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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-KSB/A
ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996 Commission File Number 0-20618
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RAILAMERICA, INC.
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(Name of small business issuer in its charter)
DELAWARE 65-0328006
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(State or Other Jurisdiction (IRS Employer
of Incorporation) Identification Number)
301 Yamato Road, Suite 1190
Boca Raton, Florida 33431
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (561) 994-6015
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, $.001 Par Value
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. ( )
The registrant's revenues for the fiscal year ended December 31, 1996
were $25,658,241.
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of May 16, 1997 computed by reference to the high/ask and
low/bid prices of registrant's common stock reported on NASDAQ on such date was
$32,000,000.
The number of shares outstanding of registrant's Common Stock, $.001
par value per share, as of May 6, 1997 was 8,428,229.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
RailAmerica, Inc. (together with its consolidated subsidiaries, the
"Company") is a multi- modal transportation company that acquires, develops and
operates shortline railroads formed primarily through the acquisition of light
density rail lines from larger railroads. The Company has expanded its
operations in the transportation industry through its acquisition of
Kalyn/Siebert, Inc. ("Kalyn"), a manufacturer of a broad range of truck
trailers, located in Gatesville, Texas. Through Kalyn, the Company has
established trailer manufacturing operations and substantially increased the
Company's assets, liabilities, revenue, expenses and income.
The Company's objectives are to create a diversified transportation
company by acquiring additional railroads and other transportation-related
companies. In accordance with this strategy, in June 1996, the Company acquired
approximately 40 miles of rail line in the state of Indiana; in September 1996,
the Company acquired 131 miles of rail line in north central Washington; in
October 1996, the Company acquired all of the issued and outstanding stock of
Otter Tail Valley Railroad Inc. ("OTVR"), a short line railroad headquartered in
Fergus Falls, Minnesota; in November 1996, the Company acquired substantially
all of the assets and business of the Gettysburg Railroad in southern
Pennsylvania; and in December 1996 the Company acquired approximately 204 miles
of rail line in northern Minnesota. In addition, in February 1997, the Company
purchased a majority interest in the stock of Empressa de Transporte Ferrovario
S.A. ("Ferronor"), a railroad serving northern Chile with approximately 1,400
miles of rail line.
The Company's business presently is conducted through twenty
wholly-owned consolidated subsidiaries - Huron and Eastern Railway Company, Inc.
("HESR"), Saginaw Valley Railway Company, Inc. ("SGVY"), Kalyn, OTVR, South
Central Tennessee Railroad Corporation ("SCTR"), Huron Distribution Services,
Inc. ("HDS"), Delaware Valley Railway Company, Inc. ("DVRC"), RailAmerica
Intermodal Services, Inc. ("RIS"), RailAmerica Carriers, Inc. ("RAC"), Prairie
Holding Corporation ("PHC"), Dakota Rail, Inc. ("Dakota Rail"), RailAmerica
Equipment Corporation ("REC"), West Texas and Lubbock Railroad Company, Inc.
("WTLR"), Plainview Terminal Company ("PTC"), Cascade and Columbia River
Railroad, Inc. ("CCRR"), Gettysburg Scenic Rail Tours, Inc., Evansville Terminal
Company ("ETC"), Minnesota Northern Railroad, Inc. ("MNR"), RailAmerica de
Chile, S.A and Steel City Carriers, Inc. ("Steel City Carriers"). All references
to the operations of the "Company" discussed in this Form 10-KSB describe the
operations of its subsidiaries. All of the Company's revenue from continuing
operations for 1995 was derived from the operations of HESR, SGVY, Kalyn, DVRC,
SCTR, Dakota Rail, WTLR, PTC.
The Company was incorporated in Delaware on March 31, 1992 to acquire
all of the outstanding capital stock of two pre-existing railroad companies -
HESR and SGVY. Over the last two and a half years, the Company has completed 13
acquisitions, including numerous short line railroads and other
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transportation related companies. These acquisitions have been integrated into
the Company's current operations and serve as a platform for the historical
growth experienced by the Company. The Company's principal executive office is
located at 301 Yamato Road, Suite 1190, Boca Raton, Florida 33431, and its
telephone number at that location is (561) 994-6015.
RAILROAD OPERATIONS
The Company's railroad subsidiaries operated approximately 930 miles
and 450 miles of rail line as of December 31, 1996 and 1995, respectively.
Currently, the Company's rail lines consist of: (i) 136 miles of rail line which
it owns in Michigan; (ii) 4 miles of trackage rights and 45 miles of rail line
which are owned by the State of Michigan and operated pursuant to an agreement
with Michigan Department of Transportation; (iii) 49 miles of rail line leased
from the South Central Tennessee Railroad Authority near Nashville, Tennessee
and 3 miles of trackage rights; (iv) 45 miles of rail line in Pennsylvania, 18
miles of which the Company has agreed to purchase from the Commonwealth of
Pennsylvania for a price to be determined and 27 miles of which are operated
under a freight easement with the Commonwealth of Pennsylvania; (v) 10 miles of
rail line in Delaware made available to Company pursuant to a ten-year lease
with the Wilmington & Northern Railroad Company; (vi) 44 miles of rail line
which the Company is operating pursuant to a contract with the State of
Minnesota; (vii) 104 miles of rail line and 4 miles of trackage rights in West
Texas; (viii) 51 miles of rail line in the state of Indiana, 18 miles of which
it owns and 33 miles of which it operates under an operating agreement; (ix) 131
miles of rail line which it owns in the state of Washington; (x) 23 miles of
rail line which it owns in southern Pennsylvania; (xi) 72 miles of rail line
which it owns in central Minnesota; and (xii) 174 miles of rail line it owns in
northern Minnesota and 37 miles of trackage rights.
In February 1997, the Company acquired a majority interest in the stock
of Ferronor, which operates approximately 1,400 miles of rail line in northern
Chile.
The Company provides it customers with local rail freight services with
access to the nation's rail system for delivery of products both domestically
and internationally. The Company hauls products for its customers based upon
market demands in its local operating areas. The Company's haulage of products
in Michigan include agricultural commodities, automotive parts, chemicals and
fertilizer, ballast and other stone products. The Company's haulage of products
in Tennessee includes wood chips, paper, chemicals and processed food products.
The Company's haulage of products in Pennsylvania and Delaware includes iron and
steel products, chemicals, agricultural products, lumber and processed food
products. The Company's haulage of products in Minnesota includes plastics,
lumber, denatured alcohol, coal, scrap iron and steel. The Company's haulage of
products in Texas consists of cotton, sodium sulfate, chemicals, fertilizer,
scrap iron and steel. The Company's haulage of products in Indiana consists of
agricultural commodities and plastics. The Company's haulage of products in
Washington consist of woodchips, lumber, minerals, cement and various
agricultural products.
In keeping with the general nature of business in the Michigan, Texas
and Minnesota market areas, agricultural commodities have represented a
significant portion of the Company's
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annual carloadings. Although the acquisition of SCTR, DVRC, Dakota Rail, WTLR,
PTC, and CCRR have helped to diversify the Company's traffic base and mitigate
seasonal fluctuations, the Company believes that, absent additional acquisitions
in industrial areas, agricultural commodities will continue to represent the
primary component of the Company's rail traffic base. As a result, the Company's
operations could be materially and adversely affected by factors such as adverse
weather conditions and fluctuations in grain prices. Additionally, sellers of
commodities tend to hold shipments if they anticipate price increases for their
commodities. Such actions could cause the Company's results of operations to
fluctuate from period to period as a result of fluctuations in the prices of
those commodities. Moreover, agricultural commodities are generally shipped from
September to May and the Company handles most of its traffic during such
periods. The Company anticipates that in the future the acquisition of Ferronor
will help insulate it from its dependence on agricultural commodities.
ACQUISITION OF EVANSVILLE TERMINAL COMPANY. On June 30, 1996, the
Company acquired 40 miles of rail line in the state of Indiana. The Company
simultaneously sold approximately 22 miles of the rail line to an unrelated
party and sold a railcar repair shop which was located along the rail line to
another unrelated party. The Company continues to own the remaining 18 miles of
rail line and operates the 22 miles pursuant to an operating agreement through a
newly formed subsidiary ETC. Such rail lines are used to haul primarily
agricultural products and plastics.
ACQUISITION OF CASCADE AND COLUMBIA RIVER RAILROAD. On September 6,
1996, the Company, through its newly formed subsidiary CCRR, completed the
purchase of a 131 mile rail line in north central Washington from Burlington
Northern Sante Fe ("BNSF"). The line extends from Oroville to Wenatchee,
Washington, were it interchanges with BNSF. Such rail line is used to carry
primarily woodchips, lumber, minerals, cement and agricultural products.
ACQUISITION OF OTTER TAIL VALLEY RAILROAD, INC. Effective October 1,
1996 the Company, through its wholly-owned subsidiary Dakota Rail, Inc.,
acquired all of the outstanding stock of OTVR. OTVR operates a 72 mile freight
rail line in western Minnesota from Fergus Falls, MN to an interchange with BNSF
near Fargo, North Dakota. Such rail line is used to carry primarily coal, grain
and fertilizer.
ACQUISITION OF GETTYSBURG RAILROAD. In November 1996, the Company,
through its wholly owned subsidiary DVRC, acquired substantially all of the
assets and business of the Gettysburg Railroad Company. The new Gettysburg
Railway operates 23 miles of rail line in south central Pennsylvania between
Gettysburg and Mount Holly Springs, and interchanges freight traffic with both
Conrail and CSX Transportation. Such line is used to carry primarily
agricultural commodities, canned goods, food and paper products and chemicals.
As part of the transaction, the Company has also acquired an existing
scenic rail tour business, which will be managed by the Company's newly-formed
subsidiary, Gettysburg Scenic Rail Tours ("Scenic"). It is anticipated that
Scenic will commence the proposed rail tour excursions in the Spring of 1997.
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ACQUISITION OF MINNESOTA NORTHERN RAILROAD. In December 1996, the
Company, through its newly formed subsidiary MNR, completed the purchase of a
cluster of rail lines in and around Crookston, Minnesota from BNSF. MNR operates
over 241 miles of track (including 37 miles of trackage rights), with traffic
from these lines interchanged with BNSF at Crookston.
These lines, which serve northwestern Minnesota, extend north to
Warroad, near the Canadian border and as far south as Perley, near Fargo, North
Dakota. Rail traffic handled on these lines consists of agricultural products,
primarily grains and fertilizer, as well as aggregates, and coal.
ACQUISITION OF FERRONOR. In February 1997, the Company through a newly
formed wholly-owned subsidiary, RailAmerica de Chile S.A., acquired 55% of the
outstanding voting stock of Ferronor. Ferronor owns and operates approximately
1,400 miles of rail line serving northern Chile. RailAmerica was joined in the
purchase of Ferronor by Andres Pirazzoli y Cia, Ltda. ("APCO"), a family-owned
Chilean transportation and distribution company.
Ferronor operates the only north-south railroad in northern Chile,
extending from La Calera near Santiago, where it connects with Chile's southern
railway, Ferrocarril del Pacifico, S.A., to its northern terminus at Iquique,
approximately 120 miles south of the Peruvian border. It also operates several
east-west branch lines that link a number of iron, copper and limestone mines
and production facilities with several Chilean Pacific port cities. Ferronor
also serves Argentina and Bolivia through traffic interchanged with the General
Belgrano Railroad and the Ferrocarriles Antofagasta Bolivia.
Ferronor currently operates approximately 30 locomotives and 700 rail
cars. Ferronor employed approximately 350 people as of the date of acquisition.
As contemplated by management, significant reductions in the work force are
being effectuated.
COMPETITION. The Company's primary source of competition in its rail
operations comes from over-the-road trucks. While the Company must build or
acquire and maintain its rail system, trucks are able to use public roadways.
Any future expenditures materially increasing the roadway system in the
Company's present or proposed areas of operation (or legislation granting
materially greater latitude for trucks with respect to size or weight
limitations) could have a significant adverse effect on the Company's
competitiveness and results of operations.
TRAILER MANUFACTURING OPERATIONS
Kalyn, located in Gatesville, Texas, was established in 1968 and
manufactures a broad range of specialty truck trailers. Kalyn products are
marketed to customers in the construction, trucking, agricultural, railroad,
utility, and oil industries. In addition, a substantial portion of Kalyn's sales
are to the military and several other local and federal government agencies.
Kalyn currently offers over 40 standard trailer models in approximately
100 different variations. The light and medium trailer category consists of a
diverse group of products. The
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trailer types in this category, ranked by sales volume, include mini-platform,
utility, gooseneck, agricultural, hydraulic dump, specialized concession
trailers and vans, and tilt and fork lift trailers.
Since Kalyn's acquisition of Siebert Trailers, Inc. ("Siebert") in
1991, Kalyn's product mix has shifted towards sales of heavy equipment and
specialty trailers. Previously located in Stockton, California, Siebert
manufactured a highly specialized detachable gooseneck trailer constructed of
high yield steel. The Siebert products include up to 300-ton capacity units. The
trailer types in the heavy equipment category, ranked by historical sales
volume, include specialized trailers (such as car haulers, truck haulers, and
jeep haulers), fixed neck lowbed, detachable lowbed, flats and platforms, drops
and double drops, folding neck low-bed, and used trailers.
The majority of Kalyn's sales are based on existing Kalyn trailer
designs which are modified with standard options. However, approximately 20% of
sales must be customized to satisfy customers' specifications. Kalyn's "Pro
Engineer" 3-D based solid modeler drafting system and computer aided drafting
system "CAD" allows its engineers to readily modify trailer component design and
generate new designs, based on customer needs.
MANUFACTURING FACILITY. Kalyn builds all the structural parts of its
trailers using primarily steel bars and plates. The major manufacturing steps
include cutting, bending and welding of steel and, once assembled, sand
blasting, cleaning and painting. The axles and running gears are purchased as
sub-assemblies which are integrated into the Kalyn trailer design. Kalyn
contracts out any necessary machining. Kalyn exercises strict quality control by
screening suppliers and conducting inspections throughout the production
process.
As a consequence of significant increases in sales order volume, during
1995 Kalyn expanded its manufacturing facility to partially address this
increased demand by building additional manufacturing space upon land that Kalyn
owns. The expansion was also completed to accommodate the receipt of a contract
with the U.S. Army Tank Automotive Command ("TACOM") pursuant to which Kalyn has
agreed to exclusively produce over a three-year period all of TACOM's
requirements for twelve-ton, tactical semi-trailer vans ("Tactical Vans"). TACOM
has advised Kalyn that over the term of this agreement, orders could be placed
for up to approximately 345 Tactical Vans, which could generate sales of up to
approximately $27 million. In February 1996, Kalyn was awarded an additional
requirements contract by TACOM. Pursuant to the terms of such agreements, TACOM
is not required to purchase a minimum number of Tactical Vans or other trailers.
During 1996, Kalyn also built a new paint booth building to accommodate the
additional volume of trailer orders. Kalyn's plant is currently operating one
shift, although Kalyn believes manufacturing capacity can be increased by adding
a partial second shift.
Kalyn's ability to manufacture trailers is dependent upon receiving
supplies or components and raw materials from a limited number of sources. To
date, Kalyn has experienced no material difficulties in procuring supplies,
components or materials. However, if deliveries of such items are delayed,
Kalyn's production ability may be decreased which could have a negative effect
on Kalyn's and the Company's results of operations.
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CUSTOMERS. Kalyn serves a variety of customers in a range of
industries. Since 1990, commercial accounts have represented approximately 60%
to 70% of sales, with military or governmental agency sales representing the
balance. During 1995 and 1996, sales to governmental agencies, including TACOM,
represented 29% and 20% of Kalyn's revenue, respectively while sales to
commercial accounts represented 71% and 80%, respectively, of Kalyn's revenues.
The majority of sales in the government segment are to the General
Services Administration ("GSA"), the purchasing arm of most non-military
agencies, and to TACOM, a Department of Defense unit established to consolidate
purchases for various branches of the military. Kalyn has been awarded "Blue
Ribbon Contractor" status which provides Kalyn with a 10% preference on bids for
certain contracts.
BACKLOG. As of December 31, 1996 and March 27, 1997, the Company's
backlog of orders was approximately $8.6 million and $13.0 million,
respectively, compared to $3.4 million and $10.7 million as of December 31, 1995
and March 1, 1996, respectively. Substantially all of the backlog at March 27,
1997 represented orders under the TACOM agreements. Kalyn includes in its
backlog only those orders for trailers for which a confirmed customer order has
been received. Kalyn manufactures trailers mostly to customer or dealer orders
and does not typically maintain an inventory of "stock" trailers in anticipation
of future orders.
DISTRIBUTION AND MARKETING. Kalyn sells through a dealer base
consisting of approximately 170 independent dealers in 49 states, Canada and
Mexico. Historically, as much as 50% of all of Kalyn's commercial sales are to
dealers, with the balance representing direct retail sales by its sales force.
Kalyn's sales staff consists of a vice president, four sales managers, an
advertising manager and three additional employees. The sales staff is supported
by two registered mechanical design engineers and five draftsmen. Historically,
Kalyn's dealers have not inventoried Kalyn trailers due to the broad variety of
specific options and trailer types. During 1995, certain dealers began
maintaining some inventory of Kalyn trailers.
Sales leads are generated through publication advertising, literature
mailings, trade show exhibitions, dealers, repeat customers, and word-of-mouth.
Kalyn exhibits at approximately five trade shows per year. Kalyn's management
believes that these trade shows are effective in maintaining Kalyn's name and
reputation and developing sales leads.
Additionally, Kalyn places advertisements in trade publications such as
Truck, Truckers USA, Texas Agriculture, Heavy Duty Trucks, Lifting and
Transportation, Overdrive, Equipment World and Truck Market News. In recent
years, Kalyn has shifted resources from advertising to
trade shows, which are more cost effective.
During the first quarter of 1995, Kalyn entered into a Wholesale and
Retail Financing Agreement with Associates Commercial Corporation and Associates
Commercial Corporation of Canada, Ltd. to stimulate and facilitate the sale and
financing of its new and used trailers. Additionally, in December of 1996, the
Company entered into an Operating Agreement with NewCourt Financial Ltd. in
order to provide wholesale and retail financing for its dealers located in
Canada. Each of these agreements provides floor plan financing for eligible
dealers and lease
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and/or purchase financing for endmarket purchasers. Under certain circumstances,
these agreements also provide for the repurchase of products sold to customers
by Kalyn and contingent responsibility for certain expenses. To date, the
Company has not experienced any losses or been required to advance funds in
connection with these agreements.
COMPETITION. The Company faces significant competition in the truck
trailer manufacturing industry which is highly competitive and has relatively
low barriers to entry. Kalyn competes with a number of other trailer
manufacturers, some of which have greater financial resources and higher sales
than Kalyn. Furthermore, Kalyn's products compete with alternative forms of
shipping, such as intermodal containers. There can be no assurance that Kalyn
will be able to continue to compete effectively with existing or potential
competitors or alternative forms of shipping containers.
MOTOR CARRIER OPERATIONS (DISCONTINUED OPERATIONS)
On February 10, 1995, the Company acquired substantially all of the
assets of Steel City, a regional motor carrier located in Sault Ste. Marie,
Ontario, Canada. Steel City operates a fleet of approximately 120 tractors and
trailers, and currently serves more than 50 customers in the steel, paper and
lumber industries by transporting a broad variety of products within Canada and
between Canada and the United States, particularly Michigan, Ohio, Indiana, New
York, and Wisconsin. Steel City Carriers currently has 50 full-time employees,
as well as 32 independent contract drivers who own and operate their own
vehicles.
For the years ended December 31, 1996 and 1995, one customer in the
Company's motor carrier division accounted for approximately 31% and 18%,
respectively, of the Company's motor carrier transportation revenue. For the
year ended December 31, 1996, a second customer accounted for approximately 14%
of the Company's motor carrier transportation revenue.
Since the Company's acquisition of Steel City, its financial
performance and development have not met the Company's expectations.
Accordingly, in March 1997 the Company adopted a formal plan to dispose of its
motor carrier operations and refocus the Company's efforts on expanding its core
railroad business. The Company's Board of Directors approved this plan on March
20, 1997.
REGULATION
OVERVIEW. In addition to environmental safety and other regulations
applicable to all businesses, the Company's railroad subsidiaries are subject to
regulation by various government agencies and regulations, including, among
others, (i) regulation by the Surface Transportation Board ("STB") and the
Federal Railroad Administration ("FRA"); (ii) certain labor related statutes
including the Railway Labor Act, Railroad Retirement Act, the Railroad
Unemployment Insurance Act, and the Federal Employer's Liability Act, and (iii)
regulation by agencies in the states in which the Company
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does business. Additionally, the Company is subject to STB regulation in
connection with the acquisition of new railroad properties. As a result of the
Staggers Rail Act amendments to the Interstate Commerce Act in 1980 and the
enactment of the ICC Termination Act of 1995, there has been a significant
relaxation in regulation governing rail carriers which management believes has
greatly simplified the purchase and sale of shortline railroad properties and
expedited the consummation of such transactions. The Company believes its
operations are in material compliance with all applicable regulations.
STB. The STB has jurisdiction over, among other matters, the
construction, acquisition, or abandonment of rail lines, the consolidation or
merger of railroads, the assumption of control of one carrier (including
railroads and interstate motor and water carriers) by another carrier (or entity
controlling another carrier), the use by one railroad of another railroad's
tracks ("trackage rights"), the rates charged by railroads for their
transportation services, and the service of rail carriers. Legislation enacted
in 1995 replaced the Interstate Commerce Commission ("ICC") with the STB and
abolished labor protective conditions applicable to numerous types of rail
transactions. Today, most transactions involving shortline railroads are no
longer subject to protective conditions imposed by labor agencies. Certain types
of transactions involving mid-size "regional railroads" (annual revenues between
$20 million and $250 million) are still subject to limited labor protective
conditions for adversely affected employees (in absence of any other
arrangements negotiated between management and labor, affected employees receive
one year's severance pay for acquisition transactions).
