<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1999
Commission File No. 0-20618
RAILAMERICA, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 65-0328006
------------------------------- ------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
301 Yamato Road, Suite 1190, Boca Raton, Florida 33431
------------------------------------------------------
(Address of Principal executive offices)
(Zip Code)
(561) 994-6015
---------------------------
(Issuer's telephone number)
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes XX No
---- ----
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date:
Common Stock, par value $.001 - 11,151,819 shares as of May 14, 1999
<PAGE> 2
RAILAMERICA, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
QUARTER ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheets - March 31, 1999 and
December 31, 1998 1
Consolidated Statements of Income - For the three months
ended March 31, 1999 and 1998 2
Consolidated Statements of Cash Flows - For the three
months ended March 31, 1999 and 1998 3
Notes to Consolidated Financial Statements 4
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II OTHER INFORMATION
Item 2 Changes in Securities and Use of Proceeds 20
Item 5 Other Information 20
Item 6 Exhibits and Reports on Form 8-K 21
Signatures
</TABLE>
<PAGE> 3
RAILAMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---------------- ---------------
ASSETS
<S> <C> <C>
Current assets:
Cash $ 2,554,775 $ 5,760,342
Accounts receivable 11,973,508 11,047,536
Notes receivable 859,378 859,378
Inventories 14,819,865 13,579,286
Other current assets 1,980,366 1,666,093
---------------- ---------------
Total current assets 32,187,892 32,912,635
Property, plant and equipment, net 116,545,150 101,833,373
Notes receivable, less current portions 1,291,205 1,284,200
Investment in Great Southern Railway Limited 1,938,942 1,938,942
Deposit on purchase agreements 18,493,900 1,962,067
Other assets 3,344,581 3,056,755
Excess of cost over net assets of companies acquired, net 2,214,274 2,241,964
---------------- ---------------
Total assets $ 176,015,944 $ 145,229,936
================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 3,373,393 $ 3,804,217
Current maturities of subordinated debt 253,892 244,542
Accounts payable 10,346,913 10,124,714
Accrued expenses and income taxes payable 5,430,965 4,132,892
---------------- ---------------
Total current liabilities 19,405,163 18,306,365
---------------- ---------------
Long-term debt, less current maturities 80,559,276 68,010,338
Subordinated debt, less current maturities 373,500 663,948
Other liabilities - deferred income 413,353 427,288
Deferred income taxes 8,497,908 8,242,000
Minority interest 8,303,393 7,937,992
Commitments and contingencies
Redeemable convertible preferred stock, $0.01 par value, $25 liquidation value,
1,000,000 shares authorized;
464,400 and 300,600 outstanding, respectively 10,691,620 6,881,684
Stockholders' equity:
Common stock, $.001 par value, 30,000,000 shares authorized; 11,794,608 issued
and 11,143,819 outstanding at March 31, 1999;
10,207,477 issued and 9,631,188 outstanding at December 31, 1998 11,795 10,207
Additional paid-in capital 40,790,532 28,277,533
Retained earnings 10,247,641 9,285,122
Accumulated other comprehensive income 640,829 470,820
Less treasury stock (651,789 and 576,289 shares, respectively, at cost) (3,919,066) (3,283,361)
---------------- ---------------
Total stockholders' equity 47,771,731 34,760,321
---------------- ---------------
Total liabilities and stockholders' equity $ 176,015,944 $ 145,229,936
================ ===============
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
1
<PAGE> 4
RAILAMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the three months ended March 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Operating revenues:
Transportation - railroad $ 9,287,755 $ 5,581,127
Manufacturing 10,417,642 8,582,725
Other 937,341 272,133
------------ ------------
Total operating revenue 20,642,738 14,435,985
------------ ------------
Operating expenses:
Transportation - railroad 4,919,666 2,778,604
Cost of goods sold - manufacturing 7,717,185 6,191,757
Selling, general and administrative 3,516,207 2,745,892
Depreciation and amortization 1,249,410 701,526
------------ ------------
Total operating expenses 17,402,468 12,417,779
------------ ------------
Operating income 3,240,270 2,018,206
Interest expense (1,429,509) (993,178)
Other income (expense) 241,930 151,465
Minority interest in income of subsidiary (365,400) (261,900)
------------ ------------
Income from continuing operations before
income taxes 1,687,291 914,593
Provision for income taxes 484,000 246,715
------------ ------------
Income from continuing operations 1,203,291 667,878
Discontinued operations
Loss from operations of discontinued Motor
Carrier segment (less applicable income tax
benefit of $40,000) -- (65,241)
------------ ------------
Net Income $ 1,203,291 $ 602,637
============ ============
=====================================================================================================
Income from continuing operations available to common
stockholders (basic) $ 962,519 $ 667,878
============ ============
Basic earnings per common share
Continuing operations $ 0.10 $ 0.07
Discontinued operations 0.00 (0.01)
------------ ------------
Net income $ 0.10 $ 0.06
============ ============
Diluted earnings per common share
Continuing operations $ 0.09 $ 0.07
Discontinued operations 0.00 (0.01)
------------ ------------
Net income $ 0.09 $ 0.06
============ ============
Weighted average common shares outstanding:
Basic 10,118,313 9,184,636
============ ============
Diluted 10,676,340 10,262,575
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
2
<PAGE> 5
RAILAMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,203,291 $ 602,637
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,429,060 885,175
Minority interest in income of subsidiary 365,400 261,900
Gain on sale of properties (18,611) (7,436)
Deferred income taxes 255,908 (196,486)
Changes in operating assets and liabilities, net of acquisitions and
dispositions:
Accounts receivable (925,972) (204,373)
Inventories (1,240,579) (3,354,847)
Other current assets (314,273) (272,983)
Accounts payable 222,199 5,374,206
Accrued expenses 1,235,480 471,882
Deposits and other (61,351) 773,302
------------ -----------
Net cash provided by operating activities 2,150,552 4,332,977
------------ -----------
Cash flows from investing activities:
Purchase of property, plant and equipment (13,576,113) (5,713,008)
Proceeds from sale of properties 6,414 47,159
Acquisitions, net of cash acquired -- (1,722,428)
Deposit on purchase agreement (18,463,900) --
Deferred acquisition costs and other (646,472) (80,191)
------------ -----------
Net cash used in investing activities (32,680,071) (7,468,468)
------------ -----------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 44,141,504 11,877,485
Principal payments on debt and capital leases (32,074,488) (9,884,095)
Sale of convertible preferred stock 4,095,000 --
Sale of common stock 11,953,993 940,050
Proceeds from exercise of stock options 192,625 755,175
Purchase of treasury stock (635,705) --
Deferred financing costs paid (338,612) (873)
Deferred loan costs paid (10,365) (24,199)
------------ -----------
Net cash provided by financing activities 27,323,952 3,663,543
------------ -----------
Net (decrease) increase in cash (3,205,567) 528,052
Cash, beginning of period 5,760,342 3,745,534
------------ -----------
Cash, end of period $ 2,554,775 $ 4,273,586
============ ===========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
3
<PAGE> 6
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION:
The consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations.
In the opinion of Management, the consolidated financial statements
contain all adjustments of a recurring nature, and disclosures
necessary to present fairly the financial position of the Company as of
March 31, 1999 and December 31, 1998, and the results of operations and
cash flows for the three months ended March 31, 1999 and 1998.
The accounting principles which materially affect the financial
position, results of operations and cash flows of the Company are set
forth in Notes to the Consolidated Financial Statements which are
included in the Company's 1998 annual report on Form 10-K. Capitalized
terms used but not otherwise defined herein have the meanings set forth
in the Company's 1998 annual report on Form 10-K.
2. EARNINGS PER SHARE:
For the three months ended March 31, 1999 and 1998, basic earnings per
share is computed using the weighted average number of common shares
outstanding during the period. Diluted earnings per share is based on
the sum of the weighted average number of common shares outstanding
plus common stock equivalents arising out of stock options, warrants
and convertible debt. Assumed conversion of the redeemable convertible
preferred stock is anti-dilutive for the three months ended March 31,
1999 and has been excluded from the weighted average shares outstanding
for diluted earnings per share.
The following is a summary of the income available for common
stockholders and weighted average shares (in thousands):
1999 1998
--------- --------
Income from continuing operations $ 1,203 $ 668
Preferred stock dividends and accretion (241) --
------- -------
Income from continuing operations available
to common stockholders (basic) 962 668
Interest from convertible debt 7 38
------- -------
Income from continuing operations available
to common stockholders (diluted) $ 969 $ 706
======= =======
4
<PAGE> 7
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2. EARNINGS PER SHARE, continued
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Weighted average shares outstanding 10,118 9,185
Assumed conversion of options and warrants 338 269
Assumed conversion of convertible debt 220 809
------ ------
Weighted average shares outstanding 10,676 10,263
====== ======
</TABLE>
3. INVENTORIES:
Inventories consist of the following as of March 31, 1999 and December
31, 1998.
<TABLE>
<CAPTION>
1999 1998
-------------- -------------
<S> <C> <C>
Raw materials $ 6,449,418 $ 5,207,154
Work in process 2,521,465 2,504,344
Finished goods 2,253,723 2,225,223
Replacement or repair parts for equipment
and road property 3,638,906 3,647,885
------------ -------------
14,863,512 13,584,606
Less, advances related to materials (43,647) (5,320)
------------ -------------
Inventories in excess of contract advances $ 14,819,865 $ 13,579,286
============ =============
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consist of the following as of March 31,
1999 and December 31, 1998:
<TABLE>
<CAPTION>
1999 1998
---------------- ----------------
<S> <C> <C>
Land $ 23,672,024 $ 19,427,529
Buildings and improvements 11,985,739 11,225,554
Railroad track and improvements 51,478,477 44,700,349
Locomotives, transportation and other equipment 40,735,426 36,582,042
------------- ------------
127,871,666 111,935,474
Less accumulated depreciation 11,326,516 10,102,101
------------- ------------
$ 116,545,150 $101,833,373
============= ============
</TABLE>
5
<PAGE> 8
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. PROPERTY, PANT AND EQUIPMENT, continued
In January 1999, the Company through a newly formed subsidiary E&N
Railway Company Ltd. ("ENR") acquired the assets of the Esquimalt and
Nanaimo Railway ("E&N") from the Canadian Pacific Railway ("CPR"). The
transaction includes the purchase of a 68-mile section of rail line
between Port Alberni and Nanaimo and the lease of a 113-mile section of
rail line from Victoria-to-Nanaimo and from Parksville-to-Courtenay on
British Columbia's Vancouver Island. The purchase of the assets of the
E&N Railway accounts for approximately $10.8 million of fixed asset
additions for the quarter ended March 31, 1999. The deposit on the asset
purchase agreement of $1.96 million at December 31, 1998 was applied to
this transaction.
5. LONG-TERM DEBT:
On April 14, 1999 , the Company's revolving line of credit ("Revolver")
was increased from $55 million to $85 million by National Bank of
Canada, as agent. The revolver bears interest, at the option of the
Company, at either the bank's prime rate plus 0.25% or the one, three or
six month LIBOR plus 2.5%. The maturity date of the Revolver was
extended to April 2002.
In the first quarter of 1999, $231,000 of convertible subordinated
debentures were converted into 102,743 shares of Common Stock.
6. COMPREHENSIVE INCOME:
Comprehensive income is defined as the change in stockholders' equity
during a period from transactions from nonowner sources. Comprehensive
income consists of net income and other comprehensive income, which
includes all other nonowner changes in stockholders' equity. For the
Company, other comprehensive income consists of foreign currency
translation adjustments that amounted to $170,010 and $602,877 for the
three months ended March 31, 1999 and 1998, respectively. Comprehensive
income for the three months ended March 31, 1999 and 1998 amounted to
$1,373,301 and $1,214,956, respectively.
6
<PAGE> 9
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
7. COMMON STOCK TRANSACTIONS:
In March 1999, the Company completed a private placement of
approximately $12.5 million of restricted common stock. Pursuant to the
offering, the Company sold approximately 1.4 million shares of its
common stock at a price of $8.8125 per share and issued approximately
210,000 warrants to purchase an equivalent number of shares of common
stock at an exercise price of $10.125 per share within one year of the
transaction's closing date. First London Securities Corporation, of
which Douglas Nichols, a director of the Company, is President and
principal shareholder, acted as placement agent and received
approximately $0.4 million in fees and cost reimbursement and one-year
warrants to purchase 141,504 shares of the Company's common stock at an
exercise price of $10.125.
8. INCOME TAX PROVISION:
The difference between the U.S. federal statutory tax rate and the
Company's effective rate from continuing operations is primarily due to
the Chilean tax rate on income from Ferronor and the Company's
valuation allowance on Ferronor's net operating loss carry forward.
9. DISCONTINUED OPERATIONS:
Operating results of the discontinued operations, as shown below,
include the operations of the Motor Carrier division for the three
months ended March 31, 1998. Effective, December 1, 1998, the Company
ceased all motor carrier operations and leased substantially all of the
operating assets of Steel City Carriers, Ltd. to Laidlaw Carriers,
Inc., an operating subsidiary of Ontario-based Contrans Corporation.
The leases are for a period of 18 to 24 months. In addition, the
Company has entered into an agreement to sell its Ontario real estate
that was previously used in its motor carrier operations.
Three Months Ended
March 31, 1998
------------------
(Thousands)
Revenues $ 1,827
Depreciation and amortization 95
Operating income (loss) (35)
Loss before taxes (105)
Benefit for income taxes 40
Net loss $ (65)
7
<PAGE> 10
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
10. SUBSEQUENT EVENTS:
On April 30, 1999, the Company, through its wholly-owned subsidiary,
Freight Victoria, acquired certain assets of the V/Line Freight
Corporation railroad in Australia for an aggregate purchase price of
$103 million (A$163.1 million). The transaction included the purchase
of 107 locomotives and over 2,600 rail cars, which will provide rail
freight service across southeastern Australia over approximately
3,000 miles of track. The track and real estate are being leased from
the Victorian government on a long-term basis. Freight Victoria
commenced operations on May 1, 1999. As of March 31, 1999, the
Company tendered a deposit of approximately $18.5 million on this
transaction. The amount is shown as a deposit on purchase agreement
on the consolidated balance sheet.
To facilitate the acquisition, Freight Victoria obtained a $100
million bridge loan from Barclays Bank PLC under a senior secured
loan facility. Upon the execution of the facility, the Company issued
to Barclays Bank PLC warrants to acquire 750,000 shares of the
Company's Common Stock at an exercise price of $9.75 per share. If
the loan is not repaid by April 30, 2000, the Company will be
required to issue to the lender additional warrants to purchase its
Common Stock.
The bridge loan is due and payable on April 30, 2000. However, if the
bridge loan is not repaid on or before April 30, 2000, it will
convert to a term loan provided that specified conditions are
satisfied. The bridge loan bears interest at a rate equal to the
London Interbank Offered Rate plus the applicable margin. The
applicable margin initially is 500 basis points and increases by 50
basis points every 90 days. If the bridge loan converts to a term
loan, the lender will have the right to elect to fix the interest
rate. The bridge loan is guaranteed by RailAmerica and is secured by
liens on [all] of the assets of Freight Victoria and by a pledge of
the stock of certain subsidiaries. The facility agreement contains
significant restrictions on RailAmerica and its subsidiaries that are
a party to the agreement, including without limitation restrictions
on additional indebtedness, liens, sales of assets and capital
expenditures. The Company is considering its available alternatives
for refinancing the bridge loan.
8
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
RailAmerica, Inc. (together with its consolidated subsidiaries, the
"Company") owns and operates short line and regional railroads and provides
freight services over approximately 2,600 miles of track in North America and
the Republic of Chile. RailAmerica also owns a specialty truck trailer
manufacturer, Kalyn/Siebert, Inc. ("KSI") with production facilities located in
Gatesville, Texas and Trois Rivieres, Quebec, Canada. Additionally, the Company
is a member of the Great Southern Railway Limited ("GSR") consortium, which
operates the 4,000 mile transcontinental passenger rail service in Australia.
The Company's historical growth has resulted primarily from the
execution of its acquisition strategy and internal growth. In accordance with
its acquisition strategy, in April 1998, the Company, through its wholly-owned
subsidiary Saginaw Valley Railway Company, acquired a 51 mile rail line in
Michigan. In August 1998, the Company, through its new subsidiary, Ventura
County Railroad Company, Inc. ("VCRR"), entered into a long term lease/purchase
agreement to operate a 13-mile rail line serving the Port of Hueneme and the
Oxnard Harbor District in Oxnard, California, located approximately 50 miles
north of Los Angeles. VCRR's operations commenced September 1, 1998.
Additionally, in January 1999, the Company through a newly formed subsidiary E&N
Railway Company Ltd. ("ENR") acquired the assets of the Esquimalt and Nanaimo
Railway ("E&N") from the Canadian Pacific Railway ("CPR"). The transaction
includes the sale of a 68-mile section of rail line between Port Alberni and
Nanaimo and the lease of a 113-mile section of rail line from
Victoria-to-Nanaimo and from Parksville-to-Courtenay on British Columbia's
Vancouver Island. On April 30, 1999, the Company, through its wholly-owned
subsidiary, Freight Victoria, acquired certain assets of the V/Line Freight
Corporation railroad in Australia. The transaction included the purchase of 107
locomotives and over 2,600 rail cars, which will provide rail freight service
across southeastern Australia over approximately 3,000 miles of track. The track
and real estate are being leased on from the Victorian government on a long-term
basis. Freight Victoria commenced operations on May 1, 1999.
The Company has added railroad properties to its portfolio primarily
through the acquisition of branch and light density rail lines from larger
railroads. Because of the acquisitions and variations in the structure, timing
and size of portfolio additions, the Company's results of operations in any
reporting period may not be directly comparable to its results of operations in
any other reporting period.
Set forth below is a discussion of the results of operations for the
Company's North American railroad operations, International railroad operations,
trailer manufacturing operations and corporate overhead.
