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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999 Commission File Number 0-20618
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RAILAMERICA, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 65-0328006
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(State or Other Jurisdiction (IRS Employer
of Incorporation) Identification Number)
5300 Broken Sound Blvd, N.W.
BOCA RATON, FLORIDA 33487
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (561) 994-6015
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, $.001 Par Value
Common Stock Purchase Rights
Check whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-K contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of March 23, 2000 computed by reference to the average bid
and asked prices of registrant's common stock reported on NASDAQ on such date
was $96.5 million.
The number of shares outstanding of registrant's Common Stock, $.001
par value per share, as of March 23, 2000 was 18,676,021.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant's proxy statement for the Annual Meeting of Stockholders
(the "Definitive Proxy Statement") to be filed with the Commission pursuant to
Regulation 14A is incorporated by reference into Part III of this Form 10-K.
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TABLE OF CONTENTS
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PART I
Item 1. Business 3
Item 2. Properties 22
Item 3. Legal Proceedings 28
Item 4. Submission of Matters to a Vote of Security Holders 28
PART II
Item 5. Market for Common Equity and Related Stockholder Matters 29
Item 6. Selected Financial Data 30
Item 7. Management's Discussion and Analysis 31
Item 7a. Market Risk 46
Item 8. Financial Statements 47
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 47
PART III
Item 10. Directors and Executive Officers of the Registrant 48
Item 11. Executive Compensation 48
Item 12. Security Ownership of Certain Beneficial Owners and Management 48
Item 13. Certain Relationships and Related Transactions 48
PART IV
Item 14. Exhibits and Reports on Form 8-K 49
Signatures
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This Form 10-K contains certain "forward-looking" statements within the
meaning of The Private Securities Act of 1995 and information relating to
RailAmerica, Inc. and it subsidiaries that are based on the beliefs of the
Company's management and that involve known and unknown risks and uncertainties.
When used in this report "anticipate," "believe," "estimate," "expect" and
"intend" and words or phrases of similar import, as they relate to the Company
or its subsidiaries or Company management, are intended to identify
forward-looking statements. Such statements reflect the current risks,
uncertainties and assumptions related to certain factors including, without
limitation, currency risk, competitive factors, general economic conditions,
customer relations, relationships with vendors, fuel costs, the interest rate
environment, governmental regulation and supervision, seasonality, technological
change, changes in industry practices, the inability to integrate successfully
the acquired operations, the ability to service debt, one-time events and other
factors described herein and in other filings made by the Company with the
Securities and Exchange Commission. Based upon changing conditions, should any
one or more of these risks or uncertainties materialize, or should any
underlying assumptions prove incorrect, actual results may vary materially from
those described herein as anticipated, believed, estimated or intended. The
Company undertakes no obligation to update, and the Company does not have a
policy of updating or revising, these forward looking statements.
PART I
ITEM 1. BUSINESS
GENERAL
RailAmerica, Inc. (together with its consolidated subsidiaries, the
"Company" or "RailAmerica") is the largest owner and operator of short line
freight railroads in North America and a leading owner and operator of regional
freight railroads in Australia and Chile. RailAmerica owns/leases, operates or
has equity interests in, a diversified portfolio of 50 railroads with
approximately 12,500 miles of track located in the United States, Australia,
Canada and Chile. Through its diversified portfolio of rail lines, the Company
operates in numerous geographic regions with varying concentrations of
commodities hauled. The Company believes that individual economic and seasonal
cycles in each region may partially offset each other.
The Company was incorporated in Delaware on March 31, 1992 as a holding
company for two pre-existing railroad companies. The Company's principal
executive office is located at 5300 Broken Sound Blvd, N.W., Boca Raton, Florida
33487, and its telephone number at that location is (561) 994-6015.
The Company's strategy is to grow through (i) the integration of the
newly acquired properties, including RailTex, Inc. ("RailTex"), (ii) the
creation of new business and improvement in operating performance of newly added
and currently operated properties and (iii) the continuance of selective
acquisitions in North America and Internationally and divestiture of non-core
lines.
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RECENT DEVELOPMENTS
Since January 1, 1999, the Company has completed the following acquisitions:
o in February 2000, the Company acquired RailTex, a leading owner and
operator of short line freight railroads concentrated in the
southeastern, midwestern, Great Lakes and New England regions of the
United States and in eastern Canada, with approximately 4,100 miles of
freight rail lines in North America, for total consideration of
approximately $128 million in cash, approximately 6.6 million shares of
RailAmerica common stock, valued at $60.8 million, and assumption of
approximately $111 million in debt. As a result of the acquisition,
former RailTex shareholders owned approximately 35 % of the Company's
common stock at the time of the merger;
o in September 1999, the Company acquired The Toledo, Peoria and Western
Railroad Corporation ("TPW"), a regional freight railroad with 369
miles of rail lines in the central United States, for an aggregate
purchase price of $18 million, including the assumption of debt and
subject to closing working capital adjustments;
o in July 1999, the Company acquired RaiLink Ltd. ("RaiLink"), the third
largest freight rail system in Canada, which owns or operates
approximately 1,620 miles of rail lines and has an approximately 26%
interest in a railroad company operating another 740 miles, for an
aggregate purchase price of $71 million, including the assumption of
debt;
o in April 1999, the Company acquired the business of V/Line Freight
Corporation, the freight railroad of Australia's Victorian Government,
with approximately 3,150 miles of rail lines in Australia, for total
consideration of $103 million. The Company operates this business
through its wholly owned subsidiary Freight Victoria Limited, which
does business as Freight Victoria;
o in January 1999, the Company acquired the assets of the Esquimalt and
Nanaimo Railway Company, a 181 mile rail line in British Columbia,
Canada, which operates as E&N Railway Corporation, for an aggregate
purchase price of $11 million.
In November 1999, the Company announced a plan to sell its trailer
manufacturing operations, Kalyn/Siebert. This business has been classified as a
discontinued operation and the results of operations have been excluded from
continuing operations in the consolidated statements of operations for all
periods presented.
In February 2000, the Company's wholly owned subsidiary Freight
Victoria announced that it will begin doing business as Freight Australia.
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BUSINESS STRATEGY
The Company's strategy is to expand its position as a leading owner and
operator of short line and regional railroads in selected markets worldwide. Key
elements of this strategy include:
INTEGRATE RECENT ACQUISITIONS INTO THE COMPANY'S OPERATIONS. A key
element to the Company's strategy will be to implement a comprehensive
integration plan focusing on areas such as rationalizing staffing, regionalizing
operations, centralizing corporate functions and management information systems
and the elimination of other duplicative costs including public company costs
and board of director fees. Should the Company be unable to integrate
successfully the acquired operations, the Company's operating results and
financial condition may be materially adversely affected.
GROW INTERNALLY THROUGH FOCUSED SALES, MARKETING EFFORTS AND CUSTOMER
SERVICE. The Company will continue to focus on increasing traffic in each of the
Company's markets by aggressively marketing the Company's customer service to
its customers and bolstering sales efforts. In many cases, customer service and
sales and marketing at railroads that the Company has acquired have been
neglected by the previous owners. The Company has purchased a number of rail
lines from Class I railroads. Due to the size of the Class I railroads and their
concentration on long-haul traffic, the Class I operators typically have not
effectively marketed these branch line operations.
Once the Company acquires a rail property the Company undertakes steps
to improve the local sales and marketing efforts and to increase the railroad's
focus on customer service. Due to the Company's decentralized management
structure and a flexible, cross-trained employee base, the Company is able to
provide flexible and customized solutions that were not previously available to
the customers under the ownership of a Class I operator. This increased focus on
service enables the Company to reestablish relationships with customers who had
previously dropped service.
In addition, the Company's management has been successful at increasing
traffic by further penetrating the acquired railroad's existing customer base.
As a result, typically revenues increase and profitability improves once the
Company acquires and integrates a railroad. The Company's management intends to
continue this successful strategy by deepening its relationships with customers
and further improving upon its local sales and marketing efforts.
MAINTAIN CLOSE RELATIONSHIPS WITH CLASS I RAILROADS. Since all of the
Company's North American short line properties interchange with at least one
Class I railroad, the Company maintains close relationships with all of the
North American Class I railroads. The Company believes that these relationships
will enable the Company to pursue new business opportunities on existing rail
properties and acquire additional short line freight lines from the Class I
railroads.
CONTINUE TO GROW THROUGH SELECTIVE ACQUISITIONS. The Company expects
that opportunities to acquire select North American short line rail properties
will continue to become available over the next several years. The Company
intends to selectively make acquisitions of properties at an attractive purchase
price and with the potential for substantial improvement in revenue and
profitability, in similar geographic regions or clusters so that synergies and
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economies of scale may be achieved. The Company expects that those acquisitions
will increase product diversification in order to further mitigate the effects
of seasonal or cyclical fluctuations.
The Company also expects to make acquisitions in economically and
politically stable international markets as a result of an increasing number of
governments seeking to privatize their national rail systems. In particular, the
Company believes that further acquisition opportunities exist within Australia,
and that the Company has a significant advantage over its competitors in
completing acquisitions of Australian rail properties given its current
operating status in the region. The Company has been successful at improving
operating efficiencies and reducing costs at the recently acquired Freight
Victoria and Ferronor railroads and the Company believes it will be able to
achieve success at other international acquisitions.
DIVERSIFICATION. RailAmerica believes that its revenue diversification
limits its exposure to geographic, economic and customer related risks, while
positioning the Company to take advantage of a broad range of business
opportunities. This diversification, and the stability it provides to the
Company's operations, differentiates it from other regional and short line
carriers. Diversification also enables the Company to develop and maintain close
relationships with essentially all major rail carriers in North America.
DIVESTITURES. In order to capitalize on opportunities more profitable
to its overall portfolio and to minimize the amount of management time and
effort on the smaller properties in its portfolio and to reduce debt, it may
from time to time divest certain of its non-core railroad properties. The
Company believes there is a market for such divestitures among other smaller
short line operating companies and selected strategic buyers.
NORTH AMERICAN RAILROAD OPERATIONS
The Company currently owns, leases and/or operates 43 rail properties
in North America and has equity interests in an additional five rail properties.
All of the Company's North American rail properties are short line railroads
that provide transportation services for both on-line customers and Class I
railroads which interchange with the Company's rail lines. Short line railroads
are typically less than 350 miles long, serve a particular class of customers in
a small geographic area and interchange with Class I railroads. Short line rail
operators primarily serve customers on their line by transporting products to
and from the Class I interchanges. Each of the Company's North American rail
lines is typically the only rail carrier directly serving its customers. The
ability to haul heavy and large quantities of freight as part of a long-distance
haul make the Company's rail services generally a more effective, lower-cost
alternative to other modes of transportation, including motor carriers.
UNITED STATES. The Company owns/leases and operates 33 short line rail
properties in the United States with approximately 5,000 miles of track. The
Company's United States properties are geographically diversified and operate in
24 states. The Company has clusters of rail properties in the southeastern,
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midwestern, Great Lakes and New England regions of the United States. The
Company believes that this cluster strategy provides economies of scale and
helps achieve operational synergies.
CANADA. The Company owns/leases and operates 10 short line rail
properties in Canada with approximately 2,200 miles of track. The Company's
Canadian properties are geographically diversified and operate in six provinces.
The Company has clusters of rail properties in Alberta, southern Ontario and
eastern Quebec. The Company also owns a 26% equity interest in Quebec Railway
Corporation, a railroad company operating five railroads in southeastern Canada.
SALES AND MARKETING. The Company focuses on providing rail service to
its customers that is easily accessible, reliable and cost-effective. Following
commencement of operations, the Company's railroads generally have attracted
increased rail shipments from existing customers and obtained traffic from new
customers who had not previously shipped by rail or had ceased rail shipments.
The Company believes its ability to generate additional traffic is enhanced by
its marketing efforts which are aimed at identifying and responding quickly to
the individual business needs of customers along its rail lines. As part of its
marketing efforts, the Company often schedules more frequent rail service, helps
customers negotiate price and service levels with interchange partners and
assists customers in obtaining the quantity and type of rail equipment required
for their operations. The Company also provides non-scheduled train service on
short notice to accommodate customers' special or emergency needs.
The Company's decentralized management structure is an important
element of its marketing strategy. Significant discretion with respect to sales
and marketing activities is given to the Company's North American regional
marketing managers and international marketing managers. Each regional marketing
manager works closely with personnel of the Company's railroads and with other
members of senior management to develop marketing plans to increase shipments
from existing customers and to develop business from new customers. The Company
also works with the marketing staffs of the connecting Class I carriers to
develop an appropriate array of rail-oriented proposals to meet customers' needs
and with industrial development organizations to locate new rail users. The
Company considers all of its employees to be customer service representatives
and encourages them to initiate and maintain regular contact with shippers.
TRAFFIC. Rail traffic may be categorized as interline, local or bridge
traffic. Interline traffic either originates or terminates with customers
located along a rail line and is interchanged with other rail carriers. Local
traffic both originates and terminates on the same rail line and does not
involve other carriers. Bridge traffic neither originates nor terminates on a
rail carrier's line, but rather passes over the line from one connecting rail
carrier to another.
Traffic which originated or terminated on RailAmerica's lines generated
89% and 100% of the Company's total freight revenue in 1999 and 1998,
respectively. The Company believes that higher levels of interline and local
traffic provide it with greater stability of revenues because such traffic
represents shipments to or from customers located along its lines, unlike bridge
traffic, which cannot be easily diverted to other rail carriers.
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The following table summarizes freight revenue by type of traffic
carried by the Company's railroads in 1999 and 1998, in dollars and as a percent
of total freight revenue.
FREIGHT REVENUE
(DOLLARS IN THOUSANDS)
1999 1998
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Interline $31,905 86.5% $14,979 99.1%
Local 945 2.6% 142 0.9%
Bridge 4,019 10.9% -- --
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$36,869 100.0% $15,121 100.0%
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CONNECTING CARRIERS. All of RailAmerica's short line properties
interchange traffic with Class I railroads. The following table summarizes the
Company's significant connecting carriers in 1999 and 1998 by freight revenues
and carloads as a percentage of total interchanged (interline and bridge)
traffic.
INTERCHANGED TRAFFIC
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1999 1998
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FREIGHT FREIGHT
REVENUES CARLOADS REVENUES CARLOADS
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Canadian Pacific 28.5% 24.4% -- --
Burlington Northern Sante Fe Railway 26.6% 34.2% 63.0% 66.2%
Canadian National Railways 20.4% 21.6% -- --
CSXT Transportation, Inc. 14.6% 10.0% 31.5% 28.2%
Union Pacific Corporation 3.5% 3.3% 1.9% 1.8%
All other railroads 6.4% 6.5% 3.6% 3.8%
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Total interchanged traffic 100.0% 100.0% 100.0% 100.0%
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Charges for interchanged traffic are generally billed to the customers
by the connecting carrier and cover the entire transportation of a shipment from
origin to destination, including the portion that travels over the Company's
lines. The Company's revenues from such traffic are generally collected through
fees paid directly to the Company by the connecting carriers rather than by
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customers on its lines and are payable regardless of whether the connecting
carriers are able to collect from the customers. The fees payable by connecting
carriers are set forth in contracts entered into by each of the Company's
railroads with their respective connecting carriers and are subject to periodic
adjustments.
CUSTOMERS. In 1999, the Company served more than 500 customers in North
America who shipped and/or received a wide variety of products. The Company's
railroads are typically the only rail carriers directly serving their customers.
Although most of the Company's North American railroads have a well-diversified
customer base, several of the smaller rail lines have one or two dominant
customers. In 1999, the Company's 10 largest North American customers accounted
for approximately 39% of North American transportation revenue. One of these
customers accounted for approximately 12% of the Company's North American
transportation revenue.
COMMODITIES. The following table sets forth by number and percentage
the carloads hauled by our North American railroads during the years ended
December 31, 1999, 1998 and 1997.
CARLOADS CARRIED BY COMMODITY GROUP
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YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- ----------------- -----------------
COMMODITY CARLOADS % OF TOTAL CARLOADS % OF TOTAL CARLOADS % OF TOTAL
----------------- -------- ---------- -------- ---------- -------- ----------
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Railroad equipment 37,023 24% -- 0% -- 0%
Paper and forest products 29,991 19% 9,152 19% 9,797 21%
Agriculture 28,140 18% 15,349 31% 13,185 29%
Steel & scrap steel 10,956 7% 1,695 3% 1,562 3%
Food products 9,736 6% 5,272 11% 4,928 11%
Chemicals/fertilizer 8,522 6% 4,936 10% 4,418 10%
Petroleum products 5,678 4% 135 0% -- 0%
Coal 5,504 4% 4,898 10% 3,877 8%
Containers 5,033 3% -- 0% -- 0%
Minerals & stones 4,066 3% 4,879 10% 5,247 11%
Auto parts 3,415 2% 683 1% 755 2%
Other 6,927 4% 2,520 5% 2,438 5%
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Total 154,991 100% 49,519 100% 46,207 100%
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</TABLE>
* - Railroad equipment includes bridge traffic on the Company's Ottawa Valley
Railway
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EMPLOYEES. Currently, the Company has approximately 1,300 full-time
railroad employees in North America. A majority of the approximately 400
Canadian employees are subject to collective bargaining agreements as well as
approximately 200 of the 900 United States employees.
SAFETY. The Company endeavors to conduct safe railroad operations for
the benefit and protection of employees, customers and the communities served by
the Company's railroads. The Company's safety program, led by the Assistant Vice
President of Safety, involves all of the Company's employees and is administered
on a daily basis by each Regional Vice President. Operating personnel are
trained and certified in train operations, hazardous materials handling, proper
radio procedures and all other areas subject to governmental rules and
regulations. Each employee involved in train operations is subject to
pre-employment and random drug testing whether or not required by federal
regulation. The Company believes that each of its North American railroads
complies in all material respects with federal, state and local regulations.
Additionally, each railroad is given flexibility to develop more stringent
safety rules based on local requirements or practices. The Company also
participates in governmental and industry sponsored safety programs including
Operation Lifesaver (the national grade crossing awareness program) and the
American Short Line Railroad Association Safety Committee.
COMPETITION. In acquiring rail properties, the Company competes with
other short line and regional railroad operators, some of which have greater
financial resources than the Company. Competition for rail properties is based
primarily upon price, operating history and financing capability. The Company
believes its established reputation as a successful acquirer of short line rail
properties, combined with its managerial resources, effectively positions it to
take advantage of future acquisition opportunities.
The Company's railroads are typically the only rail carriers directly
serving their customers; however, the Company's railroads compete directly with
other modes of transportation, principally motor carriers and, to a lesser
extent, ship and barge operators. The extent of this competition varies
significantly among the Company's railroads. Competition is based primarily upon
the rate charged and the transit time required, as well as the quality and
reliability of the service provided, for an origin-to-destination package. To
the extent other carriers are involved in transporting a shipment, the Company
cannot control the cost and quality of service.
INTERNATIONAL RAILROAD OPERATIONS
AUSTRALIAN RAILROAD OPERATIONS
In Australia, the Company owns Freight Victoria, a regional freight
railroad operating in the State of Victoria. Freight Victoria is the Company's
wholly owned Australian subsidiary that purchased the assets and business of
V/Line Freight Corporation from the Government of the State of Victoria,
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Australia on April 30, 1999 for total consideration of approximately $103
million. The assets purchased from V/Line Freight Corporation included 106
locomotives and over 2,600 rail cars. In addition, Freight Victoria prepaid to
the State of Victoria the rental payments of a 45-year lease to operate 3,150
miles of track. The present value of the lease payments totaled approximately
$60 million.
In February 2000, Freight Victoria announced that it will begin doing
business as Freight Australia.
CUSTOMERS. Freight Victoria's customers span a variety of industries,
with particular emphasis on companies in the Australian agricultural industry
for whom we carry bulk grain and other agricultural products.
MAJOR CONTRACTS. Freight Victoria generates a substantial percentage of
its revenue from contracts with the Australian Wheat Board and the Government of
Victoria's Passenger Rail Authority. In addition, Freight Victoria has recently
entered into a contract with GrainCo, a private Australian agricultural
commodities company.
o AUSTRALIAN WHEAT BOARD - Through a recently renewed five-year contract
with the Australian Wheat Board, Australia's only government-owned
grain export agency, Freight Victoria hauls grain from points on its
rail system to various export terminals throughout the State of
Victoria, including the port of Melbourne and other industrial
locations. Pursuant to this contract, Freight Victoria is guaranteed to
haul 90% of all wheat harvested in Victoria and specified surrounding
areas, and destined for export abroad, and receives fixed-rate fees for
the transportation services. The contract expires in September 2005.
Freight Victoria, under this new contract is provided a 90% guarantee
for additional grain-growing regions of southeastern Australia
(including specified areas of New South Wales) and, correspondingly, a
greater amount of tonnage to be hauled. Australian Wheat Board
represented 19% of Freight Victoria's transportation revenue for the
period May 1, 1999 to December 31, 1999.
o V/LINE PASSENGER - In connection with the acquisition of Freight
Victoria, the Company entered into a long-term agreement granting the
Victoria Passenger Rail Authority track access for its V/Line passenger
train business. Under the contract, Freight Victoria provides track
entitlements and maintenance for the passenger train business and
receives minimum fees of $16 million per year (subject to escalation
each year) in return for providing such access and maintenance. The
contract is non-cancelable and expires in 2006. V/Line Passenger access
revenue represented 23% of Freight Victoria's transportation revenue
for the period May 1, 1999 to December 31, 1999.
o GRAINCO - In September 1999, Freight Victoria entered into a two-year
contract with GrainCo, an Australian agricultural commodities company.
Under the terms of this agreement, Freight Victoria will generate total
revenue of approximately $4 million per year. GrainCo, a private
Australian company, operates an agricultural products brokerage,
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trading and distribution business through facilities located throughout
the state of Victoria, including a large new facility in the Port of
Melbourne. GrainCo handles Australian agricultural product shipments,
including grain, barley and other cereals, destined for both the
domestic Australian market as well as export.
COMMODITIES. The following table sets forth by dollar amount (in
thousands) and percentage Freight Victoria's transportation revenue for the
period from May 1, 1999 to December 31, 1999.
COMMODITY US$ AMOUNT % OF TOTAL
--------- ---------- ----------
Agricultural products 24,613 40%
Track access fees 12,430 21%
Intermodal containers 7,470 12%
Fast track* 6,744 11%
Bulk (i.e. cement, gypsum, stone, logs) 6,213 10%
Interstate 3,484 6%
------- --
Total transportation revenue 60,954 100%
======= ====
* Fast Track - Freight Victoria's Fast Track business transports products
which typically are less than a container load of freight (the majority
of traffic are either parcels or pallets). Services offered to
customers include depot-to-depot, depot-to-door, and door-to-door. The
Fast Track business has six metropolitan sites and services 24 regional
freight centers. Road contractors perform local pick-up and delivery to
and from the freight centers.
EMPLOYEES. Freight Victoria currently has approximately 650 employees.
A majority of these employees are subject to collective bargaining agreements.
CHILEAN RAILROAD OPERATIONS
In February 1997, the Company, through a newly formed, wholly owned
subsidiary, RailAmerica de Chile S.A., acquired 55% of the outstanding voting
stock of Ferronor for approximately $7.2 million. Ferronor owns and operates
approximately 1,400 miles of rail line serving northern Chile. RailAmerica was
joined in the purchase of Ferronor by Andres Pirazzoli y Cia, Ltda. ("APCO"), a
Chilean contractor providing equipment and mechanized services to the forest
industry.
Ferronor operates the only north-south railroad in northern Chile,
extending from La Calera near Santiago, where it connects with Chile's southern
railway, Ferrocarril del Pacifico, S.A., to its northern terminus at Iquique,
approximately 120 miles south of the Peruvian border. It also operates several
east-west branch lines that link a number of iron, copper and limestone mines
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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.
CUSTOMERS. Ferronor's customers are principally in the mining industry.
Ferronor had two customers who each represented more than 10% of the
transportation revenue in Chile. The customers represented 43% and 40% of the
Chilean transportation revenue for 1999.
MAJOR CONTRACTS. Ferronor, in 1996, entered into a new 20-year
take-or-pay agreement with CMH, a large Chilean mining company. The contract
outlines the terms for the transport of approximately 5.2 million tons of iron
pellets annually, commencing July 1998. The contract guarantees a minimum of 4.0
million tons per year at a rate of US$1.45/ton. The contract has escalators
based on general inflation rates and the cost of fuel. Ferronor expects the
contract to yield a minimum of US$8.6 million per year in additional revenue.
During 1998, Ferronor entered into a new 10-year transportation
contract with SQM Nitratos S.A. that the Company estimates will yield aggregate
revenues of approximately US$68 million. The contract calls for the movement of
approximately 500,000 tons annually of potassium chloride and potassium sulfite
from the Minsal Salt Flats mine in northern Chile to Coya Sur, a distance of 128
miles, with further service 54 miles to Tocopilla, in conjunction with the
Tocopilla railroad. Movements commenced in mid 1998.
COMMODITIES. Iron ore and nitrates accounted for approximately 43% and
40%, respectively, of Ferronor's revenue for 1999.
EMPLOYEES. Ferronor currently has approximately 255 full-time
employees. A majority of Ferronor's employees are subject to collective
bargaining agreements.
TRAILER MANUFACTURING OPERATIONS
Kalyn/Siebert, Inc ("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. During the second quarter of 1999, KSI's assets and
operations were transferred to a Texas limited partnership, Kalyn/Siebert L.P.
KSI is the 1% general partner and a newly formed, wholly owned subsidiary of the
Company, KS Boca, Inc., is the 99% limited partner.
In January 1998, the Company, through its wholly-owned subsidiary, KSI,
acquired all of the outstanding stock of Fabrex, Inc. and its affiliate,
Services Remorques Plus, Inc. Fabrex's operations have been combined into
Kalyn/Siebert Canada ("KSC"), a wholly-owned subsidiary of KSI. KSC is a
manufacturer of specialty bulk-hauling truck trailers located in Trois-Rivieres,
Quebec, Canada. KSC's products are marketed to the solid waste, agricultural and
construction industries.
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<PAGE> 14
In November 1999, the Company adopted a plan to sell its trailer
manufacturing operations. This business has been classified as a discontinued
operation and the results of operations have been excluded from continuing
operations in the consolidated statements of operations for all periods
presented.
PRODUCTS. KSI manufactures an extensive variety of light, medium and
heavy duty truck trailers. The Company's products include the following:
o FLATBED TRAILERS. Flatbed trailers, also known as platform trailers,
are generally used to carry loads such as steel and building materials.
The Company produces a wide variety of flatbed trailers, including
straight frames, drop frames and multi-axle units for specialized
loads. KSI's leading product in this category is the KDP-80, a 48 foot
drop deck flatbed trailer which is purchased primarily by commercial
customers. This trailer has a 10 foot spread on the tandem axle which
allows more weight per axle than narrower tandems.
o LOWBED TRAILERS. Lowbed trailers, also known as lowboy trailers or
California legals, generally haul heavy equipment such as electrical
transformers or grain silos. Lowbed trailers are equipped with up to 18
axles and have the capacity to haul up to 300 ton loads. Heavy
equipment lowbeds are used by heavy haulers, specialized carriers and
riggers, larger construction and engineering firms and
highly-specialized members of the aerospace and automotive industries.
The products constituting this category include the following trailers:
fixed neck lowbed, folding neck lowbed, detachable lowbed, and the
mechanical removable gooseneck, which is KSI's leading trailer by sales
in this product line.
o OTHER PRODUCTS. KSI manufactures a sliding-axle trailer which can be
used to transport heavy equipment such as forklifts and similar
equipment. KSI also manufactures a specialty van trailer for the United
States Tank Automotive Command ("TACOM"), a Department of Defense unit
established to consolidate purchases for various branches of the
military, which has special dolly-style suspensions and removable
landing gear so that it can be shipped on military transport cargo
planes. These specialty van trailers can be used for tactical combat
purposes or as storage containers. Another specialty trailer is a
double drop totally enclosed trailer for hauling rocket engines.
o PARTS AND ACCESSORIES. Replacement parts and accessories are primarily
sold to dealers.
KSC produces specialty bulk-hauling truck trailers used in the
solid-waste, agricultural, and construction industries. Historically,
approximately 85% of KSC's sales have been transfer trailers and 80% of these
have been made in aluminum. KSC began producing dump trailers in 1995. In 1998,
these trailers represented approximately 15% of KSC's sales. The dump trailers
consist of approximately 70% aluminum and 30% steel. During the second half of
1998, KSC began producing KSI flatbed trailers in its newly acquired facility.
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<PAGE> 15
MANUFACTURING AND ENGINEERING. KSI considers its engineering expertise,
combined with the manufacturing experience of its work force, to be key
competitive advantages. KSI utilizes this experience in its marketing by
including manufacturing personnel in initial meetings with potential KSI
customers to assist in defining and meeting the customer's objectives. This team
approach often results in new and unique ways to satisfy customer needs and
facilitates effective communication throughout the organization.
Each of KSI's trailers is manufactured from highly customized designs
based on detailed customer specifications of each aspect of the trailer,
including dimensions, structural requirements, fabrication materials, component
parts and accessories. KSI's computer assisted design allows its engineers to
readily modify trailer component designs and generate new designs based on
customer needs.
KSI builds all the structural parts of its trailers using steel bars
and plates. The major manufacturing steps include cutting, bending and welding
of steel and, once assembled, 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. KSI exercises strict quality
control by screening suppliers and conducting inspections throughout the
production process.
KSI's ability to manufacture trailers is dependent upon receiving
supplies or components and raw materials from a limited number of sources. To
date, KSI has experienced no material difficulties in procuring supplies,
components or materials. However, if deliveries of such items are delayed, KSI's
production ability may be decreased which could have a negative effect on KSI's
and the Company's results of operations.
KSI's manufacturing operations are conducted in thirteen Company owned
buildings, totaling approximately 198,000 square feet on an 25.5 acre site,
which were constructed between 1969 and 1998. The Company expects that this site
will be able to meet its manufacturing goals for the foreseeable future.
At acquisition date, Fabrex, was producing its trailers at a 45,000
square foot manufacturing facility located in Trios Rivieres, Quebec, Canada,
midway between Montreal and Quebec City. In April 1998, KSC purchased an
additional 105,000 square-foot manufacturing facility on a 36.7 acre site
located adjacent to KSC's existing plant in Trois-Rivieres, Quebec, Canada.
MARKETING AND DISTRIBUTION. KSI's marketing strategy is focused on
offering a broad range of high-quality, customized trailers manufactured to the
design specifications of its customers. These products are marketed and
distributed through a network of approximately 140 independent dealers
throughout North America and through a direct sales force. During 1998
approximately 50% of independent dealers maintained inventories of KSI trailers.
Presently, up to 75% of all of KSI's commercial sales are made to
dealers, with the balance representing direct retail sales by its sales force.
KSI's sales staff consists of a vice president, seven sales managers, and an
15
<PAGE> 16
advertising manager. The sales staff is supported by registered mechanical
design engineers and draftsmen. KSC's sales staff consists of a V.P. sales and
five sales managers.
In the United States the majority of sales are done through a network
of dealers. KSC also has access to KSI's extensive dealer base in the United
States.
CUSTOMERS. The majority of sales in the government segment are to the
General Services Administration ("GSA"), the purchasing arm of most non-military
agencies, and to TACOM. KSI has been awarded "Blue Ribbon Contractor" status
with TACOM. As a result of this status, KSI receives a 10% preference on bids
for certain contracts. Sales to governmental agencies represented 35%, 36% and
37% of KSI's manufacturing revenue for the years ended December 31, 1999, 1998
and 1997. A substantial decrease in orders by the GSA and/or TACOM could have a
material adverse effect on KSI's business and results of operations.
KSC's trailers are used in the solid-waste, agricultural and
construction industries. Waste disposal companies are KSC's largest market
segment. In addition, during the second half of 1998 KSC began producing and
marketing KSI type flatbed trailers.
Unit sales of new truck trailers have historically been subject to
substantial variation. Sales of new truck trailers have historically been
subject to a five- to seven-year replacement cycle. Additionally, periods of
economic recession in the United States have previously resulted in declines in
the profitability of the trucking industry. Future decreases in the demand for
truck trailers due to economic downturns or cyclical decreases would likely have
a material adverse effect on RailAmerica's business and results of operations.
BACKLOG. As of December 31, 1999, KSI's backlog of orders was
approximately $14.0 million, compared to $18.3 million as of December 31, 1998.
As of December 31, 1999, KSC's backlog of orders was approximately $2.3 million,
compared to $3.7 million as of December 31, 1998. KSI and KSC include in its
backlog only those orders for trailers for which a confirmed customer order has
been received. KSI manufactures trailers mostly to customer or dealer orders and
does not typically maintain an inventory of "stock" trailers in anticipation of
future orders.
COMPETITION. The Company faces significant competition in the truck
trailer manufacturing industry which is highly competitive and has relatively
low barriers to entry. The Company competes with a number of other trailer
manufacturers, some of which have greater financial resources and higher sales
than KSI. Furthermore, the Company's products compete with alternative forms of
shipping, such as intermodal containers. There can be no assurance that the
Company will be able to continue to compete effectively with existing or
potential competitors or alternative forms of shipping containers.
EMPLOYEES. Currently, KSI has 172 full-time employees in the trailer
manufacturing operation. None of the KSI employees are subject to a collective
bargaining agreement. Currently, KSC has 140 full-time employees in the trailer
manufacturing operation of which approximately 90 are subject to a collective
bargaining agreement.
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<PAGE> 17
REGULATION
UNITED STATES. The Company's subsidiaries in the United States are
subject to various safety and other laws and regulations by numerous government
agencies, including (1) regulation by the Surface Transportation Board ("STB")
and the Federal Railroad Administration ("FRA"), (2) labor related statutes
including the Railway Labor Act, Railroad Retirement Act, the Railroad
Unemployment Insurance Act, and the Federal Employer's Liability Act, and (3)
regulation by agencies in the states in which the Company does business.
Additionally, the Company is subject to STB regulation in connection with its
acquisition of new railroad properties. As a result of the enactment in 1980 of
the Staggers Rail Act, which amended the Interstate Commerce Act, and the
enactment of the ICC Termination Act of 1995, there has been a significant
relaxation in regulation governing rail carriers, which management believes has
greatly simplified the purchase and sale of short line railroad properties and
expedited the closing of such transactions.
The STB has jurisdiction over, among other matters, the construction,
acquisition, or abandonment of rail lines, the consolidation or merger of
railroads, the assumption of control of one railroad by another railroad, the
use by one railroad of another railroad's tracks through lease, joint use or
trackage rights, the rates charged for their transportation services, and the
service provided by rail carriers. The ICC Termination Act replaced the
Interstate Commerce Commission ("ICC") with the STB. The ICC Termination Act
also abolished labor protective conditions applicable to numerous types of rail
transactions. Labor protective conditions cannot be imposed on the sale of a
railroad line to a new carrier. In the sale of a railroad line to a regional
railroad, which is a railroad with annual revenues between $20 million and $250
million, as adjusted by the railroad revenue deflator, labor protection consists
of the payment of up to one year of severance pay for employees affected by the
transaction. In some instances of the sale of a railroad line to a small
railroad, which is a railroad with annual revenues that are less than $20
million, as adjusted by the railroad revenue deflator, labor protection also
consists of the payment of up to one year of severance pay for employees
affected by the transaction. While imposition of labor protective conditions on
line sales and transfers does not subject a rail line buyer to the seller's
collective bargaining agreements, rates of pay, and other labor practices and
does not unionize the buyer's operating and maintenance employees, it does
entitle employees of the buyer or seller who are "adversely affected" by the
transaction in terms of job loss, pay cuts, loss of overtime, loss of hours,
loss of benefits, and moving expenses, to receive over a period of up to six
years payments representing compensation for those losses. Generally, in a line
sale or transfer, only the seller's or transferor's employees are affected.
As a result of the Staggers Rail Act, railroads have received
considerable rate and market flexibility including the ability to obtain
wholesale exemptions from numerous provisions of the Interstate Commerce Act.
The Staggers Rail Act allowed the deregulation of all containerized and truck
trailer traffic handled by railroads. On regulated traffic, railroads and
shippers are permitted to enter into contracts for rates and provision of
transportation services without the need to file tariffs. Moreover, on regulated
traffic, the Staggers Rail Act allows railroads considerable freedom to raise or
lower rates without objection from captive shippers. While the ICC Termination
17
<PAGE> 18
Act retained maximum rate regulation on traffic over which railroads have
exclusive control, the new law relieved railroads from the requirements of
filing tariffs and rate contracts with the STB on all traffic other than
agricultural products.
Under the ICC Termination Act, the STB is funded through September 30,
2000. It is unclear whether the STB will be reauthorized in its present form.
Under the ICC Termination Act, states lost their jurisdiction over economic
regulation of interstate railroad transportation. All states retain some
jurisdiction over safety related matters.
The FRA regulates railroad safety and equipment standards, including
track maintenance, handling of hazardous shipments, locomotive and rail car
inspection and repair requirements, and operating practices and crew
qualifications.
AUSTRALIA. Our Australian subsidiary, Freight Victoria, is subject to
regulation in the State of Victoria by the Office of the Regulator-General. The
Office of the Regulator-General (the "ORG") was established by the Office of the
Regulator-General Act. The purpose of the ORG is to create a regulatory
framework for regulated industries which promotes and safeguards competition and
fair and efficient market conduct or, if there is no competitive market, which
promotes the simulation of competitive market conduct and the prevention of
misuse of monopoly power. These objectives were expanded by the Victorian
Government in the RAIL CORPORATIONS ACT 1996 to ensure that rail users have fair
and reasonable access to declared railway services.
The RAIL CORPORATIONS ACT 1996 (the "RCA") regulates the operation of
the State of Victoria's passenger trains and trams and rail network. Part 2A of
the RCA outlines an access regime which potentially applies to railways and rail
infrastructure and gives power to the ORG to regulate access to relevant
services. At present, however, no rail transport services have been declared to
be subject to the regime. ORG and the Department of Infrastructure, however,
advise that a Discussion Paper in relation to the regulation of the rail
transport authority is currently being prepared and is expected to be issued
before the end of April 2000. This paper is likely to contain draft declarations
(in relation to specific rail services which may be made subject to the access
regime in Part 2A) and draft pricing orders.
In the event that any services are declared to be "declared rail
transport services" and thus become subject to the Part 2A access regime, Part
2A provides that:
(1) manager of rail infrastructure and a provider and operator of
rolling stock must: (1) use all reasonable endeavours to meet
the requirements of persons seeking access to the declared
rail transport services;
(2) make a formal proposal of terms and conditions for access
within 14 days after receiving a request for it to do so; and
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<PAGE> 19
(3) at the request of a person seeking, or considering seeking,
access provide to that person information as prescribed by
ORG.
In the following circumstances an application may be made in writing to
ORG, by the operator or a person seeking access, for a determination:
(1) if the operator has not made a formal proposal within 14 days
after receiving a request for it to do so;
(2) if the operator and a person seeking access cannot agree on
the terms and conditions on which access is to be provided;
and
(3) a person considers that their right of access to a declared
rail transport service has been hindered.
A determination of ORG may, among other things:
(1) require the operator to provide access to the service to the
person seeking access;
(2) deal with the terms and conditions of access; and
(3) specify the extent to which the determination overrides an
earlier determination.
In addition, the Governor in the Council may specify policies or
principles which ORG must apply in:
(1) determining any amount to be paid for access to a specified
declared rail transport services; or
(2) determining the terms and conditions of access.
In addition to complying with the above-described regulations, a
manager of rail infrastructure and a provider and operator of rolling stock,
must be accredited under the TRANSPORT ACT 1993. A corporation which manages
rail infrastructure or operates rolling stock without accreditation is liable
for a fine of $250,000.
The Secretary to the Department of Infrastructure may take disciplinary
action against an accredited person if the person has failed to comply with the
requirements of accreditation or has permitted an unsafe practice or acted
negligently. Disciplinary action which the Secretary may take includes
disqualifying the person from holding an accreditation (for a period specified
by the Secretary), suspension of the accreditation, early expiry of the
accreditation and immediate or future cancellation of the accreditation.
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<PAGE> 20
The person has a right of review concerning accreditation decisions and
may apply to the Victorian Civil and Administrative Tribunal for a review of a
decision made by the Secretary. An accreditation is personal to a person who
holds it, it is not capable of being transferred of assigned or otherwise dealt
with by the person who holds it and does not vest by operation of law in any
other person.
The TRANSPORT ACT contains detailed provisions authorizing the
Secretary of the Department of the Infrastructure to carry out inspections and
giving inspectors powers to enter and inspect premises (including, to test
equipment and to seize property if appropriate). All actions must be reasonably
necessary to determine compliance with the Transport Act. A search warrant or
prior written consent of the occupier is necessary for entry into premises.
The Secretary must conduct safety audits of every person accredited at
least once every 12 months, to ensure that the accredited person is complying
with the requirements of accreditation. The Secretary may charge the accredited
person a fee for the safety audit service subject to the limits set out in the
relevant regulations. An accredited person has a duty to inquire into accidents
and incidents.
CANADA. The Company's Canadian railroad subsidiaries are subject to
regulation by various governmental departments and regulatory agencies at the
federal or provincial level depending on whether the railroad operated by the
subsidiary in question falls within federal or provincial jurisdiction. A
Canadian railroad generally falls within the jurisdiction of federal regulation
if the railroad crosses provincial or international borders or if the Parliament
of Canada has declared the railroad to be a federal work or undertaking and in
selected other circumstances. Any company which proposes to construct or operate
a railway in Canada which falls within federal jurisdiction is required to
obtain a certificate of fitness under the Canada Transportation Act ("CTA")
which is issued on proof of insurance. Under the CTA, the sale of a federally
regulated railroad line is not subject to federal approval, although a process
of advertising and negotiations may be required in connection with any proposed
discontinuance of a federal railway. Federal railroads are governed by federal
labor relations laws.
Short lines located within the boundaries of a single province which do
not otherwise fall within the federal jurisdiction are regulated by the laws of
the province in question, including laws as to licensing and labor relations.
Most of Canada's ten provinces have enacted new legislation which is more
favorable to the operation of short line railroads than previous provincial
laws. Many of the provinces require as a condition of licensing under the short
line railroads acts that the licensees comply with federal regulations
applicable to safety and other matters and remain subject to inspection by
federal railway inspectors. Under some provincial legislation, the sale of a
provincially regulated railroad line is not subject to provincial approval,
although a process of advertising and negotiations may be required in connection
with any proposed discontinuance of a provincial railway.
Acquisition of additional railroad operations in Canada, whether
federally or provincially regulated, may be subject to review by the Investment
Canada Act (the "ICA"), a federal statute which applies to every acquisition of
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<PAGE> 21
a Canadian business or establishment of a new Canadian business by a
non-Canadian. Whether or not an acquisition is subject to review under the ICA
is dependent on the book value of the assets of the Canadian business being
acquired. Acquisitions that are subject to review must, before their completion,
satisfy the Minister responsible tor administering the ICA that the acquisition
is of net benefit to Canada.
Any contemplated acquisitions may also be subject to the provisions of
the Competition Act (the "CA"), federal antitrust legislation of general
application. The CA contains merger control provisions which apply to certain
acquisitions. As a result, acquisitions exceeding specified asset and/or revenue
thresholds may be subject to pre-merger notification and subsequent substantive
review prior to their completion.
NORTH AMERICAN RAILROAD INDUSTRY
The U.S. railroad industry is dominated by major Class I railroads,
which operated approximately 120,000 miles of track and represented 91.2% of
total rail industry operating revenues of approximately $35.3 billion in 1998.
In addition to large railroad operators, there were more than 500 short line and
regional railroads, which generated approximately $3.1 billion of operating
revenues and operated approximately 50,000 miles of track at year end 1998.
The railroad industry is subject to regulations of various government
agencies, primarily the STB. For regulatory purposes, the STB classifies
railroads into three groups: Class I, Class II and Class III, based on annual
operating revenue. For 1998, the Class I railroads had operating revenues of at
least $259.4 million, Class II railroads had revenues of $20.8 million to $259.4
million, and Class III railroads had revenues of less than $20.8 million.
In compiling data on the U.S. railroad industry, the Association of
American Railroads ("AAR") uses the STB's revenue threshold for Class I
railroads. Regionals are railroads operating at least 350 miles of rail line
and/or earnings between $40 million and the Class I revenue threshold. Locals
are railroads falling below the Regional thresholds.
1998 INDUSTRY OVERVIEW
<TABLE>
<CAPTION>
NUMBER OF
TYPE OF RAILROAD CARRIERS 1998 REVENUES % OF REVENUES
---------------- --------- ------------- -------------
<S> <C> <C> <C>
Class I 9 $32.2 91.2%
Regional 35 1.6 4.5
Local 515 1.5 4.3
--- ----- -----
Total 559 $35.3 100.0%
=== ===== =====
</TABLE>
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<PAGE> 22
As a result of deregulation, Class I railroads have been able to
concentrate on core, long-haul routes, while divesting many of their low-density
branch lines to smaller and more cost-efficient freight railroad operators such
as the Company. Divesting branch lines allows Class I railroads to increase
traffic density, improve railcar utilization and avoid rail line abandonment.
The proportion of total track miles operated by short line and regional
railroads in the U.S. has increased dramatically as a result of these
divestitures.
Because of the focus by short line railroads on increasing traffic
volume through increased customer service and more efficient operations, traffic
volume on short line railroads frequently increases after divestiture by Class I
operators. Consequently, these transactions often result in net increases in
divesting carriers' freight traffic because much of the business originating or
terminating on branch lines feeds into divesting carriers' core routes.
Rail traffic may be categorized into three categories: interline, local
and bridge. Interline traffic either originates or terminates with customers
located along a rail line and is interchanged with other rail carriers. Local
traffic both originates and terminates on the same rail line and does not
involve other rail carriers. Bridge traffic neither originates nor terminates on
a rail carrier's line, but rather passes over the line from one connecting
carrier to another.
INTERNATIONAL RAILROAD INDUSTRY
Freight railroad services in countries other than the United States and
Canada are typically conducted at a loss. This is primarily the result of
state-run railroads that are unresponsive to market needs and inefficiently
operated. Due to economic necessity and a lack of cost-effective solutions, many
countries are privatizing their rail operations. Recent examples include Mexico,
Japan (for rail passenger service) and Australia.
In the last several years several states in Australia have privatized
their rail systems. The largest to-date being the V/Line Freight Corporation in
the state of Victoria. It is anticipated that several other state rail systems
as well as the national rail system will be privatized over the next several
years.
ITEM 2. DESCRIPTION OF PROPERTY
NORTH AMERICAN RAILROAD PROPERTIES
The following table sets forth certain information with respect to the
North American railroad properties that the Company owned as of December 31,
1999:
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<PAGE> 23
<TABLE>
<CAPTION>
Date of Track Principal
Railroad Acquisition Miles Structure Location Commodities
- ------------------------------- -------------- -------- ------------ --------------- -------------------------------
<S> <C> <C> <C> <C> <C>
Huron and Eastern Railway March 1986 83 Owned Michigan Agricultural products, sugar
May 1988 55 Owned products, fertilizer
45 Leased
2 Trackage
rights
- ------------------------------- -------------- -------- ------------ --------------- -------------------------------
Saginaw Valley Railway Jan. 1991 10 Owned Michigan Agricultural products,
Apr. 1998 51 Owned fertilizer
- ------------------------------- -------------- -------- ------------ --------------- -------------------------------
South Central Tennessee Feb. 1994 49 Leased Tennessee Wood products, frozen
Railroad 3 Trackage potatoes, paper products
rights
- ------------------------------- -------------- -------- ------------ --------------- -------------------------------
Dakota Rail Sept. 1995 44 Contract Minnesota Plastics, lumber, scrap steel
for Deed
- ------------------------------- -------------- -------- ------------ --------------- -------------------------------
West Texas & Lubbock Railroad Nov. 1995 104 Owned Texas Fertilizer, sodium sulfate,
4 Trackage cotton and cotton products
rights
- ------------------------------- -------------- -------- ------------ --------------- -------------------------------
Cascade and Columbia River Sept. 1996 131 Owned Washington Wood products, limestone,
Railroad 6 Trackage agricultural products
rights
- ------------------------------- -------------- -------- ------------ --------------- -------------------------------
Otter Tail Valley Railroad Oct. 1996 72 Owned Minnesota Coal, agricultural products,
fertilizer
- ------------------------------- -------------- -------- ------------ --------------- -------------------------------
Minnesota Northern Railroad Dec. 1996 167 Owned Minnesota Agricultural products, sugar
47 Trackage products, fertilizer, coal,
rights aggregates
- ------------------------------- -------------- -------- ------------ --------------- -------------------------------
St. Croix Valley Railroad Aug. 1997 44 Easement Minnesota Agricultural products,
8 Trackage fertilizer, plastics
rights
- ------------------------------- -------------- -------- ------------ --------------- -------------------------------
Ventura County Railroad Aug. 1998 13 Leased California Automobiles, paper products
- ------------------------------- -------------- -------- ------------ --------------- -------------------------------
E&N Railway Jan. 1999 61 Owned British Lumber, paper products,
120 Leased Columbia propane
- ------------------------------- -------------- -------- ------------ --------------- -------------------------------
Ottawa Valley (RaiLink) July 1999 342 Leased Ontario Bridge traffic, forest
products, mining
- ------------------------------- -------------- -------- ------------ --------------- -------------------------------
Southern Ontario (RaiLink) July 1999 53 Leased Ontario Fuel, metals, agricultural
products
- ------------------------------- -------------- -------- ------------ --------------- -------------------------------
Mackenzie Northern (RaiLink) July 1999 650 Owned Alberta, Fuel, forest products,
Northwest agricultural products
Territory
- ------------------------------- -------------- -------- ------------ --------------- -------------------------------
Coronado Bonnyville (RaiLink) July 1999 271 Owned Alberta Forest products, agricultural
products
- ------------------------------- -------------- -------- ------------ --------------- -------------------------------
Central Western (RaiLink) July 1999 103 Owned Alberta Agricultural products
- ------------------------------- -------------- -------- ------------ --------------- -------------------------------
Lakeland & Waterways (RaiLink) July 1999 202 Owned Alberta Petroleum coke
- ------------------------------- -------------- -------- ------------ --------------- -------------------------------
Toledo, Peoria and Western Sept 1999 273 Owned Indiana, Intermodal, agricultural
Railroad 96 Trackage Illinois, Iowa products, fertilizers,
rights chemicals
- ------------------------------- -------------- -------- ------------ --------------- -------------------------------
</TABLE>
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<PAGE> 24
In February 2000, the Company acquired RailTex which operates the
following 25 North American railroad properties:
<TABLE>
<CAPTION>
- ------------------------------ --------------- -------- ----------- ----------------- ------------------------------
Date of Track Principal
Railroad Acquisition* Miles Structure Location Commodities
- ------------------------------ --------------- -------- ----------- ----------------- ------------------------------
<S> <C> <C> <C> <C> <C>
Indiana & Ohio Railway June 1996 576 Owned Michigan, Ohio, Autos, railroad equipment,
Leased Indiana agricultural products
- ------------------------------ --------------- -------- ----------- ----------------- ------------------------------
Missouri & Northern Arkansas Dec 1992 497 Owned Missouri, Railroad equipment, coal,
Railroad Sept 1998 10 Leased Arkansas, Kansas agricultural products
- ------------------------------ --------------- -------- ----------- ----------------- ------------------------------
Central Oregon & Pacific Dec 1994 336 Owned Oregon Lumber, paper products
Railroad 105 Leased
8 Trackage
rights
- ------------------------------ --------------- -------- ----------- ----------------- ------------------------------
New England Central Railroad Feb 1995 330 Owned Vermont, Lumber, paper products
Massachusetts
- ------------------------------ --------------- -------- ----------- ----------------- ------------------------------
Indiana Southern Railroad Apr 1992 170 Owned Indiana Coal
6 Trackage
rights
- ------------------------------ --------------- -------- ----------- ----------------- ------------------------------
Cape Breton & Central Nova Oct 1993 245 Owned Nova Scotia Coal, paper, metals,
Scotia Railway railroad equipment
- ------------------------------ --------------- -------- ----------- ----------------- ------------------------------
Dallas Consolidated (2 rail Feb 1992 92 Leased Texas Food products, Non-metallic
lines) Jan 1999 89 Leased ores, paper products
Oct 1990 107 Leased
- ------------------------------ --------------- -------- ----------- ----------------- ------------------------------
South Carolina Central Dec 1987 58 Owned South Carolina Chemicals, metals, coal,
Railroad paper products
- ------------------------------ --------------- -------- ----------- ----------------- ------------------------------
Goderich-Exeter Railway Apr 1992 70 Owned Ontario Auto parts, chemicals,
Nov 1998 99 Leased non-metallic ores
- ------------------------------ --------------- -------- ----------- ----------------- ------------------------------
Michigan Consolidated Dec 1987 67 Owned Michigan, Ohio, Agricultural products,
(3 rail lines) Dec 1990 7 Owned Indiana non-metallic ores, chemicals
July 1993 45 Owned
- ------------------------------ --------------- -------- ----------- ----------------- ------------------------------
Georgia Southwestern Railroad June 1989 357 Leased Georgia, Alabama Non-metallic ores, lumber,
June 1995 chemicals
- ------------------------------ --------------- -------- ----------- ----------------- ------------------------------
</TABLE>
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<PAGE> 25
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
- ------------------------------ --------------- -------- ----------- ----------------- ------------------------------
Connecticut Southern Sept 1996 23 Owned Connecticut Lumber, paper products,
55 Trackage chemicals
rights
- ------------------------------ --------------- -------- ----------- ----------------- ------------------------------
Virginia Consolidated Nov 1988 75 Leased Virginia, North Coal, lumber
(3 rail lines) Nov 1987 53 Owned Carolina
Apr 1990 82 Leased
- ------------------------------ --------------- -------- ----------- ----------------- ------------------------------
Central Railroad of Indiana June 1998 81 Owned Indiana, Ohio Chemicals, minerals &
stones, metals
- ------------------------------ --------------- -------- ----------- ----------------- ------------------------------
San Diego & Imperial Valley Oct 1984 153 Trackage California, Petroleum, paper products,
Railroad rights Mexico non-metallic ores
- ------------------------------ --------------- -------- ----------- ----------------- ------------------------------
Carolina Piedmont Railroad Nov 1990 37 Owned South Carolina Chemicals, minerals &
Apr 1997 12 Owned stones, food products
- ------------------------------ --------------- -------- ----------- ----------------- ------------------------------
Pittsburgh Industrial Dec 1996 42 Owned Pennsylvania Chemicals, metals, petroleum
Railroad
- ------------------------------ --------------- -------- ----------- ----------------- ------------------------------
Central Railroad of June 1998 92 Leased Indiana Agricultural products,
Indianapolis Trackage railroad equipment,
rights
- ------------------------------ --------------- -------- ----------- ----------------- ------------------------------
Ontario L'Original Railroad Nov 1996 26 Owned Ontario Metals
- ------------------------------ --------------- -------- ----------- ----------------- ------------------------------
Texas-New Mexico Railroad Sept 1989 107 Owned Texas, New Non-metallic ores, petroleum
Mexico
- ------------------------------ --------------- -------- ----------- ----------------- ------------------------------
</TABLE>
* - Date acquired by RailTex.
CHILEAN RAILROAD PROPERTIES
In February 1997, the Company, through a newly formed, wholly-owned
subsidiary, RailAmerica de Chile S.A., acquired 55% of the outstanding voting
stock of Ferronor. Ferronor owns and operates approximately 1,400 miles of rail
line serving northern Chile. RailAmerica was joined in the purchase of Ferronor
by APCO, a family-owned Chilean transportation and distribution company.
Ferronor operates the only north-south railroad in northern Chile,
extending from La Calera near Santiago, where it connects with Chile's southern
railway, Ferrocarril del Pacifico, S.A., to its northern terminus at Iquique,
approximately 120 miles south of the Peruvian border. It also operates several
east-west branch lines that link a number of iron, copper and limestone mines
and production facilities with several Chilean Pacific port cities. Ferronor
also serves Argentina and Bolivia through traffic interchanged with the General
Belgrano Railroad and the Ferrocarriles Antofagasta Bolivia.
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<PAGE> 26
AUSTRALIAN RAILROAD PROPERTIES
On April 30, 1999, the Company through its wholly owned subsidiary
Freight Victoria, prepaid a 45-year lease to operate 3,150 miles of track in the
State of Victoria, Australia.
TEXAS MANUFACTURING PROPERTIES
KSI's manufacturing operations are conducted in thirteen Company owned
buildings, totaling approximately 198,000 square feet on an 25.5-acre site,
which were constructed over the period from 1969 to 1998. QUEBEC, CANADA
MANUFACTURING PROPERTIES
KSC's manufacturing operations are conducted in two Company owned
buildings, totaling approximately 150,000 square feet on a 36.7-acre site.
ONTARIO, CANADA MOTOR CARRIER PROPERTIES
Steel City Carriers leases a terminal it owns in Sault Ste. Marie,
Ontario, Canada, which includes an office building housing administrative and
dispatch offices, fabricating and service and a shop building. A 5-1/2 acre lot
provides adequate space for the normal loading, unloading, movement and parking
of tractors and trailers as well as for temporarily storing and transferring
some shipments. The Company has entered into an agreement to sell the real
estate and anticipates the sale closing in 12 to 24 months.
NORTH AMERICAN ROLLING STOCK
The following tables summarize the composition of the Company's North
American railroad equipment fleet as of December 31, 1999:
<TABLE>
<CAPTION>
FREIGHT CARS
TYPE OWNED LEASED TOTAL
---- ----- ------------- -----
<S> <C> <C> <C>
Covered hopper cars -- 583 583
Open top hopper cars 48 204 252
Tank cars 143 -- 143
Box cars -- 167 167
Wood chip cars -- 78 78
Center-beam flat cars -- 120 120
Flat cars 12 10 22
---- ------- -------
203 1,162 1,365
==== ======= =======
</TABLE>
<TABLE>
<CAPTION>
LOCOMOTIVES
HORSEPOWER/UNIT OWNED LEASED TOTAL
--------------- ------ ----------- -----
<S> <C> <C> <C>
Over 2000 5 -- 5
1500 to 2000 92 28 120
Under 1500 11 -- 11
---- ------ ----
108 28 136
==== ====== ====
</TABLE>
26
<PAGE> 27
INTERNATIONAL ROLLING STOCK
The following tables summarize the composition of the Company's
Australian and Chilean railroad equipment fleet as of December 31, 1999:
FREIGHT CARS
------------
TYPE CHILE AUSTRALIA TOTAL
- ---- ----- --------- -----
Covered hopper cars -- 1,157 1,157
Open top hopper cars 198 173 371
Box cars 230 249 479
Intermodal containers -- 646 646
Tank cars -- 335 335
Flat cars 115 84 199
Gondola cars 87 -- 87
----- ----- -----
630 2,644 3,274
===== ===== =====
LOCOMOTIVES
HORSEPOWER/UNIT CHILE AUSTRALIA TOTAL
- --------------- ----- ------------ -----
Over 2000 -- 40 40
1500 to 2000 -- 23 23
Under 1500 32 43 75
---- ---- ----
32 106 138
==== ==== ====
All of the international equipment fleet is owned by the Company.
Based on current and forecasted traffic levels on the Company's
railroads, management believes that its present equipment, combined with the
availability of other rail cars and/or locomotives for hire, is adequate to
support its operations. Management believes that the Company's insurance
coverage with respect to its property and equipment is adequate.
ADMINISTRATIVE OFFICES
The Company maintains its principal executive office in Boca Raton,
Florida. In July 1998, the Company purchased a 59,500 square foot office
building, located in Boca Raton, Florida, for approximately $4.6 million and has
renovated it for an additional $3.2 million. Approximately 17,500 square feet of
this building is being used as the Company's new corporate headquarters. The
remaining 42,000 square feet of space is currently leased to a single tenant.
Freight Victoria's administrative office is in Melbourne, Australia.
Freight Victoria leases approximately 20,000 square feet of space from the
Victorian Government for AUS$310,000 annually. The lease term is May 1, 1999 to
May 31, 2004.
27
<PAGE> 28
Ferronor's administrative office is in Coquimbo, Chile. Ferronor owns a
three story 21,600 square foot office building in Coquimbo. This building was
included as part of the February 1997 acquisition of Ferronor by the Company.
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of conducting its business, the Company becomes
involved in various legal actions and other claims some of which are currently
pending. Litigation is subject to many uncertainties and the Company may be
unable to accurately predict the outcome of individual litigated matters. Some
of these matters possibly may be decided unfavorably to the Company. It is the
opinion of management that the ultimate liability, if any, with respect to these
matters will not be material. Other than ordinary routine litigation incidental
to the Company's business, no other litigation exists.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of 1999.
28
<PAGE> 29
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Effective March 6, 1997, the Company's common stock began trading on
the Nasdaq National Market under the symbol "Rail". Prior to March 6, 1997, the
Company's common stock traded on the Nasdaq SmallCap Market tier of The Nasdaq
Stock Market. Set forth below is high and low bid information for the common
stock as reported on the NASDAQ system for each quarter of 1998 and 1999. All
such quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commissions and may not reflect actual transactions.
<TABLE>
<CAPTION>
1998 HIGH SALES PRICE LOW SALES PRICE
- ----------------------------------------------------------- ----- ---------------------- ----- ----------------------
<S> <C> <C> <C> <C>
First Quarter $ 7 23/32 $ 6
Second Quarter 7 3/16 5 15/16
Third Quarter 6 3/8 5
Fourth Quarter 8 3/4 5 5/16
- ----------------------------------------------------------- ----- ---------------------- ----- ----------------------
1999 HIGH SALES PRICE LOW SALES PRICE
- ---------------------------------------------------------- ----- ---------------------- ------ ----------------------
First Quarter $ 10 1/4 $ 7 11/16
Second Quarter 10 5/16 8 3/4
Third Quarter 10 3/4 9 1/8
Fourth Quarter 9 15/16 7 1/16
- ---------------------------------------------------------- ----- ---------------------- ------ ----------------------
2000 HIGH SALES PRICE LOW SALES PRICE
- ---------------------------------------------------------- ----- ---------------------- ----- ----------------------
First Quarter (through March 21) $ 9 1/16 $ 5 3/4
- ---------------------------------------------------------- ----- ---------------------- ----- ----------------------
</TABLE>
As of March 21, 2000, there were 522 holders of record of the common
stock. The Company has never declared or paid a dividend on its common stock.
The ability of the Company to pay dividends in the future will depend on, among
other things, restrictive covenants contained in loan or other agreements to
which the Company may be subject.
29
<PAGE> 30
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction
with the financial statements and the notes thereto included elsewhere in this
Annual Report on Form 10-K. The results of operations for the year ended
December 31, 1999 include the results of the railroads acquired in 1999 as
follows: Freight Victoria, effective April 30, 1999, RaiLink, effective August
1, 1999 and TPW, effective September 1, 1999. The statement of operations data
for the years ended December 31, 1997, 1998 and 1999 and the balance sheet data
at December 31, 1998 and 1999 are derived from, and are qualified by reference
to, audited financial statements included elsewhere herein and should be read in
conjunction with those financial statements and the notes thereto. The statement
of operations data set forth below for the periods ended December 31, 1995 and
1996 and the balance sheet data as of December 31, 1995, 1996 and 1997 are
derived from the audited financial statements of the Company not included herein
(thousands, except operating data).
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1995 1996 1997 1998 1999
----- ------ ----- ----- ----
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Operating revenue $ 7,205 $ 12,020 $ 24,496 $ 37,256 $125,372
Operating income 541 2,529 3,365 5,497 21,268
Income (loss) from
continuing operations (40) 478 288 113 6,026
Basic earnings per
common share from
continuing operations $ (0.15) $ 0.10 $ 0.02 $ 0.01 $ 0.45
Diluted earnings per
common share from
continuing operations $ (0.15) $ 0.09 $ 0.02 $ 0.01 $ 0.43
Weighted average
common shares - Basic 4,554 4,966 8,304 9,553 11,090
BALANCE SHEET DATA
Total assets $ 34,469 $ 65,215 $ 95,141 $130,964 $443,928
Long-term debt, including
current maturities 16,274 37,788 47,603 66,327 162,827
Subordinated debt,
including current maturities 3,879 2,212 2,212 -- 122,449
Redeemable convertible
preferred stock -- -- -- -- 8,830
Stockholders' equity 9,149 15,992 26,814 34,760 69,314
OPERATING DATA
Freight Carloads 18,505 25,871 69,140 117,535 394,177
Track Mileage 450 930 2,330 2,400 8,400
Number of full time
employees 265 275 542 652 1,707
</TABLE>
30
<PAGE> 31
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL
The Company's principal operations include the operation of North
American short line freight railroads and international regional railroads. The
Company hauls various products, which historically have consisted primarily of
agricultural commodities, for its customers corresponding to their local
operating areas. The Company recognizes railroad transportation revenue after
services are provided.
On February 4, 2000, the Company acquired RailTex through a merger of
one of its wholly owned subsidiaries with and into RailTex for approximately
$128 million in cash, assumption of $111 million in debt and approximately 6.6
million shares of the Company's common stock valued at $60.8 million. RailTex
owned and operated 25 short line freight railroads with approximately 4,100
miles of track concentrated in the southeastern, midwestern, Great Lakes and New
England regions of the United States and eastern Canada. In connection with the
acquisition, we entered into a credit agreement providing $330 million of senior
term loans and $50 million of senior revolving loans. In addition, a wholly
owned subsidiary of the Company issued $95 million of subordinated bridge notes
and another wholly owned subsidiary issued $50 million of asset sale bridge
notes, in connection with the acquisition.
Set forth below is a discussion of the historical results of operations
for the Company's North American, international railroad operations and
discontinued trailer manufacturing operations and motor carrier operations as
well as a discussion of corporate overhead.
NORTH AMERICAN RAILROAD OPERATIONS
The Company's historical results of operations include the operations
of its acquired railroads from the dates of acquisition as follows:
<TABLE>
<CAPTION>
<S> <C>
NAME OF RAILROAD DATE OF ACQUISITION
- ---------------- -------------------
Evansville Terminal Company ("ETC") July 1, 1996
(disposed of September 30, 1997)
Cascade and Columbia River Railroad September 6, 1996
Otter Tail Valley Railroad October 1, 1996
Gettysburg Railway and Gettysburg Scenic Rail Tours November 18, 1996
(disposed of October 31, 1997)
Minnesota Northern Railroad December 28, 1996
St. Croix Valley Railroad September 8, 1997
Ventura County Railroad September 1, 1998
E&N Railway January 6, 1999
RaiLink properties (6 railroads) August 1, 1999
Toledo, Peoria and Western Railroad September 1, 1999
</TABLE>
31
<PAGE> 32
As a result, the results of operations for the years ended December 31,
1999, 1998 and 1997 are not comparable in various material respects and are not
indicative of the results which would have occurred had the acquisitions been
completed at the beginning of the periods presented.
The acquisition of RailTex occurred after the periods presented and
RailTex's results of operations are not included in the discussion.
The following table sets forth the operating revenues and expenses (in
thousands) 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.
YEARS ENDED DECEMBER 31,
------------------------
1999 1998 1997
---- ---- ----
Operating Revenue:
Transportation revenue $38,842 $15,388 $14,737
Other revenue 2,095 802 1,277
------- ------- -------
Total operating revenue 40,937 16,190 16,014
------- ------- -------
Operating Expenses:
Maintenance of way 5,486 1,974 2,231
Maintenance of equipment 1,912 675 678
Transportation 12,232 3,605 3,799
Equipment rental 1,039 347 599
General and administrative 6,927 3,095 2,457
Depreciation and amortization 3,594 1,570 1,337
------- ------- -------
Total operating expenses 31,190 11,266 11,101
------- ------- -------
Operating income 9,747 4,924 4,913
Interest and other expense 5,472 2,852 2,842
------- ------- -------
Income before income taxes $ 4,275 $ 2,072 $ 2,071
======= ======= =======
COMPARISON OF NORTH AMERICAN RAILROAD OPERATING RESULTS FOR THE YEARS
ENDED DECEMBER 31, 1999 AND 1998
OPERATING REVENUES. Transportation revenue increased $23.4 million, or
152%, to $38.8 million for the year ended December 31, 1999 from $15.4 million
for the year ended December 31, 1998. The increase was primarily due to
increased carloads resulting from 1999 acquisitions. The transportation revenue
per carload decreased to $238 from $303 per car primarily due to the acquisition
of a rail line in Canada that hauls a significant amount of bridge traffic at a
lower rate per car than the Company's other rail lines and intermodal traffic on
the newly acquired TPW which also moves at a lower rate per car than the
32
<PAGE> 33
Company's other rail lines. Carloads handled totaled 154,991 for the year ended
December 31, 1999, an increase of 105,472, or 213%, compared to 49,519 for the
year ended December 31, 1998. The increase was primarily due to the acquisitions
of E&N Railroad, the RaiLink properties and TPW, which moved 7,839, 77,328 and
16,981 carloads, respectively, for the year ended December 31, 1999. The
Company's "same railroad" car loadings and revenue increased 2% and 5%,
respectively, for the year ended December 31, 1999 compared to the year ended
December 31, 1998.
Other revenue increased $1.3 million, or 161%, to $2.1 million for the
year ended December 31, 1999 from $0.8 million for the year ended December 31,
1998. Other revenues for 1999 and 1998 consist of gain on sales of railroad
assets, easement sales, railroad lease and rental income and other miscellaneous
income. The increase was primarily due to acquisitions of the RaiLink properties
and TPW, which had $0.7 million and $0.4 million, respectively, in other revenue
for the year ended December 31, 1999.
OPERATING EXPENSES. Operating expenses increased $19.9 million, or
177%, to $31.1 million for the year ended December 31, 1999 from $11.3 million
for the year ended December 31, 1998. The increase was primarily due to the
acquisitions of E&N Railroad, the RaiLink properties and TPW, which had $4.4
million, $11.1 million and $3.4 million, respectively, in operating expenses for
the year ended December 31, 1999 and the write-off of $0.6 million in costs
related to the discontinuance of the Delaware Valley Railway. Operating
expenses, as a percentage of transportation revenue, were 80.3% and 73.2% for
1999 and 1998, respectively. Exclusive of the write-off of costs at the Delaware
Valley Railway, the operating ratio was 78.7% for 1999. The increase was due
primarily to higher operating ratios at the railroads acquired in 1999 compared
to the Company's previously existing railroads. Management anticipates an
improvement in the operating ratio over the next twelve months, exclusive of
seasonality, as the new operations are assimilated into the Company's North
American operations.
Maintenance of way expenses increased approximately $3.5 million, or
178%, to $5.5 million for the year ended December 31, 1999 from $2.0 million for
the year ended December 31, 1998. The increase was primarily due to the
maintenance of way expenses at E&N Railroad, the RaiLink properties and TPW of
$0.4 million, $2.3 million and $0.4 million, respectively, for the year ended
December 31, 1999.
Maintenance of equipment increased $1.2 million, or 183%, to $1.9
million for the year ended December 31, 1999 from $0.7 million for the year
ended December 31,1998. The increase was primarily due to the maintenance of
equipment expenses at E&N Railroad, the RaiLink properties and TPW of $0.2
million, $0.8 million and $0.2 million, respectively, for the year ended
December 31, 1999.
Transportation expense increased $8.6 million, or 239%, to $12.2
million for the year ended December 31, 1999 from $3.6 million for the year
ended December 31, 1998. The increase was primarily due to the transportation
expenses at E&N Railroad, the RaiLink properties and TPW of $1.5 million, $5.1
million and $1.6 million, respectively, for the year ended December 31, 1999. In
33
<PAGE> 34
addition, the Company's transportation expenses for 1999 were negatively
impacted by the increasing fuel prices throughout the year. Fuel prices have
continued to increase this year, which may continue to have a negative impact on
operating results.
Equipment rental increased $0.7 million, or 199%, to $1.0 million for
the year ended December 31, 1999 from $0.3 million for the year ended December
31, 1998. The increase was primarily due to the equipment rental expenses at E&N
Railroad and TPW of $1.0 million and $0.4 million, respectively, for the year
ended December 31, 1999 partially offset by increased earnings on certain of the
Company's leased rail car fleets.
General and administrative expenses increased $3.8 million, or 124%, to
$6.9 million for the year ended December 31, 1999 from $3.1 million for the year
ended December 31, 1998. The increase was primarily due to general and
administrative expenses at E&N Railroad, the RaiLink properties and TPW of $1.1
million, $1.6 million and $0.4 million, respectively, for the year ended
December 31, 1999 and the write-off of costs at DVRC of $0.6 million.
Depreciation and amortization increased $2.0 million, or 129%, to $3.6
million for the year ended December 31, 1999 from $1.6 million for the year
ended December 31, 1998. The increase was primarily due to the acquisitions in
1999.
INTEREST AND OTHER EXPENSES. Interest and other expenses increased $2.6
million, or 92%, to $5.5 million for the year ended December 31, 1999 from $2.9
million for the year ended December 31, 1998. The increase in interest expense
was primarily due to increased borrowings in connection with the acquisitions of
E&N Railroad, RaiLink and TPW.
COMPARISON OF NORTH AMERICAN RAILROAD OPERATING RESULTS FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1997
OPERATING REVENUES. Transportation revenues increased $0.7 million, or
4.4%, to $15.4 million for the year ended December 31, 1998 from $14.7 million
for the year ended December 31, 1997. The transportation revenue per carload
decreased to $303 from $308 per car primarily due to the difference in product
mix hauled between 1998 and 1997. Carloads handled totaled 49,519 for the year
ended December 31, 1998, an increase of 3,312, or 7.2%, compared to 46,207 for
the year ended December 31, 1997.
Other revenues decreased $0.5 million, or 37.2%, to $0.8 million for
the year ended December 31, 1998 from $1.3 million for the year ended December
31, 1997. Other revenues for 1998 and 1997 consist of gain on sales of railroad
assets, easement sales, railroad lease and rental income and other miscellaneous
income. The decrease was primarily due to certain gains on sale of assets during
1997 with no corresponding sales of assets in 1998.
OPERATING EXPENSES. Operating expenses increased $0.2 million, or 1.8%,
to $11.3 million for the year ended December 31, 1998 from $11.1 million for the
34
<PAGE> 35
year ended December 31, 1997. Operating expenses, as a percentage of
transportation revenue, were 73.2% and 75.3% for 1998 and 1997, respectively.
Maintenance of way expenses decreased $0.2 million, or 11.5%, to $2.0
million for the year ended December 31, 1998 from $2.2 million for the year
ended December 31, 1997 primarily due to increased track work being performed as
part of scheduled maintenance programs at the West Texas and Lubbock Railroad
("WTLR") and the Huron and Eastern Railway ("HESR") during 1997.
Maintenance of equipment expenses remained fairly constant at $0.7
million for the years ended December 31, 1998 and 1997.
Transportation expense decreased $0.2 million, or 5.1%, to $3.6 million
for the year ended December 31, 1998 from $3.8 million for the year ended
December 31, 1997 primarily due to the dispositions of ETC, Gettysburg Railway
and Gettysburg Scenic Rail Tours in 1997.
Equipment rental decreased $0.3 million, or 42.0%, to $0.3 million for
the year ended December 31, 1998 from $0.6 million for the year ended December
31, 1997. The decrease is primarily due to increased utilization of the
Company's leased railcar fleet. Cascade and Columbia River Railroad ("CCRR") and
Minnesota Northern Railroad ("MNR") equipment rental expenses decreased by 78.8%
and 137.4% respectively due to increased earnings offsetting equipment rental
expense on their railcar fleets.
General and administrative expenses increased $0.6 million, or 26.0%,
to $3.1 million for the year ended December 31, 1998 from $2.5 million for the
year ended December 31, 1997. MNR had selling, general and administrative
expenses of $0.5 million in 1998 compared to $0.3 million for the year ended
December 31, 1997, an increase of $0.2 million. Otter Tail Valley Railroad had
selling, general and administrative expenses of $0.3 million in 1998 compared to
$0.2 million for the year ended December 31, 1997, an increase of approximately
$0.1 million. St. Croix Valley Railroad had selling, general and administrative
expenses of $0.1 million for the year ended December 31, 1998, an increase of
$0.1 million from $15,000 in 1997.
Depreciation and amortization increased $0.3 million, or 17.4%, to $1.6
million for the year ended December 31, 1998 from $1.3 million for the year
ended December 31, 1997.
INTEREST AND OTHER EXPENSES. Interest and other expenses remained
fairly constant at $2.9 million for the years ended December 31, 1998 and 1997.
INTERNATIONAL RAILROAD OPERATIONS
All results of operations discussed in this section are for the
Company's international railroads only, unless otherwise indicated. The results
of international railroad operations for the years ended December 31, 1998 and
1997 include only Ferronor. The results of operations for the year ended
December 31, 1999 also include the operations of Freight Victoria from May 1,
35
<PAGE> 36
1999 to December 31, 1999. As a result, the results of operations for the year
ended December 31, 1999 are not comparable to the prior years in certain
material respects and are not indicative of the results which would have
occurred had the acquisition been consummated at the beginning of the respective
periods.
The following table sets forth the operating revenues and expenses (in
thousands) for the Company's international railroad operations for the periods
indicated.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
ENDED DECEMBER 31,
---------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Revenue:
Transportation revenue $ 80,069 $ 14,915 $ 7,287
Other revenue 2,404 1,009 775
----------- ---------- ----------
Total revenue 82,473 15,924 8,062
----------- --------- ---------
Operating expenses:
Transportation 54,706 8,982 5,113
General and administrative 7,391 1,724 1,137
Depreciation and amortization 4,660 706 267
----------- --------- ---------
Total operating expenses 66,757 11,412 6,517
----------- --------- ---------
Operating income 15,716 4,512 1,545
Other income (expense) (6,867) (1,257) 319
Minority interest in earnings (1,551) (1,672) (851)
----------- --------- ---------
Income before income taxes $ 7,298 $ 1,583 $ 1,013
=========== ========= =========
</TABLE>
COMPARISON OF INTERNATIONAL RAILROAD OPERATING RESULTS FOR THE YEARS ENDED
DECEMBER 31, 1999 AND 1998
FERRONOR.
OPERATING REVENUES. Transportation revenue increased $4.2 million, or
28%, to $19.1 million for the year ended December 31, 1999 from $14.9 million
for the year ended December 31, 1998. Ferronor's carloads handled totaled 93,835
for the year ended December 31, 1999, an increase of 25,819, or 38%, compared to
68,016 for the year ended December 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 and
nitrates out of the Minsal mine during 1999. These increases were offset
slightly by a decrease in the international traffic out of Argentina and Bolivia
due to the slow down in the world economy in the second quarter of 1998.
OPERATING EXPENSES. Operating expenses increased $4.0 million, or 35%, to
$15.4 million for the year ended December 31, 1999 from $11.4 million for the
year ended December 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 and nitrates out of the Minsal mine during 1999.
Operating expenses, as a percentage of transportation revenue, were 80.7% and
76.5% for the years ended December 31, 1999 and 1998, respectively. The
operating ratio increase was due primarily to the loss in 1999 of international
traffic which is typically higher margin business.
36
<PAGE> 37
OTHER INCOME (EXPENSE). Other income (expense) decreased $0.6 million, or
46%, to $0.7 million for the year ended December 31, 1999 from $1.3 million for
the year ended December 31, 1998. The decrease in net expense was due primarily
to an exchange rate gain of $0.5 million recorded in 1999.
FREIGHT VICTORIA
OPERATING REVENUES. Operating revenues were $63.4 million for the period
May 1, 1999 through December 31, 1999. These revenues consisted of $48.5 million
of freight revenue, $12.4 million of track access fees and $2.4 million of other
operating revenue.
OPERATING EXPENSES. Operating expenses were $51.3 million for the period
May 1, 1999 through December 31, 1999. These expenses consisted of $10.0 million
of maintenance of way costs, $5.8 million of maintenance of equipment costs,
$26.9 million of transportation costs, $5.2 million of general and
administrative costs and $3.4 million in depreciation. Freight Victoria's
operating ratio for the eight month period ended December 31, 1999 was 81.0%.
OTHER INCOME (EXPENSE). Other income (expense) was a net expense of $6.2
million. This amount primarily consisted of $7.6 million in interest expense and
$3.3 million in amortization of funding costs related to the bridge financing
partially offset by a $4.1 million casualty gain recognized in the fourth
quarter of 1999. Additionally, Freight Victoria recognized an exchange rate gain
of $0.2 million in for the period.
INCOME TAX BENEFIT. Freight Victoria recognized an income tax benefit of
$2.8 million during 1999 based upon enacted tax law changes in Australia.
COMPARISON OF INTERNATIONAL RAILROAD OPERATING RESULTS FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1997.
OPERATING REVENUES. Transportation revenue increased $7.6 million, or
105%, to $14.9 million for the year ended December 31, 1998 from $7.3 million
for the year ended December 31, 1997. Ferronor's carloads handled totaled 68,016
for the year ended December 31, 1998, an increase of 45,083, or 196.6%, compared
to 22,933 carloads for the year ended December 31, 1997. The increase was
partially due to the prior year period including only ten months of operations.
In addition, Ferronor began moving iron ore out of the El Algarrabo mine in late
March 1998 and the Los Colorados mine in July 1998. These moves have
significantly increased Ferronor's car loadings and operating revenue.
OPERATING EXPENSES. Operating expenses increased $4.9 million, or 75%, to
$11.4 million for the year ended December 31, 1998 from $6.5 million for the
year ended December 31, 1997. The increase was partially due to the prior year
period including only ten months of operations in addition 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 expenses, as a percentage of
transportation revenue, were 76.5% and 89.4% for the years ended December 31,
1998 and 1997, respectively. The improvement was primarily due to cost
reductions implemented by the Company including a reduction in employees.
37
<PAGE> 38
OTHER INCOME (EXPENSE). Other income (expense) decreased $1.6 million to
$(1.3) million for the year ended December 31, 1998 from $0.3 million for the
year ended December 31, 1997. The primary reasons for the decrease were the
interest expense on the capital project financings and certain gains on sale of
assets recognized in 1997 with no corresponding gains in 1998.
TRAILER MANUFACTURING OPERATIONS
The discussion of results of operations that follows reflects the
results of KSI for the periods indicated and KSC from January 1, 1998, the
effective date of the Company's acquisition of Fabrex, Inc. and its affiliate.
As a result, the results of operations for the year ended December 31, 1998 are
not comparable to the prior year in certain material respects.
In November 1999, the Company adopted a plan to sell its trailer
manufacturing operations. This business has been classified as a discontinued
operation and the results of operations have been excluded from continuing
operations in the consolidated statements of operations for all periods
presented.
The following table sets forth the income and expense items (in
thousands) of the Company's trailer manufacturing operations for the years ended
December 31, 1999, 1998 and 1997 and the percentage relationship of income and
expense items to net sales:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1999 1998 1997
------------------ -------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $44,281 100% $39,887 100% $22,941 100%
Cost of goods sold 33,117 74.8% 28,583 71.7% 16,544 72.1%
-------- -------- --------
Gross profit 11,164 25.2% 11,304 28.3% 6,397 27.9%
Selling, general and
administrative 3,915 8.8% 3,324 8.3% 1,969 8.6%
Depreciation and amortization 1,007 2.3% 835 2.1% 473 2.1%
-------- -------- --------
Income from operations 6,242 14.1% 7,145 17.9% 3,955 17.2%
Other expenses 49 0.1% 222 0.6% 230 1.0%
-------- -------- --------
Income before income taxes $ 6,193 14.0% $ 6,923 17.4% $ 3,725 16.2%
======== ======== ========
</TABLE>
COMPARISON OF OPERATING RESULTS OF TRAILER MANUFACTURING FOR THE YEARS ENDED
DECEMBER 31, 1999 AND 1998
NET SALES. Net sales increased $4.4 million, or 11%, to $44.3 million
for the year ended December 31, 1999 from $39.9 million for the year ended
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<PAGE> 39
December 31, 1998. The net sales increase consisted of an increase of $5.6
million in sales at KSC from 1998 to 1999 and a decrease of $1.2 million in
KSI's sales from 1998 to 1999. KSI sold 710 trailers for the year ended December
31, 1999 and 895 trailers for the year ended December 31, 1998. The decrease in
KSI's sales volume decreased net sales by $6.4 million. KSC sold 405 trailers
for the year ended December 31, 1999 and 234 trailers for the year ended
December 31, 1998. The increase in KSC's sales volume increased net sales by
$6.5 million. KSI's average price per trailer sold was $41,500 for the year
ended December 31, 1999 and $34,700 for the year ended December 31, 1998. The
increase in average price per trailer increased KSI's sales by $4.8 million.
KSC's average price per trailer sold was $34,900 for the year ended December 31,
1999 and $37,900 for the year ended December 31, 1998. The decrease in average
price per trailer decreased KSC's sales by $0.9 million. Sales to governmental
agencies represented 36%, 48% and 37% of KSI's net sales for 1999, 1998 and
1997, respectively. The trailer manufacturing division had a backlog of orders
consisting of $16.4 million at December 31, 1999 compared to $22.2 million at
December 31, 1998.
COST OF GOODS SOLD. Cost of goods sold increased $4.5 million, or 16%,
to $33.1 million for the year ended December 31, 1999 from $28.6 million for the
year ended December 31, 1998. The cost of goods sold increase consisted of an
increase of $5.1 million at KSC from 1998 to 1999 and a decrease of $0.6 million
in KSI's cost of goods sold from 1998 to 1999. Cost of goods sold was 74.8% of
net sales for the year ended December 31, 1999 compared to 71.7% for the year
ended December 31, 1998. The increase was due to a higher percentage of sales
being from KSC, which has a lower gross profit margin on its trailers then KSI.
KSI's and KSC's cost of goods sold were 69.0% and 85.2%, respectively, for the
year ended December 31, 1999 compared to 68.1% and 81.8%, respectively, for the
year ended December 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 of
production than the old KSC facility and also the change in production mix.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $0.6 million, or 18%, to $3.9 million for the
year ended December 31, 1999 from $3.3 million for the year ended December 31,
1998. KSC's selling, general and administrative increased $0.6 million from 1998
to 1999, while KSI's selling, general and administrative expenses remained
fairly constant between the periods.
COMPARISON OF OPERATING RESULTS OF TRAILER MANUFACTURING FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1997
NET SALES. Net sales increased $17.0 million, or 73.9%, to $39.9
million for the year ended December 31, 1998 from $22.9 million for the year
ended December 31, 1997. The net sales increase consisted of $10.2 million in
sales from KSC in 1998 and an increase of $6.8 million in KSI's sales. KSI sold
895 trailers for the year ended December 31, 1998 and 730 trailers for the year
ended December 31, 1997. The increase in KSI's sales volume increased net sales
by $5.0 million. KSC sold 234 trailers for the year ended December 31, 1998.
KSI's average price per trailer sold was $34,700 for the year ended December 31,
1998 and $30,500 for the year ended December 31, 1997. The increase in average
39
<PAGE> 40
price per trailer increased KSI's sales by $1.8 million. Sales to governmental
agencies represented 48% and 37% of KSI's net sales for 1998 and 1997,
respectively. KSI's backlog as of December 31, 1998 was $18.3 million compared
to $19.7 million at December 31, 1997. KSC's backlog as of December 31, 1998 was
$3.7 million.
COST OF GOODS SOLD. Cost of goods sold increased $12.0 million, or
72.8%, to $28.6 million for the year ended December 31, 1998 from $16.6 million
for the year ended December 31, 1997. The cost of goods sold increase consisted
of $8.4 million from KSC in 1998 and an increase of $3.6 million in KSI's cost
of goods sold. Cost of goods sold was 71.7% for the year ended December 31, 1998
compared to 72.1% for the year ended December 31, 1997. KSI's and KSC's cost of
goods sold were 68.2% and 81.7%, respectively, for 1998.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $1.3 million, or 68.8%, to $3.3 million for
the year ended December 31, 1998 from $2.0 million for the year ended December
31, 1997. KSC's selling, general and administrative expenses were $0.9 million
for 1998, while KSI's selling, general and administrative expenses increased
$0.4 million for 1998. The increase was primarily related to KSI's increased
sales during the year as discussed above.
RESULTS OF MOTOR CARRIER OPERATIONS
The discussion of results of operations that follows reflects the
results of Steel City Carriers and RIS for the years ended December 31, 1998 and
1997. Since the Company's acquisition of Steel City Carriers in February 1995,
its performance and development have not met the Company's expectations.
Accordingly, in March 1997 the Company adopted a formal plan to discontinue its
motor carrier operations and refocus the Company's efforts on expanding its core
railroad operations. The Company's Board of Directors approved the plan of
discontinuance on March 20, 1997. Motor Carrier operations are included as
discontinued operations for the first quarter of 1998 and for all of 1997 and
1996. Motor Carrier operations are included in continuing operations from April
1, 1998 to December 1, 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,
Canada-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 the motor carrier operations.
The following table sets forth the operating revenues and expenses (in
thousands) for the Company's motor carrier operations for the years ended
December 31, 1998 and 1997.
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FOR THE YEAR ENDED
DECEMBER 31,
1998 1997
---- ----
Transportation revenue $ 6,080 $ 7,133
Operating expenses:
Transportation 5,279 6,348
General and administrative 620 599
Depreciation and amortization 401 1,120
------- ---------
Total operating expenses 6,300 8,067
------ ------
Operating income (expense) (220) (934)
Other expense (317) (187)
------- --------
Loss before income taxes ($ 537) ($1,121)
====== ========
COMPARISON OF MOTOR CARRIER OPERATIONS FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1997
The results of motor carrier operations have been included in continuing
operations commencing April 1, 1998, as disposal of the segment was not
completed within twelve months. The results of motor carrier operations have
been included as discontinued operations for the year ended December 31, 1997,
as previously reported.
OPERATING REVENUE. Operating revenue decreased $1.0 million, or 14.8%, to
$6.1 million for the year ended December 31, 1998 from $7.1 million for the year
ended December 31, 1997. The decrease was primarily due to Steel City ceasing
motor carrier operations effective November 30, 1998 and due to a temporary shut
down at one of Steel City's largest customers during the third quarter of 1998.
OPERATING EXPENSES. Operating expenses decreased $1.8 million, or 21.9%,
to $6.3 million for the year ended December 31, 1998 from $8.1 million for the
year ended December 31, 1997. Operating expenses, as a percentage of operating
revenue, were 103.6% and 113.1% for the years ended December 31, 1998 and 1997,
respectively.
Transportation expense decreased $1.0 million, or 16.8%, to $5.3 million
for the year ended December 31, 1998 from $6.3 million for the year ended
December 31, 1997. The decrease was primarily due to variable costs related to
the decreased level of operating revenue.
General and administrative expenses remained fairly constant at $0.6
million for the years ended December 31, 1998 and 1997.
Depreciation and amortization decreased $0.7 million, or 64.2%, to $0.4
million for the year ended December 31, 1998 from $1.1 million for the year
ended December 31, 1997. During 1997, the Company wrote off goodwill of
approximately $0.7 million.
Other expense increased $0.1 million, or 69.5%, to $0.3 million for the
year ended December 31, 1998 from $0.2 million for the year ended December 31,
1997.
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<PAGE> 42
CORPORATE OVERHEAD
Corporate overhead, which benefits all of the Company's business
segments, has not been allocated to the business segments for this analysis.
Corporate overhead services performed for the Company's subsidiaries include
overall strategic planning, marketing, accounting, 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, increased $1.1 million, or 27%, to $5.2 million for the year ended
December 31, 1999 from $4.1 million for the year ended December 31, 1998.
Corporate overhead increased $0.9 million, or 28.0%, to $4.1 million for the
year ended December 31, 1998 from $3.2 million for the year ended December 31,
1997. The increases in each of the specified periods were related to the
additional costs incurred to manage the acquired subsidiaries and to establish a
strong management team to handle the Company's continued growth.
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 $21.5 million for
the year ended December 31, 1999. This amount includes $9.9 million in net
income and $14.1 million in depreciation and amortization.
Cash used in investing activities was $58.7 million for the year ended
December 31, 1999. The primary use of cash during 1999 was for the purchase of
property, plant and equipment with an aggregate cost of approximately $51.4
million. Approximately $10.8 million of these purchases were for the purchase of
E&N Railroad's assets. The Company also used $8.5 million for acquisitions
during 1999.
Cash provided by financing activities was $43.6 million for 1999,
consisting of net proceeds of $11.9 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 $31.9 million primarily due to
the above mentioned purchase of E&N Railroads assets. Partially offsetting these
amounts was cash used for deferred loan costs of $2.4 million.
In February 2000, the Company entered into a credit agreement and two
bridge note facilities in connection with the acquisition of RailTex and the
refinancing of substantially all of the Company's and RailTex's existing debt.
The credit agreement provides (1) a $125 million Term A loan, (2) a $205 million
Term B loan, and (3) a $50 million revolving credit facility which includes $30
million of U.S. dollar denominated loans, $10 million of Canadian dollar
denominated loans and $10.0 million of Australian dollar denominated loans. The
Term A loan and the revolving loans mature on December 31, 2005 and the Term B
loans mature December 31, 2006. At the Company's option, the senior credit
facilities will bear interest at either (1) the alternative base rate (defined
as greater of (i) The Bank of Nova Scotia's prime rate and (ii) the Federal
Funds Effective Rate plus 0.005%) plus 1.75% for the revolving credit facilities
and for the term A loan facilities and 2.00% for the term B loan facility, or
(2) the reserve-adjusted LIBO rate plus 3.00% for the revolving credit facility
and for the term A loan facility and 3.25% for the term B loan facility;
PROVIDED, that the additional amounts added to ABR and the LIBO rate for the
Revolving Credit Facilities and the Term A loan facility discussed above will be
subject to adjustment based on changes in the Company's leverage ratio effective
two fiscal quarters after the closing of the Senior Credit Facilities. The
default rate under the Senior Credit Facilities is 2.0% above the otherwise
applicable rate. The loans are collateralized by substantially all of
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<PAGE> 43
the Company's assets other than those of KSI and its subsidiaries and Ferronor.
The loans are guaranteed by all the Company's subsidiaries other than KSI and
its subsidiaries and Ferronor. Freight Victoria guarantees only the Australian
dollar revolving loans and the Company's Canadian subsidiaries guarantee only
the Canadian dollar revolving loans. The loans are provided by a syndicate of
banks with Donaldson, Lufkin & Jenrette as syndication agent and The Bank of
Nova Scotia as administrative agent.
Pursuant to the refinancing of RailAmerica's and RailTex's debt in
February 2000, the Company will be taking an extraordinary charge in the first
quarter of 2000 for the loss on early extinguishment of debt.
The Company's new credit facilities include numerous covenants imposing
significant financial and operating restrictions on its business. The covenants
place restrictions on RailAmerica's ability to, among other things:
o incur more debt;
o pay dividends, redeem or repurchase its stock or make other
distributions;
o make acquisitions or investments;
o use assets as security in other transactions;
o enter into transactions with affiliates;
o merge or consolidate with others;
o dispose of assets or use asset sale proceeds;
o create liens on its assets; and
o extend credit.
The new credit facilities also contain financial covenants that will
require the Company to meet a number of financial ratios and tests. The
Company's ability to meet these ratios and tests and to comply with other
provisions of the new credit facilities can be affected by events beyond its
control. RailAmerica's failure to comply with the obligations in the new credit
facilities could result in an event of default under the new credit facilities,
which, if not cured or waived, could permit acceleration of the indebtedness or
other indebtedness which could have a material adverse effect on the Company.
Interest on the new credit facility is payable at variable rates.
Fluctuations in the market interest rate will affect the cost of the Company's
borrowings. The effect of a 1% increase in interest rates would result in an
increase in interest expense of $3.3 million for the year ended December 31,
2000.
In February 2000, in connection with the RailTex acquisition, the
Company's wholly-owned subsidiary, RailAmerica Transportation, Inc., issued $95
million of subordinated bridge notes, under a securities purchase agreement with
DLJ Bridge Finance, Inc. These notes mature on February 4, 2001 and have an
initial interest rate of 13% per annum, which rate increases every three months
based on the highest specified rates. The Company anticipates that it will repay
the subordinated bridge notes through the issuance of additional long-term debt
and/or equity securities. In February 2000, the
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<PAGE> 44
Company's wholly-owned subsidiary Palm Beach Rail Holding, Inc., issued $55
million of asset sale bridge notes, under a securities purchase agreement with
DLJ Bridge Finance, Inc. These notes mature on February 4, 2001 and have an
initial interest rate of 15% per annum, which rate increases every three months
based on the highest of specified rates. The asset sale bridge notes are
collateralized by the assets of Kalyn/Siebert, L.P. and its subsidiaries, which
are discontinued operations held for sale. The Company intends to repay a
portion of the asset sale bridge notes from the proceeds of the sale of its
trailer manufacturing operations, in addition will explore available
alternatives to repay any remaining balance on the notes. There can be no
assurance that the Company will be able to repay any or all of these bridge
notes.
In connection with the issuance of the subordinated bridge notes, the
purchasers of such notes are entitled to receive warrants to purchase common
stock at an exercise price of $7.75 per share commencing in May 2001 to the
extent the subordinated bridge notes are then outstanding. In connection with
the issuance of the asset sale bridge notes, the purchasers of such notes are
entitled to receive warrants to purchase common stock at an exercise price of
$7.75 per share commencing in August 2000 to the extent the asset sale bridge
notes are then outstanding. The maximum number of shares issuable upon exercise
of all these warrants would be 1,604,330, subject to specified anti-dilution
adjustments.
In January 1999, the Company completed a private offering of $11.6
million of its Series A Convertible Redeemable Preferred Stock ("Preferred
Stock"). The Company sold 464,400 shares of its Preferred Stock at a price of
$25 per share. The Preferred Stock pays annual dividends of 7.5%, is convertible
into shares of the Company's common stock at a price of $8.25 per share and is
non-voting. The Preferred Stock is mandatorily redeemable 5 years from its
issuance. The December 31, 1998 balance sheet includes 300,600 shares which were
issued during 1998. The remainder of the shares were issued in January 1999. The
carrying value of the Preferred Stock is the par value less issuance costs. The
issuance costs are being amortized on a straight-line basis over the life of the
Preferred Stock. 86,000 shares of the Preferred Stock were converted in late
1999 and an additional 80,000 were converted in early 2000.
In March 1999, the Company completed a private offering of
approximately $12.5 million of restricted Common Stock. Pursuant to the
offering, the Company sold approximately 1.4 million shares of its $.001 par
value 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 acted as placement agent and received approximately
$0.4 million in fees and cost reimbursement and one-year warrants to purchase
141,653 shares of Common Stock at an exercise price of $10.125. All warrants
related to this transaction expired on March 3, 2000 unexercised.
A majority of the proceeds from the two private offerings were used to
fund a $19 million deposit with the government of Victoria, Australia. This
deposit was used as part of the purchase price of the assets of V/Line Freight
Corporation, which closed April 30, 1999.
In August 1999, the Company issued $22.5 million aggregate principal
amount of its junior convertible subordinated debentures. Interest on the
debentures accrues at the rate of 6% per annum and is payable semi-annually,
commencing January 31, 2000. The debentures are convertible, at the option of
the holder, into shares of RailAmerica at a conversion price of $10 per share,
subjected to adjustment in selected circumstances. The debentures mature on July
31, 2004, are general unsecured obligations and rank subordinate in right of
payment to all senior indebtedness. At RailAmerica's option, the debentures may
be redeemed at par, plus accrued but unpaid interest thereon to the date of
redemption, in whole or in part, if the closing price of RailAmerica's common
stock is above 200% of the conversion price for 10 consecutive trading days.
As of December 31, 1999, the Company had working capital of $24.0
million compared to working capital of $18.5 million as of December 31, 1998.
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<PAGE> 45
Cash on hand was $11.6 million as of December 31, 1999 compared to $5.1 million
as of December 31, 1998. The increases were primarily related to the acquisition
of Freight Victoria and sale of the Company's interest in Great Southern
Railway. The Company's cash flows from operations historically have been
sufficient to meet our 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. The
Company anticipates using cash flows and borrowings for anticipated capital
expenditures of $8.5 million for the upgrading of existing North American rail
lines and purchases of locomotives and equipment. In addition, the Company
anticipates spending $22.7 million of capital expenditures over the next twelve
months on the newly acquired RailTex properties. The Company anticipates capital
expenditures of $10.6 million over the next twelve months primarily 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 was 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 during 2000. Freight Victoria's capital expenditures are estimated to
be $18.5 million over the next twelve months and the Company anticipates paying
for these through cash generated from Freight Victoria's operations. 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 anticipates debt service for the next twelve months to be
approximately $56 million including principal and interest. It is anticipated
that a portion of the debt service will be paid from the operating cash flow of
Freight Victoria. A material change in the currency exchange rate between the
U.S. dollar and the Australian dollar could adversely affect the Company's
ability to service the debt.
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
acquisitions 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 March 1, 2000, the Company had $38.0 million of availability under the
revolving line of credit facility.
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 the increases in its freight rates.
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
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<PAGE> 46
2000. This could result in a system failure or miscalculations causing
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.
As of the date of this annual report, the Company has not experienced
any significant adverse impact on the Company's operations from the transition
to the Year 2000. The Company cannot assure that its operations have not been
affected in a manner that is not yet apparent or in a manner that will arise in
the future. In addition, computer programs that were date sensitive to the Year
2000 may not have been programmed to process the Year 2000 as a leap year, and
negative effects from this remain unknown. As a result, the Company will
continue to monitor its Year 2000 compliance and the Year 2000 compliance of our
suppliers and customers. However, the Company does not anticipate any Year 2000
problems that are reasonably likely to have a material adverse effect on the
Company's operations.
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 appears at the beginning of this annual report on Form 10-K.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
which establishes accounting and reporting standards for derivative instruments
and hedging activities. SFAS No. 133 requires all derivatives to be measured at
fair value and recognized at either assets or liabilities on the balance sheet.
Furthermore, the accounting for changes in the fair value of a derivative (i.e.
gains and losses) depends on the intended use of the derivative.
ITEM 7A. MARKET RISK
FOREIGN CURRENCY. The Company's foreign currency risk arises from
owning and operating railroads in Canada, Chile and Australia. At December 31,
1999, the Company had not entered into any transactions to manage this risk.
The financial position and results of operations of the Company's
Canadian, Chilean and Australian subsidiaries are measured using the local
currency as the functional currency. Assets and liabilities are translated into
U.S. dollars at exchange rates in effect at year-end, while revenues and
expenses are translated at average exchange rates prevailing during the year.
The resulting translation gains and losses are charged directly to accumulated
other comprehensive income, a component of stockholders' equity, and are not
included in income until realized through the sale or liquidation of the
investment. At December 31, 1999, the accumulated other comprehensive income
totaled $3.5 million, or 5% of total stockholders' equity.
It is anticipated that a portion of the debt service will be paid from
the operating cash flow of Freight Victoria. A material change in the currency
exchange rate between the U.S. dollar and the Australian dollar could adversely
affect the Company's ability to service the debt.
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<PAGE> 47
INTEREST RATES. The Company's interest rate risk results from owing
variable rate debt obligations, as an increase in interest rates would result in
lower earnings and increased cash outflows. At December 31, 1999, the Company
had not entered into any transactions to manage this risk.
The interest rate on the new credit facility is payable at variable
rates. Fluctuations in the market interest rate will affect the cost of the
Company's borrowings. The effect of a 1% increase in interest rates on the
Company's $330 million variable rate debt would result in an increase in
interest expense of $3.3 million for the year ended December 31, 2000.
DIESEL FUEL. The Company is exposed to risk as a result of fluctuations
in diesel fuel prices, as an increase in the price of diesel fuel would result
in lower earnings and increased cash outflows. At December 31, 1999, the Company
had not entered into any transactions to manage this risk although RailTex has
entered into a contract to hedge against fuel prices with a cap which fixed the
price of 725,000 gallons of diesel fuel per month for the period July 1999 to
June 2000 at $0.4500 per gallon. The cost of the cap was approximately $0.2
million.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of the Company, the accompanying
notes thereto and the independent auditor's report are included as part of this
Form 10-K and immediately follow the signature page of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning directors, executive officers and nominees of
the Company is hereby incorporated by reference from the Company's definitive
proxy statement relating to its 2000 Annual Meeting of Stockholders to be filed
with the Commission pursuant to Regulation 14A on or before April 29, 2000.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning the executive compensation of the Company is
hereby incorporated by reference from the Company's definitive proxy statement
relating to its 2000 Annual Meeting of Stockholders to be filed with the
Commission pursuant to Regulation 14A on or before April 29, 2000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning the security ownership of the Company is hereby
incorporated by reference from the Company's definitive proxy statement relating
to its 2000 Annual Meeting of Stockholders to be filed with the Commission
pursuant to Regulation 14A on or before April 29, 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions
of the Company is hereby incorporated by reference from the Company's definitive
proxy statement relating to its 2000 Annual Meeting of Stockholders to be filed
with the Commission pursuant to Regulation 14A on or before April 29, 2000.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Exhibits
2.1 Amended and Restated Stock Purchase Agreement, dated as of
August 3, 1999 by and among RailAmerica, Inc., Florida Rail
Lines, Inc. Bank Austria AG, Grand Cayman Branch, CSX
Transportation, Inc., Delaware Otsego Corporation, The Brenner
Group and The Toledo, Peoria and Western Railroad
Corporation(8)
2.2 Agreement and Plan of merger, dated as of October 14, 1999,
among RailAmerica, Inc., Cotton Acquisition Corp. and RailTex,
Inc.(9)
3.1 Amended and Restated Articles of Incorporation of Registrant,
as amended(2)
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(6)
4.2 Certificate of Designation of Series A Convertible Redeemable
Preferred Stock(19)
4.3 Third Amendment to the Rights Agreement, dated as of
January 13, 2000, between the Company and American Stock
Transfer & Trust Company(10)
4.4 Warrant Agreement, dated as February 4, 2000, among the
Company and RailAmerica Funding, Inc.
4.5 Asset Bridge Warrant Agreement, dated as of February 4, 2000,
among the Company and RailAmerica Holdings Funding, Inc.
10.41 Employment Agreement between Gary O. Marino and RailAmerica,
Inc.(7)+
10.43 Stock Option Agreement, dated November 11, 1994, between
RailAmerica, Inc. and Gary O. Marino(7)+
10.45 RailAmerica, Inc. 1995 Non-Employee Director Stock Option
Plan(2)
10.46 RailAmerica, Inc. 1995 Employee Stock Purchase Plan(2)
10.47 RailAmerica, Inc. Corporate Senior Executive Bonus Plan(2)+
10.55 Confidential Private Placement Memorandum dated September 20,
1996.(3)
10.56 Stock Purchase Agreement, dated as of September 20, 1996, by
and among Otter Tail Valley Railroad Company, Inc. and Dakota
Rail, Inc.(4)
10.59 RailAmerica, Inc. Nonqualified Deferred Compensation Trust(5)+
10.60 Nonqualified Deferred Compensation Agreement between
RailAmerica, Inc. and Gary O. Marino(5)+
10.63 RailAmerica, Inc. 1998 Executive Incentive Compensation
Plan(6)+
10.64 Sale of Assets Agreement dated February 22, 1999 by and among
RailAmerica, Inc., Freight Victoria Limited and V/Line Freight
Corporation 10.2 Primary Infrastructure (11)
10.65 Lease dated April 30, 1999 by and among the Director of Public
Transport and Freight Victoria Limited(12)
10.66 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.(13)
10.67 Noncompete Agreement, dated December 1999, by and between
Ronald A. Rittenmeyer and the Company(14)
10.68 Purchase Agreement, dated as of November 4, 1998 by and among
RailTex Global Investments, L.L.C., RailTex International
Holdings, Inc. and GEEMF II Latin America, L.L.C.(15)
10.69 Memorandum of Understanding, dated as of October 29, 1999,
providing for the
49
<PAGE> 50
sale by RailTex Global Investments, LLC of its shares in
Ferrovia Centro Atlantica, S.A. (English and Portugese
language versions)(16)
10.70 Purchase Agreement, dated as of November 10, 1999, by and
bewteen RailTex International Holdings, Inc. and GEEMF II
Latin America, L.L.C.(17)
10.71 Credit Agreement, dated as of February 4, 2000, by and among
the Company and Palm Beach Rail Holdings, Inc., each as
guarantor, RailAmerica Transportation Corp., RaiLink, Ltd. And
Freight Victoria Limited, each as a borrower, various
financial institutions from time to time parties thereto, as
the lenders, DLJ Capital Funding, Inc., as the syndication
agent, the lead arranger and the sole book running manager,
The Bank of Nova Scotia, as the administrative agent for the
Lenders and ING (U.S.) Capital LLC and Fleet National Bank, as
the documentation agents for the lenders
10.72 Securities Purchase Agreement, dated as of February 4, 2000,
among RailAmerica Transportation Corp., and the Company, Palm
Beach Holdings, Inc., and all of the Restricted Subsidiaries
(as defined in the Credit Agreement) of the Company, each as a
guarantor, and RailAmerica Funding, Inc. as the purchaser.
10.73 Asset Bridge Securities Purchase Agreement, dated as of
February 4, 2000, among Palm Beach Rail Holdings, Inc., and
the Company, Kalyn/Siebert I, Inc., KS Boca, Inc. and
Kalyn/Siebert, L.P., each as a guarantor, and RailAmerica
Holdings Funding, Inc., as the purchaser
10.74 Equity Registration Rights Agreement, dated as of February 4,
2000, among the Company and RailAmerica Funding, Inc.
10.75 Debt Registration Rights Agreement, dated as of February 4,
2000, among the Company and RailAmerica Funding, Inc.
10.76 Asset Bridge Equity Registration Rights Agreement, dated as of
February 4, 2000, among the Company and RailAmerica Funding,
Inc.
99.1 Petition for Exemption, dated November 8, 1999, filed before
the Surface Transportation Board, finance Docket No. 33813, by
RailAmerica, Inc. and RailTex, Inc.(18)
21.1 Subsidiaries of Registrant
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Arthur Andersen Langton Clarke
27 Financial Data Schedule
- ----------
(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 Company's Form 10-QSB for the quarter ended September 30, 1995,
filed with the Securities and Exchange Commission on November 12, 1995.
(3) 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.
(4) 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.
(5) 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
50
<PAGE> 51
Commission on March 31, 1997.
(6) 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.
(7) 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.
(8) Incorporated by reference to exhibit 2.1 filed as part of the Company's
Form 8-K as of September 3, 1999, filed with the Securities and
Exchange Commission on September 20, 1999.
(9) Incorporated by reference to exhibit 2.1 filed as part of the Company's
Form 8-K as of October 14, 1999, filed with the Securities and Exchange
Commission on October 19, 1999.
(10) Incorporated by reference to exhibit 4.1 filed as part of the Company's
Form 8-K as of January 13, 2000, filed with the Securities and Exchange
Commission on January 26, 2000.
(11) Incorporated by reference to exhibit 10.1 filed as part of the
Company's Form 8-K as of April 30, 1999, filed with the Securities and
Exchange Commission on May 17, 1999.
(12) Incorporated by reference to exhibit 10.2 filed as part of the
Company's Form 8-K as of April 30, 1999, filed with the Securities and
Exchange Commission on May 17, 1999.
(13) Incorporated by reference to exhibit 10.64 filed as part of the
Company's Form 10-Q as of March 31, 1999, filed with the Securities and
Exchange Commission on May 17, 1999.
(14) Incorporated by reference to exhibit 10.1 filed as part of the
Company's Registration Statement on Form S-4, Registration No.
333-93611.
(15) Incorporated by reference to exhibit 10.56 filed as part of the Form
10-K filed for RailTex, Inc. for the year ended December 31, 1998,
filed with the Securities and Exchange Commission on March 30, 1999.
(16) Incorporated by reference to exhibit 10.60 filed as part of the Form
10-Q filed for RailTex, Inc. for the quarter ended September 30, 1999,
filed with the Securities and Exchange Commission on November 12, 1999.
(17) Incorporated by reference to exhibit 10.61 filed as part of the Form
10-Q filed for RailTex, Inc. for the quarter ended September 30, 1999,
filed with the Securities and Exchange Commission on November 12, 1999.
(18) Incorporated by reference to exhibit 99.1 filed as part of the
Company's Form 8-K as of November 8, 1999, filed with the Securities
and Exchange Commission on November 12, 1999.
(19) Incorporated by reference to the exhibit of the same number filed as
part of the Company's Form 10-K for the 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 December 31, 1999:
1. Current Report on Form 8-K, dated October 19, 1999, was filed
with the Securities and Exchange Commission on November 12,
1999 in connection with the Company's acquisition of the
common stock of RailTex, Inc.
2. Current Report on Form 8-K/A, dated September 3, 1999, was
filed with the Securities and Exchange Commission on November
12, 1999 in connection with the Company's acquisition of the
stock of The Toledo, Peoria and Western Railroad Corporation.
51
<PAGE> 52
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange act
of 1934, the Company has duly caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
RAILAMERICA, INC.
By: /s/ Gary O. Marino
---------------------------------------
Gary O. Marino, Chief Executive Officer
(Principal Financial officer)
By: /s/ Larry W. Bush
---------------------------------------
Larry W. Bush, Controller
(Principal Accounting Officer)
Dated March 27, 2000
In accordance with the Securities Exchange Act of 1934, this Report has
been signed below by the following persons on behalf of the Company in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ Gary O. Marino Chairman, President, Chief Executive March 27, 2000
- ----------------------------- Officer and Director
Gary O. Marino
/s/ Donald D. Redfearn Chief Administrative Officer, Executive March 27, 2000
- ----------------------------- Vice President, Secretary and Director
Donald D. Redfearn
/s/ John H. Marino Assistant Secretary and Director March 27, 2000
- -----------------------------
John H. Marino
/s/ Douglas R. Nichols Director March 27, 2000
- -----------------------------
Douglas R. Nichols
/s/ Richard Rampell Director March 27, 2000
- -----------------------------
Richard Rampell
/s/ Charles Swinburn Director March 27, 2000
- -----------------------------
Charles Swinburn
/s/ John M. Sullivan Director March 27, 2000
- -----------------------------
John M. Sullivan
/s/ Ferd. C. Meyer, Jr. Director March 27, 2000
- -----------------------------
Ferd C. Meyer, Jr.
/s/ William G. Pagonis Director March 27, 2000
- -----------------------------
William G Pagonis
</TABLE>
52
<PAGE> 53
RAILAMERICA, INC. AND SUBSIDIARIES
INDEX OF FINANCIAL STATEMENTS
-------
The following consolidated financial statements of RailAmerica, Inc. and
Subsidiaries are referred to in Item 7:
<TABLE>
<CAPTION>
PAGES
-----
<S> <C>
Report of Independent Certified Public Accountants F-2
Report of Independent Certified Public Accountants F-3
Consolidated Balance Sheets - December 31, 1999 and 1998 F-4
Consolidated Statements of Income - For the Years Ended
December 31, 1999, 1998 and 1997 F-5
Consolidated Statement of Stockholders' Equity - For the Years
Ended December 31, 1999, 1998 and 1997 F-6
Consolidated Statements of Cash Flows - For the Years Ended
December 31, 1999, 1998 and 1997 F-7
Notes to Consolidated Financial Statements F-8 - F-35
</TABLE>
<PAGE> 54
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders of
RailAmerica, Inc.
In our opinion, based upon our audits and the report of other auditors, the
accompanying consolidated balance sheets and the related consolidated statements
of income, stockholders' equity and cash flows present fairly, in all material
respects, the financial position of RailAmerica, Inc. and its subsidiaries at
December 31, 1999 and 1998, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We did not audit the financial statements of Empresa De
Transporte Ferroviario S.A., a 55% owned subsidiary of the Company, which
statements reflect total assets of $87,555,000 and $74,306,000 as of December
31, 1999 and 1998, respectively, and total revenues of $19,115,000 and
$15,312,000 for the years ended December 31, 1999 and 1998. Those statements
were audited by other auditors whose report thereon has been furnished to us,
and our opinion expressed herein, insofar as it relates to the amounts included
for Empresa De Transporte Ferroviario S.A., is based solely on the report of the
other auditors. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits and the report of other
auditors provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Ft. Lauderdale, Florida
March 15, 2000
F-2
<PAGE> 55
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of
Ferronor S.A.:
We have audited the balance sheets of Empresa de Transporte Ferroviario S.A
("Ferronor") as of December 31, 1999 and 1998, and the related statements of
income and cash flows for the years ended December 31, 1999 and 1998 and for the
ten-month period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We have conducted our audits in accordance with generally accepted auditing
standards in Chile, which are substantially consistent with those followed in
the United States of America. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and the significant
estimates made by the management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respect, the financial position of Ferronor as of December 31, 1999
and 1998 and the results of its operations and its cash flow for the years ended
December 31, 1999 and 1998 and for the ten-month period ended December 31, 1997
in conformity with generally accepted accounting principles in the United States
of America.
