the Corporation's Certificate
of Incorporation or Bylaws, (b) any law, ordinance or governmental rule
or regulation to which the Corporation or any of its Subsidiaries is
subject, (c) any judgment, order, writ, injunction, decree or award of
any court, arbitrator or governmental or regulatory official, body or
authority which is applicable to the Corporation or any of its
Subsidiaries, or (d) any mortgage, indenture, agreement, contract,
commitment, lease, license, or other instrument or document, oral or
written, to which the Corporation or any of its Subsidiaries is a
party, except where a waiver with respect thereto has been or will,
prior to Closing, be obtained or except for such violation, default or
conflict that could not reasonably be expected to have a Material
Adverse Effect or materially affect the ability of the Corporation to
consummate the transactions provided for in this Agreement.
SECTION 4.6 Financial Statements. The Corporation has
heretofore delivered to the Buyer a true copy of the audited
consolidated and consolidating balance sheet of the Corporation at
December 31, 1994 and the related audited consolidated and
consolidating statements of income and statements of changes in
financial position of the Corporation for the fiscal year then ended
(the "1994 Financial Statements") and the unaudited consolidated and
consolidating balance sheets of the Corporation, at September 30, 1995
and the related unaudited consolidated and consolidating statements of
income and statements of changes in financial position of the
Corporation for the nine months then ended (the "Unaudited Financial
Statements"). The Financial Statements present fairly the financial
position of the Corporation and its Subsidiaries as of their respective
dates, and the results of their operations and the changes in their
financial position for the periods then ended, in conformity with GAAP,
applied on a consistent basis (except as otherwise therein or in the
notes thereto stated).
SECTION 4.7 Changes in Condition. Since September 30,
1995, the Corporation and its Subsidiaries have operated their
respective businesses only in the ordinary course of business and there
has not been any change in the business or financial condition of the
Corporation and its Subsidiaries, taken as a whole, which could
reasonably be expected to have a Material Adverse Effect.
SECTION 4.8 Title to Properties. The Corporation and its
Subsidiaries have sufficient title to all material real properties and
all other material properties and assets reflected in the Unaudited
Financial Statements or purported to have been acquired by the
Corporation or its Subsidiaries after the date thereof (excepting,
however, property and other assets, in the aggregate not material to
the Corporation or its Subsidiaries, sold or otherwise disposed of
subsequent to such date in the ordinary course of business), in order
to permit the Corporation and its Subsidiaries to conduct their
business as it is currently being conducted. All material real
property owned by the Corporation and its Subsidiaries is owned free
and clear of all Liens, except for: (a) those incurred in the ordinary
course of business; (b) those reflected on the consolidated balance
sheet of the Corporation included in the Unaudited Financial
Statements; (c) statutory or common law Liens not yet delinquent; or
(d) those set forth in Schedule 4.8.
SECTION 4.9 Intangibles. Schedule 4.9 hereto contains a
list of all patents and applications therefor, trademarks, service
marks, trademark registrations and applications therefor, trade names,
copyrights, any copyright registrations and applications therefor
owned, possessed or used by or licensed to the Corporation or any of
its Subsidiaries and necessary for the conduct of their business and
the Corporation and its Subsidiaries either own the entire right, title
and interest in, or has valid licenses for, the same. To the
Corporation's Knowledge, neither the Corporation nor any of the
services provided by it infringes upon the rights of any other person,
and, to the Corporation's Knowledge, the conduct of any other person's
business or any of the services it provides does not infringe upon any
rights of the Corporation and its Subsidiaries.
SECTION 4.10 Litigation. Except as set forth on Schedule
4.10 hereto, there are no actions, suits, claims, investigations or
proceedings pending or, to the Corporation's Knowledge, threatened
against the Corporation or its Subsidiaries. None of the actions,
suits, claims, investigations or proceedings set forth in Schedule 4.10
is reasonably likely to have a Material Adverse Effect. There is no
injunction, order or decree of any court or administrative agency or
any such action or proceeding pending or, to the Corporation's
Knowledge, threatened against the Corporation or its Subsidiaries to
restrain or prohibit the consummation of the transactions contemplated
hereby.
SECTION 4.11 Outstanding Indebtedness; Liabilities.
Except as disclosed in the Unaudited Financial Statements and the notes
thereto, the Corporation and its Subsidiaries have no indebtedness for
borrowed money which the Corporation or any Subsidiary has directly or
indirectly created, incurred, assumed, or guaranteed, or with respect
to which the Corporation or any Subsidiary has otherwise become
directly or indirectly liable. The Corporation and its Subsidiaries
have no liabilities, whether accrued, absolute, contingent or
otherwise, required by GAAP to be included as a liability on an audited
consolidated balance sheet or described in the notes thereto, other
than (a) liabilities which are reflected or reserved against in the
consolidated balance sheet of the Corporation included in the Unaudited
Financial Statements, (b) liabilities incurred since the date of the
consolidated balance sheet of the Corporation included in the Unaudited
Financial Statements in the ordinary course of business consistent with
past practice, and (c) liabilities relating to the subject matter of
the representations and warranties contained in this Article IV other
than the representations and warranties contained in this Section 4.11.
Except as set forth on Schedule 4.11 hereto, the Corporation is not
currently a party to any transaction involving (i) the sale of
receivables, (ii) the sale and leaseback of assets, or (iii) inventory
financing (other than the deferred payment of certain items of
inventory and the consignment of certain items, both in the ordinary
course of business consistent with past practice).
SECTION 4.12 Violations of Law. Neither the Corporation
nor its Subsidiaries are in violation of any applicable law, ordinance,
regulation, order or requirement relating to its owned or leased
properties, real or personal, which could reasonably be expected to
have a Material Adverse Effect.
SECTION 4.13 Environmental Matters. To the
Corporation's Knowledge, except as set forth on Schedule 4.13 and
except as could not reasonably be expected to have a Material Adverse
Effect:
(a) the Corporation and its Subsidiaries have
obtained all permits, licenses and other authorizations
which are required under the Environmental Laws for the
ownership, use and operation of all real property owned,
operated or leased by the Corporation or its Subsidiaries
as of the Closing Date (individually, a "Property" and,
collectively, the "Properties");
(b) during the Corporation's ownership of the
Properties, no claim, lawsuit, administrative proceeding,
or other legal or administrative challenge has been brought
concerning the Properties, the operation of the Properties
or the existence of any Release of Hazardous Substances or
any hazardous condition thereon;
(c) the Corporation and its Subsidiaries have not
used any Property for any industrial or commercial
operation which utilizes Hazardous Substances and the
Corporation and its Subsidiaries are not aware of any such
use of any Property prior to the Corporation's ownership
thereof;
(d) the Corporation and its Subsidiaries have not
released, spilled, discharged or deposited any Hazardous
Substance on any Property, whether in containers or other
impoundments, or directly in the lands or waters of any
Property;
(e) the Corporation and its Subsidiaries have not
installed or affixed any asbestos-containing materials in
any structure on any Property;
(f) the Corporation and its Subsidiaries have not
affixed or installed any electrical transformers,
fluorescent light fixtures or other electrical equipment
containing polychlorinated biphenyls in any Property; and
(g) the Corporation and its Subsidiaries have not
installed any underground storage tanks, barrels, sumps or
other units, containers or equipment (moveable or fixed)
for the containment of Hazardous Substances in any part of
any Property other than such installations necessary to
maintain existing underground storage tanks, barrels, sumps
or other units, containers or equipment (moveable or fixed)
for the containment of Hazardous Substances in any part of
any Property, and the Corporation and its Subsidiaries are
not aware of any such prior installations.
SECTION 4.14 Employee Matters.
(a) Schedule 4.14 sets forth a list of each written
compensation, employment, labor union or collective bargaining
agreement, and each written stock option, stock purchase, life, health,
accident or other insurance, bonus, deferred or incentive compensation,
severance or separation, pension, profit sharing, stock bonus,
retirement, or other written employee benefit plan, practice, policy or
arrangement, or oral practice, policy or arrangement which is material
to the Corporation or its Subsidiaries, covering employees or former
employees of the Corporation or its Subsidiaries, including but not
limited to any employee benefit plans within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), currently maintained by or on behalf of the Corporation or
its Subsidiaries, to which the Corporation or its Subsidiaries
contribute, or under which any employees or former employees of the
Corporation or its Subsidiaries are or were covered (collectively, the
"Benefit Plans").