9
<PAGE> 12
NORTH AMERICAN RAILROAD OPERATIONS
The Company's railroad subsidiaries operated approximately 2,600 miles
of rail line as of March 31, 1999. These 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 is negotiating to purchase from the
Commonwealth of Pennsylvania 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 the Company pursuant to a 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 which it owns and 4 miles of trackage rights in West Texas; (viii) 131
miles of rail line which it owns in the state of Washington; (ix) 72 miles of
rail line which it owns in central Minnesota; (x) 204 miles of rail line it owns
in northern Minnesota and 37 miles of trackage rights; (xi) 44 miles of rail
line it owns in central Minnesota and 16 miles of trackage rights; (xii) 1,400
miles of rail line in northern Chile; and (xiii) a 68-mile section of owned rail
line and a 113-mile section of leased rail line on Vancouver Island, British
Columbia, Canada.
The Company provides its 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 varied products for its
customers based upon market demands in each customer's local operating area. The
Company's haulage of products in Michigan includes 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, 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 Washington consists of wood chips, lumber, minerals,
cement and various agricultural products. The Company's haulage of products in
Chile consists of copper, iron ore, limestone and other commodities. The
Company's haulage of products on Vancouver Island, British Columbia, Canada
consists of forest/paper products, mineral, and chemical products. A rail
passenger service is also being operated on Vancouver Island, as was prior to
the formation of ENR.
RESULTS OF NORTH AMERICAN RAILROAD OPERATIONS
The discussion of results of operations that follows reflects the
consolidated results of the Company's North American railroad operations for the
three months ended March 31, 1999 and 1998. The results of North American
railroad operations include the operations of ENR and VCRR from January 1, 1999
to March 31, 1999. As a result, the results of operations for the three months
10
<PAGE> 13
ended March 31, 1999 are not comparable to the corresponding period of the prior
year in certain material respects.
The following table sets forth the operating revenues and expenses for
the Company's North American railroad operations for the periods indicated. All
results of operations discussed in this section are for the Company's North
American railroads only, unless otherwise indicated (in thousands).
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
-------------------------
1999 1998
------- -------
<S> <C> <C>
Revenue:
Transportation revenue $ 5,219 $ 3,474
Other revenue 273 125
------- -------
Total revenue 5,492 3,599
------- -------
Operating expenses:
Maintenance of way 815 526
Maintenance of equipment 261 184
Transportation 1,268 823
Equipment rental 112 78
General and administrative 1,051 652
Depreciation and amortization 500 354
------- -------
Total operating expenses 4,007 2,617
------- -------
Operating income 1,485 982
Interest and other expenses 765 698
------- -------
Income before income taxes $ 720 $ 284
======= =======
</TABLE>
COMPARISON OF NORTH AMERICAN RAILROAD OPERATING RESULTS FOR THE THREE MONTHS
ENDED MARCH 31, 1999 AND 1998.
OPERATING REVENUES. Transportation revenue increased by $1.7 million, or
50.2%, to $5.2 million for the three months ended March 31, 1999 from $3.5
million for the three months ended March 31, 1998. The increase was primarily
due to increased carloads. The North American transportation revenue per carload
increased to $325 from $314 primarily due to the addition of ENR which receives
a higher per carload rate than the Company's other railroads. North American
carloads handled totaled 14,909 for the three months ended March 31, 1999, an
increase of 4,068, or 37.5%, compared to 10,841 carloads in the prior year
period. The increase was partially due to the acquisition of ENR which moved
1,845 carloads for the three-month period ended March 31, 1999. The Company's
"same railroad" car loadings increased by 8% from the first quarter of 1998 to
the first quarter of 1999.
Other revenues increased by approximately $0.1 million, or 119.7%, to
$0.3 million for the three months ended March 31, 1999 from $0.1 million for the
three months ended March 31, 1998. Other revenues for the three months ended
March 31, 1999 and 1998 consist of gain on sales of railroad assets, railroad
lease and rental income and other miscellaneous income.
11
<PAGE> 14
OPERATING EXPENSES. Operating expenses increased by approximately $1.4
million, or 53.1%, to $4.0 million for the three months ended March 31, 1999
from $2.6 million for the three months ended March 31, 1998. The increase was
primarily due to the acquisition of ENR which had $1.0 million in operating
expenses for the three months ended March 31, 1999. Operating expenses, as a
percentage of transportation revenue, were 76.7% and 75.3% for the three months
ended March 31, 1999 and 1998, respectively. The increase was primarily due to
start up costs at ENR. Management anticipates the operating ratio to decrease
slightly over the next 12 months based upon operating efficiencies that have
been implemented at ENR.
Maintenance of way expenses increased by approximately $0.3 million, or
54.9%, to $0.8 million for the three months ended March 31, 1999 from $0.5
million for the three months ended March 31, 1998. The increase was primarily
due to maintenance of way expenses at ENR of $0.2 million for the three months
ended March 31, 1999.
Maintenance of equipment expenses increased by approximately $0.1 million
, or 41.8%, to $0.3 million for the three months ended March 31, 1999 from $0.2
million for the three months ended March 31, 1998. The increase was primarily
due to an increase in the Company's locomotive and railcar fleet from 1998 to
1999.
Transportation expense increased by approximately $0.5 million, or 54.1%,
to $1.3 million for the three months ended March 31, 1999 from $0.8 million for
the three months ended March 31, 1998. The increase is due to the transportation
expenses at ENR of $0.3 million and direct costs related to the increased car
loads moved at the other railroads.
Equipment rental remained fairly constant at $0.1 million for the three
months ended March 31, 1999 and 1998.
Selling, general and administrative expenses increased by approximately
$0.4 million, or 61.2%, to $1.1 million for the three months ended March 31,
1999 from $0.7 million for the three months ended March 31, 1998. The increase
was primarily due to the selling, general and administrative expenses at ENR and
VCRR of $0.2 million and $0.1 million, respectively, for the three months ended
March 31, 1999.
INTEREST AND OTHER EXPENSES. Interest and other expenses increased by
approximately $0.1 million, or 9.6%, to $0.8 million for the three months ended
March 31, 1999 from $0.7 million for the three months ended March 31, 1998.
INTERNATIONAL RAILROAD OPERATIONS
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 Empresa de Transporte Ferrovario, S.A. ("Ferronor").
Ferronor owns and operates approximately 1,400 miles of rail line serving
northern Chile. The Company was joined in the purchase of Ferronor by Andres
Pirazzoli y Cia, Ltda. ("APCO"), a 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
12
<PAGE> 15
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.
The following table sets forth the operating revenues and expenses for
the Company's international railroad operations for the periods indicated. All
results of operations discussed in this section are for the Company's
international railroads only, unless otherwise indicated (in thousands).
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
-----------------------------
1999 1998
----------- ------------
<S> <C> <C>
Revenue:
Transportation revenue $ 4,069 $ 2,107
Other revenue 150 21
-------- ---------
Total revenue 4,219 2,128
-------- ---------
Operating Expenses:
Transportation 2,447 1,118
General and administrative 549 446
Depreciation and amortization 273 96
-------- ---------
Total operating expenses 3,269 1,660
-------- ---------
Operating income 950 468
Other income (expense) (225) 86
Minority interest in earnings (365) (262)
-------- ---------
Income before income taxes $ 360 $ 292
======== =========
</TABLE>
COMPARISON OF INTERNATIONAL RAILROAD OPERATING RESULTS FOR THE THREE MONTHS
ENDED MARCH 31, 1999 AND 1998.
OPERATING REVENUES. Transportation revenue increased by $2.0 million, or
93.1%, to $4.1 million for the three months ended March 31, 1999 from $2.1
million for the three months ended March 31, 1998. Ferronor's carloads handled
totaled 21,242 for the three months ended March 31, 1999, an increase of 12,205,
or 135.1%, compared to 9,037 carloads in the three months ended March 31, 1998.
The increase in both carloads and revenue is due to Ferronor commencing movement
of iron ore out of the El Algarrabo mine in late March 1998 and the Los
Colorados mine in July 1998.
Other revenues increased by approximately $129,000, or 614.3%, to
$150,000 for the three months ended March 31, 1999 from $21,000 for the three
months ended March 31, 1998. The increase is related to easement sale in the
first quarter of 1999.
OPERATING EXPENSES. Operating expenses increased by approximately $1.6
million, or 96.9%, to $3.3 million for the three months ended March 31, 1999
from $1.7 million for the three months ended March 31, 1998. The increase was
due to Ferronor commencing movement of iron ore out of the El Algarrabo mine in
late March 1998 and the Los Colorados mine in July 1998. Operating
13
<PAGE> 16
expenses, as a percentage of transportation revenue, were 80.3% and 78.8% for
the three months ended March 31, 1999 and 1998, respectively.
OTHER INCOME (EXPENSE). Other income (expense) increased by approximately
$0.3 million, or 361.6%, to $(0.2) million for the three months ended March 31,
1999 from $0.1 million for the three months ended March 31, 1998. The increase
is primarily due to interest on long term debt project funding.
TRAILER MANUFACTURING OPERATIONS
The discussion of results of operations that follows reflects the results
of Kalyn/Siebert, Inc. ("KSI") and Kalyn/Siebert Canada ("KSC") for the periods
indicated.
KSI, located in Gatesville, Texas, was established in 1968 and
manufactures a broad range of specialty truck trailers. KSI products are
marketed to customers in the construction, trucking, agricultural, railroad,
utility and oil industries. In addition, a substantial portion of KSI's sales
are to the military and several other local and federal government agencies.
Government sales represented approximately 44.1% of KSI's sales for the first
three months of 1999 and 29.6% of total manufacturing sales for the first three
months of 1999. Management anticipates that the percentage of sales to
government agencies will remain relatively constant over the next several years
based upon contracts that KSI entered into with such entities. KSC, located in
Trois Rivieres, Quebec, was established in 1985 and manufactures bulk-hauling
truck trailers. KSC products are marketed to the solid waste, agricultural and
construction industries.
KSI's manufacturing operations are conducted in thirteen Company owned
buildings, totaling approximately 198,000 square feet on a 25.5 acre site, which
were constructed over the period 1969 to 1997. KSI 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 KSI trailer design.
KSI contracts out any necessary machining.
KSC's manufacturing operations are conducted in two Company owned
buildings, totaling approximately 150,000 square feet on a 36.7-acre site.
COMPARISON OF OPERATING RESULTS OF TRAILER MANUFACTURING FOR THE THREE MONTHS
ENDED MARCH 31, 1999 AND 1998
The following table sets forth the income and expense items for the three
months ended March 31, 1999 and 1998 and the percentage relationship of income
and expense items to net sales for the periods indicated (in thousands):
14
<PAGE> 17
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
-----------------------------------------------------
MARCH 31, 1999 MARCH 31, 1998
<S> <C> <C> <C> <C>
Net sales $ 10,418 100.0% $ 8,583 100.0%
Cost of goods sold 7,717 74.1% 6,192 72.1%
-------- ------ ------- -------
Gross profit 2,701 25.9% 2,391 27.9%
Selling, general and
administrative expenses 833 8.0% 789 9.2%
Depreciation and amortization 255 2.4% 195 2.3%
-------- ------ ------- -------
Income from operations 1,613 15.5% 1,407 16.4%
Other income (expense) 20 0.2% (71) (0.8%)
-------- ------ ------- -------
Net Income Before Taxes $ 1,633 15.7% $ 1,336 15.6%
======== ====== ======= =======
</TABLE>
NET SALES. Net sales increased by approximately $1.8 million, or 21.4%,
to $10.4 million for the three months ended March 31, 1999 from $8.6 million for
the three months ended March 31, 1998. The net sales increase consisted of an
increase of $0.2 million in KSI's sales and $1.6 million in KSC's sales. The
increase was primarily due to trailers produced in the KSC facility acquired in
April 1998. KSI sold 194 trailers for the three months ended March 31, 1999 and
198 trailers for the three months ended March 31, 1998. KSC sold 103 trailers
for the three months ended March 31, 1999 and 33 trailers for the three months
ended March 31, 1998. KSI's average price per trailer sold was approximately
$38,300 for the three months ended March 31,1999 and $32,800 for the three
months ended March 31, 1998. KSC's average price per trailer sold was
approximately $31,500 for the three months ended March 31,1999 and $43,200 for
the three months ended March 31, 1998. Sales to governmental agencies
represented 44.1% and 41.6% of KSI's net sales for the three months ended March
31, 1999 and 1998, respectively. The trailer manufacturing division had a
backlog of orders consisting of approximately $19.8 million at March 31, 1999
compared to $23.1 million at March 31, 1998.
COST OF GOODS SOLD. Cost of goods sold increased by approximately $1.5
million, or 24.6% to $7.7 million for the three months ended March 31, 1999 from
$6.2 million for the three months ended March 31, 1998. The cost of goods sold
increase consisted of an increase of $0.1 million in KSI's cost of goods sold
and an increase of $1.4 million in KSC's cost of goods sold. Cost of goods sold
was 74.1% of net sales for the three months ended March 31, 1999 compared to
72.1% for the three months ended March 31, 1998. KSI's and KSC's cost of goods
sold were 69.3% and 83.8%, respectively, for the three months ended March 31,
1999, compared to 70% and 80% for the three months ended March 31, 1998. KSC's
cost of goods sold percentage was higher in 1999 due to the utilization of the
new facility being at a lower rate than the old KSC facility.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses remained fairly constant at $0.8 million for the three
months ended March 31, 1999 and 1998. KSI's and KSC's selling, general and
administrative expenses were $0.6 million and $0.2 million, respectively, for
the three months ended March 31, 1999.
15
<PAGE> 18
CORPORATE OVERHEAD
CORPORATE OVERHEAD. Corporate overhead, which benefits all of the
Company's segments, has not been allocated to the business segments for this
analysis. Corporate overhead services include overall strategic planning,
marketing, accounting, legal services, finance, cash management, payroll,
engineering and tax return preparation. The Company believes that this
presentation will facilitate a better understanding of the 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, remained fairly constant at $1.0 million for the three months ended
March 31, 1999 and 1998.
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 three months ended March 31, 1999.
Cash used in investing activities was $32.7 million for the three
months ended March 31, 1999. The Company's main use of cash during the first
three months of 1999 was an $18.5 million deposit on the Freight Victoria
acquisition and for the purchase of property, plant and equipment costing
approximately $13.5 million. Approximately $10.8 million of these purchases were
for the purchase of the assets of the E&N Railway.
The Company's cash provided by financing activities was $27.3 million
for the three months ended March 31, 1999 consisting of the net proceeds of
approximately $12.0 million from the private placement of restricted common
stock and $4.1 million from the sale of preferred stock. In addition, the
Company's net borrowings increased by $10.0 million primarily due to the above
mentioned purchase of E&N assets.
The Company's long term debt represents financing of property and
equipment, as well as the acquisition financing for many of the Company's
subsidiaries. Certain of this indebtedness was refinanced through the Company's
revolving line of credit (the "Revolver") with National Bank of Canada. The
Revolver is collateralized by substantially all of the assets of the Company and
certain of its subsidiaries.
On April 14, 1999 , the Company's revolving line of credit ("Revolver")
was increased from $55 million to $85 million by National Bank of Canada. The
Revolver bears interest, at the option of the Company, at either the bank's
prime rate plus 0.25% or the one, three or six month LIBOR plus 2.5%. The
maturity date of the Revolver was extended to April 2002.
As of March 31, 1999, the Company had working capital of $12.8 million
compared to
16
<PAGE> 19
working capital of $14.6 million as of December 31, 1998. Cash on hand as of
March 31, 1999 was $2.6 million compared to $5.8 million as of December 31,
1998. The Company's cash flows from operations historically have 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 flows 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 $2.5 million and capital expenditures at KSI of approximately $0.3
million. In addition, the Company anticipates capital expenditures of
approximately $10.5 million over the next three years related to new Ferronor
contracts received since its acquisition by the Company. Ferronor closed on a
debt financing in the first quarter of 1999 that will be used to fund certain of
the capital expenditures. Additionally, Ferronor has a commitment letter to fund
the remainder of the expansion and anticipates closing on this financing later
in 1999. The Company anticipates spending approximately $1.0 million over the
next six months to refurbish the office building that it purchased in July 1998.
The Company anticipates financing this project through its Revolver. 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, the
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. As
of May 11, 1999, the Company had approximately $3.0 million of availability
under the Revolver.
INFLATION
Inflation in recent years has not had a significant impact on the
Company's operations. The Company believes that inflation will not adversely
affect the Company in the future unless it increases substantially and the
Company is unable to pass through such increases in its freight rates and
trailer prices.
IMPACT OF YEAR 2000
The "Year 2000 Issue" is the result of computer programs that were
written using two digits rather than four to define the applicable year. If the
Company's computer programs with date-sensitive functions are not Year 2000
compliant, they may recognize a date "00" as the Year 1900 rather than the Year
2000. This could result in a system failure or miscalculations causing
17
<PAGE> 20
disruptions of operations, including, among other things, a temporary inability
to process transactions, inability to interchange information with connecting
railroads or engage in similar normal business activities.
Many of our systems and related software are currently Year 2000
compliant and we have a program in place designed to bring the remaining
software and systems into Year 2000 compliance in time to minimize any
significant detrimental affect on operations. We are utilizing internal
personnel and outside vendors to identify Year 2000 problems, modify and/or
update programs and hardware and test the modifications.
We rely on third parties, particularly the Class I railroads, for much
of our information in our domestic rail operations. In addition, our trailer
manufacturing segment relies heavily on third party suppliers for its raw
materials. We have initiated efforts to evaluate the status of these suppliers'
efforts and to determine alternatives and contingency plan requirements. An
inability of a connecting railroad to process information could cause delays in
services to customers and the inability of the Company to invoice and collect on
shipments. Failure of a third party supplier to deliver materials to our
manufacturing facilities could cause either a slow down in production and/or a
temporary shut down of the facility.
The total costs associated with required modifications to become Year
2000 compliant is not expected to be material to the Company's financial
position. The estimated total cost of the Year 2000 Project is approximately
$0.25 million. The total amount expended through March 31, 1999 is approximately
$0.2 million.