Charles A. Bunce ARTHUR ANDERSEN - LANGTON CLARKE
February 4, 2000 Santiago, Chile
F-3
<PAGE> 56
RAILAMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,1999 and 1998
<TABLE>
<CAPTION>
1999 1998
-------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 11,597,540 $ 5,085,402
Accounts and notes receivable 40,856,772 7,733,238
Inventories 9,928,789 3,647,885
Other current assets 3,500,166 1,480,637
Net assets of discontinued operation 14,995,915 13,882,586
-------------- ---------------
Total current assets 80,879,182 31,829,748
Property, plant and equipment, net 347,617,262 91,875,650
Notes receivable, less current portion 2,122,843 1,284,200
Investment in affiliates 4,666,776 1,938,942
Other assets 8,642,071 4,035,372
-------------- ---------------
Total assets $ 443,928,134 $ 130,963,912
============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 17,811,326 $ 3,557,430
Accounts payable 23,731,732 7,004,497
Accrued expenses 15,379,461 2,775,962
-------------- ---------------
Total current liabilities 56,922,519 13,337,889
-------------- ---------------
Long-term debt, less current maturities 145,016,269 62,769,869
Subordinated debt 100,000,000 --
Convertible subordinated debt 22,448,642 --
Other liabilities 16,374,169 427,288
Deferred income taxes 15,382,013 4,848,869
Minority interest 9,488,693 7,937,992
Commitments and contingencies
Redeemable convertible preferred stock, $0.01 par value,
$25 liquidation value, 1,000,000 shares authorized;
378,400 and 300,600 outstanding, respectively 8,829,844 6,881,684
Stockholders' equity:
Common stock, $0.001 par value, 30,000,000 shares authorized;
12,610,725 issued and 11,894,136 outstanding at December 31, 1999;
10,207,477 issued and 9,631,188 outstanding at December 31, 1998 12,611 10,207
Additional paid-in capital 52,304,578 28,277,533
Retained earnings 18,170,824 9,285,122
Accumulated other comprehensive income 3,485,717 470,820
Treasury stock (716,589 and 576,289 shares, respectively, at cost) (4,507,745) (3,283,361)
-------------- ---------------
Total stockholders' equity 69,465,985 34,760,321
-------------- ---------------
Total liabilities and stockholders' equity $ 443,928,134 $ 130,963,912
============== ===============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
F-4
<PAGE> 57
RAILAMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
--------------- ---------------- ----------------
<S> <C> <C> <C>
Operating revenue:
Transportation - railroad $ 118,910,941 $ 30,303,562 $ 22,023,717
Other 6,461,383 2,700,421 2,472,188
Motor Carrier -- 4,252,329 --
---------------- ----------------- -----------------
Total operating revenue 125,372,324 37,256,312 24,495,905
---------------- ----------------- -----------------
Operating expenses:
Transportation - railroad 75,375,742 15,702,487 12,502,153
Selling, general and administrative 19,549,612 9,075,571 6,840,467
Depreciation and amortization 9,179,239 2,543,115 1,788,594
Motor Carrier -- 4,438,039 --
---------------- ----------------- -----------------
Total operating expenses 104,104,593 31,759,212 21,131,214
---------------- ----------------- -----------------
Operating income 21,267,731 5,497,100 3,364,691
Interest and other expense (20,490,358) (4,944,113) (3,641,164)
Other income 6,012,072 232,070 1,000,382
Minority interest in income of subsidiary (1,550,700) (1,671,750) (851,243)
---------------- ----------------- -----------------
Income from continuing
operations before income taxes 5,238,745 (886,693) (127,334)
Provision for income taxes (786,979) (1,000,000) (415,000)
---------------- ----------------- -----------------
Income from continuing operations 6,025,724 113,307 287,666
Discontinued operations:
Estimated loss on disposal of discontinued
segments (net of income tax benefit
of $277,000) -- -- (452,402)
Income from operations of discontinued
segments (less applicable income tax
provisions of $2,300,000, $2,500,000, and
$1,200,000) 3,895,512 4,287,842 2,103,935
---------------- ----------------- -----------------
Net income $ 9,921,236 $ 4,401,149 $ 1,939,199
================ ================= =================
Net income available to common stockholders $ 8,885,702 $ 4,401,149 $ 1,939,199
================ ================= =================
Basic earnings per common share
Continuing operations $ 0.45 $ 0.01 $ 0.02
Discontinued operations 0.35 0.45 0.21
---------------- ----------------- -----------------
Net income $ 0.80 $ 0.46 $ 0.23
================ ================= =================
Diluted earnings per common share
Continuing operations $ 0.43 $ 0.01 $ 0.02
Discontinued operations 0.34 0.44 0.20
---------------- ----------------- -----------------
Net income $ 0.77 $ 0.45 $ 0.22
================ ================= =================
Weighted average common shares
outstanding:
Basic 11,089,614 9,552,866 8,303,938
================ ================= =================
Diluted 11,664,871 9,777,866 8,586,938
================ ================= =================
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
F-5
<PAGE> 58
RAILAMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the year ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Stockholders' Equity
----------------------------------------------------------------------------
Number of Additional Common
Shares Par Paid-in Stock Retained
Issued Value Capital Subscribed Earnings
---------------- -------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997 6,125,410 $ 6,125 $ 11,773,036 $ 2,340,000 $ 2,944,774
Net income -- -- -- -- 1,939,199
Issuance of common stock 1,720,627 1,721 7,163,206 (2,340,000) --
Treasury stock received for
sale of subsidiaries -- -- -- -- --
Stock incentive plan issuance -- -- -- -- --
Exercise of stock options 202,933 203 747,837 -- --
Exercise of warrants 1,080,594 1,081 3,666,653 -- --
Cumulative translation -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1997 9,129,564 $ 9,130 $ 23,350,732 $ -- $ 4,883,973
Net income -- -- -- -- 4,401,149
Other comprehensive income
Cumulative translation -- -- -- -- --
Total comprehensive income
Issuance of common stock 138,786 138 677,039 -- --
Purchase of treasury stock -- -- -- -- --
Exercise of stock options 237,950 238 870,637 -- --
Tax benefit exercise of options -- -- 178,000 -- --
Exercise of warrants 167,000 167 934,501 -- --
Conversion of debt 534,177 534 2,266,624 -- --
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1998 10,207,477 10,207 28,277,533 -- 9,285,122
Net income -- -- -- -- 9,921,236
Other comprehensive income
Cumulative translation -- -- -- -- --
Total comprehensive income
Issuance of common stock 1,437,888 1,438 12,027,787 -- --
Purchase of treasury stock -- -- -- -- --
Exercise of stock options 141,168 141 580,669 -- --
Tax benefit exercise of options -- -- 152,000 -- --
Conversion of debt 563,520 564 3,332,268 -- --
Conversion of preferred stock 260,672 261 2,006,244 -- --
Issuance of warrants -- -- 5,928,077 -- --
Preferred stock dividends
and accretion -- -- -- -- (1,035,534)
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1999 12,610,725 $ 12,611 $ 52,304,578 $ -- $ 18,170,824
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Stockholders' Equity
----------------------------------------------------------------
Other
Comprehensive Treasury
Income Stock Total
---------------------- ------------------ ------------------
<S> <C> <C> <C>
Balance, January 1, 1997 $ 67,441 $ (1,139,269) $ 15,992,107
Net income -- -- 1,939,199
Issuance of common stock -- -- 4,824,927
Treasury stock received for
sales of subsidiaries -- (479,629) (479,629)
Stock incentive plan issuance -- 173,516 173,516
Exercise of stock options -- -- 748,040
Exercise of warrants -- -- 3,667,734
Cumulative translation (52,068) -- (52,068)
------------ ---------- ------------
Balance, December 31, 1997 $ 15,373 $ (1,445,382) $ 26,813,826
Net income -- -- 4,401,149
Other comprehensive income
Cumulative translation 455,447 455,447
------------
Total comprehensive income 4,856,596
------------
Issuance of common stock -- -- 677,177
Purchase of treasury stock -- (1,837,979) (1,837,979)
Exercise of stock options -- -- 870,875
Tax benefit exercise of options -- -- 178,000
Exercise of warrants -- -- 934,668
Conversion of debt -- -- 2,267,158
------------ ---------- ------------
Balance, December 31, 1998 470,820 (3,283,361) 34,760,321
Net income -- -- 9,921,236
Other comprehensive income
Cumulative translation 3,014,897 -- 3,014,897
------------
Total comprehensive income 12,936,133
------------
Issuance of common stock -- -- 12,029,225
Purchase of treasury stock -- (1,224,384) (1,224,384)
Exercise of stock options -- -- 580,810
Tax benefit exercise of options -- -- 152,000
Conversion of debt -- -- 3,332,832
Conversion of preferred stock -- -- 2,006,505
Issuance of warrants -- -- 5,928,077
Preferred stock dividends
and accretion -- -- (1,035,534)
------------ ----------- ------------
Balance, December 31, 1999 $ 3,485,717 $(4,507,745) $ 69,465,985
============ =========== ============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
F-6
<PAGE> 59
RAILAMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ---------------- ----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 9,921,236 $ 4,401,149 $ 1,939,199
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 14,133,502 4,156,546 3,053,728
Minority interest in income of subsidiary 1,550,701 1,671,750 851,243
Equity interest in earnings of affiliate (230,109) -- --
Gain on insurance settlement (4,069,278) -- --
Loss (gain) on sale or disposal of properties 118,426 (76,791) (608,380)
Write-off of excess of costs over net assets -- -- 729,681
Write-off of deferred acquisition costs 38,855 176,179 76,292
Deferred income taxes 3,401,804 912,967 382,122
Employee stock grants -- -- 15,188
Foregiveness of debt -- (32,809) --
Changes in operating assets and liabilities,
net of acquisitions and dispositions:
Accounts receivable (2,246,205) (885,983) (3,037,697)
Inventories (2,270,833) (6,921,847) (1,294,501)
Other current assets (1,830,526) (1,157,666) 124,247
Accounts payable 3,243,680 2,410,602 (606,499)
Accrued expenses 3,326,059 720,498 714,409
Other liabilities (2,294,441) -- --
Deposits and other (1,292,753) 368,476 (47,264)
----------------- ----------------- -----------------
Net cash provided by operating activities 21,500,118 5,743,071 2,291,768
----------------- ----------------- -----------------
Cash flows from investing activities:
Purchase of property, plant and equipment (51,391,127) (28,128,546) (7,455,848)
Proceeds from sale of properties 165,610 1,806,127 331,654
Proceeds from sale of equity interest 998,441 -- --
Acquisitions, net of cash acquired (8,453,218) (1,757,033) (7,389,903)
Deposit on purchase agreement -- (1,962,067) --
Investment in Great Southern Railway -- -- (596,665)
Loan receivable from Great Southern Railway -- -- (1,193,330)
Cash held in discontinued (656,367) (674,468) (472)
Deferred acquisition costs and other 638,881 (612,956) (457,168)
----------------- ----------------- -----------------
Net cash used in investing activities (58,697,780) (31,328,943) (16,761,732)
----------------- ----------------- -----------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 182,085,208 56,006,737 31,453,500
Principal payments on long-term debt (150,182,917) (35,723,969) (25,449,364)
Sale of convertible preferred stock 4,095,000 7,515,000 --
Sale of common stock 11,868,058 1,032,168 8,163,962
Proceeds from exercise of stock options 580,810 870,875 748,041
Preferred stock dividends paid (843,024) -- --
Purchase of treasury stock (1,224,384) (1,837,979) --
Deferred financing costs paid (333,400) (603,549) (286,724)
Deferred loan costs paid (2,421,445) (333,071) (294,361)
----------------- ----------------- -----------------
Net cash provided by financing activities 43,623,906 26,926,212 14,335,054
----------------- ----------------- -----------------
Effect of exchange rates on cash 85,894 -- --
----------------- ----------------- -----------------
Net increase (decrease) in cash 6,512,138 1,340,340 (134,910)
Cash, beginning of period 5,085,402 3,745,062 3,879,972
----------------- ----------------- -----------------
Cash, end of period $ 11,597,540 $ 5,085,402 $ 3,745,062
================= ================= =================
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
F-7
<PAGE> 60
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization and Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of RailAmerica, Inc. and all of its majority-owned subsidiaries (the
"Company"). All significant inter-company balances and transactions
have been eliminated. Certain prior period amounts have been
reclassified to conform to the 1999 presentation. The Company announced
a plan to sell its trailer manufacturing operation during 1999 and it
is included as a discontinued operation for all periods reported in
these consolidated financial statements.
All of RailAmerica's consolidated subsidiaries are wholly owned except
Empresa de Transporte Ferrovario, S.A. ("Ferronor") in which the
Company has a 55% equity interest. In accordance with the Shareholders'
Agreement between RailAmerica and Andres Pirrazzoli y Cia, Ltda
("APCO"), RailAmerica controls the appointment of a majority of the
Board of Directors of Ferronor, including the Chairman. APCO maintains
certain minority rights under the shareholders Agreement, such as the
right to request the General Manager's removal under certain
circumstances. The Company considered these minority rights in
determining whether to consolidate Ferronor and has concluded that
consolidation is appropriate based upon the Company's ownership
position, and its level of control of the Board of Directors and senior
management.
In July 1999, the Company acquired a 26.3% equity interest in Quebec
Railway Corporation ("QRC") as part of its RaiLink acquisition. The
Company accounts for the investment using the equity method of
accounting.
The Company's principal operations include rail transportation in North
America, Chile and Australia. The Company hauls varied products for its
customers corresponding to their local operating areas, primarily paper
and forest products and agricultural commodities in North America,
agricultural commodities in Australia and iron ore and nitrates in
Chile.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
dates of the financial statements and the reported amounts of revenues
and expenses during the reporting periods. Actual results could differ
from those estimates.
Inventories
Inventories, which are recorded at cost, consist of replacement or
repair parts for equipment and track that are charged to property,
plant and equipment when utilized.
F-8
<PAGE> 61
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with a
maturity of three months or less at the date of purchase to be cash
equivalents.
Concentration of Credit Risk
The Company maintains its cash in demand deposit accounts which at
times may exceed FDIC insurance limits. As of December 31, 1999, the
Company had approximately $3.4 million of cash in excess of FDIC
insurance limits.
Property, Plant and Equipment
Property, plant and equipment are recorded at historical cost. Costs
assigned to property purchased as part of an acquisition are based on
the fair value of such assets on the date of acquisition. Improvements
are capitalized, and expenditures for maintenance and repairs are
charged to operations as incurred. Gains or losses on sales and
retirements of properties are included in the determination of the
results of operations.
Depreciation has been computed using the straight-line method based on
estimated useful lives as follows:
Buildings and improvements 20-33 years
Railroad track and improvements 3-40 years
Locomotives, transportation and other equipment 5-20 years
Office equipment 5-10 years
Income Taxes
The Company utilizes the liability method of accounting for deferred
income taxes. This method requires recognition of deferred tax assets
and liabilities for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under
this method, deferred tax assets and liabilities are determined based
on the difference between the financial and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. Deferred tax assets are also
established for the future tax benefits of loss and credit carryovers.
The liability method of accounting for deferred income taxes requires a
valuation allowance against deferred tax assets if, based on the weight
of available evidence, it is more likely than not that some or all of
the deferred tax assets will not be realized.
F-9
<PAGE> 62
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Revenue Recognition
Transportation - The Company recognizes transportation revenue after
services are provided. For the years ended December 31, 1999, 1998 and
1997, approximately 27%, 62% and 59%, respectively, of the Company's
North American railroad transportation revenue was derived from
interchanging with BNSF and for the years ended December 31, 1999, 1998
and 1997, and approximately 14%, 30% and 32%, respectively, from
interchanging with CSX. For the year ended December 31, 1999,
approximately 19% and 25% of the Company's North American
transportation revenue was derived from interchanging with Canadian
National Railroad and Canadian Pacific Railroad, respectively. The
Company had two customers in Chile who each represented more than 10%
of the Chilean transportation revenue and two costumers in Australia
which represented 21% and 19%, respectively, of the Australian
transportation revenue.
Commercial Trailer Sales - The Company's discontinued trailer
manufacturing operations recognize revenue from the commercial sale of
trailers when title and risk of ownership are transferred to the
customer, which generally is upon shipment or customer pick-up. In
certain instances prior to shipment or customer pick-up, the Company
receives full payment for a trailer. At that time, the Company issues a
certificate of title or statement of origin to the customer and revenue
is recognized. In these cases, the customer has made a fixed, written
commitment to purchase, the trailer has been completed and is available
for pick-up or delivery, and the customer has requested the Company to
hold the trailer until the customer determines the most economical
means of taking possession. In such cases, the Company has no further
obligation except to segregate the trailer and hold it for a short
period of time, as is customary in the industry, generally less than
one month, until pick-up or delivery. Trailers are built to customer
specifications and no right of return or exchange privileges are
granted.
Governmental Trailer Sales - The Company's discontinued trailer
manufacturing operations recognize revenue from the sale of trailers to
governmental agencies when title and risks of ownership are
transferred, which is upon completion, inspection and acceptance of
trailers by the governmental agency. At that time, the governmental
agency has made a fixed written commitment to purchase in the form of a
contract, the trailer has been completed and is available for pick-up
or delivery, and the governmental agency has requested the Company to
hold the trailer until the governmental agency determines the
appropriate means of taking possession. The Company has no further
obligation except to segregate the trailer and hold it for a short
period of time, as is customary in the industry, generally less than
one month, until pick-up or delivery. The trailers are built to the
government's specifications pursuant to a written contract and are
inspected and accepted for delivery by the governmental agency. The
contract terms provide for prepayments by the government of up to 90%
of the trailer's cost. These prepayments are recorded as advances
against the inventory. Sales to governmental agencies represented 23%,
35% and 37% of the Company's manufacturing revenue for the years ended
December 31, 1999, 1998 and 1997, respectively.
F-10
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RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Foreign Currency Translation
The financial statements and transactions of the Company's foreign
operations are maintained in their functional currency. Assets and
liabilities are translated at current exchange rates in effect at the
balance sheet date. Translation adjustments, which result from the
process of translating the financial statements into United States
dollars, are accumulated in the cumulative translation adjustment
account, which is a component of accumulated other comprehensive
income. Revenues and expenses are translated at the average exchange
rate for each period. Gains and losses from foreign currency
transactions are included in net income. The aggregate gain on foreign
currency translation for 1999 was $0.7 million. As a result of a
decline in the value of the Australian dollar against the U.S. dollar,
the Company recorded a transaction loss of approximately $2.6 million
during the first quarter of fiscal year 2000.
During 1999, Ferronor changed its functional currency from the Chilean
Peso to the U.S. dollar, as the U.S. dollar has become more
representative of the primary economic environment in which Ferronor
operates. Factors influencing this change include the Ferronor's cash
flows, sales price, sales market and financing indicator
considerations. This change has been accounted for prospectively.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," which establishes accounting and reporting standards for
derivative instruments and hedging activities. SFAS No. 133 requires
all derivatives to be measured at fair value and recognized at either
assets or liabilities on the balance sheet. Furthermore, the accounting
for changes in the fair value of a derivative (i.e. gains and losses)
depends on the intended use of the derivative.
F-11
<PAGE> 64
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------
2. EARNINGS PER SHARE
Basic earnings per share is calculated using the weighted average
number of common shares outstanding during the year. For the year ended
December 31, 1999, income from continuing operations is reduced by
preferred stock dividends and accretion for the basic earnings per
share computation.
Diluted earnings per share is calculated using the sum of the weighted
average number of common shares outstanding plus potentially dilutive
common shares arising out of stock options and warrants. Options and
warrants totaling 1.8 million were excluded from the diluted earnings
per share calculation as the exercise prices of these options and
warrants were greater than the average market price of the Common
Stock. Assumed conversion of $26.5 million of convertible debt and the
convertible preferred stock are anti-dilutive and are not included in
the calculation.
The following is a summary of the net income available for common
stockholders and weighted average shares for the diluted calculation
(in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- -------
<S> <C> <C> <C>
Income from continuing operations $ 6,026 $ 113 $ 288
Preferred stock dividends and accretion (1,036) -- --
Interest on convertible debt 42 -- --
-------- -------- --------
Income available to common stockholders $ 5,032 $ 113 $ 288
======== ======== ========
Weighted average shares outstanding 11,090 9,553 8,304
Assumed conversion of options and warrants 379 225 283
Assumed conversion of convertible debt 196 -- --
-------- -------- --------
Weighted average shares outstanding 11,665 9,778 8,587
======== ======== ========
</TABLE>
3. DISCONTINUED OPERATIONS:
In November 1999, the Company adopted a plan to sell its trailer
manufacturing operations. This business has been accounted for as a
discontinued operation and the results of operations have been excluded
from continuing operations in the consolidated statements of operations
for all periods presented.
Total revenue for the trailer manufacturing segment was $44.3 million,
$39.9 million and $22.9 million for the years ended December 31, 1999,
1998 and 1997, respectively. Income before income taxes for the trailer
manufacturing segment was $6.2 million, $6.9 million and $3.7 million
for the years ended December 31, 1999, 1998 and 1997, respectively.
Total assets in this division as of December 31, 1999 and 1998 were
$28.8 million and $28.1 million respectively. Total liabilities in this
division as of December 31, 1999 and 1998 were $13.9 million and $14.3
million, respectively.
F-12
<PAGE> 65
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------
3. DISCONTINUED OPERATIONS, continued
In March 1997, the Company adopted a formal plan to discontinue its
motor carrier division. The motor carrier division consists of Steel
City Carriers and RailAmerica Intermodal Services, both wholly-owned
subsidiaries of the Company. During the fourth quarter of 1997, the
Company re-evaluated the carrying amount of Steel City Carriers' assets
and recorded an impairment charge of approximately $730,000. This
amount was determined based on what the Company believes it will
recover through the final disposition of the remaining assets.
Operating results of the discontinued operations, as shown below,
include the operations of the Motor Carrier segment for the three
months ended March 31, 1998 and the year ended December 31, 1997. The
motor carrier operations have been included in continuing operations
for the nine months ended December 31, 1998, since the disposition of
the segment was not completed by April 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, Canada-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.
Total revenue for the motor carrier segment was $1.8 million and $7.1
million for the three months ended March 31, 1998 and year ended
December 31, 1997, respectively. Loss before income taxes for the motor
carrier segment was $0.1 million and $1.1 million for the three months
ended March 31, 1998 and year ended December 31, 1997, respectively.
4. ACQUISITIONS:
On September 3, 1999, the Company, through its wholly-owned subsidiary,
Florida Rail Lines, Inc., completed the acquisition of all the
outstanding common stock of The Toledo, Peoria and Western Railroad
Corporation ("TPW") from CSX Transportation, Delaware Ostego
Corporation, and other shareholders for an aggregate purchase price of
$18 million (including the repayment of indebtedness), subject to
certain adjustments. The Company funded the acquisition through its
revolving line of credit. TPW is headquartered in East Peoria, Illinois
and provides rail freight services to customers in the midwest United
States and operates over rail lines running from Fort Madison, Iowa
across North Central Illinois to Logansport, Indiana. TPW has certain
unsettled litigation and contingencies outstanding whose ultimate
outcome will impact the purchase price allocation.
F-13
<PAGE> 66
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------
4. ACQUISITIONS, continued
On July 26, 1999, the Company acquired approximately 98% of the
outstanding shares of RaiLink Ltd ("RaiLink"). Through the Company's
wholly-owned Canadian subsidiary, RL Acquisition Corp., the Company
commenced an all cash-bid in May 1999 for all of the common shares of
RaiLink at a price of CDN$8.75 per share pursuant to a Pre-Acquisition
Agreement dated May 17, 1999 between the Company and RaiLink. RaiLink
had approximately 8.36 million common shares outstanding on a fully
diluted basis, giving the transaction an equity value of approximately
CDN$73.2 million (approximately USD$49.8 million). As more than 90% of
the outstanding shares were acquired under the offer, the Company
acquired the remainder of the shares pursuant to the compulsory
acquisition provisions of applicable Canadian law. A portion of the
accrued liabilities assumed represented severance costs which the
Company has accrued in accordance with EITF No. 95-3, "Recognition of
Liabilities in Connection with a Purchase Business Combination."
RaiLink is a regional railway company based in Edmonton, Alberta and
provides freight transportation services to the national railways of
Canada and to a wide variety of shippers. RaiLink and its 26.3% owned
affiliate, Quebec Railway Corporation, currently operate 11 regional
railways covering approximately 2,500 miles of track in Alberta, the
Northwest Territories, Ontario, Quebec and New Brunswick. A portion of
the funding for the transaction was provided by a consortium of banks
with National Bank of Canada, as agent, through the Company's revolving
line of credit. The balance of the funding came from a private offering
of the Company's junior convertible subordinated debt.
On April 30, 1999, the Company, through its wholly owned Australian
subsidiary, Freight Victoria Limited ("Freight Victoria"), completed
the acquisition of the assets and liabilities comprising the railroad
freight business of V/Line Freight Corporation ("VLF"), a corporation
established by the Government of the State of Victoria, Australia. VLF
was established in March 1997 as part of Victoria's public
transportation privatization process and assumed many of the activities
formerly carried out by the V/Line Freight business unit of the Public
Transportation Corporation of the Government of Victoria.
Under the Sale of Assets Agreement (the "Agreement") dated February 22,
1999 by and between the Company, Freight Victoria and VLF, Freight
Victoria acquired all of the locomotives, wagons, motor vehicles,
equipment, stock, spare parts inventory and accounts receivable,
certain business, brand and trade names and trade marks, and the
outstanding business contracts of VLF for a purchase price of AUD$73.4
million in cash (approximately U.S.$49.0 million). The purchase price
has been allocated to assets acquired. In connection with the
acquisition, Freight Victoria also entered into other agreements,
including a primary infrastructure lease (the "Infrastructure Lease")
with the Director of Public Transport of Australia and various
facilities leases, access agreements, maintenance and service
agreements and other miscellaneous agreements. Pursuant to the
Infrastructure Lease, Freight Victoria received a 45-year lease of the
non-electrified intrastate Victorian railway tracks and infrastructure.
F-14
<PAGE> 67
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------
4. ACQUISITIONS, continued
Pursuant to certain other agreements, Freight Victoria is responsible
for, among other things, track and rolling stock maintenance, train
control, access to the railway infrastructure by other rail operators
and safety and signaling. Under a letter issued by Freight Victoria in
connection with its bid for the VLF business, Freight Victoria prepaid
in cash the net present value of the rental payments for the
Infrastructure Lease totaling AUD$80.8 million (approximately U.S.$54.0
million). Freight Victoria commenced operations of the rail-based
freight business on May 1, 1999.
In August 1998, the Company, through its newly formed, wholly-owned
subsidiary, 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 and
are included in the results of domestic rail operations as of that
date.
In January 1998, the Company acquired, through its wholly-owned
subsidiary Kalyn, all of the outstanding stock of Canadian truck
trailer manufacturer Fabrex, Inc. and its affiliate, Services Remorques
Plus, Inc. (collectively "Fabrex") for approximately $1.5 million in
cash and 70,000 shares of RailAmerica common stock, $.001 par value
("Common Stock"), and assumption of approximately $1.0 million of
long-term debt. Fabrex's operations have been combined into KSC, a
wholly-owned subsidiary of Kalyn. Fabrex, a manufacturer of specialty
bulk-hauling truck trailers used in the solid waste, agricultural and
construction industries, was founded in 1985 and is located in Trois
Rivieres, Quebec.
On February 19, 1997, the Company acquired, through its wholly-owned
subsidiary, RailAmerica de Chile, S.A., a majority interest in
Ferronor, a 1,400 mile railroad serving northern Chile. The Company was
joined in the purchase of Ferronor by Andres Pirrazzoli y Cia, Ltda
("APCO"). The purchase price paid by RailAmerica/APCO for substantially
all of the stock of Ferronor, was approximately $12.3 million and was
funded 55% by RailAmerica and 45% by APCO.
All of the above acquisitions were accounted for as purchases and their
results have been included since the date of acquisition. The following
unaudited pro forma summary presents the consolidated results of
operations as if the above referenced acquisitions had occurred at the
beginning of 1999 and 1998 and do not purport to be indicative of what
would have occurred had the acquisitions been made as of those dates or
of results which may occur in the future. (In thousands except net
income per share)
<TABLE>
<CAPTION>
1999 1998
-------- -------
<S> <C> <C>
Operating revenue $ 187,607 $ 167,778
Income from continuing operations $ 5,262 $ 46
Earnings per share - continuing operations
Basic $ 0.37 $ (0.09)
Diluted $ 0.36 $ (0.09)
</TABLE>
F-15
<PAGE> 68
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------
4. ACQUISITIONS, continued
The significant adjustments related to the above years represent the
inclusion of revenue on new agreements, elimination of certain
operating costs, elimination of costs related to the acquisitions,
inclusion of depreciation differences on the revaluation of property,
plant and equipment, additional interest expense based on an increase
in long-term obligations, amortization of intangible assets and the
related income tax effects.
5. GREAT SOUTHERN RAILWAY LIMITED
On October 31, 1997, the Company acquired a minority interest, of
approximately 11.4%, in the Great Southern Railway Limited ("GSR"). GSR
completed the acquisition of the assets and business comprising the
passenger rail service of the Australian National Railway Commission.
The Company has invested $0.6 million in equity of GSR, $1.2 million in
uncollateralized subordinated notes (the "Notes"). The Company sold
both its interest in the equity of GSR and the Notes to the majority
shareholder of GSR in October 1999. The Company received $0.9 million
in cash and a note for $1.3 million due March 15, 2000. A gain of $0.3
million is included in the 1999 consolidated statement of income. The
remaining note is included in current assets in the consolidated
balance sheet as of December 31, 1999 and was paid in March 2000.
6. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consist of the following as of December
31, 1999 and 1998 (in thousands):
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
Land $ 34,345 $ 19,301
Buildings and improvements 8,683 5,275
Railroad track and improvements 186,670 44,700
Locomotives, transportation and other equipment 135,309 31,104
------------- ------------
365,007 100,380
Less accumulated depreciation 17,390 8,504
------------- ------------
$ 347,617 $ 91,876
============= ============
</TABLE>
Depreciation expense was approximately $9.2 million, $3.0 million and
$1.8 million for the years ended December 31, 1999, 1998 and 1997,
respectively.
F-16
<PAGE> 69
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------
6. PROPERTY, PLANT AND EQUIPMENT, continued
In January 1999, the Company through a newly formed subsidiary E&N
Railway Company Ltd. ("ENR") acquired certain assets of the Esquimalt
and Nanaimo Railway ("E&N") from the Canadian Pacific Railway ("CPR").
The transaction included the purchase of a 68-mile section of rail line
between Port Alberni, British Columbia and Nanaimo, British Columbia
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 accounted for approximately $10.8 million of fixed asset
additions for year ended December 31, 1999.
7. INVESTMENT IN AFFILIATE:
As of December 31, 1999, the Company`s recorded investment in QRC was
$4.7 million and the Company's underlying equity in net assets of QRC
was $4.5 million. The difference is treated as goodwill and is being
amortized over a 20 year period. The Company recorded $0.2 million in
income, net of amortization, from this investment in the consolidated
statement of operations for 1999.
8. OTHER ASSETS:
Other assets consist of the following as of December 31, 1999 and 1998
(in thousands):
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Deferred loan costs, net $ 6,657 $ 608
Deposits and other 1,985 3,427
----------- ----------
$ 8,642 $ 4,035
=========== ==========
</TABLE>
Deferred loan costs are being amortized utilizing the interest method
over the term of the respective term loans.
9. RELATED PARTY TRANSACTIONS:
First London Securities Corporation ("First London"), of which Douglas
Nichols, a director of the Company, is President and principal
shareholder, served as the exclusive placement agent for the Company's
private placement which had a final close in January 1999. A portion of
the private placement was received by the Company and closed in
December 1998 (see Note 13 Redeemable Preferred stock). First London
received a total of $0.8 million in placement fees and cost
reimbursements during December 1998 and the first quarter of 1999 on
this transaction and two-year warrants to purchase 140,727 shares of
Common Stock at an exercise price of $8.25 per share.
F-17
<PAGE> 70
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------
9. RELATED PARTY TRANSACTIONS, continued
During 1997, the Company sold all the outstanding stock of its
wholly-owned subsidiary Gettysburg Scenic Rail Tours, Inc. ("GSRT"),
certain railroad equipment and substantially all the assets of
Gettysburg Railway ("GBR") to a company owned by its Vice Chairman. The
sale price for GSRT and the railroad equipment was $0.5 million, which
consisted of cash of $0.1 million and 62,602 shares of the Company's
common stock valued at $0.4 million. A gain of approximately $0.2
million was recognized on the transaction and is included in other
income (expense) in the consolidated income statement for 1997. The
sale price for substantially all of the assets of GBR was $1.45
million, which consisted of cash of $0.3 million, an $0.8 million
promissory note due June 30, 1998 and a $0.35 million mortgage note, at
an interest rate of 8.5% with a maturity of June 30, 2003. The
promissory note and mortgage note are collateralized by the land,
buildings and track assets of Gettysburg Railway. A gain of
approximately $0.2 million was recognized on the transaction and is
included in other operating income in the consolidated income
statement. The $800,000 promissory notes maturity date was extended
until June 2000.
As of December 31, 1999, $1.15 million of notes receivable from related
parties is included in notes receivable, less current portions on the
consolidated balance sheet.
10. LONG-TERM DEBT:
Long-term debt consists of the following at December 31, 1999 and 1998
(in thousands):
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Revolving line of credit. See below $ 121,005 $ 44,207
Various equipment notes, with interest imputed at rates from 8.12% to
11.63%, due in fixed monthly installments of $114 (including
interest) with varying maturities through November 2004. Certain
equipment serves as collateral. 3,381 4,457
Burlington Northern Santa Fe ("BNSF") rail facilities installment
purchase obligation, annual payments of $250, including interest
at 10%, maturing in October 2116. If car loads at OTVR fall below
7,250 in a year, BNSF will credit payments on this debt
at a rate of $250 per car. 2,139 2,139
</TABLE>
F-18
<PAGE> 71
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------
10. LONG-TERM DEBT, continued
<TABLE>
<CAPTION>
<S> <C> <C>
Credit facilities with various financial institutions,
ranging in monthly interest rates from
0.77% to 1.495%, maturing from 30 to 90 days 4,180 1,481
Credit facilities with Banco de Desarrollo, see below 10,261 7,782
Credit facility with Banco Security, interest rate of
0.0928% monthly 5,102 --
Note payable to Compania Minera del Pacifico, bearing interest at LIBOR
plus 2.5% due in monthly installments (including interest)maturing
in 2003. Certain Ferronor assets serve
as collateral. 1,765 2,822
Mortgage note payable, bearing interest at 7.85%, due in fixed
monthly installments of $46 (including interest), with
a final payment of $4,827 in January 2010. Corporate
office building serves as collateral 6,000 --
Debenture payable, interest at 6.5%, maturing December 31, 2000
Certain rail line serves as collateral 4,085 --
Capital lease obligations 1,042 1,459
Other long-term debt 3,867 1,980
---------- ----------
162,827 66,327
Less current maturities 17,811 3,557
---------- ----------
Long-term debt, less current maturities $ 145,016 $ 62,770
========= ==========
</TABLE>
Ferronor refinanced certain short-term debt as of January 28, 1999 with
Banco de Desarrollo. The refinancing consists of two credit lines. The
first credit line is a $5.0 million facility which bears interest at
the interbank cost (7.08% at December 31, 1999) plus 1.75% with
interest to be paid over 120 equal monthly installments and principal
to be paid over 96 equal installments beginning two years from the
funding. The second credit line is a $7.7 million facility which bears
interest at LIBOR plus 2.75% and is payable in 120 equal monthly
installments (including interest).
In February 2000, the Company entered into a credit agreement and two
bridge note facilities in connection with the acquisition of RailTex
and the refinancing of most of the Company's and RailTex's existing
debt. The credit agreement provides (1) a $125 million Term A loan,
initially bearing interest at LIBOR plus 3.00%, (2) a $205 million Term
B loan, initially bearing interest at LIBOR plus 3.25%, and (3) a $50
million revolving credit facility which includes $30 million of U.S.
dollar denominated loans, $10 million of Canadian dollar denominated
loans and $10.0 million of Australian dollar denominated loans with an
initial interest rate of LIBOR plus 3.00%, or a Canadian equivalent.
The loans are provided by a syndicate of banks with Donaldson, Lufkin &
Jenrette as syndication agent and The Bank of Nova Scotia as
administrative agent. All of the stock of all the Company's U.S.
subsidiaries serve as collateral for the credit facilities.
F-19
<PAGE> 72
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------
10. LONG-TERM DEBT, continued
The Term A loans requires principal payments of 5% in 2000, 10% in
2001, 15% in 2002, 20% in 2003, 25% in both 2004 an 2005. The Term B
loan requires principal payments of 1% per year through 2005 and a
balloon maturity at December 31, 2006. The revolving loans mature on
December 31, 2005.
The Company's new credit facilities include covenants which impose
financial and operating restrictions on RailAmerica's ability to, among
other things:
o incur more debt;
o pay dividends, redeem or repurchase its stock or make other
distributions;
o make acquisitions or investments;
o use assets as security in other transactions;
o enter into transactions with affiliates;
o merge or consolidate with others;
o dispose of assets or use asset sale proceeds;
o create liens on its assets; and
o extend credit.
The new credit facilities also contain financial covenants that will
require the Company to meet a number of financial ratios and tests.
In February 2000, the Company, through its wholly-owned subsidiary
RailAmerica Transportation, Inc., issued $95 million of subordinated
bridge notes, under a securities purchase agreement with DLJ Bridge
Finance, Inc. These notes mature on February 4, 2001 and have an
initial interest rate of 13% per annum, which rate increases every
three months based on the highest specified rates. The Company, through
its wholly-owned subsidiary Palm Beach Holding, Inc. issued $55 million
of asset sale bridge notes, under a securities purchase agreement with
DLJ Bridge Finance, Inc. These notes mature on February 4, 2001 and
have an initial interest rate of 15% per annum, which rate increases
every three months based on the highest of specified rates. The asset
sale bridge notes are collateralized by the assets of Kalyn/Siebert,
L.P. and its subsidiaries, which are discontinued operations held for
sale.
In connection with the issuance of the subordinated bridge notes, the
purchasers of such notes are entitled to receive warrants to purchase
common stock at an exercise price of $7.75 per share commencing in May
2001 to the extent the subordinated bridge notes are then outstanding.
In connection with the issuance of the asset sale bridge notes, the
purchasers of such notes are entitled to receive warrants to purchase
common stock at an exercise price of $7.75 per share commencing in
August 2000 to the extent the asset sale bridge notes are then
outstanding. The maximum number of shares issuable upon exercise of all
these warrants would be 1,604,330, subject to specified anti-dilution
adjustments.
In connection with the February 2000 debt refinancing, including the
refinancing of RailTex's debt, the Company will record an extraordinary
charge in the first quarter of 2000.
The aggregate annual maturities of long-term debt are as follows net of
discount amortization taking into effect the above refinancing (in
thousands):
2000 $ 17,811
2001 18,827
2002 23,938
2003 29,324
2004 35,309
Thereafter 37,618
--------
$162,827
========
F-20
<PAGE> 73
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------
10. LONG-TERM DEBT, continued
During the years ended December 31, 1999, 1998 and 1997 interest of
approximately $1,386, $465 and $69, respectively, was capitalized.
Capital Leases
The Company entered into equipment finance leases for certain tractors,
trailers and other equipment expiring at various times through 2003.
These leases are accounted for as capital leases. The financing of the
purchase of the tractors, trailers and equipment under these capital
leases was capitalized using the interest rate appropriate at the
inception of the respective leases.
Minimum annual lease commitments at December 31, 1999 are as follows
(in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------ ------
<S> <C> <C> <C>
2000 $ 427 $ 2,977
2001 451 2,631
2002 218 2,242
2003 75 1,870
2004 -- 1,033
Thereafter -- 1,163
------ -------
Total 1,171 $ 11,916
========
Less amount representing interest 129
-----
Present value of future minimum
lease payments 1,042
Less current portion 355
-----
Noncurrent portion $ 687
=====
</TABLE>
Rental expense under operating leases was approximately $3.4 million,
$2.7 million and $0.9 million for the years ended December 31, 1999,
1998 and 1997, respectively.
11. SUBORDINATED DEBT:
To facilitate the acquisition of VLF, 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. On November 30,
1999, in accordance with the terms of the bridge loan the Company
issued additional warrants to acquire 50,000 shares of the Company's
Common Stock to Barclays Bank PLC at an exercise price of $7.7875 per
share and increased the interest rate by 200 basis points. The bridge
loan was refinanced in February 2000 in conjunction with the
acquisition of RailTex (see note 10).
F-21
<PAGE> 74
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------
12. CONVERTIBLE SUBORDINATED DEBT:
In August 1999, the Company issued $22.5 million aggregate principal
amount of its junior convertible subordinated debentures. Interest on
the debentures accrues at the rate of 6% per annum and is payable
semi-annually, commencing January 31, 2000. The debentures are
convertible, at the option of the holder, into shares of RailAmerica at
a conversion price of $10, subjected to adjustment in selected
circumstances. The debentures mature on July 31, 2004, are general
unsecured obligations and rank subordinate in right of payment to all
senior indebtedness. At RailAmerica's option, the debentures may be
redeemed at par, plus accrued but unpaid interest thereon to the date
of redemption, in whole or in part, if the closing price of
RailAmerica's common stock is above 200% of the conversion price for 10
consecutive trading days.
In addition to the bridge loan the Company issued AUD$3 million
(approximately U.S.$2.0 million) in convertible debt to a certain
vendor of Freight Victoria ("Vendor Debt"). The Vendor Debt is
convertible into the Company's common stock at the current market price
or convertible into Freight Victoria stock at the option of the
Company. The Company also issued $2.64 million of convertible debt in
lieu of cash payments for fees owed to its investment banker in the
transaction. The convertible debt bears interest at 6%, is convertible
into the Company's common stock at $9.83 per share and was converted in
July 1999 into 272,415 shares of common stock.
13. REDEEMABLE PREFERRED STOCK:
In January 1999, the Company completed a private offering of $11.6
million of its Series A Convertible Redeemable Preferred Stock
("Preferred Stock"). The Company sold 464,400 shares of its Preferred
Stock at a price of $25 per share. The Preferred Stock pays annual
dividends of 7.5%, is convertible into shares of the Company's common
stock at a price of $8.25 per share and is non-voting. The Preferred
Stock is mandatorily redeemable 5 years from its issuance. The December
31, 1998 balance sheet includes 300,600 shares which were issued during
1998. The remainder of the shares were issued in January 1999. The
carrying value of the Preferred Stock is the par value less issuance
costs. The issuance costs will be amortized on a straight-line basis
over the life of the Preferred Stock. 86,000 shares of the Preferred
Stock were converted in the fourth quarter of 1999 and 88,000 shares
were converted in the first quarter of 2000.
14. COMMON STOCK TRANSACTIONS:
On August 24, 1998, the Company's Board of Directors authorized a share
repurchase program to buy back up to 1,000,000 shares of its Common
Stock (limited to $2 million per year pursuant to the new credit
facilities). Purchases will be made from time to time in the open
market and will continue until all of such shares are purchased or
until the Company determines to terminate the repurchase program. As of
December 31, 1999, the Company had purchased 445,400 shares with a
total cost of $3.1 million. The Company purchased 172,500 shares with a
total cost of $1.1 million in the first quarter of 2000.
F-22
<PAGE> 75
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------
14. COMMON STOCK TRANSACTIONS, continued
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
212,000 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. All of the warrants issued for this
transaction expired on March 3, 2000.
In August 1999, the Company issued warrants to purchase an aggregate of
676,363 shares of common stock to the investors in the private offering
of $22.5 million principal amount of its junior convertible
subordinated debentures described in Note 7. The warrants are
exercisable during the five-year period ending August 5, 2004 at an
exercise price of $10.50 per share, subject to adjustment under
selected circumstances. Warrants to purchase 200,000 shares of common
stock at an exercise price of $10.50 per share during the two-year
period ending July 31, 2001 were issued in connection with the private
offering to the placement agent.
15. OTHER REVENUE:
Other revenue as of December 31, 1999, 1998 and 1997 consisted of the
following (in thousands):
[CAPTION]
<TABLE>
1999 1998 1997
---------------- ---------------- ----------------
<S> <C> <C> <C>
Gain on sale of properties and
easements $ 266 $ 695 $ 1,251
Rental income 2,850 1,484 857
Maintenance revenue 1,703 -- --
Other 1,642 521 364
------------- ------------- -------------
$ 6,461 $ 2,700 $ 2,472
============= ============= =============
</TABLE>
16. INCOME TAX PROVISION:
Income before income taxes for the years ended December 31, 1999, 1998
and 1997 consists of (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Domestic $ (2,978) $ (2,327) $ (1,140)
Foreign Subsidiaries 8,217 1,440 1,013
--------- --------- ----------
$ 5,239 $ (887) $ (127)
========= ========= ==========
</TABLE>
F-23
<PAGE> 76
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------
16. INCOME TAX PROVISION, continued
The provision for income taxes for the years ended December 31, 1999,
1998 and 1997 consists of (in thousands):
1999 1998 1997
---- ---- ----
Federal income taxes:
Current $ 15 $ 232 $ --
Deferred 1,234 1,039 708
------- ------- -------
1,249 1,271 708
------- ------- -------
State income taxes:
Current 149 281 161
Deferred (106) (55) (26)
------- ------- -------
43 226 135
------- ------- -------
Foreign income taxes:
Current 857 33 --
Deferred 2,197 -- (306)
Change in tax law (2,835) -- --
------- ------- -------
Total income tax provision $ 1,511 $ 1,530 $ 537
======= ======= =======
The following summarizes the total income tax provisions for each of
the years ended December 31, 1999, 1998 and 1997 (in thousands):
Continuing operations ($ 787) $ 1,570 $ 963
Discontinued operations 2,298 (40) (426)
------- ------- -------
Total income tax provision $ 1,511 $ 1,530 $ 537
======= ======= =======
The differences between the U.S. federal statutory tax rate and the
Company's effective rate from continuing operations are as follows (in
thousands):
<TABLE>
<CAPTION>
1999 1998 1997
--------- ---------- ---------
<S> <C> <C> <C>
Income tax provision, at 35% $ 1,833 $ 2,113 $ 1,259
Statutory federal Surtax exemption (52) (60) (36)
State income tax, net of federal benefit (48) 147 90
Benefit due to difference between U.S. &
Chilean tax rates (295) (316) (192)
Benefit due to utilization of Chilean net
operating loss carryforwards -- (306) (152)
Benefit due to reduction in Canadian tax
rate for manufacturing companies -- (42) --
Benefit due to difference between U.S. &
Australian tax rates (266) -- --
Net Benefit due to tax law changes in Australia (2,835) -- --
Amortization of warrants not deductible 602 -- --
Non-deductible expenses, net 320 45 33
Other, net 124 107 60
Valuation allowance (170) (118) (99)
------- ------- -------
$ (787) $ 1,570 $ 963
======= ======= =======
</TABLE>
F-24
<PAGE> 77
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------
16. INCOME TAX PROVISION, continued
The Company joins in the filing of a consolidated U.S. income tax
return with its domestic subsidiaries. For state income tax purposes,
the Company and each of its domestic subsidiaries generally file on a
separate return basis in the states in which they do business. The
Company's Canadian subsidiaries file Canadian and provincial income tax
returns. The Company's Chilean and Australian subsidiaries file income
tax returns in their respective jurisdictions.
The components of deferred income tax assets and liabilities as of
December 31, 1999 and 1998 are as follows (in thousands):
1999 1998
---- ----
Deferred tax assets:
Net operating loss carry forwards $ 7,667 $ 2,798
Alternative minimum tax credit 790 766
Accrued Expense (net of deferred expense) 4,478 --
Other 108 205
-------- --------
Total deferred assets 13,043 3,769
Less: valuation allowance (321) (491)
-------- --------
Total deferred assets, net 12,722 3,278
Deferred tax liabilities:
Property, plant and equipment 29,162 11,339
Minority Investments 836 --
Installment Sales 180 181
Capital Lease Obligation 859 --
Deferred Revenue 495 --
-------- --------
Net deferred tax liability $(18,810) $ (8,242)
======== ========
The liability method of accounting for deferred income taxes requires a
valuation allowance against deferred tax assets if, based on the weight
of available evidence, it is more likely than not that some or all of
the deferred tax assets will not be realized. It is management's belief
that it is more likely than not that a portion of the deferred tax
assets will not be realized. The Company has established a valuation
allowance of $0.3 million at December 31, 1999 and $0.5 million at
December 31, 1998, respectively. The valuation allowance at December
31, 1999 is comprised of $0.2 million, which relates to prior and
current year state net operating losses, and $0.1 million which relates
to prior and current year Chilean net operating losses of Ferronor.
F-25
<PAGE> 78
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------
16. INCOME TAX PROVISION, continued
The following is a summary of net operating loss carryforwards by
jurisdiction as of December 31, 1999 (in thousands):
<TABLE>
<CAPTION>
AMOUNT EXPIRATION PERIOD
------ -----------------
<S> <C> <C>
U.S. - Federal $ 5,536 2003 - 2019
U.S. - State 16,064 2000 - 2019
Chile 1,069 None
Australia 10,938 None
Canada 2,741 2004 - 2006
---------
$ 36,348
=========
</TABLE>
As part of certain acquisitions, the Company acquired net operating
loss carry forwards for federal and state income tax purposes. The
utilization of the acquired tax loss carry forwards is further limited
by the Internal Revenue Code Section 382 to approximately $0.1 million
each year. These tax loss carry forwards expire in the years 2001
through 2010.
No provision was made in 1999 for U.S. income taxes on undistributed
earnings of the Chilean, Canadian or Australian subsidiaries as it is
the intention of management to utilize those earnings in their
respective operations for an indefinite period of time.
The provision includes a one-time income tax benefit of $3.4 million
due to legislation passed in Australia during the third quarter of
1999, which permits the Company's Australian subsidiary to deduct, for
income tax purposes, a larger amount of depreciation than is reported
for financial statement purposes. Additionally, during December 1999,
Australian tax regulations were passed which will ultimately reduce the
statutory tax rate in Australia from 36% to 30%. A one-time income tax
provision of $0.6 million was recorded to revalue the Company's
Australian net deferred tax assets due to this rate reduction.
17. OTHER INCOME:
Included in other income for 1999 was a fourth quarter gain on
insurance settlement of $4.1 million from an accident which destroyed
certain locomotives and railcars in Australia. In addition, other
income for 1999 includes $0.7 million in exchange gains from Australia
and Chile and $0.3 million in gain on the sale of the Company's
minority interest in GSR.
18. STOCK OPTIONS:
In July 1992, the Company implemented a stock option plan (the "1992
Plan") for certain officers, consultants, employees and outside
directors of the Company. The aggregate number of shares which may be
issued pursuant to the 1992 Plan is 250,000 shares which are
exercisable at date of grant and have a ten year life.
F-26
<PAGE> 79
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------
18. STOCK OPTIONS, continued
Effective January 1, 1995, the Company implemented two new stock option
plans: the 1995 Stock Incentive Plan and the 1995 Non-Employee Director
Stock Option Plan. Each plan calls for 250,000 shares to be reserved
for future issuance. Options granted under the Stock Incentive Plan are
exercisable at the date of grant. Options granted under the
Non-Employee Director Stock Option Plan are 1/3 exercisable at the date
of grant, 1/3 exercisable at the first anniversary of the grant date
and 1/3 exercisable at the second anniversary of the grant date. All
the options granted under the Stock Incentive Plan and Non-Employee
Director Stock Option Plan have a ten year life from the date of grant.
In June 1997, the Company's stockholders approved a 750,000 increase in
the number of shares of common stock reserved for issuance pursuant to
the Company's 1995 Stock Incentive Plan, bringing total shares reserved
under this plan to 1,000,000.
Under an employment agreement dated November 1994, Mr. Marino was
granted ten-year non-qualified options to purchase an aggregate of
350,000 shares of the Company's common stock at exercise prices ranging
from $3.10 to $4.15. Options to purchase 175,000 shares were
immediately exercisable and options to purchase 87,500 shares became
exercisable on each of March 1, 1996 and 1997.
Effective January 1, 1998, Mr. Marino entered into a new employment
agreement with the Company under which he was granted ten-year
non-qualified options to purchase 300,000 shares of common stock of the
Company at exercise prices varying from $7.25 to $9.50. All of the
options are immediately exercisable.
During June 1998, the Company implemented the 1998 Omnibus Executive
Incentive Compensation Plan ("1998 Plan"). The 1998 Plan supersedes the
1992 Plan and the 1995 Stock Incentive Plan. The 1998 Plan provides for
grants of stock options, stock appreciation rights, restricted stock,
deferred stock, other stock-related awards and performance or annual
incentive awards. The aggregate number of shares to be issued pursuant
to the 1998 Plan are 930,000 shares. Options for 76,000 shares of
common stock of the Company, at an exercise price of $6.125, were
issued pursuant to the 1998 Plan as of July 1, 1998. Options for
126,000 shares of common stock of the Company, at an exercise price of
$8.75, were issued pursuant to the 1998 Plan as of April 1999. These
options vest ratably over a three year period on each anniversary date
and mature ten years after the grant date. Options for 725,000 shares
of common stock of the Company, at an exercise price of $9.00, were
issued pursuant to the 1998 Plan as of January 1, 2000. These options
are subject to shareholder approval at the Company's 1999 Annual
Shareholders Meeting.
F-27
<PAGE> 80
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------
18. STOCK OPTIONS, continued
In July 1998, the Company issued, options to purchase an aggregate of
150,000 shares of common stock to certain employees at exercise prices
equal to $6.125 per share. The options vest ratably over a three year
period on each anniversary date and mature June 30, 2008. During 1999,
the Company issued options to purchase an aggregate of 25,000 shares of
common stock of the Company at an exercise price of $7.8125, options to
purchase 153,500 shares of common stock of the Company at an exercise
price of $8.75 and options to purchase 125,500 shares of common stock
of the Company at an exercise price of $9.75. All of these options vest
ratably over a three year period from the date of grant and mature in
ten years from the date of grant.
The Company has adopted the disclosure-only provisions of Statements of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation". Accordingly, no compensation costs have been recognized
for the stock options issued during 1999, 1998 and 1997 as all stock
options were granted with an exercise price at least equal to the
market price on the date of grant. Had compensation cost for the
Company's stock options issued been determined based on the fair value
at the grant date for awards in 1999, 1998 and 1997 consistent with the
provisions of SFAS No. 123, the Company's net income and net income per
share would have been reduced to the pro forma amounts indicated below
(in thousands except per share information):
<TABLE>
<CAPTION>
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net income - as reported $ 9,921 $ 4,401 $ 1,939
============= ============== ==============
Net income - pro forma $ 8,972 $ 3,562 $ 1,152
============= ============== ==============
Basic net income per share - as reported $ 0.80 $ 0.46 $ 0.23
====== ====== ======
Basic net income (loss) per share -
pro forma $ 0.72 $ 0.37 $ 0.14
====== ====== ======
</TABLE>
These calculations only take into account the options issued since
January 1, 1995. The fair value of each option grant is estimated on
the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions used for grants in 1999, 1998
and 1997: dividend yield 0.0%; expected volatility of 45%-55%;
risk-free interest rate of 5.50% -7.8%; and expected lives of 10 years.
The weighted average fair value of options granted for 1999, 1998 and
1997 were $5.86, $3.97, and $3.08, respectively.
Information regarding the above options for 1999, 1998 and 1997 is as
follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF EXERCISE
SHARES PRICE
--------- ---------
<S> <C> <C>
Outstanding at January 1, 1997 1,124,000 $3.74
Granted 363,500 $5.00
Exercised (202,933) $3.69
Forfeited (33,667) $4.21
---------
</TABLE>
F-28
<PAGE> 81
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------
18. STOCK OPTIONS, continued
<TABLE>
<CAPTION>
<S> <C> <C>
Outstanding at December 31, 1997 1,250,900 $4.10
Granted 551,000 $7.35
Exercised (237,950) $3.66
Forfeited (78,450) $3.58
---------
Outstanding at December 31, 1998 1,485,500 $5.40
Granted 455,000 $8.97
Exercised (89,667) $4.35
Forfeited (10,833) $5.09
---------
Outstanding at December 31, 1999 1,840,000 $6.34
=========
</TABLE>
The following table summarizes information about stock options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------------- ---------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICE OF OPTIONS LIFE PRICE OF OPTIONS PRICE
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$3.40-$5.00 836,750 5.92 $4.24 836,750 $4.24
$5.01-$7.00 248,250 8.50 $6.13 80,916 $6.13
$7.01-$9.50 755,000 8.80 $8.74 308,333 $8.36
--------- ---------
1,840,000 1,225,999
========= =========
</TABLE>
In January 1995, the Company established an Employee Stock Purchase
Plan open to all full-time employees. Each employee may have payroll
deductions as a percentage of their compensation, not to exceed $25,000
per year. The purchase price equals 85% of the fair market value of a
share of the Company's Common Stock on January 1 or December 31, of any
given year, whichever is lower. For the years ended December 31, 1999,
1998 and 1997, 16,500, 18,289 and 23,433 shares of common stock,
respectively, were sold to employees under this plan.
19. NONCASH INVESTING AND FINANCING ACTIVITIES:
In April 1999, the Company issued 750,000 warrants, valued at $3.0
million to purchase shares of its Common Stock as part of the Freight
Victoria acquisition financing. The Company issued an additional 50,000
warrants, valued at $0.2 million to purchase the Company's Common Stock
in November 1999 as part of the financing. The Company also issued a
$2.6 million convertible note in connection with the Freight Victoria
financing. This note was converted into the Company's stock in July
1999.
In August 1999, the Company issued 876,363 warrants, valued at $2.7
million, to purchase the Company's Common Stock pursuant to a private
offering of its junior convertible subordinated debentures.
F-29
<PAGE> 82
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------
19. NONCASH INVESTING AND FINANCING ACTIVITIES, continued
During 1999, $0.7 million of convertible notes were converted into the
Company's Common Stock. In addition, $2.0 million of the redeemable
convertible preferred stock was converted into the Company's Common
Stock during 1999.
The Company issued 20,000 shares of common stock to the Company's Chief
Executive Officer for a $95,000 note receivable during 1997. The
Company issued 30,000 shares of common stock to the Company's Chief
Executive Officer for a $97,500 note receivable during 1998.
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Acquisition of businesses:
Common stock issued for businesses acquired $ -- $ 453 $ --
Warrants issued for business acquired 3,031 -- --
Debt issued for business acquired 173,493 -- --
Acquisition costs accrued 238 31 90
Details of acquisitions:
Working capital components, other than cash (7,294) (801) 2,867
Property and equipment (209,624) (2,482) (16,071)
Other assets (4,234) (962) (31)
Deferred loan costs (6,959) -- --
Goodwill -- (355) --
Notes payable and loans payable 35,466 1,921 340
Deferred income taxes payable 7,430 440 --
Minority interest -- -- 5,415
--------- --------- ---------
Net cash used in acquisitions $ (8,453) $ (1,757) $ (7,390)
========= ========= =========
</TABLE>
Cash paid for interest during 1999, 1998 and 1997 was $16.3 million,
$5.7 million and $3.9 million, respectively. Cash paid for income taxes
during 1999, 1998 and 1997 was $1.3 million, $0.2 million and $0.2
million, respectively.
F-30
<PAGE> 83
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------
20. FAIR VALUE OF FINANCIAL INSTRUMENTS:
Management believes that the fair value of its long-term debt
approximates its carrying value for the revolving line of credit based
on the variable nature of the financing and for all other long-term
debt based on current borrowing rates available with similar terms and
maturities.
21. PENSION AND OTHER BENEFIT PROGRAMS
The Company maintains a pension plan for a majority of its Canadian
railroad employees, with both defined benefit and defined contribution
components.
DEFINED BENEFIT - The defined benefit component applies to
approximately 60 employees who transferred employment directly from
Canadian Pacific Railway Company ("CPR") to a subsidiary of RaiLink,
Ltd. The defined benefit portion of the plan is a mirror plan of CPR's
defined benefit plan. The employees that transferred and joined the
mirror plan were entitled to transfer or buy back prior years of
service. As part of the arrangement, CPR transferred to the Company the
appropriate value of each employee's pension entitlement.
The following chart summarizes the benefit obligations, assets, funded
status and rate assumptions associated with the defined benefit plan
(in thousands).
Change in benefit obligation
Benefit obligation at August 1, 1999 $ 2,710
Service cost 26
Interest cost 79
Plan participants' contributions 38
-------
Benefit obligation at December 31, 1999 2,853
-------
Change in plan assets
Fair value of plan assets at August 1, 1999 2,445
Actuarial return on plan assets 132
Employer contributions 37
Plan participants' contributions 41
-------
Fair value of plan assets at December 31, 1999 2,655
-------
Funded status (198)
Unrecognized net actuarial loss --
Unrecognized prior service costs --
-------
Accrued benefit cost $ (198)
=======
Rate Assumptions
Discount rate 7.00%
Expected return on plan assets 8.00%
Rate of compensation increase 4.50%
F-31
<PAGE> 84
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------
21. PENSION AND OTHER BENEFIT PROGRAMS, continued
Components of net periodic benefit cost for August 1, 1999 to
December 31, 1999
Service cost $ 25
Interest cost 79
Expected return on plan assets (82)
Net obligation at date of adoption 17
-----
Net periodic pension cost $ 39
=====
Freight Victoria's employees participate in the Victorian governments
superannuation funds. The contributions made by Freight Victoria for
the period May 1, 1999 to December 31, 1999 are as follows (in
thousands):
Victorian Superannuation Fund $ 62
State Superannuation Fund 647
Transport Fund 194
Freight Victoria Fund 53
----
Total contributions $956
====
Victorian Superannuation Fund (VICSUPER SCHEME)
1. Contributions are made in accordance with the Superannuation
Guarantee (Administration) Act of 1992.
State Superannuation Fund
1. Contributions are made in accordance with the actuarial
calculations as advised by the State Superannuation Fund.
Defined contribution - The defined contribution component applies to a
majority of the Company's Canadian railroad employees that are not
covered by the defined benefit component. The Company contributes 3% of
a participating employee's salary to the plan. Pension expense for the
period August 1, 1999 to December 31, 1999 for the defined contribution
members was $0.1 million.
Profit Sharing Plan
The Company maintains a contributory profit sharing plan as defined
under Section 401(k) of the U.S. Internal Revenue Code. The Company
made contributions to this plan at a rate of 50% of the employees
contribution up to a maximum annual contribution of $1,500 per eligible
employee. An employee becomes 100% vested with respect to the employer
contributions after completing six years of service. Employer
contributions during the years ended December 31, 1999, 1998 and 1997
were approximately $81,000, $66,000 and $40,000, respectively.
22. OTHER LIABILITIES
Other liabilities principally are accrued employee benefits in
Australia and consist of the following at December 31, 1999 and 1998
(in thousands):
1999 1998
-------- -------
Long service leave $ 7,663 $ --
Annual leave 6,087 --
Other leave types 2,182 --
Deferred revenue 442 427
------- -------
$16,373 $ 427
======= =======
23. COMMITMENTS AND CONTINGENCIES:
In the ordinary course of conducting its business, the Company becomes
involved in various legal actions and other claims which are pending or
could be asserted against the Company. Litigation is subject to many
uncertainties, the outcome of individual litigated matters is not
predictable with assurance, and it is reasonably possible that some of
these matters may be decided unfavorably to the Company. It is the
opinion of management that the ultimate liability, if any, with respect
to these matters will not have a material adverse effect on the
Company's financial position, results of operations or cash flows.
F-32
<PAGE> 85
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------
23. COMMITMENTS AND CONTINGENCIES, continued
The Company has a $4.9 million obligation, under certain events of
default or line abandonment occurs, to the Canadian National Railroad
in connection with its Coronado and Bonnyville property. The obligation
bears no interest and has no pre-defined terms of payment or maturity.
24. SEGMENT INFORMATION:
The Company's continuing operations have been classified into two
business segments: North American rail transportation and International
rail transportation. The North American rail transportation segment
includes the operations of the Company's railroad subsidiaries in the
United States and Canada and the International rail transportation
segment includes the operations of Company's railroad subsidiaries in
Chile and Australia. During 1999, the Company's trailer manufacturing
segment was classified as a discontinued operation and is reported that
way for all period presented.
Business segment information for the year ended December 31, 1999, 1998
and 1997 (dollar amounts in thousands):
<TABLE>
<CAPTION>
NORTH AMERICAN INTERNATIONAL
CONSOLIDATED RAILROADS RAILROADS OTHER
------------ ------------- -------------- -----
YEAR ENDED DECEMBER 31, 1999:
<S> <C> <C> <C> <C>
Revenue $ 125,372 $ 40,937 $ 82,473 $ 1,962
Depreciation and amortization $ 9,179 $ 3,594 $ 4,660 $ 925
Income (loss) before income taxes $ 5,239 $ 4,275 $ 6,897* $ (5,933)
Interest expense $ 16,287 $ 5,709 $ 9,157 $ 1,421
Total assets $ 428,932 $ 174,343 $ 214,599 $ 39,990
Capital expenditures $ 50,702 $ 22,461 $ 24,946 $ 3,295
YEAR ENDED DECEMBER 31, 1998:
NORTH AMERICAN INTERNATIONAL
CONSOLIDATED RAILROADS RAILROADS OTHER
------------ ------------- -------------- -----
Revenue $ 37,256 $ 16,191 $ 15,924 $ 5,141
Depreciation and amortization $ 2,543 $ 1,570 $ 706 $ 267
Income (loss) before income taxes $ (887) $ 2,072 $ 1,754 $ (4,713)
Interest expense $ 4,479 $ 2,822 $ 789 $ 868
Total assets $ 117,081 $ 53,692 $ 39,780 $ 23,609
Capital expenditures $ 24,767 $ 6,343 $ 12,807 $ 5,617
YEAR ENDED DECEMBER 31, 1997:
NORTH AMERICAN INTERNATIONAL
CONSOLIDATED RAILROADS RAILROADS OTHER
------------ ------------- -------------- -----
Revenue $ 24,496 $ 16,014 $ 8,062 $ 420
Depreciation and amortization $ 1,789 $ 1,337 $ 267 $ 185
Income (loss) before income taxes $ (127) $ 2,071 $ 1,013 $ (3,211)
Interest expense $ 3,275 $ 2,739 $ 341 $ 195
Total assets $ 83,585 $ 53,134 $ 23,115 $ 7,336
Capital expenditures $ 6,756 $ 3,963 $ 2,290 $ 503
</TABLE>
F-33
<PAGE> 86
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------
24. SEGMENT INFORMATION, continued
Geographical segment information for the years ended December 31, 1999,
1998 and 1997 (dollar amounts in thousands):
<TABLE>
<CAPTION>
CONSOLIDATED UNITED STATES CANADA CHILE AUSTRALIA
------------ ------------- ------ ----- ---------
YEAR ENDED DECEMBER 31, 1999:
<S> <C> <C> <C> <C> <C>
Revenue $ 125,372 $ 22,720 $ 20,179 $ 19,115 $ 63,358
Depreciation and
amortization $ 9,179 $ 2,428 $ 2,091 $ 1,231 $ 3,429
Income(loss) before
income taxes $ 5,239 $ (2,978) $ 919 $ 1,473 $ 5,825*
Interest expense $ 16,287 $ 3,926 $ 3,203 $ 1,595 $ 7,563
Total assets $ 428,932 $ 115,295 $ 99,038 $ 52,022 $ 162,577
Capital expenditures $ 50,702 $ 13,915 $ 11,841 $ 13,389 $ 11,557
YEAR ENDED DECEMBER 31, 1998:
CONSOLIDATED UNITED STATES CANADA CHILE AUSTRALIA
------------ ------------- ------ ----- ---------
Revenue $ 37,256 $ 17,080 $ 4,252 $ 15,924 $ --
Depreciation and
amortization $ 2,543 $ 1,837 $ -- $ 706 $ --
Income (loss) before
income taxes $ (887) $ (2,327) $ (142) $ 1,580 $ 2
Interest expense $ 4,479 $ 3,104 $ 109 $ 1,266 $ --
Total assets $ 117,081 $ 74,628 $ 2,672 $ 37,786 $ 1,995
Capital expenditures $ 24,767 $ 11,747 $ 213 $ 12,807 $ --
YEAR ENDED DECEMBER 31, 1997:
CONSOLIDATED UNITED STATES CHILE AUSTRALIA
------------ ------------- ----- ---------
Revenue $ 24,496 $ 16,434 $ 8,062 $ --
Depreciation and
amortization $ 1,789 $ 1,521 $ 268 $ --
Income (loss) before
income taxes $ (127) $ (1,140) $ 1,013 $ --
Interest expense $ 3,275 $ 2,933 $ 342 $
Total assets $ 83,585 $ 60,470 $ 21,261 $ 1,854
Capital expenditures $ 6,756 $ 4,466 $ 2,290 $ --
</TABLE>
* - Amount includes $4.1 million casualty gain.
Identifiable assets consist of $425 million from continuing operations
and $15 million from discontinued operations (not included in above
amounts).
F-34
<PAGE> 87
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------
25. SUBSEQUENT EVENTS:
On February 4, 2000, the Company acquired RailTex, Inc. for
approximately $128 million in cash and approximately 6.6 million shares
of the Company's common stock valued at $60.8 million. Railtex, which
operates 25 railroads over 4,100 mile of rail lines in North America,
became a wholly-owned subsidiary of the Company. RailTex shareholders
received $13.50 in cash and two-thirds of a share of RailAmerica common
stock in exchange for each share of RailTex stock. In connection with
the acquisition, the Company entered into a credit agreement providing
$330 million of senior term loans and $50 million of senior revolving
loans. In addition, a wholly-owned subsidiary of the Company issued $95
million of subordinated bridge notes and $55 million of asset sale
bridge notes.
26. UNAUDITED QUARTERLY FINANCIAL DATA:
Quarterly financial data for 1999 is as follows (in thousands except
per share amounts)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
Operating revenue $ 10,225 $ 28,088 $ 38,901 $ 48,157
Operating income $ 1,628 $ 4,373 $ 6,600 $ 8,667
Income from continuing
operations $ 54 $ 1,334 $ 2,278 $ 2,375
Net income $ 1,203 $ 2,748 $ 3,287 $ 2,683
Basic income (loss) from
continuing operations per share $ (0.02) $ 0.10 $ 0.18 $ 0.18
Diluted income (loss) from continuing
operations per share $ (0.02) $ 0.09 $ 0.16 $ 0.16
</TABLE>
Quarterly financial data for 1998 is as follows (in thousands except
per share amounts)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
Operating revenue $ 5,853 $ 9,117 $ 10,848 $ 11,439
Operating income $ 612 $ 1,216 $ 1,581 $ 2,089
Income (loss) from
continuing operations $ (172) $ 170 $ 193 $ (77)
Net income $ 603 $ 1,332 $ 1,361 $ 910
Basic income (loss) from
continuing operations per share $ (0.02) $ 0.02 $ 0.02 $ (0.01)
Diluted income (loss) from
continuing operations per share $ (0.02) $ 0.02 $ 0.02 $ (0.01)
</TABLE>
The above amounts differ from what was included in the Form 10-Q's
filed throughout the period due to the trailer manufacturing segment
being included in discontinued operations for all periods reported in
these consolidated financial statements.
F-35
<PAGE> 1
Exhibit 4.4
[EXECUTION COPY]
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of February 4, 2000 (as amended,
supplemented, amended and restated or otherwise modified from time to time, this
"WARRANT AGREEMENT"), between RAILAMERICA, INC., a Delaware corporation
("HOLDINGS"), and the purchasers set forth on the signature pages hereto (the
"PURCHASERS"). Capitalized terms used herein and not defined herein shall have
the meanings specified in the Securities Purchase Agreement described below.
RECITALS
WHEREAS, RailAmerica Transportation Corp., a Delaware corporation (the
"COMPANY"), Holdings and the other Guarantors set forth therein and the
Purchasers have entered into a Securities Purchase Agreement, dated as of
February 4, 2000 (as amended, supplemented or otherwise modified, the
"SECURITIES PURCHASE AGREEMENT"), pursuant to which the Purchasers have agreed
to purchase up to $95,000,000 in aggregate principal amount of the Senior
Subordinated Increasing Rate Notes (the "NOTES") of the Company, subject to the
terms and conditions set forth in the Securities Purchase Agreement;
WHEREAS, as a condition precedent to the purchase of the Notes by the
Purchasers, Holdings has agreed to issue, and the Purchasers are entitled to
receive (on the terms and conditions, and pursuant to the schedules, set forth
in the Escrow Agreement referred to below) warrants, as hereinafter described
(the "WARRANTS"), to purchase an amount of Common Stock, $0.001 par value per
share, of Holdings (the "COMMON STOCK") or any security substituted for Common
Stock in an amount equal to up to the percentage of the Capital Stock of
Holdings as of the Issuance Date as set forth on Schedule 1 hereto (such Common
Stock being referred to herein as the "WARRANT SHARES"), at an exercise price
equal to the closing price per share of Common Stock of Holdings traded on the
NASDAQ National Market System at the close of trading on the Issuance Date (the
"EXERCISE PRICE");
WHEREAS, Holdings has agreed that the holders of Notes shall be
entitled to receive, on each day following the end of eight subsequent 90-day
periods following the First Anniversary Date (as defined in the Escrow
Agreement) as set forth in the Escrow Agreement, Warrants representing 12.5% of
the total Warrants placed in escrow, such that on the 721st day following the
First Anniversary Date 100% of all Warrants previously held in escrow shall have
been released; and
WHEREAS, Holdings has agreed to execute the Warrants and deliver the
Warrants to an escrow agent on the date hereof and such escrow agent has agreed
to deliver the Warrants to the
<PAGE> 2
holders of Notes in accordance with an Escrow Agreement dated as of February 4,
2000 (as amended, supplemented or otherwise modified, the "ESCROW AGREEMENT")
among Holdings, the Purchasers and Snoga, Inc., as escrow agent.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
AGREEMENT
SECTION 1. WARRANT CERTIFICATES. The certificates evidencing the
Warrants (the "WARRANT CERTIFICATES") to be delivered pursuant to this Agreement
shall be in registered form only and shall be substantially in the form set
forth in EXHIBIT A attached hereto.
SECTION 2. EXECUTION OF WARRANT CERTIFICATES. Warrant Certificates
shall be signed on behalf of Holdings by its chief executive officer, its
president, any vice-president, its chief financial officer or, if Holdings shall
not have a chief financial officer, its treasurer (each an "OFFICER"). Each such
signature upon the Warrant Certificates may be in the form of a facsimile
signature of the present or any future Officer and may be imprinted or otherwise
reproduced on the Warrant Certificates and for that purpose Holdings may adopt
and use the facsimile signature of any person who shall have been an Officer,
notwithstanding the fact that at the time the Warrant Certificates shall be
delivered or disposed of he shall have ceased to hold such office.
In case any Officer of Holdings who shall have signed any of the
Warrant Certificates shall cease to be such Officer before the Warrant
Certificates so signed shall have been delivered or disposed of by Holdings,
such Warrant Certificates nevertheless may be delivered or disposed of as though
such person had not ceased to be such Officer of Holdings.
SECTION 3. REGISTRATION. Holdings shall number and register each
Warrant Certificate in a register (the "WARRANT REGISTER") as such Warrant
Certificate is issued. Holdings may deem and treat the registered holder(s) of
the Warrant Certificates as the absolute owners thereof (notwithstanding any
notation of ownership or other writing thereon made by anyone), for all
purposes, and shall not be affected by any notice to the contrary.
SECTION 4. REGISTRATION OF TRANSFERS AND EXCHANGES. Holdings shall from
time to time register the transfer of any outstanding Warrant Certificates in
the Warrant Register to be maintained by Holdings upon surrender thereof
accompanied by a written instrument or instruments of transfer in form
satisfactory to Holdings, duly executed by the registered holder or holders
thereof or by the duly appointed legal representative thereof or by a duly
authorized attorney. Upon any such registration of transfer, a new Warrant
Certificate shall be issued to the transferee(s) and the surrendered Warrant
Certificate shall be canceled and disposed of by Holdings.
-2-
<PAGE> 3
The Warrant holders agree that prior to any proposed transfer of the
Warrant or of the Warrant Shares, if such transfer is not made pursuant to an
effective Registration Statement under the Securities Act, the Warrant holder
will, if requested by Holdings, deliver to Holdings:
(1) an investment covenant reasonably satisfactory to Holdings
signed by the proposed transferee;
(2) an agreement by such transferee to the placement of the
restrictive investment legend set forth below on the Warrant or the
Warrant Shares;
(3) an agreement by such transferee that Holdings may place a
notation in the stock books of Holdings or a "stop transfer order" with
any transfer agent or registrar with respect to the Warrant Shares;
(4) an agreement by such transferee to be bound by the
provisions of this SECTION 4 relating to the transfer of such Warrant
or Warrant Shares; and
(5) an opinion of the proposed transferee's counsel
(reasonably satisfactory to Holdings) addressed to Holdings to the
effect that the proposed Transfer of such Notes may be effected without
registration under the Securities Act.
The Warrant holders agree that each certificate representing Warrants
and Warrant Shares will bear the following legend:
"THE SECURITIES EVIDENCED OR CONSTITUTED HEREBY HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED
OR HYPOTHECATED UNLESS THE REGISTRATION PROVISIONS OF SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS HAVE BEEN COMPLIED WITH OR UNLESS
HOLDINGS HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
HOLDINGS THAT SUCH REGISTRATION IS NOT REQUIRED."
Warrant Certificates may be exchanged at the option of the holder(s)
thereof when surrendered to Holdings at its office for another Warrant
Certificate or other Warrant Certificates of like tenor and representing in the
aggregate a like number of Warrants. Warrant Certificates surrendered for
exchange shall be canceled and disposed of by Holdings.
SECTION 5. TERMS OF WARRANTS: EXERCISE OF WARRANTS. Subject to the
terms of this Agreement, each Warrant holder shall have the right, which may be
exercised commencing at the opening of business on the relevant Exercise Date
and until 5:00 p.m. New York City time on the
-3-
<PAGE> 4
seventh anniversary of such Exercise Date, to receive from Holdings the number
of fully paid and nonassessable Warrant Shares which the holder may at the time
be entitled to receive on exercise of such Warrant and payment of the Exercise
Price for such Warrant Shares. For purposes hereof, "Exercise Date" means, for
any Warrant, the date upon which such Warrant was released from escrow pursuant
to the terms of the Escrow Agreement.
A Warrant may be exercised upon surrender to Holdings at its office
designated for such purpose (the address of which is set forth in SECTION 14
hereof) of the certificate or certificates evidencing the Warrants to be
exercised with the form of election to purchase on the reverse thereof duly
filled in and signed, which signature shall be guaranteed by a bank or trust
company having an office or correspondent in the United States or a broker or
dealer which is a member of a registered securities exchange or the National
Association of Securities Dealers, Inc. (the "NASD"), and upon payment to
Holdings of the Exercise Price. Payment of the Exercise Price shall be made (i)
in cash or by certified or official bank check payable to the order of Holdings,
(ii) by tendering Warrants having a fair market value equal to the Exercise
Price or (iii) with any combination of CLAUSE (I) or (II). For purpose of CLAUSE
(II) above, the fair market value of the Warrants shall be determined as
follows: (A) to the extent the Common Stock is publicly traded and listed on the
NASDAQ National Market System, or a national securities exchange, the fair
market value shall be equal to the difference between (1) the Quoted Price of
the Common Stock on the date of exercise and (2) the Exercise Price; or (B) to
the extent the Common Stock is not publicly traded, or otherwise is not listed
on a national securities exchange, the fair market value of the Warrants shall
be equal to the difference between (1) the value per share of Common Stock as
determined in good faith by the Board of Directors of Holdings pursuant to
CLAUSE (N) of SECTION 10 and (2) the Exercise Price.
Subject to the provisions of SECTION 6 hereof, upon such surrender of
Warrants and payment of the Exercise Price, Holdings shall issue and cause to be
delivered with all reasonable dispatch, but in no event later than three
Business Days after such surrender and payment, to or upon the written order of
the holder and in such name or names as the Warrant holder may designate, a
certificate or certificates for the number of full Warrant Shares issuable upon
the exercise of such Warrants as provided in SECTION 10; PROVIDED, that if any
consolidation, merger or lease or sale of assets is proposed to be effected by
Holdings as described in CLAUSE (M) of SECTION 10 hereof, or a tender offer or
an exchange offer for shares of Common Stock of Holdings shall be made, upon
such surrender of Warrants and payment of the Exercise Price as aforesaid,
Holdings shall, as soon as possible, but in any event not later than two
Business Days thereafter, issue and cause to be delivered the full number of
Warrant Shares issuable upon the exercise of such Warrants in the manner
described in this sentence as provided in SECTION 10. Together with the delivery
of such Warrant Shares, Holdings shall deliver a certificate of its chief
accounting or chief financial officer or, if Holdings shall not have a chief
financial officer, its controller setting forth and certifying the calculations
made by Holdings pursuant to SECTION 10 hereof to determine the number of
Warrant Shares issuable upon the exercise of the surrendered Warrant or
Warrants. Such certificate or certificates representing Warrant Shares shall be
-4-
<PAGE> 5
deemed to have been issued and any person so designated to be named therein
shall be deemed to have become a holder of record of such Warrant Shares as of
the date of the surrender of such Warrants and payment of the Exercise Price.
The Warrants shall be exercisable, at the election of the holders
thereof, either in full or from time to time in part and, in the event that a
certificate evidencing Warrants is exercised in respect of fewer than all of the
Warrant Shares issuable on such exercise at any time prior to the date of
expiration of the Warrants, a new certificate evidencing the remaining Warrant
or Warrants will be issued and delivered pursuant to the provisions of this
Section and of SECTION 2 hereof; PROVIDED, that Warrants may not be exercised in
denominations of less than 1,000 unless the holder has fewer than 1,000
Warrants.
All Warrant Certificates surrendered upon exercise of Warrants shall be
canceled and disposed of by Holdings.
Holdings shall keep copies of this Agreement and any notices given or
received hereunder available for inspection by the holders during normal
business hours at its office.
SECTION 6. PAYMENT OF TAXES. Holdings shall pay all documentary stamp
taxes attributable to the initial issuance of Warrant Shares upon the exercise
of Warrants; PROVIDED, that Holdings shall not be required to pay any tax or
taxes which may be payable in respect of any transfer involved in the issue of
any Warrant Certificates or any certificates for Warrant Shares in a name other
than that of the registered holder of a Warrant Certificate surrendered upon the
transfer or exercise of a Warrant, and Holdings shall not be required to issue
or deliver such Warrant Certificates or Warrant Shares unless or until the
person or persons requesting the issuance thereof shall have paid to Holdings
the amount of such tax or shall have established to the satisfaction of Holdings
that such tax has been paid.
SECTION 7. MUTILATED OR MISSING WARRANT CERTIFICATES. In case any of
the Warrant Certificates shall be mutilated, lost, stolen or destroyed, Holdings
may in its discretion issue, in exchange and substitution for and upon
cancellation of the mutilated Warrant Certificate, or in lieu of and
substitution for the Warrant Certificate lost, stolen or destroyed, a new
Warrant Certificate of like tenor and representing an equivalent number of
Warrants, but only upon receipt of evidence reasonably satisfactory to Holdings
of such loss, theft or destruction of such Warrant Certificate and indemnity, if
requested, also reasonably satisfactory to it. Applicants for such substitute
Warrant Certificates shall also comply with such other reasonable regulations
and pay such other reasonable charges as Holdings may prescribe.
SECTION 8. RESERVATION OF WARRANT SHARES. Holdings shall at all times
reserve and keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued Common Stock or its authorized and issued Common
Stock held in its treasury for the purpose of enabling it to satisfy any
obligation to issue Warrant Shares upon exercise of Warrants, the
-5-
<PAGE> 6
maximum number of shares of Common Stock which may then be deliverable upon the
exercise of all outstanding Warrants.
Holdings or, if appointed, the transfer agent for the Common Stock (the
"TRANSFER AGENT") and every subsequent transfer agent for any shares of
Holdings' Capital Stock issuable upon the exercise of any of the rights of
purchase aforesaid will be irrevocably authorized and directed at all times to
reserve such number of authorized shares as shall be required for such purpose.
Holdings will keep a copy of this Agreement on file with the Transfer Agent and
with every subsequent transfer agent for any shares of Holdings' Capital Stock
issuable upon the exercise of the rights of purchase represented by the
Warrants. Holdings will furnish such Transfer Agent a copy of all notices of
adjustments and certificates related thereto, transmitted to each holder
pursuant to SECTION 13 hereof.
Before taking any action which would cause an adjustment pursuant to
SECTION 10 or 11 hereof in the Exercise Rate (as defined below), Holdings will
take any corporate action which may, in the opinion of its counsel, be necessary
in order that Holdings may validly and legally issue fully paid and
nonassessable Warrant Shares at the Exercise Rate as so adjusted.
Holdings covenants that all Warrant Shares which may be issued upon
exercise of Warrants will, upon issue, be fully paid, nonassessable, free of
preemptive rights and free from all taxes, liens, charges and security interests
with respect to the issue thereof.
SECTION 9. OBTAINING STOCK EXCHANGE LISTINGS. Without limiting any term
or condition of the Equity Registration Rights Agreement, Holdings will from
time to time take all action which may be necessary so that the Warrant Shares,
immediately following their issuance upon the exercise of Warrants, will be
listed on the principal securities exchanges and markets within the United
States of America, if any, on which other shares of Common Stock are then
listed.
SECTION 10. ADJUSTMENT OF NUMBER OF WARRANT SHARES ISSUABLE. The number
of Warrant Shares issuable upon the exercise of each Warrant (the "EXERCISE
RATE") is subject to adjustment from time to time upon the occurrence of the
events enumerated in this SECTION 10 and under the circumstances described in
SECTION 11. For purposes of this SECTION 10, "Common Stock" means shares now or
hereafter authorized of any class of common stock of Holdings and any other
Capital Stock of Holdings, however designated, that has the right (subject to
any prior rights of any class or series of preferred stock) to participate in
any distribution of the assets or earnings of Holdings without limit as to per
share amount.
(a) ADJUSTMENT FOR CHANGE IN CAPITAL STOCK. If Holdings:
(1) pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock;
-6-
<PAGE> 7
(2) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(3) combines its outstanding shares of Common Stock into a
smaller number of shares;
(4) makes a distribution on its Common Stock in shares of its
Capital Stock other than Common Stock; or
(5) issues by reclassification of its Common Stock any shares
of its Capital Stock;
then the Exercise Rate in effect immediately prior to such action shall be
proportionately adjusted so that the holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of Capital Stock of Holdings
which he would have owned immediately following such action if such Warrant had
been exercised immediately prior to such action.
The adjustment shall become effective immediately after the record date
in the case of a dividend or distribution and immediately after the effective
date in the case of a subdivision, combination or reclassification.
If after an adjustment a holder of a Warrant upon exercise of such
Warrant may receive shares of two or more classes of Capital Stock of Holdings,
Holdings shall determine in good faith the allocation of the adjusted Exercise
Rate between the classes of Capital Stock. After such allocation, the exercise
privilege and the Exercise Rate of each class of Capital Stock shall thereafter
be subject to adjustment on terms comparable to those applicable to Common Stock
in this Section.
Such adjustment shall be made successively whenever any event listed
above shall occur.
(b) ADJUSTMENT FOR RIGHTS ISSUE. If Holdings issues any rights, options
or warrants entitling any person to subscribe for Common Stock or securities
convertible into, or exchangeable or exercisable for, Common Stock at an
offering price (or with an initial conversion, exchange or exercise price plus
such offering price) that is less than the Current Market Price per share of
Common Stock on the record date for such issuance (all of the foregoing,
"RIGHTS"), the Exercise Rate shall be adjusted in accordance with the formula:
E' = E x O + N
----------
N x P
O + -----
M
-7-
<PAGE> 8
where:
E' = the adjusted Exercise Rate.
E = the current Exercise Rate.
O = the number of shares of Common Stock outstanding on
the record date (assuming the conversion, exercise or
exchange of all Rights and convertible securities
into shares of Common Stock).
N = the number of additional shares of Common Stock
issuable pursuant to the Rights offered.
P = the offering price plus initial conversion,
exchange or exercise price per share of the
additional shares of Common Stock issuable pursuant
to the Rights.
M = the Current Market Price per share of Common Stock on
the record date.
The adjustment shall be made successively whenever any such Rights are
issued and shall become effective immediately after the record date for the
determination of stockholders entitled to receive the Rights in the case of
Rights to be issued to the holders of Common Stock. To the extent that shares of
Common Stock are not delivered after the expiration of such Rights, the Exercise
Rate shall be readjusted to the Exercise Rate which would otherwise be in effect
had the adjustment made upon the issuance of such options, rights or warrants
been made on the basis of delivery of only the number of shares of Common Stock
actually delivered. In the event that such options, rights or warrants are not
so issued, the Exercise Rate shall again be adjusted to be the Exercise Rate
which would then be in effect if such date fixed for determination of
stockholders entitled to receive such options, rights or warrants had not been
so fixed.
This CLAUSE (B) does not apply to:
(1) Rights issued to persons in a bona fide public offering
pursuant to a firm commitment underwriting,
(2) Rights issued to persons who are not affiliates of
Holdings in a bona fide private placement through a placement agent
that is a member firm of the NASD (except to the extent that any
discount from the Current Market Price attributable to restrictions on
transferability of the Rights, as determined in good faith by the Board
of Directors pursuant to CLAUSE (N) of SECTION 10 and described in a
Board resolution, shall exceed 5%), or
(3) Rights issued to Holdings employees under bona fide
employee benefit plans adopted by the Board of Directors and approved
by the holders of Common Stock when
-8-
<PAGE> 9
required by law, if such Rights would otherwise be covered by this
CLAUSE (B) (but only to the extent that the aggregate number of Rights
excluded hereby and issued after the date of this Agreement shall not
exceed the right to subscribe for more than 5% of the Common Stock then
outstanding).
(c) ADJUSTMENT FOR OTHER DISTRIBUTIONS. If Holdings distributes to all
holders of its Common Stock any of its assets (including but not limited to
cash), debt securities, preferred stock or any rights or warrants to purchase
any such securities, the Exercise Rate shall be adjusted in accordance with the
formula:
E' = E x M
-----
M - F
where:
E' = the adjusted Exercise Rate.
E = the current Exercise Rate.
M = the Current Market Price per share of
Common Stock on the record date.
F = the fair market value on the record date of the
assets, securities, rights or warrants applicable to
one share of Common Stock. The Board of Directors
shall determine the fair market value pursuant to
CLAUSE (N) of SECTION 10 based upon the trading
prices of publicly traded securities where
applicable.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
This clause does not apply to Rights referred to in CLAUSE (B) of this
SECTION 10.
(d) ADJUSTMENT FOR COMMON STOCK ISSUE. If Holdings issues shares of
Common Stock for a consideration per share less than the Current Market Price
per share on the date Holdings fixes the offering price of such additional
shares, the Exercise Rate shall be adjusted in accordance with the formula:
E' = E x O + N
----------
N x P
O + -----
M
-9-
<PAGE> 10
where:
E' = the adjusted Exercise Rate.
E = the then current Exercise Rate.
O = the number of shares of Common Stock outstanding
immediately prior to the issuance of such additional
shares (assuming the conversion, exercise or exchange
of all Rights and convertible securities into shares
of Common Stock).
N = the number of additional shares of Common Stock issued.
P = the aggregate consideration received per share for
the issuance of such additional shares of Common
Stock.
M = the Current Market Price per share of Common Stock
on the date of issuance of such additional shares of
Common Stock.
The adjustment shall be made successively whenever any such issuance is
made, and shall become effective immediately after such issuance.
This CLAUSE (D) does not apply to:
(1) any of the transactions described in CLAUSES (a), (b), (c)
or (e) of this SECTION 10 (including transactions referred to in such
clauses as not being subject thereto),
(2) the exercise of Warrants, or the conversion or exchange of
other securities convertible or exchangeable for Common Stock,
(3) Common Stock issued upon the exercise of rights or
warrants issued to the holders of Common Stock,
(4) Common Stock issued to stockholders of any person that is
not affiliated with Holdings and that merges into Holdings, or with a
subsidiary of Holdings, in proportion to their stock holdings of such
person immediately prior to such merger, upon such merger,
(5) Common Stock issued to persons in a bona fide public
offering pursuant to a firm commitment underwriting, or
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<PAGE> 11
(6) Common Stock issued to persons who are not affiliates of
Holdings in a bona fide private placement through a placement agent
that is a member firm of the NASD (except to the extent that any
discount from the Current Market Price attributable to restrictions on
transferability of the Common Stock, as determined in good faith by the
Board of Directors pursuant to CLAUSE (N) of SECTION 10 and described
in a Board resolution, shall exceed 5%).
(e) ADJUSTMENT FOR CONVERTIBLE SECURITIES ISSUE. If Holdings issues any
securities convertible into or exchangeable for Common Stock (other than
securities issued in transactions described in CLAUSES (b) and (c) of this
SECTION 10) for a consideration per share of Common Stock initially deliverable
upon conversion or exchange of such securities less than the Current Market
Price per share on the date of issuance of such securities, the Exercise Rate
shall be adjusted in accordance with the formula:
E' = E x O + N
---------
N x P
O + -----
M
where:
E' = the adjusted Exercise Rate.
E = the then current Exercise Rate.
O = the number of shares of Common Stock outstanding
immediately prior to the issuance of such securities
(assuming the conversion, exercise or exchange of all
Rights and convertible securities into shares of
Common Stock).
N = the maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for
such securities at the initial conversion or exchange
rate.
P = the aggregate consideration received for the
issuance of each such security, plus any additional
consideration received upon the exchange or
conversion of such security.
M = the Current Market Price per share on the date of
issuance of such securities.
The adjustment shall be made successively whenever any such issuance is
made, and shall become effective immediately after such issuance.
-11-
<PAGE> 12
If all of the Common Stock deliverable upon conversion or exchange of
such securities has not been issued when such securities are no longer
outstanding, then the Exercise Rate shall promptly be readjusted to the Exercise
Rate which would then be in effect had the adjustment upon the issuance of such
securities been made on the basis of the actual number of shares of Common Stock
issued upon conversion or exchange of such securities.
This CLAUSE (E) does not apply to:
(1) convertible securities issued to stockholders of any
person that is not affiliated with Holdings and that merges into
Holdings, or with a subsidiary of Holdings, in proportion to their
stock holdings of such person immediately prior to such merger, upon
such merger,
(2) convertible securities issued to persons in a bona fide
public offering pursuant to a firm commitment underwriting,
(3) convertible securities issued to persons who are not
affiliates of Holdings in a bona fide private placement through a
placement agent which is a member firm of the NASD (except to the
extent that any discount from the Current Market Price attributable to
restrictions on transferability of Common Stock issuable upon
conversion, as determined in good faith by the Board of Directors
pursuant to CLAUSE (N) of SECTION 10 and described in a Board
resolution, shall exceed 5%), or
(4) convertible securities that are otherwise provided for by
CLAUSES (a), (b), (c) or (d) of this SECTION 10.
(f) CURRENT MARKET PRICE. The current market price per share of Common
Stock (the "CURRENT MARKET PRICE") on any date is the average of the Quoted
Prices of the Common Stock for 30 consecutive trading days commencing 45 trading
days before the date in question. The "Quoted Price" of the Common Stock is the
last reported sales price of the Common Stock as reported by NASDAQ National
Market System, or if the Common Stock is listed on a securities exchange, the
last reported sales price of the Common Stock on such exchange which shall be
for consolidated trading if applicable to such exchange, or if neither so
reported or listed, the last reported bid price of the Common Stock. In the
absence of one or more such quotations, the Board of Directors of Holdings shall
determine the Current Market Price pursuant to CLAUSE (N) of SECTION 10 in good
faith.
(g) CONSIDERATION RECEIVED. For purposes of any computation respecting
consideration received pursuant to CLAUSES (d) and (e) of this SECTION 10, the
following shall apply:
(1) in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, PROVIDED that
in no case shall any
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<PAGE> 13
deduction be made for any commissions, discounts or other expenses
incurred by Holdings for any underwriting of the issue or otherwise in
connection therewith;
(2) in the case of the issuance of shares of Common Stock for
a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined in good faith by the Board of Directors pursuant to CLAUSE
(N) of SECTION 10, based upon the trading prices of publicly traded
securities where appropriate (irrespective of the accounting treatment
thereof), and described in a resolution of the Board of Directors of
Holdings; and
(3) in the case of the issuance of securities convertible into
or exchangeable for shares, the aggregate consideration received
therefor shall be deemed to be the consideration received by Holdings
for the issuance of such securities plus the additional minimum
consideration, if any, to be received by Holdings upon the conversion
or exchange thereof (the consideration in each case to be determined in
the same manner as provided in SUBCLAUSES (1) and (2) of this CLAUSE
(G)).
(h) WHEN DE MINIMIS ADJUSTMENT MAY BE DEFERRED No adjustment in the
Exercise Rate need be made unless the adjustment would require an increase or
decrease of at least 1% in the Exercise Rate. Any adjustments that are not made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section shall be made to the nearest
1/100th of a share.
(i) WHEN NO ADJUSTMENT REQUIRED. No adjustment need be made for rights
to purchase Common Stock pursuant to a plan by Holdings for reinvestment of
dividends or interest.
No adjustment need be made for a change in the par value or no par
value of the Common Stock.
To the extent the Warrants become convertible into cash, no adjustment
need be made thereafter as to the cash. Interest will not accrue on the cash.
(j) NOTICE OF ADJUSTMENT. Whenever the Exercise Rate is adjusted,
Holdings shall provide the notices required by SECTION 14 hereof.
(k) VOLUNTARY INCREASE. Holdings from time to time may increase the
Exercise Rate by any amount for any period of time if the period is at least 20
days and if the increase is irrevocable during the period.
Whenever the Exercise Rate is increased pursuant to this CLAUSE (K),
Holdings shall mail to Warrant holders a notice of the increase. Holdings shall
mail the notice at least 15 days before
-13-
<PAGE> 14
the date the increased Exercise Rate takes effect. The notice shall state the
increased Exercise Rate and the period it will be in effect.
An increase of the Exercise Rate pursuant to this CLAUSE (K) does not
change or adjust the Exercise Rate otherwise in effect for purposes of CLAUSES
(a), (b), (c), (d) and (e) of this SECTION 10.
(l) NOTICE OF CERTAIN TRANSACTIONS. If:
(1) Holdings takes any action that would require an adjustment
in the Exercise Rate pursuant to CLAUSES (a), (b), (c), (d) or (e) of
this SECTION 10;
(2) Holdings takes any action that would require a
supplemental Warrant Agreement pursuant to CLAUSE (m) of this SECTION
10; or
(3) there is a liquidation or dissolution of Holdings,
then Holdings shall mail to Warrant holders a notice stating the proposed record
date for a dividend or distribution or the proposed effective date of a
subdivision, combination, reclassification, consolidation, merger, transfer,
lease, liquidation or dissolution. Holdings shall mail the notice at least 15
days before such date. Failure to mail the notice or any defect in it shall not
affect the validity of the transaction.
(m) REORGANIZATION OF HOLDINGS. If Holdings consolidates or merges with
or into, or transfers or leases all or substantially all its assets to, any
person, upon consummation of such transaction the Warrants shall automatically
become exercisable for the kind and amount of securities, cash or other assets
which the holder of a Warrant would have owned immediately after the
consolidation, merger, transfer or lease if the holder had exercised the Warrant
immediately before the effective date of the transaction. Concurrently with the
consummation of such transaction, the corporation formed by or surviving any
such consolidation or merger if other than Holdings, or the person to which such
sale or conveyance shall have been made, shall enter into a supplemental Warrant
Agreement so providing and further providing for adjustments which shall be as
nearly equivalent as may be practical to the adjustments provided for in this
Section. The successor company shall mail to Warrant holders a notice describing
the supplemental Warrant Agreement.
If the issuer of securities deliverable upon exercise of Warrants under
the supplemental Warrant Agreement is an affiliate of the formed, surviving,
transferee or lessee corporation, that issuer shall join in the supplemental
Warrant Agreement.
If this CLAUSE (M) applies, CLAUSES (a), (b), (c), (d) and (e) of this
SECTION 10 do not apply.
-14-
<PAGE> 15
(n) HOLDINGS DETERMINATION NOT FINAL. Any determination that Holdings
or its Board of Directors must make pursuant to this Agreement shall be made in
good faith and shall be binding on the holders of Warrants, except as set forth
herein. Holdings shall give each holder of Warrants written notice of any such
determination by Holdings or its Board of Directors. If a majority of the
holders of the Warrants do not agree with any such determination by Holdings or
its Board of Directors, such holders may request, in a notice delivered to
Holdings not later than 30 days after the date on which the holders received
notice of such determination from Holdings, that such determination be made by
an independent investment banking firm (or, if an investment banking firm is
generally not qualified to render such a determination, an independent appraisal
firm) of recognized national standing chosen by Holdings, which determination
shall be final and binding on Holdings and the holders of Warrants, absent
manifest error. All fees and expenses incurred in connection with any
determination made by an independent investment banking firm or appraisal firm,
as the case might be, shall be borne by Holdings, unless such determination is
in agreement with, or more favorable to Holdings than, the determination that
was made by Holdings or its Board of Directors, in which case such fees and
expenses shall be borne by the holders that requested such determination.
(o) WHEN ISSUANCE OR PAYMENT MAY BE DEFERRED. In any case in which this
SECTION 10 shall require that an adjustment in the Exercise Rate be made
effective as of a record date for a specified event, Holdings may elect to defer
until the occurrence of such event issuing to the holder of any Warrant
exercised after such record date the Warrant Shares and other Capital Stock of
Holdings, if any, issuable upon such exercise over and above the Warrant Shares
and other Capital Stock of Holdings, if any, issuable upon such exercise on the
basis of the Exercise Rate; PROVIDED, HOWEVER, that Holdings shall deliver to
such holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional Warrant Shares and other Capital Stock of
Holdings upon the occurrence of the event requiring such adjustment.
(p) FORM OF WARRANTS. Irrespective of any adjustments in the Exercise
Rate or in the kind of shares purchasable upon the exercise of the Warrants,
Warrants theretofore or thereafter issued may continue to express the same price
and kind of shares as are stated in the Warrants initially issuable pursuant to
this Agreement.
(q) EXERCISE PRICE. If following any adjustment in the Exercise Rate
pursuant to this SECTION 10, the Exercise Price per share of common stock of
Holdings shall be less than the par value of such common stock, such Exercise
Price per share of common stock shall be increased to the par value of such
stock.
SECTION 11. NO DILUTION OR IMPAIRMENT: CAPITAL AND OWNERSHIP STRUCTURE.
If any event shall occur as to which the provisions of SECTION 10 are not
strictly applicable but the failure to make any adjustment would adversely
affect the purchase rights represented by the Warrants in accordance with the
essential intent and principles of such Section, then, in each such case,
Holdings shall appoint, at its own expense, an investment banking firm of
recognized
-15-
<PAGE> 16
national standing that does not have a direct or material indirect
financial interest in Holdings or any of its subsidiaries, who has not been,
and, at the time it is called upon to give independent financial advice to
Holdings, is not (and none of its directors, officers, employees, affiliates or
stockholders are) a promoter, director or officer of Holdings or any of its
subsidiaries, which shall give their opinion upon the adjustment, if any, on a
basis consistent with the essential intent and principles established in SECTION
10, necessary to preserve, without dilution, the purchase rights, represented by
this Agreement and the Warrants. Upon receipt of such opinion, Holdings will
promptly mail a copy thereof to the holders of the Warrants and shall make the
adjustments described therein.
Holdings will not, by amendment of its certificate of incorporation or
through any consolidation, merger, reorganization, transfer of assets,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of the Warrants,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the holders of the Warrants against dilution or other
impairment. Without limiting the generality of the foregoing, Holdings (1) will
take all such action as may be necessary or appropriate in order that Holdings
may validly and legally issue fully paid and nonassessable shares of Common
Stock on the exercise of the Warrants from time to time outstanding and (2) will
not take any action which results in any adjustment of the Exercise Rate if the
total number of Warrant Shares issuable after such action upon the exercise of
all of the Warrants would exceed the total number of shares of Common Stock then
authorized by Holdings' certificate of incorporation and available for the
purposes of issue upon such exercise. A consolidation, merger, reorganization or
transfer of assets involving Holdings covered by SECTION 10(M) shall not be
prohibited by or require any adjustment under this SECTION 11.
SECTION 12. FRACTIONAL INTERESTS. Holdings shall not be required to
issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this SECTION 12,
be issuable on the exercise of any Warrants (or specified portion thereof), the
number of Warrant Shares which shall be issued by Holdings on exercise of such
Warrants shall be rounded (i) to the last previous whole number if the fraction
is less than 0.5 of a Warrant Share or (ii) to the next higher whole number if
the fraction is greater than or equal to 0.5 of a Warrant Share.
SECTION 13. NOTICES TO WARRANT HOLDERS. Upon any adjustment of the
Exercise Rate pursuant to SECTION 10, Holdings shall promptly thereafter cause
to be delivered, by first-class mail, postage prepaid, to each of the registered
holders of the Warrant Certificates at such holder's address appearing on the
Warrant Register a certificate of an Officer of Holdings setting forth the
Exercise Rate after such adjustment and setting forth in reasonable detail the
method of
-16-
<PAGE> 17
calculation and the facts upon which such calculations are based and
setting forth the number of Warrant Shares (or portion thereof) issuable after
such adjustment in the Exercise Rate, upon exercise of a Warrant and payment of
the Exercise Price. Where appropriate, such notice shall be given in advance and
included as a part of the notice required to be mailed under the other
provisions of this SECTION 13.
In case:
(a) Holdings shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for
or purchase shares of Common Stock or of any other subscription rights
or warrants;
(b) Holdings shall authorize the distribution to all holders
of shares of Common Stock of evidences of its indebtedness or assets
(other than cash dividends or cash distributions payable out of
consolidated earnings or earned surplus or dividends payable in shares
of Common Stock or distributions referred to in CLAUSE (A) of SECTION
10 hereof);
(c) of any consolidation or merger to which Holdings is a
party and for which approval of any stockholders of Holdings is
required, or of the conveyance or transfer of the properties and assets
of Holdings substantially as an entirety, or of any reclassification or
change of Common Stock issuable upon exercise of the Warrants (other
than a change in par value, or from par value to no par value, or from
no par value to par value, or as a result of a subdivision or
combination), or a tender offer or exchange offer for shares of Common
Stock;
(d) of the voluntary or involuntary dissolution, liquidation
or winding up of Holdings; or
(e) Holdings proposes to take any action which would require
an adjustment of the Exercise Rate pursuant to SECTION 10;
then Holdings shall cause to be given to each of the registered holders of the
Warrant Certificates at such holder's address appearing on the Warrant Register,
at least 20 days (or 10 days in any case specified in clauses (a) or (b) above)
prior to the applicable record date hereinafter specified, or promptly in the
case of events for which there is no record date, by first-class mail, postage
prepaid, a written notice stating (i) the date as of which any such subdivision,
combination or reclassification is to be made, or (ii) the date as of which the
holders of record of shares of Common Stock to be entitled to receive any such
dividends, rights, options, warrants or distribution are to be determined, or
(iii) the initial expiration date set forth in any tender offer or exchange
offer for shares of Common Stock, or (iv) the date on which any such
consolidation, merger, conveyance, transfer dissolution, liquidation or winding
up is expected to become effective or consummated, and the date as of which it
is expected that holders of record of shares
-17-
<PAGE> 18
of Common Stock shall be entitled to exchange such shares for securities or
other property, if any, deliverable upon such reclassification, consolidation,
merger, conveyance, transfer, dissolution, liquidation or winding up. The
failure to give the notice required by this SECTION 13 or any delay therein
shall not affect the legality or validity of any distribution, right, option,
warrant, consolidation, merger, conveyance, transfer, dissolution, liquidation
or winding up, or the vote upon any action.
Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the holders thereof the right
to vote or to consent or to receive notice as stockholders in respect of the
meetings of stockholders or the election of Directors of Holdings or any other
matter, or any rights whatsoever as stockholders of Holdings; PROVIDED, that
each registered holder of Warrants shall be entitled to receive all notices sent
generally to stockholders, such notices to be delivered pursuant to SECTION 14
hereof at the address of such holder appearing on the Warrant Register.
SECTION 14. NOTICES. Any notice or demand authorized by this Agreement
to be given or made by the registered holder of any Warrant Certificate to or on
Holdings shall be delivered or sent by registered, certified or express mail,
postage prepaid, return receipt requested, or given or made by facsimile, in
each case, at the address specified below Holdings' name on the signature page
to the Securities Purchase Agreement, or at such other address as shall be
designated by Holdings in a written notice to the Warrant holders. Except as
otherwise provided in this Agreement, all such communications shall be deemed to
have been duly given when transmitted by facsimile (and electronic confirmation
thereof has been received) or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as aforesaid.
Any notice pursuant to this Agreement to be given by Holdings to the
registered holder(s) of any Warrant Certificate shall be delivered or sent by
registered, certified or express mail, postage prepaid, return receipt
requested, or given or made by facsimile (and electronic confirmation thereof
has been received), in each case, at the address of such holder appearing on the
Warrant Register, or at such other address as shall be designated by such holder
in a written notice to Holdings. Except as otherwise provided in this Agreement,
all such communications shall be deemed to have been duly given when transmitted
by facsimile or personally delivered or in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid.
SECTION 15. SUPPLEMENTS AND AMENDMENTS. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions of this Agreement may not be given unless Holdings has obtained the
written consent of holders of at least a majority of the outstanding Warrant
Certificates.
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<PAGE> 19
SECTION 16. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of Holdings shall bind and inure to the benefit
of its respective successors and assigns hereunder.
SECTION 17. TERMINATION. This Agreement shall terminate when all
Warrants have been exercised.
SECTION 18. NEW YORK LAW, SUBMISSION TO JURISDICTION, WAIVER OF JURY
TRIAL. THIS AGREEMENT AND EACH WARRANT CERTIFICATE SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. EACH PARTY
HERETO HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE
COURT SITTING IN NEW YORK CITY FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT
OF OR RELATING TO THIS WARRANT AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY. EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE
OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
EACH PARTY HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS WARRANT AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 19. BENEFITS OF THIS AGREEMENT. Except as expressly set forth
herein, nothing in this Agreement shall be construed to give to any person or
corporation other than Holdings and the registered holders of the Warrant
Certificates any legal or equitable right, remedy or claim under this Agreement;
but, except as so set forth, this Agreement shall be for the sole and exclusive
benefit of Holdings and the registered holders of the Warrant Certificates.
SECTION 20. COUNTERPARTS. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be duly executed, as of the day and year first above written.
RAILAMERICA, INC.
By:
----------------------------------
Name:
Title:
-19-
<PAGE> 20
PURCHASERS:
RAIL AMERICA FUNDING, INC.
By:
----------------------------------
Name:
Title:
-20-
<PAGE> 21
EXHIBIT A
[Form of Warrant Certificate]
[Face]
THE SECURITIES EVIDENCED OR CONSTITUTED HEREBY HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED
OR HYPOTHECATED UNLESS THE REGISTRATION PROVISIONS OF SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS HAVE BEEN COMPLIED WITH OR UNLESS
HOLDINGS HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
HOLDINGS THAT SUCH REGISTRATION IS NOT REQUIRED.
No. ____
Warrant Certificate
RAILAMERICA, INC.
This Warrant Certificate certifies that __________________, or its
registered assigns, is the registered holder of Warrants (the "WARRANTS") to
purchase Common Stock, $0.001 par value per share (the "COMMON STOCK"), of
RailAmerica, Inc., a Delaware corporation ("HOLDINGS"). This Warrant entitles
the holder upon exercise to receive from Holdings, up to [_______]1 fully paid
and nonassessable shares of Common Stock (each, a "WARRANT SHARE") at an
exercise price equal to the closing price per share of Common Stock of Holdings
traded on the NASDAQ National Market System at the close of trading on the
Issuance Date (the "EXERCISE PRICE") payable in lawful money of the United
States of America upon surrender of this Warrant Certificate and payment of the
Exercise Price at the office or agency of Holdings designated for such purpose,
but only subject to the conditions set forth herein and in the Warrant Agreement
referred to on the reverse hereof. The number of Warrant Shares issuable upon
exercise of the Warrants are subject to adjustment upon the occurrence of
certain events set forth in the Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., New York City time, on the
seventh anniversary of the date upon which the such Warrant was released from
escrow (the "EXERCISE DATE") pursuant to the terms of the Escrow Agreement,
dated as of February 4, 2000 (as amended, supplemented or otherwise modified,
the "ESCROW AGREEMENT"), among Holdings, the Purchasers parties thereto and
Snoga, Inc., as escrow agent.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.
- ----------
1 Represents 3.5% of the fully-diluted Capital Stock of Holdings on the
closing date.
A-1
<PAGE> 22
THIS WARRANT CERTIFICATE SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS.
IN WITNESS WHEREOF, Holdings has caused this Warrant Certificate to be
signed by an officer.
Dated: _____________
RAILAMERICA, INC.
By:
----------------------------------
Name:
Title:
A-2
<PAGE> 23
[Form of Warrant Certificate]
[Reverse]
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring on the seventh anniversary of such
Warrants' Exercise Date entitling the holder on exercise to receive shares of
Common Stock, $0.001 par value per share, of Holdings (the "COMMON STOCK"), and
are issued or to be issued pursuant to a Warrant Agreement dated as of February
4, 2000 (as amended, supplemented or otherwise modified, the "WARRANT
AGREEMENT") among Holdings and the Purchasers parties thereto, which Warrant
Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of Holdings and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants. A copy of the Warrant Agreement may be
obtained by the holder hereof upon written request to Holdings.
A Warrant will not be exercisable until its respective Exercise Date.
The holder of Warrants evidenced by this Warrant Certificate may exercise them
by surrendering this Warrant Certificate, with the form of election to purchase
set forth hereon properly completed and executed, together with payment of the
Exercise Price in cash at the office of Holdings designated for such purpose. In
the event that upon any exercise of Warrants evidenced hereby the number of
Warrants exercised shall be less than the total number of Warrants evidenced
hereby, there shall be issued to the holder hereof or his assignee a new Warrant
Certificate evidencing the number of Warrants not exercised. No adjustment shall
be made for any dividends on any Common Stock issuable upon exercise of this
Warrant.
The Warrant Agreement provides that upon the occurrence of certain
events the number of Warrant Shares issuable upon the exercise of each Warrant
(the "EXERCISE RATE") may, subject to certain conditions, be adjusted. If the
Exercise Rate is adjusted, the Warrant Agreement provides that the number of
shares of Common Stock issuable upon the exercise of each Warrant shall be
adjusted. No fractions of a share of Common Stock will be issued upon the
exercise of any Warrant.
Warrant Certificates, when surrendered at the office of Holdings by the
registered holder thereof in person or by legal representative or attorney duly
authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of Holdings, a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
A-3
<PAGE> 24
Holdings may deem and treat the registered holder(s) thereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof of any distribution to the holder(s) hereof, and for all other
purposes, and Holdings shall not be affected by any notice to the contrary.
Neither the Warrants nor this Warrant Certificate entitles any holder hereof to
any rights of a stockholder of Holdings.
A-4
<PAGE> 25
[Form of Election to Purchase]
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive ______________ shares of
Common Stock and herewith tenders payment for such shares to the order of
RailAmerica, Inc., a Delaware corporation, in the amount of 2$___ per share in
accordance with the terms hereof. The undersigned requests that a certificate
for such shares be registered in the name of ______________ ([SS#______________]
[Taxpayer ID#______________]), whose address is ______________ and that such
shares be delivered to ______________ whose address is ______________. If said
number of shares is less than all of the shares of Common Stock purchasable
hereunder, the undersigned requests that a new Warrant Certificate representing
the remaining balance of such shares be registered in the name of
______________, whose address is ______________, and that such Warrant
Certificate be delivered to ______________, whose address is ______________.
Signature:
----------------------------
Date:
-----------------------
Signature Guaranteed:
----------------------------
- ----------
2 Insert in an amount equal to the closing price per share of Common
Stock of Holdings traded on the NASDAQ National Market System at the
close of trading on the Issuance Date
A-5
<PAGE> 1
[EXECUTION COPY]
Exhibit 4.5
ASSET BRIDGE WARRANT AGREEMENT
ASSET BRIDGE WARRANT AGREEMENT, dated as of February 4, 2000 (as
amended, supplemented, amended and restated or otherwise modified from time to
time, this "WARRANT AGREEMENT"), between RAILAMERICA, INC., a Delaware
corporation ("HOLDINGS"), and the purchasers set forth on the signature pages
hereto (the "PURCHASERS"). Capitalized terms used herein and not defined herein
shall have the meanings specified in the Asset Bridge Securities Purchase
Agreement described below.
