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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
// TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-11862
INTERPOOL, INC.
(Exact name of registrant as specified in the charter)
DELAWARE 13-3467669
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
211 COLLEGE ROAD EAST, PRINCETON, NEW JERSEY 08540
(Address of principal executive office) (Zip Code)
(609) 452-8900
(Registrant's telephone number including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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Name of Each Exchange
Title of Each Class on which Registered
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<S> <C>
COMMON STOCK, PAR VALUE $.001 NEW YORK STOCK EXCHANGE
5 1/4% Convertible Exchangeable
Subordinated Notes Due 2018 NEW YORK STOCK EXCHANGE
5 3/4% Cumulative Convertible
Preferred Stock NEW YORK STOCK EXCHANGE
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
The aggregate market value of the voting stock held by non-affiliates
of the registrant was approximately $145,842,464 as of March 27, 1997.
At March 27, 1997, (after giving effect to a 3-for-2 stock split
effected on that date) there were 27,551,728 shares of the registrant's
Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held on May 21, 1997 are incorporated by reference into Part
III of the Form 10-K.
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INTERPOOL, INC.
FORM 10-K
TABLE OF CONTENTS
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Item Page
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PART I
1. Business....................................................................... 3
2. Properties..................................................................... 10
3. Legal Proceedings.............................................................. 10
4. Submission of Matters to a Vote of Security Holders............................ 10
PART II
5. Market for the Registrant's Common Equity and Related Shareholder Matters...... 10
6. Selected Financial Data........................................................ 11
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations....................................................... 12
8. Financial Statements and Supplementary Data.................................... 20
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................................... 38
PART III
10. Directors and Executive Officers of the Registrant............................. 38
11. Executive Compensation......................................................... 38
12. Security Ownership of Certain Beneficial Owners and Management................. 38
13. Certain Relationships and Related Transactions................................. 39
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K................ 39
Signatures..................................................................... 43
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PART I
ITEM 1. BUSINESS
Interpool, Inc. (the "Company" or "Interpool") is one of the world's
leading lessors of intermodal dry freight standard containers and is the second
largest lessor of intermodal container chassis in the United States. At December
31, 1996, the Company's container fleet totalled approximately 301,000 twenty
foot equivalent units ("TEUs"), the industry standard measure of dimension for
containers used in international trade, and its chassis fleet totalled
approximately 57,000 chassis. The Company leases its containers and chassis to
over 200 customers, including nearly all of the world's 20 largest international
container shipping lines.
The efficiencies and cost savings inherent in intermodal transportation
of containerized cargo have facilitated the dramatic growth of international
trade. Intermodal transportation permits movement of cargo in a standard steel
container by means of a combination of ship, rail and truck without unpacking
and repacking of the contents during transit. The world's dry freight standard
container fleet has grown from fewer than .4 million TEUs in 1970 to
approximately 8.7 million TEUs by mid-1996. During the twelve month period
ending in mid-1996 approximately 1.3 million TEUs were produced, of which .4
million have been estimated as replacements of older containers. Concurrently
with this growth of the world's container fleet, the domestic chassis fleet has
grown to accommodate the increased container traffic. Leasing companies have
played a significant role in the growth of intermodal transportation, supplying
approximately half of the world's container and chassis requirements.
The Company focuses on leasing dry freight standard containers and
container chassis on a long-term basis in order to achieve high utilization of
its equipment and stable and predictable earnings. From 1991 through 1994, the
combined utilization rate of the Company's container and chassis fleets averaged
at least 90%. At the end of 1995 and 1996 the combined utilization rate of the
Company's container and chassis fleets was approximately 97%. Substantially all
of the Company's newly acquired equipment is leased on a long-term basis, and
approximately 91% of its total equipment fleet is currently leased on this
basis. The remainder of the Company's equipment is leased under short-term
agreements to satisfy customers' peak or seasonal requirements, generally at
higher rates than under long-term leases. The Company concentrates on standard
dry cargo containers and chassis because such equipment may be more readily
remarketed upon expiration of a lease than specialized equipment. In financing
its equipment acquisitions, Interpool generally seeks to meet debt service
requirements from the leasing revenue generated by its equipment.
The Company conducts its container and chassis leasing business through
its two subsidiaries, Interpool Limited and Trac Lease, respectively. Certain
other United States equipment leasing activities are conducted through Interpool
itself.
The Company and its predecessors have been involved in the leasing of
containers and chassis since 1968. The Company leases containers throughout the
world, with particular emphasis on the Pacific Rim. The Company leases chassis
to customers for use in the United States. The Company maintains contact with
its customers through a worldwide network of offices, agents and sales
representatives. The Company believes one of the key factors in its ability to
compete effectively has been the long-standing relationships management has
established with most of the world's large shipping lines. In addition,
Interpool relies on its strong credit rating and low financing costs to maintain
its competitive position.
From time to time the Company considers possible acquisitions of
complementary business and asset portfolios.
COMPANY HISTORY
The Company is a Delaware corporation formed in February 1988. The
Company is the successor to a line of container and chassis leasing businesses
that traces its beginning to the 1960's.
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Interpool Limited, a container and chassis leasing business, was formed
in 1968 by Warren L. Serenbetz, a director of the Company and executive
consultant until January 1995, Martin Tuchman, currently Chairman of the Board,
Chief Executive Officer and director of the Company, and two other individuals.
In 1978, Interpool Limited was sold to Thyssen-Bornemisza, N.V. ("Thyssen"). As
part of Thyssen, Interpool Limited continued to be managed by Messrs. Serenbetz
and Tuchman. In 1986, Messrs. Serenbetz and Tuchman, along with Mr. Raoul J.
Witteveen and two other senior executives formed and became the stockholders of
Trac Lease, Inc. ("Trac Lease"). In 1988, the Company was formed by Messrs.
Serenbetz, Tuchman and Witteveen and acquired Interpool Limited from Thyssen
(the "Interpool Limited Acquisition"). In 1993, Trac Lease was combined with the
Company such that the Company then owned 87.5% of Trac Lease (the "Trac Lease
Acquisition"). In the first quarter of 1996 pursuant to an Agreement of Merger
between Trac Lease and Trac Lease Merger Corp., a newly formed subsidiary (the
"Trac Merger"), the Company acquired the minority interests in Trac Lease and
Trac Lease became a wholly owned subsidiary.
INTERMODAL TRANSPORTATION
The fundamental component of intermodal transportation is the container.
Containers provide a secure and cost-effective method of transporting finished
goods and component parts because they are generally freely interchangeable
between different modes of transport, making it possible to move cargo from a
point of origin to a final destination without the repeated unpacking and
repacking of the goods required by traditional shipping methods. The same
container may be carried successively on a ship, rail car and truck and across
international borders with minimal customs formalities. Containerization is more
efficient, more economical and safer in the transportation of cargo than "break
bulk transport" in which the goods are unpacked and repacked at various
intermediate points enroute to their final destination. By eliminating manual
repacking operations when differing modes of transportation are used,
containerization reduces freight and labor costs. In addition, automated
handling of containers permits faster loading and unloading and more efficient
utilization of transportation equipment, thereby reducing transit time. The
protection provided by sealed containers also reduces damage to goods and loss
and theft of goods during shipment. Containers may also be picked up, dropped
off, stored and repaired at independent common user depots located throughout
the world.
The adoption of uniform standards for containers in 1968 by the
International Standards Organization (the "ISO") precipitated a rapid growth of
the container industry, as shipping companies recognized the advantages of
containerization over traditional break bulk transportation of cargo. This
growth resulted in substantial investments in containers, container ships, port
facilities, chassis, specialized rail cars and handling equipment.
Most containers are constructed of steel in accordance with
recommendations of the ISO. The basic container type is the general purpose dry
freight standard container (accounting for approximately 87% of the world's
container fleet), which measures 20 or 40 feet long, 8 feet wide and 8 1/2 or 9
1/2 feet high. In general, 20-foot containers are used to carry heavy, dense
cargo loads (such as industrial parts and certain food products) and in areas
where transport facilities are less developed, while 40-foot containers are used
for lighter weight finished goods (such as apparel, electronic appliances and
other consumer goods) in areas with better developed transport facilities.
Standards adopted by the International Convention for Safe Containers and the
Institute of International Container Lessors govern the operation and
maintenance of containers.
The demand for containers is influenced primarily by the volume of
international and domestic trade. In recent years, however, the rate of growth
in the container industry has exceeded that of world trade as a whole due to
several factors, including the existence of geographical trade imbalances, the
expansion of shipping lines, and changes in manufacturing practices, such as
growing reliance on "just-in-time" delivery methods and increased exports by
certain technologically advanced countries of component parts for assembly in
other countries and the subsequent re-importation of finished products.
When a container vessel arrives in port, each container is loaded onto a
chassis or rail car. A chassis is a rectangular, wheeled steel frame, generally
20 or 40 feet in length, built specifically for the purpose of transporting a
container. Once mounted, the container and chassis are the functional equivalent
of a trailer. When mounted on a chassis, the container may be trucked either to
its final destination or to a railroad terminal for loading onto a rail car.
Similarly, a container shipped by rail may be transferred to a chassis to travel
over the road to its final
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destination. As the use of containers has become a predominant factor in the
intermodal movement of cargo, the chassis has become a prerequisite for the
domestic segment of the journey. A chassis seldom travels permanently with a
single container, but instead serves as a transport vehicle for containers that
are loaded or unloaded at ports or railroad terminals. Because of differing
international road regulations and the lack of international standards for
chassis, chassis used in the United States are seldom used in other countries.
The Company's management believes that over the recent years, domestic
railroads and trucking lines have begun actively marketing intermodal use of
services for the domestic transportation of freight. In 1992, container loadings
represented, for the first time, a majority of total domestic rail loadings of
intermodal transportation equipment. Management further believes that this trend
should serve to accelerate the growth of intermodal transportation, and hence
result in increased container and chassis demand.
As a result of the advantages of intermodal containerization and the
increased globalization of the world economy, the use of containers for domestic
intermodal transportation has also grown over the last few years. Greater use of
containers on cargo ships led railroad and trucking companies to develop the
capacity to transport containers domestically by chassis and rail car. In
addition, shipping companies began soliciting domestic freight in order to
mitigate the cost of moving empty containers back to the port areas for use
again in international trade. The introduction in the mid-1980's of the double
stack railroad car, specially designed to carry containers stacked one on top of
another, accelerated the growth of domestic intermodal transportation by
reducing shipping costs still further. Due to these trends, an increasing
portion of domestic cargo is now being shipped by container instead of by a
conventional highway trailer. The Company has acquired over 7,000 units of
equipment, including domestic trailers, domestic chassis and domestic
containers in order to increase its participation in the growing domestic
intermodal market.
THE LEASING MARKET AND THE COMPANY'S STRATEGY
BENEFITS OF LEASING
Leasing companies own approximately half of the world's container fleet
and half of the domestic chassis fleet, with the balance owned predominantly by
shipping lines. Leasing companies have maintained this market position because
container shipping lines receive both financial and operational benefits by
leasing a portion of their equipment. The principal benefits to shipping lines
of leasing are:
- to provide shipping lines with an alternative source of
financing in a traditionally capital-intensive industry;
- to enable shipping lines to expand their routes and market
shares at a relatively inexpensive cost without making a
permanent commitment to support their new structure;
- to enable shipping lines to benefit from leasing companies'
anticipatory buying and volume purchases, thereby offering
them attractive pricing and prompt delivery schedules;
- to enable shipping lines to accommodate seasonal and/or
directional trade route demand, thereby limiting their capital
investment and storage costs; and
- to enable shipping lines at all times to maintain the optimal
mix of equipment types in their fleets.
Because of these benefits, container shipping lines generally obtain a
significant portion of their container fleets from leasing companies, either on
short-term or long-term leases. Short-term leases provide a considerable degree
of operational flexibility in allowing a customer to pick up and drop off
containers at various locations worldwide at any time. However, customers pay
for this flexibility in the form of substantially higher lease rates for
short-term leases and drop-off charges for the privilege of returning equipment
to certain locations. Most short-term leases are "master leases," under which a
customer reserves the right to lease a certain number of containers as needed
under a general agreement between the lessor and the lessee. Long-term leases
provide the lessee with
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advantageous pricing structures, but usually contain an early termination
provision allowing the lessee to return equipment prior to expiration of the
lease only upon payment of an early termination fee. Since 1991, the Company has
experienced minimal early returns under its long-term leases, primarily because
of the penalties involved and because customers must immediately return all
containers covered by the particular long-term lease being terminated, generally
totalling several hundred units, and bear substantial costs related to their
repositioning and repair. Frequently, a lessee will retain long-term leased
equipment well beyond the initial lease term. In these cases, long-term leases
will be renewed at the then prevailing market rate, either for additional one
year periods or as part of a short-term agreement. In some cases, the customer
has the right to purchase the equipment at the end of a long-term lease. The
Company's long-term leases generally have five to eight year terms.
The Company often enters into long-term "direct finance" leases. Under a
direct finance lease, the customer owns the container at the expiration of the
lease term. Although customers pay a higher per diem rate under a direct finance
lease than under a long-term operating lease, a direct finance lease enables the
Company to provide customers with access to financing on terms generally
comparable to those available from financial institutions which provide this
type of financing. The percentage of the Company's revenues provided by direct
finance leases has increased from 11% in 1991 to 20% in 1996.
Shipping lines generally spread their business over a number of leasing
companies in order to avoid dependence on a single supplier.
Unlike the business of container leasing, which is global in scale, the
Company's chassis leasing business is almost exclusively a domestic business.
Many of the customers for the Company's chassis, however, are United States
subsidiaries or branches of international shipping lines.
COMPANY STRATEGY
The Company emphasizes long-term leases in order to minimize the impact
of economic cycles on the Company's revenues and so as to achieve high
utilization and stable and predictable earnings. The lower rate of turnover
provided by long-term leases enables the Company to concentrate on the expansion
of its asset base through the purchase and lease of new equipment, rather than
on the repeated re-marketing of its existing fleet.
The result of this strategy has been to establish the Company as one of
the world's leading lessors of dry freight standard containers. The Company
intends to continue its emphasis on acquiring and leasing dry freight standard
containers, rather than investing significantly in special purpose equipment
such as refrigerated or tank containers. Management believes that the Company
currently has one of the youngest container fleets of the world's ten largest
container lessors.
Trac Lease, with a fleet of approximately 57,000 chassis, is currently
the second largest chassis lessor in the United States, with the largest lessor
having a fleet approximating 100,000 chassis. The Company's chassis leasing
strategy includes an emphasis on long-term leasing of new or re-manufactured
chassis which allows the Company to offer equipment packages to its customers at
the most attractive cost to the Company.
In order to redeploy chassis that are coming off long-term leases, the
Company operates "chassis pools" for most of the major port authorities and
terminal operators on the Eastern seaboard and the Gulf coast. A chassis pool is
an inventory of chassis available for short-term leasing to customers of the
port or terminal. The principal ports in the United States where the Company
supplies chassis pools are Boston, New York, Baltimore, Norfolk, Charleston,
Savannah, Jacksonville, New Orleans and Houston.
Like most leasing companies, the Company depends on high utilization of
its equipment in order to run its operations profitably. Because the Company has
most of its container and chassis fleets under long-term leases, the Company
believes that it has generally experienced better utilization in periods of weak
demand than other leasing companies having a smaller proportion of their fleets
under long-term leases. From 1991 through 1994, the annual utilization of the
Company's container fleet and Trac Lease's chassis fleet has averaged at least
90%. At the end of 1995 and 1996, the combined utilization rate of the Company's
container and chassis fleets was approximately 97%.
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OPERATIONS
LEASE TERMS
Lease rentals are typically calculated on a per diem basis, regardless
of the term of the lease. The Company's leases generally provide for monthly or
quarterly billing and require payment by the lessee within 30 to 60 days after
presentation of an invoice. Generally, the lessee is responsible for payment of
all taxes and other charges arising out of use of the equipment and must carry
specified amounts of insurance to cover physical damage to and loss of
equipment, as well as bodily injury and property damage to third parties. In
addition, the Company's leases usually require lessees to repair any damage to
the containers and chassis, although in certain circumstances the Company
relieves lessees of the responsibility of paying repair costs in return for
higher lease payments. Lessees are also required to indemnify the Company
against losses to the Company arising from accidents or similar occurrences
involving the leased equipment. The Company's leases generally provide for
pick-up, drop-off and other charges and set forth a list of locations where
lessees may pick up or return equipment.
EQUIPMENT TRACKING AND BILLING
The Company uses a computer system with proprietary software for
equipment tracking and billing to provide a central operating data base showing
the Company's container and chassis leasing activities. The system processes
information received electronically from the Company's regional offices. The
system records the movement and status of each container and chassis and links
that information with the complex data comprising the specific lease terms in
order to generate billings to lessees. More than 10,000 movement transactions
per month are routinely processed through the system, which is capable of
tracking revenue on the basis of individual containers and chassis. The system
also generates a wide range of management reports containing information on all
aspects of the Company's leasing activities.
SOURCES OF SUPPLY
Because of the rising demand for containers and the availability of
relatively inexpensive labor in the Pacific Rim, approximately 50% of world
container production now occurs in China. Containers are also produced in other
countries, such as Korea, Malaysia, Indonesia, Taiwan, and, to a lesser extent,
Thailand, India and in Europe, South America and South Africa. Most chassis used
in the United States are manufactured domestically due to the high cost of
transportation to the United States of chassis manufactured abroad.
Manufacturers of chassis frequently produce over-the-road trailers as well and
can convert some production capability to chassis as needed.
Upon completion of manufacture, new containers and chassis are inspected
to insure that they conform to applicable standards of the ISO and other
international self-regulatory bodies.
MAINTENANCE, REPAIRS AND REFURBISHMENT
Maintenance for new containers and chassis has generally been minor in
nature. However, as containers and chassis age, the need for maintenance
increases, and they may eventually require extensive maintenance.
The Company's customers are generally responsible for maintenance and
repairs of equipment other than normal wear and tear. When normal wear and tear
to equipment is extensive, the equipment may have to be refurbished or
remanufactured. Refurbishing and remanufacturing involve substantial cost,
although chassis can be remanufactured for substantially less than the cost of
purchasing a new chassis. Because facilities for this purpose are not available
at all depots or branches, equipment requiring refurbishment or remanufacture
may have to be repositioned, at additional expense, to the nearest suitable
facility. Alternatively, the Company may elect to sell equipment requiring
refurbishment.
DEPOTS
The Company operates out of approximately 60 depots throughout the
world. Depots are facilities owned by third parties at which containers and
other items of transportation equipment are stored, maintained and repaired.
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The Company retains independent agents at these depots to handle and inspect
equipment delivered to or returned by lessees, store equipment that is not
leased and handle maintenance and repairs of containers and chassis. Some agents
are paid a fixed monthly retainer to defray recurring operating expenses and
some are guaranteed a minimum level of commission income. In addition, the
Company generally reimburses its agents for incidental expenses.
REPOSITIONING AND RELATED EXPENSES
If lessees in large numbers return equipment to a location which has a
larger supply than demand, the Company may incur expenses in repositioning the
equipment to a better location. Such repositioning expenses generally range
between $50 and $500 per item of equipment, depending on geographic location,
distance and other factors, and may not be fully covered by the drop-off charge
collected from the lessee. In connection with necessary repositioning, the
Company may also incur storage costs, which generally range between $.20 and
$2.50 per TEU per day. In addition, the Company bears certain operating expenses
associated with its containers and chassis, such as the costs of maintenance and
repairs not performed by lessees, agent fees, depot expenses for handling,
inspection and storage and any insurance coverage in excess of that maintained
by lessee. The Company's insurance coverage provides protection against various
risks but generally excludes war-related and other political risks.
DISPOSITION OF CONTAINERS AND CHASSIS AND RESIDUAL VALUES
From time to time, the Company sells equipment that was previously
leased. The decision whether to sell depends on the equipment's condition,
remaining useful life and suitability for continued leasing or for other uses,
as well as prevailing local market resale prices and an assessment of the
economic benefits of repairing and continuing to lease the equipment compared to
the benefits of selling. Containers are usually sold to shipping or
transportation companies for continued use in the intermodal transportation
industry or to secondary market buyers, such as wholesalers, depot operators,
mini storage operators, construction companies and others, for use as storage
sheds and similar structures. Because old chassis are more easily remanufactured
than old containers, chassis are less likely to be sold than containers.
At the time of sale, the residual value of a container or chassis will
depend, among other factors, upon mechanical or economic obsolescence, as well
as its physical condition. While there have been no major technological advances
in the short history of containerization that have made active equipment
obsolete, several changes in standards have decreased the demand for older
equipment, such as the increase in the standard height of containers from 8 feet
to 8 1/2 feet in the early 1970's.
MARKETING AND CUSTOMERS
The Company leases its containers and chassis to over 200 shipping and
transportation companies throughout the world, including nearly all of the
world's 20 largest international container shipping lines. With a network of
offices and agents covering all major ports in the United States, Europe and the
Far East, the Company has been able to supply containers in nearly all locations
requested by its customers. In 1996, the Company's top 25 customers represented
approximately 66% of its consolidated revenues, with no single customer
accounting for more than 6%.
The customers for the Company's chassis are a large number of domestic
companies, many of which are domestic subsidiaries or branches of international
shipping lines to which the Company also leases containers.
The Company maintains close relationships with a large customer base on
which detailed credit records are kept. The Company's credit policy sets maximum
exposure limits for various customers. Credit criteria may include, but are not
limited to, customer trade route, country, social and political climate,
assessments of net worth, asset ownership, bank and trade credit references,
credit bureau reports, and operational history. Since 1990, the Company's losses
from defaults by customers have averaged less than 1% of consolidated revenues.
The Company seeks to reduce credit risk by maintaining insurance
coverage against defaults and equipment losses. Although there can be no
assurance that such coverage will be available in the future, the Company
currently
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maintains contingent physical damage, recovery/repatriation and loss of revenue
insurance which provides coverage in the event of a customer's default. The
policy covers the cost of recovering the Company's containers from the customer,
including repositioning costs, the cost of repairing the containers and the
value of containers which cannot be located or are uneconomical to recover. It
also covers a portion of the lease revenues the Company may lose as a result of
the customer's default (i.e., six months of lease payments following default).
The Company has the option to renew the current policy through August 1999,
subject to premium adjustment.
COMPETITION
There are many companies leasing intermodal transportation equipment
with which the Company competes. Some of the Company's competitors have greater
financial resources than the Company or are subsidiaries or divisions of much
larger companies. Management believes that the Company is currently one of the
world's largest dry cargo container leasing companies and the second largest
container chassis leasing company in the United States.
In addition, the containerized shipping industry which the Company
services, competes with providers of alternative methods of transporting goods,
such as by air, truck and rail. The Company believes that in most instances such
alternative methods are not as cost-effective as shipping of containerized
cargo.
Because rental rates for containers and chassis are not subject to
regulation by any government authority but are determined principally by the
demand for and supply of equipment in each geographical area, price is one of
the principal methods by which the Company competes. In times of low demand and
excess supply, leasing companies tend to grant price concessions, such as free
days or pick-up credits, in order to keep their equipment on lease and to avoid
storage charges. The Company attempts to design lease packages tailored to the
requirements of individual customers and considers its long-term relationships
with customers to be important to its ability to compete effectively. The
Company also competes on the basis of its ability to deliver equipment in a
timely manner in accordance with customer requirements.
OTHER BUSINESS OPERATIONS
In addition to its container and chassis leasing operations through
Interpool Limited and Trac Lease, the Company also receives revenues from other
activities. The Company leases approximately 500 freight rail cars to railroad
companies through its Chicago based Railpool division. Microtech Leasing
Corporation, a 75.5% owned subsidiary of the Company, leases microcomputers and
related equipment. The Company also leases intermodal trailers which are
designed to be carried on rail flatcars and pulled by tractor over the highway.
The Company received, in the aggregate, approximately 11% of its consolidated
revenues for the year ended December 31, 1996 from these other business
operations. These operations have been consistently profitable since the
Company's formation.
In December 1996, Interpool acquired all of the limited partnership
interests and substantially all of the senior securities of the Interpool Income
Fund I, L.P., a Delaware limited partnership (the "Income Fund") for
approximately $21.5 million. Interpool co-sponsored the offering of the
securities of the Income Fund during 1992 and 1993 and managed the containers
and chassis owned by the Income Fund. The Income Fund originally acquired
approximately 5,700 TEU containers and approximately 1,500 chassis. As a
result of this acquisition, Interpool received title to the equipment and will
receive all of the revenue from the containers and chassis owned by the Income
Fund, and will no longer be subject to the Income Fund's obligations to make
payments of approximately 11% on its outstanding securities.
EMPLOYEES
As of December 31, 1996 the Company had approximately 110 employees,
approximately 87 of whom are based in the United States. None of the Company's
employees is covered by a collective bargaining agreement. The Company believes
its relations with its employees are good.
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ITEM 2. PROPERTIES
The Company does not own any real estate. All the Company's commercial
office space, aggregating approximately 27,000 square feet, is leased. The
Company's executive offices are located at 211 College Road East, Princeton, New
Jersey. The Company also leases office facilities in New York City, Chicago,
Portland, Barbados, Aberdeen, Antwerp, Basel, Hong Kong and Singapore.
ITEM 3. LEGAL PROCEEDINGS
The Company is engaged in various legal proceedings from time to time
incidental to the conduct of its business. In the opinion of management, the
Company is adequately insured against the claims relating to such proceedings,
and any ultimate liability arising out of such proceedings will not have a
material adverse effect on the financial condition or results of operations of
the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders through
solicitation of proxies during the fourth quarter of fiscal 1996.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
The Common Stock of the Company is traded on the New York Stock Exchange
under the symbol "IPX". The following table sets forth for the periods indicated
commencing on January 1, 1994, the high and low last reported sale prices for
the Common Stock on the New York Stock Exchange. All share and per share data
have been adjusted to reflect the 3-for-2 stock split effected on March 27, 1997
and have been rounded to the nearest eighth.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Calendar Year 1994
First Quarter ........... $13 5/8 $10 5/8
Second Quarter .......... 12 1/4 7 5/8
Third Quarter ........... 9 3/4 7 7/8
Fourth Quarter .......... 10 1/8 8 1/2
Calendar Year 1995
First Quarter ........... $13 5/8 $10 5/8
Second Quarter .......... 10 1/8 8 7/8
Third Quarter ........... 12 1/8 9 1/8
Fourth Quarter .......... 12 3/8 10 7/8
Calendar Year 1996
First Quarter ........... $12 1/8 $ 9 1/2
Second Quarter .......... 13 1/4 11 1/2
Third Quarter ........... 14 3/4 11 3/8
Fourth Quarter .......... 16 1/8 13 1/8
</TABLE>
- 10 -
<PAGE> 11
As of March 27, 1997 there were approximately 946 record holders of
Common Stock. On March 27, 1997 the last reported sale price of the Common Stock
on the New York Stock Exchange was $15.58 per share.
The Company paid an annual dividend in the amount of 12 cents in
January 1996 as declared in 1995.
The Company paid a quarterly dividend in the amount of 3.33 cents per
share on its Common Stock in April, July and October, 1996 and January 1997
and has announced a 12.5% increase in the annual dividend rate to $.15 cents
per share representing an increase to 3.75 cents per quarter.
EQUITY FINANCING
On January 27, 1997, Interpool Capital Trust, a Delaware statutory
business trust (the "Trust"), sold an aggregate of $75 million in aggregate
liquidation amount of 9 7/8% Capital Securities (the "Capital Securities") for a
total sales price of $75 million in cash. Interpool owns all the common
securities of the Trust. The proceeds received by the Trust from the sale of the
Capital Securities were used by the Trust to acquire $75 million of 9 7/8%
Junior Subordinated Debentures due February 15, 2027 of Interpool--in compliance
with Rule 144A and to a limited number of other institutional "Accredited
Investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act of 1933).
The Capital Securities were sold to a combination of "Qualified
Institutional Buyers" (as defined in Rule 144A under the Securities Act of 1933)
in compliance with Rule 144A and to a limited number of other institutional
"Accredited Investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act of 1933. Merrill Lynch & Co., Oppenheimer & Co., Inc. and Smith
Barney Inc. acted as placement agents in connection with the sale of the Capital
Securities.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected historical and pro forma
consolidated financial data for the Company, for the periods and at the dates
indicated. The historical financial data for each of the five years in the
period ended December 31, 1996, and at December 31, 1996, 1995, 1994, 1993, and
1992, are derived from and qualified by reference to the historical consolidated
financial statements that have been audited and reported upon by Arthur Andersen
LLP, independent public accountants. This information should be read in
conjunction with the historical consolidated financial statements of the Company
and the notes thereto.
<TABLE>
<CAPTION>
(In thousands, except per share amounts)
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1996 1995 1994 1993 1992 1992
---- ---- ---- ---- ---- ----
(1) (2) Pro Forma (3)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues ......................................... $147,148 $127,925 $92,272 $79,526 $74,538 $41,117
Earnings before interest and taxes ............... 81,481 70,752 46,170 35,116 31,569 20,406
Income before extraordinary gain (4) ............. $ 34,196 $ 29,545 $24,102 $20,004 $13,946 $10,115
======== ======== ======= ======= ======= =======
Income per share before extraordinary gain (4)(5):
Primary .......................................... $ 1.21 $ 1.08 $ 0.93 $ 0.86 $ 0.77 $ 0.57
======== ======== ======= ======= ======= =======
Fully diluted .................................... $ 1.15 $ 1.01 $ 0.87 N/A N/A N/A
======== ======== =======
Weighted average shares outstanding (5):
Primary .......................................... 26,726 26,193 25,953 23,180 18,191 17,777
Fully diluted .................................... 31,820 30,834 30,326 N/A N/A N/A
Cash dividends declared per common share (5) .... $ 0.13 $ 0.12 -- -- -- --
</TABLE>
- 11 -
<PAGE> 12
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1996 1995 1994 1993 1992 1992
---- ---- ---- ---- ---- ----
(1) (2) Pro Forma (3)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, short-term investments and
marketable securities................. $ 70,055 $ 70,661 $107,398 $124,574 $ 29,906 $ 33,585
Total assets............................ 939,418 851,600 664,792 435,984 277,554 203,509
Debt and capital lease obligations...... 602,704 571,102 482,323 278,397 202,737 149,846
Stockholders' equity.................... 280,546 246,690 156,147 133,454 46,850 34,555
</TABLE>
(1) The 1996 income statement data includes non-recurring expense items
totaling $3,892. The Company recorded a $1,500 charge for the initial
public offering expenses of Interpool Limited which was withdrawn in the
fourth quarter; this charge has a $.05 net income per share effect on both
primary and fully diluted basis. Also, a $2,392 charge was recorded for
the accumulated dividends of the Company's subsidiary, Trac Lease, Inc.
which resulted from the acquisition of the outstanding preferred stock of
Trac Lease through the issuance of Interpool, Inc. preferred stock. Such
charge had no impact on net income per share because unpaid dividends were
included in the computation of net income per share in prior periods.
(2) The 1995 income statement data exclude the extraordinary gain of $2,422
net of taxes resulting from the exchange of $67,436 of 5 1/4% Convertible
Exchangeable Subordinated Notes due 2018 for new 5 3/4% Cumulative
Convertible Preferred Stock.
(3) The pro forma financial data give effect to (a) the recapitalization of
Trac Lease, effected in July 1992, and (b) the acquisition of Trac Lease
and the minority interest in Interpool Limited, as if these transactions
had been consummated as of January 1, 1992.
(4) In connection with the initial public offering in May 1993, the Company
ceased to be a Subchapter "S" corporation for federal income tax purposes
and thereafter became subject to federal income taxes. The Company's
financial statements for the years ended December 31, 1992 and 1993
include a pro forma provision for taxes as if the Company had been subject
to federal income taxes for such periods.
(5) Restated to give effect of the three-for-two stock split effective March
27, 1997.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of the Company's historical financial condition
and results of operations should be read in conjunction with the historical
consolidated financial statements and the notes thereto and the other financial
information appearing elsewhere in this report.
Certain of the matters discussed herein may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 and as such may involve known and unknown risks, uncertainties and other
factors that may cause the actual results, performance or achievements of
Interpool to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements.
GENERAL
The Company generates revenues through leasing transportation equipment,
primarily dry cargo containers and container chassis. Most of the Company's
revenues are derived from payments under operating leases and income earned
under finance leases, under which the lessee has the right to purchase the
equipment at the end of the lease term.
Revenue derived from an operating lease generally consists of the total
lease payment from the customer. In 1996, 1995 and 1994, revenues derived from
operating leases were $117.1 million (80% of revenues), $107.5 million (84% of
revenues) and $82.4 million (89% of revenues), respectively.
- 12 -
<PAGE> 13
Revenue derived from a direct finance lease consists only of income
recognized over the term of the lease using the effective interest method. The
principal component of the direct finance payment is reflected as a reduction to
the net investment in the direct finance lease. In 1996, 1995 and 1994, total
payments from direct finance leases were $81.1 million, $48.9 million and $25.6
million, respectively. The revenue component of total lease payments totalled
$30.1 million (20% of revenues), $20.4 million (16% of revenues) and $9.9
million (11% of revenues) in 1996, 1995 and 1994, respectively.
The Company's mix of operating and direct finance leases is a function
of customer preference and demand and the Company's success in meeting those
customer requirements. During the initial two years of either an operating lease
or a direct finance lease the contribution to the Company's earnings before
interest and taxes is very similar. In subsequent periods, however, the
operating lease will generally be more profitable than a direct finance lease,
primarily due to the return of principal inherent in a direct finance lease.
However, after the long-term portion (and any renewal) of an operating lease
expires, the operating lease will have redeployment costs and related risks
which are avoided under a direct finance lease.
The Company conducts business with shipping line customers throughout
the world and is thus subject to the risks of operating in disparate political
and economic conditions. Offsetting this risk is the worldwide nature of the
shipping business and the ability of the Company's shipping line customers to
shift their operations from areas of unfavorable political and/or economic
conditions to more promising areas. Substantially all of the Company's revenues
are billed and paid in U.S. dollars. In addition, the Company's container
purchases are paid for in U.S. dollars. The Company believes these factors
substantially mitigate foreign currency rate risks.
The Company's container leasing operations are conducted through
Interpool Limited, a Barbados corporation. The Company's effective tax rate
benefits substantially from the application of an income tax convention,
pursuant to which the profits of Interpool Limited from container leasing
operations are exempt from federal taxation in the United States. Such profits
are subject to Barbados tax at rates which are significantly lower than the
applicable rates in the United States. See "--United States Federal Income Tax."
The Company's chassis leasing operations are conducted primarily through Trac
Lease. Certain other United States equipment leasing activities are conducted
through Interpool itself.
In March, 1997, the Financial Accounting Standards Board issued
Statement No. 128 "Earnings per Share" which is effective for fiscal 1997. This
statement establishes accounting standards for computing and presenting earnings
per share (EPS). It replaces the presentation of primary EPS with a presentation
of basic EPS. It also requires dual presentation of basic EPS and diluted EPS
for companies with complex capital structures. For 1996, on a pro forma basis
basic net income per share would have been $1.24 and diluted net income per
share would have been $1.16 under the new standard.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
REVENUES. The Company's consolidated revenues increased to $147.1
million for the year ended December 31, 1996 from $127.9 million in the year
ended December 31, 1995, an increase of $19.2 million or 15%. Of this increase,
$16.4 million was attributable to increased container revenue resulting from an
increased container fleet size which by year-end had grown by approximately
60,000 TEUs from the previous year. Chassis revenue also increased by $2.4
million with the fleet increasing to 57,000 units from the previous level of
54,000.
Revenue from other business operations increased by $.4 million in 1996
primarily due to increased intermodal trailer leasing revenue of $.9 million and
increased micro computer leasing revenue of $.2 million. Partially offsetting
the increase in other business operations revenue was a reduction in rail car
leasing revenue of $.4 million and decreased service fee income of $.3 million.
LEASE OPERATING AND ADMINISTRATIVE EXPENSES. The Company's lease
operating and administrative expenses increased to $30.7 million for the year
ended December 31, 1996 from $30.6 million in the year ended December 31, 1995,
an increase of $.1 million. The increase was the result of increased
administrative expenses of
- 13 -
<PAGE> 14
$.6 million due primarily to inflation, offset by lower lease operating expenses
of $.5 million resulting primarily from lower repair costs in the chassis
operations.
DEPRECIATION AND AMORTIZATION. The Company's depreciation and
amortization expenses increased to $32.0 million in the year ended December 31,
1996 from $28.0 million in the year ended December 31, 1995, an increase of $4.0
million. The increase is due to expanded operating lease fleet size.
GAIN ON SALE OF LEASING EQUIPMENT. The Company's gain on sale of leasing
equipment decreased to $.9 million in the year ended December 31, 1996 from $1.5
million in the year ended December 31, 1995.
INTEREST EXPENSE, NET. The Company's net interest expense increased to
$39.5 million in the year ended December 31, 1996 from $35.1 million in the year
ended December 31, 1995, an increase of $4.4 million. The issuance of additional
debt and lease financing necessary for capital expenditures resulted in
additional interest expense.
PROVISION FOR INCOME TAXES. The Company's provision for income taxes
increased to $7.8 million in the year ended December 31, 1996 from $6.1 million
in the year ended December 31, 1995, an increase of $1.7 million.
This increase was primarily due to higher pretax income in 1996.
NON-RECURRING CHARGES. In 1996 the Company recorded a non-recurring
charge of $2.4 million for accumulated dividends of its subsidiary, Trac Lease,
Inc. which resulted from the acquisition of the outstanding preferred stock of
Trac Lease, Inc. through the issuance of Interpool, Inc. preferred stock. Also,
the Company incurred a charge of $1.5 million for the expenses of an initial
public offering of its subsidiary, Interpool Limited, which was withdrawn in
the fourth quarter of 1996.
NET INCOME. As a result of the factors described above, the Company's
net income increased to $34.2 million in the year ended December 31, 1996 from
$32.0 million in the year ended December 31, 1995.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
REVENUES. The Company's consolidated revenues increased to $127.9
million for the year ended December 31, 1995 from $92.3 million in the year
ended December 31, 1994, an increase of $35.6 million or 39%. Of this increase,
$23.9 million was attributable to increased container revenue resulting from an
increased container fleet size which by year-end had grown by approximately
80,000 TEUs from the previous year. Chassis revenue also increased by $7.6
million with fleet increasing to 54,000 units from the previous level of 48,000.
Revenue from other business operations increased by $4.1 million in 1995
primarily due to increased intermodal trailer leasing revenue of $5.2 million
and increased micro computer leasing revenue of $.9 million. Partially
offsetting the increase in other business operations revenue was the sale of the
Containerbase division effective November 1994 and decreased service fee income
of $.3 million.
LEASE OPERATING AND ADMINISTRATIVE EXPENSES. The Company's lease
operating and administrative expenses increased to $30.6 million for the year
ended December 31, 1995 from $29.7 million in the year ended December 31, 1994,
an increase of $.9 million. The increase was primarily attributable to higher
lease operating expenses of $.8 million mostly resulting from increased
maintenance and repair costs partially offset by lower storage costs due to high
equipment utilization and lower lease commissions resulting from the
capitalization of lease commissions. In addition, administrative expenses
increased by $.1 million resulting primarily from inflation.
DEPRECIATION AND AMORTIZATION. The Company's depreciation and
amortization expenses increased to $28.0 million in the year ended December 31,
1995 from $18.0 million in the year ended December 31, 1994, an increase of
$10.0 million. The increase is due to expanded operating lease fleet size and
was partially offset by a change in the Company's estimate in the salvage value
of chassis which reduced 1995 depreciation by $1.0 million.
- 14 -
<PAGE> 15
GAIN ON SALE OF LEASING EQUIPMENT. The Company's gain on sale of leasing
equipment decreased to $1.5 million in the year ended December 31, 1995 from
$1.6 million in the year ended December 31, 1994.
INTEREST EXPENSE, NET. The Company's net interest expense increased to
$35.1 million in the year ended December 31, 1995 from $17.6 million in the year
ended December 31, 1994, an increase of $17.5 million. The issuance of
additional debt and lease financing necessary for capital expenditures resulted
in additional interest expense.
PROVISION FOR INCOME TAXES. The Company's provision for income taxes
increased to $6.1 million in the year ended December 31, 1995 from $4.5 million
in the year ended December 31, 1994, an increase of $1.6 million.
This increase was primarily due to higher pretax income in 1995.
INCOME BEFORE EXTRAORDINARY GAIN. As a result of the factors described
above, the Company's income before extraordinary gain increased to $29.5 million
in the year ended December 31, 1995 from $24.1 million in the year ended
December 31, 1994, an increase of $5.4 million or 23%.
EXTRAORDINARY GAIN. An extraordinary gain of $2.4 million, net of taxes,
resulted from the exchange of $67.4 million of Interpool's 5 1/4% Convertible
Exchangeable Subordinated Notes due 2018 for new 5 3/4% Cumulative Convertible
Preferred Stock with a liquidation preference of $67.4 million.
NET INCOME. As a result of the factors described above, the Company's
net income increased to $32.0 million in the year ended December 31, 1995 from
$24.1 million in the year ended December 31, 1994, an increase of $7.9 million
or 33%.
LIQUIDITY AND CAPITAL RESOURCES
The Company uses funds from various sources to finance the acquisition
of equipment for lease to customers. The primary funding sources are cash
provided by operations and borrowings, generally from banks, the issuance of
capital lease obligations and the sale of the Company's debt securities. In
addition, the Company generates cash from the sale of equipment being retired
from the Company's fleet. In general, Interpool seeks to meet debt service
requirements from the leasing revenue generated by its equipment. Since 1990,
the Company has been steadily increasing its fleet of containers and adding to
its portfolio of finance leases. The Company generated cash flow from operations
of $123.6 million, $72.8 million and $46.8 million in 1996, 1995 and 1994,
respectively. In 1996 and 1995 net cash provided by financing activities was
$21.7 million and $155.4 million, the result of the proceeds from the issuance
of debt in excess of debt repayment and dividends paid. In 1994 net cash
provided by financing activities was $203.9 million, primarily due to the
issuance of debt in excess of debt repayment. The Company has purchased
equipment costing $166.6 million in 1996, $273.6 million in 1995 and $277.7
million in 1994.
The Company has a $150.0 million revolving credit facility from a group
of commercial banks; on December 31, 1996, $5.0 million was outstanding. The
term of this facility extends until May 31, 1998 (unless the lenders elect to
renew the facility) at which time a maximum of 10% of the amount then
outstanding becomes due, with the remainder becoming payable in equal monthly
installments over a five year period. In addition, the Company has operational
lines of credit with banks of $55.0 million. As of December 31, 1996, $15.0
million was outstanding under these lines. At December 31, 1996, the Company had
total debt outstanding of $602.7 million. Subsequent to December 31, 1996,
Interpool has continued to incur and repay debt obligations in connection with
financing its equipment leasing activities.
As of December 31, 1996, commitments for capital expenditures for
containers and chassis totaled approximately $48.0 million. The Company expects
to fund such capital expenditures from the Company's operations and borrowings
under its available credit facilities and new lease financings, as well as from
additional funds raised through the issuance of debt securities in private
and/or public markets.
- 15 -
<PAGE> 16
The Company believes that cash generated by continuing operations,
together with existing short-term credit facilities, the issuance of debt
securities in the appropriate markets and the portion of the proceeds remaining
from recent debt security sales will be sufficient to finance the Company's
working capital needs for its existing business, planned capital expenditures
and expected debt repayments over the next twelve months. The Company
anticipates that long-term financing will continue to be available for the
purchase of equipment to expand its business in the future. In addition, from
time to time Interpool explores new sources of capital both at the parent and
subsidiary levels.
The following table sets forth certain historical cash flow information
for the three years ended December 31, 1996.
<TABLE>
<CAPTION>
(dollars in thousands)
Year Ended December 31,
-----------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net cash provided by operating activities ............ $123.6 $ 72.8 $ 46.8
Proceeds from disposition of leasing equipment ....... 5.7 6.7 11.6
Acquisition of leasing equipment ..................... (67.5) (167.9) (203.4)
Investment in direct financing leases ................ (99.1) (105.7) (74.3)
Net proceeds of issuance of long-term debt and capital
lease obligations in excess of payment of long-term
debt and capital lease obligations ................. 31.6 156.2 203.9
</TABLE>
From time to time, the Company may enter into discussions with third
parties regarding potential acquisitions or business combinations. If additional
capital were to be required for any such acquisition, there can be no assurance
that such additional capital would be available on terms acceptable to the
Company.
On January 27, 1997, Interpool Capital Trust, a Delaware business trust
and special purpose entity (the "Trust"), issued in a private placement 75,000
shares of 9 7/8% Company-Obligated Mandatory Redeemable Capital Securities with
an aggregate liquidation preference of $75 million (the "Capital Securities")
for proceeds of $75 million. Costs associated with the transaction amounted to
approximately $1.7 million and were borne by the Company. Interpool owns all the
common securities of the Trust. The proceeds received by the Trust from the sale
of the Capital Securities were used by the Trust to acquire $75 million of
9 7/8% Junior Subordinated Debentures due February 15, 2027 of the Company (the
"Debentures"). The Debentures are the sole assets of the Trust. The Capital
Securities represent preferred beneficial interests in the Trust's assets.
Distributions on the Capital Securities are cumulative and payable at the annual
rate of 9 7/8% of the liquidation amount, quarterly in arrears, commencing
February 15, 1997. The Company has the option to defer payment of distributions
for an extension period of up to five years if it is in compliance with the
terms of the Capital Securities. Interest at 9 7/8% will accrue on such deferred
distributions throughout the extension period. The Capital Securities will be
subject to mandatory redemption upon repayment of the Debentures to the Trust.
The redemption price decreases from 104.975% of the liquidation preference in
2007 to 100% in 2017 and thereafter. Under certain limited circumstances, the
Company may, at its option, prepay the Debentures and redeem the Capital
Securities prior to 2007 at a prepayment price specified in the governing
instruments.