The failure to correct a material Year 2000 problem could result in an
interruption in, or failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the Year 2000 problem, resulting in part from the
uncertainty of the Year 2000 readiness of third party suppliers and customers,
the Company is unable to determine at this time whether the consequences of Year
2000 failures will have a material impact on the Company's results of
operations, liquidity or financial condition. The Company believes that, with
the implementation of new business systems and completion of the program as
scheduled, the possibility of significant interruptions of normal operations
should be minimized.
Readers are cautioned that forward-looking statements contained in this
Impact of Year 2000 discussion should be read in conjunction with the Company's
disclosures under the heading "Cautionary Statement for Purposes of the "Safe
Harbor" Provisions of the Private Securities Litigation Reform Act of 1995"
which follows below in this section.
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
18
<PAGE> 21
statements" within the meaning of Section 27A of the Securities Act of 1933, 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: statements regarding further growth in transportation-related assets;
the acquisition of additional railroads and other transportation-related
companies; the increased usage of the Company's existing rail lines; the growth
of gross revenues; and the sufficiency of the Company's cash flows 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 limitation, the following: decline in demand for
transportation services; the effect of economic conditions generally and
particularly in the markets served by the Company; the Company's dependence upon
obtaining future government contracts; 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; a decline in the market
acceptability of railroad services; an organization or unionization of a
material segment of the Company's employee base; the effect of competitive
pricing; the inability to integrate acquired businesses; and the regulation of
the Company by federal, state, local and foreign regulatory authorities. Any
material adverse change in the financial condition or results of operations of
KSI would have a material adverse impact on the Company. Results actually
achieved thus may differ materially from expected results included in these
statements.
19
<PAGE> 22
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In December 1998 and January 1999, the Company sold an aggregate of 468,000
shares of its Series A Convertible Redeemable Preferred Stock, $.01 par value
(the "Series A Preferred Stock"), in a private offering to accredited investors
for an aggregate purchase price of $11,610,000 pursuant to Section 4(2) and/or
3(b) of the Securities Act of 1933, as amended (the "Securities Act"), and
Regulation D promulgated thereunder. The Company paid aggregate concessions and
fees of $822,700 to the placement agent in connection with the offering. The
Series A Preferred Stock has a liquidation value of $25.00 per share, pays
cumulative annual dividends of 7.5% payable in cash, semi-annually in arrears,
and is non-voting. The Series A Preferred Stock is convertible, at the option of
each holder, into shares of common stock at a conversion price of $8.25 per
share, subject to adjustment under certain circumstances. The Company is
required to redeem the outstanding shares of Series A Preferred Stock on
December 31, 2003, at a redemption price equal to the liquidation value, plus
accrued and unpaid dividends. The Company has the right to redeem the
outstanding shares of Series A Preferred Stock under certain circumstances.
In March 1999, the Company sold an aggregate of 1.4 million shares of
its common stock and warrants (the "1999 Warrants") to purchase 210,000 shares
of its common stock in a private offering to accredited investors for an
aggregate purchase price of $12.5 million pursuant to Section 4(2) and/or 3(b)
of the Securities Act and Regulation D promulgated thereunder. The Company paid
aggregate concessions and fees of $437,000 to the placement agent in connection
with the offering. The 1999 Warrants are exercisable during the one-year period
following consummation of the offering to purchase from the Company shares of
its common stock at $10.125 per share, subject to adjustment under certain
circumstances.
ITEM 5. OTHER INFORMATION
On April 30, 1999, the Company, through its wholly-owned subsidiary,
Freight Victoria, acquired certain assets of the V/Line Freight Corporation
railroad in Australia for an aggregate purchase price of $103 million (A$163.1
million). The transaction included the purchase of 107 locomotives and over
2,600 rail cars, which will provide rail freight service across southeastern
Australia over approximately 3,000 miles of track. The track and real estate are
being leased on a long-term basis from the Victorian government. Freight
Victoria commenced operations on May 1, 1999. As of March 31, 1999, the Company
had on deposit approximately $18.5 million toward this transaction.
20
<PAGE> 23
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Amended and Restated Articles of Incorporation of Registrant,
as amended(3)
3.2 By-laws of Registrant(1)
4.1 Form of Common Stock Rights Agreement, dated as of January 6,
1998, between the Registrant and American Stock Transfer &
Trust Company(10)
4.2 Certificate of Designation of Series A Convertible Redeemable
Preferred Stock
10.35 Employment Agreement between Robert B. Coward and
Kalyn/Siebert, Incorporated.(2)
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.(4)
10.41 Employment Agreement between Gary O. Marino and RailAmerica,
Inc.(11)+
10.43 Stock Option Agreement, dated November 11, 1994, between
RailAmerica, Inc. and Gary O. Marino(11)+
10.45 RailAmerica, Inc. 1995 Non-Employee Director Stock Option
Plan(3)
10.46 RailAmerica, Inc. 1995 Employee Stock Purchase Plan(3)
10.47 RailAmerica, Inc. Corporate Senior Executive Bonus Plan(3)+
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.(5)
10.55 Confidential Private Placement Memorandum dated September 20,
1996.(6)
10.56 Stock Purchase Agreement, dated as of September 20, 1996, by
and among Otter Tail Valley Railroad Company, Inc. and Dakota
Rail, Inc.(7)
10.57 First Amendment to Loan Agreement relating to $55,000,000
Revolving Line of Credit/Term Loan Facility, dated June 16,
1998, 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., Otter Tail
Valley Railroad Company, Inc., Minnesota Northern Railroad
Company, Inc., St. Croix Valley Railroad Company, and Delaware
Valley Railway Company, Inc.(12)
10.58 Agreement for sale of certain assets, rights and obligations
of Burlington Northern Railroad Company to Minnesota Northern
Railroad, Inc.(8)
10.59 RailAmerica, Inc. Nonqualified Deferred Compensation Trust(8)+
10.60 Nonqualified Deferred Compensation Agreement between
RailAmerica, Inc. and Gary O. Marino(8)+
10.63 RailAmerica, Inc. 1998 Executive Incentive Compensation
Plan(9)+
10.64 Asset Purchase Agreement, dated December 17, 1998, by and
among Canadian Pacific Railway Company and E & N Railway
Company (1998) Ltd., a subsidiary of RailAmerica, Inc.
21 Subsidiaries of Registrant
- ----------------------
(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. 2 on Form SB-2, dated
October 17, 1994, Registration No.
33-49026.
(3) 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.
(4) 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.
(5) 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.
(6) 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.
(7) 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.
(8) Incorporated by reference to the same exhibit number filed as part of
the Company's Form 10-KSB for year ended December 31, 1995, filed with
the Securities and Exchange Commission on March 31, 1997.
(9) Incorporated by reference to the Appendix A of the Company's Proxy
Statement filed with
21
<PAGE> 24
the Security and Exchange Commission on June 2, 1997.
(10) Incorporated by reference to exhibit No. 4.1 filed as part of the
Registrant's Statement on Form 8-A, filed with the Securities and
Exchange Commission on January 6, 1998.
(11) Incorporated by reference to the same exhibit number filed as part of
the Company's Form 10-Q for the quarter ended March 31, 1998, filed
with the Securities and Exchange Commission on May 14, 1998.
(12) Incorporated by reference to the same exhibit number filed as part of
the Company's Form 10-K for year ended December 31, 1998, filed with
the Securities and Exchange Commission on March 31, 1999.
+ Executive Compensation Plan or Arrangement.
(b) Reports on Form 8-K.
The Company filed the following reports on Form 8-K during the quarter
ended March 31, 1999:
1. A Current Report on Form 8-K, dated February 2, 1999, was filed in
connection with the Company's private offering of its Series A
Convertible Redeemable Preferred Stock.
2. A Current Report on Form 8-K, dated March 3, 1999, was filed in
connection with the Company's private offering of 1.4 million
shares of Restricted Common Stock.
22
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
RAILAMERICA, INC.
Date: May 14, 1999
By: /s/ Gary O. Marino
---------------------------
Gary O. Marino as Chairman,
Chief Executive Officer and as
Principal Financial Officer
<PAGE> 1
EXHIBIT 10.64
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made the 17th day of DECEMBER, 1998
BETWEEN:
CANADIAN PACIFIC RAILWAY COMPANY, a corporation incorporated
under the laws of Canada ("CPR") and THE ESQUIMALT AND NANAIMO
RAILWAY COMPANY, a corporation incorporated under the laws of
British Columbia ("E & N")
(collectively, the "Vendor")
OF THE FIRST PART,
AND:
E & N RAILWAY COMPANY (1998) LTD., a corporation incorporated
under the laws of British Columbia
(the "Purchaser")
OF THE SECOND PART
AND:
RAILAMERICA, INC., a corporation incorporated under the laws
of
Delaware
(the "Covenantor")
OF THE THIRD PART.
WHEREAS:
A. CPR, through its E & N Railfreight division, carries on railway
operations on its Victoria Subdivision and Port Alberni Subdivision
rail lines and the Wellcox Spur located on Vancouver Island, British
Columbia;
B. The Victoria Subdivision and Port Alberni Subdivision rail lines and
the Wellcox Spur are owned by E & N and are leased to CPR pursuant to a
lease dated July 1, 1912; and
C. The Vendor wishes to sell to the Purchaser (subject to certain
exclusions hereinafter defined) certain assets comprising the Port
Alberni Subdivision (from Parksville at mile 0.0 to Port Alberni at
mile 37.32) together with a portion of the Victoria Subdivision (from
or near Stockett at mile 68.1 to Parksville at mile 95.2) and a portion
of the Wellcox Spur (from mile 1.83 to the junction with the Victoria
Subdivision near Stockett, including both the north and south sections
of the wye) and to lease to the Purchaser certain assets comprising
portions of the Victoria Subdivision (from Victoria at mile 0.0 to
Stockett at mile 68.1 and from Parksville at mile 95.2 to Courtenay at
mile 139.75), and the Purchaser wishes to
<PAGE> 2
purchase and lease the same from the Vendor, all on the terms and
conditions herein contained.
THIS AGREEMENT WITNESSES THAT in consideration of the respective covenants,
agreements, representations and warranties of the parties hereinafter contained
and for other good and valuable consideration (the receipt and sufficiency of
which are hereby acknowledged by each party), the parties hereby agree as
follows:
1. INTERPRETATION
1.1 DEFINED TERMS. For the purposes of this Agreement, unless the context
otherwise requires, the following terms shall have the respective
meanings set out below and grammatical variations of such terms shall
have corresponding meanings:
1.1.1. "Agreements" has the meaning ascribed in subsection 2.1.2;
1.1.2. "Assignment and Assumption Agreement" means the agreement
referred to in subsection 10.2.6;
1.1.3. "Assumed Obligations" has the meaning ascribed in subsection
7.1;
1.1.4. "Board Orders" means orders issued by the Canadian
Transportation Agency pursuant to the CANADA TRANSPORTATION
ACT (Canada) and by any predecessors thereof with respect to
the Purchased Line, the Leased Lands and the Wellcox Yard;
1.1.5. "Business" means all railway operations carried on by the
CPR's E & N Railfreight division on Vancouver Island,
including the operation of the VIA Rail passenger service
described in the VIA-CPR Agreement;
1.1.6. "Business Day" means any day other than a Saturday, a Sunday
or any statutory holiday in the Province of British Columbia;
1.1.7. "Closing" means the completion of the transactions
contemplated in Section 2;
1.1.8. "Closing Date" means, subject to the provisions of subsection
6.1.3., December ___, 1998 or such other date as may be agreed
upon by the parties hereto;
1.1.9. "Collective Agreements" means the collective agreements and
related documents including all benefit agreements, letters of
understanding, letters of intent and other written
communications with bargaining agents which impose any
obligations upon the Vendor or set out the understanding of
the parties with respect to the meaning of
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<PAGE> 3
any provisions of the collective agreements entered into by
the Vendor with respect to the Business as listed in Schedule
T;
1.1.10. "Employees" means all of the unionized employees of the Vendor
who are employed in the operation of the Business, except for
mechanical employees responsible for maintenance of VIA
equipment, and who are subject to the Collective Agreements;
1.1.11. "Encumbrance" means any encumbrance, lien, charge, pledge,
mortgage, title retention agreement, security interest or
other financial encumbrance or any contract to create any of
the foregoing;
1.1.12. "Excluded Assets" means the assets listed in Schedule D;
1.1.13. "FOCCs" has the meaning ascribed in subsection 17.1.;
1.1.14. "Gap Lease Agreement" means the lease to be entered into at
the Closing in the form attached as Schedule L, as described
in subsection 9.1;
1.1.15. "GST" means any taxes payable under Part IX of the EXCISE TAX
ACT (Canada), as amended from time to time or under any
provincial legislation similar to Part IX of the EXCISE TAX
ACT (Canada);
1.1.16. "Lease Agreement" means the lease to be entered into in the
form attached as Schedule F with respect to the portions of
the Victoria Subdivision from Victoria at mile 0.0 to Stockett
at mile 68.1 and from Parksville at mile 95.2 to Courtenay at
mile 139.75;
1.1.17. "Leased Lands" means the railway lands which are the subject
of the Lease Agreement, the Reservation Lease Agreement and
the Gap Lease Agreement;
1.1.18. "Leased Property" has the meaning ascribed in section 2.1 of
the Lease Agreement;
1.1.19. "Losses" means, in respect of any matter, all claims, demands,
actions, causes of action, proceedings, suits, judgments,
awards, losses, damages, liabilities, interest, costs and
expenses (including, without limitation, reasonable legal and
other professional fees and disbursements) arising directly or
indirectly as a consequence of such matter;
1.1.20. "Material Contracts" means the agreements described in Part I
of Schedule C;
1.1.21. "Nanaimo Lands" means those lands located approximately
between miles 1.83 and 2.47 on the Wellcox Spur, which are
included in the Reservation Lease Agreement;
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1.1.22. "Nanoose Lands" means those lands located approximately
between miles 82.76 and 83.65 on the Victoria Subdivision,
which are included in the Reservation Lease Agreement;
1.1.23. "Permitted Encumbrances" means, collectively;
1.1.23.1. liens for taxes, assessments and governmental charges or
levies not at the time due and payable or delinquent or the
validity of which is being contested in good faith and
diligently by appropriate proceedings;
1.1.23.2. unregistered servitudes, easements, restrictions, rights of
way and other similar rights in real property or any interest
therein, provided the same are not of such nature as to
materially impair the Purchaser's ability to conduct railway
operations on the Purchased Line in a manner consistent with
that currently conducted by the Vendor;
1.1.23.3. undetermined or inchoate liens or charges in respect of real
property or any interest therein that are incidental to
current construction or current operations and statutory
encumbrances in respect of real property or any interest
therein claimed or held by any governmental authority which
have not at the time been filed or registered against the
title to the property or interest or served upon the Vendor
pursuant to law and which relate to obligations not due and
payable or delinquent;
1.1.23.4. security given in the ordinary course of the Business to any
public utility, municipality or government or to any
statutory or public authority in connection with the
provision of power, water or similar services consumed in the
operation of the Business (excluding, for greater certainty,
security for borrowed money);
1.1.23.5. any reservations, limitations, provisos and conditions
expressed in any original or other grant from the Crown with
respect to any real property or interest therein;
1.1.23.6. title defects or irregularities and statutory exceptions to
title which do not materially impair the Purchaser's ability
to conduct railway operations on the Purchased Line in a
manner consistent with that currently conducted by the
Vendor; and
1.1.23.7. the encumbrances identified in Schedule G;
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<PAGE> 5
1.1.24. "Port Alberni Subdivision" means the line of railway running
between Parksville at mile 0.0 and Port Alberni at mile 37.89,
in each case as designated on the Vendor's system map,
including, without limitation, the road bed, rails, ties and
tie plates affixed to the land and ballast, as well as all
switches, crossings, crossing signals, bridges, bridge
abutments, culverts, structures, fixed communications and
signal facilities, towers and apparatus, parking and storage
areas, depots, yards, shops, buildings, spur tracks, side
tracks, sidings, connections, other facilities, rights of way
and extra width property connected thereto or forming a part
thereof, if any, and all other fixtures and improvements
situate thereon;
1.1.25. "Prime Rate" for any day means the rate of interest expressed
as a rate per annum that the Bank of Montreal establishes at
its head office in Montreal as the reference rate of interest
that it will charge on that day for Canadian dollar commercial
demand loans to its commercial customers and which it at
present refers to as its "prime rate";
1.1.26. "Purchased Assets" has the meaning ascribed in subsection 2.1;
1.1.27. "Purchased Line" means the real property described in Schedule
A hereto comprising:
1.1.27.1. the Port Alberni Subdivision from Parksville at mile
0.0 to Port Alberni at mile 37.32;
1.1.27.2. a portion of the Victoria Subdivision from or near
Stockett at mile 68.1 to Parksville at mile 95.2,
excluding the Nanoose Lands; and
1.1.27.3. a portion of the Wellcox Spur from the junction with
the Victoria Subdivision at mile 0.0 to mile 1.83,
including both the north and south sections of the
wye, but excluding Lot 2 Plan 507 RW located
approximately between miles 0.68 and 0.75 and
excluding the Nanaimo Lands;
but excluding any of the Excluded Assets forming a part
thereof;
1.1.28. "Purchase Price" means the aggregate purchase price payable by
the Purchaser to the Vendor pursuant to subsection 2.2;
1.1.29. "Rail Agreements" means the agreements to be entered into at
the Closing in the forms attached as Schedules M, N, O, and X,
as described in Section 9;
1.1.30. "Reservation Lease Agreement" means the lease agreement to be
entered into at the Closing in the form attached as Schedule
W, as described in Subsection 9.2;
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<PAGE> 6
1.1.31. ""SCIC" means Seaspan Coastal Intermodal Corporation, the
operator of the marine rail ferry service between the mainland
and the Wellcox terminal;
1.1.32. "Songhees Railyard" means the railyard located in the Victoria
Subdivision, as outlined in the plan attached as Schedule U;
1.1.33. "Time of Closing" means the time for Closing set out in
subsection 10.1, or such other time on the Closing Date as the
Vendor and the Purchaser may mutually determine;
1.1.34. "Team Tracks License" means the license agreement to be
entered into at the Closing in the form attached as Schedule
J;
1.1.35. "Trestle License" means the license agreement to be entered
into at the Closing in the form attached as Schedule K;
1.1.36. "VIA-CPR Agreement" means the Train Service Agreement between
VIA Rail and CPR dated January 15, 1990;
1.1.37. "Via Rail Assignment Agreement " means that agreement to be
entered into at the Closing in the form attached as Schedule
O;
1.1.38. "Victoria Subdivision" means the line of railway running
between Victoria at mile 0.0 and Courtenay at mile 139.75, in
each case as designated on the Vendor's system map, including,
without limitation, the road bed, rails, ties and tie plates
affixed to the land and ballast, as well as all switches,
crossings, crossing signals, bridges, bridge abutments,
culverts, structures, fixed communications and signal
facilities, towers and apparatus, parking and storage areas,
depots, yards, shops, buildings, spur tracks, side tracks,
sidings, connections, other facilities, rights of way and
extra width property connected thereto or forming a part
thereof, if any, and all other fixtures and improvements
situate thereon;
1.1.39. "Wellcox Spur" means the rail spur line running from the
junction with the Victoria Subdivision at or near Stockett,
including both the north and south sections of the wye, to the
Wellcox Yard, as designated on the Vendor's system map,
including without limitation the road bed, rails, ties and tie
plates affixed to the land and ballast, as well as all
switches, crossings, crossing signals, bridges, bridge
abutments, culverts, structures, fixed communications and
signal facilities, towers and apparatus, parking and storage
areas, depots, yards, shops, buildings, spur tracks, side
tracks, sidings, connections, other facilities, rights of way
and extra width property connected thereto or forming a part
thereof, if any, and all other fixtures and improvements
situate thereon;
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<PAGE> 7
1.1.40. "Wellcox Statutory Right of Way" means the statutory right of
way agreement to be entered into at the Closing in the form
attached as Schedule E including the area outlined in red in
Schedule E which is the subject thereof; and
1.1.41. "Wellcox Yard" means the area which is the subject of the
Wellcox Statutory Right of Way.