RECITALS
WHEREAS, Palm Beach Rail Holding, Inc., a Delaware corporation
(together with its successors,"INTERMEDIATE HOLDINGS"), Holdings and the other
Guarantors set forth therein and the Purchasers have entered into an Asset
Bridge Securities Purchase Agreement, dated as of February 4, 2000 (as amended,
supplemented or otherwise modified, the "ASSET BRIDGE SECURITIES PURCHASE
AGREEMENT"), pursuant to which the Purchasers have agreed to purchase up to
$55,000,000 in aggregate principal amount of the Asset Bridge Senior Secured
Increasing Rate Notes (the "NOTES") of Intermediate Holdings, subject to the
terms and conditions set forth in the Asset Bridge Securities Purchase
Agreement;
WHEREAS, as a condition precedent to the purchase of the Asset Bridge
Notes by the Purchasers, Holdings has agreed to issue, and the Purchasers are
entitled to receive (on the terms and conditions, and pursuant to the schedules,
set forth in the Asset Bridge Escrow Agreement referred to below) warrants, as
hereinafter described (the "WARRANTS"), to purchase an amount of Common Stock,
$0.001 par value per share, of Holdings (the "COMMON STOCK") or any security
substituted for the Common Stock in an amount equal to up to the percentage of
the Capital Stock of Holdings as of the Issuance Date as set forth on Schedule 1
hereto (such Common Stock being referred to herein as the "WARRANT SHARES"), at
an exercise price equal to the closing price per share of Common Stock of
Holdings traded on the NASDAQ National Market System at the close of trading on
the Issuance Date (the "EXERCISE PRICE");
WHEREAS, Holdings has agreed that the holders of Asset Bridge Notes
shall be entitled to receive, in accordance with the Asset Bridge Escrow
Agreement, Warrants representing (x) 50% of the total Warrants placed in escrow
on the date that is 180 days following the Issuance Date, (y) 25% of the total
Warrants placed in escrow on the date that is 270 days following the Issuance
Date and (z) 25% of the total Warrants placed in escrow on the date that is 360
days following the Issuance Date; and
<PAGE> 2
WHEREAS, Holdings has agreed to execute the Warrants and deliver the
Warrants to an escrow agent on the date hereof and such escrow agent has agreed
to deliver the Warrants to the holders of Asset Bridge Notes in accordance with
an Asset Bridge Escrow Agreement dated as of February 4, 2000 (as amended,
supplemented or otherwise modified, the "ASSET BRIDGE ESCROW AGREEMENT") among
Holdings, the Purchasers and Snoga, Inc., as escrow agent.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
AGREEMENT
SECTION 1. WARRANT CERTIFICATES. The certificates evidencing the
Warrants (the "WARRANT CERTIFICATES") to be delivered pursuant to this Agreement
shall be in registered form only and shall be substantially in the form set
forth in EXHIBIT A attached hereto.
SECTION 2. EXECUTION OF WARRANT CERTIFICATES. Warrant Certificates
shall be signed on behalf of Holdings by its chief executive officer, its
president, any vice-president, its chief financial officer or, if Holdings shall
not have a chief financial officer, its treasurer (each an "OFFICER"). Each such
signature upon the Warrant Certificates may be in the form of a facsimile
signature of the present or any future Officer and may be imprinted or otherwise
reproduced on the Warrant Certificates and for that purpose Holdings may adopt
and use the facsimile signature of any person who shall have been an Officer,
notwithstanding the fact that at the time the Warrant Certificates shall be
delivered or disposed of he shall have ceased to hold such office.
In case any Officer of Holdings who shall have signed any of the
Warrant Certificates shall cease to be such Officer before the Warrant
Certificates so signed shall have been delivered or disposed of by Holdings,
such Warrant Certificates nevertheless may be delivered or disposed of as though
such person had not ceased to be such Officer of Holdings.
SECTION 3. REGISTRATION. Holdings shall number and register each
Warrant Certificate in a register (the "WARRANT REGISTER") as such Warrant
Certificate is issued. Holdings may deem and treat the registered holder(s) of
the Warrant Certificates as the absolute owners thereof (notwithstanding any
notation of ownership or other writing thereon made by anyone), for all
purposes, and shall not be affected by any notice to the contrary.
SECTION 4. REGISTRATION OF TRANSFERS AND EXCHANGES. Holdings shall from
time to time register the transfer of any outstanding Warrant Certificates in
the Warrant Register to be maintained by Holdings upon surrender thereof
accompanied by a written instrument or instruments of transfer in form
satisfactory to Holdings, duly executed by the registered holder or holders
thereof or by the duly appointed legal representative thereof or by a duly
authorized attorney. Upon any such registration of transfer, a new Warrant
Certificate shall be issued to the
-2-
<PAGE> 3
transferee(s) and the surrendered Warrant Certificate shall be canceled and
disposed of by Holdings.
The Warrant holders agree that prior to any proposed transfer of the
Warrant or of the Warrant Shares, if such transfer is not made pursuant to an
effective Registration Statement under the Securities Act, the Warrant holder
will, if requested by Holdings, deliver to Holdings:
(1) an investment covenant reasonably satisfactory to Holdings
signed by the proposed transferee;
(2) an agreement by such transferee to the placement of the
restrictive investment legend set forth below on the Warrant or the
Warrant Shares;
(3) an agreement by such transferee that Holdings may place a
notation in the stock books of Holdings or a "stop transfer order" with
any transfer agent or registrar with respect to the Warrant Shares;
(4) an agreement by such transferee to be bound by the
provisions of this SECTION 4 relating to the transfer of such Warrant
or Warrant Shares; and
(5) an opinion of the proposed transferee's counsel
(reasonably satisfactory to Holdings) addressed to Holdings to the
effect that the proposed Transfer of such Asset Bridge Notes may be
effected without registration under the Securities Act.
The Warrant holders agree that each certificate representing Warrants
and Warrant Shares will bear the following legend:
"THE SECURITIES EVIDENCED OR CONSTITUTED HEREBY HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED
OR HYPOTHECATED UNLESS THE REGISTRATION PROVISIONS OF SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS HAVE BEEN COMPLIED WITH OR UNLESS
HOLDINGS HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
HOLDINGS THAT SUCH REGISTRATION IS NOT REQUIRED."
Warrant Certificates may be exchanged at the option of the holder(s)
thereof when surrendered to Holdings at its office for another Warrant
Certificate or other Warrant Certificates of like tenor and representing in the
aggregate a like number of Warrants. Warrant Certificates surrendered for
exchange shall be canceled and disposed of by Holdings.
-3-
<PAGE> 4
SECTION 5. TERMS OF WARRANTS: EXERCISE OF WARRANTS. Subject to the
terms of this Agreement, each Warrant holder shall have the right, which may be
exercised commencing at the opening of business on the relevant Exercise Date
and until 5:00 p.m. New York City time on the seventh anniversary of such
Exercise Date, to receive from Holdings the number of fully paid and
nonassessable Warrant Shares which the holder may at the time be entitled to
receive on exercise of such Warrant and payment of the Exercise Price for such
Warrant Shares. For purposes hereof, "Exercise Date" means, for any Warrant, the
date upon which such Warrant was released from escrow pursuant to the terms of
the Asset Bridge Escrow Agreement.
A Warrant may be exercised upon surrender to Holdings at its office
designated for such purpose (the address of which is set forth in SECTION 14
hereof) of the certificate or certificates evidencing the Warrants to be
exercised with the form of election to purchase on the reverse thereof duly
filled in and signed, which signature shall be guaranteed by a bank or trust
company having an office or correspondent in the United States or a broker or
dealer which is a member of a registered securities exchange or the National
Association of Securities Dealers, Inc. (the "NASD"), and upon payment to
Holdings of the Exercise Price. Payment of the Exercise Price shall be made (i)
in cash or by certified or official bank check payable to the order of Holdings,
(ii) by tendering Warrants having a fair market value equal to the Exercise
Price or (iii) with any combination of CLAUSE (I) or (II). For purpose of CLAUSE
(II) above, the fair market value of the Warrants shall be determined as
follows: (A) to the extent the Common Stock is publicly traded and listed on the
NASDAQ National Market System, or a national securities exchange, the fair
market value shall be equal to the difference between (1) the Quoted Price of
the Common Stock on the date of exercise and (2) the Exercise Price; or (B) to
the extent the Common Stock is not publicly traded, or otherwise is not listed
on a national securities exchange, the fair market value of the Warrants shall
be equal to the difference between (1) the value per share of Common Stock as
determined in good faith by the Board of Directors of Holdings pursuant to
CLAUSE (N) of SECTION 10 and (2) the Exercise Price.
Subject to the provisions of SECTION 6 hereof, upon such surrender of
Warrants and payment of the Exercise Price, Holdings shall issue and cause to be
delivered with all reasonable dispatch, but in no event later than three
Business Days after such surrender and payment, to or upon the written order of
the holder and in such name or names as the Warrant holder may designate, a
certificate or certificates for the number of full Warrant Shares issuable upon
the exercise of such Warrants as provided in SECTION 10; PROVIDED, that if any
consolidation, merger or lease or sale of assets is proposed to be effected by
Holdings as described in CLAUSE (M) of SECTION 10 hereof, or a tender offer or
an exchange offer for shares of Common Stock of Holdings shall be made, upon
such surrender of Warrants and payment of the Exercise Price as aforesaid,
Holdings shall, as soon as possible, but in any event not later than two
Business Days thereafter, issue and cause to be delivered the full number of
Warrant Shares issuable upon the exercise of such Warrants in the manner
described in this sentence as provided in SECTION 10. Together with the delivery
of such Warrant Shares, Holdings shall deliver a certificate of its chief
accounting or chief financial officer or, if Holdings shall not have a chief
financial officer, its
-4-
<PAGE> 5
controller setting forth and certifying the calculations made by Holdings
pursuant to SECTION 10 hereof to determine the number of Warrant Shares issuable
upon the exercise of the surrendered Warrant or Warrants. Such certificate or
certificates representing Warrant Shares shall be deemed to have been issued and
any person so designated to be named therein shall be deemed to have become a
holder of record of such Warrant Shares as of the date of the surrender of such
Warrants and payment of the Exercise Price.
The Warrants shall be exercisable, at the election of the holders
thereof, either in full or from time to time in part and, in the event that a
certificate evidencing Warrants is exercised in respect of fewer than all of the
Warrant Shares issuable on such exercise at any time prior to the date of
expiration of the Warrants, a new certificate evidencing the remaining Warrant
or Warrants will be issued and delivered pursuant to the provisions of this
Section and of SECTION 2 hereof; PROVIDED, that Warrants may not be exercised in
denominations of less than 1,000 unless the holder has fewer than 1,000
Warrants.
All Warrant Certificates surrendered upon exercise of Warrants shall be
canceled and disposed of by Holdings.
Holdings shall keep copies of this Agreement and any notices given or
received hereunder available for inspection by the holders during normal
business hours at its office.
SECTION 6. PAYMENT OF TAXES. Holdings shall pay all documentary stamp
taxes attributable to the initial issuance of Warrant Shares upon the exercise
of Warrants; PROVIDED, that Holdings shall not be required to pay any tax or
taxes which may be payable in respect of any transfer involved in the issue of
any Warrant Certificates or any certificates for Warrant Shares in a name other
than that of the registered holder of a Warrant Certificate surrendered upon the
transfer or exercise of a Warrant, and Holdings shall not be required to issue
or deliver such Warrant Certificates or Warrant Shares unless or until the
person or persons requesting the issuance thereof shall have paid to Holdings
the amount of such tax or shall have established to the satisfaction of Holdings
that such tax has been paid.
SECTION 7. MUTILATED OR MISSING WARRANT CERTIFICATES. In case any of
the Warrant Certificates shall be mutilated, lost, stolen or destroyed, Holdings
may in its discretion issue, in exchange and substitution for and upon
cancellation of the mutilated Warrant Certificate, or in lieu of and
substitution for the Warrant Certificate lost, stolen or destroyed, a new
Warrant Certificate of like tenor and representing an equivalent number of
Warrants, but only upon receipt of evidence reasonably satisfactory to Holdings
of such loss, theft or destruction of such Warrant Certificate and indemnity, if
requested, also reasonably satisfactory to it. Applicants for such substitute
Warrant Certificates shall also comply with such other reasonable regulations
and pay such other reasonable charges as Holdings may prescribe.
-5-
<PAGE> 6
SECTION 8. RESERVATION OF WARRANT SHARES. Holdings shall at all times
reserve and keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued Common Stock or its authorized and issued Common
Stock held in its treasury for the purpose of enabling it to satisfy any
obligation to issue Warrant Shares upon exercise of Warrants, the maximum number
of shares of Common Stock which may then be deliverable upon the exercise of all
outstanding Warrants.
Holdings or, if appointed, the transfer agent for the Common Stock (the
"TRANSFER AGENT") and every subsequent transfer agent for any shares of
Holdings' Capital Stock issuable upon the exercise of any of the rights of
purchase aforesaid will be irrevocably authorized and directed at all times to
reserve such number of authorized shares as shall be required for such purpose.
Holdings will keep a copy of this Agreement on file with the Transfer Agent and
with every subsequent transfer agent for any shares of Holdings' Capital Stock
issuable upon the exercise of the rights of purchase represented by the
Warrants. Holdings will furnish such Transfer Agent a copy of all notices of
adjustments and certificates related thereto, transmitted to each holder
pursuant to SECTION 13 hereof.
Before taking any action which would cause an adjustment pursuant to
SECTION 10 or 11 hereof in the Exercise Rate (as defined below), Holdings will
take any corporate action which may, in the opinion of its counsel, be necessary
in order that Holdings may validly and legally issue fully paid and
nonassessable Warrant Shares at the Exercise Rate as so adjusted.
Holdings covenants that all Warrant Shares which may be issued upon
exercise of Warrants will, upon issue, be fully paid, nonassessable, free of
preemptive rights and free from all taxes, liens, charges and security interests
with respect to the issue thereof.
SECTION 9. OBTAINING STOCK EXCHANGE LISTINGS. Without limiting any term
or condition of the Asset Bridge Equity Registration Rights Agreement, Holdings
will from time to time take all action which may be necessary so that the
Warrant Shares, immediately following their issuance upon the exercise of
Warrants, will be listed on the principal securities exchanges and markets
within the United States of America, if any, on which other shares of Common
Stock are then listed.
SECTION 10. ADJUSTMENT OF NUMBER OF WARRANT SHARES ISSUABLE. The number
of Warrant Shares issuable upon the exercise of each Warrant (the "EXERCISE
RATE") is subject to adjustment from time to time upon the occurrence of the
events enumerated in this SECTION 10 and under the circumstances described in
SECTION 11. For purposes of this SECTION 10, "Common Stock" means shares now or
hereafter authorized of any class of common stock of Holdings and any other
Capital Stock of Holdings, however designated, that has the right (subject to
any prior rights of any class or series of preferred stock) to participate in
any distribution of the assets or earnings of Holdings without limit as to per
share amount.
-6-
<PAGE> 7
(a) ADJUSTMENT FOR CHANGE IN CAPITAL STOCK. If Holdings:
(1) pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock;
(2) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(3) combines its outstanding shares of Common Stock into a
smaller number of shares;
(4) makes a distribution on its Common Stock in shares of its
Capital Stock other than Common Stock; or
(5) issues by reclassification of its Common Stock any shares
of its Capital Stock;
then the Exercise Rate in effect immediately prior to such action shall be
proportionately adjusted so that the holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of Capital Stock of Holdings
which he would have owned immediately following such action if such Warrant had
been exercised immediately prior to such action.
The adjustment shall become effective immediately after the record date
in the case of a dividend or distribution and immediately after the effective
date in the case of a subdivision, combination or reclassification.
If after an adjustment a holder of a Warrant upon exercise of such
Warrant may receive shares of two or more classes of Capital Stock of Holdings,
Holdings shall determine in good faith the allocation of the adjusted Exercise
Rate between the classes of Capital Stock. After such allocation, the exercise
privilege and the Exercise Rate of each class of Capital Stock shall thereafter
be subject to adjustment on terms comparable to those applicable to Common Stock
in this Section.
Such adjustment shall be made successively whenever any event listed
above shall occur.
(b) ADJUSTMENT FOR RIGHTS ISSUE. If Holdings issues any rights, options
or warrants entitling any person to subscribe for Common Stock or securities
convertible into, or exchangeable or exercisable for, Common Stock at an
offering price (or with an initial conversion, exchange or exercise price plus
such offering price) that is less than the Current Market Price per share of
-7-
<PAGE> 8
Common Stock on the record date for such issuance (all of the foregoing,
"RIGHTS"), the Exercise Rate shall be adjusted in accordance with the formula:
E' = E x O + N
-----------
N x P
O + -----
M
where:
E' = the adjusted Exercise Rate.
E = the current Exercise Rate.
O = the number of shares of Common Stock outstanding on
the record date (assuming the conversion, exercise or
exchange of all Rights and convertible securities
into shares of Common Stock).
N = the number of additional shares of Common Stock
issuable pursuant to the Rights offered.
P = the offering price plus initial conversion,
exchange or exercise price per share of the
additional shares of Common Stock issuable pursuant
to the Rights.
M = the Current Market Price per share of Common Stock
on the record date.
The adjustment shall be made successively whenever any such Rights are
issued and shall become effective immediately after the record date for the
determination of stockholders entitled to receive the Rights in the case of
Rights to be issued to the holders of Common Stock. To the extent that shares of
Common Stock are not delivered after the expiration of such Rights, the Exercise
Rate shall be readjusted to the Exercise Rate which would otherwise be in effect
had the adjustment made upon the issuance of such options, rights or warrants
been made on the basis of delivery of only the number of shares of Common Stock
actually delivered. In the event that such options, rights or warrants are not
so issued, the Exercise Rate shall again be adjusted to be the Exercise Rate
which would then be in effect if such date fixed for determination of
stockholders entitled to receive such options, rights or warrants had not been
so fixed.
This CLAUSE (B) does not apply to:
(1) Rights issued to persons in a bona fide public offering
pursuant to a firm commitment underwriting,
(2) Rights issued to persons who are not affiliates of
Holdings in a bona fide private placement through a placement agent
that is a member firm of the NASD (except to the extent that any
discount from the Current Market Price attributable to restrictions
-8-
<PAGE> 9
on transferability of the Rights, as determined in good faith by the
Board of Directors pursuant to CLAUSE (N) of SECTION 10 and described
in a Board resolution, shall exceed 5%), or
(3) Rights issued to Holdings employees under bona fide
employee benefit plans adopted by the Board of Directors and approved
by the holders of Common Stock when required by law, if such Rights
would otherwise be covered by this CLAUSE (B) (but only to the extent
that the aggregate number of Rights excluded hereby and issued after
the date of this Agreement shall not exceed the right to subscribe for
more than 5% of the Common Stock then outstanding).
(c) ADJUSTMENT FOR OTHER DISTRIBUTIONS. If Holdings distributes to all
holders of its Common Stock any of its assets (including but not limited to
cash), debt securities, preferred stock or any rights or warrants to purchase
any such securities, the Exercise Rate shall be adjusted in accordance with the
formula:
E' = E x M
---
M-F
where:
E' = the adjusted Exercise Rate.
E = the current Exercise Rate.
M = the Current Market Price per share of Common Stock
on the record date.
F = the fair market value on the record date of the
assets, securities, rights or warrants applicable to
one share of Common Stock. The Board of Directors
shall determine the fair market value pursuant to
CLAUSE (N) of SECTION 10 based upon the trading
prices of publicly traded securities where
applicable.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
This clause does not apply to Rights referred to in CLAUSE (B) of this
SECTION 10.
(d) ADJUSTMENT FOR COMMON STOCK ISSUE. If Holdings issues shares of
Common Stock for a consideration per share less than the Current Market Price
per share on the date Holdings
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<PAGE> 10
fixes the offering price of such additional shares, the Exercise Rate shall be
adjusted in accordance with the formula:
E' = E x O + N
------------
N x P
O + -----
M
where:
E' = the adjusted Exercise Rate.
E = the then current Exercise Rate.
O = the number of shares of Common Stock outstanding
immediately prior to the issuance of such additional
shares (assuming the conversion, exercise or exchange
of all Rights and convertible securities into shares
of Common Stock).
N = the number of additional shares of Common Stock issued.
P = the aggregate consideration received per share for
the issuance of such additional shares of Common
Stock.
M = the Current Market Price per share of Common Stock
on the date of issuance of such additional shares of
Common Stock.
The adjustment shall be made successively whenever any such issuance is
made, and shall become effective immediately after such issuance.
This CLAUSE (D) does not apply to:
(1) any of the transactions described in CLAUSES (A), (B), (C)
or (E) of this SECTION 10 (including transactions referred to in such
clauses as not being subject thereto),
(2) the exercise of Warrants, or the conversion or exchange of
other securities convertible or exchangeable for Common Stock,
(3) Common Stock issued upon the exercise of rights or
warrants issued to the holders of Common Stock,
-10-
<PAGE> 11
(4) Common Stock issued to stockholders of any person that is
not affiliated with Holdings and that merges into Holdings, or with a
subsidiary of Holdings, in proportion to their stock holdings of such
person immediately prior to such merger, upon such merger,
(5) Common Stock issued to persons in a bona fide public
offering pursuant to a firm commitment underwriting, or
(6) Common Stock issued to persons who are not affiliates of
Holdings in a bona fide private placement through a placement agent
that is a member firm of the NASD (except to the extent that any
discount from the Current Market Price attributable to restrictions on
transferability of the Common Stock, as determined in good faith by the
Board of Directors pursuant to CLAUSE (N) of SECTION 10 and described
in a Board resolution, shall exceed 5%).
(e) ADJUSTMENT FOR CONVERTIBLE SECURITIES ISSUE. If Holdings issues any
securities convertible into or exchangeable for Common Stock (other than
securities issued in transactions described in CLAUSES (B) and (C) of this
SECTION 10) for a consideration per share of Common Stock initially deliverable
upon conversion or exchange of such securities less than the Current Market
Price per share on the date of issuance of such securities, the Exercise Rate
shall be adjusted in accordance with the formula:
E' = E x O + N
-----------
N x P
O + -----
M
where:
E' = the adjusted Exercise Rate.
E = the then current Exercise Rate.
O = the number of shares of Common Stock outstanding
immediately prior to the issuance of such securities
(assuming the conversion, exercise or exchange of all
Rights and convertible securities into shares of
Common Stock).
N = the maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for
such securities at the initial conversion or exchange
rate.
P = the aggregate consideration received for the
issuance of each such security, plus any additional
consideration received upon the exchange or
conversion of such security.
M = the Current Market Price per share on the date of
issuance of such securities.
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<PAGE> 12
The adjustment shall be made successively whenever any such issuance is
made, and shall become effective immediately after such issuance.
If all of the Common Stock deliverable upon conversion or exchange of
such securities has not been issued when such securities are no longer
outstanding, then the Exercise Rate shall promptly be readjusted to the Exercise
Rate which would then be in effect had the adjustment upon the issuance of such
securities been made on the basis of the actual number of shares of Common Stock
issued upon conversion or exchange of such securities.
This CLAUSE (E) does not apply to:
(1) convertible securities issued to stockholders of any
person that is not affiliated with Holdings and that merges into
Holdings, or with a subsidiary of Holdings, in proportion to their
stock holdings of such person immediately prior to such merger, upon
such merger,
(2) convertible securities issued to persons in a bona fide
public offering pursuant to a firm commitment underwriting,
(3) convertible securities issued to persons who are not
affiliates of Holdings in a bona fide private placement through a
placement agent which is a member firm of the NASD (except to the
extent that any discount from the Current Market Price attributable to
restrictions on transferability of Common Stock issuable upon
conversion, as determined in good faith by the Board of Directors
pursuant to CLAUSE (N) of SECTION 10 and described in a Board
resolution, shall exceed 5%), or
(4) convertible securities that are otherwise provided for by
CLAUSES (A), (B), (C) or (D) of this SECTION 10.
(f) CURRENT MARKET PRICE. The current market price per share of Common
Stock (the "CURRENT MARKET PRICE") on any date is the average of the Quoted
Prices of the Common Stock for 30 consecutive trading days commencing 45 trading
days before the date in question. The "Quoted Price" of the Common Stock is the
last reported sales price of the Common Stock as reported by NASDAQ National
Market System, or if the Common Stock is listed on a securities exchange, the
last reported sales price of the Common Stock on such exchange which shall be
for
-12-
<PAGE> 13
consolidated trading if applicable to such exchange, or if neither so
reported or listed, the last reported bid price of the Common Stock. In the
absence of one or more such quotations, the Board of Directors of Holdings shall
determine the Current Market Price pursuant to CLAUSE (N) of SECTION 10 in good
faith.
(g) CONSIDERATION RECEIVED. For purposes of any computation respecting
consideration received pursuant to CLAUSES (D) and (E) of this SECTION 10, the
following shall apply:
(1) in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, PROVIDED that
in no case shall any deduction be made for any commissions, discounts
or other expenses incurred by Holdings for any underwriting of the
issue or otherwise in connection therewith;
(2) in the case of the issuance of shares of Common Stock for
a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined in good faith by the Board of Directors pursuant to CLAUSE
(N) of SECTION 10, based upon the trading prices of publicly traded
securities where appropriate (irrespective of the accounting treatment
thereof), and described in a resolution of the Board of Directors of
Holdings; and
(3) in the case of the issuance of securities convertible into
or exchangeable for shares, the aggregate consideration received
therefor shall be deemed to be the consideration received by Holdings
for the issuance of such securities plus the additional minimum
consideration, if any, to be received by Holdings upon the conversion
or exchange thereof (the consideration in each case to be determined in
the same manner as provided in SUBCLAUSES (1) and (2) of this CLAUSE
(G)).
(h) WHEN DE MINIMIS ADJUSTMENT MAY BE DEFERRED No adjustment in the
Exercise Rate need be made unless the adjustment would require an increase or
decrease of at least 1% in the Exercise Rate. Any adjustments that are not made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section shall be made to the nearest
1/100th of a share.
(i) WHEN NO ADJUSTMENT REQUIRED. No adjustment need be made for rights
to purchase Common Stock pursuant to a plan by Holdings for reinvestment of
dividends or interest.
No adjustment need be made for a change in the par value or no par
value of the Common Stock.
To the extent the Warrants become convertible into cash, no adjustment
need be made thereafter as to the cash. Interest will not accrue on the cash.
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<PAGE> 14
(j) NOTICE OF ADJUSTMENT. Whenever the Exercise Rate is adjusted,
Holdings shall provide the notices required by SECTION 14 hereof.
(k) VOLUNTARY INCREASE. Holdings from time to time may increase the
Exercise Rate by any amount for any period of time if the period is at least 20
days and if the increase is irrevocable during the period.
Whenever the Exercise Rate is increased pursuant to this CLAUSE (K),
Holdings shall mail to Warrant holders a notice of the increase. Holdings shall
mail the notice at least 15 days before the date the increased Exercise Rate
takes effect. The notice shall state the increased Exercise Rate and the period
it will be in effect.
An increase of the Exercise Rate pursuant to this CLAUSE (K) does not
change or adjust the Exercise Rate otherwise in effect for purposes of CLAUSES
(A), (B), (C), (D) and (E) of this SECTION 10.
(l) NOTICE OF CERTAIN TRANSACTIONS. If:
(1) Holdings takes any action that would require an adjustment
in the Exercise Rate pursuant to CLAUSES (A), (B), (C), (D) or (E) of
this SECTION 10;
(2) Holdings takes any action that would require a
supplemental Asset Bridge Warrant Agreement pursuant to CLAUSE (M) of
this SECTION 10; or
(3) there is a liquidation or dissolution of Holdings,
then Holdings shall mail to Warrant holders a notice stating the proposed record
date for a dividend or distribution or the proposed effective date of a
subdivision, combination, reclassification, consolidation, merger, transfer,
lease, liquidation or dissolution. Holdings shall mail the notice at least 15
days before such date. Failure to mail the notice or any defect in it shall not
affect the validity of the transaction.
(m) REORGANIZATION OF HOLDINGS. If Holdings consolidates or merges with
or into, or transfers or leases all or substantially all its assets to, any
person, upon consummation of such transaction the Warrants shall automatically
become exercisable for the kind and amount of securities, cash or other assets
which the holder of a Warrant would have owned immediately after the
consolidation, merger, transfer or lease if the holder had exercised the Warrant
immediately before the effective date of the transaction. Concurrently with the
consummation of such transaction, the corporation formed by or surviving any
such consolidation or merger if other than Holdings, or the person to which such
sale or conveyance shall have been made, shall enter into a supplemental Asset
Bridge Warrant Agreement so providing and further providing for adjustments
which shall be as nearly equivalent as may be practical to the adjustments
-14-
<PAGE> 15
provided for in this Section. The successor company shall mail to Warrant
holders a notice describing the supplemental Asset Bridge Warrant Agreement.
If the issuer of securities deliverable upon exercise of Warrants under
the supplemental Asset Bridge Warrant Agreement is an affiliate of the formed,
surviving, transferee or lessee corporation, that issuer shall join in the
supplemental Asset Bridge Warrant Agreement.
If this CLAUSE (M) applies, CLAUSES (A), (B), (C), (D) and (E) of this
SECTION 10 do not apply.
(n) HOLDINGS DETERMINATION NOT FINAL. Any determination that Holdings
or its Board of Directors must make pursuant to this Agreement shall be made in
good faith and shall be binding on the holders of Warrants, except as set forth
herein. Holdings shall give each holder of Warrants written notice of any such
determination by Holdings or its Board of Directors. If a majority of the
holders of the Warrants do not agree with any such determination by Holdings or
its Board of Directors, such holders may request, in a notice delivered to
Holdings not later than 30 days after the date on which the holders received
notice of such determination from Holdings, that such determination be made by
an independent investment banking firm (or, if an investment banking firm is
generally not qualified to render such a determination, an independent appraisal
firm) of recognized national standing chosen by Holdings, which determination
shall be final and binding on Holdings and the holders of Warrants, absent
manifest error. All fees and expenses incurred in connection with any
determination made by an independent investment banking firm or appraisal firm,
as the case might be, shall be borne by Holdings, unless such determination is
in agreement with, or more favorable to Holdings than, the determination that
was made by Holdings or its Board of Directors, in which case such fees and
expenses shall be borne by the holders that requested such determination.
(o) WHEN ISSUANCE OR PAYMENT MAY BE DEFERRED. In any case in which this
SECTION 10 shall require that an adjustment in the Exercise Rate be made
effective as of a record date for a specified event, Holdings may elect to defer
until the occurrence of such event issuing to the holder of any Warrant
exercised after such record date the Warrant Shares and other Capital Stock of
Holdings, if any, issuable upon such exercise over and above the Warrant Shares
and other Capital Stock of Holdings, if any, issuable upon such exercise on the
basis of the Exercise Rate; PROVIDED, HOWEVER, that Holdings shall deliver to
such holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional Warrant Shares and other Capital Stock of
Holdings upon the occurrence of the event requiring such adjustment.
(p) FORM OF WARRANTS. Irrespective of any adjustments in the Exercise
Rate or in the kind of shares purchasable upon the exercise of the Warrants,
Warrants theretofore or thereafter issued may continue to express the same price
and kind of shares as are stated in the Warrants initially issuable pursuant to
this Agreement.
-15-
<PAGE> 16
(q) EXERCISE PRICE. If following any adjustment in the Exercise Rate
pursuant to this SECTION 10, the Exercise Price per share of common stock of
Holdings shall be less than the par value of such common stock, such Exercise
Price per share of common stock shall be increased to the par value of such
stock.
SECTION 11. NO DILUTION OR IMPAIRMENT: CAPITAL AND OWNERSHIP STRUCTURE.
If any event shall occur as to which the provisions of SECTION 10 are not
strictly applicable but the failure to make any adjustment would adversely
affect the purchase rights represented by the Warrants in accordance with the
essential intent and principles of such Section, then, in each such case,
Holdings shall appoint, at its own expense, an investment banking firm of
recognized national standing that does not have a direct or material indirect
financial interest in Holdings or any of its subsidiaries, who has not been,
and, at the time it is called upon to give independent financial advice to
Holdings, is not (and none of its directors, officers, employees, affiliates or
stockholders are) a promoter, director or officer of Holdings or any of its
subsidiaries, which shall give their opinion upon the adjustment, if any, on a
basis consistent with the essential intent and principles established in SECTION
10, necessary to preserve, without dilution, the purchase rights, represented by
this Agreement and the Warrants. Upon receipt of such opinion, Holdings will
promptly mail a copy thereof to the holders of the Warrants and shall make the
adjustments described therein.
Holdings will not, by amendment of its certificate of incorporation or
through any consolidation, merger, reorganization, transfer of assets,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of the Warrants,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the holders of the Warrants against dilution or other
impairment. Without limiting the generality of the foregoing, Holdings (1) will
take all such action as may be necessary or appropriate in order that Holdings
may validly and legally issue fully paid and nonassessable shares of Common
Stock on the exercise of the Warrants from time to time outstanding and (2) will
not take any action which results in any adjustment of the Exercise Rate if the
total number of Warrant Shares issuable after such action upon the exercise of
all of the Warrants would exceed the total number of shares of Common Stock then
authorized by Holdings' certificate of incorporation and available for the
purposes of issue upon such exercise. A consolidation, merger, reorganization or
transfer of assets involving Holdings covered by SECTION 10(M) shall not be
prohibited by or require any adjustment under this SECTION 11.
SECTION 12. FRACTIONAL INTERESTS. Holdings shall not be required to
issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this SECTION 12,
be issuable on the
-16-
<PAGE> 17
exercise of any Warrants (or specified portion thereof), the number of Warrant
Shares which shall be issued by Holdings on exercise of such Warrants shall be
rounded (i) to the last previous whole number if the fraction is less than 0.5
of a Warrant Share or (ii) to the next higher whole number if the fraction is
greater than or equal to 0.5 of a Warrant Share.
SECTION 13. NOTICES TO WARRANT HOLDERS. Upon any adjustment of the
Exercise Rate pursuant to SECTION 10, Holdings shall promptly thereafter cause
to be delivered, by first-class mail, postage prepaid, to each of the registered
holders of the Warrant Certificates at such holder's address appearing on the
Warrant Register a certificate of an Officer of Holdings setting forth the
Exercise Rate after such adjustment and setting forth in reasonable detail the
method of calculation and the facts upon which such calculations are based and
setting forth the number of Warrant Shares (or portion thereof) issuable after
such adjustment in the Exercise Rate, upon exercise of a Warrant and payment of
the Exercise Price. Where appropriate, such notice shall be given in advance and
included as a part of the notice required to be mailed under the other
provisions of this SECTION 13.
In case:
(a) Holdings shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for
or purchase shares of Common Stock or of any other subscription rights
or warrants;
(b) Holdings shall authorize the distribution to all holders
of shares of Common Stock of evidences of its indebtedness or assets
(other than cash dividends or cash distributions payable out of
consolidated earnings or earned surplus or dividends payable in shares
of Common Stock or distributions referred to in CLAUSE (A) of SECTION
10 hereof);
(c) of any consolidation or merger to which Holdings is a
party and for which approval of any stockholders of Holdings is
required, or of the conveyance or transfer of the properties and assets
of Holdings substantially as an entirety, or of any reclassification or
change of Common Stock issuable upon exercise of the Warrants (other
than a change in par value, or from par value to no par value, or from
no par value to par value, or as a result of a subdivision or
combination), or a tender offer or exchange offer for shares of Common
Stock;
(d) of the voluntary or involuntary dissolution, liquidation
or winding up of Holdings; or
(e) Holdings proposes to take any action which would require
an adjustment of the Exercise Rate pursuant to SECTION 10;
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<PAGE> 18
then Holdings shall cause to be given to each of the registered holders of the
Warrant Certificates at such holder's address appearing on the Warrant Register,
at least 20 days (or 10 days in any case specified in clauses (a) or (b) above)
prior to the applicable record date hereinafter specified, or promptly in the
case of events for which there is no record date, by first-class mail, postage
prepaid, a written notice stating (i) the date as of which any such subdivision,
combination or reclassification is to be made, or (ii) the date as of which the
holders of record of shares of Common Stock to be entitled to receive any such
dividends, rights, options, warrants or distribution are to be determined, or
(iii) the initial expiration date set forth in any tender offer or exchange
offer for shares of Common Stock, or (iv) the date on which any such
consolidation, merger, conveyance, transfer dissolution, liquidation or winding
up is expected to become effective or consummated, and the date as of which it
is expected that holders of record of shares of Common Stock shall be entitled
to exchange such shares for securities or other property, if any, deliverable
upon such reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up. The failure to give the notice required
by this SECTION 13 or any delay therein shall not affect the legality or
validity of any distribution, right, option, warrant, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up, or the vote upon
any action.
Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the holders thereof the right
to vote or to consent or to receive notice as stockholders in respect of the
meetings of stockholders or the election of Directors of Holdings or any other
matter, or any rights whatsoever as stockholders of Holdings; PROVIDED, that
each registered holder of Warrants shall be entitled to receive all notices sent
generally to stockholders, such notices to be delivered pursuant to SECTION 14
hereof at the address of such holder appearing on the Warrant Register.
SECTION 14. NOTICES. Any notice or demand authorized by this Agreement
to be given or made by the registered holder of any Warrant Certificate to or on
Holdings shall be delivered or sent by registered, certified or express mail,
postage prepaid, return receipt requested, or given or made by facsimile, in
each case, at the address specified below Holdings' name on the signature page
to the Asset Bridge Securities Purchase Agreement, or at such other address as
shall be designated by Holdings in a written notice to the Warrant holders.
Except as otherwise provided in this Agreement, all such communications shall be
deemed to have been duly given when transmitted by facsimile (and electronic
confirmation thereof has been received) or personally delivered or, in the case
of a mailed notice, upon receipt, in each case given or addressed as aforesaid.
Any notice pursuant to this Agreement to be given by Holdings to the
registered holder(s) of any Warrant Certificate shall be delivered or sent by
registered, certified or express mail, postage prepaid, return receipt
requested, or given or made by facsimile (and electronic confirmation thereof
has been received), in each case, at the address of such holder appearing on the
Warrant Register, or at such other address as shall be designated by such holder
in a written
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<PAGE> 19
notice to Holdings. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by
facsimile or personally delivered or in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid.
SECTION 15. SUPPLEMENTS AND AMENDMENTS. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions of this Agreement may not be given unless Holdings has obtained the
written consent of holders of at least a majority of the outstanding Warrant
Certificates.
SECTION 16. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of Holdings shall bind and inure to the benefit
of its respective successors and assigns hereunder.
SECTION 17. TERMINATION. This Agreement shall terminate when all
Warrants have been exercised.
SECTION 18. NEW YORK LAW, SUBMISSION TO JURISDICTION, WAIVER OF JURY
TRIAL. THIS AGREEMENT AND EACH WARRANT CERTIFICATE SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. EACH PARTY
HERETO HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE
COURT SITTING IN NEW YORK CITY FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT
OF OR RELATING TO THIS ASSET BRIDGE WARRANT AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY. EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT
ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. EACH PARTY HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS ASSET BRIDGE WARRANT
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 19. BENEFITS OF THIS AGREEMENT. Except as expressly set forth
herein, nothing in this Agreement shall be construed to give to any person or
corporation other than Holdings and the registered holders of the Warrant
Certificates any legal or equitable right, remedy or claim under this Agreement;
but, except as so set forth, this Agreement shall be for the sole and exclusive
benefit of Holdings and the registered holders of the Warrant Certificates.
-19-
<PAGE> 20
SECTION 20. COUNTERPARTS. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
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<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have caused this Asset Bridge
Warrant Agreement to be duly executed, as of the day and year first above
written.
RAILAMERICA, INC.
By:
----------------------------------
Name:
Title:
PURCHASERS:
RAIL AMERICA HOLDINGS FUNDING,
INC.
By:
----------------------------------
Name: Eugene F. Martin
Title: Senior Vice President
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<PAGE> 22
EXHIBIT A
[Form of Warrant Certificate]
[Face]
THE SECURITIES EVIDENCED OR CONSTITUTED HEREBY HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED
OR HYPOTHECATED UNLESS THE REGISTRATION PROVISIONS OF SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS HAVE BEEN COMPLIED WITH OR UNLESS
HOLDINGS HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
HOLDINGS THAT SUCH REGISTRATION IS NOT REQUIRED.
No. ____
Warrant Certificate
RAILAMERICA, INC.
This Warrant Certificate certifies that __________________, or its
registered assigns, is the registered holder of Warrants (the "WARRANTS") to
purchase Common Stock, $0.001 par value per share (the "COMMON STOCK"), of
RailAmerica, Inc., a Delaware corporation ("HOLDINGS"). This Warrant entitles
the holder upon exercise to receive from Holdings, up to [_______]1 fully paid
and nonassessable shares of Common Stock (each, a "WARRANT SHARE") at an
exercise price equal to the closing price per share of Common Stock of Holdings
traded on the NASDAQ National Market System at the close of trading on the
Issuance Date (the "EXERCISE PRICE") payable in lawful money of the United
States of America upon surrender of this Warrant Certificate and payment of the
Exercise Price at the office or agency of Holdings designated for such purpose,
but only subject to the conditions set forth herein and in the Asset Bridge
Warrant Agreement referred to on the reverse hereof. The number of Warrant
Shares issuable upon exercise of the Warrants are subject to adjustment upon the
occurrence of certain events set forth in the Asset Bridge Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., New York City time, on the
seventh anniversary of the date upon which the such Warrant was released from
escrow (the "EXERCISE DATE") pursuant to the terms of the Asset Bridge Escrow
Agreement, dated as of February 4, 2000 (as amended, supplemented or otherwise
modified, the "ESCROW AGREEMENT"), among Holdings, the Purchasers parties
thereto and Snoga, Inc., as escrow agent.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.
- --------
1 Represents 3.5% of the fully-diluted Capital Stock of Holdings on the
closing date.
A-1
<PAGE> 23
THIS WARRANT CERTIFICATE SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS.
IN WITNESS WHEREOF, Holdings has caused this Warrant Certificate to be
signed by an officer.
Dated: _____________
RAILAMERICA, INC.
By:
----------------------------------
Name:
Title:
A-2
<PAGE> 24
[Form of Warrant Certificate]
[Reverse]
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring on the seventh anniversary of such
Warrants' Exercise Date entitling the holder on exercise to receive shares of
Common Stock, $0.001 par value per share, of Holdings (the "COMMON STOCK"), and
are issued or to be issued pursuant to an Asset Bridge Warrant Agreement dated
as of February 4, 2000 (as amended, supplemented or otherwise modified, the
"ASSET BRIDGE WARRANT AGREEMENT") among Holdings and the Purchasers parties
thereto, which Asset Bridge Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of Holdings and the holders (the words "holders" or
"holder" meaning the registered holders or registered holder) of the Warrants. A
copy of the Asset Bridge Warrant Agreement may be obtained by the holder hereof
upon written request to Holdings.
A Warrant will not be exercisable until its respective Exercise Date.
The holder of Warrants evidenced by this Warrant Certificate may exercise them
by surrendering this Warrant Certificate, with the form of election to purchase
set forth hereon properly completed and executed, together with payment of the
Exercise Price in cash at the office of Holdings designated for such purpose. In
the event that upon any exercise of Warrants evidenced hereby the number of
Warrants exercised shall be less than the total number of Warrants evidenced
hereby, there shall be issued to the holder hereof or his assignee a new Warrant
Certificate evidencing the number of Warrants not exercised. No adjustment shall
be made for any dividends on any Common Stock issuable upon exercise of this
Warrant.
The Asset Bridge Warrant Agreement provides that upon the occurrence of
certain events the number of Warrant Shares issuable upon the exercise of each
Warrant (the "EXERCISE RATE") may, subject to certain conditions, be adjusted.
If the Exercise Rate is adjusted, the Asset Bridge Warrant Agreement provides
that the number of shares of Common Stock issuable upon the exercise of each
Warrant shall be adjusted. No fractions of a share of Common Stock will be
issued upon the exercise of any Warrant.
Warrant Certificates, when surrendered at the office of Holdings by the
registered holder thereof in person or by legal representative or attorney duly
authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Asset Bridge Warrant Agreement, but without payment
of any service charge, for another Warrant Certificate or Warrant Certificates
of like tenor evidencing in the aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of Holdings, a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Asset Bridge Warrant
Agreement, without charge except for any tax or other governmental charge
imposed in connection therewith.
A-3
<PAGE> 25
Holdings may deem and treat the registered holder(s) thereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof of any distribution to the holder(s) hereof, and for all other
purposes, and Holdings shall not be affected by any notice to the contrary.
Neither the Warrants nor this Warrant Certificate entitles any holder hereof to
any rights of a stockholder of Holdings.
A-4
<PAGE> 26
[Form of Election to Purchase]
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive ______________ shares of
Common Stock and herewith tenders payment for such shares to the order of
RailAmerica, Inc., a Delaware corporation, in the amount of 2$___ per share in
accordance with the terms hereof. The undersigned requests that a certificate
for such shares be registered in the name of ______________ ([SS#______________]
[Taxpayer ID#______________]), whose address is ______________ and that such
shares be delivered to ______________ whose address is ______________. If said
number of shares is less than all of the shares of Common Stock purchasable
hereunder, the undersigned requests that a new Warrant Certificate representing
the remaining balance of such shares be registered in the name of
______________, whose address is ______________, and that such Warrant
Certificate be delivered to ______________, whose address is
_______________________________.
Signature:
--------------------------
Date:
--------------------------
Signature Guaranteed:
--------------------------
- ------------
2 Insert in an amount equal to the closing price per share of Common
Stock of Holdings traded on the NASDAQ National Market System at the
close of trading on the Issuance Date
A-5
<PAGE> 1
[Exhibit 10.71]
CREDIT AGREEMENT,
dated as of February 4, 2000
among
RAILAMERICA, INC.,
as a Guarantor,
PALM BEACH RAIL HOLDING, INC.,
as a Guarantor,
RAILAMERICA TRANSPORTATION CORP.,
as a Borrower,
RAILINK, LTD.
as the Canadian Borrower,
and
FREIGHT VICTORIA LIMITED
as the Australian Borrower,
VARIOUS FINANCIAL INSTITUTIONS FROM TIME TO TIME
PARTIES HERETO,
as the Lenders,
DLJ CAPITAL FUNDING, INC.,
as the Syndication Agent,
the Lead Arranger and the Sole Book Running Manager,
THE BANK OF NOVA SCOTIA,
as the Administrative Agent for the Lenders,
and
ING (U.S.) CAPITAL LLC
and
FLEET NATIONAL BANK,
as the Documentation Agents for the Lenders.
CREDIT AGREEMENT
<PAGE> 2
THIS CREDIT AGREEMENT, dated as of February 4, 2000, is among
RAILAMERICA, INC., a Delaware corporation ("Holdings"), PALM BEACH RAIL HOLDING,
INC., a newly-formed Delaware corporation and a wholly owned Subsidiary of
Holdings ("Intermediate Holdings"), RAILAMERICA TRANSPORTATION CORP., a
newly-formed Delaware corporation and a wholly owned Subsidiary of Intermediate
Holdings (the "Company"), RAILINK, LTD., a corporation organized and existing
under the laws of the Province of Alberta, Canada (the "Canadian Borrower") and
FREIGHT VICTORIA LIMITED, a corporation organized and existing under the laws of
Australia (the "Australian Borrower" and, together with the Company and the
Canadian Borrower, the "Borrowers"), the various financial institutions and
other Persons from time to time parties hereto (the "Lenders"), DLJ CAPITAL
FUNDING, INC. ("DLJ"), as the Syndication Agent (in such capacity, the
"Syndication Agent") for the Lenders, the Lead Arranger and the Sole Book
Running Manager, THE BANK OF NOVA SCOTIA, as administrative agent (in such
capacity, the "Administrative Agent") for the Lenders, and ING (U.S.) CAPITAL
LLC and FLEET NATIONAL BANK, as documentation agent (in such capacity, the
"Documentation Agents") for the Lenders.
W I T N E S S E T H:
WHEREAS, Holdings intends to
(a) contribute all of its assets and liabilities (other than
the Holdings Convertible Preferred Stock and the Holdings Convertible
Subordinated Notes and liabilities associated with salary,
compensation, pension and other related liabilities of Holdings in
exchange for all the common stock of Intermediate Holdings; it being
understood and agreed that all current employees of Holdings shall
remain employees of Holdings after the consummation of the Transaction
and certain RailTex employees will become employees of Holdings) to
Intermediate Holdings and Intermediate Holdings shall contribute all of
its assets and liabilities (other than Kalyn/Siebert) to the Company in
exchange for all the common stock of the Company (the "Asset
Transfer"); and
(b) acquire by merger (the "Acquisition") 100% of the issued
and outstanding stock of RailTex, Inc. ("RailTex"), a Texas
corporation, pursuant to an Agreement and Plan of Merger, dated as of
October 14, 1999 (the "Merger Agreement"), among Holdings, Cotton
Acquisition Corp., a Texas corporation and a wholly owned Subsidiary of
the Company ("Mergerco") and RailTex pursuant to which (i) RailTex will
merge with and into Mergerco and RailTex shall be the surviving
corporation (the "Surviving Corporation"), (ii) each share of existing
RailTex common stock will be converted into the right to receive
consideration (the "Merger Consideration") for each such share of
RailTex consisting of (x) $13.50 in cash and (y) 0.66666667 shares of
common stock of Holdings having a par value of $.001 per common share
("Holdings Common Stock"), and (iii) each issued and outstanding share
of common stock of Mergerco will be converted into one fully paid and
non-assessable share of the Surviving Corporation;
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<PAGE> 3
WHEREAS, in connection with the Acquisition, the Company will
(a) pay an aggregate cash portion of the Merger Consideration
in an amount of up to $139,000,000;
(b) refinance (the "RailAmerica Refinancing") approximately
$221,800,000 of outstanding indebtedness of Holdings, the Company and
its Subsidiaries;
(c) refinance (the "RailTex Refinancing") approximately
$114,000,000 of outstanding indebtedness of RailTex and its
Subsidiaries; and
(d) pay fees and expenses (the "Expense Payments") in
connection with the Acquisition, the RailAmerica Refinancing, the
RailTex Refinancing and related transactions (the Acquisition, the
RailAmerica Refinancing, the RailTex Refinancing, the Asset Transfer,
the Subordinated Bridge Note Issuance (as defined below), the
Intermediate Holdings Asset Bridge Note Issuance (as defined below)
and such transactions related thereto, including those described in
the recitals hereto, being herein collectively referred to as the
"Transaction") in an amount not to exceed $36,000,000;
WHEREAS, in order to finance the consummation of the Transaction,
(a) the Company will issue (the "Subordinated Bridge Note
Issuance") its 13% Senior Subordinated Increasing Rate Bridge Notes
(such notes, together with all additional notes having substantially
the same terms as such Senior Subordinated Increasing Rate Bridge
Notes that are issued by the Company as payment of interest with
respect thereto, its "Subordinated Bridge Notes") in an aggregate
principal amount of at least $95,000,000 resulting in gross cash
proceeds to the Company of at least $95,000,000;
(b) Holdings will issue approximately $66,900,000 of Holdings
Common Stock (valued at $9.75 per share) to existing RailTex
shareholders to pay the non-cash portion of the Merger Consideration
(the "Equity Issuance");
(c) the Company will use approximately $11,100,000 of net
cash proceeds from the exercise of RailTex stock options (subject to
adjustment due to cashless exercise of such options and termination of
such options not exercised);
(d) the Company will use approximately $10,300,000 of its
cash on hand;
(e) the Company will use approximately $9,000,000 of net cash
proceeds from the sale of RailTex International Holdings and its
subsidiaries ("RailTex Brazil"); and
(f) Intermediate Holdings will issue (the "Intermediate
Holdings Asset Bridge Note Issuance") its 15% Increasing Rate Asset
Bridge Notes (the "Intermediate Holdings Asset Bridge Notes") in an
aggregate initial principal amount of $55,000,000 resulting in
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<PAGE> 4
gross proceeds to Intermediate Holdings of at least $55,000,000) the
net proceeds of which shall be contributed by Intermediate Holdings to
the Company as a common equity contribution for use in partially
financing the Transaction;
WHEREAS, in connection with the Transaction and the post-closing
ongoing working capital and general corporate needs of the Company and the
Restricted Subsidiaries, each of the Borrowers desires to obtain the following
financing facilities from the Lenders:
(a) a Term A Loan Commitment and a Term B Loan Commitment
pursuant to which, subject to the terms and conditions hereof,
Borrowings of Term Loans will be made to the Company on the Closing
Date in a maximum, original principal amount of $125,000,000 (in the
case of Term A Loans) and $205,000,000 (in the case of Term B Loans);
(b) a U.S. Revolving Loan Commitment (to include availability
for U.S. Revolving Loans, Swing Line Loans and Letters of Credit)
pursuant to which, subject to the terms and conditions hereof,
Borrowings of U.S. Revolving Loans will be made to the Company from
time to time on and subsequent to the Closing Date but prior to the
Revolving Loan Commitment Termination Date, in a maximum aggregate
principal amount not to exceed, when taken together with (x) the Letter
of Credit Outstandings and (y) all Swing Line Loans, the then existing
U.S. Revolving Loan Commitment Amount;
(c) a Canadian Revolving Loan Commitment pursuant to which,
subject to the terms and conditions hereof, Borrowings of Canadian
Loans will be made to the Canadian Borrower from time to time on and
subsequent to the Closing Date but prior to the Revolving Loan
Commitment Termination Date, in a maximum aggregate principal amount,
the U.S. Dollar Equivalent of which does not to exceed the then
existing Canadian Revolving Loan Commitment Amount;
(d) an Australian Revolving Loan Commitment pursuant to which,
subject to the terms and conditions hereof, Borrowings of Australian
Loans will be made to the Australian Borrower from time to time on and
subsequent to the Closing Date but prior to the Revolving Loan
Commitment Termination Date, in a maximum aggregate principal amount,
the U.S. Dollar Equivalent of which does not to exceed the then
existing Australian Revolving Loan Commitment Amount;
(e) a Letter of Credit Commitment pursuant to which each
Issuer will issue, subject to the terms and conditions hereof, Letters
of Credit for the account of the Company and the Restricted
Subsidiaries from time to time on and subsequent to the Closing Date
but prior to the Revolving Loan Commitment Termination Date in a
maximum aggregate Stated Amount at any one time outstanding not to
exceed (i) the Letter of Credit Commitment Amount or (ii), when taken
together with (x) all U.S. Revolving Loans, and (y) all Swing Line
Loans, the then existing U.S. Revolving Loan Commitment Amount; and
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<PAGE> 5
(f) a Swing Line Loan Commitment pursuant to which, subject to
the terms and conditions hereof, Borrowings of Swing Line Loans (which
shall be denominated solely in U.S. Dollars) will be made to the
Company from time to time on and subsequent to the Closing Date but
prior to the Revolving Loan Commitment Termination Date, in a maximum
aggregate outstanding principal amount not to exceed (i) Swing Line
Loan Commitment Amount or (ii), when taken together with (x) all U.S.
Revolving Loans, and (y) all Swing Line Loans, the then existing U.S.
Revolving Loan Commitment Amount; and
WHEREAS, the Lenders and the Issuers are willing, on the terms and
subject to the conditions hereinafter set forth, to extend the Commitments and
make Loans to the Borrowers and issue (or participate in) Letters of Credit;
NOW, THEREFORE, the parties hereto agree as follows.
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION I.1. Defined Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"ABB" means ABB Engineering Construction Pty. Ltd. (ACN 000 095 250)
of 166 William Street Potts Point, New South Wales 2011.
"Acceptance Note" is defined in clause (b) of Section 2.8.4.
"Acquisition" is defined in clause (b) of the first recital.
"Administrative Agent" is defined in the preamble and includes each
other Person appointed as the successor Administrative Agent pursuant to Section
9.4.
"Administrative Agent Fee Letter" means the confidential letter, dated
February 4, 2000, between the Company and the Administrative Agent.
"Affiliate" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person. Notwithstanding the foregoing QRC and Ferronor shall not be considered
to be Affiliates of Holdings or its Subsidiaries. "Control" of a Person means
the power, directly or indirectly,
(a) to vote 10% or more of the securities (on a fully diluted
basis) having ordinary voting power for the election of directors,
managing members or general partners (as applicable); or
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<PAGE> 6
(b) to direct or cause the direction of the management and policies of
such Person (whether by contract or otherwise).
"Agents" means the Administrative Agent and the Syndication Agent.
"Agreement" means, on any date, this Credit Agreement as originally in
effect on the Effective Date and as thereafter from time to time amended,
supplemented, amended and restated or otherwise modified from time to time and
in effect on such date.
"Alternate Base Rate" means, on any date and with respect to all Base
Rate Loans, a fluctuating rate of interest per annum (rounded upward, if
necessary, to the next highest 1/16 of 1%) equal to the higher of
(a) the Base Rate in effect on such day; and
(b) the Federal Funds Rate in effect on such day plus 1/2 of
1%.
Changes in the rate of interest on that portion of any Loans maintained as Base
Rate Loans will take effect simultaneously with each change in the Alternate
Base Rate. The Administrative Agent will give notice promptly to the Company and
the Lenders of changes in the Alternate Base Rate; provided, that the failure to
give such notice shall not affect the Alternate Base Rate in effect after such
change.
"Applicable Canadian BA Stamping Fee" means, at all times during the
applicable periods set forth below,
(a) from the Effective Date to (but excluding) the date upon
which the Compliance Certificate for the second full Fiscal Quarter
ending after the Closing Date is required to be delivered by Holdings
to the Agents pursuant to clause (d) of Section 7.1.1 in respect of a
Fiscal Quarter or Fiscal Year end, with respect to the unpaid principal
amount of each Canadian Loan made or maintained as Canadian BAs, 3.00%
per annum; and
(b) at all times from the date the Compliance Certificate
described in clause (a) above is required to be delivered, with respect
to the unpaid principal amount of each Canadian Loan made or maintained
as Canadian BAs, the rate determined by reference to the applicable
Leverage Ratio and at the applicable percentage per annum set forth
below under the column entitled "Applicable Canadian BA Stamping Fee":
Leverage Applicable
Ratio Canadian BA Stamping Fee
------------ ------------------------
>5.00x 3.25%
-
>4.50x<5.00x 3.00%
-
-6-
<PAGE> 7
Leverage Applicable
Ratio Canadian BA Stamping Fee
------------- ------------------------
>4.00x<4.50x 2.75%
-
>3.50x<4.00x 2.50%
-
>3.00x<3.50 2.25%
-
<3.00x 2.00%
The Leverage Ratio used to compute the Applicable Canadian BA Stamping
Fee for any day referred to in clause (b) above shall be the Leverage Ratio set
forth in the Compliance Certificate most recently delivered by Holdings to the
Agents on or prior to such day pursuant to clause (d) of Section 7.1.1 in
respect of a Fiscal Quarter or Fiscal Year end. Changes in the Applicable
Canadian BA Stamping Fee resulting from a change in the Leverage Ratio shall
become effective on the first day following delivery by Holdings to the Agents
of a new Compliance Certificate pursuant to clause (d) of Section 7.1.1 in
respect of a Fiscal Quarter or Fiscal Year end. If Holdings shall fail to
deliver a Compliance Certificate within the number of days after the end of any
Fiscal Quarter as required pursuant to clause (d) of Section 7.1.1 (without
giving effect to any grace period) in respect of a Fiscal Quarter or Fiscal Year
end, the Applicable Canadian BA Stamping Fee from and including the first day
after the date on which such Compliance Certificate was required to be delivered
to but not including the date Holdings delivers to the Agents such Compliance
Certificate shall conclusively equal the highest Applicable Canadian BA Stamping
Fee set forth above.
"Applicable Commitment Fee Margin" means, (a) for each day from the
Effective Date to (but excluding) the date upon which the Compliance Certificate
for the second full Fiscal Quarter ending after the Closing Date is required to
be delivered by Holdings to the Agents pursuant to clause (d) of Section 7.1.1
in respect of a Fiscal Quarter or Fiscal Year end, a fee which shall accrue at a
rate of 1/2 of 1% per annum, and (b) at all times from the date the Compliance
Certificate described in clause (a) above is required to be delivered, a fee
which shall accrue at the applicable rate per annum set forth below under the
column entitled "Applicable Commitment Fee", determined by reference to the
applicable Leverage Ratio referred to below:
Leverage
Ratio Applicable Commitment Fee
------------ -------------------------
>4.00x 0.50%
-
>3.50x<4.00x 0.375%
-
<3.50x 0.25%
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<PAGE> 8
; provided, that solely with respect to the commitment fees paid by the
Australian Borrower, the Applicable Commitment Fee is determined by reference to
the applicable Leverage Ratio referred to below:
Leverage
Ratio Applicable Commitment Fee
----------- -------------------------
>4.00x 1.375%
-
>3.50x<4.00x 1.125%
-
<3.50x 0.00875
The Leverage Ratio used to compute the Applicable Commitment Fee for any day
referred to in clause (b) above shall be the Leverage Ratio set forth in the
Compliance Certificate most recently delivered by Holdings to the Agents on or
prior to such day pursuant to clause (d) of Section 7.1.1 in respect of a Fiscal
Quarter or Fiscal Year end. Changes in the Applicable Commitment Fee resulting
from a change in the Leverage Ratio shall become effective on the first day
following delivery by Holdings to the Agents of a new Compliance Certificate
pursuant to clause (d) of Section 7.1.1 in respect of a Fiscal Quarter or Fiscal
Year end. If Holdings shall fail to deliver a Compliance Certificate within the
number of days after the end of any Fiscal Quarter as required pursuant to
clause (d) of Section 7.1.1 (without giving effect to any grace period) in
respect of a Fiscal Quarter or Fiscal Year end, the Applicable Commitment Fee
from and including the first day after the date on which such Compliance
Certificate was required to be delivered to but not including the date Holdings
delivers to the Agents such Compliance Certificate shall conclusively equal the
highest Applicable Commitment Fee set forth above.
"Applicable Margin" means, at all times during the applicable periods
set forth below,
(a) on any date, with respect to the unpaid principal amount
of each Term B Loan maintained as a (i) Base Rate Loan, 2.00% per annum
and (ii) LIBO Rate Loan, 3.25% per annum;
(b) from the Effective Date to (but excluding) the date upon
which the Compliance Certificate for the second full Fiscal Quarter
ending after the Closing Date is required to be delivered by Holdings
to the Agents pursuant to clause (d) of Section 7.1.1 in respect of a
Fiscal Quarter or Fiscal Year end, with respect to the unpaid principal
amount of each (i) Swing Line Loan (which shall be borrowed and
maintained only as a Base Rate Loan) and each Revolving Loan (other
than a Canadian Loan made or maintained as a Canadian BA) and Term A
Loan maintained as a Base Rate Loan, 1.75% per annum, and (ii)
Revolving Loan (other than a Canadian Loan) and Term A Loan maintained
as a LIBO Rate Loan, 3.00% per annum; and
(c) at all times from the date the Compliance Certificate
described in clause (b) above is required to be delivered, with respect
to the unpaid principal amount of each
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<PAGE> 9
Swing Line Loan (which shall be borrowed and maintained only as a Base
Rate Loan) and each Revolving Loan (other than a Canadian Loan made or
maintained as a Canadian BA) and Term A Loan, the rate determined by
reference to the applicable Leverage Ratio and at the applicable
percentage per annum set forth below under the column entitled
"Applicable Margin for Base Rate Loans", in the case of such Loans made
or maintained as Base Rate Loans, or by reference to the applicable
Leverage Ratio and at the applicable percentage per annum set forth
below under the column entitled "Applicable Margin for LIBO Rate
Loans", in the case of such Loans made or maintained as LIBO Rate
Loans:
<TABLE>
<CAPTION>
Applicable Applicable
Leverage Margin For Margin For
Ratio Base Rate Loans LIBO Rate Loans
--------------- --------------- ---------------
<S> <C> <C>
>5.00x 2.00% 3.25%
-
>4.50x <5.00x 1.75% 3.00%
-
>4.00x <4.50x 1.50% 2.75%
-
>3.50x<4.00x 1.25% 2.50%
-
>3.00x<3.50x 1.00% 2.25%
-
<3.00x 0.75% 2.00%
</TABLE>
The Leverage Ratio used to compute the Applicable Margin for Swing Line
Loans, Revolving Loans and Term Loans for any day referred to in clause (c)
above shall be the Leverage Ratio set forth in the Compliance Certificate most
recently delivered by Holdings to the Agents on or prior to such day pursuant to
clause (d) of Section 7.1.1 in respect of a Fiscal Quarter or Fiscal Year end.
Changes in the Applicable Margin for Swing Line Loans, Revolving Loans and Term
A Loans resulting from a change in the Leverage Ratio shall become effective on
the first day following delivery by Holdings to the Agents of a new Compliance
Certificate pursuant to clause (d) of Section 7.1.1 in respect of a Fiscal
Quarter or Fiscal Year end. If Holdings shall fail to deliver a Compliance
Certificate within the number of days after the end of any Fiscal Quarter as
required pursuant to clause (d) of Section 7.1.1 (without giving effect to any
grace period) in respect of a Fiscal Quarter or Fiscal Year end, the Applicable
Margin for Swing Line Loans, Revolving Loans and Term A Loans from and including
the first day after the date on which such Compliance Certificate was required
to be delivered to but not including the date Holdings delivers to the Agents
such Compliance Certificate shall conclusively equal the highest Applicable
Margin for Swing Line Loans, Revolving Loans and Term A Loans set forth above.
"Asset Transfer" is defined in clause (a) of the first recital.
"Assignee Lender" is defined in Section 11.11.1.
"Assignor Lender" is defined in Section 11.11.1.
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<PAGE> 10
"Australian Accession Deed" shall mean an Accession Deed in the form of
Schedule 2 to the Australian Security Trust Deed.
"Australian Borrower" is defined in the preamble.
"Australian Deed of Security" shall mean that certain RailAmerica Deed
of Security, dated as of April 29, 1999, among the Australian Borrower and the
Australian Security Trustee, substantially in the form of Exhibit G-5 hereto, as
amended, amended and restated, supplemented or otherwise modified from time to
time pursuant to the terms thereby.
"Australian Designation Notice" shall mean a Designation Notice in the
form of Schedule 1 to the Australian Security Trust Deed.
"Australian Dollars" and "Aus $" mean the lawful currency of Australia.
"Australian Equitable Mortgage of Shares No.2" shall mean that certain
Equitable Mortgage of Shares, dated as of the date hereof, between RailAmerica
Australia, Inc. and the Administrative Agent.
"Australian Equitable Mortgage of Shares No.1" shall mean that certain
RailAmerica Equitable Mortgage of Shares, dated as of April 29, 1999, among
RailAmerica Australia, Inc., a Florida corporation, RAPL and the Australian
Security Trustee, substantially in the form of Exhibit G-6 hereto, as amended,
amended and restated, supplemented or otherwise modified from time to time
pursuant to the terms thereby.
"Australian Guaranty" shall mean that certain Australian Guaranty and
Indemnity, dated as of the date hereof, granted by RailAmerica Australia Pty.
Ltd. in favor of the Administrative Agent.
"Australian Lender" means each Lender that has an Australian Revolving
Loan Percentage in excess of zero.
"Australian Restricted Subsidiary" means any Restricted Subsidiary
organized under the laws of Australia or any state thereof.
"Australian Revolving Loan" is defined in clause (b) of Section 2.1.1.
"Australian Revolving Loan Commitment" is defined in clause (b) of
Section 2.1.1.
"Australian Revolving Loan Commitment Amount" means $10,000,000 (with
Australian Revolving Loans to be denominated in Australian Dollars), as such
amount may be reduced pursuant to the terms hereof.
"Australian Revolving Loan Percentage" means, relative to any Lender,
the applicable percentage relating to Australian Revolving Loans set forth
opposite its name on Schedule II hereto
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<PAGE> 11
under the Australian Revolving Loan Commitment column or set forth in a Lender
Assignment Agreement under the Australian Revolving Loan Commitment column, as
such percentage may be adjusted from time to time pursuant to Lender Assignment
Agreements executed by such Lender and its Assignee Lender and delivered
pursuant to Section 11.11.1. A Lender shall not have any Australian Revolving
Loan Commitment if its percentage under the Australian Revolving Loan Commitment
column is zero or is blank.
"Australian Revolving Note" means a promissory note of the Australian
Borrower payable to any Australian Lender, in the form of Exhibit A-1C hereto
(as such promissory note may be amended, endorsed or otherwise modified from
time to time), evidencing the aggregate Indebtedness of the Australian Borrower
to such Australian Lender resulting from outstanding Australian Revolving Loans,
and also means all other promissory notes accepted from time to time in
substitution therefor or renewal thereof.
"Australian Security Documents" shall mean, collectively, the
Australian Security Trust Deed, the Australian Deed of Security, Australian
Guaranty, Australian Equitable Mortgage of Shares No.1 and the Australian
Equitable Mortgage of Shares No.2 and such successor thereto, each in form and
substance satisfactory to the Agents.
"Australian Security Trust Deed" shall mean that certain Security Trust
Deed RailAmerica Security Trust, dated as of April 29, 1999, among the
Australian Borrower and the Australian Security Trustee, as supplemented by (x)
the Australian Designation Notice, dated as of the date hereof, among the
Australian Borrower, and the Australian Security Trustee and (y) the Australian
Accession Deed, dated as of the date hereof, among the Lenders and the
Australian Security Trustee, substantially in the form of Exhibit G-4 hereto, as
amended, amended and restated, supplemented or otherwise modified from time to
time pursuant to the terms thereby.
"Australian Security Trustee" shall mean Barclays Bank PLC (ARBN 062
449 585) of Level 24, 400 George Street, Sydney, New South Wales or any of its
successors or assigns.
"Australian Subsidiary" means a Subsidiary of the Company that is
organized under the laws or is a resident of Australia.
"Authorized Officer" means, relative to any Obligor, those of its
officers, general parties or managing members (as applicable) whose signatures
and incumbency shall have been certified to the Agents, the Lenders and the
Issuers pursuant to Section 5.1.1.
"Base Amount" is defined in Section 7.2.7.
"Base Rate" means, at any time, the rate of interest then most recently
established by the Administrative Agent in New York as its prime rate for U.S.
Dollars loaned in the United States. The Base Rate is not necessarily intended
to be the lowest rate of interest determined by the Administrative Agent in
connection with extensions of credit.
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<PAGE> 12
"Base Rate Loan" means a Loan bearing interest at a fluctuating rate
determined by reference to the Alternate Base Rate or the Canadian Prime Rate,
as the case may be.
"BBSY Rate" means, relative to any Interest Period, the average bid
rate per annum from the rates quoted on the "BBSY" page (the "BBSY Page") of the
Reuters Monitor System at or about 11:00 am (Sidney, Australia time) on any day
of such Interest Period, for each of the quoting reference banks appearing on
such page (there being not less than five (5) such reference banks) for a bill
with a tenor equal to the Interest Period specified in the relevant Borrowing
Request or Continuation/Conversion Notice (such calculation to be effected by
eliminating the highest and the lowest mean rates and taking the average of the
remaining bid rates and then (if necessary) rounding the resultant figure
upwards to four (4) decimal places); provided, that, if on any such day the
"BBSY Rate" cannot be determined because fewer than five (5) reference banks
have quoted rates on the BBSY Page, the "BBSY Rate" shall be calculated as above
by using the rates otherwise quoted by five (5) of the reference banks on
application by the Australian Lenders for a bill of the same tenor; provided,
further, that if with respect to any Interest Period the "BBSY Rate" cannot be
determined in accordance with the foregoing procedures then the "BBSY Rate" for
that day or Interest Period shall mean such rate as is agreed between the
Australian Lenders and the Australian Borrower with regard to comparable indices
then available, and in the absence of any such agreement shall be the rate
stipulated by the Australian Lender with regard to such comparable indices.
"Borrowers" is defined in the preamble.
"Borrowing" means the Loans of the same type and, in the case of LIBO
Rate Loans, having the same Interest Period made by all Lenders required to make
such Loans on the same Business Day and pursuant to the same Borrowing Request
in accordance with Section 2.1.
"Borrowing Request" means a Loan request and certificate duly executed
by an Authorized Officer of the applicable Borrower, substantially in the form
of Exhibit B-1 hereto.
"Business Day" means
(a) any day which is neither a Saturday or Sunday nor a legal
holiday on which banks are authorized or required to be closed in New
York, New York;
(b) relative to the making, continuing, prepaying or repaying
of any LIBO Rate Loans, any day which is a Business Day described in
clause (a) above and which is also a day on which dealings in U.S.
Dollars are carried on in the London interbank eurodollar market; and
(c) with respect to any Borrowings of, Interest Periods with
respect to, and payments of principal and interest in respect of,
Foreign Currency Loans, any day which is a Business Day described in
clause (a) above and which is also not a day on which banks
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<PAGE> 13
are authorized or required to be closed in Toronto, Canada in the case
of Canadian Loans and Sydney, Australia, in the case of Australian
Revolving Loans.
"Canada" means Canada, its ten provinces and territories.
"Canadian BA" means a depository bill as defined in the Depository
Bills and Notes Act (Canada) in Canadian Dollars that is in the form of an order
signed by the Canadian Borrower and accepted by a Canadian Lender pursuant to
this Agreement or, for Canadian Lenders not participating in clearing services
contemplated in that Act, a draft or bill of exchange in Canadian Dollars that
is drawn by the Canadian Borrower and accepted by a Canadian Lender pursuant to
this Agreement. Orders that become depositary bills, drafts and bills of
exchange are sometimes collectively referred to in this Agreement as "drafts";
provided, however, that,
(a) to the extent the context shall require, each Acceptance
Note shall be deemed to be a Canadian BA; and
(b) references to outstanding principal amounts relating to
Canadian BAs shall refer to the stated amount of unmatured Canadian BAs
which have not been collateralized pursuant to, and in accordance with,
the terms of clause (a)(i) of Section 3.1.1.
"Canadian BA Rate" means, (a) with respect to any Canadian BA accepted
by a Canadian Lender named on Schedule I to the Bank Act (Canada), the rate
determined by the Administrative Agent as being the arithmetic average (rounded
upward to the nearest multiple of 0.01%) of the discount rates, calculated on
the basis of a year of 365 days and determined in accordance with normal market
practice at or about 10:00 a.m. (Toronto time) on the date of acceptance, for
bankers" acceptances of those Lenders having a comparable face amount and
identical maturity date to the face amount and maturity date of such Canadian
BA, and (b) with respect to any Canadian BA accepted by any other Canadian
Lender, the rate determined by the Administrative Agent in accordance with (a)
above plus 0.10% per annum.
"Canadian Borrower" is defined in the preamble.
"Canadian Debentures" means the Debentures executed and delivered by
the Canadian Borrower and each of its Affiliates that is a Restricted Subsidiary
and is organized in, or a resident of, Canada, pursuant to clause (c) of Section
5.1.13 or Section 7.1.8, substantially in the form of Exhibit G-3 hereto, as
amended, amended and restated, supplemented or otherwise modified from time to
time pursuant to the terms hereof.
"Canadian Dollar" and "Cdn $" each mean the lawful currency of Canada.
"Canadian Guarantees" shall mean the guarantees granted by the Obligors
organized under the laws of Alberta, Ontario, Nova Scotia, British Columbia and
Canada, dated as of the date hereof, in form and substance satisfactory to the
Administrative Agent.
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<PAGE> 14
"Canadian Lender" means each Lender that has a Canadian Revolving Loan
Percentage in excess of zero.
"Canadian Loans" is defined in clause (c) of Section 2.1.1.
"Canadian Mortgages" means a Mortgage executed and delivered by a
Canadian subsidiary.
"Canadian Pledge Agreements" means the Canadian Pledge Agreement
executed and delivered by the Canadian Borrower and each of its Affiliates that
own shares in another Affiliate of the Canadian Borrower, pursuant to Section
5.1.13 or 7.1.8, as amended, supplemented, amended and restated or otherwise
modified from time to time.
"Canadian Prime Rate" means, on any day, the greater of:
(a) the annual rate of interest expressed as a percentage per
annum announced by the Administrative Agent that day as its reference
rate for commercial loans made by it in Canada in Canadian Dollars; and
(b) the average rate for 30 day Canadian Dollar bankers'
acceptances that appears on the Reuters Screen CDOR Pate at 10:00 a.m.
Toronto time on that day, plus 1.0% per annum.
(c) the Canadian Prime Rate is not necessarily intended to be
the lowest rate of interest determined by the Administrative Agent in
connection with extensions of credit. Changes in the rate of interest
on that portion of any Canadian Loans maintained at the Canadian Prime
Rate will take effect simultaneously with each change in the Canadian
Prime Rate. The Administrative Agent will give notice promptly to the
Canadian Borrower of changes in the Canadian Prime Rate; provided, that
the failure to give such notice shall not affect the Canadian Prime
Rate in effect after such change.
"Canadian Prime Rate Loan" means a Loan bearing interest at a
fluctuating rate determined by reference to the Canadian Prime Rate.
"Canadian Restricted Subsidiary" means a Restricted Subsidiary
organized under the laws of Canada.
"Canadian Revolving Loan Commitment" is defined in clause (c) of
Section 2.1.1.
"Canadian Revolving Loan Commitment Amount" means $10,000,000 (with
Canadian Loans to be denominated in Canadian Dollars), as such amount may be
reduced pursuant to the terms hereof.
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<PAGE> 15
"Canadian Revolving Loan Percentage" means, relative to any Lender, the
applicable percentage relating to Canadian Loans set forth opposite its name on
Schedule II hereto under the Canadian Revolving Loan Commitment column or set
forth in a Lender Assignment Agreement under the Canadian Revolving Loan
Commitment column, as such percentage may be adjusted from time to time pursuant
to Lender Assignment Agreements executed by such Lender and its Assignee Lender
and delivered pursuant to Section 11.11.1. A Lender shall not have any Canadian
Revolving Loan Commitment if its percentage under the Canadian Revolving Loan
Commitment column is zero or is blank.
"Canadian Revolving Note" means a promissory note of the Canadian
Borrower payable to any Canadian Lender, in the form of Exhibit A-1B hereto (as
such promissory note may be amended, endorsed or otherwise modified from time to
time), evidencing the aggregate Indebtedness of the Canadian Borrower to such
Canadian Lender resulting from outstanding Canadian Loans, and also means all
other promissory notes accepted from time to time in substitution therefor or
renewal thereof.
"Canadian Subsidiary" means any Subsidiary of the Company that is
organized under the laws or is a resident of Canada.
"Canadian Security Documents" shall mean the Canadian Pledge
Agreements, the Canadian Guarantees, the Canadian Mortgages and the Canadian
Debentures.
"Capital Expenditures" means, for any period, the aggregate amount of
all expenditures of Holdings, Intermediate Holdings, the Company and the
Restricted Subsidiaries for fixed or capital assets made during such period
which, in accordance with GAAP, would be classified as capital expenditures.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's capital, whether now outstanding or
issued after the Effective Date.
"Capitalized Lease Liabilities" means all monetary obligations of
Holdings, Intermediate Holdings, the Company or any of the Restricted
Subsidiaries under any leasing or similar arrangement which have been (or, in
accordance with GAAP, should be) classified as capitalized leases, and for
purposes of each Loan Document the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP, and the stated
maturity thereof shall be the date of the last payment of rent or any other
amount due under such lease prior to the first date upon which such lease may be
terminated by the lessee without payment of a premium or a penalty.
"Cash Collateralize" means, with respect to a Letter of Credit, the
deposit of immediately available funds into a cash collateral account maintained
with (or on behalf of) the Administrative Agent on terms satisfactory to the
Agents in an amount equal to the Stated Amount of such Letter of Credit.
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<PAGE> 16
"Cash Equivalent Investment" means, at any time:
(a) any direct obligation of (or unconditionally guaranteed
by) the United States or a State thereof (or any agency or political
subdivision thereof, to the extent such obligations are supported by
the full faith and credit of the United States or a State thereof)
maturing not more than nine months after such time;
(b) commercial paper maturing not more than 270 days from the
date of issue, which is issued by
(i) a corporation (other than an Affiliate of any
Obligor or Ferronor or Kalyn/Siebert) organized under the laws
of any State of the United States or of the District of
Columbia and rated A-1 or higher by S&P or P-1 or higher by
Moody's, or
(ii) any Lender (or its holding company);
(c) any certificate of deposit, time deposit or bankers
acceptance, maturing not more than nine months after its date of
issuance, which is issued by either
(i) any bank organized under the laws of the United
States (or any State thereof) and which has (x) a credit
rating of A2 or higher from Moody's or A or higher from S&P
and (y) a combined capital and surplus greater than
$500,000,000, or
(ii) any Lender;
(d) any repurchase agreement having a term of 30 days or less
entered into with any Lender or any commercial banking institution
satisfying the criteria set forth in clause (c)(i) which
(i) is secured by a fully perfected security
interest in any obligation of the type described in clause
(a), and
(ii) has a market value at the time such repurchase
agreement is entered into of not less than 100% of the
repurchase obligation of such commercial banking institution
thereunder; or
(e) in the case of any Subsidiary of Holdings organized or
having its principal place of business outside the United States,
investments denominated in the Currency of the jurisdiction in which
such Subsidiary is organized or has its principal place of business
which are similar to the items specified in clauses (a) through (d)
above.
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<PAGE> 17
"Casualty Event" means the damage, destruction or condemnation, as the
case may be, of any property of Holdings, Intermediate Holdings, the Company or
any of the Restricted Subsidiaries.
"Casualty Proceeds" means, with respect to any Casualty Event, the
amount of any insurance proceeds or condemnation awards received by Holdings,
Intermediate Holdings, the Company or any of the Restricted Subsidiaries in
connection therewith, but excluding any proceeds or awards required to be paid
to a creditor (other than the Lenders) which holds a Lien on the property which
is the subject of such Casualty Event which Lien (x) is permitted by Section
7.2.3 and (y) has priority over the Liens securing the Obligations.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, 42 U.S.C. Sections 9601 et seq., as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"Change in Control" means
(a) the failure of (i) Holdings at any time to directly own
beneficially and of record on a fully diluted basis 100% of the
outstanding Capital Stock of Intermediate Holdings, or (ii)
Intermediate Holdings at any time to directly own beneficially and of
record on a fully diluted basis 100% of the outstanding Capital Stock
of the Company, in each case, all such Capital Stock to be held free
and clear of all Liens (other than Liens granted under a Loan
Document); or
(b) the failure of the Company (directly or through its wholly
owned Subsidiaries) at any time to own on a fully diluted basis 100% of
the outstanding Capital Stock of each of the Canadian Borrower, the
Australian Borrower and RailTex, such Capital Stock to be held free and
clear of all Liens (other than Liens granted under a Loan Document and
Permitted Liens); or
(c) any person or group (within the meaning of Sections 13(d)
and 14(d) under the Exchange Act), shall become the ultimate
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of Capital Stock representing
(i) in the case of the EGS Group, more than 25% of the Capital Stock of
Holdings on a fully diluted basis or (ii) in the case of all other
Persons more than 20% of the Capital Stock of Holdings on a fully
diluted basis; or
(d) during any period of 24 consecutive months, individuals
who at the beginning of such period constituted the Board of Directors
of Holdings (together with any new directors whose election to such
Board or whose nomination for election by the stockholders of Holdings
was approved by a vote of a majority of the directors then still in
office who were either directors at the beginning of such period or
whose election or
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<PAGE> 18
nomination for election was previously so approved), cease for any
reason to constitute a majority of the Board of Directors of Holdings
then in office; or
(e) the occurrence of any "Change of Control" (or similar
term) under (and as defined in) any Subordinated Debt Document or
Intermediate Holdings Asset Bridge Document.
"Closing Date" means the date of the initial Credit Extension, which
shall be a Business Day not to be later than April 15, 2000.
"Closing Date Certificate" means a certificate of an Authorized Officer
of Holdings, Intermediate Holdings and the Company substantially in the form of
Exhibit D hereto, delivered pursuant to Section 5.1.4.
"Code" means the Internal Revenue Code of 1986, and the regulations
thereunder, in each case as amended, reformed or otherwise modified from time to
time.
"Commitment" means, as the context may require, (i) a Lender's Term A
Loan Commitment, Term B Loan Commitment, Revolving Loan Commitment or Letter of
Credit Commitment or (ii) the Swing Line Lender"s Swing Line Loan Commitment.
"Commitment Amount" means, as the context may require, the Term A Loan
Commitment Amount, the Term B Loan Commitment Amount, the U.S. Revolving Loan
Commitment Amount, the Canadian Revolving Loan Commitment Amount, the Australian
Revolving Loan Commitment Amount, the Letter of Credit Commitment Amount or the
Swing Line Loan Commitment Amount.
"Commitment Termination Date" means, as the context may require, the
Term A Loan Commitment Termination Date, the Term B Loan Commitment Termination
Date or the Revolving Loan Commitment Termination Date.
"Commitment Termination Event" means
(a) the occurrence of any Event of Default described in
clauses (a) through (d) of Section 8.1.9 with respect to Holdings,
Intermediate Holdings or any Borrower; or
(b) the occurrence and continuance of any other Event of
Default and either
(i) the declaration of all or any portion of the
Loans to be due and payable pursuant to Section 8.3, or
(ii) the giving of notice by the Administrative
Agent, acting at the direction of the Required Lenders, to the
Borrowers that the Commitments have been terminated.
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<PAGE> 19
"Company" is defined in the preamble.
"Compliance Certificate" means a certificate duly completed and
executed by an Authorized Officer of Holdings that is the president, the chief
executive officer or the chief financial or accounting officer of Holdings, or,
for so long as Holdings does not have a chief financial officer or accounting
officer, the treasurer of Holdings, substantially in the form of Exhibit E-1
hereto, together with such changes thereto as the Agents may from time to time
request for the purpose of monitoring the Company"s compliance with the
financial covenants contained herein.
"Contingent Liability" means any agreement, undertaking or arrangement
by which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to, or otherwise to invest in, a
debtor, or otherwise to assure a creditor against loss) the Indebtedness of any
other Person (other than by endorsements of instruments in the course of
collection), or guarantees the payment of dividends or other distributions upon
the Capital Stock of any other Person. The amount of any Person"s obligation
under any Contingent Liability shall (subject to any limitation set forth
therein) be deemed to be the outstanding principal amount of the debt,
obligation or other liability guaranteed thereby.
"Continuation/Conversion Notice" means a notice of continuation or
conversion and certificate duly executed by an Authorized Officer of a Borrower,
substantially in the form of Exhibit C hereto.
"Controlled Group" means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with
Holdings, Intermediate Holdings, the Company or any Subsidiary, are treated as a
single employer under Section 414(b) or 414(c) of the Code or Section 4001 of
ERISA.
"Copyright Security Agreement" means any Copyright Security Agreement
executed and delivered by any Obligor in substantially the form of Exhibit D to
the U.S. Pledge and Security Agreement, as amended, supplemented, amended and
restated or otherwise modified from time to time.
"Credit Extension" means, as the context may require,
(a) the making of a Loan by a Lender; or
(b) the issuance of any Letter of Credit, or the extension of
any Stated Expiry Date of any existing Letter of Credit, by an Issuer.
"Credit Extension Request" means, as the context may require, any
Borrowing Request or Issuance Request.
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<PAGE> 20
"Currency" means, as the context may require, U.S. Dollars or a Foreign
Currency.
"Default" means any Event of Default or any condition, occurrence or
event which, after notice or lapse of time or both, would constitute an Event of
Default.
"Disbursement" is defined in Section 2.6.2.
"Disbursement Date" is defined in Section 2.6.2.
"Disclosure Schedule" means the Disclosure Schedule attached hereto as
Schedule I, as it may be amended, supplemented, amended and restated or
otherwise modified from time to time by Holdings, Intermediate Holdings and the
Borrowers with the written consent of the Required Lenders.
"Disposition" (or similar words such as "Dispose") means any sale,
transfer, lease, contribution or other conveyance (including by way of merger)
of, or the granting of options, warrants or other rights to, any of Holdings",
Intermediate Holdings", the Company's or the Restricted Subsidiaries" assets
(including accounts receivables and Capital Stock of Subsidiaries) to any other
Person (other than to another Obligor) in a single transaction or series of
transactions.
"DLJ" is defined in the preamble.
"Documentation Agent" is defined in the preamble.
"Domestic Office" means the office of a Lender designated as its
"Domestic Office" on Schedule II hereto or in a Lender Assignment Agreement, or
such other office within the United States as may be designated from time to
time by notice from such Lender to the Agents and the Company.
"Domestic Subsidiary" and "Domestic Restricted Subsidiary" mean any
Subsidiary or Restricted Subsidiary, respectively of the Company that is not a
Foreign Subsidiary.
"Domestic Subsidiary Guarantor" means any Domestic Subsidiary that is a
Subsidiary Guarantor.
"EBITDA" means, for any applicable period, subject to clause (b) of
Section 1.4, the sum (without duplication) for the Company and the Restricted
Subsidiaries on a consolidated basis of
(a) Net Income
plus
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<PAGE> 21
(b) to the extent deducted in determining Net Income, the sum
of (i) amounts attributable to amortization, (ii) Income Tax Expense,
(iii) Interest Expense, (iv) depreciation of assets and (v) all other
non-cash charges,
plus
(c) the excess of
(i) dividends received by the Company in cash, which
dividends are made in respect of the Capital Stock of Ferronor
which is directly or indirectly owned by the Company,
over
(ii) Income Tax Expense in respect of the dividends
referred to in clause (c)(i) above.
minus
(d) Restricted Payments made by the Company or any of its
Subsidiaries pursuant to clauses (b)(iii), (b)(iv) and (b)(v) of
Section 7.2.6.
"Effective Date" is defined in Section 11.8.
"EGS Group" means EGS Management, L.L.C., BEV Partners, L.P., EGS
Partners, L.L.C., Jonas Partners, L.P., William Ehrman, Beverly Ehrman (spouse
of W. Ehrman), FK Investments, L.P., Frederick Greenberg, Julia Oliver, James
Gerstl, William Lautman and Frederick Ketcher.
"Environmental Laws" means all applicable federal, state, local or
foreign statutes, laws, ordinances, codes, rules, regulations and guidelines
(including consent decrees and administrative orders) relating to public health
and safety and protection of the environment.
"Equity Issuance" is defined in clause (b) of the third recital.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to Sections of ERISA also refer to any successor Sections thereto.
"Event of Default" is defined in Section 8.1.
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<PAGE> 22
"Excess Cash Flow" means, for any Fiscal Year, the excess (if any), of
(a) EBITDA for such Fiscal Year
over
(b) the sum (for such Fiscal Year) of
(i) Interest Expense actually paid in cash by the Company and
the Restricted Subsidiaries,
plus
(ii) scheduled principal repayments, to the extent actually
made, of Term Loans pursuant to clauses (c) and (d) of Section 3.1.1
and scheduled payments of other funded debt permitted under Section
7.2.2 actually paid in cash,
plus
(iii) all income taxes actually paid in cash by the Company
and the Restricted Subsidiaries (less the sum of (x) any cash tax
refunds received and (y) any income taxes actually paid in cash in
respect of the dividends referred to in clause (c)(i) of the definition
of the term "EBITDA"),
plus
(iv) Capital Expenditures actually made by the Company and the
Restricted Subsidiaries in such Fiscal Year.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Agreements" means the Exchange Agreement, dated as of
February 4, 2000, executed and delivered by Holdings and the Exchange Agreement,
dated as of February 4, 2000, executed and delivered by Intermediate Holdings,
both delivered pursuant to the Subscription Agreement.
"Exchange Equivalent" means, on any date of determination, (a) with
respect to any Foreign Currency, the equivalent amount in U.S. Dollars of such
Foreign Currency, and (b) with respect to U.S. Dollars, the equivalent amount in
the applicable Foreign Currency of such U.S. Dollars, in each case as determined
by reference to the New York foreign exchange selling rates, as determined by
the Administrative Agent (in accordance with its standard practices).
"Exemption Certificate" is defined in clause (e) of Section 4.6.
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<PAGE> 23
"Expense Payments" is defined in clause (d) of the second recital.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to
(a) the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve System arranged
by federal funds brokers, as published for such day (or, if such day is
not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York; or
(b) if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three federal
funds brokers of recognized standing selected by it.
"Fee Letter" means the confidential fee letter, dated February 3, 2000,
between DLJ and the Company.
"Ferronor" means, collectively, RailAmerica de Chile S.A., a Chilean
corporation and its Subsidiaries.
"Ferronor Loan Documents" means, collectively, (i) the letter
agreement, dated as of January 16, 1997, between Banco de Boston and Holdings
(including the Term Sheet amended thereto), (ii) the promissory note dated as of
February 18, 1997 made by RailAmerica de Chile S.A. in favor of The First
National Bank of Boston and (iii) the Participation Agreement dated as of
February 18, 1997 between The First National Bank of Boston and Holdings, as
each such agreement is in effect on the Closing Date and in each case, as
amended, supplemented, amended and restated or otherwise modified from time to
time in accordance with Section 7.2.12.
"Filing Agent" is defined in Section 5.1.10.
"Filing Statements" is defined in Section 5.1.10.
"Fiscal Quarter" means a quarter ending on the last day of March, June,
September or December.
"Fiscal Year" means any period of twelve consecutive calendar months
ending on December 31; references to a Fiscal Year with a number corresponding
to any calendar year (e.g., the "2000 Fiscal Year") refer to the Fiscal Year
ending on December 31 of such calendar year.
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<PAGE> 24
"Fixed Charge Coverage Ratio" means, as of the close of any Fiscal
Quarter, the ratio computed for the period consisting of such Fiscal Quarter and
each of the three immediately preceding Fiscal Quarters of:
(a) (i) EBITDA (for all such Fiscal Quarters)
to
(b) the sum (without duplication) of
(i) Interest Expense paid or payable in cash for all such
Fiscal Quarters;
plus
(ii) all scheduled principal repayments of Indebtedness of the
Company and the Restricted Subsidiaries made during such period
(including repayments of the Term Loans pursuant to clauses (c)
and (d) of Section 3.1.1, after giving effect to any reductions in
such scheduled principal repayments attributable to any optional
or mandatory prepayments of the Term Loans) during all such Fiscal
Quarters;
plus
(iii) all Income Tax Expense actually paid in cash for all
such Fiscal Quarters;
plus
(iv) Restricted Payments made by the Company or any of its
Subsidiaries pursuant to clause (b)(ii) and (vii) of Section 7.2.6
(for all such Fiscal Quarters);
plus
(v) all dividends (including Restricted Payments made pursuant
to clause (b)(i) of Section 7.2.6) paid or payable in cash in
respect of preferred Capital Stock of Holdings (for all such
Fiscal Quarters).
"Foreign Borrowers" means, collectively, the Australian Borrower and
the Canadian Borrower.
"Foreign Currency" means any currency other than U.S. Dollars.
"Foreign Currency Equivalent" means the Exchange Equivalent in the
applicable Foreign Currency of any amount of U.S. Dollars.
"Foreign Currency Revolving Loan" means, as the context may require, an
Australian Revolving Loan or a Canadian Loan.
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<PAGE> 25
"Foreign Currency Revolving Loan Commitment" means, as the context may
require, a Lender's Australian Revolving Loan Commitment or Canadian Revolving
Loan Commitment.
"Foreign Currency Revolving Loan Commitment Amount" means, as the
context may require, the Australian Revolving Loan Commitment Amount and/or the
Canadian Revolving Loan Commitment Amount.
"Foreign Pledge Agreement" means any supplemental pledge agreement
governed by the laws of a jurisdiction other than the United States or a state
thereof executed and delivered by the Company or any of the Restricted
Subsidiaries pursuant to the terms of this Agreement, in form and substance
satisfactory to the Agents, as may be necessary or desirable under the laws of
organization or incorporation of a Restricted Subsidiary to further protect or
perfect the Lien on and security interest in any Collateral (as defined in a
U.S. Pledge and Security Agreement).
"Foreign Subsidiary" means any Subsidiary of Holdings (a) which is
organized under the laws of any jurisdiction outside of the United States, (b)
which conducts the major portion of its business outside of the United States
and (c) all or substantially all of the property and assets of which are located
outside of the United States.
"F.R.S. Board" means the Board of Governors of the Federal Reserve
System or any successor thereto.
"GAAP" is defined in Section 1.4.
"Governmental Authority" means the government of the United States, any
other nation or any political subdivision thereof, whether state or local, and
any agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.
"Guaranty" means, as the context may require, the Holdings Guaranty,
the Intermediate Holdings Guaranty and/or each Subsidiary Guaranty.
"Guarantor" means, as the context may require, Holdings, Intermediate
Holdings and/or each Subsidiary Guarantor.
"Hazardous Material" means
(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource
Conservation and Recovery Act, as amended; or
(c) any pollutant or contaminant or hazardous, dangerous or
toxic chemical, material or substance (including any petroleum product)
within the meaning of any other
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<PAGE> 26
applicable foreign, federal, state or local law, regulation, ordinance
or requirement (including consent decrees and administrative orders)
relating to or imposing liability or standards of conduct concerning
any hazardous, toxic or dangerous waste, substance or material, all as
amended.
"Hedging Obligations" means, with respect to any Person, all
liabilities of such Person under currency exchange agreements, interest rate
swap agreements, interest rate cap agreements and interest rate collar
agreements, and all other agreements or arrangements designed to protect such
Person against fluctuations in interest rates or currency exchange rates.
"herein", "hereof", "hereto", "hereunder" and similar terms contained
in any Loan Document refer to such Loan Document as a whole and not to any
particular section, paragraph or provision of such Loan Document.
"Holdings" is defined in the preamble.
"Holdings Common Stock" is defined in clause (b) of the first recital.
"Holdings Convertible Preferred Stock" means the Series A Convertible
Redeemable Preferred Stock, par value $.001 per share of Holdings.
"Holdings Convertible Subordinated Notes" means the outstanding 6%
Junior Convertible Debentures due July 31, 2004 issued by Holdings.
"Holdings Guaranty" means the Obligations of Holdings undertaken
pursuant to Section 10.1.
"Impermissible Qualification" means any qualification or exception to
the opinion or certification of any independent public accountant as to any
financial statement of Holdings
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of
matters relevant to such financial statement; or
(c) which relates to the treatment or classification of any
item in such financial statement and which, as a condition to its
removal, would require an adjustment to such item the effect of which
would be to cause Holdings, Intermediate Holdings or any Borrower to be
in Default.
"including" and "include" mean including without limiting the
generality of any description preceding such term, and, for purposes of each
Loan Document, the parties hereto agree that the rule of ejusdem generis shall
not be applicable to limit a general statement, which is followed by
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<PAGE> 27
or referable to an enumeration of specific matters, to matters similar to the
matters specifically mentioned.
"Income Tax Expense" means the sum of (i) all federal, state, local and
foreign income taxes paid or payable by the Company and the Restricted
Subsidiaries to the relevant Governmental Authority and (ii) without
duplication, payments under the Tax Sharing Agreement by the Company and the
Restricted Subsidiaries for the federal income tax liability of the affiliated
group as defined in Section 1504(a) of the Code, of which the Company and the
Restricted Subsidiaries are members.
"Indebtedness" of any Person means:
(a) all obligations of such Person for borrowed money or
advances and all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments;
(b) all obligations, contingent or otherwise, relative to the
face amount of all letters of credit, whether or not drawn, and
banker"s acceptances issued for the account of such Person;
(c) all Capitalized Lease Liabilities of such Person;
(d) for purposes of Section 8.1.5 only, all other items which,
in accordance with GAAP, would be included as liabilities on the
liability side of the balance sheet of such Person as of the date at
which Indebtedness is to be determined;
(e) net liabilities of such Person under all Hedging
Obligations;
(f) whether or not so included as liabilities in accordance
with GAAP, all obligations of such Person to pay the deferred purchase
price of property or services excluding trade accounts payable in the
ordinary course of business which are not overdue for a period of more
than 90 days or, if overdue for more than 90 days, as to which a
dispute exists and adequate reserves in conformity with GAAP have been
established on the books of such Person, and indebtedness secured by
(or for which the holder of such indebtedness has an existing right,
contingent or otherwise, to be secured by) a Lien on property owned or
being acquired by such Person (including indebtedness arising under
conditional sales or other title retention agreements), whether or not
such indebtedness shall have been assumed by such Person or is limited
in recourse;
(g) obligations arising under Synthetic Leases; and
(h) all Contingent Liabilities of such Person in respect of
any of the foregoing with respect to another Person.
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The Indebtedness of any Person shall include the Indebtedness of any other
entity (including any partnership in which such Person is a general partner) to
the extent such Person is liable therefor as a result of such Person"s ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor.
"Indemnified Liabilities" is defined in Section 11.4.
"Indemnified Parties" is defined in Section 11.4.
"Interco Subordination Agreement" means the Subordination Agreement,
substantially in the form of Exhibit I hereto, executed and delivered by two or
more Obligors pursuant to the terms of this Agreement, as amended, supplemented,
amended and restated or otherwise modified from time to time.
"Intercreditor Agreement" means the Intercreditor Agreement,
substantially in the form of Exhibit N hereto, executed and delivered by the
Lenders and the Administrative Agent and acknowledged by Holdings, Intermediate
Holdings, each Borrower and each Subsidiary Guarantor pursuant to the terms of
this Agreement, as amended, supplemented, amended and restated or otherwise
modified from time to time.
"Interest Coverage Ratio" means, as of the close of any Fiscal Quarter,
the ratio computed for the period consisting of such Fiscal Quarter and each of
the three immediately preceding Fiscal Quarters of:
(a) EBITDA (for all such Fiscal Quarters)
to
(b) the sum (for all such Fiscal Quarters) of (i) Interest
Expense (for all such Fiscal Quarters paid or payable in cash, (ii) all
dividends paid or payable (including, without duplication, Restricted
Payments made pursuant to clause (b)(i) of Section 7.2.6) in cash in
respect of preferred Capital Stock of Holdings (for all such Fiscal
Quarters) and (iii) Restricted Payments made by the Company or any of
its Subsidiaries pursuant to clause (b)(ii) and (b)(vii) of Section
7.2.6.
"Interest Expense" means, for any Fiscal Quarter, the aggregate
interest expense (both accrued and paid) of the Company and the Restricted
Subsidiaries for such Fiscal Quarter, including the portion of any payments made
in respect of Capitalized Lease Liabilities allocable to interest expense (net
of interest income paid during such period to the Company and the Restricted
Subsidiaries).
"Interest Period" means, (a) as to any LIBO Rate Loan, the period
beginning on (and including) the date on which such LIBO Rate Loan is made or
continued as, or converted into, a LIBO Rate Loan pursuant to Sections 2.3 or
2.4 and shall end on (but exclude) the day which numerically corresponds to such
date one, two, three, six months or, with the consent of each applicable Lender,
nine or twelve months thereafter (or, if such month has no numerically
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corresponding day, on the last Business Day of such month), as the applicable
Borrower may select in its relevant notice pursuant to Sections 2.3 or 2.4; and
(b) as to any Canadian BA or Acceptance Note, the period beginning on (and
including) the date on which such Canadian BA is accepted or rolled over
pursuant to Section 2.4 or 2.8 or such Acceptance Note is issued pursuant to
Section 2.8 and continuing to (but excluding) the date which is 30, 60, 90 or
180 days thereafter as the Canadian Borrower may select in its relevant notice
pursuant to Section 2.4 or 2.8; provided, however, that
(a) the Borrowers shall not be permitted to select Interest
Periods to be in effect at any one time which have expiration dates
occurring on more than ten different dates for U.S. Revolving Loans and
Term Loans and three different dates for Canadian Loans and three
different dates for Australian Revolving Loans;
(b) if such Interest Period would otherwise end on a day which
is not a Business Day, such Interest Period shall end on the next
following Business Day (unless such next following Business Day is the
first Business Day of a calendar month, in which case such Interest
Period shall end on the immediately preceding Business Day); and
(c) no Interest Period for any Loan may end later than the
Stated Maturity Date for such Loan.
"Intermediate Holdings" is defined in the preamble.
"Intermediate Holdings Asset Bridge Documents" means, collectively, the
note purchase agreement, promissory notes, guarantees, and other instruments
(including the Intermediate Holdings Asset Bridge Notes) and agreements
evidencing the terms of the Intermediate Holdings Asset Bridge Notes, as
amended, supplemented, amended and restated or otherwise modified in accordance
with Section 7.2.12.
"Intermediate Holdings Asset Bridge Note" is defined in clause (f) of
the third recital.
"Intermediate Holdings Asset Bridge Note Issuance" is defined in clause
(f) of the third recital.
"Intermediate Holdings Asset Bridge Note Pledge Agreement" means the
Intermediate Holdings Asset Bridge Note Pledge Agreement, dated as of February
4, 2000, executed and delivered by an Authorized Officer of Intermediate
Holdings, as amended, supplemented, amended and restated or otherwise modified
from time to time.
"Intermediate Holdings Excluded Assets" means the Capital Stock of
Kalyn/Siebert and all of its assets.
"Intermediate Holdings Guaranty" means the Obligations of Intermediate
Holdings undertaken pursuant to Section 10.1.
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"Intermediate Holdings Securities Purchase Agreement" means the
Securities Purchase Agreement, dated as of February 4, 2000 among Intermediate
Holdings and the purchasers party thereto in respect of the Intermediate
Holdings Asset Bridge Notes, as amended from time to time in accordance with
Section 7.2.12.
"Investment" means, relative to any Person,
(a) any loan, advance or extension of credit made by such
Person to any other Person, including the purchase by such Person of
any bonds, notes, debentures or other debt securities of any other
Person; and
(b) any Capital Stock held by such Person in any other Person.
The amount of any Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon and shall, if made by
the transfer or exchange of property other than cash, be deemed to have been
made in an original principal or capital amount equal to the fair market value
of such property at the time of such Investment.
"ISP Rules" is defined in Section 11.9.
"Issuance Request" means a Letter of Credit request and certificate
duly executed by an Authorized Officer of the Company, substantially in the form
of Exhibit B-2 hereto.
"Issuer" means the Administrative Agent in its capacity as Issuer of
the Letters of Credit. At the request of the Administrative Agent and with the
Company's consent (not to be unreasonably withheld), another Lender or an
Affiliate of the Administrative Agent may issue one or more Letters of Credit
hereunder.
"Kalyn/Siebert" means, collectively, Kalyn/Siebert I, Incorporated, a
Texas corporation and its Subsidiaries.
"Lender Assignment Agreement" means an assignment agreement
substantially in the form of Exhibit K hereto.
"Lenders" is defined in the preamble including any Person that becomes
a Lender pursuant to Section 11.11.1).
"Lender's Environmental Liability" means any and all losses,
liabilities, obligations, penalties, claims, litigation, demands, defenses,
costs, judgments, suits, proceedings, damages (including consequential damages),
disbursements or expenses of any kind or nature whatsoever (including reasonable
attorneys' fees at trial and appellate levels and experts' fees and
disbursements and expenses incurred in investigating, defending against or
prosecuting any litigation, claim or proceeding) which may at any time be
imposed upon, incurred by or asserted or awarded against either Agent, any
Lender or any Issuer or any of such Person's Affiliates,
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shareholders, directors, officers, employees, investment advisors and agents
in connection with or arising from:
(a) any Hazardous Material on, in, under or affecting all or
any portion of any property owned, leased or operated upon (including
rights of way easements) of Holdings, Intermediate Holdings, the
Borrowers or any of their respective Subsidiaries, the groundwater
thereunder, or any surrounding areas thereof to the extent caused by
Releases from Holdings', Intermediate Holdings', the Borrowers' or any
of their respective Subsidiaries' or any of their respective
predecessors' properties owned, leased or operated upon (including
right of way easements);
(b) any misrepresentation, inaccuracy or breach of any
warranty contained in Section 6.12;
(c) any violation or claim of violation by Holdings,
Intermediate Holdings, the Borrowers or any of their
respective Subsidiaries of any Environmental Laws; or
(d) the imposition of any lien for damages caused by or the
recovery of any costs for the cleanup, release or threatened release of
Hazardous Material by Holdings, Intermediate Holdings, the Borrowers or
any of their respective Subsidiaries, or in connection with any
property owned, leased or operated upon (including rights of way
easements) or formerly owned, leased or operated upon (including rights
of way easements) by Holdings, the Borrowers or any of their respective
Subsidiaries.
"Letter of Credit" is defined in Section 2.1.2.
"Letter of Credit Commitment" means, with respect to an Issuer, such
Issuer's obligation to issue Letters of Credit pursuant to Section 2.1.2 and,
with respect to each U.S. Revolving Lender, the obligations of each such Lender
to participate in such Letters of Credit pursuant to Section 2.6.1.
"Letter of Credit Commitment Amount" means, on any date, a maximum
amount of $10,000,000, as such amount may be permanently reduced from time to
time pursuant to Section 2.2.
"Letter of Credit Outstandings" means, on any date, an amount equal to
the sum of (i) the then aggregate amount which is undrawn and available under
all issued and outstanding Letters of Credit, and (ii) the then aggregate amount
of all unpaid and outstanding Reimbursement Obligations.
"Leverage Ratio" means, as of the last day of any Fiscal Quarter, the
ratio of
(a) Total Debt outstanding on the last day of such Fiscal
Quarter
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to
(b) EBITDA computed for the period consisting of such Fiscal
Quarter and each of the three immediately preceding Fiscal Quarters.
"LIBO Rate" means, relative to any Interest Period for LIBO Rate Loans
in any Currency, the rate of interest per annum determined by the Administrative
Agent to be the arithmetic mean (rounded upward to the next 1/16th of 1%) of the
rates of interest per annum at which deposits in such Currency in the
approximate amount of the Loan to be made or continued as, or converted into, a
LIBO Rate Loan by the Administrative Agent (or, in the case of any LIBO Rate in
respect of any LIBO Rate Loans in which the Administrative Agent will not
participate, $1,000,000 or the Foreign Currency Equivalent thereof) and having a
maturity comparable to such Interest Period would be offered to the
Administrative Agent in the London interbank market at its request in the case
of LIBO Rate Loans denominated in any Currency, at approximately 11:00 a.m.,
London time, two Business Days prior to the commencement of such Interest
Period.
"LIBO Rate Loan" means a Loan bearing interest, at all times during an
Interest Period applicable to such Loan, at a rate of interest determined by
reference to the LIBO Rate (Reserve Adjusted).
"LIBO Rate (Reserve Adjusted)" means, relative to any Loan to be made,
continued or maintained as, or converted into, a LIBO Rate Loan for any Interest
Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/16 of
1%) determined pursuant to the following formula:
LIBO Rate LIBO Rate
= ------------------------------
(Reserve Adjusted) 1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate Loans
will be determined by the Administrative Agent on the basis of the LIBOR Reserve
Percentage in effect two Business Days before the first day of such Interest
Period.
"LIBOR Office" means the office of a Lender designated as its "LIBOR
Office" on Schedule II hereto or in a Lender Assignment Agreement, or such other
office designated from time to time by notice from such Lender to the Borrowers
and the Administrative Agent, whether or not outside the United States, which
shall be making or maintaining the LIBO Rate Loans of such Lender.
"LIBOR Reserve Percentage" means, relative to any Interest Period for
LIBO Rate Loans, the reserve percentage (expressed as a decimal) equal to the
maximum aggregate reserve requirements (including all basic, emergency,
supplemental, marginal and other reserves and taking into account any
transitional adjustments or other scheduled changes in reserve requirements)
specified under regulations issued from time to time by the F.R.S. Board and
then applicable to assets or liabilities consisting of or including
"Eurocurrency Liabilities", as
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currently defined in Regulation D of the F.R.S. Board, having a term
approximately equal or comparable to such Interest Period.
"Lien" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit, encumbrance, lien (statutory or otherwise), charge against
or interest in property, or other priority or preferential arrangement of any
kind or nature whatsoever, to secure payment of a debt or performance of an
obligation.
"Loan Documents" collectively means this Agreement, the Letters of
Credit, each Rate Protection Agreement, the Interco Subordination Agreement, the
Fee Letter, the Administrative Agent Fee Letter, each agreement pursuant to
which the Administrative Agent is granted a Lien to secure any or all of the
Obligations (including each Pledge and Security Agreement and each Mortgage) and
each other agreement, certificate, document or instrument delivered in
connection with any Loan Document, whether or not specifically mentioned herein
or therein.
"Loans" means, as the context may require, a Revolving Loan, a Term
Loan or a Swing Line Loan.
"Material Adverse Effect" means a material adverse effect on (i) the
business, assets, condition (financial or otherwise), operations, performance,
properties, or prospects of Holdings, Intermediate Holdings, the Company and the
Restricted Subsidiaries taken as a whole, (ii) the rights and remedies of any
Secured Party under any Loan Document or (iii) the ability of any Obligor to
perform its Obligations under any Loan Document.
"Material Documents" means the Merger Agreement, the Organic Documents
of Holdings, Intermediate Holdings and each Borrower, the Subordinated Debt
Documents, the Intermediate Holdings Asset Bridge Documents, the Tax Sharing
Agreement, Ferronor Loan Documents, Subscription Agreements and Exchange
Agreements in each case as amended, supplemented, amended and restated or
otherwise modified from time to time in accordance with Section 7.2.12.
"Merger Agreement" is defined in clause (b) of the first recital.
"Merger Consideration" is defined in clause (b) of the first recital.
"Mergerco" is defined in clause (b) of the first recital.
"Moody's" means Moody's Investors Service, Inc.
"Mortgage" means each mortgage, deed of trust or agreement executed and
delivered by any Obligor in favor of the Administrative Agent for the benefit of
the Secured Parties pursuant to the requirements of this Agreement in
substantially the form of Exhibit J-1, J-2, or J-3 hereto, as the case may be,
as applicable, under which a Lien is granted on the real property and fixtures
described therein, in each case as amended, supplemented, amended and restated
or otherwise modified from time to time.
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"Net Debt Proceeds" means with respect to the sale or issuance by
Holdings, Intermediate Holdings, the Company or the Restricted Subsidiaries to
any Person of any of its Indebtedness not permitted pursuant to Section 7.2.2,
the excess of:
(a) the gross cash proceeds received by such Person from
such sale or issuance,
over
(b) the sum of (i) all underwriting commissions and legal,
investment banking, brokerage and accounting and other professional
fees, sales commissions and disbursements actually incurred in
connection with such sale or issuance which have not been paid to
Affiliates of Holdings in connection therewith and (ii) to the extent
used to refinance the Subordinated Bridge Notes, cash proceeds of the
Permanent Financing Debt.
"Net Disposition Proceeds" means, with respect to any sale, transfer or
other disposition of any assets of Holdings, Intermediate Holdings, the Company
or any of the Restricted Subsidiaries (other than sales made as part of the
Transaction and other sales permitted pursuant to clause (a), (b), (c), (d) or
(e) of Section 7.2.11), the excess of
(a) the gross cash proceeds received by Holdings, Intermediate
Holdings, the Company or any such Restricted Subsidiary, as the case
may be, from any such Disposition and any cash payments received in
respect of promissory notes or other non-cash consideration delivered
to Holdings, Intermediate Holdings, the Company or such Restricted
Subsidiary, as the case may be, in respect thereof,
over
(b) the sum (without duplication) of (i) all fees and expenses
with respect to legal, investment banking, brokerage, accounting and
other professional fees, sales commissions and disbursements and all
other reasonable fees, expenses and charges, in each case actually
incurred in connection with such Disposition which have not been paid
to Affiliates of Holdings, Intermediate Holdings or the Company, (ii)
all taxes and other governmental costs and expenses actually paid or
estimated by such Person (in good faith) to be payable in cash in
connection with such Disposition, and (iii) payments made by Holdings,
Intermediate Holdings, the Company or any of the Restricted
Subsidiaries to retire Indebtedness (other than the Credit Extensions)
of Holdings, Intermediate Holdings, the Company or any of the
Restricted Subsidiaries where payment of such Indebtedness is required
in connection with such Disposition;
provided, however, that if, after the payment of all taxes with respect to such
Disposition, the amount of estimated taxes, if any, pursuant to clause (b)(ii)
above exceeded the tax amount in respect of such Disposition, the aggregate
amount of such excess shall, at such time, constitute Net Disposition Proceeds.
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"Net Equity Proceeds" means with respect to any sale or issuance by
Holdings, Intermediate Holdings, the Company or the Restricted Subsidiaries to
any Person of any Capital Stock or, warrants or options for such Capital Stock
or the exercise of any such warrants or options, the excess of:
(a) the gross cash proceeds received by Holdings, Intermediate
Holdings, the Company or any such Restricted Subsidiary from such sale,
exercise or issuance; provided, however, that the Company may exclude
up to $100,000 in aggregate of such gross proceeds in each Fiscal Year.
over
(b) the sum of (i) all underwriting commissions and legal,
investment banking, brokerage, accounting and other professional fees,
sales commissions and disbursements actually incurred in connection
with such sale or issuance which have not been paid to Affiliates of
Holdings, Intermediate Holdings, or the Company in connection therewith
and (ii) to the extent used to refinance the Subordinated Bridge Notes,
cash proceeds of the Permanent Financing.
"Net Income" means, for any period, the aggregate of all amounts
(exclusive of all amounts in respect of any extraordinary gains but including
extraordinary losses) which would be included as net income on the consolidated
financial statements of the Company and the Restricted Subsidiaries for such
period.
"Net Worth" means, with respect to any Person at any date, on a
consolidated basis for such Person and its Subsidiaries, the excess of:
(a) the sum of Capital Stock taken at par value, capital
surplus, additional paid-in capital, and retained earnings (or
accumulated deficit) of such Person at such date;
minus
(b) treasury stock of such Person and, to the extent included
in the preceding clause (a), minority interests in Subsidiaries of such
Person at such date.
"Non-Domestic Lender" means any Lender that is not a "United States
person", as defined under Section 7701(a)(30) of the Code.
"Non-Excluded Taxes" means any Taxes other than net income and
franchise taxes imposed with respect to any Secured Party by a Governmental
Authority under the laws of which such Secured Party is organized or in which it
maintains its applicable lending office.
"Note" means, as the context may require, a Revolving Note, a Term A
Note, a Term B Note, a Swing Line Note or an Acceptance Note.
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"Notional BA Proceeds" means, relative to a particular Canadian Loan by
way of Canadian BAs, the aggregate face amount of such Canadian BAs less the
aggregate of:
(a) a discount from the aggregate face amount of such Canadian
BAs calculated in accordance with normal market practice based on the
Canadian BA Rate for the term of such Canadian BAs; and
(b) the amount of the Applicable Canadian BA Stamping Fees in
respect of such Canadian BAs.
