<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 10, 1997
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
JOHNSTOWN AMERICA INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 25-1672791
(State or other (I.R.S. Employer
jurisdiction of
incorporation or AND ITS GUARANTOR SUBSIDIARIES Identification No.)
organization)
DELAWARE JOHNSTOWN AMERICA CORPORATION 36-3769515
DELAWARE BOSTROM SEATING, INC. 39-1507179
DELAWARE BOSTROM HOLDINGS, INC. 36-4129282
DELAWARE FREIGHT CAR SERVICES, INC. 36-3990959
DELAWARE JAC PATENT CORPORATION 51-0345050
DELAWARE TRUCK COMPONENTS INC. 36-3535407
DELAWARE GUNITE CORPORATION 13-3369803
DELAWARE BRILLION IRON WORKS, INC. 39-1506942
DELAWARE FABCO AUTOMOTIVE CORPORATION 13-3369802
DELAWARE JAII MANAGEMENT COMPANY APPLIED FOR
(State or other (Exact name of Registrant as specified in its (I.R.S. Employer
jurisdiction of charter)
incorporation or Identification No.)
organization)
</TABLE>
------------------------------
3743
3710
(Primary Standard Industrial Classification Code Number)
------------------------------
980 NORTH MICHIGAN AVENUE
SUITE 1000
CHICAGO, ILLINOIS 60611
(312) 280-8844
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive office)
ANDREW M. WELLER
980 NORTH MICHIGAN AVENUE
SUITE 1000
CHICAGO, ILLINOIS 60611
(312) 280-8844
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPY TO:
R. CABELL MORRIS, JR.
WINSTON & STRAWN
35 WEST WACKER DRIVE
CHICAGO, ILLINOIS 60601
(312) 558-5600
------------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER SECURITY (1) PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
11 3/4% Series C Senior Subordinated Notes
due 2005.................................. $83,600,000 100% $83,600,000 $25,333
Senior Subordinated Guarantee of each of the
Guarantor Subsidiaries.................... (2) -- -- none (3)
</TABLE>
(1) Estimated in accordance with Rule 457(f)(2) under the Securities Act of
1993, as amended, solely for purpose of computing the registration fee.
(2) The 11 3/4% Series C Senior Subordinated Notes due 2005 of Johnstown America
Industries, Inc. being registered will be guaranteed on a senior
subordinated basis by each of the Guarantor Subsidiaries.
(3) Pursuant to Rule 457(n).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. THIS
PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH
SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO THE REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF SUCH STATE. THESE SECURITIES MAY NOT
BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED BEFORE THE PROSPECTUS IS DELIVERED IN
FINAL FORM.
<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 10, 1997
PROSPECTUS
[LOGO]
OFFER TO EXCHANGE $1,000 IN PRINCIPAL AMOUNT OF ITS 11 3/4% SERIES C SENIOR
SUBORDINATED NOTES DUE 2005
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR EACH $1,000
IN PRINCIPAL AMOUNT OF ITS OUTSTANDING 11 3/4% SERIES B SENIOR SUBORDINATED
NOTES DUE 2005
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1997 UNLESS EXTENDED.
------------------------------
Johnstown America Industries, Inc., a Delaware Corporation (the "Company"),
hereby offers to exchange (the "Exchange Offer") up to $80 million in aggregate
principal amount of its new 11 3/4% Series C Senior Subordinated Notes due 2005
(the "Exchange Notes") for up to $80 million in aggregate principal amount of
its outstanding 11 3/4% Series B Senior Subordinated Notes due 2005 (the "Old
Notes" and, together with the Exchange Notes, the "Notes") that were issued and
sold in a transaction exempt from registration under the Securities Act of 1933,
as amended (the "Securities Act").
The terms of the Exchange Notes are substantially identical (including
principal amount, interest rate, maturity, security and ranking) to the terms of
the Old Notes for which they may be exchanged pursuant to the Exchange Offer,
except that the Exchange Notes (i) are freely transferable by holders thereof
(except as provided below) and (ii) are not entitled to certain registration
rights and certain liquidated damages provisions which are applicable to the Old
Notes under the Registration Rights Agreement (as defined herein). The Exchange
Notes will be, and the Old Notes are, unsecured and subordinated to all existing
and future Senior Indebtedness (as defined herein) of the Company. The Exchange
Notes will, and the Old Notes do, rank PARI PASSU in right of payment with any
future Senior Subordinated Indebtedness (as defined herein) of the Company and
with the $100 million of 11 3/4% Senior Subordinated Notes due 2005 issued by
the Company in August 1995 (the "Original Notes"). The Exchange Notes will, and
the Old Notes do, rank senior to all subordinated indebtedness of the Company.
The Exchange Notes will be, and the Old Notes are, fully and unconditionally
guaranteed (collectively, the "Subsidiary Guaranty") on an unsecured, senior
subordinated basis, by each subsidiary of the Company on the issue date of the
Exchange Notes or the Old Notes, as the case may be (other than JAIX Leasing
Company), and each Restricted Subsidiary (as defined herein) acquired thereafter
(collectively, the "Guarantor Subsidiaries"). The Company is a holding company
that derives all of its operating income and cash flow from its subsidiaries,
the capital stock of each of which constitute the Company's only material assets
and are pledged to collateralize the obligations under the Senior Bank
Facilities (as defined herein). In addition, the obligations of the Company
under the Senior Bank Facilities are unconditionally and irrevocably guaranteed
on a senior basis by the Guarantor Subsidiaries and such guarantees are secured
by security interests in, pledges of, or liens on all capital stock of and all
tangible and intangible assets of the Guarantor Subsidiaries. See "Description
of Exchange Notes" and "Description of Certain Indebtedness--Senior Bank
Facilities." As of June 30, 1997, on a pro forma basis after giving effect to
the offering of the Old Notes (the "Old Notes Offering"), the aggregate amount
of the Company's (excluding its consolidated subsidiaries) outstanding Senior
Indebtedness would have been approximately $95.0 million (excluding unused
commitments and $17.1 million of outstanding letters of credit), the liabilities
of the Guarantor Subsidiaries (including trade payables and deferred taxes but
excluding the Subsidiary Guaranty and subsidiary guarantees of the Senior Bank
Facilities) would have totalled approximately $198.7 million, and the Company
would have had $100 million of Senior Subordinated Indebtedness outstanding
other than the Notes. See "Description of Exchange Notes--Ranking." The Company
does not currently have outstanding any indebtedness that is subordinate or
junior in right of payment to the Notes. The indenture under which the Exchange
Notes will be, and the Old Notes were, issued (the "Indenture," and together
with the indenture governing the Original Notes, the "Indentures") will permit
the Company and the Guarantor Subsidiaries to incur additional indebtedness,
including Senior Indebtedness and indebtedness that will rank PARI PASSU with
the Notes. The ability of the Company to incur any such additional indebtedness
is limited by the Company's covenants under the Senior Bank Facilities and the
Indentures. There will be no cash proceeds to the Company from the Exchange
Offer.
The Exchange Notes will bear interest from August 11, 1997. Holders of Old
Notes whose Old Notes are accepted for exchange will be deemed to have waived
the right to receive any payment in respect of interest on the Old Notes accrued
from August 11, 1997 to the date of the issuance of the Exchange Notes. The
Exchange Notes will bear interest at the rate of 11 3/4% per annum, payable
semi-annually on February 15 and August 15 of each year, commencing February 15,
1998. Except as described below, the Company may not redeem the Notes prior to
August 15, 2000. On or after such date, the Company may redeem the Notes, in
whole or in part, at the redemption prices set forth herein, together with
accrued and unpaid interest, if any, to the date of redemption. In addition, at
any time and from time to time on or prior to August 15, 1998, the Company may,
subject to certain requirements, redeem up to 33 1/3% of the original aggregate
principal amount of the Notes with the net cash proceeds of one or more Public
Equity Offerings (as defined herein) at a redemption price equal to 111.75% of
the principal amount to be redeemed, together with accrued and unpaid interest,
if any, to the date of redemption, provided that at least 66 2/3% of the
original aggregate principal amount of the Notes remains outstanding after each
such redemption. The Notes will not be subject to any sinking fund requirement.
Upon the occurrence of a Change of Control (as defined herein), the Company will
be required to make an offer to repurchase the Notes at a price equal to 101% of
the principal amount thereof, together with accrued and unpaid interest, if any,
to the date of purchase. See "Description of Exchange Notes."
------------------------------
HOLDERS OF OLD NOTES SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH IN
"RISK FACTORS" COMMENCING ON PAGE 16 OF THIS PROSPECTUS PRIOR TO MAKING A
DECISION WITH RESPECT TO THE EXCHANGE OFFER.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAVE THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is , 1997.
<PAGE>
(COVER PAGE CONTINUED)
The Old Notes were originally issued and sold on August 11, 1997 in a
transaction not registered under the Securities Act, in reliance upon the
exemption provided in Section 4(2) of the Securities Act and Rule 144A
promulgated under the Securities Act. Accordingly, the Old Notes may not be
reoffered, resold or otherwise pledged, hypothecated or transferred in the
United States unless so registered or unless an applicable exemption from the
registration requirements of the Securities Act is available. Based upon its
view of interpretations provided to third parties by the Staff (the "Staff") of
the Securities and Exchange Commission (the "Commission"), the Company believes
that the Exchange Notes issued pursuant to the Exchange Offer in exchange for
the Old Notes may be offered for resale, resold and otherwise transferred by
holders thereof (other than any holder which is (i) an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act (an
"Affiliate"), (ii) a broker-dealer who acquired Old Notes directly from the
Company or (iii) a broker-dealer who acquired Old Notes as a result of market
making or other trading activities) without compliance with the registration and
prospectus delivery provisions of the Securities Act provided that such Exchange
Notes are acquired in the ordinary course of such holders' business and such
holders are not engaged in, and do not intend to engage in, and have no
arrangement or understanding with any person to participate in, a distribution
of such Exchange Notes. However, the Company does not intend to request the
Commission to consider, and the Commission has not considered, the Exchange
Offer in the context of a no-action letter and there can be no assurance that
the Staff would make a similar determination with respect to the Exchange Offer
as in other circumstances. Each broker-dealer that receives Exchange Notes for
its own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. The
Letter of Transmittal that is filed as an exhibit to the Registration Statement
of which this Prospectus is a part (the "Letter of Transmittal") states that by
so acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act. This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of Exchange Notes
received in exchange for Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days after the
Expiration Date (as defined herein), it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution." Any holder who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Notes and any other holder that
cannot rely upon such interpretations must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction.