1.2. TIME IS OF THE ESSENCE. Time is of the essence of this Agreement.
1.3. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties pertaining to the purchase and sale of the
Purchased Assets and supersedes all prior agreements, undertakings,
negotiations and discussions, whether oral or written, of the parties
(including the letter of intent dated September 17, 1998), and there
are no warranties, representations, covenants or agreements between the
Vendor and the Purchaser except as set forth herein.
1.4. PREVAILING AGREEMENT. In the event of any conflict between the
provisions of this Agreement and the provisions of any other agreement
entered into pursuant hereto, including without limitation, the
Schedules, the more specific provision of this Agreement or any other
agreement entered into pursuant hereto, including without limitation,
its Schedules shall prevail over the more general provision in the
determination of the respective rights and obligations of the parties
as between themselves.
1.5. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Province of British Columbia and the
laws of Canada applicable therein.
1.6. INVALIDITY OF PROVISIONS. Each of the provisions contained in this
Agreement is distinct and severable and a declaration of invalidity or
unenforceability of any such provision or part thereof by a court of
competent jurisdiction shall not affect the validity or enforceability
of any other provision hereof.
1.7. VENDOR'S KNOWLEDGE. Where any representation or warranty is expressed
to be given by the Vendor to the best of its knowledge or to its
knowledge or is otherwise expressed to be limited in scope to matters
known to the Vendor or of which the Vendor is aware, the Vendor thereby
confirms that it has made appropriate enquiries of (i) the Chief
Operating Officer of CPR's E & N Railfreight division; (ii) with
respect to subsections 3.4 and 3.10, the appropriate person or persons
in the Vendor's legal department; and (iii) with respect to subsection
3.12, the Vendor's Manager of Environmental Affairs, and such parties
have no actual knowledge of the incompleteness or inaccuracy of the
subject representation or warranty.
1.8. CURRENCY. Unless otherwise expressly provided, all dollar amounts
referred to herein shall be in Canadian dollars.
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<PAGE> 8
1.9. GENDER AND NUMBER. Words importing the masculine, feminine or neuter
gender shall be interpreted to include all genders and words in the
singular include the plural and vice versa, unless the context requires
otherwise.
1.10. AGREEMENT REFERENCES. The term "this Agreement" means this Agreement
including the Schedules hereto, as amended from time to time, and the
words "herein", "hereof", "hereunder" and other words of similar import
refer to this Agreement as a whole and not to any particular Section or
subsection, and any reference in this Agreement to a particular
"Schedule", "Section" or "subsection" is to the particular Schedule,
Section or subsection of this Agreement.
1.11. HEADINGS. The inclusion of headings for each Schedule to and Section
and subsection of this Agreement is for convenience only and shall not
affect the construction or interpretation of this Agreement.
1.12. SCHEDULES. The following Schedules are attached to and form a part of
this Agreement:
DESCRIPTION
SCHEDULE
A. Purchased Line
- --------------------------------------------------------------------------------
B. Equipment
- --------------------------------------------------------------------------------
C. Agreements and Material Contracts
- --------------------------------------------------------------------------------
D. Excluded Assets
- --------------------------------------------------------------------------------
E. Wellcox Statutory Right of Way
- --------------------------------------------------------------------------------
F. Lease Agreement
- --------------------------------------------------------------------------------
G. Permitted Encumbrances
- --------------------------------------------------------------------------------
H. Proceedings
- --------------------------------------------------------------------------------
I. Consents
- --------------------------------------------------------------------------------
J. Team Tracks License
- --------------------------------------------------------------------------------
K. Trestle License
- --------------------------------------------------------------------------------
L. Gap Lease Agreement
- --------------------------------------------------------------------------------
M. CPR Trackage Rights Agreement (Lease
Termination)
- --------------------------------------------------------------------------------
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<PAGE> 9
N. Traffic and Haulage Agreement
- --------------------------------------------------------------------------------
O. VIA Rail Assignment Agreement
- --------------------------------------------------------------------------------
P. Post-Closing Transfer of Titles - Purchased
Line
- --------------------------------------------------------------------------------
Q. Assignment and Assumption Agreement
- --------------------------------------------------------------------------------
R. Reservation of Timber Rights
- --------------------------------------------------------------------------------
S. Post-Closing Transfer of Titles - Leased
Lands
- --------------------------------------------------------------------------------
T. Collective Agreements
- --------------------------------------------------------------------------------
U. Songhees Railyard
- --------------------------------------------------------------------------------
V. Bill of Sale
- --------------------------------------------------------------------------------
W. Reservation Lease Agreement
- --------------------------------------------------------------------------------
X. CPR Trackage Rights Agreement (VIA)
- --------------------------------------------------------------------------------
Y. License Agreement - Use of Name
- --------------------------------------------------------------------------------
Z. Form of Legal Opinion - Counsel for the
Purchaser and the Covenantor
- --------------------------------------------------------------------------------
AA. Form of Legal Opinion - Counsel for the
Vendor
- --------------------------------------------------------------------------------
1.13. JOINT AND SEVERAL OBLIGATIONS. Except where expressly provided
otherwise, all representations, warranties, covenants, and promises of
the Vendor contained in this Agreement shall be deemed to be, and shall
for all purposes be, a representation, warranty, covenant or promise
(as the case may be) of CPR and of E & N, with the intent and effect
that both CPR and E & N will be jointly and severally bound thereby.
2. PURCHASE AND SALE OF ASSETS
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<PAGE> 10
2.1. ASSETS. Upon and subject to the terms and conditions of this Agreement,
the Purchaser hereby agrees to purchase from the Vendor and the Vendor
hereby agrees to sell, convey, assign, grant, transfer and set over to
the Purchaser, at the Closing, the following:
2.1.1. all of the Vendor's right, title and interest in and to the
Purchased Line;
2.1.2. all of the Vendor's right, title and interest in and to the
following Agreements:
2.1.2.1. the Material Contracts;
2.1.2.2. all track siding agreements, road crossing
agreements, leases, pipe/wire utilities crossing
agreements and other similar agreements related to
the Purchased Line, including those listed in Part II
of Schedule C;
2.1.2.3. all road crossing agreements and track siding
agreements related to the Leased Property, including
those listed in Part III of Schedule C; and
2.1.2.4. the other agreements listed in Part IV of Schedule C.
(collectively the "Agreements");
2.1.3. all of the Vendor's right, title and interest in and to the
equipment, machinery, furniture, trade fixtures, motor
vehicles, parts, chattels, inventories of supplies, equipment,
tools and materials located on the Victoria Subdivision, Port
Alberni Subdivision and Wellcox Spur and other tangible
personal property of the Vendor, all as set out in Schedule B
(the "Equipment");
2.1.4. the Wellcox Statutory Right of Way and the improvements
situate thereon as described in Schedule E;
2.1.5. the Lease Agreement, the Gap Lease Agreement and the
Reservation Lease Agreement, all with respect to the Leased
Lands and all improvements and fixtures situated thereon;
2.1.6. all of the Vendor's right, title and interest under all Board
Orders, excluding those which relate to the Leased Lands, if
and to the extent the same are assignable to the Purchaser;
2.1.7. the Team Tracks License;
2.1.8. the Trestle License; and
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<PAGE> 11
2.1.9. a license to use the phrase "E & N Railway" in connection with
the Purchaser's railway operations on the Port Alberni
Subdivision, the Victoria Subdivision and the Wellcox Spur
following the Closing as herein contemplated, in the form
attached as Schedule Y,
but specifically excluding the Excluded Assets (all of which
properties, assets and rights are collectively referred to in this
Agreement as the "Purchased Assets").
2.2. PURCHASE PRICE. The purchase price to be paid by the Purchaser to the
Vendor for the Purchased Assets shall be the sum of $15,150,000 (the
"Purchase Price").
2.3. PURCHASE PRICE ALLOCATION. The Purchase Price shall be allocated as
follows:
Land $6,000,000
Track and Related Improvements $8,500,000
Other Assets $ 650,000
2.4 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be payable by the
Purchaser to or to the order of the Vendor at the Closing by bank draft
drawn on a Canadian chartered bank or by wire transfer to an account
designated by the Vendor, at the Vendor's election.
3. REPRESENTATIONS AND WARRANTIES OF THE VENDOR
The Purchaser acknowledges the prior railway and other possible
industrial uses of the Purchased Line, the Leased Lands and the Wellcox
Yard and that it is the Vendor's intention to sell, lease and license
the Purchased Assets on an "as is, where is" basis at the Purchaser's
risk and peril. Except as expressly provided in this Agreement, the
Purchaser acknowledges that the Vendor makes no other representations
or warranties, express or implied, with respect to the Purchased Assets
and the transactions herein contemplated including, without limitation,
representations or warranties as to title, aboriginal claims and
interests, environmental matters, or the quality, merchantability or
fitness for a particular purpose of any of the Purchased Assets.
Subject to the foregoing and to any exclusions and limitations
disclosed in the Schedules and the documents referred to therein, the
Vendor represents and warrants to the Purchaser as follows and
acknowledges that the Purchaser is relying on such representations and
warranties in connection with the transactions contemplated herein:
3.1. CORPORATE EXISTENCE AND POWER. Each of CPR and E & N is a corporation
validly existing under the laws of its jurisdiction of incorporation
and has all necessary corporate power and capacity to own its Purchased
Assets, to enter into this Agreement and all other agreements entered
into pursuant hereto and to perform its obligations hereunder and all
other agreements entered into pursuant hereto.
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<PAGE> 12
3.2. CORPORATE APPROVALS. This Agreement and all other agreements entered
into pursuant hereto constitute legal, valid and binding obligations of
each of CPR and E & N enforceable against them in accordance with their
terms and all necessary corporate proceedings of each of CPR and E & N
have been taken to authorize them to complete the transactions herein
and therein contemplated.
3.3. NON-CONTRAVENTION. Subject to the fulfilment of the conditions set out
in subsection 6.2, the execution and delivery of this Agreement and all
other agreements entered into pursuant hereto by CPR and E & N and the
consummation of the transactions contemplated hereby and thereby will
not breach or violate any of the provisions of, or constitute a default
under or conflict with CPR's and E & N's constating documents or any
resolution of their shareholders or directors (or any committee
thereof), any contract to which either of them is a party or by which
they are bound, any judgment, decree, order or award of any court,
governmental body or arbitrator having jurisdiction over them, or any
applicable law, statute, ordinance, regulation or rule.
3.4. PROCEEDINGS. Except as disclosed in Schedule H, there are no actions,
law suits, claims, proceedings, investigations, arbitrations,
grievances, human rights complaints or judgments, outstanding or, to
the knowledge of the Vendor, pending or threatened by or against or
affecting the Vendor which relate to the Purchased Assets, or the
Vendor's operations thereon and which:
3.4.1 question the legality or propriety of the transactions
contemplated by this Agreement and all other agreements
entered into pursuant hereto; or
3.4.2 would prevent the Vendor from entering into this Agreement and
all other agreements entered into pursuant hereto and from
completing the transactions contemplated by this Agreement and
all other agreements entered into pursuant hereto; or
3.4.3 would materially impair the Purchaser's ability to conduct
railway operations on the Purchased Line, the Leased Lands or
the Wellcox Yard in a manner consistent with that currently
conducted by the Vendor.
3.5. TITLE TO PURCHASED ASSETS. The Purchased Assets are owned beneficially
and of record by the Vendor and at the Closing will be free and clear
of any Encumbrances created by or arising through the Vendor other than
the Permitted Encumbrances. Schedule A sets forth the legal
descriptions of the real property included in the Purchased Line. The
Vendor will transfer and convey to the Purchaser at the Closing, all
right, title and interest of the Vendor in and to the Purchased Line,
which interest shall be sufficient to enable the Purchaser to conduct
railway operations on the Purchased Line in a manner consistent with
that currently conducted by the Vendor.
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<PAGE> 13
3.6. NO EXPROPRIATION. None of the Purchased Assets are the subject of
expropriation proceedings by any federal, provincial, state, municipal
or other authority, nor has any notice or proceeding in respect thereof
been given or, to the best knowledge of the Vendor, commenced and the
Vendor is not aware of any intent or proposal to give any such notice
or commence any such proceeding.
3.7. NO DEFAULT UNDER MATERIAL CONTRACTS. All Material Contracts are in good
standing and in full force and effect and unamended except as disclosed
to the Purchaser and, to the knowledge of the Vendor, there is no
existing default nor any event, condition or occurrence (other than the
requirement of obtaining consents to the assignment herein
contemplated) which, after notice or lapse of time or both, would
constitute a default or breach under any Material Contract.
3.8. TAX REGISTRATIONS. Each of CPR and E & N is registered under Part IX of
the EXCISE TAX ACT (Canada) under registration nos. 100769694RT and
105210595RT, respectively. CPR is registered under the SOCIAL SERVICE
TAX ACT (British Columbia) under registration no. R000041.
3.9. CONTINUOUS RAILROAD. The railroad lines which are the subject of this
Agreement, the Lease Agreement, the Gap Lease Agreement, the
Reservation Lease Agreement and the Wellcox Statutory Right of Way
together provide a continuous railroad line without gap, gore or hiatus
between Courtenay and Victoria, British Columbia and between Parksville
and Port Alberni, British Columbia.
3.10. COMPLIANCE. In executing this Agreement and all agreements entered into
pursuant hereto, the Vendor, to its knowledge, has complied with:
3.10.1. all provisions of its constating documents and with all
federal laws and regulations; and
3.10.2. all applicable provincial laws and regulations, if any, the
breach of which may result in the imposition of a financial
encumbrance upon the Purchased Assets, the Leased Property or
the Wellcox Yard or any portion thereof,
with respect to the operation and maintenance of the Purchased Line,
the Leased Lands, or the Wellcox Yard or any portion thereof,
including, without limitation, the CANADA TRANSPORTATION ACT.
3.11. PUBLIC WORKS. There are no public works projects of any federal,
provincial or municipal government existing or, to the Vendor's
knowledge, pending with respect to the Purchased Line, the Leased Lands
or the Wellcox Yard. In the event that a public works project exists or
commences prior to the Closing Date, the Vendor shall be responsible
for the cost, if any, of the work performed on the public works project
prior to the Closing Date , and the
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<PAGE> 14
Purchaser shall be responsible for the cost, if any, of the work
performed on the public works project after the Closing Date.
3.12. ENVIRONMENTAL. To the knowledge of the Vendor, there are no
environmental site assessment reports which it has prepared or caused
to have been prepared in respect of the Purchased Line, the Leased
Lands, the Wellcox Yard or any portions thereof during the preceding
five years other than the Phase I Environmental Site Assessment reports
with respect to the Purchased Line (No.ME009351), the leased portion of
the Victoria Subdivision (No. ME009352) and the Wellcox Yard (No.
ME009303), in each case excluding the Excluded Assets, and the
additional environmental assessment reports listed therein, copies of
which have been provided or made available to the Purchaser. No
representation or warranty is made as to the accuracy or completeness
of any such reports. The Vendor represents and warrants that it has not
knowingly withheld any material adverse fact relating to the
environmental condition of the Purchased Assets or any environmental
assessment or survey of the Purchased Assets which discloses an
environmental condition which materially impairs the value or utility
of the Purchased Line, the Leased Lands or the Wellcox Yard, or which
would impose material remediation costs on the Purchaser, in each case
as the Purchased Line, the Leased Lands or the Wellcox Yard is
currently utilized by the Vendor.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND THE
COVENANTOR
4.1 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
represents and warrants to the Vendor as follows and acknowledges that
the Vendor is relying on such representations and warranties in
connection with the transactions contemplated hereby:
4.1.1 CORPORATE EXISTENCE AND POWER. The Purchaser is a corporation
validly existing under the laws of its jurisdiction of
incorporation and has all necessary corporate power and
capacity to enter into this Agreement and to perform its
obligations hereunder.