"Obligations" means all obligations (monetary or otherwise, whether
absolute or contingent, matured or unmatured) of Holdings, Intermediate
Holdings, the Borrowers and each other Obligor arising under or in connection
with a Loan Document, including the principal of and premium, if any, and
interest (including interest accruing during the pendency of any proceeding of
the type described in Section 8.1.9, whether or not allowed in such proceeding)
on the Loans and all Reimbursement Obligations.
"Obligor" means, as the context may require, Holdings, Intermediate
Holdings, the Borrowers and each other Person (other than a Secured Party)
obligated under any Loan Document.
"Organic Document" means, relative to any Obligor, as applicable, its
certificate of incorporation, by-laws, certificate of partnership, partnership
agreement, certificate of formation, limited liability agreement and all
shareholder agreements, voting trusts and similar arrangements applicable to any
of such Obligor"s partnership interests, limited liability company interests or
authorized shares of Capital Stock.
"Other Taxes" means any and all stamp, documentary or similar taxes, or
any other excise or property taxes or similar levies that arise on account of
any payment made or required to be made under any Loan Document or from the
execution, delivery, registration, recording or enforcement of any Loan
Document.
"Participant" is defined in Section 11.11.2.
"Patent Security Agreement" means any Patent Security Agreement
executed and delivered by any Obligor in substantially the form of Exhibit B to
the U.S. Pledge and Security Agreement, as amended, supplemented, amended and
restated or otherwise modified from time to time.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan", as such term is defined in
Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to which
Holdings, the Company or any corporation, trade or business
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that is, along with Holdings and the Company, a member of a Controlled Group,
may have liability, including any liability by reason of having been a
substantial employer within the meaning of Section 4063 of ERISA at any time
during the preceding five years, or by reason of being deemed to be a
contributing sponsor under Section 4069 of ERISA.
"Percentage" means, as the context may require, any Lender"s U.S.
Revolving Loan Percentage, Canadian Revolving Loan Percentage, Australian
Revolving Loan Percentage, Term A Percentage or Term B Percentage.
"Permanent Financing" has the meaning set forth in the Securities
Purchase Agreement.
"Permanent Financing Debt" means Permanent Financing consisting of
Indebtedness in an aggregate principal amount not to exceed $200,000,000.
"Permitted Acquisition" means an acquisition (whether pursuant to an
acquisition of Capital Stock, assets or otherwise) by the Company or any of the
Restricted Subsidiaries from any Person of a business in which the following
conditions are satisfied:
(a) immediately before and after giving effect to such
acquisition no Default shall have occurred and be continuing or would
result therefrom (including under Section 7.2.1); and
(b) Holdings shall have delivered to the Agents a Compliance
Certificate for the period of four full Fiscal Quarters immediately
preceding such acquisition (prepared in good faith and in a manner and
using such methodology which is consistent with the most recent
financial statements delivered pursuant to Section 7.1.1) giving pro
forma effect to the consummation of such acquisition and evidencing
compliance with the covenants set forth in Section 7.2.4.
"Person" means any natural person, corporation, limited liability
company, partnership, joint venture, association, trust or unincorporated
organization, Governmental Authority or any other legal entity, whether acting
in an individual, fiduciary or other capacity.
"Pledge and Security Agreement" means, as the context may require, the
U.S. Pledge and Security Agreement, any of the Australian Security Documents
and/or the Canadian Debentures.
"Pledged Subsidiary" means each Subsidiary of the Company in respect of
which the Administrative Agent has been granted a security interest in or a
pledge of any of the Capital Stock of such Subsidiary.
"P.P.S.A." means the Personal Property Security Act (Ontario), as in
effect from time to time in the Province of Ontario; provided, that if, with
respect to any Filing Statement or by reason of any provisions of law, the
perfection or the effect of perfection or non-perfection of the security
interests granted to the Administrative Agent pursuant to the applicable Loan
Document is
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governed by the Personal Property Security Act (or other similar
legislation) as in effect in a jurisdiction of Canada other than Ontario,
"P.P.S.A." means the Personal Property Security Act (or other similar
legislation) as in effect from time to time in such other jurisdiction for
purposes of the provisions of this Agreement, each Loan Document and any Filing
Statement relating to such perfection or effect of perfection or non-perfection.
"Projections" is defined in clause (a)(ii) of Section 5.1.8.
"PWC" means PricewaterhouseCoopers LLC.
"QRC" means Societe des Chemins de Fer du Quebec Inc./Quebec Railway
Corporation, Inc., a corporation organized under the laws of the province of
Quebec, Canada.
"Quarterly Payment Date" means the last Business Day of March, June,
September and December.
"RailTex" is defined in clause (b) of the first recital.
"RailTex Brazil" is defined in clause (e) of the third recital.
"RAPL" shall mean RailAmerica Australia Pty Limited (ACN 079 392 993)
of Level 1, 140 King Street, Melbourne, Victoria.
"Rate Protection Agreement" means, collectively, any interest rate
swap, cap, collar, foreign currency exchange agreement, foreign currency
exchange hedge agreement or similar agreement entered into by the Company or any
of its Subsidiaries under which the counterparty of such agreement is (or at the
time such agreement was entered into, was) a Lender or an Affiliate of a Lender.
"RailAmerica Refinancing" is defined in clause (b) of the second
recital.
"RailTex Refinancing" is defined in clause (c) of the second recital.
"Refunded Swing Line Loans" is defined in clause (b) of Section 2.3.2.
"Register" is defined in clause (b) of Section 2.7.
"Reimbursement Obligation" is defined in Section 2.6.3.
"Related Fund" means, with respect to any Lender that is a fund that
invests in commercial loans, any other fund that invests in commercial loans and
is managed or advised by the same investment advisor as such Lender or by an
Affiliate of such investment advisor.
"Release" means a "release", as such term is defined in CERCLA.
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"Replacement Lender" is defined in Section 4.10.
"Replacement Notice" is defined in Section 4.10.
"Required Lenders" means, at any time,
(a) prior to the Closing Date, Lenders having at least 51%
of the Term Loan Commitments and the Revolving Loan Commitments; and
(b) on and after the date of the Closing Date, Lenders holding
at least 51% of the Total Exposure Amount.
"Resource Conservation and Recovery Act" means the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., as amended.
"Responsible Officer" means, with respect to any Person, its chief
executive officer, its president or any vice president, managing director,
treasurer, controller or other officer thereof having substantially the same
authority and responsibility.
"Restricted Payment" means the declaration or payment of any dividend
(other than dividends payable solely in Capital Stock of Holdings) on, or the
making of any payment or distribution on account of, or setting apart assets for
a sinking or other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of any class of Capital Stock of Holdings,
Intermediate Holdings, the Company or any Restricted Subsidiary or any warrants
or options to purchase any such Capital Stock, whether now or hereafter
outstanding, or the making of any other distribution in respect thereof, either
directly or indirectly, whether in cash or property, obligations of Holdings,
Intermediate Holdings, the Company or any Restricted Subsidiary or otherwise.
"Restricted Subsidiary" means any Subsidiary of the Company other than
Ferronor.
"Revolving Loan" means, as the context may require, a U.S. Revolving
Loan and/or a Foreign Currency Revolving Loan.
"Revolving Loan Commitment" means, as the context may require, a U.S.
Revolving Loan Commitment and/or a Foreign Currency Revolving Loan Commitment.
"Revolving Loan Commitment Amount" means, as the context may require,
the U.S. Revolving Loan Commitment Amount and/or a Foreign Currency Revolving
Loan Commitment Amount.
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"Revolving Loan Commitment Termination Date" means the earliest of
(a) April 15, 2000 (if the initial Credit Extension has not
occurred on or prior to such date);
(b) December 31, 2005;
(c) the date on which each Revolving Loan Commitment Amount is
terminated in full or reduced to zero pursuant to the terms of this
Agreement; and
(d) the date on which any Commitment Termination Event occurs.
Upon the occurrence of any event described in the preceding clauses (c) or (d),
the Revolving Loan Commitments shall terminate automatically and without any
further action.
"Revolving Note" means, as the context may require, the U.S. Revolving
Note, the Canadian Revolving Note and/or the Australian Revolving Note.
"Sale Leasebacks" is defined in Section 7.2.15.
"S&P" means Standard & Poor's Rating Services, a division of
McGraw-Hill, Inc.
"SEC" means the Securities and Exchange Commission.
"Secured Parties" means, collectively, the Lenders, the Issuers, the
Agents, each counterparty to a Rate Protection Agreement that is (or at the time
such Rate Protection Agreement was entered into, was) a Lender or an Affiliate
thereof and (in each case), each of their respective successors, transferees and
assigns.
"Securities Purchase Agreement" means the Securities Purchase
Agreement, dated as of February 4, 2000 among the Company and the Restricted
Subsidiaries and the purchasers party thereto in respect of the Subordinated
Bridge Notes, as amended from time to time in accordance with Section 7.2.12.
"Solvent" means, with respect to any Person and its Subsidiaries on a
particular date, that on such date (a) the fair value of the property of such
Person and its Subsidiaries on a consolidated basis is greater than the total
amount of liabilities, including contingent liabilities, of such Person and its
Subsidiaries on a consolidated basis, (b) the present fair salable value of the
assets of such Person and its Subsidiaries on a consolidated basis is not less
than the amount that will be required to pay the probable liability of such
Person and its Subsidiaries on a consolidated basis on its debts as they become
absolute and matured, (c) such Person does not intend to, and does not believe
that it or its Subsidiaries will, incur debts or liabilities beyond the ability
of such Person and its Subsidiaries to pay as such debts and liabilities mature,
and (d) such Person and its Subsidiaries on a consolidated basis is not engaged
in business or a transaction, and such Person
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and its Subsidiaries on a consolidated basis is not about to engage in business
or a transaction, for which the property of such Person and its Subsidiaries on
a consolidated basis would constitute an unreasonably small capital. The amount
of Contingent Liabilities at any time shall be computed as the amount that, in
light of all the facts and circumstances existing at such time, can reasonably
be expected to become an actual or matured liability.
"Specified Default" means any Event of Default, any default under
Section 8.1.1 or any default under clause (c) or (d) of Section 8.1.9.
"Stated Amount" means, on any date and with respect to a particular
Letter of Credit, the total amount then available to be drawn under such Letter
of Credit.
"Stated Expiry Date" is defined in Section 2.6.
"Stated Maturity Date" means
(a) with respect to all Term A Loans, December 31, 2005;
(b) with respect to all Term B Loans, December 31, 2006; and
(c) with respect to all Revolving Loans and Swing Line Loans,
December 31, 2005.
"Subject Lender" is defined in Section 4.10.
"Subordinated Bridge Note Issuance" is defined in clause (a) of the
third recital.
"Subordinated Bridge Notes" is defined in clause (a) of the third
recital.
"Subordinated Debt" means unsecured Indebtedness of Holdings,
Intermediate Holdings or the Company or the Restricted Subsidiaries (including
the Indebtedness evidenced by the Subordinated Bridge Notes and any Permanent
Financing of the Subordinated Bridge Notes consisting of Indebtedness, the
Holdings Convertible Subordinated Notes and the subordinated debt of Freight
Victoria to ABB) subordinated in right of payment to the Obligations pursuant to
documentation containing redemption and other prepayment events, maturities,
amortization schedules, covenants, events of default, remedies, acceleration
rights, subordination provisions and other material terms satisfactory to the
Required Lenders.
"Subordinated Debt Documents" means, collectively, the loan agreements,
indentures, note purchase agreements, promissory notes, guarantees, and other
instruments (including the Subordinated Bridge Notes and any Permanent Financing
of the Subordinated Bridge Notes consisting of Indebtedness and the Holdings
Convertible Subordinated Notes) and agreements evidencing the terms of
Subordinated Debt, as amended, supplemented, amended and restated or otherwise
modified in accordance with Section 7.2.12.
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"Subscription Agreements" means the Subscription Agreement, dated as of
February 4, 2000, executed and delivered by Holdings and Intermediate Holdings
and the Subscription Agreement, dated as of February 4, 2000 executed and
delivered by Intermediate Holdings and the Company.
"Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership or other entity of which more than 50% of
the outstanding securities (or other ownership interest) having ordinary voting
power to elect the board of directors, managers or other voting members of the
governing body of such corporation, limited liability company, partnership or
other entity (irrespective of whether at the time securities (or other ownership
interest) of any other class or classes of such corporation, limited liability
company, partnership or other entity shall or might have voting power upon the
occurrence of any contingency) is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more other Subsidiaries of
such Person, or by one or more other Subsidiaries of such Person. Unless the
context otherwise specifically requires, the term "Subsidiary" shall be a
reference to a Subsidiary of Holdings, Intermediate Holdings or the Company
"Subsidiary Guarantor" means each Domestic Restricted Subsidiary that
has executed and delivered to the Administrative Agent the Subsidiary Guaranty
(or a supplement thereto).
"Subsidiary Guaranty" means the subsidiary guaranty executed and
delivered by each Subsidiary Guarantor pursuant to the terms of this Agreement,
substantially in the form of Exhibit H hereto, as amended, supplemented, amended
and restated or otherwise modified from time to time.
"Surviving Corporation" is defined in clause (b) of the first recital.
"Swing Line Lender" means the Administrative Agent in its capacity as
Swing Line Lender hereunder.
"Swing Line Loan" is defined in clause (d) of Section 2.1.1.
"Swing Line Loan Commitment" is defined in clause (d) of Section 2.1.1.
"Swing Line Loan Commitment Amount" means, on any date, $5,000,000, as
such amount may be reduced from time to time pursuant to Section 2.2.
"Swing Line Note" means a promissory note of the Company payable to the
Swing Line Lender, in the form of Exhibit A-4 hereto (as such promissory note
may be amended, endorsed or otherwise modified from time to time), evidencing
the aggregate Indebtedness of the Company to the Swing Line Lender resulting
from outstanding Swing Line Loans, and also means all other promissory notes
accepted from time to time in substitution therefor or renewal thereof.
"Syndication Agent" is defined in the preamble.
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"Synthetic Lease" means, as applied to any Person, any lease (including
leases that may be terminated by the lessee at any time) of any property
(whether real, personal or mixed) (i) that is not a capital lease in accordance
with GAAP and (ii) in respect of which the lessee retains or obtains ownership
of the property so leased for federal income tax purposes, other than any such
lease under which that Person is the lessor.
"Tax Sharing Agreement" means the Tax Sharing Agreement, dated as of
February 4, 2000, executed and delivered by the Company and the Restricted
Subsidiaries.
"Taxes" means any and all income, stamp or other taxes, duties, levies,
imposts, charges, fees, deductions or withholdings, now or hereafter imposed,
levied, collected, withheld or assessed by any Governmental Authority, and all
interest, penalties or similar liabilities with respect thereto.
"Term A Loan" is defined in clause (a) of Section 2.1.3.
"Term A Loan Commitment" means, relative to any Lender, such Lender's
obligation (if any) to make Term A Loans pursuant to clause (a) of Section
2.1.3.
"Term A Loan Commitment Amount" means, on any date, $125,000,000.
"Term A Loan Commitment Termination Date" means the earliest of
(a) April 15, 2000 (if the Term A Loans have not been made
on or prior to such date);
(b) the Closing Date (immediately after the making of the
Term A Loans on such date); and
(c) the date on which any Commitment Termination Event
occurs.
Upon the occurrence of any event described in clauses (b) or (c), the Term A
Loan Commitments shall terminate automatically and without any further action.
"Term A Note" means a promissory note of the Company payable to any
Lender, in the form of Exhibit A-2 hereto (as such promissory note may be
amended, endorsed or otherwise modified from time to time), evidencing the
aggregate Indebtedness of the Company to such Lender resulting from outstanding
Term A Loans, and also means all other promissory notes accepted from time to
time in substitution therefor or renewal thereof.
"Term A Percentage" means, relative to any Lender, the applicable
percentage relating to Term A Loans set forth opposite its name on Schedule II
hereto under the Term A Loan Commitment column or set forth in a Lender
Assignment Agreement under the Term A Loan Commitment column, as such percentage
may be adjusted from time to time pursuant to Lender
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Assignment Agreements executed by such Lender and its Assignee Lender and
delivered pursuant to Section 11.11.1. A Lender shall not have any Term A Loan
Commitment if its percentage under the Term A Loan Commitment column is zero or
is blank.
"Term B Loan" is defined in clause (b) of Section 2.1.3.
"Term B Loan Commitment" means, relative to any Lender, such Lender's
obligation (if any) to make Term B Loans pursuant to clause (b) of Section
2.1.3.
"Term B Loan Commitment Amount" means, on any date, $205,000,000.
"Term B Loan Commitment Termination Date" means the earliest of
(a) April 15, 2000 (if the Term B Loans have not been made on
or prior to such date);
(b) the Closing Date (immediately after the making of the
Term B Loans on such date); and
(c) the date on which any Commitment Termination Event
occurs.
Upon the occurrence of any event described in clauses (b) or (c), the Term B
Loan Commitments shall terminate automatically and without any further action.
"Term B Note" means a promissory note of the Company payable to any
Lender, in the form of Exhibit A-3 hereto (as such promissory note may be
amended, endorsed or otherwise modified from time to time), evidencing the
aggregate Indebtedness of the Company to such Lender resulting from outstanding
Term B Loans, and also means all other promissory notes accepted from time to
time in substitution therefor or renewal thereof.
"Term B Percentage" means, relative to any Lender, the applicable
percentage relating to Term B Loans set forth opposite its name on Schedule II
hereto under the Term B Loan Commitment column or set forth in a Lender
Assignment Agreement under the Term B Loan Commitment column, as such percentage
may be adjusted from time to time pursuant to Lender Assignment Agreements
executed by such Lender and its Assignee Lender and delivered pursuant to
Section 11.11.1. A Lender shall not have any Term B Loan Commitment if its
percentage under the Term B Loan Commitment column is zero or is blank.
"Term Loans" means, collectively, the Term A Loans and the Term B
Loans.
"Termination Date" means the date on which all Obligations have been
paid in full in cash, all Letters of Credit have been terminated or expired (or
the Administrative Agent shall have received immediately available funds in an
amount equal to all Letter of Credit Outstandings and Canadian BAs, deposited in
a cash collateral account with the Administrative Agent or its
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designee on terms satisfactory to the Agents), all Rate Protection Agreements
have been terminated and all Commitments shall have terminated.
"Total Debt" means, on any date, the outstanding principal amount of
all Indebtedness of the Company and the Restricted Subsidiaries of the type
referred to in clause (a), clause (b) and clause (c), in each case of the
definition of "Indebtedness" and any Contingent Liability in respect of any of
the foregoing; provided, however, "Total Debt" shall not include Indebtedness in
respect of Synthetic Leases.
"Total Exposure Amount" means, on any date of determination (and
without duplication), the outstanding principal amount of all Loans, the
aggregate amount of all Letter of Credit Outstandings and the unfunded amount of
the Commitments.
"Trademark Security Agreement" means any Trademark Security Agreement
executed and delivered by any Obligor substantially in the form of Exhibit C to
the U.S. Pledge and Security Agreement, as amended, supplemented, amended and
restated or otherwise modified from time to time.
"Tranche" means, as the context may require, the Loans constituting
Term A Loans, Term B Loans, Revolving Loans or Swing Line Loans.
"Transaction" is defined in clause (d) of the second recital.
"Transaction Documents" means, collectively, each of the Material
Documents and all other agreements, documents, instruments, certificates,
filings, consents, approvals, board of directors resolutions and opinions
furnished pursuant to or in connection with the Acquisition, the RailAmerica
Refinancing, the RailTex Refinancing, the Subordinated Bridge Notes Issuance,
the Intermediate Holdings Asset Bridge Note Issuance, the Equity Issuance, the
Asset Transfer and the transactions contemplated hereby or thereby, in each case
as amended, supplemented, amended and restated or otherwise modified from time
to time in accordance with Section 7.2.12.
"type" means, relative to any Loan, the portion thereof, if any, being
maintained as a Base Rate Loan or a LIBO Rate Loan and, in the case of Revolving
Loans, made or being maintained as U.S. Revolving Loans, Canadian Loans or
Australian Revolving Loans.
"U.C.C." means the Uniform Commercial Code as in effect from time to
time in the State of New York; provided, that if, with respect to any Filing
Statement or by reason of any provisions of law, the perfection or the effect of
perfection or non-perfection of the security interests granted to the
Administrative Agent pursuant to the applicable Loan Document is governed by the
Uniform Commercial Code as in effect in a jurisdiction of the United States
other than New York, U.C.C. means the Uniform Commercial Code as in effect from
time to time in such other jurisdiction for purposes of the provisions of this
Agreement, each Loan Document and any Filing Statement relating to such
perfection or effect of perfection or non-perfection.
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"United States" or "U.S." means the United States of America, its
fifty states and the District of Columbia.
"U.S. Dollar" and the sign "$" mean the lawful currency of the United
States.
"U.S. Dollar Equivalent" means the Exchange Equivalent in U.S. Dollars
of any amount of the applicable Foreign Currency.
"U.S. Pledge and Security Agreement" means the U.S. Pledge and Security
Agreement executed and delivered by an Authorized Officer of Holdings,
Intermediate Holdings, the Company and each other Domestic Subsidiary Guarantor
pursuant to Section 5.1.13 or 7.1.8, substantially in the form of Exhibit G-1
hereto, as amended, supplemented, amended and restated or otherwise modified
from time to time.
"U.S. Revolving Loan Commitment" is defined in clause (a) of Section
2.1.1.
"U.S. Revolving Loan Commitment Amount" means $30,000,000, as such
amount may be reduced pursuant to the terms hereof.
"U.S. Revolving Loan Lender" means each Lender that has a percentage
of the U.S. Revolving Loan Commitment in excess of zero.
"U.S. Revolving Loan Percentage" means, relative to any Lender, the
applicable percentage relating to U.S. Revolving Loans set forth opposite its
name on Schedule II hereto under the U.S. Revolving Loan Commitment column or
set forth in a Lender Assignment Agreement under the U.S. Revolving Loan
Commitment column, as such percentage may be adjusted from time to time pursuant
to Lender Assignment Agreements executed by such Lender and its Assignee Lender
and delivered pursuant to Section 11.11.1. A Lender shall not have any U.S.
Revolving Loan Commitment if its percentage under the U.S. Revolving Loan
Commitment column is zero or is blank.
"U.S. Revolving Loans" is defined in clause (a) of Section 2.1.1.
"U.S. Revolving Note" means a promissory note of the Company payable to
any U.S. Revolving Loan Lender, in the form of Exhibit A-1A hereto (as such
promissory note may be amended, endorsed or otherwise modified from time to
time), evidencing the aggregate Indebtedness of the Company to such U.S.
Revolving Loan Lender resulting from outstanding U.S. Revolving Loans, and also
means all other promissory notes accepted from time to time in substitution
therefor or renewal thereof.
"Voting Stock" means, with respect to any Person, Capital Stock of any
class or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.
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"Welfare Plan" means a "welfare plan", as such term is defined in
Section 3(1) of ERISA.
"wholly owned" means any Subsidiary all of the outstanding common stock
(or similar equity interest) of which (other than any director's qualifying
shares or investments by foreign nationals mandated by applicable laws) is owned
directly or indirectly by Holdings or the Company.
SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in each other Loan Document and the
Disclosure Schedule.
SECTION 1.3. Cross-References. Unless otherwise specified, references
in a Loan Document to any Article or Section are references to such Article or
Section of such Loan Document, and references in any Article, Section or
definition to any clause are references to such clause of such Article, Section
or definition.
SECTION 1.4. Accounting and Financial Determinations. (a) Unless
otherwise specified, all accounting terms used in each Loan Document shall be
interpreted, and all accounting determinations and computations thereunder
(including under Section 7.2.4 and the definitions used in such calculations)
shall be made, in accordance with those generally accepted accounting principles
("GAAP") applied in the preparation of the financial statements referred to in
clause (a) of Section 5.1.8. Unless otherwise expressly provided, all financial
covenants and defined financial terms shall be computed on a consolidated basis
for the Company and the Restricted Subsidiaries, in each case without
duplication.
(b) For purposes of computing the Fixed Charge Coverage Ratio, Interest
Coverage Ratio and Leverage Ratio (and any financial calculations required to be
made or included within such ratios) as of the end of any Fiscal Quarter, all
components of such ratios for the period of four Fiscal Quarters ending at the
end of such Fiscal Quarter shall include, without duplication, (i) for each
Fiscal Quarter of Fiscal Year 2000 the computation of Interest Expense shall be
made as if the Credit Extensions incurred on the Closing Date by the Borrowers
were incurred on the first day of the first Fiscal Quarter would be used to
calculate the applicable ratio and (ii) such components of such ratios
attributable to any business or assets that have been acquired or disposed of by
the Company or any of the Restricted Subsidiaries (including through mergers or
consolidations) after the first day of such period of four Fiscal Quarters and
prior to the end of such period, as determined in good faith by Holdings on a
pro forma basis for such period of four Fiscal Quarters as if such acquisition
had occurred on such first day of such period (including, whether or not such
inclusion would be permitted under, solely in connection with the Transaction,
GAAP or in all cases, Regulation S-X of the Securities and Exchange Commission,
cost savings that would have been realized had such acquisition occurred on such
day).
SECTION 1.5. BBSY Rate. With respect to the Australian Revolving
Loans, all references in this Agreement to "LIBO Rate" and "LIBOR" shall be
deemed to be references to the "BBSY Rate".
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ARTICLE II
COMMITMENTS, BORROWING AND ISSUANCE
PROCEDURES, NOTES AND LETTERS OF CREDIT
SECTION 2.1. Commitments. On the terms and subject to the conditions of
this Agreement, the Lenders and the Issuers severally agree to make Credit
Extensions as set forth below.
SECTION 2.1.1. Revolving Loan Commitment and Swing Line Loan
Commitment. From time to time on any Business Day occurring from and after the
Closing Date but prior to the Revolving Loan Commitment Termination Date,
(a) each Lender having a U.S. Revolving Loan Commitment will
make loans denominated in U.S. Dollars (relative to such Lender, its
"U.S. Revolving Loans") to the Company equal to such Lender"s
Percentage, if any, of the aggregate amount of the Borrowing or
Borrowings of U.S. Revolving Loans requested by the Company to be made
on such day (with the commitment of each such Lender described in this
clause (a) herein referred to as its "U.S. Revolving Loan
Commitment"). On the terms and subject to the conditions hereof, the
Company may from time to time borrow, prepay and reborrow U.S.
Revolving Loans;
(b) each Australian Lender will make loans denominated in
Australian Dollars (relative to such Lender, its "Australian Revolving
Loans") to the Australian Borrower equal to such Lender"s Percentage,
if any, of the aggregate amount of the Borrowing or Borrowings of
Australian Revolving Loans requested by the Australian Borrower to be
made on such day (with the commitment of each such Lender described in
this clause (b) herein referred to as its "Australian Revolving Loan
Commitment"). Australian Revolving Loans may only be borrowed as LIBO
Rate Loans. On the terms and subject to the conditions hereof, the
Australian Borrower may from time to time borrow, prepay and reborrow
Australian Revolving Loans;
(c) each Canadian Lender will make loans (or accept Canadian
BAs) denominated in Canadian Dollars (such loans and Canadian BAs
relative to such Lender, its "Canadian Loans") to the Canadian Borrower
equal to such Lender"s Percentage, if any, of the aggregate amount of
the Borrowing or Borrowings of Canadian Loans requested by the Canadian
Borrower to be made on such day (with the commitment of each such
Lender described in this clause (c) herein referred to as its "Canadian
Revolving Loan Commitment"). Canadian Loans may only be borrowed as
Base Rate Loans or as Canadian BAs. On the terms and subject to the
conditions hereof, the Canadian Borrower may from time to time borrow,
prepay (or, in the case of Canadian BAs, cash collaterize) and reborrow
Canadian Loans; and
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(d) the Swing Line Lender agrees that it will make loans (its
"Swing Line Loans") to the Company equal to the principal amount of the
Swing Line Loan requested by the Company to be made on such day. The
Commitment of the Swing Line Lender described in this clause is herein
referred to as its "Swing Line Loan Commitment".
On the terms and subject to the conditions hereof, the Borrowers may from time
to time borrow, prepay and reborrow Revolving Loans and, in the case of the
Company, Swing Line Loans.
SECTION 2.1.2. Letter of Credit Commitment. From time to time on any
Business Day occurring from and after the Closing Date but prior to the
Revolving Loan Commitment Termination Date, the relevant Issuer agrees that it
will
(a) issue one or more standby letters of credit (relative to
such Issuer, its "Letter of Credit") for the account of the Company or
any other Domestic Subsidiary Guarantor in the Stated Amount requested
by the Company on such day; or
(b) extend the Stated Expiry Date of an existing standby
Letter of Credit previously issued hereunder.
No Stated Expiry Date shall extend beyond the earlier of (i) the Revolving Loan
Commitment Termination Date and (ii) unless otherwise agreed to by the Issuer in
its sole discretion, one year from the date of such issuance or extension.
SECTION 2.1.3. Term Loan Commitment. In a single Borrowing (which shall
be on a Business Day) occurring on or prior to the applicable Commitment
Termination Date, each Lender that has a Term A Loan Commitment or a Term B Loan
Commitment, as applicable, agrees that it will
(a) make loans (relative to such Lender, its "Term A Loans")
to the Company equal to such Lender's Term A Loan Percentage of the
aggregate amount of the Borrowing of Term A Loans requested by the
Company to be made on such day; and
(b) make loans (relative to such Lender, its "Term B Loans")
to the Company equal to such Lender's Term B Loan Percentage of the
aggregate amount of the Borrowing of Term B Loans requested by the
Company to be made on such day.
No amounts paid or prepaid with respect to Term Loans may be reborrowed.
SECTION 2.1.4. Lenders Not Permitted or Required to Make the Loans. No
Lender shall be permitted or required to, and the applicable Borrower shall not
request any Lender to, make any Loan if, after giving effect thereto, the
aggregate outstanding principal amount of
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(a) all U.S. Revolving Loans
(i) of all U.S. Revolving Loan Lenders, together with
the aggregate outstanding principal amount of all Swing Line
Loans and the aggregate amount of all Letter of Credit
Outstandings, would exceed the then existing U.S. Revolving
Loan Commitment Amount; or
(ii) of any such U.S. Revolving Loan Lender, together
with such Lender's Percentage of the aggregate outstanding
principal amount of all Swing Line Loans and the aggregate
amount of all Letter of Credit Outstandings, would exceed such
Lender's Percentage of the then existing U.S. Revolving Loan
Commitment Amount;
(b) all Canadian Loans
(i) of all Canadian Lenders would exceed the then
existing Canadian Revolving Loan Commitment Amount; or
(ii) of any such Canadian Lender would exceed such
Lender's Percentage of the then existing Canadian Revolving
Loan Commitment Amount;
(c) all Australian Revolving Loans
(i) of all Australian Lenders would exceed the then
existing Australian Revolving Loan Commitment Amount; or
(ii) of any such Australian Lender would exceed such
Lender's Percentage of the then existing Australian Revolving
Loan Commitment Amount;
(d) all Term A Loans or all Term B Loans (as the case may
be)
(i) of all Lenders made on the Closing Date would
exceed the Term A Loan Commitment Amount (in the case of Term
A Loans) or the Term B Loan Commitment Amount (in the case of
Term B Loans); or
(ii) of any such Lender with a Term A Loan Commitment
or with a Term B Loan Commitment, as applicable, made on the
Closing Date would exceed such Lender's Percentage of the Term
A Loan Commitment Amount (in the case of Term A Loans) or the
Term B Loan Commitment Amount (in the case of Term B Loans);
or
(e) all Swing Line Loans
(i) would exceed the then existing Swing Line Loan
Commitment Amount; or
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(ii), together with the aggregate outstanding
principal amount of all U.S. Revolving Loans and the aggregate
amount of all Letter of Credit Outstandings, would exceed the
then existing U.S. Revolving Loan Commitment Amount.
SECTION 2.1.5. Issuer Not Permitted or Required to Issue Letters of
Credit. No Issuer shall be permitted or required to, and the Company shall not
request any Issuer to, issue any Letter of Credit if, after giving effect
thereto, the aggregate amount of all Letter of Credit Outstandings (a) would
exceed the Letter of Credit Commitment Amount or (b), together with the
aggregate outstanding principal amount of all U.S. Revolving Loans and Swing
Line Loans would exceed the then existing U.S. Revolving Loan Commitment Amount.
SECTION 2.2. Reduction of the Commitment Amounts. The Commitment
Amounts are subject to reduction from time to time pursuant to this Section 2.2.
SECTION 2.2.1. Optional. The Company may, from time to time on any
Business Day occurring after the Closing Date, voluntarily reduce the amount of
the U.S. Revolving Loan Commitment Amount, any Foreign Currency Revolving Loan
Commitment Amount, the Swing Line Loan Commitment Amount or the Letter of Credit
Commitment Amount on the Business Day so specified by the Company; provided,
however, that all such reductions shall require at least one Business Day's
prior notice to the Administrative Agent and be permanent, and any partial
reduction of any Commitment Amount shall be in a minimum amount of (i)
$1,000,000 and in an integral multiple of $500,000 in the case of U.S. Revolving
Loans, (ii) Aus $500,000 and in an integral multiple of Aus $100,000 in the case
of Australian Revolving Loans and (iii) Cdn $500,000 and in an integral multiple
of Cdn $100,000 in the case of Canadian Loans. Any optional or mandatory
reduction of the U.S. Revolving Loan Commitment Amount pursuant to the terms of
this Agreement which reduces the U.S. Revolving Loan Commitment Amount below the
sum of (i) the Swing Line Loan Commitment Amount and (ii) the Letter of Credit
Commitment Amount shall result in an automatic and corresponding reduction of
the Swing Line Loan Commitment Amount and/or the Letter of Credit Commitment
Amount (as directed by the Company in a notice to the Administrative Agent
delivered together with the notice of such voluntary reduction in the U.S.
Revolving Loan Commitment Amount) to an aggregate amount not in excess of the
U.S. Revolving Loan Commitment Amount, as so reduced, without any further action
on the part of the Swing Line Lender or any Issuer.
SECTION 2.2.2. Mandatory. Following the prepayment in full of the Term
Loans, the U.S. Revolving Loan Commitment Amount shall, without any further
action, automatically and permanently be reduced on the date the Term Loans
would otherwise have been required to be prepaid pursuant to clauses (f), (g) or
(h) of Section 3.1.1, in an amount equal to the amount by which the Term Loans
would otherwise be required to be prepaid if Term Loans had been outstanding;
provided, however, the U.S. Revolving Loan Commitment Amount shall not be
required to be mandatorily reduced if any such reduction would cause the U.S.
Revolving Loan Commitment Amount to be less than $25,000,000.
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SECTION 2.3. Borrowing Procedures. Loans (other than Swing Line Loans)
shall be made by the Lenders in accordance with Section 2.3.1, and Swing Line
Loans shall be made by the Swing Line Lender in accordance with Section 2.3.2.
SECTION 2.3.1. Borrowing Procedure. In the case of Loans other than
Swing Line Loans, by delivering a Borrowing Request to the Administrative Agent
on or before 10:00 a.m. on a Business Day (and, in the case of Canadian Loans,
to the Canadian office of the Administrative Agent and, in the case of
Australian Revolving Loans, to the Australian Lenders), the applicable Borrower
may from time to time irrevocably request, on not less than one Business Day's
notice in the case of Base Rate Loans, or three Business Days' notice in the
case of LIBO Rate Loans or Canadian BAs, and in either case not more than five
Business Days' notice, that a Borrowing be made (a), in the case of LIBO Rate
Loans, in a minimum amount of (i) $500,000 and an integral multiple of $100,000
in the case of U.S. Loans and (ii) Aus $500,000 and in an integral multiple of
Aus $100,000 in the case of Australian Revolving Loans and (b), in the case of
Base Rate Loans, in a minimum amount of (i) $500,000 and an integral multiple of
$100,000 in the case of U.S. Loans and (ii) Cdn $500,000 and in an integral
multiple of Cdn $100,000 in the case of Canadian Loans or, in either case, in
the unused amount of the applicable Commitment; provided, however, that all of
the initial Loans shall be made as Base Rate Loans. On the terms and subject to
the conditions of this Agreement, each Borrowing shall be comprised of the type
of Loans, and shall be made on the Business Day, specified in such Borrowing
Request. In the case of Loans other than Swing Line Loans, Canadian Loans and
Australian Revolving Loans, on or before 11:00 a.m. on such Business Day each
Lender that has a Commitment to make the Loans being requested shall deposit
with the Administrative Agent same day funds in an amount equal to such Lender's
Percentage of the requested Borrowing. Such deposit will be made to an account
which the Administrative Agent shall specify from time to time by notice to the
Lenders. To the extent funds are received from the Lenders, the Administrative
Agent shall make such funds available to the applicable Borrower by wire
transfer to the accounts such Borrower shall have specified in its Borrowing
Request. No Lender's obligation to make any Loan shall be affected by any other
Lender's failure to make any Loan. The Canadian Lenders will on or before 11:00
a.m. or such Business Day, severally and not jointly, make an amount of such
Lender's Percentage of the requested Borrowing available to the Canadian
Borrower as directed in the relevant Borrowing Request. The Australian Lenders
will on or before 11:00 a.m. or such Business Day, severally and not jointly,
make an amount of such Lender's Percentage of the requested Borrowing available
to the Australian Borrower as directed in the relevant Borrowing Request.
SECTION 2.3.2. Swing Line Loans. (a) By telephonic notice to the Swing
Line Lender on or before 12:00 noon on a Business Day (followed (within one
Business Day) by the delivery of a confirming Borrowing Request), the Company
may from time to time irrevocably request that Swing Line Loans be made by the
Swing Line Lender in an aggregate minimum principal amount of $500,000 and an
integral multiple of $100,000. All Swing Line Loans shall be made as Base Rate
Loans and shall not be entitled to be converted into LIBO Rate Loans. The
proceeds of each Swing Line Loan shall be made available by the Swing Line
Lender to the Company by wire transfer to the account the Company shall have
specified in its notice therefor by the close of business on the Business Day
telephonic notice is received by the Swing Line Lender.
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(b) If (i) any Swing Line Loan shall be outstanding for more than four
Business Days, (ii) any Swing Line Loan is or will be outstanding on a date when
the Company requests that a U.S. Revolving Loan be made, or (iii) any Default
shall occur and be continuing, then each U.S. Revolving Loan Lender (other than
the Swing Line Lender) irrevocably agrees that it will, at the request of the
Swing Line Lender, make a U.S. Revolving Loan (which shall initially be funded
as a Base Rate Loan) in an amount equal to such Lender's U.S. Revolving Loan
Percentage of the aggregate principal amount of all such Swing Line Loans then
outstanding (such outstanding Swing Line Loans hereinafter referred to as the
"Refunded Swing Line Loans"). On or before 11:00 a.m. on the first Business Day
following receipt by each U.S. Revolving Loan Lender of a request to make U.S.
Revolving Loans as provided in the preceding sentence, each U.S. Revolving Loan
Lender shall deposit in an account specified by the Swing Line Lender the amount
so requested in same day funds and such funds shall be applied by the Swing Line
Lender to repay the Refunded Swing Line Loans. At the time the U.S. Revolving
Loan Lenders make the above referenced U.S. Revolving Loans, the Swing Line
Lender shall be deemed to have made, in consideration of the making of the
Refunded Swing Line Loans, U.S. Revolving Loans in an amount equal to the Swing
Line Lender's U.S. Revolving Loan Percentage of the aggregate principal amount
of the Refunded Swing Line Loans. Upon the making (or deemed making, in the case
of the Swing Line Lender) of any U.S. Revolving Loans pursuant to this clause,
the amount so funded shall become outstanding under such U.S. Revolving Loan
Lender's U.S. Revolving Note and shall no longer be owed under the Swing Line
Note. All interest payable with respect to any U.S. Revolving Loans made (or
deemed made, in the case of the Swing Line Lender) pursuant to this clause shall
be appropriately adjusted to reflect the period of time during which the Swing
Line Lender had outstanding Swing Line Loans in respect of which such U.S.
Revolving Loans were made. Each U.S. Revolving Loan Lender's obligation to make
the U.S. Revolving Loans referred to in this clause shall be absolute and
unconditional and shall not be affected by any circumstance, including (i) any
set-off, counterclaim, recoupment, defense or other right which such Lender may
have against the Swing Line Lender, any Obligor or any Person for any reason
whatsoever; (ii) the occurrence or continuance of any Default; (iii) any adverse
change in the condition (financial or otherwise) of any Obligor; (iv) the
acceleration or maturity of any Obligations or the termination of any Commitment
after the making of any Swing Line Loan; (v) any breach of any Loan Document by
any Person; or (vi) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing.
SECTION 2.4. Continuation and Conversion Elections. By delivering a
Continuation/Conversion Notice to the Administrative Agent on or before 11:00
a.m., New York time at its applicable office, on a Business Day, a Borrower may
from time to time irrevocably elect, on not less than one Business Day's notice
(in the case of a conversion of LIBO Rate Loans into Base Rate Loans) or three
Business Days' notice (in the case of a continuation of LIBO Rate Loans or a
conversion of Base Rate Loans into LIBO Rate Loans) nor more than five Business
Days' notice (in the case of any Loans) that all, or any portion in a minimum
amount of $500,000 or any larger integral multiple of $100,000 in the case of
any Borrowing of LIBO Rate Loans be, in the case of Base Rate Loans, converted
into LIBO Rate Loans or, in the case of LIBO Rate Loans, continued as LIBO Rate
Loans or, in the case of U.S. Loans only, converted to Base Rate Loans;
provided, however, that, in the absence of delivery of a Continuation/Conversion
Notice
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with respect to any Loan that is a LIBO Rate Loan at least three Business Days
before the last day of the then current Interest Period with respect thereto,
such LIBO Rate Loan shall, (A) in the case of a LIBO Rate Loan that is an
Australian Revolving Loan, automatically be continued as a LIBO Rate Loan with
an Interest Period of one month and (B) in the case of a LIBO Rate Loan that is
a U.S. Loan automatically convert to a Base Rate Loan, in each case on such last
day; provided, further, however, that (x) each such conversion or continuation
shall be pro rated among the applicable outstanding Loans of the relevant
Lenders, and (y) no portion of the outstanding principal amount of any Loans may
be continued as, or be converted into, LIBO Rate Loans when any Default has
occurred and is continuing.
SECTION 2.4.1. Converting Canadian Prime Rate Loans to, or Continuing
Canadian BAs as, Canadian BAs. Provided that the Canadian Borrower has, by
delivering a Continuation/Conversion Notice to the Canadian office of the
Administrative Agent on or before 11:00 a.m., New York time at the
Administrative Agent's office for Canadian Loans, not less than three and not
more than five Business Days before the date on which drafts are to be accepted,
requested the Canadian Lenders to accept its drafts to replace all or a portion
of an outstanding Canadian Loan, then each Canadian Lender shall, on the date of
conversion or continuation, as applicable, and concurrent with the payment by
the Canadian Borrower to the Canadian Lenders of an amount equal to the
difference between the principal or face amount of such outstanding Canadian
Loan or the portion thereof which is being converted or continued and the
aggregate Notional BA Proceeds with respect to the aggregate face amount equal
to its Percentage of the aggregate principal or face amount of such Canadian
Loan or the portion thereof which is being converted or continued, such
acceptance to be in accordance with Section 2.8.
SECTION 2.4.2. Converting Canadian BAs to Canadian Prime Rate
Loans. Each applicable Canadian Lender shall, at the end of an Interest Period
with respect to Canadian BAs which such Lender has accepted, pay to the holder
thereof the face amount of such Canadian BA. If the Canadian Borrower has, by
delivering a Continuation/Conversion Notice to the Canadian office of the
Administrative Agent on or before 11:00 a.m., New York time at the Administra-
tive Agent's office for Canadian Loans, not less than three nor more than five
Business Days before the end of an Interest Period, requested a Canadian Lender
to convert all or a portion of outstanding maturing Canadian BAs into a Canadian
Prime Rate Loan, or if the Canadian Borrower has failed to deliver a
Continuation/Conversion Notice pursuant to Section 2.4.1 or this Section 2.4.2,
such Lender shall, upon the end of the current Interest Period with respect to
such Canadian BAs and the payment by such Lender to the holders of such Canadian
BAs of the aggregate face amount thereof, be deemed to have made to the Canadian
Borrower the Canadian Prime Rate Loan into which the matured Canadian BAs or a
portion thereof are converted in the aggregate principal amount equal to its
Percentage of the aggregate face amount of the matured Canadian BAs or the
portion thereof which are being converted.
SECTION 2.5. Funding. Each Lender may, if it so elects, fulfill its
obligation to make, continue or convert LIBO Rate Loans hereunder by causing one
of its foreign branches or Affiliates (or an international banking facility
created by such Lender) to make or maintain such LIBO Rate Loan; provided,
however, that such LIBO Rate Loan shall nonetheless be deemed to
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have been made and to be held by such Lender, and the obligation of a Borrower
to repay such LIBO Rate Loan shall nevertheless be to such Lender for the
account of such foreign branch, Affiliate or international banking facility. In
addition, each Borrower hereby consents and agrees that, for purposes of any
determination to be made for purposes of Sections 4.1, 4.2, 4.3 or 4.4, it shall
be conclusively assumed that each Lender elected to fund all LIBO Rate Loans by
purchasing U.S. Dollar deposits in its LIBOR Office's interbank eurodollar
market. Canadian Loans shall be funded by the Canadian Lenders from their
offices specified for Canadian Loans. Australian Revolving Loans shall be funded
by the Australian Lenders from their offices specified for Australian Revolving
Loans.
SECTION 2.6. Issuance Procedures. By delivering to the Administrative
Agent an Issuance Request on or before 10:00 a.m. on a Business Day, the Company
may from time to time irrevocably request on not less than three nor more than
ten Business Days' notice, in the case of an initial issuance of a Letter of
Credit and not less than three Business Days' prior notice, in the case of a
request for the extension of the Stated Expiry Date of a standby Letter of
Credit (in each case, unless a shorter notice period is agreed to by the Issuer,
in its sole discretion), that an Issuer issue, or extend the Stated Expiry Date
of, a Letter of Credit in such form as may be requested by the Company and
approved by such Issuer, solely for the purposes described in Section 7.1.7.
Each Letter of Credit shall by its terms be stated to expire on a date (its
"Stated Expiry Date") no later than the earlier to occur of (i) the Revolving
Loan Commitment Termination Date or (ii) (unless otherwise agreed to by an
Issuer, in its sole discretion), one year from the date of its issuance. Each
Issuer will make available to the beneficiary thereof the original of the Letter
of Credit which it issues. Each Letter of Credit shall only be denominated in
U.S. Dollars.
SECTION 2.6.1. Other Lenders' Participation Participation. Upon the
issuance of each Letter of Credit, and without further action, each U.S.
Revolving Loan Lender (other than such Issuer) shall be deemed to have
irrevocably purchased, to the extent of its Percentage to make U.S. Revolving
Loans, a participation interest in such Letter of Credit (including the
Contingent Liability and any Reimbursement Obligation with respect thereto), and
such U.S. Revolving Loan Lender shall, to the extent of its Percentage to make
U.S. Revolving Loans, be responsible for reimbursing within one Business Day the
Issuer for Reimbursement Obligations which have not been reimbursed by the
Company in accordance with Section 2.6.3. In addition, such U.S. Revolving Loan
Lender shall, to the extent of its Percentage to make U.S. Revolving Loans, be
entitled to receive a ratable portion of the Letter of Credit fees payable
pursuant to Section 3.3.3 with respect to each Letter of Credit (other than the
issuance fees payable to an Issuer of such Letter of Credit pursuant to the last
sentence of Section 3.3.3) and of interest payable pursuant to Section 3.2 with
respect to any Reimbursement Obligation. To the extent that any U.S. Revolving
Loan Lender has reimbursed any Issuer for a Disbursement, such Lender shall be
entitled to receive its ratable portion of any amounts subsequently received
(from the Company or otherwise) in respect of such Disbursement.
SECTION 2.6.2. Disbursements. An Issuer will notify the Company and the
Administrative Agent promptly of the presentment for payment of any Letter of
Credit issued by such Issuer, together with notice of the date (the
"Disbursement Date") such payment shall be made (each such payment, a
"Disbursement"). Subject to the terms and provisions of such Letter of
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Credit and this Agreement, the applicable Issuer shall make such payment to the
beneficiary (or its designee) of such Letter of Credit. Prior to 11:00 a.m. on
the first Business Day following the Disbursement Date, the Company will
reimburse the Administrative Agent, for the account of the applicable Issuer,
for all amounts which such Issuer has disbursed under such Letter of Credit,
together with interest thereon at a rate per annum equal to the rate per annum
then in effect for Base Rate Loans (with the then Applicable Margin for U.S.
Revolving Loans accruing on such amount) pursuant to Section 3.2 for the period
from the Disbursement Date through the date of such reimbursement. Without
limiting in any way the foregoing and notwithstanding anything to the contrary
contained herein or in any separate application for any Letter of Credit, the
Company hereby acknowledges and agrees that it shall be obligated to reimburse
the applicable Issuer upon each Disbursement of a Letter of Credit, and it shall
be deemed to be the obligor for purposes of each such Letter of Credit issued
hereunder (whether the account party on such Letter of Credit is the Company or
a Subsidiary Guarantor).
SECTION 2.6.3. Reimbursement. The obligation (a "Reimbursement
Obligation") of the Company under Section 2.6.2 to reimburse an Issuer with
respect to each Disbursement (including interest thereon), and, upon the failure
of the Company to reimburse an Issuer, each U.S. Revolving Loan Lender's
obligation under Section 2.6.1 to reimburse an Issuer, shall be absolute and
unconditional under any and all circumstances and irrespective of any setoff,
counterclaim or defense to payment which the Company or such U.S. Revolving
Loan Lender, as the case may be, may have or have had against such Issuer or
any Lender, including any defense based upon the failure of any Disbursement to
conform to the terms of the applicable Letter of Credit (if, in such Issuer's
good faith opinion, such Disbursement is determined to be appropriate) or any
non-application or misapplication by the beneficiary of the proceeds of such
Letter of Credit; provided, however, that after paying in full its Reimbursement
Obligation hereunder, nothing herein shall adversely affect the right of the
Company or such Lender, as the case may be, to commence any proceeding against
an Issuer for any wrongful Disbursement made by such Issuer under a Letter of
Credit as a result of acts or omissions constituting gross negligence or wilful
misconduct on the part of such Issuer.
SECTION 2.6.4. Deemed Disbursements. Upon the occurrence and during the
continuation of any Default under Section 8.1.9 or upon notification by the
Administrative Agent (acting at the direction of the Required Lenders) to the
Company of its obligations under this Section, following the occurrence and
during the continuation of any other Event of Default,
(a) the aggregate Stated Amount of all Letters of Credit
shall, without demand upon or notice to the Company or any other
Person, be deemed to have been paid or disbursed by the Issuers of such
Letters of Credit (notwithstanding that such amount may not in fact
have been paid or disbursed); and
(b) the Company shall be immediately obligated to reimburse
the Issuers for the amount deemed to have been so paid or disbursed by
such Issuers.
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Amounts payable by the Company pursuant to this Section shall be deposited in
immediately available funds with the Administrative Agent and held as collateral
security for the Reimbursement Obligations. When all Defaults giving rise to the
deemed disbursements under this Section have been cured or waived the
Administrative Agent shall return to the Company all amounts then on deposit
with the Administrative Agent pursuant to this Section which have not been
applied to the satisfaction of the Reimbursement Obligations.
SECTION 2.6.5. Nature of Reimbursement Obligations. The Company, each
other Obligor and, to the extent set forth in Section 2.6.1, each U.S. Revolving
Loan Lender shall assume all risks of the acts, omissions or misuse of any
Letter of Credit by the beneficiary thereof. No Issuer (except to the extent of
its own gross negligence or wilful misconduct) shall be responsible for:
(a) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any Letter of Credit or any document submitted by any
party in connection with the application for and issuance of a Letter
of Credit, even if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged;
(b) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any instrument transferring or assigning or purporting
to transfer or assign a Letter of Credit or the rights or benefits
thereunder or the proceeds thereof in whole or in part, which may prove
to be invalid or ineffective for any reason;
(c) failure of the beneficiary to comply fully with conditions
required in order to demand payment under a Letter of Credit;
(d) errors, omissions, interruptions or delays in transmission
or delivery of any messages, by mail, cable, telegraph, telex or
otherwise; or
(e) any loss or delay in the transmission or otherwise of any
document or draft required in order to make a Disbursement under a
Letter of Credit.
None of the foregoing shall affect, impair or prevent the vesting of any of the
rights or powers granted to any Issuer or any U.S. Revolving Loan Lender
hereunder. In furtherance and not in limitation or derogation of any of the
foregoing, any action taken or omitted to be taken by an Issuer in good faith
(and not constituting gross negligence or willful misconduct) shall be binding
upon each Obligor and each such Secured Party, and shall not put such Issuer
under any resulting liability to any Obligor or any Secured Party, as the case
may be.
SECTION 2.7. Register; Notes. (a) Each Lender may maintain in
accordance with its usual practice an account or accounts evidencing the
Indebtedness of each Borrower to such Lender resulting from each Loan made by
such Lender, including the amounts of principal and interest payable and paid
to such Lender from time to time hereunder. In the case of a Lender that does
not request, pursuant to clause (c) below, execution and delivery of a Note
evidencing the
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Loans made by such Lender to such Borrower, such account or accounts shall, to
the extent not inconsistent with the notations made by the Administrative Agent
in the Register, be conclusive and binding on such Borrower absent manifest
error; provided, however, that the failure of any Lender to maintain such
account or accounts shall not limit or otherwise affect any Obligations of the
Borrower or any other Obligor.
(b) Each Borrower hereby designates the Administrative Agent to serve
as such Borrower's agent, solely for the purpose of this clause (b), to maintain
a register (the "Register") on which the Administrative Agent will record each
Lender's Commitments, the Loans made by each Lender and each repayment in
respect of the principal amount of the Loans of each Lender and annexed to which
the Administrative Agent shall retain a copy of each Lender Assignment Agreement
delivered to the Administrative Agent pursuant to Section 11.11.1. Failure to
make any recordation, or any error in such recordation, shall not affect such
Borrower"s obligation in respect of such Loans. The entries in the Register
shall be conclusive, in the absence of manifest error, and the applicable
Borrower, the Administrative Agent and the Lenders shall treat each Person in
whose name a Loan (and as provided in clause (c) the Note evidencing such Loan,
if any) is registered as the owner thereof for all purposes of this Agreement,
notwithstanding notice or any provision herein to the contrary. A Lender's
Commitment and the Loans made pursuant thereto may be assigned or otherwise
transferred in whole or in part only by registration of such assignment or
transfer in the Register. Any assignment or transfer of a Lender's Commitment or
the Loans made pursuant thereto shall be registered in the Register only upon
delivery to the Administrative Agent of a Lender Assignment Agreement duly
executed by the assignor thereof. No assignment or transfer of a Lender"s
Commitment or the Loans made pursuant thereto shall be effective unless such
assignment or transfer shall have been recorded in the Register by the
Administrative Agent as provided in this Section.
(c) Each Borrower agrees that, upon the request to the Administrative
Agent by any Lender, the applicable Borrower will execute and deliver to such
Lender, as applicable, a U.S. Revolving Note, a Canadian Revolving Note, an
Australian Revolving Note, a Term A Note, a Term B Note and a Swing Line Note,
as the case may be, evidencing the Loans made by such Lender. Each Borrower
hereby irrevocably authorizes each Lender to make (or cause to be made)
appropriate notations on the grid attached to such Lender"s Notes (or on any
continuation of such grid), which notations, if made, shall evidence, inter
alia, the date of, the outstanding principal amount of, and the interest rate
and Interest Period applicable to the Loans evidenced thereby. Such notations
shall, to the extent not inconsistent with the notations made by the
Administrative Agent in the Register, be conclusive and binding on such Borrower
absent manifest error; provided, however, that the failure of any Lender to make
any such notations or any error in any such notations shall not limit or
otherwise affect any Obligations of such Borrower or any other Obligor. The
Loans evidenced by any such Note and interest thereon shall at all times
(including after assignment pursuant to Section 11.11.1) be represented by one
or more Notes payable to the order of the payee named therein and its registered
assigns. A Note and the obligation evidenced thereby may be assigned or
otherwise transferred in whole or in part only by registration of such
assignment or transfer of such Note and the obligation evidenced thereby in the
Register (and each Note shall expressly so provide). Any assignment or transfer
of all or part of an obligation evidenced by a
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Note shall be registered in the Register only upon surrender for registration of
assignment or transfer of the Note evidencing such obligation, accompanied by a
Lender Assignment Agreement duly executed by the assignor thereof, and
thereupon, if requested by the assignee, one or more new Notes shall be issued
to the designated assignee and the old Note shall be returned by the
Administrative Agent to the applicable Borrower marked "exchanged". No
assignment of a Note and the obligation evidenced thereby shall be effective
unless it shall have been recorded in the Register by the Administrative Agent
as provided in this Section.
SECTION 2.8. Canadian BAs. Not in limitation of any other provision of
this Agreement, but in furtherance thereof, the provisions of this Section 2.8
shall further apply to the acceptance, rolling over and conversion of Canadian
BAs.
SECTION 2.8.1. Funding of Canadian BAs. If the Canadian office of the
Administrative Agent receives a Borrowing Request or a Continuation/Conversion
Notice from the Canadian Borrower requesting a Borrowing or a rollover of, or a
conversion into, a Canadian Loan by way of Canadian BAs, the Administrative
Agent shall notify each of the applicable Lenders, prior to 11:00 a.m., Toronto
time, on the second Business Day prior to the date of such Credit Extension, of
such request and of each such Lender's Percentage of such Canadian Loan. Each
applicable Lender shall, not later than 11:00 a.m., Toronto time, on the date of
each Canadian Loan by way of Canadian BAs (whether in respect of the Credit
Extension or pursuant to a rollover or conversion), accept drafts of the
Canadian Borrower which are presented to it for acceptance and which have an
aggregate face amount equal to such Lender's Percentage of the total Credit
Extension being made available by way of Canadian BAs on such date. With respect
to each drawdown of, rollover of or conversion into Canadian BAs, each such
Lender shall not be required to accept any draft which has a face amount which
is not in a minimum amount of Cdn $500,000 and in an integral multiple of Cdn
$100,000. Concurrent with the acceptance of drafts of the Canadian Borrower as
aforesaid, each applicable Lender shall, upon fulfillment by the Canadian
Borrower of the terms and conditions set forth in Article V, severally and not
jointly, make available to the Canadian Borrower as set forth in the relevant
Borrowing Request the aggregate Notional BA Proceeds with respect to the
Canadian BAs being purchased by such Lender (net of the aggregate amount
required to repay such Lender's outstanding Canadian BAs that are maturing on
such date and/or Canadian Prime Rate Loans of such Lender that are being
converted on such date). Each Canadian BA to be accepted by any Lender shall be
accepted by such Lender at its Domestic Office located in Canada.
SECTION 2.8.2. Acceptance Fees. With respect to each draft of the
Canadian Borrower accepted pursuant hereto, the Canadian Borrower shall pay to
the Canadian Lenders, in advance, an acceptance fee calculated at the rate per
annum, on the basis of a year of 365 days or 366 days, as the case may be, equal
to the Applicable Canadian BA Stamping Fee on the face amount of such Canadian
BA for its term, being the actual number of days in the period commencing on the
date of acceptance of the Canadian Borrower's draft and continuing to (but
excluding) the maturity date of such Canadian BA. Such acceptance fee shall be
non-refundable and shall be fully earned when due. Such acceptance fee shall be
paid to the Canadian Lenders by deducting the amount thereof
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from what would otherwise be Notional BA Proceeds (excluding such fee) funded
pursuant to Section 2.8.1.
SECTION 2.8.3. Execution of Canadian BAs. (a) To facilitate the
acceptance of Canadian BAs hereunder, the Canadian Borrower hereby appoints each
Canadian Lender as its attorney to sign and endorse on its behalf, in accordance
with clause (d) of Section 2.8.3, an appropriate number of drafts in the form
prescribed by that Canadian Lender.
(b) Each Canadian Lender may, at its option, execute any draft in
handwriting or by the facsimile or mechanical signature of any of its authorized
officers, and the Canadian Lenders are hereby authorized to accept or pay, as
the case may be, any draft of the Canadian Borrower which purports to bear such
a signature notwithstanding that any such individual has ceased to be an
authorized officer of the Canadian Lender.
(c) Any draft or Canadian BA signed by a Canadian Lender as attorney
for the Canadian Borrower whether signed in handwriting or by the facsimile or
mechanical signature of an authorized officer of a Canadian Lender, may be dealt
with by the Agent or any Lender to all intents and purposes and shall bind the
Canadian Borrower as if duly signed and issued by the Canadian Borrower.
(d) The receipt by the Administrative Agent of a request for a Credit
Extension by way of Canadian BAs shall be each Canadian Lender's sufficient
authority to execute, and each Canadian Lender shall, subject to the terms and
conditions of this Agreement, execute drafts in accordance with such request and
the advice of the Administrative Agent pursuant to Section 2.8.1, and the drafts
so executed shall thereupon be deemed to have been presented for acceptance.
SECTION 2.8.4. Special Provisions Relating to Acceptance Notes. (a) The
Canadian Borrower and each applicable Lender hereby acknowledge and agree that
from time to time certain Lenders which are not Canadian chartered banks or
which are Canadian chartered banks listed on Schedule II of the Bank Act
(Canada) may not be authorized to or may, as a matter of general corporate
policy, elect not to accept Canadian BA drafts, and the Canadian Borrower and
each applicable Lender agrees that any such Lender may purchase Acceptance Notes
of the Canadian Borrower in accordance with the provisions of Section 2.8.4(b)
in lieu of accepting Canadian BAs for its account.
(b) In the event that any Lender described in Section 2.8.4(a) above is
unable to, or elects as a matter of general corporate policy not to, accept
Canadian BAs hereunder, such Lender shall not accept Canadian BAs hereunder, but
rather, if the Canadian Borrower requests the acceptance of such Canadian BAs,
the Canadian Borrower shall deliver to such Lender non-interest bearing
promissory notes (each, an "Acceptance Note") of the Canadian Borrower,
substantially in the form of Exhibit A-5 hereto, having the same maturity as the
Canadian BAs that would otherwise be accepted by such Lender and in an aggregate
principal amount equal to the undiscounted face amount of such Canadian BAs.
Each such Lender hereby agrees to purchase each Acceptance Note from the
Canadian Borrower at a purchase price equal to the Notional BA Proceeds for a
Lender
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listed on Schedule II to the Bank Act (Canada) which would have been applicable
if a Canadian BA draft had been accepted by such bank and such Acceptance Notes
shall be governed by the provisions of this Article II as if they were Canadian
BAs.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1 Repayments and Prepayments; Application. The Borrowers
agree that the Loans shall be repaid and prepaid pursuant to the following
terms.
SECTION 3.1.1. Repayments and Prepayments. Each Borrower shall repay in
full the unpaid principal amount of each Loan made to such Borrower upon the
applicable Stated Maturity Date therefor. Prior thereto, payments and
prepayments of Loans shall or may be made as set forth below.
(a) From time to time on any Business Day, the Borrowers may
make a voluntary prepayment, in whole or in part, of the outstanding
principal amount of any
(i) Loans (other than Swing Line Loans and Canadian
BAs); provided, however, that (A) any such prepayment of Term
A Loans and Term B Loans shall be made pro rata among Term A
Loans and Term B Loans of the same type and, if applicable,
having the same Interest Period of all Lenders that have made
such Term A Loans or Term B Loans (applied to the remaining
amortization payments for the Term A Loans and the Term B
Loans, as the case may be, in such amounts as the Company
shall determine) and any such prepayment of Revolving Loans
shall be made pro rata among the Revolving Loans of the same
type and, if applicable, having the same Interest Period of
all Lenders that have made such Revolving Loans; (B) all such
voluntary prepayments shall require at least one but no more
than five Business Days' prior written notice to the
Administrative Agent; and (C) all such voluntary partial
prepayments shall be, in the case of (I) LIBO Rate Loans, in
an aggregate minimum amount of (A) $500,000 and an integral
multiple of $100,000 in the case of U.S. Loans and (B) Aus
$500,000 and in an integral multiple of Aus $100,000 in the
case of Australian Revolving Loans and, (II) in the case of
Base Rate Loans, in an aggregate minimum amount of (A)
$500,000 and an integral multiple of $100,000 in the case of
U.S. Loans and (B) Cdn $500,000 and in an integral multiple of
Cdn $100,000 in the case of Canadian Loans; and
(ii) Swing Line Loans; provided, that (A) all such
voluntary prepayments shall require prior telephonic notice to
the Swing Line Lender on or before 1:00 p.m. on the day of
such prepayment (such notice to be confirmed in writing within
24 hours thereafter); and (B) all such voluntary partial
prepayments shall be in an aggregate minimum amount of
$500,000 and an integral multiple of $100,000.
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In addition, from time to time on any Business Day, the Canadian
Borrower may, upon not less than one Business Day's notice to the
Administrative Agent, elect to deposit with the Administrative Agent
Canadian Dollars in immediately available funds to be held by the
Administrative Agent, pursuant to collateral arrangements satisfactory
to it, for application to the payment of Canadian BAs designated by the
Canadian Borrower in such notice (provided that any such designation
shall be made pro rata among the Canadian Lenders on the basis of the
aggregate face amount of Canadian BAs then outstanding). If such a
deposit is made, then such Canadian BAs shall (to the extent of such
deposit) be deemed no longer outstanding for purposes of this
Agreement.
(b) On each date when the sum of (i) the aggregate outstanding
principal amount of all U.S. Revolving Loans and Swing Line Loans and
(ii) the aggregate amount of all Letter of Credit Outstandings exceeds
the U.S. Revolving Loan Commitment Amount (as it may be reduced from
time to time pursuant to this Agreement), the Company shall make a
mandatory prepayment of Revolving Loans or Swing Line Loans (or both).
(c) On the Stated Maturity Date and on each Quarterly Payment
Date occurring during any period set forth below, the Company shall
make a scheduled repayment of the aggregate outstanding principal
amount, if any, of all Term A Loans in an amount equal to the amount
set forth below opposite the Stated Maturity Date or such Quarterly
Payment Date, as applicable:
Amount of Required
Period Principal Repayment
------ -------------------
Effective Date through (and
including) 12/31/2000 $ 1,562,500
01/01/2001 through (and
including) 12/31/2001 $ 3,125,000
01/01/2002 through (and
including) 12/31/2002 $ 4,687,500
01/01/2003 through (and
including) 12/31/2003 $ 6,250,000
01/01/2004 through (and
including) 9/30/2005 $ 7,812,500
Stated Maturity Date for
Term A Loans $ 7,812,500 or the
then outstanding principal
amount of all Term A Loans, if
different.
(d) On the Stated Maturity Date and on each Quarterly Payment
Date occurring during any period set forth below, the Company shall
make a scheduled repayment of the
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aggregate outstanding principal amount, if any, of all Term B Loans in an amount
equal to the amount set forth below opposite the Stated Maturity Date or such
Quarterly Payment Date, as applicable:
Amount of Required
Period Principal Repayment
------ -------------------
Effective Date through (and
including) 12/31/2005 $ 512,500
01/01/2006 through (and
including) 9/30/2006 $ 48,175,000
Stated Maturity Date for
Term B Loans $ 48,175,000 or the then
outstanding principal
amount of all Term B Loans,
if different.
(e) The Company shall, following the receipt by the Company or
any Restricted Subsidiary of any Casualty Proceeds in excess of
$500,000 (individually or in the aggregate (when taken together with
all other Casualty Proceeds and all Net Disposition Proceeds) over the
course of a Fiscal Year), deliver to the Agents a calculation of the
amount of such Casualty Proceeds and make a mandatory prepayment of the
Term Loans in an amount equal to 100% of such Casualty Proceeds within
30 days of the receipt thereof to be applied as set forth in Section
3.1.2; provided, however, that no mandatory prepayment on account of
Casualty Proceeds shall be required under this clause if the Company
informs the Agents in writing no later than 30 days following the
occurrence of the Casualty Event resulting in such Casualty Proceeds of
the Company's or the Restricted Subsidiary's good faith intention to
apply such Casualty Proceeds to the rebuilding or replacement of the
damaged, destroyed or condemned assets or property or the acquisition
or construction of other long-term capital assets useful in the
Company's or such Restricted Subsidiary's business and the Company or
the Restricted Subsidiary in fact uses such Casualty Proceeds to
rebuild or replace such damaged, destroyed or condemned assets or
acquire or construct such other long-term assets within 360 days
following the receipt of such Casualty Proceeds, with the amount of
such Casualty Proceeds unused after such 360-day period being applied
to the Term Loans pursuant to Section 3.1.2; provided, further,
however, that (i) at any time when any Specified Default shall have
occurred and be continuing, all Casualty Proceeds (together with Net
Disposition Proceeds not applied as provided in clause (f) below) shall
be deposited in an account maintained with the Administrative Agent to
pay for such rebuilding or replacement whenever no Specified Default is
then continuing or except as otherwise agreed to by the Agents for
disbursement at the request of the Company or the Restricted
Subsidiary, as the case may be, or (ii) if all such Casualty Proceeds
(together with Net Disposition Proceeds not applied as provided in
clause (f) below) aggregating in excess of $500,000 have not yet been
applied as
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described in the notice required above (or in accordance with clause
(f) below), all such Casualty Proceeds and Net Disposition Proceeds
shall be deposited in an account maintained with the Administrative
Agent for disbursement at the request of the Company or the Restricted
Subsidiaries, as the case may be, to be used for the purpose(s) set
forth in such written notice(s) or (iii) if such Casualty Proceeds were
related to assets held by (x) a Canadian Subsidiary any such
reinvestments must be made by a Canadian Restricted Subsidiary, (y) an
Australian Subsidiary any such reinvestment must be made by an
Australian Restricted Subsidiary and (z) the Company or a Domestic
Subsidiary any such reinvestment must be made by the Company or a
Domestic Restricted Subsidiary.
(f) The Company shall, following the receipt by the Company or
any Restricted Subsidiary of any Net Disposition Proceeds in excess of
$500,000 (individually or in the aggregate (when taken together with
all other Net Disposition Proceeds and all Casualty Proceeds) over the
course of a Fiscal Year), deliver to the Agents a calculation of the
amount of such Net Disposition Proceeds and make a mandatory prepayment
of the Term Loans in an amount equal to 100% of such Net Disposition
Proceeds within one Business Day of the receipt thereof to be applied
as set forth in Section 3.1.2; provided, however, that no mandatory
prepayment on account of Net Disposition Proceeds shall be required
under this clause if the Company informs the Agents in writing no later
than one Business Day following the receipt of such Net Disposition
Proceeds of the Company's or a Restricted Subsidiary's good faith
intention to apply such Net Disposition Proceeds to (i) the replacement
of the assets or property that was the subject of the Disposition or
the acquisition or construction of other long-term capital assets
useful in the Company's or such Restricted Subsidiary's business that
resulted in such Net Disposition Proceeds and/or (ii) acquire the
Capital Stock of a Person in a transaction permitted under clause (g)
of Section 7.2.5 so long as (x) the Disposition giving rise to such Net
Disposition Proceeds complies with clause (f) of Section 7.2.11, (y)
the aggregate amount of Net Disposition Proceeds used for such
acquisitions shall not exceed $10,000,000 in the aggregate in any
Fiscal Year and $20,000,000 in the aggregate for the term of this
Agreement and (z) as a result of such Acquisition, such Person becomes
a Restricted Subsidiary and complies with Section 7.1.8 and the Company
or the Restricted Subsidiary in fact uses such Net Disposition Proceeds
to replace, acquire or construct such assets or property or to make
such acquisition of Capital Stock within 360 days following the receipt
of such Net Disposition Proceeds, with the amount of such Net
Disposition Proceeds unused after such 360-day period being applied to
the Term Loans pursuant to Section 3.1.2; provided, further, however,
that (i) at any time when any Specified Default shall have occurred and
be continuing, all Net Disposition Proceeds (together with Casualty
Proceeds not applied as provided in clause (e) above) shall be
deposited in an account maintained with the Administrative Agent to pay
for such replacement, acquisition or construction whenever no Specified
Default is then continuing or except as otherwise agreed to by the
Agents for disbursement at the request of the Company or the Restricted
Subsidiary, as the case may be, or (ii) if all such Net Disposition
Proceeds (together with Casualty Proceeds not applied as provided in
clause (e) above) aggregating in excess of $500,000 have not yet been
applied as described in the notice required above (or in accordance
with clause (e)
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above), all such Net Disposition Proceeds and Casualty Proceeds shall
be deposited in an account maintained with the Administrative Agent for
disbursement at the request of the Company or the Restricted
Subsidiaries, as the case may be, to be used for the purpose(s) set
forth in such written notice(s) or (iii) if such Net Disposition
Proceeds were related to assets held by (x) a Canadian Subsidiary any
such reinvestments must be made by a Canadian Restricted Subsidiary,
(y) an Australian Subsidiary any such reinvestment must be made by an
Australian Restricted Subsidiary and (z) the Company or a Domestic
Subsidiary any such reinvestment must be made by the Company or a
Domestic Restricted Subsidiary.
(g) The Company shall, no later than five Business Days
following the delivery by Holdings of its annual audited financial
reports required pursuant to clause (c) of Section 7.1.1 (beginning
with the financial reports delivered in respect of the 2000 Fiscal
Year), deliver to the Agents a calculation of the Excess Cash Flow for
the Fiscal Year last ended and make a mandatory prepayment of the Term
Loans in an amount equal to 50% of the Excess Cash Flow (if any) for
such Fiscal Year, to be applied as set forth in Section 3.1.2.
(h) Concurrently with the receipt by Holdings, Intermediate
Holdings, the Company or any of the Restricted Subsidiaries of any Net
Debt Proceeds or Net Equity Proceeds, Holdings shall deliver to the
Agents a calculation of the amount of such Net Debt Proceeds or Net
Equity Proceeds, as the case may be, and the Company shall make a
mandatory prepayment of the Term Loans in an amount equal to 100% of
such Net Debt Proceeds or 50% of such Net Equity Proceeds, as the case
may be, to be applied as set forth in Section 3.1.2; provided, however,
that if the net proceeds of the Permanent Debt Financing are sufficient
to pay in full the Subordinated Bridge Notes then Holdings or the
Company may use 50% of the Net Debt Proceeds of Permanent Financing
Debt in excess of the amount required to pay in full the Subordinated
Bridge Notes in an aggregate amount not to exceed the lesser of
$10,000,000 or the then outstanding amount of Indebtedness evidenced by
the Intermediate Holdings Asset Bridge Notes to redeem or prepay
Intermediate Holdings Asset Bridge Notes and 100% of the remaining
balance of such excess Net Debt Proceeds shall be used to make a
mandatory prepayment of the Term Loans.
(i) On the Business Day following the date upon which Holdings
shall have delivered a certificate required to be delivered pursuant to
clause (l) of Section 7.1.1 (or during a period that a Specified
Default has occurred and is continuing on each Business Day), the
applicable Foreign Borrower shall,
(A) if the U.S. Dollar Equivalent of the aggregate
outstanding principal amount of all Canadian Loans is equal to
or greater than 103% of the Canadian Revolving Loan Commitment
Amount, make a prepayment of its Canadian Loans in Canadian
Dollars (or cash collateralize Canadian BAs, if applicable) in
an amount equal to such excess over the Canadian Revolving
Loan Commitment Amount; and
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(B) if the U.S. Dollar Equivalent of the aggregate
outstanding principal amount of all Australian Revolving Loans
is equal to or greater than 103% of the Australian Revolving
Loan Commitment Amount, make a prepayment of its Australian
Revolving Loans in Australian Dollars in an amount equal to
such excess over the Australian Revolving Loan Commitment
Amount.
For purposes of clause (i) above, the aggregate outstanding principal amount of
Foreign Currency Revolving Loans shall be calculated in accordance with the most
recently delivered certificate pursuant to clause (l) of Section 7.1.1;
provided, however, that if a Specified Default has occurred and is continuing,
the conversion rate of such Foreign Currency into U.S. Dollars shall be
determined by the Administrative Agent for each day.
(j) Immediately upon any acceleration of the Stated Maturity
Date of any Loans pursuant to Section 8.2 or Section 8.3, the Borrowers
shall repay all the Loans, unless, pursuant to Section 8.3, only a
portion of all the Loans is so accelerated (in which case the portion
so accelerated shall be so repaid).
Each prepayment of any Loans made pursuant to this Section shall be without
premium or penalty, except as may be required by Section 4.4.
SECTION 3.1.2. Application. Amounts prepaid pursuant to Section 3.1.1
shall be applied as set forth in this Section.
(a) Subject to clause (b), each prepayment or repayment of the
principal of the Loans shall be applied, to the extent of such
prepayment or repayment, first, to the principal amount thereof being
maintained as Base Rate Loans, and second, subject to the terms of
Section 4.4, to the principal amount thereof being maintained as LIBO
Rate Loans.
(b) Each prepayment of Term Loans made pursuant to clauses
(e), (f), (g) and (h) of Section 3.1.1 shall be applied pro rata to a
mandatory prepayment of the outstanding principal amount of all Term A
Loans and Term B Loans (with the amount of such prepayment of the Term
A Loans and the Term B Loans being applied to the remaining Term A Loan
or Term B Loan, as the case may be, amortization payments, pro rata in
accordance with the amount of each such remaining Term Loan
amortization payments); provided, however, that in the case of any such
prepayment of Term B Loans made pursuant to clause (e), (f), (g) and
(h) of Section 3.1.1, any Lender that has Term B Loans may elect not to
have such Loans prepaid by delivering a notice to the Agents at least
one Business Day prior to the date that such prepayment is to be made
in which notice such Lender shall decline to have such Loans prepaid
with the amounts set forth above, in which case the amounts that would
have been applied to a prepayment of such Lender's Term B Loans shall
instead be applied to a prepayment of the principal amount (if any) of
all outstanding Term A Loans until all outstanding Term A Loans have
been prepaid in full, then applied to a prepayment of such Lender"s
Term B Loans.
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SECTION 3.2. Interest Provisions. Interest on the outstanding principal
amount of Loans shall accrue and be payable in accordance with the terms set
forth below.
SECTION 3.2.1. Rates. Subject to Section 2.3.2, pursuant
to an appropriately delivered Borrowing Request or Continuation/Conversion
Notice, the applicable Borrower may elect that Loans comprising a Borrowing
accrue interest at a rate per annum:
(a) on that portion maintained from time to time as a Base
Rate Loan, equal to the sum of the Alternate Base Rate (if such Loan is
not a Canadian Loan) or Canadian Prime Rate (if such loan is a Canadian
Loan) from time to time in effect plus the Applicable Margin; provided
that all Swing Line Loans shall always accrue interest at the Alternate
Base Rate plus the then effective Applicable Margin for such Revolving
Loans; and
(b) on that portion maintained as a LIBO Rate Loan, during
each Interest Period applicable thereto, equal to the sum of the LIBO
Rate (Reserve Adjusted) for such Interest Period plus the Applicable
Margin.
All LIBO Rate Loans shall bear interest from and including the first day of the
applicable Interest Period to (but not including) the last day of such Interest
Period at the interest rate determined as applicable to such LIBO Rate Loan.
SECTION 3.2.2. Post-Default Rates. Upon the occurrence and during the
continuance of an Event of Default, the Borrowers (other than the Canadian
Borrower) shall pay, but only to the extent permitted by law, interest (after as
well as before judgment) in an amount equal to (a) in the case of any principal
of LIBO Rate Loans or unpaid interest thereon, the rate that would otherwise be
applicable to such LIBO Rate Loans pursuant to Section 3.2.1 plus 2%, (b) in the
case of any principal of Base Rate Loans or unpaid interest thereon, the rate
that would otherwise be applicable to such Base Rate Loans pursuant to Section
3.2.1 plus 2% and (c) in the case of any accrued and unpaid commitment fees,
letter of credit fees or other monetary Obligations, the rate that would
otherwise be applicable to Revolving Loans that are maintained as Base Rate
Loans pursuant to Section 3.2.1 plus 2%.
SECTION 3.2.3. Payment Dates. Interest accrued on each Loan shall be
payable, without duplication:
(a) on the Stated Maturity Date therefor;
(b) on the date of any payment or prepayment, in whole or in
part, of principal outstanding on such Loan on the principal amount so
paid or prepaid;
(c) with respect to Base Rate Loans, which bear interest with
respect to (i) the Alternate Base Rate, on each Quarterly Payment Date
and (ii) the Canadian Prime Rate on the first day of each month
occurring after the Closing Date;
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(d) with respect to LIBO Rate Loans, on the last day of each
applicable Interest Period (and, if such Interest Period shall exceed
three months, on the date occurring on each three-month interval
occurring after the first day of such Interest Period);
(e) with respect to any Base Rate Loans converted into LIBO
Rate Loans on a day when interest would not otherwise have been payable
pursuant to clause (c), on the date of such conversion; and
(f) on that portion of any Loans the Stated Maturity Date of
which is accelerated pursuant to Section 8.2 or Section 8.3,
immediately upon such acceleration.
Interest accrued on Loans or other monetary Obligations after the date such
amount is due and payable (whether on the Stated Maturity Date, upon
acceleration or otherwise) shall be payable upon demand.
SECTION 3.3. Fees. The Company agrees to pay the fees set forth below.
All such fees shall be non-refundable.
SECTION 3.3.1. Commitment Fee. (a) The Company agrees to pay to the
Administrative Agent for the account of each Lender, for the period (including
any portion thereof when any of its Commitments are suspended by reason of the
Company"s inability to satisfy any condition of Article V) commencing on the
Effective Date and continuing through the applicable Commitment Termination
Date, a commitment fee in an amount equal to the Applicable Commitment Fee
Margin, in each case on such Lender"s Percentage of the sum of the average daily
unused portion of the applicable Commitment Amount (other than the Canadian
Revolving Loan Commitment Amount and the Australian Revolving Loan Commitment
Amount) (net of Letter of Credit Outstandings, in the case of U.S. Revolving
Loan Commitment Amount). The making of Swing Line Loans shall not constitute
usage of the Revolving Loan Commitment with respect to the calculation of
commitment fees to be paid by the Company to the Lenders other than with respect
to the Swing Line Lender.
(b) The Canadian Borrower agrees to pay directly to the account of each
Canadian Lender, for the period (including any portion thereof when its Canadian
Revolving Loan Commitment is suspended by reason of the Canadian Borrower"s
inability to satisfy any condition of Article V) commencing on the Effective
Date and continuing through the Revolving Loan Commitment Termination Date, a
commitment fee in an amount equal to the Applicable Commitment Fee Margin, in
each case on such Lender"s Percentage of the sum of the average daily unused
portion of the Canadian Revolving Loan Commitment Amount.
(c) The Australian Borrower agrees to pay directly to the account of
each Australian Lender, for the period (including any portion thereof when its
Australian Revolving Loan Commitment is suspended by reason of the Australian
Borrower"s inability to satisfy any condition of Article V) commencing on the
Effective Date and continuing through the Revolving Loan Commitment Termination
Date, a commitment fee in an amount equal to the Applicable
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Commitment Fee Margin, in each case on such Lender's Percentage of the sum of
the average daily unused portion of the Australian Revolving Loan Commitment
Amount.
(d) All commitment fees payable pursuant to this Section shall be
payable by the applicable Borrower in arrears on the Effective Date and
thereafter on each Quarterly Payment Date, commencing with the first Quarterly
Payment Date following the Effective Date, and on the Revolving Loan Commitment
Termination Date. Any term or provision hereof to the contrary notwithstanding,
commitment fees payable for any period prior to the Closing Date shall be
payable in accordance with the Fee Letter.
SECTION 3.3.2. Agents' Fee. (a) The Company agrees to pay to the
Administrative Agent, for its own account, the fees in the amounts and on the
dates set forth in the Administrative Agent Fee Letter.
(b) The Company agrees to pay to the Syndication Agent, for its own
account, the fees in the amounts and on the dates set forth in the Fee Letter.
SECTION 3.3.3. Letter of Credit Fee. The Company agrees to pay to the
Administrative Agent, for the pro rata account of the applicable Issuer and each
U.S. Revolving Loan Lender, a Letter of Credit fee in an amount equal to the
then effective Applicable Margin for U.S. Revolving Loans maintained as LIBO
Rate Loans, multiplied by the Stated Amount of each such Letter of Credit, such
fees being payable quarterly in arrears on each Quarterly Payment Date following
the date of issuance of each Letter of Credit and on the Revolving Loan
Commitment Termination Date. The Company further agrees to pay to the applicable
Issuer with respect to each issuance or extension of a Letter of Credit an
issuance fee in an amount equal to 1/4 of 1% per annum on the Stated Amount of
such Letter of Credit payable on each Quarterly Payment Date following the date
of such issuance or extension and on the Revolving Loan Commitment Termination
Date.
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
SECTION 4.1. LIBO Rate Lending Unlawful. If any Lender shall determine
(which determination shall, upon notice thereof to the Borrowers and the
Administrative Agent, be conclusive and binding on the Borrowers) that the
introduction of or any change in or in the interpretation of any law makes it
unlawful, or any Governmental Authority asserts that it is unlawful, for such
Lender to make or continue any Loan as, or to convert any Loan into, a LIBO Rate
Loan, the obligations of such Lender to make, continue or convert any such LIBO
Rate Loan shall, upon such determination, forthwith be suspended until such
Lender shall notify the Administrative Agent that the circumstances causing such
suspension no longer exist, and all outstanding LIBO Rate Loans payable to such
Lender shall automatically convert into Base Rate Loans or in the case of
Australian Revolving Loans shall bear interest as set forth in Section 4.2 at
the end of the then current Interest Periods with respect thereto or sooner, if
required by such law or assertion.
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SECTION 4.2. Deposits Unavailable; Circumstances making Canadian BAs
Unavailable. If the Administrative Agent shall have determined that
(a) deposits in the relevant Currency and amount and for the
relevant Interest Period are not available to it in its relevant
market; or
(b) by reason of circumstances affecting its relevant market,
adequate means do not exist for ascertaining the interest rate
applicable hereunder to LIBO Rate Loans in a particular Currency;
then, upon notice from the Administrative Agent to the Borrowers and the
Lenders, the obligations of all Lenders under Section 2.3 and Section 2.4 to
make or continue any Loans as, or to convert any Loans into, LIBO Rate Loans
shall forthwith be suspended and, in the case of U.S. Loans, such Loans shall
accrue interest at the Base Rate plus the Applicable Margin in respect of such
Loans and, in the case of Australian Revolving Loans, such Loans shall accrue
interest at each applicable Lender's cost of funds, as reasonably determined and
as notified by such Lender to the Administrative Agent and the applicable
Borrowers, plus the Applicable Margin in respect of such Loans, in each case
from the end of the then current Interest Period applicable thereto, until the
Administrative Agent shall notify the applicable Borrowers and the Lenders that
the circumstances causing such suspension no longer exist, and subsequent LIBO
Rate Loans in respect of such Currency shall be made at an interest rate equal
to, in the case of U.S. Loans, the Base Rate plus the Applicable Margin in
respect of such Loans, in the case of Canadian Loans, such Loans shall accrue
interest at the Canadian Prime Rate plus the Applicable Margin in respect of
such Loans and, in the case of Australian Revolving Loans, each applicable
Lender"s cost of funds, as reasonably determined and as notified by such Lender
to the Administrative Agent and the Borrowers, plus the Applicable Margin in
respect of such Loans.
(c) If the Administrative Agent shall have determined that by reason of
circumstances affecting the Canadian money market, there is no market for
Canadian BAs, then the right of the Canadian Borrower to request the acceptance
of Canadian BAs and the acceptance thereof shall be suspended until the
Administrative Agent determines that the circumstances causing such suspension
no longer exist and the Administrative Agent so notifies the Canadian Borrower
and any Borrowing Request or Continuation/Conversion Notice requesting the
acceptance of Canadian BAs shall be canceled and the Loans requested therein
shall be made as, continued as or converted into Canadian Prime Rate Loans or,
in the case of a Credit Extension, if requested by the Canadian Borrower at
least one Business Day prior to the scheduled date of the Credit Extension, not
be made.
SECTION 4.3. Increased LIBO Rate Loan Costs, etc. Increased LIBO
Rate Loan Costs, etc. The applicable Borrower agrees to reimburse each Lender
and Issuer for any increase in the cost to such Lender or Issuer of, or any
reduction in the amount of any sum receivable by such Secured Party in respect
of, such Secured Party's Commitments and the making of Credit Extensions
hereunder (including the making, continuing or maintaining (or of its obligation
to make or continue) any Loans as, or of converting (or of its obligation to
convert) any Loans into, LIBO Rate Loans) that arise in connection with any
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change in, or the introduction, adoption, effectiveness, interpretation,
reinterpretation or phase-in after the date hereof of, any law or regulation,
directive, guideline, decision or request (whether or not having the force of
law) of any Governmental Authority, except for such changes with respect to
increased capital costs and Taxes which are governed by Sections 4.5 and 4.6,
respectively. Each affected Secured Party shall promptly notify the
Administrative Agent and the Borrowers in writing of the occurrence of any such
event, stating the reasons therefor and the additional amount required fully to
compensate such Secured Party for such increased cost or reduced amount. Such
additional amounts shall be payable by the applicable Borrower directly to such
Secured Party within five days of its receipt of such notice, and such notice
shall, in the absence of manifest error, be conclusive and binding on the
Borrowers.
SECTION 4.4. Funding Losses. Funding Losses. In the event any
Lender shall incur any loss or expense (including any loss or expense incurred
by reason of the liquidation or reemployment of deposits or other funds acquired
by such Lender to make or continue any portion of the principal amount of any
Loan as, or to convert any portion of the principal amount of any Loan into, a
LIBO Rate Loan) as a result of
(a) any conversion or repayment or prepayment of the principal
amount of any LIBO Rate Loan on a date other than the scheduled last
day of the Interest Period applicable thereto, whether pursuant to
Article III or otherwise;
(b) any Loans not being made as LIBO Rate Loans in accordance
with the Borrowing Request therefor (other than as a result of the
willful failure of such Lender to fund such requested LIBO Rate Loan);
or
(c) any Loans not being continued as, or converted into, LIBO
Rate Loans in accordance with the Continuation/Conversion Notice
therefor;
then, upon the written notice of such Lender to the applicable Borrowers (with a
copy to the Administrative Agent), the applicable Borrower shall, within five
days of its receipt thereof, pay directly to such Lender such amount as will (in
the reasonable determination of such Lender) reimburse such Lender for such loss
or expense. Such written notice shall, in the absence of manifest error, be
conclusive and binding on the Borrowers.
SECTION 4.5. Increased Capital Costs. Increased Capital Costs. If
any change in, or the introduction, adoption, effectiveness, interpretation,
reinterpretation or phase-in of, any law or regulation, directive, guideline,
decision or request (whether or not having the force of law) of any Governmental
Authority affects or would affect the amount of capital required or expected to
be maintained by any Secured Party or any Person controlling such Secured Party,
and such Secured Party determines (in good faith but in its sole and absolute
discretion) that the rate of return on its or such controlling Person's capital
as a consequence of the Commitments or the Credit Extensions made, or the
Letters of Credit participated in, by such Secured Party is reduced to a level
below that which such Secured Party or such controlling Person could have
achieved but for the occurrence of any such circumstance, then upon notice from
time to time by such Secured Party to
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the Borrowers, the applicable Borrower shall within five days following receipt
of such notice pay directly to such Secured Party additional amounts sufficient
to compensate such Secured Party or such controlling Person for such reduction
in rate of return. A statement of such Secured Party as to any such additional
amount or amounts shall, in the absence of manifest error, be conclusive and
binding on the Borrowers. In determining such amount, such Secured Party may use
any method of averaging and attribution that it (in its sole and absolute
discretion) shall deem applicable.
SECTION 4.6. Taxes. Each Borrower covenants and agrees as
follows with respect to Taxes.
(a) Any and all payments by such Borrower under each Loan
Document shall be made without setoff, counterclaim or other defense,
and free and clear of, and without deduction or withholding for or on
account of, any Taxes. In the event that any Taxes are required by law
to be deducted or withheld from any payment required to be made by a
Borrower to or on behalf of any Secured Party under any Loan Document,
then:
(i) subject to clause (f), if such Taxes are
Non-Excluded Taxes, the amount of such payment shall be
increased as may be necessary such that such payment is made,
after withholding or deduction for or on account of such
Taxes, in an amount that is not less than the amount provided
for in such Loan Document; and
(ii) such Borrower shall withhold the full amount of
such Taxes from such payment (as increased pursuant to clause
(a) (i)) and shall pay such amount to the Governmental
Authority imposing such Taxes in accordance with applicable
law.
(b) In addition, such Borrower shall pay any and all Other
Taxes imposed to the relevant Governmental Authority imposing such
Other Taxes in accordance with applicable law.
(c) As promptly as practicable after the payment of any Taxes
or Other Taxes, and in any event within 45 days of any such payment
being due, the applicable Borrower shall furnish to the Administrative
Agent a copy of an official receipt (or a certified copy thereof)
evidencing the payment of such Taxes or Other Taxes. The Administrative
Agent shall make copies thereof available to any Lender upon request
therefor.
(d) Subject to clause (f), the Company shall indemnify each
Secured Party for any Non-Excluded Taxes and Other Taxes levied,
imposed or assessed on (and whether or not paid directly by) such
Secured Party (whether or not such Non-Excluded Taxes or Other Taxes
are correctly or legally asserted by the relevant Governmental
Authority). Promptly upon having knowledge that any such Non-Excluded
Taxes or Other Taxes have been levied, imposed or assessed, and
promptly upon notice thereof by any Secured Party, the Company shall
pay such Non-Excluded Taxes or Other Taxes directly to the relevant
Governmental Authority (provided, however, that no Secured Party shall
be under any obligation to provide any such notice to the Company). In
addition, the Company shall
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indemnify each Secured Party for any incremental Taxes that may become
payable by such Secured Party as a result of any failure of the Company
to pay any Taxes when due to the appropriate Governmental Authority or
to deliver to the Administrative Agent, pursuant to clause (c),
documentation evidencing the payment of Taxes or Other Taxes. With
respect to indemnification for Non-Excluded Taxes and Other Taxes
actually paid by any Secured Party or the indemnification provided in
the immediately preceding sentence, such indemnification shall be made
within 30 days after the date such Secured Party makes written demand
therefor. The Company acknowledges that any payment made to any Secured
Party or to any Governmental Authority in respect of the
indemnification obligations of the Company provided in this clause
shall constitute a payment in respect of which the provisions of clause
(a) and this clause shall apply.
(e) Each Non-Domestic Lender, on or prior to the date on which
such Non-Domestic Lender becomes a Lender (other than an Australian
Lender or a Canadian Lender) hereunder (and from time to time
thereafter upon the request of the Borrower or the Administrative
Agent, but only for so long as such non-Domestic Lender is legally
entitled to do so), shall deliver to the Company and the Administrative
Agent either
(i) (x) two duly completed copies of either (A)
Internal Revenue Service Form W-8BEN (with respect to treaty
benefits only) or (B) Internal Revenue Service Form W-8ECI, or
in either case an applicable successor form, and (y) a duly
completed copy of Internal Revenue Service Form W-8 or W-9 or
applicable successor form; or
(ii) in the case of a Non-Domestic Lender that is not
legally entitled to deliver either form listed in clause
(e)(i)(x) for the purposes specified therein, (x) a
certificate of a duly authorized officer of such Non-Domestic
Lender to the effect that such Non-Domestic Lender is not (A)
a "bank" within the meaning of Section 881(c)(3)(A) of the
Code, (B) a "10 percent shareholder" of the Company within the
meaning of Section 881(c)(3)(B) of the Code, or (C) a
controlled foreign corporation receiving interest from a
related person within the meaning of Section 881(c)(3)(C) of
the Code (such certificate, an "Exemption Certificate") and
(y) two duly completed copies of Internal Revenue Service Form
W-8BEN (with respect to Foreign status) or applicable
successor form.
(f) No Borrower shall be obligated to gross up any payments to
any Lender pursuant to clause (a)(i), or to indemnify any Lender
pursuant to clause (d), in respect of United States federal withholding
taxes to the extent imposed as a result of (i) the failure of such
Lender to deliver to the Company the form or forms and/or an Exemption
Certificate, as applicable to such Lender, pursuant to clause (e), (ii)
such form or forms and/or Exemption Certificate not establishing a
complete exemption from U.S. federal withholding tax or the information
or certifications made therein by the Lender being untrue or inaccurate
on the date delivered in any material respect, or (iii) the Lender
designating a successor lending office at which it maintains its Loans
which has the effect of causing
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such Lender to become obligated for tax payments in excess of those in
effect immediately prior to such designation; provided, however, that
the Borrowers shall be obligated to gross up any payments to any such
Lender pursuant to clause (a)(i), and to indemnify any such Lender
pursuant to clause (d), in respect of United States federal withholding
taxes if (i) any such failure to deliver a form or forms or an
Exemption Certificate or the failure of such form or forms or Exemption
Certificate to establish a complete exemption from U.S. federal
withholding tax or inaccuracy or untruth contained therein resulted
from a change in any applicable statute, treaty, regulation or other
applicable law or any interpretation of any of the foregoing occurring
after the date hereof, which change rendered such Lender no longer
legally entitled to deliver such form or forms or Exemption Certificate
or otherwise ineligible for a complete exemption from U.S. federal
withholding tax, or rendered the information or certifications made in
such form or forms or Exemption Certificate untrue or inaccurate in a
material respect, (ii) the redesignation of the Lender's lending office
was made at the request of the Company or (iii) the obligation to gross
up payments to any such Lender pursuant to clause (a)(i) or to
indemnify any such Lender pursuant to clause (d) is with respect to an
Assignee Lender that becomes an Assignee Lender as a result of an
assignment made at the request of the Company.
SECTION 4.7. Payments, Computations, etc. Unless otherwise expressly
provided in a Loan Document, all payments by the Borrowers pursuant to each Loan
Document shall be made by the Borrowers to the Administrative Agent for the pro
rata account of the Secured Parties entitled to receive such payment; provided,
that, payments of principal and interest on the Canadian Loans and the
Australian Revolving Loans shall be made directly to the Lenders entitled
thereto. All payments shall be made without setoff, deduction or counterclaim
not later than 11:00 a.m. on the date due in same day or immediately available
funds to such account as the Administrative Agent, or the Canadian Lenders or
Australian Lenders as the case may be, shall specify from time to time by notice
to the Borrowers. Funds received after that time shall be deemed to have been
received by the Administrative Agent, or such Lenders as the case may be, on the
next succeeding Business Day. The Administrative Agent shall promptly remit in
same day funds to each Secured Party its share, if any, of such payments
received by the Administrative Agent for the account of such Secured Party. All
interest (including interest on LIBO Rate Loans) and fees shall be computed on
the basis of the actual number of days (including the first day but excluding
the last day) occurring during the period for which such interest or fee is
payable over a year comprised of 360 days (or, in the case of interest on a Base
Rate Loan (calculated at other than the Federal Funds Rate), 365 days or, if
appropriate, 366 days). Payments due on other than a Business Day shall (except
as otherwise required by clause (c) of the definition of the term "Interest
Period") be made on the next succeeding Business Day and such extension of time
shall be included in computing interest and fees in connection with that
payment.
SECTION 4.8. Sharing of Payments. If any Secured Party shall obtain any
payment or other recovery (whether voluntary, involuntary, by application of
setoff or otherwise) on account of any Credit Extension or Reimbursement
Obligation (other than pursuant to the terms of Sections 4.3, 4.4, 4.5 or 4.6)
in excess of its pro rata share of payments obtained by all Secured Parties,
such Secured Party shall purchase from the other Secured Parties such
participations in Credit
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Extensions made by them as shall be necessary to cause such purchasing Secured
Party to share the excess payment or other recovery ratably (to the extent such
other Secured Parties were entitled to receive a portion of such payment or
recovery) with each of them; provided, however, that if all or any portion of
the excess payment or other recovery is thereafter recovered from such
purchasing Secured Party, the purchase shall be rescinded and each Secured Party
which has sold a participation to the purchasing Secured Party shall repay to
the purchasing Secured Party the purchase price to the ratable extent of such
recovery together with an amount equal to such selling Secured Party's ratable
share (according to the proportion of (a) the amount of such selling Secured
Party's required repayment to the purchasing Secured Party to (b) total amount
so recovered from the purchasing Secured Party) of any interest or other amount
paid or payable by the purchasing Secured Party in respect of the total amount
so recovered. Each Borrower agrees that any Secured Party purchasing a
participation from another Secured Party pursuant to this Section may, to the
fullest extent permitted by law, exercise all its rights of payment (including
pursuant to Section 4.9) with respect to such participation as fully as if such
Secured Party were the direct creditor of such Borrower in the amount of such
participation. If under any applicable bankruptcy, insolvency or other similar
law any Secured Party receives a secured claim in lieu of a setoff to which this
Section applies, such Secured Party shall, to the extent practicable, exercise
its rights in respect of such secured claim in a manner consistent with the
rights of the Secured Parties entitled under this Section to share in the
benefits of any recovery on such secured claim.
SECTION 4.9. Setoff. Each Secured Party shall, upon the occurrence and
during the continuance of any Default described in clauses (b) through (d) of
Section 8.1.9 or, with the consent of the Required Lenders, upon the occurrence
and during the continuance of any other Event of Default, have the right to
appropriate and apply to the payment of the Obligations owing to it (whether or
not then due), and (as security for such Obligations) Holdings and each Borrower
hereby grants to each Secured Party a continuing security interest in, any and
all balances, credits, deposits, accounts or moneys of Holdings or such Borrower
then or thereafter maintained with such Secured Party; provided, however, that
any such appropriation and application shall be subject to the provisions of
Section 4.8. Each Secured Party agrees promptly to notify Holdings and the
Company and the Administrative Agent after any such setoff and application made
by such Secured Party; provided, however, that the failure to give such notice
shall not affect the validity of such setoff and application. The rights of each
Secured Party under this Section are in addition to other rights and remedies
(including other rights of setoff under applicable law or otherwise) which such
Secured Party may have.
SECTION 4.10. Replacement of Lenders. Each Lender hereby severally
agrees as set forth in this Section. If any Lender (a "Subject Lender") (i)
makes demand upon a Borrower for (or if such Borrower is otherwise required to
pay) amounts pursuant to Section 4.3, 4.5 or 4.6 or (ii) gives notice pursuant
to Section 4.1 requiring a conversion of such Subject Lender's LIBO Rate Loans
to Base Rate Loans or any change in the basis upon which interest is to accrue
in respect of such Subject Lender's LIBO Rate Loans or suspending such Lender's
obligation to make Loans as, or to convert Loans into, LIBO Rate Loans, the
Company may, within 180 days of receipt by such Borrower of such demand or
notice (or the occurrence of such other event causing such Borrower to be
required to pay such compensation) as the case may be, give notice (a
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"Replacement Notice") in writing to the Agents and such Subject Lender of its
intention to replace such Subject Lender with a financial institution (a
"Replacement Lender") designated in such Replacement Notice. If the Agents
shall, in the exercise of their reasonable discretion and within 30 days of
their receipt of such Replacement Notice, notify the Company and such Subject
Lender in writing that the designated financial institution is satisfactory to
the Agents (such consent not being required where the Replacement Lender is
already a Lender), then such Subject Lender shall, subject to the payment of any
amounts due pursuant to Section 4.4, assign, in accordance with Section 11.11.1,
all of its Commitments, Loans and other rights and obligations under this
Agreement and all other Loan Documents (including Reimbursement Obligations) to
such designated financial institution; provided, however, that (i) such
assignment shall be without recourse, representation or warranty and shall be on
terms and conditions reasonably satisfactory to such Subject Lender and such
designated financial institution and (ii) the purchase price paid by such
designated financial institution shall be in the amount of such Subject Lender's
Loans and its Percentage in respect of any Revolving Loan Commitment under which
there are outstanding Reimbursement Obligations of such Reimbursement
Obligation, together with all accrued and unpaid interest and fees in respect
thereof, plus all other amounts (including the amounts demanded and unreimbursed
under Sections 4.3, 4.5 and 4.6), owing to such Subject Lender hereunder. Upon
the effective date of an assignment described above, the designated financial
institution or Replacement Lender shall become a "Lender" for all purposes under
this Agreement and the other Loan Documents.
ARTICLE V
CONDITIONS TO CREDIT EXTENSIONS
SECTION 5.1. Initial Credit Extension. The obligations of the Lenders
and, if applicable, the Issuer to fund the initial Credit Extension shall be
subject to the prior or concurrent satisfaction of each of the conditions
precedent set forth in this Section 5.1.
SECTION 5.1.1. Resolutions, etc. The Agents shall have received from
each Obligor, as applicable, (i) a copy of a good standing certificate, dated a
date reasonably close to the Closing Date, for each such Person and (ii) a
certificate, dated the Closing Date and with counterparts for each Lender, duly
executed and delivered by such Person's Secretary or Assistant Secretary,
managing member or general partner, as applicable, as to
(a) resolutions of each such Person's Board of Directors (or
other managing body, in the case of other than a corporation) then in
full force and effect authorizing, to the extent relevant, all aspects
of the Transaction applicable to such Person and the execution,
delivery and performance of each Loan Document to be executed by such
Person and the transactions contemplated hereby and thereby;
(b) the incumbency and signatures of those of its officers,
managing member or general partner, as applicable, authorized to act
with respect to each Loan Document to be executed by such Person; and
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(c) the full force and validity of each Organic Document of such Person
and copies thereof;
upon which certificates each Secured Party may conclusively rely until it shall
have received a further certificate of the Secretary, Assistant Secretary,
managing member or general partner, as applicable, of any such Person canceling
or amending the prior certificate of such Person.
SECTION 5.1.2. Transaction Consummated. (a) The Asset Transfer shall
have been consummated on terms and conditions reasonably satisfactory to the
Agents.
(b) The Acquisition shall have been consummated (or shall be
consummated contemporaneously with the application by the Company of the
proceeds of the Credit Extensions) and in connection therewith, the Company
shall have acquired 100% of the issued and outstanding stock of RailTex pursuant
to the Merger Agreement for a merger consideration comprised of (i) an aggregate
cash purchase price of no more than $139,000,000 and (ii) the Equity Issuance
which shall have been consummated on terms (including documentation in respect
thereof in form and substance) satisfactory in all respects to the Agents.
(c) In connection with the Acquisition, the Rail America Refinancing
and the RailTex Refinancing shall have been consummated (or shall be consummated
contemporaneously with the application by the Company of the proceeds of the
Credit Extensions) on terms and conditions satisfactory in all respects to the
Agents and except for capital leases and senior secured indebtedness totaling
$17,900,000 and convertible subordinated indebtedness of $24,600,000, Holdings
and its Subsidiaries shall have no indebtedness for borrowed money other than
that incurred in connection with the Transaction.
(d) Each of the Intermediate Holdings Asset Bridge Note Issuance and
the Subordinated Bridge Note Issuance shall have been consummated on terms
(including documentation in respect thereof in form and substance) satisfactory
in all respects to the Agents and resulted in gross cash proceeds of at least
$55,000,000 and $95,000,000, respectively. All of the net proceeds of the
Intermediate Holdings Asset Bridge Note Issuance shall have been contributed by
Intermediate Holdings to the Company as a common equity contribution for use in
partially financing the Transaction.
(e) RailTex shall have received net cash proceeds from the exercise of
RailTex stock options of at least $11,100,000 (subject to adjustment due to
cashless exercise of such options and termination of such options not
exercised).
(f) The Company shall have at least $10,300,000 cash on hand
immediately prior to the consummation of the Transaction.
(g) RailTex shall have received net cash proceeds from the sale of
RailTex Brazil of at least $9,000,000.
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(h) The fees and expenses paid or to be paid in connection with the
Transaction shall not exceed $36,000,000.
SECTION 5.1.3. Transaction Documents. The Agents shall have received
(with copies for each Lender that shall have requested in writing copies
thereof) copies of fully executed versions of the Transaction Documents,
certified to be true and complete copies thereof by an Authorized Officer of
Holdings, Intermediate Holdings and the Company. Each Transaction Document
(including the Merger Agreement) shall be in full force and effect and shall not
have been modified or waived in any material respect, nor shall there have been
any forbearance to exercise any material rights with respect to any of the terms
or provisions relating to the conditions to the consummation of the Acquisition
set forth in the Merger Agreement unless otherwise agreed to by the Required
Lenders.
SECTION 5.1.4. Closing Date Certificate. The Administrative Agent shall
have received, with counterparts for each Lender, the Closing Date Certificate,
dated the Closing Date and duly executed and delivered by an Authorized Officer,
of each of Holdings, Intermediate Holdings and the Company, in which certificate
each of Holdings, Intermediate Holdings and the Company shall agree and
acknowledge that the statements made therein shall be deemed to be true and
correct representations and warranties of each of Holdings, Intermediate
Holdings and the Company as of such date, and, at the time each such certificate
is delivered, such statements shall in fact be true and correct. All documents
and agreements required to be appended to the Closing Date Certificate shall be
in form and substance reasonably satisfactory to the Syndication Agent.
SECTION 5.1.5. Delivery of Notes. The Agents shall have received, for
the account of each Lender that has requested a Note in writing two Business
Days prior to the Closing Date, such Lender's Notes duly executed and delivered
by an Authorized Officer of the applicable Borrower.
SECTION 5.1.6. Payment of Outstanding Indebtedness, etc. All
Indebtedness identified in Item 7.2.2(b) of the Disclosure Schedule
(Indebtedness to Be Paid), together with all interest, all prepayment premiums
and other amounts due and payable with respect thereto, shall have been paid in
full from the proceeds of the initial Credit Extension and proceeds of the
Bridge Notes and the commitments in respect of such Indebtedness shall have been
terminated, and all Liens securing payment of any such Indebtedness have been
released and the Administrative Agent shall have received all Uniform Commercial
Code Form UCC-3 termination statements or other instruments as may be suitable
or appropriate in connection therewith.
SECTION 5.1.7. Closing Fees, Expenses, etc. The Agents shall have
received for their respective accounts, or for the account of each Lender, as
the case may be, all fees, costs and expenses due and payable pursuant to
Sections 3.3 and 11.3, to the extent then invoiced.
SECTION 5.1.8. Financial Information, Material Adverse Change. (a) The
Agents shall have received, with counterparts for each Lender,
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(i) a consolidating pro forma income statement of Holdings and
its Subsidiaries for each of the twelve month period ended December 31,
1998, September 30, 1999 and December 31, 1999 and a consolidated
balance sheet of Holdings and its Subsidiaries, as of the most recent
date practicable near to the Closing Date (but no earlier than the
close of the Fiscal Quarter ending immediately prior to the Closing
Date) certified by the treasurer, chief financial or accounting
Authorized Officer of Holdings, in each case, giving effect to the
consummation of the Transaction and all the transactions contemplated
by this agreement and reflecting estimated transaction related
accounting adjustments, prepared by the Company in accordance with
Regulation S-X; and
(ii) projected financial statements (including balance sheets
and statements of income, stockholders" equity and cash flows) of
Holdings and its Subsidiaries for the eight-year period following the
Closing Date (the "Projections") satisfactory in form and substance to
the Agents.
(b) Since December 31, 1998, there shall not have been any material
adverse change in the business, assets, condition (financial or otherwise),
operations, performance, properties, Projections or prospects of Holdings,
Intermediate Holdings, the Company and the Restricted Subsidiaries, taken as a
whole.
SECTION 5.1.9. Opinions of Counsel. Opinions of Counsel. The Agents
shall have received opinions, dated the Closing Date and addressed to the Agents
and all of the Lenders, from
(a) Greenberg Traurig, P.A., counsel to the Obligors, in form
and substance satisfactory to the Agents;
(b) Shutts & Bowen LLP, counsel to the Obligors, in form and
substance satisfactory to the Agents;
(c) Heenan Blaikie, Canadian counsel to the Obligors, in form
and substance satisfactory to the Agents;
(d) Minter Ellison, Australian counsel to the Obligors, in
form and substance satisfactory to the Agents; and
(e) local counsel to the Obligors in the jurisdictions agreed
upon by the Agents and the Borrowers, each in form and substance, and
from counsel, satisfactory to the Agents.
SECTION 5.1.10. Filing Agent, etc. All Uniform Commercial Code
financing statements and other similar financing statements in other
jurisdictions and Uniform Commercial Code (Form UCC-3) termination statements
and other similar termination statements in other jurisdictions and filings with
the Surface Transportation Board and similar authorities in other jurisdictions
required pursuant to the Loan Documents (collectively, the "Filing Statements")
shall have been delivered to CT Corporation System or another similar filing
service company acceptable to the
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Agents (the "Filing Agent") and other arrangements acceptable to the Agents for
filing in other jurisdictions shall have been made. The Filing Agent shall have
acknowledged in a writing satisfactory to the Agents and their counsel (i) the
Filing Agent"s receipt of all Filing Statements, (ii) that the Filing Statements
have either been submitted for filing in the appropriate filing offices or will
be submitted for filing in the appropriate offices within ten days following the
Closing Date and (iii) that the Filing Agent will notify the Agents and their
counsel of the results of such submissions within 30 days following the Closing
Date.
SECTION 5.1.11. Subsidiary Guaranty. The Agents shall have received,
with counterparts for each Lender, the Subsidiary Guaranty, dated as of the date
hereof, duly executed and delivered by each Subsidiary Guarantor that is a party
thereto.
SECTION 5.1.12. Solvency Certificate. The Agents shall have received,
with counterparts for each Lender, a certificate duly executed and delivered by
the treasurer, chief financial or accounting Authorized Officer of each of
Holdings, Intermediate Holdings and the Company, dated the date of the Closing
Date, in the form of Exhibit F attached hereto.
SECTION 5.1.13. Pledge and Security Agreements. The Agents shall have
received executed counterparts of:
(a) the U.S. Pledge and Security Agreement, dated as of the
Closing Date, duly executed and delivered by an Authorized Officer of
Holdings, Intermediate Holdings, the Company and each other Domestic
Subsidiary Guarantor, as applicable, together with
(i) the certificates evidencing all of the issued and
outstanding shares of Capital Stock pledged pursuant to the
U.S. Pledge and Security Agreement, which certificates shall
in each case be accompanied by undated powers of transfer duly
executed in blank, or, if any such shares of Capital Stock of
each Domestic Subsidiary of such Obligor pledged pursuant to
the Pledge and Security Agreement are uncertificated
securities or are held through a securities intermediary, the
Administrative Agent shall have obtained "control" (as defined
in the UCC) over such shares of Capital Stock and such other
instruments and documents as the Agents shall deem necessary
or, in the reasonable opinion of the Agents, desirable under
applicable law to perfect the security interest of the
Administrative Agent in such shares of Capital Stock;
(ii) all promissory notes evidencing intercompany
Indebtedness payable to Holdings, Intermediate Holdings, the
Company or any other Domestic Subsidiary Guarantor duly
endorsed to the order of the Administrative Agent;
(iii) executed UCC financing statements (Form UCC-1)
naming such Obligor as the debtor and the Administrative Agent
as the secured party, or other similar instruments or
documents, suitable for filing under the UCC of all
jurisdictions as may be necessary or, in the opinion of the
Agents, desirable to
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perfect the security interest of the Administrative Agent in the interests of
such Obligor in the collateral pledged pursuant to the Pledge and Security
Agreement (provided that perfection of security interests in motor vehicles
shall not be required) and (ii) certain intellectual property owned as of the
Closing Date by the Company or its Domestic Subsidiaries shall be completed
prior to the Closing Date;
(iv) executed copies of proper UCC termination
statements (Form UCC-3), if any, necessary to release all
Liens and other rights of any Person (other than Liens
permitted under Section 7.2.3)
(A) in any collateral described in the
applicable Pledge and Security Agreement previously
granted by any Person, and
(B) securing any of the Indebtedness to be
repaid in connection with the Transaction on or prior
to the Closing Date,
together with such other UCC termination statements (Form
UCC-3) as the Agents may reasonably request from such Obligor;
and
(v) certified copies of UCC Requests for Information
or Copies (Form UCC-11), or a similar search report certified
by a party reasonably acceptable to the Agents, dated a date
reasonably near to the Closing Date, listing all effective
financing statements which name such Obligor (under its
present names and any previous names) as the debtor and which
are filed in the jurisdictions in which filings are to be made
pursuant to clause (iii) above, together with copies of such
financing statements.