The Company used $52.9 million of net proceeds from the sale of the
Debentures to the Trust to redeem 509,964 shares of the Company's 5 3/4%
Cumulative Convertible Preferred Stock (the "Preferred Stock") on March 10, 1997
at a redemption price of 103.675% of the liquidation value.
On March 10, 1997 a total of 248,730 shares, or $24.9 million in
aggregate liquidation value, of the Company's 5 3/4% Cumulative Convertible
Preferred Stock (representing 32.78% of the outstanding shares of Preferred
Stock) were converted into a total of 1,064,297 shares of Common Stock.
As a result of the redemption of shares of Preferred Stock, the Company
expects to record a one-time charge, currently estimated to be approximately 24
cents per share on a primary basis and 21 cents per share on a fully diluted
basis, for the first quarter of 1997.
- 16 -
<PAGE> 17
On March 12, 1997 the Company's Board of Directors announced a
three-for-two stock split, to be effective on March 27, 1997. The record date
for holders entitled to receive the benefits of the stock split was March 21,
1997. No fractional shares are being issued in connection with the stock
split. Instead, under the terms of the stock split, the Company will round any
fractional shares to which any stockholders is entitled as a result of the stock
split up to the nearest whole share.
UNITED STATES FEDERAL INCOME TAX
Commencing with its year ended December 31, 1993, the Company has been
subject to federal and state income taxes as a Subchapter "C" corporation under
the Internal Revenue Code of 1986. The Company, Trac Lease, Inc. and other
United States subsidiaries file a consolidated United States federal income tax
return. This consolidated group is liable for federal income taxes on its
worldwide income.
PERSONAL HOLDING COMPANY ISSUES. If the Company or any of its subsidiaries
were classified as a personal holding company, such corporation's undistributed
personal holding company income would be subject to a federal income tax of
39.6% in addition to its regular federal income tax liability. The federal
income tax laws have two requirements for classifying a company as a personal
holding company. The Company and its subsidiaries currently satisfy the first
requirement, the ownership of more than 50% of the value of the Company's stock
by five or fewer individuals. Whether or not the Company or any of its
subsidiaries satisfies the second requirement, that at least 60% of such
corporation's adjusted ordinary gross income constitutes personal holding
company income, will depend upon such corporation's income mix.
Based upon current projections, management does not believe the Company's
income mix will satisfy the second requirement; accordingly, the Company should
not be classified as a personal holding company. Although the income mix of one
or more of the Company's subsidiaries might satisfy the second requirement,
causing any such corporation to be classified as a personal holding company
(unless it were also a foreign personal holding company, in which case it would
be subject to the foreign personal holding company rules described below),
management does not believe that any subsidiary will be liable for personal
holding company tax. If any of the Company's subsidiaries were deemed to be a
personal holding company, management anticipates that such corporation would
distribute a sufficient amount of its earnings to eliminate any undistributed
personal holding company income. There can be no assurance, however, that the
Company will not at some point in the future be liable for the personal holding
company tax.
Commencing in 1994, a publicly held corporation may not, subject to
limited exceptions, deduct for federal income tax purposes certain compensation
paid to an executive in excess of $1 million in any taxable year (the "$1
million cap"). Compensation attributable to the exercise of options granted
after February 17, 1993 could be counted in determining whether the $1 million
cap has been exceeded in any taxable year. Whether the $1 million cap with
respect to an executive will be exceeded, and whether the Company's deductions
for compensation paid in excess of the $1 million cap will be denied, will
depend upon the resolution of various factual and legal issues that cannot be
resolved at this time. However, the Company intends to endeavor to comply with
the rules governing the $1 million cap so that it will not be subject to
limitation under such rules.
TRAC LEASE. Trac Lease has approximately $15.6 million of net operating
loss carryforwards for federal income tax purposes, which may be used only to
offset the income of Trac Lease and, if not utilized, will expire between 2005
and 2006. The use of substantially all these loss carryforwards is subject to a
number of limitations under federal tax laws.
INTERPOOL LIMITED. Under certain circumstances, the Company may be liable
for United States federal income taxes on earnings of Interpool Limited and any
other foreign subsidiaries of the Company, whether or not such earnings are
distributed to the Company. This would occur if Interpool Limited realized
"Subpart F income" as defined in the Code, if it were deemed to be a foreign
personal holding company or a passive foreign investment company, if it were to
have an increase in earnings invested in United States property or if it were
considered to have "excess passive assets."
- 17 -
<PAGE> 18
Subpart F income includes foreign personal holding company income, such as
dividends, interest and rents. Although a substantial portion of Interpool
Limited's income consists of rents from container leasing activities, the
Company believes that such rents are not Subpart F income because they are
derived from the active conduct of a trade or business and received from
unrelated persons. However, Interpool Limited has received some dividend and
interest income in 1995 and 1996, which will be taxed as Subpart F income.
If Interpool Limited were treated as a foreign personal holding company
for any year, the Company would be taxed on the amount the Company would have
received if Interpool Limited had distributed all its income to the Company as a
dividend. One of the conditions for treating a foreign subsidiary as a foreign
personal holding company is that a minimum of 60% of the foreign subsidiary's
gross income must be foreign personal holding company income. Foreign personal
holding company income does not include rental income that constitutes at least
50% of the subsidiary's gross income. Because the Company expects that rental
income will constitute at least 50% of Interpool Limited's gross income, the
Company does not anticipate that Interpool Limited will be deemed a foreign
personal holding company.
A foreign corporation such as Interpool Limited is a passive foreign
investment company if 75% or more of its gross income is foreign personal
holding company income or the average percentage of assets by value held by such
corporation during the taxable year which produce foreign personal holding
company income is at least 50%. The Company does not believe that Interpool
Limited is a passive foreign investment company. If Interpool Limited were to
become a passive foreign investment company, the Company would make the election
to treat Interpool Limited as a qualified electing fund with the result that the
Company would be taxed each year on Interpool Limited's entire earnings.
A parent company is also subject to taxation when a foreign subsidiary
increases the amount of its earnings invested in United States property during
any calendar year. The Company does not expect that Interpool Limited will
invest any earnings in United States property.
The Revenue Reconciliation Act of 1993 added a new type of shareholder
income inclusion where a foreign subsidiary has its post-December 31, 1993
earnings invested in "excess passive assets." Because the Company believes that
more than 75% of the adjusted basis of Interpool Limited's assets will
constitute assets used in the active conduct of a trade or business generating
income from unrelated persons, rather than passive assets, the Company does not
expect that the provisions dealing with excess passive assets will apply. The
Small Business Job Protection Act of 1996 repealed the income inclusion for
years after 1996.
UNITED STATES/BARBADOS INCOME TAX CONVENTION. Interpool Limited's
business is managed and controlled in Barbados; it also has a permanent
establishment in the United States. Under the Tax Convention, any profits of
Interpool Limited from leasing of containers used in international trade
generally are taxable only in Barbados and not in the United States. For its
taxable years commencing prior to January 1, 1994, Interpool Limited is entitled
to the benefits of the Tax Convention for each year that more than 50% of the
shares of Interpool Limited are owned, directly or indirectly, by United States
citizens or residents (the "stock ownership test") and its income is not used in
substantial part, directly or indirectly, to meet liabilities to persons who are
not residents or citizens of the United States (the "base erosion test"). The
Company believes that Interpool Limited passes both of these tests and should
continue to be eligible for the benefits of the Tax Convention, but there can be
no assurance as to such continued eligibility. If Interpool Limited ceased to be
eligible for the benefits of the Tax Convention, a substantial portion of its
income would become subject to the 35% United States federal income tax and the
30% branch profits tax.
A protocol to the Tax Convention has been ratified by the United States
and Barbados which amends the eligibility provision of the Tax Convention,
making the stock ownership test easier to satisfy and the base erosion test more
difficult to satisfy. The Protocol became effective on January 1, 1994 and
applies to taxable years of Interpool Limited commencing on or after that date.
The Company believes that Interpool Limited will continue to satisfy the base
erosion test and remain eligible for the benefits of the Tax Convention after
1993.
Neither the Tax Convention nor the protocol affords Interpool Limited any
relief from the personal holding company tax or the accumulated earnings tax. To
the extent that Interpool Limited has United States source income that is
personal holding company income or is not needed in its business, Interpool
Limited could be taxed on such
- 18 -
<PAGE> 19
income unless such income is distributed to the Company as a dividend. The
Company expects that Interpool Limited would distribute any such income to the
Company.
STATE AND LOCAL TAXES
INCOME TAXES. The Company and Trac Lease are liable for state and local
income taxes on their income, and Interpool Limited is liable for state and
local income taxes on its earnings attributable to operations in the United
States.
SALES TAX. To date, Interpool Limited and Trac Lease generally have not
paid sales taxes on their leasing revenues to the states in which they conduct
business because management has believed such revenues to be exempt from state
sales taxes on several grounds, including a long-standing interpretation of the
Commerce Clause of the United States Constitution that would prohibit the
imposition of a tax on cargo containers and chassis used primarily for
transportation of goods in interstate commerce or international trade. Recently,
Itel Containers International Corp. ("Itel"), a container leasing company,
challenged an attempt by the State of Tennessee to collect sales tax on Itel's
proceeds from the leasing of containers delivered in Tennessee. In a ruling by
the United States Supreme Court in February 1993, Itel's position was rejected
and the Court upheld the right of Tennessee to impose sales tax on leasing
revenues from containers delivered in Tennessee. The Company cannot predict the
extent to which states other than Tennessee will now attempt to collect sales
tax on the Company's equipment leasing revenues based on this Supreme Court
decision. Under the terms of the Company's equipment leases, the Company would
be entitled to pass any such sales tax on to its lessees.
INFLATION
Management believes that inflation has not had a material adverse effect
on the Company's results of operations. In the past, the effects of inflation on
administrative and operating expenses have been largely offset through economies
of scale achieved through expansion of the business.
- 19 -
<PAGE> 20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page No.
<S> <C>
INTERPOOL, INC.
Report of Independent Public Accountants ............................... 21
Consolidated Balance Sheets--At December 31, 1996 and 1995 ............. 22
Consolidated Statements of Income
For the Years Ended December 31, 1996, 1995 and 1994 .............. 23
Consolidated Statements of Stockholders' Equity
For the Years Ended December 31, 1996, 1995 and 1994 .............. 24
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1996, 1995 and 1994 .............. 25
Notes to Consolidated Financial Statements ............................. 26
</TABLE>
- 20 -
<PAGE> 21
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Interpool, Inc.:
We have audited the accompanying consolidated balance sheets of Interpool, Inc.
(a Delaware corporation) and subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Interpool, Inc. and
subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Roseland, New Jersey
February 18, 1997,
except for the matters
described in Note 13,
as to which the
date is March 27, 1997
- 21 -
<PAGE> 22
INTERPOOL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
ASSETS 1996 1995
--------- ---------
<S> <C> <C>
CASH AND SHORT-TERM INVESTMENTS .............................................. $ 45,333 $ 40,208
MARKETABLE SECURITIES ........................................................ 24,722 30,453
ACCOUNTS AND NOTES RECEIVABLE, less allowance
of $2,506 and $2,099, respectively ......................................... 28,818 25,785
NET INVESTMENT IN DIRECT FINANCING LEASES .................................... 264,955 202,576
OTHER RECEIVABLES, net including amounts from related parties of
$13,433 and $6,398, respectively ........................................... 14,721 8,831
LEASING EQUIPMENT, at cost ................................................... 650,734 609,869
Less - Accumulated depreciation and amortization ........................... (109,363) (86,249)
--------- ---------
LEASING EQUIPMENT, net ....................................................... 541,371 523,620
--------- ---------
OTHER ASSETS ................................................................. 19,498 20,127
--------- ---------
TOTAL ASSETS .............................................................. $ 939,418 $ 851,600
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
ACCOUNTS PAYABLE AND ACCRUED EXPENSES, including $21,532 due
to a related party in 1996 ................................................. $ 38,338 $ 18,653
INCOME TAXES:
Current .................................................................... 978 581
Deferred ................................................................... 14,353 9,517
--------- ---------
15,331 10,098
--------- ---------
DEFERRED INCOME .............................................................. 1,970 1,142
DEBT AND CAPITAL LEASE OBLIGATIONS, including $5,007 and
$6,140 due to a related party, respectively:
Due within one year ...................................................... 80,831 71,104
Due after one year ....................................................... 521,873 499,998
--------- ---------
602,704 571,102
--------- ---------
MINORITY INTEREST IN EQUITY OF SUBSIDIARIES .................................. 529 3,915
STOCKHOLDERS' EQUITY:
5 1/4% Cumulative Convertible Preferred stock, par value $.001 per share;
1,640 shares authorized at December 31, 1996 and 324,000 shares authorized
at December 31, 1995, none issued
5 3/4% Cumulative Convertible Preferred Stock, par value $.001 per share;
760,054 shares authorized, 758,694 outstanding, liquidation
preference $75,869 at December 31, 1996 and
676,000 shares authorized, 674,360 outstanding, liquidation
preference $67,436 at December 31, 1995 .................................. 1 1
Common stock, par value $.001 per share;
100,000,000 shares authorized, 25,953,345 outstanding .................... 26 26
Additional paid-in capital ................................................. 170,172 163,251
Retained earnings .......................................................... 109,837 83,342
Net unrealized gain on marketable securities ............................... 510 70
--------- ---------
280,546 246,690
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................................ $ 939,418 $ 851,600
========= =========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
- 22 -
<PAGE> 23
INTERPOOL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- --------
<S> <C> <C> <C>
REVENUES ........................................... $ 147,148 $ 127,925 $ 92,272
COST AND EXPENSES:
Lease operating expenses ......................... 18,361 18,857 17,979
Administrative expenses .......................... 12,370 11,773 11,673
Depreciation and amortization of leasing equipment 31,976 28,027 18,057
Gain on sale of leasing equipment ................ (932) (1,484) (1,607)
Interest expense ................................. 42,784 39,050 21,585
Interest income .................................. (3,299) (3,968) (4,017)
Non-recurring charges ............................ 3,892 -- --
--------- --------- --------
105,152 92,255 63,670
--------- --------- --------
Income before provision for income taxes
and extraordinary gain ..................... 41,996 35,670 28,602
PROVISION FOR INCOME TAXES ......................... 7,800 6,125 4,500
--------- --------- --------
Income before extraordinary gain ............. 34,196 29,545 24,102
Extraordinary gain on debt retirement,
net of applicable taxes of $1,683 ............ -- 2,422 --
--------- --------- --------
Net income ............................... $ 34,196 $ 31,967 $ 24,102
========= ========= ========
INCOME PER SHARE BEFORE EXTRAORDINARY GAIN
Primary ...................................... $ 1.21 $ 1.08 $ 0.93
========= ========= ========
Fully diluted ................................ $ 1.15 $ 1.01 $ 0.87
========= ========= ========
Income per share on extraordinary gain:
Primary ...................................... NA $ 0.09 NA
=========
Fully diluted ................................ NA $ 0.08 NA
=========
NET INCOME PER SHARE:
Primary ........................................ $ 1.21 $ 1.18 $ 0.93
========= ========= ========
Fully Diluted .................................. $ 1.15 $ 1.08 $ 0.87
========= ========= ========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING (in thousands)
Primary ....................................... 26,726 26,193 25,953
========= ========= ========
Fully Diluted ................................. 31,820 30,834 30,326
========= ========= ========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
- 23 -
<PAGE> 24
INTERPOOL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(dollars and shares in thousands)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Net Unrealized
------------------ ------------------- Additional Gain (Loss) on
Par Par Paid-in Retained Marketable
Shares Value Shares Value Capital Earnings Securities
------ ----- ------ ----- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1994 .......... -- -- 25,953 $26 $102,222 $ 31,206 --
Net income ..................... -- -- -- -- -- 24,102 --
Net unrealized loss on
marketable securities ........ -- -- -- -- -- -- (1,409)
------ --- -------- --------- -------
BALANCE, December 31, 1994 ........ -- -- 25,953 $26 $102,222 $ 55,308 (1,409)
Net income ..................... -- -- -- -- -- 31,967 --
Change in net unrealized gain on
marketable securities ....... -- -- -- -- -- -- 1,479
Exchange of debt for preferred
stock ....................... 674 1 -- -- 61,029 -- --
Cash dividends declared:
Preferred stock ............. -- -- -- -- -- (819) --
Common stock ................ -- -- -- -- -- (3,114) --
--- --- ------ --- -------- --------- -------
BALANCE, December 31, 1995 ........ 674 $1 25,953 $26 $163,251 $ 83,342 $ 70
Net income ..................... -- -- -- -- -- 34,196 --
Change in net unrealized gain on
marketable securities ....... -- -- -- -- -- -- 440
Trac Lease minority interest
acquisition ................. 84 -- -- -- 6,892 -- --
Exchange of debt for preferred
stock ....................... 1 -- -- -- 29 -- --
Cash dividends declared:
Preferred stock ............. -- -- -- -- -- (4,241) --
Common stock ................ -- -- -- -- -- (3,460) --
--- --- ------ --- -------- --------- -------
BALANCE, DECEMBER 31, 1996 ........ 759 $1 25,953 $26 $170,172 $ 109,837 $ 510
=== === ====== === ======== ========= =======
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
- 24 -
<PAGE> 25
INTERPOOL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(dollars in thousands)
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................................ $ 34,196 $ 31,967 $ 24,102
Adjustments to reconcile net income to net cash
provided by operating activities--
Cumulative dividend on preferred stock of subsidiary (extraordinary
gain) ........................................................... 2,392 (2,422) --
Depreciation and amortization ..................................... 33,371 28,958 18,353
Gain on sale of leasing equipment ................................. (932) (1,484) (1,607)
Collections on net investment in direct
financing leases ................................................ 81,051 48,880 25,562
Income recognized on direct financing leases ...................... (30,143) (20,366) (9,901)
Provision for uncollectible accounts .............................. 1,031 819 854
Changes in assets and liabilities--
Accounts and notes receivable ................................... (4,064) (6,141) (5,978)
Other receivables ............................................... 1,144 353 (1,771)
Other assets .................................................... (976) (9,656) (5,416)
Accounts payable and accrued expenses ........................... 533 (942) (1,896)
Income taxes payable ............................................ 5,144 3,367 3,846
Deferred income ................................................. 828 (705) 418
Minority interest in equity of subsidiary ....................... 40 154 276
--------- --------- ---------
Net cash provided by operating activities ......................... 123,615 72,782 46,842
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of leasing equipment ...................................... (67,538) (167,885) (203,390)
Proceeds from dispositions of leasing equipment ....................... 5,674 6,742 11,646
Investment in direct financing leases ................................. (99,064) (105,758) (74,336)
Proceeds from (purchase of) marketable securities and other
investing activities ................................................ 20,758 9,819 (20,758)
--------- --------- ---------
Net cash used for investing activities .............................. (140,170) (257,082) (286,838)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt .............................. 122,123 199,365 245,678
Payment of long-term debt and capital lease
obligations ......................................................... (90,493) (43,150) (41,752)
Dividends paid ........................................................ (9,950) (819) --
--------- --------- ---------
Net cash provided by financing activities ..................... 21,680 155,396 203,926
--------- --------- ---------
Net increase (decrease) in cash and
short-term investments ...................................... 5,125 (28,904) (36,070)
CASH AND SHORT-TERM INVESTMENTS, beginning of year ...................... 40,208 69,112 105,182
--------- --------- ---------
CASH AND SHORT-TERM INVESTMENTS, end of year ............................ $ 45,333 $ 40,208 $ 69,112
========= ========= =========
Supplemental schedule of non-cash financing activities:
Exchange of 5 1/4% Convertible Exchangeable Subordinated Notes for
5 3/4% Cumulative Convertible Preferred Stock ..................... -- $ 67,436 --
Acquisition of subsidiary common and preferred stock in exchange
for Company's 5 3/4% Cumulative Convertible Preferred Stock ....... $ 6,892 -- --
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
- 25 -
<PAGE> 26
INTERPOOL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
(1) NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES:
The nature of operations and the significant accounting policies used by
Interpool, Inc. and subsidiaries (the "Company" or "Interpool") in the
preparation of the accompanying consolidated financial statements are summarized
below. The Company's accounting records are maintained in United States dollars
and the consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States.
NATURE OF OPERATIONS--
The Company and its subsidiaries conduct business principally in a single
industry segment, the leasing of intermodal dry freight standard containers,
chassis and other transportation related equipment. The Company leases its
containers principally to international container shipping lines located
throughout the world. The customers for the Company's chassis are a large number
of domestic companies, many of which are domestic subsidiaries or branches of
international shipping lines. Equipment is purchased directly or acquired
through conditional sales contracts and lease agreements, many of which qualify
as capital leases.
BASIS OF CONSOLIDATION--
The consolidated financial statements include the accounts of the Company and
subsidiaries more than 50% owned. All significant intercompany transactions have
been eliminated. Minority interest in equity of subsidiaries represents the
minority stockholders' proportionate share of the equity in the income of the
subsidiaries.
In connection with acquisitions in 1988 and 1993, the excess of fair value of
assets acquired over the acquisition cost was allocated proportionately to
certain assets to reduce the value assigned to those assets. For accounting
purposes this allocation has only been recorded in the consolidation of the
Company and its subsidiaries.
TRANSLATION OF FOREIGN CURRENCIES--
The Company considers the U.S. dollar its functional currency and therefore,
translates foreign currency statements using an average exchange rate for
revenue and expense accounts and the rate of exchange in effect at the balance
sheet date for assets and liabilities. Substantially all transactions are U.S.
dollar denominated.
REVENUES--
Equipment leasing revenues include revenue from operating leases and income on
direct financing leases, which is recognized over the term of the lease using
the effective interest method.
LEASING EQUIPMENT--
As of December 31, 1996, in excess of 97% of leased equipment are on lease to
customers. The net value of equipment available for hire is not material.
Depreciation and amortization of leasing equipment (both equipment currently
on-lease to customers and available for hire) are provided under the
straight-line method based on the following estimated useful lives:
<TABLE>
<S> <C>
Dry freight standard containers..... 12 1/2 to 15 years
Chassis ............................ 20 years
Other .............................. 3 to 25 years
</TABLE>
- 26 -
<PAGE> 27
(dollars in thousands, except per share amounts)
Effective January 1, 1995, the Company changed the salvage value on chassis from
nine hundred dollars to one thousand two hundred dollars per unit. The effect of
this change for the year ended December 31, 1995 was to decrease depreciation
expense by $1,004.
Gains or losses resulting from the disposition of leasing equipment are recorded
in the year of disposition.
The residual value of leasing equipment is estimated based on the projections
for the economic value and market value of intermodal equipment as well as the
Company's experience in leasing and selling similarly aged equipment. Such
projected values are reviewed and updated when market and/or economic conditions
change. The Company continually reviews leasing equipment and other long lived
assets to evaluate whether changes have occurred that would suggest these assets
may be impaired based on the estimated cash flows of the assets over the
remaining amortization period. If this review indicates that the remaining
estimated useful life requires revision or that the asset is not recoverable,
the carrying amount of the asset is reduced to its fair value.
During 1996 the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 121 - "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." SFAS No. 121 did not have any impact on
the Company's financial statements.
MARKETABLE SECURITIES--
Management has determined that all securities are to be held for an indefinite
period of time and classified as securities available-for-sale carried at market
value. Unrealized holding gains and losses for available-for-sale securities are
credited (charged) to a component of stockholders' equity net of related income
taxes. Management determines the appropriate classifications of securities at
the time of purchase and reassesses the appropriateness of the classification at
each reporting date.
Premium and discount on securities are included in interest income over the
period from acquisition to maturity using the level-yield method. The specific
identification method is used to record gains and losses on security
transactions.
Sales of available-for-sale securities for the twelve months ended December 31,
1996 and 1995 resulted in proceeds of $2,852 and $2,605, gross gains of $583 and
$408, and gross losses of $135 and $101. There were no transfers of
available-for-sale securities to another category. No net unrealized holding
gains or losses have been included in income for the periods ended December 31,
1996 and 1995.
For the twelve months ended December 31, 1996 and 1995 the change in gross
unrealized gain on available-for-sale securities was $474 and $1,986 with a
corresponding tax reduction of $(34) and $(507) resulting in a cumulative net
unrealized holding gain of $510 and $70.
The amortized cost and estimated fair value of securities as of December 31,
1996 are as follows:
<TABLE>
<CAPTION>
Gross
Unrealized
Amortized Holding Holding Estimated
Cost Gains Losses Fair Value
---- ----- ------ ----------
<S> <C> <C> <C> <C>
Available-for-sale
U.S. Treasury ....... $14,945 $ 14 $ (2) $14,957
Other Debt Securities 2,385 -- (64) 2,321
Equity Securities ... 6,577 867 -- 7,444
------- ----- -------- -------
$23,907 $ 881 $ (66) $24,722
======= ===== ======== =======
</TABLE>
The amortized cost and estimated fair value of U.S. Treasury and other debt
securities, by contractual maturity, are shown below:
- 27 -
<PAGE> 28
(dollars in thousands, except in per share amounts)
<TABLE>
<CAPTION>
Amortized Estimated
Cost Fair Value
---- ----------
<S> <C> <C>
Due in one year ........................ $15,622 $15,588
Due after one year through five years... 1,561 1,530
Due after five years ................... 147 160
</TABLE>
FAIR VALUE OF FINANCIAL INSTRUMENTS--
The carrying amount of cash and short-term investments, trade receivables
and payables, accrued interest receivable and payable and the current portion of
long-term debt approximate fair value. There are no quoted market prices for the
Company's direct finance lease receivables, long-term debt, and interest rate
swap contracts, and a reasonable estimate could not be made without incurring
excessive costs.
CONCENTRATION OF CREDIT RISK--
The Company extends credit to its customers after extensive credit evaluation.
At December 31, 1996 approximately 36% of accounts receivable and notes
receivable and 84% of the net investment in direct financing leases were from
customers outside of the United States, with no significant concentration in any
one country. At December 31, 1995, approximately 31% of accounts receivable and
notes receivable and 82% of the net investment in direct financing leases were
from customers outside of the United States, with no significant concentration
in any one country.
In 1996, 1995 and 1994 the Company's top 25 customers represented approximately
66%, 67% and 66%, respectively, of its consolidated revenues, with no single
customer accounting for more than 6%.
NET INCOME PER SHARE--
Primary net income per share is computed by deducting preferred dividends (and
in 1996, adding $2,392 of non-recurring charge for cumulative dividends
described in Note 8) from net income to arrive at income attributable to common
stockholders. This amount is then divided by the weighted average number of
shares outstanding during the period adjusted for the dilutive effect of stock
options. Shares issuable upon the conversion of the 5 3/4% Cumulative
Convertible Preferred Stock and the 5 1/4% Convertible Exchangeable Subordinated
Notes have been added to the weighted shares outstanding and interest expense
net of tax effect on the notes has been added to net income in the fully diluted
earnings per share computation. Per share amounts and common shares outstanding
have been restated to give effect to the three-for-two stock split effected
March 27, 1997 described in Note 13.
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 date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(2) INCOME TAXES:
Significant components of deferred tax assets and liabilities as of December 31,
1996 and 1995 were as follows:
- 28 -
<PAGE> 29
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Deferred tax assets--
Loss carryforwards ...................... $10,783 $10,530
Finance leases receivable ............... 2,615 1,237
Other, primarily operating reserves ..... 2,895 2,819
------- -------
Total deferred tax assets ....... 16,293 14,586
Deferred tax liabilities--
Operating property, net ................. 28,404 22,659
Other ................................... 2,242 1,444
------- -------
Total deferred tax liabilities... 30,646 24,103
------- -------
Net deferred tax liability ...... $14,353 $ 9,517
======= =======
</TABLE>
One of the Company's subsidiaries has tax net operating loss carryforwards
(NOLs) for Federal income tax purposes totalling approximately $15.6 million
which may be used only to offset that subsidiary's income. These NOLs, if not
utilized, will expire between 2005 and 2006.
A significant subsidiary of the Company is a Barbados corporation. Under the
terms of a protocol between the United States and Barbados, the subsidiary's
leasing income is fully taxable by Barbados, but exempt from U.S. Federal
taxation. For the years 1991 through 1996, the Barbados tax rate was a maximum
of 2 1/2% of income earned in Barbados. No significant differences exist between
the subsidiary's book and taxable income for Barbados tax purposes. No deferred
U.S. Federal income taxes have been provided on the unremitted earnings of the
subsidiary since it is the Company's intention to indefinitely reinvest such
earnings. At December 31, 1996 unremitted earnings of this subsidiary were
approximately $94,000. The deferred U.S. Federal Income taxes related to the
unremitted earnings of this subsidiary would be approximately $31,000, assuming
these earnings are taxable at the U.S. statutory rate, net of foreign tax
credits.
A reconciliation of the U. S. statutory tax rate to the actual tax rate follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
U. S. statutory rate ....................................... 35.0% 35.0% 35.0%
Difference due to operation of subsidiary
in Barbados .............................................. (24.3) (22.3) (22.3)
Federal taxes on foreign income ............................ 3.1 2.9 5.0
State taxes ................................................ 2.4 3.1 1.7
Other foreign taxes ........................................ -- -- 0.5
Reversal of tax reserves ................................... -- (1.6) (4.4)
Cumulative dividends on Trac Lease, Inc. preferred stock.... 2.0 -- --
Other ...................................................... 0.4 0.1 0.2
------ ------ ------
Actual tax rate ....................................... 18.6% 17.2% 15.7%
====== ====== ======
</TABLE>
The 1995 and 1994 tax provision reflects the reversal of certain tax reserves
that are no longer deemed necessary.
The provision for income taxes reflected in the accompanying consolidated
statements of income is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
U. S .............. $7,210 $5,607 $4,023
</TABLE>
- 29 -
<PAGE> 30
(dollars in thousands, except per share amounts)
<TABLE>
<S> <C> <C> <C>
Other ............. 590 518 477
------ ------ ------
$7,800 $6,125 $4,500
====== ====== ======
Current............ $2,950 $2,874 $ 981
Deferred........... 4,850 3,251 3,519
------ ------ ------
$7,800 $6,125 $4,500
====== ====== ======
</TABLE>
For further information regarding the Company's tax structure reference is made
to Item 7 of this Form 10-K.
(3) LEASING ACTIVITIES:
AS LESSEE--
The net book value of assets acquired through capital leases was $159,259 at
December 31, 1996. The aggregate capital lease obligations, secured by
equipment, with installments payable in varying amounts through 2007, were
$180,836 at December 31, 1996.
As of December 31, 1996, the annual maturities of capital leases and related
interest were as follows:
<TABLE>
<CAPTION>
Payment Interest Principal
------- -------- ---------
<S> <C> <C> <C>
1997 ............. $ 32,708 $ 12,190 $ 20,518
1998 ............. 33,341 10,575 22,766
1999 ............. 26,565 8,981 17,584
2000 ............. 27,249 7,648 19,601
2001 ............. 24,832 6,257 18,575
Thereafter........ 97,497 15,705 81,792
-------- -------- --------
$242,192 $ 61,356 $180,836
======== ======== ========
</TABLE>
The Company leases office space and certain leasing equipment under operating
leases expiring at various dates through 2001. Rental expense under operating
leases aggregated $3,838, $3,753, and $3,766 for the periods ended December 31,
1996, 1995 and 1994, respectively.
As of December 31, 1996, the aggregate minimum rental commitment under operating
leases having initial or remaining noncancellable lease terms in excess of one
year was as follows:
<TABLE>
<CAPTION>
<S> <C>
1997 ............................... $2,449
1998 ............................... 1,607
1999 ............................... 1,476
2000 ............................... 891
2001 ............................... 77
------
$6,500
======
</TABLE>
AS LESSOR--
The Company has entered into various leases of equipment that qualify as direct
financing leases. At the inception of a direct finance lease, the Company
records a net investment based on the gross investment (representing the total
future minimum lease payments plus unguaranteed residual value), net of unearned
lease income. The unguaranteed residual value is generally equal to the purchase
option of the lessee, which in the case of the Company's lease contracts is
insignificant. Unearned income represents the excess of gross investment over
equipment cost. Receivables under these direct financing leases, net of unearned
income, are collectible through 2006 as follows:
- 30 -
<PAGE> 31
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31, 1996
------------------------------------------
Unearned
Total Lease Lease Net Lease
Receivables Income Receivables
----------- ------ -----------
<S> <C> <C> <C>
1997.............. $ 88,166 $ 27,370 $ 60,796
1998.............. 78,850 20,799 58,051
1999.............. 66,418 14,195 52,223
2000.............. 49,387 8,713 40,674
2001.............. 30,774 4,656 26,118
Thereafter......... 30,854 3,761 27,093
-------- -------- --------
$344,449 $ 79,494 $264,955
======== ======== ========
</TABLE>
As of December 31, 1996, the Company also had noncancellable operating leases,
under which it will receive future minimum rental payments as follows:
<TABLE>
<S> <C> <C>
1997 .............................. $37,842
1998 .............................. 19,432
1999 .............................. 10,906
2000 .............................. 4,186
2001 .............................. 1,434
-------
$73,800
=======
</TABLE>
Effective January 1, 1995 the Company began capitalizing lease commissions and
amortizing this cost over the average life of the related lease contract. At
December 31, 1996 and 1995, $2,199 and $1,432 of these commissions were included
in other assets.
(4) DEBT:
Debt consists of notes and loans secured by leasing equipment, with installments
payable in varying amounts through 2003, with effective interest rates of
approximately 5.8% to 9.0% and a weighted average rate of 7.18% in 1996. The
principal amount of debt payable under fixed rate contracts is $311,684.
Remaining debt is payable under floating rate arrangements. Approximately
$80,000 of floating rate debt has been converted to fixed rate debt through the
use of interest rate swaps as described below. The agreements contain certain
covenants which, among other things, provide for the maintenance of specified
levels of tangible net worth (as defined) and a maximum debt to net worth ratio.
At December 31, 1996, under covenants in the Company's loan agreement
approximately $67,500 of retained earnings were available for dividends. The
Company was in compliance with its debt covenants at December 31, 1996.
As of December 31, 1996, the annual maturities of notes and loans, net of
interest thereon were as follows:
<TABLE>
<S> <C>
1997 ............................... $ 60,313
1998 ............................... 70,020
1999 ............................... 74,782
2000 ............................... 72,710
2001 ............................... 81,863
Thereafter ......................... 62,180
--------
$421,868
========
</TABLE>
The Company has a $150,000 credit facility from a group of commercial banks; on
December 31, 1996, $5,000 was outstanding. The term of this facility extends
until May 31, 1998 (unless the lenders elect to renew the facility) at which
time a maximum of 10% of the amount then outstanding becomes due, with the
remainder becoming payable in equal monthly installments over a five year
period. In addition, the Company has operational lines of credit with banks of
$55,000. As of December 31, 1996, $14,974 was outstanding under these lines and
is reflected above as due in 1997.
- 31 -
<PAGE> 32
(dollar in thousands, except per share amounts)
In 1996 the Company entered into a five year interest rate swap contract with a
notional amount of $80,000 to convert variable rate debt into fixed rate debt.
The maturity of this contract coincides with the maturity of the underlying debt
instruments hedged. In 1995 the Company entered into and closed out an interest
rate swap contract with a notional amount of $82,021 which was designated as a
hedge to protect against increases in interest rates for debt instruments which
were secured in 1995. The close out value of the swap is being amortized as a
yield adjustment over the remaining period to maturity of the debt instruments
hedged.
Interest rate swap contracts are intended to be an integral part of borrowing
transactions and, therefore are not recognized at fair value. Interest
differentials paid or received under these contracts are recognized as yield
adjustments to the effective yield of the underlying debt instruments hedged.
Interest rate swap contracts would only be recognized at fair value if the
hedged relationship is terminated. Gains or losses accumulated prior to
termination of the relationship would be amortized as a yield adjustment over
the shorter of the remaining life of the contract, or the remaining period to
maturity of the underlying debt instrument hedged. If the contract remained
outstanding after termination of the hedged relationship, subsequent changes in
market value of the contract would be recognized in earnings. The Company does
not use leveraged swaps and does not use leverage in any of its investment
activities that would put principal capital at risk.
(5) EXCHANGE OF DEBT
During 1995 the Company consummated the exchange of $67,436 principal amount of
5 1/4% Convertible Exchangeable Subordinated Notes for 5 3/4% Cumulative
Convertible Preferred Stock with a $67,436 liquidation preference. The preferred
stock was convertible into shares of the Company's common stock at a conversion
price of $23.37 per share (or effectively 4.279 shares of common stock for one
share of preferred stock) and was redeemable, in whole or in part, at the option
of the Company at any time after December 15, 1996 at a redemption price of
103.675% of liquidation preference in 1996 declining to 100% in 2003 and
thereafter. See Note 13 for redemption and conversion of the preferred stock in
1997.
As a result of the exchange, the Company recognized an extraordinary gain of
$2,422, net of applicable taxes of $1,683, representing the difference between
the face value of the 5 1/4% Notes, less related deferred financing costs and
expenses related to the exchange and the fair market value of the 5 3/4%
preferred stock.
(6) OTHER CONTINGENCIES AND COMMITMENTS:
At December 31, 1996, the Company has outstanding purchase commitments for
equipment of approximately $48,000.
Under certain of the Company's leasing agreements, the Company as lessee may be
obligated to indemnify the lessor for loss, recapture or disallowance of certain
tax benefits arising from the lessor's ownership of the equipment.
The Company has entered into employment agreements with certain key officers and
employees which provide for minimum salary, bonus arrangements and benefits for
periods up to seven years.
The Company has a number of claims pending against it, has filed claims against
others and has been named as a defendant in a number of lawsuits incidental to
its business. The Company believes that such proceedings will not have a
material effect on its consolidated financial statements.
(7) CASH FLOW INFORMATION:
For purposes of the consolidated statements of cash flows, the Company includes
all highly liquid short-term investments with an original maturity of three
months or less in cash and short-term investments.
For the periods ended December 31, 1996, 1995 and 1994, cash paid for interest
was approximately $41,998, $39,646 and $21,864, respectively. Cash paid for
income taxes was approximately $2,177, $2,514 and $1,296,
- 32 -
<PAGE> 33
(dollars in thousands, except per share amounts)
respectively. The Company has entered into employment agreements with certain
key officers and employees which provide for minimum salaries, bonus
arrangements and benefits for periods up to ten years.
(8) RELATED PARTY TRANSACTIONS:
The Company leases approximately 16,000 square feet of commercial space for its
executive offices in Princeton, New Jersey from 211 College Road Associates, a
New Jersey general partnership. Martin Tuchman, the Company's Chief Executive
Officer, holds a direct or indirect equity interest of 28.85% and Radcliff
Group, Inc., a related party, holds a direct or indirect equity interest of
28.15% in 211 College Road Associates. The annual base rental for this property
is approximately $309 under a net lease expiring in 2001, subject to renewal. In
the opinion of the Company's management, rent being paid under this lease does
not exceed rent that the Company would have paid in an arms'-length transaction
with an unrelated third party.
The Company had a consultation agreement with Radcliff Group, Inc. pursuant to
which Radcliff designated Warren L. Serenbetz, a stockholder and director, as an
executive consultant. Under the terms of the agreement compensation continues
through December 31, 2002. Compensation under this agreement was $492, $492 and
$551 in 1996, 1995 and 1994, respectively.
On August 10, 1992, The Ivy Group, a related party, borrowed $7,100 from the
Company, evidenced by a promissory note due in July 1997. In connection with
this promissory note, The Ivy Group executed a Chattel Mortgage, Security
Agreement and Assignment under which the Company, as secured party, was granted
a security interest in 4,364 chassis owned by The Ivy Group and was granted an
assignment of all rights to receive rental payments and proceeds related to the
lease and sublease of such chassis. On November 12, 1993, the Company pledged
the 4,364 chassis owned by The Ivy Group as security for an additional Company
borrowing of $4,800 bearing interest at LIBOR plus 1.25%. In consideration of
The Ivy Group's consent to the foregoing, the interest rate on the outstanding
balance of its promissory note to the Company was reduced to match the Company's
borrowing rate.
On February 28, 1996, the Board of Directors approved a loan to The Ivy Group of
an additional $7,035 from the Company by increasing its outstanding balance
under the Ivy Loan from $6,398 to $13,433, reflecting the current estimated loan
value of the Ivy Collateral. Under the terms of the amended Ivy Loan, the entire
new balance bears interest at LIBOR plus 1.75% repayable over a five year term
on an interest only basis, subject to maintenance of fixed loan-to-collateral
value ratios. The Company was also granted the right to continue to utilize the
Ivy Collateral to secure additional Company financings.
The Ivy Group, in which Mr. Tuchman, Radcliff Group, Inc. and Mr. Witteveen hold
interests, has invested in chassis which it has leased to Trac Lease. In 1986,
The Ivy Group became a New Jersey general partnership and Mr. Witteveen and two
senior executive officers of Trac Lease became partners. Radcliff Group, Inc.
and Mr. Tuchman share equally in the net income of The Ivy Group derived from
the lease of 1,184 chassis to Trac Lease (Contributed Chassis). In addition,
each of Radcliff Group and Mr. Tuchman receives 28.5% of the net income of The
Ivy Group, other than that derived from the Contributed Chassis. Mr. Witteveen
receives 14.3% of the net income of The Ivy Group, other than that derived from
the Contributed Chassis. In 1994, 1995 and 1996, 32%, 32% and 17.5%,
respectively of the aggregate net income of The Ivy Group was derived from the
Contributed Chassis and 68%, 68% and 82.5%, respectively was derived from other
activities. The terms of all agreements between Trac Lease and The Ivy Group,
including rental rates, are fixed and, in the opinion of the Company's
management, are comparable to terms that Trac Lease would have obtained in
arms'-length transactions with unrelated third parties. Trac Lease has been
advised by the principals of The Ivy Group that the personal tax consequences to
such principals would make it inadvisable to terminate the transactions entered
into except with respect to any extensions of the lease agreements. The Ivy
Group has entered into an agreement with the Company pursuant to which it has
agreed not to engage in any business activities that are competitive with the
business activities of the Company or its subsidiaries (including Trac Lease).
On August 15, 1992, Eurochassis L.P., a New Jersey limited partnership in which
Raoul J. Witteveen is one of the limited partners and the general partner,
entered into a master equipment lease agreement, as lessor, with Trac
- 33 -
<PAGE> 34
(dollars in thousands, except per share amounts)
Lease, as lessee, pursuant to which Eurochassis L.P. leases 100 chassis to Trac
Lease for an annual lease payment of $91. The annual lease term renews
automatically unless canceled by either party prior to the first day of the
renewal period. The terms of such master equipment lease agreement, in the
opinion of Trac Lease's management, are comparable to terms that Trac Lease
would have obtained in an arms'-length transaction with an unrelated third
party.
On December 30, 1986, Princeton Intermodal Equipment Trust I, a New Jersey trust
(Princeton Intermodal), as lessor, and Trac Lease, as lessee, entered into a
lease agreement pursuant to which Trac Lease leases 618 chassis from Princeton
Intermodal at a fixed rate of $2.00 per day for an 11-year term. Martin Tuchman
and Warren L. Serenbetz, directly and indirectly, are among the beneficiaries of
Princeton Intermodal, of which an unaffiliated party is the trustee. The Ivy
Group, Mr. Tuchman and Warren L. Serenbetz hold 3.2%, 32.1% and 12.9% interests,
respectively, in Princeton Intermodal. The terms of the lease agreement between
Princeton Intermodal and Trac Lease, in the opinion of Trac Lease's management,
are comparable to terms that Trac Lease would have obtained in an arms'-length
transaction with an unrelated third party. The Ivy Group entered into a
guarantee of all rental payments due from Trac Lease to Princeton Intermodal
under such lease agreement, which guarantee continues for the length of the
lease term.
Since leasing the Contributed Chassis to Trac Lease in 1986, The Ivy Group, as
lessor, has entered into a series of other lease agreements with Trac Lease.
Currently, pursuant to such lease agreements, Trac Lease leases from The Ivy
Group an aggregate 7,411 chassis for aggregate annual lease payments of
approximately $3,900. Such leases either renew automatically unless canceled by
either party prior to the first day of the renewal period or expire on various
dates in 1997 or 2000. In August 1990, The Ivy Group pledged approximately 1,400
of the aforementioned chassis to a financial institution in order to secure a
loan in the amount of $6,500, of which $4,366 was outstanding as of December 31,
1996. Approximately $2,500 of the loan was used by The Ivy Group to purchase 50%
of the preferred stock of Trac Lease, with the remainder used to purchase
equipment. In the event of a default by The Ivy Group under such loan, Trac
Lease has agreed to purchase such chassis from the lender at a price equal to
the principal balance of the loan then outstanding. The Trac Lease preferred
stock held by The Ivy Group had cumulative dividends which have not been
declared in the amount of $2,315 at December 31, 1995.
On March 15, 1996, pursuant to the terms of an Agreement of Merger between Trac
Lease and Trac Lease Merger Corp., a newly formed subsidiary (the "Trac
Merger"), the Company issued an aggregate of 24,390 shares of its 5 3/4%
Cumulative Convertible Preferred Stock ("Interpool Preferred Stock") with a
value of $2,000 to Thomas P. Birnie and Graham Owen, both officers of Trac, and
Messrs. Birnie and Owen surrendered an aggregate of 25,000 shares of common
stock representing 12 1/2% of the outstanding common stock of Trac. Following
the Trac Merger, Interpool, Inc. holds 100% of the outstanding shares of common
stock of Trac.
Pursuant to the terms of the Trac Merger, the Company also issued 59,664 shares
of its Interpool Preferred Stock with a value of $4,892 to The Ivy Group and The
Ivy Group surrendered 2,500 shares of Trac Preferred Stock having a stated value
of $2,500 plus accrued, cumulative dividends of $2,392. Following the Trac
Merger, no shares of Trac Lease Preferred Stock were outstanding. The Trac
Merger was accounted for under the purchase method of accounting. The cumulative
dividends on the Trac Preferred Stock were charged to expense in the first
quarter of 1996 as a non-recurring charge. Such charge had no impact on net
income per share in the first quarter because unpaid dividends on the Trac
Preferred Stock were included in the computation of net income per share in
prior periods.