4.1.2 CORPORATE APPROVALS. The execution and delivery by the
Purchaser of this Agreement and the completion of the
transactions contemplated hereby have been duly authorized by
all necessary corporate proceedings on the part of the
Purchaser and this Agreement constitutes a legal, valid and
binding obligation of the Purchaser enforceable against it in
accordance with its terms.
4.1.3 NON-CONTRAVENTION. Subject to the fulfilment of the conditions
set out in subsection 6.1, the execution and delivery of this
Agreement and all other agreements entered into pursuant
hereto by the Purchaser and the consummation of the
transactions contemplated hereby and thereby will not breach
or violate any of the provisions of, or constitute a default
under or conflict with the Purchaser's constating documents or
any resolution of its shareholders or directors (or any
committee thereof), any
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<PAGE> 15
contract to which the Purchaser is a party, any judgment,
decree, order or award of any court, governmental body or
arbitrator having jurisdiction over the Purchaser, or any
applicable law, statute, ordinance, regulation or rule.
4.1.4 PROCEEDINGS. There is no action, lawsuit, claim, arbitration,
grievance, human rights complaint, judgment, investigation or
proceeding outstanding or, to the knowledge of the Purchaser,
pending or threatened by or against or affecting the Purchaser
which:
4.1.4.1 questions the legality or propriety of the
transactions contemplated by this Agreement
and all other agreements entered into
pursuant hereto; or
4.1.4.2 would prevent the Purchaser from entering
into this Agreement and all other agreements
entered into pursuant hereto and from
completing the transactions contemplated by
this Agreement and all other agreements
entered into pursuant hereto; or
4.1.4.3 would materially impair the Purchaser's
ability to conduct railway operations on the
Purchased Line, the Leased Lands or the
Wellcox Yard in a manner consistent with
that currently conducted by the Vendor.
4.1.5. FINANCIAL REPRESENTATIONS. The Purchaser has the financial
capacity to enter into and perform all of its obligations
under this Agreement and all other documents and agreements
contemplated hereby to be entered into by Purchaser at the
Closing and to satisfy as they arise all obligations of the
Purchaser contemplated by such agreements. Purchaser is not
aware of any existing circumstance that would prevent it from
discharging the Assumed Obligations in accordance with their
respective terms.
4.1.6. GST Registration. The Purchaser will, at the Closing Date, be
a registrant for the purposes of collecting and remitting GST.
4.1.7. INVESTMENT CANADA. The Purchaser is a non-Canadian within the
meaning of the INVESTMENT CANADA ACT (Canada).
4.2 REPRESENTATIONS AND WARRANTIES OF THE COVENANTOR. The Covenantor
represents and warrants to the Vendor as follows and acknowledges that
the Vendor is relying on such representations and warranties in
connection with the transactions contemplated hereby:
4.2.1 CORPORATE EXISTENCE AND POWER. The Covenantor is a corporation
validly existing under the laws of its jurisdiction of
incorporation and has all necessary corporate power and
capacity to enter into this Agreement and to perform its
obligations hereunder.
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4.2.2 CORPORATE APPROVALS. The execution and delivery by the
Covenantor of this Agreement and the completion of the
transactions contemplated hereby have been duly authorized by
all necessary corporate proceedings on the part of the
Covenantor and this Agreement constitutes a legal, valid and
binding obligation of the Covenantor enforceable against it in
accordance with its terms.
4.2.3 NON-CONTRAVENTION. Subject to the fulfilment of the conditions
set out in subsection 6.1, the execution and delivery of this
Agreement and all other agreements entered into pursuant
hereto by the Covenantor and the consummation of the
transactions contemplated hereby and thereby will not breach
or violate any of the provisions of, or constitute a default
under or conflict with the Covenantor's constating documents
or any resolution of its shareholders or directors (or any
committee thereof), any contract to which the Covenantor is a
party, any judgment, decree, order or award of any court,
governmental body or arbitrator having jurisdiction over the
Covenantor, or any applicable law, statute, ordinance,
regulation or rule.
4.2.4 PROCEEDINGS. There is no action, lawsuit, claim, arbitration,
grievance, human rights complaint, judgment, investigation or
proceeding outstanding or, to the knowledge of the Covenantor,
pending or threatened by or against or affecting the
Covenantor which:
4.2.4.1 questions the legality or propriety of the
transactions contemplated by this Agreement
and all other agreements entered into
pursuant hereto; or
4.2.4.2 would prevent the Covenantor from entering
into this Agreement and completing the
transactions contemplated by this Agreement
and all other agreements entered into
pursuant hereto; or
4.2.4.3 would materially impair the Purchaser's
ability to conduct railway operations on the
Purchased Line, the Leased Lands or the
Wellcox Yard in a manner consistent with
that currently conducted by the Vendor;
4.2.5. FINANCIAL REPRESENTATIONS. The Covenantor has the financial
capacity to enter into and perform all of its obligations
under this Agreement and to satisfy as they arise all
obligations of the Covenantor contemplated by this Agreement;
4.2.6. INVESTMENT CANADA. The Covenantor is a non-Canadian within the
meaning of the INVESTMENT CANADA ACT (Canada).
5. PRE-CLOSING MATTERS
5.1. VENDOR'S COVENANTS. The Vendor covenants and agrees that from
the date hereof to the Closing:
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5.1.1. OPERATION OF PURCHASED LINE: except as otherwise contemplated
by this Agreement, the Vendor will operate the Business in the
ordinary course consistent with past practice and not take, or
omit to take, any action without the Purchaser's written
consent which, if taken or omitted, would have a material
adverse effect on the Purchased Assets or the Business.
Without limiting the generality of the foregoing, no action
will be taken by the Vendor regarding the operation of the
Business with respect to any of the matters listed below,
without the prior written approval of the Purchaser:
5.1.1.1. the entering into of any lease for a term of one year
or more, whether as lessor or lessee;
5.1.1.2. the termination of any Material Contract by the
Vendor;
5.1.1.3. the entering into of any agreement, contract,
license, permit or authorisation other than renewals
or replacements of any Agreement existing at the date
hereof and other than any new Agreement entered into
in the ordinary course of the Business;
5.1.2. MAINTENANCE OF ASSETS: the Vendor will maintain all of the
Purchased Assets in the condition, repair and working order to
the standard maintained at the date of this Agreement,
reasonable wear and tear excepted. The Vendor will promptly
notify the Purchaser of any material loss or damage to any of
the Purchased Assets;
5.1.3. ACCESS: the Vendor will give the Purchaser and the Purchaser's
lawyers, accountants and other representatives reasonable
access during normal business hours and at mutually convenient
times to all of the Vendor's accounting, legal and other
records relating to the Business and the Purchased Assets. The
Vendor will provide copies of all information as may be
reasonably requested by the Purchaser from time to time;
5.1.4. CONSENTS: the Vendor will use all reasonable efforts to obtain
all necessary consents and approvals, as identified in
Schedule I, of governmental or regulatory authorities and
other parties, including without limitation, parties to the
Agreements, required to be obtained by the Vendor with respect
to the sale of the Purchased Assets contemplated by this
Agreement;
5.1.5. APPROVALS: the Vendor will cooperate with the Purchaser in
obtaining all necessary authority, including licenses,
permits, certificates, registrations, consents and other
approvals of governmental or regulatory authorities, which
would allow the Purchaser to conduct railway operations on the
Purchased Line and the Leased Lands
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from and after the Closing Date in a manner consistent with
that currently conducted by the Vendor.
5.2. PURCHASER'S COVENANTS. The Purchaser covenants and agrees that from the
date hereof to the Closing:
5.2.1 RAILWAY AUTHORITIES: the Purchaser will use all reasonable
efforts to obtain all necessary authority, including licenses,
permits, certificates, registrations, consents and other
approvals of governmental or regulatory authorities, including
without limitation, a letter from the appropriate provincial
governmental authority which shall be delivered at the Closing
that the final drafts of this Agreement, the Lease Agreement,
the Reservation Lease Agreement and the Gap Lease Agreement
are acceptable and will be approved pursuant to section 258 of
the B.C. RAILWAY ACT, to allow the Purchaser to conduct
railway operations on the Victoria Subdivision, the Port
Alberni Subdivision and the Wellcox Spur from and after the
Closing Date in a manner consistent with that currently
conducted by the Vendor;
5.2.2. CONSENTS: the Purchaser will cooperate with and assist the
Vendor to obtain the consents referred to in subsection 5.1.4.
The Purchaser acknowledges that the Vendor will be responsible
for all communications with third parties in this regard and
the Purchaser will not contact any such third party unless
requested by the Vendor; and
5.2.3. INVESTMENT CANADA APPROVAL: the Purchaser will promptly file
all such applications and documentation and take all such
actions required in order to comply with the provisions of the
INVESTMENT CANADA ACT (Canada) and will use all reasonable
efforts, including the provision of undertakings, if any,
reasonably or customarily requested by Investment Canada, to
obtain Investment Canada approval as set out in subsection 6.3
as soon as possible prior to the Closing Date.
6. CONDITIONS OF CLOSING
6.1. CONDITIONS IN FAVOUR OF THE PURCHASER. The obligation of the Purchaser
to complete the transactions herein contemplated at the Closing is
subject to the following conditions:
6.1.1. REPRESENTATIONS AND WARRANTIES: the representations and
warranties of the Vendor contained in this Agreement shall be
true and correct in all material respects at the date of this
Agreement and on the Closing Date as if made at and as of such
date and time;
6.1.2. COVENANTS: the Vendor shall have performed and complied with
all, and shall not be in breach under any of the covenants,
agreements and conditions required by this
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<PAGE> 19
Agreement to be performed or complied with by the Vendor prior
to or at the Closing Date;
6.1.3. MATERIAL LOSS: since the date of this Agreement there shall
have been no loss of or damage to the Purchased Assets which
has not been repaired and which would prevent the Purchaser
from conducting railway operations on the Purchased Line , the
Leased Lands and the Wellcox Yard in a manner consistent with
that currently conducted by the Vendor. If, prior to the
Closing, a material amount of the Purchased Assets are lost,
destroyed or substantially damaged by fire or other casualty,
so as to prevent the Purchaser from conducting railway
operations on the Purchased Line, the Leased Lands and the
Wellcox Yard in a manner consistent with that currently
conducted by the Vendor and same can be repaired or replaced
within 30 days of the Closing Date, the parties agree to
extend the Closing for a maximum of 30 days from the Closing
Date (unless otherwise mutually agreed), but if such loss or
destruction cannot be replaced on repaired within 30 days from
the Closing Date, either party may, at its option, elect not
to close, provided, however, that the Purchaser may elect to
close and accept the Purchased Assets without reduction of the
Purchase Price;
6.1.4. DELIVERY OF CLOSING DOCUMENTS: the Vendor shall have executed
and delivered to the Purchaser at the Closing all of the
documents, certificates, instruments and agreements listed in
subsection 10.2 hereof;
6.1.5. CONSENTS AND APPROVALS: the consents and approvals listed in
Schedule I shall have been obtained on or before the Closing
Date, or other arrangements satisfactory to the Purchaser in
this regard shall have been made in writing signed by the
Purchaser; and
6.1.6. CORPORATE APPROVALS: the Purchaser shall have obtained all
necessary approvals of its Board of Directors with respect to
the consummation of the transactions contemplated in this
Agreement.
The foregoing conditions are inserted for the exclusive benefit of the
Purchaser and may be waived in whole or in part by the Purchaser at any
time provided that the Purchaser shall not be entitled to any reduction
of the Purchase Price in the event of the non-fulfilment of any such
conditions. In the event that any of the foregoing conditions are not
fulfilled or performed on or before the dates set out above, the
Purchaser may terminate this Agreement upon notice to the Vendor, in
which case the Purchaser will thereupon be released from any and all
further obligations hereunder.
6.2. CONDITIONS IN FAVOUR OF THE VENDOR. The obligation of the Vendor to
complete the transactions contemplated by this Agreement is subject to
the following conditions:
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<PAGE> 20
6.2.1. REPRESENTATIONS AND WARRANTIES: the representations and
warranties of the Purchaser contained in this Agreement shall
be true and correct in all material respects at the date of
this Agreement and on the Closing Date as if made at and as of
such date and time;
6.2.2. COVENANTS: the Purchaser shall have performed and complied
with all, and shall not be in breach under any of the
covenants, agreements and conditions required by this
Agreement to be performed or complied with by the Purchaser
prior to or at the Closing;
6.2.3. LABOUR SETTLEMENT: on or before the Closing Date, the Vendor,
using commercially reasonable efforts, shall have negotiated
and concluded an agreement with each of the unions
representing the Employees, on terms satisfactory to the
Vendor, with respect to the Vendor's obligations to such
Employees from and after the Closing;
6.2.4. DELIVERY OF CLOSING DOCUMENTS: the Purchaser shall have
delivered to the Vendor at the Closing, all of the documents,
certificates, instruments and agreements listed in subsection
10.3; and
6.2.5. CONSENTS AND APPROVALS: the consents and approvals listed in
Schedule I shall have been obtained on or before the Closing
Date, or other arrangements satisfactory to the Vendor in this
regard shall have been made in writing signed by the Vendor.
The foregoing conditions are inserted for the exclusive benefit of the
Vendor and may be waived in whole or in part by the Vendor at any time.
In the event that any of the foregoing conditions are not fulfilled or
performed by the Closing Date, the Vendor may terminate this Agreement
upon notice to the Purchaser, in which case the Vendor will thereupon
be released from any and all further obligations hereunder.
6.3. MUTUAL CONDITIONS. The obligation of each of the Purchaser and the
Vendor to complete the transactions contemplated by this Agreement at
the Closing is subject to the following conditions:
6.3.1. INVESTMENT CANADA: the purchase of the Purchased Assets by the
Purchaser shall have been approved or deemed to have been
approved pursuant to the INVESTMENT CANADA ACT (Canada); and
6.3.2. RAILWAY AUTHORITIES: the Purchaser shall have obtained or
applied for all necessary authority, including licenses,
permits, certificates, registrations, consents and other
approvals of governmental or regulatory authorities, to allow
it to conduct railway operations on the Purchased Line and
Leased Lands from and after the Closing Date in substantially
the manner heretofore carried on by the Vendor and as herein
contemplated.
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The foregoing conditions are inserted for the mutual benefit of the
Vendor and the Purchaser and may be waived in whole or in part only if
jointly waived by both the Vendor and the Purchaser. In the event that
any of the foregoing conditions are not fulfilled on or before the
Closing Date, or prior to such time shall have become incapable of
being fulfilled, either the Vendor or the Purchaser may terminate this
Agreement upon notice to the other.
7. ASSUMED OBLIGATIONS
7.1. ASSUMED OBLIGATIONS. The Purchaser shall assume at and as of the
Closing Date and shall pay, discharge and perform, as the case may be,
from and after the Closing Date, all liabilities and obligations to be
performed by the Vendor on or after the Closing Date under or in
respect of the Agreements and the Board Orders (excluding those Board
Orders which relate to the Leased Lands), including those Agreements
entered into between the date hereof and the Closing, which by the
terms and conditions thereof are to be observed, paid, discharged or
performed at any time on or after the Closing Date and which have been
assigned to the Purchaser in accordance with this Agreement
(collectively the "Assumed Obligations").
7.2. INDEMNITY. The Purchaser shall indemnify and save the Vendor harmless
from and against any and all Losses suffered or incurred by the Vendor
as a result of or in connection with any failure of the Purchaser to
pay, discharge or perform any of the Assumed Obligations. The Vendor
shall promptly notify the Purchaser of any such Losses and shall
cooperate with the Purchaser in the defence of such Losses. For greater
certainty, the Purchaser shall not be responsible for any liabilities
and obligations incurred by the Vendor prior to the Closing Date which
have not been assumed by the Purchaser in accordance with this
Agreement and the Vendor shall indemnify and save the Purchaser
harmless from and against any and all Losses suffered or incurred by
the Purchaser as a result of or in connection with any failure of the
Vendor to pay, discharge or perform any liabilities and obligations
incurred by the Vendor prior to the Closing Date which have not been
assigned to the Purchaser in accordance with this Agreement.
8. EMPLOYEES
8.1. OBLIGATIONS UNDER COLLECTIVE AGREEMENTS. On the Closing Date, the
Purchaser shall assume all obligations and liabilities of the Vendor
under and in respect of, and shall become bound by, the Collective
Agreements with respect to those unionized Employees of the Business
who accept employment with the Purchaser. It is the intention of the
Purchaser to offer a minimum of twenty-five (25) jobs to unionized
Employees in accordance with the senority provisions of the Collective
Agreements. The Vendor shall not be responsible for any obligations or
liabilities of the employer under the Collective Agreements arising
from and after the Closing Date with respect to any unionized Employees
who accept employment with the Purchaser and the Purchaser shall
indemnify and hold the Vendor harmless from and
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against all Losses, including settlement payments, arising in respect
of the foregoing from and after the Closing Date.
8.2. PENSION OBLIGATIONS. The Purchaser shall assume the obligations of the
employer under the Collective Agreements with respect to pension plans
of those Employees who become employees of the Purchaser.
8.3. TRANSFER OF PENSION ASSETS. The Vendor shall pay out from the Canadian
Pacific Railway Company Pension Plan (the "Pension Plan"), in such
manner and at such time as may be directed by the Purchaser and each
Employee, an amount or assets in an amount equal to the actuarial
liability for the benefits which would have been payable under the
Pension Plan for services prior to the Closing Date with respect to all
Employees of the Vendor who accept employment with the Purchaser if the
"final average earnings" of those Employees under the Pension Plan had
been increased to levels projected in accordance with the actuarial
assumptions currently used in connection with the Pension Plan. The
amount of such actuarial liability shall otherwise be determined in
accordance with the actuarial assumptions currently used in connection
with the Pension Plan. The Vendor and the Purchaser will use all
reasonable efforts to determine the amount of such actuarial liability
as soon as possible after the Closing. In the event of any dispute over
the amount of such actuarial liability, the amount not in dispute shall
be transferred to the Purchaser's pension plan as soon as possible and
the disputed amount shall be settled by final and binding arbitration
pursuant to the COMMERCIAL ARBITRATION ACT (British Columbia), as
amended from time to time.