(b) the Australian Security Documents, duly executed and
delivered by Authorized Officers of the Australian Borrower and each of
its Affiliates that is a Restricted Subsidiary and is organized in, or
a resident of, Australia, the Australian Security Trustee and any other
parties required to sign thereunder together with
(i) the certificates evidencing all of the issued and
outstanding shares of Capital Stock pledged pursuant to the
Australian Equitable Mortgage of Shares No.1 (to the extent
that such shares pledged represent shares in the Australian
Borrower) and the Australian Equitable Mortgage of Shares
No.2, which certificates shall in each case be accompanied by
undated powers of transfer duly executed in blank and such
other instruments and documents as the Agents shall deem
necessary or, in the reasonable opinion of the Agents,
desirable under applicable law to perfect the security
interest of the Administrative Agent in such shares of Capital
Stock;
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(ii) ASIC Form 309 and 350, if necessary, in respect
of the Australian Security Documents to be registered under
the Australian Corporations Law with the relevant agreement
properly annexed to Form 309, together with the appropriate
registration fee; and
(iii) forms and any other documents required to
effect the registration of the Australian Security Documents
with any other relevant Governmental Authority, together with
the appropriate registration fee; and
(c) a Canadian Security Documents, dated as of the date
hereof, duly executed and delivered by Authorized Officers of each of
the Canadian Borrower and its Affiliates that is a Restricted
Subsidiary and is organized in, or a resident of, Canada, together with
(i) the certificates evidencing all of the issued
and outstanding shares of Capital Stock pledged pursuant to
the Canadian Pledge Agreements (provided, that not more than
65% of any Subsidiary's share of Capital Stock shall be
pledged if such pledge would result in adverse U.S. Tax
consequences to the applicable pledgor), which certificates
shall in each case be accompanied by undated powers of
transfer duly executed in blank and such other instruments and
documents as the Agents shall deem necessary or, in the
reasonable opinion of the Agents, desirable under applicable
law to perfect the security interest of the Administrative
Agent in such shares of Capital Stock,
(ii) a verification statement evidencing the filings
under the P.P.S.A. of financing statements in form
satisfactory to the Agents, naming the Canadian Borrower and
each such Affiliate as debtor and the Administrative Agent as
secured party, and evidence satisfactory to the Agents of
filings in the other provinces and territories of Canada as
may be necessary or, in the opinion of the Agents, desirable
to perfect the security interest of the Administrative Agent
pursuant to the Canadian Debentures, and
(iii) certificates issued by the Registrar of the
Personal Property Registry under the P.P.S.A. showing that
there are no outstanding financing statements naming the
Canadian Borrower or any such Affiliate as debtor under the
P.P.S.A. other than that described in clause (c)(ii) above,
and evidence satisfactory to the Agents concerning the absence
of filings by other creditors pursuant to other relevant
statutes in Ontario and in any other provinces or territories
of Canada where filings in respect of the Canadian Debentures
have been made,
in each case, free from all prior security interests and third party rights and
interests except as expressly permitted by any Loan Document.
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SECTION 5.1.14. Trademark Security Agreement. The Agents shall have
received the Trademark Security Agreement, dated as of the Closing Date, duly
executed and delivered by an Authorized Officer of each Obligor that has
delivered the U.S. Pledge and Security Agreement.
SECTION 5.1.15. Foreign Pledge Agreements. All Foreign Pledge
Agreements shall have been duly executed and delivered by all parties thereto
and shall remain in full force and effect, and all Liens granted to the
Administrative Agent thereunder shall be duly perfected to provide the
Administrative Agent with a security interest in and Lien on all collateral
granted thereunder free and clear of other Liens, except to the extent consented
to by the Agents.
SECTION 5.1.16. Insurance. The Agents shall have received, with copies
for each Lender, certified copies of the insurance policies (or binders in
respect thereof), from one or more insurance companies reasonably satisfactory
to the Agents, evidencing coverage required to be maintained pursuant to each
Loan Document.
SECTION 5.1.17. Mortgage. The Administrative Agent shall have received
counterparts of each Mortgage, dated as of the date hereof, duly executed by
each applicable Borrower and each other applicable Subsidiary Guarantor,
together with
(a) evidence of the completion (or reasonably satisfactory
arrangements for the completion) of all recordings and filings of each
Mortgage as may be necessary or, in the reasonable opinion of the
Agents, desirable effectively to create a valid, perfected first
priority Lien against the properties purported to be covered thereby;
(b) updated mortgage lien searches with respect to certain
properties described in clause (a) or as requested by the Agents; and
(c) such other approvals, opinions, or documents as the Agents
may request each in form and substance satisfactory to the Agents.
SECTION 5.1.18. Litigation. There shall exist no pending or threatened
action, suit, investigation, litigation or proceeding in any court or before any
arbitrator or governmental instrumentality which (x) purports to affect the
consummation of the Transaction or the legality or validity of the Credit
Agreement, any other Loan Document or any Material Document or (y) could
reasonably be expected to have a Material Adverse Effect.
SECTION 5.1.19. Minimum EBITDA. The Company's EBITDA for the
consecutive twelve month period ended September 30, 1999 shall be at least
$93,900,000, including (i) EBITDA as reported of $62,800,000, (ii) transaction
related accounting adjustments, prepared by the Company which are in accordance
with Regulation S-X for Form S-1 Registration Statements of no less than
$26,700,000 and (iii) other pro forma cost savings of no less than $4,400,000
which are reasonably satisfactory in form and substance to the Agents.
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SECTION 5.1.20. Corporate, Tax and Capital Structure. The tax structure
(including Organic Documents), the Tax-Sharing Agreement, the shareholders
agreements and the management of Holdings, Intermediate Holdings, the Company
and their respective Subsidiaries both before and after the Transaction shall be
reasonably satisfactory to the Syndication Agent in all respects. The corporate
and capital structure of Holdings, Intermediate Holdings, the Company and such
Subsidiaries shall be as set forth in Annex I hereto.
SECTION 5.1.21. Approvals. All governmental, shareholder and third
party consents (including Surface Transportation Board clearance) and approvals
necessary or desirable in connection with the consummation of the Transaction,
and the related financings and other transactions contemplated hereby shall have
been duly obtained and all applicable waiting periods shall have expired,
without any action being taken by any competent authority that could restrain,
prevent or impose any materially adverse conditions on the Transaction, and no
such law or regulation shall be applicable which in the judgment of the
Syndication Agent could have any such effect.
SECTION 5.1.22. Environmental Assessment. The Agents shall have
received copies of an environmental assessment of the properties of the Company
and its Subsidiaries, to be completed by Pilko & Associates, Inc. The results of
such environmental assessment shall be reasonably satisfactory in form, scope
and substance to the Agents.
SECTION 5.1.23. Appraisal of Assets. The Agents shall have received
copies of appraisals of the assets of the Company and its Subsidiaries performed
by Mainline Management Services, Inc. and Norman W. Seip & Associates. The
results of such appraisals shall be satisfactory in form, scope and substance to
the Agents.
SECTION 5.1.24. Foreign Acquisitions and Takeovers Act Approval. If
Holdings, Intermediate Holdings or the Company is required to obtain an approval
or an indication of non-objection under the Foreign Acquisitions and Takeovers
Act 1975 of Australia or any real estate policy guidelines of the Commonwealth
Government of Australia and/or an approval or certification of the Treasurer of
Australia under the Foreign Acquisitions and Takeovers Regulations of Australia
to enter into the Merger Agreement, or to give effect to the Transaction, the
Company shall have provided to the Administrative Agent, and the Administrative
Agent shall have received, copies of the application to obtain the approval or
certification of the Treasurer of Australia or the statement of non-objection
and copies of the relevant approval, certification or statement.
SECTION 5.1.25. Delivery of Counterparts to the Intercreditor
Agreement. The Agents shall have received counterparts of the Intercreditor
Agreement, dated as of the date hereof, duly executed by each Lender and
acknowledged by each Borrower.
SECTION 5.2. All Credit Extensions. The obligation of each Lender and
each Issuer to make any Credit Extension (including the initial Credit
Extension) shall be subject to the satisfaction of each of the conditions
precedent set forth below.
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SECTION 5.2.1. Compliance with Warranties, No Default, etc. Both before
and after giving effect to any Credit Extension (but, if any Default of the
nature referred to in Section 8.1.5 shall have occurred with respect to any
other Indebtedness, without giving effect to the application, directly or
indirectly, of the proceeds thereof) the following statements shall be true and
correct:
(a) the representations and warranties set forth in each Loan
Document shall, in each case, be true and correct with the same effect
as if then made (unless stated to relate solely to an earlier date, in
which case such representations and warranties shall be true and
correct in all material respects as of such earlier date); and
(b) no Default shall have then occurred and be continuing.
SECTION 5.2.2. Credit Extension Request, etc. Subject to Section 2.3.2,
the Administrative Agent shall have received a Borrowing Request if Loans are
being requested, or an Issuance Request if a Letter of Credit is being requested
or extended. Each of the delivery of a Borrowing Request or Issuance Request and
the acceptance by a Borrower of the proceeds of such Credit Extension shall
constitute a representation and warranty by such Borrower that on the date of
such Credit Extension (both immediately before and after giving effect to such
Credit Extension and the application of the proceeds thereof) the statements
made in Section 5.2.1 are true and correct in all material respects.
SECTION 5.2.3. Satisfactory Legal Form. All documents executed or
submitted pursuant hereto by or on behalf of Holdings or any of its Subsidiaries
or any other Obligors shall be reasonably satisfactory in form and substance to
the Agents and their counsel; the Agents and their counsel shall have received
all information, approvals, opinions, documents or instruments as the Agents or
their counsel may reasonably request.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Secured Parties to enter into this Agreement and
to make Credit Extensions hereunder, each of Holdings, Intermediate Holdings and
the Company, jointly and severally, represents and warrants to each Secured
Party as set forth in this Article.
SECTION 6.1. Organization, etc. Holdings, Intermediate Holdings, each
Borrower and each of the Restricted Subsidiaries is validly organized and
existing and in good standing under the laws of the state or jurisdiction of its
incorporation or organization, is qualified to do business and is in good
standing as a foreign entity in each jurisdiction where the nature of its
business requires such qualification, except where the failure to be so
qualified could not reasonably be expected to have a Material Adverse Effect and
has full power and authority and holds all requisite governmental licenses,
permits and other approvals to enter into and perform its Obligations under each
Loan Document to which it is a party and to own and hold under lease its
property and to conduct its business substantially as currently conducted by it,
except such licenses, permits and
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approvals the failure of which to have could not reasonably be expected to have
a Material Adverse Effect.
SECTION 6.2. Due Authorization, Non-Contravention, etc. Due
Authorization, Non-Contravention, etc. The execution, delivery and performance
by each of Holdings, Intermediate Holdings and each Borrower of each Loan
Document executed or to be executed by it, the execution, delivery and
performance by each other Obligor of each Loan Document executed or to be
executed by it, Holdings', Intermediate Holdings' and the Company's and each
such other Obligor's participation in the consummation of all aspects of the
Transaction, and the execution, delivery and performance by Holdings,
Intermediate Holdings and each Borrower or (if applicable) any Obligor of the
agreements executed and delivered in connection with the Transaction are in each
case within each such Person's powers, have been duly authorized by all
necessary action, and do not
(a) contravene any (i) Obligor's Organic Documents, (ii)
except as set forth in Item 6.2 of the Disclosure Schedule contractual
restriction binding on or affecting any Obligor which contravention
could reasonably be expected to have a Material Adverse Effect, (iii)
court decree or order binding on or affecting any Obligor or (iv) law
or governmental regulation binding on or affecting any Obligor which
contravention could reasonably be expected to have a Material Adverse
Effect; or
(b) result in, or require the creation or imposition of, any
Lien on any Obligor's properties (except as permitted by this
Agreement).
SECTION 6.3. Government Approval, Regulation, etc. No authorization or
approval or other action by, and no notice to or filing with, (except for U.C.C.
and P.P.S.A. and other filings duly executed and delivered to the Administrative
Agent or the Filing Agent, or for which other filing arrangements reasonably
satisfactory to the Agents have been made, on the Closing Date) any Governmental
Authority or other Person (other than those that have been, or on the Closing
Date will be, duly obtained or made and which are, or on the Closing Date will
be, in full force and effect) is required for the consummation of the
Transaction or the due execution, delivery or performance by each of Holdings,
Intermediate Holdings, any Borrower or any other Obligor of any Loan Document to
which it is a party, or for the due execution, delivery and/or performance of
Transaction Documents, in each case by the parties thereto or the consummation
of the Transaction. Neither Holdings, Intermediate Holdings, the Company nor any
of their respective Subsidiaries is an "investment company" within the meaning
of the Investment Company Act of 1940, as amended, or a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
SECTION 6.4. Validity, etc. This Agreement and the Transaction
Documents to which it is a party constitute, and each other Loan Document
executed by Holdings, Intermediate Holdings or a Borrower will, on the due
execution and delivery thereof, constitute, the legal, valid and binding
obligations of such Obligor, enforceable against such Obligor in accordance with
their respective terms; and each Loan Document executed by each other Obligor
will, on the due
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execution and delivery thereof by such Obligor, constitute the legal, valid and
binding obligation of such Obligor enforceable against such Obligor in
accordance with its terms (except, in any case, as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally and by principles of equity).
SECTION 6.5. Financial Information. The financial statements of
Holdings and its Subsidiaries furnished to the Agents and each Lender pursuant
to Section 5.1.8 have been prepared in accordance with GAAP consistently
applied, and present fairly the consolidated financial condition of the Persons
covered thereby as at the dates thereof and the results of their operations for
the periods then ended, subject in the case of interim financial statements to
normal year-end adjustments. All balance sheets, all statements of operations,
shareholders' equity and cash flow and all other financial information of each
of Holdings and its Subsidiaries furnished pursuant to Section 7.1.1 have been
and will for periods following the Effective Date be prepared in accordance with
GAAP consistently applied, and do or will present fairly the consolidated
financial condition of the Persons covered thereby as at the dates thereof and
the results of their operations for the periods then ended, subject in the case
of interim financial statements to normal year-end adjustments.
SECTION 6.6. No Material Adverse Change. There has been no material
adverse change in the business, assets, condition (financial or otherwise),
operations, performance, properties, or prospects of Holdings, Intermediate
Holdings, the Company or any of the Restricted Subsidiaries since December 31,
1998.
SECTION 6.7. Litigation, Labor Controversies, etc. There is no pending
or, to the knowledge of Holdings, Intermediate Holdings, any Borrower or any of
their respective Subsidiaries, threatened litigation, action, proceeding or
labor controversy
(a) except as disclosed in Item 6.7 of the Disclosure
Schedule, affecting Holdings or any of its Restricted Subsidiaries or
any other Obligor, or any of their respective properties, businesses,
assets or revenues, which could reasonably be expected to have a
Material Adverse Effect, and no material adverse development has
occurred in any labor controversy, litigation, arbitration or
governmental investigation or proceeding disclosed in Item 6.7; or
(b) which purports to affect the legality, validity or
enforceability of any Loan Document, the Transaction Documents or the
Transaction.
SECTION 6.8. Subsidiaries. Neither Holdings, Intermediate Holdings nor
the Company has any Subsidiaries, except those Subsidiaries
(a) which are identified in Item 6.8 of the Disclosure
Schedule; or
(b) which are permitted to have been organized or acquired in
accordance with Sections 7.2.5 or 7.2.10.
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SECTION 6.9. Ownership of Properties. Holdings, Intermediate Holdings,
the Company and each of the Restricted Subsidiaries owns (i) in the case of real
property, good and marketable fee title, leasehold, easement, right of way or
other similar estate which is sufficient to permit such Person to operate as
railroads and other business as currently operated or carried on without undue
charge or expense, and (ii) in the case of owned personal property, good and
valid title to, or, in the case of leased real or personal property, valid and
enforceable leasehold interests (as the case may be) in, all of its properties
and assets, real and personal, tangible and intangible, of any nature
whatsoever, free and clear in each case of all Liens or claims, except for Liens
permitted pursuant to Section 7.2.3.
SECTION 6.10. Taxes. Holdings and each of its Subsidiaries has filed
all tax returns and reports required by law to have been filed by it and has
paid all taxes and governmental charges thereby shown to be due and owing,
except any such taxes or charges which are being diligently contested in good
faith by appropriate proceedings and for which adequate reserves in accordance
with GAAP shall have been set aside on its books.
SECTION 6.11. Pension and Welfare Plans. Except as disclosed in Item
6.11 of the Disclosure Schedule, during the twelve-consecutive-month period
prior to the date of the execution and delivery of this Agreement and prior to
the date of any Credit Extension hereunder, no steps have been taken to
terminate any Pension Plan, and no contribution failure has occurred with
respect to any Pension Plan sufficient to give rise to a Lien under Section
302(f) of ERISA. Except as disclosed in Item 6.11 of the Disclosure Schedule, no
condition exists or event or transaction has occurred with respect to any
Pension Plan which might result in the incurrence by Holdings, the Company or
any member of the Controlled Group of any material liability, fine or penalty.
Except as disclosed in Item 6.11 of the Disclosure Schedule, neither Holdings,
the Company nor any member of the Controlled Group has any contingent liability
with respect to any post-retirement benefit under a Welfare Plan, other than
liability for continuation coverage described in Part 6 of Title I of ERISA.
Holdings has no nor will it have any Pension Plan.
SECTION 6.12. Environmental Warranties. Except as set forth in Item
6.12 of the Disclosure Schedule:
(a) all facilities and property (including underlying
groundwater) owned, leased, or operated upon (including all right of
way easements) by Holdings or any of its Subsidiaries have been, and
continue to be in material compliance with all Environmental Laws;
(b) there have been no past, and there are no pending or, to
the best knowledge of the Company, threatened (i) claims, complaints,
notices or requests for information received by Holdings, Intermediate
Holdings, the Company or any of the Subsidiaries with respect to any
alleged violation of any Environmental Law, or (ii) complaints, notices
or inquiries to Holdings or any of its Subsidiaries regarding potential
liability under any Environmental Law;
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(c) to the best knowledge of the Company, there have been no
Releases of Hazardous Materials at, on or under any property now or
previously owned, leased or operated upon (including all rights of way
easements) by Holdings or any of its Subsidiaries that singly or in the
aggregate have, or could reasonably be expected to have, a Material
Adverse Effect;
(d) to the best knowledge of the Company, after all due
inquiry Holdings and its Subsidiaries have been issued and are in
material compliance with all permits, certificates, approvals, licenses
and other authorizations relating to environmental matters;
(e) to the best knowledge of the Company, no property now or
previously owned or leased or operated upon (including all right of way
easements) by Holdings or any of its Subsidiaries is listed or proposed
for listing on the National Priorities List pursuant to CERCLA, on the
CERCLIS or on any similar state list of sites requiring investigation
or clean-up;
(f) to the best knowledge of the Company, there are no
underground storage tanks, active or abandoned, including petroleum
storage tanks, on or under any property now or previously owned, leased
or operated upon (including all right of way easements) by Holdings or
any of its Subsidiaries that, singly or in the aggregate, have, or
could reasonably be expected to have, a Material Adverse Effect;
(g) to the best knowledge of the Company, neither Holdings nor
any Subsidiary has directly transported or directly arranged for the
transportation of any Hazardous Material to any location which is
listed or proposed for listing on the National Priorities List pursuant
to CERCLA, on the CERCLIS or on any similar state list or which is the
subject of federal, state or local enforcement actions or other
investigations which may lead to material claims against Holdings or
such Subsidiary for any remedial work, damage to natural resources or
personal injury, including claims under CERCLA;
(h) there are no polychlorinated biphenyls or friable asbestos
present at any property now or previously owned, leased or operated
upon (including right of way easements) by Holdings or any Subsidiary
that, singly or in the aggregate, have, or could reasonably be expected
to have, a Material Adverse Effect; and
(i) no conditions exist at, on or under any properties now or
previously owned, leased or operated upon (including right of way
easements) by Holdings or any of its Subsidiaries which, with the
passage of time, or the giving of notice or both, would singly or in
the aggregate give rise to liability under any Environmental Law which
could reasonably be expected to have a Material Adverse Effect.
SECTION 6.13. Accuracy of Information. None of the factual information
heretofore or contemporaneously furnished in writing to any Secured Party by or
on behalf of any Obligor in connection with any Loan Document or any transaction
contemplated hereby (including the
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Transaction) contains any untrue statement of a material fact, or omits to state
any material fact necessary to make any information not misleading in light of
the circumstances under which made, and no other factual information hereafter
furnished in connection with any Loan Document by or on behalf of any Obligor to
any Secured Party will contain any untrue statement of a material fact or will
omit to state any material fact necessary to make any information not misleading
in light of the circumstances under which made on the date as of which such
information is dated or certified.
SECTION 6.14. Regulations U and X. No Obligor is engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock, and no proceeds of any Credit Extensions will be used to purchase or
carry margin stock or otherwise for a purpose which violates, or would be
inconsistent with, F.R.S. Board Regulation U or Regulation X. Terms for which
meanings are provided in F.R.S. Board Regulation U or Regulation X or any
regulations substituted therefor, as from time to time in effect, are used in
this Section with such meanings.
SECTION 6.15. Year 2000. Except as disclosed on Item 6.15 of the
Disclosure Schedule, each Obligor has reviewed the areas within its business and
operations which could be adversely affected by, and has developed or is
developing a program to address, the "Year 2000 Problem" (that is, the risk that
computer applications used by such Obligor may be unable to recognize and
properly perform date-sensitive functions involving certain dates prior to and
any date on or after December 31, 1999). Based on such review and program, the
Year 2000 Problem could not reasonably be expected to have a Material Adverse
Effect.
SECTION 6.16. Issuance of Subordinated Debt; Status of Obligations as
Senior Indebtedness, etc. The Company has the power and authority to incur the
Subordinated Debt evidenced by the Subordinated Bridge Notes as provided for
under the Subordinated Debt Documents applicable thereto and has duly
authorized, executed and delivered the Subordinated Debt Documents applicable to
such Subordinated Debt. The Company has issued, pursuant to due authorization,
the Subordinated Debt evidenced by the Subordinated Bridge Notes under the
applicable Subordinated Debt Documents, and such Subordinated Debt Documents
constitute the legal, valid and binding obligations of the Company enforceable
against it in accordance with its terms (except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally and by principles of equity). The
subordination provisions of the Subordinated Bridge Notes contained in the
applicable Subordinated Debt Documents are enforceable against the holders of
such Subordinated Debt by the holder of any "Senior Indebtedness" or similar
term referring to the Obligations (as defined in the Subordinated Debt
Documents). All Obligations, including those to pay principal of and interest
(including post-petition interest, whether or not allowed as a claim under
bankruptcy or similar laws) on the Loans and Reimbursement Obligations, and fees
and expenses in connection therewith, constitute "Senior Indebtedness" (or
similar term) relating to the Obligations (as defined in the Subordinated Debt
Documents) and all such Obligations are entitled to the benefits of the
subordination created by the Subordinated Debt Documents. The Company
acknowledges that each Agent, each Lender and each Issuer is entering into this
Agreement and is extending its Commitments in reliance upon the subordination
provisions of the Subordinated Debt Documents.
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SECTION 6.17. Solvency. The Transaction (including, among other things,
the incurrence of the initial Credit Extension hereunder and the execution and
delivery by the Guarantors of the Guarantees) will not involve or result in any
fraudulent transfer or fraudulent conveyance under the provisions of Section 548
of the Bankruptcy Code (11 U.S.C. Section 101 et seq., as from time to time
hereafter amended, and any successor or similar statute) or any applicable state
law respecting fraudulent transfers or fraudulent conveyances. On the Closing
Date, after giving effect to the Transaction (including, among other things, the
incurrence of the initial Credit Extension hereunder and the execution and
delivery by the Guarantors of the Guarantees), Holdings and its Subsidiaries,
Intermediate Holdings and its Subsidiaries and the Company and the Restricted
Subsidiaries, in each case taken as a whole, are Solvent.
ARTICLE VII
COVENANTS
SECTION 7.1. Affirmative Covenants. Each of Holdings, Intermediate
Holdings and each of the Borrowers agrees with each Lender, each Issuer and each
Agent that until the Termination Date has occurred, such Obligor will, and will
cause its Subsidiaries to, perform or cause to be performed the obligations set
forth below.
SECTION 7.1.1. Financial Information, Reports, Notices, etc. Holdings,
Intermediate Holdings and each Borrower will furnish or cause to be furnished to
the Agents (with sufficient copies for each Lender) copies of the following
financial statements, reports, notices and information:
(a) as soon as practicable, and in any event within thirty
(30) days (or for calendar months ending on or prior to June 30, 2000
and for the last month of each Fiscal Quarter thereafter, forty-five
(45) days) after the end of each calendar month in each Fiscal Year,
the unaudited consolidated and consolidating statements of income of
Holdings and its Subsidiaries for such fiscal month and for the period
from the beginning of the then current Fiscal Year to the end of such
fiscal month, setting forth in each case for each month beginning
February 2001 in comparative form the corresponding figures for the
corresponding calendar month of the previous Fiscal Year and the
corresponding figures from the consolidated financial forecast for the
current Fiscal Year delivered pursuant to Section 7.1.1(g), certified
as complete and correct by the chief financial or accounting Authorized
Officer of Holdings and including (in each case), in comparative form
the figures for the corresponding calendar month in, and year to date
portion of, the immediately preceding Fiscal Year, certified as
complete and correct by the chief financial or accounting Authorized
Officer of Holdings;
(b) as soon as available and in any event within 45 days after
the end of each of the first three Fiscal Quarters of each Fiscal Year,
an unaudited consolidated and consolidating balance sheets of Holdings
and its Subsidiaries as of the end of such Fiscal Quarter and the
related consolidated and consolidating statements of income and cash
flow
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of Holdings and its Subsidiaries for such Fiscal Quarter and for the
period commencing at the end of the previous Fiscal Year and ending with the end
of such Fiscal Quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding Fiscal Quarter of the previous
Fiscal Year and the corresponding figures from the consolidated financial
forecast for the current Fiscal Year delivered pursuant to Section 7.1.1(g),
certified as complete and correct by the chief financial or accounting
Authorized Officer of Holdings and including (in each case), in comparative form
the figures for the corresponding Fiscal Quarter in, and year to date portion
of, the immediately preceding Fiscal Year, certified as complete and correct by
the chief financial or accounting Authorized Officer of Holdings; provided,
however, that in lieu of delivery of such consolidated financial statements of
Holdings and its Subsidiaries, Holdings may deliver instead a copy of its SEC
Form 10-Q for such Fiscal Quarter;
(c) as soon as available and in any event within 90 days after the end
of each Fiscal Year, a copy of the consolidated and consolidating balance sheets
of Holdings and its Subsidiaries, and the related consolidated and consolidating
statements of income and cash flow of Holdings and its Subsidiaries for such
Fiscal Year, setting forth in comparative form the figures for the immediately
preceding Fiscal Year and the corresponding figures from the consolidated
financial forecasts for such Fiscal Year delivered pursuant to Section 7.1.1(g),
audited (without any Impermissible Qualification), in the case of the
consolidated financial statements by PWC or such other independent public
accountants acceptable to the Agents, which shall include a calculation of the
financial covenants set forth in Section 7.2.4 and stating that, in performing
the examination necessary to deliver the audited financial statements of
Holdings, no knowledge was obtained of any Event of Default and, in the case of
all other financial statements certified by the chief financial or accounting
Authorized Officer of Holdings; provided, however, that in lieu of delivery of
such consolidated financial statements of Holdings and its Subsidiaries,
Holdings may deliver instead a copy of its SEC Form 10-K for such Fiscal Year;
(d) concurrently with the delivery of the financial information
pursuant to clauses (a), (b) and (c), a Compliance Certificate, executed by the
chief financial or accounting Authorized Officer of Holdings, showing compliance
with the financial covenants set forth in Section 7.2.4 and stating that no
Default has occurred and is continuing to the knowledge of a Responsible Officer
(or, if a Default has occurred, specifying the details of such Default and the
action that Holdings or an Obligor has taken or proposes to take with respect
thereto);
(e) as soon as possible and in any event within three Business Days
after Holdings or any other Obligor obtains knowledge of the occurrence of a
Default, a statement of an Authorized Officer of Holdings setting forth details
of such Default and the action which Holdings or such Obligor has taken and
proposes to take with respect thereto;
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(f) as soon as possible and in any event within three Business Days
after Holdings or any other Obligor obtains knowledge of (i) the occurrence of
any material adverse development with respect to any litigation, action,
proceeding or labor controversy described in Item 6.7 of the Disclosure Schedule
or (ii) the commencement of any litigation, action, proceeding or labor
controversy of the type and materiality described in Section 6.7, notice thereof
and, to the extent either Agent requests, copies of all documentation relating
thereto;
(g) no later than the last day of each Fiscal Year beginning with
Fiscal Year 2000, (i) an annual business plan for the next Fiscal Year for each
of Holdings and its Subsidiaries, substantially in the form of the business plan
heretofore delivered to the Administrative Agent and the Lenders; and (ii) a
consolidated and consolidating plan and financial forecast consisting of balance
sheets, income statements and cash flow statements on a monthly basis for the
next 12 months and on an annual basis for each Fiscal Year from such Fiscal Year
through the 2007 Fiscal Year of Holdings and its Subsidiaries based upon facts
and assumptions that Holdings believes to be reasonable in light of the then
current and foreseeable business conditions (it being understood that actual
results may differ from the projections);
(h) promptly after the sending or filing thereof, copies of all
reports, notices, prospectuses and registration statements which any Obligor
files with the SEC or any national securities exchange;
(i) promptly upon becoming aware of (i) the institution of any steps
by any Person to terminate any Pension Plan, (ii) the failure to make a required
contribution to any Pension Plan if such failure is sufficient to give rise to a
Lien under Section 302(f) of ERISA, (iii) the taking of any action with respect
to a Pension Plan which could result in the requirement that any Obligor furnish
a bond or other security to the PBGC or such Pension Plan, or (iv) the
occurrence of any event with respect to any Pension Plan which could result in
the incurrence by any Obligor of any material liability, fine or penalty, notice
thereof and copies of all documentation relating thereto;
(j) promptly upon receipt thereof, copies of all "management letters"
submitted to Holdings or any other Obligor by the independent public accountants
referred to in clause (c) in connection with each audit made by such
accountants;
(k) promptly following the mailing or receipt of any notice, financial
information or report delivered under the terms of any Subordinated Debt
Document or Intermediate Holdings Asset Bridge Document that is not otherwise
required to be delivered hereunder, copies of such notice, financial information
or report;
(l) within 20 days after the end of each calendar month, a certificate
in substantially the form of Exhibit E-2, executed by the president, chief
executive officer, treasurer, controller or chief financial Authorized Officer
of Holdings showing the U.S. Dollar
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Equivalent of the aggregate outstanding principal amount of all Foreign
Currency Revolving Loans, as of the end of such month, for (i) all
Foreign Borrowers, taken as a whole, and (ii) each Foreign Borrower,
individually; and
(m) such other financial and other information as any Lender
or Issuer through the Administrative Agent or either Agent may from
time to time reasonably request (including information and reports in
such detail as either Agent may request with respect to the terms of
and information provided pursuant to the Compliance Certificate).
SECTION 7.1.2. Maintenance of Existence; Compliance with Laws, etc.
Each of Holdings, Intermediate Holdings and each Borrower will, and will cause
each of the Restricted Subsidiaries to,
(a) except as otherwise permitted by Section 7.2.10, preserve
and maintain its legal existence; and
(b) comply in all material respects with all applicable laws,
rules, regulations and orders, including the payment (before the same
become delinquent), of all taxes, assessments and governmental charges
imposed upon Holdings or its Subsidiaries or upon their property except
to the extent being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP
have been set aside on the books of Holdings or its Subsidiaries, as
applicable.
SECTION 7.1.3. Maintenance of Properties. Each of Holdings,
Intermediate Holdings and each Borrower will, and will cause each of the
Restricted Subsidiaries to, maintain, preserve, protect and keep its and their
respective properties whether owned, leased or operated upon (including right of
way easements) in good repair, working order and condition (ordinary wear and
tear excepted), and make necessary repairs, renewals and replacements so that
the business carried on by Holdings and its Subsidiaries may be properly
conducted at all times, unless Holdings or such Subsidiary determines in good
faith that the continued maintenance of such property is no longer economically
desirable.
SECTION 7.1.4. Insurance. Each of Holdings, Intermediate Holdings and
each Borrower will, and will cause each of the Restricted Subsidiaries to:
(a) maintain insurance on its property with financially sound
and reputable insurance companies against loss and damage in at least
the amounts (and with only those deductibles) customarily maintained,
and against such risks as are typically insured against in the same
general area, by Persons of comparable size engaged in the same or
similar business as Holdings and its Subsidiaries; and
(b) all worker"s compensation, employer"s liability insurance
or similar insurance as may be required under the laws of any state or
jurisdiction in which it may be engaged in business.
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Without limiting the foregoing, all insurance policies required pursuant to this
Section shall (i) name the Administrative Agent on behalf of Secured Parties as
mortgagee (in the case of property insurance) or additional insured (in the case
of liability insurance), as applicable, and provide that no cancellation or
modification of the policies will be made without thirty days' prior written
notice to the Administrative Agent and (ii) be in addition to any requirements
to maintain specific types of insurance contained in the other Loan Documents.
SECTION 7.1.5. Books and Records. Each of Holdings, Intermediate
Holdings and each of the Borrowers will, and will cause each of their respective
Subsidiaries to, keep books and records in accordance with GAAP which accurately
reflect all of its business affairs and transactions and permit each Secured
Party or any of their respective representatives, at reasonable times and
intervals upon reasonable notice to the Company and, in the case of the Agents,
at the Company's expense, to visit each Obligor's offices, to discuss such
Obligor's financial matters with its officers and employees, and its independent
public accountants (and the Company hereby authorizes such independent public
accountant to discuss the Company's and each Obligor's financial matters with
each Secured Party or their representatives whether or not any representative of
the Company or such Obligor is present) and to examine (and photocopy extracts
from) any of its books and records. The Company shall pay any fees of such
independent public accountant incurred in connection with any Secured Party's
exercise of its rights pursuant to this Section.
SECTION 7.1.6. Environmental Law Covenant. Each of Holdings,
Intermediate Holdings and each of the Borrowers will, and will cause each of
their respective Subsidiaries to,
(a) use and operate all of its and their facilities and
properties owned, leased or operated upon (including right of way
easements) in material compliance with all Environmental Laws, keep all
necessary material permits, approvals, certificates, licenses and other
authorizations relating to environmental matters in effect and remain
in material compliance therewith, and handle all Hazardous Materials in
material compliance with all applicable Environmental Laws; and
(b) promptly notify the Agents and provide copies upon receipt
of all written claims, complaints, notices or inquiries of a
Governmental Authority relating to the condition of its facilities and
properties whether owned, leased or operated upon (including right of
way easements) in respect of, or as to compliance with, Environmental
Laws, and shall promptly resolve any non-compliance with Environmental
Laws and keep such property free of any Lien imposed by any
Environmental Law.
SECTION 7.1.7. Use of Proceeds. The Borrowers will apply the proceeds
of the Credit Extensions as follows:
(a) apply the proceeds of the Loans
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(i) in the case of the Term Loans, (A) to finance the
consummation of the Transaction, and (B) to pay the Expense
Payments associated with the Transaction; provided, that the
aggregate amount of such Expense Payments shall not exceed
$36,000,000;
(ii) in the case of U.S. Revolving Loans and Swing
Line Loans, for post-Closing Date working capital and general
corporate purposes of the Company and its Restricted
Subsidiaries;
(iii) in the case of Canadian Loans, for post-Closing
Date working capital and general corporate purposes of the
Canadian Borrower and its Restricted Subsidiaries; and
(iv) in the case of Australian Revolving Loans, for
post-Closing Date working capital and general corporate
purposes of the Australian Borrower and its Restricted
Subsidiaries; and
(b) use Letters of Credit only for purposes of supporting
working capital and general corporate purposes of the Company and the
Restricted Subsidiaries.
SECTION 7.1.8. Future Guarantors, Security, etc. Each of Holdings,
Intermediate Holdings and each Borrower will, and will cause each Domestic
Subsidiary, Canadian Subsidiary and Australian Subsidiary to execute any
documents, Financing Statements, agreements and instruments, and take all
further action (including filing Mortgages) that may be required under
applicable law, or that either Agent may reasonably request, in order to
effectuate the transactions contemplated by the Loan Documents and in order to
grant, preserve, protect and perfect the validity and first priority of the
security interests created or intended to be created by the Loan Documents. Each
Borrower will cause any subsequently acquired or organized Domestic Subsidiary,
Canadian Subsidiary and Australian Subsidiary to execute a Subsidiary Guaranty
(or a supplement thereto) and each applicable Loan Document in favor of the
relevant Secured Parties; provided, that no such Restricted Subsidiary that is a
Domestic Subsidiary shall be required to pledge more than 65% of the Voting
Stock of any directly held Foreign Subsidiary. In addition, from time to time,
each of Holdings, Intermediate Holdings and each Borrower will, at its cost and
expense, promptly secure the Obligations by pledging or creating, or causing to
be pledged or created, perfected security interests with respect to such of its
assets and properties as either Agent or the Required Lenders shall designate
(it being understood that it is the intent of the parties that (i) all of the
Obligations shall be secured by, among other things, all of the Capital Stock of
the Company and substantially all the assets of the Company and its Domestic
Subsidiaries that are Restricted Subsidiaries); provided, that neither the
Company nor any such Domestic Subsidiary shall be required to pledge more than
65% of the Voting Stock of any directly held Foreign Subsidiary, (ii) the
Obligations of the Australian Borrower will also be secured by substantially all
of the assets of the Australian Borrower and each of its Affiliates that is an
Australian Restricted Subsidiary and is organized in, or a resident of,
Australia and (iii) the Obligations of the Canadian Borrower will also be
secured by substantially all of the assets of the Canadian
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Borrower and each of its Affiliates that is a Canadian Restricted Subsidiary and
is organized in, or a resident of, Canada, in each case including real and other
properties acquired subsequent to the Effective Date. Such security interests
and Liens will be created under the Loan Documents in form and substance
satisfactory to the Agents, and each of Holdings and the Company shall deliver
or cause to be delivered to the Lenders all such instruments and documents
(including legal opinions, title insurance policies and lien searches) as the
Agents shall reasonably request to evidence compliance with this Section.
SECTION 7.1.9. Rate Protection Agreements. Within 90 days following the
Closing Date, the Company will enter into interest rate swap, cap, collar or
similar arrangements designed to protect the Company against fluctuations in
interest rates to the extent necessary to provide that at least 50% of the
aggregate principal amount then outstanding of Term Loans and Indebtedness
permitted under clause (g) of Section 7.2.2 is subject to a fixed interest rate
(after giving effect to each such arrangement) for a minimum period of two years
from the date of such determination (but not beyond the Stated Maturity Date of
the Term B Loans), with the terms and conditions of such arrangement being
reasonably satisfactory to the Agents.
SECTION 7.1.10. Use of Proceeds of Holdings Disposition of Capital
Stock or Assets. Immediately upon the Disposition of any of its Capital Stock by
Holdings, Holdings shall use the Net Equity Proceeds therefrom (calculated
without giving effect to clause (b)(ii) of the definition of Net Equity
Proceeds) to (i) redeem or prepay Intermediate Holdings Asset Bridge Notes and
(ii) make a capital contribution to the common equity of the Company in an
amount equal to the remaining balance of such Net Equity Proceeds. Immediately
upon the receipt of the net proceeds of any Disposition of Kalyn/Siebert,
Intermediate Holdings shall immediately make an equity contribution of such net
proceeds to the common equity of the Company to the extent such net proceeds are
not used to prepay or redeem Intermediate Holdings Asset Bridge Notes and use
the proceeds of such a capital contribution to make a prepayment of Term Loans
pursuant to clause (a) of Section 3.1.1.
SECTION 7.1.11. RailAmerica Limited Pty Limited Constitution. The
Company undertakes to procure the delivery to the Administrative Agent of a
certified copy of the constitution of RAPL on the first day following the date
of the Australian Equitable Mortgage of Shares No.2.
SECTION 7.2. Negative Covenants. Each of Holdings, Intermediate
Holdings and each Borrower covenants and agrees with each Lender, each Issuer
and each Agent that until the Termination Date has occurred, Holdings,
Intermediate Holdings and each Borrower will, and will cause the Restricted
Subsidiaries to, perform or cause to be performed the obligations set forth
below.
SECTION 7.2.1. Business Activities. (a) Each Borrower will not, and
each of Holdings, Intermediate Holdings and each Borrower will not permit any of
the Restricted Subsidiaries to, engage in any business activity except those
business activities engaged in on the date of this Agreement and activities
reasonably incidental thereto.
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(b) Holdings will not engage in any business activity other
than (i) its direct ownership of the Capital Stock of Intermediate Holdings and
its indirect ownership of the Capital Stock of the Company, Kalyn/Siebert, the
Canadian Borrower, the Australian Borrower and each Subsidiary of each Borrower,
(ii) its employment and provision of benefits to certain employees, including
certain former employees of RailTex and (iii) its compliance with the
obligations applicable to it under the Loan Documents and the Transaction
Documents.
(c) Intermediate Holdings will not engage in any business
activity other than (i) its direct ownership of the Capital Stock of the Company
and its indirect ownership of the Capital Stock of the Canadian Borrower, the
Australian Borrower and each Subsidiary of each Borrower, (ii) its ownership of
Kalyn/Siebert and (iii) its compliance with the obligations applicable to it
under the Loan Documents and the Transaction Documents.
SECTION 7.2.2. Indebtedness. Each of Holdings, Intermediate Holdings
and each Borrower will not, and will not permit any of the Restricted
Subsidiaries to, create, incur, assume or permit to exist any Indebtedness,
other than:
(a) Indebtedness in respect of the Obligations;
(b) until the Closing Date, Indebtedness that is to be repaid
in full as further identified in Item 7.2.2(b) of the Disclosure
Schedule;
(c) in the case of Holdings, the Borrowers and the Restricted
Subsidiaries, Indebtedness existing as of the Effective Date which is
identified in Item 7.2.2(c) of the Disclosure Schedule, and refinancing
of such Indebtedness (other than the Holdings Convertible Subordinated
Notes);
(d) in the case of the Company and the Restricted
Subsidiaries, unsecured Indebtedness of the Company and the Restricted
Subsidiaries (i) incurred in the ordinary course of business of the
Company and the Restricted Subsidiaries (including open accounts
extended by suppliers on normal trade terms in connection with
purchases of goods and services which are not overdue for a period of
more than 90 days or, if overdue for more than 90 days, as to which a
dispute exists and adequate reserves in conformity with GAAP have been
established on the books of the Company or such Restricted Subsidiary)
and (ii) in respect of performance, surety or appeal bonds provided in
the ordinary course of business, but excluding (in each case),
Indebtedness incurred through the borrowing of money or Contingent
Liabilities in respect thereof;
(e) in the case of the Company and the Restricted
Subsidiaries, Indebtedness of the Company and the Restricted
Subsidiaries (i) in respect of industrial revenue bonds or other
similar governmental or municipal bonds, (ii) evidencing the deferred
purchase price of newly acquired property or incurred to finance the
acquisition of equipment of the Company and the Restricted Subsidiaries
(pursuant to purchase money mortgages or otherwise, whether owed to the
seller or a third party) used in the ordinary course of
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business of the Company and the Restricted Subsidiaries (provided, that such
Indebtedness is incurred within 60 days of the acquisition of such property) and
(iii) Capitalized Lease Liabilities; provided, that the aggregate amount of all
Indebtedness outstanding pursuant to this clause (e) shall not at any time
exceed $10,000,000;
(f) Indebtedness of any Subsidiary owing to the Company or any
other Restricted Subsidiary, which Indebtedness
(i) shall, if payable to the Company or a Domestic
Subsidiary, be evidenced, if requested by the Administrative
Agent, by one or more promissory notes in form and substance
satisfactory to the Agents, duly executed and delivered in
pledge to the Administrative Agent pursuant to a Loan
Document, and shall not be forgiven or otherwise discharged
for any consideration other than payment in full or in part in
cash (provided, that only the amount repaid in part shall be
discharged); and
(ii) if incurred by a Foreign Subsidiary owing to the
Company or a Domestic Subsidiary Guarantor, shall not (when
aggregated with the amount of Investments made by the Company
and such Subsidiary Guarantors in Foreign Subsidiaries under
clause (e)(ii) of Section 7.2.5) at any time exceed $5,000,000
for all such Subsidiaries;
(g) unsecured Subordinated Debt of the Company evidenced by
the Subordinated Bridge Notes incurred pursuant to the terms of the
Subordinated Debt Documents in a principal amount not to exceed
$95,000,000, and unsecured Contingent Liabilities of the Guarantors in
respect of such Subordinated Debt, but only if such Contingent
Liabilities are subordinated to the Obligations on substantially the
same terms as the Subordinated Debt of the Company is subordinated to
the Obligations and (in each case), and the Permanent Financing Debt
which shall satisfy the terms of the definition of "Subordinated Debt";
(h) Indebtedness of a Person existing at the time such Person
became a Subsidiary of the Company in an aggregate amount of all such
Persons not to exceed $10,000,000, but only to the extent that such
Indebtedness was not created or incurred in contemplation of such
Person becoming a Subsidiary; and
(i) Indebtedness of the Company and the Restricted
Subsidiaries owing to a Governmental Authority, bearing a low interest
rate or subsidized interest rate in an aggregate principal amount not
to exceed $5,000,000 per loan or $15,000,000 at any time outstanding;
(j) other Indebtedness of the Company and its Subsidiaries
(other than Indebtedness of Foreign Subsidiaries owing to the Company
or any of its Domestic Subsidiaries) in an aggregate principal amount
at any time outstanding not to exceed $10,000,000 in aggregate
principal amount;
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(k) secured Indebtedness of Intermediate Holdings evidenced by
the Intermediate Holdings Asset Bridge Notes incurred pursuant to the
terms of the Intermediate Holdings Asset Bridge Documents in an initial
principal amount not to exceed $55,000,000;
(l) Indebtedness of the Company and any of its Subsidiaries
incurred in connection with "fuel rate hedging agreements" entered into
by the Company or any of its Subsidiaries in the ordinary course of
business and not for speculative purposes in an aggregate notional
amount not to exceed $15,000,000 at any time outstanding; and
(m) Indebtedness of the Company and the Restricted
Subsidiaries incurred in respect of Synthetic Leases not to exceed
$5,000,000 at any time outstanding.
provided, however, that no Indebtedness otherwise permitted by clauses (e),
(f)(ii), (h), (i), (j), (l) or (m) shall be assumed or otherwise incurred if a
Specified Default has occurred and is then continuing or would result therefrom.
SECTION 7.2.3. Liens. Each of Holdings, Intermediate Holdings and each
Borrower will not, and will not permit any of the Restricted Subsidiaries to,
create, incur, assume or permit to exist any Lien upon any of its property
(including Capital Stock of any Person), revenues or assets, whether now owned
or hereafter acquired, except:
(a) Liens securing payment of the Obligations;
(b) until the Closing Date, Liens securing payment of
Indebtedness of the type described in clause (b) of Section 7.2.2;
(c) Liens existing as of the Effective Date and disclosed in
Item 7.2.3(c) of the Disclosure Schedule securing Indebtedness
described in clause (c) of Section 7.2.2, and refinancings of such
Indebtedness; provided, that no such Lien shall encumber any additional
property and the amount of Indebtedness secured by such Lien is not
increased from that existing on the Effective Date (as such
Indebtedness may have been permanently reduced subsequent to the
Effective Date);
(d) Liens securing Indebtedness of the type permitted under
clause (e) of Section 7.2.2; provided, that (i) such Lien is granted
within 60 days after such Indebtedness is incurred, (ii) the
Indebtedness secured thereby does not exceed 100% of the lesser of the
cost or the fair market value of the applicable property, improvements
or equipment at the time of such acquisition (or construction) and
(iii) such Lien secures only the assets that are the subject of the
Indebtedness referred to in such clause;
(e) Liens securing Indebtedness of the type permitted under
clause (i) of Section 7.2.2; provided, that such Indebtedness may be
secured (i) on a first lien basis by the assets that are subject to the
Indebtedness referred to in clause (i) of Section 7.2.2 and (ii) by a
second lien on other fixed assets of such Person with an aggregate
value (determined at the
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greater of the cost or the fair market value thereof) not to exceed the
principal amount of the applicable Loan less the value of the assets
secured by the first lien;
(f) Liens securing Indebtedness permitted by clause (h) of
Section 7.2.2; provided, that such Liens existed prior to such Person
becoming a Subsidiary, were not created in anticipation thereof and
attach only to specific tangible assets of such Person (and not assets
of such Person generally);
(g) Liens in favor of carriers, warehousemen, mechanics,
materialmen and landlords granted in the ordinary course of business
for amounts not overdue or being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance
with GAAP shall have been set aside on its books;
(h) Liens incurred or deposits made in the ordinary course of
business in connection with worker's compensation, unemployment
insurance or other forms of governmental insurance or benefits, or to
secure performance of tenders, statutory obligations, bids, leases or
other similar obligations (other than for borrowed money) entered into
in the ordinary course of business or to secure obligations on surety
and appeal bonds or performance bonds;
(i) judgment Liens in existence for less than 45 days after
the entry thereof or with respect to which execution has been stayed or
the payment of which is covered in full (subject to a customary
deductible) by insurance maintained with responsible insurance
companies and which do not otherwise result in an Event of Default
under Section 8.1.6;
(j) easements, rights-of-way, zoning restrictions, minor
defects or irregularities in title and other similar encumbrances not
interfering in any material respect with the value for railroad
property or use of the property to which such Lien is attached;
(k) Liens for taxes, assessments or other governmental charges
or levies not at the time delinquent or thereafter payable without
penalty or being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books; and
(l) Liens on the Intermediate Holdings Excluded Assets
securing Indebtedness under the Intermediate Holdings Asset Bridge
Notes.
SECTION 7.2.4. Financial Covenants. The Company and the Restricted
Subsidiaries will not permit to occur any of the events set forth below.
(a) The Company and the Restricted Subsidiaries will not permit the
Leverage Ratio as of the last day of any Fiscal Quarter occurring
during any period set forth below to be greater than the ratio set
forth opposite such period:
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Leverage
Period Ratio
------- ---------
Closing Date to 3/31/00 5.25:1.00
4/1/00 to 6/30/00 5.00:1.00
7/1/00 to 9/30/00 4.75:1.00
10/1/00 to 12/31/00 4.50:1.00
1/1/01 to 3/31/01 4.25:1.00
4/1/01 to 12/31/01 4.00:1.00
1/1/02 to 6/30/02 3.75:1.00
7/1/02 to 12/31/02 3.50:1.00
1/1/03 to 6/30/03 3.25:1.00
7/1/03 to 12/31/03 3.00:1.00
1/1/04 to 6/30/04 2.75:1.00
7/1/04 to 12/31/04 2.50:1.00
1/1/05 to 6/30/05 2.25:1.00
7/1/05 to 12/31/05 2.00:1.00
1/1/06 to 6/30/06 1.75:1.00
7/1/06 and thereafter 1.50:1.00
(b) The Company and the Restricted Subsidiaries will not
permit the Fixed Charge Coverage Ratio as of the last day of any Fiscal
Quarter occurring during any period set forth below to be less than the
ratio set forth opposite such period:
Fixed Charge
Period Coverage Ratio
------ --------------
Closing date to 6/30/00 1.25:1.0
7/1/00 and thereafter 1.30:1.0
(c) The Company and the Restricted Subsidiaries will not
permit the Interest Coverage Ratio as of the last day of any Fiscal
Quarter occurring during any period set forth below to be less than the
ratio set forth opposite such period:
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Interest Coverage
Period Ratio
------ -----------------
Closing Date to 6/30/00 1.75:1.00
7/1/00 to 12/31/00 2.00:1.00
1/1/01 to 12/31/01 2.25:1.00
1/1/02 to 6/30/02 2.35:1.00
7/1/02 to 6/30/03 2.50:1.00
7/1/03 to 12/31/03 2.75:1.00
1/1/04 to 12/31/04 3.00:1.00
1/1/05 to 6/30/05 3.25:1.00
7/1/05 and thereafter 3.50:1.00
(d) Holdings and its Subsidiaries (other than Ferronor and
Kalyn/Siebert) will not permit their Net Worth as of the last day of
any Fiscal Quarter to be less than the sum of (i) $100,000,000 plus
(ii) the sum of the Net Income for each Fiscal Quarter ending after the
Closing Date and ending on or before such date of measurement in which
the Net Income was positive, multiplied by 75%.
SECTION 7.2.5. Investments. Each of Holdings, Intermediate Holdings and
each Borrower will not, and will not permit any of the Restricted Subsidiaries
to, purchase, make, incur, assume or permit to exist any Investment in any other
Person, except:
(a) Investments existing on the Effective Date and identified
in Item 7.2.5(a) of the Disclosure Schedule;
(b) Cash Equivalent Investments;
(c) Investments received in connection with the bankruptcy or
reorganization of, or settlement of delinquent accounts and disputes
with, customers and suppliers, in each case in the ordinary course of
business;
(d) Investments permitted as Capital Expenditures pursuant to
Section 7.2.7;
(e) Investments by way of contributions to capital or
purchases of Capital Stock (i) by Holdings, Intermediate Holdings or
Intermediate Holdings in the Company, (ii) by the Company in any
Restricted Subsidiary or by any Subsidiary in other Restricted
Subsidiaries; provided, that the aggregate amount of intercompany loans
made pursuant to clause (f)(ii) of Section 7.2.2 and Investments under
this clause made by the Company and Domestic Subsidiary
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Guarantors in Subsidiaries that are not Domestic Subsidiary Guarantors
shall not exceed $5,000,000 at any time, or (iii) by any Subsidiary in
the Company;
(f) Investments by Subsidiaries of Holdings constituting (i)
accounts receivable arising, (ii) trade debt granted, or (iii) deposits
made in connection with the purchase price of goods or services, in
each case in the ordinary course of business;
(g) Investments by the Company or any Restricted Subsidiary by
way of the acquisition of Capital Stock constituting Permitted
Acquisitions in an amount not to exceed $20,000,000 in any one
transaction, but in any event not to exceed $50,000,000 over the term
of this Agreement; provided, that (i) such Investments shall result in
the acquisition of a wholly owned Subsidiary and (ii) upon making such
Investments, the provisions of Section 7.1.8 are complied with;
(h) Investments consisting of any deferred portion of the
sales price received by the Company or any Restricted Subsidiary in
connection with any Disposition permitted under Section 7.2.11; and
(i) other Investments by the Company or any Restricted
Subsidiary in an amount not to exceed $5,000,000 over the term of this
Agreement;
provided, however, that
(j) any Investment which when made complies with the
requirements of clauses (a), (b) or (c) of the definition of the term
"Cash Equivalent Investment" may continue to be held notwithstanding
that such Investment if made thereafter would not comply with such
requirements; and
(k) no Investment otherwise permitted by clauses (d), (e)(i),
(g) or (i) shall be permitted to be made if any Specified Default has
occurred and is continuing or would result therefrom.
Notwithstanding any other provision of this Section 7.2.5, contributions by the
Company to Ferronor which are then paid as interest, principal or agent fees
pursuant to the Ferronor Loan Documents shall not constitute Investments for so
long as the Participation Agreement as referred to in clause (iii) of the
definition of Ferronor Loan Documents is in effect.
SECTION 7.2.6. Restricted Payments, etc. Each of Holdings, Intermediate
Holdings and each Borrower will not, and will not permit any of the Restricted
Subsidiaries to, declare or make a Restricted Payment, or make any deposit for
any Restricted Payment, other than (a) Restricted Payments made by Subsidiaries
to the Company or wholly owned Subsidiaries of the Company and (b) the Company
may make Restricted Payments to Intermediate Holdings and Intermediate Holdings
may make Restricted Payments to Holdings in amounts sufficient to pay (i) so
long as no Specified Default has occurred and is continuing or would be created
thereby, required semi-
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annual dividends on and any mandatory redemption of Holdings" Convertible
Preferred Stock as in effect on the date hereof, (ii) so long as no Specified
Default has occurred and is continuing or would be created thereby, scheduled
payments of interest on and, when due, principal of Holdings" Convertible
Subordinated Notes, (iii) salaries, wages, employee benefits and direct expenses
for Holdings" employees, (iv) insurance, (v) public company expenses, including
but not limited to, accounting fees, director's fees, legal fees and printing
fees and related expenses, (vi) payments under the Tax Sharing Agreement, (vii)
so long as no Specified Default has occurred and is continuing or would be
created thereby, up to $4,000,000 per Fiscal Year (including up to $2,000,000
per year to buyback Holdings" common stock under Holdings" stock buyback
program) for various other expenses and (viii) payments on the Intermediate
Holdings Asset Bridge Notes to the extent permitted by clause (c) of Section
7.2.8.
SECTION 7.2.7. Capital Expenditures, etc. (a) Subject (in the case of
Capitalized Lease Liabilities), to clause (e) of Section 7.2.2, each of
Holdings, Intermediate Holdings and each Borrower will not, and will not permit
any of the Restricted Subsidiaries to, make or commit to make Capital
Expenditures in any Fiscal Year which aggregate in excess of the amount (the
"Base Amount") set forth below opposite such Fiscal Year:
Capital
Period Expenditure Amount
-------------- ------------------
1/1/00 to 12/31/00 $54,500,000
1/1/01 to 12/31/01 $54,500,000
1/1/02 to 12/31/02 $53,000,000
1/1/03 to 12/31/03 $54,000,000
1/1/04 to 12/31/04 $55,000,000
1/1/05 to 12/31/05 $56,000,000
1/1/06 to 12/31/06 $57,000,000
provided, however, that, to the extent the Base Amount exceeds the aggregate
amount of Capital Expenditures actually made during such Fiscal Year, such
excess amount (up to an aggregate of 50% of the amount of the Base Amount for
such Fiscal Year) may be carried forward to (but only to) the next succeeding
Fiscal Year (any such amount to be certified by Holdings to the Agents in the
Compliance Certificate delivered for the last Fiscal Quarter of such Fiscal
Year, and any such amount carried forward to a succeeding Fiscal Year shall be
deemed to be used prior to the Company and the Restricted Subsidiaries using the
Base Amount for such succeeding Fiscal Year, without giving effect to such
carry-forward). Holdings and Intermediate Holdings shall not incur any Capital
Expenditures.
(b) The parties acknowledge and agree that the permitted
Capital Expenditure level set forth in clause (a) above shall be exclusive of
the amount of Capital Expenditures actually made with Casualty Proceeds or Net
Disposition Proceeds that are reinvested by the Company or any of the Restricted
Subsidiaries, after the Closing Date and specifically identified in a
certificate delivered by an Authorized Officer of the Company to the Agents on
or about the time such reinvestment is made (but in any event prior to the time
of the Capital Expenditure made with such reinvestment).
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SECTION 7.2.8. No Prepayment of Certain Debt. Each of Holdings,
Intermediate Holdings and each Borrower will not, and will not permit any of the
Restricted Subsidiaries to,
(a) other than pursuant to a Permanent Financing of the
Subordinated Bridge Notes make any payment or prepayment of principal
of, or premium or interest on, any Subordinated Debt (i) other than the
stated, scheduled date for payment of interest set forth in the
applicable Subordinated Debt Documents (it being understood and agreed
that for purposes of this clause (a), the only stated, scheduled date
for payment of principal on the Subordinated Bridge Notes shall be the
date which is six months following the Stated Maturity Date for the
Term B Loans); provided, that, the Company may not pay cash interest on
the Subordinated Bridge Notes at a rate in excess of 15% per annum or
(ii) which would violate the terms of this Agreement or the applicable
Subordinated Debt Documents or (iii) other than the scheduled payments
of interest on and, when due, principal of Holdings" Convertible
Subordinated Notes to the extent permitted by clause (b)(ii) of Section
7.2.6;
(b) redeem, retire, purchase, defease or otherwise acquire
any Subordinated Debt;
(c) redeem, retire, purchase or defease any Intermediate
Holdings Asset Bridge Notes other than from (i) the net proceeds of a
Disposition of Intermediate Holdings Excluded Assets or (ii) the net
proceeds of a Disposition of QRC or (iii) that portion of (x) Net
Equity Proceeds arising from a Disposition of Capital Stock of Holdings
not required to be used to prepay Loans pursuant to clause (h) of
Section 3.1.1 or (y) Excess Cash Flow not required to be used to prepay
Loans pursuant to clause (g) of Section 3.1.1 in an amount not to
exceed the lesser of $10,000,000 and then outstanding Indebtedness
evidenced by the Intermediate Holdings Asset Bridge Notes or (iv) that
portion of the Net Debt Proceeds of the Permanent Financing Debt that
is permitted to be used to redeem or prepay the Intermediate Holdings
Asset Bridge Notes in an aggregate amount not to exceed the lesser of
(x) $10,000,000 or (y) the then outstanding Indebtedness evidenced by
the Intermediate Holdings Asset Bridge Notes; or
(d) make any deposit (including the payment of amounts into a
sinking fund or other similar fund) for any of the foregoing purposes.
Furthermore, neither Holdings, Intermediate Holdings, the Company nor any
Restricted Subsidiary will designate any Indebtedness other than the Obligations
as "Designated Senior Debt" (or any analogous term) in any Subordinated Debt
Document.
SECTION 7.2.9. Capital Stock of Subsidiaries. Each of Intermediate
Holdings and the Borrowers will not, and will not permit any of the Restricted
Subsidiaries to, (i) issue any Capital Stock (whether for value or otherwise) to
any Person other than (x) in the case of any Restricted Subsidiary, to the
Company or another wholly owned Restricted Subsidiary of the Company or (y) in
the case of the Company, to Intermediate Holdings or (z) in the case of
Intermediate
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Holdings, to Holdings or (ii) become liable in respect of any obligation
(contingent or otherwise) to purchase, redeem, retire, acquire or make any other
payment in respect of any Capital Stock of Holdings, any Borrower or any
Restricted Subsidiary or any option, warrant or other right to acquire any such
Capital Stock.
SECTION 7.2.10. Consolidation, Merger, etc. Each of Holdings,
Intermediate Holdings and the Borrowers will not, and will not permit any of the
Restricted Subsidiaries to, liquidate or dissolve, consolidate with, or merge
into or with, any other Person, or purchase or otherwise acquire all or
substantially all of the assets of any Person (or any division thereof), except
(a) any Restricted Subsidiary may liquidate or dissolve
voluntarily into, and may merge with and into, the Company or any other
Restricted Subsidiary (provided, however, that a Domestic Subsidiary
Guarantor may only liquidate or dissolve into, or merge with and into,
the Company or another Domestic Subsidiary Guarantor), and the assets
or Capital Stock of any Subsidiary may be purchased or otherwise
acquired by the Company or any other Restricted Subsidiary (provided,
however, that the assets or Capital Stock of any Domestic Subsidiary
Guarantor may only be purchased or otherwise acquired by the Company or
another Domestic Subsidiary Guarantor); provided, further, that in no
event shall any Pledged Subsidiary consolidate with or merge with and
into any Subsidiary (other than another Subsidiary the Capital Stock of
which is pledged to the Administrative Agent for the benefit of the
same Secured Parties to which the Capital Stock of such Pledged
Subsidiary are pledged) unless after giving effect thereto, the
Administrative Agent shall have a perfected pledge of, and security
interest in and to, at least the same percentage of the issued and
outstanding interests of Capital Stock (on a fully diluted basis) of
the surviving Person as the Administrative Agent had immediately prior
to such merger or consolidation in form and substance satisfactory to
the Agents and its counsel, pursuant to such documentation and opinions
as shall be necessary in the opinion of the Agents to create, perfect
or maintain the collateral position of the Secured Parties therein; and
(b) so long as no Specified Default has occurred and is
continuing or would occur after giving effect thereto, the Company or
any of its Subsidiaries may (to the extent permitted by clause (g) of
Section 7.2.5) purchase all or substantially all of the assets or
Capital Stock of any Person (or any division thereof), or acquire such
Person by merger.
SECTION 7.2.11. Permitted Dispositions. Each of Holdings, Intermediate
Holdings and each Borrower will not, and will not permit any of the Restricted
Subsidiaries to, Dispose of any of such Obligor's or such Restricted
Subsidiaries' assets (including accounts receivable and Capital Stock of
Subsidiaries) to any Person in one transaction or series of transactions unless
such Disposition is either (a) inventory Disposed of in the ordinary course of
its business or is of obsolete or worn-out property, (b) permitted by Section
7.2.10, (c) in the case of Intermediate Holdings, the Intermediate Holdings
Excluded Assets so long as the net proceeds thereof are used to redeem or retire
Intermediate Holdings Asset Bridge Notes and then to pay Term Loans, (d) is
between the Company and Domestic Restricted Subsidiaries, between Canadian
Restricted Subsidiaries, between Australian Restricted Subsidiaries or between
Domestic Restricted Subsidiaries, (e) a Disposition of the Capital Stock of QRC
so long as an amount equal to the net proceeds thereof are used to redeem or
retire Intermediate Holdings Asset Bridge Notes and then
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to pay Term Loans, or (f) a Disposition for fair market value (which does not
constitute a Disposition of all or a substantial part of the Company's and its
Subsidiaries' assets, taken as a whole)(provided that the consideration to be
received by the Company or the Restricted Subsidiaries is at least 75% cash and
the aggregate value (to be determined by the greater of net book value or the
fair market value) is not to exceed $20,000,000 in the aggregate in any Fiscal
Year and $40,000,000 in the aggregate for the term of this Agreement and the Net
Disposition Proceeds are applied pursuant to clause (f) of Section 3.1.1.
SECTION 7.2.12. Modification of Certain Agreements. Each of Holdings,
Intermediate Holdings and each Borrower will not, and will not permit any of the
Restricted Subsidiaries to, consent to any amendment, supplement, waiver or
other modification of, or enter into any forbearance from exercising any rights
with respect to the terms or provisions contained in,
(a) the Subordinated Debt Documents or the Intermediate
Holdings Asset Bridge Documents, as the case may be, other than any
amendment, supplement, waiver or modification for which no fee is
payable to the holders of the Subordinated Debt or the Intermediate
Holdings Asset Bridge Notes, as the case may be, and which (i) extends
the date or reduces the amount of any required repayment, prepayment or
redemption of the principal of such Subordinated Debt, (ii) reduces the
rate or extends the date for payment of the interest, premium (if any)
or fees payable on such Indebtedness or (iii) makes the covenants,
events of default or remedies in such Subordinated Debt Documents or
Intermediate Holdings Asset Bridge Documents, as the case may be, less
restrictive on Holdings, Intermediate Holdings or the Company, as the
case may be; or
(b) any of the Transaction Documents.
SECTION 7.2.13. Transactions with Affiliates. Each of Holdings,
Intermediate Holdings and each Borrower will not, and will not permit any of the
Restricted Subsidiaries to, enter into or cause or permit to exist any
arrangement, transaction or contract (including for the purchase, lease or
exchange of property or the rendering of services) with any of its other
Affiliates (other than a Restricted Subsidiary) or with Ferronor or
Kalyn/Siebert, unless such arrangement, transaction or contract (i) is on fair
and reasonable terms no less favorable to Holdings and Intermediate Holdings,
the Company or such Restricted Subsidiary than it could obtain in an
arm's-length transaction with a Person that is not an Affiliate and (ii) is of
the kind which would be entered into by a prudent Person in the position of
Holdings, the Company or such Restricted Subsidiary with a Person that is not
one of its Affiliates or unless such arrangement, transaction, or contract is
(i) an Investment made in accordance with Section 7.2.5, (ii) is between the
Company and Domestic Restricted Subsidiaries, between Canadian Restricted
Subsidiaries, between Australian Restricted Subsidiaries, or between Domestic
Restricted Subsidiaries or (iii) pursuant to the Ferronor Loan Documents.
SECTION 7.2.14. Restrictive Agreements, etc. Each of Holdings,
Intermediate Holdings and each Borrower will not, and will not permit any of the
Restricted Subsidiaries to, enter into any agreement prohibiting
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(a) the creation or assumption of any Lien upon its
properties, revenues or assets, whether now owned or hereafter
acquired;
(b) the ability of any Obligor to amend or otherwise modify
any Loan Document; or
(c) the ability of any Restricted Subsidiary to make any
payments, directly or indirectly, to the Company, including by way of
dividends, advances, repayments of loans, reimbursements of management
and other intercompany charges, expenses and accruals or other returns
on investments.
The foregoing prohibitions shall not apply to restrictions contained (i) in any
Loan Document, any of the Subordinated Debt Documents, or any of the
Intermediate Holdings Asset Bridge Documents or (ii) in the case of clause (a),
any agreement governing any Indebtedness permitted by clause (e) of Section
7.2.2 as to the assets financed with the proceeds of such Indebtedness.
SECTION 7.2.15. Sale and Leaseback. Each of Holdings, Intermediate
Holdings and each Borrower will not, and will not permit any of the Restricted
Subsidiaries to, directly or indirectly enter into any agreement or arrangement
("Sale Leasebacks") providing for the sale or transfer by it of any property
(now owned or hereafter acquired) to a Person and the subsequent lease or rental
of such property or other similar property from such Person other than Sale
Leasebacks for fair market value provided that the consideration to be received
is solely comprised of cash and the aggregate value (to be determined by the
greater of net book value or the fair market value thereof) does not exceed
$10,000,000 in any Fiscal Year and $20,000,000 in the aggregate for the term of
this Agreement and the Net Disposition Proceeds are applied pursuant to clause
(f) of Section 3.1.1.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. Listing of Events of Default. Each of the following
events or occurrences described in this Article shall constitute an "Event of
Default".
SECTION 8.1.1. Non-Payment of Obligations. Any Borrower shall default
in the payment or prepayment when due of
(a) any principal of any Loan, or any Reimbursement Obligation
or any deposit of cash for collateral purposes pursuant to Section
2.6.4;
(b) any interest on any Loan or Reimbursement Obligation and
such default shall continue unremedied for a period of three Business
Days after such amount was due; or
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(c) any fee described in Article III or any other monetary
Obligation, and such default shall continue unremedied for a period of
three Business Days after such amount was due.
SECTION 8.1.2. Breach of Warranty. Any representation or warranty of
any Obligor made or deemed to be made in any Loan Document (including any
certificates delivered pursuant to Article V) is or shall be incorrect when made
or deemed to have been made in any material respect.
SECTION 8.1.3. Non-Performance of Certain Covenants and Obligations.
Holdings, Intermediate Holdings or any Borrower shall default in the due
performance or observance of any of its obligations under Section 7.1.1(e),
Section 7.1.7, Section 7.1.10 or Section 7.2.
SECTION 8.1.4. Non-Performance of Other Covenants and Obligations. Any
Obligor shall default in the due performance and observance of any other
agreement contained in any Loan Document executed by it, and such default shall
continue unremedied for a period of 30 days after notice thereof shall have been
given to Holdings, Intermediate Holdings or the Company by either Agent or any
Lender.
SECTION 8.1.5. Default on Other Indebtedness. A default shall occur in
the payment of any amount when due (subject to any applicable grace period),
whether by acceleration or otherwise, of any principal or stated amount of, or
interest or fees on, any Indebtedness (other than Indebtedness described in
Section 8.1.1) of Holdings, Intermediate Holdings or the Company or any of the
Restricted Subsidiaries or any other Obligor having a principal or stated
amount, individually or in the aggregate, in excess of $5,000,000, or a default
shall occur in the performance or observance of any obligation or condition with
respect to such Indebtedness if the effect of such default is to accelerate the
maturity of any such Indebtedness or such default shall continue unremedied for
any applicable period of time sufficient to permit the holder or holders of such
Indebtedness, or any trustee or agent for such holders, to cause or declare such
Indebtedness to become due and payable or to require such Indebtedness to be
prepaid, redeemed, purchased or defeased, or require an offer to purchase or
defease such Indebtedness to be made, prior to its expressed maturity.
SECTION 8.1.6. Judgments. Any judgment or order for the payment of
money individually or in the aggregate in excess of $5,000,000 (exclusive of any
amounts fully covered by insurance (less any applicable deductible) and as to
which the insurer has acknowledged its responsibility to cover such judgment or
order) shall be rendered against Holdings, Intermediate Holdings or the Company
or any of the Restricted Subsidiaries or any other Obligor and such judgment
shall not have been vacated or discharged or stayed or bonded pending appeal
within 30 days after the entry thereof or enforcement proceedings shall have
been commenced by any creditor upon such judgment or order.
SECTION 8.1.7. Pension Plans. Any of the following events shall occur
with respect to any Pension Plan
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(a) the institution of any steps by Holdings, any member of
its Controlled Group or any other Person to terminate a Pension Plan
if, as a result of such termination, Holdings or any such member could
be required to make a contribution to such Pension Plan, or could
reasonably expect to incur a liability or obligation to such Pension
Plan, in excess of $1,000,000; or
(b) a contribution failure occurs with respect to any Pension
Plan sufficient to give rise to a Lien under section 302(f) of ERISA.
SECTION 8.1.8. Change in Control. Any Change in Control shall occur.
SECTION 8.1.9. Bankruptcy, Insolvency, etc. Holdings, Intermediate
Holdings, the Company or any of the Restricted Subsidiaries or any other Obligor
shall
(a) become insolvent or generally fail to pay, or admit in
writing its inability or unwillingness generally to pay, debts as they
become due;
(b) apply for, consent to, or acquiesce in the appointment of
a trustee, receiver, sequestrator or other custodian for any
substantial part of the property of any thereof, or make a general
assignment for the benefit of creditors;
(c) in the absence of such application, consent or
acquiescence in, permit or suffer to exist the appointment of a
trustee, receiver, sequestrator or other custodian for a substantial
part of the property of any thereof, and such trustee, receiver,
sequestrator or other custodian shall not be discharged within 60 days;
provided, that Holdings, Intermediate Holdings, the Company each
Restricted Subsidiary and each other Obligor hereby expressly
authorizes each Secured Party to appear in any court conducting any
relevant proceeding during such 60-day period to preserve, protect and
defend their rights under the Loan Documents;
(d) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law or any dissolution,
winding up or liquidation proceeding, in respect thereof, and, if any
such case or proceeding is not commenced by Holdings, Intermediate
Holdings, the Company any Restricted Subsidiary or any Obligor, such
case or proceeding shall be consented to or acquiesced in by Holdings,
Intermediate Holdings, the Company such Restricted Subsidiary or such
Obligor, as the case may be, or shall result in the entry of an order
for relief or shall remain for 60 days undismissed; provided, that
Holdings, Intermediate Holdings, each Restricted Subsidiary and each
Obligor hereby expressly authorizes each Secured Party to appear in any
court conducting any such case or proceeding during such 60-day period
to preserve, protect and defend their rights under the Loan Documents;
or
(e) take any action authorizing, or in furtherance of, any of
the foregoing.
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SECTION 8.1.10. Impairment of Security, etc. Any Loan Document or any
Lien granted thereunder shall (except in accordance with its terms), in whole or
in part, terminate, cease to be effective or cease to be the legally valid,
binding and enforceable obligation of any Obligor party thereto; any Obligor or
any other party shall, directly or indirectly, contest in any manner such
effectiveness, validity, binding nature or enforceability; or, except as
permitted under any Loan Document, any Lien securing any Obligation shall, in
whole or in part, cease to be a perfected first priority Lien.
SECTION 8.1.11. Failure of Subordination. Unless otherwise waived or
consented to by the Agents, all of the Lenders and the Issuers in writing, the
subordination provisions relating to any Subordinated Debt (the "Subordination
Provisions") shall fail to be enforceable by the Agents, the Lenders and the
Issuers in accordance with the terms thereof, or the monetary Obligations shall
fail to constitute "Senior Indebtedness" (or similar term) referring to the
Obligations; or Holdings, the Company or any of their respective Restricted
Subsidiaries shall, directly or indirectly, disavow or contest in any manner (i)
the effectiveness, validity or enforceability of any of the Subordination
Provisions, (ii) that the Subordination Provisions exist for the benefit of the
Agents, the Lenders and the Issuers or (iii) that all payments of principal of
or premium and interest on the Subordinated Debt, or realized from the
liquidation of any property of any Obligor, shall be subject to any of such
Subordination Provisions.
SECTION 8.1.12. Failure to Refinance or Extend the Subordinated Bridge
Notes. The Company shall have failed to consummate a Permanent Financing of
Indebtedness in respect of the Subordinated Bridge Notes prior to the Maturity
Date (as defined in the Securities Purchase Agreement, the "Bridge Note Maturity
Date") and the Administrative Agent shall not have received, prior to the Bridge
Note Maturity Date, evidence satisfactory to it that the maturity of the
Subordinated Bridge Notes will, effective on the Bridge Note Maturity Date, be
extended to the date that is at least six months following the Stated Maturity
Date for the Term B Loans.
SECTION 8.2. Action if Bankruptcy. If any Event of Default described in
clauses (a) through (d) of Section 8.1.9 with respect to Holdings or any
Borrower shall occur, the Commitments (if not theretofore terminated) shall
automatically terminate and the outstanding principal amount of all outstanding
Loans and all other Obligations (including Reimbursement Obligations) shall
automatically be and become immediately due and payable, without notice or
demand to any Person and each Obligor shall automatically and immediately be
obligated to Cash Collateralize all Letter of Credit Outstandings.
SECTION 8.3. Action if Other Event of Default. If any Event of Default
(other than any Event of Default described in clauses (a) through (d) of Section
8.1.9 with respect to Holdings or any Borrower) shall occur for any reason,
whether voluntary or involuntary, and be continuing, the Administrative Agent,
upon the direction of the Required Lenders, shall by notice to the Borrowers
declare all or any portion of the outstanding principal amount of the Loans and
other Obligations (including Reimbursement Obligations) to be due and payable
and/or the Commitments (if not theretofore terminated) to be terminated,
whereupon the full unpaid amount of such Loans and other Obligations which shall
be so declared due and
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payable shall be and become immediately due and payable, without further notice,
demand or presentment, and/or, as the case may be, the Commitments shall
terminate and the Company shall automatically and immediately be obligated to
Cash Collateralize all Letter of Credit Outstandings.
ARTICLE IX
THE ADMINISTRATIVE AGENT
SECTION 9.1. Actions. Each Lender hereby appoints DLJ as its
Syndication Agent and The Bank of Nova Scotia as Administrative Agent under and
for purposes of each Loan Document. Each Lender authorizes each Agent to act on
behalf of such Lender under each Loan Document and, in the absence of other
written instructions from the Required Lenders received from time to time by the
Agents (with respect to which each Agent agrees that it will comply, except as
otherwise provided in this Section or as otherwise advised by counsel in order
to avoid contravention of applicable law), to exercise such powers hereunder and
thereunder as are specifically delegated to or required of such Agent by the
terms hereof and thereof, together with such powers as may be reasonably
incidental thereto. Each Lender hereby indemnifies (which indemnity shall
survive any termination of this Agreement) each Agent, pro rata according to
such Lender's proportionate Total Exposure Amount, from and against any and all
liabilities, obligations, losses, damages, claims, costs or expenses of any kind
or nature whatsoever which may at any time be imposed on, incurred by, or
asserted against, such Agent in any way relating to or arising out of any Loan
Document, including reasonable attorneys' fees, and as to which such Agent is
not reimbursed by Holdings or the Company; provided, however, that no Lender
shall be liable for the payment of any portion of such liabilities, obligations,
losses, damages, claims, costs or expenses which are determined by a court of
competent jurisdiction in a final proceeding to have resulted from such Agent's
gross negligence or wilful misconduct. Neither Agent shall be required to take
any action under any Loan Document, or to prosecute or defend any suit in
respect of any Loan Document, unless it is indemnified hereunder to its
satisfaction. If any indemnity in favor of either Agent shall be or become, in
such Agent's determination, inadequate, such Agent may call for additional
indemnification from the Lenders and cease to do the acts indemnified against
hereunder until such additional indemnity is given.
SECTION 9.2. Funding Reliance, etc. Unless the Administrative Agent
shall have been notified in writing by any Lender by 3:00 p.m. on the Business
Day prior to a Borrowing that such Lender will not make available the amount
which would constitute its Percentage of such Borrowing on the date specified
therefor, the Administrative Agent may assume that such Lender has made such
amount available to the Administrative Agent and, in reliance upon such
assumption, make available to the applicable Borrower a corresponding amount. If
and to the extent that such Lender shall not have made such amount available to
the Administrative Agent, such Lender and Holdings and the Company severally
agree to repay the Administrative Agent forthwith on demand such corresponding
amount together with interest thereon, for each day from the date the
Administrative Agent made such amount available to the applicable Borrower to
the date such amount is repaid to the Administrative Agent, at the interest rate
applicable at the time to Loans comprising such Borrowing (in the case of a
Borrower) and (in the case of a Lender), at the
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Federal Funds Rate for the first two Business Days after which such amount has
not been repaid, and thereafter at the interest rate applicable to Loans
comprising such Borrowing.
SECTION 9.3. Exculpation. Neither Agent nor any of its directors,
officers, employees or agents shall be liable to any Lender for any action taken
or omitted to be taken by it under any Loan Document, or in connection herewith
or therewith, except for its own wilful misconduct or gross negligence, nor
responsible for any recitals or warranties herein or therein, nor for the
effectiveness, enforceability, validity or due execution of any Loan Document,
nor for the creation, perfection or priority of any Liens purported to be
created by any of the Loan Documents, or the validity, genuineness,
enforceability, existence, value or sufficiency of any collateral security, nor
to make any inquiry respecting the performance by any Obligor of its
Obligations. Any such inquiry which may be made by either Agent shall not
obligate it to make any further inquiry or to take any action. The
Administrative Agent shall be entitled to rely upon advice of counsel concerning
legal matters and upon any notice, consent, certificate, statement or writing
which the Administrative Agent believes to be genuine and to have been presented
by a proper Person.
SECTION 9.4. Successor. The Syndication Agent may resign as such upon
one Business Day's notice to the Borrowers and the Administrative Agent. The
Administrative Agent may resign as such at any time upon at least 30 days' prior
notice to Holdings and the Borrowers and all Lenders. If the Administrative
Agent at any time shall resign, the Required Lenders may appoint another Lender
as a successor Administrative Agent which shall thereupon become the
Administrative Agent hereunder. If no successor Administrative Agent shall have
been so appointed by the Required Lenders, and shall have accepted such
appointment, within 30 days after the retiring Administrative Agent's giving
notice of resignation, then the retiring Administrative Agent may, on behalf of
the Lenders, appoint a successor Administrative Agent, which shall be one of the
Lenders or a commercial banking institution organized under the laws of the U.S.
(or any state thereof) or a U.S. branch or agency of a commercial banking
institution, and having a combined capital and surplus of at least $250,000,000;
provided, however that if, such retiring Administrative Agent is unable to find
a commercial banking institution which is willing to accept such appointment and
which meets the qualifications set forth in above, the retiring Administrative
Agent's resignation shall nevertheless thereupon become effective and the
Lenders shall assume and perform all of the duties of the Administrative Agent
hereunder until such time, if any, as the Required Lenders appoint a successor
as provided for above. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall be entitled to receive from the retiring
Administrative Agent such documents of transfer and assignment as such successor
Administrative Agent may reasonably request, and shall thereupon succeed to and
become vested with all rights, powers, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations under the Loan Documents. After any retiring
Administrative Agent's resignation hereunder as the Administrative Agent, the
provisions of this Article shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was the Administrative Agent under the Loan
Documents, and Section 11.3 and Section 11.4 shall continue to inure to its
benefit. If the Syndication Agent shall resign, then all actions required to be
taken by
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or consented to by the Agents shall only be required to be taken or consented
to, as the case may be, by the Administrative Agent.
SECTION 9.5. Credit Extensions by each Agent and Issuer. Each Agent and
each Issuer shall have the same rights and powers with respect to (x)(i) in the
case of an Agent, the Credit Extensions made by it or any of its Affiliates and
(ii) in the case of an Issuer, the Loans made by it or any of its Affiliates,
and (y) the Notes held by it or any of its Affiliates as any other Lender and
may exercise the same as if it were not an Agent or Issuer. Each Agent, each
Issuer and each of their respective Affiliates may accept deposits from, lend
money to, and generally engage in any kind of business with Holdings, the
Company or any Subsidiary or Affiliate of Holdings as if such Agent or Issuer
were not an Agent or Issuer hereunder.
SECTION 9.6. Credit Decisions. Each Lender acknowledges that it has,
independently of each Agent and each other Lender, and based on such Lender's
review of the financial information of Holdings and the Company, the Loan
Documents (the terms and provisions of which being satisfactory to such Lender)
and such other documents, information and investigations as such Lender has
deemed appropriate, made its own credit decision to extend its Commitments. Each
Lender also acknowledges that it will, independently of each Agent and each
other Lender, and based on such other documents, information and investigations
as it shall deem appropriate at any time, continue to make its own credit
decisions as to exercising or not exercising from time to time any rights and
privileges available to it under the Loan Documents.
SECTION 9.7. Copies, etc. The Administrative Agent shall give prompt
notice to each Lender of each notice or request required or permitted to be
given to the Administrative Agent by Holdings or any Borrower pursuant to the
terms of the Loan Documents (unless concurrently delivered to the Lenders by
Holdings or any Borrower). The Administrative Agent will distribute to each
Lender each document or instrument received for its account and copies of all
other communications received by the Administrative Agent from the Company for
distribution to the Lenders by the Administrative Agent in accordance with the
terms of the Loan Documents.
SECTION 9.8. Reliance by Agents. Each Agent shall be entitled to rely
upon any certification, notice or other communication (including any thereof by
telephone, telecopy, telegram or cable) believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person, and upon
advice and statements of legal counsel, independent accountants and other
experts selected by such Agent. As to any matters not expressly provided for by
the Loan Documents, each Agent shall in all cases be fully protected in acting,
or in refraining from acting, hereunder or thereunder in accordance with
instructions given by the Required Lenders or all of the Lenders as is required
in such circumstance, and such instructions of such Lenders and any action taken
or failure to act pursuant thereto shall be binding on all Secured Parties. For
purposes of applying amounts in accordance with this Section, each Agent shall
be entitled to rely upon any Secured Party that has entered into a Rate
Protection Agreement with any Obligor for a determination (which such Secured
Party agrees to provide or cause to be provided upon request of each Agent) of
the outstanding Obligations owed to such Secured Party under any Rate Protection
Agreement. Unless it has actual knowledge evidenced by way of
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written notice from any such Secured Party and the Company to the contrary, each
Agent, in acting in such capacity under the Loan Documents, shall be entitled to
assume that no Rate Protection Agreements or Obligations in respect thereof are
in existence or outstanding between any Secured Party and any Obligor.
SECTION 9.9. Defaults. Neither Agent shall be deemed to have knowledge
or notice of the occurrence of a Default unless such Agent has received a
written notice from a Lender or Holdings or any Borrower specifying such Default
and stating that such notice is a "Notice of Default". In the event that either
Agent receives such a notice of the occurrence of a Default, such Agent shall
give prompt notice thereof to the Lenders. Each Agent shall (subject to Section
11.1) take such action with respect to such Default as shall be directed by the
Required Lenders; provided, that unless and until such Agent shall have received
such directions, such Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Default as it
shall deem advisable in the best interest of the Lenders except to the extent
that this Agreement expressly requires that such action be taken, or not be
taken, only with the consent or upon the authorization of the Required Lenders
or all Lenders, as applicable.
SECTION 9.10. Documentation Agent. The Lender identified on the
signature pages of this Agreement as the "Documentation Agent" shall not have
any right, power, obligation, liability, responsibility or duty under this
Agreement (or any other Loan Document) other than those applicable to all
Lenders as such. Without limiting the foregoing, the Lender so identified as the
"Documentation Agent" shall not have or be deemed to have any fiduciary
relationship with any other Lender. Each Lender acknowledges that it has not
relied, and will not rely, on the Lender so identified as the "Documentation
Agent" in deciding to enter into this Agreement and each other Loan Document to
which it is a party or in taking or not taking action hereunder or thereunder.
SECTION 9.11. Security Trust Deed. In order for the Lenders to become
beneficiaries under the Australian Security Trust Deed, the Administrative Agent
is hereby authorized and instructed to execute as agent on behalf each Lender an
Australian Accession Deed. Each Lender authorizes the Administrative Agent to
act as its representative for the purposes of the Australian Security Trust Deed
in connection with any communication or other dealings with the Australian
Security Trustee, and the Australian Security Trustee shall not be required to
accept any communication from any other party other than the Administrative
Agent with respect to any request, instruction, direction, approval, consent,
agreement or other instruction of the Lenders (as beneficiaries) under the
Australian Security Trust Deed.
ARTICLE X
HOLDINGS AND INTERMEDIATE HOLDINGS GUARANTY
SECTION 10.1. Guaranty. Each of Holdings and Intermediate Holdings
hereby, jointly and severally, absolutely, unconditionally and irrevocably
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(a) guarantees the full and punctual payment when due, whether
at stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise, of all Obligations of each Borrower and each other
Obligor now or hereafter existing under this Agreement and each other
Loan Document to which such Borrower and each other Obligor is or may
become a party, whether for principal, interest, fees, expenses or
otherwise (including all such amounts which would become due but for
the operation of the automatic stay under Section 362(a) of the United
States Bankruptcy Code, 11 U.S.C. Section 362(a), and the operation of
Sections 502(b) and 506(b) of the United States Bankruptcy Code,
11 U.S.C. Section 502(b) and Section 506(b)), and
(b) indemnifies and holds harmless each Lender for any and all
costs and expenses (including reasonable attorney's fees and expenses)
incurred by such Lender or such holder, as the case may be, in
enforcing any rights under this Article X;
This Article X constitutes a guaranty of payment when due and not of collection,
and Holdings and Intermediate Holdings specifically agree that it shall not be
necessary or required that any Lender exercise any right, assert any claim or
demand or enforce any remedy whatsoever against any Borrower or any other
Obligor (or any other Person) before or as a condition to the obligations of
Holdings and Intermediate Holdings hereunder.
SECTION 10.2. Acceleration of Obligations Hereunder. Holdings and
Intermediate Holdings agree that, in the event of the dissolution or insolvency
of any Borrower or any other Obligor, or the inability or failure of any
Borrower or any other Obligor to pay its debts as they become due, or an
assignment by any Borrower or any other Obligor for the benefit of creditors, or
the commencement of any case or proceeding in respect of any Borrower or any
other Obligor under any bankruptcy, insolvency or similar laws, and if such
event shall occur at a time when any of the Obligations of any Borrower or any
other Obligor may not then be due and payable, Holdings and Intermediate
Holdings agree that they will pay to the Lenders forthwith the full amount which
would be payable hereunder by such Borrower or such other Obligor if all such
Obligations were then due and payable.
SECTION 10.3. Obligations Hereunder Absolute, etc. The obligations of
Holdings and Intermediate Holdings under this Article X shall in all respects be
a continuing, absolute, unconditional and irrevocable guaranty of payment, and
shall remain in full force and effect until all Obligations of each Borrower and
each other Obligor have been paid in full and all Commitments shall have
terminated. Holdings and Intermediate Holdings guarantee that the Obligations of
each Borrower and each other Obligor will be paid strictly in accordance with
the terms of this Agreement and each other Loan Document under which they arise,
regardless of any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of any Lender or any
holder of any Note with respect thereto. The liability of Holdings and
Intermediate Holdings under this Article X shall be absolute, unconditional and
irrevocable irrespective of:
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(a) any lack of validity, legality or enforceability of other
provisions of this Agreement or any other Loan Document;
(b) the failure of any Lender
(i) to assert any claim or demand or to enforce any
right or remedy against any Borrower, any other Obligor or any
other Person (including any other guarantor) under the
provisions of this Agreement, any other Loan Document or
otherwise, or
(ii) to exercise any right or remedy against any
other guarantor of, or collateral securing, any Obligations of
any Borrower or any other Obligor;
(c) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations of any Borrower or
any other Obligor, or any other extension, compromise or renewal of any
Obligation of any Borrower or any other Obligor;
(d) any reduction, limitation, impairment or termination of
any Obligation of any Borrower or any other Obligor for any reason
(other than the indefeasible payment in full in cash of such
Obligation), including any claim of waiver, release, surrender,
alteration or compromise, and shall not be subject to (and Holdings and
Intermediate Holdings hereby waive any right to or claim of) any
defense or setoff, counterclaim, recoupment or termination whatsoever
by reason of the invalidity, illegality, nongenuineness, irregularity,
compromise, unenforceability of, or any other event or occurrence
affecting, any Obligation of any Borrower, any other Obligor or
otherwise;
(e) any amendment to, rescission, waiver, or other
modification of, or any consent to departure from, any of the other
terms of this Agreement or any other Loan Document;
(f) any addition, exchange, release, surrender or
non-perfection of any collateral, or any amendment to or waiver or
release or addition of, or consent to departure from, any other
guaranty, held by any Lender securing any of the Obligations of any
Borrower or any other Obligor; or
(g) any other circumstance which might otherwise constitute a
defense available to, or a legal or equitable discharge of, any
Borrower, any other Obligor, any surety or any guarantor.
SECTION 10.4. Reinstatement, etc. Holdings and Intermediate Holdings
agree that this Article X shall continue to be effective or be reinstated, as
the case may be, if at any time any payment (in whole or in part) of any of the
Obligations of any Borrower is rescinded or must otherwise be restored by any
Lender upon the insolvency, bankruptcy or reorganization of any Borrower or any
other Obligor or otherwise, all as though such payment had not been made.
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SECTION 10.5. Waiver, etc. Holdings and Intermediate Holdings hereby
waive promptness, diligence, notice of acceptance and any other notice with
respect to any of the Obligations of any Borrower or any other Obligor and this
Article X and any requirement that the Administrative Agent and any other Lender
protect, secure or perfect or insure any security interest or Lien, or any
property subject thereto, or exhaust any right or take any action against any
Borrower, any other Obligor or any other Person (including any other guarantor)
or entity or any collateral securing the Obligations of any Borrower or any
other Obligor, as the case may be.
SECTION 10.6. Postponement of Subrogation. Holdings and Intermediate
Holdings agree that they will not exercise any rights which they may acquire by
way of subrogation under this Article X, by any payment made hereunder or
otherwise, until the prior payment, in full and in cash, of all Obligations of
each Borrower and each other Obligor. Any amount paid to Holdings and
Intermediate Holdings on account of any such subrogation rights prior to the
payment in full of all Obligations of each Borrower and each other Obligor shall
be held in trust for the benefit of the Lenders and shall immediately be paid to
the Lenders and credited and applied against the Obligations of each Borrower
and each other Obligor whether matured or unmatured, in accordance with the
terms of this Agreement; provided, however, that if all Obligations of each
Borrower and each other Obligor have been paid in full and all Commitments have
been permanently terminated, each Lender agrees that, at Holdings' and
Intermediate Holdings' request, the Lenders will execute and deliver to Holdings
and Intermediate Holdings appropriate documents (without recourse and without
representation or warranty) necessary to evidence the transfer by subrogation to
Holdings and Intermediate Holdings of an interest in the Obligations of each
Borrower and each other Obligor resulting from such payment by Holdings and
Intermediate Holdings. In furtherance of the foregoing, for so long as any
Obligations of any Borrower or any Commitments remain outstanding, Holdings and
Intermediate Holdings shall refrain from taking any action or commencing any
proceeding against any Borrower or any other Obligor (or its successors or
assigns), whether in connection with a bankruptcy proceeding or otherwise to
recover any amounts in respect of payments made under this Article X to any
Lender.
SECTION 10.7. Successors, Transferees and Assigns; Transfers of Notes,
etc. Without limiting the generality of Section 11.11, any Lender may assign or
otherwise transfer (in whole or in part) any Obligation of any Borrower held by
it to any other Person, and such other Person shall thereupon become vested with
all rights and benefits in respect thereof granted to such Lender under any Loan
Document (including this Article X) or otherwise, subject, however, to any
contrary provisions in such assignment or transfer, and to the provisions of
Section 11.11 and Article IX of this Agreement.
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.1. Waivers, Amendments, etc.XI.1. Waivers, Amendments, etc.
The provisions of each Loan Document may from time to time be amended, modified
or waived, if such amendment, modification or waiver is
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in writing and consented to by Holdings, Intermediate Holdings, the Borrowers
and the Required Lenders; provided, however, that no such amendment,
modification or waiver shall:
(a) modify this Section without the consent of all Lenders;
(b) increase the aggregate amount of any Credit Extensions
required to be made by a Lender pursuant to its Commitments, extend the
final Commitment Termination Date of Credit Extensions made (or
participated in) by a Lender or reduce any fees described in Article
III payable to any Lender without the consent of such Lender;
(c) extend the final Stated Maturity Date for any Lender's
Loan, or reduce the principal amount of, rate of interest or fees on
any Loan or Reimbursement Obligations (which shall in each case include
the conversion of all or any part of the Obligations into equity of any
Obligor), or extend the date on which interest or fees are payable in
respect of such Loan or Reimbursement Obligation, in each case, without
the consent of the Lender which has made such Loan or, in the case of a
Reimbursement Obligation, the Issuer owed, and those Lenders
participating in, such Reimbursement Obligation (it being understood
and agreed, however, that any vote to rescind any acceleration made
pursuant to Section 8.2 and Section 8.3 of amounts owing with respect
to the Loans and other Obligations shall only require the vote of the
Required Lenders);
(d) reduce the percentage set forth in the definition of
"Required Lenders" or modify any requirement hereunder that any
particular action be taken by all Lenders without the consent of all
Lenders;
(e) except as otherwise expressly provided in a Loan Document,
release (i) Holdings, Intermediate Holdings or any Borrower from its
Obligations under the Loan Documents or any Guarantor from its
Obligations under a Guaranty or (ii) all or substantially all of the
collateral under the Loan Documents, in each case without the consent
of all Lenders;
(f) (i) amend, modify or waive clause (b) of Section 3.1.1 or
(ii) have the effect (either immediately or at some later time) of
enabling any Borrower to satisfy a condition precedent to the making of
a Revolving Loan or the issuance of a Letter of Credit unless such
amendment, modification or waiver shall have been consented to by the
holders of at least 51% of the Revolving Loan Commitments of the
applicable Tranche.
(g) amend, modify or waive the provisions of clause (a)(i),
(c) or (d) of Section 3.1.1 or clause (b) of Section 3.1.2, or effect
any amendment, modification or waiver that by its terms adversely
affects the rights of Lenders participating in any Tranche differently
from those of other Lenders participating in other Tranches, unless
such amendment, modification or waiver shall have been consented to by
the holders of at least 51% of the aggregate amount of Loans
outstanding under the Tranche or Tranches affected by such
modification, or, in the case of a modification affecting any of the
Revolving Loan
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Commitments, the Lenders holding at least 51% of the Revolving Loan Commitments
of the applicable Tranche;
(h) change any of the terms of clause (e) of Section 2.1.4 or
Section 2.3.2 without the consent of the Swing Line Lender; or
(i) affect adversely the interests, rights or obligations of
either Agent (in its capacity as an Agent) or any Issuer (in its
capacity as an Issuer), unless consented to by such Agent or such
Issuer, as the case may be.
No failure or delay on the part of either Agent, any Issuer or any Lender in
exercising any power or right under any Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power or right
preclude any other or further exercise thereof or the exercise of any other
power or right. No notice to or demand on any Obligor in any case shall entitle
it to any notice or demand in similar or other circumstances. No waiver or
approval by either Agent, any Issuer or any Lender under any Loan Document
shall, except as may be otherwise stated in such waiver or approval, be
applicable to subsequent transactions. No waiver or approval hereunder shall
require any similar or dissimilar waiver or approval thereafter to be granted
hereunder.
For purposes of this Section 11.1, the Syndication Agent, in
coordination with the Administrative Agent, shall have primary responsibility,
together with Holdings, Intermediate Holdings and the Borrowers, in the
negotiation, preparation and documentation relating to any amendment,
modification or waiver under this Agreement, any other Loan Document or any
other agreement or document related hereto or thereto contemplated pursuant to
this Section.
SECTION 11.2. Notices; Time. All notices and other communications
provided under each Loan Document shall be in writing or by facsimile and
addressed, delivered or transmitted, if to either Agent or to Holdings or a
Borrower, to the applicable Person at its address or facsimile number set forth
below its signature in this Agreement, and if to a Lender or Issuer to the
applicable Person at its address or facsimile number set forth below its
signature in this Agreement or set forth in the Lender Assignment Agreement
pursuant to which it may become a Lender hereunder, or at such other address or
facsimile number as may be designated by any such party in a notice to the other
parties. Any notice, if mailed and properly addressed with postage prepaid or if
properly addressed and sent by pre-paid courier service, shall be deemed given
when received; any notice, if transmitted by facsimile, shall be deemed given
when the confirmation of transmission thereof is received by the transmitter.
Unless otherwise indicated, all references to the time of a day in a Loan
Document shall refer to New York time.
SECTION 11.3. Payment of Costs and Expenses. Each of Holdings,
Intermediate Holdings and the Company agrees to pay on demand all expenses of
each Agent (including the reasonable fees and out-of-pocket expenses of Mayer,
Brown & Platt, counsel to the Agents and of local counsel, if any, who may be
retained by or on behalf of the Agents) in connection with
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(a) the negotiation, preparation, execution and delivery of
each Loan Document, including schedules and exhibits, and any
amendments, waivers, consents, supplements or other modifications to
any Loan Document as may from time to time hereafter be required,
whether or not the transactions contemplated hereby are consummated;
and
(b) the filing or recording of any Loan Document (including
the Filing Statements) and all amendments, supplements, amendment and
restatements and other modifications to any thereof, searches made
following the Closing Date in jurisdictions where Filing Statements (or
other documents evidencing Liens in favor of the Secured Parties) have
been recorded and any and all other documents or instruments of further
assurance required to be filed or recorded by the terms of any Loan
Document; and
(c) the preparation and review of the form of any document or
instrument relevant to any Loan Document.
Each of Holdings, Intermediate Holdings and the Company further agrees to pay,
and to save each Secured Party harmless from all liability for, any stamp or
other taxes which may be payable in connection with the execution or delivery of
each Loan Document, the Credit Extensions or the issuance of the Notes. Each of
Holdings, Intermediate Holdings and the Company also agrees to reimburse each
Secured Party upon demand for all reasonable out-of-pocket expenses (including
reasonable attorneys" fees and legal expenses of counsel to each Secured Party)
incurred by such Secured Party in connection with (x) the negotiation of any
restructuring or "work-out" with Holdings, Intermediate Holdings or any
Borrower, whether or not consummated, of any Obligations and (y) the enforcement
of any Obligations.
SECTION 11.4. Indemnification. In consideration of the execution and
delivery of this Agreement by each Secured Party, each of Holdings, Intermediate
Holdings and the Company, jointly and severally, hereby indemnifies, exonerates
and holds each Secured Party and each of their respective officers, directors,
employees and agents (collectively, the "Indemnified Parties") free and harmless
from and against any and all actions, causes of action, suits, losses, costs,
liabilities and damages, and expenses incurred in connection therewith
(irrespective of whether any such Indemnified Party is a party to the action for
which indemnification hereunder is sought), including reasonable attorneys" fees
and disbursements, whether incurred in connection with actions between or among
the parties hereto or the parties hereto and third parties (collectively, the
"Indemnified Liabilities"), incurred by the Indemnified Parties or any of them
as a result of, or arising out of, or relating to
(a) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of any Credit
Extension, including all Indemnified Liabilities arising in connection
with the Transaction;
(b) the entering into and performance of any Loan Document by
any of the Indemnified Parties (including any action brought by or on
behalf of Holdings, Intermediate Holdings or a Borrower as the result
of any determination by the Required Lenders
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pursuant to Article V not to fund any Credit Extension, provided that
any such action is resolved in favor of such Indemnified Party);
(c) any investigation, litigation or proceeding related to any
acquisition or proposed acquisition by any Obligor or any Subsidiary
thereof of all or any portion of the Capital Stock or assets of any
Person, whether or not an Indemnified Party is party thereto;
(d) any investigation, litigation or proceeding related to any
environmental cleanup, audit, compliance or other matter relating to
the protection of the environment on, under or arising from any
operations or property owned, leased or operated upon (including right
of way easements) of Holdings or its Subsidiaries or the Release by any
Obligor or any Subsidiary thereof of any Hazardous Material;
(e) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or releases from, any
operations of Obligor or Subsidiary or any real property owned, leased,
or operated upon (including right of way easements) by any Obligor or
any Subsidiary thereof of any Hazardous Material (including any losses,
liabilities, damages, injuries, costs, expenses or claims asserted or
arising under any Environmental Law), regardless of whether caused by,
or within the control of, such Obligor or Subsidiary; or
(f) each Lender's Environmental Liability (the indemnification
herein shall survive repayment of the Obligations and any transfer of
the property of any Obligor or its Subsidiaries by foreclosure or by a
deed in lieu of foreclosure for any Lender's Environmental Liability,
regardless of whether caused by, or within the control of, such Obligor
or such Subsidiary);
except for Indemnified Liabilities arising for the account of a particular
Indemnified Party by reason of the relevant Indemnified Party's gross negligence
or wilful misconduct. Each Obligor and its successors and assigns hereby waive,
release and agree not to make any claim or bring any cost recovery action
against, any Indemnified Party under CERCLA or any state equivalent, or any
similar law now existing or hereafter enacted. It is expressly understood and
agreed that to the extent that any Indemnified Party is strictly liable under
any Environmental Laws, each Obligor's obligation to such Indemnified Party
under this indemnity shall likewise be without regard to fault on the part of
any Obligor with respect to the violation or condition which results in
liability of an Indemnified Party. If and to the extent that the foregoing
undertaking may be unenforceable for any reason, each Obligor agrees to make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
SECTION 11.5. Survival. The obligations of Holdings,
Intermediate Holdings and the Borrowers under Sections 4.3, 4.4, 4.5, 4.6, 11.3
and 11.4, and the obligations of the Lenders under Section 9.1, shall in each
case survive any assignment from one Lender to another (in the case of Sections
11.3 and 11.4) and the occurrence of the Termination Date. The representations
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and warranties made by each Obligor in each Loan Document shall survive the
execution and delivery of such Loan Document.
SECTION 11.6. Severability. Any provision of any Loan Document which is
prohibited or unenforceable in any jurisdiction shall, as to such provision and
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of such Loan
Document or affecting the validity or enforceability of such provision in any
other jurisdiction.
SECTION 11.7. Headings. The various headings of each Loan Document are
inserted for convenience only and shall not affect the meaning or interpretation
of such Loan Document or any provisions thereof.
SECTION 11.8. Execution in Counterparts, Effectiveness, etc. This
Agreement may be executed by the parties hereto in several counterparts, each of
which shall be an original and all of which shall constitute together but one
and the same agreement. This Agreement shall become effective (the "Effective
Date") when counterparts hereof executed on behalf of Holdings, Intermediate
Holdings and each Borrower, each Agent and each Lender (or notice thereof
satisfactory to the Agents), shall have been received by the Agents.
SECTION 11.9. Governing Law; Entire Agreement. EACH LOAN DOCUMENT
(OTHER THAN THE LETTERS OF CREDIT, TO THE EXTENT SPECIFIED BELOW AND EXCEPT AS
OTHERWISE EXPRESSLY SET FORTH IN A LOAN DOCUMENT) WILL EACH BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK
(INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK). EACH LETTER OF CREDIT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN
SUCH LETTER OF CREDIT, OR IF NO LAWS OR RULES ARE DESIGNATED, THE INTERNATIONAL
STANDBY PRACTICES (ISP98--INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NUMBER
590 (THE "ISP RULES")) AND, AS TO MATTERS NOT GOVERNED BY THE ISP RULES, THE
INTERNAL LAWS OF THE STATE OF NEW YORK. The Loan Documents constitute the entire
understanding among the parties hereto with respect to the subject matter
thereof and supersede any prior agreements, written or oral, with respect
thereto.
SECTION 11.10. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that neither Holdings nor
Intermediate Holdings nor the Borrowers may assign or transfer their rights or
obligations hereunder without the consent of all Lenders.
SECTION 11.11. Sale and Transfer of Credit Extensions; Participations
in Credit Extensions Notes. Each Lender may assign, or sell participations in,
its Loans, Letters of Credit and Commitments to one or more other Persons in
accordance with this the terms set forth below.
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SECTION 11.11.1. Assignments. Any Lender (an "Assignor Lender"),
(a) with the written consents of Holdings, the Agents and (in
the case of any assignment of U.S. Revolving Loan Commitments and
related participations in Letters of Credit, Letter of Credit
Outstandings and Swing Line Loans) the Issuers (which consents (i)
shall not be unreasonably delayed or withheld, (ii) of Holdings shall
not be required upon the occurrence and during the continuance of any
Event of Default and (iii) of the Agents and the Issuers shall not be
required in the case of any assignment made by DLJ or any of its
Affiliates), may at any time assign and delegate to one or more
commercial banks, funds that are regularly engaged in making,
purchasing or investing in loans or securities, or other financial
institutions, and
(b) with notice to Holdings, the Agents, and (in the case of
any assignment of U.S. Revolving Loan Commitments and related
participations in Letters of Credit, Letter of Credit Outstandings and
Swing Line Loans) the Issuers, but without the consent of Holdings,
each of the Agents or the Issuers, may assign and delegate to any of
its Affiliates or Related Funds or to any other Lender or any Affiliate
or Related Fund of any other Lender
(each Person described in either of the foregoing clauses as being the Person to
whom such assignment and delegation is to be made, being hereinafter referred to
as an "Assignee Lender"), all or any fraction of such Assignor Lender's Loans
and Commitments (and in the case of any assignment of U.S. Revolving Loan
Commitments, related participations in Letters of Credit, Letter of Credit
Outstandings and Swing Line Loans) (which assignment and delegation shall be,
(i) as among U.S. Revolving Loan Commitments, Revolving Loans and participations
in Letters of Credit, Letter of Credit Outstandings and Swing Line Loans, (ii)
as among Canadian Revolving Loan Commitments and Canadian Loans and (iii) as
among Australian Revolving Loan Commitments and Australian Revolving Loans, in
each case, of a constant, and not a varying, percentage) is in a minimum
aggregate amount of (i) $1,000,000 (provided that (1) assignments that are made
on the same day to funds that (x) invest in commercial loans and (y) are managed
or advised by the same investment advisor or any Affiliate of such investment
advisor may be treated as a single assignment for purposes of the minimum amount
and (2) no minimum amount shall be required in the case of any assignment
between two Lenders (or to any Affiliate or Related Fund of such Assignor
Lender) so long as the Assignor Lender has an aggregate amount of Loans and
Commitments of at least $1,000,000 following such assignment) unless Holdings
and the Agents otherwise consent or (ii) the then remaining amount of such
Assignor Lender's Loans and Commitments; provided, however, that any such
Assignee Lender will comply, if applicable, with the provisions contained in
Section 4.6 and Holdings, each Borrower, each other Obligor and the Agents shall
be entitled to continue to deal solely and directly with such Assignor Lender in
connection with the interests so assigned and delegated to an Assignee Lender
until
(c) written notice of such assignment and delegation, together
with payment instructions, addresses and related information with
respect to such Assignee Lender, shall
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have been given to Holdings and the Agents by such Assignor Lender and such
Assignee Lender;
(d) such Assignee Lender shall have executed and delivered to
Holdings and the Agents a Lender Assignment Agreement, accepted by the
Agents;
(e) the processing fees described below shall have been paid;
and
(f) the Administrative Agent shall have registered such
assignment and delegation in the Register pursuant to clause (b) of
Section 2.7.
From and after the date that the Agents accept such Lender Assignment Agreement
and such assignment and delegation is registered pursuant to clause (b) of
Section 2.7, (x) the Assignee Lender thereunder shall be deemed automatically to
have become a party hereto and to the extent that rights and obligations
hereunder have been assigned and delegated to such Assignee Lender in connection
with such Lender Assignment Agreement, shall have the rights and obligations of
a Lender hereunder and under the other Loan Documents (including the
Intercreditor Agreement), and (y) the Assignor Lender, to the extent that rights
and obligations hereunder have been assigned and delegated by it in connection
with such Lender Assignment Agreement, shall be released from its obligations
hereunder and under the other Loan Documents (including the Intercreditor
Agreement). Any Assignor Lender that shall have previously requested and
received any Note or Notes in respect of any Tranche to which any such
assignment applies shall, upon the acceptance by the Administrative Agent of the
applicable Lender Assignment Agreement, mark such Note or Notes "exchanged" and
deliver them to the applicable Borrower (against, if the Assignor Lender has
retained Loans or Commitments with respect to the applicable Tranche and has
requested replacement Notes pursuant to clause (b)(ii) of Section 2.7, its
receipt from the applicable Borrower of replacement Notes in the principal
amount of the Loans and Commitments of the applicable Tranche retained by it).
Such Assignor Lender or such Assignee Lender (unless the Assignor Lender or the
Assignee Lender is DLJ or one of its Affiliates) must also pay a processing fee
to the Administrative Agent upon delivery of any Lender Assignment Agreement in
the amount of $3,500, unless such assignment and delegation is by a Lender to
its Affiliate or Related Fund or if such assignment and delegation is by a
Lender to a Federal Reserve Bank, as provided below or is otherwise consented to
by the Administrative Agent. Any attempted assignment and delegation not made in
accordance with this Section 11.11.1 shall be null and void. Nothing contained
in this Section 11.11.1 shall prevent or prohibit any Lender from pledging its
rights (but not its obligations to make Loans or participate in Letters of
Credit, Letter of Credit Outstandings or Swing Line Loans) under this Agreement
and/or its Loans hereunder to a Federal Reserve Bank in support of borrowings
made by such Lender from such Federal Reserve Bank and any Lender that is a fund
that invests in bank loans may pledge all or any portion of its rights (but not
its obligations to make Loans or participate in Letters of Credit or Letter of
Credit Outstandings) hereunder to any trustee or any other holder or
representative of holders of obligations owed or securities issued by such fund
as security for such obligations or securities. In the event that S&P, Moody's
or Thompson's BankWatch (or InsuranceWatch Ratings Service, in the case of
Lenders that are insurance companies (or Best's Insurance Reports, if such
insurance company is not rated
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by Insurance Watch Ratings Service)) shall, after the date that any Lender with
a Commitment to make U.S. Revolving Loans or participate in Letters of Credit,
Letter of Credit Outstandings or Swing Line Loans becomes a Lender, downgrade
the long-term certificate of deposit rating or long-term senior unsecured debt
rating of such Lender, and the resulting rating shall be below BBB+, Baa or B
(or BB, in the case of Lender that is an insurance company (or B++, in the case
of an insurance company not rated by InsuranceWatch Ratings Service))
respectively, then the applicable Issuer or Holdings shall have the right, but
not the obligation, upon notice to such Lender and the Agents, to replace such
Lender with an Assignee Lender in accordance with and subject to the
restrictions contained in this Section, and such Lender hereby agrees to
transfer and assign without recourse (in accordance with and subject to the
restrictions contained in this Section) all its interests, rights and
obligations in respect of its U.S. Revolving Loan Commitment under this
Agreement to such Assignee Lender; provided, however, that (i) no such
assignment shall conflict with any law, regulation or order of any governmental
authority and (ii) such Assignee Lender shall pay to such Lender in immediately
available funds on the date of such assignment the principal of and interest and
fees (if any) accrued to the date of payment on the Loans made, and Letters of
Credit participated in, by such Lender hereunder and all other amounts accrued
for such Lender's account or owed to it hereunder.
SECTION 11.11.2. Participations. Any Lender may sell to one or more
commercial banks or other Persons (each of such commercial banks and other
Persons being herein called a "Participant") participating interests in any of
the Loans, Commitments, or other interests of such Lender hereunder; provided,
however, that
(a) no participation contemplated in this Section shall
relieve such Lender from its Commitments or its other obligations under
any Loan Document;
(b) such Lender shall remain solely responsible for the
performance of its Commitments and such other obligations;
(c) each Obligor and the Administrative Agent shall continue
to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under each Loan Document;
(d) no Participant, unless such Participant is an Affiliate of
such Lender or is itself a Lender, shall be entitled to require such
Lender to take or refrain from taking any action under any Loan
Document, except that such Lender may agree with any Participant that
such Lender will not, without such Participant's consent, take any
actions of the type described in clauses (a), (b), (c) or (f) of
Section 11.1 with respect to Obligations participated in by such
Participant; and
(e) the Borrowers shall not be required to pay any amount
under this Agreement that is greater than the amount which it would
have been required to pay had no participating interest been sold.
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Each Borrower and Holdings acknowledges and agrees that each Participant, for
purposes of Sections 4.3, 4.4, 4.5, 4.6, 4.8, 4.9, 7.1.1, 11.3 and 11.4, shall
be considered a Lender. Each Participant shall only be indemnified for increased
costs pursuant to Section 4.3, 4.5 or 4.6 if and to the extent that the Lender
which sold such participating interest to such Participant concurrently is
entitled to make, and does make, a claim on the applicable Borrower for such
increased costs. Any Lender that sells a participating interest in any Loan,
Commitment or other interest to a Participant under this Section shall indemnify
and hold harmless Holdings and the Borrowers and the Administrative Agent from
and against any taxes, penalties, interest or other costs or losses (including
reasonable attorneys' fees and expenses) incurred or payable by Holdings and the
Borrowers or the Administrative Agent as a result of the failure of Holdings and
the Borrowers or the Administrative Agent to comply with its obligations to
deduct or withhold any Taxes from any payments made pursuant to this Agreement
to such Lender or the Administrative Agent, as the case may be, which Taxes
would not have been incurred or payable if such Participant had been a Non-U.S.
Lender that was entitled to deliver to the Company, the Administrative Agent or
such Lender, and did in fact so deliver, a duly completed and valid Form W-8BEN
or W-8ECI (or applicable successor form) entitling such Participant to receive
payments under this Agreement without deduction or withholding of any United
States federal taxes.
SECTION 11.12. Other Transactions. Nothing contained herein shall
preclude the Administrative Agent, any Issuer or any other Lender from engaging
in any transaction, in addition to those contemplated by the Loan Documents,
with Holdings, Intermediate Holdings, any Borrower or any of their Affiliates in
which such Obligor or such Affiliate is not restricted hereby from engaging with
any other Person.
SECTION 11.13. Judgment Currency. (a) If, for the purpose of obtaining
judgment in any court, it is necessary to convert a sum due hereunder (including
under Section 9.1), under any Note or under any other Loan Document in another
currency into U.S. Dollars or into a Foreign Currency, as the case may be, the
parties hereto agree, to the fullest extent that they may effectively do so,
that the rate of exchange used shall be that at which, in accordance with normal
banking procedures, the applicable Secured Party could purchase such other
currency with U.S. Dollars or with such Foreign Currency, as the case may be, in
New York City, New York at the close of business on the Business Day immediately
preceding the day on which final judgment is given, together with any premiums
and costs of exchange payable in connection with such purchase.