While imposition of labor protective conditions on line sales and
transfers does not subject a rail line buyer to the seller's collective
bargaining agreements, rates of pay, and other labor practices and does not
unionize the buyer's operating and maintenance employees, it entitles employees
of buyer or seller who are "adversely affected" by the transaction in terms of
job loss, pay cuts, loss of overtime, loss of hours, loss of benefits, and
moving expenses, to receive payments over a period of four years representing
compensation for those losses. Generally, in a line sale or transfer, only the
seller's or transferor's employees are affected.
As a result of the 1980 Staggers Rail Act amendments, railroads
received considerable rate and market flexibility including the ability to
obtain wholesale exemptions from numerous provisions of the Interstate Commerce
Act. Under the Staggers Rail Act, all containerized and truck trailer traffic
handled by railroads was deregulated. On regulated traffic, railroads and
shippers are permitted to enter into contracts for rates and provision of
transportation services without the need to file tariffs. Moreover, on regulated
traffic, the Staggers Rail Act amendments have allowed railroads considerable
freedom to raise or lower rates without objection from captive shippers. While
the ICC termination retained maximum rate regulation on traffic over which
railroads have exclusive control, the new law relieved railroads from the
requirements of filing tariffs and rate contracts with the STB on all traffic
other than agricultural products.
FUTURE OF THE STB. Under the ICC Termination Act the STB is presently
authorized through September 30, 1998. It is unclear whether the STB will be
reauthorized in its present form, whether its functions will be expanded to
include regulation of ocean shipping presently
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under the jurisdiction of the Federal Maritime Commission and to prescribe "open
access" for captive rail shippers such as utility companies, or whether the STB
will be disbanded and its functions split between the U.S. Departments of
Transportation and Justice.
FRA. The FRA regulates railroad safety and equipment standards,
including track maintenance, handling of hazardous shipments, locomotive and
rail car inspection and repair requirements, and operating practices and crew
qualifications. The FRA recently abolished regulations allowing it to impose
user fees on rail carriers subject to its jurisdiction.
STATES. Under the ICC Termination Act states lost their jurisdiction
over economic regulation of intrastate transportation. All states retain some
jurisdiction over safety related matters, including such matters as grade
crossings, bridges and track conditions. Local governments may have ordinances
regulating train speeds, noise and environmental issues.
TRUCKING. The STB, the Federal Highway Administration ("FHWA") of the
U.S. Department of Transportation ("DOT"), and various state agencies in the
United States and provinces in Canada have powers, generally governing highway
safety, vehicle size and weight and handling hazardous cargo, periodic financial
reporting, driver licensing, hours of service and to a limited extent, rates and
charges. The ICC's jurisdiction over motor carriers was transferred to the DOT
(carrier registration and insurance) and to the STB.
Motor carrier operations are also subject to safety regulations
governing interstate operations prescribed by the DOT. Such matters as gross
weight and dimension of equipment are also subject to federal and state
regulations. The failure of the Company to comply with the rules and regulations
of the STB, DOT, FHWA or state agencies could result in substantial fines or
revocation of the Company's operating licenses. The trucking industry is also
subject to regulatory and legislative changes which can affect the economics of
the industry by requiring changes in operating practices or influencing the
demand for, and the cost of providing, services to shippers. Previously, the
Motor Carrier Act of 1980 and the Trucking Industry Reform Act of 1994
materially reduced federal regulation of interstate motor freight carriers.
In August 1994, the Federal Aviation Administration Authorization Act
of 1994 (the "1994 FAA Act") became law. Effective January 1, 1995, the 1994 FAA
Act preempts certain state and local laws regulating the prices, routes or
services of motor carriers. The 1994 FAA Act does not limit the authority of a
state or other political subdivision to impose safety regulations or highway
route limitations or controls based on the size or weight of the motor vehicle,
the hazardous nature of cargo being transported by motor vehicles or financial
responsibility requirements relating to insurance and self-insurance
authorization.
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EMPLOYEES; LABOR CONSIDERATIONS
The Company currently has approximately 475 full-time employees
including approximately 275 in North America and approximately 200 in Chile.
None of the Company's employees are members of a union. The Company's railroad
operations are somewhat seasonal. Most agricultural shipments occur from
September through May, and much of the Company's track maintenance is performed
in the summer months. Temporary layoffs of personnel, hiring of part-time or
short-term employees, or use of independent contractors are sometimes required
to adjust to the seasonal nature of track maintenance work and other business
requirements. The Company currently has approximately 90 full-time employees in
its railroad operations.
Kalyn currently has 120 full-time employees consisting of 28
administrative and sales personnel and 92 production workers. Kalyn's
administrative staff includes its four in-house salesmen and eight-person
engineering department.
Steel City Carriers currently has approximately 50 full-time employees
consisting of 9 administrative staff, 15 mechanics, shop and yard workers and 26
drivers. Steel City Carriers also uses approximately 32 independent contract
drivers.
Ferronor operated with approximately 350 employees as of the date that
the Company acquired a majority ownership interest therein in February 1997. As
contemplated by management, significant reductions in the work force are being
effectuated. As of May 1, 1997, the work force has been reduced to approximately
200 employees. It is anticipated that the work force will be reduced to between
150 and 200 full-time employees by the end of the first year of operations.
ITEM 2. DESCRIPTION OF PROPERTY
MICHIGAN PROPERTIES
The majority of the Company's 185 miles of Michigan rail line consists
of 90 pound or heavier welded and jointed rail. In 1995, the Company retired 10
miles of rail line that had been abandoned. In addition, a two mile segment of
85 pound jointed rail was replaced with heavier rail in connection with the
Company's 1996 capital improvement program. The Company anticipates that it will
replace an additional 2 miles of rail during 1997. The Company's track standards
allow for maximum operating speeds ranging from 10 m.p.h. to 25 m.p.h. The
Company owns approximately 1,260 acres of operating and non-operating real
estate in Michigan. The Company's Michigan rail properties serve as collateral
for the Company's financing with National Bank of Canada. (See Note 8 to Notes
to Consolidated Financial Statements)
The Company maintains its Midwest regional headquarters office in a
building it leases in Saginaw, Michigan. The monthly payments under the lease
are $1,267 through December 1998. This facility houses management, staff,
engineering, accounting and marketing personnel. The Company also maintains an
operations center in a building it owns in Bad Axe, Michigan, which includes
equipment repair, track maintenance and real property management. The Company
owns a locomotive shop which was constructed in 1987, a maintenance-of-way
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equipment repair building completed in 1989 and a warehouse facility now used as
a maintenance headquarters.
TENNESSEE PROPERTIES
SCTR leases approximately 49 miles of rail line and approximately 450
acres of related real estate from the South Central Tennessee Railroad
Authority. The lease provides for base lease payments of $2,083 per month, plus
10% of taxable income of SCTR up to $100,000, and 15% of taxable income of SCTR
in excess of $100,000. The lease expires in October 1998 and upon expiration of
the lease term SCTR will acquire the leased property without further payment.
SCTR also has an option to acquire the property prior to expiration of the lease
term for $350,000 with a full credit allowed for rents paid under the lease.
SCTR owns a locomotive shop and general office facility which houses
all of its operating personnel in Centerville, Tennessee. SCTR also owns related
maintenance and office equipment. The Company's rights to the lease of the SCTR
property, as well as the common stock of SCTR owned by the Company and SCTR's
other equipment, serve as collateral under the Company's financing with General
Electric Capital Corporation obtained in connection with the Company's
acquisition of SCTR. (See Note 8 to Notes to Consolidated Financial Statements).
DELAWARE AND PENNSYLVANIA PROPERTIES
DVRC operates approximately 55 miles of rail line, of which 45 miles
are located in southeastern Pennsylvania, and 10 miles of contiguous line
extending into the State of Delaware, where the Company interchanges with CSX
Transportation at Elsmere, Delaware. The Pennsylvania rail line was operated
pursuant to an agreement between DVRC and the Commonwealth of Pennsylvania. The
rail line in Delaware was operated by DVRC pursuant to a 10-year lease with the
Wilmington & Northern Railroad Company. DVRC terminated that lease on June 30,
1996 and has since been operating over that rail segment on a month-to-month
basis. DVRC continues to receive grants from the Commonwealth for track
maintenance and improvements which require local matching. Such funds were
provided by DVRC in 1994 through 1996. In 1996, DVRC entered into a purchase
agreement to purchase a segment of the rail line owned by the Commonwealth of
Pennsylvania subject to a satisfactory appraised value.
The Company owns approximately 23 miles of rail line, between
Gettysburg and Mt. Holly Springs, Pennsylvania. The total land owned is
approximately 169 acres. In addition to the rail line and land, the Company owns
two buildings in Gettysburg.
MINNESOTA PROPERTIES
Dakota Rail operates approximately 44 miles of rail line, between
Hutchinson and Wayzata, Minnesota. The rail line is being purchased pursuant to
a contract for deed from the State of Minnesota. Dakota Rail also owns certain
non-operating real estate parcels. The total land owned by Dakota Rail both
operating and non-operating equals approximately 580 acres.
12
<PAGE> 13
In addition to the rail line and land, Dakota Rail also owns six buildings
including two depots, two diesel houses and two other buildings.
MNR currently owns approximately 174 miles of rail. The rail line
includes five branch lines, divided into seven segments in northern Minnesota.
MNR also owns approximately 2,600 acres of operating and non-operating land. MNR
sold approximately 30 miles of rail line in December 1996.
TEXAS RAILROAD PROPERTIES
WTLR owns approximately 104 miles of rail line, extending from the City
of Lubbock to both Seagraves and Whiteface. WTLR sold approximately 9 miles of
rail line during 1996. The total land owned by WTLR is approximately 1,500
acres. PTC has operating rights over 4 miles of track owned by the Burlington
Northern and Santa Fe Railroad in Plainview, Texas. In addition to the rail line
and land, WTLR owns four buildings. These buildings consist of a one story
storefront office building used as the railroad general offices in Brownfield,
Texas, as well as a maintenance building and a storage shed, in Brownfield and a
polebarn in Lubbock. The Company's Texas railroad properties serve as collateral
for the Company's financing with National Bank of Canada. (See Note 8 to Notes
to Consolidated Financial Statements).
WASHINGTON RAILROAD PROPERTIES
CCRR owns 131 miles of rail line, between Oroville and Wenatchee,
Washington. The total land owned by CCRR is approximately 1,600 acres. In
addition to the rail line and land, CCRR owns two buildings. These buildings
consist of an office building in Omak, Washington and a storage building in
Omak. The Company's Washington railroad properties serve as collateral for the
Company's financing with National Bank of Canada. (See Note 8 to Notes to
Consolidated Financial Statements).
INDIANA RAILROAD PROPERTY
ETC owns approximately 18 miles of rail line in southern Indiana. ETC
operates an additional 33 miles of rail line pursuant to an operating agreement.
CHILEAN PROPERTY
In February 1997, the Company through a newly formed wholly-owned
subsidiary, RailAmerica de Chile S.A., acquired 55% of the outstanding voting
stock of Ferronor. Ferronor owns and operates approximately 1,400 miles of rail
line serving northern Chile. RailAmerica was joined in the purchase of Ferronor
by APCO, a family-owned Chilean transportation and distribution company.
Ferronor operates the only north-south railroad in northern Chile,
extending from La Calera near Santiago, where it connects with Chile's southern
railway, Ferrocarril del Pacifico,
13
<PAGE> 14
S.A., to its northern terminus at Iquique, approximately 120 miles south of the
Peruvian border. It also operates several east-west branch lines that link a
number of iron, copper and limestone mines and production facilities with
several Chilean Pacific port cities. Ferronor also serves Argentina and Bolivia
through traffic interchanged with the General Belgrano Railroad and the
Ferrocarriles Antofagasta Bolivia.
TEXAS MANUFACTURING PROPERTIES
Kalyn's manufacturing operations are conducted in thirteen Company
owned buildings, totaling approximately 198,000 square feet on an 25.5-acre
site, which were constructed over the period from 1969 to 1996. Kalyn expanded
its manufacturing facility during 1995 and 1996. The Company's Texas
manufacturing properties serve as collateral for the Company's financing with
National Bank of Canada. (See Note 8 to Notes to Consolidated Financial
Statements). The Company expects that this site will be able to meet its
manufacturing goals in the foreseeable future.
ONTARIO PROPERTIES
Steel City Carriers operates from a terminal it owns located in Sault
Ste. Marie, Ontario, Canada, which includes an office building housing
administrative and dispatch offices, fabricating and service and a shop
building. The service facility has three bays which provide adequate space for
repairs and maintenance of Steel City Carriers' tractors and trailers as well as
some owner-operators' tractors. A 5-1/2 acre lot provides adequate space for the
normal loading, unloading, movement and parking of tractors and trailers as well
as for temporarily storing and transferring some shipments. The Company's
Ontario properties serve as collateral for the Company's financing with National
Bank of Canada. (See Note 8 to Notes to Consolidated Financial Statements).
ROLLING STOCK
As of December 31, 1996, the Company's domestic railroad rolling stock
consisted of 34 locomotives and 495 freight cars, some of which were owned and
some of which are leased from third parties. For most rail cars, the Company
pays no rental fees for their use and may retain such cars as long as the
Company demonstrates adequate utilization of the cars with connecting railroads
who must pay standard car hire charges for their use. The remainder of the cars
are subject to fixed monthly lease payments which are offset, in part, by fees
charged by the Company to connecting railroads and shippers. All of the
Company's locomotives are owned and serve as collateral under financing
agreements. (See Note 8 to Notes to Consolidated Financial Statements) The
Company also owns various other equipment used in the maintenance and operation
of its railroads. The following tables summarize the composition of the
Company's domestic railroad equipment fleet as of December 31, 1996:
14
<PAGE> 15
<TABLE>
<CAPTION>
Freight Cars
------------
Type Owned Leased Total
- ---- ----- ------ -----
<S> <C> <C> <C>
Covered hopper cars -- 229 229
Tank cars 98 -- 98
Box cars -- 80 80
Wood chip cars -- 78 78
Flat cars 10 -- 10
--- --- ---
108 387 495
=== === ===
<CAPTION>
Horsepower/Unit Locomotives
- --------------- -----------
3000 and over 2
1500 to 2000 27
Under 1500 5
---
34
===
</TABLE>
As of March 1, 1997, Ferronor operated approximately 30 locomotives and
700 rail cars in Chile.
Based on current and forecasted traffic levels on the Company's
railroads, management believes that its present equipment, combined with the
availability of other rail cars for hire, is adequate to support its operations.
Management believes that the Company's insurance coverage with respect to its
property and equipment is adequate.
ADMINISTRATIVE OFFICES
The Company maintains its principal executive office in Boca Raton,
Florida. This office consists of approximately 3,600 square feet and is leased
through January 2001. The lease calls for monthly rental payments of
approximately $3,300 with annual increases. The Company signed an amendment to
the lease in the first quarter of 1997 which calls for the rental of an
additional approximately 3,000 square feet at such facility. It is anticipated
that this increased space will be ready for occupancy in May of 1997. In
addition, the Company maintains a corporate office in Alexandria, Virginia,
consisting of approximately 1,000 square feet and leased through March 1998,
with monthly rental payments of $1,459. The Company subleases a corporate office
in San Francisco, California, consisting of approximately 1,000 square feet and
leased through June 2001, with lease payments of approximately $550 per month.
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of conducting its business, the Company becomes
involved in various legal actions and other claims some of which are currently
pending. Litigation is subject to many uncertainties, the outcome of individual
litigated matters is not predictable with
15
<PAGE> 16
assurance, and it is reasonably possible that some of these matters may be
decided unfavorably to the Company. It is possible that the Company's financial
position, results of operations or cash flows could be materially affected by an
ultimate unfavorable outcome, if any, of such pending litigation. Other than
ordinary routine litigation incidental to the Company's business, no other
litigation exists, except as described below.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of 1996.
16
<PAGE> 17
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Effective March 6, 1997, the Company's Common Stock began trading on
the Nasdaq National Market under the symbol "RAIL". Prior to March 6, 1997, the
Company's common stock traded on the Nasdaq SmallCap Market of the Nasdaq Stock
Market. Set forth below is high and low bid information for the Common Stock as
reported on the NASDAQ system for each quarter of 1995 and 1996. All such
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commissions and may not reflect actual transactions.
<TABLE>
<CAPTION>
1995 High Bid Price Low Bid Price
- ---- -------------- -------------
<S> <C> <C>
First Quarter $ 4 3/8 $ 2 15/16
Second Quarter 5 1/4 3 13/16
Third Quarter 5 1/16 3 1/2
Fourth Quarter 4 5/32 3 3/8
<CAPTION>
1996 High Bid Price Low Bid Price
- ---- -------------- -------------
First Quarter $ 4 1/16 $ 3 1/8
Second Quarter 4 3/16 3 3/16
Third Quarter 4 3/8 3 3/8
Fourth Quarter 5 3/4 4 1/8
<CAPTION>
1997 High Bid Price Low Bid Price
- ---- -------------- -------------
First Quarter $ 6 1/8 $ 4 5/8
</TABLE>
As of May 6, 1997, there were 301 holders of record of the Common Stock
and approximately 3,000 beneficial shareholders. The Company has never declared
or paid a dividend on its Common Stock. The ability of the Company to pay
dividends in the future will depend on, among other things, restrictive
covenants contained in loan or other agreements to which the Company may be
subject.
17
<PAGE> 18
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL
The results of operations of the Company for the year ended December
31, 1996 include the operations of ETC from July 1, 1996, CCRR from September 6,
1996, OTVR from October 1, 1996, Gettysburg Railway from November 18, 1996 and
MNR from December 28, 1996. The results of operations of the Company for the
year ended December 31, 1995 include the operations of Dakota Rail from
September 1, 1995 and WTLR and PTC from November 1, 1995. As a result, the
Company's financial position as of December 31, 1996 and its results of
operations for the years ended December 31, 1996 and 1995 are not comparable to
the prior year in certain material respects. In March 1997, the Company adopted
a formal plan to discontinue the operations of its motor carrier division. The
revenue and expenses for this division are not included in the consolidated
results of continuing operations of the Company for either 1996 or 1995. The
results of operations for the motor carrier division have been presented as
discontinued operations in the Company's 1996 and 1995 statements of income.
The Company's revenues increased by $0.6 million, or 2.3%, from $25.1
million for the year ended December 31, 1995 to $25.7 million for the year ended
December 31, 1996. Operating expenses decreased by $0.1 million, or less than
one percent, from $21.9 million for the year ended December 31, 1995 to $21.8
million for the year ended December 31, 1996. Other expenses, net increased by
$1.0 million, or 87.8%, from $1.1 million for the year ended December 31, 1995
to $2.1 million for the year ended December 31, 1996. Income from continuing
operations remained fairly constant at $1.1 million from 1995 to 1996. Increases
in revenue, operating expenses, and other expenses were primarily due to the
acquisition of additional rail lines and related operations in 1995 and 1996.
Primary earnings per share was $0.04 in 1995 compared to $0.10 in 1996.
Earnings per share in 1995 reflects a reduction of $666,665 to net income
available to common shareholders. Such reduction relates to a non-recurring
charge in connection with a deemed preferred stock dividend on the retirement of
such stock. On October 1, 1995, the Company was notified by the shareholders of
its redeemable convertible preferred stock of their intention to convert such
stock into shares of Common Stock. The Company redeemed the convertible
preferred stock at 97.5% of the then market value of the underlying common stock
for an aggregate redemption price of $1,666,665. The excess of the redemption
price over the book value of the preferred stock was deemed a non-recurring
dividend which reduced net income available to common shareholders by $666,665
or $0.14 per share.
Set forth below is a discussion of the results of operations for the
Company's railroad operations, trailer manufacturing operations and motor
carrier operations (discontinued operations). The corporate overhead, which
benefits all of the Company's segments, has not been allocated to the business
segments for the purposes of this analysis. The Company believes that this
presentation facilitates a better understanding of the relevant changes in the
results of the Company's operations. Corporate overhead, which is included in
selling, general and administrative expenses in the consolidated statements of
income, increased by $483,000, or 24.1%, to $2.5 million in 1996 compared to
$2.0 million for
18
<PAGE> 19
1995. The increase was related to the additional costs incurred to manage the
assets and businesses acquired during 1995 and 1996 including Dakota Rail, OTVR,
WTLR, PTC, ETC, CCRR, Gettysburg Railway and MNR. Certain corporate overhead was
also included in depreciation and amortization in the consolidated statements of
income. This depreciation and amortization increased by $51,000, or 213.9%, to
$75,000 in 1996 compared to $24,000 in 1995.
RESULTS OF RAILROAD OPERATIONS
The following discussion reflects the consolidated results of the
Company's railroad operations for the years ended December 31, 1996 and 1995. As
a result of the acquisitions discussed above, the results of operations for the
years ended December 31, 1996 and 1995 are not comparable to the prior years in
certain material respects.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
The table below compares the components of the Company's revenues from
its railroad operations for the periods shown.