In December 1996, Interpool acquired all of the limited partnership
interest and substantially all of the senior securities of the Interpool Income
Fund I, L.P., (the "Income Fund") a Delaware limited partnership for $21,532.
This amount is included in accounts payable and accrued expense at December 31,
1996. Interpool co-sponsored the offering of the securities of the Income fund
during 1992 and 1993 and managed the containers and chassis owned by the Income
Fund. Fees for managing the equipment on behalf of the Income Fund were not
material. The Income Fund originally acquired approximately 5,700 TEU
containers and approximately 1,500 chassis. As a result of this acquisition,
Interpool received title to the equipment and will receive all of the revenue
from the containers and chassis owned by the Income Fund, and will no longer be
subject to the Income Funds's obligations to make payments of approximately
11% on its outstanding securities.
The effect of the above related party transactions included in the accompanying
statement of income are as follows:
- 34 -
<PAGE> 35
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenue .................. $ 851 $ 450 $ 494
====== ====== ======
Lease operating expense... $2,573 $2,573 $2,573
====== ====== ======
Administrative expense.... $ 838 $ 785 $ 817
====== ====== ======
Interest expense ......... $ 691 $ 801 $ 900
====== ====== ======
Non-recurring charge ..... $2,392 $ -- $ --
====== ====== ======
</TABLE>
(9) RETIREMENT PLANS:
Certain subsidiaries have defined contribution plans covering substantially all
full-time employees. No contributions were made by the Company or its
subsidiaries to these plans during the years ended December 31, 1996, 1995, and
1994.
(10) SEGMENT AND GEOGRAPHIC DATA:
The Company is engaged in one line of business, the leasing of intermodal dry
freight standard containers and intermodal container chassis. The Company's
shipping line customers utilize international containers in world trade over
many varied and changing trade routes. In addition, most large shipping lines
have many offices in various countries involved in container operations. The
Company's revenue from international containers is earned while the containers
are used in service carrying cargo around the world, while certain other
equipment is utilized in the United States. Accordingly, the information about
the business of the Company by geographic area is derived from either
international sources or from United States sources. Such presentation is
consistent with industry practice. Information about the business of the Company
by geographic area is presented in the table below:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Revenues--
United States (a) .. $ 70,981 $ 67,345 $ 51,681
International ...... 76,167 60,580 40,591
-------- -------- --------
$147,148 127,925 92,272
Income before taxes--
United States ...... $ 10,481 11,495 9,050
International ...... 31,515 24,175 19,552
-------- -------- --------
41,996 35,670 28,602
Capital expenditures--
United States ...... 59,061 93,355 113,671
International ...... 107,531 180,288 164,055
-------- -------- --------
166,592 273,643 277,726
Depreciation--
United States ...... 14,689 14,207 9,792
International ...... 17,287 13,820 8,265
-------- -------- --------
31,976 28,027 18,057
Assets--
United States ...... 427,365 371,191 325,221
International ...... 512,053 480,409 339,571
-------- -------- --------
$939,418 $851,600 $664,792
======== ======== ========
</TABLE>
(a) Includes revenues from related parties of $851, $450 and $494 in 1996,
1995 and 1994, respectively.
(11) CAPITAL STOCK:
- 35 -
<PAGE> 36
(dollars in thousands, except per share amounts)
The Company's 1993 Stock Option Plan for Executive Officers and Directors (the
"Stock Option Plan") was adopted by the Company's Board of Directors and
approved by the stockholders in March 1993.
A total of 6 million shares of common stock have been reserved for issuance
under the Stock Option Plan. Options may be granted under the Stock Option Plan
to executive officers and directors of the Company or a subsidiary (including
any executive consultant of the Company and its subsidiaries), whether or not
they are employees. During 1994, 2,445,000 options were granted under the Stock
Option Plan at an exercise price of $9.33 a share (the fair value of the
Company's common stock on the dates of the grants). No options were granted in
1995. During 1996, options to purchase 465,000 shares were granted under the
Stock Option Plan at an exercise price of $11.08 a share (the fair value of
the Company's common stock on the dates of the grants). These options vest six
months from date of grant and expire ten years from date of grant. To date,
none of the options have been exercised.
The Company's Nonqualified Stock Option Plan for Nonemployee, Nonconsultant
Directors (the "Directors' Plan") was adopted by the Board of Directors and
approved by the stockholders in March 1993. Under the Directors' Plan a non
qualified stock option to purchase 15,000 shares of common stock is
automatically granted to each nonemployee, nonconsultant director of the
Company, in a single grant at the time the director first joins the Board of
Directors. The Directors' Plan authorizes grants of options up to an aggregate
of 150,000 shares of common stock. The exercise price per share is the fair
market value of the Company's common stock on the date on which the option is
granted (the "Grant Date"). The options granted pursuant to the Directors' Plan
may be exercised at the rate of 1/3 of the shares on the first anniversary of
the director's Grant Date and 1/3 of the shares on the second anniversary of the
director's Grant Date and 1/3 of the shares on the third anniversary of the
director's Grant Date, subject to certain holding periods required under rules
of the Securities and Exchange Commission. Options granted pursuant to the
Directors' Plan expire ten years from their Grant Date. Pursuant to the
Director's Plan, in March 1993 options to purchase 15,000 shares of common stock
at the public offering price of $9.33 a share were granted to each of three
Directors of the Company.
The Directors' Plan is administered by the Stock Option Committee of the Board
of Directors. Pursuant to the Directors' Plan, in June 1994 an option to
purchase 15,000 shares of common stock at $7.67 a share was granted to Peter
D. Halstead upon his appointment to the Board. In April 1996, an option to
purchase 15,000 shares of common stock at $12.17 a share was granted to Joseph
J. Whalen upon his appointment to the Board. To date, none of the options have
been exercised.
In connection with the issuance of the 5 3/4% Cumulative Convertible Preferred
Stock and the 5 1/4% Convertible Exchangeable Subordinated Notes, (Note 5)
approximately 2.9 million shares of Common stock were reserved for issuance at
December 31, 1996. See Note 13 for redemption and conversion of Preferred Stock.
Common stock dividends declared and unpaid at December 31, 1996 amounted to
$865, and are included in accounts payable and accrued expenses.
Effective January 1, 1996, the Company adopted the provisions of Statement No.
123, Accounting for Stock-Based Compensation. As permitted by the Statement, the
Company has chosen to continue to account for stock-based compensation using the
intrinsic value method. To date, all options were granted with exercise price
equal to the fair market price of the Company's Stock at Grant Date,
accordingly, no compensation expense has been recognized. Options issued with an
exercise price below the fair value of the Company's common stock on the date of
grant will be accounted for as compensatory options. The difference between the
exercise price and the fair value of the Company's common stock will be charged
to expense over the shorter of the vesting or service period. Options issued at
fair value are non-compensatory. Had the fair value method of accounting been
applied to the Company's stock option plans, which requires recognition of
compensation cost ratably over the vesting period of the underlying equity
instruments, net income would have been reduced by $1,473 or $.06 per share
primary and $.05 per share fully diluted. This pro forma impact only takes into
account options granted since January 1, 1995. The average fair value of options
granted during 1996 was $5.28. The fair value was estimated using the
Black-Scholes option pricing model based on the market price at grant date of
- 36 -
<PAGE> 37
(dollars in thousands, except per share amounts)
$11.08 and the following weighted average assumptions: risk-free interest rate
of 6.22%, expected life of 10 years, volatility of 31% and dividend yield of
1.2%.
In 1996 there was a non-recurring charge of $1,500 for the initial public
offering expense of Interpool Limited, which was withdrawn in the fourth
quarter.
(12) 1996 QUARTERLY FINANCIAL DATA (UNAUDITED):
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
--- --- --- ---
<S> <C> <C> <C> <C>
Revenues ................................. $ 35,179 $ 36,431 $ 37,482 $ 38,056
Net income ............................... $ 8,448(1) $ 9,471 $ 9,886 $ 10,283(2)
Primary net income per share ............. $ 0.28 $ 0.32 $ 0.33 $ 0.34(2)
Fully diluted net income per share ....... $ 0.27 $ 0.30 $ 0.31 $ 0.32(2)
1995 QUARTERLY FINANCIAL DATA (UNAUDITED):
Revenues ................................. $ 27,695 $ 31,484 $ 33,582 $ 35,164
Net income ............................... $ 6,421 $ 6,975 $ 7,584 $ 8,565
Primary net income per share ............. $ 0.25 $ 0.27 $ 0.29 $ 0.29
Fully diluted net income per share ....... $ 0.23 $ 0.25 $ 0.26 $ 0.28
</TABLE>
(1) Excludes a $2,392 non-cash and non-recurring charge for accumulated
dividends of its subsidiary, Trac Lease, Inc., which resulted from the
acquisition of the outstanding preferred stock of Trac Lease, Inc. through
the issuance of Interpool, Inc. preferred stock. Such charge has no impact
on net income per share because unpaid dividends were included in the
computation of net income per share in prior years.
(2) Excludes a $1,500 charge, $.05 per share primary and $.05 per share fully
diluted for the initial public offering expenses of Interpool Limited which
offering was withdrawn in the fourth quarter of 1996.
(13) SUBSEQUENT EVENTS:
On January 27, 1997, Interpool Capital Trust, a Delaware business trust and
special purpose entity (the "Trust"), issued in a private placement 75,000
shares of 9 7/8% Company-Obligated Mandatory Redeemable Capital Securities with
an aggregate liquidation preference of $75,000 (the "Capital Securities") for
proceeds of $75,000. Costs associated with the transaction amounted to
approximately $1,700 and were borne by the Company. Interpool owns all the
common securities of the Trust. The proceeds received by the Trust from the sale
of the Capital Securities were used by the Trust to acquire $75,000 of 9 7/8%
Junior Subordinated Debentures due February 15, 2027 of the Company (the
"Debentures"). The Debentures are the sole assets of the Trust. The Capital
Securities represent preferred beneficial interests in the Trust's assets.
Distributions on the Capital Securities are cumulative and payable at the annual
rate of 9 7/8% of the liquidation amount, quarterly in arrears, commencing
February 15, 1997. The Company has the option to defer payment of distributions
for an extension period of up to five years if it is in compliance with the
terms of the Capital Securities. Interest at 9 7/8% will accrue on such deferred
distributions throughout the extension period. The Capital Securities will be
subject to mandatory redemption upon repayment of the Debentures to the Trust.
The redemption price decreases from 104.975% of the liquidation preference in
2007 to 100% in 2017 and thereafter. Under certain limited circumstances, the
Company may, at its option, prepay the Debentures and redeem the Capital
Securities prior to 2007 at a prepayment price specified in the governing
instruments.
The Company used $52,871 of net proceeds from the sale of the Debentures to the
Trust to redeem 509,964 shares of the Company's 5 3/4% Cumulative Convertible
Preferred Stock (the "Preferred Stock") on March 10, 1997 at a redemption price
of 103.675% per share of the liquidation value.
- 37 -
<PAGE> 38
(dollars in thousands, except per share amounts)
On March 10, 1997 a total of 248,730 shares, or $24,873 in aggregate liquidation
value, of the Company's 5 3/4% Cumulative Convertible Preferred Stock
(representing 32.78% of the outstanding shares of Preferred Stock) were
converted into a total of 1,064,297 shares of Common Stock.
As a result of the redemption of shares of Preferred Stock, the Company expects
to record a one-time charge, currently estimated to be approximately 24 cents
per share on a primary basis and 21 cents per share on a fully diluted basis,
for the first quarter of 1997.
On March 12, 1997 the Company's Board of Directors announced a three-for-two
stock split, to be effective on March 27, 1997. The record date for holders
entitled to receive the benefits of the stock split will be March 21, 1997. No
fractional shares are being issued in connection with the stock split. Instead,
under the terms of the stock split, the Company will round any fractional shares
to which any stockholders is entitled as a result of the stock split up to the
nearest whole share.
On March 27, 1997, options for the purchase of 1,498,500 shares of common stock
were granted under the Stock Option Plan at an exercise price of $15.58 per
share (the fair value of the Company's common stock on the date of the grant).
These options vest six months from the date of the grant and expire in ten
years from the date of the grant.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this Item 10 with respect to the directors of
registrant is hereby incorporated by reference to registrant's definitive proxy
statement to be filed pursuant to Regulation 14A promulgated by the Securities
and Exchange Commission under the Securities Exchange Act of 1934, which proxy
statement is anticipated to be filed on or about April 17, 1997.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this Item 11 is hereby incorporated by reference to
registrant's definitive proxy statement to be filed pursuant to Regulation 14A
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, which proxy statement is anticipated to be filed on or
about April 17, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this Item 12 is hereby incorporated by reference to
registrant's definitive proxy statement to be filed pursuant to Regulation 14A
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, which proxy statement is anticipated to be filed on or
about April 17, 1997.
- 38 -
<PAGE> 39
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this Item 13 is hereby incorporated by reference to
registrant's definitive proxy statement to be filed pursuant to Regulation 14A
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, which proxy statement is anticipated to be filed on or
about April 17, 1997.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8K
(a)(1) FINANCIAL STATEMENTS
INTERPOOL, INC.
Report of Independent Public Accountants
Consolidated Balance Sheets--At December 31, 1996 and 1995
Consolidated Statements of Income for the Years Ended December 31, 1996, 1995
and 1994.
Consolidated Statements of Stockholders' Equity for the Years Ended December 31,
1996, 1995 and 1994.
Consolidated Statements of Cash Flows for the Years Ended December 31, 1996,
1995 and 1994.
Notes to Consolidated Financial Statements
(a)(2) FINANCIAL STATEMENT SCHEDULES
Schedule II -- Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
regulations of the Commission are not required under the related instructions or
are inapplicable, and therefore have been omitted.
(a)(3) EXHIBITS
3.1* -- Form of Restated Certificate of Incorporation of the Company
3.2* -- Form of Restated Bylaws of the Company
4.1* -- Form of Certificate representing the Common Stock
10.1* -- Purchase Agreement dated as of January 30, 1993 by and between Sequa
Capital Corp. and the Company, as amended as of March 5, 1993.
10.2* -- Restructuring Agreement dated as of August 5, 1992 among the
Company, Trac Lease, Radcliff Group, Interpool Limited, Sequa
Capital Corp., Martin Tuchman, Raoul J. Witteveen, Warren L.
Serenbetz, Warren L. Serenbetz, Jr., Paul H. Serenbetz, Stuart W.
Serenbetz and Clay R. Serenbetz.
10.3* -- Amended and Restated Term Credit Agreement dated as of February 19,
1993 between the Company and Swiss Bank Corporation.
10.4* -- Promissory Note of the Company dated February 11, 1993 to United
Jersey Bank/Central N.A.
10.5* -- Employment Agreement dated as of January 1, 1992 by and between
Raoul J. Witteveen and the Company.
10.6* -- Employment Agreement dated as of January 1, 1992 by and between
Radcliff Group and the Company.
- 39 -
<PAGE> 40
10.7* -- Consultation Services Agreement dated as of January 1, 1992 by and
between Radcliff Group and the Company.
10.9* -- Form of Stock Option Plan for Executive Officers and Directors.
10.10* -- Form of Stockholders' Agreement dated as of May 4, 1993, among the
Company and Messrs. Martin Tuchman, Raoul J. Witteveen, Warren L.
Serenbetz, Warren L. Serenbetz, Jr., Clay R. Serenbetz, Paul H.
Serenbetz, Stuart W. Serenbetz and Arthur L. Burns and the Serenbetz
Trust.
10.12** -- Form of Non-Compete Agreement dated as of May 4, 1993, by and
between The Ivy Group and the Company.
10.13* -- Lease Agreements by and between 211 College Road Associates and
Interpool Limited and 211 College Road Associates and Microtech
Leasing.
10.14* -- Lease Agreement dated December 30, 1986 between Princeton Intermodal
Equipment Trust I and Trac Lease.
10.15* -- Lease Agreements between The Ivy Group and Trac Lease.
10.16* -- Amendment No. 1, dated August 10, 1992, to Secured Promissory Note
and Chattel Mortgage, Security Agreement and Assignment by and
between The Ivy Group and the Company.
10.17* -- Chassis Lease Agreement dated as of August 15, 1992 by and between
Eurochassis L.P. and Trac Lease.
10.18* -- Form of Transfer and Subscription Agreement among Radcliff Group,
Martin Tuchman, Raoul J. Witteveen, Warren L. Serenbetz, Warren L.
Serenbetz, Jr., Clay R. Serenbetz, Paul H. Serenbetz, Stuart W.
Serenbetz, the Serenbetz Trust and the Company.
10.19* -- Form of Exchange and Subscription Agreement by and between the
Company and Arthur L. Burns.
10.20* -- Demand promissory notes of the Company payable to Martin Tuchman,
Warren L. Serenbetz and Princeton International Properties.
10.23* -- Indemnity Agreement between the Company and other directors.
10.26* -- Agreement between the Company and Arthur L. Burns regarding certain
litigation.
10.27 -- Indenture between the Company and IBJ Schroeder Bank & Trust
Company, as Trustee, dated January 27, 1997.
10.28. -- First Supplemental Indenture between Interpool, Inc. and IBJ
Schroeder Bank & Trust Company dated January 27, 1997.
10.29 -- Series A Capital Securities Guarantee Agreement dated January 27,
1997.
10.30***-- Agreement of Merger dated March 15,1996 among Trac Lease, Inc.,
Trac Lease Merger Corp. and the Company.
10.31***-- Letter Agreement between The Ivy Group and the Company.
12.1** -- Statement regarding computation of ratios of earnings to fixed
charges.
21.1* -- Subsidiaries of the Company.
23.1** -- Consent of Arthur Andersen LLP with respect to consolidated
financial statements of the Company.
27. -- Financial Data Schedule.
99. -- Press Releases dated November 22, 1996; November 26, 1996; December
24, 1996; December 31, 1996; January 23, 1997; January 31, 1997;
February 18, 1997; March 11, 1997; and March 12, 1997.
- - ---------------
* Filed with the Registrant's Registration Statement on Form S-1 declared
effective by the Commission on May 4, 1993 (Reg. No. 33-59498) and
incorporated herein by reference as indicated.
** Filed with the Registrant's Registration Statement on Form S-1 declared
effective by the Commission on December 7, 1993 (Reg. No. 33-71538) and
incorporated herein by reference as indicated.
***Formerly filed with the Registrant's Annual Report on Form 10-K for the
period ended 12/31/95 and incorporated herein by reference as indicated.
(b) REPORTS ON FORM 8-K
None
- 40 -
<PAGE> 41
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To Interpool, Inc.:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of Interpool, Inc. and subsidiaries included
in this Form 10-K and have issued our report thereon dated February 18, 1997
except for the matters described in Note 13, as to which the date is March 27,
1997. Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying Schedule II is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. The schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
Arthur Andersen LLP
Roseland, New Jersey
February 18, 1997
- 41 -
<PAGE> 42
INTERPOOL, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
ALLOWANCE FOR DOUBTFUL ACCOUNTS
(in thousands)
<TABLE>
<CAPTION>
Balance at Charged to Write-offs, Balance
Beginning Costs and Net of at End
of Year Expenses Recoveries of Year
------- -------- ---------- -------
<S> <C> <C> <C> <C>
Year Ended December 31, 1996................................. $2,099 $1,126 $719 $2,506
====== ====== ==== ======
Year Ended December 31, 1995................................. $1,883 $819 $603 $2,099
====== ====== ==== ======
Year Ended December 31, 1994................................. $2,005 $854 $976 $1,883
====== ====== ==== ======
</TABLE>
- 42 -
<PAGE> 43
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
INTERPOOL, INC.
(Registrant)
March 27, 1997 By /s/ Martin Tuchman
-----------------------------------------------
Martin Tuchman
Chairman of the Board, Chief Executive Officer,
and Director (Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C>
March 27, 1997 By /s/ Martin Tuchman
-----------------------------------------------
Martin Tuchman
Chairman of the Board, Chief Executive Officer,
and Director (Principal Executive Officer)
March 27, 1997 By /s/ Raoul J. Witteveen
-----------------------------------------------
Raoul J. Witteveen
President, Chief Financial Officer and
Director
March 27, 1997 By /s/ Warren L. Serenbetz
-----------------------------------------------
Warren L. Serenbetz
Director
March 27, 1997 By /s/ John M. Bucher
-----------------------------------------------
John M. Bucher
Director
March 27, 1997 By /s/ Arthur L. Burns
-----------------------------------------------
Arthur L. Burns
Director
March 27, 1997 By /s/ Peter D. Halstead
-----------------------------------------------
Peter D. Halstead
Director
March 27, 1997 By /s/ Joseph J. Whalen
-----------------------------------------------
Joseph J. Whalen
Director
March 27, 1997 By /s/ William Geoghan
-----------------------------------------------
William Geoghan
Controller (Principal Accounting Officer)
</TABLE>
- 43 -
<PAGE> 44
EXHIBIT INDEX
3.1* -- Form of Restated Certificate of Incorporation of the Company
3.2* -- Form of Restated Bylaws of the Company
4.1* -- Form of Certificate representing the Common Stock
10.1* -- Purchase Agreement dated as of January 30, 1993 by and between Sequa
Capital Corp. and the Company, as amended as of March 5, 1993.
10.2* -- Restructuring Agreement dated as of August 5, 1992 among the
Company, Trac Lease, Radcliff Group, Interpool Limited, Sequa
Capital Corp., Martin Tuchman, Raoul J. Witteveen, Warren L.
Serenbetz, Warren L. Serenbetz, Jr., Paul H. Serenbetz, Stuart W.
Serenbetz and Clay R. Serenbetz.
10.3* -- Amended and Restated Term Credit Agreement dated as of February 19,
1993 between the Company and Swiss Bank Corporation.
10.4* -- Promissory Note of the Company dated February 11, 1993 to United
Jersey Bank/Central N.A.
10.5* -- Employment Agreement dated as of January 1, 1992 by and between
Raoul J. Witteveen and the Company.
10.6* -- Employment Agreement dated as of January 1, 1992 by and between
Radcliff Group and the Company.
<PAGE> 45
10.7* -- Consultation Services Agreement dated as of January 1, 1992 by and
between Radcliff Group and the Company.
10.9* -- Form of Stock Option Plan for Executive Officers and Directors.
10.10* -- Form of Stockholders' Agreement dated as of May 4, 1993, among the
Company and Messrs. Martin Tuchman, Raoul J. Witteveen, Warren L.
Serenbetz, Warren L. Serenbetz, Jr., Clay R. Serenbetz, Paul H.
Serenbetz, Stuart W. Serenbetz and Arthur L. Burns and the Serenbetz
Trust.
10.12** -- Form of Non-Compete Agreement dated as of May 4, 1993, by and
between The Ivy Group and the Company.
10.13* -- Lease Agreements by and between 211 College Road Associates and
Interpool Limited and 211 College Road Associates and Microtech
Leasing.
10.14* -- Lease Agreement dated December 30, 1986 between Princeton Intermodal
Equipment Trust I and Trac Lease.
10.15* -- Lease Agreements between The Ivy Group and Trac Lease.
10.16* -- Amendment No. 1, dated August 10, 1992, to Secured Promissory Note
and Chattel Mortgage, Security Agreement and Assignment by and
between The Ivy Group and the Company.
10.17* -- Chassis Lease Agreement dated as of August 15, 1992 by and between
Eurochassis L.P. and Trac Lease.
10.18* -- Form of Transfer and Subscription Agreement among Radcliff Group,
Martin Tuchman, Raoul J. Witteveen, Warren L. Serenbetz, Warren L.
Serenbetz, Jr., Clay R. Serenbetz, Paul H. Serenbetz, Stuart W.
Serenbetz, the Serenbetz Trust and the Company.
10.19* -- Form of Exchange and Subscription Agreement by and between the
Company and Arthur L. Burns.
10.20* -- Demand promissory notes of the Company payable to Martin Tuchman,
Warren L. Serenbetz and Princeton International Properties.
10.23* -- Indemnity Agreement between the Company and other directors.
10.26* -- Agreement between the Company and Arthur L. Burns regarding certain
litigation.
10.27 -- Indenture between the Company and IBJ Schroeder Bank & Trust
Company, as Trustee, dated January 27, 1997.
10.28. -- First Supplemental Indenture between Interpool, Inc. and IBJ
Schroeder Bank & Trust Company dated January 27, 1997.
10.29 -- Series A Capital Securities Guarantee Agreement dated January 27,
1997.
10.30***-- Agreement of Merger dated March 15,1996 among Trac Lease, Inc.,
Trac Lease Merger Corp. and the Company.
10.31***-- Letter Agreement between The Ivy Group and the Company.
12.1** -- Statement regarding computation of ratios of earnings to fixed
charges.
21.1* -- Subsidiaries of the Company.
23.1** -- Consent of Arthur Andersen LLP with respect to consolidated
financial statements of the Company.
27. -- Financial Data Schedule.
99. -- Press Releases dated November 22, 1996; November 26, 1996; December
24, 1996; December 31, 1996; January 23, 1997; January 31, 1997;
February 18, 1997; March 11, 1997; and March 12, 1997.
- - ---------------
* Filed with the Registrant's Registration Statement on Form S-1 declared
effective by the Commission on May 4, 1993 (Reg. No. 33-59498) and
incorporated herein by reference as indicated.
** Filed with the Registrant's Registration Statement on Form S-1 declared
effective by the Commission on December 7, 1993 (Reg. No. 33-71538) and
incorporated herein by reference as indicated.
***Formerly filed with the Registrant's Annual Report on Form 10-K for the
period ended 12/31/95 and incorporated herein by reference as indicated.
(b) REPORTS ON FORM 8-K
None
<PAGE> 1
Exhibit 10.27
INTERPOOL, INC.
INDENTURE
DATED AS OF JANUARY 27, 1997
IBJ SCHRODER BANK & TRUST COMPANY
AS TRUSTEE
JUNIOR SUBORDINATED DEBT SECURITIES
<PAGE> 2
INDENTURE
THIS INDENTURE, dated as of January 27, 1997, between INTERPOOL, INC.,
a Delaware corporation (hereinafter sometimes called the "Company"), and IBJ
SCHRODER BANK & TRUST COMPANY, a New York banking corporation, as trustee
(hereinafter sometimes called the "Trustee"),
W I T N E S S E T H :
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the issue from time to time of its unsecured junior subordinated
debentures to be issued in one or more series (the "Securities") up to such
principal amount or amounts as may from time to time be authorized by the
Company and, to provide the terms and conditions upon which the Securities are
to be authenticated, issued and delivered, the Company has duly authorized the
execution of this Indenture; and
WHEREAS, all acts and things necessary to make this Indenture a valid
agreement according to its terms, have been done and performed;
NOW, THEREFORE, in consideration of the premises, and the purchase of
the Securities by the holders thereof, the Company covenants and agrees with the
Trustee for the equal and proportionate benefit of the respective holders from
time to time of the Securities or of a series thereof, as follows:
ARTICLE ONE
DEFINITIONS
SECTION 1.01. Definitions.
The terms defined in this Section 1.01 (except as herein
otherwise expressly provided or unless the context otherwise requires) for all
purposes of this Indenture and of any indenture supplemental hereto shall have
the respective meanings specified in this Section 1.01. All other terms used in
this Indenture which are defined in the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"), or which are by reference therein defined in the
Securities Act of 1933, as amended (the "Securities Act"), shall (except as
herein otherwise expressly provided or unless the context otherwise requires)
have the meanings assigned to such terms in said Trust Indenture Act and in said
Securities Act as in force at the date of this Indenture as originally executed.
All accounting terms used herein and not expressly defined shall have the
meanings assigned to such terms in accordance with generally accepted accounting
principles and the term "generally accepted accounting principles" means such
accounting principles as are generally accepted at the time of any computation.
The words "herein," "hereof" and "hereunder" and other words of similar import
refer to this Indenture as a whole and not to any particular Article, Section or
other subdivision.
<PAGE> 3
"Affiliate" shall mean, with respect to a specified Person,
(a) any Person directly or indirectly owning, controlling or holding with power
to vote 10% or more of the outstanding voting securities or other ownership
interests of the specified Person, (b) any Person 10% or more of whose
outstanding voting securities or other ownership interests are directly or
indirectly owned, controlled or held with power to vote by the specified Person,
(c) any Person directly or indirectly controlling, controlled by, or under
common control with the specified Person, (d) a partnership in which the
specified Person is a general partner, (e) any officer or director of the
specified Person, and (f) if the specified Person is an individual, any entity
of which the specified Person is an officer, director or general partner.
"Authenticating Agent" shall mean any agent or agents of the
Trustee which at the time shall be appointed and acting pursuant to Section
6.14.
"Bankruptcy Law" shall mean Title 11, U.S. Code, or any
similar federal or state law for the relief of debtors.
"Board of Directors" shall mean the Board of Directors or the
Executive Committee of the Company or any duly authorized Committee of the Board
of Directors of the Company.
"Board Resolution" shall mean a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification.
"Business Day" shall mean, with respect to any series of
Securities, any day other than a day on which federal or state banking
institutions in New York, New York, or Wilmington, Delaware are authorized or
obligated by law, executive order or regulation to close.
"Capital Securities" shall mean undivided beneficial interests
in the assets of any Interpool Capital Trust which rank pari passu with Common
Securities issued by such Interpool Capital Trust; provided, however, that upon
the occurrence of an Event of Default, the rights of holders of Common
Securities to payment in respect of distributions and payments upon liquidation,
redemption and otherwise are subordinated to the rights of holders of Capital
Securities.
"Capital Securities Guarantee" shall mean any guarantee that
the Company may enter into with a/any Person or Persons that operates directly
or indirectly for the benefit of holders of Capital Securities of an Interpool
Capital Trust.
"Commission" shall mean the Securities and Exchange
Commission.
<PAGE> 4
"Common Securities" shall mean undivided beneficial interests
in the assets of any Interpool Capital Trust which rank pari passu with Capital
Securities issued by such Interpool Capital Trust; provided, however, that upon
the occurrence of an Event of Default, the rights of holders of Common
Securities to payment in respect of distributions and payments upon liquidation,
redemption and otherwise are subordinated to the rights of holders of Capital
Securities.
"Common Securities Guarantee" shall mean any guarantee that
the Company may enter into with any Person or Persons that operates directly or
indirectly for the benefit of holders of Common Securities of an Interpool
Capital Trust.
"Common Stock" shall mean the Common Stock par value $.001 per
share, of the Company or any other class of stock resulting from changes or
reclassifications of such Common Stock consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value.
"Company" shall mean Interpool, Inc., a Delaware corporation,
and, subject to the provisions of Article Ten, shall include its successors and
assigns.
"Custodian" shall mean any receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law.
"Declaration" with respect to an Interpool Capital Trust,
shall mean the Amended and Restated Declaration of Trust of such Interpool
Capital Trust.
"Default" shall mean any event, act or condition that with
notice or lapse of time, or both, would constitute an Event of Default.
"Defaulted Interest" shall have the meaning assigned to such
term in Section 2.05.
"Defeasance Agent" shall have the meaning assigned to such
term in Section 11.05 hereof.
"Depositary" shall mean, with respect to Securities of any
series, for which the Company shall determine that such Securities will be
issued as a Global Security, The Depository Trust Company, New York, New York,
another clearing agency, or any successor registered as a clearing agency
pursuant to Section 17A of the Exchange Act, or other applicable statute or
regulation, which, in each case, shall be designated by the Company pursuant to
either Section 2.04 or 2.11.
"Discharged" shall have the meaning assigned to such term in
Section 11.05 hereof.
<PAGE> 5
"Dissolution Event" with respect to any series of Securities,
shall have the meaning specified in the supplemental indenture or Officers'
Certificate providing for the issuance of such series of Securities.
"Event of Default" shall mean any event specified in Section
5.01, continued for the period of time, if any, and after the giving of the
notice, if any, therein designated.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Exchange Offer" with respect to any series of Securities, has
the meaning specified in the supplemental indenture or Officers' Certificate
providing for the issuance of such series of Securities.
"Extended Interest Payment Period" with respect to any series
of Securities, shall have the meaning assigned to such term in any supplemental
indenture or Officers' Certificate providing for the issuance of such series of
Securities.
"Global Security" shall mean, with respect to any series of
Securities, a Security of such series executed by the Company and delivered by
the Trustee to the Depositary or pursuant to the Depositary's instruction, all
in accordance with the Indenture, which shall be registered in the name of the
Depositary or its nominee.
"Indenture" shall mean this instrument as originally executed
or, if amended or supplemented as herein provided, as so amended or
supplemented, or both, and shall include the form and terms of particular series
of Securities established as contemplated hereunder.
"Interest" shall mean, when used with respect to non-interest
bearing Securities, interest payable after maturity.
"Interest Payment Date", when used with respect to any
installment of interest on a Security of a particular series, shall mean the
date specified in such Security or in a Board Resolution or in an indenture
supplemental hereto with respect to such series as the fixed date on which an
installment of interest with respect to Securities of that series is due and
payable.
"Interpool Capital Trust" shall mean Interpool Capital Trust,
a Delaware business trust or any other similar trust created for the purpose of
issuing Capital Securities in connection with the issuance of Securities under
this Indenture.
"Maturity Date" shall mean the date on which any Securities
mature and on which the principal shall be due and payable together with all
accrued and unpaid interest thereon.
<PAGE> 6
"Mortgage" shall mean and include any mortgage, pledge, lien,
security interest, conditional sale or other title retention agreement or other
similar encumbrance.
"Officers' Certificate" shall mean a certificate signed by any
two of the following: the Chief Executive Officer, the President, the Chief
Financial Officer, any Vice President, the Treasurer, an Assistant Treasurer,
the Controller, an Assistant Controller, the Secretary or an Assistant Secretary
of the Company and delivered to the Trustee. Each such certificate shall include
the statements provided for in Section 13.06 if and to the extent provided by
the provisions of such Section.
"Opinion of Counsel" shall mean an opinion in writing signed
by legal counsel, who may be an employee of or counsel to the Company, or may be
other counsel satisfactory to the Trustee. Each such opinion shall include the
statements provided for in Section 13.06 if and to the extent required by the
provisions of such Section.
"Original Issue Date" of any Security (or any portion thereof)
shall mean the earlier of (a) the date of such Security or (b) the date of any
Security (or portion thereof) for which such Security was issued (directly or
indirectly) on registration of transfer, exchange or substitution.
"Original Issue Discount Security" shall mean any Security
which provides for an amount less than the principal amount thereof to be due
and payable upon a declaration of acceleration of the maturity thereof pursuant
to Section 5.01.
"Other Guarantees" with respect to any series of Securities,
means all guarantees (other than the Capital Securities Guarantee relating to
such series of Securities) issued by the Company with respect to capital
securities (if any) and issued to any Interpool Capital Trust (if any).
"Other Securities" with respect to any series of Securities,
shall mean all other junior subordinated debentures that may be issued by the
Company, which will be issued and sold (if at all) to an Interpool Capital Trust
(if any), and which rank subordinate and junior in right of payment to all
Senior Indebtedness to the extent and in the manner set forth herein.
The term "outstanding" (except as otherwise provided in
Section 6.08), when used with reference to Securities, shall, subject to the
provisions of Section 7.04, mean, as of any particular time, all Securities
authenticated and delivered by the Trustee or the Authenticating Agent under
this Indenture, except
(a) Securities theretofore canceled by the Trustee or the
Authenticating Agent or delivered to the Trustee for
cancellation;
<PAGE> 7
(b) Securities, or portions thereof, for the payment or
redemption of which moneys in the necessary amount
shall have been deposited in trust with the Trustee
or with any paying agent (other than the Company) or
shall have been set aside and segregated in trust by
the Company (if the Company shall act as its own
paying agent); provided that, if such Securities, or
portions thereof, are to be redeemed prior to
maturity thereof, notice of such redemption shall
have been given as provided in Article Fourteen or
provision satisfactory to the Trustee shall have been
made for giving such notice; and
(c) Securities paid pursuant to Section 2.08 or in lieu
of or in substitution for which other Securities
shall have been authenticated and delivered pursuant
to the terms of Section 2.08 unless proof
satisfactory to the Company and the Trustee is
presented that any such Securities are held by bona
fide holders in due course.
In determining whether the holders of the requisite principal
amount of outstanding Securities have given any request, demand, authorization,
direction, notice, consent or waiver hereunder, the principal amount of an
Original Issue Discount Security that shall be deemed to be outstanding for such
purposes shall be the amount of the principal thereof that would be due and
payable as of the date of such determination upon a declaration of acceleration
of the maturity thereof pursuant to Section 5.01
"Person" shall mean any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Predecessor Security" of any particular Security shall mean
every previous Security evidencing all or a portion of the same debt as that
evidenced by such particular Security; and, for the purposes of this definition,
any Security authenticated and delivered under Section 2.08 in lieu of a lost,
destroyed or stolen Security shall be deemed to evidence the same debt as the
lost, destroyed or stolen Security.
"Principal Office of the Trustee", or other similar term,
shall mean the principal office of the Trustee, at which at any particular time
its corporate trust business shall be administered.
"Property Trustee" shall have the meaning set forth in the
Declaration.
<PAGE> 8
"Registration Rights Agreement" with respect to any series of
Securities, shall have the meaning specified in the supplemental indenture or
the Officers' Certificate providing for the issuance of such series of
Securities.
"Responsible Officer", when used with respect to the Trustee,
shall mean within the corporate trust office of the Trustee any senior trust
officer, any trust officer or any other officer of the Trustee customarily
performing functions similar to those performed by the persons who at the time
shall be such officers, respectively, or to whom any corporate trust matter is
referred because of his knowledge of and familiarity with the particular
subject.
"Security" or "Securities" shall have the meaning stated in
the first recital of this Indenture and more particularly means any security or
securities, as the case may be, authenticated and delivered under this
Indenture.
"Securityholder", "holder" or other similar terms, shall mean
any person in whose name at the time a particular Security is registered on the
register kept by the Company or the Trustee for that purpose in accordance with
the terms hereof.
"Senior Indebtedness" shall mean (i) the principal, premium,
if any, and interest in respect of (A) indebtedness of the Company for money
borrowed, whether outstanding on the date of this Indenture or thereafter
created, and (B) indebtedness evidenced by securities, debentures, bonds or
other similar instruments issued by the Company, (ii) all capital lease
obligations of the Company, (iii) all obligations of the Company issued or
assumed as the deferred purchase price of property, all conditional sale
obligations of the Company and all obligations of the Company under any title
retention agreement (but excluding trade accounts payable arising in the
ordinary course of business), (iv) all obligations of the Company for the
reimbursement on any letter of credit, banker's acceptance, security purchase
facility or similar credit transactions, (v) all obligations of the Company
arising from off-balance sheet guarantees by the Company and direct credit
substitutes and obligations of the Company associated with derivative products
such as interest and foreign exchange rate contracts, commodity contracts, swap
agreements (including interest rate and foreign exchange swap agreements), cap
agreements, floor agreements, collar agreements, interest rate agreements,
foreign exchange rate agreements, options, commodity futures contracts and
commodity option contracts; (vi) all obligations of the types referred to in
clauses (i) through (v) above of other Persons for the payment of which the
Company is responsible or liable as obligor, guarantor or otherwise and (vii)
all obligations of the types referred to in clauses (i) through (vi) above of
other Persons secured by any lien on any property or asset of the Company
(whether or not such obligation is assumed by the Company), except for (1) any
such indebtedness that is by its terms subordinated to or ranks pari passu with
the Securities and (2) any indebtedness between or among the Company or its
affiliates, including all other debt securities and guarantees in respect of
those debt securities, issued to (a) the Trust or (b) any other trust, or a
trustee of such trust, partnership or other entity affiliated with the Company
that is a financing vehicle of the Company
<PAGE> 9
(a "financing entity") in connection with the issuance by such financing entity
of preferred securities or other securities that rank pari passu with, or junior
to, the Capital Securities. For purposes of this Indenture, Senior Indebtedness
shall continue to be Senior Indebtedness and be entitled to the benefits of the
subordination provisions accorded thereto hereunder and under the Securities
irrespective of any amendment, modification or waiver of any term of such Senior
Indebtedness.
"Subsidiary" shall mean with respect to any Person, (i) any
corporation at least a majority of whose outstanding voting stock of which is
owned, directly or indirectly, by such Person or by one or more of its
Subsidiaries, or by such Person and one or more of its Subsidiaries, (ii) any
general partnership, joint venture or similar entity, at least a majority of
whose outstanding partnership or similar interests shall at the time be owned by
such Person, or by one or more of its Subsidiaries, or by such Person and one or
more of its Subsidiaries and (iii) any limited partnership of which such Person
or any of its Subsidiaries is a general partner. For the purposes of this
definition, "voting stock" means shares, interests, participations or other
equivalents in the equity interest (however designated) in such Person having
ordinary voting power for the election of a majority of the directors (or the
equivalent) of such Person, other than shares, interests, participations or
other equivalents having such power only by reason of the occurrence of a
contingency.
"Trust Indenture Act" shall mean the Trust Indenture Act of
1939 as in force at the date of execution of this Indenture, except as provided
in Section 9.03.
"Trust Securities" with respect to an Interpool Capital Trust,
shall mean the Common Securities and the Capital Securities of such Interpool
Capital Trust.
"Trustee" shall mean the Person identified as "Trustee" in the
first paragraph hereof, and, subject to the provisions of Article Six hereof,
shall also include its successors and assigns as Trustee hereunder. The term
"Trustee" as used with respect to a particular series of the Securities shall
mean the trustee with respect to that series.
"U.S. Government Obligations" shall mean securities that are
(i) direct obligations of the United States of America for the payment of which
its full faith and credit is pledged or (ii) obligations of a Person controlled
or supervised by and acting as an agency or instrumentality of the United States
of America the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America, which, in either case
under clauses (i) or (ii) are not callable or redeemable at the option of the
issuer thereof, and shall also include a depository receipt issued by a bank or
trust company as custodian with respect to any such U.S. Government Obligation
or a specific payment of interest on or principal of any such U.S. Government
Obligation held by such custodian for the account of the holder of a depository
receipt, provided that (except as required by law) such custodian is not
authorized to make any deduction from the
<PAGE> 10
amount payable to the holder of such depository receipt from any amount received
by the custodian in respect of the U.S. Government Obligation or the specific
payment of interest on or principal of the U.S. Government Obligation evidenced
by such depository receipt.
"Vice President" when used with respect to the Company or the
Trustee shall mean any vice president, whether or not designated by a number or
word or words added before or after the title "vice president," including any
executive, senior or assistant vice president.
"Yield to Maturity" shall mean the yield to maturity on a
series of Securities, calculated at the time of issuance of such series of
Securities, or if applicable, at the most recent redetermination of interest on
such series and calculated in accordance with accepted financial practice by a
nationally recognized accounting firm selected by the Company and not objected
to by the Trustee.
ARTICLE TWO
SECURITIES
SECTION 2.01. Forms Generally.
The Securities of each series shall be in substantially the
form as shall be established by or pursuant to a Board Resolution and as set
forth in an Officers' Certificate of the Company or in one or more indentures
supplemental hereto, in each case with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture, and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may be required to comply
with any law or with any rules made pursuant thereto or with any rules of any
securities exchange or all as may, consistently herewith, be determined by the
officers executing such Securities, as evidenced by their execution of the
Securities.
In the event the Securities are issued in definitive form
pursuant to this Indenture, such Securities shall be typewritten, printed,
lithographed or engraved on steel engraved borders or may be produced in any
other manner, all as determined by the officers executing such Securities, as
evidenced by their execution of such Securities.
SECTION 2.02. Form of Trustee's Certificate of Authentication.
The Trustee's certificate of authentication on all Securities
shall be in substantially the following form:
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
<PAGE> 11
IBJ SCHRODER BANK & TRUST COMPANY
as Trustee
By_______________________________
Authorized Signatory
SECTION 2.03. Amount Unlimited; Issuable in Series.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture or otherwise by the Company is
unlimited.
The Securities may be issued in one or more series up to the
aggregate principal amount of securities of that series from time to time
authorized by or pursuant to a Board Resolution of the Company or pursuant to
one or more indentures supplemental hereto. Prior to the initial issuance of
Securities of any series, there shall be established in or pursuant to a Board
Resolution of the Company and set forth in an Officers' Certificate of the
Company or established in one or more indentures supplemental hereto:
(1) the title of the Securities of the series (which
shall distinguish the Securities of the series from
all other Securities);
(2) any limit upon the aggregate principal amount of the
Securities of the series which may be authenticated
and delivered under this Indenture (except for
Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or
in lieu of, other Securities of the series pursuant
to Section 2.07, 2.08, 2.09, 9.04 or 14.03);
(3) the date or dates on which the principal of and
premium, if any, on the Securities of the series is
payable;
(4) the rate or rates at which the Securities of the
series shall bear interest, if any, or the method by
which such interest may be determined, the date or
dates from which such interest shall accrue, the
Interest Payment Dates on which such interest shall
be payable or the manner of determination of such
Interest Payment Dates and the record dates for the
determination of holders to whom interest is payable
on any such Interest Payment Dates;
(5) the place or places where the principal of, and
premium, if any, and any interest on Securities of
the series shall be payable;
<PAGE> 12
(6) the right, if any, to extend the interest payment
periods and the duration of such extension, the rate
at which additional interest, if any, will be paid,
and notification requirements to the Trustee and
Holders;
(7) the price or prices at which, the period or periods
within which and the terms and conditions upon which
Securities of the series may be redeemed, in whole or
in part, at the option of the Company, pursuant to
any sinking fund or otherwise;
(8) the obligation, if any, of the Company to redeem,
purchase or repay Securities of the series at the
option of a Securityholder thereof and the price or
prices at which and the period or periods within
which the price or prices at which, and the terms and
conditions upon which Securities of the series shall
be redeemed, purchased or repaid, in whole or in
part, pursuant to such obligation;
(9) if other than the principal amount thereof, the
portion of the principal amount of Securities of the
series which shall be payable upon declaration of
acceleration of the maturity thereof pursuant to
Section 5.01 or provable in bankruptcy pursuant to
Section 5.02;
(10) any Events of Default with respect to the Securities
of the series, if other than as set forth herein;
(11) the form of the Securities of the series;
(12) any trustee, authenticating or paying agents, warrant
agents, transfer agents or registrars (in addition to
the Trustee) with respect to the Securities of the
series;
(13) whether the Securities of the series shall be issued
in whole or in part in the form of one or more Global
Securities and, in such case, the Depositary for such
Global Security or Securities, and whether beneficial
owners of interests in any such Global Securities may
exchange such interests for other Securities of such
series in the manner provided in Section 2.07, and
the manner and the circumstances under which and the
place or places where any such exchanges may occur if
other than in the manner provided in Section 2.07,
and any other terms of the series relating to the
global nature of the Global Securities of such series
and the exchange, registration or transfer thereof
and the payment of any principal thereof, or interest
or premium, if any, thereon;
<PAGE> 13
(14) the terms of any Securities to be issued pursuant to
an Exchange Offer with respect to the series; and
(15) any other terms of the series (which terms shall not
be inconsistent with the provisions of this
Indenture).