Old Notes initially purchased by qualified institutional buyers were
initially represented by two global Notes in registered form, registered in the
name of a nominee of The Depository Trust Company ("DTC"), as depository. The
Exchange Notes exchanged for Old Notes represented by the global Notes will be
represented by one or more global Exchange Notes in registered form, registered
in the name of the nominee of DTC. See "Description of Exchange Notes--Book
Entry, Delivery and Form." Exchange Notes issued to non-qualified institutional
buyers in exchange for Old Notes held by such investors will be issued only in
certificated, fully registered, definitive form. Except as described herein,
Exchange Notes in definitive certificated form will not be issued in exchange
for the global Exchange Note(s) or interests therein.
Any Old Notes not tendered and accepted in the Exchange Offer will remain
outstanding. To the extent that Old Notes are tendered and accepted in the
Exchange Offer, a holder's ability to sell untendered, and tendered but
unaccepted, Old Notes could be adversely affected. Following consummation of the
Exchange Offer, the holders of any remaining Old Notes will continue to be
subject to the existing restrictions on transfer thereof and the Company will
have no further obligation to such holders to provide for the registration under
the Securities Act of the Old Notes except under certain limited circumstances.
See "Old Notes Registration Rights; Liquidated Damages." No assurance can be
given as to the liquidity of the trading market for either the Old Notes or the
Exchange Notes.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered or accepted for exchange. The Exchange Offer
will expire at 5:00 p.m., New York City time, on , 1997, unless
extended (the "Expiration Date"). The date of acceptance for exchange of the Old
Notes (the "Exchange Date") will be the first business day following the
Expiration Date, upon surrender of the Old Notes. Old Notes tendered pursuant to
the Exchange Offer may be withdrawn at any time prior to the Expiration Date;
otherwise such tenders are irrevocable.
2
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
and Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. The reports, proxy statements and other information filed by the
Company with the Commission can be inspected and copied at the public reference
facilities of the Commission at its principal office at Judiciary Plaza, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at its regional
offices at 500 W. Madison Street, Suite 1400, Chicago, Illinois 60661, and at
Seven World Trade Center, Suite 1300, New York, New York 10048. Any interested
party may obtain copies of such material at prescribed rates from the Public
Reference Section of the Commission at its principal office at Judiciary Plaza,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. In addition, certain
documents filed with the Commission through its Electronic Data Gathering,
Analysis and Retrieval system are publicly available through the Commission's
site on the Internet's World Wide Web, located at HTTP://WWW.SEC.GOV.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K and the Company's Amendment to
Annual Report on Form 10-KA for the year ended December 31, 1996, the Company's
Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 1997
and June 30, 1997 and the Company's Current Report on Form 8-K dated July 24,
1997 are hereby incorporated by reference.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act, subsequent to the date of this
Prospectus and prior to the termination of the offering made hereby shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing such documents. Any statement contained herein or
in a document incorporated or deemed to be incorporated herein by reference
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained in any subsequently filed document which
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide, without charge, to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of such person, a
copy of any or all of the documents incorporated herein by reference (other than
exhibits thereto, unless such exhibits are specifically incorporated by
reference into the information that this Prospectus incorporates). Written or
telephone requests for such copies should be directed to the Company's principal
office: Johnstown America Industries, Inc., 980 North Michigan Avenue, Suite
1000, Chicago, Illinois 60611, Attention: Secretary (telephone: (312) 280-8844).
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS, AND
THE RELATED NOTES THERETO, INCLUDED ELSEWHERE IN THIS PROSPECTUS. AS USED IN
THIS PROSPECTUS, (I) THE "COMPANY" REFERS TO JOHNSTOWN AMERICA INDUSTRIES, INC.
AND ITS SUBSIDIARIES AND (II) "TCI," "GUNITE," "BRILLION," "BOSTROM," "FABCO,"
"JAC," "JAIX LEASING" AND "FCS" REFER TO TRUCK COMPONENTS INC., GUNITE
CORPORATION, BRILLION IRON WORKS, INC., BOSTROM SEATING, INC., FABCO AUTOMOTIVE
CORPORATION, JOHNSTOWN AMERICA CORPORATION, JAIX LEASING COMPANY AND FREIGHT CAR
SERVICES, INC., RESPECTIVELY, ALL WHOLLY OWNED SUBSIDIARIES OF THE COMPANY.
UNLESS OTHERWISE INDICATED, ALL TRUCK INDUSTRY DATA ARE DERIVED FROM REPORTS
PUBLISHED BY AMERICA'S COMMERCIAL TRANSPORTATION PUBLICATIONS AND ALL FREIGHT
CAR INDUSTRY DATA ARE DERIVED FROM REPORTS PUBLISHED BY AMERICAN RAILWAY CAR
INSTITUTE AND THE WEFA GROUP ("WEFA"). SEE "GLOSSARY OF CERTAIN TERMS" FOR
DEFINITIONS OF CERTAIN INDUSTRY TERMS USED IN THIS PROSPECTUS.
THE COMPANY
The Company, through its subsidiaries, designs and manufactures: components
and assemblies primarily for heavy- and medium-duty trucks; high quality,
complex iron castings for transportation-related and a variety of other markets;
and railroad freight cars. The Company's principal business operations are:
TRUCK COMPONENTS AND ASSEMBLIES. Gunite is the leading North American
supplier of wheel-end systems and components, such as brake drums, disc wheel
hubs, spoke wheels, rotors and slack adjusters to original equipment
manufacturers ("OEMs") in the heavy-duty truck industry. The Company believes
Gunite's products are offered as standard equipment on more heavy-duty truck
manufacturers' vehicles than any of its competitors' products. Management also
believes Gunite's fully integrated operations, which combine advanced product
design, casting and machining capabilities, provide it with significant
competitive advantages, particularly in the development of new, value-added
products. Gunite is a market leader in the production of wheel-end components
for anti-lock braking systems ("ABS"), which have been mandated for all new
trucks beginning in March 1997 and all new trailers beginning in March 1998.
Gunite also has developed a new lightweight brake drum ("Gunite-Lite-TM-") for
applications in the heavy-duty truck market where certain customers value
strong, lighter weight components. In addition to serving OEMs, Gunite has
significant sales to the less cyclical, higher margin aftermarket which, as a
percentage of Gunite's net sales, has increased since the acquisition of Gunite
by the Company in 1995 from approximately 26% in 1995 to approximately 35% for
the six months ended June 30, 1997. Further, Gunite's commitment to quality,
customer satisfaction and continuous improvement is evidenced by its ISO 9000
and QS 9000 certifications.
The Company's other truck components and assemblies operations include
Bostrom and Fabco. Bostrom is a leading manufacturer of air suspension and
static seating systems for the heavy- and medium-duty truck industry, supplying
almost 50% of the heavy-duty truck OEM market. Bostrom also has significant
sales to the aftermarket, which represent approximately 20% of Bostrom's net
sales. Bostrom's commitment to quality, customer satisfaction and continuous
improvement is evidenced by its ISO 9000 certification. Fabco is a leading
supplier of steerable drive axles, gear boxes and related parts for heavy on/off
highway trucks and utility vehicles.
The Company's truck components and assemblies subsidiaries reported net
sales of $275.8 million and $237.0 million in 1995 (including the period in 1995
prior to the acquisition of TCI) and 1996, respectively; and $124.2 million and
$141.4 million in the six months ended June 30, 1996 and 1997, respectively.
IRON CASTINGS. Brillion operates one of the nation's largest and most
versatile iron foundries and is focused on providing high quality, complex
castings to customers in a wide range of industries, including the truck,
industrial machinery, automotive and construction equipment markets. A leader in
ductile
4
<PAGE>
iron technology, Brillion specializes in the production of lightweight,
intricate thin wall castings. In addition to providing an important source of
high quality castings for Gunite (12.6% of Brillion's net foundry sales in
1996), Brillion has long-standing relationships with many of its over 225
customers. Generally, once a foundry begins production of a product, it will
continue to manufacture the item for the product's life cycle. Brillion also
manufactures and sells a line of farm equipment products. In 1996, over 95% of
Brillion's net foundry sales were from established customers. Brillion also
benefits from numerous quality certifications, including ISO 9000 and QS 9000,
and from achieving preferred supplier status with many of its customers.
Excluding intercompany sales, the Company's iron casting operations reported
net sales of $132.1 million and $125.1 million in 1995 (including the period in
1995 prior to the acquisition of TCI) and 1996, respectively; and $64.5 million
and $69.0 million in the six months ended June 30, 1996 and 1997, respectively.
RAILROAD FREIGHT CARS. The Company, through its subsidiary, JAC, is a
leading manufacturer of railroad freight cars used principally for hauling coal.
JAC also offers aluminum covered hoppers for the grain hauling market and
intermodal freight cars, which it has manufactured in the past and has the
capability to produce in response to future market demand. JAC is the largest
North American manufacturer of coal freight cars. JAC is recognized for its
expertise in the development and manufacture of aluminum freight cars that
increase load capacity and consequently reduce carrier costs. JAC's BethGon
Coalporter-Registered Trademark- had an estimated average market share of 81% of
the aluminum coal gondola market during the five-year period from 1992 to 1996.
In addition to manufacturing its standard BethGon
Coalporter-Registered Trademark-, in 1996 JAC introduced a new lighter weight
BethGon which weighs approximately 3,500 pounds less than a standard BethGon,
thereby enabling the car to carry significantly more coal per trip. JAC also
successfully introduced in 1996 an aluminum rapid discharge coal car, the
AutoFlood II-TM-, to compete in the aluminum bottom dump segment of the coal
freight car market. The AutoFlood II-TM- provides 18 tons more capacity per load
than conventional steel automatic discharge freight cars. These products have
been well received in the marketplace and the Company believes that JAC should
be able to further penetrate the market for aluminum coal freight cars.
As part of its full service business strategy for the freight car market,
the Company formed two new subsidiaries in 1994 and 1995, JAIX Leasing and FCS.
JAIX Leasing was formed to provide operating lease alternatives for its
customers. FCS was formed to participate in the freight car rebuilding and
repair market as well as to provide new freight car manufacturing capability for
specialty markets.
The Company's freight car operations reported manufacturing net sales of
$490.4 million and $193.3 million in 1995 and 1996, respectively, and $94.9
million and $60.6 million in the six months ended June 30, 1996 and 1997,
respectively. JAIX Leasing reported leasing revenues of $2.6 million and $4.5
million in 1995 and 1996, respectively, and $2.0 million and $2.9 million in the
six months ended June 30, 1996 and 1997, respectively.
STRATEGY
The Company's strategy is to strengthen its financial position by reducing
its indebtedness, while continuing to build a diversified transportation
equipment manufacturing company with leading market positions in the markets it
serves. The acquisitions of Gunite, Brillion, Bostrom and Fabco have enabled the
Company to diversify its revenue base, with truck components and assemblies,
iron castings and freight car operations contributing approximately 42.3%, 22.3%
and 35.4% of the Company's 1996 revenues, respectively, and 51.6%, 25.2% and
23.2% of the Company's revenues for the six months ended June 30, 1997. The
primary elements of the Company's strategy are to: (i) expand its business by
capitalizing on its leading market positions; (ii) develop new products and
extend its product lines; (iii) aggressively pursue cost reductions and increase
operating efficiencies; and (iv) expand its
5
<PAGE>
aftermarket presence. Despite significant softness in the freight car markets
served by JAC since late 1995, the Company believes that it has made significant
progress toward implementing its strategy.