<TABLE>
<CAPTION>
For the Year Ended
--------------------------------------------------------
December 31, 1996 December 31, 1995
------------------------ ------------------------
Gross % Change Gross % Change
Revenues From 1995 Revenues From 1994
------------ --------- ----------- ---------
<S> <C> <C> <C> <C>
Transportation revenues $ 9,783,041 44.6% $ 6,767,530 34.5%
Other revenues 1,921,160 340.0% 436,586 272.1%
------------ -----------
Total revenues $ 11,704,201 62.5% $ 7,204,116 39.9%
============ ===========
</TABLE>
TRANSPORTATION REVENUES. Transportation revenues for the year ended
December 31, 1996 increased by $3.0 million, or 44.6%, compared to the prior
year primarily due the acquisitions which occurred during 1996 and the second
half of 1995. WTLR, which was acquired in November 1995, had revenue of
approximately $255,000 for the two months ended December 31, 1995 and
approximately $1.8 million for 1996, an increase of $1.5 million. Dakota Rail,
which was acquired in September 1995, had revenue of approximately $230,000 for
the four months ended December 31, 1995 and $590,000 in 1996, an increase of
$360,000. CCRR, which was acquired in September 1996, had revenue of
approximately $750,000 in 1996. OTVR, which was acquired in October 1996, had
revenue of approximately $560,000 in 1996. In addition to the foregoing
acquisitions, SCTR's revenue increased by approximately $400,000 due to
increased carloads and demurrage earned from certain shippers, offset by a
decrease in HESR's revenue of approximately $796,000 due to a reduction in
carloads in the second half of 1996 compared to 1995. The transportation revenue
per carload increased from $366 in 1995 to $378 in 1996 due primarily to
increased rates and divisions of revenue with
19
<PAGE> 20
connecting carriers. Carloads handled by the Company's railroads totaled 25,871
for the year ended December 31, 1996, an increase of 7,366, or 39.8%, compared
to 18,505 for the year ended December 31, 1995. The increase was primarily the
result of acquisitions of WTLR, whose carloads increased by 3,630 from 1995 to
1996, Dakota Rail, whose carloads increased by 550 from 1995 to 1996, CCRR,
whose carloads totalled 1,892 in 1996, OTVR, whose carloads totalled 1,730 in
1996 and ETC, whose carloads totalled 715 carloads in 1996. Additionally, SCTR's
carloads increased by 242 in 1996 as compared to 1995. These increases were
partially offset by a decrease in HESR's carloads of 1,408 resulting from a
decrease in agricultural shipments in the second half of 1996.
OTHER REVENUES. Other revenues increased by approximately $1.5 million,
or 340.0%, from $436,586 for the year ended December 31, 1995 to $1.9 million
for the year ended December 31, 1996. Other revenues for 1996 included gains on
sales of certain operating assets, rental income and other miscellaneous items
of income. The increase was primarily due to the gain of (i) approximately
$582,000 from the sale of 22 miles of track and a rail car repair shop in
Indiana, (ii) approximately $579,000 from the sale of 30 miles of track in
Minnesota, and (iii) approximately $230,000 from the sale of 9 miles of track in
Texas. Additionally, during 1996 the Company sold a permanent easement in
Michigan for $106,000. Rental income increased as a result of assets acquired in
1995 and 1996.
OPERATING EXPENSES. The table below is a comparison of operating
expenses (which do not include interest expense and other income) for the
periods shown.
<TABLE>
<CAPTION>
For The Year Ended
--------------------------
December 31, 1996 December 31, 1995
--------------------- -------------------
% Change % Change
Expenses From 1995 Expenses From 1994
----------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Maintenance of way $ 1,309,976 66.5% $ 786,708 136.3%
Maintenance of equipment 625,177 33.0% 470,058 36.9%
Transportation 2,074,897 34.0% 1,548,084 25.5%
Equipment rental 387,834 69.2% 229,218 (24.4%)
Selling, general and administrative 1,381,169 72.4% 801,187 0.0%
Depreciation and amortization $ 961,383 20.5% $ 797,614 41.0%
----------- -----------
Total operating expenses $ 6,740,436 45.5% $ 4,632,869 29.4%
=========== ===========
</TABLE>
Operating expenses increased by $2.1 million, or 45.5%, from $4.6
million for the year ended December 31, 1995 to $6.7 million for the year ended
December 31, 1996. Maintenance of way expenses increased by approximately
$520,000, or 66.5%,
20
<PAGE> 21
from $786,708 for the year ended December 31, 1995 to approximately $1.3 million
for the year ended December 31, 1996 primarily due to certain acquisitions which
occurred in 1996 and the second half of 1995. WTLR, which was acquired November
1, 1995, had maintenance of way expenses of approximately $53,000 for the two
months ended December 31, 1995 compared to maintenance of way expenses of
approximately $370,000 in 1996, an increase of $317,000. Dakota Rail, which was
acquired September 1, 1995, had maintenance of way expenses of approximately
$40,000 for the four months ended December 31, 1995 compared to maintenance of
way expenses of approximately $150,000 in 1996, an increase of $110,000. CCRR,
which was acquired in September 1996, had maintenance of way expenses of
approximately $57,000 in 1996. OTVR, which was acquired October 1, 1996, had
maintenance of way expenses of approximately $49,000 in 1996. ETC, which was
acquired in June 1996, had maintenance of way expenses of approximately $47,000
in 1996. Maintenance of equipment expenses increased by approximately $155,000,
or 33.0%, primarily due to certain acquisitions which occurred in the second
half of 1995. WTLR, which was acquired November 1, 1995, had maintenance of
equipment expenses of approximately $18,000 for the two months ended December
31, 1995 compared to maintenance of equipment expenses of approximately $132,000
in 1996, an increase of $114,000. Transportation expenses increased by
approximately $530,000, or 34.0%, primarily due to certain acquisitions which
occurred in 1996 and the second half of 1995. WTLR, which was acquired November
1, 1995, had transportation expenses of approximately $71,000 for the two months
ended December 31, 1995 compared to transportation expenses of approximately
$322,000 in 1996, an increase of $251,000. CCRR, which was acquired in September
1996, had transportation expenses of approximately $144,000 in 1996. Dakota
Rail, which was acquired September 1, 1995, had transportation expenses of
approximately $34,000 for the four months ended December 31, 1995 compared to
transportation expenses of approximately $98,000 in 1996, an increase of
$64,000. OTVR, which was acquired October 1, 1996, had transportation expenses
of approximately $59,000 in 1996. ETC, which was acquired in June 1996, had
transportation expenses of approximately $42,000 in 1996. These increases in
transportation expenses were partially offset by a decrease in transportation
costs of approximately $28,000 at the Company's railroads in Pennsylvania
related to decreased carloads from 1995 to 1996. Equipment rental increased
approximately $160,000, or 69.2%, for the period primarily due to an increase of
approximately $157,000 in the costs associated with increased carloads from the
acquisitions in 1996 and late 1995 and increased car hire expense at SCTR of
approximately $82,000, partially offset by decreased costs at HESR of
approximately $75,000 due to decreased car loads from 1995 to 1996. Selling,
general and administrative expenses increased approximately $580,000, or 72.4%,
compared to the prior period. Such increase was due primarily to additional
costs of approximately $515,000 related to the acquisitions in 1996 and the
second half of 1995.
Operating expenses, as a percentage of transportation revenue, were
68.9% and 68.5% for 1996 and 1995, respectively. The change was primarily due to
higher maintenance of way expenses and equipment rental costs as a percentage of
total revenue for certain of the acquisitions. Management anticipates that
operating expenses as a percentage of revenue will remain fairly constant over
the next twelve months.
OTHER INCOME (EXPENSE). Interest expense
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<PAGE> 22
increased by approximately $695,000, or 111.7%, from $605,000 for the year ended
December 31, 1995 to $1.3 million for the year ended December 31, 1996. The
increase is primarily due to the interest expense related to the acquisitions of
CCRR (interest of $254,432), OTVR (interest of $77,756), and WTLR (interest of
$326,332).
RESULTS OF TRAILER MANUFACTURING OPERATIONS
The discussion of the results of operations that follows reflects the
results of Kalyn, REC and RailAmerica Financial Services ("RFS") for the years
ended December 31, 1996 and 1995. REC and RFS are leasing companies. REC
currently leases railroad tank cars, flat cars and locomotives to various
railroads and shippers. RFS was merged into REC in November 1996.
COMPARISON OF OPERATING RESULTS OF KALYN FOR THE YEARS ENDED DECEMBER 31, 1996
AND 1995.
The following table sets forth the income and expense items of Kalyn
for the years ended December 31, 1996 and 1995 and the percentage relationship
of income and expense items to net sales:
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended
December 31, 1996 December 31, 1995
------------------------ -------------------
<S> <C> <C> <C> <C>
Net Sales $ 13,637,978 100.0% $17,872,777 100.0%
Cost of Goods Sold 10,447,827 76.6% 13,398,740 75.0%
------------ -----------
Gross Profit 3,190,151 23.4% 4,474,037 25.0%
Selling, General and
Administrative expenses 1,399,646 10.3% 1,383,812 7.7%
Depreciation and amortization 433,353 3.2% 408,139 2.3%
------------- -----------
Income from Operations 1,357,152 9.9% 2,682,086 15.0%
Other Expenses (net) 348,430 2.5% 530,789 3.0%
------------- -----------
Income Before Taxes $ 1,008,722 7.4% $ 2,151,297 12.0%
============= ===========
</TABLE>
NET SALES. Net sales consist of trailer sales, part sales and repair
income. Net sales decreased by approximately $4.3 million, or 31.6%, from $17.9
million for the year ended December 31, 1995 to $13.6 million for the year ended
December 31, 1996. Trailer sales represented approximately 96% of the net sales
in both 1996 and 1995. Kalyn sold 547 trailers
22
<PAGE> 23
during 1996 and 875 trailers during 1995. The decrease in volume resulted in a
decrease of approximately $6.6 million in net sales. The average price per
trailer sold was approximately $24,000 for the year ended December 31, 1996 and
approximately $20,000 for the year ended December 31, 1995. The increase in
average price resulted in an increase of approximately $2.2 million in net
sales. Sales to governmental agencies represented 20% and 29% of Kalyn's net
sales for 1996 and 1995, respectively. During the first half of 1996, Kalyn was
in the process of building 5 prototype trailers in connection with the October
1995 TACOM contract. Full production under the contract began immediately after
acceptance by TACOM of the prototypes. The decrease in sales for 1996 compared
to 1995 was partially due to the above contract work as well as the federal
government budget impasse during the fourth quarter of 1995 and early 1996,
which resulted in a suspension of new trailer orders from the government. The
changes in net sales attributable to decreases in the TACOM contract and the
"budget impasse" amounted to approximately $1.0 million and $1.5 million,
respectively.
COST OF GOODS SOLD. Cost of goods sold decreased by approximately $3.0
million, or 28.8%, from $13.4 million for the year ended December 31, 1995 to
$10.4 million for the year ended December 31, 1996. Cost of goods sold
represented 76.6% of net sales for the year ended December 31, 1996 compared to
75.0% for the comparable period. The increase was partially due to certain fixed
costs of manufacturing being spread over a smaller revenue base in 1996.
Additionally, commercial orders represented a higher percentage of sales in 1996
than in 1995. Commercial trailers have more variations in design which generally
require greater expertise in the manufacturing process. Government contracts are
typically for larger quantities of similar style trailers creating greater
economies of scale in the production process which results in a relatively lower
cost per unit produced. Historically, commercial sales have had a higher cost of
goods sold and lower gross profit margins than government sales. Management
anticipates gross profit as a percentage of net revenue to increase over the
next twelve months as a relatively larger percentage of sales will be
attributable to government agencies as orders are received and processed under
the TACOM agreements that were entered into during the fourth quarter of 1995
and first quarter of 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative costs remained fairly constant during 1996 compared to 1995.
REC AND RFS. Revenue for REC and RFS for the year ended December 31,
1996 increased by $316,037 compared to the prior year as a result of tank car
leases and locomotive leases entered into during 1996. Selling, general and
administrative expense increased by $108,641 from $35,443 in the year ended
December 31, 1995 to $144,084 for the year ended December 31, 1996. The increase
was primarily due to costs associated with the management and operation of the
tank car leases. Depreciation and amortization expenses also increased to
$56,557 in 1996 from $1,907 in the prior period due to the addition of the tank
cars and locomotives. Interest expense of $83,570 in 1996 represented interest
from financing the purchase of tank cars and locomotives.
RESULTS OF MOTOR CARRIER OPERATIONS (DISCONTINUED OPERATIONS)
The discussion of results of operations that follows reflects the
results of Steel City Carriers and RIS from February 10, 1995 through December
31, 1996.
Since the Company's acquisition of Steel City, its financial
performance and development have not met the Company's expectations.
Accordingly, in March 1997 the
23
<PAGE> 24
Company adopted a formal plan to discontinue its motor carrier operations and
refocus the Company's efforts on expanding its core railroad business. The
Company's Board of Directors approved the plan of discontinuance on March 20,
1997. Management anticipates selling either substantially all of the assets or
the stock of the Company's motor carrier subsidiaries during 1997.
<TABLE>
<CAPTION>
For the Period from
For the Year Ended February 10, 1995 to
December 31, 1996 December 31, 1995
------------------------ ------------------------
<S> <C> <C> <C> <C>
Transportation revenue $ 7,216,301 100.0% $ 5,083,238 100.0%
------------ -----------
Direct operating expenses 6,541,528 90.6% 4,468,306 87.9%
Selling, General and
Administrative expenses 801,201 11.1% 520,881 10.2%
Depreciation and amortization 365,088 5.1% 243,755 4.8%
------------ -----------
Total operating expenses 7,707,817 106.8% 5,232,942 102.9%
------------ -----------
Operating loss 491,516 6.8% 149,704 2.9%
Other expenses (net) 406,158 5.6% 203,014 4.0%
------------ -----------
Net loss before taxes $ 897,674 12.4% $ 352,718 6.9%
============ ===========
</TABLE>
TRANSPORTATION REVENUE - Transportation revenue increased by
approximately $2.1 million, or 41.2%, from $5.1 million for the year ended
December 31, 1995 to $7.2 million for the year ended December 31, 1996. The
increase was primarily due to the increase in miles driven by Steel City
carriers during 1996 and the inclusion of RIS operations in 1996. RIS had
transportation revenue of $230,266 for 1996 compared to $27,556 for the prior
year.
DIRECT OPERATING EXPENSES - Direct operating expenses increased by
approximately $2.0 million, or 44.4%, from $4.5 million for the year ended
December 31, 1995 to $6.5 million for the year ended December 31, 1996. Direct
operating expenses represented 90.6% of transportation revenue for the year
ended December 31, 1996 compared to 87.9% for the period ended December 31,
1995. The increase was due to increased equipment maintenance and repairs, a
significant increase in fuel costs from 1995 to 1996 and the unusually extreme
winter weather in early 1996. The extreme winter weather caused many roads in
Ontario and the northern United States to be closed for extended periods of
time, resulting in lost revenue and increased costs.
GENERAL AND ADMINISTRATIVE - General and administrative expenses
decreased slightly as a percentage of transportation revenue for the year ended
December 31, 1996 compared to the period ended December 31, 1995. This decrease
was due to economies of scale achieved due to
24
<PAGE> 25
increased revenue in 1996.
OTHER EXPENSE (NET) - Other expenses, net increased by approximately
$200,000, or 100%, due primarily to losses from the disposal of certain old
equipment of approximately $125,000 and increased interest expense of
approximately $100,000.
LIQUIDITY AND CAPITAL RESOURCES - COMBINED OPERATIONS
The discussion of liquidity and capital resources that follows reflects
the consolidated results of the Company, including all subsidiaries.
The Company's cash provided by operating activities was $2.2 million
for the year ended December 31, 1996. However approximately $1.8 million of cash
provided by operating activities, net of acquisitions during the period, is
attributable to an increase in accounts receivable. The Company's accounts
receivable increased from $2.2 million as of December 31, 1995 to $4.6 million
as of December 31, 1996 primarily as a result of orders placed by TACOM under
requirements contracts with Kalyn, which accounts receivable were collected in
early 1997, and accounts receivable related to acquisitions.
Cash used in investing activities was $5.4 million for the year ended
December 31, 1996. One of the Company's main uses of cash during 1996 was for
the purchase of property, plant and equipment. Property, plant and equipment
increased $28.3 million during 1996 primarily due to the purchase of 131 miles
of rail line in the state of Washington, the purchase of 276 miles of rail line
in central and northern Minnesota, the purchase of 23 miles of rail line in
Pennsylvania, improvements made to the Company's various other rail lines,
Kalyn's new plant construction and the acquisition of transportation equipment
for the motor carrier and railroad segments, less current depreciation. During
late 1995, Kalyn began construction of additional space at its manufacturing
facility upon land that it owns to accommodate production under the TACOM
agreement. The expansion was completed in 1996. This expansion cost
approximately $300,000 and was funded through operating cash flow and advance
payments from TACOM.
The Company's cash provided by financing activities for 1996 was $3.6
million and consisted of the net proceeds from borrowings under the Company's
revolving line of credit with the National Bank of Canada, net proceeds of
approximately $4.0 million from the issuance of 1,250,000 shares of the
Company's common stock in a private placement transaction and $2.34 million
received in December 1996 as part of a private placement transaction which was
completed in January 1997.
25
<PAGE> 26
The Company's long term debt represents financing of property and
equipment, as well as the acquisition financing for SCTR, Kalyn, Steel City
Carriers, Dakota Rail, WTLR, PTC, ETC, CCRR, MNR, OTVR and Gettysburg Railway.
Certain of this indebtedness was refinanced through a $15 million revolving line
of credit (the "Revolver") with National Bank of Canada. The Revolver bears
interest, at the option of the Company, at either the bank's prime rate plus
0.5% or the one, three or six month LIBOR plus 2.5%. The Revolver is
collateralized by substantially all of the assets of the Company, Kalyn, HESR,
SGVY, RIS, CCRR, Steel City Carriers, WTLR and OTVR.
In October 1996, the Company increased the Revolver by $10.0 million.
The increased facility bears interest at the rate of 0.5% above prime. The
maturity date of the entire $25 million revolver was extended to October 1999.
On March 3, 1997, the Company received a loan commitment from National
Bank of Canada and Comerica Bank N.A. to further increase the Revolver to $40
million. It is anticipated that this additional increase will be finalized in
April 1997.
As of December 31, 1996, the Company had working capital of $5.1
million compared to working capital of $3.0 million as of December 31, 1995.
Cash on hand as of December 31, 1996 was $3.9 million compared to $3.5 million
as of December 31, 1995. The increase in cash from December 31, 1995 to December
31, 1996 is due primarily to cash received in December 1996 as part of a private
placement that was completed in January 1997 and cash received from the sale of
track assets in December 1996. The Company's cash flows from operations have
historically been sufficient to meet its ongoing operating requirements, capital
expenditures for property, plant and equipment, and to satisfy the Company's
interest requirements.
The Company expects that its future cash flow will be sufficient for
its current and contemplated operations for at least the next twelve months and
will be used for, among other things, anticipated capital expenditures for the
upgrading of existing rail lines and purchases of locomotives and equipment of
approximately $1.5 million and capital expenditures at Kalyn of approximately
$100,000. The Company does not presently anticipate any other significant
capital expenditures over the next twelve months. To the extent possible, the
Company will seek to finance any further acquisitions of property, plant and
equipment in order to allow its cash flow from operations to be devoted to other
uses, including debt reduction and acquisition requirements.
The Company's long-term business strategy includes the selective
acquisition of additional transportation-related businesses. Accordingly,
Company may require additional equity and/or debt capital in order to consummate
an acquisition or undertake major development activities. It is impossible to
predict the amount of capital that may be required for such acquisitions or
development, and there is no assurance that sufficient financing for such
activities will be available on terms acceptable to the Company, if at all. The
Company's $25 million revolving line of credit allows acquisition loan advances
of up to $20 million for such acquisitions. The Company borrowed $8.9 million
under the Revolver in order to fund its acquisition of
26
<PAGE> 27
ETC and CCRR. In addition, the Company borrowed $4.5 million from Comerica Bank
to acquire MNR. It is anticipated that the balance of this loan will be rolled
into the increased $40 million Revolver. Upon the closing of the increase in the
Revolver, the Company will have approximately $13.5 million available for future
acquisitions. As of March 1, 1997, the Company had approximately $3.0 million
of availability under the $25 million Revolver.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, Statements of Financial Accounting Standards ("SFAS"_
No. 128 "Earnings Per Share" was issued. SFAS No. 128 established new standards
for computing and presenting earnings per share ("EPS"). This statement
replaces the presentation of primary EPS and will require a duel presentation
of basic and diluted EPS. SFAS No. 128 is effective for financial statements
issued for periods ended after December 15, 1997 and requires restatement of
all prior-period EPS data presented. The Company has not yet determined the
impact, if any, the adoption of SFAS No. 128 will have on the Company's
financial statements.
INFLATION
Inflation in recent years has not had a significant adverse impact on
the Company's operations, and it is not expected to adversely affect the Company
in the future unless it increases substantially, and the Company is unable to
pass through the increases in its freight rates and trailer prices.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995.
The foregoing Management's Discussion and Analysis contains various
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1993, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, which represent the Company's expectations or beliefs concerning
future events, including the following: statements regarding the further growth
in transportation-related assets; the acquisition of additional railroads and
other transportation-related companies; the development of additional
transportation-related businesses; the increased usage of the Company's existing
rail lines; the development of synergy among the consolidated group; the growth
of gross revenues; and the sufficiency of the Company's cash flow for the
Company's future liquidity and capital resource needs. The Company cautions that
these statements are further qualified by important factors that could cause
actual results to differ materially from those in the forward-looking
statements, including, without limitations, the following: decline in demand for
transportation services; the effect of economic conditions generally and
particularly in the markets served by the Company; orders under the TACOM
agreements; the Company's dependence upon the agricultural industry as a
significant user of the Company's rail services; the Company's dependence upon
the availability of financing for acquisitions of railroads and other
transportation-related companies and the development of additional
transportation-related businesses; a decline in the market acceptability of
trucking or railroad services; the effect of competitive pricing; the
regulation of the Company by federal, state and local regulatory authorities.