All Securities of any one series shall be substantially
identical except as to denomination and except as may otherwise be provided in
or pursuant to such Board Resolution or in any such indenture supplemental
hereto.
If any of the terms of the series are established by action
taken pursuant to a Board Resolution, a copy of an appropriate record of such
action shall be certified by the Secretary or an Assistant Secretary of the
Company and delivered to the Trustee at or prior to the delivery of the
Officers' Certificate of the Company setting forth the terms of the series.
SECTION 2.04. Authentication and Dating.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities of any series
executed by the Company to the Trustee for authentication, and the Trustee shall
thereupon authenticate and make available for delivery said Securities to or
upon the written order of the Company, signed by any two of its Chief Executive
Officer, Chief Financial Officer, President, Vice Presidents, Treasurer,
Assistant Treasurer, Controller or Assistant Controller, Secretary or Assistant
Secretary, without any further action by the Company hereunder. In
authenticating such Securities, and accepting the additional responsibilities
under this Indenture in relation to such Securities, the Trustee shall be
entitled to receive, and (subject to Section 6.01) shall be fully protected in
relying upon:
(1) a copy of any Board Resolution or Resolutions
relating thereto and, if applicable, an appropriate
record of any action taken pursuant to such
resolution, in each case certified by the Secretary
or an Assistant Secretary of the Company; and
(2) either (x) an executed supplemental indenture, if
any; or (y) an Officers' Certificate, in either case
setting forth the form and terms of the Securities as
required pursuant to Sections 2.01 and 2.03,
respectively; and
(3) an Opinion of Counsel which shall state:
<PAGE> 14
(a) that the form of such Securities has been
established by or pursuant to a Board Resolution or
by a supplemental indenture as permitted by Section
2.01 in conformity with the provisions of this
Indenture;
(b) that the terms of such Securities have been
established by or pursuant to a Board Resolution or
by a supplemental indenture as permitted by Section
2.03 in conformity with the provisions of this
Indenture;
(c) that such Securities, when authenticated and
delivered by the Trustee and issued by the Company in
the manner and subject to any conditions specified in
such Opinion of Counsel, will constitute valid and
legally binding obligations of the Company;
(d) that all laws and requirements in respect of the
execution and delivery by the Company of the
Securities have been complied with in all material
respects and that authentication and delivery of the
Securities by the Trustee will not violate the terms
of the Indenture; and
(e) such other matters as the Trustee may reasonably
request.
The Trustee shall have the right to decline to authenticate
and deliver any Securities under this Section if the Trustee, being advised by
counsel, determines that such action may not lawfully be taken or if the Trustee
in good faith by its board of directors or trustees, executive committee, or a
trust committee of directors or trustees and/or vice presidents shall determine
that such action would expose the Trustee to personal liability to existing
holders.
SECTION 2.05. Date and Denomination of Securities.
The Securities shall be issuable as registered Securities
without coupons and in such denominations as shall be specified as contemplated
by Section 2.03. In the absence of any such specification with respect to the
Securities of any series, the Securities of such Series shall be issuable in the
denominations of $1,000 and any multiple thereof. The Securities shall be
numbered, lettered, or otherwise distinguished in such manner or in accordance
with such plans as the officers of the Company executing the same may determine
with the approval of the Trustee as evidenced by the execution and
authentication thereof.
Every Security shall be dated the date of its authentication,
shall bear interest, if any, from such date and shall be payable on such dates,
in each case, as contemplated by Section 2.03. The interest installment on any
Security that is payable, and is punctually paid or duly provided for, on any
Interest Payment Date for Securities of that series shall be paid to the Person
in whose name said Security (or one or more Predecessor Securities) is
registered at the close of business on the
<PAGE> 15
regular record date for such interest installment. In the event that any
Security of a particular series or portion thereof is called for redemption and
the redemption date is subsequent to a regular record date with respect to any
Interest Payment Date and prior to such Interest Payment Date, interest on such
Security will be paid upon presentation and surrender of such Security as
provided in Section 3.02.
Any interest on any Security that is payable, but is not
punctually paid or duly provided for, except any interest deferred during any
Extended Interest Payment Period permitted by any indenture supplemental hereto
or an Officers' Certificate providing for the initial issuance of any Security,
on any Interest Payment Date for Security of the same series (herein called
"Defaulted Interest") shall forthwith cease to be payable to the registered
holder on the relevant regular record date by virtue of having been such holder;
and such Defaulted Interest shall be paid by the Company, at its election, as
provided in clause (1) or clause (2) below:
(1) Except as may be set forth in a supplemental
indenture or an Officers' Certificate pursuant to
Section 2.03 hereof, the Company may make payment of
any Defaulted Interest on Securities to the Persons
in whose names such Securities (or their respective
Predecessor Securities) are registered at the close
of business on a special record date for the payment
of such Defaulted Interest, which shall be fixed in
the following manner: the Company shall notify the
Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each such Security
and the date of the proposed payment, and at the same
time the Company shall deposit with the Trustee an
amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to
the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be
held in trust for the benefit of the Persons entitled
to such Defaulted Interest as in this clause
provided. Thereupon the Trustee shall fix a special
record date for the payment of such Defaulted
Interest which shall not be more than 15 nor less
than 10 days prior to the date of the proposed
payment and not less than 10 days after the receipt
by the Trustee of the notice of the proposed payment.
The Trustee shall promptly notify the Company of such
special record date and, in the name and at the
expense of the Company, shall cause notice of the
proposed payment of such Defaulted Interest and the
special record date therefor to be mailed, first
class postage prepaid, to each Securityholder at his
or her address as it appears in the Security Register
(as hereinafter defined), not less than 10 days prior
to such special record date. Notice of the proposed
payment of such Defaulted Interest and the special
record date therefor having been mailed as aforesaid,
such Defaulted Interest shall be paid to the Persons
in whose names such Securities (or their respective
Predecessor
<PAGE> 16
Securities) are registered on such special record
date and shall be no longer payable pursuant to the
following clause (2).
(2) Except as may be set forth in a supplemental
indenture or an Officers' Certificate pursuant to
Section 2.03 hereof, the Company may make payment of
any Defaulted Interest on any Securities in any other
lawful manner not inconsistent with the requirements
of any securities exchange on which such Securities
may be listed, and upon such notice as may be
required by such exchange, if, after notice given by
the Company to the Trustees of the proposed payment
pursuant to this clause, such manner of payment shall
be deemed practicable by the Trustee.
Unless otherwise set forth in one or more indentures
supplemental hereto or any Officers' Certificate establishing the terms of any
series of Securities pursuant to Section 2.01 hereof, the term "regular record
date" as used in this Section with respect to a series of Securities with
respect to any Interest Payment Date for such series shall mean either the
fifteenth day of the month in which an Interest Payment Date established for
such series pursuant to Section 2.01 hereof shall occur, if such Interest
Payment Date is the last day of a month, or the first day of the month in which
an Interest Payment Date established for such series pursuant to Section 2.01
hereof shall occur, if such Interest Payment Date is the fifteenth day of a
month, whether or not such date is a Business Day.
Subject to the foregoing provisions of this Section, each
Security of a series delivered under this Indenture upon transfer of or in
exchange for or in lieu of any other Security of such series shall carry the
rights to interest accrued and unpaid, and to accrue, that were carried by such
other Security.
SECTION 2.06. Execution of Securities.
The Securities shall be signed in the name and on behalf of
the Company by the manual or facsimile signature of its Chief Executive Officer,
President or one of its Vice Presidents and may be attested by the manual or
facsimile signature of its Secretary or one of its Assistant Secretaries, under
its corporate seal which may be affixed thereto or printed, engraved or
otherwise reproduced thereon, by facsimile or otherwise, and which need not be
attested. Only such Securities as shall bear thereon a certificate of
authentication substantially in the form hereinbefore recited, executed by the
Trustee or the Authenticating Agent, shall be entitled to the benefits of this
Indenture or be valid or obligatory for any purpose. Such certificate by the
Trustee or the Authenticating Agent upon any Security executed by the Company
shall be conclusive evidence that the Security so authenticated has been duly
authenticated and delivered hereunder and that the holder is entitled to the
benefits of this Indenture.
<PAGE> 17
In case any officer of the Company who shall have signed any
of the Securities shall cease to be such officer before the Securities so signed
shall have been authenticated and delivered by the Trustee or the Authenticating
Agent, or disposed of by the Company, such Securities nevertheless may be
authenticated and delivered or disposed of as though the person who signed such
Securities had not ceased to be such officer of the Company; and any Security
may be signed on behalf of the Company by such persons as, at the actual date of
the execution of such Security, shall be the proper officers of the Company,
although at the date of the execution of this Indenture any such person was not
such an officer.
SECTION 2.07. Exchange and Registration of Transfer of Securities.
Subject to Section 2.03, Securities of any series may be
exchanged for a like aggregate principal amount of Securities of the same series
of other authorized denominations. Securities to be exchanged may be surrendered
at the principal corporate trust office of the Trustee or at any office or
agency to be maintained by the Company for such purpose as provided in Section
3.02, and the Company shall execute, the Company or the Trustee shall register
and the Trustee or the Authenticating Agent shall authenticate and make
available for delivery in exchange therefor the Security or Securities which the
Securityholder making the exchange shall be entitled to receive. Upon due
presentment for registration of transfer of any Security of any series at the
principal corporate trust office of the Trustee or at any office or agency of
the Company maintained for such purpose as provided in Section 3.02, the Company
shall execute, the Company or the Trustee shall register and the Trustee or the
Authenticating Agent shall authenticate and make available for delivery in the
name of the transferee or transferees a new Security or Securities of the same
series for a like aggregate principal amount. Registration or registration of
transfer of any Security by the Trustee or by any agent of the Company appointed
pursuant to Section 3.02, and delivery of such Security, shall be deemed to
complete the registration or registration of transfer of such Security.
The Company or the Trustee shall keep, at the Principal Office
of the Trustee, a register for each series of Securities issued hereunder in
which, subject to such reasonable regulations as it may prescribe, the Company
or the Trustee shall register all Securities and shall register the transfer of
all Securities as this Article Two provides, which (subject to Section 2.11)
shall be the only method of effecting a transfer of Securities. Such register
shall be in written form or in any other form capable of being converted into
written form within a reasonable time.
All Securities presented for registration of transfer or for
exchange or payment shall (if so required by the Company or the Trustee or the
Authenticating Agent) be duly endorsed by, or be accompanied by a written
instrument or instruments of transfer in form satisfactory to the Company and
the Trustee or the Authenticating Agent duly executed by, the holder or his
attorney duly authorized in writing.
<PAGE> 18
No service charge shall be made for any exchange or
registration of transfer of Securities, but the Company or the Trustee may
require payment of a sum sufficient to cover any tax, fee or other governmental
charge that may be imposed in connection therewith.
The Company or the Trustee shall not be required to exchange
or register a transfer of (a) any Security for a period of 15 days next
preceding the date of selection of Securities of such series for redemption, or
(b) any Securities of any series selected, called or being called for redemption
in whole or in part, except in the case of any Securities of any series to be
redeemed in part, the portion thereof not so to be redeemed.
SECTION 2.08. Mutilated, Destroyed, Lost or Stolen Securities.
In case any temporary or definitive Security shall become
mutilated or be destroyed, lost or stolen, the Company shall execute, and upon
written request by the Company, the Trustee shall authenticate and deliver, a
new Security of the same series bearing a number not contemporaneously
outstanding, in exchange and substitution for the mutilated Security, or in lieu
of and in substitution for the Security so destroyed, lost or stolen. In every
case the applicant for a substituted Security shall furnish to the Company and
the Trustee such security or indemnity as may be required by them to save each
of them harmless, and, in every case of destruction, loss or theft, the
applicant shall also furnish to the Company and the Trustee evidence to their
satisfaction of the destruction, loss or theft of such Security and of the
ownership thereof.
The Trustee may authenticate any such substituted Security and
deliver the same upon the written request or authorization of any officer of the
Company. Upon the issuance of any substituted Security, the Company may require
the payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto and any other expenses connected
therewith. In case any Security which has matured or is about to mature or has
been called for redemption in full shall become mutilated or be destroyed, lost
or stolen, the Company may, instead of issuing a substitute Security, pay or
authorize the payment of the same (without surrender thereof except in the case
of a mutilated Security) if the applicant for such payment shall furnish to the
Company and the Trustee such security or indemnity as may be required by them to
save each of them harmless and, in case of destruction, loss or theft, evidence
satisfactory to the Company and to the Trustee of the destruction, loss or theft
of such Security and of the ownership thereof.
Every substituted Security of any series issued pursuant to
the provisions of this Section 2.08 by virtue of the fact that any such Security
is destroyed, lost or stolen shall constitute an additional contractual
obligation of the Company, whether or not the destroyed, lost or stolen Security
shall be found at any time, and shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Securities of the
same series duly issued hereunder. All Securities shall be held and owned upon
the express condition that, to the extent permitted by
<PAGE> 19
applicable law, the foregoing provisions are exclusive with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities and
shall preclude any and all other rights or remedies notwithstanding any law or
statute existing or hereafter enacted to the contrary with respect to the
replacement or payment of negotiable instruments or other securities without
their surrender.
SECTION 2.09. Temporary Securities.
Subject to Section 2.03, pending the preparation of definitive
Securities of any series the Company may execute and the Trustee shall
authenticate and make available for delivery temporary Securities (typed,
printed or lithographed). Temporary Securities shall be issuable in any
authorized denomination, and substantially in the form of the definitive
Securities but with such omissions, insertions and variations as may be
appropriate for temporary Securities, all as may be determined by the Company.
Every such temporary Security shall be executed by the Company and be
authenticated by the Trustee upon the same conditions and in substantially the
same manner, and with the same effect, as the definitive Securities. Without
unreasonable delay the Company will execute and deliver to the Trustee or the
Authenticating Agent definitive Securities and thereupon any or all temporary
Securities of such series may be surrendered in exchange therefor, at the
principal corporate trust office of the Trustee or at any office or agency
maintained by the Company for such purpose as provided in Section 3.02, and the
Trustee or the Authenticating Agent shall authenticate and make available for
delivery in exchange for such temporary Securities a like aggregate principal
amount of such definitive Securities. Such exchange shall be made by the Company
at its own expense and without any charge therefor except that in case of any
such exchange involving a registration of transfer the Company may require
payment of a sum sufficient to cover any tax, fee or other governmental charge
that may be imposed in relation thereto. Until so exchanged, the temporary
Securities of any series shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities of the same series authenticated
and delivered hereunder.
SECTION 2.10. Cancellation of Securities Paid, etc.
All Securities surrendered for the purpose of payment,
redemption, exchange or registration of transfer, shall, if surrendered to the
Company or any paying agent, be surrendered to the Trustee and promptly canceled
by it, or, if surrendered to the Trustee or any Authenticating Agent, shall be
promptly canceled by it, and no Securities shall be issued in lieu thereof
except as expressly permitted by any of the provisions of this Indenture. All
Securities canceled by any Authenticating Agent shall be delivered to the
Trustee. The Trustee shall deliver all canceled Securities to the Company. If
the Company shall acquire any of the Securities, however, such acquisition shall
not operate as a redemption or satisfaction of the indebtedness represented by
such Securities unless and until the same are surrendered to the Trustee for
cancellation.
<PAGE> 20
SECTION 2.11. Global Securities.
(a) If the Company shall establish pursuant to Section 2.03
that the Securities of a particular series are to be issued as a Global
Security, then the Company shall execute and the Trustee shall, in accordance
with Section 2.04, authenticate and deliver, a Global Security that (i) shall
represent, and shall be denominated in an amount equal to the aggregate
principal amount of, all of the outstanding Securities of such series, (ii)
shall be registered in the name of the Depositary or its nominee, (iii) shall be
delivered by the Trustee to the Depositary or pursuant to the Depositary's
instruction and (iv) shall bear a legend substantially to the following effect:
Unless this certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to the
Issuer or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or
in such other name as is requested by an authorized representative of
DTC (and any payment is made to Cede & Co. or to such other entity as
is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an
interest herein.
(b) Subject to Section 2.11(c), notwithstanding the provisions
of Section 2.07, the Global Security of a series may be transferred, in whole
but not in part and in the manner provided in Section 2.07, only to another
nominee of the Depositary for such series, or to a successor Depositary for such
series selected or approved by the Company or to a nominee of such successor
Depositary.
(c) A Global Security shall be exchangeable for Securities in
registered certificated form if (i) the Depositary (x) notifies the Trust that
it is unwilling or unable to continue as Depositary for the Global Security and
the Company thereupon fails to appoint a successor Depositary within 90 days or
(y) has ceased to be a clearing agency registered under the Exchange Act, (ii)
the Company in its sole discretion elects to cause the issuance of the
Securities in certificated form or (iii) there shall have occurred and be
continuing an Event of Default or any event which after notice or lapse of time
or both would be an Event of Default. In any such event the Company will execute
and, subject to Section 2.07, the Trustee, upon receipt of an Officers'
Certificate evidencing such determination by the Company that such event has
occurred, will authenticate and make available for delivery the Securities of
such series in definitive registered form without coupons, in authorized
denominations, and in an aggregate principal amount equal to the principal
amount of the Global Security of such series in exchange for such Global
Security. Upon the exchange of the Global Security for such Securities in
definitive registered form without coupons, in authorized denominations, the
Global Security shall be canceled by the Trustee. Such Securities in definitive
registered form issued in exchange for the Global Security or beneficial
<PAGE> 21
interests therein pursuant to this Section 2.11(c) shall be registered in such
names and in such authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee. The Trustee shall deliver such Securities to the
Depositary for delivery to the Persons in whose names such Securities are so
registered.
In addition, beneficial interests in a Global Security may be
exchanged for certificated Securities upon request but only upon at least 20
days prior written notice given to the Trustee by or on behalf of DTC in
accordance with customary procedures.
So long as the system of registration described in this
Section 2.11 is in effect, (a) the records of the Depositary will be
determinative for all purposes and (b) neither the Company, the Trustee nor any
paying agent, Security registrar or transfer agent for such Securities will have
any responsibility or liability for (i) any aspect of the records relating to or
payments made on account of owners of beneficial interests in the Securities of
such series, (ii) maintaining, supervising or reviewing any records relating to
such beneficial interests, (iii) receipt of notices, voting and requesting or
directing the Trustee to take, or not to take, or consenting to, certain actions
hereunder, or (iv) the records and procedures of the Depositary.
SECTION 2.12. CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers
(if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Securityholders; provided that any
such notice may state that no representation is made as to the correctness of
such numbers either as printed on the Securities or as contained in any notice
of a redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers. The Company will promptly notify
the Trustee of any change in the CUSIP numbers provided, however, that such
notification will be provided to the Trustee within three (3) business days.
ARTICLE THREE
PARTICULAR COVENANTS OF THE COMPANY.
SECTION 3.01. Payment of Principal, Premium and Interest.
The Company covenants and agrees for the benefit of each
series of Securities that it will duly and punctually pay or cause to be paid
the principal of, premium, if any, and interest on each of the Securities of
that series at the place, at the respective times and in the manner provided in
such Securities. Except with respect to Global Securities, each installment of
interest on the Securities of any series may be paid by mailing checks for such
interest payable to the order of the
<PAGE> 22
holders of Securities of such series entitled thereto as they appear on the
registry books of the Company. The Company further covenants to pay any and all
amounts, including without limitation, Liquidated Damages, required under the
Registration Rights Agreement.
SECTION 3.02. Offices for Notices and Payments, etc.
So long as any of the Securities remain outstanding, the
Company will maintain in New York, New York, an office or agency where the
Securities of each series may be presented for payment, an office or agency
where the Securities of that series may be presented for registration of
transfer and for exchange as in this Indenture provided and an office or agency
where notices and demands to or upon the Company in respect of the Securities of
that series or of this Indenture may be served. The Company will give to the
Trustee written notice of the location of any such office or agency and of any
change of location thereof. Until otherwise designated from time to time by the
Company in a notice to the Trustee, or specified as contemplated by Section
2.03, any such office or agency for all of the above purposes shall be the
office or agency of the Trustee. In case the Company shall fail to maintain any
such office or agency in New York, New York, or shall fail to give such notice
of the location or of any change in the location thereof, presentations and
demands may be made and notices may be served at the principal corporate trust
office of the Trustee.
In addition to any such office or agency, the Company may from
time to time designate one or more offices or agencies outside New York, New
York, where the Securities may be presented for registration of transfer and for
exchange in the manner provided in this Indenture, and the Company may from time
to time rescind such designation, as the Company may deem desirable or
expedient; provided, however, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain any such office or
agency in New York, New York, for the purposes above mentioned. The Company will
give to the Trustee prompt written notice of any such designation or rescission
thereof.
SECTION 3.03. Appointments to Fill Vacancies in Trustee's Office.
The Company, whenever necessary to avoid or fill a vacancy in
the office of Trustee, will appoint, in the manner provided in Section 6.10, a
Trustee, so that there shall at all times be a Trustee hereunder.
SECTION 3.04. Provision as to Paying Agent.
(a) If the Company shall appoint a paying agent other than the
Trustee with respect to the Securities of any series, it will cause such paying
agent to execute and deliver to the Trustee an instrument in which such agent
shall agree with the Trustee, subject to the provision of this Section 3.04,
<PAGE> 23
(1) that it will hold all sums held by it as such agent
for the payment of the principal of and premium, if
any, or interest, if any, on the Securities of such
series (whether such sums have been paid to it by the
Company or by any other obligor on the Securities of
such series) in trust for the benefit of the holders
of the Securities of such series; and
(2) that it will give the Trustee immediate written
notice of any failure by the Company (or by any other
obligor on the Securities of such series) to make any
payment of the principal of and premium, if any, or
interest, if any, on the Securities of such series
when the same shall be due and payable.
(b) If the Company shall act as its own paying agent, it will,
on or before each due date of the principal of and premium, if any, or interest,
if any, on the Securities of any series, set aside, segregate and hold in trust
for the benefit of the holders of the Securities of such series a sum sufficient
to pay such principal, premium or interest so becoming due and will immediately
notify the Trustee in writing of any failure to take such action and of any
failure by the Company (or by any other obligor under the Securities of such
series) to make any payment of the principal of and premium, if any, or
interest, if any, on the Securities of such series when the same shall become
due and payable.
(c) Anything in this Section 3.04 to the contrary
notwithstanding, the Company may, at any time, for the purpose of obtaining a
satisfaction and discharge with respect to one or more or all series of
Securities hereunder, or for any other reason, pay or cause to be paid to the
Trustee all sums held in trust for any such series by the Trustee or any paying
agent hereunder, as required by this Section 3.04, such sums to be held by the
Trustee upon the trusts herein contained.
(d) Anything in this Section 3.04 to the contrary
notwithstanding, the agreement to hold sums in trust as provided in this Section
3.04 is subject to Sections 11.03 and 11.04.
SECTION 3.05. Certificate to Trustee.
The Company will deliver to the Trustee on or before 120 days after the
end of each fiscal year, so long as Securities of any series are outstanding
hereunder, an Officers' Certificate stating that in the course of the
performance by the signers of their duties as officers of the Company they would
normally have knowledge of any default by the Company in the performance of any
covenants contained herein, stating whether or not they have knowledge of any
such default and, if so, specifying each such default of which the signers have
knowledge and the nature thereof.
SECTION 3.06. Compliance with Consolidation Provisions.
<PAGE> 24
The Company will not, while any of the Securities remain
outstanding, consolidate with, or merge into, any other Person or permit any
other Person to merge into the Company, or sell or convey all or substantially
all of its property to any other Person unless the provisions of Article Ten
hereof are complied with.
SECTION 3.07. Limitation on Dividends.
If with respect to any series of Securities (i) there shall
have occurred any event of which the Company has actual knowledge that (A)
constitutes, or with the giving of notice or the lapse of time, or both, would
constitute, an Event of Default and (B) in respect of any nonpayment default,
which the Company shall not have taken reasonable steps to cure, and in respect
of any payment default, which shall not have been cured, (ii) such Securities
are issued to Interpool Capital Trust or a trustee of such trust and the Company
shall be in default with respect to its payment of any obligations under the
Capital Securities Guarantee relating to such Interpool Capital Trust, or (iii)
the Company shall have given notice of its election of an Extended Interest
Payment Period, or any extension thereof, and shall not have rescinded such
notice, and such Extended Interest Payment Period, or any extension thereof,
shall have commenced, then the Company shall not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock (which includes
common and preferred stock); (ii) make any payment of principal, interest or
premium, if any, on or repay, repurchase or redeem any debt securities
(including Other Securities) issued by the Company which rank pari passu with or
junior in right of payment to such Securities; or (iii) make any guarantee
payments with respect to any guarantee by the Company of the debt securities of
any subsidiary of the Company (including under Other Guarantees) if such
guarantee ranks pari passu with or junior in right of payment to such Securities
(other than (a) dividends or distributions in shares of, or options, warrants or
rights to subscribe for or purchase shares of, common stock of the Company, (b)
any declaration of a dividend in connection with the implementation of a
stockholder's rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Capital Securities Guarantee, (d) the purchase of fractional
shares resulting from a reclassification of the Company's capital stock, (e) the
exchange or conversion of one class or series of the Company's capital stock for
another class or series of the Company's capital stock, (f) the purchase of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged and (g) purchases of common stock related to the issuance
of common stock or rights under any of the Company's benefit plans for its
directors, officers or employees or any of the Company's dividend reinvestment
plans).
SECTION 3.08. Covenants as to Interpool Capital Trust.
In the event Securities are issued to an Interpool Capital
Trust or a trustee of such trust in connection with the issuance of Trust
Securities by such Interpool Capital Trust, for so long
<PAGE> 25
as such Trust Securities remain outstanding, the Company will (i) maintain 100%
direct or indirect ownership of the Common Securities of such Interpool Capital
Trust, (ii) use its reasonable efforts to cause such Interpool Capital Trust (a)
to remain a statutory business trust, except in connection with a distribution
of Securities held by such Interpool Capital Trust to the holders of the Trust
Securities thereof, the redemption of all of the Trust Securities of such
Interpool Capital Trust or certain mergers, consolidations or amalgamations,
each as permitted by the Declaration of such Interpool Capital Trust, and (b) to
otherwise continue to be treated as a grantor trust for United States federal
income tax purposes and (iii) use its reasonable efforts to cause each holder of
Trust Securities to be treated as owning an individual beneficial interest in
the Securities.
SECTION 3.09. Calculation of Original Issue Discount.
In the event there are any Original Issue Discount Securities
issued and outstanding, the Company shall file with the Trustee promptly at the
end of each calendar year a written notice specifying the amount of any original
issue discount (including daily rates and accrual periods) accrued on
outstanding Securities as of the end of such year.
ARTICLE FOUR
SECURITYHOLDERS' LISTS AND REPORTS BY THE
COMPANY AND THE TRUSTEE
SECTION 4.01. Securityholders' Lists.
The Company covenants and agrees that it will furnish or cause
to be furnished to the Trustee:
(a) on a semi-annual basis on each regular record date for
each series of Securities, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Securityholders
of such series of Securities as of such record date (and on dates to be
determined pursuant to Section 2.03 for non-interest bearing securities
in each year); and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company, of any such request, a
list of similar form and content as of a date not more than 15 days
prior to the time such list is furnished;
except that no such lists need be furnished so long as the Trustee is in
possession thereof by reason of its acting as Security registrar for such
series.
<PAGE> 26
SECTION 4.02. Preservation and Disclosure of Lists.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, all information as to the names and addresses of the
holders of each series of Securities (1) contained in the most recent list
furnished to it as provided in Section 4.01 or (2) received by it in the
capacity of Securities registrar (if so acting) hereunder. The Trustee may
destroy any list furnished to it as provided in Section 4.01 upon receipt of a
new list so furnished.
(b) In case three or more holders of Securities of any series
(hereinafter referred to as "applicants") apply in writing to the Trustee and
furnish to the Trustee reasonable proof that each such applicant has owned a
Security of such series for a period of at least six months preceding the date
of such application, and such application states that the applicants desire to
communicate with other holders of Securities of such series or with holders of
all Securities with respect to their rights under this Indenture or under such
Securities and is accompanied by a copy of the form of proxy or other
communication which such applicants propose to transmit, then the Trustee shall
within five business days after the receipt of such application, at its
election, either:
(1) afford such applicants access to the information
preserved at the time by the Trustee in accordance
with the provisions of subsection (a) of this Section
4.02, or
(2) inform such applicants as to the approximate number
of holders of such series or all Securities, as the
case may be, whose names and addresses appear in the
information preserved at the time by the Trustee in
accordance with the provisions of subsection (a) of
this Section 4.02, and as to the approximate cost of
mailing to such Securityholders the form of proxy or
other communication, if any, specified in such
application. If the Trustee shall elect not to afford
such applicants access to such information, the
Trustee shall, upon the written request of such
applicants, mail to each Securityholder of such
series or to all Securityholders, as the case may be,
whose name and address appear in the information
preserved at the time by the Trustee in accordance
with the provisions of subsection (a) of this Section
4.02 a copy of the form of proxy or other
communication which is specified in such request with
reasonable promptness after a tender to the Trustee
of the material to be mailed and of payment, or
provision for the payment, of the reasonable expenses
of mailing, unless within five days after such
tender, the Trustee shall mail to such applicants and
file with the Commission, together with a copy of the
material to be mailed, a written statement to the
effect that, in the opinion of the Trustee, such
mailing would be contrary to the best interests of
the holders of Securities of such series or all
Securities, as the case may be, or would be in
<PAGE> 27
violation of applicable law. Such written statement
shall specify the basis of such opinion. If the
Commission, after opportunity for a hearing upon the
objections specified in the written statement so
filed, shall enter an order refusing to sustain any
of such objections or if, after the entry of an order
sustaining one or more of such objections, the
Commission shall find, after notice and opportunity
for hearing, that all the objections so sustained
have been met and shall enter an order so declaring,
the Trustee shall mail copies of such material to all
such Securityholders with reasonable promptness after
the entry of such order and the renewal of such
tender; otherwise the Trustee shall be relieved of
any obligation or duty to such applicants respecting
their application.
(c) Each and every holder of Securities, by receiving and
holding the same, agrees with Company and the Trustee that neither the Company
nor the Trustee nor any paying agent shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the holders
of Securities in accordance with the provisions of subsection (b) of this
Section 4.02, regardless of the source from which such information was derived,
and that the Trustee shall not be held accountable by reason of mailing any
material pursuant to a request made under said subsection (b).
SECTION 4.03. Reports by Company.
(a) The Company covenants and agrees to file with the Trustee,
within 15 days after the Company is required to file the same with the
Commission, copies of the annual reports and of the information, documents and
other reports, including annual reports on Form 10-K and quarterly reports on
Form 10-Q (or copies of such portions of any of the foregoing as the Commission
may from time to time by rules and regulations prescribe), which the Company may
be required to file with the Commission pursuant to Section 13 or Section 15(d)
of the Exchange Act; or, if the Company is not required to file information,
documents or reports pursuant to either of such sections, then to file with the
Trustee and the Commission, in accordance with rules and regulations prescribed
from time to time by the Commission, such of the supplementary and periodic
information, documents and reports which may be required pursuant to Section 13
of the Exchange Act in respect of a security listed and registered on a national
securities exchange as may be prescribed from time to time in such rules and
regulations.
(b) The Company covenants and agrees to file with the Trustee
and the Commission, in accordance with the rules and regulations prescribed from
time to time by the Commission, such additional information, documents and
reports with respect to compliance by the Company with the conditions and
covenants provided for in this Indenture as may be required from time to time by
such rules and regulations.
<PAGE> 28
(c) Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
(d) So long as is required for an offer or sale of any series
of the Securities to qualify for an exemption under Rule 144A under the
Securities Act, the Company shall, upon request, provide the information
required by clause (d)(4) thereunder to each Holder and to each beneficial owner
and prospective purchaser of Securities identified by any holder of Restricted
Securities, unless such information is furnished to the Commission pursuant to
Section 13 or 15(d) of the Exchange Act.
SECTION 4.04. Reports by the Trustee.
(a) The Trustee shall transmit to Securityholders such reports
concerning the Trustee and its actions under this Indenture as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant thereto. If required by Section 313(a) of the Trust Indenture Act, the
Trustee shall, within 60 days after each December 15 following the date of this
Indenture, deliver to Securityholders a brief report, dated as of such December
15, which complies with the provisions of such Section 313(a).
(b) A copy of each such report shall, at the time of such
transmission to Securityholders, be filed by the Trustee with each stock
exchange, if any, upon which the Securities are listed, with the Commission and
with the Company. The Company will promptly notify the Trustee when the
Securities are listed on any stock exchange.
ARTICLE FIVE
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
SECTION 5.01. Events of Default.
In case one or more of the following Events of Default with
respect to Securities of any series or such other events as may be established
with respect to the Securities of that series as contemplated by Section 2.03
hereof shall have occurred and be continuing (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):
<PAGE> 29
(a) default in the payment of any interest upon any Securities
of that series or any Other Securities when it becomes due and payable,
and continuance of such default for a period of 30 days; provided,
however, that a valid extension of an interest payment period by the
Company in accordance with the terms of any indenture supplemental
hereto or Officers' Certificate, shall not constitute a default in the
payment of interest for this purpose; or
(b) default in the payment of all or any part of the principal
of (or premium, if any, on) any Securities of that series or any Other
Securities as and when the same shall become due and payable either at
maturity, upon redemption, by declaration of acceleration or otherwise;
or
(c) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with and other than those set forth
exclusively in terms of any particular series of Securities established
as contemplated in this Indenture), and continuance of such default or
breach for a period of 90 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to the
Company and the Trustee by the holders of at least 25% in principal
amount of the outstanding Securities a written notice specifying such
default or breach and requiring it to be remedied and stating that such
notice is a "Notice of Default" hereunder; or
(d) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Company in an involuntary
case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of the
Company or for any substantial part of its property, or ordering the
winding-up or liquidation of its affairs and such decree or order shall
remain unstayed and in effect for a period of 90 consecutive days; or
(e) the Company shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, shall consent to the entry of an order for relief in an
involuntary case under any such law, or shall consent to the
appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or other similar official)
of the Company or of any substantial part of its property, or shall
make any general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due; or
(f) in the event Securities are issued to an Interpool Capital
Trust or a trustee of such trust, such Interpool Capital Trust shall
have voluntarily or involuntarily dissolved,
<PAGE> 30
wound-up its business or otherwise terminated its existence except in
connection with (i) the distribution of Securities to holders of Trust
Securities in liquidation of their interests in such Interpool Capital
Trust, (ii) the redemption of all of the outstanding Trust Securities
of such Interpool Capital Trust or (iii) certain mergers,
consolidations or amalgamations, each as permitted by the Declaration
of such Interpool Capital Trust.
If an Event of Default occurs and is continuing, then, and in
each and every such case, unless the principal of all of the Securities of such
series shall have already become due and payable, either the Trustee or the
holders of not less than 25% in aggregate principal amount of the Securities of
that series then outstanding hereunder, by notice in writing to the Company (and
to the Trustee if given by Securityholders), may declare the entire principal
(or, if the Securities of that series are Original Issue Discount Securities,
such portion of the principal amount as may be specified in the terms of that
series) of all Securities of that series and the interest and premiums accrued
thereon, if any, together with any premium otherwise payable pursuant to the
terms of such Securities to be due and payable immediately, and upon any such
declaration the same shall become immediately due and payable.
The foregoing provisions, however, are subject to the
condition that if, at any time after the principal (or, if the Securities are
Original Issue Discount Securities, such portion of the principal as may be
specified in the terms thereof) of the Securities of any series (or of all the
Securities, as the case may be) shall have been so declared due and payable, and
before any judgment or decree for the payment of the moneys due shall have been
obtained or entered as hereinafter provided, the Company shall pay or shall
deposit with the Trustee a sum sufficient to pay all matured installments of
interest upon all the Securities of such series (or of all the Securities, as
the case may be) and the principal of and premium, if any, on any and all
Securities of such series (or of all the Securities, as the case may be) which
shall have become due otherwise than by acceleration (with interest upon such
principal and premium, if any, and, to the extent that payment of such interest
is enforceable under applicable law, on overdue installments of interest, at the
same rate as the rate of interest or Yield to Maturity (in the case of Original
Issue Discount Securities) specified in the Securities of such series (or at the
respective rates of interest or Yields to Maturity of all the Securities, as the
case may be) to the date of such payment or deposit) and such amount as shall be
sufficient to cover reasonable compensation to the Trustee and each predecessor
Trustee, their respective agents, attorneys and counsel, and all other expenses
and liabilities incurred, and all advances made, by the Trustee and each
predecessor Trustee except as a result of negligence or bad faith, and if any
and all Events of Default under the Indenture (other than the non-payment of the
principal of the Securities which shall have become due solely by such
declaration of acceleration), shall have been cured, waived or otherwise
remedied as provided herein -- then and in every such case the holders of a
majority in aggregate principal amount of the Securities of such series (or of
all the Securities, as the case may be) then outstanding, by written notice to
the Company and to the Trustee, may waive all defaults with respect to that
series (or with respect to all Securities, as the case may be, in such case,
treated as a single class) and rescind and
<PAGE> 31
annul such declaration and its consequences, but no such waiver or rescission
and annulment shall extend to or shall affect any subsequent default or shall
impair any right consequent thereon.
In case the Trustee shall have proceeded to enforce any right
under this Indenture and such proceedings shall have been discontinued or
abandoned because of such rescission or annulment or for any other reason or
shall have been determined adversely to the Trustee, then and in every such case
the Company, the Trustee and the holders of the Securities shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Company, the Trustee and the holders of the
Securities shall continue as though no such proceeding had been taken.
SECTION 5.02. Payment of Securities on Default; Suit Therefor.
The Company covenants that:
(a) in case default shall be made in the payment of any
installment of interest upon any of the Securities of any series as and
when the same shall become due and payable, and such default shall have
continued for a period of 30 days, or
(b) in case of default shall be made in the payment of the
principal of or premium, if any, on any of the Securities of any series
as and when the same shall have become due and payable, whether at
maturity of the Securities of that series or upon redemption or by
declaration or otherwise;
(c) then, upon demand of the Trustee, the Company will pay to
the Trustee, for the benefit of the holders of the Securities of that
series, the amount that then shall have become due and payable on all
such Securities of that series for principal and premium, if any, or
interest, or both, as the case may be, with interest upon the overdue
principal and premium, if any, and (to the extent that payment of such
interest is enforceable under applicable law) upon the overdue
installments of interest at the rate or Yield to Maturity (in the case
of Original Issue Discount Securities) borne by the Securities of that
series; and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including a
reasonable compensation to the Trustee, its agents, attorneys and
counsel, and any expenses or liabilities incurred by the Trustee
hereunder other than through its negligence or bad faith.
In case the Company shall fail forthwith to pay such amounts
upon such demand, the Trustee, in its own name and as trustee of an express
trust, shall be entitled and empowered to institute any actions or proceedings
at law or in equity for the collection of the sums so due and unpaid, and may
prosecute any such action or proceeding to judgment or final decree, and may
enforce any such judgment or final decree against the Company or any other
obligor on such
<PAGE> 32
Securities and collect in the manner provided by law out of the property of the
Company or any other obligor on such Securities wherever situated the moneys
adjudged or decreed to be payable.
In case there shall be pending proceedings for the bankruptcy
or for the reorganization of the Company or any other obligor on the Securities
of any series under Title 11, United States Code, or any other applicable law,
or in case a receiver or trustee shall have been appointed for the property of
the Company or such other obligor, or in the case of any other similar judicial
proceedings relative to the Company or other obligor upon the Securities of any
series, or to the creditors or property of the Company or such other obligor,
the Trustee, irrespective of whether the principal of the Securities of any
series shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand
pursuant to the provisions of this Section 5.02, shall be entitled and
empowered, by intervention in such proceedings or otherwise, to file and prove a
claim or claims for the whole amount of principal and interest (or, if the
Securities of that series are Original Issue Discount Securities, such portion
of the principal amount as may be specified in the terms of that series) owing
and unpaid in respect of the Securities of such series and, in case of any
judicial proceedings, to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
(including any claim for reasonable compensation to the Trustee and each
predecessor Trustee, and their respective agents, attorneys and counsel, and for
reimbursement of all expenses and liabilities incurred, and all advances made,
by the Trustee and each predecessor Trustee, except as a result of negligence or
bad faith) and of the Securityholders allowed in such judicial proceedings
relative to the Company or any other obligor on the Securities of any series, or
to the creditors or property of the Company or such other obligor, unless
prohibited by applicable law and regulations, to vote on behalf of the holders
of the Securities or any series in any election of a trustee or a standby
trustee in arrangement, reorganization, liquidation or other bankruptcy or
insolvency proceedings or person performing similar functions in comparable
proceedings, and to collect and receive any moneys or other property payable or
deliverable on any such claims, and to distribute the same after the deduction
of its charges and expenses; and any receiver, assignee or trustee in bankruptcy
or reorganization is hereby authorized by each of the Securityholders to make
such payments to the Trustee, and, in the event that the Trustee shall consent
to the making of such payments directly to the Securityholders, to pay to the
Trustee such amounts as shall be sufficient to cover reasonable compensation to
the Trustee, each predecessor Trustee and their respective agents, attorneys and
counsel, and all other expenses and liabilities incurred, and all advances made,
by the Trustee and each predecessor Trustee except as a result of negligence or
bad faith.
Nothing herein contained shall be construed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any
Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities of any series or the rights of any holder
thereof or to authorize the Trustee to vote in respect of the claim of any
Securityholder in any such proceeding.
<PAGE> 33
All rights of action and of asserting claims under this
Indenture, or under any of the Securities, may be enforced by the Trustee
without the possession of any of the Securities, or the production thereof on
any trial or other proceeding relative thereto, and any such suit or proceeding
instituted by the Trustee shall be brought in its own name as trustee of an
express trust, and any recovery of judgment shall be for the ratable benefit of
the holders of the Securities.
In any proceedings brought by the Trustee (and also any
proceedings involving the interpretation of any provision of this Indenture to
which the Trustee shall be a party) the Trustee shall be held to represent all
the holders of the Securities, and it shall not be necessary to make any holders
of the Securities parties to any such proceedings.
SECTION 5.03. Application of Moneys Collected by Trustee.
Any moneys collected by the Trustee shall be applied in the
following order, at the date or dates fixed by the Trustee for the distribution
of such moneys, upon presentation of the several Securities in respect of which
moneys have been collected, and stamping thereon the payment, if only partially
paid, and upon surrender thereof if fully paid:
First: To the payment of costs and expenses of collection
applicable to such series and reasonable compensation to the Trustee,
its agents, attorneys and counsel, and of all other expenses and
liabilities incurred, and all advances made, by the Trustee except as a
result of its negligence or bad faith;
Second: To the payment of all Senior Indebtedness of the
Company if and to the extent required by Article Fifteen;
Third: In case the principal of the outstanding Securities in
respect of which moneys have been collected shall not have become due
and be unpaid, to the payment of the amounts then due and unpaid upon
Securities of such series for principal (and premium, if any), and
interest on the Securities of such series, in respect of which or for
the benefit of which money has been collected, ratably, without
preference or priority of any kind, according to the amounts due on
such Securities for principal (and premium, if any) and interest,
respectively.
Fourth: To the Company.
SECTION 5.04. Proceedings by Securityholders.
(a) No holder of any Security of any series shall have any
right by virtue of or by availing of any provision of this Indenture to
institute any suit, action or proceeding in equity or at
<PAGE> 34
law upon or under or with respect to this Indenture or for the appointment of a
receiver or trustee, or for any other remedy hereunder, unless (i) such holder
previously shall have given to the Trustee written notice of an Event of Default
and of the continuance thereof with respect to the Securities of such series
specifying such Event of Default, as hereinbefore provided; (ii) the holders of
not less than 25% in aggregate principal amount of the Securities of that series
then outstanding shall have made written request upon the Trustee to institute
such action, suit or proceeding in its own name as Trustee hereunder; (iii) such
holder or holders shall have offered to the Trustee such reasonable indemnity as
it may require against the costs, expenses and liabilities to be incurred
therein or thereby; (iv) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity shall have failed to institute any such
action, suit or proceeding, and (v) during such 60 day period the holders of a
majority in principal amount of the Securities of that series shall not have
given the Trustee a direction inconsistent with the request; it being understood
and intended, and being expressly covenanted by the taker and holder of every
Security with every other taker and holder and the Trustee, that no one or more
holders of Securities of any series shall have any right in any manner whatever
by virtue of or by availing of any provision of this Indenture to affect,
disturb or prejudice the rights of any other holder of Securities, or to obtain
or seek to obtain priority over or preference to any other such holder, or to
enforce any right under this Indenture, except in the manner herein provided and
for the equal, ratable and common benefit of all holders of Securities of the
applicable series.