8.4. PURCHASER'S INDEMNITY. The Purchaser shall indemnify and save the
Vendor harmless from and against:
8.4.1. LOSSES: all Losses, including settlement payments, which may
be suffered or incurred by the Vendor arising out of or in
connection with any termination or constructive termination by
the Purchaser of any employee of the Vendor who accepts
employment with the Purchaser; and
8.4.2. CLAIMS: any claim by any employee of the Vendor who accepts
employment with the Purchaser for any benefits under the
Pension Plan, subject only to the completion of the Vendor's
obligations in subsection 8.3.
8.5. VENDOR'S LIABILITIES. The Purchaser will not assume and will not be
liable for any of the following:
8.5.1. SALARY, ETC.: all liabilities for salary, bonus, vacation pay
and other compensation and all liabilities under employee
benefit plans of the Vendor relating to employment of all
persons in the operation of the Business prior to the Closing
Date;
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8.5.2. TERMINATION CLAIMS: all severance payments, damages for
wrongful dismissal and related costs in respect of the
termination by the Vendor prior to the Closing Date with
respect to the employment of any employee who chooses not to
accept employment with the Purchaser; and
8.5.3. OTHER CLAIMS: all liabilities for claims for injury,
disability, death or worker's compensation arising from or
related to employment in the Business prior to the Closing
Date.
Notwithstanding subsection 8.1, the Vendor shall remain responsible for
any and all obligations and liabilities of the employer, including
without limitation, grievances, human rights complaints or other
similar actions, under the Collective Agreements which remain
outstanding as of the Closing Date or which may arise, based upon facts
and matters occurring, prior to the Closing Date and the Vendor shall
assume conduct of any and all proceedings arising therefrom and shall
indemnify and hold the Purchaser harmless from and against all Losses,
including settlement payments, arising in respect thereto. The Vendor
shall indemnify and save the Purchaser harmless from and against all
Losses, including settlement payments, which may be suffered or
incurred by the Purchaser arising out of or in connection with any
claims, law suits, actions, proceedings, investigations or inquiries
initiated by any and all Employees of the Vendor who are not selected
for employment by the Purchaser pursuant to section 8.1 of this
Agreement or who choose not to accept the Purchaser's offer of
employment.
9. RAIL AGREEMENTS
9.1. GAP LEASE AGREEMENT. At the Closing the Vendor and the Purchaser shall
enter into a lease with respect to the use by the Purchaser of those
certain lands located approximately between miles 0.68 and 0.75 on the
Wellcox Spur and those certain lands located approximately between
miles 37.32 and 37.89 on the Port Alberni Subdivision, in substantially
the form set out in Schedule L.
9.2. RESERVATION LEASE AGREEMENT. At the Closing the Vendor and the
Purchaser shall enter into a lease with respect to the use by the
Purchaser of the Nanaimo Lands and the Nanoose Lands, in substantially
the form set out in Schedule W, which lease shall include an option in
favour of the Purchaser to require the Vendor, subject to any statutory
restriction on the transfer of the Nanaimo Lands or the Nanoose Lands,
to transfer to the Purchaser all of the Vendor's interest in the
Nanaimo Lands and the Nanoose Lands for the sum of one dollar ($1.00).
9.3. TRACKAGE RIGHTS. At the Closing the Vendor and the Purchaser shall
enter into the following trackage rights agreements:
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9.3.1. CPR TRACKAGE RIGHTS AGREEMENT (LEASE TERMINATION): an
agreement in substantially the form set out in Schedule M with
respect to the use by the Vendor of the trackage on the
Wellcox Yard and on the portions of the Victoria Subdivision
and the Wellcox Spur included in the Purchased Line;
9.3.2. CPR TRACKAGE RIGHTS AGREEMENT (VIA): an agreement whereby the
Purchaser grants the Vendor certain rights to operate VIA's
passenger trains over the Victoria Subdivision, the Wellcox
Spur and the Wellcox Yard, in substantially the form set out
in Schedule X.
9.4. TRAFFIC AND HAULAGE AGREEMENT. At the Closing the Vendor and the
Purchaser shall enter into a traffic and haulage agreement with respect
to the haulage of cars in the account of CPR hauled by the Purchaser on
Vancouver Island, in substantially the form set out in Schedule N.
9.5. VIA RAIL ASSIGNMENT AGREEMENT. At the Closing, the Vendor and the
Purchaser shall enter into an agreement with respect to the performance
by the Purchaser of certain obligations of the Vendor pursuant to the
VIA-CPR Agreement, substantially in the form set out in Schedule O.
10. CLOSING
10.1. TIME AND PLACE OF CLOSING. The Closing shall occur at 10:00 a.m.
(Vancouver time) on the Closing Date, at the office of Lawson Lundell
Lawson & McIntosh in Vancouver, British Columbia, or at such other time
and place or in such other manner as the Vendor and the Purchaser may
mutually agree.
10.2. VENDOR'S DELIVERIES AT THE CLOSING. At the Closing, the Vendor shall
deliver to the Purchaser:
10.2.1. TRANSFER OF ASSETS: all necessary deeds, transfers, bills of
sale, assignments and other documents, in registrable form
where required, which are necessary or desirable to transfer,
assign and grant the Purchased Assets to and in the name of
the Purchaser;
10.2.2. RAIL AGREEMENTS: the Rail Agreements, duly executed by the
Vendor;
10.2.3. LICENSE AGREEMENTS: the Team Tracks License and the Trestle
License, duly executed by the Vendor;
10.2.4. LEASE AGREEMENTS: the Lease Agreement, Gap Lease Agreement and
Reservation Lease Agreement, duly executed by the Vendor;
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10.2.5. WELLCOX STATUTORY RIGHT OF WAY: the Wellcox Statutory Right of
Way, duly executed by the Vendor;
10.2.6. ASSIGNMENT AND ASSUMPTION AGREEMENT: an assignment and
assumption agreement ("Assignment and Assumption Agreement")
in substantially the form attached as Schedule Q, duly
executed by the Vendor;
10.2.7. LEGAL OPINION: a legal opinion from counsel for the Vendor, in
substantially the form attached as Schedule AA;
10.2.8. TITLE DOCUMENTS: originals (where available) or copies of
certificates, deeds and other title documents for the
Purchased Assets, including maps, mylars, and plans relating
to the Purchased Line, and copies of certificates, deeds, and
other title documents for the Leased Lands and the Wellcox
Yard, including copies of maps, mylars and plans, in each case
in the Vendor's possession or control; provided, however, that
the Vendor may retain copies of the original documents
relating to the Purchased Assets;
10.2.9. CONSENTS: all consents referred to in subsection 5.1.4 which
have been obtained up to the Time of Closing;
10.2.10. OFFICER'S CERTIFICATE: a certificate signed by an authorized
officer of CPR, dated the Closing Date, certifying on behalf
of the Vendor that at and as of the Closing, the
representations and warranties of the Vendor contained in this
Agreement are true and correct as if made at the Closing and
that all covenants, agreements and conditions required by this
Agreement to be performed or complied with by the Vendor prior
to or at the Closing have been performed and complied with,
except as otherwise specifically disclosed to the Purchaser;
10.2.11. ELECTIONS: the elections referred to in Section 12, duly
executed by the Vendor; and
10.2.12. OTHER DOCUMENTS: all such other documents, certificates,
instruments and agreements as are required or contemplated to
be delivered by the Vendor pursuant to this Agreement.
10.3. PURCHASER'S DELIVERIES AT CLOSING. At the Closing the Purchaser shall
deliver to the Vendor:
10.3.1. PURCHASE PRICE: payment of the Purchase Price in accordance
with Section 2 hereof;
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10.3.2. ASSIGNMENT AND ASSUMPTION AGREEMENT: the Assignment and
Assumption Agreement, duly executed by the Purchaser;
10.3.3. RAIL AGREEMENTS: the Rail Agreements, duly executed by the
Purchaser;
10.3.4. LICENSE AGREEMENTS: the Team Tracks License and the Trestle
License, duly executed by the Purchaser;
10.3.5. LEASE AGREEMENT: the Lease Agreement, Gap Lease Agreement and
Reservation Lease Agreement, duly executed by the Purchaser;
10.3.6. WELLCOX STATUTORY RIGHT OF WAY: the Wellcox Statutory Right of
Way, duly executed by the Purchaser;
10.3.7. LEGAL OPINION: a legal opinion from counsel for [the
Covenantor and] the Purchaser, in substantially the form
attached as Schedule Z;
10.3.8. OFFICER'S CERTIFICATE: a certificate signed by an authorized
officer of the Purchaser, dated the Closing Date, certifying
on behalf of the Purchaser that at and as of the Closing, the
representations and warranties of the Purchaser contained in
this Agreement are true and correct as if made at the Closing
and that all covenants, agreements and conditions required by
this Agreement to be performed or complied with by the
Purchaser prior to or at the Closing have been performed and
complied with, except as otherwise specifically disclosed to
the Vendor;
10.3.9. INVESTMENT CANADA: evidence of the approval or deemed approval
of the transactions contemplated herein under the INVESTMENT
CANADA ACT (Canada);
10.3.10. RAILWAY LICENSES: evidence of the receipt by Purchaser of all
necessary licenses, etc. as set out in subsection 6.3.2;
10.3.11. ELECTIONS: the elections referred to in Section 12, duly
executed by the Purchaser;
10.3.12. INSURANCE: evidence of insurance coverage in accordance with
the Lease Agreement; and
10.3.13. OTHER DOCUMENTS: all such other documents, certificates,
instruments and agreements as are required or contemplated to
be delivered by the Purchaser pursuant to this Agreement.
11. CONSENTS
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11.1 CONSENTS. Where the consent of a third party is required to permit the
transfer or assignment to the Purchaser of the Vendor's interest in the
Agreements or other document included in the Purchased Assets, the
assignment of those agreements and rights in respect of which the
required consent has not been received on or before the Closing Date
(the "retained agreements") will not be effective in each case until
the required consent has been received and such retained agreements
will be held by the Vendor following the Closing in trust for the
benefit and exclusive use of the Purchaser.
11.2 VENDOR'S COVENANTS. The Vendor shall account for all monies received
pursuant to the retained agreements with respect to the period after
the Closing and shall forward same to the Purchaser on a timely basis.
The Vendor shall continue to use all reasonable efforts to obtain the
required consents and shall only make use of such retained agreements
in accordance with the reasonable directions of the Purchaser. Upon
such consents being obtained, the Vendor shall forthwith assign such
retained agreements to the Purchaser. In the event any such consents
have not been obtained within six months after Closing, then the
subject retained agreement shall be deemed to be an Excluded Asset and
the Vendor shall be entitled to terminate or otherwise deal with such
retained agreement in its sole discretion without any adjustment to the
Purchase Price.
11.3 PURCHASER'S COVENANTS. The Purchaser agrees to cooperate with the
Vendor in such regard and to agree to all reasonable conditions to the
obtaining of such consents and to enter into such assignment and
assumption agreements as may be reasonably required by such third
parties to effect such consents, provided that the Vendor shall be
solely responsible for making any payments, including without
limitation, any assignment, fees, registration costs, or legal,
accounting or administrative fees which are payable in respect of or as
a condition precedent to the transfer or assignment of any retained
agreement.
11.4 VENDOR'S INDEMNITY. The Purchaser shall indemnify and save harmless the
Vendor and its directors, officers, employees, agents, successors and
assigns from and against any and all Losses which may be suffered or
incurred by or claimed against the Vendor or its directors, officers,
employees, agents, successors or assigns arising from or in connection
with the Purchaser's use of such retained agreements.
12. TAXES AND ELECTIONS
12.1. PAYMENT OF TAXES ON SALE AND TRANSFER. The Purchaser shall be
responsible for and shall remit and pay upon Closing, all property
purchase taxes, federal Goods and Services taxes, provincial sales
taxes and similar taxes and all duties and registration, transfer or
other fees payable in respect of the sale and transfer of the Purchased
Assets to the Purchaser. The Vendor shall be responsible for and pay
all taxes, if any, payable pursuant to the ESQUIMALT AND NANAIMO
RAILWAY BELT TAX ACT (British Columbia) in connection with the sale and
transfer of the Purchased Assets to the Purchaser.
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12.2. GST ELECTION. On the Closing Date the Purchaser and the Vendor shall
make a joint election contemplated under section 167 of the EXCISE TAX
ACT (Canada). Purchaser shall file such election in the manner and
within the time prescribed by the said Act and shall indemnify and hold
harmless Vendor from and against any Losses suffered by Vendor in the
event such election has not been validly made or filed.
12.3. TAX MINIMIZATION. The parties agree to cooperate in good faith to take
such steps as may be available to minimise (or eliminate) any taxes in
respect of the transactions contemplated by this Agreement in
accordance with applicable legislation or regulations, as may be
reasonably requested by either party. Each party agrees not to withhold
consent to any such steps as may be requested by the other party unless
such steps would adversely affect the financial or tax position of the
party.
12.4. DELINQUENT TAXES. The Vendor shall remain responsible for the payment
of any and all taxes, assessments, fines and penalties and governmental
charges or levies referred to in subsection 1.1.23.1 which arise prior
to the Closing Date and which, if being contested by the Vendor in good
faith and diligently by appropriate proceedings, are subsequently
resolved against the Vendor.
12.5. LIENS. The Vendor shall remain responsible for the payment and
discharge from title to the Purchased Line of all undetermined or
inchoate liens or charges referred to in subsection 1.1.23.3. which
right to claim of all undetermined or inchoate liens or charges in
respect of any fact or matter has arisen prior to the Closing Date.
13. POST CLOSING MATTERS
13.1. REMOVAL OF PERSONAL PROPERTY. For a period of thirty (30) days after
the Closing Date, the Purchaser shall permit the Vendor to remove
personal property constituting Excluded Assets from the Purchased Line
and the Leased Lands and Wellcox Statutory Right of Way. All such
removal shall be during normal business hours, shall be following
reasonable notice to the Purchaser and shall not unreasonably interfere
with the normal business of the Purchaser. Any such personal property
which is not removed by the Vendor within the time provided for by this
subsection 13.1 shall thereafter become part of the Purchased Assets
with no further adjustment of the Purchase Price.
13.2. VENDOR'S ACCESS TO RECORDS. The Purchaser agrees that, for a period of
six (6) years from the Closing Date, it will allow the Vendor
reasonable access to all records and documents provided by the Vendor
to the Purchaser relating to the Purchased Assets during normal
business hours and when requested make copies thereof at the Vendor's
expense. If the Purchaser shall desire to dispose of any of such
records and documents prior to the expiration of such six year period,
the Purchaser shall, prior to such disposition, give the Vendor a
reasonable opportunity, at the Purchaser's expense, to segregate and
remove such of those
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records as the Vendor may select. Notwithstanding the foregoing, the
Purchaser shall not be liable to the Vendor for any Losses, cost or
expenses of any nature directly or indirectly occasioned by any
accidental loss or destruction of any records or documents included in
the Purchased Assets, regardless of the cause of any such accidental
loss or destruction, and the Purchaser does not guarantee the accuracy
of any notations made by the Purchaser on such records and documents.
13.3. PURCHASER'S ACCESS TO RECORDS. The Vendor agrees that, for a period of
six (6) years from the Closing Date, it will allow the Purchaser
reasonable access to all records and documents pertaining to the
Purchased Assets and operation of the Purchased Line during normal
business hours and when requested make copies thereof at the
Purchaser's expense. If the Vendor shall desire to dispose of any of
such records and documents prior to the expiration of such six year
period, other than in the Vendor's ordinary course of business, the
Vendor shall, prior to such disposition, give the Purchaser a
reasonable opportunity, at Vendor's expense, to segregate and remove
such of those records as the Purchaser may select.
13.4. PURCHASED LINE TITLES. The Purchaser acknowledges that the Vendor does
not have title to three parcels of real property included in the
Purchased Line and identified in Schedule P. The Vendor agrees to use
all reasonable efforts to obtain title to such parcels in a timely
manner as soon as possible after the Closing and, if successful, to
forthwith execute and deliver all such documents and do such acts and
things as may be necessary to convey title to the subject parcels to
the Purchaser. Until title to the subject parcels has been transferred
to the Purchaser, the Vendor shall hold all of its right, title and
interest in the subject parcels in trust for the Purchaser. The Vendor
represents and warrants to the Purchaser that the Purchaser's inability
to acquire title to the subject parcels shall not interrupt the
Purchaser's use of such parcels for railway operations on the Purchased
Line or disrupt the continuity of the Purchased Line.
13.5. LEASED LANDS TITLES. The Purchaser acknowledges that the Vendor does
not have title to several parcels of real property included in the
Leased Lands and identified in Schedule S. The Vendor agrees to use all
reasonable efforts to obtain title to such parcels in a timely manner
as soon as possible after the Closing and, if successful, to forthwith
confirm to the Purchaser that such parcels are subject to and included
in the Lease Agreement. The Vendor represents and warrants to the
Purchaser that the Vendor's inability to acquire title to the subject
parcels shall not interrupt the Purchaser's use of such parcels for
railway operations on the Leased Lands or disrupt the continuity of the
railway line on the Leased Lands.
13.6. EXCLUDED LANDS. The Purchaser acknowledges that subdivision and/or
survey plans for the lands comprising the Excluded Assets referred to
in items 2 to 4 inclusive of Schedule D will not be completed before
the Closing. The Purchaser covenants and agrees to cooperate with the
Vendor so as to assist the Vendor in completing the same as soon as
possible following the Closing and to forthwith execute and deliver all
such documents and do such acts and things as may be necessary to
convey title to such Excluded Assets to the Vendor. Until title
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to such Excluded Assets has been transferred to the Vendor, the
Purchaser shall hold all of its right, title and interest in such
Excluded Assets in trust for the Vendor. The Vendor shall be
responsible for all costs associated with the subdivision and/or survey
plans and the said lands shall remain at the sole risk of the Vendor.
The Vendor shall pay to the Purchaser any costs associated with the
holding of the said lands in trust for the Vendor, including without
limitation, the Vendor's proportionate share of real property taxes.