Any material adverse change in the financial condition or results of operations
of Kalyn would have a material adverse impact on the Company. Results actually
achieved thus may differ materially from expected results included in these
statements.
ITEM 7. FINANCIAL STATEMENTS
The Consolidated Financial Statements of the Company, the accompanying
notes thereto and the independent auditor's report are included as part of this
Form 10-KSB and immediately follow the signature page of this Form 10-KSB.
27
<PAGE> 28
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE. - None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The Board of Directors of the Company (sometimes referred to herein as
the "Board") is divided into three classes. The directors are elected by the
stockholders of the Company for staggered three-year terms, or until their
successors are elected and qualified. The current term of the Class I director
terminates on the date of the Company's 1999 annual meeting of stockholders; the
current term of the Class II directors terminates on the date of the 1997 annual
meeting of stockholders; and the current term of the Class III directors
terminates on the date of the 1998 annual meeting of stockholders. At each
annual meeting of stockholders, successors to the class of directors whose term
expires at that annual meeting are elected for a three-year term. Messrs. Donald
Redfearn and Charles Swinburn currently serve as Class I directors. Messrs. John
Marino, John Sullivan and Robert Toia currently serve as Class II directors, and
Messrs. Gary Marino, Richard Rampell and Douglas Nichols currently serve as
Class III directors.
At the July 1996 meeting of the Company's Board of Directors, the Board
voted to expand the size of the board. Robert Toia and Douglas Nichols were
elected at the Annual Meeting of Shareholders in July 1996 to fill such
vacancies.
The following table sets forth information with respect to the
directors and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Gary O. Marino(1) 52 Chairman of the Board, Chief Executive Officer, President,
Treasurer
John H. Marino(1) 57 Vice Chairman of the Board, Senior Transportation Officer,
Assistant Secretary
Donald D. Redfearn 44 Executive Vice President, Secretary,
Director
W. Graham Claytor, III 46 Senior Vice President - Rail Group
Robert B. Coward 51 Senior Vice President - Manufacturing Group
John M. Sullivan 72 Director
</TABLE>
28
<PAGE> 29
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Charles Swinburn 54 Director
Richard Rampell 44 Director
Douglas Nichols 44 Director
Robert F. Toia 67 Director
- ----------------------
</TABLE>
(1) John H. Marino and Gary O. Marino are brothers.
Pursuant to the terms of the Underwriting Agreement relating to the
Company's November 1992 initial public offering, the Representatives of the
Underwriters of such offering have the right, until September 1997, to have a
designee attend all meetings of the Board of Directors of the Company and to
cause the Company to nominate and use its best efforts to obtain election to the
Board of Directors of a person designated by the Representatives. Mr. Sullivan
was elected to the Board after designation by the Underwriters.
The executive officers of the Company are elected annually and hold
office until their respective successors have been elected and qualified or
until death, resignation or removal by the Board of Directors. Information
concerning the principal occupations and employment of the directors and
executive officers of the Company for, at least, the past five years is set
forth below.
GARY O. MARINO - Mr. Marino has been Chairman, a director and Treasurer
of the Company since its inception in April 1992, Chief Executive Officer since
March 1, 1994 and President since July 1996, and has been Chairman, a director
and Treasurer of HESR since 1986. Mr. Marino joined the Company on a full-time
basis in March 1994. Mr. Marino was also the Chairman of Huron Transportation
Group, Inc. ("HTG") from its inception in 1987 until HTG merged with RailAmerica
Services Corporation in December 1993 (the "HTG Merger"). From 1984 until
October 1993 Mr. Marino was the Chairman, President and Chief Executive Officer
of Boca Raton Capital Corporation ("BRCC"), a publicly-traded venture capital
firm. He received his B.A. from Colgate University in 1966 and an M.B.A. from
Fordham University in 1973. From 1966 to 1969 Mr. Marino served as an officer
with the United States Army Ordnance Corps.
JOHN H. MARINO - Mr. Marino has been Vice Chairman of the Company since
July 1996 and a director of the Company since its inception in April 1992 and
has been President and a director of HESR since 1986. Mr. Marino was President
and Chief Operating Officer from the Company's inception until July 1996. Mr.
Marino was also the President of HTG from its formation in January 1987 until
the HTG Merger in December 1993. Prior to founding HESR in 1985, Mr. Marino
served as President and Chief Executive Officer of several shortline railroads,
as an officer of the Reading Railroad, and with the United States Railway
Association, Washington D.C. Mr. Marino received his B.S. in civil engineering
from Princeton University
29
<PAGE> 30
in 1961 and his M.S. in transportation engineering from Purdue University in
1963. From 1963 to 1965, Mr. Marino served as an officer with the United States
Army Corps of Engineers.
DONALD D. REDFEARN - Mr. Redfearn has been Executive Vice President,
Administration and Secretary of the Company since December 1994. Mr. Redfearn
has been an officer and director since the Company's inception in April 1992 and
HESR since 1986. Mr. Redfearn joined the Company on a full-time basis in January
1996. Mr. Redfearn was president of Jenex Financial Services, Inc., a financial
consulting firm from September 1993 until September 1995. From 1984 until
September 1993 Mr. Redfearn served in various capacities at BRCC where he served
as Senior Vice President, Assistant Secretary and Treasurer. Mr. Redfearn was
also a Vice President of HTG until the HTG merger. He received his B.A. in
Business Administration from the University of Miami in Florida and graduated
from the School of Banking of the South at Louisiana State University, Baton
Rouge, Louisiana.
W. GRAHAM CLAYTOR, III - Mr. Claytor serves as the Company's Senior
Vice President, Rail Group. Mr. Claytor joined the Company in March 1996. Mr.
Claytor was Managing Director of Southern Pacific ("SP")'s Plant Rationalization
function, charged with selling, leasing and abandoning surplus branch and
mainline trackage. Prior to his six-year tenure at Southern Pacific in short
line sales, Mr. Claytor served as Superintendent of the Buffalo & Pittsburgh
Railroad and as Trainmaster for Norfolk Southern Corporation, and supervised
marine terminal operations of the Virginia Maryland Railroad. He received a B.S.
degree from Boston University.
ROBERT B. COWARD - Mr. Coward has served as the Company's Senior Vice
President, Manufacturing Group since July 1996. Mr. Coward served as President
and General Manager of Kalyn from 1981, when he arranged the management buyout
of the company from its prior stockholders, until the acquisition of Kalyn by
RailAmerica. Mr. Coward continued with Kalyn as Vice President and General
Manager after RailAmerica acquired Kalyn in 1994. Mr. Coward started with Kalyn
as Production Manager in 1968. He was promoted to General Manager in 1969, and
has performed all functions related to the Company's government contracting
business. Mr. Coward earned his B.S. degree in Industrial Arts from Tarleton
State University in 1967.
JOHN M. SULLIVAN - Mr. Sullivan was elected a director in January 1993.
From 1977 until 1981 Mr. Sullivan served, upon appointment by President Carter,
as head of the United States Federal Railroad Administration. From 1982 until
1990, Mr. Sullivan was President and Chief Executive Officer of Haug Die
Casting, Inc., where he remains as a director. Mr. Sullivan received his B.S. in
engineering from the United States Naval Academy and served with the United
States Navy as an officer, and ultimately as a carrier aviator, from 1946 until
1954.
CHARLES SWINBURN - Mr. Swinburn joined the Board of Directors of the
Company effective February 1, 1995. Mr. Swinburn is currently a practicing
attorney in the Washington, D.C. office of Morgan, Lewis & Bockius, where he
specializes in environmental law. From April 1990 through August 1993, Mr.
Swinburn served as a consultant to private industry and the government. Prior to
that time, Mr. Swinburn served as Vice President of Rollins Environmental
Services, Inc. Mr. Swinburn served in various capacities at the U.S. Department
of
30
<PAGE> 31
Transportation, most recently as Deputy Assistant Secretary for Policy and
International Affairs. Mr. Swinburn received his B.A. from Princeton University
in 1969, his M.B.A. from Harvard Business School in 1971 and his J.D. from the
University of Pennsylvania in 1993.
RICHARD RAMPELL - Mr. Rampell joined the Board of Directors of the
Company effective, July 27, 1995. Mr. Rampell, a certified public accountant, is
currently the Chief Executive of Rampell and Rampell, P.A., of Palm Beach,
Florida. Mr. Rampell is past president of the Palm Beach Tax Institute and a
past president of the Florida Institute of CPA's, East Coast Chapter. Mr.
Rampell graduated with honors from Princeton University with an AB degree and
received his M.B.A. from the Wharton School at the University of Pennsylvania.
ROBERT TOIA - Mr. Toia was elected a director in July 1996. Mr. Toia
was the former President of the Brandywine Valley Railroad, the Upper Merion &
Plymouth Railroad and the South Central Florida Railroad. Mr. Toia served as a
transportation consultant to the Lukens Steel Company from 1957 until he joined
the company as a Supervisor, Traffic and Transportation. From 1967 to 1992, Mr,
Toia served in various capacities with Lukens Steel Company, including from 1982
to 1992, as the company's Corporate General Manager, Rail Division where he was
responsible for managing Lukens' in-plant railroads. In all, Mr. Toia has over
forty years experience in the transportation industry. Mr. Toia completed
executive management programs at the University of Michigan and Columbia
University. From 1951 to 1953, Mr. Toia served in the Judge Advocate Corps of
the United States Army.
DOUGLAS R. NICHOLS - Mr. Nichols was elected a director in July 1996.
Mr. Nichols is a certified public accountant and the founder, President and
principal stockholder of First London Securities Corporation, a securities
broker-dealer specializing in equity trading and investment banking. From 1989
to 1991, Mr. Nichols was a Vice President with the Dallas, Texas office of Smith
Barney and, from 1986 to 1989, was a broker with the Dallas branch of Shearson
Lehman Brothers. Mr. Nichols is a member of the National Railway Historical
Society. Mr. Nichols received his B.A. from Allegheny College, Meadville
Pennsylvania in 1974.
COMPLIANCE WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who own more than ten
percent (10%) of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership in common stock of the Company
with the Securities and Exchange Commission ("SEC"). Officers, directors and
greater than 10% shareholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
the Company believes that, during the year ended December 31, 1996 and with
respect thereto, all filing requirements applicable to its officers, directors
and greater than 10% beneficial owners were complied with except a Form 3,
covering one transaction, was filed late by Douglas Nichols, a Form 4, covering
one transaction, was filed late by W. Graham Clayton, III and a Form 3 and
31
<PAGE> 32
Form 4, covering two separate transactions, were filed late by Robert Toia.
ITEM 10. EXECUTIVE COMPENSATION
BOARD OF DIRECTORS COMPENSATION
During 1995, each director of the Company who was not an employee of
the Company received a retainer of $1,000 per month and was paid $500 per Board
meeting attended and $400 for each additional day spent on Company business. All
directors are reimbursed for reasonable out-of-pocket expenses associated with
travel to Board meetings and other Company business.
Effective March 1, 1996, the compensation for directors that are not
employees of the Company changed to a retainer of $2,000 per month, and will be
paid $500 for each Board meeting attended and $400 for each committee meeting
attended ($600 for the Chairman).
1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN. The Board of Directors of
the Company has adopted, effective January 1, 1995, the 1995 Non-Employee
Director Stock Option Plan (the "Directors Plan"), under which 250,000 shares of
common stock have been reserved for issuance. Pursuant to the Directors Plan,
directors of the Company who are not also employees of the Company
("Non-Employee Directors") are granted options to purchase Common Stock. The
Directors Plan is administered by the Compensation Committee, the members of
which are also participants therein. Subject to the provisions of the Directors
Plan, the Compensation Committee has sole discretionary authority to construe,
interpret and apply the terms of the Directors Plan, to determine all questions
thereunder, and to adopt and amend rules and regulations for the administration
thereof as it may deem desirable.
Under the terms of the Directors Plan, each Non-Employee Director will
be granted an option to purchase 50,000 shares of common stock on the date such
person is first elected to become a director of the Company. The term of the
Directors Plan is ten years from the effective date, after which no further
options will be granted thereunder. Options granted under the Directors Plan
expire ten years from the date of grant. The exercise price per share of each
option granted under the Directors Plan will be the fair market value of the
Common Stock on the date prior to the date the option is granted. Options
granted under the Directors Plan vest over a period of three years at the rate
of one-third annually on each anniversary date of the grant, provided the
Non-Employee Director to whom the options are granted continues to serve as a
director on each such vesting date.
As of the date hereof, options to purchase 10,000 shares of the
Company's Common Stock have been granted to Donald D. Redfearn under the
Directors Plan, at an exercise price of $3.50 per share, options to purchase
50,000 shares of the Company's Common Stock have been granted to Charles
Swinburn under the Directors Plan at an exercise price of $4.19 per share,
options to purchase 50,000 shares of the Company's Common Stock have been
granted to Richard Rampell under the Directors Plan at an exercise price of
$4.81 per share and options to purchase 50,000 shares of the Company's Common
Stock each have been granted to Robert Toia and Douglas
32
<PAGE> 33
Nichols at an exercise price of $3.50 per share.
EXECUTIVE COMPENSATION
The Company entered into employment agreements with each of Messrs.
Gary O. Marino and John H. Marino effective as of March 1, 1994. Under Gary
Marino's employment arrangement, which provided that he serve as Chief Executive
Officer of the Company, he received a base salary of $150,000 from March 1, 1994
through August 31, 1994, $175,000 from September 1, 1994 through December 31,
1994 and $200,000 per year as of January 1, 1995. Mr. Marino's base salary is
subject to increase in accordance with the Consumer Price Index, as well as any
additional increases in the discretion of the Board of Directors. Commencing
January 1, 1996 and January 1, 1997, Gary Marino's base salary was increased to
$210,000 and $250,000, respectively. Mr. Marino is also entitled to a $642
monthly car allowance, subject to annual increase in accordance with the
Consumer Price Index. Under the arrangement, Gary Marino is entitled to such
benefits (including medical, dental, disability and life insurance) as the
Company typically provided to its senior executive officers. The arrangement
also provides that Mr. Marino receive an annual cash payment in lieu of
participating in a retirement benefits plan.
In addition, Gary Marino's employment arrangement provides that he be
issued an aggregate of 50,000 shares of the Company's Common Stock upon the
execution of a formal employment agreement. All of these shares were issued to
Mr. Marino in July 1995 upon his execution of a written employment agreement.
Pursuant to Mr. Marino's employment agreement, Mr. Marino was also granted
non-qualified options to purchase an aggregate of 350,000 shares of Common Stock
of the Company at varying exercise prices and exercise dates. Options for 87,500
shares of Common Stock at an exercise price of $3.10 and 87,500 shares of Common
Stock at an exercise price of $3.40 were immediately exercisable by Mr. Marino
upon execution of his written employment agreement. Additional options for
87,500 shares of Common Stock became exercisable under the agreement on March 1,
1996 at an exercise price of $3.75 and options for 87,500 shares of Common Stock
became exercisable under the agreement on March 1, 1997 at an exercise price
equal of $4.15 per share. All such options have ten year terms from the date
they become exercisable. The agreement has an initial term expiring on March 1,
1998, and is subject to automatic one year renewal terms, unless either party
notifies the other of non-renewal 180 days prior to the expiration of the
current term. In the event Mr. Marino's employment is terminated without cause
pursuant to a change in control of the Company, Mr. Marino is entitled to
receive as of the date of termination a lump sum equal to 150% of his total
compensation in the 12 months prior to the date of termination. The agreement
contains certain non-competition provisions applicable to Mr. Marino should he
resign from the Company or be terminated with cause.
John Marino's employment agreement provided for him to serve as
President of the Company and its transportation and distribution subsidiaries.
Under this agreement, Mr. Marino received a base salary of $120,000 per year for
March 1, 1994 through August 31, 1994, $135,000 from September 1, 1994 through
December 31, 1994 and $150,000 per year commencing January 1, 1995. Mr. Marino's
base salary is subject to increase in accordance with
33
<PAGE> 34
the Consumer Price Index, as well as any additional increases in the discretion
of the Board of Directors. Commencing January 1, 1996 and January 1, 1997, John
Marino's base salary was increased to $154,200 and $158,828, respectively. Mr.
Marino is also entitled to a $642 per month car allowance, subject to annual
increase in accordance with the Consumer Price Index. Under the agreement, John
Marino is entitled to such benefits (including medical, dental, disability and
life insurance) as the Company typically provide for its senior executive
officers. The agreement also provides that Mr. Marino receive annual cash
payments in lieu of participating in a retirement benefits plan. The agreement
has an initial term ending March 1, 1998, and is subject to automatic one year
renewal terms, unless either party notifies the other of non-renewal 180 days
prior to the expiration of the current term. In the event that Mr. Marino's
employment is terminated without cause pursuant to a change in control of the
Company, he is entitled to receive as of the date of termination a lump sum
equal to 150% of his total compensation in the 12 months prior to the date of
termination. The agreement contains certain non-competition provisions
applicable to Mr. Marino should he resign from the Company or be terminated with
cause.
The following table sets forth compensation awarded to the Chief
Executive Officer of the Company and other executive officers (the "Executive
Officers") who, for the fiscal year ended December 31, 1996, received total
salary and bonus payments in excess of $100,000. Except as set forth below, no
executive officer of the Company had a salary and bonus during the year ended
December 31, 1996 that exceeded $100,000 for services rendered in all capacities
to the Company.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Other
Name & Annual Long-Term Compensation
Principal Position Year Salary Bonus Compensation Award Payments
- ------------------ ---- ------ ----- ------------ -------------- --------
<S> <C> <C> <C> <C> <C> <C>
Gary O. Marino
Chairman 1996 $230,000(1) - $30,567(2) N/A N/A
(Chief Executive Officer)
1995 $200,000 $124,034(4) N/A N/A N/A
1994 $169,379 $140,000 N/A N/A N/A
John H. Marino
(Vice Chairman) 1996 $154,200 - $31,561(3) N/A N/A
1995 $150,000 $37,650(5) 15,000 N/A N/A
1994 $137,584 $ 30,000 N/A N/A N/A
Donald D. Redfearn
(Executive Vice President) 1996 $113,750 - N/A N/A N/A
1995 N/A N/A N/A N/A N/A
1994 N/A N/A N/A N/A N/A
</TABLE>
- ----------
34
<PAGE> 35
(1) Includes $20,000 payment in lieu of his participation in a retirement
benefits plan.
(2) Includes payment of medical, dental, disability and life insurance benefits
of $20,857, car allowance of $7,710 and group 401(k) plan contributions of
$1,000.
(3) Includes payment of medical, dental, disability and life insurance benefits
of $7,431, car allowance of $7,710 and group 401(k) plan contributions of
$1,000, as well as $15,420 pursuant to a deferred compensation plan.
(4) Includes a bonus of 50,000 shares of the Company's Common Stock granted
pursuant to Mr. Marino's employment agreement, which bonus was valued at $93,750
as of the date of execution of the agreement in July 1995. Also includes a bonus
of $30,284 which was paid to Mr. Marino in 1996 based upon the performance of
the Company for the year ended December 31, 1995.
(5) Represents a bonus paid to Mr. John Marino in 1996 based upon the
performance of the Company and its transportation subsidiaries for the year
ended December 31, 1995.
NONQUALIFIED DEFERRED COMPENSATION TRUST
Effective January 3, 1997, the Company adopted certain nonqualified
deferred compensation plans and established a trust to which the Company will
make contributions under the Plans (the "Trust"). In connection with the
foregoing, the Company executed Nonqualified Deferred Compensation Agreements
(the "Deferred Compensation Agreements") with Gary O. Marino, the Company's
Chairman of the Board, President and Chief Executive Officer, and John Marino,
the Company's Vice Chairman of the Board, pursuant to which such individuals may
defer a percentage of their respective compensation and contribute such amount
to their retirement pay. Any amount of compensation or bonus deferred by the
employee shall be transferred to the Trust and thereafter be invested and
reinvested by trustee and paid to the employee in accordance with the Trust and
the Deferred Compensation Agreement. In addition to each employee's requested
deferral, the Company shall transfer to the Trust for the employee's benefit
each calendar year at least $20,000, which amounts shall be invested and
reinvested by the trustee in accordance with the Trust and the Deferral
Compensation Agreements. In January 1997, the Company contributed an aggregate
of $21,000 to the Trust on behalf of Gary O. Marino which represented amounts
deferred by Mr. Marino under his employment agreement for 1995 and 1996. In
addition, in January 1997, the Company contributed an aggregate of $30,420 to
the Trust on behalf of John H. Marino, which represented amounts deferred by Mr.
Marino under his employment agreement for 1995 and 1996.
Information regarding certain options granted to Executive Officers of
the Company, is set forth below:
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
NUMBER OF PERCENT OF
SECURITIES TOTAL
UNDERLYING OPTIONS/SARS
OPTIONS/SARS TO EMPLOYEES EXERCISE ($/SH) EXPIRATION
NAME YEAR GRANTED IN FISCAL YEAR PRICE DATE
- ---- ---- ------- -------------- ----- ----
<S> <C> <C> <C> <C> <C>
Gary O. Marino 1996 10,000 3% $3.625 Jan 1, 2006
John H. Marino 1996 50,000 17% $3.625 Jan 1, 2006
Donald D. Redfearn 1996 50,000 17% $5.00 Nov 1, 2006
</TABLE>
1992 STOCK OPTION PLAN
The Company maintains a 1992 Stock Option Plan which provides officers,
employees and consultants of the Company that are not directors of the Company
or 5% stockholders (directly or indirectly) of the Company, with the ability to
receive grants of incentive stock options (as defined in Section 422(b) of the
Internal Revenue Code of 1986, as amended), and provides such individuals and
non-employee directors that are not 5% stockholders with the ability to receive
non-qualified stock options. The 1992 Stock Option Plan was approved by the
Company's stockholders as of July 1, 1992, and became effective as of such date.