Notwithstanding any other provisions in this Indenture,
however, the right of any holder of any Security to receive payment of the
principal of (premium, if any) and interest, if any, on such Security, on or
after the same shall have become due and payable, or to institute suit for the
enforcement of any such payment, shall not be impaired or affected without the
consent of such holder and by accepting a Security hereunder it is expressly
understood, intended and covenanted by the taker and holder of every Security of
such series with every other such taker and holder and the Trustee, that no one
or more holders of Securities of such series shall have any right in any manner
whatsoever by virtue or by availing of any provision of this Indenture to
affect, disturb or prejudice the rights of the holders of any other such
Securities, or to obtain or seek to obtain priority over or preference to any
other such holder, or to enforce any right under this Indenture, except in the
manner herein provided and for the equal, ratable and common benefit of all
holders of Securities of such series. For the protection and enforcement of the
provisions of this Section, each and every Securityholder and the Trustee shall
be entitled to such relief as can be given either at law or in equity.
SECTION 5.05. Proceedings by Trustee.
In case of an Event of Default hereunder the Trustee may in
its discretion proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights, either by suit in
equity or by action at law or by proceeding in bankruptcy or otherwise, whether
for the specific
<PAGE> 35
enforcement of any covenant or agreement contained in this Indenture or in aid
of the exercise of any power granted in this Indenture, or to enforce any other
legal or equitable right vested in the Trustee by this Indenture or by law.
SECTION 5.06. Remedies Cumulative and Continuing.
Except as otherwise provided in Section 2.08, all powers and
remedies given by this Article Five to the Trustee or to the Securityholders
shall, to the extent permitted by law, be deemed cumulative and not exclusive of
any other powers and remedies available to the Trustee or the holders of the
Securities, by judicial proceedings or otherwise, to enforce the performance or
observance of the covenants and agreements contained in this Indenture or
otherwise established with respect to such series, and no delay or omission of
the Trustee or of any holder of any of the Securities to exercise any right or
power accruing upon any Event of Default occurring and continuing as aforesaid
shall impair any such right or power, or shall be construed to be a waiver of
any such default or an acquiescence therein; and, subject to the provisions of
Section 5.04, every power and remedy given by this Article Five or by law to the
Trustee or to the Securityholders may be exercised from time to time, and as
often as shall be deemed expedient, by the Trustee or by the Securityholders.
SECTION 5.07. Direction of Proceedings and Waiver of Defaults by
Majority of Securityholders.
Subject to the last paragraph of Section 6.01 and Section
6.02(d), the holders of a majority in aggregate principal amount of the
Securities of any series affected at the time outstanding shall have the right
to direct the time, method, and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee, in each case with respect to such series of Securities; provided,
however, that (subject to the provisions of Section 6.01) the Trustee shall have
the right to decline to follow any such direction if the Trustee shall determine
that the action so directed would be unjustly prejudicial to the holders not
taking part in such direction or if the Trustee being advised by counsel
determines that the action or proceeding so directed may not lawfully be taken
or if the Trustee in good faith by its board of directors or trustees, executive
committee, or a trust committee of directors or trustees and/or Responsible
Officers shall determine that the action or proceedings so directed would
involve the Trustee in personal liability. Prior to any declaration accelerating
the maturity of any series of the Securities, the holders of a majority in
aggregate principal amount of the Securities of that series at the time
outstanding may on behalf of the holders of all of the Securities of such series
waive any past default or Event of Default including any default established
pursuant to Section 2.03 and its consequences except a default (a) in the
payment of principal of, premium, if any, or interest on any of the Securities,
(b) in respect of covenants or provisions hereof which cannot be modified or
amended without the consent of the holder of each Security affected, or (c) in
respect of the covenants contained in Section 3.06; provided, however, that if
the Securities of such series
<PAGE> 36
are held by any Interpool Capital Trust or a trustee of such trust, such waiver
or modification to such waiver shall not be effective until the holders of a
majority in liquidation preference of Trust Securities of such Interpool Capital
Trust shall have consented to such waiver or modification to such waiver;
provided further, that if the consent of the holder of each outstanding Security
is required, such waiver shall not be effective until each holder of the Trust
Securities of such Interpool Capital Trust shall have consented to such waiver.
Upon any such waiver, the default covered thereby shall be deemed to be cured
for all purposes of this Indenture and the Company, the Trustee and the holders
of the Securities of such series shall be restored to their former positions and
rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon. Upon any
such waiver the Company, the Trustee and the holders of the Securities of that
series (or of all Securities, as the case may be) shall be restored to their
former positions and rights hereunder, respectively; but no such waiver shall
extend to any subsequent or other default or Event of Default or impair any
right consequent thereon. Whenever any default or Event of Default hereunder
shall have been waived as permitted by this Section 5.07, such default or Event
of Default shall for all purposes of the Securities of that series (or of all
Securities, as the case may be) and this Indenture be deemed to have been cured
and to be not continuing.
SECTION 5.08. Notice of Defaults.
Within 90 days after a Responsible Officer of the Trustee has
received actual knowledge of the occurrence of a default with respect to the
Securities of any series, the Trustee shall mail to all Securityholders of that
series, as the names and addresses of such holders appear upon the Security
register, notice of all defaults with respect to that series known to the
Trustee, unless such defaults shall have been cured before the giving of such
notice (the term "defaults" for the purpose of this Section 5.08 being hereby
defined to be the events specified in clauses (a), (b), (c), (d), (e) and (f) of
Section 5.01, not including periods of grace, if any, provided for therein, and
irrespective of the giving of written notice specified in clause (c) of Section
5.01 and (pursuant to Section 2.03(10)) any events specified in any indentures
supplemental hereto or Officers' Certificate providing for the initial issuance
of securities of such series, not including periods of grace); provided,
however, that, except in the case of default in the payment of the principal of,
premium, if any, or interest on any of the Securities of such series, the
Trustee shall be protected in withholding such notice if and so long as the
board of directors, the executive committee, or a trust committee of directors
and/or Responsible Officers of the Trustee in good faith determines that the
withholding of such notice is in the interests of the Securityholders of such
series; and provided further, that in the case of any default of the character
specified in Section 5.01(c) no such notice to Securityholders of such series
shall be given until at least 60 days after the occurrence thereof but shall be
given within 90 days after such occurrence.
SECTION 5.09. Undertaking to Pay Costs.
<PAGE> 37
All parties to this Indenture agree, and each holder of any
Security by such holder's acceptance thereof shall be deemed to have agreed,
that any court may in its discretion require, in any suit for the enforcement of
any right or remedy under this Indenture, or in any suit against the Trustee for
any action taken or omitted by it as Trustee, the filing by any party litigant
in such suit of an undertaking to pay the costs of such suit, and that such
court may in its discretion assess reasonable costs, including reasonable
attorneys' fees and expenses, against any party litigant in such suit, having
due regard to the merits and good faith of the claims or defenses made by such
party litigant; but the provisions of this Section 5.09 shall not apply to any
suit instituted by the Trustee, to any suit instituted by any Securityholder, or
group of Securityholders of any series, holding in the aggregate more than 10%
in principal amount of the Securities of that series outstanding, or to any suit
instituted by any Securityholder for the enforcement of the payment of the
principal of (or premium, if any) or interest on any Security against the
Company on or after the same shall have become due and payable.
ARTICLE SIX
CONCERNING THE TRUSTEE
SECTION 6.01. Duties and Responsibilities of Trustee.
With respect to the holders of any series of Securities issued
hereunder, the Trustee, prior to the occurrence of an Event of Default with
respect to securities of that series and after the curing or waiving of all
Events of Default which may have occurred, with respect to securities of that
series, undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture or any supplemental indenture with
respect to such series. In case an Event of Default with respect to the
Securities of a series has occurred (which has not been cured or waived) of
which a Responsible Officer of the Trustee has actual knowledge, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture or
any supplemental indenture with respect to such series, and use the same degree
of care and skill in their exercise, as a prudent man would exercise or use
under the circumstances in the conduct of his own affairs.
No provision of this Indenture shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct, except that:
(a) prior to the occurrence of an Event of Default with
respect to Securities of a series and after the curing or waiving of
all Events of Default with respect to that series which may have
occurred:
(1) the duties and obligations of the Trustee with
respect to Securities of a series shall be determined
solely by the express provisions of this Indenture or
any
<PAGE> 38
supplemental indenture with respect to such series,
and the Trustee shall not be liable except for the
performance of such duties and obligations with
respect to such series as are specifically set forth
in this Indenture or any supplemental indenture with
respect to such series, and no implied covenants or
obligations shall be read into this Indenture or any
supplemental indenture with respect to such series
against the Trustee; and
(2) in the absence of bad faith on the part of the
Trustee, the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or
opinions furnished to the Trustee and conforming to
the requirements of this Indenture; but, in the case
of any such certificates or opinions which by any
provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall be under
a duty to examine the same to determine whether or
not they conform to the requirements of this
Indenture;
(b) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer or Officers of the Trustee,
unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts; and
(c) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith, in accordance with
the direction of the Securityholders pursuant to Section 5.07, relating
to the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Indenture.
None of the provisions contained in this Indenture shall
require the Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the exercise
of any of its rights or powers, if there is reasonable ground for believing that
the repayment of such funds or liability is not reasonably assured to it under
the terms of this Indenture or adequate indemnity against such risk is not
reasonably assured to it.
SECTION 6.02. Reliance on Documents, Opinions, etc.
Except as otherwise provided in Section 6.01:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond,
note, debenture or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
<PAGE> 39
(b) any request, direction, order or demand of the Company
mentioned herein shall be sufficiently evidenced by an Officers'
Certificate (unless other evidence in respect thereof be herein
specifically prescribed); and any Board Resolution may be evidenced to
the Trustee by a copy thereof certified by the Secretary or an
Assistant Secretary of the Company;
(c) the Trustee may consult with counsel of its selection and
any advice or Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or suffered
omitted by it hereunder in good faith and in accordance with such
advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request,
order or direction of any of the Securityholders, pursuant to the
provisions of this Indenture, unless such Securityholders shall have
offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which may be incurred therein or
thereby;
(e) the Trustee shall not be liable for any action taken or
omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this
Indenture; nothing contained herein shall, however, relieve the Trustee
of the obligation, upon the occurrence of an Event of Default with
respect to a series of the Securities (that has not been cured or
waived) of which a Responsible Officer of the Trustee has actual
knowledge, to exercise with respect to Securities of that series such
of the rights and powers vested in it by this Indenture, and to use the
same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own
affairs;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent,
order, approval, bond, debenture, coupon or other paper or document,
unless requested in writing to do so by the holders of not less than a
majority in principal amount of the outstanding Securities of the
series affected thereby; provided, however, that if the payment within
a reasonable time to the Trustee of the costs, expenses or liabilities
likely to be incurred by it in the making of such investigation is, in
the opinion of the Trustee, not reasonably assured to the Trustee by
the security afforded to it by the terms of this Indenture, the Trustee
may require reasonable indemnity against such expense or liability as a
condition to so proceeding; and
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents (including any Authenticating
<PAGE> 40
Agent) or attorneys, and the Trustee shall not be responsible for any
misconduct or negligence on the part of any such agent or attorney
appointed by it with due care.
SECTION 6.03. No Responsibility for Recitals, etc.
The recitals contained herein and in the Securities (except in
the certificate of authentication of the Trustee or the Authenticating Agent)
shall be taken as the statements of the Company only, and the Trustee and the
Authenticating Agent assume no responsibility for the correctness of the same.
The Trustee and the Authenticating Agent make no representations as to the
validity or sufficiency of this Indenture or of the Securities. The Trustee and
the Authenticating Agent shall not be accountable for the use or application by
the Company of any Securities or the proceeds of any Securities authenticated
and delivered by the Trustee or the Authenticating Agent in conformity with the
provisions of this Indenture.
SECTION 6.04. Trustee, Authenticating Agent, Paying Agents, Transfer
Agents or Registrar May Own Securities.
The Trustee or any Authenticating Agent or any paying agent or
any transfer agent or any Security registrar, in its individual or any other
capacity, may become the owner or pledgee of Securities with the same rights it
would have if it were not Trustee (subject, however, to Section 6.08 hereof),
Authenticating Agent, paying agent, transfer agent or Security registrar.
SECTION 6.05. Moneys to be Held in Trust.
Subject to the provisions of Section 11.04, all moneys
received by the Trustee or any paying agent shall, until used or applied as
herein provided, be held in trust for the purpose for which they were received,
but need not be segregated from other funds except to the extent required by
law. The Trustee and any paying agent shall be under no liability for interest
on any money received by it hereunder except as otherwise agreed in writing with
the Company. So long as no Event of Default shall have occurred and be
continuing, all interest allowed on any such moneys shall be paid from time to
time upon the written order of the Company, signed by the Chief Executive
Officer, the President or a Vice President or the Treasurer or an Assistant
Treasurer or the Controller or an Assistant Controller of the Company.
SECTION 6.06. Compensation and Expenses of Trustee.
The Company covenants and agrees to pay to the Trustee from
time to time, and the Trustee shall be entitled to, such compensation as shall
be agreed to in writing between the Company and the Trustee (which shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust), and the Company will pay or reimburse the Trustee upon its
request for all reasonable expenses, disbursements and advances incurred or made
by the
<PAGE> 41
Trustee in accordance with any of the provisions of this Indenture or any
supplemental indenture (including the reasonable compensation and the expenses
and disbursements of its counsel and of all persons not regularly in its employ)
except any such expense, disbursement or advance as may arise from its gross
negligence or bad faith. The Company also covenants to indemnify each of the
Trustee or any predecessor Trustee (and its officers, agents, directors and
employees) for, and to hold it harmless against, any and all loss, damage,
claim, liability or expense including taxes (other than taxes based on the
income of the Trustee) incurred without gross negligence or bad faith on the
part of the Trustee and arising out of or in connection with the acceptance or
administration of this trust or the performance of its duties hereunder,
including the costs and expenses of defending itself against any claim of
liability in connection with the exercise or performance of any of its powers or
duties hereunder. The obligations of the Company under this Section 6.06 to
compensate and indemnify the Trustee and to pay or reimburse the Trustee for
expenses, disbursements and advances shall constitute additional indebtedness
hereunder. Such additional indebtedness shall be secured by a lien prior to that
of the Securities upon all property and funds held or collected by the Trustee
as such, except funds held in trust for the benefit of the holders of particular
Securities.
When the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 5.01(d), Section
5.01(e) or Section 5.01(f), the expenses (including the reasonable charges and
expenses of its counsel) and the compensation for the services are intended to
constitute expenses of administration under any applicable federal or state
bankruptcy, insolvency or other similar law.
The provisions of this Section shall survive the termination
of this Indenture.
SECTION 6.07. Officers' Certificate as Evidence.
Except as otherwise provided in Sections 6.01 and 6.02,
whenever in the administration of the provisions of this Indenture the Trustee
shall deem it necessary or desirable that a matter be proved or established
prior to taking or omitting any action hereunder, such matter (unless other
evidence in respect thereof be herein specifically prescribed) may, in the
absence of negligence or bad faith on the part of the Trustee, be deemed to be
conclusively proved and established by an Officers' Certificate delivered to the
Trustee, and such certificate, in the absence of negligence or bad faith on the
part of the Trustee, shall be full warrant to the Trustee for any action taken
or omitted by it under the provisions of this Indenture upon the faith thereof.
SECTION 6.08. Conflicting Interest of Trustee.
If the Trustee has or shall acquire any "conflicting interest"
within the meaning of Section 310(b) of the Trust Indenture, the Trustee and the
Company shall in all respects comply with the provisions of Section 310(b) of
the Trust Indenture Act.
<PAGE> 42
SECTION 6.09. Eligibility of Trustee.
The Trustee hereunder shall at all times be a corporation
organized and doing business under the laws of the United States of America or
any state or territory thereof or of the District of Columbia or a corporation
or other Person permitted to act as trustee by the Commission authorized under
such laws to exercise corporate trust powers, having a combined capital and
surplus of at least $50,000,000 and subject to supervision or examination by
federal, state, territorial, or District of Columbia authority. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then
for the purposes of this Section 6.09 the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published.
The Company may not, nor may any Person directly or indirectly
controlling, controlled by, or under common control with the Company, serve as
Trustee.
In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 6.09, the Trustee shall resign
immediately in the manner and with the effect specified in Section 6.10.
SECTION 6.10. Resignation or Removal of Trustee.
(a) The Trustee, or any trustee or trustees hereafter
appointed, may at any time resign with respect to one or more or all series of
Securities by giving written notice of such resignation to the Company and by
mailing notice thereof to the holders of the applicable series of Securities at
their addresses as they shall appear on the Security register. Upon receiving
such notice of resignation, the Company shall promptly appoint a successor
trustee or trustees with respect to the applicable series by written instrument,
in duplicate, executed under the authority of a Board Resolution, one copy of
which instrument shall be delivered to the resigning Trustee and one copy to the
successor trustee. If no successor trustee shall have been so appointed with
respect to any series of Securities and have accepted appointment within 30 days
after the mailing of such notice of resignation to the affected Securityholders,
the resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor trustee, or any Securityholder who has been a bona
fide holder of a Security or Securities of the applicable series for at least
six months may, subject to the provisions of Section 5.09, on behalf of himself
and all others similarly situated, petition any such court for the appointment
of a successor trustee. Such court may thereupon, after such notice, if any, as
it may deem proper and prescribe, appoint a successor trustee.
(b) In case at any time any of the following shall occur:
<PAGE> 43
(1) the Trustee shall fail to comply with the provisions
of subsection (a) of Section 6.08 after written
request therefor by the Company or by any
Securityholder who has been a bona fide holder of a
Security or Securities for at least six months, or
(2) the Trustee shall cease to be eligible in accordance
with the provisions of Section 6.09 and shall fail to
resign after written request therefor by the Company
or by any such Securityholder, or
(3) the Trustee shall become incapable of acting, or
shall be adjudged a bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be
appointed, or any public officer shall take charge or
control of the Trustee or of its property or affairs
for the purpose of rehabilitation, conservation or
liquidation, then, in any such case, the Company may
remove the Trustee and appoint a successor trustee by
written instrument, in duplicate, executed under the
authority of a Board Resolution, one copy of which
instrument shall be delivered to the Trustee so
removed and one copy to the successor trustee, or,
subject to the provisions of Section 5.09, any
Securityholder who has been a bona fide holder of a
Security or Securities of the applicable series for
at least six months may, on behalf of himself and all
others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee
and the appointment of a successor trustee. Such
court may thereupon, after such notice, if any, as it
may deem proper and prescribe, remove the Trustee and
appoint a successor trustee.
(c) The holders of a majority in aggregate principal amount of
the Securities of any series at the time outstanding may at any time remove the
Trustee with respect to such series and nominate a successor trustee with
respect to the applicable series of Securities or all series, as the case may
be, which shall be deemed appointed as successor trustee with respect to the
applicable series unless within 10 days after such nomination the Company
objects thereto, in which case the Trustee so removed or any Securityholder of
the applicable series, upon the terms and conditions and otherwise as in
subsection (a) of this Section 6.10 provided, may petition any court of
competent jurisdiction for an appointment of a successor trustee with respect to
such series.
(d) Any resignation or removal of the Trustee and appointment
of a successor trustee pursuant to any of the provisions of this Section 6.10
shall become effective upon acceptance of appointment by the successor trustee
as provided in Section 6.11.
SECTION 6.11. Acceptance by Successor Trustee.
<PAGE> 44
Any successor trustee appointed as provided in Section 6.10
shall execute, acknowledge and deliver to the Company and to its predecessor
trustee an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the retiring trustee with respect to all or any
applicable series shall become effective and such successor trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, duties and obligations with respect to such series of its predecessor
hereunder, with like effect as if originally named as trustee herein; but,
nevertheless, on the written request of the Company or of the successor trustee,
the trustee ceasing to act shall, upon payment of any amounts then due it
pursuant to the provisions of Section 6.06, execute and deliver an instrument
transferring to such successor trustee all the rights and powers of the trustee
so ceasing to act and shall duly assign, transfer and deliver to such successor
trustee all property and money held by such retiring trustee thereunder. Upon
request of any such successor trustee, the Company shall execute any and all
instruments in writing for more fully and certainly vesting in and confirming to
such successor trustee all such rights and powers. Any trustee ceasing to act
shall, nevertheless, retain a lien upon all property or funds held or collected
by such trustee to secure any amounts then due it pursuant to the provisions of
Section 6.06.
No successor trustee shall accept appointment as provided in
this Section 6.11 unless at the time of such acceptance such successor trustee
shall be qualified under the provisions of Section 6.08 and eligible under the
provisions of Section 6.09.
Upon acceptance of appointment by a successor trustee as
provided in this Section 6.11, the Company shall mail notice of the succession
of such trustee hereunder to the holders of Securities at their addresses as
they shall appear on the Security register. If the Company fails to mail such
notice within 10 days after the acceptance of appointment by the successor
trustee, the successor trustee shall cause such notice to be mailed at the
expense of the Company.
SECTION 6.12. Succession by Merger, etc.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, shall be the successor of the Trustee
hereunder without the execution or filing of any paper or any further act on the
part of any of the parties hereto; provided, however, that the Trustee must
continue to abide by the terms of Section 6.09.
In case at the time such successor to the Trustee shall
succeed to the trusts created by this Indenture any of the Securities of any
series shall have been authenticated but not delivered, any such successor to
the Trustee may adopt the certificate of authentication of any predecessor
trustee, and deliver such Securities so authenticated; and in case at that time
any of the Securities of any series shall not have been authenticated, any
successor to the Trustee may authenticate such
<PAGE> 45
Securities either in the name of any predecessor hereunder or in the name of the
successor trustee; and in all such cases such certificates shall have the full
force which it is anywhere in the Securities of such series or in this Indenture
provided that the certificate of the Trustee shall have; provided, however, that
the right to adopt the certificate of authentication of any predecessor Trustee
or authenticate Securities of any series in the name of any predecessor Trustee
shall apply only to its successor or successors by merger, conversion or
consolidation.
SECTION 6.13. Limitation on Rights of Trustee as a Creditor.
The Trustee shall comply with Section 311(a) of the Trust
Indenture Act, excluding any creditor relationship described in Section 311(b)
of the Trust Indenture Act. A Trustee who has resigned or been removed shall be
subject to Section 311(a) of the Trust Indenture Act to the extent included
therein.
SECTION 6.14. Authenticating Agents.
There may be one or more Authenticating Agents appointed by
the Trustee upon the request of the Company with power to act on its behalf and
subject to its direction in the authentication and delivery of Securities of any
series issued upon exchange or transfer thereof as fully to all intents and
purposes as though any such Authenticating Agent had been expressly authorized
to authenticate and deliver Securities of such series; provided, however, that
the Trustee shall have no liability to the Company for any acts or omissions of
the Authenticating Agent with respect to the authentication and delivery of
Securities of any series. Any such Authenticating Agent shall at all times be a
corporation organized and doing business under the laws of the United States or
of any state or territory thereof or of the District of Columbia authorized
under such laws to act as Authenticating Agent, having a combined capital and
surplus of at least $5,000,000 and being subject to supervision or examination
by federal, state, territorial or District of Columbia authority. If such
corporation publishes reports of condition at least annually pursuant to law or
the requirements of such authority, then for the purposes of this Section 6.14
the combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time an Authenticating Agent shall cease to be eligible
in accordance with the provisions of this Section, it shall resign immediately
in the manner and with the effect herein specified in this Section.
Any corporation into which any Authenticating Agent may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, consolidation or conversion to which any
Authenticating Agent shall be a party, or any corporation succeeding to the
corporate trust business of any Authenticating Agent, shall be the successor of
such Authenticating Agent hereunder, if such successor corporation is otherwise
eligible under this Section 6.14 without the execution or filing of any paper or
any further act on the part of the parties hereto or such Authenticating Agent.
<PAGE> 46
Any Authenticating Agent may at any time resign with respect
to one or more or all series of Securities by giving written notice of
resignation to the Trustee and to the Company. The Trustee may at any time
terminate the agency of any Authenticating Agent with respect to one or more or
all series of Securities by giving written notice of termination to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time any
Authenticating Agent shall cease to be eligible under this Section 6.14, the
Trustee may, and upon the request of the Company shall, promptly appoint a
successor Authenticating Agent with respect to the applicable series eligible
under this Section 6.14, shall give written notice of such appointment to the
Company and shall mail notice of such appointment to all holders of the
applicable series of Securities as the names and addresses of such holders
appear on the Security register. Any successor Authenticating Agent with respect
to all or any series upon acceptance of its appointment hereunder shall become
vested with all rights, powers, duties and responsibilities with respect to such
series of its predecessor hereunder, with like effect as if originally named as
Authenticating Agent herein.
The Company agrees to pay to any Authenticating Agent from
time to time reasonable compensation for its services. Any Authenticating Agent
shall have no responsibility or liability for any action taken by it as such in
accordance with the directions of the Trustee.
If an appointment is made pursuant to this Section, the
Securities may have endorsed thereon, in addition to the Trustee's certificate
of authentication, an alternative certificate of authentication in the following
form:
This is one of the Securities of the series designated therein
referred to in the within mentioned Indenture.
IBJ SCHRODER BANK & TRUST COMPANY
As Trustee
By:_____________________________________
As Authenticating Agent
By:______________________________________
Authorized Officer
<PAGE> 47
ARTICLE SEVEN
CONCERNING THE SECURITYHOLDERS
SECTION 7.01. Action by Securityholders.
Whenever in this Indenture it is provided that the holders of
a specified percentage in aggregate principal amount of the Securities of any or
all series may take any action (including the making of any demand or request,
the giving of any notice, consent or waiver or the taking of any other action)
the fact that at the time of taking any such action the holders of such
specified percentage have joined therein may be evidenced (a) by any instrument
or any number of instruments of similar tenor executed by such Securityholders
in person or by agent or proxy appointed in writing, or (b) by the record of
such holders of Securities voting in favor thereof at any meeting of such
Securityholders duly called and held in accordance with the provisions of
Article Eight, or (c) by a combination of such instrument or instruments and any
such record of such a meeting of such Securityholders.
If the Company shall solicit from the Securityholders of any
series any request, demand, authorization, direction, notice, consent, waiver or
other action, the Company may, at its option, as evidenced by an Officers'
Certificate, fix in advance a record date for such series for the determination
of Securityholders entitled to give such request, demand, authorization,
direction, notice, consent, waiver or other action, but the Company shall have
no obligation to do so. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other action may be given
before or after the record date, but only the Securityholders of record at the
close of business on the record date shall be deemed to be Securityholders for
the purposes of determining whether Securityholders of the requisite proportion
of outstanding Securities of that series have authorized or agreed or consented
to such request, demand, authorization, direction, notice, consent, waiver or
other action, and for that purpose the outstanding Securities of that series
shall be computed as of the record date; provided, however, that no such
authorization, agreement or consent by such Securityholders on the record date
shall be deemed effective unless it shall become effective pursuant to the
provisions of this Indenture not later than six months after the record date.
SECTION 7.02. Proof of Execution by Securityholders.
Subject to the provisions of Section 6.01, 6.02 and 8.05,
proof of the execution of any instrument by a Securityholder or his agent or
proxy shall be sufficient if made in accordance with such reasonable rules and
regulations as may be prescribed by the Trustee or in such manner as shall be
satisfactory to the Trustee. The ownership of Securities shall be proved by the
Security register or by a certificate of the Security registrar. The Trustee may
require such additional proof of any matter referred to in this Section as it
shall deem necessary.
<PAGE> 48
The record of any Securityholders' meeting shall be proved in
the manner provided in Section 8.06.
SECTION 7.03. Who Are Deemed Absolute Owners.
Prior to due presentment for registration of transfer of any
Security, the Company, the Trustee, any Authenticating Agent, any paying agent,
any transfer agent and any Security registrar may deem the Person in whose name
such Security shall be registered upon the Security register (including a
Depositary in the case of a Global Security) to be, and may treat such person
as, the absolute owner of such Security (whether or not such Security shall be
overdue) for the purpose of receiving payment of or on account of the principal
of, premium, if any, and interest on such Security and for all other purposes;
and neither the Company nor the Trustee nor any Authenticating Agent nor any
paying agent nor any transfer agent nor any Security registrar shall be affected
by any notice to the contrary. All such payments so made to any holder for the
time being or upon his order shall be valid, and, to the extent of the sum or
sums so paid, effectual to satisfy and discharge the liability for moneys
payable upon any such Security.
SECTION 7.04. Securities Owned by Company Deemed Not Outstanding.
In determining whether the holders of the requisite aggregate
principal amount of Securities have concurred in any direction, consent or
waiver under this Indenture, Securities which are owned by the Company or any
other obligor on the Securities or by any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company or any other obligor on the Securities shall be disregarded and deemed
not to be outstanding for the purpose of any such determination; provided,
however, that for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, consent or waiver, only Securities
which the Trustee actually knows are so owned shall be so disregarded.
Securities so owned which have been pledged in good faith may be regarded as
outstanding for the purposes of this Section 7.04 if the pledgee shall establish
to the satisfaction of the Trustee the pledgee's right to vote such Securities
and that the pledgee is not the Company or any such other obligor or person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company or any such other obligor. In the case of a
dispute as to such right, any decision by the Trustee taken upon the advice of
counsel shall be full protection to the Trustee.
SECTION 7.05. Revocation of Consents; Future Holders Bound.
At any time prior to (but not after) the evidencing to the
Trustee, as provided in Section 7.01, of the taking of any action by the holders
of the percentage in aggregate principal amount of Securities specified in this
Indenture in connection with such action, any holder of a Security (or any
Security issued in whole or in part in exchange or substitution therefor) the
serial
<PAGE> 49
number of which is shown by the evidence to be included in the Securities the
holders of which have consented to such action may, by filing written notice
with the Trustee at its principal office and upon proof of holding as provided
in Section 7.02, revoke such action so far as concerns such Security (or so far
as concerns the principal amount represented by any exchanged or substituted
Security). Except as aforesaid any such action taken by the holder of any
Security shall be conclusive and binding upon such holder and upon all future
holders and owners of such Security, and of any Security issued in exchange or
substitution therefor, irrespective of whether or not any notation in regard
thereto is made upon such Security or any Security issued in exchange or
substitution therefor.
ARTICLE EIGHT
SECURITYHOLDERS' MEETINGS
SECTION 8.01. Purposes of Meetings. A meeting of Securityholders of
any or all series may be called at any time and from time to time pursuant to
the provisions of this Article Eight for any of the following purposes:
(a) to give any notice to the Company or to the Trustee, or to
give any directions to the Trustee, or to consent to the waiving of any
default hereunder and its consequences, or to take any other action
authorized to be taken by Securityholders pursuant to any of the
provisions of Article Five;
(b) to remove the Trustee and nominate a successor trustee
pursuant to the provisions of Article Six;
(c) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 9.02; or
(d) to take any other action authorized to be taken by or on
behalf of the holders of any specified aggregate principal amount of
such Securities under any other provision of this Indenture or under
applicable law.
SECTION 8.02. Call of Meetings by Trustee.
The Trustee may at any time call a meeting of Securityholders
of any or all series to take any action specified in Section 8.01, to be held at
such time and at such place in New York, New York, as the Trustee shall
determine. Notice of every meeting of the Securityholders of any or all series,
setting forth the time and the place of such meeting and in general terms the
action proposed to be taken at such meeting, shall be mailed to holders of
Securities of each series affected
<PAGE> 50
at their addresses as they shall appear on the Securities register of each
series affected. Such notice shall be mailed not less than 20 nor more than 180
days prior to the date fixed for the meeting.
SECTION 8.03. Call of Meetings by Company or Securityholders.
In case at any time the Company pursuant to a resolution of
the Board of Directors, or the holders of at least 10% in aggregate principal
amount of the Securities of any or all series, as the case may be, then
outstanding, shall have requested the Trustee to call a meeting of
Securityholders of any or all series, as the case may be, by written request
setting forth in reasonable detail the action proposed to be taken at the
meeting, and the Trustee shall not have mailed the notice of such meeting within
20 days after receipt of such request, then the Company or such Securityholders
may determine the time and the place in said Borough of Manhattan for such
meeting and may call such meeting to take any action authorized in Section 8.01,
by mailing notice thereof as provided in Section 8.02.
SECTION 8.04. Qualifications for Voting.
To be entitled to vote at any meeting of Securityholders a
person shall (a) be a holder of one or more Securities with respect to which the
meeting is being held or (b) a person appointed by an instrument in writing as
proxy by a holder of one or more such Securities. The only persons who shall be
entitled to be present or to speak at any meeting of Securityholders shall be
the persons entitled to vote at such meeting and their counsel and any
representatives of the Trustee and its counsel and any representatives of the
Company and its counsel.
SECTION 8.05. Regulations.
Notwithstanding any other provisions of this Indenture, the
Trustee may make such reasonable regulations as it may deem advisable for any
meeting of Securityholders, in regard to proof of the holding of Securities and
of the appointment of proxies, and in regard to the appointment and duties of
inspectors of votes, the submission and examination of proxies, certificates and
other evidence of the right to vote, and such other matters concerning the
conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a
temporary chairman of the meeting, unless the meeting shall have been called by
the Company or by Securityholders as provided in Section 8.03, in which case the
Company or the Securityholders calling the meeting, as the case may be, shall in
like manner appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by majority vote of the meeting.
Subject to the provisions of Section 7.04 and unless otherwise
provided in an indenture supplemental hereto, at any meeting each holder of
Securities with respect to which such
<PAGE> 51
meeting is being held or proxy therefor shall be entitled to one vote for each
$1,000 principal amount (in the case of Original Issue Discount Securities, such
principal amount to be determined as provided in the definition "outstanding")
of Securities held or represented by such holder; provided, however, that no
vote shall be cast or counted at any meeting in respect of any Security
challenged as not outstanding and ruled by the chairman of the meeting to be not
outstanding. The chairman of the meeting shall have no right to vote other than
by virtue of Securities held by him or instruments in writing as aforesaid duly
designating him as the person to vote on behalf of other Securityholders. Any
meeting of Securityholders duly called pursuant to the provisions of Section
8.02 or 8.03 may be adjourned from time to time by a majority of those present,
whether or not constituting a quorum, and the meeting may be held as so
adjourned without further notice.
SECTION 8.06. Voting.
The vote upon any resolution submitted to any meeting of
holders of Securities with respect to which such meeting is being held shall be
by written ballots on which shall be subscribed the signatures of such holders
or of their representatives by proxy and the serial number or numbers of the
Securities held or represented by them. The permanent chairman of the meeting
shall appoint two inspectors of votes who shall count all votes cast at the
meeting for or against any resolution and who shall make and file with the
secretary of the meeting their verified written reports in triplicate of all
votes cast at the meeting. A record in duplicate of the proceedings of each
meeting of Securityholders shall be prepared by the secretary of the meeting and
there shall be attached to said record the original reports of the inspectors of
votes on any vote by ballot taken thereat and affidavits by one or more persons
having knowledge of the facts setting forth a copy of the notice of the meeting
and showing that the notice was mailed as provided in Section 8.02. The record
shall show the serial numbers of the Securities voting in favor of or against
any resolution. The record shall be signed and verified by the affidavits of the
permanent chairman and secretary of the meeting and one of the duplicates shall
be delivered to the Company and the other to the Trustee to be preserved by the
Trustee, the latter to have attached thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence
of the matters therein stated.
<PAGE> 52
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 9.01. Supplemental Indentures without Consent of
Securityholders.
The Company and the Trustee may from time to time and at any
time enter into an indenture or indentures supplemental hereto (which shall
conform to the provisions of the Trust Indenture Act as then in effect), without
the consent of the Securityholders, for one or more of the following purposes:
(a) to evidence the succession of another corporation to the
Company, or successive successions, and the assumption by the successor
corporation of the covenants, agreements and obligations of the Company
pursuant to Article Ten hereof;
(b) to add to the covenants of the Company such further
covenants, restrictions or conditions for the protection of the holders
of all or any series of Securities (and, if such covenants are to be
for the benefit of less than all series of Securities, stating that
such covenants are expressly being included for the benefit of such
series) as the Company and the Trustee shall consider to be for the
protection of the holders of such Securities, and to make the
occurrence, or the occurrence and continuance, of a default in any of
such additional covenants, restrictions or conditions a default or an
Event of Default permitting the enforcement of all or any of the
several remedies provided in this Indenture as herein set forth;
provided, however, that in respect of any such additional covenant,
restriction or condition such supplemental indenture may provide for a
particular period of grace after default (which period may be shorter
or longer than that allowed in the case of other defaults) or may
provide for an immediate enforcement upon such default or may limit the
remedies available to the Trustee upon such default;
(c) to cure any ambiguity or to correct or supplement any
provision contained herein or in any supplemental indenture which may
be defective or inconsistent with any other provision contained herein
or in any supplemental indenture, or to make such other provisions in
regard to matters or questions arising under this Indenture; provided
that any such action shall not materially adversely affect the
interests of the holders of the Securities;
(d) to qualify, or maintain the qualification of, this
Indenture under the Trust Indenture Act;
(e) to evidence and provide for the acceptance of appointment
hereunder by a successor trustee with respect to the Securities of one
or more series and to add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the
<PAGE> 53
administration of the trusts hereunder by more than one trustee,
pursuant to the requirements of Section 6.11;
(f) to make provision for transfer procedures, certification,
book-entry provisions, the form of restricted securities legends, if
any, to be placed on Securities and all other matters necessary,
desirable or appropriate in connection with the issuance of Securities
to holders of Capital Securities in the event of a distribution of
Securities by an Interpool Capital Trust following a Dissolution Event;
(g) to make any change that does not adversely affect the
rights of any Securityholder; or
(h) pursuant to Section 2.03, to provide for the issuance of
and establish the form and terms and conditions of additional series of
Securities.
The Trustee is hereby authorized to join with the Company in
the execution of any such supplemental indenture, to make any further
appropriate agreements and stipulations which may be therein contained and to
accept the conveyance, transfer and assignment of any property thereunder, but
the Trustee shall not be obligated to, but may in its discretion, enter into any
such supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of
this Section 9.01 may be executed by the Company and the Trustee without the
consent of the holders of any of the Securities at the time outstanding,
notwithstanding any of the provisions of Section 9.02.
SECTION 9.02. Supplemental Indentures with Consent of Securityholders.
With the consent (evidenced as provided in Section 7.01) of
the holders of not less than a majority in aggregate principal amount of each
series of the Securities at the time outstanding affected by such supplemental
indenture, the Company and the Trustee may from time to time and at any time
enter into an indenture or indentures supplemental hereto (which shall conform
to the provisions of the Trust Indenture Act then in effect) for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of any supplemental indenture or of modifying in
any manner the rights of the holders of the Securities of such series; provided,
however, that no such supplemental indenture shall without the consent of all
the holders of the Securities of each series then outstanding and affected
thereby (i) change the fixed maturity of any Security of such series, or reduce
the rate or extend the time of payment of interest thereon, or reduce the
principal amount thereof or any premium thereon, or reduce any amount payable on
redemption or prepayment thereof or change any date on which the Securities of
such series may be prepaid or make the principal thereof or any interest or
premium
<PAGE> 54
thereon payable in any coin or currency other than that provided in the
Securities, or reduce the amount of the principal of an Original Issue Discount
Security that would be due and payable upon an acceleration of the maturity
thereof pursuant to Section 5.01 or the amount thereof provable in bankruptcy
pursuant to Section 5.02, or impair or affect the right of any Securityholder to
institute suit for payment thereof or the right of repayment, if any, at the
option of the holder, or modify Section 13.13, without the consent of the holder
of each Security so affected, or (ii) reduce the aforesaid percentage of
Securities of such series the holders of which are required to consent to any
such supplemental indenture, without the consent of the holders of each Security
then affected; provided, further, that if the Securities of such series are held
by an Interpool Capital Trust or a trustee of such trust, such supplemental
indenture shall not be effective until the holders of a majority in liquidation
preference of Trust Securities of such Interpool Capital Trust shall have
consented to such supplemental indenture; provided further, that if the consent
of the holder of each outstanding Security is required, such supplemental
indenture shall not be effective until each holder of the Trust Securities of
such Interpool Capital Trust shall have consented to such supplemental
indenture.
A supplemental indenture which changes or eliminates any
covenant or other provision of this Indenture which has expressly been included
solely for the benefit of one or more particular series of Securities, or which
modifies the rights of Securityholders of such series with respect to such
covenant or provision, shall be deemed not to affect the rights under this
Indenture or the Securityholders of any other series.
Upon the request of the Company accompanied by a copy of a
Board Resolution authorizing the execution of any such supplemental indenture,
and upon the filing with the Trustee of evidence of the consent of
Securityholders as aforesaid, the Trustee shall join with the Company in the
execution of such supplemental indenture unless such supplemental indenture
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such supplemental indenture. The Trustee may receive an
Opinion of Counsel as conclusive evidence that any supplemental indenture
executed pursuant to this Article is authorized or permitted by, and conforms
to, the terms of this Article and that it is proper for the Trustee under the
provisions of this Article to join in the execution thereof.
Promptly after the execution by the Company and the Trustee of
any supplemental indenture pursuant to the provisions of this Section 9.02, the
Trustee shall transmit by mail, first class postage prepaid, a notice, prepared
by the Company, setting forth in general terms the substance of such
supplemental indenture, to the Securityholders of all series affected thereby as
their names and addresses appear upon the Security register. Any failure of the
Trustee to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture.
<PAGE> 55
It shall not be necessary for the consent of the
Securityholders under this Section 9.02 to approve the particular form of any
proposed supplemental indenture, but it shall be sufficient if such consent
shall approve the substance thereof.
SECTION 9.03. Compliance with Trust Indenture Act; Effect of
Supplemental Indentures.
Any supplemental indenture executed pursuant to the provisions
of this Article Nine shall comply with the Trust Indenture Act, as then in
effect. Upon the execution of any supplemental indenture pursuant to the
provisions of this Article Nine, this Indenture shall be and be deemed to be
modified and amended in accordance therewith and the respective rights,
limitations of rights, obligations, duties and immunities under this Indenture
of the Trustee, the Company and the holders of Securities of each series
affected thereby shall thereafter be determined, exercised and enforced
hereunder subject in all respects to such modifications and amendments and all
the terms and conditions of any such supplemental indenture shall be and be
deemed to be part of the terms and conditions of this Indenture for any and all
purposes.
SECTION 9.04. Notation on Securities.
Securities of any series authenticated and delivered after the
execution of any supplemental indenture affecting such series pursuant to the
provisions of this Article Nine may bear a notation in form approved by the
Trustee as to any matter provided for in such supplemental indenture. If the
Company or the Trustee shall so determine, new Securities of any series so
modified as to conform, in the opinion of the Trustee and the Board of
Directors, to any modification of this Indenture contained in any such
supplemental indenture may be prepared and executed by the Company,
authenticated by the Trustee or the Authenticating Agent and delivered in
exchange for the Securities of any series then outstanding.
SECTION 9.05. Evidence of Compliance of Supplemental Indenture to be
Furnished Trustee.
The Trustee, subject to the provisions of Sections 6.01 and
6.02, shall be entitled to receive an Officers' Certificate and an Opinion of
Counsel as conclusive evidence that any supplemental indenture executed pursuant
hereto complies with the requirements of this Article Nine.
ARTICLE TEN
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE.
SECTION 10.01. Company May Consolidate, etc., on Certain Terms.
<PAGE> 56
The Company shall not consolidate with or merge into any other
Person or transfer or lease its properties and assets as an entirety or
substantially as an entirety to any Person, and the Company shall not permit any
other Person to consolidate with or merge into the Company, or convey, transfer
or lease its properties and assets as an entirety or substantially as an
entirety to the Company unless:
(a) either the Company shall be the continuing corporation, or
the corporation (if other than the Company) formed by such
consolidation or into which the Company is merged or to which the
properties and assets of the Company substantially as an entity are
transferred or leased shall be a corporation organized and existing
under the laws of the United States of America or any State thereof or
the District of Columbia and shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of the Company under
the Debentures and this Indenture; and
(b) immediately after giving effect to such transaction no
Event of Default, and no event which, after notice of lapse of time or
both, would become an Event of Default, shall have occurred and be
continuing.
SECTION 10.02. Successor Corporation to be Substituted for Company.
In case of any such consolidation, merger, conveyance or
transfer and upon the assumption by the successor corporation, by supplemental
indenture, executed and delivered to the Trustee and satisfactory in form to the
Trustee, of the due and punctual payment of the principal of and premium, if
any, and interest on all of the Securities and the due and punctual performance
and observance of all of the covenants and conditions of this Indenture to be
performed or observed by the Company, such successor corporation shall succeed
to and be substituted for the Company, with the same effect as if it had been
named herein as the party of the first part, and the Company thereupon shall be
relieved of any further liability or obligation hereunder or upon the
Securities. Such successor corporation thereupon may cause to be signed, and may
issue either in its own name or in the name of the Company, any or all of the
Securities issuable hereunder which theretofore shall not have been signed by
the Company and delivered to the Trustee or the Authenticating Agent; and, upon
the order of such successor corporation instead of the Company and subject to
all the terms, conditions and limitations in this Indenture prescribed, the
Trustee or the Authenticating Agent shall authenticate and deliver any
Securities which previously shall have been signed and delivered by the officers
of the Company to the Trustee or the Authenticating Agent for authentication,
and any Securities which such successor corporation thereafter shall cause to be
signed and delivered to the Trustee or the Authenticating Agent for that
purpose. All the Securities so issued shall in all respects have the same legal
rank and benefit under this Indenture as the
<PAGE> 57
Securities theretofore or thereafter issued in accordance with the terms of this
Indenture as though all of such Indentures had been issued at the date of the
execution hereof.
SECTION 10.03. Opinion of Counsel to be Given Trustee.
The Trustee, subject to the provisions of Sections 6.01 and
6.02, shall be entitled to receive an Opinion of Counsel as conclusive evidence
that any consolidation, merger, conveyance or transfer, and any assumption,
permitted or required by the terms of this Article Ten complies with the
provisions of this Article Ten.
ARTICLE ELEVEN
SATISFACTION AND DISCHARGE OF INDENTURE.
SECTION 11.01. Discharge of Indenture.