13.7. LEASED LANDS. The Purchaser acknowledges that certain of the Leased
Lands consist of unsubdivided portions of lands and that, as such,
there is some doubt based upon Section 73 of the LAND TITLE ACT
(British Columbia) as to the validity of the Lease Agreement, with
respect to such unsubdivided lands. Each of the Purchaser and the
Vendor covenants and agrees with the other that it will not at any time
assert that the Lease Agreement is invalid or null and void, in whole
or in part, by virtue of Section 73 of the LAND TITLE ACT (British
Columbia). In the event that any third party challenges the validity of
the Purchaser's interest in any of such lands, the Vendor shall, at the
request of the Purchaser, cooperate with the Purchaser to either, at
the election of the Vendor:
13.7.1 subdivide the subject lands or otherwise obtain all necessary
approvals under the LAND TITLE ACT (British Columbia) to lease
such lands;
13.7.2 grant a statutory right of way over the subject lands; or
13.7.3 otherwise assure to the Purchaser, to the extent permitted by
applicable law, the Purchaser's ability to conduct railway
operations on such unsubdivided lands in accordance with the
terms and conditions of the Lease Agreement;
the costs of which, in each case, shall be paid equally by the Vendor
and the Purchaser.
13.8. RECORDS AND REPORTS: Within 45 days after the Closing, the Vendor shall
deliver to the Purchaser real estate and engineering drawings,
schematics, records and reports, inspections, tests and similar
documents relating to the construction, modification, inspection and
testing of the Purchased Line, Leased Lands and the Wellcox Yard in the
Vendor's possession or control; provided, however, that the Vendor may
retain copies of the foregoing with respect to the Purchased Line and
originals with respect to the Leased Lands and the Wellcox Yard.
14. FUTURE PASSENGER SERVICE
14.1. PASSENGER STATIONS. In the event that the VIA Rail passenger service is
discontinued on the Victoria Subdivision:
14.1.1. in order to allow the Purchaser an opportunity to
determine if it wishes to establish a new passenger
or commuter service, the Vendor agrees that for a
period of one year
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after the VIA Rail passenger service has been discontinued,
the Vendor shall not lease such portions of any of the
existing railway stations located at Duncan, Ladysmith,
Nanaimo, Parksville, Qualicum and Courtenay that would
reasonably be required for passenger ticketing and waiting
areas, other than pursuant to leases which may be terminated
by the Vendor on 90 days or less notice, provided that the
Vendor is the owner with respect to each station and,
14.1.2. the Vendor agrees, provided it is the owner with respect to
each station, to lease to the Purchaser reasonable ticketing
and waiting area space at each of the existing railway
stations at a rent and on terms to be agreed between the
parties, subject to space being available for lease to the
Purchaser at each such station at the time requested by the
Purchaser and also subject to all necessary regulatory
approvals including the HERITAGE RAILWAY STATIONS PROTECTION
ACT (Canada) being obtained. This shall only apply for a three
(3) year period following the VIA Rail passenger service being
discontinued. The Vendor shall have no obligation to the
Purchaser to maintain any of the stations either prior to or
after VIA discontinues passenger services.
14.2. SONGHEES RAILYARD. In the event that the Purchaser wishes to operate
any passenger or commuter service over the Victoria Subdivision in
addition to or in substitution for the existing VIA Rail passenger
service, then at the request of the Purchaser, CPR agrees to negotiate
with the Purchaser with a view to providing the Purchaser with a lease
over portions of the trackage and buildings in the Songhees Railyard
provided that:
14.2.1. the Songhees Railyard continues to be used or available for
use as a rail yard, as determined by CPR in its sole
discretion;
14.2.2. either the carshop or the roundhouse located in the Songhees
Railyard is available for use and occupancy by the Purchaser;
14.2.3. the rent for such premises shall be as mutually agreed between
the parties;
14.2.4. any such lease would be terminable by CPR at any time upon 90
days notice in the event CPR wishes to redevelop or sell the
Songhees Railyard;
14.2.5. all necessary regulatory approvals including the HERITAGE
RAILWAY STATIONS PROTECTION ACT (Canada) are obtained; and
14.2.6. any such lease would be based on an "as is" basis with no
obligation on CPR to repair.
15. ENVIRONMENTAL MATTERS
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15.1. IMPAIRED PARCELS. In the event that any of the Purchased Line or the
Leased Lands are determined, either before the Closing or during the
period of two years after the Closing, to contain any "hazardous
material" which was placed, held, located, released, discharged or
disposed of on, under or at the Purchased Line and the Leased Lands
prior to the Closing and which (i) materially impairs the value or
utility of the Purchased Line or the Leased Lands, or (ii) would
require material costs of remediation in accordance with applicable
environmental laws, in each case based upon the use of such lands as at
the Closing (in either case referred to herein as an "Impaired
Parcel"), then the Purchaser may at its option reconvey such lands, if
an owned parcel, or surrender its lease of such lands, if a leased
parcel, for one dollar ($1.00) to the Vendor delivered no later than 30
days after the second anniversary of the Closing Date. Neither the
Purchaser nor the Vendor shall be entitled to an adjustment in the
Purchase Price or an abatement in rent as a result of any such
reconveyance or surrender. For the purposes of this Section 15,
"hazardous material" means any hazardous substance or any pollutant or
contaminant, toxic or dangerous waste substance or material and
"hazardous material" shall also include materials or substances which
are found to be on, in or under the Purchased Line or the Leased Lands
or in the groundwater within the Purchased Line or the Leased Lands in
amounts exceeding levels determined to be acceptable by any
governmental or other body having administrative or regulatory
jurisdiction over the same, whether municipal, provincial or federal.
Notwithstanding the foregoing, the existence of coal or mine product
tailings (in moderate concentration), ties containing creosote (except
in a creosote tie burial hole), or leakage at any rail lubricator site
on any lands sold or leased to the Purchaser under this Agreement shall
not provide a basis for designating said lands an "Impaired Parcel".
15.2. VENDOR'S ACCESS. As a condition to the reconveyance or surrender of any
Impaired Parcel, Purchaser shall grant to the Vendor, for the benefit
of the Vendor, and its successors and assigns, a charge-free license,
easement or right of way on mutually acceptable terms and conditions
over such portion of the Purchased Assets as may be required for the
Vendor to gain free and adequate access to such Impaired Parcel from
public roads. No such license, easement or right of way shall be
required in the event that the Impaired Parcel already has adequate
access from public roads. In connection with the reconveyance or
surrender to the Vendor of any Impaired Parcel:
15.2.1. PURCHASER'S INDEMNITY: if any hazardous material was placed,
held, located, released, discharged or disposed of on, under
or at such Impaired Parcel during the period prior to the
Closing Date, then, for a period of five (5) years after the
Closing Date, the Vendor shall indemnify the Purchaser against
any third party claims made during such period relating to the
existence of such hazardous material on such Impaired Parcel,
as follows:
Years 1 - 3 - 100%; and
Years 4 - 5 - 75%
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of all Losses suffered or incurred by the Vendor.
15.2.2. VENDOR'S INDEMNITY: if any hazardous material was placed,
held, located, released, discharged or disposed of on, under
or at such Impaired Parcel during the period commencing on the
Closing Date and terminating on the date of the reconveyance
or surrender of such Impaired Parcel to the Vendor, then for a
period of five (5) years after the date of the reconveyance or
surrender the Purchaser shall indemnify the Vendor against any
third party claims made during such period relating to the
existence of any such hazardous material on such Impaired
Parcel, as follows:
Years 1 - 3 - 100%; and
Years 4 - 5 - 75%
of all Losses suffered by the Purchaser.
15.2.3. PURCHASER'S LIABILITIES: Except for Losses caused by the acts
or omissions of the Vendor, the Purchaser shall assume and
indemnify the Vendor against all other liabilities relating to
the ownership, occupancy and use of such Impaired Parcel,
including payment of all real property and other taxes
associated therewith and performance and discharge of all
Assumed Obligations relating to such Impaired Parcel and all
Losses which relate to or arise out of the Purchaser's
operations or presence on such Impaired Parcel from and after
the date of such reconveyance or surrender.
15.3. IMPAIRED PARCEL BOUNDARIES. If the Purchaser elects to reconvey or
surrender any Impaired Parcel, the Purchaser and the Vendor shall
negotiate, in good faith, to agree on the size, boundaries and shape of
such Impaired Parcel as well as any lands to be subject to a license,
easement or right of way required under subsection 15.2.
15.4. COSTS. The Vendor and the Purchaser shall each pay one-half of:
15.4.1. COSTS: the cost of any land surveys required in connection
with the reconveyance or surrender of any Impaired Parcel,
including any costs incurred for the division or subdivision
of any parcel of real property; and
15.4.2. TAXES ON FEES: any property purchase tax, sales tax, and
registration and filing fees in connection therewith.
Unless the Vendor agrees in writing otherwise, any Impaired Parcel
shall be reconveyed or surrendered to the Vendor in the same condition
conveyed to Purchaser pursuant hereto, normal wear and tear and
modifications for railway operations excepted.
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15.5. EASEMENT. If and to the extent that an Impaired Parcel which has been
returned to the Vendor is necessary for Purchaser's rail operations on
the Purchased Line or the Leased Lands, then at the time of
reconveyance or surrender to the Vendor, the Vendor shall grant to
Purchaser a charge-free license, easement, right of way or trackage
rights pursuant to which Purchaser shall have the exclusive right to
conduct rail operations thereon.
15.6 REMEDIATION.
15.6.1. AT VENDOR'S OPTION: notwithstanding subsection 15.1, as an
alternative to accepting reconveyance or surrender of an
Impaired Parcel from Purchaser, the Vendor may at its option
and expense elect to remediate any Impaired Parcel in
accordance with applicable environmental laws to a condition
which is sufficient for the purposes of railway operations
thereon, in which case Purchaser shall retain such Impaired
Parcel; and
15.6.2. REQUIRED BY GOVERNMENT: if at any time during the two year
period following the Closing Date any governmental or
regulatory authority requires remediation of an environmental
condition on, in or under any such Impaired Parcel retained by
the Purchaser and either initiates or threatens actions to
suspend, impede or restrict railroad operations on such
Impaired Parcel, or to levy fines or penalties against the
Purchaser in respect thereof, the Vendor shall remediate the
environmental condition, at its own expense, to the standards
and reasonable time frames required by that governmental
agency in order to allow Purchaser to resume railroad
operations or to remove any such impediment or restriction on
the Purchaser's railroad operations on such Impaired Parcel.
The Vendor shall indemnify and save harmless the Purchaser and
its directors, officers, employees, agents, successors and
assigns, from and against any and all Losses suffered or
incurred by the Purchaser or its directors, officers,
employees, agents, successors or assigns arising from or in
connection with the Vendor's failure to remediate such
Impaired Parcel as herein provided.
15.7. INFORMATION CONFIDENTIAL. The Vendor and the Purchaser shall keep
confidential any and all information regarding the environmental
condition of the Purchased Line, the Leased Lands and the Wellcox Yard
which is provided by one party to the other in connection with this
transaction and shall not disclose such information to any third party
without the written consent of the providing party, except to the
extent that such disclosure is required by law.
15.8. ENTIRE RIGHTS. Purchaser hereby covenants and agrees that the rights
granted to the Purchaser under this Section 15 constitute the exclusive
rights and remedies relating to the environmental condition of the
Purchased Assets that the Purchaser has or may exercise against the
Vendor and the Purchaser hereby waives any other rights or remedies it
has or may have against the Vendor with respect thereto. Subject to and
except as otherwise expressly provided in this Section 15, from and
after the Closing the Purchaser shall release, indemnify and save
harmless the Vendor and its directors, officers, employees, agents,
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tenants, successors and assigns, from and against any and all Losses
which may be suffered or incurred by or claimed against the Vendor or
its directors, officers, employees, agents, successors or assigns
arising from or in connection with the existence, or alleged existence,
of any hazardous material on, in or under the Purchased Line or the
Leased Lands at any time, whether arising before of after the Closing.
15.9. SITE PROFILE. The Purchaser hereby waives any right to receive from the
Vendor site profiles in respect of the Purchased Assets as provided
under Section 26.1(7) of the WASTE MANAGEMENT ACT (British Columbia).
15.10. WELLCOX YARD. The Vendor shall:
15.10.1. remove all scrap creosote ties stored at the Wellcox Yard on
the Closing Date within six (6) months after the Closing Date;
and
15.10.2. remove all contaminated soil being "bio-farmed" at the Wellcox
Yard on the Closing Date within three (3) years after the
Closing Date to the extent that such soil has not been
remediated and is still contaminated,
in each case at the sole cost and expense of the Vendor.
15.11. SONGHEES RAILYARD. The foregoing provisions of this Section 15 shall
not apply to the portion of the Leased Lands which run through the
Songhees Railyard, which portion of the Leased Lands shall be subject
to the same terms and conditions as regards the environmental condition
of such lands and the indemnities of the parties relating thereto as
are set out in Article 6 of the Wellcox Statutory Right of Way.
16. CLOSING ADJUSTMENTS
16.1. ADJUSTMENTS. The Vendor and the Purchaser confirm their intention that
all expenses and revenues in respect of the Purchased Assets and the
Business are for the account of the Vendor up to the Closing Date and,
with respect to the Purchased Assets, are for the account of the
Purchaser from and after the Closing Date. Accordingly, the Vendor and
the Purchaser agree to make such adjustments as may be necessary, to be
effective as of the Closing Date, and without in any way restricting
the generality of the foregoing such adjustments shall include:
16.1.1. TAXES: real property taxes and local improvement charges
assessed or levied against the Purchased Line, the Leased
Lands and Wellcox Statutory Right of Way lands by any
provincial, municipal, civic or school authority; and
16.1.2. OTHER: vehicle licenses and leases, mobile equipment licenses,
business licenses, business taxes and utilities and any
prepaid expenses to the extent that the benefit and
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advantage of the prepaid expenses or unexpired portion thereof can be,
and is, by agreement between the parties assigned to the Purchaser by
the Vendor on the Closing Date.
16.2. CALCULATION AND PAYMENT. Commencing not less than five days prior to
the Closing Date the Vendor and the Purchaser shall calculate the
amount of such adjustments based upon the information available to them
at that time and the agreed amount of such adjustments shall be settled
between the parties at the Closing. Thereafter, the Purchaser shall
allow the Vendor access to the records of the Purchaser from time to
time for the purpose of calculating, or verifying the Purchaser's
calculation of, any remaining adjustments with a view to settling all
final adjustments within sixty (60) days after Closing. Any disputed
adjustments shall be referred to final and binding arbitration pursuant
to the COMMERCIAL ARBITRATION ACT (British Columbia), as amended from
time to time.
17. FIBRE OPTICS AGREEMENTS
17.1. FIBRE OPTICS ACCESS. The Purchaser acknowledges that it acquires the
Purchased Line and the Leased Lands subject to, INTER ALIA, the
Statutory Rights of Way granted to BC TEL and registered in the
Victoria Land Title Office under numbers EM 112318 and EM 112317,
respectively (the "Fibre Optic SRWs"), relating to the installation and
maintenance of certain communication conduits, telecommunication cables
and associated equipment, assets and structures, including fibre optic
communications cables (collectively, "FOCCs"). The Vendor shall
forthwith provide the Purchaser with a copy of the plans and
specifications identifying the exact location of the FOCCs.
The Purchaser agrees and covenants that, from and after the Closing
Date, the Purchaser shall: (i) comply with all of the Vendor's
obligations arising from and after the Closing Date under the Fibre
Optic SRWs; (ii) perform in accordance with their terms, and be bound
by, all of the terms and conditions of the Fibre Optic SRWs; and (iii)
grant to the Vendor, its licensees and their respective successors and
assigns such access to the subject lands as may be required in
connection with the Fibre Optic SRWs. The Purchaser shall not cause or
suffer any interference with the enjoyment and use of the rights,
interests and privileges granted or conferred in the Fibre Optic SRWs.
The Vendor shall be entitled to any and all revenue and income of every
kind, nature and description, derived from the Fibre Optic SRWs.
17.2. ADDITIONAL LICENCES. The Purchaser hereby acknowledges that the Vendor
shall be entitled, and is hereby authorized, at its cost and for its
benefit, to grant additional licenses, easements or statutory
rights-of-way over the Purchased Line, the Leased Lands and the Wellcox
Yard to accommodate additional FOCCs ("additional SRWs") on terms and
conditions which are similar or more advantageous than those set out in
the Fibre Optic SRWs and which are no more onerous to the Purchaser
with respect to the operation of its railway business; provided that
the Vendor shall give the Purchaser thirty (30) days written notice
before doing so,
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which notice shall include all drawings, plans and specifications and
precise and detailed site and survey plans (collectively, the "FOCC
Plans") showing the exact location thereof and which location must be
consented to in writing by the Purchaser, said consent not to be
unreasonably withheld or delayed. At the request of the Vendor, the
Purchaser covenants and agrees to enter into and grant such additional
SRWs with respect to the Purchased Line provided that such additional
SRWs shall conform at all times with all applicable municipal,
provincial or federal statutory and regulatory requirements. The
Purchaser may at any time request confirmation from the Vendor of
conformity of the additional SRWs, to the FOCC Plans provided by the
Vendor following completion thereof.
17.3. VENDOR'S INDEMNITY. Provided the Purchaser has been furnished with all
FOCC Plans, the Purchaser shall forever protect, indemnify and defend
the Vendor and its officers, directors, agents, employees and licensees
from and against any and all Losses resulting from or arising out of
damage to the FOCCs and any modification, replacement and additions
thereto, caused by or arising from the maintenance, excavation,
demolition or alteration of the subject lands by the Purchaser, so long
as the damaged FOCCs have been adequately identified in the FOCC Plans.
17.4. COMPENSATION. The Vendor shall pay to the Purchaser reasonable
compensation for any material increase in the Purchaser's cost of
maintenance and operation of the Purchased Assets, or any material
adverse effect on the Purchaser's ability to conduct railway operations
on the Purchased Line, caused or contributed to by the Vendor or by any
third parties to which the Vendor has granted any rights with respect
to the additional SRWs, including the Vendor's licensees, their agents
and contractors, with respect to the use, installation, construction,
operation, maintenance, repair, renewal, replacement, addition and
removal of the FOCCs.