The Company has reserved 250,000 shares of Common Stock for the grant of options
under the 1992 Stock Option Plan, all of which have been granted and are
currently outstanding at an exercise price of $3.50 per share.
35
<PAGE> 36
BONUS PLAN
In May 1995, the Board of Directors adopted the Corporate Senior
Executive Bonus Plan (the "Bonus Plan") pursuant to which participants in the
Bonus Plan shall receive cash bonuses based upon the annual performance of the
Company and the its subsidiaries, commencing with the 1995 fiscal year. Bonuses
will be paid to designated individuals based on Company's performance on a
consolidated basis, the Company's subsidiaries performance or a combination of
both.
Participants in the Bonus Plan which are subsidiary-specific shall
receive cash bonuses based upon objective, auditable and performance-related
criteria relating to the Company's subsidiaries. No subsidiary-specific
participant will be paid a bonus greater than 50% of the salary earned by that
participant for the full year. Subsidiary-specific participants will be
designated by the Chief Executive Officer subject to ratification by the
Compensation Committee. Bonuses paid to participants for consolidated Company
performance will be paid from a bonus pool equal to 12% of any pre-tax
consolidated income in excess of that amount required to achieve a 12% return on
average shareholders' equity. The initial participants in the Bonus Plan to
receive awards based on consolidated Company performance were Messrs. Gary
Marino, John Marino, Jack Conser, Robert Coward, Larry Bush and Robert
Huddleston. Mr. Donald Redfearn and Mr. Rick Jany have been subsequently added
to the consolidated bonus plan. No participant will be paid a bonus based on
consolidated Company performance greater than the salary earned by that
participant for the full year.
1995 STOCK PLANS
The following plans were approved by the Company's stockholders at the
Company's 1995 Annual Meeting, in July 1995:
1995 STOCK INCENTIVE PLAN. The Board of Directors of the Company has
adopted, effective January 1, 1995, a 1995 Stock Incentive Plan (the "Stock
Incentive Plan"). Pursuant to the Stock Incentive Plan, key personnel of the
Company who have been selected as participants are eligible to receive awards of
various forms of equity-based incentive compensation, including stock options,
stock appreciation rights, stock bonuses, restricted stock awards, performance
units and phantom stock, and awards consisting of combinations of such
incentives. The Stock Incentive Plan is administered by the Compensation
Committee. Subject to the provisions of the Stock Incentive Plan, the
Compensation Committee has sole discretionary authority to interpret the Stock
Incentive Plan and to determine the type of awards to grant, when, if and to
whom awards are granted, the number of shares covered by each award and the
terms and conditions of the award. Options granted under the Stock Incentive
Plan may be "incentive stock options" ("ISOs"), within the meaning of Section
422 of the Code, or nonqualified stock options ("NQSOs"). The exercise price of
the options is determined by the Compensation Committee at the time the options
are granted, subject to a minimum price in the case of ISOs equal to the fair
market value of the Common Stock on the date of grant and a minimum price in the
case of NQSOs of the par value of the Common Stock.
36
<PAGE> 37
The Company has reserved 250,000 shares of Common Stock for issuance
under the Stock Incentive Plan. Options to purchase 141,000 and 105,000 shares
of the Company's Common Stock were granted January 1, 1995 and January 1, 1996,
respective under the Stock Incentive Plan. The January 1, 1995 and 1996 options
have exercise prices of $3.50 and $3.625 per share, respectively. Options to
purchase 27,500 shares of Common Stock have been exercised and options to
purchase 9,500 shares of Common Stock have expired due to certain employees
leaving the Company as of March 1, 1997.
1995 EMPLOYEE STOCK PURCHASE PLAN. The Board of Directors of the
Company has adopted, effective January 1, 1995, the 1995 Employee Stock Purchase
Plan (the "Stock Purchase Plan"), under which 250,000 shares of Common Stock are
reserved for issuance. During the first quarter of 1996, the Company implemented
the Stock Purchase Plan. The Stock Purchase Plan, which is designed to qualify
under Section 423 of the Code, is designed to encourage stock ownership by
employees of the Company. Employees of the Company other than members of the
Board of Directors and owners of 5% or more of the Company's Common Stock are
eligible to participate in the Stock Purchase Plan, with certain exceptions, if
they are employed by the Company for at least 20 hours per week and more than
five months per year. No employee is eligible to participate who, after the
grant of options under the Stock Purchase Plan, owns (including all shares which
may be purchased under any outstanding options) 5% or more of the Company's
Common Stock.
On January 1 of each year ("Enrollment Date"), the Company will grant
to each participant an option to purchase on December 31 of each such year
("Exercise Date") at a price determined as described below (the "Purchase
Price") the number of shares of Common Stock which his or her accumulated
payroll deductions on the Exercise Date will purchase at the Purchase Price. The
Purchase Price will be the lesser of (i) a percentage (not less than 85%) of the
fair market value of the Common Stock on the Enrollment Date, or (ii) a
percentage (not less than 85%) of the fair market value of the Common Stock on
the Exercise Date. As soon as practicable after any Exercise Date on which a
purchase of shares occurs, the Company will deliver to each participant, a
certificate representing the shares purchased, upon exercise of his or her
option; however, the Compensation Committee may determine to hold a
participant's certificates until the participant ceases participation in the
Stock Purchase Plan or requests delivery of the certificates.
Common Stock of the Company was issued to employees in January 1997
pursuant to the Stock Purchase Plan in an aggregate amount of 17,908 shares.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares and percentage
owned of the Company's Common Stock beneficially owned as of March 15, 1997 by
(i) owners of more than five percent of the Common Stock, (ii) each director of
the Company, (iii) the President and the Chairman of the Company and each other
executive officer of the Company, and (iv) all executive officers and directors
of the Company as a group.
37
<PAGE> 38
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF
PRINCIPAL STOCKHOLDERS OTHER SHARES OF COMMON PERCENTAGE
THAN EXECUTIVE OFFICERS OR DIRECTORS STOCK OWNED OWNED (1)
- ------------------------------------ ---------------- ------------
<S> <C> <C>
Luther King Capital Management Corporation
301 Commerce, Suite 1600
Fort Worth, TX 76102 1,040,000 13.07%
NAME AND ADDRESS OF
EXECUTIVE OFFICER OR DIRECTOR
- -----------------------------
Gary O. Marino
301 Yamato Road, Suite 1190
Boca Raton, FL 33431 474,500(4) 5.68%
John H. Marino
RailAmerica, Inc.
King Street Station
Suite 150, 1800 Diagonal Road
Alexandria, VA 22314 412,500(2) 5.15%
Donald D. Redfearn
301 Yamato Road, Suite 1190
Boca Raton, FL 33431 122,301(5) 1.52%
John M. Sullivan
10279 SW Stones Throw Terrace
Palm City, FL 34990 51,100(3) 0.64%
Charles Swinburn
1713 Maple Hill Place
Alexandria, VA 22302 51,000(6) 0.64%
Richard Rampell
122 North County Road
Palm Beach, FL 33480 51,000(7) 0.64%
Douglas Nichols 343,000(8) 4.13%
260 State Street
Dallas, TX 75201
Robert Toia 51,000(9) 0.64%
574 Broadmoor Court
Sanford, NC 27330
</TABLE>
38
<PAGE> 39
<TABLE>
<CAPTION>
<S> <C> <C>
W. Graham Claytor, III
Pier 33 North
San Francisco, CA 94133 11,000(10) 0.14%
Robert Coward
U.S Highway 84 West
Gatesville, TX 76528 101,479(11) 1.26%
All Executive Officers and Directors 1,668,880 18.23%
</TABLE>
(1) Based on 8,428,229 shares of Common Stock issued and outstanding on the
date of the filing hereof.
(2) Includes options to purchase 50,000 shares of Common Stock at $3.625
per share, pursuant to options granted January 1, 1996 under the
Company's 1995 Stock Incentive Plan.
(3) Includes options to purchase 50,000 shares of Common Stock at $3.50 per
share, pursuant to options granted in 1993 under the Company's 1992
Stock Option Plan.
(4) Includes options to purchase 40,000 shares of Common Stock at $3.50 per
share granted in 1993 under the Company's 1992 Stock Option Plan and
10,000 shares of Common Stock at $3.625 per share granted January 1,
1996 under the 1995 Stock Incentive Plan. Also includes, options to
purchase 87,500 shares of Common Stock at $3.10 per share, 87,500
shares of Common Stock at $3.40 per share, 87,500 shares of Common
Stock at $3.75 per share and 87,500 shares of Common Stock at $4.15
per share issued pursuant to Mr. Marino's employment agreement.
(5) Includes options to purchase 40,000 shares of Common Stock at $3.50 per
share granted to Mr. Redfearn in 1993 under the Company's 1992 Stock
Option Plan, options to purchase 10,000 shares of Common Stock at $3.50
per share granted to Mr. Redfearn under the Company's 1995 Non-Employee
Directors Stock Option Plan and options to purchase 50,000 shares of
Common Stock at $5.00 granted November 1, 1996.
(6) Includes options to purchase 50,000 shares of Common Stock at $4.19 per
share granted to Mr. Swinburn as of February 1, 1995, under the
Company's 1995 Non-Employee Director Stock Option Plan.
(7) Includes options to purchase 50,000 shares of Common Stock at $4.81 per
share granted to Mr. Rampell as of July 27, 1995, under the Company's
1995 Non-Employee Director Stock Option Plan.
(8) Includes options to purchase 50,000 shares of Common Stock at $3.50 per
share granted to Mr. Nichols as of July 24, 1996, under the Company's
1995 Non-Employee Director Stock Option Plan. Also includes, warrants
to purchase 125,000 shares of Common Stock at $4.60 per share and
warrants to purchase 167,000 shares of Common Stock at $5.75 per share
owned by First London Securities Corporation. Mr. Nichols is President
and principal shareholder of First London Securities Corporation.
(9) Includes options to purchase 50,000 shares of Common Stock at $3.50 per
share granted to Mr. Toia as of July 24, 1996, under the Company's
1995 Non-Employee Director Stock Option Plan.
39
<PAGE> 40
(10) Includes options to purchase 10,000 shares of Common Stock at $3.65
granted to Mr. Clayton as of March 15, 1996.
(11) Includes a $225,000 convertible subordinated note, which is currently
convertible into Common Stock at $2.25 per share (100,000 shares of
common stock).
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Donald Redfearn and Jenex Financial Corporation, a company in which he
was a principal shareholder, received $72,000 in fees during 1995 for consulting
services performed for the benefit of the Company and its subsidiaries.
First London Securities Corporation ("First London"), of which Douglas
Nichols is President and principal shareholder, served as the exclusive
placement agent for the Company's private placements which closed in September
1996 and in January 1997. First London received as part of the September 1996
private placement a $225,000 placement fee, $45,000 nonaccountable expense fee
and warrants exercisable in one-year to purchase 125,000 shares of Common Stock
at an exercise price of $4.60 per share. First London received as part of the
January 1997 private placement a $375,750 placement fee, $75,150 nonaccountable
expense fee and warrants exercisable in one-year to purchase 167,000 shares of
Common Stock at an exercise price of $5.75 per share.
The Company believes that all of the transactions described above are
on terms comparable to those that might have been obtained from unaffiliated
parties.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed herewith except as noted (each
management contract or compensatory plan or arrangement included below
is designated as an "Executive Compensation Plan or Arrangement"):
<TABLE>
<CAPTION>
<S> <C>
3.1 Amended and Restated Articles of Incorporation of Registrant, as amended(10)
3.2 By-laws of Registrant(1)
4.2 Class B Warrant(2)
4.3 Unit Purchase Warrant(2)
4.4 Series A Convertible Subordinated Debentures(8)
10.14 RailAmerica, Inc. 1992 Stock Option Plan(1)+
10.23 Loan Agreement among RailAmerica, Inc., South Central Tennessee Railroad
Corporation, South Central Tennessee Railroad Company, Inc. and Charter
Financial, Inc., dated as of December 31, 1993.(5)
10.24 Lease Agreement between South Central Tennessee Railroad Authority and South
Central Tennessee Railroad Company, Inc. dated October 16, 1984.(3)
10.32 Stock Purchase Agreement between Steel City Truck Lines Limited, Josef Bichler
and RailAmerica, Inc. dated December 19, 1994.(11)
10.33 Stock Purchase Agreement between 823215 Ontario, Inc. and RailAmerica, Inc.
</TABLE>
40
<PAGE> 41
<TABLE>
<CAPTION>
<S> <C>
dated February 6, 1995.(11)
10.35 Employment Agreement between Robert B. Coward and Kalyn Siebert,
Incorporated.(6)
10.36 Loan documents in connection with RailAmerica's acquisition of the assets of
Steel City Truck Lines Limited(7)
10.37 Stock Purchase Agreement, dated July 11, 1995, among RailAmerica, Inc., Brian
E. Muir, Elli M.A. Mills and Kimberly Hughes, Prairie Holding Corporation and
Dakota Rail, Inc.(8)
10.38 Settlement Agreement, entered into March 15, 1995, by Eric D. Gerst and
RailAmerica, Inc., RailAmerica Services Corporation and Huron & Eastern
Railway Company, Inc.(8)
10.39 Loan Agreement, dated September 29, 1995, by and between
RailAmerica, Inc., Kalyn/Siebert Incorporated, RailAmerica
Intermodal Services, Inc., RailAmerica Carriers, Inc., Steel
City Carriers, Inc., Saginaw Valley Railway Company, Inc.,
Huron & Eastern Railway Company, Inc. and National Bank of
Canada(10)
10.40 Asset Purchase Agreement, dated October 11, 1995, by and among Seagraves,
Whiteface & Lubbock Railroad Co., American Railway Corporation, TEMCO
Corporation and RailAmerica, Inc.(9)
10.41 Employment Agreement between Gary O. Marino and RailAmerica, Inc.(10)+
10.42 Employment Agreement between John H. Marino and RailAmerica, Inc.(10)+
10.43 Stock Option Agreement, dated November 11, 1994, between RailAmerica, Inc.
and Gary O. Marino(10)+
10.44 RailAmerica, Inc. 1995 Stock Incentive Plan(10)+
10.45 RailAmerica, Inc. 1995 Non-Employee Director Stock Option Plan(10)
10.46 RailAmerica, Inc. 1995 Employee Stock Purchase Plan(10)
10.47 RailAmerica, Inc. Corporate Senior Executive Bonus Plan(10)+
10.49 Purchase and Sale Agreement dated November 30, 1995, by and between CSX
Transportation, Inc. and Saginaw Valley Railway Company, Inc.(11)
10.50 Stock Repurchase Agreement dated October 1, 1995 by and between
RailAmerica, Inc. and the holders of all the issued and outstanding shares of the
Company's Preferred Stock.(11)
10.51 Asset Purchase Agreement dated January 26, 1996 by and between
Temco Corporation and RailAmerica Equipment Corporation(11)
10.52 Agreement of Sale dated July 18, 1996 by and between the
Commonwealth's Department of Transportation and Delaware
Valley Railway Company, Inc., a wholly-owned subsidiary of
RailAmerica, Inc.(12)
10.53 Agreement entered into by and between R. Frank Unger, Trustee of Sagamore
National Corporation, Indiana HiRail Corporation and RailAmerica, Inc.(12)
10.54 Asset Purchase Agreement, dated August 5, 1996, by and among
Burlington Northern Railroad Company and Cascade and Columbia
river Railroad Company, a subsidiary of RailAmerica, Inc.(13)
10.55 Confidential Private Placement Memorandum dated September 20, 1996(14)
10.56 Stock Purchase Agreement, dated as of September 20, 1996, by and among Otter
Tail Valley Railroad Company, Inc. and Dakota Rail, Inc.(15)
10.57 Commitment letter relating to $40,000,000 Revolving Line of Credit/Term Loan
</TABLE>
41
<PAGE> 42
<TABLE>
<CAPTION>
<S> <C>
Facility, dated March 3, 1997, by and between National Bank of
Canada, Comerica Bank, RailAmerica, Inc., Kalyn/Siebert,
Incorporated, RailAmerica Intermodal Services, Inc.,
RailAmerica Carriers, Inc., Steel City Carriers, Inc., Saginaw
Valley Railway Company, Inc., Huron and Eastern Railway
Company, Inc., West Texas and Lubbock Railroad Company, Inc.,
Plainview Terminal Company, Cascade and Columbia River
Railroad Company, Inc., Minnesota Northern Railroad Company,
Inc. and Delaware Valley Railway Company, Inc.(16)
10.58 Agreement for sale of certain assets, rights and obligations
of Burlington Northern Railroad Company to Minnesota Northern
Railroad, Inc.(16)
10.59 RailAmerica, Inc. Nonqualified Deferred Compensation Trust(16)+
10.60 Nonqualified Deferred Compensation Agreement between RailAmerica, Inc. and
Gary O. Marino
10.61 Nonqualified Deferred Compensation Agreement between RailAmerica, Inc. and
John H. Marino
11 Computation of Per Share Earnings
21 Subsidiaries of Registrant
27 Financial Data Schedule (for SEC use only)(16).
</TABLE>
(1) Incorporated by reference to the same exhibit number filed as part of
the Registrant's Registration Statement on Form S-1, Registration No.
33-49026.
(2) Incorporated by reference to the same exhibit number filed as part of
the Registrant's Post-Effective Amendment No. 3 on Form SB-2, dated
November 25, 1994, Registration No. 33-49026.
(3) Incorporated by reference to the same exhibit number filed as part of
the Company's annual report on Form 10-KSB, filed with the Securities
and Exchange Commission on March 31, 1993.
(4) Incorporated by reference to the same exhibit number filed as part of
the Registrant's Post-Effective Amendment No. 4 on Form SB-2, dated
December 14, 1994, Registration No. 33-49026.
(5) Incorporated by reference to the same exhibit number filed as part of
the Company's Form 10-KSB for the year ended December 31, 1993, filed
with the Securities and Exchange Commission on April 15, 1994.
(6) Incorporated by reference to the same exhibit number filed as a part of
the Registrant's Post-Effective Amendment No. 2 on Form SB-2, dated
October 17, 1994, Registration No. 33-49026.
(7) Incorporated by reference to the same exhibit number filed as part of
the Company's Form 10-KSB for the year ended December 31, 1994, filed
with the Securities and Exchange Commission on March 30, 1995.
(8) Incorporated by reference to the same exhibit number filed as part of
the Company's Form 10-QSB for the quarter ended June 30, 1995, filed
with the Securities and Exchange Commission on August 9, 1995.
42
<PAGE> 43
(9) Incorporated by reference to the exhibit number 2.1 filed as part of
the Company's Form 8-K as of November 1, 1995, filed with the
Securities and Exchange Commission on November 3, 1995.
(10) Incorporated by reference to the same exhibit number filed as part of
the Company's Form 10-QSB for the quarter ended September 30, 1995,
filed with the Securities and Exchange Commission on November 12, 1995.
(11) Incorporated by reference to the same exhibit number filed as part of
the Company's Form 10-KSB for the year ended December 31, 1995, filed
with the Securities and Exchange Commission on April 12, 1996.
(12) Incorporated by reference to the same exhibit number filed as part of
the Company's Form 10-QSB for the quarter ended July 30, 1996, filed
with the Securities and Exchange Commission on August 12, 1996
(13) Incorporated by reference to the exhibit 2.1 filed as part of the
Company's Form 8-K as of September 6, 1996, filed with the Securities
and Exchange Commission on September 12, 1996.
(14) Incorporated by reference to the exhibit A filed as part of the
Company's Form 8-K as of September 30, 1996, filed with the Securities
and Exchange Commission on October 17, 1996.
(15) Incorporated by reference to the exhibit 2.1 filed as part of the
Company's Form 8-K as of October 11, 1996, filed with the Securities
and Exchange Commission on October 25, 1996.
(16) Incorporated by reference to the same exhibit number filed as part of
the Company's Form 10-KSB for the year ended December 31, 1996, filed
with the Securities and Exchange Commission on March 31, 1997.
+ Executive Compensation Plan or Arrangement.
(b) Reports on Form 8-K.
The Company filed the following reports on Form 8-K during the last
quarter of fiscal year 1996:
1. A Form 8-K dated September 30, 1996, was filed on October 17,
1996, as a result of completing a Private Placement of
1,250,000 shares of the Company's common stock.
2. A Form 8-K dated October 11, 1996, was filed on October 25,
1996, as a result of completing the purchase of all of the
outstanding stock of Otter Tail Valley Railroad, Inc. for
$4.25 million.
3. A Form 8-K/A amending Form 8-K, dated October 11, 1996, was
filed on December 11, 1996, to disclose both the financial
statements of the Otter Tail Valley Railroad, Inc., which was
acquired by the Company, and the Company's financial
statements following the acquisition. The following is a list
of financial statements that were filed:
(a) Financial Statements of Otter Tail Valley Railroad
43
<PAGE> 44
Independent Auditor's Report on 1995 and 1994 Financial
Statements
Balance Sheets as of December 31, 1995 and 1994
Statements of Stockholders' Equity for the years ended
December 31, 1995 and 1994
Statements of Income for the years ended December 31, 1995 and
1994
Notes to the 1995 and 1994 financial statements
Unaudited Balance Sheet as of September 30, 1996
Unaudited Statement of Income for the nine and three months
ended September 30, 1996
Unaudited Statement of Cash Flows for the nine months ended
September 30, 1996
(b) Pro Forma Financial Statements
Pro Forma Consolidated Balance Sheet as of September 30, 1996
Pro Forma Consolidated Statement of Income for the nine months
ended September 30, 1996
Pro Forma Consolidated Statement of Income for the year ended
December 31, 1995
Notes to Pro Forma Consolidated Financial Statements
44
<PAGE> 45
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange act
of 1934, the Company has duly caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
RAILAMERICA, INC.