MAINTAIN AND EXPAND LEADING MARKET POSITIONS. Management believes that the
Company has enhanced its competitive position in many of its markets. Gunite and
Bostrom have expanded their relationships with OEM customers by continuing to
provide high-quality products and reliable customer service, which should result
in additional business opportunities, as well as expanded their presence in the
aftermarket by capitalizing on the market leading positions of their products.
For example, Gunite's wheel-end products recently were selected as the standard
configuration by an additional leading North American heavy-duty truck OEM. To
expand its market position, Brillion has maintained its long-term relationships
as well as built new relationships by providing reliable customer service,
drawing on its technical expertise to reduce costs to customers and producing
highly complex castings. The Company's freight car operations enhanced its
leadership position in aluminum freight car design and manufacturing by recently
introducing two innovative coal cars: a lighter weight BethGon
Coalporter-Registered Trademark- and a new lightweight aluminum rapid discharge
hopper car, the AutoFlood II-TM-. Management of the Company believes that
customer satisfaction is the key to maintaining and expanding the Company's
presence in the markets it serves, which requires high quality manufacturing,
timely product delivery and responsive customer service.
DEVELOP NEW PRODUCTS AND EXTEND PRODUCT LINES. The Company continually
invests in developing new products and extending its product lines, many times
at the suggestion of, or in conjunction with, an existing or a potential
customer. Gunite has successfully introduced its lightweight brake drum, Gunite-
Lite-TM-, which has generated substantial interest and orders in the
marketplace. In addition, Bostrom is working with its OEM customers to develop a
new generation of seating systems for heavy-duty trucks. The Company's freight
car operations continue to introduce new aluminum coal car products and FCS was
established to offer customers rebuilding and repair services as well as
specialty freight car manufacturing.
PURSUE COST REDUCTIONS AND INCREASE OPERATING EFFICIENCY. The Company has
improved operating efficiencies in many of its businesses. Gunite, Brillion and
Bostrom have each increased profitability and capacity with little capital
investment through improved operating efficiency. Gunite and Brillion strive to
improve their operations by continually refining their manufacturing processes.
Bostrom recently undertook a program to increase profitability by substantially
increasing productivity, reducing production costs and improving customer
service. At the same time, JAC has reduced its operating costs and increased its
operational flexibility to enhance its ability to operate profitably even at
reduced volume levels. Examples of production efficiency initiatives undertaken
at JAC in 1996 include reducing the number of freight car erection lines,
reducing change-over times and inventories and implementing cellular
manufacturing concepts. Management of the Company is committed to continuous
improvement in operating efficiency to enhance the Company's ability to achieve
significant profitability at higher volume levels and increase its ability to
operate profitably at lower volume levels.
EXPAND AFTERMARKET PRESENCE. The Company has significantly expanded its
presence in the less cyclical, higher margin aftermarket. A substantial
percentage of both Gunite's and Bostrom's revenues are attributable to
aftermarket sales. Gunite has increased its market penetration in the
aftermarket and as a result has increased the percentage of its revenues
attributable to aftermarket sales from 26% for the year ended December 31, 1995
to 35% for the six months ended June 30, 1997. The Company has also expanded its
presence in rebuilding and repairing freight cars through the start-up of FCS in
1995. At FCS, the Company successfully rehabilitated a closed facility and
brought on-line a profitable provider of repair and rebuilding services and a
manufacturer of specialty freight cars for a minimum capital investment.
Further, JAC has and will continue to expand its presence in the high margin
service parts businesses related to its products. Notwithstanding the Company's
progress to date, the Company intends to continue to increase its presence in
the aftermarket and the service parts market.
6
<PAGE>
INDUSTRY OVERVIEW
HEAVY-DUTY TRUCK INDUSTRY. Demand for the products supplied by Gunite and
Bostrom closely follows the demand for North American Class 8 trucks (trucks
with a gross axle weight in excess of 33,000 pounds). The North American Class 8
truck build increased consistently from 1992 through 1995 reaching a record
truck build of 246,000 in 1995. The North American truck build decreased to
191,500 in 1996, which despite the decline, represented the third largest Class
8 truck build ever. The North American Class 8 truck build in the first two
quarters of 1997 was 103,600 and is projected to be approximately 212,500 units
in 1997, 204,000 units in 1998 and 195,000 units in 1999. Management continues
to believe that a number of factors will promote demand for new Class 8 trucks,
including (i) continued growth in the demand for trucking services due to the
continued strong United States economy, (ii) a trend toward consolidation in the
trucking industry, (iii) the truck replacement cycle, (iv) new, more fuel
efficient truck offerings and (v) increasingly stringent safety and emission
standards. Further, management of the Company believes that the aftermarket will
remain strong during the next few years because the record number of Class 8
trucks built in the past five years will continue to require replacement parts.
IRON FOUNDRY INDUSTRY. In recent years the traditionally fragmented U.S.
iron foundry industry has continued to consolidate. Many smaller iron foundries
have closed due to the increasing cost of complying with environmental and other
governmental regulations and their inability to satisfy the increasing demand
for higher quality, more complex castings. At the same time, major automotive,
farm equipment and construction machinery manufacturers have continued to
outsource production of components in an effort to control inventory and labor
costs and address quality concerns. Stable, established, independent iron
foundries, including Brillion, have benefitted and, despite increased foundry
capacity brought on line by competitors during the past several years, will
continue to benefit from consolidation and outsourcing trends.
FREIGHT CAR INDUSTRY. The freight car market is cyclical in nature. From
1993 through 1995, new car deliveries totaled 35,239, 53,281 and 60,853,
respectively. In 1996, new car deliveries remained strong at 57,877 due to the
strong backlog in orders at the end of 1995. However, industrywide orders slowed
considerably in 1996 and industrywide year end backlog declined from 32,574 at
the end of 1995 to 17,508 at the end of 1996. New car orders declined more
dramatically since the end of 1995 for the primary markets served by JAC. For
example, the industrywide backlog for coal gondolas, JAC's most significant
market, declined from 1,784 at the end of 1995 to 320 at the end of 1996.
Industrywide deliveries of coal open hoppers declined from 6,214 in 1995 to
2,298 in 1996 and industrywide deliveries of intermodal cars declined from
10,536 in 1995 to 1,549 in 1996, with no backlog for intermodal cars at the end
of 1996. Management believes that this cyclical trough in demand for the types
of cars offered by JAC has begun to improve slightly. Industrywide backlog for
coal gondolas at the end of the second quarter of 1997 improved to 2,385 cars
from 320 at the end of 1996. The Company's backlog improved from 774 new and
rebuilt cars at the end of 1996 to 1,949 at the end of the second quarter of
1997. Management believes that while projected 1997 industrywide deliveries
(approximately 44,000) will be down significantly from 1996 (57,877) and while
industrywide backlog will likely remain consistent with the 17,508 backlog at
the end of 1996, the aluminum coal car markets will likely see continued gradual
improvement through the remainder of 1997 and through 1998. According to WEFA,
industrywide deliveries for new aluminum coal gondolas are expected to gradually
increase from 3,000 in 1997 to over 5,000 by 1999. In addition, the industry
forecast anticipates gradual improvement in the aluminum coal open hopper market
with estimated annual deliveries increasing from 4,000 in 1997 to 5,000 in 2001.
The Company is also being adversely affected by intense pricing pressures
currently present in a freight car market characterized by depressed demand and
production overcapacity. Although the freight car industry does not report
freight car rebuilding activity, management believes that a relatively stable
market for freight car rebuilding exists.
7
<PAGE>
RECENT EVENT
On September 10, 1997, the Company announced that TCI and Gunite settled two
pending environmental lawsuits. As a result of the settlement, the Company's
reserve for environmental matters of $26.1 million at June 30, 1997 will be
decreased by $14.3 million to $11.8 million. This non-cash reversal will
generate pre-tax income of $14.3 million and after tax income of $8.4 million,
or $0.86 per share, which will be reflected in the Company's results of
operations for the quarter ending September 30, 1997. See
"Business--Environmental Matters."
8
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The Exchange Offer........................... The Company is offering to exchange (the
"Exchange Offer") up to $80 million aggregate
principal amount of its new 11 3/4% Series C
Senior Subordinated Notes due 2005 (the
"Exchange Notes") for up to $80 million
aggregate principal amount of its outstanding
11 3/4% Series B Senior Subordinated Notes
due 2005 that were issued and sold in a
transaction exempt from registration under
the Securities Act (the "Old Notes"). The Old
Notes were initially offered and sold by
Chase Securities Inc., as the initial
purchaser of the Old Notes (the "Initial
Purchaser"), to certain institutional and
accredited investors at a price of 104.5% of
the principal amount thereof. The form and
terms of the Exchange Notes are substantially
identical (including principal amount,
interest rate, maturity, security and
ranking) to the form and terms of the Old
Notes for which they may be exchanged
pursuant to the Exchange Offer, except that
the Exchange Notes are freely transferable by
holders thereof except as provided herein
(see "The Exchange Offer--Terms of the
Exchange" and "Terms and Conditions of the
Letter of Transmittal") and are not entitled
to certain registration rights and certain
liquidation damages provisions that are
applicable to the Old Notes under an exchange
and registration rights agreement dated as of
August 11, 1997 (the "Registration Rights
Agreement") between the Company, the
Guarantor Subsidiaries and the Initial
Purchaser. Exchange Notes issued pursuant to
the Exchange Offer in exchange for the Old
Notes may be offered for resale, resold and
otherwise transferred by holders thereof
(other than any holder which is (i) an
Affiliate of the Company, (ii) a
broker-dealer who acquired Old Notes directly
from the Company or (iii) a broker- dealer
who acquired Old Notes as a result of
market-making or other trading activities),
without compliance with the registration and
prospectus delivery provisions of the
Securities Act provided that such Exchange
Notes are acquired in the ordinary course of
such holders' business and such holders are
not engaged in, and do not intend to engage
in, and have no arrangement or understanding
with any person to participate in, a
distribution of such Exchange Notes.
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
Minimum Condition............................ The Exchange Offer is not conditioned upon
any minimum aggregate principal amount of Old
Notes being tendered or accepted for
exchange.
Expiration Date.............................. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , 1997 unless
extended (the "Expiration Date").
Exchange Date................................ The first date of acceptance for exchange for
the Old Notes will be the first business day
following the Expiration Date.
Conditions to the Exchange Offer............. The obligation of the Company to consummate
the Exchange Offer is subject to certain
conditions. See "The Exchange
Offer--Conditions to the Exchange Offer." The
Company reserves the right to terminate or
amend the Exchange Offer at any time prior to
the Expiration Date upon the occurrence of
any such condition.