When (a) the Company shall deliver to the Trustee for
cancellation all Securities theretofore authenticated (other than any Securities
which shall have been destroyed, lost or stolen and which shall have been
replaced or paid as provided in Section 2.08) and not theretofore canceled, or
(b) all the Securities not theretofore canceled or delivered to the Trustee for
cancellation shall have become due and payable, or are by their terms to become
due and payable within one year or are to be called for redemption within one
year under arrangements satisfactory to the Trustee for the giving of notice of
redemption, and the Company shall deposit with the Trustee, in trust, funds
sufficient to pay at maturity or upon redemption all of the Securities (other
than any Securities which shall have been destroyed, lost or stolen and which
shall have been replaced or paid as provided in Section 2.08) not theretofore
canceled or delivered to the Trustee for cancellation, including principal and
premium, if any, and interest due or to become due to such date of maturity or
redemption date, as the case may be, but excluding, however, the amount of any
moneys for the payment of principal of, and premium, if any, or interest on the
Securities (1) theretofore repaid to the Company in accordance with the
provisions of Section 11.04, or (2) paid to any state or to the District of
Columbia pursuant to its unclaimed property or similar laws, and if in either
case the Company shall also pay or cause to be paid all other sums payable
hereunder by the Company, then this Indenture shall cease to be of further
effect except for the provisions of Sections 2.05, 2.07, 2.08, 3.01, 3.02, 3.04,
6.06, 6.10 and 11.04 hereof shall survive until such Securities shall mature and
be paid. Thereafter, Sections 6.10 and 11.04 shall survive, and the Trustee, on
demand of the Company accompanied by any Officers' Certificate and an Opinion of
Counsel and at the cost and expense of the Company, shall execute proper
instruments acknowledging satisfaction of and discharging this Indenture, the
Company, however, hereby agreeing to reimburse the Trustee for any costs or
expenses thereafter reasonably and properly incurred by the Trustee in
connection with this Indenture or the Securities.
<PAGE> 58
SECTION 11.02. Deposited Moneys and U.S. Government Obligations to be
Held in Trust by Trustee.
Subject to the provisions of Section 11.04, all moneys and
U.S. Government Obligations deposited with the Trustee pursuant to Sections
11.01 or 11.05 shall be held in trust and applied by it to the payment, either
directly or through any paying agent (including the Company if acting as its own
paying agent), to the holders of the particular Securities for the payment of
which such moneys or U.S. Government Obligations have been deposited with the
Trustee, of all sums due and to become due thereon for principal, premium, if
any, and interest.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to Section 11.05 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the holders of outstanding Securities.
SECTION 11.03. Paying Agent to Repay Moneys Held.
Upon the satisfaction and discharge of this Indenture all
moneys then held by any paying agent of the Securities (other than the Trustee)
shall, upon demand of the Company, be repaid to it or paid to the Trustee, and
thereupon such paying agent shall be released from all further liability with
respect to such moneys.
SECTION 11.04. Return of Unclaimed Moneys.
Any moneys deposited with or paid to the Trustee or any paying
agent for payment of the principal of, and premium, if any, or interest on
Securities and not applied but remaining unclaimed by the holders of Securities
for two years after the date upon which the principal of, and premium, if any,
or interest on such Securities, as the case may be, shall have become due and
payable, shall be repaid to the Company by the Trustee or such paying agent on
written demand; and the holder of any of the Securities shall thereafter look
only to the Company for any payment which such holder may be entitled to collect
and all liability of the Trustee or such paying agent with respect to such
moneys shall thereupon cease.
SECTION 11.05. Defeasance Upon Deposit of Moneys or U.S. Government
Obligations.
The Company shall be deemed to have been Discharged (as
defined below) from its respective obligations with respect to any series of
Securities on the 91st day after the applicable conditions set forth below have
been satisfied with respect to any series of Securities at any time after the
applicable conditions set forth below have been satisfied:
<PAGE> 59
(1) The Company shall have deposited or caused to be deposited
irrevocably with the Trustee or the Defeasance Agent (as defined below)
as trust funds in trust, specifically pledged as security for, and
dedicated solely to, the benefit of the holders of the Securities of
such series (i) money in an amount, or (ii) U.S. Government Obligations
which through the payment of interest and principal in respect thereof
in accordance with their terms will provide, not later than one day
before the due date of any payment, money in an amount, or (iii) a
combination of (i) and (ii), sufficient, in the opinion (with respect
to (ii) and (iii)) of a nationally recognized firm of independent
public accountants expressed in a written certification thereof
delivered to the Trustee and the Defeasance Agent, if any, to pay and
discharge each installment of principal (including any mandatory
sinking fund payments) of, and interest and premium, if any, on, the
outstanding Securities of such series on the dates such installments of
principal, interest or premium are due;
(2) if the Securities of such series are then listed on any
national securities exchange, the Company shall have delivered to the
Trustee and the Defeasance Agent, if any, an Opinion of Counsel to the
effect that the exercise of the option under this Section 11.05 would
not cause such Securities to be delisted from such exchange;
(3) no Event of Default or event which with notice or lapse of
time would become an Event of Default with respect to the Securities of
such series shall have occurred and be continuing on the date of such
deposit; and
(4) the Company shall have delivered to the Trustee and the
Defeasance Agent, if any, an Opinion of Counsel to the effect that
holders of the Securities of such series will not recognize income,
gain or loss for United States federal income tax purposes as a result
of the exercise of the option under this Section 11.05 and will be
subject to United States federal income tax on the same amount and in
the same manner and at the same times as would have been the case if
such option had not been exercised, and, in the case of the Securities
of such series being Discharged, such opinion shall be accompanied by a
private letter ruling to that effect received from the United States
Internal Revenue Service or a revenue ruling pertaining to a comparable
form of transaction to that effect published by the United States
Internal Revenue Service.
"Discharged" means that the Company shall be deemed to have
paid and discharged the entire indebtedness represented by, and obligations
under, the Securities of such series and to have satisfied all the obligations
under this Indenture relating to the Securities of such series (and the Trustee,
at the expense of the Company, shall execute proper instruments acknowledging
the same), except (A) the rights of holders of Securities of such series to
receive, from the trust fund described in clause (1) above, payment of the
principal of and the interest and premium, if any, on such Securities when such
payments are due; (B) the Company's obligations with respect to such
<PAGE> 60
Securities under Sections 2.07, 2.08, 5.02 and 11.04; and (C) the rights,
powers, trusts, duties and immunities of the Trustee hereunder.
"Defeasance Agent" means another financial institution which
is eligible to act as Trustee hereunder and which assumes all of the obligations
of the Trustee necessary to enable the Trustee to act hereunder. In the event
such a Defeasance Agent is appointed pursuant to this section, the following
conditions shall apply:
(1) The Trustee shall have approval rights over the
document appointing such Defeasance Agent and the
document setting forth such Defeasance Agent's rights
and responsibilities;
(2) The Defeasance Agent shall provide verification to
the Trustee acknowledging receipt of sufficient money
and/or U.S. Government Obligations to meet the
applicable conditions set forth in this Section
11.05; and
(3) The Trustee shall determine whether the Company shall
be deemed to have been Discharged from its respective
obligations with respect to any series of Securities.
ARTICLE TWELVE
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
SECTION 12.01. Indenture and Securities Solely Corporate Obligations
No recourse for the payment of the principal of or premium, if
any, or interest on any Security, or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company in this Indenture or in any supplemental indenture, or
in any Security, or because of the creation of any indebtedness represented
thereby, shall be had against any incorporator, stockholder, officer or
director, as such, past, present or future, of the Company or of any successor
corporation of the Company, either directly or through the Company or any
successor corporation of the Company, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise; it being expressly understood that all such liability is hereby
expressly waived and released as a condition of, and as a consideration for, the
execution of this Indenture or any supplemental indenture and the issue of the
Securities.
<PAGE> 61
ARTICLE THIRTEEN
MISCELLANEOUS PROVISIONS
SECTION 13.01. Successors.
All the covenants, stipulations, promises and agreements in
this Indenture contained by the Company shall bind its successors and assigns
whether so expressed or not.
SECTION 13.02. Official Acts by Successor Corporation.
Any act or proceeding by any provision of this Indenture or
any supplemental indenture authorized or required to be done or performed by any
board, committee or officer of the Company shall and may be done and performed
with like force and effect by the like board, committee or officer of any
corporation that shall at the time be the lawful sole successor of the Company.
SECTION 13.03. Surrender of Company Powers.
The Company by instrument in writing executed by appropriate
authority of its Board of Directors and delivered to the Trustee may surrender
any of the powers reserved to the Company, and thereupon such power so
surrendered shall terminate both as to the Company, as the case may be, and as
to any successor corporation.
SECTION 13.04. Addresses for Notices, etc.
Any notice or demand which by any provision of this Indenture
is required or permitted to be given or served by the Trustee or by the holders
of Securities on the Company may be given or served by being deposited postage
prepaid by registered or certified mail in a post office letter box addressed
(until another address is filed by the Company with the Trustee for the purpose)
to the Company, Interpool, Inc., 211 College Road East, Princeton, New Jersey
08540, Attention: Chief Executive Officer. Any notice, direction, request or
demand by any Securityholder to or upon the Trustee shall be deemed to have been
sufficiently given or made, for all purposes, if given or made in writing at the
office of the Trustee, addressed to the Trustee, One State Street, New York, New
York 10004, Attention: Corporate Trust Department.
SECTION 13.05. Governing Law.
This Indenture and each Security shall be deemed to be a
contract made under the laws of the State of New York, and for all purposes
shall be governed by and construed in accordance with the laws of said State,
without regard to conflicts of laws principles thereof.
<PAGE> 62
SECTION 13.06. Evidence of Compliance with Conditions Precedent.
Upon any application or demand by the Company to the Trustee
to take any action under any of the provisions of this Indenture, the Company
shall furnish to the Trustee an Officers' Certificate stating that in the
opinion of the signers all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with and an Opinion
of Counsel stating that, in the opinion of such counsel, all such conditions
precedent have been complied with.
Each certificate or opinion of the Company provided for in
this Indenture and delivered to the Trustee with respect to compliance with a
condition or covenant provided for in this Indenture shall include (1) a
statement that the person making such certificate or opinion has read such
covenant or condition; (2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based; (3) a statement that, in the opinion of
such person, he has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such covenant or
condition has been complied with; and (4) a statement as to whether or not, in
the opinion of such person, such condition or covenant has been complied with.
SECTION 13.07. Legal Holidays.
In any case where the date of payment of interest on or
principal of the Securities will be in New York, New York or Wilmington,
Delaware a legal holiday or a day on which banking institutions are authorized
by law to close, the payment of such interest on or principal of the Securities
need not be made on such date but may be made on the next succeeding Business
Day, with the same force and effect as if made on the date of payment and no
interest shall accrue for the period from and after such date.
SECTION 13.08. Trust Indenture Act to Control.
If and to the extent that any provision of this Indenture
limits, qualifies or conflicts with another provision included in this Indenture
which is required to be included in this Indenture by any of Sections 310 to
317, inclusive, of the Trust Indenture Act of 1939, such required provision
shall control from and after the date on which this Indenture is qualified under
the Trust Indenture Act.
SECTION 13.09. Table of Contents, Headings, etc.
The table of contents and the titles and headings of the
articles and sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
<PAGE> 63
SECTION 13.10. Execution in Counterparts.
This Indenture may be executed in any number of counterparts,
each of which shall be an original, but such counterparts shall together
constitute but one and the same instrument.
SECTION 13.11. Severability.
In case any one or more of the provisions contained in this
Indenture, any supplemental indenture or in the Securities of any series shall
for any reason be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provisions of this Indenture, such supplemental indenture or of such Securities,
but this Indenture and such Securities shall be construed as if such invalid or
illegal or unenforceable provision had never been contained herein or therein.
SECTION 13.12. Assignment.
The Company will have the right at all times to assign any of
its respective rights or obligations under this Indenture to a direct or
indirect wholly owned Subsidiary of the Company, provided, however, that, in the
event of any such assignment, the Company will remain liable for all such
obligations. Subject to the foregoing, the Indenture is binding upon and inures
to the benefit of the parties thereto and their respective successors and
assigns. This Indenture may not otherwise be assigned by the parties thereto.
SECTION 13.13. Acknowledgment of Rights.
The Company acknowledges that, with respect to any Securities
held by Interpool Capital Trust or a trustee of such trust, if the Property
Trustee of such Trust fails to enforce its rights under this Indenture as the
holder of the series of Securities held as the assets of Interpool Capital
Trust, any holder of Capital Securities may institute legal proceedings directly
against the Company to enforce such Property Trustee's rights under this
Indenture without first instituting any legal proceedings against such Property
Trustee or any other person or entity. Notwithstanding the foregoing, if an
Event of Default has occurred and is continuing and such event is attributable
to the failure of the Company to pay interest or principal on the applicable
series of Securities on the date such interest or principal is otherwise payable
(or in the case of redemption, on the redemption date), the Company acknowledges
that a holder of Capital Securities may directly institute a proceeding for
enforcement of payment to such holder of the principal of or interest on the
applicable series of Securities having a principal amount equal to the aggregate
liquidation amount of the Capital Securities of such holder on or after the
respective due date specified in the applicable series of Securities.
<PAGE> 64
ARTICLE FOURTEEN
REDEMPTION OF SECURITIES
SECTION 14.01. Applicability of Article.
The provisions of this Article shall be applicable to the
Securities of any series which are redeemable or prepayable before their stated
maturity except as otherwise specified as contemplated by the terms of the
Securities of such series. All references to redemption in this Article Fourteen
shall apply equally to a prepayment of Securities.
SECTION 14.02. Notice of Redemption; Selection of Securities.
In case the Company shall desire to exercise the right to
redeem all, or, as the case may be, any part of the Securities of any series in
accordance with their terms, it shall fix a date for redemption and shall mail a
notice of such redemption at least 30 and not more than 60 days prior to the
date fixed for redemption to the holders of Securities of such series so to be
redeemed as a whole or in part at their last addresses as the same appear on the
Security register. Such mailing shall be by first class mail. The notice if
mailed in the manner herein provided shall be conclusively presumed to have been
duly given, whether or not the holder receives such notice. In any case, failure
to give such notice by mail or any defect in the notice to the holder of any
Security of a series designated for redemption as a whole or in part shall not
affect the validity of the proceedings for the redemption of any other Security
of such series.
Each such notice of redemption shall specify the CUSIP number
of the Securities to be redeemed, the date fixed for redemption, the redemption
price at which Securities of such series are to be redeemed, the place or places
of payment, that payment will be made upon presentation and surrender of such
Securities, that interest accrued to the date fixed for redemption will be paid
as specified in said notice, and that on and after said date interest thereon or
on the portions thereof to be redeemed will cease to accrue. If less than all
the Securities of such series are to be redeemed the notice of redemption shall
specify the numbers of the Securities of that series to be redeemed. In case any
Security of a series is to be redeemed in part only, the notice of redemption
shall state the portion of the principal amount thereof to be redeemed and shall
state that on and after the date fixed for redemption, upon surrender of such
Security, a new Security or Securities of that series in principal amount equal
to the unredeemed portion thereof will be issued. Notwithstanding the foregoing,
such notice shall not be required to state the redemption price where such price
may not otherwise be determined at the time of the giving of such notice in
accordance with the terms of the applicable supplemental indenture or Officers'
Certificate providing for the issuance of the series of securities to be
redeemed, in which event a second notice shall be provided stating such
redemption price at the earliest practicable time following its determination.
<PAGE> 65
Prior to the redemption date specified in the notice of
redemption given as provided in this Section, the Company will deposit with the
Trustee or with one or more paying agents an amount of money sufficient to
redeem on the redemption date all the Securities so called for redemption at the
appropriate redemption price, together with accrued interest to the date fixed
for redemption.
If all, or less than all, the Securities of a series are to be
redeemed, the Company will give the Trustee notice not less than 45 nor more
than 60 days, respectively, prior to the redemption date as to the aggregate
principal amount of Securities of that series to be redeemed. In the event that
fewer than all the outstanding Securities of such series are to be redeemed, the
Securities to be redeemed shall be redeemed pro rata from each Holder of
Securities of such series, it being understood that, in respect of Securities
registered in the name of and held of record by the Depositary or its nominee
(or any successor Depositary or its nominee) or any nominee, the distribution of
the proceeds of such redemption will be made to the Depositary and disbursed by
such Depositary in accordance with the procedures applied by such agency or
nominee.
SECTION 14.03. Payment of Securities Called for Redemption.
If notice of redemption has been given as provided in Section
14.02, the Securities or portions of Securities of the series with respect to
which such notice has been given shall become due and payable on the date and at
the place or places stated in such notice at the applicable redemption price,
together with interest accrued to the date fixed for redemption, and on and
after said date (unless the Company shall default in the payment of such
Securities at the redemption price, together with interest accrued to said date)
interest on the Securities or portions of Securities of any series so called for
redemption shall cease to accrue. On presentation and surrender of such
Securities at a place of payment specified in said notice, the said Securities
or the specified portions thereof shall be paid and redeemed by the Company at
the applicable redemption price, together with interest accrued thereon to the
date fixed for redemption.
Upon presentation of any Security of any series redeemed in
part only, the Company shall execute and the Trustee shall authenticate and make
available for delivery to the holder thereof, at the expense of the Company, a
new Security or Securities of such series of authorized denominations, in
principal amount equal to the unredeemed portion of the Security so presented.
ARTICLE FIFTEEN
SUBORDINATION OF SECURITIES
SECTION 15.01. Agreement to Subordinate.
<PAGE> 66
The Company covenants and agrees, and each holder of
Securities issued hereunder and under any supplemental indenture or by any
resolutions by the Board of Directors ("Additional Provisions") by such
Securityholder's acceptance thereof likewise covenants and agrees, that all
Securities shall be issued subject to the provisions of this Article Fifteen;
and each holder of a Security, whether upon original issue or upon transfer or
assignment thereof, accepts and agrees to be bound by such provisions.
The payment by the Company of the principal of, premium, if
any, and interest on all Securities issued hereunder and under any Additional
Provisions shall, to the extent and in the manner hereinafter set forth, be
subordinated and junior in right of payment to the prior payment in full of all
Senior Indebtedness of the Company, whether outstanding at the date of this
Indenture or thereafter incurred.
No provision of this Article Fifteen shall prevent the
occurrence of any default or Event of Default hereunder.
SECTION 15.02. Default on Senior Indebtedness.
In the event and during the continuation of any default by the
Company in the payment of principal, premium, interest or any other payment due
on any Senior Indebtedness of the Company or in the event that the maturity of
any Senior Indebtedness of the Company has been accelerated (because of a
default, a judicial proceeding or otherwise), then, in either case, no payment
shall be made by the Company with respect to the principal (including redemption
payments) of, or premium, if any, or interest on the Securities until the Senior
Indebtedness is repaid in full.
In the event of the acceleration of the maturity of the
Securities, no payment shall be made by the Company with respect to principal
of, or premium, if any, or interest on the Securities until all Senior
Indebtedness is repaid in full.
In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee when such payment is prohibited by the
preceding paragraphs of this Section 15.02, such payment shall be held in trust
for the benefit of, and shall be paid over or delivered to, the holders of
Senior Indebtedness or their respective representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Senior Indebtedness
may have been issued, as their respective interests may appear, but only to the
extent that the holders of the Senior Indebtedness (or their representative or
representatives or a trustee) notify the Trustee in writing within 90 days of
such payment of the amounts then due and owing on the Senior Indebtedness and
only the amounts specified in such notice to the Trustee shall be paid to the
holders of Senior Indebtedness.
SECTION 15.03. Liquidation; Dissolution; Bankruptcy.
<PAGE> 67
Upon any payment by the Company or distribution of assets of
the Company of any kind or character, whether in cash, property or securities,
to creditors upon any dissolution or winding-up or liquidation or reorganization
of the Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due upon all Senior Indebtedness
of the Company shall first be paid in full, or payment thereof provided for in
money in accordance with its terms, before any payment is made by the Company on
account of the principal (and premium, if any) or interest on the Securities;
and upon any such dissolution or winding-up or liquidation or reorganization,
any payment by the Company, or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, to which the
Securityholders or the Trustee would be entitled to receive from the Company,
except for the provisions of this Article Fifteen, shall be paid by the Company
or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other
Person making such payment or distribution, or by the Securityholders or by the
Trustee under the Indenture if received by them or it, directly to the holders
of Senior Indebtedness of the Company (pro rata to such holders on the basis of
the respective amounts of Senior Indebtedness held by such holders, as
calculated by the Company) or their representative or representatives, or to the
trustee or trustees under any indenture pursuant to which any instruments
evidencing such Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay such Senior Indebtedness in
full, in money or money's worth, after giving effect to any concurrent payment
or distribution to or for the holders of such Senior Indebtedness, before any
payment or distribution is made to the Securityholders or to the Trustee.
In the event that, notwithstanding the foregoing, any payment
or distribution of assets of the Company of any kind or character, whether in
cash, property or securities, prohibited by the foregoing, shall be received by
the Trustee before all Senior Indebtedness of the Company is paid in full, or
provision is made for such payment in money in accordance with its terms, such
payment or distribution shall be held in trust for the benefit of and shall be
paid over or delivered to the holders of such Senior Indebtedness or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Indebtedness
may have been issued, as their respective interests may appear, as calculated by
the Company, for application to the payment of all Senior Indebtedness of the
Company, as the case may be, remaining unpaid to the extent necessary to pay
such Senior Indebtedness in full in money in accordance with its terms, after
giving effect to any concurrent payment or distribution to or for the benefit of
the holders of such Senior Indebtedness.
For purposes of this Article Fifteen, the words "cash,
property or securities" shall not be deemed to include shares of stock of the
Company as reorganized or readjusted, or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment, the
payment of which is subordinated at least to the extent provided in this Article
Fifteen with respect to the Securities to the payment of all Senior Indebtedness
of the Company, as the case may
<PAGE> 68
be, that may at the time be outstanding, provided that (i) such Senior
Indebtedness is assumed by the new corporation, if any, resulting from any such
reorganization or readjustment, and (ii) the rights of the holders of such
Senior Indebtedness are not, without the consent of such holders, altered by
such reorganization or readjustment. The consolidation of the Company with, or
the merger of the Company into, another corporation or the liquidation or
dissolution of the Company following the conveyance or transfer of its property
as an entirety, or substantially as an entirety, to another corporation upon the
terms and conditions provided for in Article Ten of this Indenture shall not be
deemed a dissolution, winding-up, liquidation or reorganization for the purposes
of this Section 15.03 if such other corporation shall, as a part of such
consolidation, merger, conveyance or transfer, comply with the conditions stated
in Article Ten of this Indenture. Nothing in Section 15.02 or in this Section
15.03 shall apply to claims of, or payments to, the Trustee under or pursuant to
Section 6.05 of this Indenture.
SECTION 15.04. Subrogation.
Subject to the payment in full of all Senior Indebtedness of
the Company, the rights of the Securityholders shall be subrogated to the rights
of the holders of such Senior Indebtedness to receive payments or distributions
of cash, property or securities of the Company, as the case may be, applicable
to such Senior Indebtedness until the principal of (and premium, if any) and
interest on the Securities shall be paid in full; and, for the purposes of such
subrogation, no payments or distributions to the holders of such Senior
Indebtedness of any cash, property or securities to which the Securityholders or
the Trustee (except as otherwise provided in Section 5.03) would be entitled
except for the provisions of this Article Fifteen, and no payment over pursuant
to the provisions of this Article Fifteen to or for the benefit of the holders
of such Senior Indebtedness by Securityholders or the Trustee, shall, as between
the Company, its creditors other than holders of Senior Indebtedness of the
Company, and the holders of the Securities, be deemed to be a payment by the
Company to or on account of such Senior Indebtedness. It is understood that the
provisions of this Article Fifteen are and are intended solely for the purposes
of defining the relative rights of the holders of the Securities, on the one
hand, and the holders of such Senior Indebtedness on the other hand.
Nothing contained in this Article Fifteen or elsewhere in this
Indenture, any supplemental indenture or in the Securities is intended to or
shall impair, as between the Company, its creditors other than the holders of
Senior Indebtedness of the Company, and the holders of the Securities, the
obligation of the Company, which is absolute and unconditional, to pay to the
holders of the Securities the principal of (and premium, if any) and interest on
the Securities as and when the same shall become due and payable in accordance
with their terms, or is intended to or shall affect the relative rights of the
holders of the Securities and creditors of the Company, as the case may be,
other than the holders of Senior Indebtedness of the Company, as the case may
be, nor shall anything herein or therein prevent the Trustee or the holder of
any Security from exercising all remedies otherwise permitted by applicable law
upon default under the Indenture, subject to the
<PAGE> 69
rights, if any, under this Article Fifteen of the holders of such Senior
Indebtedness in respect of cash, property or securities of the Company, as the
case may be, received upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Company
referred to in this Article Fifteen, the Trustee, subject to the provisions of
Article Six of this Indenture, and the Securityholders shall be entitled to
conclusively rely upon any order or decree made by any court of competent
jurisdiction in which such dissolution, winding-up, liquidation or
reorganization proceedings are pending, or a certificate of the receiver,
trustee in bankruptcy, liquidation trustee, agent or other Person making such
payment or distribution, delivered to the Trustee or to the Securityholders, for
the purposes of ascertaining the Persons entitled to participate in such
distribution, the holders of Senior Indebtedness and other indebtedness of the
Company, as the case may be, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article Fifteen.
SECTION 15.05. Trustee to Effectuate Subordination.
Each Securityholder by such Securityholder's acceptance
thereof authorizes and directs the Trustee on such Securityholder's behalf to
take such action as may be necessary or appropriate to effectuate the
subordination provided in this Article Fifteen and appoints the Trustee such
Securityholder's attorney-in-fact for any and all such purposes.
SECTION 15.06. Notice by the Company.
The Company shall give prompt written notice to a Responsible
Officer of the Trustee of any fact known to the Company that would prohibit the
making of any payment of monies to or by the Trustee in respect of the
Securities pursuant to the provisions of this Article Fifteen. Notwithstanding
the provisions of this Article Fifteen or any other provision of this Indenture
or any supplemental indenture, the Trustee shall not be charged with knowledge
of the existence of any facts that would prohibit the making of any payment of
monies to or by the Trustee in respect of the Securities pursuant to the
provisions of this Article Fifteen, unless and until a Responsible Officer of
the Trustee shall have received written notice thereof from the Company or a
holder or holders of Senior Indebtedness or from any trustee therefor; and
before the receipt of any such written notice, the Trustee, subject to the
provisions of Article Six of this Indenture, shall be entitled in all respects
to assume that no such facts exist; provided, however, that if the Trustee shall
not have received the notice provided for in this Section 15.06 at least two
Business Days prior to the date upon which by the terms hereof any money may
become payable for any purpose (including, without limitation, the payment of
the principal of (or premium, if any) or interest on any Security), then,
anything herein contained to the contrary notwithstanding, the Trustee shall
have full power and authority to receive such money and to apply the same to the
<PAGE> 70
purposes for which they were received, and shall not be affected by any notice
to the contrary that may be received by it within two Business Days prior to
such date.
The Trustee, subject to the provisions of Article Six of this
Indenture, shall be entitled to conclusively rely on the delivery to it of a
written notice by a Person representing himself to be a holder of Senior
Indebtedness of the Company, as the case may be (or a trustee on behalf of such
holder), to establish that such notice has been given by a holder of such Senior
Indebtedness or a trustee on behalf of any such holder or holders. In the event
that the Trustee determines in good faith that further evidence is required with
respect to the right of any Person as a holder of such Senior Indebtedness to
participate in any payment or distribution pursuant to this Article Fifteen, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of such Senior Indebtedness held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article Fifteen, and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
SECTION 15.07. Rights of the Trustee; Holders of Senior Indebtedness.
The Trustee in its individual capacity shall be entitled to
all the rights set forth in this Article Fifteen in respect of any Senior
Indebtedness at any time held by it, to the same extent as any other holder of
Senior Indebtedness, and nothing in this Indenture or any Additional Provisions
shall deprive the Trustee of any of its rights as such holder.
With respect to the holders of Senior Indebtedness of the
Company, the Trustee undertakes to perform or to observe only such of its
covenants and obligations as are specifically set forth in this Article Fifteen,
and no implied covenants or obligations with respect to the holders of such
Senior Indebtedness shall be read into this Indenture or any Additional
Provisions against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of such Senior Indebtedness and, subject to the
provisions of Article Six of this Indenture, the Trustee shall not be liable to
any holder of such Senior Indebtedness if it shall pay over or deliver to
Securityholders, the Company or any other Person money or assets to which any
holder of such Senior Indebtedness shall be entitled by virtue of this Article
Fifteen or otherwise.
Nothing in this Article Fifteen shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 6.06.
SECTION 15.08. Subordination May Not Be Impaired.
No right of any present or future holder of any Senior
Indebtedness of the Company to enforce subordination as herein provided shall at
any time in any way be prejudiced or impaired
<PAGE> 71
by any act or failure to act on the part of the Company, as the case may be, or
by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company, as the case may be, with the terms, provisions and
covenants of this Indenture, regardless of any knowledge thereof that any such
holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness of the Company may, at any time
and from time to time, without the consent of or notice to the Trustee or the
Securityholders, without incurring responsibility to the Securityholders and
without impairing or releasing the subordination provided in this Article
Fifteen or the obligations hereunder of the holders of the Securities to the
holders of such Senior Obligations, do any one or more of the following: (i)
change the manner, place or terms of payment or extend the time of payment of,
or renew or alter, such Senior Indebtedness, or otherwise amend or supplement in
any manner such Senior Indebtedness or any instrument evidencing the same or any
agreement under which such Senior Indebtedness is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing such Senior Indebtedness; (iii) release any Person liable in
any manner for the collection of such Senior Indebtedness; and (iv) exercise or
refrain from exercising any rights against the Company, as the case may be, and
any other Person.
IBJ Schroder Bank & Trust Company hereby accepts the trust in
this Indenture declared and provided, upon the terms and conditions hereinabove
set forth.
<PAGE> 72
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed by their respective authorized officers, as of the
day and year first above written.
INTERPOOL, INC.
By _________________________
Name:
Title:
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By _________________________
Name:
Title:
<PAGE> 73
STATE OF NEW YORK
COUNTY OF NEW YORK
On the __ day of January, 1997, before me personally came
_____, to me known, who, being by me duly sworn, did depose and say that he
resides at ____________, ______________; that he is a _____________ of
Interpool, Inc., one of the parties described in and which executed the above
instrument; and that he signed his name thereto by authority of the board of
directors of such corporation.
Notary Public
[NOTARIAL SEAL]
STATE OF NEW YORK
COUNTY OF NEW YORK
On the __ day of January, 1997, before me personally came
_____, to me known, who, being by me duly sworn, did depose and say that he
resides at _____________; that he is an _________ of IBJ Schroder Bank & Trust
Company, one of the parties described in and which executed the above
instrument; and that such execution was by authority of the board of directors
of said corporation.
Notary Public
[NOTARIAL SEAL]
<PAGE> 1
Exhibit 10.28
FIRST SUPPLEMENTAL INDENTURE
BETWEEN
INTERPOOL, INC.
AND
IBJ SCHRODER BANK & TRUST COMPANY
DATED AS OF JANUARY 27, 1997
9 7/8% SERIES A AND SERIES B JUNIOR SUBORDINATED
DEFERRABLE INTEREST DEBENTURES
DUE FEBRUARY 15, 2027
<PAGE> 2
FIRST SUPPLEMENTAL INDENTURE
THIS FIRST SUPPLEMENTAL INDENTURE, dated as of January 27,
1997 (the "First Supplemental Indenture"), between INTERPOOL, INC., a Delaware
corporation (the "Company"), and IBJ SCHRODER BANK & TRUST COMPANY, as trustee
(the "Trustee") under the Indenture dated as of January 27, 1997 between the
Company and the Trustee (the "Indenture").
WHEREAS, the Company executed and delivered the Indenture to
the Trustee to provide for the issuance of the Company's unsecured junior
subordinated debentures to be issued from time to time in one or more series as
might be determined by the Company under the Indenture, in an unlimited
aggregate principal amount which may be authenticated and delivered as provided
in the Indenture;
WHEREAS, pursuant to the terms of the Indenture, the Company
desires to provide for (i) the establishment of a series of its securities to be
known as its 9 7/8% Series A Junior Subordinated Deferrable Interest Debentures
due February 15, 2027 (the "Series A Debentures") and (ii) the establishment of
a series of its securities to be known as its 9 7/8% Series B Junior
Subordinated Deferrable Interest Debentures due February 15, 2027, the form and
substance of all such Debentures and the terms, provisions and conditions
thereof to be set forth as provided in the Indenture and this First Supplemental
Indenture;
WHEREAS, under the terms of a Purchase Agreement dated as of
January 22, 1997 (the "Purchase Agreement"), among the Company, Interpool
Capital Trust (the "Trust") and the initial purchasers named therein (the
"Purchasers"), the Trust has agreed to sell to the Purchasers $75,000,000
aggregate liquidation amount of its 9 7/8% Series A Capital Securities (the
"Series A Capital Securities");
WHEREAS, under the terms of a Subscription Agreement dated as
of January 27, 1997 between the Trust and the Company (the "Subscription
Agreement"), the Company has committed to purchase all of the Common Securities
of the Trust (the "Common Securities") from the Trust, which Common Securities
represent at least 3% of the capital of the Trust;
WHEREAS, the Trust proposes to invest the gross proceeds from
such sale of the Series A Capital Securities, together with the gross proceeds
of the issuance and sale by the Trust to the Company of the Common Securities,
in the Series A Debentures, as a result of which the Trust will purchase
$77,320,000 aggregate principal amount of the Series A Debentures; and
WHEREAS, the Company, the Trust and the Purchasers have
entered into a Registration Rights Agreement dated the date hereof (the
"Registration Rights Agreement")
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<PAGE> 3
whereby the Company has agreed to exchange, among other securities, Series B
Debentures (as defined herein) for Series A Debentures (the "Exchange Offer").
WHEREAS, the Company has requested that the Trustee execute
and deliver this First Supplemental Indenture, and all requirements necessary to
make this First Supplemental Indenture a valid instrument in accordance with its
terms and to make the Debentures, when executed by the Company and authenticated
and delivered by the Trustee, the valid obligations of the Company, have been
performed, and the execution and delivery of this First Supplemental Indenture
have been duly authorized in all respects;
NOW THEREFORE, in consideration of the purchase and acceptance
of the Debentures by the Holders thereof, and for the purpose of setting forth,
as provided in the Indenture, the form and substance of the Debentures and the
terms, provisions and conditions thereof, the Company covenants and agrees with
the Trustee as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definition of Terms.
Unless the context otherwise requires:
(a) a term defined in the Indenture has the same meaning when
used in this First Supplemental Indenture;
(b) a term defined anywhere in this First Supplemental
Indenture has the same meaning throughout;
(c) the singular includes the plural and vice versa;
(d) a reference to a Section or Article is to a Section or
Article of this First Supplemental Indenture;
(e) headings are for convenience of reference only and do not
affect interpretation;
(f) the following terms have the meanings given to them in the
Declaration: (i) Clearing Agency; (ii) Delaware Trustee; (iii) Direct Action;
(iv) Distributions; (v) Property
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<PAGE> 4
Trustee; (vi) Purchase Agreement; (vii) Regular Trustees; (viii) Trust
Securities; (ix) Sponsor; and (x) Capital Securities.
(g) the following terms have the meanings given to them in
this Section 1.1(g):
"Additional Sums" shall have the meaning set forth in Section
2.5.
"Adjusted Treasury Rate" means, with respect to any prepayment
date, the Treasury Rate for such date plus (i) 1.35% if such prepayment date
occurs on or prior to January 31, 1998 or (ii) 0.50% in all other cases.
"Comparable Treasury Issue" means, with respect to any
prepayment date, the United States Treasury security selected by the Quotation
Agent as having a maturity comparable to the Remaining Life that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the Remaining Life. If no United States Treasury security has a
maturity which is within a period from three months before to three months after
February 15, 2007, the two most closely corresponding United States Treasury
securities shall be used as the Comparable Treasury Issue, and the Treasury Rate
shall be interpolated or extrapolated on a straight-line basis, rounding to the
nearest month, using such securities.
"Comparable Treasury Price" means, with respect to any
prepayment date, (i) the average of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount)
on the third Business Day preceding such prepayment date, as set forth in the
daily statistical release (or any successor release) published by the Federal
Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such Business Day, (A) the average
of five Reference Treasury Dealer Quotations for such prepayment date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(B) if the Trustee obtains fewer than three such Reference Treasury Dealer
Quotations, the average of all such Quotations.
"Compounded Interest" shall have the meaning set forth in
Section 4.1.
"Declaration" means the Amended and Restated Declaration of
Trust of Interpool Capital Trust, a Delaware statutory business trust, dated as
of January 27, 1997.
"Debentures" means the Series A Debentures and the Series B
Debentures.
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<PAGE> 5
"Deferred Interest" shall have the meaning set forth in
Section 4.1.
"Definitive Debentures" has the meaning set forth in Section
2.3.
"Dissolution Election" means that, as a result of the election
of the Company, as Sponsor, the Trust is to be dissolved in accordance with the
Declaration, and the Debentures held by the Property Trustee are to be
distributed to the holders of the Trust Securities issued by the Trust in such
manner as may be specified in the Declaration.
"Extended Interest Payment Period" shall have the meaning set
forth in Section 4.1.
"Global Debenture" means a Debenture executed by the Company
and delivered by the Trustee to the Depositary or pursuant to the Depositary's
instruction, all in accordance with the Indenture, which shall be registered in
the name of the Depositary or its nominee.
"Interest Rate" shall have the meaning set forth in Section
2.5 hereof.
"Investment Company Act Event" means the receipt by the
Company and the Trust of an opinion of counsel experienced in practice under the
Investment Company Act of 1940, as amended (the "1940 Act"), to the effect that,
as a result of the occurrence of a change in law or regulation or change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in 1940 Act Law"),
there is more than an insubstantial risk that the Trust is or will be considered
an "investment company" that is required to be registered under the 1940 Act,
which Change in 1940 Act Law becomes effective on or after January 27, 1997.
"Maturity Date" means February 15, 2027.
"Maturity Repayment Price" means the price, at the Maturity
Date, equal to the principal amount of, plus accrued interest on, the
Debentures.
"Optional Prepayment" means prepayment of the Debentures at
the option of the Company in whole or in part at any time on or after February
15, 2007 pursuant to Section 3.2.
"Optional Prepayment Price" shall have the meaning set forth
in Section 3.2.
"Quotation Agent" means the Reference Treasury Dealer
appointed by the Company.
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<PAGE> 6
"Reference Treasury Dealer" means (i) Merrill Lynch Government
Securities, Inc. and its successors; provided, however, that if the foregoing
shall cease to be a primary U.S. Government securities dealer in New York City
(a "Primary Treasury Dealer"), the Company shall substitute therefor another
Primary Treasury Dealer; and (ii) any other Primary Treasury Dealer selected by
the Company.
"Reference Treasury Dealer Quotations" means, with respect to
each Reference Treasury Dealer and any prepayment date, the average, as
determined by the Trustee, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m.,
New York City time, on the third Business Day preceding such prepayment date.
"Series B Debentures" means the 9 7/8% Series B Junior
Subordinated Deferrable Interest Debentures due February 15, 2027, as
authenticated and issued under the Indenture, to be issued in connection with
the Exchange Offer.
"Special Event" means a Tax Event or an Investment Company Act
Event.
"Special Event Prepayment" means a prepayment of the
Debentures prior to February 15, 2007, in whole but not in part, pursuant to
Section 3.1.
"Special Event Prepayment Price" means the greater of (i) 100%
of the principal amount of the Debentures or (ii) the sum, as determined by a
Quotation Agent, of the present values of the principal amount and premium
payable with respect to an optional prepayment of Debentures on February 15,
2007, together with scheduled payments of interest on the Debentures accruing
from the prepayment date to and including February 15, 2007 (the "Remaining
Life"), discounted to the prepayment date on a semi-annual basis (assuming a
360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate,
plus, in each case, accrued interest on the Debentures to the date of
prepayment.
"Tax Event" means the receipt by the Company and the Trust of
an opinion of counsel experienced in such matters to the effect that, as a
result of any amendment to, or change (including any announced prospective
change) in, the laws or any regulations thereunder of the United States or any
political subdivision or taxing authority thereof or therein or as a result of
any official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after January 27, 1997, there
is more than an insubstantial risk that (i) the Trust is, or within 90 days
after the date of such opinion will be, subject to United States federal income
tax with respect to income received or accrued on the Debentures, (ii) interest
payable by the Company on the Debentures is not, or within 90 days after the
date of such opinion, will not
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<PAGE> 7
be, deductible by the Company, in whole or in part, for United States federal
income tax purposes or (iii) the Trust is, or within 90 days after the date of
such opinion will be, subject to more than a de minimus amount of other taxes,
duties or other governmental charges.
"Treasury Rate" means, with respect to any prepayment date,
(i) the rate per annum equal to the yield, under the heading which represents
the average for the immediately prior week, appearing in the most recently
published statistical release designated "H.15 (519)" or any successor
publication which is published weekly by the Federal Reserve Board and which
establishes yields on actively traded United States Treasury securities adjusted
to constant maturity under the caption "Treasury Constant Maturities," for the
maturity corresponding to the Remaining Life (if no maturity is within three
months before or after the maturity corresponding to the Remaining Life, yields
for the two published maturities most closely corresponding to the Remaining
Life shall be determined and the Treasury Rate shall be interpolated or
extrapolated from such yields on a straight-line basis, rounding to the nearest
month) or (ii) if such release (or any successor release) is not published
during the week preceding the calculation date or does not contain such yields,
the rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, calculated using a price for the Comparable Treasury
Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such prepayment date. The Treasury Rate shall be
calculated on the third Business Day preceding the prepayment date.
ARTICLE II
GENERAL TERMS AND CONDITIONS OF THE DEBENTURES
SECTION 2.1 Designation and Principal Amount.
There is hereby authorized:
(a) a series of Securities designated the "9 7/8% Series A
Junior Subordinated Deferrable Interest Debentures due February 15, 2027,"
limited in aggregate principal amount to $77,320,000, and
(b) a series of Securities designated the "9 7/8% Series B
Junior Subordinated Deferrable Interest Debentures due February 15, 2027,"
limited in aggregate principal amount to such amount of the Series A Debentures
exchanged in the Exchange Offer, and in any case not exceeding $77,320,000;
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<PAGE> 8
in either case, the amount of such series shall be as set
forth in any written order of the Company for the authentication and delivery of
Debentures of such series pursuant to Section 2.04 of the Indenture.
SECTION 2.2 Maturity. The Maturity Date is February 15, 2027.
SECTION 2.3 Form and Payment
Except as provided in Section 2.4, the Debentures shall be
issued in fully registered certificated form without interest coupons
("Definitive Debentures"). Principal and interest on the Debentures will be
payable, the transfer of such Debentures will be registrable and such Debentures
will be exchangeable for Debentures bearing identical terms and provisions at
the office or agency of the Trustee in New York, New York or at the office of
such Paying Agent or Paying Agents as the Company may designate from time to
time; provided, however, that, except in the case of a Global Debenture, at the
option of the Company payment of interest may be made by check mailed to the
Holder at such address as shall appear in the security register for the
Debentures maintained pursuant to Section 2.07 of the Indenture. Notwithstanding
the foregoing, so long as the Holder of any Debentures is the Property Trustee,
the payment of the principal of and interest (including Compounded Interest and
Additional Interest, if any) on such Debentures held by the Property Trustee
will be made at such place and to such account as may be designated by the
Property Trustee.
SECTION 2.4 Global Debenture.
(a) In connection with a Dissolution Election,
(i) if any Capital Securities are held in book-entry
form, the related Definitive Debentures shall be presented to the Trustee (if an
arrangement with the Depositary has been maintained) by the Property Trustee in
exchange for one or more Global Debentures in an aggregate principal amount
equal to the aggregate principal amount of all outstanding Debentures, to be
registered in the name of the Depositary, or its nominee, and delivered by the
Trustee to the Depositary for crediting to the accounts of its participants
pursuant to the instructions of the Regular Trustees; the Company upon any such
presentation shall execute one or more Global Debentures in such aggregate
principal amount and deliver the same to the Trustee for authentication and
delivery in accordance with the Indenture; and payments on the Debentures issued
as a Global Debenture will be made to the Depositary; and
(ii) if any Capital Securities are held in
non-book-entry certificated form ("Non-Book-Entry Capital Securities"), the
related Debentures may be presented to the Trustee by the Property Trustee and
any Capital Security certificate which represents such
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<PAGE> 9
Non-Book Entry Capital Securities will be deemed to represent beneficial
interests in Debentures presented to the Trustee by the Property Trustee having
an aggregate principal amount equal to the aggregate liquidation amount of the
Non-Book-Entry Capital Securities until such Capital Security certificates are
presented to the security registrar for transfer or reissuance, at which time
such Capital Security certificates will be canceled and a Debenture, registered
in the name of the holder of the Capital Security certificate or the transferee
of the holder of such Capital Security certificate, as the case may be, with an
aggregate principal amount equal to the aggregate liquidation amount of the
Capital Security certificate canceled, will be executed by the Company and
delivered to the Trustee for authentication and delivery in accordance with the
Indenture and this First Supplemental Indenture. On issue of such Debentures,
Debentures with an equivalent aggregate principal amount that were presented by
the Property Trustee to the Trustee will be deemed to have been canceled.
(b) The Global Debentures shall represent the aggregate amount
of outstanding Debentures from time to time endorsed thereon; provided, that the
aggregate amount of outstanding Debentures represented thereby may from time to
time be reduced or increased, as appropriate, to reflect exchanges and
redemptions. Any endorsement of a Global Debenture to reflect the amount of any
increase or decrease in the amount of outstanding Debentures represented thereby
shall be made by the Trustee, at the Company's expense and in accordance with
instructions given by the Company.
(c) A Global Debenture may be transferred, in whole but not in
part, only to another nominee of the Depositary, or to a successor Depositary
selected or approved by the Company or to a nominee of such successor
Depositary.