By: /s/ Gary O Marino
---------------------------------------
Gary O. Marino, Chief Executive Officer
By: /s/ Larry W. Bush
---------------------------------------
Larry W. Bush, Controller
(Principal Accounting Officer)
Dated: May 7, 1997
In accordance with the Securities Exchange Act of 1934, this Report has
been signed below by the following persons on behalf of the Company in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ Gary O. Marino Chairman, President, Chief Executive May 7, 1997
- ----------------------------- Officer and Director (Principal Financial Officer)
Gary O. Marino
/s/ John H. Marino Vice Chairman/Sr. Transportation Officer May 7, 1997
- ----------------------------- and Director
John H. Marino
/s/ Donald D. Redfearn Executive Vice President, Secretary May 7, 1997
- ----------------------------- and Director
Donald D. Redfearn
/s/ Larry W. Bush Controller May 7, 1997
- -----------------------------
Larry W. Bush
/s/ Douglas R. Nichols Director May 7, 1997
- -----------------------------
Douglas R. Nichols
/s/ Richard Rampell Director May 7, 1997
- -----------------------------
Richard Rampell
/s/ Charles Swinburn Director May 7, 1997
- -----------------------------
Charles Swinburn
/s/ John M. Sullivan Director May 7, 1997
- -----------------------------
John M. Sullivan
/s/ Robert F. Toia Director May 7, 1997
- -----------------------------
Robert F. Toia
</TABLE>
45
<PAGE> 1
Exhibit 10.59
RAILAMERICA, INC. NONQUALIFIED DEFERRED COMPENSATION TRUST
This RailAmerica, Inc. Nonqualified Deferred Compensation Trust
Agreement is made this 3rd day of January, 1997 by and between RailAmerica,
Inc. (the "Company") and Donald D. Redfearn (the "Trustee");
WHEREAS, the Company has adopted the nonqualified deferred
compensation Plans as listed in Appendix One hereto and may adopt additional
nonqualified deferred compensation Plans for the benefit of eligible employees
(the "Plan");
WHEREAS, the Company has incurred or expects to incur liability under
the terms of such Plans with respect to the individuals participating in such
Plans;
WHEREAS, the Company wishes to establish a trust (hereinafter called
"Trust") and to contribute to the Trust assets that shall be held therein,
subject to the claims of the Company's creditors in the event of the Company's
Insolvency, as herein defined, until paid to Plan participants and their
beneficiaries in such manner and at such times as specified in the Plans;
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plans
as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974;
WHEREAS, it is the intention of the Company to make contributions to
the Trust to provide itself with a source of funds to assist it in the meeting
of its liabilities under the Plans;
NOW, THEREFORE, the parties do hereby establish the Trust and agree
that the Trust shall be comprised, held and disposed of as follows:
1. ESTABLISHMENT OF TRUST.
(a) The Company hereby deposits with the Trustee in trust the
amount shown on Appendix Two hereto, which shall become the
principal of the Trust to be held, administered and disposed
of by the Trustee as provided in this Trust Agreement.
(b) The Trust hereby established is irrevocable.
(c) The Trust is intended to be a grantor trust, of which the
Company is the grantor, within the meaning of subpart E, part
I, subchapter J, chapter 1, subtitle A of the Internal Revenue
Code of 1986, as amended, and shall be construed accordingly.
(d) The principal of the Trust, and any earnings thereon shall be
held separate and apart from other funds of the Company and
shall be used exclusively for the uses and purposes of Plan
participants and general creditors as herein set forth.
Plan participants and their beneficiaries shall have no
preferred claim on, or any beneficial ownership interest in,
any assets of the Trust. Any rights created under the Plans
and this Trust Agreement shall be mere unsecured contractual
rights of Plan participants and their beneficiaries against the
Company. Any assets held by the Trust will be subject to the
claims of the Company's general creditors under federal and
state law in the event of Insolvency, as defined in Section
3(a) herein.
<PAGE> 2
(e) The Company, in its sole discretion, may at any time, or from
time to time, make additional deposits of cash or other
property in trust with the Trustee to augment the principal to
be held, administered and disposed of by the Trustee as
provided in this Trust Agreement. Neither the Trustee nor any
Plan participant or beneficiary shall have any right to compel
such additional deposits.
2. PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES.
(a) The Company shall deliver to the Trustee a schedule (the
"Payment Schedule") that indicates the amounts payable in
respect of each Plan participant (and his or her
beneficiaries), that provides a formula or other instructions
acceptable to the Trustee for determining the amounts so
payable, the form in which such amount is to be paid (as
provided for or available under the Plans), and the time of
commencement for payment of such amounts. Except as otherwise
provided herein, the Trustee shall make payments to the Plan
participants and their beneficiaries in accordance with such
Payment Schedule. The Trustee shall make provision for the
reporting and withholding of any federal, state or local taxes
that may be required to be withheld with respect to the
payment of benefits pursuant to the terms of the Plans and
shall pay amounts withheld to the appropriate taxing
authorities or determine that such amounts have been reported,
withheld and paid by the Company.
(b) The entitlement of a Plan participant or his or her
beneficiaries to benefits under the Plans shall be determined
by the Company or such party as it shall designate under the
Plans, and any claim for such benefits shall be considered and
reviewed under the procedures set out in the Plans.
(c) The Company may make payment of benefits directly to Plan
participants or their beneficiaries as they become due under
the terms of the Plans. The Company shall notify the Trustee
of its decision to make payment of benefits directly prior to
the time amounts are payable to participants or their
beneficiaries. In addition, if the principal of the Trust,
and any earnings thereon, are not sufficient to make payments
of benefits in accordance with the terms of the Plans, the
Company shall make the balance of each such payment as it
falls due. The Trustee shall notify the Company where
principal and earnings are not sufficient.
3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS
TO TRUST BENEFICIARY WHEN COMPANY IS INSOLVENT.
(a) The Trustee shall cease payment of benefits to Plan
participants and their beneficiaries if the Company is
Insolvent. The Company shall be considered "Insolvent" for
purposes of this Trust Agreement if (i) the Company is unable
to pay its debts as they become due, or (ii) the Company is
subject to a pending proceeding as a debtor under the United
States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided
in Section 1(d) hereof, the principal and income of the Trust
shall be subject to claims of general creditors of the Company
under federal and state law as set forth below.
(1) The Board of Directors and the Chief
Executive Officer of the Company shall have the duty to inform the Trustee in
writing of the Company's Insolvency. If a person claiming to be a creditor
of the Company alleges in writing to the Trustee that the Company has become
Insolvent, the Trustee shall determine whether the Company is Insolvent
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<PAGE> 3
and, pending such determination, the Trustee shall discontinue payment of
benefits to Plan participants or their beneficiaries.
(2) Unless the Trustee has actual knowledge of
the Company's Insolvency, or has received notice from the Company or a person
claiming to be a creditor alleging that the Company is Insolvent, the
Trustee shall have no duty to inquire whether the Company is Insolvent. The
Trustee may in all events rely on such evidence concerning the Company's
solvency as may be furnished to the Trustee and that provides the Trustee with a
reasonable basis for making a determination concerning the Company's solvency.
(3) If at any time the Trustee has determined
that the Company is Insolvent, the Trustee shall discontinue payments to Plan
participants or their beneficiaries and shall hold the assets of the Trust for
the benefit of the Company's general creditors. Nothing in this Trust Agreement
shall in any way diminish any rights of Plan participants or their beneficiaries
to pursue their rights as general creditors of the Company with respect to
benefits due under the Plans or otherwise.
(4) The Trustee shall resume the payment of
benefits to Plan participants or their beneficiaries in accordance with Section
2 of this Trust Agreement only after the Trustee has determined that the
Company is not Insolvent (or is no longer Insolvent).
(a) Provided that there are sufficient assets, if the Trustee
discontinues the payment of benefits from the Trust pursuant to Section 3(b)
hereof and subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to Plan
participants or their beneficiaries under the terms of the Plans for the period
of such discontinuance, less the aggregate amount of any payments made to Plan
participants or their beneficiaries by the Company in lieu of the payments
provided for hereunder during any such period of discontinuance.
4. PAYMENTS TO COMPANY.
Except as provided in Section 3 hereof, after the Trust has become
irrevocable, the Company shall have no right or power to direct the Trustee to
return to the Company or to divert to others any of the Trust assets before all
payment of benefits have been made to Plan participants and their beneficiaries
pursuant to the terms of the Plans.
5. INVESTMENT AUTHORITY.
(a) The Trust Fund shall be held in trust by the Trustee and shall
be invested and reinvested as provided in this Section 5, without distinction
between principal and income and without regard to the restrictions of
the laws of the State of Florida, or any other jurisdiction, relating to the
investment of Trust Funds. The Trustee shall invest and reinvest the Trust Fund
in its discretion, except as otherwise directed by the Company, or in accordance
with Section 5(d) in accordance with the directions of an Investment Manager.
The Trustee shall be under no duty or obligation to review any investment to be
acquired, held or disposed of pursuant to such directions nor to make any
recommendation with respect to the disposition or continued retention of any
such investment.
(b) In addition to the more general investment powers provided
below, the Trustee may invest in securities (including stock or rights to
acquire stock) or obligations issued
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<PAGE> 4
by the Company. All rights associated with assets of the Trust shall be
exercised by the Trustee or the person designated by the Trustee, and shall in
no event be exercisable by or rest with Plan participants. The Company shall
have the right at anytime, and from time to time in its sole discretion, to
substitute assets of equal fair market value for any asset held by the Trust.
This right is exercisable by the Company in a nonfiduciary capacity without the
approval or consent of any person in a fiduciary capacity.
(c) The Company shall establish specific investment policies and
guidelines for Trust Funds. The Trustee shall be responsible only for investing
the Trust Fund in accordance with such policies and guidelines. If any
change in such policies or guidelines is subsequently deemed appropriate,
notice of such change shall be promptly communicated by the Company to the
Trustee, but the Trustee shall be under no duty to take or refrain from taking
any action based on such changes prior to receiving such notice.
(d) The Company may appoint one or more than one Investment
Manager to direct the investment of the Trust Fund. Upon the effective date of
such appointment, such Investment Manager shall have the sole power,
without prior consultation with the Trustee, to manage and direct the
acquisition and disposition of the Trust Fund. The Investment Manager shall
keep such records and make such reports to the Trustee as may be specified in
the agreement appointing such Investment Manager. The Company at its discretion
also may terminate the appointment of any Investment Manager. The Company shall
notify the Trustee of such termination and, in the absence of specific
directions from the Company or the appointment of a successor Investment Manager
for the Investment Account, the Company shall be responsible for the management
and control of the assets formerly managed by the Investment Manager.
(e) To the extent neither the Company nor an Investment Manager
furnishes directions as to the investment of the Trust Fund, the Trustee may
retain uninvested cash or cash balances, without being required to pay
interest thereon, or may invest such assets in short-term investments and one of
the commingled funds described in Section 5(f)(8).
(f) The Trustee shall have the power to do all things and execute
such instruments as it may deem necessary or proper to carry out its
responsibilities under this Trust Agreement, including the following powers:
(1) To invest any and all monies in stock of the
Company, other stocks, bonds, securities, insurance policies insuring the
lives of employees covered by any Plan, mutual funds, investment company or
trust shares, mortgages, notes, choses in action, real estate, improvements
thereon, and other property acceptable to the Trustee;
(2) To sell, exchange, or otherwise dispose of
any property at any time held or acquired by the Trust Fund, at public or
private sale, for cash or on terms, without advertisement, including the right
to lease for any term;
(3) To vote in person or by proxy any corporate
stock or other security and to agree to or take, or refrain from taking, any
other action necessary or appropriate for a shareholder or owner in regard to
any reorganization, merger, consolidation, liquidation, bankruptcy or other
procedure or proceeding affecting any stock, bond, note or other property;
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<PAGE> 5
(4) To compromise, settle, adjust or otherwise
act in any reasonable manner whatsoever on any claim or demand by or against
the Trust Fund and to agree to any rescission or modification of any contract
or agreement affecting the Trust Fund;
(5) To deposit any stock, bond or other security
in any depository or other similar institution and to register any stock, bond
or other security in the name of any nominee, ithout the addition of words
indicating that such security is held in a fiduciary capacity, but accurate
records shall be maintained showing that such security is a Trust Fund asset
and the Trustee shall be responsible for the acts of such depository or
nominee;
(6) To hold cash (including, without limitation,
in non-interest bearing accounts) in such amounts and for such time as may be
in its opinion reasonable for the proper management of the Trust Fund;
(7) To grant, sell, purchase, or exercise any
option of any kind or description whatsoever to purchase or sell any security
or other property which is a permissible investment under this Section 5,
provided the Trustee in no event shall grant or sell any option under which any
person can require the Trust Fund to sell any security or other property
which the Trust Fund at the time of such grant or sale does not hold in an
amount sufficient to cover such option and any other outstanding option granted
or sold by the Trustee, and the Trustee in no event shall dispose of any
security or other property covering any option until such option is exercised
or otherwise expires;
(8) To invest all, or any part, of the assets of
the Trust Fund in any common, collective or group trust fund which is
maintained under section 584 of the Code or Revenue Ruling 81-100, 1981-1 C.B.
326, by the Trustee or any bank which is a member of an "affiliated group" (as
that term is defined in section 1504 of the Code) with the Trustee, the
provisions of which common, collective or group trust fund upon such investment
shall automatically be adopted and made a part of this Trust Agreement for the
period such investment is made in such common, collective or group trust fund;
(9) To make such other investments without regard
to any law now or hereafter in force limiting the investments of trustees
or other fiduciaries.
(g) With respect to any policy of life insurance
that the Trustee owns or under which the death benefits are made payable
to the Trustee, the Trustee shall have the following specific powers and
responsibilities:
(1) If the Trustee is the owner of any such
policy, the Trustee reserves all available benefits, privileges, payments,
dividends, surrender values, options, conversion rights and elections,
including the right at any time or times to change the beneficiary, to borrow
or otherwise receive the surrender value, to pledge or assign the policy or its
proceeds as collateral security for any loan which the owner or owners may
obtain from any lender, including a Trustee under this agreement individually
or a parent or affiliate company, and to withdraw the policy if deposited with
the trustees, without any duty on the trustees to see its return.
(2) Upon the death of the insured under the
policy the Trustee shall take such action as they deem best to collect the
policy proceeds, paying the expenses of collection from the Trust Fund,
but the Trustee need not enter into or maintain any litigation to
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<PAGE> 6
enforce payment on the policy until indemnified to their satisfaction against
all expenses and liabilities to which it might by any such litigation be
subjected. The Trustee may release the insurance company from its liability
under the policy and make any compromise which the trustees deem proper.
(3) The insurance company shall not take notice
of the provisions of this Agreement or see to the application of the policy
proceeds, and the Trustee's receipt to the insurance company shall be a
complete release for any payment made and shall bind every participant or
beneficiary under this Agreement.
6. DISPOSITION OF INCOME.
During the term of this Trust, all income received by the Trust, net of
expenses and taxes, shall be accumulated and reinvested.
7. ACCOUNTING BY TRUSTEE.
The Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between the
Company and the Trustee. Within 90 days following the close of each calendar
year and within 30 days after the removal or resignation of the Trustee, the
Trustee shall deliver to the Company a written account of its administration of
the Trust during such year or during the period from the close of the last
preceding year to the date of such removal or resignation, setting forth all
investments, receipts, disbursements and other transactions effected by it,
including a description of all securities and investments purchased and sold
with the cost or net proceeds of such purchases or sales (accrued interest paid
or receivable being shown separately), and showing all cash, securities and
other property held in the Trust at the end of such year or as of the date of
such removal or resignation, as the case may be.
8. RESPONSIBILITY OF TRUSTEE.
(a) The Trustee shall act with the care, skill, prudence and
diligence under the circumstances then prevailing that a prudent person acting
in like capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, however, that the
Trustee shall incur no liability to any person for any action taken
pursuant to a direction, request or approval given by the Company which is
contemplated by, and in conformity with, the terms of the Plans or this Trust
and is given in writing by the Company. In the event of a dispute between the
Company and a party, the Trustee may apply to a court of competent jurisdiction
to resolve the dispute.
(b) If the Trustee undertakes or defends any litigation arising in
connection with this Trust, the Company agrees to indemnify the Trustee against
the Trustee's costs, expenses and liabilities (including, without limitation,
attorneys' fees and expenses) relating thereto and to be primarily liable for
such payments. If the Company does not pay such costs, expenses and
liabilities in a reasonably timely manner, the Trustee may obtain payment from
the Trust.
(c) The Trustee may consult with legal counsel (who may also be
counsel for the Company generally) with respect to any of its duties or
obligations hereunder.
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<PAGE> 7
(d) The Trustee may hire agents, accountants, actuaries,
investment advisors, financial consultants or other professionals to assist it
in performing any of its duties or obligations hereunder.
(e) The Trustee shall have, without exclusion, all powers conferred
on Trustees by applicable law, unless expressly provided otherwise herein,
provided, however, that if an insurance policy is held as an asset of the
Trust, the Trustee shall have no power to name a beneficiary of the policy
other than the Trust, to assign the policy (as distinct from conversion of
the policy to a different form) other than to a successor Trustee, or to loan
to any person the proceeds of any borrowing against such policy.
(f) Notwithstanding any powers granted to the Trustee pursuant to
this Trust Agreement or to applicable law, the Trustee shall not have any
power that could give this Trust the objective of carrying on a business and
dividing the gains therefrom, within the meaning of section 301.7701-2 of the
Procedure and Administrative Regulations promulgated pursuant to the Internal
Revenue Code.
9. COMPENSATION AND EXPENSES OF TRUSTEE.
The Company shall pay all administrative and the Trustee's
fees and expenses. If not so paid, the fees and expenses shall be paid from
the Trust.
10. RESIGNATION AND REMOVAL OF TRUSTEE.
(a) The Trustee may resign at any time by written notice
to the Company, which shall be effective 45 days after receipt of such notice
unless the Company and the Trustee agree otherwise.
(b) The Trustee may be removed by the Company on 30 days
notice or upon shorter notice accepted by the Trustee.
(c) Upon a Change of Control, as defined herein, the
Trustee may not be removed by the Company for 5 years.
(d) If the Trustee resigns or is removed within 5 years of
a Change of Control, as defined herein, the Trustee shall select asuccessor
Trustee in accordance with the provisions of Section 11(b) hereof prior to the
effective date of the Trustee's resignation or removal.
(e) Upon resignation or removal of the Trustee and
appointment of a successor Trustee, all assets shall subsequently be
transferred to the successor Trustee. The transfer shall be completed within
30 days after receipt of notice of resignation, removal or transfer, unless the
Company extends the time limit.
(f) If the Trustee resigns or is removed, a successor
shall be appointed, in accordance with Section 11 hereof, by the effective date
of resignation or removal under paragraphs (a) and (b) of this section.
If no such appointment has been made, the Trustee may apply to a court of
competent jurisdiction for appointment of a successor or for instructions. All
expenses of the Trustee in connection with the proceeding shall be allowed as
administrative expenses of the Trust.
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<PAGE> 8
11. APPOINTMENT OF SUCCESSOR.
(a) If the Trustee resigns or is removed in accordance with Section
10(a) or (b) hereof, the Company may appoint any third party, such as a bank
trust department or other party that may be granted corporate trustee powers
under state law, as a successor to replace the Trustee upon resignation or
removal. The appointment shall be effective when accepted in writing by the new
Trustee, who shall have all of the rights and powers of the former Trustee,
including ownership rights in the Trust assets. The former Trustee shall
execute any instrument necessary or reasonably requested by the Company or the
successor Trustee to evidence the transfer.
(b) If the Trustee resigns or is removed pursuant to the provisions
of Section 10(d) hereof and selects a successor Trustee, the Trustee may
appoint any third party such as a bank trust department or other party that may
be granted corporate trustee powers under state law. The appointment of a
successor Trustee shall be effective when accepted in writing by the new
Trustee. The new Trustee shall have all the rights and powers of the
former Trustee, including ownership rights in Trust assets. The former Trustee
shall execute any instrument necessary or reasonably requested by the successor
Trustee to evidence the transfer.
12. AMENDMENT AND TERMINATION.
(a) The Trust is irrevocable but this Agreement may be amended with
the written consent of the Trustee and all beneficiaries. No amendment will be
permitted that would vest the assets of the Trust in, or at the direction
of, the Company except as required pursuant to Section 1(d) hereof.
(b) The Trust shall not terminate until the date on which Plan
participants and their beneficiaries are no longer entitled to benefits
pursuant to the terms of the Plans. Upon termination of the Trust, any
assets remaining in the Trust shall be returned to the Company.
13. MISCELLANEOUS.
(a) Any provisions of this Trust Agreement prohibited by law
shall be ineffective to the extent of any such prohibition, without
invalidating the remaining provisions hereof.
(b) Benefits payable to Plan participants and their beneficiaries
under this Trust Agreement may not be anticipated, assigned (either at law or
in equity), alienated, pledged, encumbered or subjected to attachment,
garnishment, levy, execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed in
accordance with the laws of the State of Florida.