Withdrawal Rights............................ Tenders of Old Notes pursuant to the Exchange
Offer may be withdrawn at any time prior to
the Expiration Date. Any Old Notes not
accepted for any reason will be returned
without expense to the tendering holders
thereof as promptly as practicable after the
expiration or termination of the Exchange
Offer.
Procedures for Tendering Old Notes........... See "The Exchange Offer--How to Tender."
Federal Income Tax Consequences.............. The exchange of Old Notes for Exchange Notes
by tendering holders should not be a taxable
exchange for federal income tax purposes, and
such holders should not recognize any taxable
gain or loss or any interest income as a
result of such exchange.
Use of Proceeds.............................. There will be no cash proceeds to the Company
from the exchange pursuant to the Exchange
Offer.
Effect on Holders of Old Notes............... As a result of the making of this Exchange
Offer, and upon acceptance for exchange of
all validly tendered Old Notes pursuant to
the terms of this Exchange Offer, the Company
will have fulfilled a covenant contained in
the Registration Rights Agreement, and,
accordingly, the holders of the Old Notes
will have no further registration or other
rights under the Registration Rights
Agreement, except under certain limited
circumstances. See "Old Notes Registration
Rights; Liquidated Damages." Holders of the
Old Notes who do not tender their Old Notes
in the Exchange Offer will continue to hold
such Old Notes and will be entitled to all
the rights and limitations applicable
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
thereto under the Indenture. All untendered,
and tendered but unaccepted, Old Notes will
continue to be subject to the restrictions on
transfer provided for in the Old Notes and
the Indenture. To the extent that Old Notes
are tendered and accepted in the Exchange
Offer, the trading market, if any, for the
Old Notes not so tendered could be adversely
affected. See "Risk Factors-- Consequences of
Failure to Exchange Old Notes."
</TABLE>
TERMS OF THE EXCHANGE NOTES
The Exchange Offer applies to $80 million aggregate principal amount of Old
Notes. The form and terms of the Exchange Notes are substantially identical to
the form and terms of the Old Notes except that the Exchange Notes have been
registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof. The Exchange Notes will evidence the same debt
as the Old Notes and will be entitled to the benefits of the Indenture. See
"Description of Exchange Notes."
<TABLE>
<S> <C>
Issuer....................................... Johnstown America Industries, Inc.
Securities Offered........................... $80 million aggregate principal amount of
11 3/4% Series C Senior Subordinated Notes
due 2005.
Maturity..................................... August 15, 2005.
Interest Payment Dates....................... February 15 and August 15 of each year,
commencing on February 15, 1998.
Sinking Fund................................. None.
Optional Redemption.......................... Except as described below, the Company may
not redeem the Exchange Notes prior to August
15, 2000. On or after such date, the Company
may redeem the Exchange Notes, in whole or in
part, at any time at the redemption price set
forth herein, together with accrued and
unpaid interest, if any, to the date of
redemption. In addition, at any time and from
time to time on or prior to August 15, 1998,
the Company may, subject to certain
requirements, redeem up to 33 1/3% of the
original aggregate principal amount of the
Exchange Notes with the net cash proceeds of
one or more Public Equity Offerings at a
price equal to 111.75% of the principal
amount of the Exchange Notes to be redeemed,
together with accrued and unpaid interest, if
any, to the date of redemption, provided that
at least 66 2/3% of the original aggregate
principal amount of the Exchange Notes
remains outstanding after each such
redemption. See "Description of Exchange
Notes--Optional Redemption".
Change of Control............................ Upon the occurrence of a Change of Control,
the Company will be required to make an offer
to
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
repurchase the Exchange Notes at a price
equal to 101% of the principal amount
thereof, together with accrued and unpaid
interest, if any, to the date of purchase.
The Senior Bank Facilities, however, prohibit
the purchase of the Exchange Notes by the
Company in the event of a Change of Control,
unless and until such time as the
indebtedness under the Senior Bank Facilities
is repaid in full. See "Description of
Exchange Notes--Optional Redemption,"
"--Change of Control" and "Description of
Certain Indebtedness--Senior Bank
Facilities."
Subsidiary Guaranty.......................... The Exchange Notes will be fully and
unconditionally guaranteed on an unsecured,
senior subordinated basis by each of the
Guarantor Subsidiaries. See "Description of
Exchange Notes--Subsidiary Guaranty."
Ranking...................................... The Exchange Notes will be unsecured and will
be subordinated to all existing and future
Senior Indebtedness of the Company. The
Exchange Notes will rank PARI PASSU with any
future Senior Subordinated Indebtedness of
the Company and with the Original Notes, and
will rank senior to all other subordinated
indebtedness of the Company. The Subsidiary
Guaranty will be an unsecured, senior
subordinated obligation of the Guarantor
Subsidiaries, subordinated in right of
payment to existing and future Senior
Indebtedness (as defined in "Description of
Exchange Notes") of the Guarantor
Subsidiaries. As of June 30, 1997, on a pro
forma basis after giving effect to the Old
Notes Offering and the application of the
proceeds therefrom, the aggregate amount of
the Company's (excluding its consolidated
subsidiaries) outstanding Senior Indebtedness
would have been $95.0 million (excluding
unused commitments and $17.1 million of
outstanding letters of credit), the
liabilities of the Guarantor Subsidiaries
(including trade payables and deferred taxes
but excluding the Subsidiary Guaranty and
subsidiary guarantees of the Senior Bank
Facilities) would have totalled approximately
$198.7 million, and the Company would have
had $100 million of Senior Subordinated
Indebtedness outstanding other than the Notes
and no indebtedness that is subordinated or
junior in right of payment to the
indebtedness represented by the Notes. See
"Description of Exchange Notes-- Ranking."
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
Restrictive Covenants........................ The Indenture will limit (i) the incurrence
of additional indebtedness by the Company and
its subsidiaries, (ii) the existence of
liens, (iii) the payment of dividends on, and
redemption of, capital stock of the Company
and its subsidiaries and the redemption of
certain subordinated obligations of the
Company and its subsidiaries, (iv) restricted
payments, (v) sales of assets and subsidiary
stock, (vi) transactions with affiliates,
(vii) the lines of business in which the
Company may operate, (viii) sale and
leaseback transactions and (ix)
consolidations, mergers and transfers of all
or substantially all the Company's assets.
The Indenture will also prohibit certain
restrictions on distributions from
subsidiaries. In the event of an Asset
Disposition (as defined herein), the Company
will be required to use the proceeds to repay
certain debt, including Senior Indebtedness,
to reinvest in the Company's business, to
offer to purchase the Original Notes, or to
offer to purchase the Notes at 100% of the
principal amount thereof, plus accrued and
unpaid interest, if any, to the date of
purchase. All of these limitations and
prohibitions are subject to a number of
important qualifications and exceptions. See
"Description of Exchange Notes--Certain
Covenants."
</TABLE>
RISK FACTORS
Holders of Old Notes should carefully consider all the information set forth
in this Prospectus and, in particular, should evaluate the specific factors set
forth under "Risk Factors" beginning on page 16 prior to making an investment
decision with respect to the Exchange Offer. See "Risk Factors."
------------------------
The Company, a Delaware corporation, is a holding company whose operations
are conducted exclusively through its wholly-owned subsidiaries including TCI,
Gunite, Brillion, Bostrom, Fabco, JAC, JAIX Leasing and FCS. The principal
executive offices of the Company are located at 980 North Michigan Avenue, Suite
1000, Chicago, Illinois 60611, and its telephone number is (312) 280-8844. The
Company's Common Stock (the "Common Stock") is listed for trading on the NASDAQ
National Market under the symbol "JAII."
13
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth summary consolidated financial data with
respect to the Company for the periods and at the dates indicated. The summary
consolidated income statement and balance sheet data of the Company for the
years ended and as of December 31, 1992, 1993, 1994, 1995 and 1996 are derived
from financial statements which have been audited by Arthur Andersen LLP,
independent public accountants. The summary consolidated financial data for the
six months ended and as of June 30, 1996 and 1997 are derived from unaudited
consolidated financial statements of the Company, but reflect, in the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of such data. Operating results for the six
month period ended June 30, 1997 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1997. This information
should be read in conjunction with the consolidated financial statements of the
Company and the notes thereto appearing elsewhere in this Prospectus and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------- ---------
1992 1993(A) 1994 1995(B) 1996 1996
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenue........................................... $ 204,500 $ 329,122 $ 468,525 $ 668,601 $ 559,972 $ 285,629
Cost of goods sold...................................... 187,174 301,629 442,153 608,982 474,158 240,859
--------- --------- --------- --------- --------- ---------
Gross profit.......................................... 17,326 27,493 26,372 59,619 85,814 44,770
Selling, general and administrative..................... 9,108 11,340 13,144 28,117 46,605 23,808
Amortization............................................ 3,843 3,721 3,573 6,478 10,174 5,133
Gain on sale of leased freight cars..................... -- -- -- -- (1,354) --
--------- --------- --------- --------- --------- ---------
Operating income...................................... 4,375 12,432 9,655 25,024 30,389 15,829
Interest expense, net................................... 5,360 2,968 266 14,702 35,836 17,586
Provision (credit) for income taxes..................... (254) 4,083 3,692 4,737 (76) 195
--------- --------- --------- --------- --------- ---------
Income (loss) before extraordinary items.............. (731) 5,381 5,697 5,585 (5,371) (1,952)
Extraordinary items, net of taxes(c).................... -- (2,918) -- -- -- --
--------- --------- --------- --------- --------- ---------
Net income (loss)..................................... $ (731) $ 2,463 $ 5,697 $ 5,585 $ (5,371) $ (1,952)
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Income (loss) before extraordinary items per share...... $ (0.13) $ 0.66 $ 0.58 $ 0.57 $ (0.55) $ (0.20)
Extraordinary items per share(c)........................ -- (0.36) -- -- -- --
--------- --------- --------- --------- --------- ---------
Net income (loss) per share............................. $ (0.13) $ 0.30 $ 0.58 $ 0.57 $ (0.55) $ (0.20)
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
OPERATING AND OTHER DATA (EXCLUDING JAIX LEASING, EXCEPT
WITH RESPECT TO RATIO OF EARNINGS TO FIXED CHARGES):(d)
EBITDA(e)............................................... $ 10,256 $ 18,652 $ 16,041 $ 37,779 $ 51,639 $ 27,299
Depreciation and amortization........................... 5,881 6,220 6,386 14,091 24,890 12,768
Cash interest expense(f)................................ 5,360 2,968 266 13,109 30,967 15,389
Capital expenditures.................................... 2,275 3,865 7,295 14,954 9,919 4,914
Ratio of EBITDA to cash interest expense................ 1.91x 6.28x 60.30x 2.85x 1.64x 1.77x
Ratio of earnings to fixed charges(g)................... (g) 4.19x 36.30x 1.66x (g) (g)
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents............................... $ 675 $ 7,136 $ 1,754 $ 11,639 $ 24,535 $ 17,105
Working capital (deficit)............................... (2,313) 15,600 24,967 24,697 27,219 30,735
Property, plant, equipment and leasing business assets,
net................................................... 27,472 28,838 38,162 164,425 147,114 161,699
Total assets............................................ 95,570 107,966 143,354 578,825 555,283 575,514
Long-term debt, including current maturities............ 34,847 -- 7,600 329,786 304,175 326,709
Shareholders' equity.................................... 16,300 57,235 63,234 68,874 63,537 66,921
<CAPTION>
1997
---------
<S> <C>
INCOME STATEMENT DATA:
Total revenue........................................... $ 273,962
Cost of goods sold...................................... 232,520
---------
Gross profit.......................................... 41,442
Selling, general and administrative..................... 22,062
Amortization............................................ 4,248
Gain on sale of leased freight cars..................... (587)
---------
Operating income...................................... 15,719
Interest expense, net................................... 17,381
Provision (credit) for income taxes..................... 743
---------
Income (loss) before extraordinary items.............. (2,405)
Extraordinary items, net of taxes(c).................... --
---------
Net income (loss)..................................... $ (2,405)
---------
---------
Income (loss) before extraordinary items per share...... $ (0.25)
Extraordinary items per share(c)........................ --
---------
Net income (loss) per share............................. $ (0.25)
---------
---------
OPERATING AND OTHER DATA (EXCLUDING JAIX LEASING, EXCEPT
WITH RESPECT TO RATIO OF EARNINGS TO FIXED CHARGES):(d)
EBITDA(e)............................................... $ 26,391
Depreciation and amortization........................... 12,252
Cash interest expense(f)................................ 15,438
Capital expenditures.................................... 2,405
Ratio of EBITDA to cash interest expense................ 1.71x
Ratio of earnings to fixed charges(g)................... (g)
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents............................... $ 17,311
Working capital (deficit)............................... 24,910
Property, plant, equipment and leasing business assets,
net................................................... 158,452
Total assets............................................ 570,640
Long-term debt, including current maturities............ 311,928
Shareholders' equity.................................... 61,132
</TABLE>
See Notes to Summary Consolidated Financial Data.