(b) Except as set forth on Schedule 4.14 hereto, all
contributions, premiums and other payments required to be made by the
Corporation or its Subsidiaries to or under any Benefit Plan on or
before the Closing Date for or on behalf of any of their employees or
former employees or their beneficiaries have been made or reserves
adequate for such purposes (to the extent such payments are not yet
due) have been set aside therefor and are reflected in the Financial
Statements, in accordance with the terms of each such Benefit Plan.
Except as set forth on Schedule 4.14, all contributions made by
employees of the Corporation or its Subsidiaries as of the date hereof
have been deposited by the Corporation or its Subsidiaries, as
applicable, with the appropriate funding agency of each Benefit Plan in
accordance with the terms of each such plan.
(c) Each Benefit Plan that is a "pension plan" (as
defined in Section 3(2) of ERISA) intended to qualify under the Code
has received a favorable determination letter as to such qualification
and, to the Corporation's Knowledge, nothing has occurred that would
cause the loss of such qualification. No Benefit Plan that is a
pension plan has incurred an "accumulated funding deficiency" (as
defined in Section 302 of ERISA). There are no actions, suits or
claims (other than routine claims for benefits in the ordinary course)
pending, or to the Corporation's Knowledge, threatened with respect to
any Benefit Plan or to the Corporation's Knowledge, any government
investigations.
(d) To the Corporation's Knowledge, there are no
violations of ERISA or of the Code by the Corporation or its
Subsidiaries with respect to any Benefit Plan and no aspect of the
Benefit Plans, or their administration, is in material noncompliance
with the applicable provisions of ERISA, the Code and any other federal
or state law applicable to the Benefit Plans. Neither the Corporation,
nor its Subsidiaries, nor any of their respective directors, employees
or agents, nor any "party in interest" (as defined in Section 3(14) of
ERISA) or "disqualified person" (as defined in Section 4975(e)(2) of
the Code) has engaged in or been a party to any "prohibited
transaction" (as defined in Section 406 of ERISA) with respect to any
Benefit Plan in connection with which any person could be subject to
either a civil penalty assessed or liability incurred pursuant to ERISA
or a tax imposed by Section 4975 of the Code. No pension plan listed
on Schedule 4.14 hereto is subject to Title IV of ERISA or to the
minimum funding requirements of Section 302 of ERISA or Section 412 of
the Code, or is a multiemployer plan as defined in Section 3(37) and
4001(a)(iii) of ERISA.
SECTION 4.15 Taxes.
(a) Except as set forth on Schedule 4.15, the Corporation
and its Subsidiaries, with respect to consolidated or combined returns
in which the Corporation and its Subsidiaries are included, have duly
and properly filed, or will duly and properly file, on a timely basis
all Tax Returns which were or will be required to be filed by any of
them, and all such Tax Returns were (or will be) true, correct and
complete in all material respects when filed for all periods ending on
or before the Closing. The Corporation and its Subsidiaries have paid
all Taxes payable by them in respect of all periods covered by such
filed Tax Returns, or the Corporation will so reflect or set up on its
books, for all subsequent periods or portions thereof ending on or
before the Closing reserves which are adequate for the payment of all
such Taxes. All Taxes that the Corporation and its Subsidiaries are or
were required by law to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper
governmental body. There are no Liens with respect to Taxes upon any
of the properties or assets, real or personal, tangible or intangible,
of the Corporation and its Subsidiaries.
(b) Except as set forth on Schedule 4.15, no such Tax
Returns for any taxable year are currently under audit.
(c) Except as set forth on Schedule 4.15, the Corporation
has not given any waivers or comparable consents respecting the
application of the applicable statute of limitations with regard to any
Tax Returns which waivers or consents are still in effect.
SECTION 4.16 Contracts. Schedule 4.16 hereto sets forth
all of the contracts, agreements, leases, licenses, relationships and
commitments, written or oral, currently in effect, to which the
Corporation or any Subsidiary is a party which are: (a) the twenty-
five (25) largest freight rail service contracts (measured by gross
freight revenue in dollars for the fiscal year ended December 31,
1995); (b) Benefit Plans; (c) leases of real property involving the
payment or receipt of more than $10,000 per year; (d) leases of
personal property involving the payment or receipt of more than
$250,000 per lease or series of related leases; (e) trackage rights
and joint facility agreements; (f) agreements limiting the freedom of
the Corporation or its Subsidiaries to compete in any line of business
or in any geographic area or with any person; (g) letters of intent or
agreements providing for the disposition of the business, assets or
capital stock of the Corporation or its Subsidiaries, agreements of
merger or consolidation which involve the receipt by the Corporation or
any Subsidiary of $50,000 or more; (h) agreements to which the
Corporation or any Subsidiary is a party and in which any of the
directors, officers or employees of the Corporation or any Subsidiary
has any personal interest, either direct or indirect; (i) letters of
intent or agreements with respect to the acquisition of the business,
assets or shares of any other business; (j) contracts relating to the
provision of consulting services which require the payment of $100,000
or more; (k) switching or ancillary service contracts requiring the
payment of $250,000 or more; or (l) contracts, agreements, leases,
licenses requiring the payment of money to or by the Corporation or any
Subsidiary, relationships or commitments, other than those listed in
any parts of (a) through (k), which involve, or may reasonably be
expected to involve, the payment or receipt of $500,000 or more
(whether in cash or in goods or services of an equivalent value) over
their term, including renewal options. Except as set forth on Schedule
4.16, each of the contracts listed on Schedule 4.16 is in full force
and effect and is a valid and binding obligation of the Corporation or
its Subsidiaries. Except as set forth on Schedule 4.16, no event has
occurred that constitutes or would, with the passage of time or
compliance with any applicable notice requirements, constitute a
default by the Corporation or any Subsidiary, or to the Corporation's
Knowledge, any other party thereto, under any such contracts.
SECTION 4.17 Bank Accounts. Schedule 4.17 hereto lists
all bank accounts and lock boxes of the Corporation and its
Subsidiaries in which there are deposited monies of the Corporation or
its Subsidiaries. The individuals listed on Schedule 4.17 are the
designated signatories for the accounts listed on Schedule 4.17.
SECTION 4.18 Permits and Licenses. The Corporation and
its Subsidiaries have all permits, licenses, orders and approvals of
all federal, state, local or foreign governmental or regulatory bodies
required for it to carry on its business as currently conducted, except
those permits, licenses, orders and approvals the failure to obtain
which individually or in the aggregate would not reasonably be expected
to have a Material Adverse Effect.
SECTION 4.19 Brokers. Except as set forth on
Schedule 4.19, the Corporation has not employed or retained any broker,
agent, finder or other party, or incurred any obligation for brokerage
fees, finder's fees or commissions with respect to the transactions
contemplated by this Agreement, or otherwise dealt with anyone
purporting to act in the capacity of a finder or broker with respect
thereto whereby the Corporation or its Subsidiaries, or the Sellers, or
the Buyer, may be obligated to pay such a fee or commission.
SECTION 4.20 Approvals Required. Except as set forth on
Schedule 4.20, neither the execution and delivery by the Corporation of
this Agreement, nor the consummation by the Corporation of the
transactions contemplated by this Agreement, requires the consent or
approval of, or the giving of advance notice by the Corporation or its
Subsidiaries to, or the registration by the Corporation or its
Subsidiaries with, or the taking of any other action by the Corporation
or its Subsidiaries in respect of, any federal, state or local
governmental authority.
SECTION 4.21 Employment Relations. During the last three
years, except as set forth on Schedule 4.21, no unfair labor practice
charges or complaints have been filed against the Corporation or any of
its Subsidiaries. To the Corporation's Knowledge, there is no event or
circumstance which may give rise to the filing of any unfair labor
practice charge or complaint, and neither the Corporation nor any of
its Subsidiaries have received any notice or communication reflecting
an intention or a threat to file any such charges or complaint. Except
as set forth on Schedule 4.21, the Corporation and each of its
Subsidiaries has complied in all material respects with all applicable
laws, rules or regulations relating to the employment of labor,
including those relating to wages, hours, collective bargaining, the
withholding and payment of taxes and contributions, safety and civil
rights. Except as set forth in Schedule 4.21, there have been no work
stoppages during the last three years.