(b) The obligation of each Borrower, Intermediate Holdings and Holdings
in respect of any sum due from it to any Agent or any Lender hereunder, under
any Note or under any other Loan Document shall, notwithstanding any judgment in
a currency other than U.S. Dollars or a Foreign Currency, as the case may be, be
discharged only to the extent that on the Business Day next succeeding receipt
by such Agent or such Lender of any sum adjudged to be so due in such other
currency, such Agent or such Lender may, in accordance with normal banking
procedures, purchase U.S. Dollars or such Foreign Currency, as the case may be,
with such other currency. If the U.S. Dollars or such Foreign Currency so
purchased are less than the sum originally due to such Agent or such Lender in
U.S. Dollars or in such Foreign Currency, such Borrower and
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Holdings agrees, as a separate obligation and notwithstanding any such judgment,
to indemnify such Agent or such Lender against such loss.
SECTION 11.14. Forum Selection and Consent to Jurisdiction. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, ANY
LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
ORAL OR WRITTEN) OR ACTIONS OF THE AGENTS, THE LENDERS, ANY ISSUER OR HOLDINGS
OR ANY BORROWER IN CONNECTION HEREWITH OR THEREWITH MAY BE BROUGHT AND
MAINTAINED IN THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT
ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE
BROUGHT, AT THE AGENTS' OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH BORROWER IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL
SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK AT THE ADDRESS FOR NOTICES
SPECIFIED IN SECTION 11.2. EACH OF HOLDINGS AND EACH BORROWER HEREBY EXPRESSLY
AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION
WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH
LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY
SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH BORROWER HEREBY
IRREVOCABLY APPOINTS CT CORPORATION SYSTEMS (THE "PROCESS AGENT"), WITH AN
OFFICE ON THE DATE HEREOF AT 111 EIGHTH AVENUE, 13TH FLOOR, NEW YORK, NEW YORK
10011, UNITED STATES, AS ITS AGENT TO RECEIVE, ON THE BORROWER'S BEHALF AND ON
BEHALF OF THE BORROWER'S PROPERTY, SERVICE OF COPIES OF THE SUMMONS AND
COMPLAINT AND ANY OTHER PROCESS WHICH MAY BE SERVED IN ANY SUCH ACTION OR
PROCEEDING. SUCH SERVICE MAY BE MADE BY MAILING TO THE BORROWER AS PROVIDED IN
SECTION 11.2 OR DELIVERING A COPY OF SUCH PROCESS TO EACH BORROWER IN CARE OF
THE PROCESS AGENT AT THE PROCESS AGENT'S ABOVE ADDRESS, AND THE BORROWER HEREBY
IRREVOCABLY AUTHORIZES AND DIRECTS THE PROCESS AGENT TO ACCEPT SUCH SERVICE ON
ITS BEHALF. AS AN ALTERNATIVE METHOD OF SERVICE, THE BORROWER FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. TO THE
EXTENT THAT ANY BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM
JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR
NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR
OTHERWISE) WITH
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RESPECT TO ITSELF OR ITS PROPERTY, EACH OF HOLDINGS AND EACH BORROWER HEREBY
IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW SUCH IMMUNITY IN
RESPECT OF ITS OBLIGATIONS UNDER THE LOAN DOCUMENTS.
SECTION 11.15. Waiver of Jury Trial. EACH AGENT, EACH LENDER, EACH
ISSUER AND EACH OF HOLDINGS AND EACH BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHTS THEY MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING
OUT OF, UNDER, OR IN CONNECTION WITH, EACH LOAN DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
SUCH AGENT, SUCH LENDER, SUCH ISSUER OR EACH OF HOLDINGS AND EACH BORROWER IN
CONNECTION THEREWITH. ANY BORROWER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED
FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION
OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A
MATERIAL INDUCEMENT FOR EACH AGENT, EACH LENDER AND EACH ISSUER ENTERING INTO
THE LOAN DOCUMENTS.
SECTION 11.16. Independence of Covenants. All covenants contained in
this Agreement and each other Loan Document shall be given independent effect
such that, in the event a particular action or condition is not permitted by any
of such covenants, the fact that it would be permitted by an exception to, or be
otherwise within the limitations of, another covenant shall not, unless
expressly so provided in such first covenant, avoid the occurrence of Default or
an Event of Default if such action is taken or such condition exists.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
RAILAMERICA, INC.
By: /s/ Donald Redfearn
____________________________
Name:
Title:
Address: 5300 Broken Sound Blvd. N.W.
Boca Raton, FL 33487
Facsimile No.: (561) 994-3929
Attention: Donald Redfearn
PALM BEACH RAIL HOLDING, INC.
By: /s/ Donald Redfearn
____________________________
Name:
Title:
Address: 5300 Broken Sound Blvd. N.W.
Boca Raton, FL 33487
Facsimile No.: (561) 994-3929
Attention: Donald Redfearn
<PAGE> 132
RAILAMERICA TRANSPORTATION CORP.
By: /s/ Donald Redfearn
____________________________
Name:
Title:
Address: 5300 Broken Sound Blvd. N.W.
Boca Raton, FL 33487
Facsimile No.: (561) 994-3929
Attention: Donald Redfearn
FREIGHT VICTORIA LIMITED
By: /s/ Marinus Van Onselen
_____________________________
Name:
Title:
Address: Level 1
589 Collins Street
Melbourne, Victoria 3000
Australia
Facsimile No.: 011-61-3-9619-1311
Attention: Marinus Van Onselen
<PAGE> 133
RAILINK LTD.
By: /s/ Donald Redfearn
__________________________
Name:
Title:
Address: 5300 Broken Sound Blvd. N.W.
Boca Raton, FL 33487
Facsimile No.: (561) 994-3929
Attention: Donald Redfearn
DLJ CAPITAL FUNDING, INC., as the
Syndication Agent and Lender
By: /s/ Diane Albanese
___________________________
Title:
Address: 277 Park Avenue
New York, NY 10172
Facsimile No.: (212) 892-6031
Attention: Diane Albanese
<PAGE> 134
THE BANK OF NOVA SCOTIA, as the
Administrative Agent and Lender
By: /s/ Stephen Lockhart
_____________________________
Name:
Title:
Address: One Liberty Plaza
26th Floor
New York, NY 10026
Facsimile No.: (212) 225-5090
Attention: Stephen Lockhart
ING (U.S.) CAPITAL LLC,
as the Documentation Agent and Lender
By: /s/ William Redmond
____________________________
Name:
Title:
Address: 55 East 52nd Street
32nd Floor
New York, NY 10055
Facsimile No.: (212) 409-7813
Attention: William Redmond
<PAGE> 135
]
FLEET NATIONAL BANK,
as the Documentation Agent and Lender
By: /s/ Robert Gamba
____________________________
Name:
Title:
Address: 1185 Avenue of the Americas
16th Floor
New York, NY 10036
Facsimile No.: (212) 819-6201
Attention: Robert Gamba
<PAGE> 136
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
<S> <C> <C>
1.1. Defined Terms.............................................................................................4
1.2. Use of Defined Terms.....................................................................................46
1.3. Cross-References.........................................................................................46
1.4. Accounting and Financial Determinations..................................................................46
1.5. BBSY Rate................................................................................................47
ARTICLE II
COMMITMENTS, BORROWING AND ISSUANCE
PROCEDURES, NOTES AND LETTERS OF CREDIT
2.1. Commitments...............................................................................................47
2.1.1. Revolving Loan Commitment and Swing Line Loan Commitment.................................................47
2.1.2. Letter of Credit Commitment..............................................................................48
2.1.3. Term Loan Commitment.....................................................................................49
2.1.4. Lenders Not Permitted or Required to Make the Loans......................................................49
2.1.5. Issuer Not Permitted or Required to Issue Letters of Credit..............................................50
2.2. Reduction of the Commitment Amounts......................................................................50
2.2.1. Optional.................................................................................................50
2.2.2. Mandatory................................................................................................51
2.3. Borrowing Procedures.....................................................................................51
2.3.1. Borrowing Procedure......................................................................................51
2.3.2. Swing Line Loans.........................................................................................52
2.4. Continuation and Conversion Elections....................................................................53
2.4.1. Converting Canadian Prime Rate Loans to, or Continuing Canadian BAs as, Canadian BAs.....................53
2.4.2. Converting Canadian BAs to Canadian Prime Rate Loans.....................................................54
2.5. Funding..................................................................................................54
2.6. Issuance Procedures......................................................................................54
2.6.1. Other Lenders' Participation.............................................................................55
2.6.2. Disbursements............................................................................................55
2.6.3. Reimbursement............................................................................................55
2.6.4. Deemed Disbursements.....................................................................................56
2.6.5. Nature of Reimbursement Obligations......................................................................56
2.7. Register; Notes..........................................................................................57
2.8. Canadian BAs.............................................................................................58
2.8.1. Funding of Canadian BA...................................................................................58
</TABLE>
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<TABLE>
<S> <C> <C>
2.8.3. Execution of Canadian BAs................................................................................59
2.8.4. Special Provisions Relating to Acceptance Notes..........................................................60
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
3.1. Repayments and Prepayments; Application..................................................................60
3.1.1. Repayments and Prepayments...............................................................................60
3.1.2. Application..............................................................................................66
3.2. Interest Provisions......................................................................................66
3.2.1. Rates....................................................................................................67
3.2.2. Post-Default Rates.......................................................................................67
3.2.3. Payment Dates............................................................................................67
3.3. Fees.....................................................................................................68
3.3.1. Commitment Fee...........................................................................................68
3.3.2. Agents' Fee..............................................................................................69
3.3.3. Letter of Credit Fee.....................................................................................69
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
4.1. LIBO Rate Lending Unlawful...............................................................................69
4.2. Deposits Unavailable; Circumstances making Canadian BAs Unavailable......................................70
4.3. Increased LIBO Rate Loan Costs, etc......................................................................70
4.4. Funding Losses...........................................................................................71
4.5. Increased Capital Costs..................................................................................71
4.6. Taxes....................................................................................................72
4.7. Payments, Computations, etc..............................................................................74
4.8. Sharing of Payments......................................................................................75
4.9. Setoff...................................................................................................75
4.10. Replacement of Lenders...................................................................................76
ARTICLE V
CONDITIONS TO CREDIT EXTENSIONS
5.1. Initial Credit Extension.................................................................................76
5.1.1. Resolutions, etc.........................................................................................76
5.1.2. Transaction Consummated..................................................................................77
5.1.3. Transaction Documents....................................................................................78
5.1.4. Closing Date Certificate.................................................................................78
5.1.5. Delivery of Notes........................................................................................78
5.1.6. Payment of Outstanding Indebtedness, etc.................................................................78
</TABLE>
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<TABLE>
Section Page
<S> <C> <C>
5.1.7. Closing Fees, Expenses, etc............................................................................79
5.1.8. Financial Information, Material Adverse Change.........................................................79
5.1.9. Opinions of Counsel....................................................................................79
5.1.10. Filing Agent, etc......................................................................................80
5.1.11. Subsidiary Guaranty....................................................................................80
5.1.12. Solvency Certificate...................................................................................80
5.1.13. Pledge and Security Agreements.........................................................................80
5.1.14. Trademark Security Agreement...........................................................................83
5.1.15. Foreign Pledge Agreements..............................................................................83
5.1.16. Insurance..............................................................................................83
5.1.17. Mortgage...............................................................................................83
5.1.18. Litigation.............................................................................................83
5.1.19. Minimum EBITDA.........................................................................................84
5.1.20. Corporate, Tax and Capital Structure...................................................................84
5.1.21. Approvals..............................................................................................84
5.1.22. Environmental Assessment...............................................................................84
5.1.23. Appraisal of Assets....................................................................................84
5.1.24. Foreign Acquisitions and Takeovers Act Approval........................................................84
5.1.25. Delivery of Counterparts to the Intercreditor Agreement................................................85
5.2. All Credit Extensions..................................................................................85
5.2.1. Compliance with Warranties, No Default, etc............................................................85
5.2.2. Credit Extension Request, etc..........................................................................85
5.2.3. Satisfactory Legal Form................................................................................85
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1. Organization, etc......................................................................................86
6.2. Due Authorization, Non-Contravention, etc..............................................................86
6.3. Government Approval, Regulation, etc...................................................................86
6.4. Validity, etc..........................................................................................87
6.5. Financial Information..................................................................................87
6.6. No Material Adverse Change.............................................................................87
6.7. Litigation, Labor Controversies, etc...................................................................87
6.8. Subsidiaries...........................................................................................88
6.9. Ownership of Properties................................................................................88
6.10. Taxes..................................................................................................88
6.11. Pension and Welfare Plans..............................................................................88
6.12. Environmental Warranties...............................................................................89
6.13. Accuracy of Information................................................................................90
6.14. Regulations U and X....................................................................................90
6.15. Year 2000..............................................................................................90
</TABLE>
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<TABLE>
Section Page
<S> <C> <C>
6.16. Issuance of Subordinated Debt; Status of Obligations as Senior
Indebtedness, etc......................................................................................91
6.17. Solvency...............................................................................................91
ARTICLE VII
COVENANTS
7.1. Affirmative Covenants..................................................................................91
7.1.1. Financial Information, Reports, Notices, etc...........................................................92
7.1.2. Maintenance of Existence; Compliance with Laws, etc....................................................94
7.1.3. Maintenance of Properties..............................................................................95
7.1.4. Insurance..............................................................................................95
7.1.5. Books and Records......................................................................................95
7.1.6. Environmental Law Covenant.............................................................................96
7.1.7. Use of Proceeds........................................................................................96
7.1.8. Future Guarantors, Security, etc.......................................................................97
7.1.9. Rate Protection Agreements.............................................................................97
7.1.10. Use of Proceeds of Holdings Disposition of Capital Stock or Assets.....................................97
7.2. Negative Covenants.....................................................................................98
7.2.1. Business Activities....................................................................................98
7.2.2. Indebtedness...........................................................................................98
7.2.3. Liens.................................................................................................100
7.2.4. Financial Covenants...................................................................................102
7.2.5. Investments...........................................................................................104
7.2.6. Restricted Payments, etc..............................................................................105
7.2.7. Capital Expenditures, etc.............................................................................105
7.2.8. No Prepayment of Certain Debt.........................................................................106
7.2.9. Capital Stock of Subsidiaries.........................................................................107
7.2.10. Consolidation, Merger, etc............................................................................107
7.2.11. Permitted Dispositions................................................................................108
7.2.12. Modification of Certain Agreements....................................................................108
7.2.13. Transactions with Affiliates..........................................................................109
7.2.14. Restrictive Agreements, etc...........................................................................109
7.2.15. Sale and Leaseback....................................................................................110
ARTICLE VIII
EVENTS OF DEFAULT
8.1. Listing of Events of Default..........................................................................110
8.1.1. Non-Payment of Obligations............................................................................110
8.1.2. Breach of Warranty....................................................................................110
8.1.3. Non-Performance of Certain Covenants and Obligations..................................................110
</TABLE>
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<TABLE>
<CAPTION>
Page
<C> <C>
8.1.4. Non-Performance of Other Covenants and Obligations....................................................110
8.1.5. Default on Other Indebtedness.........................................................................111
8.1.6. Judgments.............................................................................................111
8.1.7. Pension Plans.........................................................................................111
8.1.8. Change in Control.....................................................................................111
8.1.9. Bankruptcy, Insolvency, etc...........................................................................111
8.1.10. Impairment of Security, etc...........................................................................112
8.1.11. Failure of Subordination..............................................................................112
8.1.12. Failure to Refinance or Extend the Subordinated Bridge Notes..........................................113
8.2. Action if Bankruptcy..................................................................................113
8.3. Action if Other Event of Default......................................................................113
ARTICLE IX
THE ADMINISTRATIVE AGENT
9.1. Actions...............................................................................................113
9.2. Funding Reliance, etc.................................................................................114
9.3. Exculpation...........................................................................................114
9.4. Successor.............................................................................................115
9.5. Credit Extensions by each Agent and Issuer............................................................115
9.6. Credit Decisions......................................................................................116
9.7. Copies, etc...........................................................................................116
9.8. Reliance by Agents....................................................................................116
9.9. Defaults..............................................................................................116
9.10. Documentation Agent...................................................................................117
9.11. Security Trust Deed...................................................................................117
ARTICLE X
HOLDINGS AND INTERMEDIATE HOLDINGS GUARANTY
10.1. Guaranty..............................................................................................117
10.2. Acceleration of Obligations Hereunder.................................................................118
10.3. Obligations Hereunder Absolute, etc...................................................................118
10.4. Reinstatement, etc....................................................................................119
10.5. Waiver, etc...........................................................................................119
10.6. Postponement of Subrogation...........................................................................120
10.7. Successors, Transferees and Assigns; Transfers of Notes, etc..........................................120
</TABLE>
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<TABLE>
<C> <C>
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1. Waivers, Amendments, etc................................ ...........................................120
11.2. Notices; Time.......................................................................................122
11.3. Payment of Costs and Expenses.......................................................................122
11.4. Indemnification.....................................................................................123
11.5. Survival............................................................................................124
11.6. Severability........................................................................................125
11.7. Headings............................................................................................125
11.8. Execution in Counterparts, Effectiveness, etc.......................................................125
11.9. Governing Law; Entire Agreement.....................................................................125
11.10 Successors and Assigns..............................................................................125
11.11. Sale and Transfer of Credit Extensions; Participations in Credit Extensions Notes...................125
11.11.1. Assignments.........................................................................................126
11.11.2. Participations......................................................................................128
11.12. Other Transactions..................................................................................129
11.13. Judgment Currency...................................................................................129
11.14. Forum Selection and Consent to Jurisdiction.........................................................130
11.15. Waiver of Jury Trial................................................................................131
11.16. Independence of Covenants...........................................................................131
</TABLE>
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<PAGE> 1
Exhibit 10.72
[EXECUTION COPY]
SECURITIES PURCHASE AGREEMENT,
dated as of
February 4, 2000,
among
RAILAMERICA TRANSPORTATION CORP.
RAILAMERICA, INC.,
PALM BEACH RAIL HOLDING, INC.,
and
THE GUARANTORS PARTY HERETO,
and
THE PURCHASERS PARTY HERETO.
<PAGE> 2
PURCHASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ARTICLE I
DEFINITIONS
Section 1.1 Definitions......................................................................... 1
Section 1.2 Incorporated Definition............................................................. 10
ARTICLE II
PURCHASE AND SALE OF SECURITIES; TERMS OF SECURITIES
Section 2.1 Commitment to Purchase.............................................................. 10
Section 2.2 Takedown Procedures................................................................. 11
Section 2.3 Fees................................................................................ 11
Section 2.4 Mandatory Termination of Commitments................................................ 12
Section 2.5 Interest............................................................................ 12
Section 2.6 Maturity of Notes; Prepayment of Notes.............................................. 13
Section 2.7 Taxes............................................................................... 16
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
HOLDINGS, INTERMEDIATE HOLDINGS AND THE COMPANY
Section 3.1 Incorporation of Representations and Warranties in Incorporated
Agreement....................................................................... 19
Section 3.2 Authorization, Execution and Enforceability......................................... 20
Section 3.3 Capitalization...................................................................... 20
Section 3.4 Solicitation........................................................................ 20
Section 3.5 Non-fungibility..................................................................... 21
</TABLE>
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<TABLE>
<S> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
Section 4.1 Purchase for Investment; Authority; Binding Agreement............................... 21
ARTICLE V
CONDITIONS PRECEDENT TO PURCHASE
Section 5.1 Conditions to Purchasers' Obligation at Takedown.................................... 22
Section 5.2 Conditions to the Company's Obligations............................................. 27
ARTICLE VI
COVENANTS
Section 6.1 Incorporation of Affirmative Covenants from the Incorporated
Agreement....................................................................... 28
Section 6.2 Incorporation of Negative Covenants from the Incorporated
Agreement....................................................................... 28
Section 6.3 Investment Company Act.............................................................. 29
Section 6.4 Use of Proceeds..................................................................... 29
Section 6.5 Restrictions on Certain Amendments.................................................. 29
Section 6.6 No Senior Subordinated Debt......................................................... 29
Section 6.7 Permanent Financing................................................................. 30
Section 6.8 Additional Guarantors............................................................... 30
Section 6.9 Syndication Efforts................................................................. 30
ARTICLE VII
EVENTS OF DEFAULT
Section 7.1 Events of Default Defined; Acceleration of Maturity; Waiver of
Default......................................................................... 31
ARTICLE VIII
LIMITATION ON TRANSFERS
Section 8.1 Restrictions on Transfer............................................................ 33
Section 8.2 Restrictive Legends................................................................. 33
Section 8.3 Notice of Proposed Transfers........................................................ 34
Section 8.4 Right to Sell, Transfer or Assign Notes............................................. 34
Section 8.5 Replacement Notes................................................................... 35
</TABLE>
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<TABLE>
<S> <C>
ARTICLE IX
SUBORDINATION
Section 9.1 Notes Subordinated to Designated Senior Debt........................................ 35
Section 9.2 No Payment on Notes in Certain Circumstances........................................ 35
Section 9.3 Notes Subordinated to Prior Payment of all Designated Senior Debt
on Dissolution, Liquidation or Reorganization................................... 36
Section 9.4 Holders to be Subrogated to Rights of Holders of Designated Senior
Debt............................................................................ 38
Section 9.5 Obligations of the Company Unconditional............................................ 38
Section 9.6 Subordination Rights not Impaired by Acts or Omissions of the
Company or Holders of Designated Senior Debt.................................... 38
Section 9.7 Not to Prevent Events of Default.................................................... 39
Section 9.8 Miscellaneous....................................................................... 39
ARTICLE X
GUARANTEES
Section 10.1 Guarantees.......................................................................... 39
Section 10.2 Subordination of Guarantees......................................................... 41
Section 10.3 Limitation on Guarantor Liability................................................... 41
Section 10.4 Consolidation or Merger of Guarantors............................................... 41
Section 10.5 Release of Guarantors............................................................... 42
ARTICLE XI
MISCELLANEOUS
Section 11.1 Notices............................................................................. 42
Section 11.2 No Waivers; Amendments.............................................................. 42
Section 11.3 Indemnification..................................................................... 42
Section 11.4 Expenses............................................................................ 45
Section 11.5 Payment............................................................................. 45
Section 11.6 Successors and Assigns.............................................................. 45
Section 11.7 Brokers............................................................................. 45
Section 11.8 New York Law; Submission to Jurisdiction; Waiver of Jury Trial...................... 45
Section 11.9 Severability........................................................................ 46
Section 11.10 Counterparts........................................................................ 46
Section 11.11 Confidentiality..................................................................... 46
</TABLE>
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<TABLE>
<S> <C>
Section 11.12 Survival of Representations and Warranties.......................................... 47
Section 11.13 Construction........................................................................ 47
Section 11.14 Integration......................................................................... 47
Section 11.15 Replacement Notes................................................................... 47
Section 11.16 Headings............................................................................ 47
</TABLE>
SCHEDULES
Schedule 3.3 Capitalization of Holdings
ANNEX
Annex I Corporate and Capital Structure
EXHIBITS
Exhibit A Form of Escrow Agreement
Exhibit B Form of Note
Exhibit C Form of Debt Registration Rights Agreement
Exhibit D Form of Warrant Agreement
Exhibit E Form of Equity Registration Rights Agreement
Exhibit F Form of Issuance Date Certificate
Exhibit G Form of Solvency Certificate
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<PAGE> 6
SECURITIES PURCHASE AGREEMENT
THIS AGREEMENT, dated as of February 4, 2000, is made by and among
RAILAMERICA TRANSPORTATION CORP., a Delaware corporation (the "COMPANY"),
RAILAMERICA, INC., a Delaware corporation ("HOLDINGS"), PALM BEACH RAIL HOLDING,
INC., a Delaware corporation ("INTERMEDIATE HOLDINGS"), each Restricted
Subsidiary of the Company that is a party hereto as a "Guarantor" (each such
Restricted Subsidiary, together with Holdings and Intermediate Holdings, the
"GUARANTORS") and the Persons parties hereto as "Purchasers" (collectively, the
"PURCHASERS").
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. The following terms, as used herein (including
as used in any provision of the Incorporated Agreement that has been
incorporated by reference herein), have the following meanings:
"ADDITIONAL NOTES" means Notes issued in satisfaction of the Company's
obligations to pay interest on the outstanding Notes in accordance with the
terms hereof.
"ADMINISTRATIVE AGENT" is defined in the definition of the term "Credit
Agreement".
"AGREEMENT" means this Agreement, as amended, supplemented or otherwise
modified from time to time in accordance with its terms.
"BONA FIDE PROPOSAL" has the meaning set forth in SECTION 2.6(d).
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
close.
"COMMISSION" means the Securities and Exchange Commission.
"COMMITMENT" means, with respect to any Purchaser, the amount set forth
opposite its name on the signature pages hereto or the obligation of such
Purchaser to purchase Notes hereunder in an aggregate principal amount at any
time outstanding not to exceed such amount.
"COMMON STOCK" means the authorized common stock, par value $.001 per
share, of Holdings.
<PAGE> 7
"COMPANY" is defined in the PREAMBLE.
"CREDIT AGREEMENT" means the Credit Agreement, dated as of February 4,
2000, among the Company, Intermediate Holdings, Holdings, Railink, Ltd., a
corporation organized and existing under the laws of the Province of Alberta,
Canada, Freight Victoria Limited, a corporation organized and existing under the
laws of Australia, the lenders party thereto, DLJ Capital Funding, Inc., as
syndication agent for the lenders, the lead arranger and the sole book running
manager, The Bank of Nova Scotia, as administrative agent (in such capacity, the
"ADMINISTRATIVE AGENT") for the lenders, and ING (U.S.) Capital LLC and Fleet
National Bank, as documentation agent for the lenders, as amended, modified,
amended and restated, renewed, refunded, replaced or refinanced from time to
time, PROVIDED that (i) such refinancing or refunding has a final maturity date
that is the same as or later than the final maturity date of the Indebtedness
being amended, modified, amended and restated, renewed, refunded, replaced or
refinanced, and (ii) the principal amount thereof does not exceed $380,000,000,
plus the amount of reasonable expenses incurred in connection therewith (other
than as a result of currency fluctuations) less the amount of all principal
repayments actually made from time to time hereafter of term Indebtedness and
permanent reductions of revolving Indebtedness thereunder.
"DEBT INCURRENCE" means any incurrence by Holdings, Intermediate
Holdings, the Company or any of its Restricted Subsidiaries of any Indebtedness,
other than Indebtedness permitted under CLAUSE (b) of SECTION 6.2.
"DEBT REGISTRATION RIGHTS AGREEMENT" means the Debt Registration Rights
Agreement, dated as of February 4, 2000, between the Company, the Purchasers and
the Guarantors, in the form attached as Exhibit C to this Agreement, as amended,
supplemented or otherwise modified from time to time.
"DEFAULT" means any Event of Default or any event or condition which,
with the giving of notice or lapse of time or both, would, unless cured or
waived, become an Event of Default.
"DESIGNATED SENIOR DEBT" means any Senior Debt outstanding under the
Loan Documents or otherwise described in CLAUSE (i) of the definition of Senior
Debt.
"DLJ HIGH YIELD INDEX RATE" means the index of high yield securities
most recently published by DLJSC in THE WEEK IN LEVERAGED FINANCE.
"DLJSC" means Donaldson, Lufkin & Jenrette Securities Corporation, a
Delaware corporation, and its successors.
"DOLLARS" or "$" mean lawful currency of the United States of America.
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<PAGE> 8
"ENGAGEMENT LETTER" means the Engagement Letter, dated as of February
4, 2000, between Holdings and DLJSC, as amended, supplemented or otherwise
modified from time to time.
"EQUITY ISSUANCE" means the issuance of any equity securities by
Holdings (including without limitation any equity securities issued pursuant to
the exercise of stock options or warrants or the Permanent Financing), but
excluding (i) any stock option agreement, subscription agreement, incentive plan
or similar arrangement with any officer, employee or director of Holdings,
Intermediate Holdings, the Company or any of their respective Restricted
Subsidiaries, (ii) the issuance of any Capital Stock of Holdings to any officer,
director or employee of Holdings, Intermediate Holdings, the Company or any of
their respective Restricted Subsidiaries, (iii) the issuance of equity
securities pursuant to the Transaction or (iv) the issuance of equity securities
to Holdings, Intermediate Holdings, the Company or any Guarantor.
"EQUITY REGISTRATION RIGHTS AGREEMENT" means the Equity Registration
Rights Agreement, dated as of February 4, 2000, among Holdings and the
Purchasers, in the form attached as Exhibit E to this Agreement, as amended,
supplemented or otherwise modified from time to time.
"ESCROW AGENT" means Snoga, Inc., a Delaware corporation.
"ESCROW AGREEMENT" means the Escrow Agreement, dated as of February 4,
2000, among Holdings, the Purchasers and the Escrow Agent, in the form attached
as Exhibit A to this Agreement, as amended, supplemented or otherwise modified
from time to time.
"EVENT OF DEFAULT" has the meaning set forth in SECTION 7.1.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXPIRATION DATE" has the meaning set forth in SECTION 2.1(b).
"FEE LETTER" means the letter agreement with respect to fees dated
February 1, 2000 made by DLJ Bridge Finance, Inc. and DLJ Capital Funding, Inc
and accepted by Holdings on February 2, 2000.
"FINANCING DOCUMENTS" means this Agreement, the Notes, the Debt
Registration Rights Agreement, the Equity Registration Rights Agreement, the
Warrant Agreement, the Warrants and the Escrow Agreement.
"FIRST ANNIVERSARY DATE" means the first anniversary of the Issuance
Date (or if such date is not a Business Day, the next preceding Business Day).
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<PAGE> 9
"FIXED RATE HOLDER" means a Holder of a Note which is designated as a
Fixed Rate Holder by notice to the Company and to such Holder by a Purchaser or
any of its Affiliates substantially contemporaneously with the transfer by such
Purchaser or such Affiliate of such Note to such subsequent Holder with a fixed
rate of interest in accordance with Section 8.4(b).
"FIXED RATE NOTE" means a Note which has been transferred to a Fixed
Rate Holder (including any Note issued upon any subsequent exchange or transfer
thereof and any Additional Note issued in respect thereof).
"FIXED RATE SALE DATE" means the earlier of (i) the first anniversary
of the Issuance Date and (ii) the date of any refusal by the Company to execute
a Bona Fide Proposal.
"GUARANTEE" means the subordinated guarantee by the Guarantors of the
Notes pursuant to Article X.
"GUARANTEE OBLIGATION" means as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another Person
(including, without limitation, any bank under any letter of credit) to induce
the creation of which the guaranteeing person has issued a reimbursement,
counter indemnity or similar obligation, in either case guaranteeing or in
effect guaranteeing any Indebtedness (the "primary obligations") of any other
third Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of the guaranteeing
person, whether or not contingent, (i) to purchase any such primary obligation
or any property constituting direct or indirect security therefor, (ii) to
advance or supply funds (1) for the purchase or payment of any such primary
obligation or (2) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency of the primary
obligor or (iii) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation against loss in
respect thereof; PROVIDED, HOWEVER, that the term Guarantee Obligation shall not
include endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Guarantee Obligation of any guaranteeing
person shall be deemed to be the lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such guaranteeing person
may be liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable, in which case
the amount of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as determined in
good faith by the guaranteeing Person.
"GUARANTORS" is defined in the preamble.
"HOLDER" means any holder of any Note.
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<PAGE> 10
"HOLDINGS" is defined in the preamble.
"INCORPORATED AGREEMENT" means the Credit Agreement; PROVIDED that any
amendment, supplement or waiver thereto or thereunder shall be effective for
purposes of this definition if and only if consented to in writing by the
Majority Holders. Each reference herein to the Incorporated Agreement shall by
such reference incorporate the provisions of the Incorporated Agreement to which
such reference is made as though fully set forth in such place, together with
related definitions and ancillary provisions, PROVIDED that for purposes of such
incorporation by reference, except as the context may otherwise require:
(i) references therein to "this Agreement", the "Notes", the
"Loan Documents" and the like shall be deemed to refer to and include
this Agreement, the Notes and the Financing Documents, respectively;
(ii) references therein to the "Administrative Agent" shall be
deemed to refer to the Purchasers;
(iii) references therein to the "Lenders" shall be deemed to
refer to (x) prior to the issuance of the Notes, the Purchasers and (y)
from and after the issuance of the Notes, the Holders from time to time
of the Notes;
(iv) references therein to the "Required Lenders" or the like
shall be deemed to refer to the Majority Holders;
(v) references therein to the "Obligors" shall be deemed to
refer to Holdings, the Company and the Guarantors;
(vi) references in Article VI thereof to the "Credit
Extensions" shall be deemed to refer to the Indebtedness evidenced by
the Notes; and
(vii) provisions within the Incorporated Agreement shall be
deemed for all purposes hereof to be modified as set forth in ARTICLES
III, VI and VII hereof.
"INITIAL RATE" has the meaning set forth in SECTION 2.5(b).
"INTEREST PAYMENT DATE" means each May 4, August 4, November 4 and
February 4 (or, if any such date is not a Business Day, the next succeeding
Business Day).
"INTERMEDIATE HOLDINGS" is defined in the preamble.
"ISSUANCE DATE" means the date the Notes are issued by the Company and
purchased by the Purchasers.
-5-
<PAGE> 11
"ISSUANCE DATE CERTIFICATE" means a certificate of an Authorized
Officer of Holdings, Intermediate Holdings and the Company substantially in the
form of EXHIBIT F hereto, delivered pursuant to CLAUSE (d) of SECTION 5.1.
"LENDERS" means the banks and other financial institutions from time to
time party to the Credit Agreement.
"LOAN DOCUMENTS" means the Credit Agreement, together with all notes,
collateral and security documents, guaranties, interest rate hedge or similar
arrangements to which the counterparty at the time such interest rate hedge or
similar arrangement was entered into was a lender under the Credit Agreement or
any of its Affiliates, agreements and other documents delivered at any time in
connection therewith, all as amended, supplemented or otherwise modified from
time to time in accordance with their respective terms.
"MAJORITY HOLDERS" means (i) at any time prior to the issuance of the
Notes, the Purchasers and (ii) at any time thereafter, the holders of voting
rights with respect to waivers, amendments and other actions permitted or
required to be taken by Holders under the terms of the Notes constituting a
majority of such voting rights attributable to the aggregate outstanding amount
of Notes at such time.
"MAKE-WHOLE AMOUNT" means, with respect to any Fixed Rate Note, an
amount equal to the excess, if any, of the Discounted Value of the Remaining
Scheduled Payments with respect to the Called Principal of such Fixed Rate Note
over the amount of such Called Principal, PROVIDED that the Make-Whole Amount
may in no event be less than zero. For the purposes of determining the
Make-Whole Amount, the following terms have the following meanings:
"CALLED PRINCIPAL" means, with respect to any Fixed Rate Note,
the principal of such Fixed Rate Note that is to be prepaid pursuant to
SECTION 2.6(b) or has become or is declared to be immediately due and
payable pursuant to SECTION 7.1, as the context requires.
"DISCOUNTED VALUE" means, with respect to the Called Principal
of any Fixed Rate Note, the amount obtained by discounting all
Remaining Scheduled Payments with respect to such Called Principal
from their respective scheduled due dates to the Settlement Date with
respect to such Called Principal, in accordance with accepted financial
practice and at a discount factor (applied on the same periodic basis
as that on which interest on the Fixed Rate Notes is payable) equal to
the Reinvestment Yield with respect to such Called Principal.
"REINVESTMENT YIELD" means, with respect to the Called
Principal of any Fixed Rate Note, 0.50% over the yield to maturity
implied by (i) the yields reported, as of 10:00 a.m. (New York City
time) on the second Business Day preceding the Settlement
-6-
<PAGE> 12
Date with respect to such Called Principal, on the display designated
as "Page USD" on the Bloomberg Financial Markets System (or such other
display as may replace Page USD on the Bloomberg Financial Markets
System) for actively traded U.S. Treasury securities having a maturity
equal to the Remaining Average Life of such Called Principal as of
such Settlement Date, or (ii) if such yields are not reported as of
such time or the yields reported as of such time are not ascertainable,
the Treasury Constant Maturity Series Yields reported, for the latest
day for which such yields have been so reported as of the second
Business Day preceding the Settlement Date with respect to such Called
Principal, in Federal Reserve Statistical Release H.15 (519) (or any
comparable successor publication) for actively traded U.S. Treasury
securities having a constant maturity equal to the Remaining Average
Life of such Called Principal as of such Settlement Date. Such implied
yield will be determined, if necessary, by (a) converting U.S. Treasury
bill quotations to bond-equivalent yields in accordance with accepted
financial practice and (b) interpolating linearly between (1) the
actively traded U.S. Treasury security with the maturity closest to and
greater than the Remaining Average Life and (2) the actively traded
U.S. Treasury security with the maturity closest to and less than the
Remaining Average Life.
"REMAINING AVERAGE LIFE" means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth
year) obtained by dividing (i) such Called Principal into (ii) the sum
of the products obtained by multiplying (a) the principal component of
each Remaining Scheduled Payment with respect to such Called Principal
by (b) the number of years (calculated to the nearest one-twelfth year)
that will elapse between the Settlement Date with respect to such
Called Principal and the scheduled due date of such Remaining Scheduled
Payment.
"REMAINING SCHEDULED PAYMENTS" means, with respect to the
Called Principal of any Fixed Rate Note, all payments of such Called
Principal and interest thereon that would be due after the Settlement
Date with respect to such Called Principal if no payment of such
Called Principal were made prior to its scheduled due date, PROVIDED
that if such Settlement Date is not a date on which interest payments
are due to be made under the terms of the Fixed Rate Notes, then the
amount of the next succeeding scheduled interest payment will be
reduced by the amount of interest accrued to such Settlement Date and
required to be paid on such Settlement Date pursuant to SECTION 2.6(b)
or SECTION 7.1; and PROVIDED FURTHER that any such determination shall
assume the extension of the maturity of such Fixed Rate Note pursuant
to SECTION 2.6(a), whether or not such maturity has in fact been so
extended.
"SETTLEMENT DATE" means, with respect to the Called Principal
of any Fixed Rate Note, the date on which such Called Principal is to
be prepaid pursuant to SECTION 2.6(b) or has become or is declared to
be immediately due and payable pursuant to SECTION 7.1, as the context
requires.
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<PAGE> 13
"MATERIAL ACQUISITION DOCUMENTS" means the Merger Agreement, the Credit
Agreement, the Engagement Letter and all other material instruments, agreements
and documents relating to the Acquisition, the RailAmerica Refinancing, the
RailTex Refinancing, the Intermediate Holdings Asset Bridge Note Issuance, the
Equity Issuance (as defined in the Incorporated Agreement), the Asset Transfer
and the transactions contemplated hereby or thereby, in each case as amended
from time to time in accordance with CLAUSE (j) of SECTIONS 6.2 and 6.5.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect upon the
business, assets, condition (financial or otherwise), operations, performance,
properties or prospects of Holdings, Intermediate Holdings, the Company and the
Restricted Subsidiaries taken as a whole, (ii) the material impairment of the
ability of Holdings, Intermediate Holdings, the Company or any Guarantor to
perform their respective obligations under the Financing Documents, or (iii) a
material adverse effect on the rights and remedies of any Holder under any
Financing Document.
"NET DEBT PROCEEDS" means with respect to the sale or issuance by
Holdings, Intermediate Holdings, the Company or the Restricted Subsidiaries to
any Person of any of its Indebtedness not permitted pursuant to Section 7.2.2 of
the Incorporated Agreement as incorporated by reference in CLAUSE (b) of SECTION
6.2, the EXCESS of:
(a) the gross cash proceeds received by such Person from such
sale or issuance,
OVER
(b) all underwriting commissions and legal, investment
banking, brokerage and accounting and other professional fees, sales
commissions and disbursements actually incurred in connection with such
sale or issuance which have not been paid to Affiliates of Holdings in
connection therewith.
"NET EQUITY PROCEEDS" means with respect to any sale or issuance by
Holdings, Intermediate Holdings, the Company or the Restricted Subsidiaries to
any Person of any of their respective Capital Stock or, warrants or options for
such Capital Stock or the exercise of any such warrants or options, the excess
of:
(a) the gross cash proceeds received by Holdings, Intermediate
Holdings, the Company or any such Restricted Subsidiary from such sale,
exercise or issuance; PROVIDED, HOWEVER, that the Company may exclude
up to $100,000 in aggregate of such gross proceeds in each Fiscal Year,
OVER
(b) the sum of all underwriting commissions and legal,
investment banking, brokerage, accounting and other professional fees,
sales commissions and disbursements
-8-
<PAGE> 14
actually incurred in connection with such sale or issuance which have
not been paid to Affiliates of Holdings, Intermediate Holdings, or the
Company in connection therewith.
"NOTES" means the Company's Senior Subordinated Increasing Rate Bridge
Notes substantially in the form set forth as EXHIBIT B hereto.
"OBLIGATIONS" means all obligations (monetary or otherwise, whether
absolute or contingent, matured or unmatured) of Holdings, Intermediate
Holdings, the Company and each other Obligor arising under or in connection with
a Financing Document, including the principal of and premium, if any, and
interest (including interest accruing during the pendency of any proceeding of
the type described in Section 8.1.9 of the Incorporated Agreement as
incorporated by reference in CLAUSE (i) of SECTION 7.1, whether or not allowed
in such proceeding) on the Notes.
"OTHER TAXES" has the meaning set forth in SECTION 2.7(a).
"PERMANENT FINANCING" means any Debt Incurrence or Equity Issuance
following the date hereof for the purpose of refinancing the Notes.
"PERSON" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or any agency or political subdivision thereof) or other entity of
any kind.
"PRIME RATE" means, as of any date, the rate of interest then most
recently announced by The Bank of New York as its prime or reference rate for
dollars loaned in the United States.
"PROJECTIONS" is defined in CLAUSE (h)(i)(b) of SECTION 5.1.
"PURCHASERS" is defined in the PREAMBLE.
"REGISTRATION RIGHTS" means the registration rights applicable to the
Notes on the terms set forth in the Debt Registration Rights Agreement.
"RELEVANT FIXED INTEREST RATE" is defined in SECTION 8.4(b).
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SENIOR DEBT" means (i) all Indebtedness outstanding under the Loan
Documents, including, without limitation, in each case, principal, premium,
interest (including interest accruing subsequent to the filing of, or which
would have accrued but for the filing of, a petition for bankruptcy, whether or
not such interest is an allowable claim in such bankruptcy proceeding),
indemnifications, fees and expenses relating thereto, (ii) any interest rate
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agreements entered into in connection with any Indebtedness referred to in
clause (i), (iii) any other Indebtedness permitted to be incurred by the Company
under the terms of this Agreement which the Holders agree will be senior in
right of payment to the Notes and (iv) all obligations with respect to the
foregoing. Notwithstanding anything to the contrary in the foregoing, Senior
Debt will not include (w) any liability for federal, state, local or other taxes
owed or owing by the Company, (x) any Indebtedness of the Company to any of its
Restricted Subsidiaries or other Affiliates, (y) any trade payables or (z) any
Indebtedness that is incurred in violation of this Agreement.
"SHELF REGISTRATION" means a "shelf" registration statement on any
appropriate form pursuant to Rule 415 (or similar rule that may be adopted by
the Commission) under the Securities Act.
"SUBORDINATED DEBT" means unsecured Indebtedness of Holdings,
Intermediate Holdings, the Company or any their Restricted Subsidiaries
subordinated in right of payment to the Obligations pursuant to documentation
containing redemption and other prepayment events, maturities, amortization
schedules, covenants, events of default, remedies, acceleration rights,
subordination provisions and other material terms satisfactory to the Majority
Holders.
"SUBORDINATED OBLIGATIONS" has the meaning set forth in SECTION 9.1.
"TAXES" has the meaning set forth in SECTION 2.7(a).
"TRANSFER" means any disposition of Notes that would constitute a sale
thereof under the Securities Act.
"TREASURY RATE" means, as of any date, the yield to maturity as of such
date of United States Treasury securities with a constant maturity (as compiled
and published in the most recent Federal Reserve Statistical Release H.15 (519)
that has become publicly available at least two Business Days prior to such date
(or, if such Statistical Release is no longer published, any publicly available
source of similar market data)) most nearly equal to (but not less than) the
remaining term to maturity of the Notes; PROVIDED, HOWEVER, that if such term to
maturity is less than one year, the weekly average yield on actually traded
United States Treasury securities adjusted to a constant maturity of one year
shall be used.
"VARIABLE RATE NOTE" means any Note other than a Fixed Rate Note.
"VARIABLE RATE HOLDER" means any Holder of a Variable Rate Note.
"WARRANT AGREEMENT" means the Warrant Agreement, dated as of February
4, 2000, among Holdings and the Purchasers in the form attached as Exhibit D to
this Agreement, as amended, supplemented or otherwise modified from time to
time.
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"WARRANT SHARES" has the meaning set forth in CLAUSE (u) of SECTION
5.1.
"WARRANTS" means the warrants to purchase common stock of Holdings to
be issued pursuant to the Warrant Agreement.
Section 1.2 INCORPORATED DEFINITION. Unless the context otherwise
requires, capitalized terms defined in the Incorporated Agreement and not
otherwise defined herein shall have the meanings assigned thereto in the
Incorporated Agreement.
ARTICLE II
PURCHASE AND SALE OF SECURITIES; TERMS OF SECURITIES
Section 2.1 COMMITMENT TO PURCHASE. (a) Subject to the terms and
conditions set forth herein and in reliance on the representations and
warranties of the Company contained herein and in the other Financing Documents,
the Company may at its option issue and sell to the Purchasers on the Issuance
Date, and each Purchaser agrees to purchase on the Issuance Date, Notes in an
aggregate outstanding principal amount equaling such Purchaser's Commitment. The
purchase price for the Notes shall be 100% of the principal amount thereof.
(b) The Commitment will terminate (the "EXPIRATION DATE") on the
earliest of (i) the termination of the Merger Agreement in accordance with the
terms thereof prior to the consummation of the Acquisition, (ii) the
consummation of the Transaction without the issuance of the Notes (if such date
occurs prior to the Issuance Date), (iii) the date on which Holdings,
Intermediate Holdings, the Company or any of their respective Restricted
Subsidiaries commences the marketing of any proposed Permanent Financing with
respect to which DLJSC or any of its Affiliates is not (unless otherwise agreed
to by DLJSC in its sole and absolute discretion) the sole and exclusive manager,
agent, purchaser, underwriter or lead arranger (if such date occurs prior to the
Issuance Date) and (iv) 5:00 P.M. (New York City time) on April 15, 2000 (if
such date occurs prior to the Issuance Date); PROVIDED, that if at any time on
or after the date hereof an Event of Default shall have occurred and be
continuing, a Purchaser may at its option terminate its Commitment by notice to
the Company, such termination to be effective upon the giving of such notice;
and PROVIDED, FURTHER, that the Commitments shall automatically terminate,
without notice to the Company or any other action on the part of the Purchasers,
upon the occurrence of any Default described in clauses (b), (c) or (d) of
Section 8.1.9 of the Incorporated Agreement as incorporated by reference in
CLAUSE (i) of SECTION 7.1 with respect to any Obligor.
(c) The Commitments are not revolving in nature, and principal amounts
of Notes prepaid in accordance with SECTION 2.6 may not be resold to the
Purchasers hereunder.
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Section 2.2 TAKEDOWN PROCEDURES. (a) The Company shall give the
Purchasers notice not later than 3:00 P.M. (New York City time) one Business Day
before the date of the proposed purchase and sale of Notes, which notice shall
specify the principal amount of Notes to be purchased and sold and the proposed
Issuance Date (which shall be a Business Day).
(b) On the Issuance Date, the Purchasers, severally and not jointly,
shall deliver by wire transfer, to the account number of the Company specified
by the Company in writing no later than 1:00 P.M. (New York City time) on the
Issuance Date, immediately available funds in an amount equal to the aggregate
purchase price of the Notes to be purchased by the Purchasers hereunder on such
Issuance Date, less the aggregate amount of fees payable by the Company to the
Purchasers on such date pursuant to SECTION 2.3(a) and expenses (if any) payable
to the Purchasers on such date pursuant to SECTION 11.4.
(c) On the Issuance Date, against payment as set forth in CLAUSE (b)
above, the Company shall deliver to each Purchaser a single Note representing
the aggregate principal amount of Notes to be purchased by such Purchaser
registered in the name of such Purchaser, or, if requested by such Purchaser,
separate Notes in such other denominations representing in total such aggregate
principal amount and registered in such name or names as shall be designated by
such Purchaser by notice to the Company at least one Business Day prior to the
Issuance Date.
Section 2.3 FEES. (a) The Company shall pay to the Purchasers the fees
that are set forth in the Fee Letter at such times and in such amounts as agreed
to therein.
(b) On the Fixed Rate Sale Date, the Company shall pay to each Holder a
cash duration fee (the "EXTENSION FEE") in an amount equal to three percent
(3.00%) of the principal amount of the Notes held by such Holder that are
outstanding on such date immediately prior to such payment.
Section 2.4 MANDATORY TERMINATION OF COMMITMENTS. The Commitment shall
terminate on the Expiration Date.
Section 2.5 INTEREST. (a) Interest on each Note shall be payable
quarterly in arrears, on each Interest Payment Date of each year in which such
Note remains outstanding, commencing with the first Interest Payment Date after
the date of issuance thereof, on the principal amount of such Note outstanding.
Interest on each Variable Rate Note shall be calculated at the rates per annum
set forth below and interest on each Fixed Rate Note shall be calculated at the
Relevant Fixed Interest Rate, and in each case shall accrue from and including
the most recent Interest Payment Date to which interest has been paid on such
Note (or if no interest has been paid on such Note, (x) from the date of
issuance thereof in the case of each Variable Rate Note and (y) from the Fixed
Rate Sale Date in the case of each Fixed Rate Note) to but excluding the date on
which payment in full of the principal sum of such Note has been made.
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<PAGE> 18
(b) The interest rate applicable to each Note from and including the
Issuance Date shall be 13.0% (the "INITIAL RATE") until the Interest Payment
Date falling on May 4, 2000. Interest on each Note will be calculated on the
basis of a 360-day year and paid for the actual number of days elapsed.
(c) The interest rate applicable to each Note from and including the
Interest Payment Date falling on May 4, 2000, shall be a floating rate per annum
equal to the greatest of (i) the sum of (A) the Prime Rate in effect from time
to time plus (B) 4.50%, (ii) the sum of (A) the Treasury Rate plus (B) 6.36%,
(iii) the sum of (A) the DLJ High Yield Index Rate plus (B) 0.80%, and (iv) the
sum of (A) the Initial Rate plus (B) .50%, and in the case of CLAUSES (c)(i)
through (iv), increasing by .50% on each Interest Payment Date thereafter until
the date the principal amount of, and accrued and unpaid interest on, if any,
such Note is paid in full or such Note becomes a Fixed Rate Note.
(d) In addition to any adjustments to the Interest Rate set forth in
CLAUSE (c) above, if, pursuant to the terms of the Debt Registration Rights
Agreement, a Shelf Registration with respect to the Notes either (i) has not
been filed with the Commission on or prior to the 30th day following the Fixed
Rate Sale Date or (ii) has not been declared effective by the Commission on or
prior to the 90th day following the Fixed Rate Sale Date, then the interest rate
then in effect (including the interest rate in effect with respect to Fixed Rate
Notes) shall be increased by an additional 1.00% per annum until such time as
such Shelf Registration has been declared effective by the Commission. Following
the effectiveness of the Shelf Registration, the interest rate then in effect
shall (including the interest rate in effect with respect to Fixed Rate Notes)
be increased by an additional 1.00% beginning on the first date on which such
Shelf Registration ceases to remain effective and shall continue at such
increased interest rate until such Shelf Registration or another Shelf
Registration with respect to the Notes is declared effective by the Commission.
(e) Overdue principal and interest on the Notes shall bear interest
from the date so due to the date paid at a rate which is 2.0% per annum in
excess of the rate then borne by the Notes.
(f) Notwithstanding anything to the contrary set forth above, at no
time shall the per annum interest rate on the Notes exceed seventeen percent
(17.00%), nor shall the per annum interest rate on the Notes be lower than ten
percent (10.00%). In addition, if and to the extent that the amount of interest
payable on any Interest Payment Date is greater than the amount of interest on
the Notes that would have been payable on such Interest Payment Date if the
interest rate in effect at all times during the three-month period then ended
had been fifteen percent (15.00%) per annum (the amount of such excess being
hereinafter referred to as the "PIK Amount" for such period), then the Company
may, at its option, in lieu of payment in cash of the PIK Amount, pay interest
on such Interest Payment Date through the issuance of Additional Notes. Such
Additional Notes issued on any Interest Payment Date shall, subject to the
remaining provisions of this paragraph, be in an aggregate principal amount
equal to the PIK
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<PAGE> 19
Amount for such Interest Payment Date, shall otherwise be identical to the
outstanding Notes and shall be issued to the Holders of the outstanding Notes in
proportions such that each Holder shall receive the same ratio of cash interest
to Additional Notes on such Interest Payment Date. Such Additional Notes shall
be issued only in denominations of $1,000 and multiples thereof. Any interest
otherwise payable in Additional Notes which cannot be so paid because an
Additional Note would have a denomination less than $1,000 (or not be a multiple
thereof) shall be paid in cash.
Section 2.6 MATURITY OF NOTES; PREPAYMENT OF NOTES. (a) The Notes shall
mature on the First Anniversary Date; PROVIDED, however that, unless the Company
shall have notified the Purchasers in writing not less than 5 Business Days
prior to the First Anniversary Date of its intention to repay the Notes in full
on or prior to the First Anniversary Date, the maturity date will be
automatically extended to the date which is six (6) months after the Stated
Maturity Date for Term B Loans if, on the First Anniversary Date, (i) no Default
under this Agreement shall have occurred and be continuing; (ii) no event of
default or event which with the giving of notice or the lapse of time, or both,
would become an event of default under the Loan Documents or any Indebtedness of
Holdings, Intermediate Holdings, the Company or any of its Restricted
Subsidiaries relating to more than $5,500,000 in aggregate principal amount
shall have occurred and be continuing; and (iii) all fees and expenses payable
as of such date to the Purchasers, Holders or DLJSC hereunder or under the
Engagement Letter shall have been paid in full.
(b) (i) For so long as any Variable Rate Notes are outstanding, the
Company at its option may, upon 5 Business Days' written notice to the Holders
thereof, at any time, prepay all or any part of the principal amount of the
Variable Rate Notes at a redemption price equal to 100.00% of the outstanding
principal amount of the Notes so prepaid, together with accrued and unpaid
interest through the date of prepayment, subject to SECTION 2.6(d), and (ii) for
so long as any Fixed Rate Notes are outstanding, the Company at its option may,
upon 10 Business Days' written notice to the Holders thereof, prepay all or any
part of the principal amount of the Fixed Rate Notes at a redemption price equal
to 100.00% of the outstanding principal amount of the Notes so prepaid, together
with accrued and unpaid interest through the date of prepayment and a premium
equal to the Make-Whole Amount in respect thereof, subject to SECTION 2.6(d).
(c) (i) The Company shall, following the receipt by the Company or any
Restricted Subsidiary of any Casualty Proceeds in excess of $500,000
(individually or in the aggregate (when taken together with all other Casualty
Proceeds and all Net Disposition Proceeds) over the course of a Fiscal Year),
deliver to the Holders a calculation of the amount of such Casualty Proceeds and
make a mandatory redemption of the Notes at a redemption price of 100.00% of the
principal amount so redeemed in an amount equal to 100% of such Casualty
Proceeds within 30 days of the receipt thereof; PROVIDED, HOWEVER, that no
mandatory prepayment or redemption on account of Casualty Proceeds shall be
required under this clause if the Company informs the Holders in writing no
later than 30 days following the occurrence of the Casualty Event resulting in
such Casualty Proceeds of the Company's or the Restricted Subsidiary's good
faith intention
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to apply such Casualty Proceeds to the rebuilding or replacement of the damaged,
destroyed or condemned assets or property or the acquisition or construction of
other long-term capital assets useful in the Company's or such Restricted
Subsidiary's business and the Company or the Restricted Subsidiary in fact uses
such Casualty Proceeds to rebuild or replace such damaged, destroyed or
condemned assets or property or acquire or construct such other long-term
capital assets within 360 days following the receipt of such Casualty Proceeds,
with the amount of such Casualty Proceeds unused after such 360-day period being
applied to make a mandatory redemption of the Notes at a redemption price of
100.00% of the principal amount so redeemed in an amount equal to such unused
amount of such Casualty Proceeds; PROVIDED, HOWEVER, that if such Casualty
Proceeds related to assets or property held by (x) a Canadian Subsidiary any
such reinvestments must be made by a Canadian Restricted Subsidiary, (y) an
Australian Subsidiary any such reinvestment must be made by an Australian
Restricted Subsidiary and (z) the Company or a Domestic Subsidiary any such
reinvestment must be made by the Company or a Domestic Restricted Subsidiary.
(ii) The Company shall, following the receipt by the Company or any
Restricted Subsidiary of any Net Disposition Proceeds in excess of $500,000
(individually or in the aggregate (when taken together with all other Net
Disposition Proceeds and all Casualty Proceeds) over the course of a Fiscal
Year), deliver to the Holders a calculation of the amount of such Net
Disposition Proceeds and make a mandatory redemption of the Notes at a
redemption price of 100.00% of the principal amount so redeemed in an amount
equal to 100% of such Net Disposition Proceeds within one Business Day of the
receipt thereof; PROVIDED, HOWEVER, that no mandatory prepayment or redemption
on account of Net Disposition Proceeds shall be required under this clause if
the Company informs the Holders in writing no later than one Business Day
following the receipt of such Net Disposition Proceeds of the Company's or a
Restricted Subsidiary's good faith intention to apply such Net Disposition
Proceeds to (i) the replacement of the assets or property that was the subject
of the Disposition or the acquisition or construction of other long-term capital
assets useful in the Company's or such Restricted Subsidiary's business and/or
(ii) acquire the Capital Stock of a Person in a transaction permitted under
CLAUSE (g) of Section 7.2.5 of the Incorporated Agreement as incorporated by
reference in CLAUSE (d) of SECTION 6.2 so long as (x) the Disposition giving
rise to such Net Disposition Proceeds complies with clause (f) of Section 7.2.11
of the Incorporated Agreement as incorporated by reference in CLAUSE (i) of
SECTION 6.2, (y) the aggregate amount of Net Disposition Proceeds used for such
acquisitions shall not exceed $10,000,000 in the aggregate in any Fiscal Year
and $20,000,000 in the aggregate for the term of this Agreement and (z) as a
result of such Acquisition, such Person becomes a Restricted Subsidiary and to
the extent such Person becomes a Domestic Subsidiary complies with SECTION 6.8
and the Company or the Restricted Subsidiary in fact uses such Net Disposition
Proceeds to replace, acquire or construct such assets or property or to make
such acquisition of Capital Stock within 360 days following the receipt of such
Net Disposition Proceeds, with the amount of such Net Disposition Proceeds
unused after such 360-day period being applied to make a mandatory redemption of
the Notes at a redemption price of 100.00% of the principal amount so redeemed
in an amount equal to such
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unused amount of such Net Disposition Proceeds; PROVIDED, HOWEVER, that if such
Net Disposition Proceeds related to assets or property held by (x) a Canadian
Subsidiary any such reinvestments must be made by a Restricted Subsidiary, (y)
an Australian Subsidiary any such reinvestment must be made by an Australian
Restricted Subsidiary and (z) the Company or a Domestic Subsidiary any such
reinvestment must be made by the Company or a Domestic Restricted Subsidiary
that is a Restricted Subsidiary.
(iii) Concurrently with the receipt by Holdings, Intermediate Holdings,
the Company or any of the Restricted Subsidiaries of any Net Equity Proceeds or
Net Debt Proceeds, Holdings shall deliver to the Holders a calculation of the
amount of such Net Equity Proceeds or Net Debt Proceeds, as the case may be, and
the Company shall make a mandatory redemption of the Notes at a redemption price
of 100% of the principal amount so redeemed in an amount equal to 100% of such
Net Equity Proceeds or Net Debt Proceeds, as the case may be.
(iv) Notwithstanding anything contained in this Agreement to the
contrary, the Company shall not be obligated to prepay or redeem the principal
amount of Notes with (i) any Net Debt Proceeds of any Debt Incurrence if such
prepayment is prohibited by the lenders with respect to such Debt Incurrence or
(ii) (A) any Net Debt Proceeds, Net Equity Proceeds (other than in respect of a
Permanent Financing) or (B) any Casualty Proceeds or Net Disposition Proceeds,
to the extent any portion of such Net Debt Proceeds, Net Equity Proceeds,
Casualty Proceeds or Net Disposition Proceeds is required under the Incorporated
Agreement to be paid to the holders of any Designated Senior Debt thereunder.
(d) If the Company, at any time or from time to time, (i) redeems the
Notes at their scheduled maturity (whether or not extended pursuant to SECTION
2.6), (ii) exercises its right to redeem any Notes under SECTION 2.6(b) or (iii)
redeems any Notes pursuant to SECTION 2.6(c), in any such case with or in
anticipation of funds raised directly or indirectly by any means other than a
transaction in which DLJSC or one or more of its Affiliates acted (unless
otherwise agreed to by DLJSC in its sole and absolute discretion) as sole book
running manager, lead initial purchaser, sole underwriter, sole lead agent or
sole lead arranger, as the case may be, to Holdings, Intermediate Holdings, the
Company or any of its Restricted Subsidiaries the redemption price shall be
equal to 103.00% of the principal amount of the Notes so prepaid, together with
accrued interest through the date of prepayment and, in the case of prepayment
of Fixed Rate Notes, a premium equal to the Make-Whole Amount in respect
thereof; PROVIDED, HOWEVER, that on or after the First Anniversary Date, the
Notes may be redeemed with or in anticipation of funds raised by any means other
than a transaction in which DLJSC or any Affiliate thereof has acted as sole and
exclusive lead manager, lead initial purchaser, lead underwriter, lead agent or
lead arranger as the case may be, to Holdings, Intermediate Holdings, the
Company or any of its Restricted Subsidiaries at a redemption price equal to
100.00% of the principal amount of the Notes, together with accrued interest to
the date of prepayment and, in the case of prepayment of Fixed Rate Notes, a
premium equal to the Make-Whole Amount in respect thereof unless (i) (A) prior
to the First Anniversary Date DLJSC delivered to the
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Company a proposal to market securities of Holdings, Intermediate Holdings, the
Company or any of its Restricted Subsidiaries to one or more financially
responsible institutional investors (or a commitment from DLJSC to underwrite
the public sale of such securities, on a firm commitment basis), on financial
and other terms and conditions no less favorable to the issuer than those
generally available in the United States capital markets to issuers of
securities having a creditworthiness comparable to that of the issuer, in an
amount sufficient to redeem all the Notes (a "BONA FIDE PROPOSAL"), and (B) such
issuer did not authorize DLJSC to execute such Bona Fide Proposal; it being
understood that no such proposal shall be deemed to be a Bona Fide Proposal if
DLJSC fails to execute such proposal on substantially the terms proposed, or
(ii) the Company and DLJSC have agreed in their reasonable judgment that no such
Bona Fide Proposal could be made.
(e) Any prepayment of the Notes pursuant to SECTION 2.6(b) shall be in
a minimum amount of at least $500,000, unless less than $500,000 of the Variable
Rate Notes or the Fixed Rate Notes, as the case may be, remain outstanding, in
which case all of the Notes must be prepaid. Any prepayment of the Notes
pursuant to SECTION 2.6(c) shall be in a minimum amount which is a multiple of
$1,000 times the number of Holders at the time of such prepayment.
(f) Any partial prepayment of the Notes pursuant to SECTION 2.6(b)
shall be made so that the Variable Rate Notes or the Fixed Rate Notes, as the
case may be, held by each Holder shall be prepaid in a principal amount which
shall bear the same ratio, as nearly as may be, to the total principal amount of
such Notes being prepaid as the principal amount of such Notes held by such
Holder shall bear to the aggregate principal amount of all such Notes then
outstanding. Any partial prepayment of the Notes pursuant to SECTION 2.6(c)
shall be applied first to the Variable Rate Notes until all such Notes shall
have been prepaid in full, and then to the Fixed Rate Notes, and within such
categories shall be made so that such Notes then held by each Holder shall be
prepaid in a principal amount which shall bear the same ratio, as nearly as may
be, to the total principal amount of such Notes being prepaid as the principal
amount of such Notes held by such Holder shall bear to the aggregate principal
amount of all such Notes then outstanding; PROVIDED that any Holder of a Fixed
Rate Note may elect in its discretion by written notice to the Company (given
within five Business Days of its receipt of written notice of such prepayment)
not to participate in a prepayment pursuant to SECTION 2.6(c), in which case the
amount that would otherwise have been paid to such Holder may be retained by the
Company. In the event of a partial prepayment of any Note, upon presentation and
surrender of such Note the Company shall execute and deliver to or on the order
of the Holder, at the expense of the Company, a new Note in principal amount
equal to the remaining outstanding portion of such Note.
Section 2.7 TAXES. (a) For the purposes of this Section, the following
terms have the following meanings:
"Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings with respect to any payment by the
Company pursuant to this
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Agreement or under any Note or any other Financing Document, and all liabilities
with respect thereto, excluding (i) United States federal withholding taxes
payable under laws in effect on the date hereof and (ii) in the case of any
Purchaser or Holder, taxes imposed on the net income of such Purchaser or Holder
and franchise or similar taxes imposed on the net income of such Purchaser or
Holder, by a jurisdiction under the laws of which such Purchaser or such Holder
is organized or in which its principal executive office or the office holding
any Notes or any Financing Document is located.
"Other Taxes" means any present or future stamp or documentary taxes
and any other excise or property taxes, or similar charges or levies, which
arise from any payment made pursuant to this Agreement or under any Note or any
other Financing Document or from the execution, delivery, registration,
recordation or enforcement of, or otherwise with respect to, this Agreement or
any Note or any other Financing Document.
(b) All payments by the Company to or for the account of any Purchaser
or Holder under any Financing Document shall be made without deduction for any
Taxes or Other Taxes; PROVIDED that, if the Company shall be required by law to
deduct any Taxes or Other Taxes from any such payment, the sum payable shall be
increased as necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section), such
Purchaser or Holder (as the case may be) receives an amount equal to the sum it
would have received had no such deductions been made, the Company shall make
such deductions, the Company shall pay the full amount deducted to the relevant
taxation authority or other authority in accordance with applicable law and the
Company shall promptly furnish to such Purchaser or Holder (as the case may be)
the original or a certified copy of a receipt or other documentation available
to the Company evidencing payment thereof.
(c) The Company agrees to indemnify each Purchaser and Holder for the
full amount of Taxes and Other Taxes (including, without limitation, any Taxes
or Other Taxes imposed or asserted (whether or not correctly) by any
jurisdiction on amounts payable under this Section) paid by such Purchaser or
Holder (as the case may be) and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto; PROVIDED, HOWEVER, that the
Company shall not be obligated to make any payment pursuant to this SECTION
2.7(c) in respect of penalties or interest attributable to any Taxes or Other
Taxes, if written demand therefor has not been made by such Purchaser or Holder
(as the case may be) within 60 days from the date on which any Purchaser or
Holder received written notice of the imposition of Taxes or Other Taxes by the
relevant taxing authority, or for any additional imposition which may arise from
the failure of any Purchaser or Holder (as the case may be) to apply payments in
accordance with the applicable tax law after the Company has made the payments
required hereunder. After any Purchaser or Holder (as the case may be) receives
written notice of the imposition of Taxes, such Purchaser or Holder will act in
good faith to notify the Company of its obligations thereunder as soon as
reasonably possible.
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(d) The Company shall have no obligation for Taxes under SECTION 2.7(b)
or SECTION 2.7(c) for or on account of:
(i) any Taxes (other than Other Taxes) that would not have
been so imposed but for the existence of any present or former
connection between any Purchaser, Holder or beneficial owner (or
between a fiduciary, settlor, beneficiary, member, or shareholder of,
or possessor of a power over, such Purchaser, Holder or beneficial
owner, if such Purchaser, Holder or beneficial owner is an estate, a
trust, a partnership or corporation) and the jurisdiction imposing the
Tax other than merely holding such Note or any Financing Document, or
the receipt of payments in respect thereof, including, without
limitation, such Purchaser, Holder or beneficial owner (or such
fiduciary, settlor, beneficiary, member, shareholder, or possessor)
being or having been a citizen or resident thereof, or being or having
been engaged in a trade or business or having a permanent establishment
or other fixed base therein, or making or having made an election the
effect of which is to subject such Purchaser, Holder or beneficial
owner (or such fiduciary, settlor, beneficiary, member, shareholder, or
possessor) to such Tax;
(ii) any Taxes in the nature of estate, inheritance or gift
taxes;
(iii) any Tax that is imposed or withheld by reason of the
failure of such Purchaser, Holder or beneficial owner of a Note to
comply with a written request by the Company, addressed to such
Purchaser, Holder or beneficial owner, to provide information
concerning the nationality, residence or identity of such Purchaser,
Holder or beneficial owner, if providing such information under a
statute, treaty, regulation or administrative practice of the
jurisdiction imposing such Tax would result in a complete exemption
from such Tax;
(iv) any Taxes imposed on any payment on a Note to any
Purchaser or Holder that is a fiduciary or partnership or other than
sole beneficial owner of such payment to the extent a beneficiary or
settlor with respect to such fiduciary or a member of such partnership
or a beneficial owner would not have been entitled to the payment of
taxes had such beneficiary, settlor, member or beneficial owner
directly received its beneficial or distributive share of such payment;
and
(v) any combination of items (i) through (iv) above.
(e) If the Company determines in good faith that a reasonable basis
exists for contesting the imposition of a Tax or Other Tax with respect to any
Purchaser or Holder, such Purchaser or Holder shall cooperate with the Company
in challenging such Tax or Other Tax at the Company's expense (including,
without limitation, any additional costs, expenses or Taxes incurred by any
Purchaser or Holder, as the case may be, as a result of such contesting of such
Taxes) if requested by the Company; PROVIDED, HOWEVER, that nothing in this
SECTION 2.7(e) shall
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require any Purchaser or Holder to submit to the Company any tax returns or any
part thereof, or to prepare or file any tax returns other than as such Purchaser
or Holder in its sole discretion shall determine.
(f) Each Purchaser and Holder agrees, to the extent reasonable and
without material cost to it, to cooperate with the Company to minimize any
amounts payable by the Company under this SECTION 2.7.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
HOLDINGS, INTERMEDIATE HOLDINGS AND THE COMPANY
Each of Holdings, Intermediate Holdings and the Company represents and
warrants to the Purchasers (both before and after giving effect to the
Transaction) as set forth below:
Section 3.1 INCORPORATION OF REPRESENTATIONS AND WARRANTIES IN
INCORPORATED AGREEMENT. Each of Holdings, Intermediate Holdings and the Company
hereby makes, for the benefit of the Purchasers and the Holders from time to
time of the Notes, the representations and warranties contained in the following
Sections of the Incorporated Agreement:
(a) 6.1 (Organization, etc.);
(b) 6.2 (Due Authorization, Non-Contravention, etc.);
(c) 6.3 (Government Approval, Regulation, etc.);
(d) 6.5 (Financial Information);
(e) 6.6 (No Material Adverse Change);
(f) 6.7 (Litigation, Labor Controversies, etc.);
(g) 6.8 (Subsidiaries);
(h) 6.9 (Ownership of Properties);
(i) 6.10 (Taxes);
(j) 6.11 (Pension and Welfare Plans);
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(k) 6.12 (Environmental Warranties);
(l) 6.13 (Accuracy of Information);
(m) 6.14 (Regulations U and X);
(n) 6.15 (Year 2000); and
(o) 6.17 (Solvency).
Section 3.2 AUTHORIZATION, EXECUTION AND ENFORCEABILITY. (a) Each of
the Financing Documents (other than the Notes) and the Material Acquisition
Documents to which any of Holdings, Intermediate Holdings or the Company is a
party constitutes the valid and binding agreement of such Obligor enforceable in
accordance with its terms (except, in any case, as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally and by principles of equity). When
executed and delivered by the Company against payment therefor in accordance
with the terms hereof, the Notes will constitute valid and binding obligations
of the Company, enforceable in accordance with their terms (except, in any case,
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally and by
principles of equity).
(b) The Warrants have been duly authorized by Holdings. When executed
pursuant to the terms of the Warrant Agreement and delivered to the Escrow Agent
pursuant to the provisions of this Agreement, the Warrants will be the valid and
binding obligations of Holdings, enforceable against it in accordance with their
terms (except, in any case, as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally and by principles of equity).
(c) The Warrant Shares to be issued upon exercise of the Warrants have
been duly authorized and reserved for issuance by Holdings and will be issued at
the times and in the manner required by the Warrant Agreement and, upon due
exercise of a Warrant, the Warrant Shares issued will be validly issued, fully
paid and nonassessable.
Section 3.3 CAPITALIZATION. At the Issuance Date, after giving effect
to the consummation of the Transaction, the capitalization of Holdings will be
as set forth on SCHEDULE 3.3. All of the issued and outstanding shares of Common
Stock of Holdings are, and, upon consummation of the Transaction, will be,
validly issued, fully paid and nonassessable and the holders thereof are not
entitled to any preemptive or other similar rights. Except for the Material
Acquisition Documents or as set forth on SCHEDULE 3.3, there are no
subscriptions, options, warrants, rights, convertible securities, exchangeable
securities or other agreements or
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commitments of any character pursuant to which Holdings is required to issue any
shares of its capital stock.
Section 3.4 SOLICITATION. No form of general solicitation or general
advertising was used by the Company or, to the best of its knowledge, any other
Person acting on behalf of the Company, in connection with the offer and sale of
the Notes. Neither the Company nor, to the best of its knowledge, any Person
acting on behalf of the Company has, either directly or indirectly, sold or
offered for sale to any Person any of the Notes or any other similar security of
the Company except as contemplated by this Agreement, and the Company represents
that neither the Company nor any person acting on its behalf other than the
Purchasers and its Affiliates will sell or offer for sale to any Person any such
security to, or solicit any offers to buy any such security from, or otherwise
approach or negotiate in respect thereof with, any Person or Persons so as
thereby to bring the issuance or sale of any of the Notes within the provisions
of Section 5 of the Securities Act.
Section 3.5 NON-FUNGIBILITY. When the Notes are issued and delivered
pursuant to this Agreement, the Notes will not be of the same class (within the
meaning of Rule 144A under the Securities Act) as securities which are (i)
listed on a national securities exchange registered under Section 6 of the
Exchange Act or (ii) quoted in a U.S. automated inter-dealer quotation system.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
Section 4.1 PURCHASE FOR INVESTMENT; AUTHORITY; BINDING AGREEMENT. Each
of the Purchasers represents and warrants, severally and not jointly, as to
itself only, to Holdings and the Company that:
(a) such Purchaser is an Accredited Investor within the
meaning of Rule 501(a) under the Securities Act and the Notes to be
acquired by it pursuant to this Agreement are being acquired for its
own account without a view toward distribution and the Purchaser will
not offer, sell, transfer, pledge, hypothecate or otherwise dispose of
the Notes unless pursuant to a transaction either registered under, or
exempt from registration under, the Securities Act;
(b) the execution, delivery and performance of this Agreement
and the purchase of the Notes pursuant hereto are within such
Purchaser's corporate powers and have been duly and validly authorized
by all requisite corporate action;
(c) this Agreement has been duly executed and delivered by
such Purchaser;
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(d) this Agreement constitutes a valid and binding agreement
of such Purchaser enforceable in accordance with its terms;
(e) such Purchaser has such knowledge and experience in
financial and business matters so as to be capable of evaluating the
merits and risks of its investment in the Notes and such Purchaser is
capable of bearing the economic risks of such investment; and
(f) such Purchaser has had the opportunity to ask questions of
and receive answers from representatives of Holdings concerning
Holdings and its Subsidiaries and the terms and conditions of this
Agreement and the Notes, and has been granted access to all books,
records and documents of Holdings and its Subsidiaries as it has
requested.
ARTICLE V
CONDITIONS PRECEDENT TO PURCHASE
Section 5.1 CONDITIONS TO PURCHASERS' OBLIGATION AT TAKEDOWN. The
obligation of the Purchasers (which is several and not joint) to purchase the
Notes to be issued and sold by the Company on the Issuance Date is subject to
the satisfaction of the following conditions contemporaneously with such
purchase:
(a) RESOLUTIONS, ETC. The Purchasers shall have received from
each Obligor, as applicable, (i) a copy of a good standing certificate,
dated a date reasonably close to the Issuance Date, for each such
Person and (ii) a certificate, dated the Issuance Date, duly executed
and delivered by such Person's Secretary or Assistant Secretary,
managing member or general partner, as applicable, as to
(i) resolutions of each such Person's Board of
Directors (or other managing body, in the case of other than a
corporation) then in full force and effect authorizing, to the
extent relevant, all aspects of the Transaction applicable to
such Person and the execution, delivery and performance of
each Financing Document to be executed by such Person and the
transactions contemplated hereby and thereby;
(ii) the incumbency and signatures of those of its
officers, managing member or general partner, as applicable,
authorized to act with respect to each Financing Document to
be executed by such Person; and
(iii) the full force and validity of each Organic
Document of such Person and copies thereof;
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upon which certificates each Secured Party may conclusively rely until
it shall have received a further certificate of the Secretary,
Assistant Secretary, managing member or general partner, as applicable,
of any such Person canceling or amending the prior certificate of such
Person.
(b) TRANSACTION CONSUMMATED. (i) The Asset Transfer shall have
been consummated on terms and conditions reasonably satisfactory to the
Purchasers.
(ii) The Acquisition shall have been consummated (or
shall be consummated contemporaneously with the application by
the Company of the proceeds of the Notes) and in connection
therewith, the Company shall have acquired 100% of the issued
and outstanding stock of RailTex pursuant to the Merger
Agreement for a merger consideration comprised of (i) an
aggregate cash purchase price of no more than $139,000,000 and
(ii) the Equity Issuance (as defined in the Incorporated
Agreement) which shall have been consummated on terms
(including documentation in respect thereof in form and
substance) satisfactory in all respects to the Purchasers.
(iii) In connection with the Acquisition, the Rail
America Refinancing and the RailTex Refinancing shall have
been consummated (or shall be consummated contemporaneously
with the application by the Company of the proceeds of the
Notes) on terms and conditions satisfactory in all respects to
the Purchasers and except for capital leases and senior
secured indebtedness totaling $17,900,000 and convertible
subordinated indebtedness of $24,600,000, Holdings and its
Subsidiaries shall have no indebtedness for borrowed money
other than that incurred in connection with the Transaction.
(iv) The Company shall have received proceeds of not
less than $330,000,000 of Term Loans under the Credit
Agreement and the Revolving Loans shall be available
thereunder (but undrawn) on the Issuance Date.
(v) The Intermediate Holdings Asset Bridge Note
Issuance shall have been consummated on terms (including
documentation in respect thereof in form and substance)
satisfactory in all respects to the Purchasers and resulted in
gross cash proceeds of at least $55,000,000. All of the net
proceeds of the Intermediate Holdings Asset Bridge Note
Issuance shall have been contributed by Intermediate Holdings
to the Company as a common equity contribution for use in
partially financing the Transaction.
(vi) RailTex shall have received net cash proceeds
from the exercise of RailTex stock options of at least
$11,100,000 (subject to adjustment due to cashless exercise of
such options and termination of such options not exercised).
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(vii) The Company shall have at least $10,300,000
cash on hand immediately prior to the consummation of the
Transaction.
(viii) RailTex shall have received net cash proceeds
from the sale of RailTex Brazil of at least $9,000,000.
(ix) The fees and expenses paid or to be paid in
connection with the Transaction shall not exceed $36,000,000.
(c) TRANSACTION DOCUMENTS. The Purchasers shall have received
copies of fully executed versions of the Transaction Documents
(including the Material Acquisition Documents and the Loan Documents),
certified to be true and complete copies thereof by an Authorized
Officer of Holdings, Intermediate Holdings and the Company. Each
Transaction Document (including the Merger Agreement) shall be in full
force and effect and shall not have been modified or waived in any
material respect, nor shall there have been any forbearance to exercise
any material rights with respect to any of the terms or provisions
relating to the conditions to the consummation of the Acquisition set
forth in the Merger Agreement unless otherwise agreed to by the
Purchasers. The covenants and the other terms and conditions contained
in the Credit Agreement shall be reasonably satisfactory to the
Purchasers in all respects.
(d) ISSUANCE DATE CERTIFICATE. The Purchasers shall have
received the Issuance Date Certificate, dated the Issuance Date and
duly executed and delivered by an Authorized Officer, of each of
Holdings, Intermediate Holdings and the Company, in which certificate
each of Holdings, Intermediate Holdings and the Company shall agree and
acknowledge that the statements made therein shall be deemed to be true
and correct representations and warranties of each of Holdings,
Intermediate Holdings and the Company as of such date, and, at the time
each such certificate is delivered, such statements shall in fact be
true and correct. All documents and agreements required to be appended
to the Issuance Date Certificate shall be in form and substance
reasonably satisfactory to the Purchasers.
(e) DELIVERY OF NOTES. The Purchasers shall have received the
Notes to be issued on the Issuance Date, duly executed by the Company
in the denominations and registered in the names specified in or
pursuant to SECTION 2.2.
(f) PAYMENT OF OUTSTANDING INDEBTEDNESS, ETC. All Indebtedness
identified in ITEM 7.2.2(b) of the Disclosure Schedule (Indebtedness to
Be Paid) to the Incorporated Agreement, together with all interest, all
prepayment premiums and other amounts due and payable with respect
thereto, shall have been paid in full in part from the proceeds
received by the Company in consideration for the Notes and the proceeds
of the Credit Extensions (as defined in the Credit Agreement) and the
Intermediate Holdings Asset
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Bridge Note Issuance (that were contributed by Intermediate Holdings to
and) received by the Company and the commitments in respect of such
Indebtedness shall have been terminated, and all Liens securing payment
of any such Indebtedness have been released.
(g) FEES, EXPENSES, ETC. The Purchasers shall have received
for their respective accounts all fees, costs and expenses (other than
amounts to be netted against the purchase price of the Notes pursuant
to SECTION 2.2(b)) due and payable pursuant to SECTIONS 2.3(a) and
11.4.
(h) FINANCIAL INFORMATION, MATERIAL ADVERSE CHANGE. (i) The
Purchasers shall have received
(A) a consolidating PRO FORMA income
statement of Holdings and its Subsidiaries for each
of the twelve month periods ended December 31, 1998,
September 30, 1999 and December 31, 1999 and a
consolidated balance sheet of Holdings and its
Subsidiaries, as of the most recent date practicable
near to the Closing Date (but no earlier than the
close of the Fiscal Quarter ending immediately prior
to the Closing Date) certified by the treasurer,
chief financial or accounting Authorized Officer of
Holdings, in each case, giving effect to the
consummation of the Transaction and all the
transactions contemplated by this agreement and
reflecting estimated transaction related accounting
adjustments, prepared by the Company in accordance
with Regulation S-X; and
(B) projected financial statements
(including balance sheets and statements of income,
stockholders' equity and cash flows) of Holdings and
its Subsidiaries for the eight-year period following
the Issuance Date (the "PROJECTIONS") satisfactory in
form and substance to the Purchasers.
(ii) Since December 31, 1998, there shall not have
been any material adverse change in the business, assets,
condition (financial or otherwise), operations, performance,
properties, Projections or prospects of Holdings, Intermediate
Holdings, the Company and the Restricted Subsidiaries, taken
as a whole.
(i) OPINIONS OF COUNSEL. The Purchasers shall have received
opinions, dated the Issuance Date and addressed to the Purchasers, from
(i) Greenberg Traurig, P.A., counsel to the Obligors,
in form and substance satisfactory to the Purchasers; and
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(ii) Shutts & Bowen, counsel to the Obligors, in form
and substance satisfactory to the Purchasers.
(j) SOLVENCY CERTIFICATE. The Purchasers shall have received a
certificate duly executed and delivered by the treasurer, chief
financial or accounting Authorized Officer of each of Holdings,
Intermediate Holdings and the Company, dated the date of the Issuance
Date, in the form of EXHIBIT G attached hereto.
(k) INSURANCE. The Purchasers shall have received certified
copies of the insurance policies (or binders in respect thereof), from
one or more insurance companies reasonably satisfactory to the
Purchasers, evidencing coverage required to be maintained pursuant to
each Loan Document.
(l) LITIGATION. There shall exist no pending or threatened
action, suit, investigation, litigation or proceeding in any court or
before any arbitrator or governmental instrumentality which (x)
purports to affect the consummation of the Transaction or the legality
or validity of this Agreement, any Note, any other Financing Document
or any Material Acquisition Document or (y) could reasonably be
expected to have a Material Adverse Effect.
(m) MINIMUM EBITDA. The Company's EBITDA for the consecutive
twelve month period ended September 30, 1999 shall be at least
$93,900,000, including (i) EBITDA as reported of $62,800,000, (ii)
transaction related accounting adjustments, prepared by the Company
which are in accordance with Regulation S-X for Form S-1 Registration
Statements of no less than $26,700,000 and (iii) other pro forma cost
savings of no less than $4,400,000 which are reasonably satisfactory in
form and substance to the Purchasers.
(n) CORPORATE, TAX AND CAPITAL STRUCTURE. The tax structure
(including Organic Documents), the Tax-Sharing Agreement, the
shareholders agreements and the management of Holdings, Intermediate
Holdings, the Company and their respective Subsidiaries both before and
after the Transaction shall be reasonably satisfactory to the
Purchasers in all respects. The corporate and capital structure of
Holdings, Intermediate Holdings, the Company and such Subsidiaries
shall be as set forth in ANNEX I hereto.
(o) APPROVALS. All governmental, shareholder and third party
consents (including Surface Transportation Board clearance) and
approvals necessary or desirable in connection with the consummation of
the Transaction, and the related financings and other transactions
contemplated hereby shall have been duly obtained and all applicable
waiting periods shall have expired, without any action being taken by
any competent authority that could restrain, prevent or impose any
materially adverse conditions on the
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Transaction, and no such law or regulation shall be applicable which in
the judgment of the Purchasers could have any such effect.
(p) ENVIRONMENTAL ASSESSMENT. The Purchasers shall have
received copies of an environmental assessment of the properties of the
Company and its Subsidiaries, to be completed by Pilko & Associates,
Inc. The results of such environmental assessment shall be reasonably
satisfactory in form, scope and substance to the Purchasers.
(q) APPRAISAL OF ASSETS. The Purchasers shall have received
copies of appraisals of the assets of the Company and its Subsidiaries
performed by Mainline Management Services, Inc. and Norman W. Seip &
Associates. The results of such appraisals shall be satisfactory in
form, scope and substance to the Purchasers.
(r) FOREIGN ACQUISITIONS AND TAKEOVERS ACT APPROVAL. If
Holdings, Intermediate Holdings or the Company is required to obtain an
approval or an indication of non-objection under the Foreign
Acquisitions and Takeovers Act 1975 of Australia or any real estate
policy guidelines of the Commonwealth Government of Australia and/or an
approval or certification of the Treasurer of Australia under the
Foreign Acquisitions and Takeovers Regulations of Australia to enter
into the Merger Agreement, or to give effect to the Transaction, the
Company shall have provided to the Purchasers, and the Purchasers shall
have received, copies of the application to obtain the approval or
certification of the Treasurer of Australia or the statement of
non-objection and copies of the relevant approval, certification or
statement.
(s) The representations and warranties of the Company
contained in the Financing Documents shall be true and correct in all
material respects on and as of the Issuance Date as if made on and as
of such date (unless stated to relate solely to an earlier date, in
which case, such representations and warranties shall be true and
correct in all material respects as of such earlier date) and the
Company shall have performed and complied with all covenants and
agreements required by the Financing Documents to be performed by it or
complied with by it at or prior to the Issuance Date, and the
Purchasers shall have received a certificate from an authorized officer
of the Company to such effect.
(t) There shall not exist any Default.
(u) Pursuant to the terms of the Escrow Agreement, Holdings
shall have executed and delivered to the Escrow Agent fully
authenticated Warrants, unregistered or registered in blank,
representing the right to purchase shares of Common Stock of Holdings
at any time in an amount equal to 3.5% of the fully-diluted Capital
Stock of Holdings, calculated after giving effect to the transactions
occurring on or prior to the Issuance Date (the "WARRANT SHARES"),
exercisable for a period of seven years at a price
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equal to the closing price per share of Common Stock of Holdings traded
on the NASDAQ National Market at the close of trading on the Issuance
Date.
(v) The Engagement Letter shall have been executed and
delivered.
(w) The Purchasers shall have received such additional
certificates, legal and other opinions and documentation as they shall
reasonably request.
Section 5.2 CONDITIONS TO THE COMPANY'S OBLIGATIONS. The obligations of
the Company to issue and sell the Notes pursuant to this Agreement to the
Purchasers are subject to the satisfaction, at or prior to the time of purchase
of the Notes, of the following conditions:
(a) The representations and warranties of the Purchasers
contained herein shall be true and correct in all material respects on
and as of the Issuance Date as if made on and as of such date.
(b) The issuance and sale of the Notes by the Company shall
not be prohibited by any applicable law, court order or governmental
regulation.
(c) The Transaction shall have been consummated (or shall be
consummated contemporaneously with the application by the Company of
the proceeds from the issuance and sale of the Notes hereunder).
(d) Contemporaneously therewith, the Company shall have
received the purchase price for the Notes to be purchased by the
Purchasers in accordance with SECTION 2.2(b).
ARTICLE VI
COVENANTS
The Company agrees that, from and after the Issuance Date and so long
as any Notes remain outstanding and unpaid, and for the benefit of the
Purchasers and the Holders:
Section 6.1 INCORPORATION OF AFFIRMATIVE COVENANTS FROM THE
INCORPORATED AGREEMENT. Each of Holdings, Intermediate Holdings and the Company
shall, and (where and to the extent contemplated by the terms of the
Incorporated Agreement) shall cause each of their Subsidiaries to, comply with
the affirmative covenants set forth in the following Sections of the
Incorporated Agreement:
(a) 7.1.1 (Financial Information, Reports, Notices, etc.)
(excluding clause (l) thereof);
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(b) 7.1.2 (Maintenance of Existence; Compliance with Laws,
etc.);
(c) 7.1.3 (Maintenance of Properties);
(d) 7.1.4 (Insurance);
(e) 7.1.5 (Books and Records) (excluding the last sentence
thereof);
(f) 7.1.6 (Environmental Law Covenant); and
(g) 7.1.10 (Use of Proceeds of Holdings Disposition of Capital
Stock or Assets).
Section 6.2 INCORPORATION OF NEGATIVE COVENANTS FROM THE INCORPORATED
AGREEMENT. None of Holdings, Intermediate Holdings or the Company shall, nor
shall any such Obligor permit any of its Restricted Subsidiaries to, violate any
of the negative covenants set forth in the following Sections of the
Incorporated Agreement:
(a) 7.2.1 (Business Activities);
(b) 7.2.2 (Indebtedness) (excluding clause (f)(i) (to the
extent such clause requires such Indebtedness to be evidenced by a
promissory note that is pledged to the Administrative Agent pursuant to
a Loan Document)), PROVIDED that for purposes hereof (i) the aggregate
principal amount of "Obligations" permitted by clause (a) thereof shall
not exceed (i) $380,000,000 minus (ii) the aggregate amount of the
permanent payments or prepayments of Term Loans and permanent
reductions of the Revolving Loan Commitment Amount;
(c) 7.2.3 (Liens);
(d) 7.2.5 (Investments);
(e) 7.2.6 (Restricted Payments, etc.);
(f) 7.2.8 (No Prepayment of Certain Debt) (excluding clauses
(a) (as such clause relates to the Obligations evidenced hereby) and
(c)(iii) thereof);
(g) 7.2.9 (Capital Stock of Subsidiaries);
(h) 7.2.10 (Consolidation, Merger, etc.);
(i) 7.2.11 (Permitted Dispositions);
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(j) 7.2.12 (Modification of Certain Agreements); PROVIDED that
for purposes hereof the term "Subordinated Debt Documents" as used
therein shall not include the Financing Documents;
(k) 7.2.13 (Transactions with Affiliates);
(l) 7.2.14 (Restrictive Agreements, etc.) (excluding clause
(a) thereof); PROVIDED that the lead in to such Section shall be
amended by inserting the words "(other than the Loan Documents)"
immediately following the words "enter into any agreement" and
immediately preceding the word "prohibiting" in such lead in; and
(m) 7.2.15 (Sale and Leaseback).
Section 6.3 INVESTMENT COMPANY ACT. None of Holdings, Intermediate
Holdings or the Company will be or become an open-end investment trust, unit
investment trust or face-amount certificate company that is or is required to be
registered under the Investment Company Act of 1940, as amended.
Section 6.4 USE OF PROCEEDS. The proceeds from the issuance and sale of
the Notes by the Company pursuant to this Agreement shall be used to fund the
Transaction and to pay related fees and expenses.
Section 6.5 RESTRICTIONS ON CERTAIN AMENDMENTS. None of Holdings,
Intermediate Holdings or the Company will amend, or suffer to be amended, the
Loan Documents in any respect which would impose a limitation upon, or a
requirement of consent in connection with, the Permanent Financing, which
limitation or requirement was not applicable under the Loan Documents as in
effect on the Issuance Date.
Section 6.6 NO SENIOR SUBORDINATED DEBT. Except for the Indebtedness
that is permitted to be incurred under clauses (a) and (k) of Section 7.2.2 of
the Incorporated Agreement as incorporated by reference in CLAUSE (b) of SECTION
6.2 above, none of Holdings, Intermediate Holdings or the Company will, nor will
either such Obligor permit any of its Restricted Subsidiaries to, create, incur,
assume or suffer to exist any Indebtedness of Holdings, Intermediate Holdings,
the Company or such Restricted Subsidiary that is subordinate in right of
payment to any other Indebtedness of the Company or such Restricted Subsidiary
unless such Indebtedness by its terms or the terms of the instrument creating or
evidencing such Indebtedness, is subordinate in right of payment or PARI PASSU
with the Notes or the Guarantee, as applicable, on terms acceptable to the
Majority Holders.
Section 6.7 PERMANENT FINANCING. (a) The Company will, and will cause
each of its Restricted Subsidiaries to, take all actions which, in the
reasonable judgment of DLJSC, are necessary or desirable to obtain Permanent
Financing as soon as practicable through issuance of
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subordinated securities at such interest rates and other terms as are, in the
reasonable opinion of DLJSC, prevailing for new issues of securities of
comparable size and credit rating in the United States capital markets at the
time such Permanent Financing is consummated and obtained in comparable
transactions made on an arm's-length basis between unaffiliated parties;
PROVIDED that, if in the reasonable judgment of DLJSC, equity securities of
Holdings need to be provided for the consummation of the Permanent Financing on
the terms set forth above, the terms of the Permanent Financing shall provide
for the issuance of such equity securities (which may include warrants to
purchase such equity securities). The respective amounts to be financed through
the subordinated debentures or through the issuance of other securities shall be
as determined by the Company, but shall be in an amount at least sufficient to
repay or redeem the Notes in full in accordance with their terms. The Company
hereby covenants and agrees that the proceeds from the Permanent Financing shall
be used to the extent required to redeem in full the Notes in accordance with
their terms.
(b) The Company covenants that it will, and will cause each of its
Restricted Subsidiaries to, enter into such agreements as in the reasonable
judgment of DLJSC are customary in connection with the Permanent Financing, make
such filings under the Securities Act, the Exchange Act, the Trust Indenture Act
of 1939, as amended, and State securities laws (subject to customary exceptions)
as in the reasonable judgment of DLJSC shall be required to permit consummation
of the Permanent Financing and take such steps as in the reasonable judgment of
DLJSC are necessary to cause such filings to become effective or in the
reasonable judgment of DLJSC are otherwise required to consummate the Permanent
Financing in a manner that does not violate the Credit Agreement.
Section 6.8 ADDITIONAL GUARANTORS. The Company will cause each of its
Domestic Restricted Subsidiaries that enters a Guarantee Obligation with respect
to any Designated Senior Debt to execute and deliver to the Holders a
counterpart hereof as a Guarantor hereunder within 5 Business Days of its
entering such Guarantee Obligation with respect to such Designated Senior Debt.
Section 6.9 SYNDICATION EFFORTS. (a) The Company acknowledges that the
Purchasers may transfer (such transfers, collectively, the "SYNDICATION") all or
part of the Notes issued to the Purchasers on the Issuance Date to one or more
other Holders. Holdings, Intermediate Holdings and the Company shall, and shall
cause the Guarantors to, actively assist Rail America Funding, Inc. in
completing the syndication in a manner satisfactory to it. Without limiting the
foregoing, upon the request of Rail America Funding, Inc., Holdings,
Intermediate Holdings and the Company shall, and shall cause the Guarantors to
(i) use commercially reasonable efforts to ensure that the syndication efforts
benefit materially from the Purchasers existing lending and other financing
relationships, (ii) provide direct contact between senior management and
advisors of Holdings, Intermediate Holdings, the Company, and the Guarantors and
the proposed Holders, (iii) assist in the preparation of a confidential
information memorandum and other marketing materials to be used in connection
with the syndication and (iv) host, with Rail America Funding,
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Inc. or on one or more of their respective Affiliates, of one or more meetings
of prospective Holders.
(b) DLJSC or one of its Affiliates shall manage all aspects of
any syndication, in consultation with the Company including decisions as to the
selection of potential Holders to be approached and when they will be
approached, when their commitments will be accepted, which potential Holders
will participate, and the principal amount of the Notes to be transferred to
each such Holder. In order to assist DLJSC or such Affiliate in any syndication
efforts, Holdings, Intermediate Holdings and the Company shall, and shall cause
each of the Guarantors to, promptly prepare and provide to DLJSC, the Purchasers
or such Affiliate all information with respect to Holdings, Intermediate
Holdings, the Company, the Transaction, the Permanent Financing and the other
transactions contemplated hereby and thereby, including all financial
information and projections, as DLJSC, Rail America Funding, Inc., or such
Affiliate may reasonably request in connection with such syndication.
ARTICLE VII
EVENTS OF DEFAULT
Section 7.1 EVENTS OF DEFAULT DEFINED; ACCELERATION OF MATURITY; WAIVER
OF DEFAULT. In case one or more of the following (each, an "Event of Default"),
whatever the reason for such Event of Default and whether it shall be voluntary
or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body, shall have occurred and be continuing:
(a) default in the payment of all or any part of the principal
or premium, if any, on any of the Notes as and when the same shall
become due and payable either at maturity, upon any redemption, by
declaration or otherwise; or
(b) default in the payment of any installment of interest upon
any of the Notes or any fees payable under this Agreement or the
Engagement Letter or any amount payable under SECTION 2.7 as and when
the same shall become due and payable, and continuance of such default
for a period of five days; or
(c) failure on the part of Holdings, Intermediate Holdings, or
the Company to observe or perform any of the covenants contained in
SECTIONS 6.1(g), 6.2, 6.3, 6.4, 6.5 and 6.6 of this Agreement; or
(d) failure on the part of Holdings, Intermediate Holdings, or
the Company to observe or perform any of the other covenants or
agreements contained in the Financing
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Documents, if such failure shall continue for a period of 30 days after
the date on which written notice thereof shall have been given to the
Company by a Holder; or
(e) there shall be a default in respect of any Indebtedness of
the Company or any of its Restricted Subsidiaries in an aggregate
principal amount in excess of $5,500,000 whether such Indebtedness now
exists or shall hereafter be created (excluding the Notes) if such
default results in acceleration of the maturity of such Indebtedness;
or the Company or any of its Restricted Subsidiaries shall fail to pay
at maturity any such Indebtedness whether such Indebtedness now exists
or shall hereafter be created; or
(f) any representation, warranty, certification or statement
made or deemed made by the Company or any of its Restricted
Subsidiaries in any Financing Document or which is contained in any
certificate, document or financial or other statement furnished at any
time under or in connection with any Financing Document shall prove to
have been untrue in any material respect when made or deemed made; or
(g) a Change in Control has occurred; or
(h) any of the Financing Documents to which the Company or a
Guarantor is a party shall for any reason fail to constitute the valid
and binding agreement of the Company or such Guarantor as the case may
be,; or
(i) any Event of Default set forth in Sections 8.1.6
(Judgments) (PROVIDED that the amount "$5,000,000" therein shall be
replaced with the amount "$5,500,000") or 8.1.9 (Bankruptcy,
Insolvency, etc.) of the Incorporated Agreement,
then, and in each and every such case (other than an Event of Default described
in clauses (b), (c) and (d) of Section 8.1.9 of the Incorporated Agreement as
incorporated by reference in CLAUSE (i) above with respect to any Obligor),
unless the principal of all the Notes shall have already become due and payable,
the Majority Holders (or, if at such time the Purchasers no longer hold at least
50% of the aggregate outstanding principal amount of the Notes, Holders of at
least 33 1/3% of the aggregate outstanding principal amount of the Notes), by
notice in writing to the Company and the Administrative Agent, may declare the
entire outstanding principal amount of the Notes together with accrued and
unpaid interest thereon to be immediately due and payable; PROVIDED that for so
long as the Loan Documents are in effect, such acceleration shall not become
effective until the earlier of (i) five Business Days after the notice of
acceleration is given to the Administrative Agent or (ii) the date on which the
Indebtedness under the Loan Documents is accelerated. If an Event of Default
described in clauses (b), (c) or (d) of Section 8.1.9 of the Incorporated
Agreement as incorporated by reference in CLAUSE (i) above with respect to any
Obligor occurs, the outstanding principal of and accrued and unpaid interest on
the Notes will be immediately due and payable without any notice, declaration or
other act on the part of the Holders. The Majority Holders may annul any notice
of acceleration or past Defaults (other than
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monetary Defaults not yet cured) by delivering a notice of annulment to the
Company and the Administrative Agent. If an Event of Default shall occur and be
continuing, the Purchasers shall have the right to appoint one (1)
representative to serve as a member of the Board of Directors of Holdings;
PROVIDED, HOWEVER, that such right shall terminate if the Purchasers no longer
hold at least 50% of the aggregate outstanding principal amount of the Notes.
ARTICLE VIII
LIMITATION ON TRANSFERS
Section 8.1 RESTRICTIONS ON TRANSFER. From and after the Issuance Date,
none of the Notes shall be transferable except upon the conditions specified in
SECTIONS 8.2 and 8.3, which conditions are intended to ensure compliance with
the provisions of the Securities Act in respect of the Transfer of any of such
Notes or any interest therein and SECTION 8.4; PROVIDED, HOWEVER, that the
Purchasers shall not Transfer any Notes to any Person that is not its Affiliate
prior to the Fixed Rate Sale Date without the consent of the Company (which
consent shall not be unreasonably delayed or denied). The Purchasers will cause
any proposed transferee of any Notes (or any interest therein) held by it to
agree to take and hold such Notes (or any interest therein) subject to the
provisions and upon the conditions specified in this SECTION 8.1 and in SECTIONS
8.2 and 8.3.
Section 8.2 RESTRICTIVE LEGENDS. (a) Each Note issued to the Purchasers
or to a subsequent transferee shall (unless otherwise permitted by the
provisions of SECTION 8.2(b) or SECTION 8.3) include a legend in substantially
the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT
BE OFFERED OR SOLD, UNLESS IT HAS BEEN REGISTERED UNDER SUCH
ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS AN
EXEMPTION FROM REGISTRATION IS AVAILABLE AND THEN ONLY IN
COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER SET FORTH IN THE
SECURITIES PURCHASE AGREEMENT, DATED AS OF FEBRUARY 4, 2000, A
COPY OF WHICH MAY BE OBTAINED FROM THE ISSUER OF THIS SECURITY
AT ITS PRINCIPAL EXECUTIVE OFFICE.
(b) Any Holders of Notes registered pursuant to the Securities Act and
qualified under applicable state securities laws may exchange such Notes on
transfer for new securities that shall not bear the legend set forth in CLAUSE
(a) of this SECTION 8.2.
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Section 8.3 NOTICE OF PROPOSED TRANSFERS. (a) Ten days prior to any
proposed Transfer (other than Transfers of Notes (i) registered under the
Securities Act, (ii) to an Affiliate of DLJSC or a general partnership in which
DLJSC, or any of its Affiliates is one of the general partners or (iii) to be
made in reliance on Rule 144A under the Securities Act) of any Notes, the holder
thereof shall give written notice to the Company of such holder's intention to
effect such Transfer, setting forth the manner and circumstances of the proposed
Transfer, and which notice shall be accompanied by (A) an opinion of the
proposed transferee's counsel (reasonably satisfactory to the Company) addressed
to the Company to the effect that the proposed Transfer of such Notes may be
effected without registration under the Securities Act, (B) such representation
letters in form and substance reasonably satisfactory to the Company to ensure
compliance with the provisions of the Securities Act and (C) such letters in
form and substance reasonably satisfactory to the Company from each such
transferee stating such transferee's agreement to be bound by the terms of this
Agreement. Such proposed Transfer may be effected only if the Company shall have
received such notice of transfer, opinion of counsel, representation letters and
other letters referred to in the immediately preceding sentence, whereupon the
holder of such Notes shall be entitled to Transfer such Notes in accordance with
the terms of the notice delivered by the holder to the Company. Each Note
transferred as above provided shall bear the legend set forth in SECTION 8.2(a)
except that such Note shall not bear such legend if the opinion of counsel
referred to above is to the further effect that neither such legend nor the
restrictions on Transfer in SECTIONS 8.1 through 8.3 are required in order to
ensure compliance with the provisions of the Securities Act.
(b) Ten days prior to any proposed Transfer of any Notes to be made in
reliance on Rule 144A under the Securities Act ("RULE 144A"), the holder thereof
shall give written notice to the Company of such holder's intention to effect
such Transfer, setting forth the manner and circumstances of the proposed
Transfer and certifying that such Transfer will be made (i) in full compliance
with Rule 144A and (ii) to a transferee that (A) such holder reasonably believes
to be a "qualified institutional buyer" within the meaning of Rule 144A and (B)
is aware that such Transfer will be made in reliance on Rule 144A. Such proposed
Transfer may be effected only if the Company shall have received such notice of
transfer, whereupon the holder of such Notes shall be entitled to Transfer such
Notes in accordance with the terms of the notice delivered by the holder to the
Company. Each Note transferred as above provided shall bear the legend set forth
in SECTION 8.2(a).
Section 8.4 RIGHT TO SELL, TRANSFER OR ASSIGN NOTES. (a) Subject to
SECTIONS 8.1 through 8.3, the Purchasers shall have the absolute and
unconditional right to Transfer Notes in compliance with applicable law to any
third party at any time.
(b) Commencing on the Fixed Rate Sale Date, any Note then outstanding
may be sold by the Purchaser that is the holder of such Note to any Person
(other than any Affiliate of such Purchaser) on a fixed rate basis with the
interest rate per annum fixed at a market rate to be determined by such
Purchaser (such interest rate with respect to such Note, the "RELEVANT FIXED
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INTEREST RATE"); PROVIDED that (i) such rate shall in no event exceed 17.00% per
annum and (ii) such Purchaser shall give the Company ten days written notice
prior to any such sale.
Section 8.5 REPLACEMENT NOTES. Within five Business Days after any
Transfer made pursuant to SECTION 8.3(a) or 8.3(b), upon surrender to the
Company of the Notes subject to such Transfer, the Company, at its own expense,
shall execute and deliver to the Purchaser in exchange for the Note or Notes
that are subject of such Transfer a new Note or Notes registered in the name of
the transferee of such Note or Notes (or in such name or names as shall be
designated by such transferee) in an amount equal to the aggregate principal
amount of the Note or Notes so transferred, and if the transferring Holder has
not transferred all of the Notes held by such transferor a new Note or Notes
registered in the name of the transferring holder (or such name or names as
shall be designated by such transferring holder) equal to the aggregate
principal amount of the Notes surrendered in connection with such Transfer less
the aggregate principal amount of the Note or Notes that are the subject of such
Transfer, which shall be dated the effective date of such Transfer and shall
otherwise be in substantially the form of EXHIBIT B attached hereto. Holdings
shall not be required to pay any documentary stamp tax which may be payable in
respect of any Transfer of any Note from a Holder to any transferee; PROVIDED
that Holdings shall take all such actions as may be reasonably requested by such
Holder or such transferee to minimize or eliminate any such tax.
ARTICLE IX
SUBORDINATION
Section 9.1 NOTES SUBORDINATED TO DESIGNATED SENIOR DEBT. The Company
for itself and its successors, and each Holder, by its acceptance of the Notes,
agrees that the payment of the principal amount of the Notes and interest
thereon, and any claim for rescission or damages in respect thereof under any
applicable law (the "Subordinated Obligations") by the Company is subordinated,
to the extent and in the manner provided in this ARTICLE IX, to the prior
payment of Designated Senior Debt (whether outstanding on the date hereof or
hereafter created, incurred, assumed or guaranteed); PROVIDED, that the
provisions of this ARTICLE IX do not apply to, and the Notes are not
subordinated in respect of, the proceeds of the Permanent Financing. This
ARTICLE IX will constitute a continuing offer to all persons who, in reliance
upon its provisions, become holders of, or continue to hold, Designated Senior
Debt, and such provisions are made for the benefit of the holders of Designated
Senior Debt, and such holders are made obligees under this ARTICLE IX and they
and/or each of them may enforce its provisions.
Section 9.2 NO PAYMENT ON NOTES IN CERTAIN CIRCUMSTANCES. (a) No
payment will be made on account of the Subordinated Obligations, or to acquire
any of the Notes for cash, property or securities, or on account of the
redemption provisions of the Notes (x) upon the maturity of any Designated
Senior Debt by lapse of time, acceleration or otherwise, unless and
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until all such Designated Senior Debt shall first be paid in full in cash or
cash equivalents or provision for the payment in full in cash or cash
equivalents have been made with respect thereto, in each case, in a manner
satisfactory to the holders of Designated Senior Debt or (y) in the event that
the Company defaults in the payment of any principal of or interest on or any
other amounts payable on or due in connection with any Designated Senior Debt
when it becomes due and payable, whether at maturity or at a date fixed for
prepayment or by declaration or otherwise, unless and until such default has
been cured or waived in writing.
(b) Upon the occurrence of any event of default (or if an event of
default would result upon any payment with respect to the Subordinated
Obligations) with respect to any Designated Senior Debt, as such event of
default is defined in the instruments evidencing such Designated Senior Debt or
under which it is outstanding, permitting the holders to accelerate its maturity
(if the default is other than default in payment of the principal of or interest
on or any other amount due in connection with such Designated Senior Debt), upon
written notice of the event of default given to the Company by the holders of
such Designated Senior Debt (or their agent or representative), then, unless and
until such event of default has been cured or waived in writing, no payment will
be made by the Company with respect to the Subordinated Obligations or to
acquire any of the Notes for cash, property or securities or with regard to
redemption of Notes; PROVIDED, that the foregoing will not prevent the making of
any payment for a period of more than 179 days after the date the written notice
of the default is given unless such Designated Senior Debt in respect of which
such event of default exists has been declared due and payable in its entirety
within that period, and that declaration has not been rescinded. If such
Designated Senior Debt is not declared due and payable within 179 days after the
written notice of the default is given, promptly after the end of the 179-day
period the Company will pay all sums not paid during the 179-day period because
of this CLAUSE (b) unless CLAUSE (a) above is then applicable. During any period
of 360 consecutive days only one such period during which payment of principal
of, or interest on, the Notes may not be made may commence and the duration of
such period may not exceed 179 days.
(c) If any payment or distribution of assets of the Company is received
by any Holder in respect of the Subordinated Obligations at a time when that
payment or distribution should not have been made because of CLAUSE (a) or (b)
above, such payment or distribution will be received and held in trust for and
will be paid over to the holders of Designated Senior Debt which is due and
payable and remains unpaid or unprovided for (pro rata as to each of such
holders on the basis of the respective amounts of such Designated Senior Debt
which is due and payable) until all such Designated Senior Debt has been paid in
full in cash or cash equivalents or provided for in cash or cash equivalents in
a manner satisfactory to the holders of Designated Senior Debt, after giving
effect to any concurrent payment or distribution or provision therefor to the
holders of such Designated Senior Debt.
Section 9.3 NOTES SUBORDINATED TO PRIOR PAYMENT OF ALL DESIGNATED
SENIOR DEBT ON DISSOLUTION, LIQUIDATION OR REORGANIZATION. (a) Upon any
distribution of assets of the Company
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upon any dissolution, winding up, liquidation or reorganization of the Company
(whether in bankruptcy, insolvency, receivership or similar proceeding related
to the Company or its property or upon an assignment for the benefit of
creditors, any marshaling of the Company's assets or liabilities, or otherwise):
(i) the holders of all Designated Senior Debt will first be
entitled to receive payment in full in cash or cash equivalents or
provision for payment in full in cash or cash equivalents in a manner
satisfactory to the holders of Designated Senior Debt of the principal
of and interest on Designated Senior Debt and other amounts due in
connection with Designated Senior Debt (including interest accruing
subsequent to an event described in Section 8.1.9 of the Incorporated
Agreement) (or which would have accrued but for the occurrence of such
event) at the rate provided for in the documents governing such
Designated Senior Debt, whether or not such interest is an allowed
claim enforceable against the debtor in a bankruptcy case under Title
11 of the United States Code), before the Holders are entitled to
receive any payment on account of the principal of or interest on the
Notes;
(ii) any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities, to
which the Holders would be entitled except for the provisions of this
Section will be paid by the liquidating trustee or agent or other
person making such a payment or distribution directly to the holders of
Designated Senior Debt or their representatives to the extent necessary
to make payment in full in cash or cash equivalents or provision for
payment in full in cash or cash equivalents in a manner satisfactory to
the holders of Designated Senior Debt of all Designated Senior Debt
remaining unpaid, after giving effect to any concurrent payment or
distribution or provision therefor to the holders of such Designated
Senior Debt; and
(iii) if, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether
in cash, property or securities is received by the Holders on account
of the Subordinated Obligations before all Designated Senior Debt is
paid in full in cash or cash equivalents or provided for in cash or
cash equivalents in a manner satisfactory to the holders of Designated
Senior Debt, such payment or distribution will be received and held in
trust for and will be paid over to the holders of the Designated Senior
Debt remaining so unpaid or unprovided for or their representatives for
application to the payment of such Designated Senior Debt until all
such Designated Senior Debt has been paid in full in cash or cash
equivalents or provided for in cash or cash equivalents in a manner
satisfactory to the holders of Designated Senior Debt, after giving
effect to any concurrent payment or distribution or provision therefor
to the holders of such Designated Senior Debt.
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(b) The Company will give prompt written notice to the Holders of any
dissolution, winding up, liquidation or reorganization of it or any assignment
for the benefit of its creditors and of any event of default in respect of
Designated Senior Debt.
(c) For purposes of this SECTION 9.3, the words "cash, property or
securities" shall not be deemed to include (x) shares of common stock of the
Company as reorganized or readjusted, (y) securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment which are
subordinated, to at least the same extent as the Notes, to the payment of all
Designated Senior Debt then outstanding or (z) any payment or distribution of
securities of the Company or any other corporation authorized by an order or
decree giving effect, and stating in such order or decree that effect has been
given, to subordination of the Notes to Designated Senior Debt and made by a
court of competent jurisdiction in a reorganization proceeding under any
applicable bankruptcy, insolvency or similar law. For purposes of this ARTICLE
IX, (i) "distribution" and "payment" with respect to the Company or its assets
include payments, distributions and other transfers of assets by or on behalf of
the Company from any source, of any kind or character, whether direct or
indirect, by set-off or otherwise, whether in cash, property or securities, (ii)
"payment on the account of the Subordinated Obligations" shall not include the
Warrants, any shares issued upon exercise of the Warrants or any sale or
transfer of any of the foregoing and (iii) "cash equivalents" means Cash
Equivalents described in clause (i) of the definition thereof to the extent such
Cash Equivalents mature within nine months.
Section 9.4 HOLDERS TO BE SUBROGATED TO RIGHTS OF HOLDERS OF DESIGNATED
SENIOR DEBT. Following the payment in full in cash or cash equivalents or
provision for payment in full in cash or cash equivalents in a manner
satisfactory to the holders of Designated Senior Debt of all Designated Senior
Debt, the Holders will be subrogated to the rights of the holders of Designated
Senior Debt to receive payments or distributions of assets of the Company
applicable to the Designated Senior Debt until all amounts owing on the Notes
have been paid in full, and for the purpose of such subrogation no such payments
or distributions to the holders of Designated Senior Debt by or on behalf of the
Company or by or on behalf of the Holders by virtue of this ARTICLE IX which
otherwise would have been made to the Holders will, as between the Company and
the Holders, be deemed to be payment by the Company to or on account of the
Designated Senior Debt, it being understood that the provisions of this ARTICLE
IX are and are intended solely for the purpose of defining the relative rights
of the Holders, on the one hand, and the holders of Designated Senior Debt, on
the other hand.