17.5. BENEFIT AND COMPLIANCE. The intent of the parties is that the Vendor
shall be entitled to continue to benefit from any and all revenues and
income of every kind, nature and description derived from the Fibre
Optic SRWs and the additional SRWs, if any, and from all rights created
in its favour in the Fibre Optic SRWs and the additional SRWs and that
the Purchaser shall have the benefit of all rights of the Vendor under
the Fibre Optic SRWs and the additional SRWs, if any, as are necessary
for the safe and efficient operation of its railway business.
Accordingly, without limiting the generality of the foregoing, the
Vendor agrees to cause the grantees of any additional SRWs with respect
to its Leased Lands to comply with and to satisfy their obligations as
they relate to the safe and efficient operation of the Purchaser's
railway business and agrees that forthwith upon the request of the
Purchaser, the Vendor shall, for the benefit of the Purchaser, enforce
the provisions of the additional SRWs, if any, with respect to the
Leased Lands, at the Vendor's cost, provided that the Purchaser shall
have the right to conduct and control through counsel of its choosing
the enforcement of such provisions or shall have otherwise agreed in
writing beforehand with the Vendor on the appropriate mechanisms of
enforcement.
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18. ABORIGINAL TITLE MATTERS
18.1. INDEMNITY. For a period of five (5) years after the Closing Date, the
Vendor shall indemnify and save the Purchaser harmless from and against
any and all Losses arising from any legal proceeding commenced by or on
behalf of any Indian band during such five year period, claiming title
to any portion of the Purchased Line or the Leased Lands which adjoins
or is surrounded by any reservation lands (as defined in the Indian
Act) and which would impair the Purchaser's ability to conduct railway
operations on such lines in a manner consistent with that currently
conducted by the Vendor, as follows:
Years 1 - 3 - 100%; and
Years 4 - 5 - 75%
of all Losses suffered or incurred by the Purchaser.
19. TIMBER RIGHTS
19.1. TIMBER RIGHTS. The Vendor shall retain title to all harvestable timber
on the Purchased Line for ten (10) years after the Closing, and the
Purchaser shall use all reasonable efforts to cooperate with the Vendor
in connection therewith. The transfer of the Purchased Line shall be
made subject to the reservation of timber rights in the form set out in
Schedule R.
19.2. NOTICE. If the Vendor desires to enter upon the real property
comprising the Purchased Line to harvest timber located thereon, the
Vendor shall give at least forty-eight (48) hours prior written notice
to the Purchaser.
19.3. INDEMNITY. The Vendor will indemnify and save the Purchaser harmless
from and against any and all Losses suffered or incurred by the
Purchaser, the Purchaser's employees, representatives or agents, which
are based upon, arise out of or are connected directly or indirectly
with the exercise of the Vendor's rights under this Section 19. The
Vendor shall ensure that in the exercise of the Vendor's rights under
this Section 19, it shall not interfere with the railway operations of
the Purchaser.
19.4 COMPENSATION. The Vendor shall pay to the Purchaser reasonable
compensation for any increase in the Purchaser's costs of maintenance
and operation of the Purchased Assets or any material adverse effect on
the Purchaser's ability to conduct railway operations on the Purchased
Line, caused or contributed to by the Vendor, its employees,
representatives and agents, with respect to the Vendor's rights under
this Section 19.
20. RISK OF LOSS
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<PAGE> 39
20.1. RISK OF LOSS. Until the Closing is completed, the Purchased Assets
shall be and remain at the risk of the Vendor. Upon completion of the
Closing, the Purchased Assets shall be and thereafter remain at the
risk of the Purchaser.
21. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND LIMITATION OF
LIABILITY
21.1. SURVIVAL. All of the warranties and representations of the parties
contained in this Agreement and in all ancillary documents, instruments
and certificates delivered at Closing, will not merge on, and shall
survive the Closing, the transfer of the Purchased Assets, the payment
of the Purchase Price and any reorganization, amalgamation, sale or
transfer of the Vendor or Purchaser or their respective businesses or
any sale or transfer of the Purchased Assets by the Purchaser and will
continue in full force and effect for a period of two years immediately
after the Closing Date, except to the extent that any breach thereof is
disclosed in writing by either party prior to the Closing and the other
party elects to waive such breach by completing the transactions herein
contemplated.
21.2. LIMITATION. Notwithstanding any other provision of this Agreement, the
Purchaser shall only be entitled to make a claim against the Vendor in
respect of the breach of any warranty or representation of the Vendor
referred to in subsection 21.1 if:
21.2.1. the amount of each individual claim exceeds $25,000; and
21.2.2. the aggregate amount of all claims being made exceeds
$200,000.
The maximum aggregate liability of the Vendor under this Agreement and
under all other agreements entered into pursuant hereto shall be
limited to $10,000,000.
21.3 COVENANTOR. The Covenantor agrees to cause the Purchaser to perform all
of the Purchaser's obligations under this Agreement and all other
agreements entered into pursuant hereto, and to indemnify and save the
Vendor harmless from and against any and all Losses suffered or
incurred by the Vendor, the Vendor's employees, representatives or
agents for a period of five years after the Closing, which are based
upon, arise out of, or are connected directly or indirectly with the
Purchaser's breach of or failure to perform any of its obligations
under this Agreement and all other agreements entered into pursuant
hereto; provided, however, that the Covenantor's liability under this
section shall be limited to $10,000,000.
22. GENERAL PROVISIONS
22.1. CONFIDENTIALITY. Notwithstanding any other provision hereof, the
Purchaser covenants and agrees that in the event the transactions
contemplated by this Agreement do not close and this Agreement is
terminated for any reason whatsoever, the Purchaser shall not use the
information disclosed to it by the Vendor pertaining to this Agreement
and the Purchaser,
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<PAGE> 40
its agents, lawyers, accountants and other professional advisors, shall
keep all such information and data confidential and will return all
such information to the Vendor and all copies of documents obtained
pursuant to this Agreement, in accordance with the terms of the
confidentiality agreement dated May 4, 1998 made between the parties,
which confidentiality agreement will survive the termination of this
Agreement in accordance with its terms.
22.2. ANNOUNCEMENTS. The terms of this Agreement will be kept confidential by
each of the parties and no announcements, new releases or other
disclosure concerning the transactions herein contemplated may be made
by either party, its employees, agents or representatives, to the
public or to suppliers, customers or employees of the Business, without
the prior consent of the other, except as required by law and then only
after prior written notice to the other party. The Vendor and Purchaser
will consult with each other on the text of any proposed announcement
relating to this Agreement and the transactions herein contemplated.
22.3. VENDOR'S NAME, TRADEMARKS, ETC. Except as expressly permitted in the
license referred to in subsection 2.1.7, the Purchaser shall not be
entitled to use any trademarks, tradenames, business names, logos or
other similar property of the Vendor and shall take all reasonable
steps to remove all such trademarks, tradenames, business names, logos
and similar property from the Purchased Assets as soon as possible and
no later than 90 days after the Closing, except those that are
permanently inscribed.
22.4. NOTICES. Any notice, demand or communication required or permitted to
be given under this Agreement shall be in writing and delivered by
pre-paid mail, delivery or facsimile transmission, to the party to
which it is to be given as follows:
if to the Vendor:
Canadian Pacific Railway Company
Suite 500, Gulf Canada Square
401 - 9th Avenue, S.W.
Calgary, Alberta T2P 4Z4
Fax No. (403) 319-7473
Attention: Ed Dodge,
Executive Vice President and Chief Operating
Officer
with a copy to:
Canadian Pacific Railway Company
Legal Services
Suite 2000, Gulf Canada Square
401 - 9th Avenue, S.W.
Calgary, Alberta T2P 4Z4
Fax No. (403) 319-6770
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<PAGE> 41
Attention: Vice President, Law
if to the Purchaser:
c/o RailAmerica, Inc.
Northern Trust Plaza
301 Yamato Road, Sutie 1190
Boca Raton, Florida 33431 U.S.A.
Attention: Mr. Gary O. Marino, C.E.O. and Chairman
--------------------------------------------------
Fax: (561) 994-3929
with a copy to:
Shutts & Bowen LLP
250 Australian Avenue, South, Suite 500
West Palm Beach, Florida 33401 U.S.A.
Attention: Scott G. Williams. Esq.
----------------------------------
Fax: (561) 650-8530
or to such other address as a party may specify by notice given in accordance
with this Section. Any such notice, request, demand or communication given shall
be deemed to have been given, in the case of delivery by hand, when delivered,
in the case of mail, three Business Days following the date of mailing, and in
the case of delivery by facsimile transmission, on the first Business Day
following the date of transmission.
22.5. FURTHER ASSURANCES. Each of the parties shall execute and deliver all
such further documents and do such further acts and things as may be
reasonably required from time to time to give effect to this Agreement.
22.6. EXPENSES. Each of the Purchaser and the Vendor shall be responsible for
all costs and expenses (including fees and expenses of legal advisers,
accountants and other professional advisers) incurred by them,
respectively, in connection with the negotiation and settlement of this
Agreement and the completion of the transactions contemplated hereby.
22.7. WAIVER, AMENDMENT. Except as expressly provided in this Agreement, no
amendment or waiver of this Agreement shall be binding unless executed
in writing by the party to be bound thereby. No waiver of any provision
of this Agreement shall constitute a waiver of any other provision nor
shall any waiver of any provision of this Agreement constitute a
continuing waiver unless otherwise expressly provided.
22.8. ASSIGNMENT. The Purchaser may not assign any of its rights, benefits,
obligations or liabilities under this Agreement to any person without
the prior written consent of the
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<PAGE> 42
Vendor, which consent the Vendor may withhold in its sole discretion.
Notwithstanding the foregoing, the Purchaser may assign any or all of
its rights, benefits, obligations or liabilities under this Agreement
to a wholly owned subsidiary of the Purchaser or grant a security
interest with respect to this Agreement in favour of the Purchaser's
financial institution; provided that any such assignment or security
interest shall not release the Purchaser or the Covenantor from any of
its obligations hereunder. The Vendor may assign any and all of its
rights, obligations and liabilities under this Agreement with notice to
the Purchaser.
22.9. ENUREMENT. This Agreement shall enure to the benefit of and shall be
binding upon the parties hereto and their respective successors,
permitted assigns, heirs, executors and legal personal representative.
22.10. COUNTERPARTS. This Agreement may be executed and delivered in
counterparts and by facsimile, each of which counterpart and facsimile
shall constitute an original and all of which taken together shall
constitute one and the same instrument.
22.11. OTHER GOVERNMENTAL AUTHORITIES. In the event either party receives
notice from any governmental authority that any notices, applications,
filings or governmental permits are required with respect to this
Agreement, other agreements entered into pursuant hereto or the
transactions contemplated hereby, the Purchaser or the Vendor, as
appropriate, shall inform the other party and both parties shall
cooperate to make such notices, applications, or filings and seek such
governmental permits.
22.12. BROKERS. Each party represents and warrants to the other party that
such party has not incurred any liability to any broker, finder or
agent for any brokerage fees or commissions or finders' fees or
commissions with respect to the transactions contemplated by this
Agreement which will be a direct or indirect obligation of the other
party. Each party agrees to indemnify, defend and hold harmless the
other party from and against any and all claims asserted against such
other party for any such fees or commissions claimed by any persons
purporting to act or to have acted for or on behalf of the indemnifying
party.
IN WITNESS WHEREOF this Agreement has been executed effective the day
and year first above written.
CANADIAN PACIFIC RAILWAY COMPANY
Per: /s/ John Walsh
-----------------------------------------
Authorized Signatory
-42-
<PAGE> 43
E & N RAILWAY COMPANY (1998) LTD.
Per: /s/ J. Preston Claytor
--------------------------------------------
Authorized Signatory
THE ESQUIMALT AND NANAIMO RAILWAY COMPANY
Per: /s/ Dave C. Courville
--------------------------------------------
Authorized Signatory
Per: /s/ Doris Collis
--------------------------------------------
Authorized Signatory
RAILAMERICA, INC.
Per: /s/ J. Preston Claytor
--------------------------------------------
Authorized Signatory
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<PAGE> 44
FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT
AND ESCROW LETTER
THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT AND ESCROW LETTER
("Amendment") made and entered into by and between CANADIAN PACIFIC RAILWAY
COMPANY THE ("CPR"), THE EXHIBIT 10.64 ESQUIMALT AND NANAIMO RAILWAY COMPANY
("E&N") (collectively the "Vendor") and E & N RAILWAY COMPANY (1998) LTD.
(the "Purchaser") and RAILAMERICA, INC. (the "Covenantor").
RECITALS
A. Vendor, Purchaser and Commentator entered into that certain Asset
Purchase Agreement dated December 17, 1998 (the "Agreement"), pertaining to
the sale and purchase of the Victoria Subdivision and Port Alberni
Subdivision rail lines located an Vancouver Island, British Columbia, and
delivered signed closing documents into the escrow of Lawson Lundell, Lawson
& McIntosh (the "Escrow Agent") under an escrow letter of same date.
B. The transaction was scheduled to close on December 29, 1998,
however the Purchaser has requested an extension of the time period needed for
delivering funds in order to complete this acquisition and Vendor, Purchaser
and Covenantor now wish to amend and modify the terms and conditions of this
Agreement and the escrow letter as hereinafter set forth:
NOW, THEREFORE, for and in consideration of the mutual agreements set
forth herein, the parties agree to amend the Agreement and the escrow letter
as follows:
1. INCORPORATION OF RECITALS BY REFERENCE. The recitals set forh
above are hereby incorporated in the body of this Amendment by reference.
2. DEPOSIT SUM. Purchaser and Covenantor hereby deliver to CPR on
December 31, 1998, a deposit sum of Three Million Dollars (Canadian) (the
"Deposit") to be credited to and applied to the purchase price as defined in
Subsection 2.2 of the Agreement. The deposit shall be non refundable except
in the event that the provisions of Section 6.1.3 of the Agreement apply in
which case the deposit shall be refunded to the Purchaser.
3. CLOSING DATE AND DELIVERY OF FUNDS. The Closing date shall be
deemed to be effective as of December 29, 1998, provided that Purchaser shall
have by close of business of January 7, 1999 delivered the balance of the
Purchaser Price closing proceeds as directed by the Vendor.
4. TRANSITION OF OPERATIONS. The parties agree that Vendor shall
continue to conduct railroad operations for Purchaser's account through and
including January 7, 1999. In order to simplify the compensation payable to
Vendor, Purchaser shall permit Vendor to retain all revenues as an offset to
the costs of operation, risk of loss, and responsibilities and liabilities as
the operator through and including January 7, 1999. The parties agree that the
possession and operational control shall transfer to the Purchaser effective as
of 12:01 a.m. (Pacific time) on January 8, 1999.
<PAGE> 45
5. BALANCE OF TERM TO REMAIN IN FULL FARES AND EFFECT. All of the
remaining terms of the Agreement and the escrow letter are unaffected by this
Amendment and shall remain in full force and effect. In the event of a conflict
between the terms of this Amendment and those of the Agreement or the escrow
letter, the provisions of this Amendment shall govern.
IN WITNESS WHEREOF, the parties have signed ibis Amendment as of this
31st day of December, 1998.
CANADIAN PACIFIC RAILWAY COMPANY ON BEHALF OF ITSELF AND THE ESQUIMALT AND
NANAIMO RAILWAY COMPANY AS VENDOR
Per: /s/ Brock M. Winter, Vice President
--------------------------------------
Authorized Signatory
E&N RAILWAY COMPANY (1998) LTD.
Per: /s/ Gary O. Marino, Chairman, President, CEO
-------------------------------------------------------
Authorized Signatory
RAILAMERICA, INC.
Per: /s/ Donald Redfearn, Executive Vice President/Secretary
-------------------------------------------------------
Authorized Signatory
<PAGE> 1
EXHIBIT 21 - SUBSIDIARIES OF REGISTRANT
<TABLE>
<CAPTION>
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
E & N Railway Company (1988) Ltd. Canada
Empresa de Transporte Ferroviaro S.A. - Ferronor Chile
Florida Rail Lines, Inc. Delaware
Freight Victoria Limited Australia
Huron and Eastern Railway Company, Inc. Michigan
Kalyn/Siebert Canada, Inc. Quebec
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 Australia, Inc. Delaware
RailAmerica Australia Pty Ltd Australia
RailAmerica de Chile, S.A. Chile
RailAmerica Carriers, Inc. Canada
RailAmerica Equipment Corporation Delaware
RailAmerica Intermodal Services, Inc. Delaware
Rail Operating Support Group, Inc. Delaware
Saginaw Valley Railway Company, Inc. Delaware
South Central Tennessee Railroad Corp., Inc. Delaware
St. Croix Valley Railroad Company, Inc. Delaware
Steel City Carriers, Inc. Canada
U.S. Rail Lines, Inc. Delaware
Ventura County Railroad Co., Inc. Delaware
West Texas and Lubbock Railroad Company, Inc. Texas
3025619 Nova Scotia Ltd. Canada
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 2,554,775
<SECURITIES> 0
<RECEIVABLES> 11,973,508
<ALLOWANCES> 0
<INVENTORY> 14,819,865
<CURRENT-ASSETS> 32,187,892
<PP&E> 116,545,150
<DEPRECIATION> 0
<TOTAL-ASSETS> 176,015,944
<CURRENT-LIABILITIES> 19,405,163
<BONDS> 80,559,276
10,691,620
0
<COMMON> 11,795
<OTHER-SE> 37,068,316
<TOTAL-LIABILITY-AND-EQUITY> 176,015,944
<SALES> 10,417,642
<TOTAL-REVENUES> 20,642,738
<CGS> 7,717,185
<TOTAL-COSTS> 17,402,468
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,429,509
<INCOME-PRETAX> 1,687,291
<INCOME-TAX> 484,000
<INCOME-CONTINUING> 1,203,291
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,203,291
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.09
</TABLE>