SECTION 4.22 Affiliates; Interested Transactions. Except
as set forth on Schedule 4.22, no director or officer of the
Corporation or any Person owning, or who has the right to acquire, more
than one percent (1%) of the outstanding Common Stock of the
Corporation (nor the spouse, child, grandchild, parent, grandparent or
sibling, nor the spouse of a child, grandchild, parent, grandparent or
sibling, of any such director, officer or shareholder), (a) is a
director, officer or employee of, or consultant to, or owns, directly
or indirectly, any significant interest in, any competitor, franchisee,
supplier or customer of the Corporation or any of its Subsidiaries, or
(b) owns, directly or indirectly, in whole or in part, any property,
asset or right, tangible or intangible, which the Corporation or any of
its Subsidiaries is currently operating or using and which is necessary
for the operation of the business of the Corporation or any of its
Subsidiaries.
SECTION 4.23 Customers. All of the customers set forth
on Schedule 4.23 have accounted for more than $4,000,000 of the
Corporation's gross revenues for the fiscal year ended December 31,
1995 (the "Major Customers"). To the Corporation's Knowledge, none of
the Major Customers has advised the Corporation that any conditions
exist which would have a material adverse effect on the business
relationship between the Corporation and such Major Customer.
SECTION 4.24 Disclosure. No representation or warranty
by the Corporation or the Sellers in this Agreement, including the
schedules hereto, or in any other document furnished pursuant to
Articles III and IV hereof contains an untrue statement of a material
fact or omits to state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances in which
they were made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer represents and warrants to the Sellers that as of
the date hereof:
SECTION 5.1 Organization; Good Standing; Corporate Power.
The Buyer is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and has the
corporate power to enter into this Agreement and to perform its
obligations hereunder.
SECTION 5.2 Authorization. The execution and delivery of
this Agreement by the Buyer has been duly authorized by all necessary
corporate action. This Agreement has been duly executed and delivered
by the Buyer and, assuming due authorization, execution and delivery by
the other parties hereto, constitutes the legal, valid and binding
obligation of the Buyer enforceable against the Buyer in accordance
with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar laws affecting creditor's rights generally and
general principles of equity.
SECTION 5.3 Violation or Conflict. The execution and
delivery of this Agreement, and the consummation of the transactions
contemplated hereby, by the Buyer will not violate, conflict with,
result in a breach of, or constitute a default under, any mortgage,
indenture, agreement, contract, commitment, lease, license or other
instrument or document, oral or written, to which the Buyer is a party
or by which it is bound, or conflict with the Buyer's Certificate of
Incorporation or Bylaws, other than violations, defaults or conflicts
which would not materially affect the ability of the Buyer to
consummate the transactions provided for in this Agreement.
SECTION 5.4 Litigation. There is no injunction, order or
decree of any court or administrative agency or any such action or
proceeding pending or, to the Buyer's Knowledge, threatened against the
Buyer to restrain or prohibit the consummation of the transactions
contemplated hereby.
SECTION 5.5 Brokers. Except as set forth on Schedule 5.5,
the Buyer has not employed or retained any broker, agent, finder or
other party or incurred any obligation for brokerage fees, finder's
fees or commissions with respect to the transactions contemplated by
this Agreement, or otherwise dealt with anyone purporting to act in the
capacity of a finder or broker with respect thereto whereby the
Corporation or its Subsidiaries, or the Sellers, or the Buyers, may be
obligated to pay such a fee or a commission.
SECTION 5.6 Approvals Required. Except for the DOT
Approval and as set forth on Schedule 5.6, neither the execution and
delivery by the Buyer of this Agreement, nor the consummation by the
Buyer of the transactions contemplated by this Agreement, requires the
consent or approval of, or the giving of advance notice by the Buyer
to, or the registration by the Buyer with, or the taking of any other
action by the Buyer in respect of, any federal, state or local
governmental authority.
SECTION 5.7 Investment. The Buyer is acquiring the Shares
for its own account, for investment and not with a view to, or for
offer or resale in connection with, a distribution thereof within the
meaning of the Securities Act of 1933, as amended and the rules and
regulations thereunder or a distribution thereof in violation of any
applicable securities laws.
SECTION 5.8 Investigations by Buyer. The Buyer has
conducted an extensive investigation of the financial condition,
properties and operations of the Corporation and its Subsidiaries and
that during the course of such investigation, the Corporation, its
Subsidiaries and the Sellers have caused the facilities, books, records
and personnel of the Corporation and its Subsidiaries to be made
available to the Buyer and have caused to be provided to the Buyer such
other information with respect to the Corporation and its Subsidiaries
as the Buyer has requested. The Buyer has received from the
Corporation, its Subsidiaries and the Sellers all of the written
information which the Buyer has requested in writing, and the Buyer has
been given the opportunity to discuss the Corporation, its Subsidiaries
and their business prospects with representatives of the Corporation,
its Subsidiaries and the Sellers, to have such representatives answer
any questions regarding the business of the Corporation and its
Subsidiaries, all of which questions have been answered to the Buyer's
full satisfaction, and to obtain any additional information which the
Corporation, its Subsidiaries or the Sellers possess that is necessary
for the Buyer to complete its investigation to its satisfaction. The
Buyer has had access to the facilities and properties of the
Corporation and its Subsidiaries and has inspected them to the Buyer's
satisfaction.
ARTICLE VI
COVENANTS
SECTION 6.1 Conduct of Business in Ordinary Course. From
the date hereof until the Closing Date, except as contemplated by this
Agreement, the Corporation will, and will cause its Subsidiaries to,
operate and carry out their respective businesses in all material
respects in the ordinary course of business consistent with past
practice, and shall use all reasonable efforts to preserve intact their
business organizations and relationships with third parties; provided,
however, that nothing in this Section shall be deemed to prevent the
Corporation from undertaking any action necessary, proper or advisable
to effectuate this Agreement and the transactions contemplated
hereunder. Subject to the express provisions of Section 6.2 hereof,
without limiting the generality of the foregoing, from the date hereof
until the Closing Date, without the prior written consent of the Buyer,
the Corporation, will not, and will not permit its Subsidiaries, to:
(a) declare, set aside or pay any dividend or make any
other distribution of stock or property with respect to any
shares of capital stock of the Corporation;
(b) cancel or waive any claims or rights of value
except in the ordinary course of business consistent with
past practice and pursuant to existing contracts or
commitments;
(c) sell, lease, license or otherwise dispose of
any assets or property except for such sales or
dispositions made in the ordinary course of business
consistent with past practice which do not exceed $350,000
in the aggregate;
(d) adopt or propose any amendment to its
Certificate of Incorporation or Bylaws;
(e) (i) acquire (including, without limitation, by
merger, consolidation, or acquisition of stock or assets)
any corporation, partnership, other business organization
or any division thereof or (ii) acquire any assets except
in the ordinary course of business consistent with past
practice;
(f) assume, incur or guarantee any obligation or
liability for borrowed money, except in the ordinary course of
business consistent with past practice and as set forth on
Schedule 6.1(f);
(g) grant an increase in the compensation payable
or to become payable to any director, officer or employee
thereof, or grant any severance or termination pay or enter
into or vary the terms of any Benefit Plan, except (i) as
set forth on Schedule 6.1(g), (ii) scheduled increases
pursuant to existing contracts or (iii) increases in salary
for management employees, the aggregate amount of which may
not exceed the existing salaries for management employees
as a group by more than five percent (5%);
(h) account for, manage or treat accounts
receivable or inventory in any manner other than in the
ordinary and normal course consistent with past practice or
(without limiting the generality of the foregoing) write
off as uncollectible any notes or accounts receivable or
write down the value of any inventory except in immaterial
amounts or in the ordinary course of business consistent
with past practice;
(i) hire any person except in the ordinary course
of business consistent with past practice;
(j) pay, discharge or satisfy any material
liability or obligation (whether accrued, absolute,
contingent or otherwise) except in the ordinary course of
business consistent with past practice and except the
Corporation may make payments on its Funded Indebtedness;
(k) make any material change in any method of
accounting or any material change in its accounting
policies or any change in its sales, credit or collection
terms and conditions which would encourage accelerated
payment of accounts receivable;
(l) subject to Liens any assets owned by the
Corporation and material to the business of the Corporation
and its Subsidiaries, taken as a whole, except Liens
securing indebtedness of the Corporation and its
Subsidiaries incurred to finance the purchase price of
assets provided that such Liens attach only to the assets
purchased;
(m) authorize for issuance, issue, deliver or sell
any debt or equity securities, or any options, warrants or
other rights to purchase any of the foregoing, or alter the
terms of any outstanding securities issued by it;
(n) amend, extend or modify any contract set forth
on Schedule 4.16 (other than real property leases, licenses
and contracts involving the payment by the Corporation of
less than $25,000) if such amended, extended or modified
contract has a term beyond December 31, 1997; or
(o) enter into any contract or commitment of any
kind if such contract or commitment involves (i) the
payment or receipt by the Corporation of $25,000 or more
during its term and (ii) has a term beyond December 31,
1997.