14
<PAGE>
NOTES TO SUMMARY CONSOLIDATED FINANCIAL DATA
(a) On July 23, 1993, the Company consummated an initial public offering whereby
the Company issued 3.0 million shares of its Common Stock.
(b) On January 13, 1995, the Company acquired Bostrom for a total purchase price
of approximately $32.6 million financed by borrowings under the Company's
previous borrowing facility. On August 23, 1995, the Company completed the
acquisition of TCI for a total purchase price of approximately $266.1
million financed by borrowings under the Senior Bank Facilities and the
proceeds of the issuance of the Original Notes. The acquisitions were
accounted for as a purchase, and the operating results were included in the
Company's operations from the date of acquisition. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and Note 3 to the Company's Consolidated Financial Statements contained
elsewhere in this Prospectus.
(c) The Company reported an extraordinary loss in connection with an early
extinguishment of its long-term debt which was retired with a portion of the
proceeds from its initial public offering in July 1993.
(d) JAIX Leasing is not a Guarantor Subsidiary and funds its operations through
bank borrowings, secured by underlying leases and assets of JAIX Leasing,
which are non-recourse to the Company. As a result, the operating and other
data of JAIX Leasing have been excluded from the data presented herein,
except with respect to Ratio of earnings to fixed charges.
(e) EBITDA is defined as earnings before interest, taxes, depreciation,
amortization and extraordinary items and is presented because it is commonly
used by certain investors and analysts to analyze and compare on the basis
of operating performance and to determine a company's ability to service and
incur debt. EBITDA should not be considered in isolation from or as a
substitute for net income, cash flows from operating activities or other
consolidated income or cash flow statement data prepared in accordance with
generally accepted accounting principles or as a measure of profitability or
liquidity.
(f) Cash interest expense is defined as interest expense exclusive of
amortization of deferred financing costs.
(g) The ratio of earnings to fixed charges is expressed as the ratio of fixed
charges plus pretax earnings to fixed charges. Fixed charges include
interest on borrowings, amortization of deferred financing costs and the
interest portion of rent expense. Earnings were insufficient to cover fixed
charges for the years ended December 31, 1992 and 1996 by $1.0 million and
$5.5 million, respectively, and for the six month periods ended June 30,
1996 and 1997 by $1.8 million and $1.7 million, respectively. Adjusted to
give effect to the Old Notes Offering and the application of the estimated
net proceeds therefrom, the Company's earnings would have been insufficient
to cover the fixed charges in the amount of $7.0 million and $2.5 million
for the year ended December 31, 1996 and for the six months ended June 30,
1997, respectively.
15
<PAGE>
RISK FACTORS
In addition to other information contained or incorporated by reference in
this Prospectus, before tendering their Old Notes for the Exchange Notes offered
hereby, holders of Old Notes should consider carefully the following factors,
which may be generally applicable to the Old Notes as well as to the Exchange
Notes:
CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes, as set forth in the legend thereon, as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act and applicable state
securities laws, or pursuant to an exemption therefrom. Except under certain
limited circumstances, the Company does not intend to register the Old Notes
under the Securities Act. In addition, any holder of Old Notes who tenders in
the Exchange Offer for the purpose of participating in a distribution of the
Exchange Notes may be deemed to have received restricted securities and, if so,
will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction. To
the extent Old Notes are tendered and accepted in the Exchange Offer, the
trading market, if any, for the Old Notes not so tendered could be adversely
affected. See "The Exchange Offer" and "Old Notes Registration Rights;
Liquidated Damages."
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE DEBT; RECENT LOSSES
The Company is highly leveraged and has indebtedness that is substantial in
relation to its shareholders' equity. As of June 30, 1997, after giving effect
to the Old Notes Offering and the application of the estimated net proceeds
therefrom, the Company (excluding its consolidated subsidiaries) would have had
an aggregate of $95.0 million of outstanding Senior Indebtedness (excluding
unused commitments and $17.1 million of outstanding letters of credit) and
shareholders' equity of $59.1 million. See "Capitalization." For the year ended
December 31, 1996 and the six months ended June 30, 1997, the Company's earnings
were insufficient to cover fixed charges (consisting principally of interest on
its long-term debt) in the amount of $5.5 million and $1.7 million,
respectively. Adjusted to give effect to the Old Notes Offering and the
application of the estimated net proceeds therefrom, the Company's earnings
would have been insufficient to cover the fixed charges in the amount of $7.0
million and $2.5 million for the year ended December 31, 1996 and for the six
months ended June 30, 1997, respectively. See "Selected Consolidated Financial
Data." The Indentures permit the Company and the Guarantor Subsidiaries to incur
additional indebtedness, including Senior Indebtedness under the Senior Bank
Facilities, subject to certain limitations. The Company has additional borrowing
capacity on a revolving credit basis under the Senior Bank Facilities. See
"Capitalization" and "Description of Certain Indebtedness--Senior Bank
Facilities."
The Company's high degree of leverage could have important consequences to
the holders of the Notes, including the following: (i) the Company's ability to
obtain additional financing for working capital, capital expenditures, general
corporate purposes or other purposes may be impaired in the future; (ii) a
substantial portion of the Company's cash flow from operations must be dedicated
to the payment of principal and interest on its indebtedness, thereby reducing
the funds available to the Company for other purposes; (iii) certain of the
Company's borrowings are and will continue to be at variable rates of interest,
which exposes the Company to the risk of increased interest rates; (iv) the
indebtedness outstanding under the Senior Bank Facilities is secured and matures
prior to the maturity of the Notes; and (v) the Company's flexibility to adjust
to changing market conditions and ability to withstand competitive pressures
could be limited and the Company may be more vulnerable to a downturn in
16
<PAGE>
general economic conditions or its business. See "Description of Certain
Indebtedness--Senior Bank Facilities" and "Description of Exchange Notes."
The Company's ability to make scheduled payments or to refinance its
obligations with respect to its indebtedness will depend on its financial and
operating performance, which, in turn, is subject to prevailing economic
conditions and to certain financial, business and other factors beyond its
control. If the Company's cash flow and capital resources are insufficient to
fund its debt service obligations, the Company may be forced to reduce or delay
capital expenditures, sell assets, obtain additional equity capital or
restructure its debt. There can be no assurance that the Company's cash flow and
capital resources will be sufficient for payment of its indebtedness in the
future. In the absence of such operating results and resources, the Company
could face substantial liquidity problems and might be required to dispose of
material assets or operations to meet its debt service and other obligations,
and there can be no assurance as to the timing of such sales or the proceeds
which the Company could realize therefrom. The Company has been making scheduled
principal payments under the Senior Bank Facilities since March 1996 and such
payments will continue through March 2003. See "Description of Certain
Indebtedness--Senior Bank Facilities" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
The Company reported net losses in the year ended December 31, 1996 and the
six months ended June 30, 1997. The significant decline in demand experienced in
1996 and early 1997 by JAC produced significant operating losses that, coupled
with the Company's significant debt service requirements, more than offset
operating income generated by its truck components and assemblies and iron
castings operations. Although demand for freight cars has improved slightly, the
market remains subject to intense pricing competitiveness in a freight car
market characterized by depressed demand and production overcapacity and, as a
result, the Company expects to report a net loss for the year ended December 31,
1997. Given the cyclicality of the freight car and heavy-duty trucking
industries and other market factors, there can be no assurance that the Company
will achieve or sustain profitability in the future.
RESTRICTIVE DEBT COVENANTS
The Senior Bank Facilities contain a number of significant covenants that,
among other things, restrict the ability of the Company and its subsidiaries to
dispose of assets, incur additional indebtedness, incur guarantee obligations,
repay other indebtedness or amend other debt instruments (including the
Indenture and the Subsidiary Guaranty), pay dividends, create liens on assets,
enter into sale and leaseback transactions, make investments, loans or advances,
make acquisitions, engage in mergers or consolidations, make capital
expenditures, or engage in certain transactions with affiliates and otherwise
restrict corporate activities. In addition, under the Senior Bank Facilities,
the Company is required to comply with specified financial ratios and tests,
including minimum interest coverage ratios, maximum leverage ratios, annual
capital expenditure limitations and net worth tests. See "Description of Certain
Indebtedness--Senior Bank Facilities."