SECTION 2.5 Interest.
(a) Each Debenture will bear interest at the rate of 9 7/8%
per annum (the "Interest Rate") from January 27, 1997 until the principal
thereof becomes due and payable, and on any overdue principal and (to the extent
that payment of such interest is enforceable under applicable law) on any
overdue installment of interest at the Interest Rate, compounded semi-annually,
payable (subject to the provisions of Article IV) semi-annually in arrears on
February 15 and August 15 of each year (each, an "Interest Payment Date"),
commencing on February 15, 1997, to the Person in whose name such Debenture is
registered, at the close of business on the first day of the month in which the
relevant Interest Payment Date falls. In addition, Liquidated Damages (as
defined in the Registration Rights Agreement) shall be payable with respect to
the Debentures under certain circumstances as described in the Registration
Rights Agreement.
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<PAGE> 10
(b) The amount of interest payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months. For periods
less than a full month, interest payable shall reflect interest on the
Debentures computed on the basis of the actual number of elapsed days based on a
360-day year. In the event that any date on which interest is payable on the
Debentures is not a Business Day, then payment of interest payable on such date
will be made on the next succeeding day which is a Business Day (and without any
interest or other payment in respect of any such delay), in each case with the
same force and effect as if made on such date.
(c) During such time as the Interpool Capital Trust or a
trustee thereof is the holder of any Debentures, the Company shall pay any
additional amounts on the Debentures as may be necessary in order that the
amount of Distributions then due and payable by the Interpool Capital Trust on
the outstanding Debentures shall not be reduced as a result of any additional
taxes, duties and other governmental charges to which the Trust has become
subject as a result of a Tax Event ("Additional Sums").
SECTION 2.6 Defaulted Interest.
Any interest on any Debenture that is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the holder
on the relevant regular record date by virtue of having been such holder; and
such Defaulted Interest shall be paid by the Company, at its election, as
provided in clause (a) or clause (b) below:
(a) The Company may make payment of any Defaulted
Interest on Debentures to the Persons in whose names such Debentures
(or their respective predecessor Debentures) are registered at the
close of business on a special record date for the payment of such
Defaulted Interest, which shall be fixed in the following manner: the
Company shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each such Debenture and the date of the
proposed payment, and at the same time the Company shall deposit with
the Trustee an amount of money equal to the aggregate amount proposed
to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the
date of the proposed payment, such money when deposited to be held in
trust for the benefit of the Persons entitled to such Defaulted
Interest as in this clause provided. Thereupon the Trustee shall fix a
special record date for the payment of such Defaulted Interest which
shall not be more than 15 nor less than 10 days prior to the date of
the proposed payment and not less than 10 days after the receipt by
the Trustee shall promptly notify the Company of such special record
date and, in the name and at the expense of the Company, shall cause
notice of the proposed payment of such Defaulted Interest and the
special record date
-11-
<PAGE> 11
therefore to be mailed, first class postage prepaid, to each
Securityholder at his or her address as it appears in the security
register, not less than 10 days prior to such special record date.
Notice of the proposed payment of such Defaulted Interest and the
special record date therefor having been mailed as aforesaid, such
Defaulted Interest shall be paid to the Persons in whose names such
Debentures (or their respective predecessor Debentures) are registered
on such special record date and shall be no longer payable pursuant to
the following clause (b).
(b) The Company may make payment of any Defaulted
Interest on any Debentures in any other lawful manner not inconsistent
with the requirements of any securities exchange on which such
Debentures may be listed, and upon such notice as may be required by
such exchange, if, after notice given by the Company to the Trustees of
the proposed payment pursuant to this clause, such manner of payment
shall be deemed practicable by the Trustee.
SECTION 2.7 Legends.
(a) Except as permitted by subsection (b) of this Section 2.7
or as otherwise determined by the Company in accordance with applicable law,
each Debenture shall bear the applicable legends relating to restrictions on
transfer pursuant to the securities laws in substantially the form set forth in
Section 7.1 hereto.
(b) The Company shall issue and the Trustee shall authenticate
Series B Debentures in exchange for Series A Debentures accepted for exchange in
the Exchange Offer, which Series B Debentures shall not bear the legends
required by subsection (a) above, in each case unless the holder of such Series
A Debentures is either (A) a broker-dealer who purchased such Series A
Debentures directly from the Company for resale pursuant to Rule 144A or any
other available exemption under the Securities Act, (B) a Person participating
in the distribution of the Series B Debentures or (C) a Person who is an
affiliate (as defined in Rule 144 under the Securities Act) of the Company.
SECTION 2.8 Restrictions on Transfer.
(a) The Series A Debentures, and those Series B Debentures
with respect to which any Person described in Section 2.7(b)(A), (B) or (C) is
the beneficial owner, may not be transferred except in compliance with the
legend contained in Section 7.1 unless otherwise determined by the Company in
accordance with applicable law. Upon any distribution of the Debentures
following a Dissolution Event, the Company and the Trustee shall enter into a
supplemental indenture pursuant to Section 9.01 of the Indenture to provide for
the transfer
-12-
<PAGE> 12
restrictions and procedures with respect to the Debentures substantially similar
to those contained in the Declaration to the extent applicable in the
circumstances existing at such time.
The Debentures will be issued, and until registered under the
Securities Act may be transferred only, in blocks having an aggregate principal
amount of not less than $100,000. Any such transfer of Debentures in a block
having an aggregate principal amount of less than $100,000 shall be deemed to be
void and of no legal effect whatsoever. Any such transferee shall be deemed not
to be the holder of such Debentures for any purpose, including but not limited
to the receipt of payments on such Debentures, and such transferee shall be
deemed to have no interest whatsoever in such Debentures.
SECTION 2.9 Exchange of Series A Debentures for Series B Debentures.
The Series A Debentures may be exchanged for Series B
Debentures pursuant to the terms of the Exchange Offer and the Registration
Rights Agreement. The Trustee shall make the exchange as follows:
The Company shall present the Trustee with an Officers'
Certificate certifying the following:
(a) upon issuance of the Series B Debentures, the
transactions contemplated by the Exchange Offer will
have been consummated; and
(b) the principal amount of Series A Debentures properly
tendered in the Exchange offer that are represented
by a Global Debenture and the principal amount of
Series A Debentures properly tendered in the Exchange
Offer that are represented by Definitive Debentures,
the name of each holder of such Definitive
Debentures, the principal amount at maturity properly
tendered in the Exchange Offer by each such holder
and the name and address to which Definitive
Debentures for Series B Debentures shall be
registered and sent for each such holder.
The Trustee, upon receipt of (i) such Officers' Certificate,
(ii) an Opinion of Counsel (x) to the effect that the Series B Debentures have
been registered under Section 5 of the Securities Act and the Indenture has been
qualified under the Trust Indenture Act and (y) with respect to the matters set
forth in Section 3(p) of the Registration Rights Agreement and (iii) a Company
Order, shall authenticate (A) a Global Debenture for Series B Debentures in
aggregate principal amount equal to the aggregate principal amount of Series A
Debentures represented by a Global Debenture indicated in such Officers'
Certificate as having been properly tendered and
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<PAGE> 13
(B) Definitive Debentures representing Series B Debentures registered in the
names of, and in the principal amounts indicated in, such Officers' Certificate.
If the principal amount at maturity of the Global Debenture
for the Series B Debentures is less than the principal amount at maturity of the
Global Debenture for the Series A Debentures, the Trustee shall make an
endorsement on such Global Debenture for Series A Debentures indicating a
reduction in the principal amount at maturity represented thereby.
The Trustee shall deliver such Definitive Debentures for
Series B Debentures to the holders thereof as indicated in such Officers'
Certificate.
ARTICLE III
PREPAYMENT OF THE DEBENTURES
SECTION 3.1 Special Event Prepayment.
If a Special Event has occurred and is continuing the Company
shall have the right upon not less than 30 days nor more than 60 days notice to
the Holders of the Debentures to prepay the Debentures, in cash, in whole but
not in part, at any time prior to February 15, 2007 within 90 days following the
occurrence of such Special Event at a prepayment price equal to the Special
Event Prepayment Price. The Special Event Prepayment Price shall be paid prior
to 2:00 p.m., New York time, on the date of such prepayment, provided that the
Company shall deposit with the Trustee an amount sufficient to pay the Special
Event Prepayment Price by 10:00 a.m., New York time, on the date such Special
Event Prepayment Price is to be paid.
SECTION 3.2 Optional Prepayment by Company.
(a) Subject to the provisions of Section 3.2(b) and to the
provisions of Article Fourteen of the Indenture, the Company shall have the
right to prepay the Debentures, in cash, in whole or in part, at any time and
from time to time, on or after February 15, 2007, at the prepayment prices set
forth below (expressed as percentages of principal) plus accrued and unpaid
interest thereon (including Additional Sums and Compounded Interest payable in
accordance with the terms of the Indenture which are due on or prior to the
applicable prepayment date) to the applicable date of prepayment (the "Optional
Prepayment Price") if prepaid during the 12-month period beginning February 15
of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2007....................................... 104.9375%
2008....................................... 104.4438
</TABLE>
-14-
<PAGE> 14
<TABLE>
<S> <C>
2009....................................... 103.9500
2010....................................... 103.4563
2011....................................... 102.9625
2012....................................... 102.4688
2013....................................... 101.9750
2014....................................... 101.4813
2015....................................... 100.9875
2016....................................... 100.4938
2017 and thereafter........................ 100.0000%
</TABLE>
If the Debentures are only partially prepaid pursuant to this Section 3.2, the
Debentures will be prepaid pro rata or by lot or by any other method utilized by
the Trustee; provided, that if at the time of prepayment the Debentures are
registered as a Global Debenture, the Depositary shall determine, in accordance
with its procedures, the principal amount of such Debentures held by each
beneficial holder of Debenture in global form to be prepaid. The Optional
Prepayment Price shall be paid prior to 2:00 p.m., New York time, on the date of
such prepayment, provided that the Company shall deposit with the Trustee an
amount sufficient to pay the Optional Prepayment Price by 10:00 a.m., New York
time, on the date such Optional Prepayment Price is to be paid.
(b) If a partial prepayment of the Debentures would result in
the delisting of the Capital Securities issued by the Trust from any national
securities exchange or other organization on which the Capital Securities are
then listed, the Company shall not be permitted to effect such partial
prepayment and may only prepay the Debentures in whole.
SECTION 3.3 No Sinking Fund.
The Debentures are not entitled to the benefit of any sinking
fund.
ARTICLE IV
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 4.1 Extension of Interest Payment Period.
So long as no Event of Default under the Indenture has
occurred and is continuing, the Company shall have the right, at any time and
from time to time during the term of the Debentures, to defer payments of
interest by extending the interest payment period of such Debentures for a
period not exceeding 10 consecutive semi-annual periods (an "Extended Interest
Payment Period"), during which Extended Interest Payment Period no interest
shall be due and
-15-
<PAGE> 15
payable; provided that no Extended Interest Payment Period may extend beyond the
Maturity Date. To the extent permitted by applicable law, interest, the payment
of which has been deferred because of the extension of the interest payment
period pursuant to this Section 4.1, will bear interest thereon at the Interest
Rate compounded semi-annually for each semi-annual period of the Extended
Interest Payment Period ("Compounded Interest"). At the end of the Extended
Interest Payment Period, the Company shall pay all interest accrued and unpaid
on the Debentures, including any Additional Sums and Compounded Interest
(together, "Deferred Interest") that shall be payable to the holders of the
Debentures in whose names the Debentures are registered in the Security Register
on the record date with respect to the first Interest Payment Date after the end
of the Extended Interest Payment Period. Before the termination of any Extended
Interest Payment Period, the Company may further extend such period, provided
that such period together with all such further extensions thereof shall not
exceed 10 consecutive semi-annual periods, or extend beyond the Maturity Date of
the Debentures. Upon the termination of any Extended Interest Payment Period and
the payment of all Deferred Interest then due, the Company may commence a new
Extended Interest Payment Period, subject to the foregoing requirements. No
interest shall be due and payable during an Extended Interest Payment Period,
except at the end thereof, but the Company may prepay at any time all or any
portion of the interest accrued during an Extended Interest Payment Period.
SECTION 4.2 Notice of Extension.
(a) At the time the Company selects an Extended Interest
Payment Period, the Company shall give the holders of the Debentures, the
Trustee and, for such time as the Debentures are held by the Trust, the Property
Trustee and the Regular Trustees, written notice of its selection of such
Extended Interest Payment Period at least five Business Days before the earlier
of (i) the date interest on the Debentures would have been payable except for
the election to begin or extend such Extended Interest Payment period or (ii)
the date the Company, or for such time as the Debentures are held by the Trust,
Regular Trustees are required to give notice to any securities exchange or to
holders of Debentures or Capital Securities, as the case requires, of the record
date or the date such payments are due, but in any event not less than five
Business Days prior to such record date.
(b) Upon receipt by a Responsible Officer of the Trustee of
written notice of an Extended Interest Payment Period, the Trustee shall give
notice to the holders at the Company's expense of the Debentures of the
Company's election to begin or extend an Extension Period.
(c) The semi-annual period in which any notice is given
pursuant to paragraph (b) of this Section 4.2 shall be counted as one of the 10
semi-annual periods permitted in the maximum Extended Interest Payment Period
permitted under Section 4.1.
-16-
<PAGE> 16
ARTICLE V
EXPENSES
SECTION 5.1 Payment of Expenses.
In connection with the offering, sale and issuance of the
Debentures to the Property Trustee and in connection with the sale of the Trust
Securities by the Trust, the Company, in its capacity as borrower with respect
to the Debentures, shall:
(a) pay all costs and expenses relating to the offering, sale
and issuance of the Debentures, including compensation of the Trustee under the
Indenture in accordance with the provisions of Section 6.06 of the Indenture;
(b) pay all costs and expenses of the Trust (including, but
not limited to, costs and expenses relating to the organization, maintenance and
dissolution of the Trust, the offering, sale and issuance of the Trust
Securities (including compensation to the Purchasers in connection therewith),
the fees and expenses of the Property Trustee and the Delaware Trustee, the
costs and expenses relating to the operation of the Trust, including without
limitation, costs and expenses of accountants, attorneys, statistical or
bookkeeping services, expenses for printing and engraving and computing or
accounting equipment, paying agent(s), registrar(s), transfer agent(s),
duplicating, travel and telephone and other telecommunications expenses and
costs and expenses incurred in connection with the acquisition, financing, and
disposition of Trust assets, other than the Trust's obligations to the holders
of Capital Securities);
(c) be primarily and fully liable for any indemnification
obligations arising with respect to the Declaration;
(d) pay any and all taxes (other than United States
withholding taxes attributable to the Trust or its assets) and all liabilities,
costs and expenses with respect to such taxes of the Trust; and
(e) pay all other fees, expenses, debts and obligations (other
than the Trust Securities) related to the Trust.
SECTION 5.2 Payment Upon Resignation or Removal.
Upon termination of this First Supplemental Indenture or the
Indenture or the removal or resignation of the Trustee, unless otherwise stated,
the Company shall pay to the
-17-
<PAGE> 17
Trustee all amounts accrued to the date of such termination, removal or
resignation. The Trustee's rights under Section 6.06 of the Indenture shall
survive such termination under this Section. Upon termination of the Declaration
or the removal or resignation of the Delaware Trustee or the Property Trustee,
as the case may be, pursuant to Section 5.6 of the Declaration, the Company
shall pay to the Delaware Trustee or the Property Trustee, as the case may be,
all amounts accrued to the date of such termination, removal or resignation.
ARTICLE VI
COVENANT TO LIST ON EXCHANGE; REGISTRATION RIGHTS
SECTION 6.1 Listing on an Exchange.
If the Debentures are to be issued as a Global Debenture in
connection with the distribution of the Debentures to the holders of the Capital
Securities issued by the Trust upon a Dissolution Election, the Company will use
its best efforts to list such Debentures on any stock exchanges on which the
Capital Securities are then listed.
SECTION 6.2 Registration Rights.
The Company hereby agrees to make any and all payments,
including without limitation, Liquidated Damages (as defined in the Registration
Rights Agreement) set forth in the Registration Rights Agreement pursuant to the
terms thereof.
ARTICLE VII
FORM OF DEBENTURE
SECTION 7.1 Form of Debenture.
The Debentures and the Trustee's Certificate of Authentication
to be endorsed thereon are to be substantially in the following forms:
(FORM OF FACE OF DEBENTURE)
[IF THE DEBENTURE IS TO BE A GLOBAL DEBENTURE, INSERT - This
Debenture is a Global Debenture within the meaning of the Indenture hereinafter
referred to and is registered in the name of the Depositary or a nominee
thereof. This Debenture is exchangeable for Debentures registered in the name of
a person other than the Depositary or a nominee thereof
-18-
<PAGE> 18
only in the limited circumstances described in the Indenture, and no transfer of
this Debenture may be registered except in limited circumstances.
Unless this Debenture is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the issuer or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as requested by an authorized representative of DTC and any payment
is made to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co. has an interest herein.]
[IN THE CASE OF SERIES A DEBENTURES, INSERT - THE DEBENTURES
REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS OR
ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS DEBENTURE NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM,
OR NOT SUBJECT TO, REGISTRATION.
THE DEBENTURES WILL BE ISSUED, AND UNTIL REGISTERED UNDER THE
SECURITIES ACT MAY BE TRANSFERRED ONLY, IN BLOCKS HAVING AN AGGREGATE
PRINCIPAL AMOUNT OF NOT LESS THAN $100,000. ANY SUCH TRANSFER OF
DEBENTURES IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN
$100,000 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.
ANY SUCH TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH
DEBENTURES FOR ANY PURPOSE, INCLUDING BUT NOT LIMITED TO THE RECEIPT OF
PAYMENTS ON SUCH DEBENTURES, AND SUCH TRANSFEREE SHALL BE DEEMED TO
HAVE NO INTEREST WHATSOEVER IN SUCH DEBENTURES.
THE HOLDER OF THIS DEBENTURE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER THIS DEBENTURE PRIOR TO THE DATE (THE
"RESALE RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE
LATER OF THE ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON
-19-
<PAGE> 19
WHICH THE COMPANY OR ANY "AFFILIATE" OF THE COMPANY WAS THE OWNER OF
THIS DEBENTURE (OR ANY PREDECESSOR OF THIS DEBENTURE) ONLY (A) TO THE
COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) SO LONG AS THIS
DEBENTURE IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A) (1), (2), (3) OR (7)
OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS DEBENTURE
FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR
FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT, SUBJECT TO
THE RIGHT OF THE TRUST AND THE COMPANY PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER (i) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF
AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND (ii) PURSUANT TO CLAUSE (D) TO
REQUIRE THAT THE TRANSFEROR DELIVER TO THE ISSUER A LETTER FROM THE
TRANSFEREE WITH RESPECT TO THE DEBENTURE COVERING THE MATTERS SET FORTH
IN ANNEX A TO THE OFFERING MEMORANDUM DATED JANUARY 22, 1997, SUCH
HOLDER FURTHER AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
DEBENTURE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND.]
-20-
<PAGE> 20
CUSIP No. ______ __ __
$_______________
No._____________
INTERPOOL, INC.
9 7/8% SERIES - JUNIOR SUBORDINATED DEFERRABLE INTEREST
DEBENTURE DUE FEBRUARY 15, 2027
INTERPOOL, INC., a Delaware corporation (the "Company", which
term includes any successor corporation under the Indenture hereinafter referred
to), for value received, hereby promises to pay to ______________ or registered
assigns, the principal sum of _____________ Dollars ($___________) on February
15, 2027 (the "Maturity Date"), and to pay interest on said principal sum from
January 27, 1997, or from the most recent interest payment date (each such date,
an "Interest Payment Date") to which interest has been paid or duly provided
for, semi-annually (subject to deferral as set forth herein) in arrears on
February 15 and August 15 of each year, commencing February 15, 1997, at the
rate of 9 7/8% per annum until the principal hereof shall have become due and
payable, and on any overdue principal and premium, if any, and (without
duplication and to the extent that payment of such interest is enforceable under
applicable law) on any overdue installment of interest at the same rate per
annum compounded semi-annually. The amount of interest payable on any Interest
Payment Date shall be computed on the basis of a 360-day year of twelve 30-day
months. For periods less than a full month interest payable shall reflect
interest on the Debentures computed on the basis of the actual number of elapsed
days based on a 360-day year. In the event that any date on which interest is
payable on this Debenture is not a Business Day, then payment of interest
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay), in
each case with the same force and effect as if made on such date. The interest
installment so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in the Indenture, be paid to the person
in whose name this Debenture (or one or more Predecessor Securities, as defined
in said Indenture) is registered at the close of business on the regular record
date for such interest installment, which shall be the close of business on the
first day (whether or not such day is a Business Day) of the month in which the
relevant Interest Payment Date falls. Any such interest installment not
punctually paid or duly provided for shall forthwith cease to be payable to the
registered Holders on such regular record date and may be paid to the Person in
whose name this Debenture (or one or more Predecessor Securities) is registered
at the close of business on a special record date to be fixed by the Trustee for
the payment of such defaulted interest, notice whereof shall be given to the
registered holders of this series of Debentures not less than 10 days prior to
such special record date, or may be paid at any time in any other lawful manner
not inconsistent with the requirements of any securities exchange on which the
Debentures may be
-21-
<PAGE> 21
listed, and upon such notice as may be required by such exchange, all as more
fully provided in the Indenture. The principal of (and premium, if any) and the
interest on this Debenture shall be payable at the office or agency of the
Trustee maintained for that purpose in any coin or currency of the United States
of America that at the time of payment is legal tender for payment of public and
private debts; provided, however, that, except in the case of a Global
Debenture, payment of interest may be made at the option of the Company by check
mailed to the registered Holder at such address as shall appear in the Security
Register. Notwithstanding the foregoing, so long as the Holder of this Debenture
is the Property Trustee, the payment of the principal of (and premium, if any)
and interest on this Debenture will be made at such place and to such account as
may be designated by the Property Trustee.
The indebtedness evidenced by this Debenture is, to the extent
provided in the Indenture, subordinate and junior in right of payment to the
prior payment in full of all Senior Indebtedness (as defined in the Indenture)
and this Debenture is issued subject to the provisions of the Indenture with
respect thereto. Each Holder of this Debenture, by accepting the same, (a)
agrees to and shall be bound by such provisions, (b) authorizes and directs the
Trustee on his or her behalf to take such action as may be necessary or
appropriate to acknowledge or effectuate the subordination so provided and (c)
appoints the Trustee his or her attorney-in-fact for any and all such purposes.
Each Holder hereof, by his or her acceptance hereof, hereby waives all notice of
the acceptance of the subordination provisions contained herein and in the
Indenture by each holder of Senior Indebtedness, whether now outstanding or
hereafter incurred, and waives reliance by each such holder upon said
provisions.
This Debenture shall not be entitled to any benefit under the
Indenture hereinafter referred to, be valid or become obligatory for any purpose
until the Certificate of Authentication hereon shall have been signed by or on
behalf of the Trustee.
The provisions of this Debenture are continued on the reverse
side hereof and such continued provisions shall for all purposes have the same
effect as though fully set forth at this place.
-22-
<PAGE> 22
IN WITNESS WHEREOF, the Company has caused this instrument to
be executed in its name by its duly authorized officers.
INTERPOOL, INC.
By: ______________________
Name:_____________________
[Seal] Title:____________________
Attest:
By: ________________________
Name: _______________________
Title: ______________________
-23-
<PAGE> 23
(FORM OF CERTIFICATE OF AUTHENTICATION)
CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
Dated ______________________
IBJ SCHRODER BANK & TRUST
COMPANY,
as Trustee
By ______________________
Authorized Signatory
-24-
<PAGE> 24
(FORM OF REVERSE OF DEBENTURE)
This Debenture is one of a duly authorized series of
Debentures of the Company (herein sometimes referred to as the "Debentures"),
specified in the Indenture, all issued or to be issued in one or more series
under and pursuant to an Indenture dated as of January 27, 1997, duly executed
and delivered between the Company and IBJ Schroder Bank & Trust Company, as
Trustee (the "Trustee"), as supplemented by the First Supplemental Indenture
dated as of January 27, 1997, between the Company and the Trustee (the Indenture
as so supplemented, the "Indenture"), to which Indenture and all indentures
supplemental thereto reference is hereby made for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Trustee, the Company and the Holders of the Debentures. By the terms of the
Indenture, the Debentures are issuable in series that may vary as to amount,
date of maturity, rate of interest and in other respects as provided in the
Indenture. This series of Debentures is limited in aggregate principal amount as
specified in said First Supplemental Indenture.
Following the occurrence and continuation of a Special Event,
in certain circumstances, this Debenture may become due and payable, at the
Company's option, on or before February 15, 2007, at a prepayment price equal to
the greater of (i) 100% of the principal amount of the Debentures or (ii) the
sum, as determined by a Quotation Agent, of the present values of the principal
amount and premium payable with respect to an optional prepayment of Debentures
on February 15, 2007, together with scheduled payments of interest on the
Debentures accruing from the prepayment date to and including February 15, 2007
(the "Remaining Life"), discounted to the prepayment date on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Adjusted
Treasury Rate, plus, in each case, accrued interest on the Debentures to the
date of prepayment (the "Special Event Prepayment Price"). The Special Event
Prepayment Price shall be paid prior to 2:00 p.m., New York time, on the date of
such prepayment.
The Company shall have the right to prepay this Debenture at
the option of the Company, in whole or in part at any time on or after February
15, 2007 (an "Optional Prepayment"), at the prepayment prices set forth below
(expressed as percentages of principal) plus accrued and unpaid interest thereon
(including Additional Sums and Compounded Interest payable in accordance with
the terms of the Indenture which are due on or prior to the applicable
prepayment date) to the applicable date of prepayment (the "Optional Prepayment
Price") if prepaid during the 12-month period beginning February 15 of the years
indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2007........................................ 104.9375%
2008........................................ 104.4438
2009........................................ 103.9500
</TABLE>
-25-
<PAGE> 25
<TABLE>
<S> <C>
2010........................................ 103.4563
2011........................................ 102.9625
2012........................................ 102.4688
2013........................................ 101.9750
2014........................................ 101.4813
2015........................................ 100.9875
2016........................................ 100.4938
2017 and thereafter......................... 100.0000%
</TABLE>
Any prepayment pursuant to this paragraph will be made upon
not less than 30 days nor more than 60 days notice. If the Debentures are only
partially prepaid by the Company pursuant to an Optional Prepayment, the
Debentures to be prepaid will be selected pro rata or by lot or by any other
method utilized by the Trustee; provided that if, at the time of prepayment, the
Debentures are registered as a Global Debenture, the Depositary shall determine
the principal amount of such Debentures held by each Debentureholder to be
prepaid in accordance with its procedures.
Unless the Debentures are issued as a Global Debenture, in the
event of prepayment of this Debenture in part only, a new Debenture or
Debentures of this series for the unrepaid portion hereof will be issued in the
name of the Holder hereof upon the cancellation hereof.
The Company will not, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Company's capital stock (which includes common and
preferred stock), (ii) make any payment of principal, interest or premium, if
any, on or repay or repurchase or redeem any debt securities of the Company
(including Other Securities) that rank pari passu with or junior in right of
payment to the Debentures or (iii) make any guarantee payments with respect to
any guarantee by the Company of the debt securities of any subsidiary of the
Company (including under Other Guarantees) if such guarantee ranks pari passu or
junior in right of payment to the Debentures (other than (a) dividends or
distributions in shares of, or options, warrants or rights to subscribe for or
purchase shares of, common stock of the Company, (b) any declaration of a
dividend in connection with the implementation of a stockholder's rights plan,
or the issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the Capital
Securities Guarantee, (d) the purchase of fractional shares resulting from a
reclassification of the Company's capital stock, (e) the exchange or conversion
of one class or series of the Company's capital stock for another class or
series of the Company's capital stock, (f) the purchase of fractional interests
in shares of the Company's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being
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<PAGE> 26
converted or exchanged and (g) purchases of common stock related to the issuance
of common stock or rights under any of the Company's benefit plans for its
directors, officers or employees or any of the Company's dividend reinvestment
plans) if at such time (1) there shall have occurred any event of which the
Company has actual knowledge that (a) is, or with the giving of notice or the
lapse of time, or both, would be, an Event of Default and (b) in respect of any
nonpayment default, which the Company shall not have taken reasonable steps to
cure, and in respect of any payment default,, which has not been cured, (2) if
such Debentures are held by the Trust, the Company shall be in default with
respect to its payment of any obligations under the Capital Securities Guarantee
or (3) the Company shall have given notice of its election of an Extended
Interest Payment Period (as hereinafter defined), or any extension thereof, as
provided in the Indenture and shall not have rescinded such notice, and such
Extended Interest Payment Period (as hereinafter defined), or any extension
thereof, shall have commenced.
In case an Event of Default, as defined in the Indenture,
shall have occurred and be continuing, the principal of all of the Debentures
may be declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and
the Trustee, with the consent of the Holders of not less than a majority in
aggregate principal amount of the Debentures at the time outstanding, to execute
supplemental indentures for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of the Indenture or of any
supplemental indenture or of modifying in any manner the rights of the Holders
of the Debentures; provided, however, that no such supplemental indenture shall
without the consent of the holders of each outstanding Debenture so affected,
(i) change the fixed maturity of any Debentures of any series, or reduce the
principal amount thereof, or reduce the rate or extend the time of payment of
interest thereon, or reduce any amount payable upon the redemption or prepayment
thereof, or change any date on which the Debenture may be prepaid or (ii) reduce
the aforesaid percentage of Debentures, the holders of which are required to
consent to any such supplemental indenture, without the consent of the Holders
of each Debenture then outstanding and affected thereby.
The Indenture also contains provisions permitting the holders
of a majority in aggregate principal amount of the Debentures affected thereby,
on behalf of all of the Holders of the Debentures of such series, to waive any
past default in the performance of any of the covenants contained in the
Indenture, or established pursuant to the Indenture with respect to such series,
and its consequences, except a default (a) in the payment of the principal of or
premium, if any, on or interest on any of the Debentures of such series or, (b)
in respect of covenants or provisions of the Indenture which cannot be modified
or amended without the consent of the holder of each Debenture affected. Any
such consent or waiver by the registered
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<PAGE> 27
Holder of this Debenture (unless revoked as provided in the Indenture) shall be
conclusive and binding upon such Holder and upon all future holders and owners
of this Debenture and of any Debenture issued in exchange herefor or in place
hereof (whether by registration of transfer or otherwise), irrespective of
whether or not any notation of such consent or waiver is made upon this
Debenture.
No reference herein to the Indenture and no provision of this
Debenture or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest on this Debenture at the time and place and at the
rate and in the money herein prescribed.
So long as no Event of Default under the Indenture has
occurred and is continuing, the Company shall have the right, at any time and
from time to time during the term of the Debentures, to defer the payment of
interest by extending the interest payment period of such Debentures for a
period not exceeding 10 consecutive semi-annual periods (an "Extended Interest
Payment Period"), at the end of which period the Company shall pay all interest
then accrued and unpaid on the Debentures (together with interest thereon at the
annual rate of 9 7/8%, compounded semi-annually, to the extent that payment of
such interest is permitted under applicable law); provided that no Extended
Interest Payment Period may extend beyond the Maturity Date of the Debentures.
Before the termination of any such Extended Interest Payment Period, the Company
may further extend such Extended Interest Payment Period, provided that such
Extended Interest Payment Period together with all such further extensions
thereof shall not exceed 10 consecutive semi-annual periods or extend beyond the
Maturity Date of the Debentures. Payment of all accrued and unpaid interest
shall be payable to the Holder of the Debenture in whose name such Debenture is
registered in the Security Register on the record date with respect to the first
Interest Payment Date after the end of the Extended Interest Payment Period.
Upon the termination of any Extended Interest Payment Period and the payment of
all accrued and unpaid interest and any additional amounts then due, the Company
may commence a new Extended Interest Payment Period, subject to the requirements
contained in this paragraph.
As provided in the Indenture and subject to certain
limitations therein set forth, this Debenture is transferable by the registered
Holder hereof on the Security Register of the Company, upon surrender of this
Debenture for registration of transfer at the office or agency of the Trustee in
the City and State of New York accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company and the Trustee or
the Authenticating Agent duly executed by the registered Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Debentures of
authorized denominations and for the same aggregate principal amount and series
will be issued to the designated transferee or transferees.
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No service charge will be made for any such transfer, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in relation thereto.
All terms used in this Debenture that are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE
INDENTURE AND THE DEBENTURES WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS
THEREOF.
ARTICLE VIII
ORIGINAL ISSUE OF DEBENTURES
SECTION 8.1 Original Issue of Debentures.
Series A Debentures in the aggregate principal amount of
$77,320,000 may, upon execution of this First Supplemental Indenture, and Series
B Debentures in aggregate amount of up to $77,320,000 may, upon consummation of
the Exchange Offer, be executed by the Company and delivered to the Trustee for
authentication, and the Trustee shall thereupon authenticate and deliver said
Debentures to or upon the written order of the Company, signed by its Chief
Executive Officer, its President, or any Vice President, its Treasurer, any
Assistant Treasurer, its Controller or any Assistant Controller, its Secretary
or any Assistant Secretary without any further action by the Company.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Ratification of Indenture.
The Indenture, as supplemented by this First Supplemental
Indenture, is in all respects ratified and confirmed, and this First
Supplemental Indenture shall be deemed part of the Indenture in the manner and
to the extent herein and therein provided.
SECTION 9.2 Trustee Not Responsible for Recitals.
The recitals herein contained are made by the Company and not
by the Trustee, and the Trustee assumes no responsibility for the correctness
thereof. The Trustee makes no representation as to the validity or sufficiency
of this First Supplemental Indenture.
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SECTION 9.3 Governing Law.
This First Supplemental Indenture and each Debenture shall be
deemed to be a contract made under the internal laws of the State of New York,
and for all purposes shall be construed in accordance with the laws of said
State.
SECTION 9.4 Severability.
In case any one or more of the provisions contained in this
First Supplemental Indenture or in the Debentures shall for any reason be held
to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions of this
First Supplemental Indenture or of the Debentures, but this First Supplemental
Indenture and the Debentures shall be construed as if such invalid or illegal or
unenforceable provision had never been contained herein or therein.
SECTION 9.5 Counterparts.
This First Supplemental Indenture may be executed in any
number of counterparts each of which shall be an original; but such counterparts
shall together constitute but one and the same instrument.
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<PAGE> 30
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed by their authorized respective
officers as of the day and year first above written.
INTERPOOL, INC.
By:
------------------------------
Name:
Title:
IBJ SCHRODER BANK & TRUST COMPANY
as Trustee
By:
------------------------------
Name:
Title:
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<PAGE> 1
Exhibit 10.29
----------------------------------------------
SERIES A CAPITAL SECURITIES GUARANTEE AGREEMENT
INTERPOOL CAPITAL TRUST
Dated as of January 27, 1997
----------------------------------------------
<PAGE> 2
Exhibit 29
SERIES A CAPITAL SECURITIES GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (the "Capital Securities Guarantee"),
dated as of January 27, 1997, is executed and delivered by INTERPOOL, INC., a
Delaware corporation (the "Guarantor"), and IBJ SCHRODER BANK & TRUST COMPANY, a
New York banking corporation, as trustee (the "Capital Guarantee Trustee"), for
the benefit of the Holders (as defined herein) from time to time of the Capital
Securities (as defined herein) of Interpool Capital Trust, a Delaware statutory
business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of
Trust (the "Declaration"), dated as of January 27, 1997, among the trustees of
the Issuer named therein, the Guarantor, as sponsor, and the holders from time
to time of undivided beneficial interests in the assets of the Issuer, the
Issuer is issuing on the date hereof 75,000 capital securities, having an
aggregate liquidation amount of $75,000,000, designated the 9 7/8% Series A
Capital Securities of the Issuer;
WHEREAS, as incentive for the Holders to purchase the Capital
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Capital Securities Guarantee, to pay to the Holders
of the Capital Securities the Guarantee Payments (as defined herein) and to make
certain other payments on the terms and conditions set forth herein.
WHEREAS, the Guarantor is also executing and delivering a
guarantee agreement (the "Common Securities Guarantee") in substantially
identical terms to this Capital Securities Guarantee for the benefit of the
holders of the Common Securities (as defined herein), except that if an Event of
Default (as defined in the Indenture), has occurred and is continuing, the
rights of holders of the Common Securities to receive Guarantee Payments under
the Common Securities Guarantee are subordinated to the rights of Holders of
Capital Securities to receive Guarantee Payments under this Capital Securities
Guarantee.
NOW, THEREFORE, in consideration of the purchase by each
Holder of Capital Securities, which purchase the Guarantor hereby agrees shall
benefit the Guarantor, the Guarantor executes and delivers this Capital
Securities Guarantee for the benefit of the Holders.
<PAGE> 3
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions and Interpretation
In this Capital Securities Guarantee, unless the context otherwise
requires:
(a) Capitalized terms used in this Capital Securities
Guarantee but not defined in the preamble above have the respective meanings
assigned to them in this Section 1.1;
(b) terms defined in the Declaration as at the date of
execution of this Capital Securities Guarantee have the same meaning when used
in this Capital Securities Guarantee;
(c) a term defined anywhere in this Capital Securities
Guarantee has the same meaning throughout;
(d) all references to "the Capital Securities Guarantee" or
"this Capital Securities Guarantee" are to this Capital Securities Guarantee as
modified, supplemented or amended from time to time;
(e) all references in this Capital Securities Guarantee to
Articles and Sections are to Articles and Sections of this Capital Securities
Guarantee, unless otherwise specified;
(f) a term defined in the Trust Indenture Act has the same
meaning when used in this Capital Securities Guarantee, unless otherwise defined
in this Capital Securities Guarantee or unless the context otherwise requires;
and
(g) a reference to the singular includes the plural and vice
versa.
"Capital Guarantee Trustee" means IBJ Schroder Bank & Trust
Company, a New York banking corporation, until a Successor Capital Guarantee
Trustee has been appointed and has accepted such appointment pursuant to the
terms of this Capital Securities Guarantee and thereafter means each such
Successor Capital Guarantee Trustee.
"Capital Securities" means the Series A 9 7/8% Capital
Securities, representing preferred undivided beneficial interests in the assets
of the Issuer, issued pursuant to the Declaration.
"Common Securities" means the securities representing common
undivided beneficial interests in the assets of the Issuer, issued pursuant to
the Declaration.
"Corporate Trust Office" means the office of the Capital
Guarantee Trustee at which the corporate trust business of the Capital Guarantee
Trustee shall, at any particular time, be principally administered, which office
at the date of execution of this Agreement is located at One State Street, New
York, New York 10004.
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<PAGE> 4
"Covered Person" means any Holder or beneficial owner of
Capital Securities.
"Debentures" means the series of junior subordinated debt
securities of the Guarantor designated the Series A 9 7/8% Junior Subordinated
Deferrable Interest Debentures due February 15, 2027 held by the Property
Trustee of the Issuer.
"Event of Default" means a failure by the Guarantor to perform
any of its payment or other obligations under this Capital Securities Guarantee.
"Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the Capital Securities, to
the extent not paid by or on behalf of the Issuer: (i) any accumulated and
unpaid Distributions that are required to be paid on the Capital Securities, to
the extent the Issuer has funds on hand legally available therefor, (ii) the
redemption price, including all accumulated and unpaid Distributions to the date
of redemption (the "Redemption Price"), with respect to any Capital Securities
called for redemption by the Issuer, to the extent the Issuer has funds on hand
legally available therefor, and (iii) upon a voluntary or involuntary
termination and liquidation of the Issuer (unless the Debentures are distributed
to the Holders in exchange for Capital Securities as provided in the
Declaration), the lesser of (a) the aggregate of the liquidation amount of the
Capital Securities plus all accumulated and unpaid Distributions on the Capital
Securities to the date of payment, and (b) the amount of assets of the Issuer
remaining available for distribution to Holders in liquidation of the Issuer (in
either case, the "Liquidation Distribution"). If an event of default under the
Indenture has occurred and is continuing, the rights of holders of the Common
Securities to receive payments under the Common Securities Guarantee Agreement
are subordinated to the rights of Holders of Capital Securities to receive
Guarantee Payments.
"Holder" shall mean any holder as registered on the books and
records of the applicable Clearing Agency.
"Indemnified Person" means the Capital Guarantee Trustee, any
Affiliate of the Capital Guarantee Trustee, or any officers, directors,
shareholders, members, partners, employees, representatives, nominees,
custodians or agents of the Capital Guarantee Trustee.
"Indenture" means the Indenture dated as of January 27, 1997,
among the Guarantor (the "Debenture Issuer") and IBJ Schroder Bank & Trust
Company, as trustee, together with the First Supplemental Indenture dated as of
January 27, 1997 and any other indenture supplemental thereto, pursuant to which
certain junior subordinated debt securities of the Debenture Issuer are to be
issued to the Property Trustee (as defined in the Declaration) of the Issuer.
"Majority in liquidation amount of the Securities" means,
except as provided in the terms of the Capital Securities by the Trust Indenture
Act, Holder(s) of outstanding Capital Securities, voting separately as a class,
of more than 50% of the liquidation amount (including the stated amount that
would be paid on redemption, liquidation, dissolution or otherwise, plus accrued
and unpaid Distributions to the date upon which the voting percentages are
determined) of all Capital Securities.
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<PAGE> 5
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two Authorized Officers of such Person. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Capital Securities Guarantee shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definition relating
thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in rendering the
Officers' Certificate;
(c) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is necessary to
enable such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Responsible Officer" means, with respect to the Capital
Guarantee Trustee, within the Corporate Trust Office of the Capital Guarantee
Trustee, any senior trust officer, any trust officer or any other officer of the
Corporate Trust Office of the Capital Guarantee Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of that officer's knowledge of
and familiarity with the particular subject.
"Senior Indebtedness" shall mean, with respect to the
Guarantor, (i) the principal, premium, if any, and interest in respect of (A)
indebtedness of the Guarantor for money borrowed, whether outstanding on the
date of the Indenture or thereafter created, and (B) indebtedness evidenced by
securities, debentures, bonds or other similar instruments issued by the
Guarantor; (ii) all capital lease obligations of the Guarantor; (iii) all
obligations of the Guarantor issued or assumed as the deferred purchase price of
property, all conditional sale obligations of the Guarantor and all obligations
of the Guarantor under any title retention agreement (but excluding trade
accounts payable arising in the ordinary course of business); (iv) all
obligations of the Guarantor for the reimbursement on any letter of credit,
banker's acceptance, security purchase facility or similar credit transactions;
(v) all obligations of the Guarantor arising from off-balance sheet guarantees
by the Guarantor and direct credit substitutes and obligations of the Guarantor
associated with derivative products such as interest and foreign exchange rate
contracts, commodity contracts, swap agreements (including interest and foreign
exchange swap agreements), cap agreements, floor agreements, collar agreements,
interest rate agreements, foreign exchange rate agreements, options, commodity
futures contracts and commodity option contracts; (vi) all obligations of the
type referred to in clauses (i) through (v) of other Persons for the payment of
which the Guarantor is
7
<PAGE> 6
responsible or liable as obligor, guarantor or otherwise; and (vii) all
obligations of the type referred to in clauses (i) through (vi) above of other
Persons secured by any lien on any property or asset of the Guarantor (whether
or not such obligation is assumed by the Guarantor), except for (1) any such
indebtedness that by its terms is subordinated to or ranks pari passu with the
Capital Securities Guarantee, and (2) any indebtedness between or among the
Guarantor and its Affiliates, including all other debt securities and guarantees
in respect of those debt securities, issued to (a) the Issuer or (b) any other
trust, or a trustee of such trust, partnership or other entity affiliated with
the Guarantor which is a financing vehicle of the Guarantor (a "financing
entity") in connection with the issuance by such financing entity of preferred
securities or other securities that rank pari passu with, or junior to, the
Capital Securities.
"Successor Capital Guarantee Trustee" means a successor
Capital Guarantee Trustee possessing the qualifications to act as Capital
Guarantee Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended.
"Trust Securities" means the Common Securities and the Capital
Securities.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application
(a) This Capital Securities Guarantee is subject to the
provisions of the Trust Indenture Act that are required to be part of this
Capital Securities Guarantee and shall, to the extent applicable, be governed by
such provisions; and
(b) if and to the extent that any provision of this Capital
Securities Guarantee limits, qualifies or conflicts with the duties imposed by
Section 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties
shall control.
SECTION 2.2 Lists of Holders of Securities
(a) Unless the Capital Guarantee Trustee is also the registrar
for the Capital Securities, the Guarantor shall provide the Capital Guarantee
Trustee with a list, in such form as the Capital Guarantee Trustee may
reasonably require, of the names and addresses of the Holders of the Capital
Securities ("List of Holders") as of such date, (i) within 14 days after each
record date, and (ii) at any other time within 30 days of receipt by the
Guarantor of a written request for a List of Holders as of a date no more than
14 days before such List of Holders is given to the Capital Guarantee Trustee;
provided, however that the Guarantor shall not be obligated to provide such List
of Holders at any time the List of Holders does not differ from the most recent
List of Holders given to the Capital Guarantee Trustee by the Guarantor. The
Capital Guarantee Trustee may destroy any List of Holders previously given to it
on receipt of a new List of Holders.
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<PAGE> 7
(b) The Capital Guarantee Trustee shall comply with its
obligations under Sections 311(a), 311(b) and Section 312(b) of the Trust
Indenture Act.
SECTION 2.3 Reports by the Capital Guarantee Trustee
Within 60 days after December 31 of each year, the Capital
Guarantee Trustee shall provide to the Holders of the Capital Securities such
reports as are required by Section 313 of the Trust Indenture Act, if any, in
the form and in the manner provided by Section 313 of the Trust Indenture Act.
The Capital Guarantee Trustee shall also comply with the requirements of Section
313(d) of the Trust Indenture Act.