SECTION 6.2 Conduct of Business Exception. From the date
hereof until the Closing Date, in the event the Corporation desires to
take any of the actions prohibited by Section 6.1(n) or (o) (each, a
"Contract Action"), the Corporation shall deliver written notice (the
"Proposed Action Notice") to the Buyer of its desire to take any
Contract Action. The Buyer shall have seventy-two (72) hours after
delivery of a Proposed Action Notice to deliver an objection in writing
to the Corporation stating that the Buyer objects to the Proposed
Action and specifying in detail the basis for such objection (the
"Objection Response"). If the Corporation does not receive the
Objection Response within seventy-two (72) hours of the Proposed Action
Notice, the Corporation may take the proposed Contract Action and such
Contract Action shall not constitute a breach of Section 6.1(n) or (o),
as applicable.
SECTION 6.3 Capital Expenditures. After the date hereof,
the Corporation agrees to use commercially reasonable efforts to
capitalize materials, labor, purchase services and additives, in
accordance with the Corporation's past practice and in accordance with
GAAP applied on a consistent basis, in the amounts and during the
periods set forth on Schedule 6.3.
SECTION 6.4 Pre-Closing Access. From the date hereof to
the Closing, the Corporation shall afford to the Buyer and its
representatives, agents or attorneys reasonable access during normal
business hours to all of the offices, properties, books, contracts and
financial records of the Corporation and its Subsidiaries and shall
cause their independent certified public accountants to furnish to the
Buyer their working papers relating to the 1994 Financial Statements
and the 1995 Financial Statements and such additional data and
information as the Buyer may from time to time reasonably request. No
investigation pursuant to this Section 6.4 shall be deemed to modify
any representation or warranty made to the Buyer.
SECTION 6.5 Resignations. On the Closing, the Sellers
shall cause the persons listed on Schedule 6.5 to resign as directors
of the Corporation. On the Closing Date, if the Buyer shall request,
each such director shall have released in writing, in form and content
satisfactory to the Buyer, all claims each such director may have
against the Corporation or any Subsidiary (other than claims arising
under this Agreement or the transactions contemplated hereby).
SECTION 6.6 Public Announcements. The Sellers, the
Corporation and its Subsidiaries, and the Buyer will consult with each
other before issuing any press release with respect to this Agreement
and the transactions contemplated hereunder and except as may be
required by applicable law shall not issue any such press release or
make any public statement without approval of the other parties, which
shall not be unreasonably withheld.
SECTION 6.7 Confidentiality.
(a) The Sellers and their respective agents will treat
and hold as such any and all information concerning the business or
assets of the Corporation (the "Confidential Information"), refrain
from using any of the Confidential Information except in connection
with this Agreement, and deliver promptly to the Buyer or destroy, at
the request and option of the Buyer, all tangible embodiments (and all
copies) of the Confidential Information which are in its possession.
In the event that any Seller is requested or required (by oral question
or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand or similar process)
to disclose any Confidential Information, such Seller will notify the
Buyer promptly of the request or requirement so that the Buyer may seek
an appropriate protective order or waive compliance with the provisions
of this Section 6.7(a). If, in the absence of a protective order or
the receipt of a waiver hereunder, the Seller is, on the advice of
counsel, compelled to disclose any Confidential Information to any
tribunal or governmental agency or else stand liable for contempt, such
party may disclose the Confidential Information to the tribunal or
governmental agency. The foregoing provisions shall not apply to any
Confidential Information which is or becomes generally available to the
public prior to the time of disclosure by the Sellers.
(b) In the event this Agreement is terminated pursuant to
Article X for any reason whatsoever prior to the occurrence of a
Closing, all information given to the Buyer shall be subject to the
terms and conditions of that certain Confidentiality Agreement, dated
November 1, 1995 (the "Confidentiality Agreement"), the provisions of
which are incorporated herein by reference and shall continue to apply
for the benefit of the Corporation and the Sellers as if entirely set
forth herein.
SECTION 6.8 Further Assurances. Each party to this
Agreement shall cooperate with the other, and execute and deliver, or
cause to be executed and delivered, all such other instruments,
including instruments of conveyance, assignment and transfer, and take
all such other actions as such party may reasonably be requested to
take by the other party hereto from time to time, consistent with the
terms of this Agreement, in order to effectuate the provisions and
purposes of this Agreement.
SECTION 6.9 Post-Closing Access; Support. In connection
with the matters for which indemnification is sought under Article IX
hereof, the Buyer agrees to give the Sellers and their representatives
access to the books, records and employees of the Corporation, its
Subsidiaries and the Buyer to the extent such reasonably relate to the
matters to which a Claim Notice relates. In the event and for so long
as any party to this Agreement actively is contesting or defending
against any charge, complaint, action, suit, proceeding, hearing,
investigation, claim or demand in connection with (a) any transaction
contemplated under this Agreement or (b) any fact, situation,
circumstance, status, condition, activity, practice, occurrence, event,
incident, action, failure to act or transaction occurring on or prior
to the Closing Date involving the Corporation, each of the other
parties, to a reasonable extent, will cooperate with the contesting or
defending party and its counsel in the contest or defense, make
available its personnel, and provide such testimony and access to its
books and records as shall be necessary in connection with the contest
or defense, all at the sole cost and expense of the contesting or
defending party, unless the contesting or defending party is entitled
to indemnification therefor under Article IX hereof.
SECTION 6.10 Record Retention. The Buyer agrees that
for a period of not less than six years following the Closing Date it
shall not, and shall not permit the Corporation or its Subsidiaries to,
destroy or otherwise dispose of any of those books, records or other
documents held by the Corporation or any Subsidiary and relating to the
properties, liabilities or operations of the Corporation and its
Subsidiaries prior to the Closing Date. The Buyer agrees that it
shall, and it shall cause the Corporation and its Subsidiaries to, make
available to the Sellers and their representatives, agents or attorneys
all such books, records and documents, and permit the Sellers and their
respective representatives, agents or attorneys to examine, make
extracts from and, at their expense, copy such books, records or
documents at any time during normal business hours for any proper
purpose. All information obtained by the Sellers pursuant to this
Section 6.10 under the circumstances described therein shall be held by
the Sellers in accordance with Section 6.7(b).
SECTION 6.11 DOT Approval. The Buyer shall (a) make all
filings or other presentations (the "DOT Filings") necessary to obtain
the DOT Approval, (b) prosecute the DOT Filings with diligence, (c)
diligently oppose any objections to, appeals from or petitions to
reconsider or reopen, any DOT Approval by persons not a party to this
Agreement, (d) take all such further action as may facilitate obtaining
DOT Approval, (e) provide copies of all DOT Filings to the Sellers and
(f) provide such other information regarding the status of the DOT
Filings and the DOT Approval as shall be reasonably requested by the
Sellers. The Buyer shall provide one copy of all information and
documents filed with the DOT or an index thereof to the Federal Trade
Commission and the Assistant Attorney General as required by the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
regulations thereunder. The Sellers will cooperate with the Buyer, to
the extent reasonably requested, with respect to the DOT Filings and
the DOT Approval and agree not to oppose or object to any DOT Approval.
SECTION 6.12 Notifications Regarding Schedules. From
time to time prior to the Closing Date, the Sellers will promptly
notify the Buyer in writing of information with respect to any matter
hereafter arising which, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described in the
schedules to this Agreement. However, no such notification shall be
deemed to cure any breach of any representation or warranty made in
this Agreement unless the Buyer specifically agrees thereto in writing.