Section 9.5 OBLIGATIONS OF THE COMPANY UNCONDITIONAL. Nothing contained
in this ARTICLE IX or elsewhere in the Notes is intended to or will impair, as
between the Company and the Holders, the obligations of the Company, which are
absolute and unconditional, to pay to the Holders the Subordinated Obligations
as and when they become due and payable in accordance with their terms, or is
intended to or will affect the relative rights of the Holders and creditors of
the Company other than the holders of the Designated Senior Debt, nor will
anything herein or therein prevent any Holder from exercising all remedies
otherwise permitted by applicable law
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upon default under the Notes, subject to the rights if any, under this ARTICLE
IX of the holders of Designated Senior Debt.
Section 9.6 SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR OMISSIONS OF
THE COMPANY OR HOLDERS OF DESIGNATED SENIOR DEBT. No right of any present or
future holders of any Designated Senior Debt to enforce subordination as
provided herein will at any time or in any way be prejudiced or impaired by any
act or failure to act on the part of the Company or by any act or failure to act
by any such holder, or by any noncompliance by the Company with the terms of
this ARTICLE IX, regardless of any knowledge thereof which any such holder may
have or otherwise be charged with. The holders of Designated Senior Debt may
extend, renew, modify or amend the terms of the Designated Senior Debt or any
security or guarantee therefor or thereof, release, sell or exchange such
security, exercise or refrain from exercising any rights against the Company,
any of its Subsidiaries or any other Person and otherwise deal freely with the
Company, all without affecting the liabilities and obligations of the parties to
the document or the Holders. No amendment to these provisions will be effective
against the holders of the Designated Senior Debt who have not consented thereto
in writing.
Section 9.7 NOT TO PREVENT EVENTS OF DEFAULT. The failure to make a
payment on account of the Subordinated Obligations by reason of any provision of
this ARTICLE IX will not be construed as preventing the occurrence of an Event
of Default.
Section 9.8 MISCELLANEOUS. If, upon any proceeding referred to in
SECTION 9.3, a Holder does not file a claim in such proceeding prior to fifteen
days before the expiration of the time to file such claim, the holders of the
Designated Senior Debt or their agent or representative, at the expense of the
holders of Designated Senior Debt, may file such claim on behalf of such Holder.
ARTICLE X
GUARANTEES
Section 10.1 GUARANTEES. (a) Subject to SECTIONS 10.2 and 10.3, each of
the Guarantors jointly and severally unconditionally guarantees to each Holder,
irrespective of the validity and enforceability of the other provisions of this
Agreement, or of the Financing Documents, the Notes and the obligations of the
Company hereunder or thereunder, that: (i) the principal of, premium, if any,
and interest, if any, on the Notes shall be promptly paid in full when due,
whether at maturity, by acceleration, redemption or otherwise, and (to the
extent permitted by law) interest on the overdue principal of, premium, if any,
and interest, if any, on the Notes (including all reasonable costs of collection
and enforcement thereof and interest thereon which would be owing by the Company
but for the effect of any bankruptcy law, if any), and all other obligations of
the Company to the Holders under this Agreement, the Financing Documents and the
Notes shall be promptly paid in full when due or performed, all in accordance
with the terms
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of this Agreement, the Financing Documents and the Notes; and (ii) in case of
any extension of time of payment or renewal of any Notes, or the issuance of any
of such other obligations, that the same shall be promptly paid in full when due
or performed in accordance with their terms whether at stated maturity, by
acceleration, redemption or otherwise. Failing payment when due of any amount so
guaranteed for whatever reason, the Guarantors shall be jointly and severally
and unconditionally obligated to pay the same immediately whether or not such
failure to pay has become an Event of Default which could cause acceleration
pursuant to SECTION 7.1. Each Guarantor agrees that this is a continuing
guarantee of payment and not merely a guarantee of collection.
(b) The Guarantors hereby agree that, subject to SECTIONS 10.2 AND
10.3, their obligations hereunder shall be unconditional and absolute and,
without limiting the generality of the foregoing, shall not be released,
discharged or otherwise affected by:
(i) any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of the Company under this
Agreement, the Financing Documents or the Notes, by operation of law or
otherwise;
(ii) any modification or amendment of or supplement to any
other provisions of this Agreement, or to the Financing Documents or
the Notes with the consent of the Guarantors, which consent shall not
be unreasonably withheld;
(iii) any release, non-perfection or invalidity of any direct
or indirect security for, or any other guarantee of, any of the
obligations guaranteed by this ARTICLE X;
(iv) any change in the corporate existence, structure or
ownership of the Company, or any insolvency, bankruptcy, reorganization
or other similar proceeding affecting the Company or its assets or any
resulting release or discharge of any obligation of the Company
contained in this Agreement, the Financing Documents or the Notes;
(v) the existence of any claim, set-off or other rights which
any Guarantor may have at any time against the Company or any other
Person, whether in connection herewith or with an unrelated
transactions, PROVIDED that nothing herein shall prevent the assertion
of any such claim by separate suit or compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or against
the Company for any reason of this Agreement, the Financing Documents
or the Notes, or any provision of applicable law or regulation
purporting to prohibit the payment by the Company of the principal of
or interest on the Notes or any other amount payable by it under this
Agreement, the Financing Documents or the Notes;
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<PAGE> 48
(vii) any other act or omission to act or delay of any kind by
the Company or any other Person or any other circumstance whatsoever
which might, but for the provisions of this paragraph, constitute a
legal or equitable discharge of any Guarantor's obligations hereunder;
or
(viii) any issuance of additional Notes pursuant to SECTION
2.5(f).
(c) Each Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or bankruptcy
of the Company, any right to require a proceeding first against the Company,
protest, notice and all demands whatsoever and covenants that, subject to this
Article X, this Guarantee shall not be discharged except by complete performance
of all obligations on and with respect to the Notes, this Agreement and the
Financing Documents.
(d) If any Holder is required by any court or otherwise to return to
the Company or any of the Guarantors, or any custodian, trustee, liquidator or
other similar official acting in relation to either the Company or any of the
Guarantors, any amount paid to such Holder, this Guarantee, to the extent of the
amount so returned, shall be reinstated in full force and effect.
(e) Each Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby. Each
Guarantor further agrees that, as between the Guarantors, on the one hand, and
the Holders, on the other hand, (x) the maturity of the obligations guaranteed
hereby may be accelerated as provided in SECTION 7.1 notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
obligations guaranteed hereby and (y) in the event of any declaration of
acceleration of such obligations as provided in SECTION 7.1, such obligations
(whether or not due and payable) shall forthwith become due and payable by the
Guarantors for the purpose of this Guarantee. The Guarantors shall have the
right to seek contribution from any non-paying Guarantor so long as the exercise
of such right does not impair the rights of the Holders under this Guarantee.
Section 10.2 SUBORDINATION OF GUARANTEES. The obligations of each
Guarantor under its Guarantee pursuant to this Article X are junior and
subordinated to any guarantees by such Guarantor of any Designated Senior Debt
on the same basis as the Notes are junior and subordinate to such Designated
Senior Debt under ARTICLE IX (it being understood that delivery of any notice to
the Company pursuant to SECTION 9.2(b) shall constitute notice to each Guarantor
hereunder).
Section 10.3 LIMITATION ON GUARANTOR LIABILITY. Each Guarantor, and by
its acceptance of Notes, each Holder, hereby confirms that it is the intention
of all such parties that this Guarantee not constitute a fraudulent transfer or
conveyance for purposes of any bankruptcy law, the Uniform Fraudulent Conveyance
Act, the Uniform Fraudulent Transfer Act or any similar
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<PAGE> 49
federal or state law to the extent applicable to this Guarantee. To effectuate
the foregoing intention, the Holders and the Guarantors hereby irrevocably agree
that the obligations of each Guarantor under this Guarantee shall be limited to
the maximum amount as will, after giving effect to such maximum amount and all
other contingent and fixed liabilities of such Guarantor that are relevant under
such laws, and after giving effect to any collections from, rights to receive
contribution from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under this Guarantee, result
in the obligations of such Guarantor under the Guarantee not constituting a
fraudulent transfer or conveyance.
Section 10.4 CONSOLIDATION OR MERGER OF GUARANTORS. Subject to SECTION
10.5, without limiting the provisions of CLAUSE (h) of SECTION 6.2, no Guarantor
may consolidate with or merge with or into (whether or not such Guarantor is the
surviving Person) another corporation, Person or entity whether or not
affiliated with such Guarantor unless such corporation, person or entity is a
Guarantor.
Section 10.5 RELEASE OF GUARANTORS. If at any time any Guarantor shall
be released from all of its obligations under all guarantees of, and all grants
of Liens on any of its assets or property securing, Designated Senior Debt, the
obligations of such Guarantor under this Agreement and the other Financing
Documents shall be automatically released.
ARTICLE XI
MISCELLANEOUS
Section 11.1 NOTICES. All notices, demands and other communications to
any party hereunder shall be in writing (including facsimile or similar writing)
and shall be given to such party at its address set forth on the signature pages
hereof, or such other address as such party may hereinafter specify for the
purpose. Each such notice, demand or other communication shall be effective (i)
if given by facsimile, when such facsimile is transmitted to the facsimile
number specified on the signature page hereof, or (ii) if given by overnight
courier, addressed as aforesaid or by any other means, when delivered at the
address specified in this Section.
Section 11.2 NO WAIVERS; AMENDMENTS. (a) No failure or delay on the
part of any party in exercising any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy. The remedies provided for
herein are cumulative and are not exclusive of any remedies that may be
available to any party at law or in equity or otherwise.
(b) Any provision of this Agreement may be amended, supplemented or
waived if, but only if, such amendment, supplement or waiver is in writing and
is signed by the Company and
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<PAGE> 50
the Majority Holders; PROVIDED, that without the consent of each Holder of any
Note affected thereby, an amendment, supplement or waiver may not (a) reduce the
aggregate principal amount of Notes whose Holders must consent to an amendment,
supplement or waiver, (b) reduce the rate or extend the time for payment of
interest on any Note, (c) reduce the principal amount of or extend the stated
maturity of any Note or (d) make any Note payable in money or property other
than as stated in the Notes. In determining whether the Holders of the requisite
principal amount of Notes have concurred in any direction, consent, or waiver as
provided in this Agreement or in the Notes, Notes which are owned by the Company
or any other obligor on or guarantor of the Notes, or, except for DLJSC and its
Affiliates by any Person controlling, controlled by, or under common control
with any of the foregoing, shall be disregarded and deemed not to be outstanding
for the purpose of any such determination; and PROVIDED, FURTHER, that no such
amendment, supplement or waiver which affects the rights of the Purchasers and
its Affiliates otherwise than solely in their capacities as Holders of Notes
shall be effective with respect to them without their prior written consent.
Section 11.3 INDEMNIFICATION. (a) The Company (the "INDEMNIFYING
PARTY") agrees to indemnify and hold harmless each Purchaser, its respective
Affiliates, and each Person, if any, who controls such Purchaser, or any of its
Affiliates, within the meaning of the Securities Act or the Exchange Act (a
"CONTROLLING PERSON"), and the respective partners, agents, employees, officers
and directors of such Purchaser, its Affiliates and any such Controlling Person
(each an "INDEMNIFIED PARTY," and collectively, the "INDEMNIFIED PARTIES"), from
and against any and all losses, claims, damages, liabilities and expenses
(including, without limitation and as incurred, reasonable costs of
investigating, preparing or defending any such claim or action, whether or not
such Indemnified Party is a party thereto) arising out of, or in connection with
any activities contemplated by this Agreement or any other services rendered in
connection herewith, including, but not limited to, losses, claims, damages,
liabilities or expenses arising out of or based upon any untrue statement or any
alleged untrue statement of a material fact or any omission or any alleged
omission to state a material fact in any of the disclosure or offering or
confidential information documents (the "DISCLOSURE DOCUMENTS") pertaining to
any of the transactions or proposed transactions contemplated herein, including
any eventual refinancing or resale of the Notes, PROVIDED, that the Indemnifying
Party will not be responsible for any claims, liabilities, losses, damages or
expenses that are determined by final judgment of a court of competent
jurisdiction to result from such Indemnified Party's gross negligence, willful
misconduct or bad faith. The Indemnifying Party also agrees that (i) no
Purchaser shall have liability (except for breach of provisions of this
Agreement) for claims, liabilities, damages, losses or expenses, including legal
fees, incurred by the Indemnifying Party in connection with this Agreement,
unless they are determined by final judgment of a court of competent
jurisdiction to result from such Purchaser's gross negligence, willful
misconduct or bad faith and (ii) no Purchaser shall in any event have any
liability to the Company on any theory of liability for special or punitive
damages (as opposed to direct or actual damages) arising out of, or in
connection with, or as a result of this Agreement.
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<PAGE> 51
(b) If any action shall be brought against an Indemnified Party with
respect to which indemnity may be sought against the Indemnifying Party under
this Agreement, such Indemnified Party shall promptly notify the Indemnifying
Party in writing and the Indemnifying Party shall, if requested by such
Indemnified Party or if the Indemnifying Party desires to do so, assume the
defense thereof, including the employment of counsel reasonably satisfactory to
such Indemnified Party and payment of all reasonable fees and expenses. The
failure to so notify the Indemnifying Party shall not affect any obligations the
Indemnifying Party may have to such Indemnified Party under this Agreement or
otherwise unless the Indemnifying Party is materially adversely affected by such
failure. Such Indemnified Party shall have the right to employ separate counsel
in such action and participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party, unless: (i)
the Indemnifying Party has failed to assume the defense and employ counsel
reasonably satisfactory to such Indemnified Party or (ii) the named parties to
any such action (including any impleaded parties) include such Indemnified Party
and the Indemnifying Party, and such Indemnified Party shall have been advised
by counsel that there may be one or more legal defenses available to it which
are different from or additional to those available to the Indemnifying Party,
in which case, if such Indemnified Party notifies the Indemnifying Party in
writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the right to assume
the defense of such action or proceeding on behalf of such Indemnified Party,
PROVIDED, HOWEVER, that the Indemnifying Party shall not, in connection with any
one such action or proceeding or separate but substantially similar or related
actions or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be responsible hereunder for the reasonable fees
and expenses of more than one such firm of separate counsel, in addition to any
local counsel, which counsel shall be designated by the Purchasers. The
Indemnifying Party shall not be liable for any settlement of any such action
effected without the written consent of the Indemnifying Party (which shall not
be unreasonably withheld) and the Indemnifying Party agrees to indemnify and
hold harmless each Indemnified Party from and against any loss or liability by
reasons of settlement of any action effected with the consent of the
Indemnifying Party. In addition, the Indemnifying Party will not, without the
prior written consent of the Indemnified Party, settle or compromise or consent
to the entry of any judgment in or otherwise seek to terminate any pending or
threatened action, claim, suit or proceeding in respect of which indemnification
or contribution may be sought hereunder (whether or not any Indemnified Party is
a party thereto) unless such settlement, compromise, consent or termination
includes an express unconditional release of the Purchasers and the other
Indemnified Parties, reasonably satisfactory in form and substance to the
Purchasers, from all liability arising out of such action, claim, suit or
proceeding.
(c) If for any reason the foregoing indemnity is unavailable (otherwise
than pursuant to the express terms of such indemnity) to an Indemnified Party or
insufficient to hold an Indemnified Party harmless, then in lieu of indemnifying
such Indemnified Party, the Indemnifying Party shall contribute to the amount
paid or payable by such Indemnified Party as a result of such claims,
liabilities, losses, damages, or expenses (i) in such proportion as is
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<PAGE> 52
appropriate to reflect the relative benefits received by the Indemnifying Party
on the one hand and by a Purchaser on the other from the transactions
contemplated by this Agreement or (ii) if the allocation provided by clause (i)
above is not permitted under applicable law, in such proportion as is
appropriate to reflect not only the relative benefits received by the
Indemnifying Party on the one hand and such Purchaser on the other, but also the
relative fault of the Indemnifying Party and such Purchaser as well as any other
relevant equitable considerations. Notwithstanding the provisions of this
SECTION 11.3, the aggregate contribution of all Indemnified Parties shall not
exceed the amount of fees actually received by the Purchasers pursuant to this
Agreement. It is hereby further agreed that the relative benefits to the
Indemnifying Party on the one hand and a Purchaser on the other with respect to
the transactions contemplated hereby shall be deemed to be in the same
proportion as (i) the aggregate principal amount of Notes issued by the Company
bears to (ii) the fees actually received by such Purchaser pursuant to this
Agreement. The relative fault of the Indemnifying Party on the one hand and a
Purchaser on the other with respect to the transactions contemplated hereby
shall be determined by reference to, among other things, whether any untrue or
alleged untrue statement of material fact or the omission or alleged omission to
state a material fact related to information supplied by the Indemnifying Party
or by such Purchaser and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
(d) The indemnification, contribution and expense reimbursement
obligations set forth in this SECTION 11.3 (i) shall be in addition to any
liability the Indemnifying Party may have to any Indemnified Party at common law
or otherwise, (ii) shall survive the termination of this Agreement and the
payment in full of the Notes and (iii) shall remain operative and in full force
and effect regardless of any investigation made by or on behalf of the
Purchasers or any other Indemnified Party.
Section 11.4 EXPENSES. The Company agrees to pay all reasonable
out-of-pocket costs, expenses and other payments of the Purchasers in connection
with the purchase and sale of the Notes as contemplated by this Agreement
including without limitation (i) reasonable fees and disbursements of special
counsel and any local counsel for the Purchasers incurred in connection with the
preparation of this Agreement, (ii) all reasonable out-of-pocket expenses of the
Purchasers, including reasonable fees and disbursements of counsel, in
connection with any waiver or consent hereunder or any amendment hereof or any
Default or alleged Default hereunder and (iii) if an Event of Default occurs,
all reasonable out-of-pocket expenses incurred by the Purchasers and each Holder
of Notes, including reasonable fees and disbursements of a single counsel (which
counsel shall be selected by the Purchasers if the Purchaser is a Holder of
Notes when such Event of Default occurs), in connection with such Event of
Default and collection, bankruptcy, insolvency and other enforcement proceedings
resulting therefrom.
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<PAGE> 53
Section 11.5 PAYMENT. The Company agrees that, so long as a Purchaser
shall own any Notes purchased by it from the Company hereunder, the Company will
make payments to such Purchaser of all amounts due thereon by wire transfer by
1:00 P.M. (New York City time) on the date of payment to such account as is
specified beneath such Purchaser's name on the signature page hereof or to such
other account or in such other similar manner as such Purchaser may designate to
the Company in writing.
Section 11.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of the Company, the Purchasers, the
Guarantors, the holders of the Designated Senior Debt and their respective
successors and assigns; PROVIDED that neither the Company nor any Guarantor may
assign or otherwise transfer its rights or obligations under this Agreement to
any other Person without the prior written consent of the Majority Holders. All
provisions hereunder purporting to give rights to the Purchasers and its
Affiliates, or to Holders are for the express benefit of such Persons.
Section 11.7 BROKERS. The Company represents and warrants that, except
for DLJSC and Barclays Capital, it has not employed any broker, finder,
financial advisor or investment banker who might be entitled to any brokerage,
finder's or other fee or commission in connection with the Transaction or the
sale of the Notes.
Section 11.8 NEW YORK LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK. EACH PARTY HERETO HEREBY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY
FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN
SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 11.9 SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
-48-
<PAGE> 54
Section 11.10 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original with the same effect
as if the signatures thereto and hereto were upon the same instrument.
Section 11.11 CONFIDENTIALITY. (a) The Company acknowledges and agrees
that: (i) the Purchasers and certain of their respective Affiliates are a full
service financial firm and as such may from time to time effect transactions for
their own account or the account of customers, and hold positions in loans or
options on loans of Persons that may be the subject of this arrangement; (ii)
the Purchasers may employ the services of DLJSC and its Affiliates in providing
certain services hereunder and may, subject to CLAUSE (b) below, exchange with
such entities information concerning Holdings, Intermediate Holdings, the
Company and the Guarantors, and such Affiliates will be entitled to the benefits
afforded the Purchasers hereunder, and (iii) the Purchasers or their respective
Affiliates may be providing financing or other services to Persons whose
interests may conflict with the interest of Holdings, Intermediate Holdings, the
Company and the Guarantors.
(b) The Purchasers and each other Holder agrees to keep confidential
any Confidential Information; PROVIDED that nothing herein shall prevent the
Purchasers or such other Holder from disclosing any such information (i) to the
extent permitted under the Engagement Letter, (ii) to any Person which receives
such information having been made aware of, and which agrees to maintain, the
confidential nature thereof in order to facilitate or enable the Purchasers or
such other Holder to syndicate, sell transfer (including, without limitation,
the transfer of a participation in the Notes) or assign any portion of its
notes, (iii) to any Holder, (iv) to its employees, directors, agents, attorneys,
accountants and other professional advisors which receive such information
having been made aware of the confidential nature thereof, (v) upon the request
or demand of any Governmental Authority having jurisdiction over either
Purchaser, (vi) in response to any order of any court or other Governmental
Authority or as may otherwise be required pursuant to any Requirement of Law,
(vii) which has been publicly disclosed other than in breach of this Agreement,
or (viii) in connection with the exercise of any remedy hereunder.
Section 11.12 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made hereunder and in any document, certificate
or statement delivered pursuant hereto or in connection herewith shall survive
the execution and delivery of this Agreement and the issuance of the Notes.
Section 11.13 CONSTRUCTION. Each covenant contained herein shall be
construed (absent express provision to the contrary) as being independent of
each other covenant contained herein, so that compliance with any one covenant
shall not (absent such an express contrary provision) be deemed to excuse
compliance with any other covenant. Where any provision herein refers to action
to be taken by any Person, or which such person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person.
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<PAGE> 55
Section 11.14 INTEGRATION. This Agreement represents the agreement of
the parties hereto with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by Holdings, the Company
or the Purchasers relative to the subject matter hereof not expressly set forth
herein or in the other Financing Documents.
Section 11.15 REPLACEMENT NOTES. If any mutilated Note is surrendered
to the Company or the Company receives reasonably satisfactory evidence of the
destruction, loss or theft of any Note (which evidence shall be, in the case of
an institutional investor, notice from such institutional investor of such
ownership and such destruction, loss or theft), the Company shall, at the
expense of the holder of such Note, execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.
Section 11.16 HEADINGS. Section headings used herein and in the table
of contents are for convenience only and are not to effect the construction of,
or be taken into consideration in interpreting this Agreement and the other
Financing Documents.
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<PAGE> 56
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers, as of the date first
above written.
RAILAMERICA TRANSPORTATION
CORP.
By: /s/ Joseph B. Doherty
------------------------------------
Name: Joseph B. Doherty
Title: Treasurer
Address for Notices:
5300 Broken Sound Blvd. N.W.
Boca Raton, FL 33487
Telecopier: (561) 994-3929
Attention: Joseph B. Doherty
GUARANTORS:
RAILAMERICA, INC.
By: /s/ Joseph B. Doherty
------------------------------------
Name: Joseph B. Doherty
Title: Treasurer
Address for Notices:
5300 Broken Sound Blvd. N.W.
Boca Raton, FL 33487
Telecopier: (561) 994-3929
Attention: Joseph B. Doherty
<PAGE> 57
PALM BEACH RAIL HOLDING, INC.
By: /s/ Joseph B. Doherty
------------------------------------
Name: Joseph B. Doherty
Title: Treasurer
Address for Notices:
5300 Broken Sound Blvd. N.W.
Boca Raton, FL 33487
Telecopier: (561) 994-3929
Attention: Joseph B. Doherty
CASCADE AND COLUMBIA RIVER
RAILROAD COMPANY, INC., a
Delaware corporation
DAKOTA RAIL, INC., a South Dakota
corporation
DELAWARE VALLEY RAILWAY
COMPANY, INC., a Delaware
corporation
FLORIDA RAIL LINES, INC., a Delaware
corporation
HURON AND EASTERN RAILWAY
COMPANY, INC., a Michigan
corporation
KS BOCA, INC., a Florida corporation
KALYN/SIEBERT INCORPORATED, a
Texas corporation
MARKSMAN CORP., a Delaware
corporation
<PAGE> 58
MINNESOTA NORTHERN RAILROAD,
INC., a Delaware corporation
OTTER TAIL VALLEY RAILROAD
COMPANY, INC., a Minnesota
corporation
PLAINVIEW TERMINAL COMPANY, a
Texas corporation
PRAIRIE HOLDING CORPORATION, a
Florida corporation
RAILAMERICA AUSTRALIA, INC., a
Delaware corporation
RAILAMERICA EQUIPMENT
CORPORATION, a Delaware
corporation
RAILAMERICA INTERMODAL
SERVICES, INC., a Delaware
corporation
RAIL OPERATING SUPPORT GROUP,
INC., a Delaware corporation
SAGINAW VALLEY RAILWAY
COMPANY, INC., a Delaware
corporation
SOUTH CENTRAL TENNESSEE
RAILROAD CORP., a Delaware
corporation
ST. CROIX VALLEY RAILROAD
COMPANY, a Delaware corporation
TOLEDO, PEORIA & WESTERN
RAILWAY CORPORATION, a New
Jersey corporation
<PAGE> 59
THE TOLEDO, PEORIA & WESTERN
RAILROAD CORPORATION, a New
York corporation
VENTURA COUNTY RAILROAD CO.,
INC., a Delaware corporation
WEST TEXAS AND LUBBOCK
RAILROAD COMPANY, INC., a Texas
corporation
INDIANA SOUTHERN RAILROAD, INC.,
a Delaware corporation
CENTRAL RAILROAD COMPANY OF
INDIANAPOLIS, an Indiana
corporation
CENTRAL RAILROAD COMPANY OF
INDIANA, an Indiana corporation
DALLAS, GARLAND &
NORTHEASTERN RAILROAD, INC.,
a Texas corporation
DALLAS, GARLAND &
NORTHEASTERN RAILROAD, INC.,
a Delaware corporation
GEORGIA SOUTHWESTERN
RAILROAD, INC., a Texas corporation
INDIANA AND OHIO RAIL CORP., a
Delaware corporation
INDIANA AND OHIO RAILWAY
COMPANY., a Delaware corporation
INDIANA AND OHIO CENTRAL
RAILROAD INC., a Delaware
corporation
<PAGE> 60
CONNECTICUT SOUTHERN
RAILROAD, INC., a Delaware
corporation
CENTRAL OREGON & PACIFIC
RAILROAD, INC., a Delaware
corporation
BOSTON CENTRAL FREIGHT
RAILROAD, INC., a Delaware
corporation
AUSTIN & NORTHWESTERN
RAILROAD COMPANY., INC., a
Texas corporation
SOUTH CAROLINA CENTRAL
RAILROAD COMPANY, INC., a South
Carolina corporation
SAN DIEGO & IMPERIAL VALLEY
RAILROAD COMPANY, INC., a
California corporation
RAILTEX LOGISTICS, INC., a Delaware
corporation
MID-MICHIGAN RAILROAD, INC., a
Michigan corporation
MISSOURI & NORTHERN ARKANSAS
RAILROAD COMPANY, INC., a
Kansas corporation
RAILTEX DISTRIBUTION SERVICES,
INC., a Texas corporation
RAILTEX INTERNATIONAL
HOLDINGS, INC., a Delaware
corporation
<PAGE> 61
NORTH CAROLINA AND VIRGINIA
RAILROAD COMPANY, INC., a
Delaware corporation
NEW ENGLAND CENTRAL RAILROAD,
INC., a Delaware corporation
NEW ORLEANS LOWER COAST
RAILROAD COMPANY, INC., a
Louisiana corporation
PITTSBURGH INDUSTRIAL
RAILROAD, INC., a Delaware
corporation
RAILTEX ACQUISITION CORP., a
Delaware corporation
RAILTEX SERVICE CO., INC., a
Delaware corporation
By: /s/ Joseph B. Doherty
------------------------------------
Name: Joseph B. Doherty
Title: Treasurer
<PAGE> 62
COMMITMENT: PURCHASERS:
- ----------- RAIL AMERICA FUNDING, INC.
$95,000,000
By:
----------------------------------
Name:
Title:
Address for Notices:
277 Park Avenue
New York, NY 10172
Telecopier: 212-892-7542
Attention: Joe Adipietro
Wiring Instructions:
ABA#
A/C#
=========== Attention:
$95,000,000
<PAGE> 1
[EXECUTION COPY]
Exhibit 10.73
ASSET BRIDGE SECURITIES PURCHASE AGREEMENT,
dated as of
February 4, 2000,
among
PALM BEACH RAIL HOLDING, INC.,
RAILAMERICA, INC.,
and
THE GUARANTORS PARTY HERETO,
and
THE PURCHASERS PARTY HERETO.
<PAGE> 2
PURCHASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS
Section 1.1 Definitions..........................................................................1
Section 1.2 Incorporated Definition..............................................................9
ARTICLE II
PURCHASE AND SALE OF SECURITIES; TERMS OF SECURITIES
Section 2.1 Commitment to Purchase...............................................................9
Section 2.2 Takedown Procedures..................................................................9
Section 2.3 Fees................................................................................10
Section 2.4 Mandatory Termination of Commitments................................................10
Section 2.5 Interest............................................................................10
Section 2.6 Maturity of Asset Bridge Notes; Prepayment of Asset Bridge Notes....................11
Section 2.7 Taxes...............................................................................13
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
HOLDINGS, INTERMEDIATE HOLDINGS AND THE COMPANY
Section 3.1 Incorporation of Representations and Warranties in Incorporated
Agreement.......................................................................16
Section 3.2 Authorization, Execution and Enforceability.........................................17
Section 3.3 Capitalization......................................................................17
Section 3.4 Solicitation........................................................................17
Section 3.5 Non-fungibility.....................................................................18
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
Section 4.1 Purchase for Investment; Authority; Binding Agreement...............................18
ARTICLE V
CONDITIONS PRECEDENT TO PURCHASE
Section 5.1 Conditions to Purchasers' Obligation at Takedown....................................19
Section 5.2 Conditions to the Intermediate Holdings Obligations.................................26
ARTICLE VI
COVENANTS
Section 6.1 Incorporation of Affirmative Covenants from the Incorporated
Agreement.......................................................................27
Section 6.2 Incorporation of Negative Covenants from the Incorporated
Agreement.......................................................................27
Section 6.3 Investment Company Act..............................................................29
Section 6.4 Use of Proceeds.....................................................................29
Section 6.5 Copies of Documents and Notices.....................................................29
Section 6.6 Syndication Efforts.................................................................30
ARTICLE VII
EVENTS OF DEFAULT
Section 7.1 Events of Default Defined; Acceleration of Maturity; Waiver of
Default.........................................................................30
ARTICLE VIII
LIMITATION ON TRANSFERS
Section 8.1 Restrictions on Transfer............................................................32
Section 8.2 Restrictive Legends.................................................................32
Section 8.3 Notice of Proposed Transfers........................................................33
Section 8.4 Right to Sell, Transfer or Assign Asset Bridge Notes................................34
Section 8.5 Replacement Asset Bridge Notes......................................................34
</TABLE>
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<TABLE>
<S> <C>
ARTICLE IX
COLLATERAL AGENT
Section 9.1 Actions.............................................................................34
Section 9.2 Exculpation.........................................................................35
Section 9.3 Successor...........................................................................35
Section 9.4 Asset Bridge Notes held by the Collateral Agent.....................................36
Section 9.5 Credit Decisions....................................................................36
Section 9.6 Reliance by the Collateral Agent....................................................36
Section 9.7 Defaults............................................................................36
Section 9.8 Payment of Costs and Expenses.......................................................37
Section 9.9 Indemnification.....................................................................37
ARTICLE X
GUARANTEES
Section 10.1 Guarantees..........................................................................39
Section 10.2 Limitation on Guarantor Liability...................................................41
Section 10.3 Consolidation or Merger of Guarantors...............................................41
ARTICLE XI
MISCELLANEOUS
Section 11.1 Notices.............................................................................41
Section 11.2 No Waivers; Amendments..............................................................41
Section 11.3 Indemnification.....................................................................42
Section 11.4 Expenses............................................................................44
Section 11.5 Payment.............................................................................44
Section 11.6 Successors and Assigns..............................................................45
Section 11.7 Brokers.............................................................................45
Section 11.8 New York Law; Submission to Jurisdiction; Waiver of Jury Trial......................45
Section 11.9 Severability........................................................................45
Section 11.10 Counterparts........................................................................45
Section 11.11 Confidentiality.....................................................................46
Section 11.12 Survival of Representations and Warranties..........................................46
Section 11.13 Construction........................................................................46
Section 11.14 Integration.........................................................................46
Section 11.15 Replacement Asset Bridge Notes......................................................47
Section 11.16 Headings............................................................................47
</TABLE>
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SCHEDULES
Schedule 3.3 Capitalization of Holdings
ANNEX
Annex I Corporate and Capital Structure
EXHIBITS
Exhibit A Form of Asset Bridge Escrow Agreement
Exhibit B Form of Asset Bridge Note
Exhibit C Form of Asset Bridge Equity Registration Rights Agreement
Exhibit D Form of Asset Bridge Warrant Agreement
Exhibit E Form of Asset Bridge Pledge and Security Agreement
Exhibit F Form of Issuance Date Certificate
Exhibit G Form of Solvency Certificate
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<PAGE> 6
SECURITIES PURCHASE AGREEMENT
THIS AGREEMENT, dated as of February 4, 2000, is made by and among PALM
BEACH RAIL HOLDING, INC., a Delaware corporation ("INTERMEDIATE HOLDINGS"),
RAILAMERICA, INC., a Delaware corporation ("HOLDINGS"), each Designated
Restricted Subsidiary of Intermediate Holdings that is a party hereto as a
"Guarantor" (collectively, the "GUARANTORS"), the Persons parties hereto as
"Purchasers" (collectively, the "PURCHASERS").
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. The following terms, as used herein (including
as used in any provision of the Incorporated Agreement that has been
incorporated by reference herein), have the following meanings:
"ADDITIONAL ASSET BRIDGE NOTES" means Asset Bridge Notes issued in
satisfaction of Intermediate Holdings' obligations to pay interest on the
outstanding Asset Bridge Notes in accordance with the terms hereof.
"ADMINISTRATIVE AGENT" is defined in the definition of the term "Credit
Agreement".
"AGREEMENT" means this Agreement, as amended, supplemented or otherwise
modified from time to time in accordance with its terms.
"ASSET BRIDGE EQUITY REGISTRATION RIGHTS AGREEMENT" means the Asset
Bridge Equity Registration Rights Agreement, dated as of February 4, 2000, among
Holdings and the Purchasers, in the form attached as Exhibit C to this
Agreement, as amended, supplemented or otherwise modified from time to time.
"ASSET BRIDGE ESCROW AGREEMENT" means the Asset Bridge Escrow
Agreement, dated as of February 4, 2000, among Holdings, the Purchasers and the
Escrow Agent, in the form attached as Exhibit A to this Agreement, as amended,
supplemented or otherwise modified from time to time.
"ASSET BRIDGE NOTES" means Intermediate Holdings' Asset Bridge Senior
Secured Increasing Rate Bridge Notes substantially in the form set forth as
EXHIBIT B hereto.
<PAGE> 7
"ASSET BRIDGE PLEDGE AND SECURITY AGREEMENT" means the Asset Bridge
Pledge and Security Agreement executed and delivered by an Authorized Officer of
Intermediate Holdings and each Guarantor pursuant to CLAUSE (W) of SECTION 5.1,
substantially in the form of EXHIBIT E hereto, as amended, supplemented, amended
and restated or otherwise modified from time to time.
"ASSET BRIDGE WARRANT AGREEMENT" means the Asset Bridge Warrant
Agreement, dated as of February 4, 2000, among Holdings and the Purchasers in
the form attached as Exhibit D to this Agreement, as amended, supplemented or
otherwise modified from time to time.
"AUTHORIZED OFFICER" means, relative to any Obligor, those of its
officers, general parties or managing members (as applicable) whose signatures
and incumbency shall have been certified to the Purchasers and the Holders
pursuant to CLAUSE (A) of SECTION 5.1.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
close.
"COLLATERAL AGENT" means Rail America Funding, Inc., in its capacity as
collateral agent for the Secured Parties and includes each other Person
appointed as the successor Collateral Agent pursuant to SECTION 9.3.
"COMMISSION" means the Securities and Exchange Commission.
"COMMITMENT" means, with respect to any Purchaser, the amount set forth
opposite its name on the signature pages hereto or the obligation of such
Purchaser to purchase Asset Bridge Notes hereunder in an aggregate principal
amount at any time outstanding not to exceed such amount.
"COMMON STOCK" means the authorized common stock, par value $.001 per
share, of Holdings.
"COMPANY" is defined in the definition of the term "Credit Agreement".
"CREDIT AGREEMENT" means the Credit Agreement, dated as of February 4,
2000, among RailAmerica Transportation Corp. (the "COMPANY"), Intermediate
Holdings, Holdings, Railink, Ltd., a corporation organized and existing under
the laws of the Province of Alberta, Canada, Freight Victoria Limited, a
corporation organized and existing under the laws of Australia, the lenders
party thereto, DLJ Capital Funding, Inc., as syndication agent for the lenders,
the lead arranger and the sole book running manager, The Bank of Nova Scotia, as
administrative agent (in such capacity, the "ADMINISTRATIVE AGENT") for the
lenders, and ING (U.S.) Capital LLC and Fleet National Bank, as documentation
agent for the lenders, as amended, modified, amended and restated, renewed,
refunded, replaced or refinanced from time to time, PROVIDED that (i) such
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<PAGE> 8
refinancing or refunding has a final maturity date that is the same as or later
than the final maturity date of the Indebtedness being amended, modified,
amended and restated, renewed, refunded, replaced or refinanced, and (ii) the
principal amount thereof does not exceed $380,000,000, plus the amount of
reasonable expenses incurred in connection therewith (other than as a result of
currency fluctuations) less the amount of all principal repayments actually made
from time to time hereafter of term Indebtedness and permanent reductions of
revolving Indebtedness thereunder.
"DEBT INCURRENCE" means any incurrence by Holdings, Intermediate
Holdings or any of its Designated Restricted Subsidiaries of any Indebtedness,
other than Indebtedness permitted under CLAUSE (B) of SECTION 6.2.
"DEFAULT" means any Event of Default or any event or condition which,
with the giving of notice or lapse of time or both, would, unless cured or
waived, become an Event of Default.
"DESIGNATED RESTRICTED SUBSIDIARY" means Kalyn/Siebert.
"DOLLARS" or "$" mean lawful currency of the United States of America.
"ESCROW AGENT" means Snoga, Inc., a Delaware corporation.
"EVENT OF DEFAULT" has the meaning set forth in SECTION 7.1.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXPIRATION DATE" has the meaning set forth in SECTION 2.1(B).
"FEE LETTER" means the letter agreement with respect to fees dated
February 1, 2000 made by DLJ Bridge Finance, Inc. and DLJ Capital Funding, Inc
and accepted by Holdings on February 2, 2000.
"FINANCING DOCUMENTS" means this Agreement, the Asset Bridge Notes, the
Asset Bridge Equity Registration Rights Agreement, the Asset Bridge Warrant
Agreement, the Warrants and the Asset Bridge Escrow Agreement.
"FIRST ANNIVERSARY DATE" means the first anniversary of the Issuance
Date (or if such date is not a Business Day, the next preceding Business Day).
"GUARANTEE" means the guarantee by the Guarantors of the Asset Bridge
Notes pursuant to Article X.
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<PAGE> 9
"GUARANTEE OBLIGATION" means as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another Person
(including, without limitation, any bank under any letter of credit) to induce
the creation of which the guaranteeing person has issued a reimbursement,
counter indemnity or similar obligation, in either case guaranteeing or in
effect guaranteeing any Indebtedness (the "primary obligations") of any other
third Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of the guaranteeing
person, whether or not contingent, (i) to purchase any such primary obligation
or any property constituting direct or indirect security therefor, (ii) to
advance or supply funds (1) for the purchase or payment of any such primary
obligation or (2) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency of the primary
obligor or (iii) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation against loss in
respect thereof; PROVIDED, HOWEVER, that the term Guarantee Obligation shall not
include endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Guarantee Obligation of any guaranteeing
person shall be deemed to be the lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such guaranteeing person
may be liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable, in which case
the amount of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as determined in
good faith by the guaranteeing Person.
"GUARANTORS" is defined in the preamble.
"HOLDER" means any holder of any Asset Bridge Note.
"HOLDINGS" is defined in the preamble.
"INCORPORATED AGREEMENT" means the Credit Agreement; PROVIDED that any
amendment, supplement or waiver thereto or thereunder shall be effective for
purposes of this definition if and only if consented to in writing by the
Majority Holders. Each reference herein to the Incorporated Agreement shall by
such reference incorporate the provisions of the Incorporated Agreement to which
such reference is made as though fully set forth in such place, together with
related definitions and ancillary provisions, PROVIDED that for purposes of such
incorporation by reference, except as the context may otherwise require:
(i) references therein to "this Agreement", the "Notes", the
"Loan Documents" and the like shall be deemed to refer to and include
this Agreement, the Asset Bridge Notes and the Financing Documents,
respectively;
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<PAGE> 10
(ii) references therein to the "Administrative Agent" shall be
deemed to refer to the Purchasers;
(iii) references therein to the "Lenders" shall be deemed to
refer to (x) prior to the issuance of the Asset Bridge Notes, the
Purchasers and (y) from and after the issuance of the Asset Bridge
Notes, the Holders from time to time of the Asset Bridge Notes;
(iv) references therein to the "Required Lenders" or the like
shall be deemed to refer to the Majority Holders;
(v) references therein to the "Obligors" shall be deemed to
refer to Holdings, Intermediate Holdings and the Guarantors;
(vi) references in Article VI thereof to the "Credit
Extensions" shall be deemed to refer to the Indebtedness evidenced by
the Asset Bridge Notes; and
(vii) provisions within the Incorporated Agreement shall be
deemed for all purposes hereof to be modified as set forth in ARTICLES
III, VI and VII hereof.
"INITIAL RATE" has the meaning set forth in SECTION 2.5(B).
"INTEREST PAYMENT DATE" means each May 4, August 4, November 4 and
February 4 (or, if any such date is not a Business Day, the next succeeding
Business Day).
"INTERMEDIATE HOLDINGS" is defined in the preamble.
"ISSUANCE DATE" means the date the Asset Bridge Notes are issued by
Intermediate Holdings and purchased by the Purchasers.
"ISSUANCE DATE CERTIFICATE" means a certificate of an Authorized
Officer of Holdings and Intermediate Holdings substantially in the form of
EXHIBIT F hereto, delivered pursuant to CLAUSE (D) of SECTION 5.1.
"LENDERS" means the banks and other financial institutions from time to
time party to the Credit Agreement.
"LOAN DOCUMENTS" means the Credit Agreement, together with all notes,
collateral and security documents, guaranties, interest rate hedge or similar
arrangements to which the counterparty at the time such interest rate hedge or
similar arrangement was entered into was a lender under the Credit Agreement or
any of its Affiliates, agreements and other documents delivered at any time in
connection therewith, all as amended, supplemented or otherwise modified from
time to time in accordance with their respective terms.
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<PAGE> 11
"MAJORITY HOLDERS" means (i) at any time prior to the issuance of the
Asset Bridge Notes, the Purchasers and (ii) at any time thereafter, the holders
of voting rights with respect to waivers, amendments and other actions permitted
or required to be taken by Holders under the terms of the Asset Bridge Notes
constituting a majority of such voting rights attributable to the aggregate
outstanding amount of Asset Bridge Notes at such time.
"MATERIAL ACQUISITION DOCUMENTS" means the Merger Agreement, the Credit
Agreement and all other material instruments, agreements and documents relating
to the Acquisition, the RailAmerica Refinancing, the RailTex Refinancing, the
Intermediate Holdings Asset Bridge Note Issuance, the Equity Issuance, the Asset
Transfer and the transactions contemplated hereby or thereby, in each case as
amended from time to time in accordance with CLAUSE (J) of SECTION 6.2.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect upon the
business, assets, condition (financial or otherwise), operations, performance,
properties or prospects of Holdings, Intermediate Holdings and the Designated
Restricted Subsidiaries taken as a whole, (ii) the material impairment of the
ability of Holdings, Intermediate Holdings or any Guarantor to perform their
respective obligations under the Financing Documents, or (iii) a material
adverse effect on the rights and remedies of any Holder under any Financing
Document.
"MORTGAGE" means each mortgage, deed of trust or agreement executed and
delivered by any Designated Restricted Subsidiary in favor of the Collateral
Agent for the benefit of the Secured Parties pursuant to the requirements of
this Agreement in form and substance satisfactory to the Collateral Agent, under
which a Lien is granted on the real property and fixtures described therein, as
amended, supplemented, amended and restated or otherwise modified from time to
time.
"NET DEBT PROCEEDS" means with respect to the sale or issuance by
Holdings, Intermediate Holdings or the Designated Restricted Subsidiaries to any
Person of any of its Indebtedness not permitted pursuant to Section 7.2.2 of the
Incorporated Agreement as incorporated by reference in CLAUSE (B) of SECTION
6.2, the EXCESS of:
(a) the gross cash proceeds received by such Person from such
sale or issuance,
OVER
(b) all underwriting commissions and legal, investment
banking, brokerage and accounting and other professional fees, sales
commissions and disbursements actually incurred in connection with such
sale or issuance which have not been paid to Affiliates of Holdings in
connection therewith.
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<PAGE> 12
"NET EQUITY PROCEEDS" means with respect to any sale or issuance by
Holdings, Intermediate Holdings or the Designated Restricted Subsidiaries to any
Person of any of their respective Capital Stock or, warrants or options for such
Capital Stock or the exercise of any such warrants or options, the excess of:
(a) the gross cash proceeds received by Holdings, Intermediate
Holdings or any such Designated Restricted Subsidiary from such sale,
exercise or issuance; PROVIDED, HOWEVER, that Intermediate Holdings may
exclude up to $100,000 in aggregate of such gross proceeds received in
each Fiscal Year as a result of any sale or issuance by Holdings or
Intermediate Holdings to any Person of any of their respective Capital
Stock or, warrants or options for such Capital Stock or the exercise of
any such warrants or options,
OVER
(b) the sum of all underwriting commissions and legal,
investment banking, brokerage, accounting and other professional fees,
sales commissions and disbursements actually incurred in connection
with such sale or issuance which have not been paid to Affiliates of
Holdings or Intermediate Holdings in connection therewith.
"OBLIGATIONS" means all obligations (monetary or otherwise, whether
absolute or contingent, matured or unmatured) of Holdings, Intermediate Holdings
and each other Obligor arising under or in connection with a Financing Document,
including the principal of and premium, if any, and interest (including interest
accruing during the pendency of any proceeding of the type described in Section
8.1.9 of the Incorporated Agreement as incorporated by reference in CLAUSE (I)
of SECTION 7.1, whether or not allowed in such proceeding) on the Asset Bridge
Notes.
"OTHER TAXES" has the meaning set forth in SECTION 2.7(A).
"PERSON" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or any agency or political subdivision thereof) or other entity of
any kind.
"PRIME RATE" means, as of any date, the rate of interest then most
recently announced by The Bank of New York as its prime or reference rate for
dollars loaned in the United States.
"PROJECTIONS" is defined in CLAUSE (H)(I)(B) of SECTION 5.1.
"PURCHASERS" is defined in the PREAMBLE.
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"RESTRICTED SUBSIDIARY" means any Subsidiary of Intermediate Holdings
other than Ferronor.
"SECURED PARTIES" means the Collateral Agent and each of the Holders.
"SECURED PARTY'S ENVIRONMENTAL LIABILITY" means any and all losses,
liabilities, obligations, penalties, claims, litigation, demands, defenses,
costs, judgments, suits, proceedings, damages (including consequential damages),
disbursements or expenses of any kind or nature whatsoever (including reasonable
attorneys' fees at trial and appellate levels and experts' fees and
disbursements and expenses incurred in investigating, defending against or
prosecuting any litigation, claim or proceeding) which may at any time be
imposed upon, incurred by or asserted or awarded against any Secured Party or
any of such Person's Affiliates, shareholders, directors, officers, employees,
and agents in connection with or arising from:
(a) any Hazardous Material on, in, under or affecting all or
any portion of any property owned, leased or operated upon (including
rights of way easements) of Holdings, Intermediate Holdings or any of
its Designated Restricted Subsidiaries, the groundwater thereunder, or
any surrounding areas thereof to the extent caused by Releases from
Holdings', Intermediate Holdings' or any of its Designated Restricted
Subsidiaries' or any of their respective predecessors' properties
owned, leased or operated upon (including right of way easements);
(b) any misrepresentation, inaccuracy or breach of any
warranty contained in Section 6.12 of the Incorporated Agreement as
incorporated by reference in CLAUSE (K) of Section 3.1;
(c) any violation or claim of violation by Holdings,
Intermediate Holdings or any of its Designated Restricted Subsidiaries
of any Environmental Laws; or
(d) the imposition of any lien for damages caused by or the
recovery of any costs for the cleanup, release or threatened release of
Hazardous Material by Holdings, Intermediate Holdings or any of its
Designated Restricted Subsidiaries, or in connection with any property
owned, leased or operated upon (including right of way easements) or
formerly owned, leased or operated upon (including rights of way
easements) by Holdings, Intermediate Holdings or any of its Designated
Restricted Subsidiaries.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY DOCUMENTS" means, collectively, the Asset Bridge Pledge and
Security Agreement, the Foreign Pledge Agreements, if any, and the Mortgage(s).
-8-
<PAGE> 14
"SHELF REGISTRATION" means a "shelf" registration statement on any
appropriate form pursuant to Rule 415 (or similar rule that may be adopted by
the Commission) under the Securities Act.
"SUBORDINATED DEBT" means unsecured Indebtedness of Holdings,
Intermediate Holdings or any their Restricted Subsidiaries subordinated in right
of payment to the Obligations pursuant to documentation containing redemption
and other prepayment events, maturities, amortization schedules, covenants,
events of default, remedies, acceleration rights, subordination provisions and
other material terms satisfactory to the Majority Holders.
"TAXES" has the meaning set forth in SECTION 2.7(A).
"TRANSFER" means any disposition of Asset Bridge Notes that would
constitute a sale thereof under the Securities Act.
"TREASURY RATE" means, as of any date, the yield to maturity as of such
date of United States Treasury securities with a constant maturity (as compiled
and published in the most recent Federal Reserve Statistical Release H.15 (519)
that has become publicly available at least two Business Days prior to such date
(or, if such Statistical Release is no longer published, any publicly available
source of similar market data)) most nearly equal to (but not less than) the
remaining term to maturity of the Asset Bridge Notes; PROVIDED, HOWEVER, that if
such term to maturity is less than one year, the weekly average yield on
actually traded United States Treasury securities adjusted to a constant
maturity of one year shall be used.
"WARRANT SHARES" has the meaning set forth in CLAUSE (U) of SECTION
5.1.
"WARRANTS" means the warrants to purchase common stock of Holdings to
be issued pursuant to the Asset Bridge Warrant Agreement.
Section 1.2 INCORPORATED DEFINITION. Unless the context otherwise
requires, capitalized terms defined in the Incorporated Agreement and not
otherwise defined herein shall have the meanings assigned thereto in the
Incorporated Agreement.
ARTICLE II
PURCHASE AND SALE OF SECURITIES; TERMS OF SECURITIES
Section 2.1 COMMITMENT TO PURCHASE. (a) Subject to the terms and
conditions set forth herein and in reliance on the representations and
warranties of Intermediate Holdings contained herein and in the other Financing
Documents, Intermediate Holdings may at its option issue and sell to the
Purchasers on the Issuance Date, and each Purchaser agrees to purchase on the
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<PAGE> 15
Issuance Date, Asset Bridge Notes in an aggregate outstanding principal amount
equaling such Purchaser's Commitment. The purchase price for the Asset Bridge
Notes shall be 100% of the principal amount thereof.
(b) The Commitment will terminate (the "EXPIRATION DATE") on the
earliest of (i) the termination of the Merger Agreement in accordance with the
terms thereof prior to the consummation of the Acquisition, (ii) the
consummation of the Transaction without the issuance of the Asset Bridge Notes
(if such date occurs prior to the Issuance Date) and (iii) 5:00 P.M. (New York
City time) on April 15, 2000 (if such date occurs prior to the Issuance Date);
PROVIDED, that if at any time on or after the date hereof an Event of Default
shall have occurred and be continuing, a Purchaser may at its option terminate
its Commitment by notice to Intermediate Holdings, such termination to be
effective upon the giving of such notice; and PROVIDED, FURTHER, that the
Commitments shall automatically terminate, without notice to Intermediate
Holdings or any other action on the part of the Purchasers, upon the occurrence
of any Default described in clauses (b), (c) or (d) of Section 8.1.9 of the
Incorporated Agreement as incorporated by reference in CLAUSE (I) of SECTION 7.1
with respect to any Obligor.
(c) The Commitments are not revolving in nature, and principal amounts
of Asset Bridge Notes prepaid in accordance with SECTION 2.6 may not be resold
to the Purchasers hereunder.
Section 2.2 TAKEDOWN PROCEDURES. (a) Intermediate Holdings shall give
the Purchasers notice not later than 3:00 P.M. (New York City time) one Business
Day before the date of the proposed purchase and sale of Asset Bridge Notes,
which notice shall specify the principal amount of Asset Bridge Notes to be
purchased and sold and the proposed Issuance Date (which shall be a Business
Day).
(b) On the Issuance Date, the Purchasers, severally and not jointly,
shall deliver by wire transfer, to the account number of Intermediate Holdings
specified by Intermediate Holdings in writing no later than 1:00 P.M. (New York
City time) on the Issuance Date, immediately available funds in an amount equal
to the aggregate purchase price of the Asset Bridge Notes to be purchased by the
Purchasers hereunder on such Issuance Date, less the aggregate amount of fees
payable by Intermediate Holdings to the Purchasers on such date pursuant to
SECTION 2.3 and expenses (if any) payable to the Purchasers on such date
pursuant to SECTIONS 9.8 and 11.4.
(c) On the Issuance Date, against payment as set forth in CLAUSE (B)
above, Intermediate Holdings shall deliver to each Purchaser a single Asset
Bridge Note representing the aggregate principal amount of Asset Bridge Notes to
be purchased by such Purchaser registered in the name of such Purchaser, or, if
requested by such Purchaser, separate Asset Bridge Notes in such other
denominations representing in total such aggregate principal amount and
registered in such name or names as shall be designated by such Purchaser by
notice to Intermediate Holdings at least one Business Day prior to the Issuance
Date.
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<PAGE> 16
Section 2.3 FEES. Intermediate Holdings shall pay to the Purchasers the
fees that are set forth in the Fee Letter at such times and in such amounts as
agreed to therein.
Section 2.4 MANDATORY TERMINATION OF COMMITMENTS. The Commitment shall
terminate on the Expiration Date.
Section 2.5 INTEREST. (a) Interest on each Asset Bridge Note shall be
payable quarterly in arrears, on each Interest Payment Date of each year in
which such Asset Bridge Note remains outstanding, commencing with the first
Interest Payment Date after the date of issuance thereof, on the principal
amount of such Asset Bridge Note outstanding. Interest on each Asset Bridge Note
shall be calculated at the rates per annum set forth below and shall accrue from
and including the most recent Interest Payment Date to which interest has been
paid on such Asset Bridge Note (or if no interest has been paid on such Asset
Bridge Note, from the date of issuance thereof in the case of each Asset Bridge
Note) to but excluding the date on which payment in full of the principal sum of
such Asset Bridge Note has been made.
(b) The interest rate applicable to each Asset Bridge Note (i) from and
including the Issuance Date to but excluding the day that is 180 days following
the Issuance Date shall be 15.00%, (ii) from and including the day that is 180
days following the Issuance Date to but excluding the day that is 270 days
following the Issuance Date shall be 15.50% and (iii) from and including the day
that is 270 days following the Issuance Date to but excluding the date that each
such Asset Bridge Note shall have been paid in full in cash shall be 15.75%.
Interest on each Asset Bridge Note will be calculated on the basis of a 360-day
year and paid for the actual number of days elapsed.
(c) Overdue principal and interest on the Asset Bridge Notes shall bear
interest from the date so due to the date paid at a rate which is 2.0% per annum
in excess of the rate then borne by the Asset Bridge Notes.
(d) Notwithstanding anything to the contrary set forth above,
Intermediate Holdings may, at its option, in lieu of making payments of interest
in cash on any Interest Payment Date (other than the Interest Payment Date
occuring on or about the date that the Asset Bridge Notes shall be paid in
full), pay interest on such Interest Payment Date through the issuance of
Additional Asset Bridge Notes. Such Additional Asset Bridge Notes issued on any
Interest Payment Date shall, subject to the remaining provisions of this
paragraph, be in an aggregate principal amount equal to the interest then due
for such Interest Payment Date, shall otherwise be identical to the outstanding
Asset Bridge Notes and shall be issued to the Holders of the outstanding Asset
Bridge Notes in proportions such that each Holder shall receive the same ratio
of cash interest, if any, to Additional Asset Bridge Notes on such Interest
Payment Date.
Section 2.6 MATURITY OF ASSET BRIDGE NOTES; PREPAYMENT OF ASSET BRIDGE
NOTES. (a) The Asset Bridge Notes shall mature on the earlier of (x) the First
Anniversary Date (PROVIDED,
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<PAGE> 17
HOWEVER that, unless Intermediate Holdings shall have notified the Purchasers in
writing not less than 5 Business Days prior to the First Anniversary Date of its
intention to repay the Asset Bridge Notes in full on or prior to the First
Anniversary Date, the maturity date for purposes of this CLAUSE (X) will be
automatically extended to the date which is six (6) months after the Stated
Maturity Date for Term B Loans if, on the First Anniversary Date, (i) no Default
under this Agreement shall have occurred and be continuing; (ii) no event of
default or event which with the giving of notice or the lapse of time, or both,
would become an event of default under the Loan Documents or any Indebtedness of
Holdings, Intermediate Holdings or any of its Designated Restricted Subsidiaries
relating to more than $5,500,000 in aggregate principal amount shall have
occurred and be continuing; and (iii) all fees and expenses payable as of such
date to the Purchasers or Holders hereunder shall have been paid in full) and
(y) the date that all or substantially all of the Collateral (as defined in the
Security Documents) shall have been Disposed of by Intermediate Holdings and/or
the relevant Guarantors.
(b) For so long as any Asset Bridge Notes are outstanding, Intermediate
Holdings at its option may, upon 5 Business Days' written notice to the Holders
thereof, at any time, prepay all or any part of the principal amount of the
Asset Bridge Notes at a redemption price equal to 100.00% of the outstanding
principal amount of the Asset Bridge Notes so prepaid, together with accrued and
unpaid interest through the date of prepayment.
(c) (i) Intermediate Holdings shall, following the receipt by any
Designated Restricted Subsidiary of any Casualty Proceeds deliver to the Holders
a calculation of the amount of such Casualty Proceeds and make a mandatory
redemption of the Asset Bridge Notes at a redemption price of 100.00% of the
principal amount so redeemed in an amount equal to 100% of such Casualty
Proceeds within 15 Business Days of the receipt thereof; PROVIDED, HOWEVER, that
if
(A) Intermediate Holdings informs the Holders in writing no
later than the earlier of (x) 30 days following the occurrence of the
Casualty Event resulting in such Casualty Proceeds and (y) 5 Business
Days following the receipt of such Casualty Proceeds of such Designated
Restricted Subsidiary's good faith intention to apply such Casualty
Proceeds to the rebuilding or replacement of the damaged, destroyed or
condemned assets or property or the acquisition or construction of
other long-term capital assets useful in the such Designated Restricted
Subsidiary's business and
(B) the Majority Holders give their written consent to such
application,
then no mandatory redemption on account of Casualty Proceeds shall be required
under this clause so long as such Designated Restricted Subsidiary in fact uses
such Casualty Proceeds to rebuild or replace such damaged, destroyed or
condemned assets or acquire or construct such other long-term assets in
accordance with, among other things, the schedule consented to by the Majority
Holders, with any amount of such Casualty Proceeds not so requested to be so
applied
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in such rebuilding, replacement, acquisition or construction being applied to
redeem the Asset Bridge Notes at a redemption price of 100.00% of the principal
amount so redeemed.
(ii) Intermediate Holdings shall, following the receipt by Intermediate
Holdings or any Designated Restricted Subsidiary of any Net Disposition Proceeds
in excess of $15,000 (individually or in the aggregate), deliver to the Holders
a calculation of the amount of such Net Disposition Proceeds and make a
mandatory redemption of the Asset Bridge Notes at a redemption price of 100.00%
of the principal amount so redeemed in an amount equal to 100% of such Net
Disposition Proceeds within one Business Day of the receipt thereof; PROVIDED,
HOWEVER, that a Disposition by Intermediate Holdings of any of its assets other
than the Capital Stock of any Designated Restricted Subsidiary shall not
constitute a Disposition for purposes of determining Net Disposition Proceeds
hereunder.
(iii) Concurrently with the receipt by Holdings, Intermediate Holdings
or any of the Restricted Subsidiaries of any Net Equity Proceeds, Holdings shall
deliver to the Holders a calculation of the amount of such Net Equity Proceeds
and Intermediate Holdings shall make a mandatory redemption of the Asset Bridge
Notes at a redemption price of 100% of the principal amount so redeemed in an
amount equal to 100% of such Net Equity Proceeds.
(iv) Concurrently with the receipt by Holdings, Intermediate Holdings
or any of the Restricted Subsidiaries of any Net Debt Proceeds, Holdings shall
deliver to the Holders a calculation of the amount of such Net Debt Proceeds and
Intermediate Holdings shall make a mandatory redemption of the Asset Bridge
Notes at a redemption price of 100% of the principal amount so redeemed in an
amount equal to the lesser of (x) 100% of such Net Debt Proceeds and (y)
$10,000,000.
(v) Concurrently with the Disposition by Holdings, Intermediate
Holdings or any of their respective Restricted Subsidiaries of any Capital Stock
of QRC owned by Holdings, Intermediate Holdings or any such Restricted
Subsidiary to any Person other than Intermediate Holdings or any of its
Designated Restricted Subsidiaries, Intermediate Holdings shall make a mandatory
redemption of the Asset Bridge Notes at a redemption price of 100% of the
principal amount so redeemed in an amount equal to the amount of consideration
received by Holdings, Intermediate Holdings or any such Restricted Subsidiary,
as the case may be.
(vi) Notwithstanding anything contained in this Agreement to the
contrary, Intermediate Holdings shall not be obligated to prepay or redeem the
principal amount of Asset Bridge Notes (A) with (1) any Net Debt Proceeds of any
Debt Incurrence if such prepayment is prohibited by the lenders with respect to
such Debt Incurrence or (2) any Net Debt Proceeds or Net Equity Proceeds, to the
extent any portion of such Net Debt Proceeds or Net Equity Proceeds are required
under the Credit Agreement to be paid to the holders of the principal amount of
any loans thereunder or (B) with respect to any Excess Cash Flow, to the extent
a mandatory
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prepayment is required under the Credit Agreement to be paid to the holders of
the principal amount of any loans thereunder in respect of any portion of such
Excess Cash Flow.
(d) Any prepayment of the Asset Bridge Notes pursuant to SECTION 2.6(B)
shall be in a minimum amount of at least $500,000, unless less than $500,000 of
the Asset Bridge Notes remain outstanding, in which case all of the Asset Bridge
Notes must be prepaid. Any prepayment of the Asset Bridge Notes pursuant to
SECTION 2.6(C) shall be in a minimum amount which is a multiple of $1,000 times
the number of Holders at the time of such prepayment.
(e) Any partial prepayment of the Asset Bridge Notes pursuant to
SECTION 2.6(B) shall be made so that the Asset Bridge Notes held by each Holder
shall be prepaid in a principal amount which shall bear the same ratio, as
nearly as may be, to the total principal amount of such Asset Bridge Notes being
prepaid as the principal amount of such Asset Bridge Notes held by such Holder
shall bear to the aggregate principal amount of all such Asset Bridge Notes then
outstanding. Any partial prepayment of the Asset Bridge Notes pursuant to
SECTION 2.6(C) shall be applied the Asset Bridge Notes until all such Asset
Bridge Notes shall have been prepaid in full, and shall be made so that such
Asset Bridge Notes then held by each Holder shall be prepaid in a principal
amount which shall bear the same ratio, as nearly as may be, to the total
principal amount of such Asset Bridge Notes being prepaid as the principal
amount of such Asset Bridge Notes held by such Holder shall bear to the
aggregate principal amount of all such Asset Bridge Notes then outstanding. In
the event of a partial prepayment of any Asset Bridge Note, upon presentation
and surrender of such Asset Bridge Note Intermediate Holdings shall execute and
deliver to or on the order of the Holder, at the expense of Intermediate
Holdings, a new Asset Bridge Note in principal amount equal to the remaining
outstanding portion of such Asset Bridge Note.
Section 2.7 TAXES. (a) For the purposes of this Section, the following
terms have the following meanings:
"Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings with respect to any payment by
Intermediate Holdings pursuant to this Agreement or under any Asset Bridge Note
or any other Financing Document, and all liabilities with respect thereto,
excluding (i) United States federal withholding taxes payable under laws in
effect on the date hereof and (ii) in the case of the Collateral Agent, any
Purchaser or any other Holder, taxes imposed on the net income of the Collateral
Agent or such Purchaser or Holder and franchise or similar taxes imposed on the
net income of the Collateral Agent or such Purchaser or Holder, by a
jurisdiction under the laws of which the Collateral Agent or such Purchaser or
Holder is organized or in which its principal executive office or the office
holding any Asset Bridge Notes or any Financing Document is located.
"Other Taxes" means any present or future stamp or documentary taxes
and any other excise or property taxes, or similar charges or levies, which
arise from any payment made
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pursuant to this Agreement or under any Asset Bridge Note or any other Financing
Document or from the execution, delivery, registration, recordation or
enforcement of, or otherwise with respect to, this Agreement or any Asset Bridge
Note or any other Financing Document.
(b) All payments by Intermediate Holdings to or for the account of the
Collateral Agent or any Purchaser or Holder under any Financing Document shall
be made without deduction for any Taxes or Other Taxes; PROVIDED that, if
Intermediate Holdings shall be required by law to deduct any Taxes or Other
Taxes from any such payment, the sum payable shall be increased as necessary so
that after making all required deductions (including deductions applicable to
additional sums payable under this Section), the Collateral Agent or such
Purchaser or Holder (as the case may be) receives an amount equal to the sum it
would have received had no such deductions been made, Intermediate Holdings
shall make such deductions, Intermediate Holdings shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable law and Intermediate Holdings shall promptly furnish to the
Collateral Agent or such Purchaser or Holder (as the case may be) the original
or a certified copy of a receipt or other documentation available to
Intermediate Holdings evidencing payment thereof.
(c) Intermediate Holdings agrees to indemnify the Collateral Agent and
each Purchaser and Holder for the full amount of Taxes and Other Taxes
(including, without limitation, any Taxes or Other Taxes imposed or asserted
(whether or not correctly) by any jurisdiction on amounts payable under this
Section) paid by the Collateral Agent or such Purchaser or Holder (as the case
may be) and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto; PROVIDED, HOWEVER, that Intermediate Holdings
shall not be obligated to make any payment pursuant to this SECTION 2.7(C) in
respect of penalties or interest attributable to any Taxes or Other Taxes, if
written demand therefor has not been made by the Collateral Agent or such
Purchaser or Holder (as the case may be) within 60 days from the date on which
the Collateral Agent or such Purchaser or Holder received written notice of the
imposition of Taxes or Other Taxes by the relevant taxing authority, or for any
additional imposition which may arise from the failure of the Collateral Agent
or such Purchaser or Holder (as the case may be) to apply payments in accordance
with the applicable tax law after Intermediate Holdings has made the payments
required hereunder. After the Collateral Agent or any Purchaser or Holder (as
the case may be) receives written notice of the imposition of Taxes, the
Collateral Agent or such Purchaser or Holder will act in good faith to notify
Intermediate Holdings of its obligations thereunder as soon as reasonably
possible.
(d) Intermediate Holdings shall have no obligation for Taxes under
SECTION 2.7(B) or SECTION 2.7(C) for or on account of:
(i) any Taxes (other than Other Taxes) that would not have
been so imposed but for the existence of any present or former
connection between the Collateral Agent or any Purchaser, Holder or
beneficial owner of a Asset Bridge Note (or between a fiduciary,
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settlor, beneficiary, member, or shareholder of, or possessor of a
power over, the Collateral Agent or such Purchaser, Holder or
beneficial owner, if the Collateral Agent or such Purchaser, Holder or
beneficial owner is an estate, a trust, a partnership or corporation)
and the jurisdiction imposing the Tax other than merely holding such
Asset Bridge Note or any Financing Document, or the receipt of payments
in respect thereof, including, without limitation, the Collateral Agent
or such Purchaser, Holder or beneficial owner (or such fiduciary,
settlor, beneficiary, member, shareholder, or possessor) being or
having been a citizen or resident thereof, or being or having been
engaged in a trade or business or having a permanent establishment or
other fixed base therein, or making or having made an election the
effect of which is to subject the Collateral Agent or such Purchaser,
Holder or beneficial owner (or such fiduciary, settlor, beneficiary,
member, shareholder, or possessor) to such Tax;
(ii) any Taxes in the nature of estate, inheritance or gift
taxes;
(iii) any Tax that is imposed or withheld by reason of the
failure of the Collateral Agent or such Purchaser, Holder or beneficial
owner of a Asset Bridge Note to comply with a written request by
Intermediate Holdings, addressed to the Collateral Agent or such
Purchaser, Holder or beneficial owner, to provide information
concerning the nationality, residence or identity of the Collateral
Agent or such Purchaser, Holder or beneficial owner, if providing such
information under a statute, treaty, regulation or administrative
practice of the jurisdiction imposing such Tax would result in a
complete exemption from such Tax;
(iv) any Taxes imposed on any payment on a Asset Bridge Note
to any Purchaser or Holder that is a fiduciary or partnership or other
than sole beneficial owner of such payment to the extent a beneficiary
or settlor with respect to such fiduciary or a member of such
partnership or a beneficial owner would not have been entitled to the
payment of taxes had such beneficiary, settlor, member or beneficial
owner directly received its beneficial or distributive share of such
payment; and
(v) any combination of items (i) through (iv) above.
(e) If Intermediate Holdings determines in good faith that a reasonable
basis exists for contesting the imposition of a Tax or Other Tax with respect to
the Collateral Agent or any Purchaser or Holder, the Collateral Agent, such
Purchaser or Holder (as the case may be) shall cooperate with Intermediate
Holdings in challenging such Tax or Other Tax at Intermediate Holdings' expense
(including, without limitation, any additional costs, expenses or Taxes incurred
by the Collateral Agent or any Purchaser or Holder, as the case may be, as a
result of such contesting of such Taxes) if requested by Intermediate Holdings;
PROVIDED, HOWEVER, that nothing in this SECTION 2.7(E) shall require the
Collateral Agent or any Purchaser or Holder to submit to Intermediate Holdings
any tax returns or any part thereof, or to prepare or file any tax
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returns other than as the Collateral Agent or such Purchaser or Holder in its
sole discretion shall determine.
(f) Each of the Collateral Agent and each Purchaser and Holder agrees,
to the extent reasonable and without material cost to it, to cooperate with
Intermediate Holdings to minimize any amounts payable by Intermediate Holdings
under this SECTION 2.7.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
HOLDINGS, INTERMEDIATE HOLDINGS AND THE COMPANY
Each of Holdings and Intermediate Holdings represents and warrants to
the Purchasers (both before and after giving effect to the Transaction) as set
forth below:
Section 3.1 INCORPORATION OF REPRESENTATIONS AND WARRANTIES IN
INCORPORATED AGREEMENT. Each of Holdings and Intermediate Holdings hereby makes,
for the benefit of the Purchasers and the Holders from time to time of the Asset
Bridge Notes, the representations and warranties contained in the following
Sections of the Incorporated Agreement:
(a) 6.1 (Organization, etc.);
(b) 6.2 (Due Authorization, Non-Contravention, etc.);
(c) 6.3 (Government Approval, Regulation, etc.);
(d) 6.5 (Financial Information);
(e) 6.6 (No Material Adverse Change);
(f) 6.7 (Litigation, Labor Controversies, etc.);
(g) 6.8 (Subsidiaries);
(h) 6.9 (Ownership of Properties);
(i) 6.10 (Taxes);
(j) 6.11 (Pension and Welfare Plans);
(k) 6.12 (Environmental Warranties);
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(l) 6.13 (Accuracy of Information);
(m) 6.14 (Regulations U and X);
(n) 6.15 (Year 2000); and
(o) 6.17 (Solvency).
Section 3.2 AUTHORIZATION, EXECUTION AND ENFORCEABILITY. (a) Each of
the Financing Documents (other than the Asset Bridge Notes) and the Material
Acquisition Documents to which any of Holdings or Intermediate Holdings is a
party constitutes the valid and binding agreement of such Obligor enforceable in
accordance with its terms (except, in any case, as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally and by principles of equity). When
executed and delivered by Intermediate Holdings against payment therefor in
accordance with the terms hereof, the Asset Bridge Notes will constitute valid
and binding obligations of Intermediate Holdings, enforceable in accordance with
their terms (except, in any case, as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally and by principles of equity).
(b) The Warrants have been duly authorized by Holdings. When executed
pursuant to the terms of the Asset Bridge Warrant Agreement and delivered to the
Escrow Agent pursuant to the provisions of this Agreement, the Warrants will be
the valid and binding obligations of Holdings, enforceable against it in
accordance with their terms (except, in any case, as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally and by principles of equity).
(c) The Warrant Shares to be issued upon exercise of the Warrants have
been duly authorized and reserved for issuance by Holdings and will be issued at
the times and in the manner required by the Asset Bridge Warrant Agreement and,
upon due exercise of a Warrant, the Warrant Shares issued will be validly
issued, fully paid and nonassessable.
Section 3.3 CAPITALIZATION. At the Issuance Date, after giving effect
to the consummation of the Transaction, the capitalization of Holdings will be
as set forth on SCHEDULE 3.3. All of the issued and outstanding shares of Common
Stock of Holdings are, and, upon consummation of the Transaction, will be,
validly issued, fully paid and nonassessable and the holders thereof are not
entitled to any preemptive or other similar rights. Except for the Material
Acquisition Documents or as set forth on SCHEDULE 3.3, there are no
subscriptions, options, warrants, rights, convertible securities, exchangeable
securities or other agreements or commitments of any character pursuant to which
Holdings is required to issue any shares of its capital stock.
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<PAGE> 24
Section 3.4 SOLICITATION. No form of general solicitation or general
advertising was used by Intermediate Holdings or, to the best of its knowledge,
any other Person acting on behalf of Intermediate Holdings, in connection with
the offer and sale of the Asset Bridge Notes. Neither Intermediate Holdings nor,
to the best of its knowledge, any Person acting on behalf of Intermediate
Holdings has, either directly or indirectly, sold or offered for sale to any
Person any of the Asset Bridge Notes or any other similar security of
Intermediate Holdings except as contemplated by this Agreement, and Intermediate
Holdings represents that neither Intermediate Holdings nor any person acting on
its behalf other than the Purchasers and its Affiliates will sell or offer for
sale to any Person any such security to, or solicit any offers to buy any such
security from, or otherwise approach or negotiate in respect thereof with, any
Person or Persons so as thereby to bring the issuance or sale of any of the
Asset Bridge Notes within the provisions of Section 5 of the Securities Act.
Section 3.5 NON-FUNGIBILITY. When the Asset Bridge Notes are issued and
delivered pursuant to this Agreement, the Asset Bridge Notes will not be of the
same class (within the meaning of Rule 144A under the Securities Act) as
securities which are (i) listed on a national securities exchange registered
under Section 6 of the Exchange Act or (ii) quoted in a U.S.
automated inter-dealer quotation system.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
Section 4.1 PURCHASE FOR INVESTMENT; AUTHORITY; BINDING AGREEMENT. Each
of the Purchasers represents and warrants, severally and not jointly, as to
itself only, to Holdings and Intermediate Holdings that:
(a) such Purchaser is an Accredited Investor within the
meaning of Rule 501(a) under the Securities Act and the Asset Bridge
Notes to be acquired by it pursuant to this Agreement are being
acquired for its own account without a view toward distribution and the
Purchaser will not offer, sell, transfer, pledge, hypothecate or
otherwise dispose of the Asset Bridge Notes unless pursuant to a
transaction either registered under, or exempt from registration under,
the Securities Act;
(b) the execution, delivery and performance of this Agreement
and the purchase of the Asset Bridge Notes pursuant hereto are within
such Purchaser's corporate powers and have been duly and validly
authorized by all requisite corporate action;
(c) this Agreement has been duly executed and delivered by
such Purchaser;
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<PAGE> 25
(d) this Agreement constitutes a valid and binding agreement
of such Purchaser enforceable in accordance with its terms;
(e) such Purchaser has such knowledge and experience in
financial and business matters so as to be capable of evaluating the
merits and risks of its investment in the Asset Bridge Notes and such
Purchaser is capable of bearing the economic risks of such investment;
and
(f) such Purchaser has had the opportunity to ask questions of
and receive answers from representatives of Holdings concerning
Holdings and its Subsidiaries and the terms and conditions of this
Agreement and the Asset Bridge Notes, and has been granted access to
all books, records and documents of Holdings and its Subsidiaries as it
has requested.
ARTICLE V
CONDITIONS PRECEDENT TO PURCHASE
Section 5.1 CONDITIONS TO PURCHASERS' OBLIGATION AT TAKEDOWN. The
obligation of the Purchasers (which is several and not joint) to purchase the
Asset Bridge Notes to be issued and sold by Intermediate Holdings on the
Issuance Date is subject to the satisfaction of the following conditions
contemporaneously with such purchase:
(a) RESOLUTIONS, ETC. The Purchasers shall have received from
each Obligor, as applicable, (i) a copy of a good standing certificate,
dated a date reasonably close to the Issuance Date, for each such
Person and (ii) a certificate, dated the Issuance Date, duly executed
and delivered by such Person's Secretary or Assistant Secretary,
managing member or general partner, as applicable, as to
(i) resolutions of each such Person's Board of
Directors (or other managing body, in the case of other than a
corporation) then in full force and effect authorizing, to the
extent relevant, all aspects of the Transaction applicable to
such Person and the execution, delivery and performance of
each Financing Document to be executed by such Person and the
transactions contemplated hereby and thereby;
(ii) the incumbency and signatures of those of its
officers, managing member or general partner, as applicable,
authorized to act with respect to each Financing Document to
be executed by such Person; and
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(iii) the full force and validity of each Organic
Document of such Person and copies thereof;
upon which certificates each Secured Party may conclusively rely until
it shall have received a further certificate of the Secretary,
Assistant Secretary, managing member or general partner, as applicable,
of any such Person canceling or amending the prior certificate of such
Person.
(b) TRANSACTION CONSUMMATED. (i) The Asset Transfer shall have
been consummated on terms and conditions reasonably
satisfactory to the Purchasers.
(ii) The Acquisition shall have been consummated (or
shall be consummated contemporaneously with the application by
the Company of the proceeds of the Asset Bridge Notes that
have been contributed to it by Intermediate Holdings) and in
connection therewith, the Company shall have acquired 100% of
the issued and outstanding stock of RailTex pursuant to the
Merger Agreement for a merger consideration comprised of (i)
an aggregate cash purchase price of no more than $139,000,000
and (ii) the Equity Issuance (as defined in the Incorporated
Agreement) which shall have been consummated on terms
(including documentation in respect thereof in form and
substance) satisfactory in all respects to the Purchasers.
(iii) In connection with the Acquisition, the Rail
America Refinancing and the RailTex Refinancing shall have
been consummated (or shall be consummated contemporaneously
with the application by the Company of the proceeds of the
Asset Bridge Notes that have been contributed to it by
Intermediate Holdings) on terms and conditions satisfactory in
all respects to the Purchasers and except for capital leases
and senior secured indebtedness totaling $17,900,000 and
convertible subordinated indebtedness of $24,600,000, Holdings
and its Subsidiaries shall have no indebtedness for borrowed
money other than that incurred in connection with the
Transaction.
(iv) The Company shall have received proceeds of not
less than $330,000,000 of Term Loans under the Credit
Agreement and the Revolving Loans shall be available
thereunder (but undrawn) on the Issuance Date.
(v) The Subordinated Bridge Note Issuance shall have
been consummated on terms (including documentation in respect
thereof in form and substance) satisfactory in all respects to
the Purchasers and resulted in gross cash proceeds of at least
$95,000,000.
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(vi) RailTex shall have received net cash proceeds
from the exercise of RailTex stock options of at least
$11,100,000 (subject to adjustment due to cashless exercise of
such options and termination of such options not exercised).
(vii) The Company shall have at least $10,300,000
cash on hand immediately prior to the consummation of the
Transaction.
(viii) RailTex shall have received net cash proceeds
from the sale of RailTex Brazil of at least $9,000,000.
(ix) The fees and expenses paid or to be paid in
connection with the Transaction shall not exceed $36,000,000.
(c) TRANSACTION DOCUMENTS. The Purchasers shall have received
copies of fully executed versions of the Transaction Documents
(including the Material Acquisition Documents and the Loan Documents),
certified to be true and complete copies thereof by an Authorized
Officer of Holdings and Intermediate Holdings. Each Transaction
Document (including the Merger Agreement) shall be in full force and
effect and shall not have been modified or waived in any material
respect, nor shall there have been any forbearance to exercise any
material rights with respect to any of the terms or provisions relating
to the conditions to the consummation of the Acquisition set forth in
the Merger Agreement unless otherwise agreed to by the Purchasers. The
covenants and the other terms and conditions contained in the Credit
Agreement shall be reasonably satisfactory to the Purchasers in all
respects.
(d) ISSUANCE DATE CERTIFICATE. The Purchasers shall have
received the Issuance Date Certificate, dated the Issuance Date and
duly executed and delivered by an Authorized Officer, of each of
Holdings and Intermediate Holdings, in which certificate each of
Holdings and Intermediate Holdings shall agree and acknowledge that the
statements made therein shall be deemed to be true and correct
representations and warranties of each of Holdings and Intermediate
Holdings as of such date, and, at the time each such certificate is
delivered, such statements shall in fact be true and correct. All
documents and agreements required to be appended to the Issuance Date
Certificate shall be in form and substance reasonably satisfactory to
the Purchasers.
(e) DELIVERY OF ASSET BRIDGE NOTES. The Purchasers shall have
received the Asset Bridge Notes to be issued on the Issuance Date, duly
executed by Intermediate Holdings in the denominations and registered
in the names specified in or pursuant to SECTION 2.2.
(f) PAYMENT OF OUTSTANDING INDEBTEDNESS, ETC. All Indebtedness
identified in ITEM 7.2.2(B) of the Disclosure Schedule (Indebtedness to
Be Paid) to the Incorporated Agreement, together with all interest, all
prepayment premiums and other amounts due
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and payable with respect thereto, shall have been paid in full in part
from the proceeds received by Intermediate Holdings in consideration
for the Asset Bridge Notes and the proceeds of the Credit Extensions
(as defined in the Credit Agreement) and the Subordinated Bridge Note
Issuance received by the Company and the commitments in respect of such
Indebtedness shall have been terminated, and all Liens securing payment
of any such Indebtedness have been released.
(g) FEES, EXPENSES, ETC. The Purchasers shall have received
for their respective accounts all fees, costs and expenses (other than
amounts to be netted against the purchase price of the Asset Bridge
Notes pursuant to SECTION 2.2(B)) due and payable pursuant to SECTIONS
2.3, 9.8 and 11.4.
(h) FINANCIAL INFORMATION, MATERIAL ADVERSE CHANGE. (i) The
Purchasers shall have received
(A) a consolidating PRO FORMA income
statement of Holdings and its Subsidiaries for each
of the twelve month periods ended December 31, 1998,
September 30, 1999 and December 31, 1999 and a
consolidated balance sheet of Holdings and its
Subsidiaries, as of the most recent date practicable
near to the Issuance Date (but no earlier than the
close of the Fiscal Quarter ending immediately prior
to the Issuance Date) certified by the treasurer,
chief financial or accounting Authorized Officer of
Holdings, in each case, giving effect to the
consummation of the Transaction and all the
transactions contemplated by this agreement and
reflecting estimated transaction related accounting
adjustments, prepared by the Company in accordance
with Regulation S-X; and
(B) projected financial statements
(including balance sheets and statements of income,
stockholders' equity and cash flows) of Holdings and
its Subsidiaries for the eight-year period following
the Issuance Date (the "PROJECTIONS") satisfactory in
form and substance to the Purchasers.
(ii) Since December 31, 1998, there shall not have
been any material adverse change in the business, assets,
condition (financial or otherwise), operations, performance,
properties, Projections or prospects of Holdings, Intermediate
Holdings and the Designated Restricted Subsidiaries, taken as
a whole.
(i) OPINIONS OF COUNSEL. The Purchasers shall have received
opinions, dated the Issuance Date and addressed to the Purchasers, from
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(i) Greenberg Traurig, P.A., counsel to the Obligors,
in form and substance satisfactory to the Purchasers;
(ii) Shutts & Bowen, counsel to the Obligors, in form
and substance satisfactory to the Purchasers; and
(iii) local counsel to the Guarantors in the
jurisdictions agreed upon by the Purchasers and Intermediate
Holdings, each in form and substance, and from counsel,
satisfactory to the Purchasers.
(j) SOLVENCY CERTIFICATE. The Purchasers shall have received a
certificate duly executed and delivered by the treasurer, chief
financial or accounting Authorized Officer of each of Holdings and
Intermediate Holdings, dated the date of the Issuance Date, in the form
of EXHIBIT G attached hereto.
(k) INSURANCE. The Purchasers shall have received certified
copies of the insurance policies (or binders in respect thereof), from
one or more insurance companies reasonably satisfactory to the
Purchasers, evidencing coverage required to be maintained pursuant to
each Loan Document.
(l) LITIGATION. There shall exist no pending or threatened
action, suit, investigation, litigation or proceeding in any court or
before any arbitrator or governmental instrumentality which (x)
purports to affect the consummation of the Transaction or the legality
or validity of this Agreement, any Asset Bridge Note, any other
Financing Document or any Material Acquisition Document or (y) could
reasonably be expected to have a Material Adverse Effect.
(m) MINIMUM EBITDA. The Company's EBITDA for the consecutive
twelve month period ended September 30, 1999 shall be at least
$93,900,000, including (i) EBITDA as reported of $62,800,000, (ii)
transaction related accounting adjustments, prepared by the Company
which are in accordance with Regulation S-X for Form S-1 Registration
Statements of no less than $26,700,000 and (iii) other pro forma cost
savings of no less than $4,400,000 which are reasonably satisfactory in
form and substance to the Purchasers.
(n) CORPORATE, TAX AND CAPITAL STRUCTURE. The tax structure
(including Organic Documents), the Tax-Sharing Agreement, the
shareholders agreements and the management of Holdings, Intermediate
Holdings and their respective Subsidiaries both before and after the
Transaction shall be reasonably satisfactory to the Purchasers in all
respects. The corporate and capital structure of Holdings, Intermediate
Holdings and such Subsidiaries shall be as set forth in ANNEX I hereto.
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(o) APPROVALS. All governmental, shareholder and third party
consents (including Surface Transportation Board clearance) and
approvals necessary or desirable in connection with the consummation of
the Transaction, and the related financings and other transactions
contemplated hereby shall have been duly obtained and all applicable
waiting periods shall have expired, without any action being taken by
any competent authority that could restrain, prevent or impose any
materially adverse conditions on the Transaction, and no such law or
regulation shall be applicable which in the judgment of the Purchasers
could have any such effect.
(p) ENVIRONMENTAL ASSESSMENT. The Purchasers shall have
received copies of an environmental assessment of the properties of the
Company and its Subsidiaries, to be completed by Pilko & Associates,
Inc. The results of such environmental assessment shall be reasonably
satisfactory in form, scope and substance to the Purchasers.
(q) APPRAISAL OF ASSETS. The Purchasers shall have received
copies of appraisals of the assets of the Company and its Subsidiaries
performed by Mainline Management Services, Inc. and Norman W. Seip &
Associates. The results of such appraisals shall be satisfactory in
form, scope and substance to the Purchasers.
(r) FOREIGN ACQUISITIONS AND TAKEOVERS ACT APPROVAL. If
Holdings, Intermediate Holdings or the Company is required to obtain an
approval or an indication of non-objection under the Foreign
Acquisitions and Takeovers Act 1975 of Australia or any real estate
policy guidelines of the Commonwealth Government of Australia and/or an
approval or certification of the Treasurer of Australia under the
Foreign Acquisitions and Takeovers Regulations of Australia to enter
into the Merger Agreement, or to give effect to the Transaction,
Intermediate Holdings shall have provided to the Purchasers, and the
Purchasers shall have received, copies of the application to obtain the
approval or certification of the Treasurer of Australia or the
statement of non-objection and copies of the relevant approval,
certification or statement.
(s) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Intermediate Holdings contained in the Financing
Documents shall be true and correct in all material respects on and as
of the Issuance Date as if made on and as of such date (unless stated
to relate solely to an earlier date, in which case, such
representations and warranties shall be true and correct in all
material respects as of such earlier date) and Intermediate Holdings
shall have performed and complied with all covenants and agreements
required by the Financing Documents to be performed by it or complied
with by it at or prior to the Issuance Date, and the Purchasers shall
have received a certificate from an authorized officer of Intermediate
Holdings to such effect.
(t) NO DEFAULT. There shall not exist any Default.
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(u) WARRANTS. Pursuant to the terms of the Escrow Agreement,
Holdings shall have executed and delivered to the Escrow Agent fully
authenticated Warrants, unregistered or registered in blank,
representing the right to purchase shares of Common Stock of Holdings
at any time in an amount equal to 2.0% of the fully-diluted Capital
Stock of Holdings, calculated after giving effect to the transactions
occurring on or prior to the Issuance Date (the "WARRANT SHARES"),
exercisable for a period of seven years at a price equal to the closing
price per share of Common Stock of Holdings traded on the NASDAQ
National Market at the close of trading on the Issuance Date.
(v) FILING AGENT, ETC. All Uniform Commercial Code financing
statements and other similar financing statements in other
jursidictions and Uniform Commercial Code (Form UCC-3) termination
statements and other similar termination statements in other
jurisdictions required pursuant to the Financing Documents
(collectively, the "FILING STATEMENTS") shall have been delivered to CT
Corporation System or another similar filing service company acceptable
to the Collateral Agent (the "FILING AGENT") and other arrangements
acceptable to the Collateral Agent for filing in other jurisdictions
shall have been made. The Filing Agent shall have acknowledged in a
writing satisfactory to the Collateral Agent and its counsel (i) the
Filing Agent's receipt of all Filing Statements, (ii) that the Filing
Statements have either been submitted for filing in the appropriate
filing offices or will be submitted for filing in the appropriate
offices within ten days following the Issuance Date and (iii) that the
Filing Agent will notify the Collateral Agent and its counsel of the
results of such submissions within 30 days following the Issuance Date.
(w) ASSET BRIDGE PLEDGE AND SECURITY AGREEMENT. The Collateral
Agent shall have received executed counterparts of the Asset Bridge
Pledge and Security Agreement, dated as of the Issuance Date, duly
executed and delivered by an Authorized Officer of Intermediate
Holdings and each Guarantor, together with
(i) the certificates evidencing all of the issued and
outstanding shares of Capital Stock pledged pursuant to the
Asset Bridge Pledge and Security Agreement, which certificates
shall in each case be accompanied by undated powers of
transfer duly executed in blank, or, if any such shares of
Capital Stock of any Domestic Subsidiary of such Obligor
pledged pursuant to the Asset Bridge Pledge and Security
Agreement are uncertificated securities or are held through a
securities intermediary, the Collateral Agent shall have
obtained "control" (as defined in the UCC) over such shares of
Capital Stock and such other instruments and documents as the
Collateral Agent shall deem necessary or, in the reasonable
opinion of the Collateral Agent, desirable under applicable
law to perfect the security interest of the Collateral Agent
in such shares of Capital Stock;
(ii) all promissory notes evidencing intercompany
Indebtedness payable to any Guarantor duly endorsed to the
order of the Collateral Agent;
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(iii) executed UCC financing statements (Form UCC-1)
naming such Obligor as the debtor and the Collateral Agent as
the secured party, or other similar instruments or documents,
suitable for filing under the UCC of all jurisdictions as may
be necessary or, in the opinion of the Collateral Agent,
desirable to perfect the security interest of the Collateral
Agent in the interests of such Obligor in the collateral
pledged pursuant to the Asset Bridge Pledge and Security
Agreement (PROVIDED that perfection of security interests in
motor vehicles shall not be required);
(iv) executed copies of proper UCC termination
statements (Form UCC-3), if any, necessary to release all
Liens and other rights of any Person (other than Liens
permitted under Section 7.2.3 of the Incorporated Agreement as
incorporated by reference in CLAUSE (C) of SECTION 6.2)
(A) in any collateral described in the
applicable Asset Bridge Pledge and Security Agreement
previously granted by any Person, and
(B) securing any of the Indebtedness to be
repaid in connection with the Transaction on or prior
to the Issuance Date,
together with such other UCC termination statements (Form
UCC-3) as the Collateral Agent may reasonably request from
such Obligor; and
(v) certified copies of UCC Requests for Information
or Copies (Form UCC-11), or a similar search report certified
by a party reasonably acceptable to the Collateral Agent,
dated a date reasonably near to the Issuance Date, listing all
effective financing statements which name such Obligor (under
its present names and any previous names) as the debtor and
which are filed in the jurisdictions in which filings are to
be made pursuant to CLAUSE (III) above, together with copies
of such financing statements.
(x) FOREIGN PLEDGE AGREEMENTS. All Foreign Pledge Agreements
shall have been duly executed and delivered by all parties thereto and
shall remain in full force and effect, and all Liens granted to the
Collateral Agent thereunder shall be duly perfected to provide the
Collateral Agent with a security interest in and Lien on all collateral
granted thereunder free and clear of other Liens, except to the extent
consented to by the Collateral Agent.
(y) MORTGAGE. The Collateral Agent shall have received
counterparts of each Mortgage, dated as of the date hereof, duly
executed by each applicable Guarantor, together with
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(i) evidence of the completion (or reasonably
satisfactory arrangements for the completion) of all
recordings and filings of each Mortgage as may be necessary
or, in the reasonable opinion of the Collateral Agent,
desirable effectively to create a valid, perfected first
priority Lien against the properties purported to be covered
thereby;
(ii) updated mortgage lien searches with respect to
certain properties described in CLAUSE (I) or as requested by
the Collateral Agent; and
(iii) such other approvals, opinions, or documents as
the Collateral Agent may request each in form and substance
satisfactory to the Collateral Agent.
(z) MISCELLANEOUS. The Purchasers shall have received such
additional certificates, legal and other opinions and documentation as
they shall reasonably request.
Section 5.2 CONDITIONS TO THE INTERMEDIATE HOLDINGS OBLIGATIONS. The
obligations of Intermediate Holdings to issue and sell the Asset Bridge Notes
pursuant to this Agreement to the Purchasers are subject to the satisfaction, at
or prior to the time of purchase of the Asset Bridge Notes, of the following
conditions:
(a) The representations and warranties of the Purchasers
contained herein shall be true and correct in all material respects on
and as of the Issuance Date as if made on and as of such date.
(b) The issuance and sale of the Asset Bridge Notes by
Intermediate Holdings shall not be prohibited by any applicable law,
court order or governmental regulation.
(c) The Transaction shall have been consummated (or shall be
consummated contemporaneously with the application by Intermediate
Holdings of the proceeds from the issuance and sale of the Asset Bridge
Notes hereunder).
(d) Contemporaneously therewith, Intermediate Holdings shall
have received the purchase price for the Asset Bridge Notes to be
purchased by the Purchasers in accordance with SECTION 2.2(B).
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ARTICLE VI
COVENANTS
Intermediate Holdings agrees that, from and after the Issuance Date
and so long as any Asset Bridge Notes remain outstanding and unpaid, and for the
benefit of the Purchasers and the Holders:
Section 6.1 INCORPORATION OF AFFIRMATIVE COVENANTS FROM THE
INCORPORATED AGREEMENT. Each of Holdings and Intermediate Holdings shall, and
(where and to the extent contemplated by the terms of the Incorporated
Agreement) shall cause each of their Subsidiaries to, comply with the
affirmative covenants set forth in the following Sections of the Incorporated
Agreement:
(a) 7.1.1 (Financial Information, Reports, Notices, etc.)
(excluding clause (l) thereof);
(b) 7.1.2 (Maintenance of Existence; Compliance with Laws,
etc.);
(c) 7.1.3 (Maintenance of Properties);
(d) 7.1.4 (Insurance);
(e) 7.1.5 (Books and Records) (excluding the last sentence
thereof);
(f) 7.1.6 (Environmental Law Covenant); and
(g) 7.1.10 (Use of Proceeds of Holdings Disposition of Capital
Stock or Assets).
Section 6.2 INCORPORATION OF NEGATIVE COVENANTS FROM THE INCORPORATED
AGREEMENT. None of Holdings or Intermediate Holdings shall, nor shall any such
Obligor permit any of its Restricted Subsidiaries to, violate any of the
negative covenants set forth in the following Sections of the Incorporated
Agreement:
(a) 7.2.1 (Business Activities);
(b) 7.2.2 (Indebtedness) (excluding clauses (a), (b), (c),
(e), (g), (h), (i), (j), (l) and (m) thereof (in each case, to the
extent any such clause is applicable to any Designated Restricted
Subsidiary)); PROVIDED that for purposes hereof (i) the aggregate
principal amount of "Obligations" permitted by clause (a) thereof shall
not exceed (A) $380,000,000 minus (B) the aggregate amount of the
permanent payments or prepayments of Term Loans and permanent
reductions of the Revolving Loan Commitment Amount and (ii) in the case
of clause (f) thereof, notwithstanding anything to the contrary
therein, (A) the Designated Restricted Subsidiaries may not
(individually or in the aggregate) incur Indebtedness from any
Restricted Subsidiary in an aggregate outstanding principal amount
exceeding $2,000,000 other than from any other Designated
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Restricted Subsidiary and no Designated Restricted Subsidiary that is a
Foreign Subsidiary may incur Indebtedness from any other Restricted
Subsidiary other than any other Designated Restricted Subsidiary that
is also a Foreign Subsidiary and (B) no Restricted Subsidiary that is
not a Designated Restricted Subsidiary may incur any Indebtedness from
any Designated Restricted Subsidiary;
(c) 7.2.3 (Liens) (excluding clauses (a), (b), (c), (d) and
(e) thereof (in each case, to the extent any such clause is applicable
to any Designated Restricted Subsidiary));
(d) 7.2.5 (Investments) (excluding clauses (e)(iii), (g), (h)
and (i) thereof (in each case, to the extent any such clause is
applicable to any Designated Restricted Subsidiary)); PROVIDED that for
purposes hereof in the case of clause (e)(ii) thereof, notwithstanding
anything to the contrary therein, no Designated Restricted Subsidiary
may make any Investment in any other Restricted Subsidiary other than
in any other Designated Restricted Subsidiary and no Designated
Restricted Subsidiary that is not a Foreign Subsidiary may make any
Investment in any other Restricted Subsidiary other than any other
Designated Restricted Subsidiary that is also not a Foreign Subsidiary;
(e) 7.2.6 (Restricted Payments, etc.); PROVIDED that for
purposes hereof in the case of clause (a) thereof, notwithstanding
anything to the contrary therein, no Designated Restricted Subsidiary
may make a Restricted Payment to any Subsidiary of Holdings other than
Intermediate Holdings or any other Designated Restricted Subsidiary;
(f) 7.2.8 (No Prepayment of Certain Debt) (excluding clause
(c) thereof (as such clause relates to the Obligations evidenced
hereby));
(g) 7.2.9 (Capital Stock of Subsidiaries) (excluding clauses
(x), (y) and (z) thereof (in each case, to the extent any such clause
is applicable to any Designated Restricted Subsidiary));
(h) 7.2.10 (Consolidation, Merger, etc.) (excluding clauses
(a) and (b) thereof (in each case, to the extent any such clause is
applicable to any Designated Restricted Subsidiary));
(i) 7.2.11 (Permitted Dispositions) (excluding clauses (d) and
(f) thereof (in each case, to the extent any such clause is applicable
to any Designated Restricted Subsidiary));
(j) 7.2.12 (Modification of Certain Agreements) (except as
such Section may apply to any of the "Intermediate Asset Bridge
Documents" or the "Intermediate Asset Bridge Note")
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(k) 7.2.13 (Transactions with Affiliates); PROVIDED, HOWEVER,
that for purposes hereof, such Section shall be incorporated by
reference herein as two separate subclauses: (i) for purposes of this
SUBCLAUSE (I), the terms "Restricted Subsidiary", "Restricted
Subsidiaries" and "Domestic Restricted Subsidiaries" as used in such
Section shall be interpreted so that no such term includes any
Designated Restricted Subsidiary and (ii) for purposes of this
SUBCLAUSE (II), (A) the words "Restricted Subsidiary" and "Restricted
Subsidiaries" as used in such Section shall be replaced with the words
"Designated Restricted Subsidiary" and "Designated Restricted
Subsidiaries", (B) the words "or Kalyn/Siebert" and the words "or
unless such arrangement, transaction, or contract is (i) an Investment
made in accordance with Section 7.2.5, (ii) is between the Company and
Domestic Restricted Subsidiaries, between Canadian Restricted
Subsidiaries, between Australian Restricted Subsidiaries, or between
Domestic Restricted Subsidiaries or (iii) pursuant to the Ferronor Loan
Documents" shall be deleted therefrom;
(l) 7.2.14 (Restrictive Agreements, etc.); PROVIDED that (i)
the words "Restricted Subsidiary" and "Restricted Subsidiaries" as used
in such Section shall be replaced with the words "Designated Restricted
Subsidiary" and "Designated Restricted Subsidiaries" and (ii) the lead
in to such Section shall be amended by inserting the words "(other than
the Loan Documents)" immediately following the words "enter into any
agreement" and immediately preceding the word "prohibiting" in such
lead in; and
(m) 7.2.15 (Sale and Leaseback); PROVIDED, HOWEVER, that no
Designated Restricted Subsidiary shall directly or indirectly enter
into any Sale Leasebacks.
Section 6.3 INVESTMENT COMPANY ACT. None of Holdings or Intermediate
Holdings will be or become an open-end investment trust, unit investment trust
or face-amount certificate company that is or is required to be registered under
the Investment Company Act of 1940, as amended.
Section 6.4 USE OF PROCEEDS. The proceeds from the issuance and sale of
the Asset Bridge Notes by Intermediate Holdings pursuant to this Agreement shall
be used to fund the Transaction and to pay related fees and expenses.
Section 6.5 COPIES OF DOCUMENTS AND NOTICES. Holdings and Intermediate
Holdings will, and will cause each of its Designated Restricted Subsidiaries to,
deliver to each Holder any and all certifications, notices and communications
that Holdings, Intermediate Holdings or such Designated Restricted Subsidiary
delivers to the Collateral Agent.
Section 6.6 SYNDICATION EFFORTS. (a) Intermediate Holdings acknowledges
that the Purchasers may transfer (such transfers, collectively, the
"SYNDICATION") all or part of the Asset Bridge Notes issued to the Purchasers on
the Issuance Date to one or more other Holders.
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Holdings and Intermediate Holdings shall, and shall cause the Guarantors to,
actively assist Rail America Funding, Inc. in completing the syndication in a
manner satisfactory to it. Without limiting the foregoing, upon the request of
Rail America Funding, Inc., Holdings and Intermediate Holdings shall, and shall
cause the Guarantors to (i) use commercially reasonable efforts to ensure that
the syndication efforts benefit materially from the Purchasers existing lending
and other financing relationships, (ii) provide direct contact between senior
management and advisors of Holdings, Intermediate Holdings and the Guarantors
and the proposed Holders, (iii) assist in the preparation of a confidential
information memorandum and other marketing materials to be used in connection
with the syndication and (iv) host, with Rail America Funding, Inc. or on one or
more of their respective Affiliates, of one or more meetings of prospective
Holders.
(b) Rail America Funding, Inc. or one of its Affiliates shall manage
all aspects of any syndication, in consultation with Intermediate Holdings
including decisions as to the selection of potential Holders to be approached
and when they will be approached, when their commitments will be accepted, which
potential Holders will participate, and the principal amount of the Asset Bridge
Notes to be transferred to each such Holder. In order to assist Rail America
Funding, Inc. or such Affiliate in any syndication efforts, Holdings and
Intermediate Holdings shall, and shall cause each of the Guarantors to, promptly
prepare and provide to Rail America Funding, Inc., the Purchasers or such
Affiliate all information with respect to Holdings, Intermediate Holdings, the
Transaction and the other transactions contemplated hereby and thereby,
including all financial information and projections, as Rail America Funding,
Inc. or such Affiliate may reasonably request in connection with such
syndication.
ARTICLE VII
EVENTS OF DEFAULT
Section 7.1 EVENTS OF DEFAULT DEFINED; ACCELERATION OF MATURITY; WAIVER
OF DEFAULT. In case one or more of the following (each, an "Event of Default"),
whatever the reason for such Event of Default and whether it shall be voluntary
or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body, shall have occurred and be continuing:
(a) default in the payment of all or any part of the principal
or premium, if any, on any of the Asset Bridge Notes as and when the
same shall become due and payable either at maturity, upon any
redemption, by declaration or otherwise; or
(b) default in the payment of any installment of interest upon
any of the Asset Bridge Notes or any fees payable under this Agreement
or any amount payable under
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SECTION 2.7 as and when the same shall become due and payable, and
continuance of such default for a period of five days; or
(c) failure on the part of Holdings or Intermediate Holdings
to observe or perform any of the covenants contained in SECTIONS
6.1(G), 6.2, 6.3, or 6.4 of this Agreement; or
(d) failure on the part of Holdings or Intermediate Holdings
to observe or perform any of the other covenants or agreements
contained in the Financing Documents, if such failure shall continue
for a period of 30 days after the date on which written notice thereof
shall have been given to Intermediate Holdings by a Holder; or
(e) there shall be a default in respect of any Indebtedness of
Intermediate Holdings or any of its Designated Restricted Subsidiaries
in an aggregate principal amount in excess of $5,500,000 whether such
Indebtedness now exists or shall hereafter be created (excluding the
Asset Bridge Notes) if such default results in acceleration of the
maturity of such Indebtedness; or Intermediate Holdings or any of its
Designated Restricted Subsidiaries shall fail to pay at maturity any
such Indebtedness whether such Indebtedness now exists or shall
hereafter be created; or
(f) any representation, warranty, certification or statement
made or deemed made by Holdings, Intermediate Holdings or any of its
Designated Restricted Subsidiaries in any Financing Document or which
is contained in any certificate, document or financial or other
statement furnished at any time under or in connection with any
Financing Document shall prove to have been untrue in any material
respect when made or deemed made; or
(g) a Change in Control has occurred; or
(h) any of the Financing Documents to which Holdings,
Intermediate Holdings or a Guarantor is a party shall for any reason
fail to constitute the valid and binding agreement of Holdings,
Intermediate Holdings or such Guarantor as the case may be; or
(i) any Event of Default set forth in Sections 8.1.6
(Judgments) (PROVIDED that the amount "$5,000,000" therein shall be
replaced with the amount "$5,500,000") or 8.1.9 (Bankruptcy,
Insolvency, etc.) of the Incorporated Agreement, in each case to the
extent that each such Section relates to Intermediate Holdings and the
Designated Restricted Subsidiaries,
then, and in each and every such case (other than an Event of Default described
in clauses (b), (c) and (d) of Section 8.1.9 of the Incorporated Agreement as
incorporated by reference in CLAUSE (I) above with respect to any Obligor),
unless the principal of all the Asset Bridge Notes shall have already become due
and payable, the Majority Holders (or, if at such time the Purchasers no
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longer hold at least 50% of the aggregate outstanding principal amount of the
Asset Bridge Notes, Holders of at least 33 1/3% of the aggregate outstanding
principal amount of the Asset Bridge Notes), by notice in writing to
Intermediate Holdings and the Administrative Agent, may declare the entire
outstanding principal amount of the Asset Bridge Notes together with accrued and
unpaid interest thereon to be immediately due and payable; PROVIDED that for so
long as the Loan Documents are in effect, such acceleration shall not become
effective until the earlier of (i) five Business Days after the notice of
acceleration is given to the Administrative Agent or (ii) the date on which the
Indebtedness under the Loan Documents is accelerated. If an Event of Default
described in clauses (b), (c) or (d) of Section 8.1.9 of the Incorporated
Agreement that have been incorporated by reference in CLAUSE (I) above with
respect to any Obligor occurs, the outstanding principal of and accrued and
unpaid interest on the Asset Bridge Notes will be immediately due and payable
without any notice, declaration or other act on the part of the Holders. The
Majority Holders may annul any notice of acceleration or past Defaults (other
than monetary Defaults not yet cured) by delivering a notice of annulment to
Intermediate Holdings and the Administrative Agent. If an Event of Default shall
occur and be continuing, the Purchasers shall have the right to appoint one (1)
representative to serve as a member of the Board of Directors of Holdings;
PROVIDED, HOWEVER, that such right shall terminate if the Purchasers no longer
hold at least 50% of the aggregate outstanding principal amount of the Asset
Bridge Notes.
ARTICLE VIII
LIMITATION ON TRANSFERS
Section 8.1 RESTRICTIONS ON TRANSFER. From and after the Issuance Date,
none of the Asset Bridge Notes shall be transferable except upon the conditions
specified in SECTIONS 8.2 and 8.3, which conditions are intended to ensure
compliance with the provisions of the Securities Act in respect of the Transfer
of any of such Asset Bridge Notes or any interest therein and SECTION 8.4. The
Purchasers will cause any proposed transferee of any Asset Bridge Notes (or any
interest therein) held by it to agree to take and hold such Asset Bridge Notes
(or any interest therein) subject to the provisions and upon the conditions
specified in this SECTION 8.1 and in SECTIONS 8.2 and 8.3.
Section 8.2 RESTRICTIVE LEGENDS. (a) Each Asset Bridge Note issued to
the Purchasers or to a subsequent transferee shall (unless otherwise permitted
by the provisions of SECTION 8.2(B) or SECTION 8.3) include a legend in
substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT
BE OFFERED OR SOLD, UNLESS IT HAS BEEN REGISTERED UNDER SUCH
ACT AND APPLICABLE STATE SECURITIES LAWS
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OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE AND THEN
ONLY IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER SET FORTH
IN THE SECURITIES PURCHASE AGREEMENT, DATED AS OF FEBRUARY 4,
2000, A COPY OF WHICH MAY BE OBTAINED FROM THE ISSUER OF THIS
SECURITY AT ITS PRINCIPAL EXECUTIVE OFFICE.
(b) Any Holders of Asset Bridge Notes registered pursuant to the
Securities Act and qualified under applicable state securities laws may exchange
such Asset Bridge Notes on transfer for new securities that shall not bear the
legend set forth in CLAUSE (A) of this SECTION 8.2.
Section 8.3 NOTICE OF PROPOSED TRANSFERS. (a) Ten days prior to any
proposed Transfer (other than Transfers of Asset Bridge Notes (i) registered
under the Securities Act, (ii) to an Affiliate of Rail America Funding, Inc. or
a general partnership in which Rail America Funding, Inc., or any of its
Affiliates is one of the general partners or (iii) to be made in reliance on
Rule 144A under the Securities Act) of any Asset Bridge Notes, the holder
thereof shall give written notice to Intermediate Holdings of such holder's
intention to effect such Transfer, setting forth the manner and circumstances of
the proposed Transfer, and which notice shall be accompanied by (A) an opinion
of the proposed transferee's counsel (reasonably satisfactory to Intermediate
Holdings) addressed to Intermediate Holdings to the effect that the proposed
Transfer of such Asset Bridge Notes may be effected without registration under
the Securities Act, (B) such representation letters in form and substance
reasonably satisfactory to Intermediate Holdings to ensure compliance with the
provisions of the Securities Act and (C) such letters in form and substance
reasonably satisfactory to Intermediate Holdings from each such transferee
stating such transferee's agreement to be bound by the terms of this Agreement.
Such proposed Transfer may be effected only if Intermediate Holdings shall have
received such notice of transfer, opinion of counsel, representation letters and
other letters referred to in the immediately preceding sentence, whereupon the
holder of such Asset Bridge Notes shall be entitled to Transfer such Asset
Bridge Notes in accordance with the terms of the notice delivered by the holder
to Intermediate Holdings. Each Asset Bridge Note transferred as above provided
shall bear the legend set forth in SECTION 8.2(A) except that such Asset Bridge
Note shall not bear such legend if the opinion of counsel referred to above is
to the further effect that neither such legend nor the restrictions on Transfer
in SECTIONS 8.1 through 8.3 are required in order to ensure compliance with the
provisions of the Securities Act.
(b) Ten days prior to any proposed Transfer of any Asset Bridge Notes
to be made in reliance on Rule 144A under the Securities Act ("RULE 144A"), the
holder thereof shall give written notice to Intermediate Holdings of such
holder's intention to effect such Transfer, setting forth the manner and
circumstances of the proposed Transfer and certifying that such Transfer will be
made (i) in full compliance with Rule 144A and (ii) to a transferee that (A)
such holder reasonably believes to be a "qualified institutional buyer" within
the meaning of Rule 144A and
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(B) is aware that such Transfer will be made in reliance on Rule 144A. Such
proposed Transfer may be effected only if Intermediate Holdings shall have
received such notice of transfer, whereupon the holder of such Asset Bridge
Notes shall be entitled to Transfer such Asset Bridge Notes in accordance with
the terms of the notice delivered by the holder to Intermediate Holdings. Each
Asset Bridge Note transferred as above provided shall bear the legend set forth
in SECTION 8.2(A).
Section 8.4 RIGHT TO SELL, TRANSFER OR ASSIGN ASSET BRIDGE NOTES.
Subject to SECTIONS 8.1 through 8.3, the Purchasers shall have the absolute and
unconditional right to Transfer Asset Bridge Notes in compliance with applicable
law to any third party at any time.
Section 8.5 REPLACEMENT ASSET BRIDGE NOTES. Within five Business Days
after any Transfer made pursuant to SECTION 8.3(A) or 8.3(B), upon surrender to
Intermediate Holdings of the Asset Bridge Notes subject to such Transfer,
Intermediate Holdings, at its own expense, shall execute and deliver to the
Purchaser in exchange for the Asset Bridge Note or Asset Bridge Notes that are
subject of such Transfer a new Asset Bridge Note or Asset Bridge Notes
registered in the name of the transferee of such Asset Bridge Note or Asset
Bridge Notes (or in such name or names as shall be designated by such
transferee) in an amount equal to the aggregate principal amount of the Asset
Bridge Note or Asset Bridge Notes so transferred, and if the transferring Holder
has not transferred all of the Asset Bridge Notes held by such transferor a new
Asset Bridge Note or Asset Bridge Notes registered in the name of the
transferring holder (or such name or names as shall be designated by such
transferring holder) equal to the aggregate principal amount of the Asset Bridge
Notes surrendered in connection with such Transfer less the aggregate principal
amount of the Asset Bridge Note or Asset Bridge Notes that are the subject of
such Transfer, which shall be dated the effective date of such Transfer and
shall otherwise be in substantially the form of EXHIBIT B attached hereto.
Holdings shall not be required to pay any documentary stamp tax which may be
payable in respect of any Transfer of any Asset Bridge Note from a Holder to any
transferee; PROVIDED that Holdings shall take all such actions as may be
reasonably requested by such Holder or such transferee to minimize or eliminate
any such tax.
ARTICLE IX
COLLATERAL AGENT
Section 9.1 ACTIONS. Each Holder by accepting its Asset Bridge Note and
an interest in the Collateral (as defined in the Security Documents) securing
such Asset Bridge Note hereby appoints Rail America Holdings Funding, Inc. as
its Collateral Agent under and for purposes of each Security Document. Each
Holder authorizes the Collateral Agent to act on behalf of such Holder under
each Security Document and, in the absence of other written instructions from
the Majority Holders received from time to time by the Collateral Agent (with
respect to which the Collateral Agent agrees that it will comply in such
capacity, except as otherwise provided in this
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Section or as otherwise advised by counsel in order to avoid contravention of
applicable law), to exercise such powers thereunder as are specifically
delegated to or required of the Collateral Agent by the terms hereof and
thereof, together with such powers as may be reasonably incidental thereto. Each
Holder hereby indemnifies (which indemnity shall survive any termination of this
Agreement) the Collateral Agent, PRO RATA according to the percentage of the
outstanding aggregate principal amount of such Holder's Asset Bridge Note in
respect of the outstanding aggregate principal amount of all Asset Bridge Notes,
from and against any and all liabilities, obligations, losses, damages, claims,
costs or expenses of any kind or nature whatsoever which may at any time be
imposed on, incurred by, or asserted against, the Collateral Agent in any way
relating to or arising out of any Security Document, including reasonable
attorneys' fees, and as to which the Collateral Agent is not reimbursed by
Holdings or Intermediate Holdings; PROVIDED, HOWEVER, that no Holder shall be
liable for the payment of any portion of such liabilities, obligations, losses,
damages, claims, costs or expenses which are determined by a court of competent
jurisdiction in a final proceeding to have resulted from the Collateral Agent's
gross negligence or wilful misconduct. The Collateral Agent shall not be
required to take any action under any Security Document, or to prosecute or
defend any suit in respect of any Security Document, unless it is indemnified
hereunder to its satisfaction. If any indemnity in favor of the Collateral Agent
shall be or become, in the Collateral Agent's determination, inadequate, the
Collateral Agent may call for additional indemnification from the Holders and
cease to do the acts indemnified against hereunder until such additional
indemnity is given.