(d) For purposes of this Trust, Change of Control shall mean the
purchase or other acquisition by any person, entity or group of persons,
within the meaning of section 13(d) or 14(d) of the Securities Exchange Act of
1934 ('Act'), or any comparable successor provisions, of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Act) of 30 percent or
more of either the outstanding shares of common stock or the combined
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<PAGE> 9
voting power of the Company's then outstanding voting securities entitled to
vote generally, or the approval by the stockholders of the Company of a
reorganization, merger, or consolidation, in each case, with respect to which
persons who were stockholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own
more than 50 percent of the combined voting power entitled to vote generally in
the election of directors of the reorganized, merged or consolidated the
Company's then outstanding securities, or a liquidation or dissolution of the
Company or of the sale of all or substantially all of the Company's assets.
14. EFFECTIVE DATE.
The effective date of this Trust Agreement shall be
January 3, 1997.
The Company and the Trustee have executed this Trust Agreement
effective as provided herein.
RAILAMERICA, INC.
By:/s/ Donald Redfearn
-----------------------------
TITLE: EXECUTIVE VICE PRESIDENT
ATTEST:
(CORPORATE SEAL)
By:/s/ Larry W. Bush
------------------------
Ass't. Secretary
TRUSTEE:
/s/ Donald D. Redfearn
--------------------------------
Donald D. Redfearn
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<PAGE> 10
APPENDIX ONE
TO
RAILAMERICA, INC. NONQUALIFIED DEFERRED COMPENSATION TRUST
Plans Currently in Place Reflecting Agreements with the Following Employees:
1. Nonqualified Deferred Compensation Agreement with Gary O. Marino.
2. Nonqualified Deferred Compensation Agreement with John Marino.
<PAGE> 11
APPENDIX TWO
TO
RAILAMERICA, INC. NONQUALIFIED DEFERRED COMPENSATION TRUST
The amount of the initial deposit to the RailAmerica, Inc.
Nonqualified Deferred Compensation Trust is ___________________________
Dollars ($____________).
<PAGE> 1
Exhibit 10.60
NONQUALIFIED DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT, made and entered into as of this 3rd day of January,
1997, by and between RailAmerica, Inc., a corporation headquartered in Boca
Raton, Florida (the "Employer"), and Gary O. Marino, a resident of the State of
Florida (the "Employee").
WHEREAS, the Employee has been employed by the Employer as its
Chairman;
WHEREAS, the Employer recognizes the value of the services performed
by the Employee and wishes to encourage his continued employment;
WHEREAS, the Employee wishes to be afforded the opportunity to defer
payment of compensation until a future date and the Employer desires to
facilitate that goal and to also contribute an additional amount toward the
Employee's retirement pay;
WHEREAS, the parties hereto wish to provide the terms and conditions
upon which the Employee may defer compensation and the Employer may contribute
toward the Employee's retirement pay; and
WHEREAS, the parties hereto intend that this Agreement be considered
an unfunded arrangement, maintained primarily to provide deferred compensation
and retirement benefits for the Employee, a member of a select group of
management or highly compensated employees of the Employer, for purposes of the
Employee Retirement Income Security Act of 1974, as amended;
NOW, THEREFORE, in consideration of the premises and of the mutual
promises herein contained, the parties hereto agree as follows:
1. DEFERRAL OF COMPENSATION OR BONUS. Commencing with the date
of this Agreement, and continuing through the date on which the Employee's
employment terminates because of his death or any other cause, the Employee and
the Employer agree that the Employee shall be entitled to elect to defer any
percentage of the compensation that the Employee would otherwise be entitled to
receive from the Employer in each Fiscal Year of the Employer. In addition,
the Employee shall be entitled to elect to defer all or any portion of any
bonus that the Employer may award during or for any Fiscal Year.
2. ELECTION TO DEFER COMPENSATION. The Employee may elect to
defer compensation or bonus hereunder by filing a written notice to that effect
with the Employer, referred to as an Election of Deferral. Any such Election
of Deferral shall be made before the Employee has earned the right to the
compensation or bonus deferred and shall continue until changed in writing by
the Employee. Any change in the Employee's Election of Deferral shall be
effective with the first payment of compensation or bonus that the Employee
earns and that otherwise would be paid following delivery of notice of a change
in the Employee's Election of Deferral. Any amount of compensation or bonus
deferred shall be referred to as the "Deferral Amount."
3. TRANSFER OF DEFERRAL AMOUNT TO TRUSTEE. The Employer shall
transfer to the then acting trustee (the "Trustee") of the RailAmerica, Inc.
Nonqualified Deferred Compensation Trust (the "Trust") the Employee's Deferral
Amount, as soon as practical following the date that the Deferral Amount
otherwise would have been paid to the Employee but for the Employee's Election
of Deferral. The Deferral Amount shall thereafter be invested and reinvested
by such trustee and paid from the Trust to the Employee, or his designated
<PAGE> 2
beneficiary, in accordance with this Agreement and the Trust. The Trust and
any assets held by the Trust to assist it in meeting its obligations hereunder
will conform to the substantive terms of the trust described in Internal
Revenue Service Revenue Procedure 92-64.
4. EMPLOYER'S ADDITIONS TO DEFERRAL AMOUNT. In addition to the
Employee's Deferral Amount, the Employer also shall transfer to the Trust for
the Employee's benefit each calendar year at least $20,000, with the first
payment to be made as soon as practical following execution of this Agreement
and subsequent payments to be made during the first quarter of each subsequent
calendar year. This amount shall be referred to as the "Employer's Additions,"
shall be invested and reinvested by such trustee and paid from the Trust to the
Employee, or his designated beneficiary, in accordance with this Agreement and
the Trust.
5. EMPLOYEE'S DEFERRAL ACCOUNT.
a. DEFERRAL ACCOUNT ESTABLISHED UNDER TRUST. The Employee's
Deferral Amount, the Employer's Additions and the proceeds of the investment
and reinvestment of both, shall be credited to an account maintained by the
Trustee, called the Employee's Deferral Account, and shall be accounted for
separately so long as any amount remains to be paid to the Employee or his
beneficiary hereunder. The Employer shall cause the Trustee to provide to the
Employee periodically, and no less often than once every 12 months, a statement
of the Employee's Deferral Account that shows the current investment status of
the Employee's Deferral Account.
b. TRUST'S INVESTMENT OF DEFERRAL ACCOUNT IN INSURANCE
POLICY. As described in the agreement establishing the Trust, the Trustee may
also invest the assets of the Employee's Deferral Account in one or more life
insurance policies issued on the life of the Employee. If the Trustee elects
to invest all or any portion of the Deferral Account in any life insurance
policy issued on the life of the Employee, then the Employee agrees to assist
the Trustee in making application for any such policy by submitting to any
required physical examination and supplying any information necessary for
completion of such application. To the extent that the Trustee invests the
Deferral Account in any life insurance policy, the value of the Deferral
Account attributable to such investment shall be as provided under such life
insurance policy to the owner thereof. If the Trust elects to invest all or
any portion of the Deferral Account in any life insurance policy paying a death
benefit to the Employer upon the Employee's death, then the amount of any such
proceeds shall be deemed to have been paid to the Deferral Account and shall
increase the death benefit payable under Section 7 hereof to the Employee's
designated beneficiary.
6. TERMINATION BENEFIT. From and after the termination of the
Employee from the service of the Employer, the Trustee thereafter shall
distribute to the Employee's Deferral Account held under the Trust to the
Employee in 120 substantially equal monthly payments. The Employee at his sole
option may make an election before the date benefit payments begin from his
Deferral Account to receive his Deferral Account in equal monthly installment
payments over a shorter period or commencing at a later date than otherwise
would apply, or in a single payment. The election referred to in the preceding
sentence must be made at least 15 days before the date benefit payments are
scheduled to begin and shall be irrevocable. The first designated monthly
payment hereunder or the single payment, as the case may be, shall be due and
payable on the first business day of the second month following the Employee's
termination of employment. Subsequent monthly payments, if any, shall be made
on the first business day of each month thereafter for the applicable payment
period. In addition to the
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<PAGE> 3
election referred to above, the Employee at his sole option at least 15 days
before each annual anniversary date of the commencement of monthly payments
hereunder also may make an election to receive the balance of his Deferral
Account in equal monthly installment payments over a shorter period than
otherwise would apply, or in a single payment. Notwithstanding the foregoing,
the Employer may at any time direct the Trustee to accelerate payments to the
Employee hereunder.
7. DEATH BENEFIT.
a. BEFORE PAYMENT OF TERMINATION BENEFIT BEGINS. In
event of the Employee's death before commencement of termination benefits
hereunder, the Employee's Deferral Account held under the Trust shall be paid
in 120 substantially equal monthly payment to the Employee's designated
beneficiary, in accordance with the last such designation received by the
Employer from the Employee before his death. Alternatively, the designated
beneficiary at his or her sole option may make an election before the date
benefit payments begin to receive monthly installment payments over a shorter
period or commencing at a later date than otherwise would apply, or in a single
payment. The election referred to in the preceding sentence must be made at
least 15 days before the date benefits payments are scheduled to begin and
shall be irrevocable. In any event, the first designated monthly payment or
the single payment, as the case may be, shall be due and payable on the first
business day of the second month following the Employee's death. Subsequent
monthly payments, if any, shall be made on the first business day of each month
thereafter for the applicable payment period. Notwithstanding the foregoing,
the Employer may at any time direct the Trustee to accelerate payments to the
Employee's designated beneficiary hereunder.
b. AFTER PAYMENT OF TERMINATION BENEFIT BEGINS. In the
event of the Employee's death after commencement of termination benefits
hereunder but before completion of all such payments due and owning
hereunder, the Trustee shall continue to make such payments, in equal monthly
installments, over the remainder of the period during which the Employee would
have received such payments, and at the time and in the same manner, had the
Employee survived, Such continuing payments shall be made to the Employee's
designated beneficiary, in accordance with the last such designation
received by the Employer from the Employee before his death. Notwithstanding
the foregoing, the Employer may at any time direct the Trustee to accelerate
payments to the Employee's designated beneficiary hereunder.
c. DESIGNATED BENEFICIARY. The Employee's designated
beneficiary shall be the person(s) named in accordance with the last such
designation received by the Employer from the Employee before his death. If no
such designation has been received by the Employer from the Employee before his
death, said payments shall be made to the Employee's surviving spouse, so long
as she shall live and thereafter to such person or persons, including her
estate, as the Employee's surviving spouse may appoint under her Will, making
specific reference hereto. If the Employee is not survived by a spouse or if
she shall fail to so appoint, then said payments shall be made to the then
living children of the Employee, if any, in equal shares, or to the survivor of
such children.
8. HARDSHIP BENEFIT. In the event the Employee suffers a
financial hardship (as hereinafter defined), the Trustee may, if it deems it to
be in the Employee's best interests, distribute to or on behalf of the Employee
as a hardship benefit (the "Hardship Benefit") any portion of the Employee's
Deferral Account attributable to the Employee's Deferral Amount, including
earnings thereon. Financial hardship shall mean an immediate and heavy
financial need of the Employee caused by temporary or permanent disability or
incapacity of the
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Employee or a dependent of the Employee, medical or educational expenses of any
dependent of the Employee, the purchase or maintenance of a residence of the
Employee or a dependent of the Employee, death of the Employee's spouse or a
material reduction in the Employee's family income (the Employee's and spouse's
income).
9. BENEFIT UPON CHANGE IN CONTROL OF EMPLOYER. In the event of a
Change of Control of the Employer, as defined herein, the Trustee immediately
shall distribute the Employee's Deferral Account held under the Trust to the
Employee in a lump sum. For purposes of this Agreement, Change of Control
shall mean (a) the purchase or other acquisition by any person, entity or group
of persons, within the meaning of section 13(d) or 14(d) of the Securities
Exchange Act of 1934 (the "Act"), or any comparable successor provisions, of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Act) of 30 percent or more of either the outstanding shares of common stock or
the combined voting power of the Employer's then outstanding voting securities
entitled to vote generally, (b) the approval by the stockholders of the
Employer of a reorganization, merger, or consolidation, with respect to which
persons who were stockholders of the Employer immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own
more than 50 percent of the combined voting power entitled to vote generally in
the election of directors of the reorganized, merged or consolidated Employer's
then outstanding securities, (c) a liquidation or dissolution of the Employer
or (d) the sale of all or substantially all of the Employer's assets.
10. ADDITIONAL PERMITTED DISTRIBUTION. In the event that the
Employer and the Employee enter into a salary continuation agreement, or the
Employer institutes a salary continuation plan covering the Employee, the
Employee shall be permitted to request distribution of all or a portion of the
Employee's aggregate Deferral Amount through the date of such agreement or
plan, and the Trustee shall make prompt distribution to the Employee pursuant
to such request. The Employee shall have a limited period of 30 days from the
date of such agreement or plan within which to request such a distribution from
the Trust.
11. NON-COMPETITION DURING EMPLOYMENT. In consideration of the
foregoing agreements of the Employer, the Employee hereby agrees that, so long
as he remains employed by the Employer, he will devote substantially all of his
time, skill, diligence and attention to the business of the Employer, and will
not actively engage, either directly or indirectly, in any business or other
activity which is or may be deemed to be in any way competitive with or adverse
to the best interests of the business of the Employer.
12. DETERMINATION OF BENEFITS, CLAIMS
PROCEDURE AND ADMINISTRATION.
a. REQUEST FOR BENEFIT. A person who believes that he
is being denied a benefit to which he is entitled under this Agreement
(hereinafter referred to as a "Claimant") may file a written request for such
benefit with the Employer, setting forth his claim. The request must be
addressed to the Chairman of the Board of Directors of the Employer at its then
principal place of business.
b. CLAIM PROCEDURE. Upon receipt of a claim, the
Employer shall advise the Claimant that a reply will be forthcoming within
ninety (90) days and shall, in fact, deliver such reply within such period.
The Employer may, however, extend the reply period for an additional ninety
(90) days for reasonable cause. If the claim is denied in whole or in part,
the Employer shall adopt a written opinion, using language calculated to be
understood by the Claimant, setting forth: (a) the specific reason or reasons
for such denial; (b) the specific
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reference to pertinent provisions of this Agreement on which such denial is
based; (c) a description of any additional material or information necessary
for the Claimant to perfect his claim and an explanation why such material or
such information is necessary; (d) appropriate information as to the steps to
be taken if the Claimant wishes to submit the claim for review; and (e) the
time limits for requesting a review under subsection c and for review under
subsection d hereof.
c. REQUEST FOR REVIEW. Within sixty (60) days after the
receipt by the Claimant of the written opinion described above, the Claimant
may request in writing that the Secretary of the Employer review the
determination of the corporation. Such request must be addressed to the
Secretary of the Employer, at its then principal place of business. The
Claimant or his duly authorized representative may, but need not, review the
pertinent documents and submit issues and comments in writing for consideration
by the Employer. If the Claimant does not request a review of the
corporation's determination by the Secretary of the Employer within such sixty
(60) day period, he shall be barred and estopped from challenging the
Employer's determination.
d. DECISION ON REVIEW. Within sixty (60) days after the
Secretary's receipt of a request for review, he will review the Employer's
determination. After consideration of all materials presented by the Claimant,
the Secretary will render a written opinion, written in a manner calculated to
be understood by the Claimant, setting forth the specific reasons for the
decision and containing specific references to the pertinent provisions of this
Agreement on which the decision is based. If special circumstances require
that the sixty (60) day time period be extended, the Secretary will so notify
the Claimant and will render the decision as soon as possible, but no later
than one hundred twenty (120) days after receipt of the request for review.
13. BINDING ARBITRATION. If any dispute arises with respect to
this Agreement, each party shall use its best efforts to resolve the dispute
using the claims procedure provided above. If, after 30 days the dispute has
not been resolved, either party may elect to submit the dispute to mediation by
an independent certified circuit civil mediator selected jointly by the parties
by giving notice to the other party of its election to mediate (the "Mediation
Notice"). If a party elects to mediate a dispute, the other party must mediate
the dispute, although the result of the mediation will not be binding on either
party. The mediator shall convene a meeting of the parties to the dispute
within 60 days after his or her appointment.
Either party may elect to submit the dispute to binding
arbitration before a panel of arbitrators in accordance with the Florida
Arbitration Code and the Florida Evidence Code after the conclusion of the
mediation of the dispute by giving the other party a notice of arbitration in
accordance with section 12 (the "Arbitration Notice"). If the parties do not
resolve the dispute through mediation, arbitration will be the sole and
exclusive method of resolving the dispute. All parties must arbitrate the
dispute, and each party will be barred from filing a lawsuit concerning the
subject matter of the dispute, except to obtain an equitable remedy.
The parties shall select a mutually acceptable Florida
corporate lawyer who is rated "AV" by the Martindale-Hubbell law directory to
arbitrate the dispute. If within ten (10) days after the effective date of the
Arbitration Notice the parties are unable to select such an arbitrator, an
arbitration panel will be selected. The arbitration panel will consist of
three arbitrators selected by agreement of the parties. At least one of the
arbitrators must be a Florida corporate lawyer who is rated "AV" by the
Martindale-Hubbell law directory. Each party shall select an arbitrator within
twenty (20) days after the effective date of the Arbitration Notice. A party
who fails to select an arbitrator within the prescribed 20-day period waives
the right to
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select an arbitrator, and the arbitrators chosen by the other party will
constitute the "arbitration panel" for purposes of this Agreement. If each
party selects an arbitrator, the two arbitrators so selected shall select the
third arbitrator.
Every mediator or arbitrator must be independent (not a lawyer
or relative of a party to this Agreement or an officer, director, employee, or
shareholder of the Employer) without any economic or financial interest of any
kind in the outcome of the mediation or arbitration. Each arbitrator's conduct
will be governed by the Code of Ethics for Arbitrators in Commercial Disputes
(1986) that has been approved and recommended by the American Bar Association
and the American Arbitration Association.
Within 60 days after the effective date of their election or
appointment, the arbitration panel shall convene a hearing for the dispute to
be held on such date and at such time and place in Broward County or Palm Beach
County, Florida, as the arbitration panel designates upon 45 days' advance
notice to the parties. The arbitration panel shall render its decision within
30 days after the conclusion of the hearing. The decision of the arbitration
panel will be binding and conclusive as to all the parties and, upon the
pleading of any party, any court having jurisdiction may enter a judgment of
any award rendered in the arbitration, which may include an award of any
damages. The arbitration panel shall hear and decide the dispute based on the
evidenced produced, notwithstanding the failure or refusal to appear by a party
who has been duly notified of the date, time and place of the hearing.
14. NON-ASSIGNABILITY OF BENEFITS. Neither the Employee, his
designated beneficiary nor any other beneficiary under this Agreement shall
have any power or right to transfer, assign, anticipate, hypothecate or
otherwise encumber any part or all of the amounts payable hereunder, which are
expressly declared to be unassignable and non- transferable. Any such
attempted assignment or transfer shall be void and shall terminate this
Agreement; the Employer shall thereupon have no further liability hereunder.
No amount payable hereunder shall, before actual payment thereof, be subject to
seizure by any creditor of any such beneficiary for the payment of any debt,
judgment or other obligation, by a proceeding at law or in equity, nor
transferable by operation of law in the event of the bankruptcy, insolvency or
death of the Employee, his designated beneficiary or any other beneficiary
hereunder.
15. AMENDMENT. This Agreement may not be amended, altered or
modified, except by a written instrument signed by the parties hereto or their
respective successors and may not be otherwise terminated except as provided
herein.
16. INUREMENT. This Agreement shall be binding upon and inure to
the benefit of the Employer and its successors and assigns, and the Employee,
his successors, heirs, executors, administrators and beneficiaries.
17. INTENDED TAX CONSEQUENCES. The parties acknowledge that it is
their intent that the Employee's Deferral Amount, the Employer's Additions and
any earnings thereon while held by the Trust will not be subject to income
taxes to the Employee until the Employee (or his Designated Beneficiary)
receives any amount hereunder and will not be deductible by the Employer until
payment hereunder. The Employee's Deferral Amount and the Employer's Additions
may be subject to employment taxes, with respect to which the Employer shall
report and withhold appropriately.
18. NOTICES. Any notice, consent or demand required or permitted
to be given under the provisions of this Agreement shall be in writing, and
shall be signed by the party
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giving or making the same. If such notice, consent or demand is mailed to a
party hereto, it shall be sent by United States certified mail, postage
prepaid, addressed to such party's last known address as shown on the records
of the Employer. The date of such mailing shall be deemed the date of notice,
consent or demand.
19. GOVERNING LAW; VENUE. This Agreement, and the rights of the
parties hereunder, shall be governed by and construed in accordance with the
laws of the State of Florida. This Agreement shall be subject to the exclusive
jurisdiction of the courts of Broward County or Palm Beach County, Florida.
The parties irrevocably waive, to the fullest extent permitted by law, any
objection which they may now or hereafter have to the laying of venue of any
suit, action or proceeding arising out of or relating to this Agreement, or any
judgment entered by any court in respect hereof brought in Broward County or
Palm Beach County, Florida, and further irrevocably waive any claim that any
suit, action or proceeding brought in Broward County or Palm Beach County,
Florida has been brought in an inconvenient forum.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
in duplicate, as of the day and year first above written.
RAILAMERICA, INC.
ATTEST:/s/ Larry W. Bush By:/s/ Donald Redfearn
----------------- ------------------------
Ass't. Secretary EXECUTIVE VICE PRESIDENT
/s/ Gary O. Marino
---------------------------
GARY O. MARINO
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Exhibit 10.61
NONQUALIFIED DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT, made and entered into as of this 3rd day of January,
1997, by and between RailAmerica, Inc., a corporation headquartered in Boca
Raton, Florida (the "Employer"), and John H. Marino, a resident of the State of
Virginia (the "Employee").