In connection with the Old Notes Offering, the Company amended the credit
agreement governing the Senior Bank Facilities (the "Credit Agreement") to reset
the financial covenants for the remaining term of the Credit Agreement and to
reduce the Revolving Facility (as defined herein) from $100 million to $75
million. The banks also have consented to the issuance of the Notes. The
Company's ability to continue to comply with the covenants and restrictions
contained in the Credit Agreement, as amended in connection with the Old Notes
Offering, may be affected by events beyond its control, including prevailing
economic, financial and industry conditions. The breach of any of such covenants
or restrictions could result in a default under the Senior Bank Facilities
and/or the Indentures, which would permit the senior lenders or the holders of
the Original Notes or the Notes, as the case may be, to declare all amounts
borrowed thereunder to be due and payable, together with accrued and unpaid
interest, and the commitments of the senior lenders to make further extensions
of credit under the Senior Bank
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Facilities could be terminated. If the Company were unable to repay its
indebtedness to its senior lenders, such lenders could proceed against the
collateral securing such indebtedness as described under "Description of Certain
Indebtedness--Senior Bank Facilities."
HOLDING COMPANY STRUCTURE; POSSIBLE UNENFORCEABILITY OF THE SUBSIDIARY GUARANTY
The Company is a holding company which derives all of its operating income
from its subsidiaries. The holders of the Notes will have no direct claim
against such subsidiaries other than the claim created by the Subsidiary
Guaranty, which may themselves be subject to legal challenge in the event of the
bankruptcy of a subsidiary. See "--Fraudulent Conveyance." If such a challenge
were upheld, the Subsidiary Guaranty would be invalidated and unenforceable. To
the extent that the Subsidiary Guaranty is not enforceable, the rights of
holders of the Notes to participate in any distribution of assets of any
Guarantor Subsidiary upon liquidation, bankruptcy, reorganization or otherwise
may, as is the case with other unsecured creditors of the Company, be subject to
prior claims of creditors of that Guarantor Subsidiary. The Company must rely
upon dividends and other payments from its subsidiaries to generate the funds
necessary to meet its obligations, including the payment of principal of and
interest on the Notes. The Indenture contains covenants which restrict the
ability of the Company's subsidiaries to enter into any agreement limiting
distributions and transfers, including dividends. However, the ability of the
Company's subsidiaries to pay dividends and make other payments may be
restricted by, among other things, applicable state corporate laws and other
laws and regulations or by terms of agreements to which they may become party.
See "Description of Exchange Notes."
DEPENDENCE ON TRUCK AND FREIGHT CAR MARKETS AND GENERAL ECONOMIC CONDITIONS
During the year ended December 31, 1996 and the six months ended June 30,
1997, components and assemblies for the heavy- and medium-duty truck market
accounted for approximately 42.3% and 51.6%, respectively, and freight cars
accounted for approximately 35.4% and 23.2%, respectively, of the Company's net
sales. Both the truck and freight car markets are subject to significant
fluctuations due to economic conditions, changes in usage of the alternative
methods of transportation and other factors which may have an effect on the
level of the Company's sales and profitability.
The heavy- and medium-duty truck market is particularly sensitive to the
industrial sector of the economy, which generates a significant portion of the
freight tonnage hauled by trucks. Truck and automotive demand also depends on
general economic conditions, interest rate levels, fuel costs and changes in
state and federal laws and regulations. A key performance indicator for the
truck industry is the North American Class 8 truck build, which at 105,000 units
in 1991 reflected a general economic recession. This market recovered commencing
in 1992, together with the general economy, to reach a record truck build of
246,000 units in 1995. The North American truck build decreased to 191,500 in
1996 and the 1997 truck build is forecast by industry analysts to be 212,500. As
noted above, however, the market is cyclical and there can be no assurance that
the annual North American Class 8 truck build will not decline substantially in
the future. Any significant reduction in truck production, whether linked to a
general economic recession or otherwise, would significantly reduce the level of
the Company's sales to truck manufacturers, which could have a material adverse
effect on the Company's results of operations and financial condition.
Since 1970, annual production of freight cars on an industrywide basis has
ranged from a high of 96,500 units in 1979 to a low of 5,900 units in 1983.
Demand in the 1980's was unusually weak due to production overcapacity, the
United States embargo on the exportation of grain to the Soviet Union and
changes in the tax laws affecting leasing of freight cars. During the 1990's,
however, the use of railroads for freight transportation increased, industry
overcapacity was greatly reduced and a large number of freight cars reached or
neared the end of their useful lives. These factors, coupled with relatively
strong general economic conditions, resulted in industrywide freight car
production peaking at 60,853 units in 1995. New car deliveries remained strong
in 1996 at 57,877 units due to the strong backlog in orders at
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the end of 1995. However, industrywide orders slowed considerably in 1996 and
industrywide year end backlog declined from 32,574 at the end of 1995 to 17,508
at the end of 1996. New car orders declined more dramatically since the end of
1995 for the primary markets served by JAC. For example, the industrywide
backlog for coal gondolas, JAC's most significant market, declined from 1,784 at
the end of 1995 to 320 at the end of 1996. Industrywide deliveries of coal open
hoppers declined from 6,214 in 1995 to 2,298 in 1996 and industrywide deliveries
of intermodal cars declined from 10,536 in 1995 to 1,549 in 1996, with no
backlog for intermodal cars at the end of 1996. Although management believes
that this cyclical trough in demand for the types of cars offered by JAC has
begun to improve slightly, no assurance can be given that such increased demand
will continue. Industry analysts also are forecasting gradual improvements in
the market for aluminum coal cars. However, such forecasts have been inaccurate
in the past and no assurance can be given that the demand currently forecast by
industry analysts will occur. The Company also is being adversely affected by
intense pricing pressures currently present in a freight car market
characterized by depressed demand and production overcapacity.
Although sales of intermodal cars have historically represented a
significant percentage of JAC's total freight car shipments, this market segment
has been the most severely affected by the recent freight car industry downturn
and the Company has not produced any intermodal cars since 1995. Moreover, the
mix of intermodal freight cars expected to be delivered by the freight car
industry in the foreseeable future has predominantly shifted towards deep well
car designs that JAC does not manufacture. In response to these market factors,
JAC has increasingly focused its product development and marketing efforts on
other product categories, including aluminum gondola, covered hopper and open
hopper cars. See "Business--Railroad Freight Cars."
RELATIONSHIP WITH EMPLOYEES
Most of the Company's employees (approximately 68% as of December 31, 1996)
are covered by collective bargaining agreements. Each of the Company's
subsidiaries has a separate agreement covering the workers at its facility or
facilities and, as a result, the Company has collective bargaining agreements
with several different unions. Such agreements expire at various times over the
next few years. While the Company considers its relations with its employees to
be good at each of the Company's subsidiaries other than JAC and fair at JAC,
there can be no assurance that the Company's subsidiaries will reach new
agreements upon expiration of their existing collective bargaining agreements or
that the failure to reach new agreements will not have a material adverse effect
on the financial condition or results of operations of the Company.
JAC's current three-year agreement with the United Steelworkers of America
is scheduled to expire on October 31, 1997. This agreement was negotiated in a
period characterized by strong demand for freight cars and significant
industrywide backlog. In light of current depressed market conditions and the
weak operating performance of JAC, the Company will seek a mutually satisfactory
agreement to enable JAC to improve its competitiveness and help it return to
profitability. Although the Company believes it will be able to reach a new
agreement upon expiration of JAC's current agreement, no assurance can be given
that the Company will be able to reach a satisfactory agreement on a timely
basis. There can be no assurance that the failure to reach such an agreement on
a timely basis will not have a material adverse effect on the Company's
financial condition or results of operations.
SUBORDINATION; UNSECURED STATUS OF THE NOTES AND THE SUBSIDIARY GUARANTY
The payment of principal of and interest on, and any premium or other
amounts owing in respect of, the Notes will be subordinated to the prior payment
in full of all existing and future Senior Indebtedness of the Company, including
all amounts owing under the Senior Bank Facilities. As of June 30, 1997, after
giving effect to the Old Notes Offering and the application of the estimated net
proceeds therefrom, the aggregate amount of such Senior Indebtedness of the
Company (excluding its consolidated subsidiaries) would have been approximately
$95.0 million (excluding unused commitments and $17.1 million of
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outstanding letters of credit). Consequently, in the event of a bankruptcy,
liquidation, dissolution, reorganization or similar proceeding with respect to
the Company, assets of the Company will be available to pay obligations on the
Notes only after Senior Indebtedness has been paid in full, and there can be no
assurance that there will be sufficient assets to pay amounts due on all or any
of the Notes.
Similarly, the Subsidiary Guaranty of the Notes will be subordinated to the
prior payment in full of all existing and future Senior Indebtedness of the
Guarantor Subsidiaries, including all amounts owing pursuant to the guarantees
by the Guarantor Subsidiaries of the Senior Bank Facilities. As of June 30,
1997, after giving effect to the Old Notes Offering and the application of the
estimated net proceeds therefrom, the liabilities of the Guarantor Subsidiaries
(including trade payables and deferred taxes but excluding the Subsidiary
Guaranty and subsidiary guarantees of the Senior Bank Facilities) would have
totalled approximately $198.7 million. See "Description of Exchange
Notes--Ranking" and "--Subsidiary Guaranty."
The Notes will rank PARI PASSU with all future Senior Subordinated
Indebtedness of the Company and with the Original Notes. However, in the event
of an Asset Disposition, the Company will be required to use the proceeds to
repay certain debt, including Senior Indebtedness and the Original Notes, before
any proceeds remaining from the Asset Disposition would be available to fund a
required offer to purchase the Notes. See "Description of Exchange
Notes--Certain Covenants--Limitation on Sales of Assets and Subsidiary Stock."
As of June 30, 1997, after giving effect to the Old Notes Offering and the
application of the estimated proceeds therefrom, the aggregate amount of such
Senior Subordinated Indebtedness of the Company (other than the Notes) would
have been $100 million.
The Indenture will permit the Company and the Guarantor Subsidiaries to
incur certain secured indebtedness, including indebtedness under the Senior Bank
Facilities, which will be secured by a lien on substantially all of the assets
of the Company and the Guarantor Subsidiaries. The Notes and the Subsidiary
Guaranty are unsecured and therefore do not have the benefit of such collateral.
Accordingly, if an event of default occurs under the Senior Bank Facilities, the
lenders will have a prior right to the assets of the Company and the Guarantor
Subsidiaries, and may foreclose upon such collateral to the exclusion of the
holders of the Notes, notwithstanding the existence of an event of default with
respect thereto. In such event, such assets would first be used to repay in full
amounts outstanding under the Senior Bank Facilities, resulting in all or a
portion of the Company's assets being unavailable to satisfy the claims of the
holders of Notes and other unsecured indebtedness.
ENVIRONMENTAL MATTERS
The Company is subject to comprehensive and frequently changing federal,
state and local environmental laws and regulations, including those governing
emissions of air pollutants, discharges of wastewaters and storm waters, and the
disposal of non-hazardous and hazardous waste. The Company anticipates that it
will incur additional capital and operating costs in the future to comply with
currently existing laws and regulations, new regulatory requirements arising
from recently enacted statutes and possible new statutory enactments. The
Company expended approximately $0.4 million in 1996 and has budgeted $0.5
million in 1997 for capital expenditures to comply with environmental laws. The
actual capital expenditures in 1997 may differ from this amount, and capital
expenditures in future years may significantly exceed the amounts budgeted for
1997. The Company's operating costs for compliance with environmental
requirements also may increase substantially in future years.