SECTION 6.13 Additional Financial Statements. The
Corporation shall furnish the Buyer with a true copy of the audited
consolidated and consolidating balance sheet of the Corporation at
December 31, 1995 and the related audited consolidated and
consolidating statements of income and statements of changes in
financial position of the Corporation for the fiscal year then ended
(the "1995 Financial Statements"), as soon as they become available.
The Corporation shall also furnish the Buyer with unaudited
consolidated financial statements for the Corporation for each full
monthly period prior to the Closing Date (each a "Monthly Financial
Statement") and for the quarterly periods ending March 31, 1996, June
30, 1996, and September 30, 1996 (if the Closing has not occurred prior
thereto), in each case as soon as they become available.
SECTION 6.14 No Solicitation. Neither the Corporation
nor any of its shareholders, directors, officers, employees,
representatives, agents or affiliates shall, directly or indirectly,
encourage, solicit or initiate any discussions or negotiations with, or
provide any information to, or afford any access to the properties,
books or records of the Corporation, or otherwise assist, facilitate or
encourage any corporation, partnership, person or other entity or group
(other than the Buyer or an affiliate of the Buyer) concerning any
merger, consolidation, sale of assets, sale of shares of capital stock
or similar transaction involving the Corporation, a Subsidiary or any
major asset of the Corporation or any Subsidiary. The Corporation
shall promptly notify the Buyer if any such information is requested
from it or any such negotiations or discussions are sought to be
initiated with the Corporation and will promptly communicate to the
Buyer the terms of any proposal or inquiry which it may receive in
respect of such transaction and such other information as the Buyer may
request.
SECTION 6.15 Employment Arrangements.
(a) With respect to each person listed on Schedule
6.15(a), the Buyer agrees to either (i) offer such person
continued employment by the Corporation or the Buyer after
the Closing Date with duties and responsibilities at least
comparable to their then existing position and at their
then existing level of compensation with comparable
benefits or (ii) cause the Corporation to make a lump-sum
severance payment to such person, after the Closing Date,
in an amount equal to two times their base salary as of the
Closing Date.
(b) With respect to each person listed on Schedule
6.15(b), the Buyer agrees to either (i) offer such person
continued employment by the Corporation after the Closing
Date at their current geographic location for a period of
two years with duties and responsibilities at least
comparable to their then existing position and at their
then existing level of compensation with comparable
benefits or (ii) cause the Corporation to make a lump-sum
severance payment to such person, after the Closing Date,
in an amount equal to two times their base salary as of the
Closing Date. Nothing contained herein shall preclude the
Buyer from offering employment to such persons listed on
Schedule 6.15(b) at a location other than their current
geographic location and acceptance of such offer by such
persons shall satisfy the Buyer's obligations under this
Section 6.15(b).
(c) With respect to all of the persons listed on
Schedule 6.15(a) and 6.15(b) who accept offers of
employment with the Corporation or the Buyer (collectively,
the "Transferred Employees"), the Buyer agrees to credit
such employees with all years of service performed by each
Transferred Employee with the Corporation or any of its
Subsidiaries prior to the Closing Date, for purposes of
determining vacation benefits with the Buyer or the
Corporation, as the case may be.
SECTION 6.16 Tax Exposure. In the event there is not a
final determination of the Corporation's federal income tax liability
for the fiscal year ended December 31, 1992 resulting from the 1992 Tax
Audit on or prior to 25 days prior to the Closing Date, the Sellers'
Agent shall deliver to the Buyer its reasonable estimate of the amount
of any additional payments (including interest and penalties) due the
IRS in connection with the 1992 Tax Audit (the "Sellers' Tax Estimate")
on the 25th day prior to the Closing Date. If the Buyer delivers
written notice to the Sellers' Agent within five Business Days after
delivery of the Sellers' Tax Estimate objecting to such Sellers' Tax
Estimate and specifying in detail the basis of such objection, the
Buyer and the Sellers' Agent shall attempt to resolve and finally
determine the amount of any additional payments (including interest and
penalties) due the IRS in connection with the 1992 Tax Audit within
five Business Days of the objection notice. If the Buyer has not
objected to the Sellers' Tax Estimate within five Business Days after
delivery of such Sellers' Tax Estimate, the amount of the Sellers' Tax
Estimate shall be conclusively presumed to be true and correct and
shall be binding upon the parties hereto. If the Buyer has objected to
the Sellers' Tax Estimate and the Buyer and the Sellers' Agent are
unable to agree upon the amount of any additional payments (including
interest and penalties) due the IRS in connection with the 1992 Tax
Audit, the Independent Tax Accountant shall make a final determination
as to the estimated amount of any additional payments (including
interest and penalties) due the IRS in connection with the 1992 Tax
Audit on or prior to the Business Day immediately preceding the Closing
Date. Any final determination as to the estimated amount of any
additional payments (including interest and penalties) due the IRS in
connection with the 1992 Tax Audit pursuant to this Section 6.16 is
herein referred to as the "Estimated Tax Exposure."
ARTICLE VII
CONDITIONS TO BUYER'S AND SELLERS'
OBLIGATION TO CONSUMMATE THE TRANSACTIONS
SECTION 7.1 Obligations of Buyer and Sellers. The
obligations of both the Buyer and the Sellers at the Closing are
subject to the satisfaction (or waiver by the party for whose benefit
such conditions exist) of the following conditions:
(a) Consents. All consents, authorizations, orders
and approvals of, and filings and registrations with, any
federal or state governmental commission, board or other
regulatory body that are required for the consummation by
each party hereto of the transactions provided for herein
(other than DOT Approval) shall have been obtained or made.
(b) Proceedings. On the Closing Date there shall
be no action or proceeding initiated or threatened by any
governmental agency or any third party which seeks to
restrain, prohibit or invalidate any transaction provided
for in this Agreement or to recover substantial damages or
other substantial relief with respect thereto, which is
likely to result in an order restraining, prohibiting or
invalidating such transaction or recovering substantial
damages or other substantial relief, and no injunction or
restraining order shall have been issued by any court
restraining, prohibiting or invalidating any such
transaction.
(c) Non-Competition Agreement. The Buyer and each
of the Sellers shall have executed and delivered the Non-
Competition Agreement.
(d) Escrow Agreement. The Buyer and the Sellers
shall have executed and delivered the Escrow Agreement.
SECTION 7.2 Buyer's Obligations. The obligations of the
Buyer at the Closing hereunder are subject, at the Buyer's election, to
the satisfaction on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. The
representations and warranties of the Sellers contained in
Articles III and IV hereof, respectively, shall be true in
all material respects on and as of the Closing Date as
though made on the Closing Date.
(b) Covenants Performed. The Sellers, and the
Corporation and its Subsidiaries, shall have performed in
all material respects all of their covenants and agreements
contained herein which are required to be performed by them
on or prior to the Closing Date.
(c) No Material Adverse Change. Since the date of
this Agreement, there will have been no material adverse
change in the business or financial condition of the
Corporation or any of its Subsidiaries.
(d) Officer's Certificate. Each of the Sellers and
the Corporation shall have delivered to the Buyer a
certificate signed by such Seller or a duly authorized
officer or officers of the Corporation, as the case may be,
dated the Closing Date, to the effect stated in Sections
7.2(a) and (b) hereof.
(e) Counsel's Opinion. Stinson, Mag & Fizzell,
P.C., counsel to the Sellers and the Corporation, shall
have delivered to the Buyer a written opinion dated the
Closing Date, in a form reasonably satisfactory to the
Buyer.
(f) DOT Approval. The DOT Approval shall have been
obtained and the DOT Approval shall not impose on the Buyer
any other terms or conditions (including, without
limitation, labor protective provisions but excluding
conditions heretofore imposed by the DOT in New York Dock
Railway--Control--Brooklyn Eastern District, 360 I.C.C. 60
(1979)) that materially and adversely affect the economic
benefits of the transactions contemplated by this Agreement
to the Buyer.