WHEREAS, the Employee has been employed by the Employer as its
President and Chief Operating Officer;
WHEREAS, the Employer recognizes the value of the services performed
by the Employee and wishes to encourage his continued employment;
WHEREAS, the Employee wishes to be afforded the opportunity to defer
payment of compensation until a future date and the Employer desires to
facilitate that goal and to also contribute an additional amount toward the
Employee's retirement pay;
WHEREAS, the parties hereto wish to provide the terms and conditions
upon which the Employee may defer compensation and the Employer may contribute
toward the Employee's retirement pay; and
WHEREAS, the parties hereto intend that this Agreement be considered
an unfunded arrangement, maintained primarily to provide deferred compensation
and retirement benefits for the Employee, a member of a select group of
management or highly compensated employees of the Employer, for purposes of the
Employee Retirement Income Security Act of 1974, as amended;
NOW, THEREFORE, in consideration of the premises and of the mutual
promises herein contained, the parties hereto agree as follows:
1. DEFERRAL OF COMPENSATION OR BONUS. Commencing with the date
of this Agreement, and continuing through the date on which the Employee's
employment terminates because of his death or any other cause, the Employee and
the Employer agree that the Employee shall be entitled to elect to defer any
percentage of the compensation that the Employee would otherwise be entitled to
receive from the Employer in each Fiscal Year of the Employer. In addition,
the Employee shall be entitled to elect to defer all or any portion of any
bonus that the Employer may award during or for any Fiscal Year.
2. ELECTION TO DEFER COMPENSATION. The Employee may elect to
defer compensation or bonus hereunder by filing a written notice to that effect
with the Employer, referred to as an Election of Deferral. Any such Election
of Deferral shall be made before the Employee has earned the right to the
compensation or bonus deferred and shall continue until changed in writing by
the Employee. Any change in the Employee's Election of Deferral shall be
effective with the first payment of compensation or bonus that the Employee
earns and that otherwise would be paid following delivery of notice of a change
in the Employee's Election of Deferral. Any amount of compensation or bonus
deferred shall be referred to as the "Deferral Amount."
3. TRANSFER OF DEFERRAL AMOUNT TO TRUSTEE. The Employer shall
transfer to the then acting trustee (the "Trustee") of the RailAmerica, Inc.
Nonqualified Deferred Compensation Trust (the "Trust") the Employee's Deferral
Amount, as soon as practical following the date that the Deferral Amount
otherwise would have been paid to the Employee but for the Employee's Election
of Deferral. The Deferral Amount shall thereafter be invested
<PAGE> 2
and reinvested by such trustee and paid from the Trust to the Employee, or his
designated beneficiary, in accordance with this Agreement and the Trust. The
Trust and any assets held by the Trust to assist it in meeting its obligations
hereunder will conform to the substantive terms of the trust described in
Internal Revenue Service Revenue Procedure 92-64.
4. EMPLOYER'S ADDITIONS TO DEFERRAL AMOUNT. In addition to the
Employee's Deferral Amount, the Employer also shall transfer to the Trust for
the Employee's benefit each calendar year at least $20,000, with the first
payment to be made as soon as practical following execution of this Agreement
and subsequent payments to be made during the first quarter of each subsequent
calendar year. This amount shall be referred to as the "Employer's Additions,"
shall be invested and reinvested by such trustee and paid from the Trust to the
Employee, or his designated beneficiary, in accordance with this Agreement and
the Trust.
5. EMPLOYEE'S DEFERRAL ACCOUNT.
a. DEFERRAL ACCOUNT ESTABLISHED UNDER TRUST. The Employee's
Deferral Amount, the Employer's Additions and the proceeds of the investment
and reinvestment of both, shall be credited to an account maintained by the
Trustee, called the Employee's Deferral Account, and shall be accounted for
separately so long as any amount remains to be paid to the Employee or his
beneficiary hereunder. The Employer shall cause the Trustee to provide to the
Employee periodically, and no less often than once every 12 months, a statement
of the Employee's Deferral Account that shows the current investment status of
the Employee's Deferral Account.
b. TRUST'S INVESTMENT OF DEFERRAL ACCOUNT IN INSURANCE
POLICY. As described in the agreement establishing the Trust, the Trustee may
also invest the assets of the Employee's Deferral Account in one or more life
insurance policies issued on the life of the Employee. If the Trustee elects
to invest all or any portion of the Deferral Account in any life insurance
policy issued on the life of the Employee, then the Employee agrees to assist
the Trustee in making application for any such policy by submitting to any
required physical examination and supplying any information necessary for
completion of such application. To the extent that the Trustee invests the
Deferral Account in any life insurance policy, the value of the Deferral
Account attributable to such investment shall be as provided under such life
insurance policy to the owner thereof. If the Trust elects to invest all or
any portion of the Deferral Account in any life insurance policy paying a death
benefit to the Employer upon the Employee's death, then the amount of any such
proceeds shall be deemed to have been paid to the Deferral Account and shall
increase the death benefit payable under Section 7 hereof to the Employee's
designated beneficiary.
6. TERMINATION BENEFIT. From and after the termination of the
Employee from the service of the Employer, the Trustee thereafter shall
distribute to the Employee's Deferral Account held under the Trust to the
Employee in 120 substantially equal monthly payments. The Employee at his sole
option may make an election before the date benefit payments begin from his
Deferral Account to receive his Deferral Account in equal monthly installment
payments over a shorter period or commencing at a later date than otherwise
would apply, or in a single payment. The election referred to in the preceding
sentence must be made at least 15 days before the date benefit payments are
scheduled to begin and shall be irrevocable. The first designated monthly
payment hereunder or the single payment, as the case may be, shall be due and
payable on the first business day of the second month following the Employee's
termination of employment. Subsequent monthly payments, if any, shall be made
on the first
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business day of each month thereafter for the applicable payment period. In
addition to the election referred to above, the Employee at his sole option at
least 15 days before each annual anniversary date of the commencement of
monthly payments hereunder also may make an election to receive the balance of
his Deferral Account in equal monthly installment payments over a shorter
period than otherwise would apply, or in a single payment. Notwithstanding the
foregoing, the Employer may at any time direct the Trustee to accelerate
payments to the Employee hereunder.
7. DEATH BENEFIT.
a. BEFORE PAYMENT OF TERMINATION BENEFIT BEGINS. In
event of the Employee's death before commencement of termination benefits
hereunder, the Employee's Deferral Account held under the Trust shall be paid
in 120 substantially equal monthly payment to the Employee's designated
beneficiary, in accordance with the last such designation received by the
Employer from the Employee before his death. Alternatively, the designated
beneficiary at his or her sole option may make an election before the date
benefit payments begin to receive monthly installment payments over a shorter
period or commencing at a later date than otherwise would apply, or in a single
payment. The election referred to in the preceding sentence must be made at
least 15 days before the date benefits payments are scheduled to begin and
shall be irrevocable. In any event, the first designated monthly payment or
the single payment, as the case may be, shall be due and payable on the first
business day of the second month following the Employee's death. Subsequent
monthly payments, if any, shall be made on the first business day of each month
thereafter for the applicable payment period. Notwithstanding the foregoing,
the Employer may at any time direct the Trustee to accelerate payments to the
Employee's designated beneficiary hereunder.
b. AFTER PAYMENT OF TERMINATION BENEFIT BEGINS. In the
event of the Employee's death after commencement of termination benefits
hereunder but before completion of all such payments due and owning hereunder,
the Trustee shall continue to make such payments, in equal monthly installments,
over the remainder of the period during which the Employee would have received
such payments, and at the time and in the same manner, had the Employee
survived, Such continuing payments shall be made to the Employee's designated
beneficiary, in accordance with the last such designation received by the
Employer from the Employee before his death. Notwithstanding the foregoing, the
Employer may at any time direct the Trustee to accelerate payments to the
Employee's designated beneficiary hereunder.
c. DESIGNATED BENEFICIARY. The Employee's designated
beneficiary shall be the person(s) named in accordance with the last such
designation received by the Employer from the Employee before his death. If no
such designation has been received by the Employer from the Employee before his
death, said payments shall be made to the Employee's surviving spouse, so long
as she shall live and thereafter to such person or persons, including her
estate, as the Employee's surviving spouse may appoint under her Will, making
specific reference hereto. If the Employee is not survived by a spouse or if
she shall fail to so appoint, then said payments shall be made to the then
living children of the Employee, if any, in equal shares, or to the survivor of
such children.
8. HARDSHIP BENEFIT. In the event the Employee suffers a
financial hardship (as hereinafter defined), the Trustee may, if it deems it to
be in the Employee's best interests, distribute to or on behalf of the Employee
as a hardship benefit (the "Hardship Benefit") any portion of the Employee's
Deferral Account attributable to the Employee's Deferral Amount, including
earnings thereon. Financial hardship shall mean an immediate and heavy
financial
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need of the Employee caused by temporary or permanent disability or incapacity
of the Employee or a dependent of the Employee, medical or educational expenses
of any dependent of the Employee, the purchase or maintenance of a residence of
the Employee or a dependent of the Employee, death of the Employee's spouse or
a material reduction in the Employee's family income (the Employee's and
spouse's income).
9. BENEFIT UPON CHANGE IN CONTROL OF EMPLOYER. In the event of a
Change of Control of the Employer, as defined herein, the Trustee immediately
shall distribute the Employee's Deferral Account held under the Trust to the
Employee in a lump sum. For purposes of this Agreement, Change of Control
shall mean (a) the purchase or other acquisition by any person, entity or group
of persons, within the meaning of section 13(d) or 14(d) of the Securities
Exchange Act of 1934 (the "Act"), or any comparable successor provisions, of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Act) of 30 percent or more of either the outstanding shares of common stock or
the combined voting power of the Employer's then outstanding voting securities
entitled to vote generally, (b) the approval by the stockholders of the
Employer of a reorganization, merger, or consolidation, with respect to which
persons who were stockholders of the Employer immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own
more than 50 percent of the combined voting power entitled to vote generally in
the election of directors of the reorganized, merged or consolidated Employer's
then outstanding securities, (c) a liquidation or dissolution of the Employer
or (d) the sale of all or substantially all of the Employer's assets.
10. ADDITIONAL PERMITTED DISTRIBUTION. In the event that the
Employer and the Employee enter into a salary continuation agreement, or the
Employer institutes a salary continuation plan covering the Employee, the
Employee shall be permitted to request distribution of all or a portion of the
Employee's aggregate Deferral Amount through the date of such agreement or
plan, and the Trustee shall make prompt distribution to the Employee pursuant
to such request. The Employee shall have a limited period of 30 days from the
date of such agreement or plan within which to request such a distribution from
the Trust.
11. NON-COMPETITION DURING EMPLOYMENT. In consideration of the
foregoing agreements of the Employer, the Employee hereby agrees that, so long
as he remains employed by the Employer, he will devote substantially all of his
time, skill, diligence and attention to the business of the Employer, and will
not actively engage, either directly or indirectly, in any business or other
activity which is or may be deemed to be in any way competitive with or adverse
to the best interests of the business of the Employer.
12. DETERMINATION OF BENEFITS, CLAIMS
PROCEDURE AND ADMINISTRATION.
a. REQUEST FOR BENEFIT. A person who believes that he
is being denied a benefit to which he is entitled under this Agreement
(hereinafter referred to as a "Claimant") may file a written request for such
benefit with the Employer, setting forth his claim. The request must be
addressed to the Chairman of the Board of Directors of the Employer at its then
principal place of business.
b. CLAIM PROCEDURE. Upon receipt of a claim, the
Employer shall advise the Claimant that a reply will be forthcoming within
ninety (90) days and shall, in fact, deliver such reply within such period.
The Employer may, however, extend the reply period for an additional ninety
(90) days for reasonable cause. If the claim is denied in whole or in part,
the Employer shall adopt a written opinion, using language calculated to be
understood by the
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<PAGE> 5
Claimant, setting forth: (a) the specific reason or reasons for such denial;
(b) the specific reference to pertinent provisions of this Agreement on which
such denial is based; (c) a description of any additional material or
information necessary for the Claimant to perfect his claim and an explanation
why such material or such information is necessary; (d) appropriate information
as to the steps to be taken if the Claimant wishes to submit the claim for
review; and (e) the time limits for requesting a review under subsection c and
for review under subsection d hereof.
c. REQUEST FOR REVIEW. Within sixty (60) days after the
receipt by the Claimant of the written opinion described above, the Claimant
may request in writing that the Secretary of the Employer review the
determination of the corporation. Such request must be addressed to the
Secretary of the Employer, at its then principal place of business. The
Claimant or his duly authorized representative may, but need not, review the
pertinent documents and submit issues and comments in writing for consideration
by the Employer. If the Claimant does not request a review of the
corporation's determination by the Secretary of the Employer within such sixty
(60) day period, he shall be barred and estopped from challenging the
Employer's determination.
d. DECISION ON REVIEW. Within sixty (60) days after the
Secretary's receipt of a request for review, he will review the Employer's
determination. After consideration of all materials presented by the Claimant,
the Secretary will render a written opinion, written in a manner calculated to
be understood by the Claimant, setting forth the specific reasons for the
decision and containing specific references to the pertinent provisions of this
Agreement on which the decision is based. If special circumstances require
that the sixty (60) day time period be extended, the Secretary will so notify
the Claimant and will render the decision as soon as possible, but no later
than one hundred twenty (120) days after receipt of the request for review.
13. BINDING ARBITRATION. If any dispute arises with respect to
this Agreement, each party shall use its best efforts to resolve the dispute
using the claims procedure provided above. If, after 30 days the dispute has
not been resolved, either party may elect to submit the dispute to mediation by
an independent certified circuit civil mediator selected jointly by the parties
by giving notice to the other party of its election to mediate (the "Mediation
Notice"). If a party elects to mediate a dispute, the other party must mediate
the dispute, although the result of the mediation will not be binding on either
party. The mediator shall convene a meeting of the parties to the dispute
within 60 days after his or her appointment.
Either party may elect to submit the dispute to binding
arbitration before a panel of arbitrators in accordance with the Florida
Arbitration Code and the Florida Evidence Code after the conclusion of the
mediation of the dispute by giving the other party a notice of arbitration in
accordance with section 12 (the "Arbitration Notice"). If the parties do not
resolve the dispute through mediation, arbitration will be the sole and
exclusive method of resolving the dispute. All parties must arbitrate the
dispute, and each party will be barred from filing a lawsuit concerning the
subject matter of the dispute, except to obtain an equitable remedy.
The parties shall select a mutually acceptable Florida
corporate lawyer who is rated "AV" by the Martindale-Hubbell law directory to
arbitrate the dispute. If within ten (10) days after the effective date of the
Arbitration Notice the parties are unable to select such an arbitrator, an
arbitration panel will be selected. The arbitration panel will consist of
three arbitrators selected by agreement of the parties. At least one of the
arbitrators must be a Florida corporate lawyer who is rated "AV" by the
Martindale-Hubbell law directory. Each party shall select an arbitrator within
twenty (20) days after the effective date of the Arbitration Notice.
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A party who fails to select an arbitrator within the prescribed 20-day period
waives the right to select an arbitrator, and the arbitrators chosen by the
other party will constitute the "arbitration panel" for purposes of this
Agreement. If each party selects an arbitrator, the two arbitrators so
selected shall select the third arbitrator.
Every mediator or arbitrator must be independent (not a lawyer
or relative of a party to this Agreement or an officer, director, employee, or
shareholder of the Employer) without any economic or financial interest of any
kind in the outcome of the mediation or arbitration. Each arbitrator's conduct
will be governed by the Code of Ethics for Arbitrators in Commercial Disputes
(1986) that has been approved and recommended by the American Bar Association
and the American Arbitration Association.
Within 60 days after the effective date of their election or
appointment, the arbitration panel shall convene a hearing for the dispute to
be held on such date and at such time and place in Broward County or Palm Beach
County, Florida as the arbitration panel designates upon 45 days' advance
notice to the parties. The arbitration panel shall render its decision within
30 days after the conclusion of the hearing. The decision of the arbitration
panel will be binding and conclusive as to all the parties and, upon the
pleading of any party, any court having jurisdiction may enter a judgment of
any award rendered in the arbitration, which may include an award of any
damages. The arbitration panel shall hear and decide the dispute based on the
evidenced produced, notwithstanding the failure or refusal to appear by a party
who has been duly notified of the date, time and place of the hearing.
14. NON-ASSIGNABILITY OF BENEFITS. Neither the Employee, his
designated beneficiary nor any other beneficiary under this Agreement shall
have any power or right to transfer, assign, anticipate, hypothecate or
otherwise encumber any part or all of the amounts payable hereunder, which are
expressly declared to be unassignable and non- transferable. Any such
attempted assignment or transfer shall be void and shall terminate this
Agreement; the Employer shall thereupon have no further liability hereunder.
No amount payable hereunder shall, before actual payment thereof, be subject to
seizure by any creditor of any such beneficiary for the payment of any debt,
judgment or other obligation, by a proceeding at law or in equity, nor
transferable by operation of law in the event of the bankruptcy, insolvency or
death of the Employee, his designated beneficiary or any other beneficiary
hereunder.
15. AMENDMENT. This Agreement may not be amended, altered or
modified, except by a written instrument signed by the parties hereto or their
respective successors and may not be otherwise terminated except as provided
herein.
16. INUREMENT. This Agreement shall be binding upon and inure to
the benefit of the Employer and its successors and assigns, and the Employee,
his successors, heirs, executors, administrators and beneficiaries.
17. INTENDED TAX CONSEQUENCES. The parties acknowledge that it is
their intent that the Employee's Deferral Amount, the Employer's Additions and
any earnings thereon while held by the Trust will not be subject to income
taxes to the Employee until the Employee (or his Designated Beneficiary)
receives any amount hereunder and will not be deductible by the Employer until
payment hereunder. The Employee's Deferral Amount and the Employer's Additions
may be subject to employment taxes, with respect to which the Employer shall
report and withhold appropriately.
-6-
<PAGE> 7
18. NOTICES. Any notice, consent or demand required or permitted
to be given under the provisions of this Agreement shall be in writing, and
shall be signed by the party giving or making the same. If such notice,
consent or demand is mailed to a party hereto, it shall be sent by United
States certified mail, postage prepaid, addressed to such party's last known
address as shown on the records of the Employer. The date of such mailing
shall be deemed the date of notice, consent or demand.
19. GOVERNING LAW; VENUE. This Agreement, and the rights of the
parties hereunder, shall be governed by and construed in accordance with the
laws of the State of Florida. This Agreement shall be subject to the exclusive
jurisdiction of the courts of Broward County or Palm Beach County, Florida.
The parties irrevocably waive, to the fullest extent permitted by law, any
objection which they may now or hereafter have to the laying of venue of any
suit, action or proceeding arising out of or relating to this Agreement, or any
judgment entered by any court in respect hereof brought in Broward County or
Palm Beach County, Florida, and further irrevocably waive any claim that any
suit, action or proceeding brought in Broward County or Palm Beach County,
Florida has been brought in an inconvenient forum.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
in duplicate, as of the day and year first above written.
RAILAMERICA, INC.
ATTEST:/s/ Larry W. Bush By:/s/ Donald Redfearn
---------------- ------------------------
Ass't. Secretary EXECUTIVE VICE PRESIDENT
/s/ John H. Marino
------------------------
JOHN H. MARINO
-7-
<PAGE> 1
EXHIBIT 11 - COMPUTATION OF PER SHARE EARNINGS
PRIMARY EARNINGS PER SHARE FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Net earnings attributable to common shares:
<S> <C>
Net income $ 868,333
Deemed dividend on redemption of convertible
preferred stock (666,665)
-----------
Net earnings attributable to common shares $ 201,668
===========
Actual weighted average shares outstanding 4,554,285
Primary earnings per share $ 0.04
===========
FULLY DILUTED EARNINGS PER SHARE FOR THE YEAR ENDED DECEMBER 31, 1995
Net earnings attributable to common shares:
Net income $ 868,333
Deemed dividend on redemption of convertible
preferred stock (666,665)
-----------
Net earnings attributable to common shares $ 201,668
===========
Actual weighted average shares outstanding 4,554,285
Fully diluted earnings per share $ 0.04
===========
</TABLE>
<PAGE> 1
<TABLE>
<CAPTION>
EXHIBIT 21 - SUBSIDIARIES OF REGISTRANT
Subsidiary and Name Under Which Subsidiary Does Business State of Incorporation
- -------------------------------------------------------- ----------------------
<S> <C>
Cascade and Columbia River Railroad Company, Inc. Delaware
Dakota Rail, Inc. South Dakota
Delaware Valley Railway Company, Inc. Delaware
Evansville Terminal Company Delaware
Florida Rail Lines, Inc. Delaware
Gettysburg Scenic Rail Tours, Inc. Delaware
Huron and Eastern Railway Company, Inc. Michigan
Huron Distribution Services, Inc. Delaware
Kalyn/Siebert Incorporated Texas
Minnesota Northern Railroad, Inc. Delaware
Otter Tail Valley Railroad Company, Inc. Minnesota
Plainview Terminal Company Texas
Prairie Holding Corporation Florida
RailAmerica de Chile, S.A. Chile
RailAmerica Carriers, Inc. Ontario, Canada
RailAmerica Equipment Corporation Delaware
RailAmerica Intermodal Services, Inc. Delaware
Saginaw Valley Railway Company, Inc. Delaware
South Central Tennessee Railroad Corporation Delaware
Steel City Carriers, Inc. Ontario, Canada
U.S. Rail Lines, Inc. Delaware
West Texas and Lubbock Railroad Company, Inc. Texas
</TABLE>