In addition to environmental laws that regulate the Company's subsidiaries'
ongoing operations, the subsidiaries also are subject to environmental
remediation liability. Under the federal Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") and analogous state laws, the
Company's subsidiaries may be liable as a result of the release or threatened
release of hazardous substances into the environment. The Company's subsidiaries
are currently involved in several matters
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relating to the investigation and/or remediation of locations where the
subsidiaries had arranged for the disposal of foundry and other wastes.
Such matters include five situations in which the Company, through its TCI
subsidiaries and their predecessors, have been named or are believed to be
potentially responsible parties ("PRPs") in the contamination of the sites.
Additionally, environmental remediation may be required at two of the TCI
facilities at which soil and ground water contamination has been identified.
With respect to claims involving Gunite, TCI and Gunite in September 1997
entered into a private-party settlement (the "Settlement") of certain pending
litigation with a prior owner of Gunite, pursuant to which each of TCI and
Gunite and the prior owner withdrew their claims against the other. As a result
of the Settlement, TCI and Gunite will not be responsible for liabilities and
costs related to certain alleged contamination at Gunite's facilities and at
certain off-site properties to the extent arising out of operations of Gunite
prior to the acquisition of Gunite by TCI in September 1987. The Company
believes that it has valid claims for contractual indemnification against
Brillion's prior owners for certain of the investigatory and remedial costs at
the Brillion sites. The Company has been notified, however, by the Brillion
contractual indemnitors that they will not honor Brillion's claims for
indemnification. Accordingly, the Company is litigating indemnification claims
against Brillion's prior owners (Beatrice Company, et al.) and is appealing an
adverse lower court ruling against Brillion and TCI. There is no assurance that
even if successful in any such claims, any judgments against the indemnitors
will ultimately be recoverable. In addition, the Company believes it is likely
that it has incurred some liability at various sites for activities and disposal
following acquisition which would not in any event be covered by indemnification
by prior owners.
As of June 30, 1997, based on all of the information currently available,
the Company maintained an environmental reserve in the amount of $26.1 million.
As a result of the Settlement, the Company's environmental reserve was decreased
in September 1997 by $14.3 million to $11.8 million. The environmental reserve
is principally related to potential remediation liability at various off-site
locations. This non-cash reserve is based on current cost estimates and does not
reduce estimated expenditures to net present value. Further, the estimated
reserve takes into consideration the number of other PRPs at each site, the
alleged volume of waste contributed by other PRPs at each site, and the identity
and financial position of such parties in light of the joint and several nature
of the liability, but it does not take into account possible insurance coverage
or other similar indemnification or reimbursement other than the Settlement. The
Company currently anticipates spending approximately $0.4 million per year for
the current year and the next two years and approximately $0.5 million per year
in the years 2000 and 2001 (reduced as a result of the Settlement from $0.5
million per year for the current year and the next two years and approximately
$1 million per year in the years 2000 and 2001) for monitoring the various
environmental sites associated with the environmental reserve, including
attorney and consultant costs for strategic planning and negotiations with
regulators and other PRPs, and payment of remedial investigation costs. The
Company expects to fund such expenditures with the cash flow generated from its
operations and amounts available under its Revolving Facility (as defined
herein). These sites are generally in the early investigatory stages of the
remediation process and thus it is anticipated that significant cash payments
for remediation will not be incurred for at least several years. After the
evaluation and investigation period, the investigation and remediation costs
will likely increase because the actual remediation of the various environmental
sites associated with the environmental reserve will likely be under way. In
addition, it is possible that the timing of any necessary expenditures could be
accelerated. Any cash expenditures required by the Company or its subsidiaries
to comply with applicable environmental laws and/or to pay for any remediation
efforts will not be reduced or otherwise affected by the existence of the
environmental reserve. Due to the early stage of investigation of many of the
sites and potential remediations referred to above, there are significant
uncertainties as to waste quantities involved, the extent and timing of the
remediation which will be required, the range of acceptable solutions, costs of
remediation and the number of PRPs contributing to such costs. Based on all of
the information presently available to it, the Company believes that the
environmental reserve will be adequate to cover its future costs related to the
sites associated with the environmental reserve, and
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that any additional costs will not have a material adverse effect on the
financial condition or results of operations of the Company. However, the
discovery of additional sites, the modification of existing laws or regulations,
the imposition of joint and several liability under CERCLA or the uncertainties
referred to above could result in such a material adverse effect.
RELIANCE ON MAJOR CUSTOMERS AND PRODUCTS; UNEVEN FREIGHT CAR ORDER FLOW
Sales to Navistar by Gunite, Bostrom and Fabco constituted approximately
11.4% of the Company's total net revenues during 1996. No other customer
accounted for more than 10% of the Company's total net revenues during this
period. Although the Company has long-standing relationships with its major
customers, the loss of any significant portion of sales to any such customer
could have a material adverse effect on the business and financial results of
the Company. See "Business--Truck Components and Assemblies."
The number of potential purchasers of freight cars is relatively small and
such cars typically are sold pursuant to large one-time orders. Accordingly, a
few purchasers may account for a significant percentage of the cars purchased
industrywide in any given year. Similarly, a limited number of customers
typically represent a significant percentage of the cars sold by JAC in any
given year. See "Business-- Railroad Freight Cars--Customers."
Due to the large size of customer orders for freight cars and the fact that
many such orders represent one-time purchases designed to accommodate the
customer's need for a particular type of freight car for the foreseeable future,
there is limited predictability of order flows. As a result, there can be no
assurance that the Company would not be adversely affected by a shortage of
orders relating to its freight car business. In addition, due to the large size
of freight car orders, and variations in the mix of car types ordered, the
number and type of cars produced in any given quarter (as well as the size of
the Company's freight car backlog) may fluctuate greatly and, consequently, the
Company's quarterly revenues and income from operations may vary substantially.
The Company's revenues and income from operations are also subject to the
effects of the capital budgeting patterns of its freight car customers. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be required to
make an offer to purchase all of the outstanding Notes and the Original Notes at
a price equal to 101% of the principal amounts thereof to the date of repurchase
plus accrued and unpaid interest, if any, to the date of repurchase. The
occurrence of certain of the events which would constitute a Change of Control
would constitute a default under the Senior Bank Facilities. In addition, the
Senior Bank Facilities prohibit the purchase of the Notes and the Original Notes
by the Company in the event of a Change of Control, unless and until such time
as the indebtedness under the Senior Bank Facilities is repaid in full. The
Company's failure to purchase the Notes and the Original Notes would result in a
default under the Indentures and the Senior Bank Facilities. The inability to
repay the indebtedness under the Senior Bank Facilities, if accelerated, would
also constitute an event of default under the Indentures, which could have
adverse consequences to the Company and the holders of the Notes and the
Original Notes. In the event of a Change of Control, there can be no assurance
that the Company would have sufficient assets to satisfy all of its obligations
under the Senior Bank Facilities and the Notes and the Original Notes. Future
Senior Indebtedness of the Company may also contain prohibitions of certain
events or transactions which would constitute a Change of Control or require
such Senior Indebtedness to be repurchased upon a Change of Control. See
"Description of Exchange Notes--Change of Control" and "Description of Certain
Indebtedness--Senior Bank Facilities."
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COMPETITION
The Company faces significant competition in each of its markets and has
numerous competitors, some of which are larger and have greater financial
resources than the Company. There can be no assurance that the Company will be
able to continue to compete successfully in its markets. Because the Company
competes, in part, on the technical advantages and cost of its products,
significant technical advances by competitors or the achievement by such
competitors of improved operating effectiveness that enable them to reduce
prices could reduce the Company's competitive advantage in these products and
thereby adversely affect the Company's business and financial results. See
"Business-- Competition."
RISKS RELATED TO INDEMNIFICATION BY BETHLEHEM
In connection with the acquisition by the Company in 1991 of substantially
all of the assets of the Freight Car Division of Bethlehem Steel Corporation
("Bethlehem"), Bethlehem has agreed to make certain pension payments to, and
reimburse the Company for certain retiree health expenses related to, employees
of the Company who were employees of Bethlehem at the time of the acquisition of
the Freight Car Division. Bethlehem has also agreed to indemnify the Company
against liabilities retained by Bethlehem relating to the operation of such
business prior to such acquisition, including, without limitation, certain
environmental liabilities. There can be no assurance that the Company would not
be adversely affected if in the future Bethlehem becomes unable to satisfy these
obligations.
FRAUDULENT CONVEYANCE
The incurrence by the Company of indebtedness such as the Notes may be
subject to review under relevant state and federal fraudulent conveyance and
similar laws if a bankruptcy or reorganization case or a lawsuit is commenced by
or on behalf of creditors of the Company. Under these laws, if a court were to
find that, after giving effect to the sale of the Notes and the application of
the net proceeds therefrom, either (a) the Company incurred such indebtedness
with the intent of hindering, delaying or defrauding then-existing or future
creditors or (b) the Company received less than a reasonably equivalent value or
fair consideration for incurring such indebtedness and at the time of the
incurrence of such indebtedness the Company (i) was insolvent or was rendered
insolvent by reason of such transactions; (ii) was engaged in a business or
transaction for which the assets remaining with the Company constituted
unreasonably small capital; or (iii) intended to incur, or believed that it
would incur, debts beyond its ability to pay as they matured, such court may
subordinate such indebtedness to presently existing and future indebtedness of
the Company, avoid the issuance of such indebtedness and direct the repayment of
any amounts paid thereunder to the creditors of the Company or take other action
detrimental to the holders of such indebtedness.
The measure of insolvency for purposes of determining whether a transfer is
avoidable as a fraudulent transfer varies depending upon the law of the
jurisdiction which is being applied. Generally, however, a debtor would be
considered insolvent if the sum of all its liabilities, including contingent
liabilities, was greater than the value of all its assets at a fair valuation,
or if the present fair saleable value of the debtor's assets was less than the
amount required to repay its probable liabilities on its debts, including
contingent liabilities, as they become absolute and matured. There can be no
assurance as to what standard a court would apply in order to determine
solvency.
The Company believes that it will receive equivalent value at the time that
indebtedness under the Notes is incurred. In addition, the Company does not,
after giving effect to the consummation of the Old Notes Offering: (i) believe
that it will be insolvent or rendered insolvent; (ii) believe that it will be
engaged in a business or transaction for which its remaining assets constitute
unreasonably small capital; or (iii) intend to incur, or believe that it will
incur, debts beyond its ability to pay as they mature. These beliefs are based
on the Company's analysis of internal cash flow projections and estimated values
of assets
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and liabilities of the Company and the Guarantor Subsidiaries at the time of the
Old Notes Offering. There can be no assurance, however, that a court passing on
the issues would make the same determination.