(g) Chief Financial Officer's Certificate. On the
Closing Date, the Chief Financial Officer of the
Corporation shall have delivered a certificate of such
officer, together with supporting documentation setting
forth reasonable detail related thereto, to the following
effects: (i) the amount of cash and cash equivalents of the
Corporation as of the Business Day immediately preceding
the Closing Date, (ii) the amount of Funded Indebtedness of
the Corporation as of the Business Day immediately
preceding the Closing Date, (iii) an estimate of Net
Working Capital as of the Business Day immediately
preceding the Closing Date (the "Estimated Net Working
Capital Amount") and (iv) an estimate of the Capital
Expenditure Amount as of the Business Day immediately
preceding the Closing Date (the "Estimated Capital
Expenditure Amount").
SECTION 7.3 Sellers Obligations. The obligations of the
Sellers at the Closing hereunder are subject, at the Sellers' election,
to the satisfaction on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. The
representations and warranties of the Buyer contained in
Article V hereof shall be true in all material respects on
and as of the Closing Date as though made on the Closing
Date.
(b) Covenants. The Buyer shall have performed in
all material respects all of its covenants and agreements
contained herein which are required to be performed by the
Buyer on or prior to the Closing Date.
(c) Officer's Certificate. The Buyer shall have
delivered to the Sellers an officer's certificate executed
by the Chief Executive Officer, President or Chief
Financial Officer of the Buyer dated the Closing Date to
the effect stated in Sections 7.3(a) and (b) hereof.
(d) Counsel's Opinion. Ron Lane, general counsel
to the Buyer, shall have delivered to the Sellers a written
opinion, dated the Closing Date, in a form reasonably
satisfactory to the Sellers.
(e) Escrow Deposit. The Buyer shall have deposited
an aggregate amount equal to $1,000,000 (the "Buyer's
Purchase Price Adjustment Amount") with the Escrow Bank, to
be held in accordance with the terms of the Escrow
Agreement.
ARTICLE VIII
CLOSING
SECTION 8.1 Closing. The Closing shall take place at
9:00 a.m. (local time) within five (5) Business Days after all of the
conditions to Closing have been satisfied, or as soon thereafter as
practicable, at a time and place fixed by mutual written consent of the
parties at the offices of Stinson, Mag & Fizzell, P.C., 1201 Walnut
Street, Kansas City, Missouri, or at such other time, date and place as
the parties may otherwise agree.
SECTION 8.2 Sellers' Obligations at Closing. At the
Closing, the Sellers shall deliver, or cause to be delivered, to the
Buyer the following items:
(a) certificates representing the Shares,
registered in the names of the Sellers, duly endorsed by
the Sellers for transfer or accompanied by an assignment of
the Shares duly executed by the Sellers;
(b) the stock books, stock ledger, minute books,
and corporate seals of the Corporation;
(c) the officer's certificate, opinion of the
Sellers' counsel and certificate of the Chief Financial
Officer described in Sections 7.2(d), (e), and (g),
respectively.
SECTION 8.3 Buyer's Obligations at Closing. At the
Closing, the Buyer shall deliver, or cause to be delivered, to the
Sellers the following items:
(a) the Purchase Price; and
(b) the officer's certificate and the opinion of
the Buyer's counsel described in Sections 7.3(c) and (d),
respectively.
ARTICLE IX
INDEMNIFICATION
SECTION 9.1 Sellers' Indemnity. Subject to the provisions
of this Article IX, the Sellers shall indemnify, defend and hold
harmless (a) the Buyer and its directors, officers, employees,
affiliates, agents and successors in interest and (b) from and after
the Closing Date, the Corporation and its Subsidiaries and their
respective directors, officers, employees, affiliates, agents and
successors in interest, from and against any and all loss, liability or
expense (including, but not limited to, reasonable costs of
investigation and defense and reasonable attorneys' fees and
disbursements) (collectively, "Damages") arising out of or resulting
from (x) any breach of a representation or warranty of the Sellers in
this Agreement (other than a breach of a representation or warranty of
the Sellers in Section 4.15 relating to the Corporation's federal
income tax return for the fiscal year ended December 31, 1992), (y) any
failure to perform any covenant or agreement made by the Sellers in
this Agreement or (z) the 1992 Tax Audit; provided, however, that the
Sellers shall not be required to indemnify, defend and hold harmless
the Buyer Parties unless the Buyer Parties give a Claim Notice to the
Sellers in the case of clauses (x) and (y) above within one year of the
Closing Date, describing with specificity the facts giving rise to the
asserted right; and provided, further, that the Sellers shall only be
required to indemnify the Buyer Parties pursuant to clauses (x) and (y)
above for Material Damages; and, provided, further, that the Sellers
shall not be required to indemnify the Buyer Parties pursuant to
clauses (x) and (y) unless and until the amount of all Material Damages
for which indemnification is sought first exceeds $250,000, in which
event the Buyer may seek indemnification for all such aggregate
Material Damages in excess of $250,000 (the "Initial Threshold
Amount"); and, provided, further, that, in the case of clauses (x) and
(y) above, the Sellers shall bear 90% of Material Damages in excess of
the Initial Threshold Amount and the Buyer shall bear 10% of Material
Damages in excess of the Initial Threshold Amount. In no event shall
the Sellers be required to indemnify the Buyer Parties pursuant to
clauses (x) and (y) above in an amount in excess of $5,000,000. For
purposes of this Section 9.1, (i) the Persons in clauses (a) and (b)
hereof are sometimes referred to herein as the "Buyer Parties" and (ii)
"Material Damages" shall mean any Damage in excess of $25,000 based on
any single item.
SECTION 9.2 Recoveries. There shall be netted from the
amount of any payment required under Section 9.1 (i) the amount of any
indemnification received by a Buyer Party from an unrelated party with
respect to such Damages and (ii) the amount of any insurance proceeds
paid to the Buyer Parties as an offset against such Damages (and no
right of subrogation shall accrue to any insurer hereunder).
SECTION 9.3 Buyer's Indemnity. The Buyer, the Corporation
and its Subsidiaries shall indemnify, defend and hold harmless each of
the Sellers from and against any and all Damages arising out of or
resulting from (a) any breach of a representation or warranty of the
Buyer in this Agreement, (b) any failure to perform any covenant or
agreement made by the Buyer in this Agreement, (c) the covenants
contained in Sections 6.1(n) and (o), and Section 6.2, hereof, (d) the
assets, business, operations, conduct, products and/or employees
(including former employees) of the Corporation and its Subsidiaries,
relating to or arising out of or in connection with occurrences after
the Closing Date, or (e) the assets, business, operations, conduct,
products and/or employees (including former employees) of the
Corporation and its Subsidiaries, relating to or arising out of or in
connection with occurrences before the Closing if, but only if, the
Sellers, or any one of them, is not required to indemnify a Buyer Party
pursuant to Section 9.1 with respect to such occurrence.
SECTION 9.4 Claims. All claims for indemnification by a
party under this Article IX (the party claiming indemnification and the
party against whom such claims are asserted being hereinafter called
the "Indemnified Party" and the "Indemnifying Party," respectively)
shall be asserted and resolved as follows:
(a) In the event that any claim or demand for which
an Indemnifying Party would be liable to an Indemnified
Party hereunder is asserted against or sought to be
collected from such Indemnified Party by a third party,
such Indemnified Party shall with reasonable promptness
give notice (the "Claim Notice") to notify the Indemnifying
Party of such claim or demand, specifying the nature of and
specific basis for such claim or demand and the amount or
the estimated amount thereof to the extent then feasible
(which estimate shall not be conclusive of the final amount
of such claim and demand). The Indemnifying Party shall
not be obligated to indemnify the Indemnified Party with
respect to any such claim or demand if the Indemnified
Party fails to notify the Indemnifying Party thereof in
accordance with the provisions of this Agreement in
reasonably sufficient time so that the Indemnifying Party's
ability to defend against the claim or demand is not
prejudiced. The Indemnifying Party shall have 45 days from
the personal delivery or mailing of the Claim Notice (the
"Notice Period") to notify the Indemnified Party (i)
whether or not it disputes the liability of the
Indemnifying Party to the Indemnified Party hereunder with
respect to such claim or demand and (ii) whether or not it
desires, at the cost and expense of the Indemnifying Party,
to defend the Indemnified Party against such claim or
demand; provided, however, that any Indemnified Party is
hereby authorized prior to and during the Notice Period to
file any motion, answer or other pleading which it shall
deem necessary or appropriate to protect its interests or
those of the Indemnifying Party and not prejudicial to the
Indemnifying Party. If the Indemnifying Party notifies the
Indemnified Party within the Notice Period that it desires
to defend the Indemnified Party against such claim or
demand, the Indemnifying Party shall, subject to the last
sentence of this paragraph, have the right to control the
defense against the claim by all appropriate proceedings
and any settlement negotiations and may settle such claims
without the consent of the Indemnified Party if such claim
is settled solely with a cash payment. If the Indemnified
Party desires to participate in, but not control, any such
defense or settlement it may do so at its sole cost and
expense. Notwithstanding the foregoing, if the basis of
the proceeding relates to a condition or operations which
existed or were conducted both prior to and after the
Closing Date, each party shall have the same right to
participate in the proceeding without either party having
the right of control.