Section 9.2 EXCULPATION. Neither the Collateral Agent nor any of its
directors, officers, employees or agents shall be liable to any Holder for any
action taken or omitted to be taken by it under any Security Document, or in
connection herewith or therewith, except for its own wilful misconduct or gross
negligence, nor responsible for any recitals or warranties herein or therein,
nor for the effectiveness, enforceability, validity or due execution of any
Security Document, nor for the creation, perfection or priority of any Liens
purported to be created by any of the Security Documents, or the validity,
genuineness, enforceability, existence, value or sufficiency of any collateral
security, nor to make any inquiry respecting the performance by any Obligor of
its Obligations. Any such inquiry which may be made by the Collateral Agent
shall not obligate it to make any further inquiry or to take any action. The
Collateral Agent shall be entitled to rely upon advice of counsel concerning
legal matters and upon any notice, consent, certificate, statement or writing
which the Collateral Agent believes to be genuine and to have been presented by
a proper Person.
Section 9.3 SUCCESSOR. The Collateral Agent may resign as such at any
time upon at least 30 days' prior notice to Holdings and Intermediate Holdings
and all Holders. If the Collateral Agent at any time shall resign, the Majority
Holders may appoint another Holder as a successor Collateral Agent which shall
thereupon become the Collateral Agent under the Security Documents. If no
successor Collateral Agent shall have been so appointed by the Majority Holders,
and shall have accepted such appointment, within 30 days after the retiring
Collateral
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Agent's giving notice of resignation, then the retiring Collateral Agent may, on
behalf of the Holders, appoint a successor Collateral Agent, which shall be one
of the Holders or a commercial banking institution organized under the laws of
the U.S. (or any State thereof) or a U.S. branch or agency of a commercial
banking institution, and having a combined capital and surplus of at least
$250,000,000; PROVIDED, HOWEVER, that if, such retiring Collateral Agent is
unable to find a commercial banking institution which is willing to accept such
appointment and which meets the qualifications set forth above in this SECTION
9.3, the retiring Collateral Agent's resignation shall nevertheless thereupon
become effective and the Holders shall assume and perform all of the duties of
the Collateral Agent under the Security Documents until such time, if any, as
the Majority Holders appoint a successor as provided for above. Upon the
acceptance of any appointment as Collateral Agent hereunder by a successor
Collateral Agent, such successor Collateral Agent shall be entitled to receive
from the retiring Collateral Agent such documents of transfer and assignment as
such successor Collateral Agent may reasonably request, and shall thereupon
succeed to and become vested with all rights, powers, privileges and duties of
the retiring Collateral Agent, and the retiring Collateral Agent shall be
discharged from its duties and obligations under the Security Documents. After
any retiring Collateral Agent's resignation hereunder as the Collateral Agent,
the provisions of this ARTICLE shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was the Collateral Agent under the
Security Documents.
Section 9.4 ASSET BRIDGE NOTES HELD BY THE COLLATERAL AGENT. The
Collateral Agent shall have the same rights and powers with respect to the Asset
Bridge Notes held by it or any of its Affiliates as any other Holder and may
exercise the same as if it were not the Collateral Agent. The Collateral Agent
and each of its Affiliates may accept deposits from, lend money to, and
generally engage in any kind of business with Holdings, Intermediate Holdings or
any Subsidiary or Affiliate of Holdings as if the Collateral Agent were not the
Collateral Agent under the Security Documents
Section 9.5 CREDIT DECISIONS. Each Holder acknowledges that it has,
independently of the Collateral Agent and each other Holder, and based on such
Holder's review of the financial information of Holdings, Intermediate Holdings
and the Restricted Subsidiaries, the Financing Documents (the terms and
provisions of which being satisfactory to such Holder) and such other documents,
information and investigations as such Holder has deemed appropriate, made its
own credit decision to hold its Asset Bridge Note. Each Holder also acknowledges
that it will, independently of the Collateral Agent and each other Holder, and
based on such other documents, information and investigations as it shall deem
appropriate at any time, continue to make its own credit decisions as to
exercising or not exercising from time to time any rights and privileges
available to it under the Financing Documents.
Section 9.6 RELIANCE BY THE COLLATERAL AGENT. The Collateral Agent
shall be entitled to rely upon any certification, notice or other communication
(including any thereof by telephone, telecopy, telegram or cable) believed by it
to be genuine and correct and to have been signed or
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sent by or on behalf of the proper Person, and upon advice and statements of
legal counsel, independent accountants and other experts selected by the
Collateral Agent. As to any matters not expressly provided for by the Security
Documents, the Collateral Agent shall in all cases be fully protected in acting,
or in refraining from acting, hereunder or thereunder in accordance with
instructions given by the Majority Holders or all of the Holders as is required
in such circumstance, and such instructions of such Holders and any action taken
or failure to act pursuant thereto shall be binding on all Secured Parties.
Section 9.7 DEFAULTS. The Collateral Agent shall not be deemed to have
knowledge or notice of the occurrence of a Default unless the Collateral Agent
has received a written notice from a Holder, Holdings or Intermediate Holdings
specifying such Default and stating that such notice is a "Notice of Default".
In the event that the Collateral Agent receives such a notice of the occurrence
of a Default, the Collateral Agent shall give prompt notice thereof to the
Holders. The Collateral Agent shall (subject to SECTION 11.2) take such action
with respect to such Default as shall be directed by the Majority Holders;
PROVIDED, that unless and until the Collateral Agent shall have received such
directions, the Collateral Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Default as it
shall deem advisable in the best interest of the Holders except to the extent
that this Agreement expressly requires that such action be taken, or not be
taken, only with the consent or upon the authorization of the Majority Holders
or all Holders, as applicable.
Section 9.8 PAYMENT OF COSTS AND EXPENSES. Holdings and Intermediate
Holdings jointly and severally agree to pay on demand all expenses of the
Collateral Agent (including the reasonable fees and out-of-pocket expenses of
Mayer, Brown & Platt, counsel to the Collateral Agent and of local counsel, if
any, who may be retained by or on behalf of the Collateral Agent) in connection
with
(i) the negotiation, preparation, execution and delivery of
each Security Document, including schedules and exhibits, and any
amendments, waivers, consents, supplements or other modifications to
any Security Document as may from time to time hereafter be required,
whether or not the transactions contemplated hereby are consummated;
and
(ii) the filing or recording of any Security Document
(including the Filing Statements) and all amendments, supplements,
amendment and restatements and other modifications to any thereof,
searches made following the Issuance Date in jurisdictions where Filing
Statements (or other documents evidencing Liens in favor of the Secured
Parties) have been recorded and any and all other documents or
instruments of further assurance required to be filed or recorded by
the terms of any Security Document; and
(iii) the preparation and review of the form of any document
or instrument relevant to any Security Document.
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Holdings and Intermediate Holdings further jointly and severally agree to pay,
and to save each Secured Party harmless from all liability for, any stamp or
other taxes which may be payable in connection with the execution or delivery of
each Security Document. Holdings and Intermediate Holdings also jointly and
severally agree to reimburse each Secured Party upon demand for all reasonable
out-of-pocket expenses (including reasonable attorneys' fees and legal expenses
of counsel to each Secured Party) incurred by such Secured Party in connection
with the enforcement of the Security Documents.
Section 9.9 INDEMNIFICATION. In consideration of the execution and
delivery of this Agreement by each Purchaser and the continued maintainenance by
the Holders of the Indebtedness evidenced by the Asset Bridge Notes, Holdings
and Intermediate Holdings, jointly and severally, hereby indemnify, exonerate
and hold each Secured Party and each of their respective officers, directors,
employees and agents (collectively, the "INDEMNIFIED SECURED PARTIES") free and
harmless from and against any and all actions, causes of action, suits, losses,
costs, liabilities and damages, and expenses incurred in connection therewith
(irrespective of whether any such Indemnified Secured Party is a party to the
action for which indemnification hereunder is sought), including reasonable
attorneys' fees and disbursements, whether incurred in connection with actions
between or among the parties hereto or the parties hereto and third parties
(collectively, the "INDEMNIFIED LIABILITIES"), incurred by the Indemnified
Secured Parties or any of them as a result of, or arising out of, or relating to
(i) the entering into and performance of any Security Document
by any of the Indemnified Secured Parties (including any action brought
by or on behalf of Holdings or Intermediate Holdings in connection with
the administration thereof, provided that any such action is resolved
in favor of such Indemnified Secured Party);
(ii) any investigation, litigation or proceeding related to
any environmental cleanup, audit, compliance or other matter relating
to the protection of the environment on, under or arising from any
operations or property owned, leased or operated upon (including right
of way easements) of any Designated Restricted Subsidiary, Intermediate
Holdings or Holdings or the Release by any Designated Restricted
Subsidiary, Intermediate Holdings or Holdings of any Hazardous
Material;
(iii) the presence on or under, or the escape, seepage,
leakage, spillage, discharge, emission, discharging or releases from,
any operations of any Designated Restricted Subsidiary, Intermediate
Holdings or Holdings on any real property owned, leased, or operated
upon (including right of way easements) by any Obligor or any
Subsidiary thereof of any Hazardous Material (including any losses,
liabilities, damages, injuries, costs, expenses or claims asserted or
arising under any Environmental Law), regardless of whether caused by,
or within the control of, such Obligor or Subsidiary; or
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(iv) each Secured Party's Environmental Liability (the
indemnification herein shall survive repayment of the Obligations and
any transfer of the property of any Designated Restricted Subsidiary,
Intermediate Holdings or Holdings by foreclosure or by a deed in lieu
of foreclosure for any Secured Party's Environmental Liability,
regardless of whether caused by, or within the control of, such
Designated Restricted Subsidiary, Intermediate Holdings or Holdings);
except for Indemnified Liabilities arising for the account of a particular
Indemnified Secured Party by reason of the relevant Indemnified Secured Party's
gross negligence or wilful misconduct. Each Designated Restricted Subsidiary,
Intermediate Holdings and Holdings and its successors and assigns hereby waive,
release and agree not to make any claim or bring any cost recovery action
against, any Indemnified Secured Party under CERCLA or any state equivalent, or
any similar law now existing or hereafter enacted. It is expressly understood
and agreed that to the extent that any Indemnified Secured Party is strictly
liable under any Environmental Laws, the obligation of each Designated
Restricted Subsidiary, Intermediate Holdings and Holdings to such Indemnified
Secured Party under this indemnity shall likewise be without regard to fault on
the part of any Designated Restricted Subsidiary, Intermediate Holdings or
Holdings with respect to the violation or condition which results in liability
of an Indemnified Secured Party. If and to the extent that the foregoing
undertaking may be unenforceable for any reason, each Designated Restricted
Subsidiary, Intermediate Holdings and Holdings agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
ARTICLE X
GUARANTEES
Section 10.1 GUARANTEES. (a) Subject to SECTION 10.2, each of the
Guarantors jointly and severally unconditionally guarantees to each Holder,
irrespective of the validity and enforceability of the other provisions of this
Agreement, or of the Financing Documents, the Asset Bridge Notes and the
obligations of Intermediate Holdings hereunder or thereunder, that: (i) the
principal of, premium, if any, and interest, if any, on the Asset Bridge Notes
shall be promptly paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and (to the extent permitted by law) interest on the
overdue principal of, premium, if any, and interest, if any, on the Asset Bridge
Notes (including all reasonable costs of collection and enforcement thereof and
interest thereon which would be owing by Intermediate Holdings but for the
effect of any bankruptcy law, if any), and all other obligations of Intermediate
Holdings to the Holders under this Agreement, the Financing Documents and the
Asset Bridge Notes shall be promptly paid in full when due or performed, all in
accordance with the terms of this Agreement, the Financing Documents and the
Asset Bridge Notes; and (ii) in case of any extension of time of payment or
renewal of any Asset Bridge Notes, or the issuance of any of such other
obligations,
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that the same shall be promptly paid in full when due or performed in accordance
with their terms whether at stated maturity, by acceleration, redemption or
otherwise. Failing payment when due of any amount so guaranteed for whatever
reason, the Guarantors shall be jointly and severally and unconditionally
obligated to pay the same immediately whether or not such failure to pay has
become an Event of Default which could cause acceleration pursuant to SECTION
7.1. Each Guarantor agrees that this is a continuing guarantee of payment and
not merely a guarantee of collection.
(b) The Guarantors hereby agree that, subject to SECTION 10.2, their
obligations hereunder shall be unconditional and absolute and, without limiting
the generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(i) any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of Intermediate Holdings under
this Agreement, the Financing Documents or the Asset Bridge Notes, by
operation of law or otherwise;
(ii) any modification or amendment of or supplement to any
other provisions of this Agreement, or to the Financing Documents or
the Asset Bridge Notes with the consent of the Guarantors, which
consent shall not be unreasonably withheld;
(iii) any release, non-perfection or invalidity of any direct
or indirect security for, or any other guarantee of, any of the
obligations guaranteed by this ARTICLE X;
(iv) any change in the corporate existence, structure or
ownership of Intermediate Holdings, or any insolvency, bankruptcy,
reorganization or other similar proceeding affecting Intermediate
Holdings or its assets or any resulting release or discharge of any
obligation of Intermediate Holdings contained in this Agreement, the
Financing Documents or the Asset Bridge Notes;
(v) the existence of any claim, set-off or other rights which
any Guarantor may have at any time against Intermediate Holdings or any
other Person, whether in connection herewith or with an unrelated
transactions, PROVIDED that nothing herein shall prevent the assertion
of any such claim by separate suit or compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or against
Intermediate Holdings for any reason of this Agreement, the Financing
Documents or the Asset Bridge Notes, or any provision of applicable law
or regulation purporting to prohibit the payment by Intermediate
Holdings of the principal of or interest on the Asset Bridge Notes or
any other amount payable by it under this Agreement, the Financing
Documents or the Asset Bridge Notes;
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(vii) any other act or omission to act or delay of any kind by
Intermediate Holdings or any other Person or any other circumstance
whatsoever which might, but for the provisions of this paragraph,
constitute a legal or equitable discharge of any Guarantor's
obligations hereunder; or
(viii) any issuance of Additional Asset Bridge Notes pursuant
to SECTION 2.5(D).
(c) Each Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or bankruptcy
of Intermediate Holdings, any right to require a proceeding first against
Intermediate Holdings, protest, notice and all demands whatsoever and covenants
that, subject to this Article X, this Guarantee shall not be discharged except
by complete performance of all obligations on and with respect to the Asset
Bridge Notes, this Agreement and the Financing Documents.
(d) If any Holder is required by any court or otherwise to return to
Intermediate Holdings or any of the Guarantors, or any custodian, trustee,
liquidator or other similar official acting in relation to either Intermediate
Holdings or any of the Guarantors, any amount paid to such Holder, this
Guarantee, to the extent of the amount so returned, shall be reinstated in full
force and effect.
(e) Each Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby. Each
Guarantor further agrees that, as between the Guarantors, on the one hand, and
the Holders, on the other hand, (x) the maturity of the obligations guaranteed
hereby may be accelerated as provided in SECTION 7.1 notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
obligations guaranteed hereby and (y) in the event of any declaration of
acceleration of such obligations as provided in SECTION 7.1, such obligations
(whether or not due and payable) shall forthwith become due and payable by the
Guarantors for the purpose of this Guarantee. The Guarantors shall have the
right to seek contribution from any non-paying Guarantor so long as the exercise
of such right does not impair the rights of the Holders under this Guarantee.
Section 10.2 LIMITATION ON GUARANTOR LIABILITY. Each Guarantor, and by
its acceptance of Asset Bridge Notes, each Holder, hereby confirms that it is
the intention of all such parties that this Guarantee not constitute a
fraudulent transfer or conveyance for purposes of any bankruptcy law, the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any
similar federal or state law to the extent applicable to this Guarantee. To
effectuate the foregoing intention, the Holders and the Guarantors hereby
irrevocably agree that the obligations of each Guarantor under this Guarantee
shall be limited to the maximum amount as will, after giving effect to such
maximum amount and all other contingent and fixed liabilities of such Guarantor
that are relevant under such laws, and after giving effect to any collections
from, rights to receive contribution from or payments made by or on behalf of
any other Guarantor in respect
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of the obligations of such other Guarantor under this Guarantee, result in the
obligations of such Guarantor under the Guarantee not constituting a fraudulent
transfer or conveyance.
Section 10.3 CONSOLIDATION OR MERGER OF GUARANTORS. Without limiting
the provisions of CLAUSE (H) of SECTION 6.2, no Guarantor may consolidate with
or merge with or into (whether or not such Guarantor is the surviving Person)
another corporation, Person or entity whether or not affiliated with such
Guarantor unless such corporation, person or entity is a Guarantor.
ARTICLE XI
MISCELLANEOUS
Section 11.1 NOTICES. All notices, demands and other communications to
any party hereunder shall be in writing (including facsimile or similar writing)
and shall be given to such party at its address set forth on the signature pages
hereof, or such other address as such party may hereinafter specify for the
purpose. Each such notice, demand or other communication shall be effective (i)
if given by facsimile, when such facsimile is transmitted to the facsimile
number specified on the signature page hereof, or (ii) if given by overnight
courier, addressed as aforesaid or by any other means, when delivered at the
address specified in this Section.
Section 11.2 NO WAIVERS; AMENDMENTS. (a) No failure or delay on the
part of any party in exercising any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy. The remedies provided for
herein are cumulative and are not exclusive of any remedies that may be
available to any party at law or in equity or otherwise.
(b) Any provision of this Agreement may be amended, supplemented or
waived if, but only if, such amendment, supplement or waiver is in writing and
is signed by Intermediate Holdings and the Majority Holders; PROVIDED, that
without the consent of each Holder of any Asset Bridge Note affected thereby, an
amendment, supplement or waiver may not (a) reduce the aggregate principal
amount of Asset Bridge Notes whose Holders must consent to an amendment,
supplement or waiver, (b) reduce the rate or extend the time for payment of
interest on any Asset Bridge Note, (c) reduce the principal amount of or extend
the stated maturity of any Asset Bridge Note or (d) make any Asset Bridge Note
payable in money or property other than as stated in the Asset Bridge Notes. In
determining whether the Holders of the requisite principal amount of Asset
Bridge Notes have concurred in any direction, consent, or waiver as provided in
this Agreement or in the Asset Bridge Notes, Asset Bridge Notes which are owned
by Intermediate Holdings or any other obligor on or guarantor of the Asset
Bridge Notes, or, except for Rail America Funding, Inc. and its Affiliates by
any Person controlling, controlled by, or under common control with any of the
foregoing, shall be disregarded and deemed not to be
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outstanding for the purpose of any such determination; and PROVIDED, FURTHER,
that no such amendment, supplement or waiver which affects (x) the rights of the
Purchasers and its Affiliates otherwise than solely in their capacities as
Holders of Asset Bridge Notes shall be effective with respect to them without
their prior written consent or (y) the interests, rights or obligations of the
Collateral Agent (in its capacity as the Collateral Agent) shall be effective
without the Collateral Agent's prior written consent.
Section 11.3 INDEMNIFICATION. (a) Intermediate Holdings (the
"INDEMNIFYING PARTY") agrees to indemnify and hold harmless each Purchaser, its
respective Affiliates, and each Person, if any, who controls such Purchaser, or
any of its Affiliates, within the meaning of the Securities Act or the Exchange
Act (a "CONTROLLING PERSON"), and the respective partners, agents, employees,
officers and directors of such Purchaser, its Affiliates and any such
Controlling Person (each an "INDEMNIFIED PARTY," and collectively, the
"INDEMNIFIED PARTIES"), from and against any and all losses, claims, damages,
liabilities and expenses (including, without limitation and as incurred,
reasonable costs of investigating, preparing or defending any such claim or
action, whether or not such Indemnified Party is a party thereto) arising out
of, or in connection with any activities contemplated by this Agreement or any
other services rendered in connection herewith, including, but not limited to,
losses, claims, damages, liabilities or expenses arising out of or based upon
any untrue statement or any alleged untrue statement of a material fact or any
omission or any alleged omission to state a material fact in any of the
disclosure or offering or confidential information documents (the "DISCLOSURE
DOCUMENTS") pertaining to any of the transactions or proposed transactions
contemplated herein, including any eventual refinancing or resale of the Asset
Bridge Notes, PROVIDED, that the Indemnifying Party will not be responsible for
any claims, liabilities, losses, damages or expenses that are determined by
final judgment of a court of competent jurisdiction to result from such
Indemnified Party's gross negligence, willful misconduct or bad faith. The
Indemnifying Party also agrees that (i) no Purchaser shall have liability
(except for breach of provisions of this Agreement) for claims, liabilities,
damages, losses or expenses, including legal fees, incurred by the Indemnifying
Party in connection with this Agreement, unless they are determined by final
judgment of a court of competent jurisdiction to result from such Purchaser's
gross negligence, willful misconduct or bad faith and (ii) no Purchaser shall in
any event have any liability to Intermediate Holdings on any theory of liability
for special or punitive damages (as opposed to direct or actual damages) arising
out of, or in connection with, or as a result of this Agreement.
(b) If any action shall be brought against an Indemnified Party with
respect to which indemnity may be sought against the Indemnifying Party under
this Agreement, such Indemnified Party shall promptly notify the Indemnifying
Party in writing and the Indemnifying Party shall, if requested by such
Indemnified Party or if the Indemnifying Party desires to do so, assume the
defense thereof, including the employment of counsel reasonably satisfactory to
such Indemnified Party and payment of all reasonable fees and expenses. The
failure to so notify the Indemnifying Party shall not affect any obligations the
Indemnifying Party may have to such Indemnified Party under this Agreement or
otherwise unless the Indemnifying Party is materially
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adversely affected by such failure. Such Indemnified Party shall have the right
to employ separate counsel in such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party, unless: (i) the Indemnifying Party has failed to assume
the defense and employ counsel reasonably satisfactory to such Indemnified Party
or (ii) the named parties to any such action (including any impleaded parties)
include such Indemnified Party and the Indemnifying Party, and such Indemnified
Party shall have been advised by counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the Indemnifying Party, in which case, if such Indemnified Party
notifies the Indemnifying Party in writing that it elects to employ separate
counsel at the expense of the Indemnifying Party, the Indemnifying Party shall
not have the right to assume the defense of such action or proceeding on behalf
of such Indemnified Party, PROVIDED, HOWEVER, that the Indemnifying Party shall
not, in connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same jurisdiction
arising out of the same general allegations or circumstances, be responsible
hereunder for the reasonable fees and expenses of more than one such firm of
separate counsel, in addition to any local counsel, which counsel shall be
designated by the Purchasers. The Indemnifying Party shall not be liable for any
settlement of any such action effected without the written consent of the
Indemnifying Party (which shall not be unreasonably withheld) and the
Indemnifying Party agrees to indemnify and hold harmless each Indemnified Party
from and against any loss or liability by reasons of settlement of any action
effected with the consent of the Indemnifying Party. In addition, the
Indemnifying Party will not, without the prior written consent of the
Indemnified Party, settle or compromise or consent to the entry of any judgment
in or otherwise seek to terminate any pending or threatened action, claim, suit
or proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not any Indemnified Party is a party thereto) unless such
settlement, compromise, consent or termination includes an express unconditional
release of the Purchasers and the other Indemnified Parties, reasonably
satisfactory in form and substance to the Purchasers, from all liability arising
out of such action, claim, suit or proceeding.
(c) If for any reason the foregoing indemnity is unavailable (otherwise
than pursuant to the express terms of such indemnity) to an Indemnified Party or
insufficient to hold an Indemnified Party harmless, then in lieu of indemnifying
such Indemnified Party, the Indemnifying Party shall contribute to the amount
paid or payable by such Indemnified Party as a result of such claims,
liabilities, losses, damages, or expenses (i) in such proportion as is
appropriate to reflect the relative benefits received by the Indemnifying Party
on the one hand and by a Purchaser on the other from the transactions
contemplated by this Agreement or (ii) if the allocation provided by clause (i)
above is not permitted under applicable law, in such proportion as is
appropriate to reflect not only the relative benefits received by the
Indemnifying Party on the one hand and such Purchaser on the other, but also the
relative fault of the Indemnifying Party and such Purchaser as well as any other
relevant equitable considerations. Notwithstanding the provisions of this
SECTION 11.3, the aggregate contribution of all Indemnified Parties shall not
exceed the amount of fees actually received by the Purchasers
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<PAGE> 52
pursuant to this Agreement. It is hereby further agreed that the relative
benefits to the Indemnifying Party on the one hand and a Purchaser on the other
with respect to the transactions contemplated hereby shall be deemed to be in
the same proportion as (i) the aggregate principal amount of Asset Bridge Notes
issued by Intermediate Holdings bears to (ii) the fees actually received by such
Purchaser pursuant to this Agreement. The relative fault of the Indemnifying
Party on the one hand and a Purchaser on the other with respect to the
transactions contemplated hereby shall be determined by reference to, among
other things, whether any untrue or alleged untrue statement of material fact or
the omission or alleged omission to state a material fact related to information
supplied by the Indemnifying Party or by such Purchaser and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
(d) The indemnification, contribution and expense reimbursement
obligations set forth in this SECTION 11.3 (i) shall be in addition to any
liability the Indemnifying Party may have to any Indemnified Party at common law
or otherwise, (ii) shall survive the termination of this Agreement and the
payment in full of the Asset Bridge Notes and (iii) shall remain operative and
in full force and effect regardless of any investigation made by or on behalf of
the Purchasers or any other Indemnified Party.
Section 11.4 EXPENSES. Intermediate Holdings agrees to pay all
reasonable out-of-pocket costs, expenses and other payments of the Purchasers in
connection with the purchase and sale of the Asset Bridge Notes as contemplated
by this Agreement including without limitation (i) reasonable fees and
disbursements of special counsel and any local counsel for the Purchasers
incurred in connection with the preparation of this Agreement, (ii) all
reasonable out-of-pocket expenses of the Purchasers, including reasonable fees
and disbursements of counsel, in connection with any waiver or consent hereunder
or any amendment hereof or any Default or alleged Default hereunder and (iii) if
an Event of Default occurs, all reasonable out-of-pocket expenses incurred by
the Purchasers and each Holder of Asset Bridge Notes, including reasonable fees
and disbursements of a single counsel (which counsel shall be selected by the
Purchasers if the Purchaser is a Holder of Asset Bridge Notes when such Event of
Default occurs), in connection with such Event of Default and collection,
bankruptcy, insolvency and other enforcement proceedings resulting therefrom.
Section 11.5 PAYMENT. Intermediate Holdings agrees that, so long as a
Purchaser shall own any Asset Bridge Notes purchased by it from Intermediate
Holdings hereunder, Intermediate Holdings will make payments to such Purchaser
of all amounts due thereon by wire transfer by 1:00 P.M. (New York City time) on
the date of payment to such account as is specified beneath such Purchaser's
name on the signature page hereof or to such other account or in such other
similar manner as such Purchaser may designate to Intermediate Holdings in
writing.
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<PAGE> 53
Section 11.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of Holdings, Intermediate Holdings, the
Purchasers, the Guarantors and their respective successors and assigns; PROVIDED
that none of Holdings, Intermediate Holdings or any Guarantor may assign or
otherwise transfer its rights or obligations under this Agreement to any other
Person without the prior written consent of the Majority Holders. All provisions
hereunder purporting to give rights to the Purchasers and its Affiliates, or to
Holders are for the express benefit of such Persons.
Section 11.7 BROKERS. Intermediate Holdings represents and warrants
that, except for Donaldson, Lufkin & Jenrette Securities Corporation and
Barclays Capital, it has not employed any broker, finder, financial advisor or
investment banker who might be entitled to any brokerage, finder's or other fee
or commission in connection with the Transaction or the sale of the Asset Bridge
Notes.
Section 11.8 NEW YORK LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK. EACH PARTY HERETO HEREBY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY
FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN
SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 11.9 SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
Section 11.10 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original with the same effect
as if the signatures thereto and hereto were upon the same instrument.
Section 11.11 CONFIDENTIALITY. (a) Intermediate Holdings acknowledges
and agrees that: (i) the Purchasers and certain of their respective Affiliates
are a full service financial firm and as
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<PAGE> 54
such may from time to time effect transactions for their own account or the
account of customers, and hold positions in loans or options on loans of Persons
that may be the subject of this arrangement; (ii) the Purchasers may employ the
services of Donaldson, Lufkin & Jenrette Securities Corporation and its
Affiliates in providing certain services hereunder and may, subject to CLAUSE
(B) below, exchange with such entities information concerning Holdings,
Intermediate Holdings and the Guarantors, and such Affiliates will be entitled
to the benefits afforded the Purchasers hereunder, and (iii) the Purchasers or
their respective Affiliates may be providing financing or other services to
Persons whose interests may conflict with the interest of Holdings, Intermediate
Holdings and the Guarantors.
(b) The Purchasers and each other Holder agrees to keep confidential
any confidential information; PROVIDED that nothing herein shall prevent the
Purchasers or such other Holder from disclosing any such information (i) to any
Person which receives such information having been made aware of, and which
agrees to maintain, the confidential nature thereof in order to facilitate or
enable the Purchasers or such other Holder to syndicate, sell transfer
(including, without limitation, the transfer of a participation in the Asset
Bridge Notes) or assign any portion of its notes, (ii) to any Holder, (iii) to
its employees, directors, agents, attorneys, accountants and other professional
advisors which receive such information having been made aware of the
confidential nature thereof, (iv) upon the request or demand of any Governmental
Authority having jurisdiction over either Purchaser or such other Holder, (v) in
response to any order of any court or other Governmental Authority or as may
otherwise be required pursuant to any legal requirement, (vi) which has been
publicly disclosed other than in breach of this Agreement, or (vii) in
connection with the exercise of any remedy hereunder.
Section 11.12 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made hereunder and in any document, certificate
or statement delivered pursuant hereto or in connection herewith shall survive
the execution and delivery of this Agreement and the issuance of the Asset
Bridge Notes.
Section 11.13 CONSTRUCTION. Each covenant contained herein shall be
construed (absent express provision to the contrary) as being independent of
each other covenant contained herein, so that compliance with any one covenant
shall not (absent such an express contrary provision) be deemed to excuse
compliance with any other covenant. Where any provision herein refers to action
to be taken by any Person, or which such person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person.
Section 11.14 INTEGRATION. This Agreement represents the agreement of
the parties hereto with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by Holdings, Intermediate
Holdings or the Purchasers relative to the subject matter hereof not expressly
set forth herein or in the other Financing Documents.
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<PAGE> 55
Section 11.15 REPLACEMENT ASSET BRIDGE NOTES. If any mutilated Asset
Bridge Note is surrendered to Intermediate Holdings or Intermediate Holdings
receives reasonably satisfactory evidence of the destruction, loss or theft of
any Asset Bridge Note (which evidence shall be, in the case of an institutional
investor, notice from such institutional investor of such ownership and such
destruction, loss or theft), Intermediate Holdings shall, at the expense of the
holder of such Asset Bridge Note, execute and deliver, in lieu thereof, a new
Asset Bridge Note, dated and bearing interest from the date to which interest
shall have been paid on such lost, stolen, destroyed or mutilated Asset Bridge
Note or dated the date of such lost, stolen, destroyed or mutilated Asset Bridge
Note if no interest shall have been paid thereon.
Section 11.16 HEADINGS. Section headings used herein and in the table
of contents are for convenience only and are not to effect the construction of,
or be taken into consideration in interpreting this Agreement and the other
Financing Documents.
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<PAGE> 56
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers, as of the date first
above written.
PALM BEACH RAIL HOLDING, INC.
By: /s/ Joseph B. Doherty
------------------------------------
Name: Joseph B. Doherty
Title: Treasurer
Address for Notices:
5300 Broken Sound Blvd. N.W.
Boca Raton, FL 33487
Telecopier: (561) 994-3929
Attention: Joseph B. Doherty
GUARANTORS:
RAILAMERICA, INC.
By: /s/ Joseph B. Doherty
------------------------------------
Name: Joseph B. Doherty
Title: Treasurer
Address for Notices:
5300 Broken Sound Blvd. N.W.
Boca Raton, FL 33487
Telecopier: (561) 994-3929
Attention: Joseph B. Doherty
KALYN/SIEBERT I, INCORPORATED
By:
------------------------------------
Name:
Title:
<PAGE> 57
KS BOCA, INC.
By:
------------------------------------
Name:
Title:
KALYN/SIEBERT, L.P.
By Kalyn/Siebert I, Incorporated, its general
partner
By:
------------------------------------
Name:
Title:
<PAGE> 58
COMMITMENT: PURCHASERS:
- ----------- RAIL AMERICA HOLDINGS FUNDING,
$55,000,000 INC.
By:
------------------------------------
Name:
Title:
Address for Notices:
277 Park Avenue
New York, NY 10172
Telecopier: 212-892-7542
Attention: Joe Adipietro
Wiring Instructions:
ABA#
A/C#
=========== Attention:
$55,000,000
<PAGE> 1
[EXECUTION COPY]
Exhibit 10.74
================================================================================
EQUITY REGISTRATION RIGHTS AGREEMENT
among
RAILAMERICA, INC.
and
THE PURCHASERS PARTY HERETO.
-----------------------
Dated as of February 4, 2000
================================================================================
<PAGE> 2
TABLE OF CONTENTS
1. Definitions.........................................................1
2. Securities Subject to this Agreement................................3
3. Piggyback Registration..............................................3
4. Hold-Back Agreements................................................4
5. Registration Expenses...............................................5
6. Indemnification.....................................................5
7. Rule 144............................................................7
8. Miscellaneous.......................................................8
<PAGE> 3
EQUITY REGISTRATION RIGHTS AGREEMENT
This EQUITY REGISTRATION RIGHTS AGREEMENT, dated as of February 4,
2000(as amended, supplemented, amended and restated or otherwise modified from
time to time, this "AGREEMENT"), is made and entered by and between RAILAMERICA,
INC., a Delaware corporation ("HOLDINGS"), and the Persons parties hereto as
"Purchasers" (collectively, the "PURCHASERS").
RECITALS
This Agreement is being delivered pursuant to the Securities Purchase
Agreement, dated as of February 4, 2000 (as amended, supplemented or otherwise
modified, "SECURITIES PURCHASE AGREEMENT"), by and among Holdings, RailAmerica
Transportation Corp., a Delaware corporation (the "COMPANY"), Palm Beach Rail
Holding, Inc., a Delaware corporation ("INTERMEDIATE HOLDINGS"), each Restricted
Subsidiary of the Company that is a party thereto as a "Guarantor" (each such
Restricted Subsidiary, together with Holdings and Intermediate Holdings, the
"GUARANTORS") and the Purchasers. In order to induce the Purchasers to enter
into the Securities Purchase Agreement, Holdings has agreed to provide the
registration rights set forth in this Agreement. The execution of this Agreement
is a condition to the closing under the Securities Purchase Agreement.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS.
(a) CERTAIN TERMS. As used in this Agreement, the following capitalized
terms shall have the following meanings:
"INDEMNIFIED PARTIES" is defined in SECTION 6(A) hereof.
"INDEMNIFYING PARTY" is defined in SECTION 6(C) hereof.
"NASD" means the National Association of Securities Dealers,
Inc.
"PIGGYBACK REGISTRATION" is defined in SECTION 3(A) hereof.
"PROSPECTUS" means the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with
respect to the terms of the
<PAGE> 4
offering of any portion of the Registrable Securities covered by such
Registration Statement and by all other amendments and supplements to
the prospectus, including post-effective amendments and all material
incorporated by reference in such prospectus.
"REGISTRABLE SECURITIES" means the Registrable Warrants and
the Registrable Warrant Shares; PROVIDED, that a security ceases to be
a Registrable Security when it is no longer a Transfer Restricted
Security.
"REGISTRABLE WARRANT SHARES" means all Warrant Shares issuable
to the holders of Warrants upon exercise of such Warrants.
"REGISTRABLE WARRANTS" means all Warrants originally issued
pursuant to the Warrant Agreement.
"REGISTRATION EXPENSES" is defined in SECTION 5 hereof.
"REGISTRATION STATEMENT" means any registration statement of
Holdings which covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such Registration Statement, including post-effective
amendments, all exhibits and all material incorporated by reference in
such Registration Statement.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"TRANSFER RESTRICTED SECURITY" means the Registrable
Securities upon original issuance thereof; PROVIDED, that a Registrable
Security is no longer a Transfer Restricted Security when such
Registrable Security is sold to the public.
"UNDERWRITTEN REGISTRATION" and "UNDERWRITTEN OFFERING" mean a
registration in which securities of Holdings are sold to an underwriter
for reoffering to the public.
"WARRANT AGREEMENt" means the Warrant Agreement, dated as of
February 4, 2000, among Holdings and the Purchasers, as amended,
supplemented or otherwise modified from time to time.
"WARRANT SHARES" means the shares of Common Stock or any
security substituted for the Common Stock in an amount equal to 3.5% of
the common equity of Holdings issuable to the holders of Warrants upon
exercise of the Warrants.
"WARRANTS" means the Warrants issued pursuant to the Warrant
Agreement to purchase Common Stock or any security substituted for the
Common Stock in an amount
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<PAGE> 5
equal to 3.5% of the common equity of Holdings in accordance with the
Warrant Agreement.
(b) SECURITIES PURCHASE AGREEMENT DEFINITIONS. Unless otherwise defined
herein or the context otherwise requires, terms used in this Agreement,
including its preamble, have the meanings provided in the Securities Purchase
Agreement.
2. SECURITIES SUBJECT TO THIS AGREEMENT.
(a) REGISTRABLE SECURITIES. The securities entitled to the benefits of
this Agreement are the Registrable Securities.
(b) HOLDERS OF REGISTRABLE SECURITIES. A Person is deemed to be a
holder of Registrable Securities whenever such Person owns Registrable
Securities of record or has provided evidence reasonably satisfactory to
Holdings that such Person has the right to acquire such Registrable Securities,
whether or not such acquisition has actually been effected and disregarding any
legal restrictions upon the exercise of such right.
3. PIGGYBACK REGISTRATION.
(a) RIGHT TO PIGGYBACK. Subject to the last sentence of this CLAUSE
(A), whenever Holdings proposes to register any shares of Common Stock (or
securities exercisable or exchangeable for or convertible into, or options to
acquire, Common Stock) with the Commission under the Securities Act and the
registration form to be used may be used for the registration of the Registrable
Securities (a "PIGGYBACK REGISTRATION"), Holdings will give written notice to
the Purchasers, at least 10 days prior to the anticipated filing date, of its
intention to effect such a registration, which notice will specify the proposed
offering price, the kind and number of securities proposed to be registered, the
distribution arrangements and such other information that at the time would be
appropriate to include in such notice, and will, subject to CLAUSE (B) below,
include in such Piggyback Registration all Registrable Securities with respect
to which Holdings has received written requests for inclusion therein within 5
days after the effectiveness of Holding's notice; PROVIDED, that if the proceeds
of the offering are to be used by Holdings or the Company to redeem all of the
Notes, Holdings will not be required to include any Registrable Securities in
such Piggyback Registration. Except as may otherwise be provided in this
Agreement, Registrable Securities with respect to which such request for
registration has been received will be registered by Holdings and offered to the
public in a Piggyback Registration pursuant to this Section 3 on the terms and
conditions at least as favorable as those applicable to the registration of
shares of Common Stock to be sold by Holdings and by any other Person selling
under such Piggyback Registration.
(b) PRIORITY ON PIGGYBACK REGISTRATION. Holdings shall use all
reasonable efforts to cause the managing underwriter or underwriters of a
proposed Underwritten Offering to permit the
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<PAGE> 6
Registrable Securities requested to be included in the registration statement
for such offering to be included on the same terms and conditions as any other
Common Stock to be offered pursuant to such registration statement by Holdings
or any other security holders included therein. Notwithstanding the foregoing,
if the managing underwriter or underwriters of such offering deliver a written
opinion to Holdings that either because of (i) the kind or combination of
securities which the holders of Registrable Securities, Holdings and any other
Persons intend to include in such offering or (ii) the size of the offering
which such holders, Holdings and such other Persons intend to make, are such
that the success of the offering would be materially and adversely affected by
inclusion of the Registrable Securities requested to be included, then (A) in
the event that the size of the offering is the basis of such managing
underwriter's opinion, the amount of securities to be offered for the accounts
of such holders shall be reduced pro rata (according to the Registrable
Securities proposed for registration) to the extent necessary to reduce the
total amount of securities to be included in such offering to the amount
recommended by such managing underwriter or underwriters; PROVIDED, that if
securities are being offered for the account of other Persons as well as
Holdings, then with respect to the Registrable Securities intended to be offered
by such holders, the proportion by which the amount of such class of securities
intended to be offered by such holders is reduced shall not exceed the
proportion by which the amount of such class of securities intended to be
offered by such other Persons is reduced; and (B) in the event that the kind (or
combination) of securities to be offered is the basis of such managing
underwriter's opinion, (x) the Registrable Securities to be included in such
offering shall be reduced as described in clause (A) above (subject to the
proviso in clause (A)) or (y) if the actions described in clause (x) would, in
the judgment of the managing underwriter or underwriters, be insufficient to
substantially eliminate the adverse effect that inclusion of the Registrable
Securities requested to be included would have on such offering, such
Registrable Securities will be excluded from such offering.
(c) SELECTION OF UNDERWRITERS. If any Piggyback Registration is an
Underwritten Offering, Holdings will select a managing underwriter or
underwriters to administer the offering, which managing underwriter or
underwriters will be of nationally recognized standing.
4. HOLD-BACK AGREEMENTS.
(a) Each holder of Registrable Securities whose Registrable Securities
are covered by a Registration Statement filed pursuant to Section 3 hereof
agrees, if requested by the managing underwriters in an Underwritten Offering,
not to effect any public sale or distribution of securities of Holdings of the
same class or convertible into or exercisable for securities of the same class,
as the securities included in such Registration Statement, including a sale
pursuant to Rule 144 under the Securities Act (except as part of such
Underwritten Registration), during the 30-day period prior to, and during the
90-day period beginning on, the closing date of each Underwritten Offering made
pursuant to such Registration Statement, to the extent timely notified in
writing by Holdings or the managing underwriters; PROVIDED, HOWEVER, that each
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<PAGE> 7
holder of Registrable Securities shall be subject to the hold-back restrictions
of this Section 4(a) only once during any 365-day period.
(b) The foregoing provisions shall not apply to any holder of
Registrable Securities if such holder is prevented by applicable statute or
regulation from entering any such agreement; PROVIDED, HOWEVER, that any such
holder shall undertake, in its request to participate in any such Underwritten
Offering, not to effect any public sale or distribution of any Registrable
Securities held by such holder and covered by a Registration Statement
commencing on the date of sale of the Registrable Securities unless it has
provided 45 days prior written notice of such sale or distribution to the
underwriter or underwriters.
5. REGISTRATION EXPENSES. All reasonable expenses incident to Holdings'
performance of or compliance with this Agreement, including, without limitation,
all (i) registration and filing fees, fees and expenses associated with filings
required to be made with the NASD (including, if applicable, the fees and
expenses of any "qualified independent underwriter" and its counsel as may be
required by the rules and regulations of the NASD), (ii) fees and expenses of
compliance with securities or blue sky laws (including fees and disbursements of
counsel for the underwriters in connection with blue sky qualifications of the
Registrable Securities and determination of their eligibility for investment
under the laws of such jurisdictions as the managing underwriters may reasonably
designate), (iii) printing expenses (including expenses of printing certificates
for the Registrable Securities in a form eligible for deposit with The
Depository Trust Company and of printing prospectuses), (iv) fees and
disbursements of counsel for Holdings and for the sellers of the Registrable
Securities, and customary out of pocket expenses and fees paid by issuers to the
extent provided for in an underwriting agreement (excluding discounts,
commissions or fees of underwriters, selling brokers, dealer managers or similar
securities industry professionals relating to the distribution of the
Registrable Securities, transfer taxes or legal expenses of any Person other
than Holdings, the Company and the selling holders), (v) the cost of securities
acts liability insurance if Holdings so desires and (vi) fees and expenses of
other Persons retained by Holdings (all such expenses being herein called
"REGISTRATION EXPENSES") will be borne by Holdings, regardless whether the
Registration Statement becomes effective. Each holder of Registrable Securities
will pay any fees or disbursements of counsel to such holder and all
underwriting discounts and commissions and transfer taxes, if any, and provide
other fees, costs and expenses of such holder (other than Registration Expenses)
relating to the sale or disposition of such holder's Registrable Securities.
Holdings, in any event, will pay Holdings' own internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with the listing of the securities to
be registered on each securities exchange on which similar securities issued by
Holdings are then listed and the fees and expenses of any Person, including
special experts, retained by Holdings.
-5-
<PAGE> 8
6. INDEMNIFICATION.
(a) INDEMNIFICATION BY HOLDINGS. Holdings agrees to indemnify and hold
harmless, to the full extent permitted by law, each holder of Registrable
Securities, its officers, directors and employees and each Person who controls
such holder (within the meaning of the Securities Act) (the "INDEMNIFIED
PARTIES") against all losses, claims, damages, liabilities and expenses incurred
by such Indemnified Party in connection with any actual or threatened action
arising out of or based upon any untrue or alleged untrue statement of a
material fact contained in any Registration Statement, Prospectus or preliminary
Prospectus or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as the same arise out of or are based upon any such
untrue statement or omission made in reliance on and in conformity with any
information furnished in writing to Holdings by such holder or its counsel
expressly for use therein; PROVIDED, that Holdings shall not be liable in any
such case to the extent that any such loss, claim, damage, liability or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission in the Prospectus, if such untrue statement or
alleged untrue statement, omission or alleged omission is completely corrected
in an amendment or supplement to the Prospectus and the holder of Registrable
Securities thereafter fails to deliver such Prospectus as so amended or
supplemented prior to or concurrently with the sale of the Registrable
Securities to the Person asserting such loss, claim, damage, liability or
expense after Holdings has furnished such holder with a sufficient number of
copies of the same. Holdings shall also indemnify underwriters, their officers
and directors and each Person who controls such Persons (within the meaning of
the Securities Act) to the same extent as provided above with respect to the
indemnification of the Indemnified Parties, if requested.
(b) INDEMNIFICATION BY HOLDER OF REGISTRABLE SECURITIES. In connection
with a Piggy Back Registration, each holder of Registrable Securities included
therein will furnish to Holdings in writing such information and affidavits as
Holdings reasonably requests for use in connection with any such Registration
Statement or Prospectus and agrees to indemnify and hold harmless, to the
fullest extent permitted by law, Holdings, its directors and officers and each
Person who controls Holdings (within the meaning of the Securities Act) against
any losses, claims damages, liabilities and expenses resulting from any untrue
statement of a material fact contained in any Registration Statement or
Prospectus or any omission of a material fact required to be stated in the
Registration Statement or Prospectus or preliminary Prospectus or necessary to
make the statements therein not misleading, to the extent, but only to the
extent, that such untrue statement or omission relates to a holder and is made
in reliance on and in conformity with any information or affidavit furnished in
writing by such holder to Holdings specifically for inclusion in such
Registration Statement or Prospectus. In no event shall the liability of any
selling holder of Registrable Securities hereunder be greater in amount than the
dollar amount of the proceeds received by such holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation. Holdings
shall be entitled to receive indemnities from underwriters, selling brokers,
dealer managers and similar securities industry professionals participating in
the distribution of such Registrable Securities to the same extent as provided
above with respect to
-6-
<PAGE> 9
information or affidavit furnished in writing by such Persons specifically for
inclusion in any Prospectus or Registration Statement.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person entitled to
indemnification hereunder will (i) give prompt notice to Holdings or the holder
of Registrable Securities, as the case may be (in either case, as applicable, an
"INDEMNIFYING PARTY") of any claim with respect to which such Person seeks
indemnification and (ii) permit such Indemnifying Party to assume the defense of
such claim with counsel reasonably satisfactory to such Person; PROVIDED,
HOWEVER, that any Person entitled to indemnification hereunder shall have the
right to employ separate counsel and to participate in the defense of such
claim, but the fees and expenses of such counsel shall be at the expense of such
Person unless (a) the Indemnifying Party has agreed to pay such fees or
expenses, (b) the Indemnifying Party has failed to assume the defense of such
claim or (c) in the reasonable judgment of any such Person, based upon advice of
its counsel, a conflict of interest may exist between such Person and the
Indemnifying Party with respect to such claims (in which case, if such Person
notifies the Indemnifying Party in writing that such Person elects to employ
separate counsel at the expense of the Indemnifying Party, the Indemnifying
Party shall not have the right to assume the defense of such claim on behalf of
such Person). If such defense is not assumed by the Indemnifying Party, the
Indemnifying Party will not be subject to any liability for any settlement made
without its consent (but such consent will not be unreasonably withheld). No
Indemnifying Party will be required to consent to the entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Person entitled to
indemnification a release from all liability in respect to such claim or
litigation. If any Indemnifying Party who is not entitled to, or elects not to,
assume the defense of a claim will not be obligated to pay the fees and expenses
of more than one counsel for all Persons entitled to indemnification by such
Indemnifying Party with respect to such claim, unless in the reasonable judgment
of any such Person a conflict of interest may exist between such Person and any
other Person entitled to indemnification with respect to such claim, in which
event the Indemnifying Party shall be obligated to pay the fees and expenses of
such additional counsel or counsels, but only of one such additional counsel for
each group of similarly situated Persons in any one jurisdiction.
(d) CONTRIBUTION. If for any reason the indemnification provided for in
preceding CLAUSES (A) and (B) is unavailable to any Person entitled to
indemnification hereunder or is insufficient to hold such Person harmless as
contemplated by the preceding CLAUSES (A) and (B), then the Indemnifying Party
shall contribute to the amount paid or payable by such Person as a result of
such loss, claim, damage or liability in such proportion as is appropriate to
reflect not only the relative benefits received by such Person and the
Indemnifying Party, but also the relative fault of such Person and the
Indemnifying Party, as well as any other relevant equitable considerations;
PROVIDED, that no holder of Registrable Securities shall be required to
contribute an amount greater than the dollar amount of the proceeds received by
such holder of Registrable Securities with respect to the sale of any
securities. No Person guilty of fraudulent
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<PAGE> 10
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
7. RULE 144. Holdings covenants that it will file the reports required
to be filed by it under the Securities Act and the Exchange Act and the rules
and regulations adopted by the Commission thereunder (or, if it is not required
to file such reports, it will, upon the request of any holder of Registrable
Securities made after the Fixed Rate Sale Date, make publicly available other
information so long as necessary to permit sales pursuant to Rule 144 under the
Securities Act), and it will take such further action as any holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation hereafter adopted by
the Commission. Upon the request of any holder of Registrable Securities,
Holdings will deliver to such holder a written statement as to whether it has
complied with such information and filing requirements.
8. MISCELLANEOUS.
(a) REMEDIES. Each holder of Registrable Securities, in addition to
being entitled to exercise all rights provided herein or granted by law,
including recovery of damages, in connection with the breach by Holdings of its
obligations to register the Registrable Securities will, to the fullest extent
permitted under applicable law, be entitled to specific performance of its
rights under this Agreement. Holdings agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement and agrees, to the extent permitted under
applicable law, to waive the defense in any action for specific performance that
a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. Holdings will not on or after the date
of this Agreement enter into any agreement with respect to its securities which
is inconsistent with the rights granted to the holders of Registrable Securities
in this Agreement or otherwise conflicts with the provisions hereof. The rights
granted to the holders of Registrable Securities hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the holders of
Holdings' securities under any other agreements. Holdings has not previously
entered into any inconsistent agreement with respect to its securities granting
any registration rights to any Person.
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions of this Agreement may
not be given unless Holdings has obtained the written consent of holders of at
least a majority of the outstanding Registrable Securities (excluding
Registrable Securities held by Holdings or any of its Subsidiaries).
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<PAGE> 11
(d) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, facsimile or air courier guaranteeing overnight delivery:
(i) if to a holder of Registrable Securities, at the most
current address given by such holder to Holdings in accordance with the
provisions of this Section 8(d), which address initially is, with
respect to the Purchasers, the address set forth next to the
Purchasers' name on the signature pages of the Securities Purchase
Agreement; and
(ii) if to Holdings, initially to it at the address set forth
in the Securities Purchase Agreement and thereafter at such other
address, notice of which is given in accordance with the provisions of
this Section 8(d).
All such notices and communications shall be deemed to have been duly given: at
the time delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; when answered back, if
delivered by facsimile; and on the next business day, if timely delivered to an
air courier guaranteeing overnight delivery.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties hereto,
including without limitation, and without the need for an express assignment,
subsequent holders of Registrable Securities.
(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) NEW YORK LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK. EACH PARTY HERETO HEREBY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY FOR PURPOSES
OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT
AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM. EACH
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<PAGE> 12
PARTY HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
(i) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of any such provision in such jurisdiction in every other
respect and of the remaining provisions contained herein shall not be affected
or impaired thereby.
(j) ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement with respect to the subject matter contained
herein and intended to be a complete and exclusive statement of the agreement
and understanding of the parties hereto in respect of the subject matter
contained herein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein with respect to
the registration rights granted by Holdings with respect to the Registrable
Securities. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
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<PAGE> 13
IN WITNESS WHEREOF, the parties have executed this Equity Registration
Rights Agreement as of the date first written above.
RAILAMERICA, INC.
By:
-------------------------------------
Name:
Title:
PURCHASERS:
RAIL AMERICA FUNDING, INC.
By:
-------------------------------------
Name:
Title:
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<PAGE> 1
[EXECUTION COPY]
Exhibit 10.75
================================================================================
DEBT REGISTRATION RIGHTS AGREEMENT
among
RAILAMERICA TRANSPORTATION CORP.
RAILAMERICA, INC.,
PALM BEACH RAIL HOLDING, INC.,
and
THE ADDITIONAL REGISTRANTS PARTY HERETO,
and
THE PURCHASERS PARTY HERETO.
-----------------------
Dated as of February 4, 2000
================================================================================
<PAGE> 2
TABLE OF CONTENTS
1. Definitions..............................................................1
2. Securities Subject to this Agreement.....................................2
3. Shelf Registration.......................................................3
4. Piggy-Back Registration..................................................3
5. Hold-Back Agreements.....................................................4
6. Registration Procedures..................................................5
7. Registration Expenses....................................................9
8. Indemnification.........................................................10
9. Rule 144................................................................12
10. Miscellaneous...........................................................13
<PAGE> 3
DEBT REGISTRATION RIGHTS AGREEMENT
This DEBT REGISTRATION RIGHTS AGREEMENT, dated as of February 4, 2000
(as amended, supplemented, amended and restated or otherwise modified from time
to time, this "AGREEMENT"), is made and entered by and among RAILAMERICA
TRANSPORTATION CORP., a Delaware corporation (the "COMPANY"), RAILAMERICA, INC.,
a Delaware corporation ("HOLDINGS"), PALM BEACH RAIL HOLDING, INC., a Delaware
corporation ("INTERMEDIATE HOLDINGS"), each Restricted Subsidiary of the Company
that is a party hereto as an "Additional Registrant" (each such Restricted
Subsidiary, together with Holdings and Intermediate Holdings, the "ADDITIONAL
REGISTRANTS") and the Persons parties hereto as "Purchasers" (collectively, the
"PURCHASERS").
RECITALS
This Agreement is being delivered pursuant to the Securities Purchase
Agreement, dated as of February 4, 2000 (as amended, supplemented or otherwise
modified, "SECURITIES PURCHASE AGREEMENT"), by and among the Company, the
Additional Registrants and the Purchasers. In order to induce the Purchasers to
enter into the Securities Purchase Agreement, each of the Company and each
Additional Registrant has agreed to provide the registration rights set forth in
this Agreement. The execution of this Agreement is a condition to the closing
under the Securities Purchase Agreement.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS.
(a) CERTAIN TERMS. As used in this Agreement, the following capitalized
terms shall have the following meanings:
"INDEMNIFIED PARTIES" is defined in SECTION 8(A) hereof.
"INDEMNIFYING PARTY" is defined in SECTION 8(C) hereof.
"NASD" means the National Association of Securities Dealers,
Inc.
"PIGGY-BACK REGISTRATION" is defined in SECTION 4(A) hereof.
<PAGE> 4
"PROSPECTUS" means the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement and by all other
amendments and supplements to the prospectus, including post-effective
amendments and all material incorporated by reference in such
prospectus.
"REGISTRABLE SECURITIES" means all Notes; PROVIDED that a Note
ceases to be a Registrable Security when it is no longer a Transfer
Restricted Security.
"REGISTRANTS" means the Company and the Additional
Registrants.
"REGISTRATION EXPENSES" is defined in SECTION 7 hereof.
"REGISTRATION STATEMENT" means any registration statement of
any Registrant which covers any of the Registrable Securities pursuant
to the provisions of this Agreement, including the Prospectus,
amendments and supplements to such Registration Statement, including
post-effective amendments, all exhibits and all material incorporated
by reference in such Registration Statement.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHELF REGISTRATION" is defined in SECTION 3(A) hereof.
"TRANSFER RESTRICTED SECURITY" means Registrable Securities
upon original issuance thereof; PROVIDED that a Registrable Security is
no longer a Transfer Restricted Security when such Registrable Security
is sold to the public.
"UNDERWRITTEN REGISTRATION" and "UNDERWRITTEN OFFERING" mean a
registration in which securities of any Registrant are sold to an
underwriter for reoffering to the public.
(b) SECURITIES PURCHASE AGREEMENT DEFINITIONS. Unless otherwise defined
herein or the context otherwise requires, terms used in this Agreement,
including its preamble, have the meanings provided in the Securities Purchase
Agreement.
2. SECURITIES SUBJECT TO THIS AGREEMENT.
(a) REGISTRABLE SECURITIES. The securities entitled to the benefits of
this Agreement are the Registrable Securities.
(b) HOLDERS OF REGISTRABLE SECURITIES. A Person is deemed to be a
holder of Registrable Securities whenever such Person owns Registrable
Securities of record or has provided evidence reasonably satisfactory to the
Company that such Person has the right to acquire such Registrable Securities in
compliance with the provisions of the Securities Purchase Agreement, whether or
not such acquisition has actually been effected.
3. SHELF REGISTRATION. The Registrants shall file, and shall use their
best efforts to cause to become effective a "shelf" registration statement on
any appropriate form pursuant to Rule 415 (or
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<PAGE> 5
similar rule that may be adopted by the Commission) under the Securities Act (a
"SHELF REGISTRATION") on or as soon as practicable after the Fixed Rate Sale
Date in order to permit registered resales of all of the Registrable Securities.
Subject to the last paragraph of SECTION 6, the Registrants agree to use their
best efforts thereafter to keep such Shelf Registration continuously effective,
and to prevent the happening of any event of the kind described in SECTION 6(C)
hereof that requires the Registrants to give notice pursuant to the last
paragraph of SECTION 6 hereof, until such time as all the Registrable Securities
covered by the Shelf Registration have been sold pursuant to such Shelf
Registration or have been otherwise redeemed or repaid in full by the
Registrants.
4. PIGGY-BACK REGISTRATION.
(a) If any Registrant proposes to file a registration statement under
the Securities Act with respect to an offering (other than an offering the
proceeds of which are to be used to redeem the Notes) by such Registrant of any
debt securities for its own account or for the account of any of its security
holders (PROVIDED that, in the case of a registration on demand of such security
holders, the holders of a majority in aggregate principal amount of any such
debt securities consent in writing) of any class of debt or equity security
(other than a registration statement on Form S-4 or S-8 (or any substitute form
that may be adopted by the Commission), then such Registrant shall give written
notice of such proposed filing to the holders of Registrable Securities as soon
as practicable (but in no event less than 30 days before the anticipated filing
date), and such notice shall offer such holders the opportunity to register such
principal amount of Registrable Securities as each such Holder may request (a
"PIGGY-BACK REGISTRATION").
(b) The applicable Registrant shall use all reasonable efforts to cause
the managing underwriter or underwriters of a proposed Underwritten Offering to
permit the Registrable Securities requested to be included in the registration
statement for such offering to be included on the same terms and conditions as
any similar class of debt or equity securities of such Registrant or of such
other security holders included therein. Notwithstanding the foregoing, if the
managing underwriter or underwriters of such offering deliver a written opinion
to such Registrant that either because of (i) the kind or combination of
securities which the holders of Registrable Securities, such Registrant and any
other Persons intend to include in such offering or (ii) the size of the
offering which such holders, such Registrant and such other Persons intend to
make, are such that the success of the offering would be materially and
adversely affected by inclusion of the Registrable Securities requested to be
included, then (A) in the event that the size of the offering is the basis of
such managing underwriter's opinion, the amount of securities to be offered for
the accounts of such holders shall be reduced pro rata (according to the
Registrable
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<PAGE> 6
Securities proposed for registration) to the extent necessary to reduce the
total amount of securities to be included in such offering to the amount
recommended by such managing underwriter or underwriters; PROVIDED that if
securities are being offered for the account of other Persons as well as such
Registrant, then with respect to the Registrable Securities intended to be
offered by such holders, the proportion by which the amount of such class of
securities intended to be offered by such holders is reduced shall not exceed
the proportion by which the amount of such class of securities intended to be
offered by such other Persons is reduced; and (B) in the event that the kind (or
combination) of securities to be offered is the basis of such managing
underwriter's opinion, (x) the Registrable Securities to be included in such
offering shall be reduced as described in CLAUSE (A) above (subject to the
proviso in CLAUSE (A)) or (y) if the actions described in CLAUSE (X) would, in
the judgment of the managing underwriter or underwriters, be insufficient to
substantially eliminate the adverse effect that inclusion of the Registrable
Securities requested to be included would have on such offering, such
Registrable Securities will be excluded from such offering.
5. HOLD-BACK AGREEMENTS.
(a) RESTRICTIONS ON PUBLIC SALE BY HOLDER OF REGISTRABLE SECURITIES.
Each holder of Registrable Securities whose Registrable Securities are covered
by a Registration Statement filed pursuant to SECTION 3 or 4 hereof agrees, if
requested by the managing underwriters in an Underwritten Offering, not to
effect any public sale or distribution of securities of any of the Registrants
of the same class as the securities included in such Registration Statement,
including a sale pursuant to Rule 144 under the Securities Act (except as part
of such Underwritten Registration), during the 30-day period prior to, and
during the 90-day period beginning on, the closing date of each Underwritten
Offering made pursuant to such Registration Statement, to the extent timely
notified in writing by such Registrant or the managing underwriters; PROVIDED,
HOWEVER, that each holder of Registrable Securities shall be subject to the
hold-back restrictions of this SECTION 5(A) only once during any 365-day period.
The foregoing provisions shall not apply to any holder of Registrable
Securities if such holder is prevented by applicable statute or regulation from
entering any such agreement; PROVIDED, HOWEVER, that any such holder shall
undertake, in its request to participate in any such Underwritten Offering, not
to effect any public sale or distribution of any Registrable Securities held by
such holder and covered by a Registration Statement commencing on the date of
sale of the Registrable Securities unless it has provided 45 days prior written
notice of such sale or distribution to the underwriter or underwriters.
(b) RESTRICTIONS ON SALE OF DEBT SECURITIES BY THE REGISTRANTS AND
OTHERS. The Registrants agree (i) not to effect any public or private offer,
sale or distribution of any of its debt securities or any class or series of its
capital stock having a preference in liquidation or with respect to dividends,
including a sale pursuant to Regulation D under the Securities Act (other than
any such sale or distribution of such securities in connection with any merger
or
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<PAGE> 7
consolidation by Holdings, the Company or any of their respective Restricted
Subsidiaries or the acquisition by Holdings, the Company or any of their
respective Restricted Subsidiaries of the capital stock or substantially all the
assets of any other Person or in connection with any employee stock option or
other benefit plan; PROVIDED, that in each such case the recipients of such
securities agree to be bound by a restriction on transfer comparable to that set
forth in this SECTION 5(B)), during the 10-day period prior to, and during the
120-day period beginning with, the effectiveness of a Registration Statement
filed under SECTION 3 hereof to the extent timely notified in writing by a
holder of Registrable Securities or the managing underwriter or underwriters in
an Underwritten Offering and (ii) during the aforementioned period, to cause
each holder of each of the Registrants' privately placed debt securities or any
class or series of the Registrants' capital stock having a preference in
liquidation or with respect to dividends purchased from the Registrants at any
time on or after the date of this Agreement to agree not to effect any public
sale or distribution of any such securities during such period, including a sale
pursuant to Rule 144 under the Securities Act (except as part of such
registration, if permitted).
6. REGISTRATION PROCEDURES. In connection with the Registrants' Shelf
Registration obligations set forth in SECTION 3 hereof, each Registrant will use
its best efforts to effect such registration to permit the sale of such
Registrable Securities in accordance with the intended method or methods of
distribution thereof, and pursuant thereto such Registrant will, as
expeditiously as possible:
(a) prepare and file with the Commission, within the time period
provided in SECTION 3 hereof, a Registration Statement or Registration
Statements relating to the Shelf Registration on any appropriate form under the
Securities Act, which form shall be available for the sale of the Registrable
Securities in accordance with the intended method or methods of distribution
thereof and shall include all financial statements (including, if applicable,
financial statements of any Person that shall have guaranteed any indebtedness
of the Registrants) required by the Commission to be filed therewith, cooperate
and assist in any filings required to be made with the NASD, and use its best
efforts to cause such Registration Statement to become effective; PROVIDED, that
before filing a Registration Statement or any amendments or supplements thereto,
the Registrants will furnish to the holders of the Registrable Securities
covered by such Registration Statement, copies of all such documents proposed to
be filed, which documents will be subject to the review by such holders, and the
Registrants will not, except to the extent required by applicable law, file any
Registration Statement or any amendments or supplements thereto to which the
holders of a majority in aggregate principal amount of such Registrable
Securities shall reasonably object;
(b) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be necessary to
keep the Registration Statement effective until all Registrable Securities
covered by such Registration Statement have been sold; cause the Prospectus to
be supplemented by any required
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<PAGE> 8
Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
under the Securities Act; and comply with the provisions of the Securities Act
with respect to the disposition of all Registrable Securities covered by such
Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the sellers thereof set forth in
such Registration Statement or supplement to the Prospectus;
(c) notify the selling holders of Registrable Securities promptly, and
(if requested by any such Person) confirm such advice in writing, (i) when the
Prospectus or any Prospectus supplement or post-effective amendment has been
filed, and, with respect to the Registration Statement or any post-effective
amendment, when the same has become effective, (ii) of any request by the
Commission for amendments or supplements to the Registration Statement or the
Prospectus or for additional information, (iii) of the issuance by the
Commission of any stop order of which any Registrants or its counsel is aware
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose, (iv) if at any time the representations and
warranties of the Registrants contemplated by CLAUSE (O) below cease to be true
and correct in all material respects, (v) of the receipt by the Registrants of
any notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose and (vi) of any Registrant's
becoming aware that the Prospectus (including any document incorporated therein
by reference), as then in effect, includes an untrue statement of material fact
or omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing;
(d) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of the Registration Statement at the earliest
possible moment;
(e) if reasonably requested by a holder of Registrable Securities being
sold in connection with an Underwritten Offering, promptly incorporate in a
Prospectus such information as the holders of a majority in aggregate principal
amount of the Registrable Securities being sold agree should be included therein
relating to the plan of distribution with respect to such Registrable
Securities, including, without limitation, information with respect to the
principal amount of Registrable Securities being sold, the purchase price being
paid therefor and any other terms of the underwritten (or best efforts
underwritten) offering of the Registrable Securities to be sold in such
offering; and make all required filings of such Prospectus as promptly as
practicable upon being notified of the matters to be incorporated in such
Prospectus;
(f) furnish to each selling holder of Registrable Securities without
charge, at least one signed copy of the Registration Statement and any
post-effective amendment thereto,
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<PAGE> 9
including financial statements and schedules, all documents incorporated therein
by reference and all exhibits (including those incorporated by reference);
(g) deliver to each selling holder of Registrable Securities without
charge, as many copies of the Prospectus (including each preliminary prospectus)
and any amendment or supplement thereto as such Persons may reasonably request;
subject to the last sentence of this SECTION 6, the Registrants' consent to the
use of the Prospectus by each of the selling holders of Registrable Securities,
in connection with the offering and sale of the Registrable Securities covered
by the Prospectus;
(h) prior to any public offering of Registrable Securities, use its
best reasonable efforts to register or qualify or cooperate with the selling
holders of Registrable Securities and their counsel in connection with the
registration or qualification of such Registrable Securities for offer and sale
under the securities or blue sky laws of such jurisdictions as any such seller
reasonably requests in writing and do any and all other acts or things necessary
or advisable to enable the disposition in such jurisdictions of such Registrable
Securities; PROVIDED, that the Registrants will not be required to qualify
generally to do business in any jurisdiction where it is not then so qualified
or to take any action which would subject it to general service of process or
taxation in any such jurisdiction where it is not then so subject;
(i) cooperate with the selling holders of Registrable Securities to
facilitate, to the extent commercially reasonable under the circumstances, the
timely preparation and delivery of certificates representing such Registrable
Securities to be sold and not bearing any restrictive legends; and enable such
Registrable Securities to be in such denominations and registered in such names
as such selling holders may reasonably request at least two business days prior
to any sale of such Registrable Securities;
(j) use their best efforts to cause the Registrable Securities covered
by the applicable Registration Statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to enable
the seller or sellers thereof to consummate the disposition of such Registrable
Securities;
(k) upon the occurrence of any event contemplated by CLAUSE (C)(VI)
above, prepare a supplement or post-effective amendment to the related
Registration Statement or the related Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the holders of the Registrable Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading in light of the
circumstances then existing;
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<PAGE> 10
(l) use commercially reasonable efforts to cause all Registrable
Securities covered by a Registration Statement to be listed on each securities
exchange on which similar securities issued by the Registrants are then listed
if such listing is permitted under the rules of such exchange and if requested
by the holders of a majority in aggregate principal amount of such Registrable
Securities;
(m) cause the Registrable Securities covered by a Registration
Statement to be rated with such rating agencies as the holders of a majority in
aggregate principal amount of such Registrable Securities may designate;
(n) not later than the effective date of the Shelf Registration,
provide a CUSIP number for all Registrable Securities and provide the transfer
agent with printed certificates for the Registrable Securities which are in a
form eligible for deposit with The Depository Trust Company;
(o) enter into such agreements (including an underwriting agreement)
and take all such other appropriate and reasonable actions in connection
therewith in order to expedite or facilitate the disposition of such Registrable
Securities and in such connection, whether or not an underwriting agreement is
entered into and whether or not the registration is an Underwritten Registration
(i) make such representations and warranties to the holders of such Registrable
Securities in form, substance and scope as are customarily made by issuers to
underwriters in primary Underwritten Offerings and covering matters including,
but not limited to, those set forth in the Securities Purchase Agreement by the
Registrants; (ii) obtain opinions of counsel to the Registrants (which counsel
and opinions (in form, scope and substance) shall be reasonably satisfactory to
the holders of a majority in principal amount of such Registrable Securities)
addressed to each selling holder covering the matters customarily covered in
opinions requested in Underwritten Offerings and such other matters as may be
reasonably requested by such holders or underwriters; (iii) obtain "cold
comfort" letters and updates thereof from the Registrants' independent certified
public accountants addressed to such holders, such letters to be in customary
form and covering matters of the type customarily covered in "cold comfort"
letters by the Registrants' independent certified public accountants in
connection with primary Underwritten Offerings; (iv) if an underwriting
agreement is entered into, if permitted by the managing underwriter or
underwriters the same shall set forth in full the indemnification provisions and
procedures of SECTION 8 hereof with respect to all parties to be indemnified
pursuant to said Section; PROVIDED, that the indemnification provisions and
procedures set forth in such underwriting agreement shall be no less favorable
to the selling holders of Registrable Securities and the underwriters than the
indemnification provisions and procedures of SECTION 8 hereof; and (v) the
Registrants shall deliver such documents and certificates as may be requested by
the holders of a majority of the Registrable Securities being sold to evidence
compliance with CLAUSE (K) above and with any customary conditions contained in
the underwriting agreement or other agreement
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<PAGE> 11
entered into by the Registrants. The above shall be done at each closing under
such underwriting or similar agreement or as and to the extent required
thereunder;
(p) make available for inspection by a representative of the holders of
a majority in principal amount of the Registrable Securities and any attorney or
accountant retained by such holders, all financial and other records, pertinent
corporate documents and properties of the Registrants as may be reasonably
necessary to enable them to exercise their due diligence responsibilities, and
provide reasonable access to appropriate officers of the Registrants in
connection with such due diligence responsibilities; PROVIDED, HOWEVER, that
such representative and such holders, to the extent not already bound by Section
11.11 of the Securities Purchase Agreement, shall enter into a confidentiality
agreement with the Company having terms substantially the same as such Section;
(q) otherwise use their best efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to their
security holders, earnings statements for the Registrants satisfying the
provisions of Section 11(a) of the Securities Act, no later than 45 days after
the end of any twelve-month period (or 90 days, if such period is a fiscal year)
beginning with the first month of the Registrants' first fiscal quarter
commencing after the effective date of the Registration Statement, which
statements shall cover said twelve-month periods; PROVIDED, that a Registrant
shall be deemed to have complied with this CLAUSE (Q) if it has satisfied Rule
158 under the Securities Act; and
(r) promptly, prior to the filing of any document (relating to any
selling holder) which is to be incorporated by reference into the Registration
Statement or Prospectus (after initial filing of the Registration Statement),
provide copies of such document to counsel to the selling holders of Registrable
Securities covered by such Registration Statement, make the Registrants'
representatives available for discussion of such document with such selling
holders and make such changes in such document prior to the filing thereof as
counsel for such selling holders may reasonably request in writing.
The Registrants may require each seller of Registrable Securities as to
which any registration is being effected to furnish to the Registrants such
information regarding the distribution of such securities as the Registrants may
from time to time reasonably request in writing. Each holder of Registrable
Securities agrees by acceptance of such Registrable Securities that, upon
receipt of any notice from the Registrants of the happening of any event of the
kind described in SECTION 6(C)(III), (V) or (VI) hereof that, in the reasonable
judgment of any Registrants' Board of Directors, it is advisable to suspend use
of the prospectus for a discrete period of time due to pending corporate
developments, public filings with the Commission or similar events, such holder
will forthwith discontinue disposition of Registrable Securities until such
holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by SECTION 6(K) hereof, or until it is advised in writing (the
"ADVICE") by the Registrants that the use
-9-
<PAGE> 12
of such Prospectus may be resumed, and has received copies of any additional or
supplemental filings which are incorporated by reference in such Prospectus,
and, if so directed by the Registrants, such holder will deliver to the
Registrants (at the Registrants' expense) all copies, other than permanent file
copies then in such holder's possession, of such Prospectus covering such
Registrable Securities current at the time of receipt of such notice. The
Registrants shall use all reasonable efforts to insure that the use of the
prospectus may be resumed as soon as practicable, and in any event shall not be
entitled to required the Holder to suspend use of any prospectus for more than
30 business days in any twelve-month period.
7. REGISTRATION EXPENSES.
(a) All reasonable expenses incident to the Registrants' performance of
or compliance with this Agreement, including, without limitation, all (i)
registration and filing fees, fees and expenses associated with filings required
to be made with the NASD (including, if applicable, the fees and expenses of any
"qualified independent underwriter" and its counsel as may be required by the
rules and regulations of the NASD), (ii) fees and expenses of compliance with
securities or blue sky laws (including fees and disbursements of counsel for the
selling holders in connection with blue sky qualifications of the Registrable
Securities and determination of their eligibility for investment under the laws
of such jurisdictions as the holders of a majority in aggregate principal amount
of the Registrable Securities being sold may reasonably designate), (iii)
printing expenses (including expenses of printing certificates for the
Registrable Securities in a form eligible for deposit with The Depository Trust
Company and of printing prospectuses), (iv) fees and disbursements of counsel
for the Registrants and for the sellers of the Registrable Securities (subject
to the provisions of SECTION 7(B)), and customary out of pocket expenses and
fees paid by issuers to the extent provided for in any underwriting agreement
(excluding discounts, commissions or fees of underwriters, selling brokers,
dealer managers or similar securities industry professionals relating to the
distribution of the Registrable Securities, transfer taxes or legal expenses of
any Person other than the Registrants and the selling holders), (v) the cost of
securities acts liability insurance if the Registrants so desire and (vi) fees
and expenses of other Persons retained by the Registrants (all such expenses
being herein called "REGISTRATION EXPENSES") will be borne by the Registrants,
regardless whether the Registration Statement becomes effective. Each holder of
Registrable Securities will pay any fees or disbursements of counsel to such
holder (other than as provided in SECTION 7(B)) and all underwriting discounts
and commissions and transfer taxes, if any, and provide other fees, costs and
expenses of such holder (other than Registration Expenses) relating to the sale
or disposition of such holder's Registrable Securities. Each Registrant, in any
event, will pay such Registrant's own internal expenses (including, without
limitation, all salaries and expenses of their officers and employees performing
legal or accounting duties), the expense of any annual audit, the fees and
expenses incurred in connection with the listing of the securities to be
registered on each securities exchange on which similar securities issued by the
Registrants are then listed, rating agency fees and the fees and expenses of any
Person, including special experts, retained by the Registrants.
-10-
<PAGE> 13
(b) In connection with the Shelf Registration hereunder, the
Registrants will reimburse the selling holders of Registrable Securities being
registered in such registration for the reasonable fees and disbursements of not
more than one counsel chosen by the selling holders of a majority in principal
amount of such Registrable Securities.
8. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE REGISTRANTS. The Registrants jointly and
severally agree to indemnify and hold harmless, to the full extent permitted by
law, each holder of Registrable Securities, its officers, directors and
employees and each Person who controls such holder (within the meaning of the
Securities Act) (the "INDEMNIFIED PARTIES") against all losses, claims, damages,
liabilities and expenses incurred by such Indemnified Party in connection with
any actual or threatened action arising out of or based upon any untrue or
alleged untrue statement of a material fact contained in any Registration
Statement, Prospectus or preliminary Prospectus or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same arise out of or are based upon any such untrue statement or omission made
in reliance on and in conformity with any information furnished in writing to
the Registrants by such holder or its counsel expressly for use therein;
PROVIDED, that the Registrants shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or expense arises out of or
is based upon an untrue statement or alleged untrue statement or omission or
alleged omission in the Prospectus, if such untrue statement or alleged untrue
statement, omission or alleged omission is completely corrected in an amendment
or supplement to the Prospectus and the holder of Registrable Securities
thereafter fails to deliver such Prospectus as so amended or supplemented prior
to or concurrently with the sale of the Registrable Securities to the Person
asserting such loss, claim, damage, liability or expense after the Registrants
have furnished such holder with a sufficient number of copies of the same. Each
Registrant shall also indemnify underwriters, their officers and directors and
each Person who controls such Persons (within the meaning of the Securities Act)
to the same extent as provided above with respect to the indemnification of the
Indemnified Parties, if requested.
(b) INDEMNIFICATION BY HOLDER OF REGISTRABLE SECURITIES. In connection
with the Shelf Registration and each Piggy-Back Registration, each holder of
Registrable Securities included therein will furnish to the Registrants in
writing such information and affidavits as the Registrants reasonably request
for use in connection with any such Registration Statement or Prospectus and
agrees to indemnify and hold harmless, to the fullest extent permitted by law,
the Registrants, their directors and officers and each Person who controls a
Registrants (within the meaning of the Securities Act) against any losses,
claims, damages, liabilities and expenses resulting from any untrue statement of
a material fact contained in any Registration Statement or Prospectus or any
omission of a material fact required to be stated in the Registration Statement
or Prospectus or preliminary Prospectus or necessary to make the statements
therein not misleading, to the extent, but only to the extent, that such untrue
statement or omission relates to
-11-
<PAGE> 14
a holder and is made in reliance on and in conformity with any information or
affidavit furnished in writing by such holder to the Registrants specifically
for inclusion in such Registration Statement or Prospectus. In no event shall
the liability of any selling holder of Registrable Securities hereunder be
greater in amount than the dollar amount of the proceeds received by such holder
upon the sale of the Registrable Securities giving rise to such indemnification
obligation. The Registrants shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in the distribution of such Registrable Securities
to the same extent as provided above with respect to information or affidavit
furnished in writing by such Persons specifically for inclusion in any
Prospectus or Registration Statement.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person entitled to
indemnification hereunder will (i) give prompt notice to the applicable
Registrant or holder of Registrable Securities, as the case may be (in either
case, as applicable, an "INDEMNIFYING PARTY"), of any claim with respect to
which such Person seeks indemnification and (ii) permit such Indemnifying Party
to assume the defense of such claim with counsel reasonably satisfactory to such
Person; PROVIDED, HOWEVER, that any Person entitled to indemnification hereunder
shall have the right to employ separate counsel and to participate in the
defense of such claim, but the fees and expenses of such counsel shall be at the
expense of such Person unless (a) the Indemnifying Party has agreed to pay such
fees or expenses, (b) the Indemnifying Party has failed to assume the defense of
such claim or (c) in the reasonable judgment of any such Person, based upon
advice of its counsel, a conflict of interest may exist between such Person and
the Indemnifying Party with respect to such claims (in which case, if such
Person notifies the Indemnifying Party in writing that such Person elects to
employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense of such claim
on behalf of such Person). If such defense is not assumed by the Indemnifying
Party, the Indemnifying Party will not be subject to any liability for any
settlement made without its consent (but such consent will not be unreasonably
withheld). No Indemnifying Party will be required to consent to the entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Person entitled to
indemnification a release from all liability in respect to such claim or
litigation. If any Indemnifying Party who is not entitled to, or elects not to,
assume the defense of a claim will not be obligated to pay the fees and expenses
of more than one counsel for all Persons entitled to indemnification by such
Indemnifying Party with respect to such claim, unless in the reasonable judgment
of any such Person a conflict of interest may exist between such Person and any
other Person entitled to indemnification with respect to such claim, in which
event the Indemnifying Party shall be obligated to pay the fees and expenses of
such additional counsel or counsels, but only of one such additional counsel for
each group of similarly situated Persons in any one jurisdiction.
(d) CONTRIBUTION. If for any reason the indemnification provided for in
the preceding CLAUSES (a) and (b) is unavailable to any Person entitled to
indemnification hereunder or is
-12-
<PAGE> 15
insufficient to hold such Person harmless as contemplated by the preceding
CLAUSES (a) and (b), then the Indemnifying Party shall contribute to the amount
paid or payable by such Person as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect not only the relative
benefits received by such Person and the Indemnifying Party, but also the
relative fault of such Person and the Indemnifying Party, as well as any other
relevant equitable considerations; PROVIDED, that no holder of Registrable
Securities shall be required to contribute an amount greater than the dollar
amount of the proceeds received by such holder of Registrable Securities with
respect to the sale of any securities. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
9. RULE 144. The Registrants covenant that they will file the reports
required to be filed by them under the Securities Act and the Exchange Act and
the rules and regulations adopted by the Commission thereunder (or, if any of
them is not required to file such reports, the applicable party will, upon the
request of any holder of Registrable Securities made after the Fixed Rate Sale
Date make publicly available other information so long as necessary to permit
sales pursuant to Rule 144 under the Securities Act), and they will take such
further action as any holder of Registrable Securities may reasonably request,
all to the extent required from time to time to enable such holder to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 under the Securities Act,
as such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon the request of any holder
of Registrable Securities, the Registrants will deliver to such holder a written
statement as to whether they have complied with such information and filing
requirements.
10. MISCELLANEOUS.
(a) REMEDIES. Each holder of Registrable Securities, in addition to
being entitled to exercise all rights provided herein, in the Securities
Purchase Agreement or granted by law, including recovery of damages, in
connection with the breach by the Registrants of their obligations to register
the Registrable Securities will, to the fullest extent permitted under
applicable law, be entitled to specific performance of its rights under this
Agreement. The Registrants agree that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by any of them of the
provisions of this Agreement and each agrees, to the extent permitted under
applicable law, to waive the defense in any action for specific performance that
a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. The Registrants will not on or after
the date of this Agreement enter into any agreement with respect to its
securities which is inconsistent with the rights granted to the holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the holders of Registrable Securities
hereunder do not in any way conflict with and are not inconsistent with the
rights granted to the holders of
-13-
<PAGE> 16
the Registrants' securities under any other agreements. The Registrants have not
previously entered into any inconsistent agreement with respect to their
securities granting any registration rights to any Person.
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions of this Agreement may
not be given unless the Registrants have obtained the written consent of holders
of at least a majority of the principal amount of the outstanding Registrable
Securities (excluding Registrable Securities held by Holdings, the Company or
any of their respective Subsidiaries).
(d) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, facsimile or air courier guaranteeing overnight delivery:
(i) if to a holder of Registrable Securities, at the most current
address given by such holder to the Registrants in accordance with the
provisions of this SECTION 10(D), which address initially is, with
respect to the Purchasers, the address set forth next to the
Purchasers' name on the signature pages of the Securities Purchase
Agreement; and
(ii) if to a Registrant, initially to it in care of the Company
at the address set forth in the Securities Purchase Agreement and
thereafter at such other address, notice of which is given in
accordance with the provisions of this SECTION 10(D).
All such notices and communications shall be deemed to have been duly given: at
the time delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; when receipt thereof is
electronically confirmed, if delivered by facsimile; and on the next business
day if timely delivered to an air courier guaranteeing overnight delivery.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties hereto,
including, without limitation and without the need for an express assignment,
subsequent holders of Registrable Securities.
(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
-14-
<PAGE> 17
(h) NEW YORK LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK. EACH PARTY HERETO HEREBY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY FOR PURPOSES
OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT
AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM. EACH PARTY HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(i) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of any such provision in such jurisdiction in every other
respect and of the remaining provisions contained herein shall not be affected
or impaired thereby.
(j) ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement with respect to the subject matter contained
herein and intended to be a complete and exclusive statement of the agreement
and understanding of the parties hereto in respect of the subject matter
contained herein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein with respect to
the registration rights granted by the Registrants with respect to the
Registrable Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
-15-
<PAGE> 18
IN WITNESS WHEREOF, the parties have executed this Debt Registration
Rights Agreement as of the date first written above.
RAILAMERICA TRANSPORTATION
CORP.
By:
--------------------------------------
Name:
Title:
ADDITIONAL REGISTRANTS:
RAILAMERICA, INC.
By:
--------------------------------------
Name:
Title:
PALM BEACH RAIL HOLDING, INC.
By:
--------------------------------------
Name:
Title:
CASCADE AND COLUMBIA RIVER
RAILROAD COMPANY, INC., a
Delaware corporation
DAKOTA RAIL, INC., a South Dakota
corporation
DELAWARE VALLEY RAILWAY
COMPANY, INC., a Delaware
corporation
<PAGE> 19
FLORIDA RAIL LINES, INC., a Delaware
corporation
HURON AND EASTERN RAILWAY
COMPANY, INC., a Michigan
corporation
KS BOCA, INC., a Florida corporation
KALYN/SIEBERT INCORPORATED, a
Texas corporation
MARKSMAN CORP., a Delaware
corporation
MINNESOTA NORTHERN RAILROAD,
INC., a Delaware corporation
OTTER TAIL VALLEY RAILROAD
COMPANY, INC., a Minnesota
corporation
PLAINVIEW TERMINAL COMPANY, a
Texas corporation
PRAIRIE HOLDING CORPORATION, a
Florida corporation
RAILAMERICA AUSTRALIA, INC., a
Delaware corporation
RAILAMERICA EQUIPMENT
CORPORATION, a Delaware
corporation
RAILAMERICA INTERMODAL
SERVICES, INC., a Delaware
corporation
RAIL OPERATING SUPPORT GROUP,
INC., a Delaware corporation
<PAGE> 20
SAGINAW VALLEY RAILWAY
COMPANY, INC., a Delaware
corporation
SOUTH CENTRAL TENNESSEE
RAILROAD CORP., a Delaware
corporation
ST. CROIX VALLEY RAILROAD
COMPANY, a Delaware corporation
TOLEDO, PEORIA & WESTERN
RAILWAY CORPORATION, a New
Jersey corporation
THE TOLEDO, PEORIA & WESTERN
RAILROAD CORPORATION, a New
York corporation
VENTURA COUNTY RAILROAD CO.,
INC., a Delaware corporation
WEST TEXAS AND LUBBOCK
RAILROAD COMPANY, INC., a Texas
corporation
INDIANA SOUTHERN RAILROAD, INC.,
a Delaware corporation
CENTRAL RAILROAD COMPANY OF
INDIANAPOLIS, an Indiana corporation
CENTRAL RAILROAD COMPANY OF
INDIANA, an Indiana corporation
DALLAS, GARLAND & NORTHEASTERN
RAILROAD, INC., a Texas corporation
<PAGE> 21
DALLAS, GARLAND & NORTHEASTERN
RAILROAD, INC., a Delaware
corporation
GEORGIA SOUTHWESTERN RAILROAD,
INC., a Texas corporation
INDIANA AND OHIO RAIL CORP., a
Delaware corporation
INDIANA AND OHIO RAILWAY
COMPANY., a Delaware corporation
INDIANA AND OHIO CENTRAL
RAILROAD INC., a Delaware
corporation
CONNECTICUT SOUTHERN RAILROAD,
INC., a Delaware corporation
CENTRAL OREGON & PACIFIC
RAILROAD, INC., a Delaware
corporation
BOSTON CENTRAL FREIGHT
RAILROAD, INC., a Delaware
corporation
AUSTIN & NORTHWESTERN RAILROAD
COMPANY., INC., a Texas corporation
SOUTH CAROLINA CENTRAL
RAILROAD COMPANY, INC., a South
Carolina corporation
SAN DIEGO & IMPERIAL VALLEY
RAILROAD COMPANY, INC., a
California corporation
<PAGE> 22
RAILTEX LOGISTICS, INC., a Delaware
corporation
MID-MICHIGAN RAILROAD, INC., a
Michigan corporation
MISSOURI & NORTHERN ARKANSAS
RAILROAD COMPANY, INC., a Kansas
corporation
RAILTEX DISTRIBUTION SERVICES,
INC., a Texas corporation
RAILTEX INTERNATIONAL HOLDINGS,
INC., a Delaware corporation
NORTH CAROLINA AND VIRGINIA
RAILROAD COMPANY, INC., a
Delaware corporation
NEW ENGLAND CENTRAL RAILROAD,
INC., a Delaware corporation
NEW ORLEANS LOWER COAST
RAILROAD COMPANY, INC., a
Louisiana corporation
PITTSBURGH INDUSTRIAL RAILROAD,
INC., a Delaware corporation
RAILTEX ACQUISITION CORP., a
Delaware corporation
RAILTEX SERVICE CO., INC., a Delaware
corporation
By:
--------------------------------------
Name:
Title:
<PAGE> 23
PURCHASERS:
RAIL AMERICA FUNDING, INC.
By:
--------------------------------------
Name:
Title:
<PAGE> 1
[EXECUTION COPY]
Exhibit 10.76
================================================================================
ASSET BRIDGE EQUITY REGISTRATION RIGHTS AGREEMENT
among
RAILAMERICA, INC.
and
THE PURCHASERS PARTY HERETO.
-----------------------
Dated as of February 4, 2000
================================================================================
<PAGE> 2
TABLE OF CONTENTS
1. Definitions................................................................1
2. Securities Subject to this Agreement.......................................3
3. Piggyback Registration.....................................................3
4. Hold-Back Agreements.......................................................4
5. Registration Expenses......................................................5
6. Indemnification............................................................5
7. Rule 144...................................................................7
8. Miscellaneous..............................................................8
<PAGE> 3
ASSET BRIDGE EQUITY REGISTRATION RIGHTS AGREEMENT
This ASSET BRIDGE EQUITY REGISTRATION RIGHTS AGREEMENT, dated as of
February 4, 2000(as amended, supplemented, amended and restated or otherwise
modified from time to time, this "AGREEMENT"), is made and entered by and
between RAILAMERICA, INC., a Delaware corporation ("HOLDINGS"), and the Persons
parties hereto as "Purchasers" (collectively, the "PURCHASERS").
RECITALS
This Agreement is being delivered pursuant to the Asset Bridge
Securities Purchase Agreement, dated as of February 4, 2000 (as amended,
supplemented or otherwise modified, "ASSET BRIDGE SECURITIES PURCHASE
AGREEMENT"), by and among Palm Beach Rail Holding, Inc., a Delaware corporation
("INTERMEDIATE HOLDINGS"), Holdings, each Designated Restricted Subsidiary of
Intermediate Holdings that is a party thereto as a "Guarantor" (each such
Designated Restricted Subsidiary, together with Holdings, the "GUARANTORS") and
the Purchasers. In order to induce the Purchasers to enter into the Asset Bridge
Securities Purchase Agreement, Holdings has agreed to provide the registration
rights set forth in this Agreement. The execution of this Agreement is a
condition to the closing under the Asset Bridge Securities Purchase Agreement.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS.
(a) CERTAIN TERMS. As used in this Agreement, the following capitalized
terms shall have the following meanings:
"ASSET BRIDGE WARRANT AGREEMENT" means the Asset Bridge
Warrant Agreement, dated as of February 4, 2000, among Holdings and the
Purchasers, as amended, supplemented or otherwise modified from time to
time.
"INDEMNIFIED PARTIES" is defined in SECTION 6(A) hereof.
"INDEMNIFYING PARTY" is defined in SECTION 6(C) hereof.
"NASD" means the National Association of Securities Dealers,
Inc.
<PAGE> 4
"PIGGYBACK REGISTRATION" is defined in SECTION 3(A) hereof.
"PROSPECTUS" means the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement and by all other
amendments and supplements to the prospectus, including post-effective
amendments and all material incorporated by reference in such
prospectus.
"REGISTRABLE SECURITIES" means the Registrable Warrants and
the Registrable Warrant Shares; PROVIDED, that a security ceases to be
a Registrable Security when it is no longer a Transfer Restricted
Security.
"REGISTRABLE WARRANT SHARES" means all Warrant Shares issuable
to the holders of Warrants upon exercise of such Warrants.
"REGISTRABLE WARRANTS" means all Warrants originally issued
pursuant to the Asset Bridge Warrant Agreement.
"REGISTRATION EXPENSES" is defined in SECTION 5 hereof.
"REGISTRATION STATEMENT" means any registration statement of
Holdings which covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such Registration Statement, including post-effective
amendments, all exhibits and all material incorporated by reference in
such Registration Statement.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"TRANSFER RESTRICTED SECURITY" means the Registrable
Securities upon original issuance thereof; PROVIDED, that a Registrable
Security is no longer a Transfer Restricted Security when such
Registrable Security is sold to the public.
"UNDERWRITTEN REGISTRATION" and "UNDERWRITTEN OFFERING" mean a
registration in which securities of Holdings are sold to an underwriter
for reoffering to the public.
"WARRANT SHARES" means the shares of Common Stock or any
security substituted for the Common Stock in an amount equal to 3.5% of
the common equity of Holdings issuable to the holders of Warrants upon
exercise of the Warrants.
"WARRANTS" means the Warrants issued pursuant to the Asset
Bridge Warrant Agreement to purchase Common Stock or any security
substituted for the Common Stock
-2-
<PAGE> 5
in an amount equal to 3.5% of the common equity of Holdings in
accordance with the Asset Bridge Warrant Agreement.
(b) ASSET BRIDGE SECURITIES PURCHASE AGREEMENT DEFINITIONS. Unless
otherwise defined herein or the context otherwise requires, terms used in this
Agreement, including its preamble, have the meanings provided in the Asset
Bridge Securities Purchase Agreement.
2. SECURITIES SUBJECT TO THIS AGREEMENT.
(a) REGISTRABLE SECURITIES. The securities entitled to the benefits of
this Agreement are the Registrable Securities.
(b) HOLDERS OF REGISTRABLE SECURITIES. A Person is deemed to be a
holder of Registrable Securities whenever such Person owns Registrable
Securities of record or has provided evidence reasonably satisfactory to
Holdings that such Person has the right to acquire such Registrable Securities,
whether or not such acquisition has actually been effected and disregarding any
legal restrictions upon the exercise of such right.
3. PIGGYBACK REGISTRATION.
(a) RIGHT TO PIGGYBACK. Subject to the last sentence of this CLAUSE
(A), whenever Holdings proposes to register any shares of Common Stock (or
securities exercisable or exchangeable for or convertible into, or options to
acquire, Common Stock) with the Commission under the Securities Act and the
registration form to be used may be used for the registration of the Registrable
Securities (a "PIGGYBACK REGISTRATION"), Holdings will give written notice to
the Purchasers, at least 10 days prior to the anticipated filing date, of its
intention to effect such a registration, which notice will specify the proposed
offering price, the kind and number of securities proposed to be registered, the
distribution arrangements and such other information that at the time would be
appropriate to include in such notice, and will, subject to CLAUSE (B) below,
include in such Piggyback Registration all Registrable Securities with respect
to which Holdings has received written requests for inclusion therein within 5
days after the effectiveness of Holding's notice; PROVIDED, that if the proceeds
of the offering are to be used by Holdings or Intermediate Holdings to redeem
all of the Asset Bridge Notes, Holdings will not be required to include any
Registrable Securities in such Piggyback Registration. Except as may otherwise
be provided in this Agreement, Registrable Securities with respect to which such
request for registration has been received will be registered by Holdings and
offered to the public in a Piggyback Registration pursuant to this Section 3 on
the terms and conditions at least as favorable as those applicable to the
registration of shares of Common Stock to be sold by Holdings and by any other
Person selling under such Piggyback Registration.
(b) PRIORITY ON PIGGYBACK REGISTRATION. Holdings shall use all
reasonable efforts to cause the managing underwriter or underwriters of a
proposed Underwritten Offering to permit the
-3-
<PAGE> 6
Registrable Securities requested to be included in the registration statement
for such offering to be included on the same terms and conditions as any other
Common Stock to be offered pursuant to such registration statement by Holdings
or any other security holders included therein. Notwithstanding the foregoing,
if the managing underwriter or underwriters of such offering deliver a written
opinion to Holdings that either because of (i) the kind or combination of
securities which the holders of Registrable Securities, Holdings and any other
Persons intend to include in such offering or (ii) the size of the offering
which such holders, Holdings and such other Persons intend to make, are such
that the success of the offering would be materially and adversely affected by
inclusion of the Registrable Securities requested to be included, then (A) in
the event that the size of the offering is the basis of such managing
underwriter's opinion, the amount of securities to be offered for the accounts
of such holders shall be reduced pro rata (according to the Registrable
Securities proposed for registration) to the extent necessary to reduce the
total amount of securities to be included in such offering to the amount
recommended by such managing underwriter or underwriters; PROVIDED, that if
securities are being offered for the account of other Persons as well as
Holdings, then with respect to the Registrable Securities intended to be offered
by such holders, the proportion by which the amount of such class of securities
intended to be offered by such holders is reduced shall not exceed the
proportion by which the amount of such class of securities intended to be
offered by such other Persons is reduced; and (B) in the event that the kind (or
combination) of securities to be offered is the basis of such managing
underwriter's opinion, (x) the Registrable Securities to be included in such
offering shall be reduced as described in clause (A) above (subject to the
proviso in clause (A)) or (y) if the actions described in clause (x) would, in
the judgment of the managing underwriter or underwriters, be insufficient to
substantially eliminate the adverse effect that inclusion of the Registrable
Securities requested to be included would have on such offering, such
Registrable Securities will be excluded from such offering.
(c) SELECTION OF UNDERWRITERS. If any Piggyback Registration is an
Underwritten Offering, Holdings will select a managing underwriter or
underwriters to administer the offering, which managing underwriter or
underwriters will be of nationally recognized standing.
4. HOLD-BACK AGREEMENTS.
(a) Each holder of Registrable Securities whose Registrable Securities
are covered by a Registration Statement filed pursuant to Section 3 hereof
agrees, if requested by the managing underwriters in an Underwritten Offering,
not to effect any public sale or distribution of securities of Holdings of the
same class or convertible into or exercisable for securities of the same class,
as the securities included in such Registration Statement, including a sale
pursuant to Rule 144 under the Securities Act (except as part of such
Underwritten Registration), during the 30-day period prior to, and during the
90-day period beginning on, the closing date of each Underwritten Offering made
pursuant to such Registration Statement, to the extent timely notified in
writing by Holdings or the managing underwriters; PROVIDED, HOWEVER, that each
-4-
<PAGE> 7
holder of Registrable Securities shall be subject to the hold-back restrictions
of this Section 4(a) only once during any 365-day period.
(b) The foregoing provisions shall not apply to any holder of
Registrable Securities if such holder is prevented by applicable statute or
regulation from entering any such agreement; PROVIDED, HOWEVER, that any such
holder shall undertake, in its request to participate in any such Underwritten
Offering, not to effect any public sale or distribution of any Registrable
Securities held by such holder and covered by a Registration Statement
commencing on the date of sale of the Registrable Securities unless it has
provided 45 days prior written notice of such sale or distribution to the
underwriter or underwriters.
5. REGISTRATION EXPENSES. All reasonable expenses incident to Holdings'
performance of or compliance with this Agreement, including, without limitation,
all (i) registration and filing fees, fees and expenses associated with filings
required to be made with the NASD (including, if applicable, the fees and
expenses of any "qualified independent underwriter" and its counsel as may be
required by the rules and regulations of the NASD), (ii) fees and expenses of
compliance with securities or blue sky laws (including fees and disbursements of
counsel for the underwriters in connection with blue sky qualifications of the
Registrable Securities and determination of their eligibility for investment
under the laws of such jurisdictions as the managing underwriters may reasonably
designate), (iii) printing expenses (including expenses of printing certificates
for the Registrable Securities in a form eligible for deposit with The
Depository Trust Company and of printing prospectuses), (iv) fees and
disbursements of counsel for Holdings and for the sellers of the Registrable
Securities, and customary out of pocket expenses and fees paid by issuers to the
extent provided for in an underwriting agreement (excluding discounts,
commissions or fees of underwriters, selling brokers, dealer managers or similar
securities industry professionals relating to the distribution of the
Registrable Securities, transfer taxes or legal expenses of any Person other
than Holdings, Intermediate Holdings and the selling holders), (v) the cost of
securities acts liability insurance if Holdings so desires and (vi) fees and
expenses of other Persons retained by Holdings (all such expenses being herein
called "REGISTRATION EXPENSES") will be borne by Holdings, regardless whether
the Registration Statement becomes effective. Each holder of Registrable
Securities will pay any fees or disbursements of counsel to such holder and all
underwriting discounts and commissions and transfer taxes, if any, and provide
other fees, costs and expenses of such holder (other than Registration Expenses)
relating to the sale or disposition of such holder's Registrable Securities.
Holdings, in any event, will pay Holdings' own internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with the listing of the securities to
be registered on each securities exchange on which similar securities issued by
Holdings are then listed and the fees and expenses of any Person, including
special experts, retained by Holdings.
-5-
<PAGE> 8
6. INDEMNIFICATION.
(a) INDEMNIFICATION BY HOLDINGS. Holdings agrees to indemnify and hold
harmless, to the full extent permitted by law, each holder of Registrable
Securities, its officers, directors and employees and each Person who controls
such holder (within the meaning of the Securities Act) (the "INDEMNIFIED
PARTIES") against all losses, claims, damages, liabilities and expenses incurred
by such Indemnified Party in connection with any actual or threatened action
arising out of or based upon any untrue or alleged untrue statement of a
material fact contained in any Registration Statement, Prospectus or preliminary
Prospectus or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as the same arise out of or are based upon any such
untrue statement or omission made in reliance on and in conformity with any
information furnished in writing to Holdings by such holder or its counsel
expressly for use therein; PROVIDED, that Holdings shall not be liable in any
such case to the extent that any such loss, claim, damage, liability or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission in the Prospectus, if such untrue statement or
alleged untrue statement, omission or alleged omission is completely corrected
in an amendment or supplement to the Prospectus and the holder of Registrable
Securities thereafter fails to deliver such Prospectus as so amended or
supplemented prior to or concurrently with the sale of the Registrable
Securities to the Person asserting such loss, claim, damage, liability or
expense after Holdings has furnished such holder with a sufficient number of
copies of the same. Holdings shall also indemnify underwriters, their officers
and directors and each Person who controls such Persons (within the meaning of
the Securities Act) to the same extent as provided above with respect to the
indemnification of the Indemnified Parties, if requested.
(b) INDEMNIFICATION BY HOLDER OF REGISTRABLE SECURITIES. In connection
with a Piggy Back Registration, each holder of Registrable Securities included
therein will furnish to Holdings in writing such information and affidavits as
Holdings reasonably requests for use in connection with any such Registration
Statement or Prospectus and agrees to indemnify and hold harmless, to the
fullest extent permitted by law, Holdings, its directors and officers and each
Person who controls Holdings (within the meaning of the Securities Act) against
any losses, claims damages, liabilities and expenses resulting from any untrue
statement of a material fact contained in any Registration Statement or
Prospectus or any omission of a material fact required to be stated in the
Registration Statement or Prospectus or preliminary Prospectus or necessary to
make the statements therein not misleading, to the extent, but only to the
extent, that such untrue statement or omission relates to a holder and is made
in reliance on and in conformity with any information or affidavit furnished in
writing by such holder to Holdings specifically for inclusion in such
Registration Statement or Prospectus. In no event shall the liability of any
selling holder of Registrable Securities hereunder be greater in amount than the
dollar amount of the proceeds received by such holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation. Holdings
shall be entitled to receive indemnities from underwriters, selling brokers,
dealer managers and similar securities industry professionals participating in
the distribution of such Registrable Securities to the same extent as provided
above with respect to
-6-
<PAGE> 9
information or affidavit furnished in writing by such Persons specifically for
inclusion in any Prospectus or Registration Statement.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person entitled to
indemnification hereunder will (i) give prompt notice to Holdings or the holder
of Registrable Securities, as the case may be (in either case, as applicable, an
"INDEMNIFYING PARTY") of any claim with respect to which such Person seeks
indemnification and (ii) permit such Indemnifying Party to assume the defense of
such claim with counsel reasonably satisfactory to such Person; PROVIDED,
HOWEVER, that any Person entitled to indemnification hereunder shall have the
right to employ separate counsel and to participate in the defense of such
claim, but the fees and expenses of such counsel shall be at the expense of such
Person unless (a) the Indemnifying Party has agreed to pay such fees or
expenses, (b) the Indemnifying Party has failed to assume the defense of such
claim or (c) in the reasonable judgment of any such Person, based upon advice of
its counsel, a conflict of interest may exist between such Person and the
Indemnifying Party with respect to such claims (in which case, if such Person
notifies the Indemnifying Party in writing that such Person elects to employ
separate counsel at the expense of the Indemnifying Party, the Indemnifying
Party shall not have the right to assume the defense of such claim on behalf of
such Person). If such defense is not assumed by the Indemnifying Party, the
Indemnifying Party will not be subject to any liability for any settlement made
without its consent (but such consent will not be unreasonably withheld). No
Indemnifying Party will be required to consent to the entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Person entitled to
indemnification a release from all liability in respect to such claim or
litigation. If any Indemnifying Party who is not entitled to, or elects not to,
assume the defense of a claim will not be obligated to pay the fees and expenses
of more than one counsel for all Persons entitled to indemnification by such
Indemnifying Party with respect to such claim, unless in the reasonable judgment
of any such Person a conflict of interest may exist between such Person and any
other Person entitled to indemnification with respect to such claim, in which
event the Indemnifying Party shall be obligated to pay the fees and expenses of
such additional counsel or counsels, but only of one such additional counsel for
each group of similarly situated Persons in any one jurisdiction.
(d) CONTRIBUTION. If for any reason the indemnification provided for in
preceding CLAUSES (A) and (B) is unavailable to any Person entitled to
indemnification hereunder or is insufficient to hold such Person harmless as
contemplated by the preceding CLAUSES (A) and (B), then the Indemnifying Party
shall contribute to the amount paid or payable by such Person as a result of
such loss, claim, damage or liability in such proportion as is appropriate to
reflect not only the relative benefits received by such Person and the
Indemnifying Party, but also the relative fault of such Person and the
Indemnifying Party, as well as any other relevant equitable considerations;
PROVIDED, that no holder of Registrable Securities shall be required to
contribute an amount greater than the dollar amount of the proceeds received by
such holder of Registrable Securities with respect to the sale of any
securities. No Person guilty of fraudulent
-7-
<PAGE> 10
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
7. RULE 144. Holdings covenants that it will file the reports required
to be filed by it under the Securities Act and the Exchange Act and the rules
and regulations adopted by the Commission thereunder (or, if it is not required
to file such reports, it will, upon the request of any holder of Registrable
Securities made after the Fixed Rate Sale Date, make publicly available other
information so long as necessary to permit sales pursuant to Rule 144 under the
Securities Act), and it will take such further action as any holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation hereafter adopted by
the Commission. Upon the request of any holder of Registrable Securities,
Holdings will deliver to such holder a written statement as to whether it has
complied with such information and filing requirements.
8. MISCELLANEOUS.
(a) REMEDIES. Each holder of Registrable Securities, in addition to
being entitled to exercise all rights provided herein or granted by law,
including recovery of damages, in connection with the breach by Holdings of its
obligations to register the Registrable Securities will, to the fullest extent
permitted under applicable law, be entitled to specific performance of its
rights under this Agreement. Holdings agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement and agrees, to the extent permitted under
applicable law, to waive the defense in any action for specific performance that
a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. Holdings will not on or after the date
of this Agreement enter into any agreement with respect to its securities which
is inconsistent with the rights granted to the holders of Registrable Securities
in this Agreement or otherwise conflicts with the provisions hereof. The rights
granted to the holders of Registrable Securities hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the holders of
Holdings' securities under any other agreements. Holdings has not previously
entered into any inconsistent agreement with respect to its securities granting
any registration rights to any Person.
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions of this Agreement may
not be given unless Holdings has obtained the written consent of holders of at
least a majority of the outstanding Registrable Securities (excluding
Registrable Securities held by Holdings or any of its Subsidiaries).
-8-
<PAGE> 11
(d) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, facsimile or air courier guaranteeing overnight delivery:
(i) if to a holder of Registrable Securities, at the most
current address given by such holder to Holdings in accordance with the
provisions of this Section 8(d), which address initially is, with
respect to the Purchasers, the address set forth next to the
Purchasers' name on the signature pages of the Asset Bridge Securities
Purchase Agreement; and
(ii) if to Holdings, initially to it at the address set forth
in the Asset Bridge Securities Purchase Agreement and thereafter at
such other address, notice of which is given in accordance with the
provisions of this SECTION 8(D).
All such notices and communications shall be deemed to have been duly given: at
the time delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; when answered back, if
delivered by facsimile; and on the next business day, if timely delivered to an
air courier guaranteeing overnight delivery.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties hereto,
including without limitation, and without the need for an express assignment,
subsequent holders of Registrable Securities.
(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) NEW YORK LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK. EACH PARTY HERETO HEREBY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY FOR PURPOSES
OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT
AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT
-9-
<PAGE> 12
IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY HERETO
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
(i) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of any such provision in such jurisdiction in every other
respect and of the remaining provisions contained herein shall not be affected
or impaired thereby.
(j) ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement with respect to the subject matter contained
herein and intended to be a complete and exclusive statement of the agreement
and understanding of the parties hereto in respect of the subject matter
contained herein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein with respect to
the registration rights granted by Holdings with respect to the Registrable
Securities. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
-10-
<PAGE> 13
IN WITNESS WHEREOF, the parties have executed this Asset Bridge Equity
Registration Rights Agreement as of the date first written above.
RAILAMERICA, INC.
By:
----------------------------------
Name:
Title:
PURCHASERS:
RAIL AMERICA HOLDINGS FUNDING,
INC.
By: /s/ Eugene F. Martin
----------------------------------
Name: Eugene F. Martin
Title: Senior Vice President
-11-
<PAGE> 1
EXHIBIT 21.1 - SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY AND NAME UNDER WHICH SUBSIDIARY DOES BUSINESS INCORPORATION
- -------------------------------------------------------- -------------
<S> <C>
Kalyn/Siebert L.P. (Limited Partnership) Texas
3025619 Nova Scotia Ltd. Nova Scotia
Austin & Northwestern Railroad Company, Inc. Texas
Boston Central Freight Railroads, Inc. Delaware
Cape Breton & Central Nova Scotia Railway Limited Nova Scotia
Cascade and Columbia River Railroad Company, Inc. Delaware
Central Oregon & Pacific Railroad, Inc. Delaware
Central Railroad Company of Indiana Indiana
Central Railroad Company of Indianapolis Indiana
Central Western Railway Corporation Alberta
Connecticut Southern Railroad, Inc. Delaware
Dakota Rail, Inc. South Dakota
Dallas, Garland & Northeastern Railroad, Inc. Texas
Dallas, Garland & Northeastern Railroad, Inc. Delaware
Delaware Valley Railway Company, Inc. Delaware
E&N Railway Company (1998) Ltd. British Columbia
Empresa de Transporte Ferroviaro S.A. (d/b/a Ferronor)(55% interest) Chile
Florida Rail Lines, Inc. Delaware
Freight Victoria (d/b/a Freight Australia) Australian Capital
Territory
Georgia Southwestern Railroad, Inc. Delaware
Goderich-Exeter Railway Company Limited Ontario
Huron and Eastern Railway Company, Inc. Delaware
Indiana & Ohio Central Railroad, Inc. Delaware
Indiana & Ohio Rail Corp. Delaware
Indiana & Ohio Railway Company Delaware
Indiana Southern Railroad, Inc. Delaware
Kalyn/Siebert Canada, Inc. Quebec
Kalyn/Siebert I, Incorporated Texas
Kalyn/Siebert Incorporated Texas
KS Boca, Inc. Florida
Marksman Corp. Delaware
Mid-Michigan Railroad, Inc. Michigan
Minnesota Northern Railroad, Inc. Delaware
Missouri & Northern Arkansas Railroad Company, Inc. Kansas
New England Central Railroad, Inc. Delaware
New Orleans Lower Coast Railroad Company, Inc. Delaware
North Carolina and Virginia Railroad Company, Inc. Delaware
Ontario L'Original Railway, Inc. Ontario
Otter Tail Valley Railroad Company, Inc. Minnesota
Palm Beach Rail Holding, Inc. Delaware
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
Pittsburg Industrial Railroad, Inc. Delaware
Plainview Terminal Company Texas
Prairie Holdings Corporation Florida
Rail Operating Support Group, Inc. Delaware
RailAmerica Australia Pty Ltd. Australia
RailAmerica Australia, Inc. Delaware
RailAmerica Carriers, Inc. Ontario
RailAmerica Equipment Corporation Delaware
RailAmerica Intermodal Services, Inc. Delaware
RailAmerica Transportation Corp. Delaware
RaiLink Canada Ltd. Canada Business
Corporation Act
RaiLink Ltd. Alberta
RailTex Acquisition Corp. Delaware
RailTex Distribution Services, Inc. Texas
RailTex, Inc. Texas
RailTex International Holdings, Inc. Delaware
RailTex Logisitics, Inc. Delaware
RailTex Services Co., Inc. Texas
RailTex Canada, Inc. Ontario
RL Acquisition Corp. Alberta
Saginaw Valley Railway Company, Inc. Delaware
San Diego & Imperial Valley Railroad Company, Inc. California
South Carolina Central Railroad Company, Inc. South Carolina
South Central Tennessee Railroad Corp., Inc. Delaware
St. Croix Valley Railroad Company Delaware
Steel City Carriers, Inc. Ontario
The Toledo, Peoria & Western Railroad Corporation New York
Toledo, Peoria & Western Railway Corporation New Jersey
Ventura County Railroad Co., Inc. Delaware
West Texas and Lubbock Railroad Company, Inc. Texas
</TABLE>
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-3 (Nos. 333-93885, 333-87415 and 333-76771) of
RailAmerica, Inc. of our report dated March 15, 2000 relating to the financial
statements, which appear in this Form 10-K.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
March 28, 2000
<PAGE> 1
Exhibit 23.2
ARTHUR ANDERSEN
March 30, 2000 Santiago, Chile
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this registration
statement filed on Form S-3 (Nos. 333-93885, 333-87415 and 333-76771) of report
dated February 4, 2000, on our audits of the financial statements of Ferronor
S.A. (a Chilean corporation and subsidiary of RailAmerica) included in the
RailAmerica, Inc. Form 10-K for the year ended December 31, 1999.
/s/ Charles A. Bunce
Charles A. Bunce ARTHUR ANDERSEN-LANGTON CLARKE
(Partner)
Santiago, Chile
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 11,597,540
<SECURITIES> 0
<RECEIVABLES> 40,856,772
<ALLOWANCES> 0
<INVENTORY> 9,928,789
<CURRENT-ASSETS> 76,204,417
<PP&E> 347,617,262
<DEPRECIATION> 0
<TOTAL-ASSETS> 443,928,134
<CURRENT-LIABILITIES> 56,922,519
<BONDS> 145,016,269
8,829,844
0
<COMMON> 12,611
<OTHER-SE> 69,453,374
<TOTAL-LIABILITY-AND-EQUITY> 443,928,134
<SALES> 0
<TOTAL-REVENUES> 125,372,323
<CGS> 0
<TOTAL-COSTS> 104,104,593
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,286,891
<INCOME-PRETAX> 5,238,745
<INCOME-TAX> (786,979)
<INCOME-CONTINUING> 6,025,723
<DISCONTINUED> 3,895,512
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,921,236
<EPS-BASIC> 0.45
<EPS-DILUTED> 0.43
</TABLE>