SECTION 2.4 Periodic Reports to Capital Guarantee Trustee
The Guarantor shall provide to the Capital Guarantee Trustee
such documents, reports and information as required by Section 314 of the Trust
Indenture Act (if any) and the compliance certificate required by Section 314 of
the Trust Indenture Act in the form, in the manner and at the times required by
Section 314 of the Trust Indenture Act.
SECTION 2.5 Evidence of Compliance with Conditions Precedent
The Guarantor shall provide to the Capital Guarantee Trustee
such evidence of compliance with any conditions precedent, if any, provided for
in this Capital Securities Guarantee that relate to any of the matters set forth
in Section 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer pursuant to Section 314(c)(1) shall be given
in the form of an Officers' Certificate.
SECTION 2.6 Events of Default; Waiver
The Holders of a Majority in liquidation amount of the Capital
Securities may, by vote, on behalf of the Holders of all of the Capital
Securities, waive any past Event of Default and its consequences. Upon such
waiver, any such Event of Default shall cease to exist, and any Event of Default
arising therefrom shall be deemed to have been cured, for every purpose of this
Capital Securities Guarantee, but no such waiver shall extend to any subsequent
or other default or Event of Default or impair any right consequent thereon.
SECTION 2.7 Event of Default; Notice
(a) The Capital Guarantee Trustee shall, within 90 days after
the occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the Capital Securities, notices of all Events of
Default actually known to a Responsible Officer of the Capital Guarantee
Trustee, unless such defaults have been cured before the giving of such notice,
provided, that, the Capital Guarantee Trustee shall be protected in withholding
such notice if and so long as a Responsible Officer of the Capital Guarantee
Trustee in good faith determines that the withholding of such notice is in the
interests of the Holders of the Capital Securities.
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<PAGE> 8
(b) The Capital Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default unless the Capital Guarantee Trustee shall
have received written notice, or of which a Responsible Officer of the Capital
Guarantee Trustee charged with the administration of the Declaration shall have
obtained actual knowledge.
SECTION 2.8 Conflicting Interests
The Declaration shall be deemed to be specifically described
in this Capital Securities Guarantee for the purposes of clause (i) of the first
proviso contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS
OF CAPITAL GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Capital Guarantee Trustee
(a) This Capital Securities Guarantee shall be held by the
Capital Guarantee Trustee for the benefit of the Holders of the Capital
Securities, and the Capital Guarantee Trustee shall not transfer this Capital
Securities Guarantee to any Person except a Holder of Capital Securities
exercising his or her rights pursuant to Section 5.4(b) or to a Successor
Capital Guarantee Trustee on acceptance by such Successor Capital Guarantee
Trustee of its appointment to act as Successor Capital Guarantee Trustee. The
right, title and interest of the Capital Guarantee Trustee shall automatically
vest in any Successor Capital Guarantee Trustee, and such vesting and cessation
of title shall be effective whether or not conveyancing documents have been
executed and delivered pursuant to the appointment of such Successor Capital
Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible
Officer of the Capital Guarantee Trustee has occurred and is continuing, the
Capital Guarantee Trustee shall enforce this Capital Securities Guarantee for
the benefit of the Holders of the Capital Securities.
(c) The Capital Guarantee Trustee, other than during the
continuance of a default by the Company in performance of its obligations under
this Capital Securities Guarantee, shall undertake to perform only such duties
as are specifically set forth in this Capital Securities Guarantee, and no
implied covenants shall be read into this Capital Securities Guarantee against
the Capital Guarantee Trustee. In case such a default by the Company has
occurred (which has not been cured or waived pursuant to Section 2.6) and is
actually known to a Responsible Officer of the Capital Guarantee Trustee, the
Capital Guarantee Trustee shall exercise such of the rights and powers vested in
it by this Capital Securities Guarantee, and use the same degree of care and
skill in its exercise thereof, as a prudent individual would exercise or use
under the circumstances in the conduct of his or her own affairs.
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<PAGE> 9
(d) No provision of this Capital Securities Guarantee shall be
construed to relieve the Capital Guarantee Trustee from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) prior to the occurrence of any Event of Default
of which a Responsible Officer of the Capital Guarantee Trustee has actual
knowledge, and after the curing or waiving of all such Events of Default that
may have occurred:
(A) the duties and obligations of the Capital Guarantee Trustee shall be
determined solely by the express provisions of this Capital Securities
Guarantee, and the Capital Guarantee Trustee shall not be liable except for the
performance of such duties and obligations as are specifically set forth in this
Capital Securities Guarantee, and no implied covenants or obligations shall be
read into this Capital Securities Guarantee against the Capital Guarantee
Trustee; and
(B) in the absence of bad faith on the part of the Capital Guarantee Trustee,
the Capital Guarantee Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Capital Guarantee Trustee and
conforming to the requirements of this Capital Securities Guarantee; but in the
case of any such certificates or opinions that by any provision hereof are
specifically required to be furnished to the Capital Guarantee Trustee, the
Capital Guarantee Trustee shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this Capital Securities
Guarantee;
(ii) the Capital Guarantee Trustee shall not be
liable for any error of judgment made in good faith by a Responsible Officer of
the Capital Guarantee Trustee, unless it shall be proved that the Capital
Guarantee Trustee was negligent in ascertaining the pertinent facts upon which
such judgment was made;
(iii) the Capital Guarantee Trustee shall not be
liable with respect to any action taken or omitted to be taken by it in good
faith in accordance with the direction of the Holders of not less than a
Majority in liquidation amount of the Capital Securities relating to the time,
method and place of conducting any proceeding for any remedy available to the
Capital Guarantee Trustee, or exercising any trust or power conferred upon the
Capital Guarantee Trustee under this Capital Securities Guarantee; and
(iv) no provision of this Capital Securities
Guarantee shall require the Capital Guarantee Trustee to expend or risk its own
funds or otherwise incur personal financial liability in the performance of any
of its duties or in the exercise of any of its rights or powers, if the Capital
Guarantee Trustee shall have reasonable grounds for believing that the repayment
of such funds or liability is not reasonably assured to it under the terms of
this Capital Securities Guarantee or indemnity, reasonably satisfactory to the
Capital Guarantee Trustee, against such risk or liability is not reasonably
assured to it.
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<PAGE> 10
SECTION 3.2 Certain Rights of Capital Guarantee Trustee
(a) Subject to the provisions of Section 3.1:
(i) The Capital Guarantee Trustee may conclusively
rely, and shall be fully protected in acting or refraining from acting upon, any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be genuine and to have
been signed, sent or presented by the proper party or parties.
(ii) Any direction or act of the Guarantor
contemplated by this Capital Securities Guarantee shall be sufficiently
evidenced by an Officers' Certificate.
(iii) Whenever, in the administration of this Capital
Securities Guarantee, the Capital Guarantee Trustee shall deem it desirable that
a matter be proved or established before taking, suffering or omitting any
action hereunder, the Capital Guarantee Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on its part, request
and conclusively rely upon an Officers' Certificate and/or an Opinion of Counsel
which, upon receipt of such request, shall be promptly delivered by the
Guarantor.
(iv) The Capital Guarantee Trustee shall have no duty
to see to any recording, filing or registration of any instrument (or any
rerecording, refiling or registration thereof).
(v) The Capital Guarantee Trustee may consult with
counsel of its selection, and the advice or opinion of such counsel with respect
to legal matters shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder in good faith
and in accordance with such advice or opinion. Such counsel may be counsel to
the Guarantor or any of its Affiliates and may include any of its employees. The
Capital Guarantee Trustee shall have the right at any time to seek instructions
concerning the administration of this Capital Securities Guarantee from any
court of competent jurisdiction.
(vi) The Capital Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by this Capital
Securities Guarantee at the request or direction of any Holder, unless such
Holder shall have offered to the Capital Guarantee Trustee an indemnity,
reasonably satisfactory to the Capital Guarantee Trustee, against the costs,
expenses (including attorneys' fees and expenses and the expenses of the Capital
Guarantee Trustee's agents, nominees or custodians) and liabilities that might
be incurred by it in complying with such request or direction, including such
reasonable advances as may be requested by the Capital Guarantee Trustee;
provided, however, that nothing contained in this Section 3.2(a)(vi) shall be
taken to relieve the Capital Guarantee Trustee, upon the occurrence of an Event
of Default of which a Responsible Officer of the Capital Securities Trustee has
actual knowledge, of its obligation to exercise the rights and powers vested in
it by this Capital Securities Guarantee.
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<PAGE> 11
(vii) The Capital Guarantee Trustee shall not be
bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Capital Guarantee Trustee, in
its discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit.
(viii) The Capital Guarantee Trustee may execute any
of the trusts or powers hereunder or perform any duties hereunder either
directly or by or through agents, nominees, custodians or attorneys, and the
Capital Guarantee Trustee shall not be responsible for any misconduct or
negligence on the part of any agent, nominee, custodian or attorney appointed
with due care by it hereunder.
(ix) Any action taken by the Capital Guarantee
Trustee or its agents hereunder shall bind the Holders of the Capital
Securities, and the signature of the Capital Guarantee Trustee or its agents
alone shall be sufficient and effective to perform any such action. No third
party shall be required to inquire as to the authority of the Capital Guarantee
Trustee to so act or as to its compliance with any of the terms and provisions
of this Capital Securities Guarantee, both of which shall be conclusively
evidenced by the Capital Guarantee Trustee's or its agent's taking such action.
(x) Whenever in the administration of this Capital
Securities Guarantee the Capital Guarantee Trustee shall deem it desirable to
receive instructions with respect to enforcing any remedy or right or taking any
other action hereunder, the Capital Guarantee Trustee (i) may request
instructions from the Holders of a Majority in liquidation amount of the
Securities, (ii) may refrain from enforcing such remedy or right or taking such
other action until such instructions are received, and (iii) shall be protected
in conclusively relying on or acting in accordance with such instructions.
(xi) The Capital Guarantee Trustee shall not be
liable for any action taken, suffered, or omitted to be taken by it in good
faith and reasonably believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Capital Securities Guarantee.
(b) No provision of this Capital Securities Guarantee shall be
deemed to impose any duty or obligation on the Capital Guarantee Trustee to
perform any act or acts or exercise any right, power, duty or obligation
conferred or imposed on it in any jurisdiction in which it shall be illegal, or
in which the Capital Guarantee Trustee shall be unqualified or incompetent in
accordance with applicable law, to perform any such act or acts or to exercise
any such right, power, duty or obligation. No permissive power or authority
available to the Capital Guarantee Trustee shall be construed to be a duty.
SECTION 3.3 Not Responsible for Recitals or Issuance of Capital
Securities Guarantee
The recitals contained in this Capital Securities Guarantee
shall be taken as the statements of the Guarantor, and the Capital Guarantee
Trustee does not assume any responsibility
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<PAGE> 12
for their correctness. The Capital Guarantee Trustee makes no representation as
to the validity or sufficiency of this Capital Securities Guarantee.
ARTICLE IV
CAPITAL GUARANTEE TRUSTEE
SECTION 4.1 Capital Guarantee Trustee; Eligibility
(a) There shall at all times be a Capital Guarantee Trustee
which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the
laws of the United States of America or any State or Territory thereof or of the
District of Columbia, or a corporation or Person permitted by the Securities and
Exchange Commission to act as an Property Trustee under the Trust Indenture Act,
authorized under such laws to exercise corporate trust powers, having a combined
capital and surplus of at least $50,000,000, and subject to supervision or
examination by Federal, State, Territorial or District of Columbia authority. If
such corporation publishes reports of condition at least annually, pursuant to
law or to the requirements of the supervising or examining authority referred to
above, then, for the purposes of this Section 4.1(a)(ii), the combined capital
and surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published.
(b) If at any time the Capital Guarantee Trustee shall cease
to be eligible to so act under Section 4.1(a), the Capital Guarantee Trustee
shall immediately resign in the manner and with the effect set out in Section
4.2(c).
(c) If the Capital Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Capital Guarantee Trustee and Guarantor shall in all respects
comply with the provisions of Section 310(b) of the Trust Indenture Act.
SECTION 4.2 Appointment, Removal and Resignation of Capital Guarantee
Trustee
(a) Subject to Section 4.2(b), the Capital Guarantee Trustee
may be appointed or removed without cause at any time by the Guarantor except
during an event of default.
(b) The Capital Guarantee Trustee shall not be removed in
accordance with Section 4.2(a) until a Successor Capital Guarantee Trustee has
been appointed and has accepted such appointment by written instrument executed
by such Successor Capital Guarantee Trustee and delivered to the Guarantor.
(c) The Capital Guarantee Trustee appointed to office shall
hold office until a Successor Capital Guarantee Trustee shall have been
appointed or until its removal or resignation. The Capital Guarantee Trustee may
resign from office (without need for prior or subsequent
14
<PAGE> 13
accounting) by an instrument in writing executed by the Capital Guarantee
Trustee and delivered to the Guarantor, which resignation shall not take effect
until a Successor Capital Guarantee Trustee has been appointed and has accepted
such appointment by instrument in writing executed by such Successor Capital
Guarantee Trustee and delivered to the Guarantor and the resigning Capital
Guarantee Trustee.
(d) If no Successor Capital Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 4.2 within 60
days after delivery of an instrument of removal or resignation, the Capital
Guarantee Trustee resigning or being removed may petition any court of competent
jurisdiction for appointment of a Successor Capital Guarantee Trustee. Such
court may thereupon, after prescribing such notice, if any, as it may deem
proper, appoint a Successor Capital Guarantee Trustee.
(e) No Capital Guarantee Trustee shall be liable for the acts
or omissions to act of any Successor Capital Guarantee Trustee.
(f) Upon termination of this Capital Securities Guarantee or
removal or resignation of the Capital Guarantee Trustee pursuant to this Section
4.2, the Guarantor shall pay to the Capital Guarantee Trustee all amounts
accrued to the date of such termination, removal or resignation.
ARTICLE V
GUARANTEE
SECTION 5.1 Guarantee
The Guarantor irrevocably and unconditionally agrees to pay in
full to the Holders the Guarantee Payments (without duplication of amounts
theretofore paid by the Issuer), as and when due, regardless of any defense,
right of set-off or counterclaim that the Issuer may have or assert (other than
the defense of payment). The Guarantor's obligation to make a Guarantee Payment
may be satisfied by direct payment of the required amounts by the Guarantor to
the Holders or by causing the Issuer to pay such amounts to the Holders.
SECTION 5.2 Waiver of Notice and Demand
The Guarantor hereby waives notice of acceptance of this
Capital Securities Guarantee and of any liability to which it applies or may
apply, presentment, demand for payment, any right to require a proceeding first
against the Issuer or any other Person before proceeding against the Guarantor,
protest, notice of nonpayment, notice of dishonor, notice of redemption and all
other notices and demands.
SECTION 5.3 Obligations Not Affected
15
<PAGE> 14
The obligations, covenants, agreements and duties of the
Guarantor under this Capital Securities Guarantee shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise,
of the performance or observance by the Issuer of any express or implied
agreement, covenant, term or condition relating to the Capital Securities to be
performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all
or any portion of the Distributions, or any other sums payable under the terms
of the Capital Securities or the extension of time for the performance of any
other obligation under, arising out of, or in connection with, the Capital
Securities (other than an extension of time for payment of Distributions, or
other sum payable that results from the extension of any interest payment period
on the Debentures or any extension of the maturity date of the Debentures
permitted by the Indenture);
(c) any failure, omission, delay or lack of diligence on the
part of the Holders to enforce, assert or exercise any right, privilege, power
or remedy conferred on the Holders pursuant to the terms of the Capital
Securities, or any action on the part of the Issuer granting indulgence or
extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution,
sale of any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or readjustment
of debt of, or other similar proceedings affecting, the Issuer or any of the
assets of the Issuer;
(e) any invalidity of, or defect or deficiency in, the Capital
Securities;
(f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it being
the intent of this Section 5.3 that the obligations of the Guarantor hereunder
shall be absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders or the Capital
Guarantee Trustee to give notice to, or obtain consent of, the Guarantor with
respect to the happening of any of the foregoing.
SECTION 5.4 Rights of Holders
(a) The Holders of a Majority in liquidation amount of the
Capital Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Capital Guarantee
Trustee in respect of this Capital Securities Guarantee or to direct the
exercise of any trust or power conferred upon the Capital Guarantee Trustee
under this Capital Securities Guarantee.
16
<PAGE> 15
(b) If the Capital Guarantee Trustee fails to enforce such
Capital Securities Guarantee, any Holder of Capital Securities may institute a
legal proceeding directly against the Guarantor to enforce the Capital Guarantee
Trustee's rights under this Capital Securities Guarantee, without first
instituting a legal proceeding against the Issuer, the Capital Guarantee Trustee
or any other Person. The Guarantor waives any right or remedy to require that
any action be brought first against the Issuer, the Capital Guarantee Trustee or
any other Person before proceeding directly against the Guarantor.
SECTION 5.5 Guarantee of Payment
This Capital Securities Guarantee creates a guarantee of
payment and not of collection. Subject to the provisions of Section 7.1, this
Capital Securities Guarantee will not be discharged except by payment of the
Guarantee Payments in full (without duplication of amounts theretofore paid by
the Issuer) or upon distribution of the Debentures to the Holders of the Capital
Securities as provided in the Declaration.
SECTION 5.6 Subrogation
The Guarantor shall be subrogated to all (if any) rights of
the Holders of Capital Securities against the Issuer in respect of any amounts
paid to such Holders by the Guarantor under this Capital Securities Guarantee;
provided, however, that the Guarantor shall not (except to the extent required
by mandatory provisions of law) be entitled to enforce or exercise any right
that it may acquire by way of subrogation or any indemnity, reimbursement or
other agreement, in all cases as a result of payment under this Capital
Securities Guarantee, if, at the time of any such payment, any amounts are due
and unpaid under this Capital Securities Guarantee. If any amount shall be paid
to the Guarantor in violation of the preceding sentence, the Guarantor agrees to
hold such amount in trust for the Holders and to pay over such amount to the
Holders.
SECTION 5.7 Independent Obligations
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Capital
Securities, and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Capital
Securities Guarantee notwithstanding the occurrence of any event referred to in
subsections (a) through (g), inclusive, of Section 5.3 hereof.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions
If (1) there shall have occurred any event of which the
Guarantor has actual knowledge that (a) is, or with the giving of notice or the
lapse of time, or both, would be, an Event of Default under the Capital
Securities Guarantee or an Event of Default under the Indenture and (b) in
respect of any nonpayment default, which the Guarantor shall not have taken
reasonable steps to cure, and in respect of any payment default, which has not
been cured, (2) the Debentures are
17
<PAGE> 16
held by the Issuer, and the Guarantor shall be in default with respect to its
payment of any obligations under the Capital Securities Guarantee or (3) the
Guarantor shall have given notice of its election of an Extended Interest
Payment Period, or any extension thereof, as provided in the Indenture and shall
not have rescinded such notice, and such period, or any extension thereof, shall
have commenced, then the Guarantor will not (i) declare or pay any dividend on,
make any distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Guarantor's capital stock (which
includes common and preferred stock), (ii) make any payments of principal,
interest or premium, if any, on or repay or repurchase or redeem any debt
securities of the Guarantor (including Other Debentures) that rank pari passu
with or junior in right of payment to the Debentures or (iii) make any guarantee
payments with respect to any guarantee by the Guarantor of the debt securities
of any subsidiary of the Guarantor (including Other Guarantees) is such
guarantee ranks pari passu or junior in right of payment to the Debentures
(other than (a) dividends or distributions in shares of, or options, warrants or
rights to subscribe for or purchase shares of, common stock of the Guarantor,
(b) any declaration of a dividend in connection with the implementation of a
stockholder's rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under this Capital Securities Guarantee, (d) the purchase of fractional
shares resulting from a reclassification of the Guarantor's capital stock, (e)
the exchange or conversion of one class or series of the Guarantor's capital
stock for another class or series of the Guarantor's capital stock, (f) the
purchase of fractional interest in shares of the Guarantor's capital stock
pursuant to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged and (g) purchases of common stock related
to the issuance of common stock or rights under any of the Guarantor's benefit
plans for its directors, officers of employees or any of the Guarantor's
dividend reinvestment plans).
SECTION 6.2 Ranking
This Capital Securities Guarantee will constitute an unsecured
obligation of the Guarantor and will rank (i) subordinate and junior in right of
payment to all Senior Indebtedness, in the same manner and to the same extent as
provided in the Indenture with respect to the Debentures, except in the case of
a bankruptcy or insolvency proceeding in respect of the Guarantor, in which case
this Capital Securities Guarantee will rank subordinate and junior in right of
payment to all liabilities, including contingent liabilities (but excluding any
other guarantee now or hereafter entered into by the Guarantor in respect of any
preferred securities or preference stock of any Affiliate of the Guarantor),
(ii) pari passu with any guarantee now or hereafter entered into by the
Guarantor in respect of any preferred securities or preference stock of any
Affiliate of the Guarantor, and (iii) senior to the Guarantor's common stock.
18
<PAGE> 17
ARTICLE VII
TERMINATION
SECTION 7.1 Termination
This Capital Securities Guarantee shall terminate and be of no
further force and effect (i) upon full payment of the applicable Redemption
Price of all Capital Securities, (ii) upon the distribution of the Debentures to
the Holders of all of the Capital Securities or (iii) upon full payment of the
amounts payable in accordance with the Declaration upon liquidation of the
Issuer. Notwithstanding the foregoing, this Capital Securities Guarantee will
continue to be effective or will be reinstated, as the case may be, if at any
time any Holder of Capital Securities must restore payment of any sums paid
under the Capital Securities or under this Capital Securities Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Exculpation
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Covered Person for
any loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith in accordance with this Capital
Securities Guarantee and in a manner that such Indemnified Person reasonably
believed to be within the scope of the authority conferred on such Indemnified
Person by this Capital Securities Guarantee or by law, except that an
Indemnified Person shall be liable for any such loss, damage or claim incurred
by reason of such Indemnified Person's negligence or willful misconduct with
respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying
in good faith upon the records of the Guarantor and upon such information,
opinions, reports or statements presented to the Guarantor by any Person as to
matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Guarantor, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits, losses, or any other facts pertinent to the existence and
amount of assets from which Distributions to Holders of Capital Securities might
properly be paid.
19
<PAGE> 18
SECTION 8.2 Indemnification
The Guarantor agrees to indemnify each Indemnified Person for,
and to hold each Indemnified Person harmless against, any and all loss,
liability, damage, claim or expense (including reasonable legal fees and
expenses) incurred without negligence or bad faith on its part, arising out of
or in connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses (including reasonable legal fees and
expenses) of defending itself against, or investigating, any claim or liability
in connection with the exercise or performance of any of its powers or duties
hereunder. The obligation to indemnify as set forth in this Section 8.2 shall
survive the termination of this Capital Securities Guarantee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Successors and Assigns
All guarantees and agreements contained in this Capital
Securities Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
of the Capital Securities then outstanding.
SECTION 9.2 Amendments
Except with respect to any changes that do not materially
adversely affect the rights of Holders (in which case no vote or consent of
Holders will be required), this Capital Securities Guarantee may not be amended
without the prior approval of the Holders of at least a Majority in liquidation
of the outstanding Capital Securities. The provisions of Section 12.2 of the
Declaration with respect to meetings of Holders of the Securities apply to the
giving of such approval.
SECTION 9.3 Notices
All notices provided for in this Capital Securities Guarantee
shall be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by first class mail, as follows:
(a) If given to the Capital Guarantee Trustee, at the Capital
Guarantee Trustee's mailing address set forth below (or such other address as
the Capital Guarantee Trustee may give notice of to the Holders of the Capital
Securities):
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attention: Corporate Trust Department
20
<PAGE> 19
(b) If given to the Guarantor, at the Guarantor's mailing
address set forth below (or such other address as the Guarantor may give notice
of to the Holders of the Capital Securities):
Interpool, Inc.
211 College Road East
Princeton, New Jersey 08540
Attention: Chief Executive Officer
(c) If given to any Holder of Capital Securities, at the
address set forth on the books and records of the Issuer.
All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
SECTION 9.4 Benefit
This Capital Securities Guarantee is solely for the benefit of
the Holders of the Capital Securities and, subject to Section 3.1(a), is not
separately transferable from the Capital Securities.
SECTION 9.5 Governing Law
THIS CAPITAL SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.
21
<PAGE> 20
IN WITNESS WHEREOF, this Capital Securities Guarantee is
executed as of the day and year first above written.
INTERPOOL, INC., as
Guarantor
By:______________________________________
Name:
Title:
IBJ SCHRODER BANK & TRUST
COMPANY, as Capital Guarantee Trustee
By:______________________________________
Name:
Title:
22
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 45,333
<SECURITIES> 24,722
<RECEIVABLES> 31,324
<ALLOWANCES> 2,506
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 650,734
<DEPRECIATION> 109,363
<TOTAL-ASSETS> 939,418
<CURRENT-LIABILITIES> 122,117
<BONDS> 521,873
0
1
<COMMON> 26
<OTHER-SE> 280,519
<TOTAL-LIABILITY-AND-EQUITY> 939,418
<SALES> 147,148
<TOTAL-REVENUES> 147,148
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 65,667
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39,485
<INCOME-PRETAX> 41,996
<INCOME-TAX> 7,800
<INCOME-CONTINUING> 34,196
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,196
<EPS-PRIMARY> 1.21
<EPS-DILUTED> 1.15
</TABLE>
<PAGE> 1
Exhibit 99
FOR IMMEDIATE RELEASE
CONTACT: Raoul J. Witteveen
Interpool, Inc.
(212) 916-3261
INTERPOOL DECLARES CASH DIVIDEND ON ITS 5 3/4% CUMULATIVE
CONVERTIBLE PREFERRED STOCK
Princeton, NJ, November 22, 1996 -- Interpool, Inc. (NYSE: IPX), one of the
world's leading lessors of intermodal dry cargo containers and the second
largest lessor of intermodal container chassis in the United States, reported
today that its Board of Directors has declared a cumulative cash dividend on
its 5 3/4% Cumulative Convertible Preferred Stock payable on December 15, 1996
to holders of record on December 2, 1996.
The dividend in the amount of $1.4375 per share computed by dividing the annual
5 3/4% dividend rate by four, will be paid for the period commencing
September 16, 1996 through December 15, 1996.
###
<PAGE> 2
CONTACT: Raoul J. Witteveen
(212) 916-3261
FOR IMMEDIATE RELEASE
INTERPOOL TO CONSIDER REDEMPTION OF SHARES OF
5 3/4% CUMULATIVE CONVERTIBLE PREFERRED STOCK
PRINCETON, NJ, November 26, 1996 -- Interpool, Inc. (NYSE: IPX)
announced today that it is considering exercising its rights to redeem all or a
portion of its outstanding 5 3/4% Cumulative Convertible Preferred Stock
following December 15, 1996, the date on which such Preferred Stock becomes
redeemable in accordance with its terms. Interpool has a total of 758,414
shares of such 5 3/4% Preferred Stock outstanding, with an aggregate
liquidation preference of $75.8 million. The 5 3/4% Preferred Stock is
convertible into Interpool Common Stock at a price of $23.37 per share.
If Interpool elects to redeem shares of its 5 3/4% Preferred Stock,
holders of 5 3/4% Preferred Stock would become entitled to receive the
redemption price of 103.675% of the face amount of the shares redeemed, except
to the extent holders exercised the right to convert shares of 5 3/4% Preferred
Stock into Common Stock. Any notice of redemption would be given at least 30
days prior to the redemption date fixed by Interpool.
Interpool stated that it is considering various alternatives for
financing the redemption price of shares of 5 3/4% Preferred Stock called for
redemption and not converted into Common Stock. Among the alternatives being
examined is a public or private offering of preferred securities to be issued
by a grantor trust that would hold junior subordinated debentures of Interpool.
Any such public offering would be made only by means of a prospectus.
Martin Tuchman, Chairman and Chief Executive Officer of Interpool,
stated that, "We believe that now may be an excellent time for us to call all
or part of our convertible preferred stock and reduce the over-hang that could
act as an artificial ceiling on the price of Interpool's common stock."
Interpool, originally founded in 1968, is one of the world's leading
lessors of cargo containers used in international trade and is the second
largest lessor of intermodal container chassis in the United States. The
Company leases its containers and chassis to over 200 customers, including
nearly all of the world's 20 largest international container shipping lines.
###
<PAGE> 3
FOR IMMEDIATE RELEASE
Contact: Raoul J. Witteveen
Interpool, Inc.
212-986-3388
INTERPOOL TO PAY CASH DIVIDENDS ON COMMON STOCK
Princeton, NJ. December 24, 1996 -- Interpool, Inc. (NYSE: IPX), which leases
intermodal dry cargo containers and containers chassis, today announced that a
cash dividend of 5 cents per share will be paid to all common stock holders on
January 15, 1997. The dividend will be payable to all stockholders of record on
January 2, 1997.
Interpool stated that the aggregate amount of this dividend is expected to be
approximately $865,000.00. The amount of the dividend is based upon Interpool's
anticipated earnings for the fourth quarter ending December 31, 1996.
Interpool, originally founded in 1968, is one of the world's leading lessors of
intermodal dry cargo containers and is the second largest lessor of intermodal
container chassis in the United States. In addition to Interpool's 286,000 TEU
container fleet, its chassis fleet has approximately 54,000 chassis. Interpool
leases its containers and chassis to over 200 customers, including nearly all
of the world's 20 largest international container shipping lines.
# # #
<PAGE> 4
Contact: Raoul J. Witteveen
(212) 916-3261
NEWS FOR IMMEDIATE RELEASE
INTERPOOL TO ACQUIRE OUTSTANDING SECURITIES OF INTERPOOL INCOME FUND I, L.P.
PRINCETON, NJ, December 31, 1996 -- Interpool, Inc. (NYSE: IPX)
announced today that all of the conditions to its acquisition of substantially
all of the issued and outstanding securities of Interpool Income Fund I, L.P., a
Delaware limited partnership, have been satisfied. Effective today, Interpool
is acquiring all of the limited partnership interests and substantially all of
the Senior Securities for approximately $20 million. In addition, Interpool
Services, Inc., a subsidiary of the company, will become the sole general
partner of the partnership. It is anticipated that payment for the partnership
securities will be made on or about January 15, 1997.
Interpool co-sponsored the offering of securities in the partnership
during 1992 and 1993 and manages the containers and chassis owned by the
partnership. As a result of this acquisition, Interpool will receive all of the
revenue from the containers and chassis owned by the partnership, but will not
be subject to the partnership's obligations to make payments of approximately
11% per year on its outstanding securities.
Interpool, originally founded in 1968, is one of the world's leading
lessors of cargo containers used in international trade and is the second
largest lessor of intermodal container chassis in the United States. The
Company leases its containers and chassis to over 200 customers, including
nearly all of the world's 20 largest international container shipping lines.
###
<PAGE> 5
CONTACT: Raoul J. Witteveen
(212) 916-3261
FOR IMMEDIATE RELEASE
INTERPOOL ANNOUNCES SALE OF
TRUST ISSUED CAPITAL SECURITIES
PRINCETON, NJ, January 23, 1997 -- Interpool, Inc. (NYSE: IPX)
announced today that it has entered into a purchase agreement for the sale of
$75 million aggregate liquidation amount of 9.875% capital securities to be
issued by Interpool Capital Trust, a special purpose subsidiary of Interpool.
The capital securities to be sold will represent preferred undivided beneficial
interests in the assets of Interpool Capital Trust, a Delaware business trust,
which will use the proceeds of the offering to purchase an equivalent amount of
9.875% Junior Subordinated Deferrable Interest Debentures due 2027 to be issued
by Interpool. Interpool will own all the common securities of the Trust. The
capital securities are being sold in a private transaction pursuant to Rule
144A under the Securities Act of 1933.
Interpool expects to use the majority of the net proceeds from the
issuance of the Junior Subordinated Debentures to redeem shares of its
outstanding 5-3/4% Convertible Preferred Stock. The Company intends to call for
redemption all 758,694 outstanding shares of 5-3/4% Convertible Preferred
Stock, having an aggregate liquidation preference of $75.9 million, at the
current redemption price of 103.675% of their liquidation preference. Shares of
5-3/4% Preferred Stock may be converted prior to their redemption date into
shares of the Company's common stock at a conversion price of $23.37 per share.
Any additional net proceeds not needed for the purpose of redeeming shares of
5-3/4% Preferred Stock will be used for general corporate purposes, which may
include repayment of existing indebtedness, purchase of shares of Interpool's
common stock on the open market, purchase of new equipment, acquisitions,
and/or working capital.
Interpool, originally founded in 1968, is one of the world's leading
lessors of cargo containers used in international trade and is the second
largest lessor of intermodal container chassis in the United States. The
Company leases its containers and chassis to over 200 customers, including
nearly all of the world's 20 largest international container shipping lines.
The capital securities are being sold in a private transaction pursuant
to Rule 144A under the Securities Act of 1933 and will not be registered under
the Securities Act of 1933 and may not be offered or sold in the United States
absent registration or an applicable exemption from registration requirements.
###
<PAGE> 6
CONTACT: Raoul J. Witteveen
(212) 916-3261
FOR IMMEDIATE RELEASE
INTERPOOL ANNOUNCES CALL OF 5 3/4%
CUMULATIVE CONVERTIBLE PREFERRED STOCK
PRINCETON, NJ, January 31, 1997 - Interpool, Inc. (NYSE: IPX) announced
the call for redemption of its outstanding 5 3/4% Cumulative Convertible
Preferred Stock, to be funded primarily with proceeds from its recently
completed sale of $75 million of Capital Securities.
The 5 3/4% Preferred Stock, originally issued in September 1995, will
be redeemed on March 10, 1997, at a redemption price of $103.675 per share
(103.675% of the liquidation value), plus accrued dividends up to the date of
redemption. A notice of redemption is being mailed to all record holders of
those shares. Interpool currently has 758,694 shares of 5 3/4% Preferred Stock
outstanding with an aggregate liquidation value of $75.9 million. Shares of 5
3/4% Preferred Stock are convertible into shares of Interpool common stock on
or prior to the redemption date at a conversion price of $23.37 per share. The
closing price of Interpool common stock on the New York Stock Exchange on
January 30, 1997 was $24.50 per share. Any shares of 5 3/4% Preferred Stock
converted after the date formal notice of redemption is given will be entitled
to receive accrued dividends to the date of conversion.
Member of Interpool's senior management who own approximately $10
million in aggregate liquidation value of the 5 3/4% Preferred Stock have
indicated that they intend to convert all their shares of 5 3/4% Preferred
Stock into Common Stock. Martin Tuchman, Chairman and Chief Executive Officer
of Interpool, said "We in senior management have been increasing our already
substantial common stock position over the past several months, and we believe
this conversion provides and excellent opportunity for us to add to our
holdings at a very attractive price."
On January 27, 1997, $75 million aggregate liquidation amount of 9 7/8%
Capital Securities were issued by Interpool Capital Trust under Rule 144A of
the Securities Act of 1933. Interpool Capital Trust used the proceeds from the
sale of Capital Securities to purchase Interpool's 9 7/8% Junior Subordinated
Debentures. Interpool plans to use the proceeds from this transaction to redeem
the 5 3/4% Preferred Stock and for general corporate purposes. The Capital
Securities have not been registered under the Securities Act of 1933, as
amended, and may not be offered or sold in the United States absent
registration or an applicable exemption from registration requirements.
Interpool Capital Trust, a Delaware business trust, is a special purpose
subsidiary of Interpool, Inc.
Interpool, originally founded in 1968, is one of the world's leading
lessors of cargo containers used in international trade and is the second
largest lessor of intermodal container chassis in the United States. Interpool
leases its containers and chassis to over 200 customers, including nearly all
of the world's 20 largest international container shipping lines.
###
<PAGE> 7
Contact: Raoul J. Witteveen
(212) 916-3261
NEWS FOR IMMEDIATE RELEASE
INTERPOOL, INC. REPORTS RECORD 4TH QUARTER INCOME PER SHARE BEFORE
NON-RECURRING CHARGE, AN INCREASE OF 17%; INTERPOOL INCREASES ANNUAL DIVIDEND
FROM 20 CENTS TO 22.5 CENTS PER COMMON SHARE.
PRINCETON, NJ, FEBRUARY 18, 1997 -- Interpool, Inc. (NYSE: IPX) reported today
that its 1996 fourth quarter income per share on a fully diluted basis, before
a non-recurring charge, rose 17% to 48 cents per share as compared with 41
cents per share for the same period in 1995. Revenues during the fourth quarter
of 1996 were $38,056,000, up 8% from $35,164,000 in 1995.
For the year ended December 31, 1996, income before extraordinary gain and
non-recurring charges rose to $38,088,000 from $29,545,000 in the same period a
year ago. Revenues for the year ended December 31, 1996 rose to $147,148,000,
up 15% from $127,925,000 in 1995. On a fully diluted basis, Interpool's income
per share before extraordinary gain and non-recurring charges rose 19% to
$1.79 for the year ended December 31, 1996 compared with $1.51 in 1995.
The company conducts its international container leasing business through its
subsidiary Interpool Limited, while the domestic intermodal equipment leasing
business is conducted by Interpool, Inc. and its other subsidiaries. During the
fourth quarter of 1996, the Interpool Limited international container
division's contribution to consolidated income rose 32% over the same period a
year ago to $8,020,000, while the domestic intermodal division's contribution
declined 9% to $2,263,000. Revenues for the fourth quarter of 1996 from the
Interpool Limited international container division rose 13% to $20,320,000
while revenues from the domestic intermodal division rose 3% to $17,736,000.
During the year ended December 31, 1996, the Interpool Limited international
container division's contribution to consolidated income rose 31% over the
prior year to $29,490,000, while the domestic intermodal division's
contribution declined slightly (on a pro-forma comparable basis) to $8,598,000.
Revenues for the year ended December 31, 1996 from the Interpool Limited
international container division rose 24% to $79,422,000, while revenues from
the domestic intermodal division rose 6% to $67,726,000.
<PAGE> 8
Interpool 4Q96 02/18/97 Page 2
Martin Tuchman, Chairman and Chief Executive Officer, commented that the
company's fully-diluted income per share before extraordinary gain and
non-recurring charges was a record, and was the direct result of the continued
expansion of Interpool's container and chassis fleets. During the past twelve
months, the company's container fleet has grown to approximately 301,000
container TEUs (twenty-foot equivalent units) from 241,000 TEU's, with
container utilization at 98%, while the chassis fleet has grown to
approximately 57,000 units from 54,000 units, with chassis utilization at 94%.
Mr. Tuchman indicated that Interpool had achieved another milestone, with
quarterly earnings before non-recurring items exceeding $10 million for the
first time in the company's history. He noted that "these outstanding results
reflect the continued success of our long-term leasing strategy, and the
underlying value of our business."
The company also announced that based upon its 1996 results, the Board of
Directors has approved a 12.5% increase in the annual dividend rate on
Interpool common stock from the current level of 20 cents per share to 22.5
cents per share (representing an increase to 5.625 cents per quarter). The
increase will become effective on the next quarterly common stock dividend
payment date, scheduled for April, 1997.
As previously announced, Interpool has called for redemption its 5-3/4%
Cumulative Convertible Preferred Stock, having an aggregate liquidation value
of $75.9 million. The company anticipates that, based upon the current market
price of the common stock, a significant number of preferred stockholders will
exercise their right to convert to common stock on or before the March 10, 1997
redemption date, given the economic benefits of conversion and the fact that
conversion would enable many holders to defer or avoid a taxable gain. Members
of Interpool's senior management who own approximately $10 million in aggregate
liquidation value of the 5-3/4% Preferred Stock have indicated that they intend
to convert all of their shares of 5-3/4% Preferred Stock into Common Stock.
Senior management have also indicated that they intend to continue adding to
their already substantial common stock position.
The company note that preferred stockholders who wish to convert will need to
submit a notice of conversion to the transfer agent on or before the March 10,
1997 redemption date of their preferred stock will automatically be redeemed
for cash.
Interpool, originally founded in 1968, is one of the world's leading lessors of
intermodal dry cargo containers and is the second largest lessor of intermodal
container chassis in the United States. Interpool leases its containers and
chassis to over 200 customers, including nearly all of the world's 20 largest
international container shipping lines.
***TABLE FOLLOWS***
<PAGE> 9
INTERPOOL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except amounts per share)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
REVENUES $38,056 $35,164 $147,148 $127,925
LEASE OPERATION AND ADMINISTRATIVE
EXPENSES 8,346 8,173 30,731 30,630
DEPRECIATION AND AMORTIZATION
OF LEASING EQUIPMENT 7,907 7,763 31,976 28,027
(GAIN) ON SALE OF LEASING EQUIPMENT (439) (760) (932) (1,484)
------- ------- -------- --------
EARNINGS BEFORE INTEREST AND TAXES 22,242 19,988 85,373 70,752
INTEREST EXPENSE, NET 9,659 9,348 39,485 35,082
------- ------- -------- --------
INCOME BEFORE TAXES, EXTRAORDINARY GAIN
AND NON-RECURRING CHARGE 12,583 10,640 45,888 35,670
PROVISION FOR INCOME TAXES 2,300 2,075 7,800 6,125
------- ------- -------- --------
INCOME BEFORE EXTRAORDINARY GAIN AND
NON-RECURRING CHARGES 10,283 8,565 38,088 29,545
EXTRAORDINARY ITEM-GAIN ON EARLY
RETIREMENT OF DEBT, NET OF TAX EXPENSE
OF $1,683 -- -- -- 2,422
NON-RECURRING CHARGES:
COST OF SUBSIDIARY INITIAL PUBLIC
OFFERING(2) 1,500 -- 1,500 --
ACQUISITION OF PREFERRED STOCK OF
SUBSIDIARY(3) -- -- 2,392 --
------- ------- -------- --------
NET INCOME $ 8,783 $ 8,565 $ 34,196 $ 31,967
======= ======= ======== ========
INCOME PER SHARE BEFORE EXTRAORDINARY
AND NONRECURRING CHARGES:
PRIMARY $0.51 $0.43 $1.89 $1.63
FULLY DILUTED $0.48 $0.41 $1.79 $1.51
INCOME (LOSS) PER SHARE ON
PRIMARY $(0.08) NA $(0.08) $0.14
FULLY DILUTED $(0.07) NA $(0.07) $0.12
NET INCOME PER SHARE
PRIMARY $0.43 $0.43 $1.81 $1.76
FULLY DILUTED $0.41 $0.41 $1.72 $1.63
WEIGHTED AVERAGE SHARES OUTSTANDING:
PRIMARY 17,982 17,603 17,817 17,462
FULLY DILUTED 21,302 20,556 21,213 20,556
</TABLE>
(1) In September 1995, subordinated note were exchanged for preferred stock. If
those notes had been exchanged on January 1, 1995 interest expense would have
been $2,642 lower for the year ended December 31, 1995 and the provision for
income taxes would have been $1,004 higher for the year ended December 31,
1995. Therefore net income would have been $1,638 higher for the year ended
December 31, 1995. Fully diluted net income per share would not change because
the above mentioned effects were included in the fully diluted earnings per
share calculation.
<PAGE> 10
(2) Represents a charge for the initial public offering expenses of Interpool
Limited which offering was withdrawn in the fourth quarter.
(3) Represents a non-cash and non-recurring charge for accumulated dividends of
its subsidiary, Trac Lease, Inc., which resulted from the acquisition of the
outstanding preferred stock of Trac Lease, Inc. through the issuance of
Interpool, Inc. preferred stock. Such charge has no impact on net income per
share because unpaid dividends were included in the computation of net income.
<PAGE> 11
CONTACT: Raoul J. Witteveen
(212) 916-3261
FOR IMMEDIATE RELEASE
INTERPOOL ANNOUNCES RESULTS OF CALL OF 5 3/4%
CUMULATIVE CONVERTIBLE PREFERRED STOCK
PRINCETON, N.J., March 11, 1997 -- Interpool, Inc. (NYSE;IPX) announced
that a total of 248,730 shares, or $24,873,000 in aggregate liquidation value,
of the Company's 5 3/4% Cumulative Convertible Preferred Stock (representing
32.78% of the outstanding shares of Preferred Stock) were converted into a
total of 1,064,297 shares of Common Stock prior to yesterday's redemption date
for the Preferred Stock. The remaining 509,964 shares of the Preferred Stock or
$50,996,400 in aggregate liquidation value, were redeemed at a redemption
price of $103.675 per share.
As a result of the redemption of shares of Preferred Stock, the Company
expects to record a one-time charge, currently estimated to be approximately 37
cents per share on a primary basis and 32 cents per share on a fully diluted
basis, for the first quarter of 1997.
Martin Tuchman, Interpool's Chairman and Chief Executive Officer, said
that Interpool was "very pleased that a large number of holders of the
Preferred Stock chose to continue as investors in Interpool by converting into
Common Stock."
Interpool, originally founded in 1968, is one of the world's leading
lessors of cargo containers used in international trade and is the second
largest lessor of intermodal container chassis in the United States. Interpool
leases its containers and chassis to over 200 customers, including nearly all
of the world's 20 largest international container shipping lines.
###
<PAGE> 12
CONTACT: Raoul J. Witteveen
(212) 916-3261
FOR IMMEDIATE RELEASE
INTERPOOL ANNOUNCES 3-FOR-2-SPLIT OF COMMON STOCK
PRINCETON, N.J., March 12, 1997 -- Interpool, Inc. (NYSE:IPX)
announced that its Board of Directors has approved a three-for-two stock split,
to be effective on March 27, 1997. The record date for holders entitled to
receive the benefits of the stock split will be March 21, 1997.
The Company stated that no fractional shares are being issued in
connection with the stock split. Instead, under the terms of the stock split,
the Company will round any fractional shares to which any stockholders is
entitled as a result of the stock split up to the nearest whole share.
The distribution of the additional shares as a result of the stock
split shall be accomplished through American Stock Transfer and Trust Company,
which operates as transfer agent and registrar for the Company's Common Stock.
Interpool, originally founded in 1968, is one of the world's leading
lessors of cargo containers used in international trade and is the second
largest lessor of intermodal container chassis in the United States. Interpool
leases its containers and chassis to over 200 customers, including nearly all
of the world's 20 largest international container shipping lines.
###