If requested by the Indemnifying Party, the
Indemnified Party agrees to cooperate with the Indemnifying
Party and its counsel in contesting any claim or demand
which the Indemnifying Party elects to contest, or, if
appropriate and related to the claim in question, in making
any counterclaim against the person asserting the third
party claim or demand, or any cross-complaint against any
person. No claim may be settled without the consent of the
Indemnifying Party.
(b) If any Indemnified Party should have a claim
against the Indemnifying Party hereunder which does not
involve a claim or demand being asserted against or sought
to be collected from it by a third party, the Indemnified
Party shall send a Claim Notice with respect to such claim
to the Indemnifying Party. If the Indemnifying Party
disputes such claim, such dispute shall be resolved in the
manner specified in Section 11.13.
SECTION 9.5 Sellers' Payment. Subject to Section 9.6, in
the event any payments are required to be made by Sellers to the Buyer
Parties pursuant to Section 9.1 (other than payments required under
Section 9.1 in respect of the 1992 Tax Audit), such payments shall be
made solely from moneys available under, and in accordance with and
pursuant to the terms and conditions of, the Escrow Agreement. Any
payments required to be made by the Sellers to the Buyer Parties
pursuant to Section 9.1 in respect of the 1992 Tax Audit shall be made
first from moneys available for such payment under the Escrow Agreement
and second from other moneys paid by the Sellers.
SECTION 9.6 Exclusive Remedy. The remedies expressly
provided for in this Article IX shall be the parties' exclusive
remedies with respect to the matters covered by this Agreement, except
in the case of fraud or intentional misconduct by any party hereto, in
which case the other parties shall have all available remedies at law
or in equity. No party shall be liable to the other under this
Agreement, in law or in equity with respect to any matter not initiated
within the time limits specified in Section 11.1.
ARTICLE X
TERMINATION
SECTION 10.1 Termination. Anything herein or elsewhere
to the contrary notwithstanding, this Agreement and the consummation of
the transactions contemplated by this Agreement may be terminated at
any time prior to the Closing:
(a) by the agreement in writing of the Sellers and the
Buyer;
(b) by either the Buyer or the Sellers if the Closing
does not occur prior to December 31, 1996; provided, however,
that the right to terminate this Agreement under this Article X
shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or
resulted in, the failure of the Closing to occur on or prior to
such date;
(c) by the Buyer, upon a material breach of any
representation or warranty of the Sellers or the Sellers fail to
comply in any material respect with any of the covenants or
agreements, or if any representation or warranty of the Sellers
shall become untrue in any material respect, in either case such
that the conditions set forth in Section 7.2 would be incapable
of being satisfied by December 31, 1996 (or as otherwise
extended), provided that a wilful breach shall be deemed to cause
such conditions to be incapable of being satisfied by such date;
or
(d) by the Sellers, upon a material breach of any
representation or warranty of the Buyer or the Buyer fails to
comply in any material respect with any of its covenants or
agreements, or if any representation or warranty of the Buyer
shall become untrue in any material respect, in either case such
that the conditions set forth in Section 7.3 would be incapable
of being satisfied by December 31, 1996 (or as otherwise
extended), provided that a wilful breach shall be deemed to cause
such conditions to be incapable of being satisfied by such date.
SECTION 10.2 Procedure for Termination. In the event of
termination of this Agreement by either the Sellers or the Buyer as
provided in Section 10.1 above, written notice thereof shall be given
by the terminating party to the other party hereto in the manner set
forth in Section 11.4 and this Agreement shall terminate and be without
further force and effect, with the exception that the obligations set
forth in Section 6.7, Article IX, Sections 11.2, 11.4 and 11.10 shall
remain in full force and effect, and the transactions contemplated
hereby shall be abandoned, without further action by the parties
hereto. Except as provided in Section 10.3, no such termination shall
relieve any party of any liability or damages resulting from any breach
by that party of this Agreement.
If the transactions contemplated by this Agreement are
terminated as provided in this Article X: (a) each party will
redeliver all documents and other material of any other party relating
to transactions contemplated hereby, whether obtained before or after
the execution hereof, to the party furnishing the same; and (b) all
confidential information received by any party hereto with respect to
the business of any other party or its subsidiaries shall be treated in
accordance with Section 6.7 hereof.
SECTION 10.3 Default. Notwithstanding the foregoing
provisions of this Article X, if either the Buyer or the Sellers shall
intentionally fail or refuse to consummate the transactions
contemplated herein, then the nondefaulting party, after affording the
defaulting party a 10-day period after notice in which to consummate
the transactions contemplated hereby, shall have the right to terminate
this Agreement and the defaulting party shall pay to the nondefaulting
party the sum of $10,000,000.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Survival of Covenants, Agreements,
Representations and Warranties. Except as set forth in this
Section 11.1, the rights of the parties hereto to initiate any action
for (a) any breach of a representation or warranty in this Agreement,
or (b) any failure to perform any covenant or agreement in this
Agreement, shall survive only until close of business on the date one
year after the Closing Date; provided, however, that the
representations and warranties contained in Section 4.15 shall survive
until the expiration of the applicable statute of limitations. The
rights of the parties to enforce the covenants in (a) Section 6.7(a)
shall survive in full force and effect without expiration, (b) Section
6.7(b) shall survive as provided in the Confidentiality Agreement, (c)
Section 6.10 shall survive for a period of six years following the
Closing Date. Notwithstanding anything in this Agreement to the
contrary, no claim for (a) any breach of a representation or warranty
in this Agreement or (b) any failure to perform any covenant or
agreement in this Agreement, may be brought, and no litigation with
respect thereto commenced, and the party breaching such representation
or warranty or failing to perform any covenant or agreement shall not
have any obligation with respect thereto, unless a Claim Notice thereof
specifying with particularity the breach of representation or warranty,
or failure to perform a covenant or agreement claimed shall have been
delivered to such party in accordance with Section 9.4 on or before the
expiration of such one-year period; provided, however, that a claim for
any breach of a representation or warranty in Section 4.15 may be
brought until the expiration of the applicable statute of limitations.
SECTION 11.2 Expenses. Except as set forth in
Section 10.3, whether or not the transactions contemplated by this
Agreement shall be consummated, the Buyer shall pay all fees and
expenses incurred by (or on behalf of) the Buyer and its affiliates,
and the Sellers shall pay all fees and expenses incurred by (or on
behalf of) the Sellers, the Corporation or any of their respective
affiliates in connection with, or in anticipation of this Agreement and
the consummation of the transactions contemplated hereby, including,
without limitation, those costs incident to the preparation of this
Agreement, and the fees and disbursements of legal counsel, accountants
and consultants.
SECTION 11.3 Amendment; No Waiver. This Agreement may
not be amended or modified except by a writing signed by each of the
Sellers, the Buyer and the Corporation. No waiver of the performance
or breach of, or default under, any condition or obligation hereof
shall be deemed to be a waiver of any other performance, or breach of,
or default under, the same or any other condition or obligation of this
Agreement.
SECTION 11.4 Notices. Any notice, request, consent or
communication under this Agreement shall be in writing and shall be
deemed given (a) when personally delivered; (b) the second Business Day
after being deposited in the United States mail registered or certified
(return receipt requested); or (c) the first Business Day after being
deposited with Federal Express or any other recognized national
overnight courier service for overnight delivery, in each case to the
parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
(i) If to the Corporation:
CCP Holdings, Inc.
402 East 4th Street
Waterloo, Iowa 50704
Attention: Lyle D. Reed
Telephone: (319) 236-9200
Telecopier: (319) 292-3313
with a copy to:
Stinson, Mag & Fizzell, P.C.
1201 Walnut Street, Suite 2800
Kansas City, Missouri 64106
Attention: Patrick A. Pohlen
Telephone: (816) 842-8600
Telecopier: (816) 691-3495
(ii) If to Donald R. Wood, Jr.:
Donald R. Wood, Jr.
5505 Lake Washington Blvd., N.E.
#1-E
Kirkland, Washington 98033
(iii) If to Lyle D. Reed:
Lyle D. Reed
115 Sheridan Road
Waterloo, Iowa 50701
(iv) If to the Ann L. and Walter A. Drexel Revocable
Trust:
Ann L. Drexel
1009 Taray de Avila
Tampa, Florida 33613
with a copy to:
Walter A. Drexel
11609 Pine Creek Court
Aledo, Texas 76008
(v) If to the Reed Charitable Remainder Unitrust:
Donald R. Wood, Jr.
5505 Lake Washington Blvd., N.E.
#1-E
Kirkland, Washington 98033
with a copy to:
Lyle D. Reed
115 Sheridan Road
Waterloo, Iowa 50701
(vi) If to the Buyer:
Illinois Central Corporation
455 N. Cityfront Plaza Drive
Chicago, Illinois 60611-5504
Attention: Ronald A. Lane
Telephone: (312) 755-7650
Telecopier: (312) 755-7669
with a copy to:
Schiff Hardin & Waite
7200 Sears Tower
Chicago, Illinois 60606
Attention: Stuart L. Goodman
Telephone: (312) 258-5711
Telecopier: (312) 258-5600
or such other addresses as shall be furnished in writing by any such
party, and shall be deemed to have been given as of the date so
personally delivered or received.
SECTION 11.5 Third Party Beneficiaries. This Agreement
is binding upon and is for the benefit of the parties hereto and their
respective successors and permitted assigns. This Agreement is not
made for the benefit of any person, firm, corporation or association
not a party hereto (or his or its respective heirs, executors,
administrators or assigns), and no person, firm, corporation or
association other than the Sellers (or their successors or assigns) and
the Buyer (or its successors or assigns) shall acquire or have any
right under or by virtue of this Agreement.
SECTION 11.6 Assignment. Neither this Agreement nor any
of the rights, interests or obligations hereunder may be transferred or
assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other party, such
consent not to be unreasonably withheld; except that it is understood
and agreed between the parties that the Buyer may assign this Agreement
to any of its existing or to be formed subsidiaries.
SECTION 11.7 Entire Agreement. This Agreement embodies
the entire agreement between the parties hereto and there are no
agreements, representations or warranties between the parties other
than those set forth or provided herein. All schedules called for by
this Agreement and delivered to the parties shall be considered a part
hereof with the same force and effect as if the same had been
specifically set forth in this Agreement.
SECTION 11.8 Counterparts. This Agreement may be
executed in two or more counterparts, all of which shall be considered
one and the same agreement and shall become effective when two or more
counterparts have been signed by each of the parties and delivered to
the other parties, it being understood that all parties need not sign
the same counterpart.
SECTION 11.9 Headings. The headings contained in this
Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
SECTION 11.10 GOVERNING LAW. ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT WILL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAW, AND NOT
THE LAW OF CONFLICTS, OF THE STATE OF DELAWARE.
SECTION 11.11 Gender. Words of any gender used in this
Agreement shall be held and construed to include any other gender, and
words in the singular number shall be held to include the plural,
unless the context otherwise requires.
SECTION 11.12 Severability. In case any one or more of
the provisions contained in this Agreement shall for any reason be held
to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality, or unenforceability shall not affect any other
provision hereof and this Agreement shall be construed as if such
invalid, illegal, or unenforceable provision had never been contained
herein.
SECTION 11.13 Arbitration. Any dispute between any of the
parties hereto or claim by a party against another party arising out of
or in relation to this Agreement or in relation to any alleged breach
thereof, except as otherwise provided for in this Agreement, shall be
finally determined by arbitration in accordance with the rules then in
force of the American Arbitration Association. The arbitration
proceedings shall take place at such location as the parties in dispute
hereafter may agree upon; and such proceedings shall be governed by the
laws of the State of Delaware of the United States of America as such
laws are applied to agreements between residents of such State entered
into and to be performed entirely within such State. There shall be
one arbitrator, as shall be agreed upon by the parties in dispute, who
shall be an individual skilled in the legal and business aspects of the
subject matter of this agreement and of the dispute. In the absence of
such agreement, each party in dispute shall select one arbitrator and
the arbitrators so selected shall select a third arbitrator. In the
event the arbitrators cannot agree upon the selection of a third
arbitrator, such third arbitrator shall be appointed by the American
Arbitration Association at the request of any of the parties in
dispute. The arbitrators shall be individuals skilled in the legal and
business aspects of the subject matter of this agreement and of the
dispute. The decision rendered by the arbitrator or arbitrators shall
be accompanied by a written opinion in support thereof. Such decision
shall be final and binding upon the parties in dispute without right of
appeal. Judgment upon any such decision may be entered into in any
court having jurisdiction thereof, or application may be made to such
court for a judicial acceptance of the decision and an order of
enforcement. Costs of the arbitration shall be assessed by the
arbitrator or arbitrators against any or all of the parties in dispute,
and shall be paid promptly by the party or parties so assessed.
SECTION 11.14 Sellers' Agent. Each of the Sellers hereby
agrees to have one person duly appointed and authorized to act on their
behalf on all matters relating to Section 2.3 and Article IX (the
person so appointed is herein referred to as the "Sellers' Agent").
Each of the Sellers hereby appoints Lyle D. Reed as its agent and
authorizes the Sellers' Agent to take any and all actions on behalf of
the Sellers with respect to Section 2.3, including, without limitation,
determining (i) the amount of Net Working Capital as of the Closing
Date and (ii) the Capital Expenditure Amount as of the Closing Date,
and with respect to Article IX. Each Seller agrees to be bound by any
and all actions taken by the Sellers' Agent with respect to Section 2.3
and Article IX. Any and all parties to this Agreement shall be
entitled to rely, and shall be fully protected in relying upon all
actions taken by the Sellers' Agent. The Sellers' Agent shall have no
liability to any Seller for any error of judgment, mistake of fact or
law or act done or omitted by him as Sellers' Agent in good faith,
except for wilful misconduct or gross negligence. In the event of the
resignation, death or inability to act as the Sellers' Agent, a
majority in number of the Sellers shall appoint a successor Sellers'
Agent and provide notice of a successor Sellers' Agent to the Buyer.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the date first above written.
CCP HOLDINGS, INC. ILLINOIS CENTRAL CORPORATION
By: By:
Name: Name:
Title: Title:
SELLERS
Donald R. Wood, Jr.
Lyle D. Reed
Ann L. and Walter A. Drexel
Revocable Trust
u/t/a dated 1/5/93
By:
Ann L. Drexel, as trustee
Reed Charitable Remainder Unitrust
u/t/a dated 12/27/95
By:
Donald R. Wood, Jr., as Trustee
PHANTOM STOCK UNIT HOLDERS
R. Kevin Trout
John A. Adair
Gregory L. Amys
EXHIBIT A
FORM OF ESCROW AGREEMENT
EXHIBIT B
FORM OF NON-COMPETITION
AGREEMENT
EXHIBIT C
FORM OF OPINION
OF STINSON, MAG
& FIZZELL, P.C.
EXHIBIT D
FORM OF OPINION
OF GENERAL COUNSEL
EXHIBIT 23.1
Consent of Independent Accountants
As independent public accountants, we hereby consent to the use of our
report dated January 19, 1996 on the consolidated financial statements
of CCP Holdings, Inc. and its subsidiaries (the "Company") as of
December 31, 1995 and 1994 for each of the years in the three year
period ended December 31, 1995 in this Current Report on Form 8-K. It
should be noted that we have not audited any financial statements of
the Company subsequent to December 31, 1995 or performed any audit
procedures subsequent to the date of our report.
ARTHUR ANDERSEN LLP
Chicago, Illinois
May 15, 1996