In addition, the Subsidiary Guaranty may be subject to review under relevant
federal and state fraudulent conveyance and similar statutes in a bankruptcy or
reorganization case or a lawsuit by or on behalf of creditors of any of the
Guarantor Subsidiaries. In such a case, the analysis set forth above would
generally apply, except that the Subsidiary Guaranty could also be subject to
the claim that, since the Subsidiary Guaranty was incurred for the benefit of
the Company (and only indirectly for the benefit of the Guarantor Subsidiaries),
the obligations of the Guarantor Subsidiaries thereunder were incurred for less
than reasonably equivalent value or fair consideration. A court could void a
Guarantor Subsidiary's obligation under the Subsidiary Guaranty, subordinate the
Subsidiary Guaranty to other indebtedness of a Guarantor Subsidiary or take
other action detrimental to the holders of the Notes.
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements concerning the
Company's operations, economic performance and financial condition, including,
in particular, the likelihood of the Company's success in developing and
expanding its business. These statements are based upon a number of assumptions
and estimates which are inherently subject to significant uncertainties and
contingencies, many of which are beyond the control of the Company, and reflect
future business decisions which are subject to change. The foregoing description
of risk factors specifies the principal contingencies and uncertainties to which
the Company believes it is subject. In particular, reference is made to the
following risk factors: "Substantial Leverage; Ability to Service Debt; Recent
Losses;" "Dependence on Truck and Freight Car Markets and General Economic
Conditions;" "Relationship with Employees;" "Environmental Matters" and
"Reliance on Major Customers and Products; Uneven Freight Car Order Flow" and
the following other sections of this Prospectus: "Prospectus Summary-- Industry
Overview;" "Management's Discussion and Analysis of Financial Condition and
Results of Operations--General; Liquidity and Capital Resources" and
"Business--Industry Overview." Some of these assumptions inevitably will not
materialize, and unanticipated events will occur which will affect the Company's
results.
USE OF PROCEEDS
There will be no cash proceeds to the Company resulting from the Exchange
Offer. The net proceeds from the Old Notes Offering, of approximately $80.0
million (after deduction of discounts to the Initial Purchaser and other
expenses of the Old Notes Offering), was used to pay the Tranche A Term Loans
(as defined herein) under the Company's term loan and revolving credit facility
with The Chase Manhattan Bank, as administrative agent and collateral agent (the
"Senior Bank Facilities"). The Tranche A Term Loans accrued interest at a rate
per annum equal to the adjusted London inter-bank offered rate ("Adjusted
LIBOR") plus 2.5% and was repayable in quarterly principal payments over the
next five years. The Tranche B Term Loans (as defined herein), which are the
only term loans that remain outstanding under the Senior Bank Facilities after
the Old Notes Offering, currently bear interest at a rate per annum equal to
Adjusted LIBOR plus 3.0% and is repayable in quarterly principal payments over
the next six years. As a result of the Old Notes Offering, the Company's
principal payments under the Tranche B Term Loans for the remainder of 1997 and
for 1998, 1999, 2000, 2001, 2002 and 2003 will be $1.7 million, $3.3 million,
$3.3 million, $20.0 million, $23.3 million, $26.7 million and $16.7 million,
respectively. See "Description of Certain Indebtedness--Senior Bank Facilities."
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The sole purpose of the Exchange Offer is to fulfill the obligations of the
Company and the Guarantor Subsidiaries with respect to the registration of the
Old Notes.
The Old Notes were originally issued and sold on August 11, 1997 (the "Issue
Date"). Such sales were not registered under the Securities Act in reliance upon
the exemption provided by Section 4(2) of the Securities Act and Rule 144A
promulgated under the Securities Act. In connection with the sale of the Old
Notes, the Company, the Guarantor Subsidiaries and the Initial Purchaser entered
into an exchange and registration rights agreement dated August 11, 1997 (the
"Registration Rights Agreement") pursuant to which the Company and the Guarantor
Subsidiaries agreed, for the benefit of the holders of Old Notes, that they
will, at their cost, (i) within 30 days after the date of original issue of the
Old Notes use their respective reasonable best efforts to file a registration
statement in accordance with the Securities Act (an "Exchange Offer Registration
Statement") with the Commission with respect to a registered offer to exchange
the Old Notes for the Exchange Notes, which will have terms substantially
identical in all material respects to the Old Notes and (ii) use their
reasonable best efforts to cause such Exchange Offer Registration Statement to
be declared effective under the Securities Act within 90 days after such issue
date. Upon such Exchange Offer Registration Statement being declared effective,
the Company agreed to offer to holders of Old Notes who are able to make certain
representations an opportunity to exchange properly tendered Old Notes for
Exchange Notes. The Company has agreed to keep the Exchange Offer open for not
less than 30 days (or longer if required by applicable law) after the date
notice of such Exchange Offer is mailed to the holders of Old Notes.
In the event that applicable interpretations of the staff of the Commission
do not permit the Company to effect the Exchange Offer or do not permit any
holder of the Old Notes to participate in the Exchange Offer or to receive fully
transferable securities from the Exchange Offer, the Company and the Guarantor
Subsidiaries will, at their own expense, use their reasonable best efforts to
(a) as promptly as practicable, file a shelf registration statement covering
resales of the Old Notes (a "Shelf Registration Statement"), (b) cause such
Shelf Registration Statement to be declared effective under the Securities Act
and (c) keep effective such Shelf Registration Statement until the earlier of
(i) two years following the date of original issue of the Old Notes or such
shorter period that will terminate when all the Transfer Restricted Securities
(as defined herein) covered by the Shelf Registration Statement have been sold
pursuant thereto and (ii) the date on which the Old Notes become eligible for
resale without volume restrictions pursuant to Rule 144 under the Securities
Act. The Company and the Guarantor Subsidiaries will, in the event a Shelf
Registration Statement is required to be filed by them, provide to each holder
of Old Notes copies of the prospectus which is a part of such Shelf Registration
Statement, notify each such holder of Old Notes when such Shelf Registration
Statement for the Old Notes has become effective and take certain other actions
as are required to permit unrestricted resales of the Old Notes. A holder of Old
Notes who sells such Old Notes pursuant to the Shelf Registration Statement
generally would be required to be named as a selling security holder in the
related prospectus and to deliver a prospectus to purchasers, will be subject to
certain of the civil liability provisions under the Securities Act in connection
with such sales and will be bound by the provisions of the Registration Rights
Agreement which is applicable to such a holder (including certain
indemnification and contribution rights and obligations).
If (a) neither the Exchange Offer Registration Statement nor a Shelf
Registration Statement is filed with the Commission on or prior to 30 days after
the Issue Date, (b) neither the Exchange Offer Registration Statement nor a
Shelf Registration Statement is declared effective by the Commission on or prior
to 90 days after the Issue Date, (c) the Exchange Offer is not consummated on or
prior to 120 days after the Issue Date, or (d) the Shelf Registration Statement
is filed and declared effective within 90 days after the Issue Date but
thereafter ceases to be effective (at any time that the Company is obligated to
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<PAGE>
maintain the effectiveness thereof) without being succeeded within 30 days by an
additional Registration Statement filed and declared effective (each such event
referred to in clauses (a) through (d) above a "Registration Default"), then the
Company and the Guarantor Subsidiaries will be required to pay liquidated
damages to each holder of Transfer Restricted Securities. See "Old Notes
Registration Rights; Liquidated Damages."
TERMS OF THE EXCHANGE
The Company hereby offers to exchange, upon the terms and subject to the
conditions set forth herein and the Letter of Transmittal accompanying the
Registration Statement of which this Prospectus is a part (the "Letter of
Transmittal"), $1,000 in principal amount of Exchange Notes for each $1,000 in
principal amount of Old Notes. The Terms of the Exchange Notes are substantially
identical to the terms of the Old Notes for which they may be exchanged pursuant
to this Exchange Offer, except that the Exchange Notes will generally be freely
transferable by holders thereof, and the holders of the Exchange Notes (as well
as remaining holders of any Old Notes) are not entitled to certain registration
rights and certain liquidated damages provisions which are applicable to the Old
Notes under the Registration Rights Agreement. The Exchange Notes will evidence
the same debt as the Old Notes and will be entitled to the benefits of the
Indenture. See "Description of Exchange Notes."
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered or accepted for exchange.
Based on its view of interpretations set forth in no-action letters issued
by the Staff to third parties, the Company believes that Exchange Notes issued
pursuant to the Exchange Offer in exchange for the Old Notes may be offered for
resale, resold and otherwise transferred by holders thereof (other than any
holder which is (i) an Affiliate of the Company, (ii) a broker-dealer who
acquired Old Notes directly from the Company or (iii) a broker-dealer who
acquired Old Notes as a result of market making or other trading activities)
without compliance with the registration and prospectus delivery provisions of
the Securities Act provided that such Exchange Notes are acquired in the
ordinary course of such holders' business, and such holders are not engaged in,
and do not intend to engage in, and have no arrangement or understanding with
any person to participate in, a distribution of such Exchange Notes. However,
the Company does not intend to request the Commission to consider, and the
Commission has not considered, the Exchange Offer in the context of a no-action
letter and there can be no assurance that the Staff would make a similar
determination with respect to the Exchange Offer as in other circumstances. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. Each broker-dealer that receives Exchange Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. See "Plan of Distribution." The Letter of Transmittal
states that by so acknowledging, and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. Broker-dealers who acquired Old Notes as a result of market
making or other trading activities may use this Prospectus, as supplemented or
amended, in connection with resales of Exchange Notes. The Company has agreed
that, for a period of 180 days after consummation of the Exchange Offer, it will
make this Prospectus available to any broker-dealer for use in connection with
any such resale. Any holder who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Notes or any other holder that
cannot rely upon such interpretations must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction.
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<PAGE>
Tendering holders of Old Notes will not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of the Old Notes
pursuant to the Exchange Offer.
The Exchange Notes will bear interest from August 11, 1997. Holders of Old
Notes whose Old Notes are accepted for exchange will be deemed to have waived
the right to receive any payment in respect of interest on the Old Notes accrued
from August 11, 1997 to the date of the issuance of the Exchange Notes. The
Exchange Notes will bear interest at a rate of 11 3/4% per annum, payable
semi-annually on February 15 and August 15 of each year, commencing February 15,
1998.
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The Exchange Offer expires on the Expiration Date. The term "Expiration
Date" means 5:00 p.m., New York City time, on , 1997 unless the Company in
its sole discretion extends the period during which the Exchange Offer is open,
in which event the term "Expiration Date" means the latest time and date on
which the Exchange Offer, as so extended by the Company, expires. The Company
reserves the right to extend the Exchange Offer at any time and from time to
time prior to the Expiration Date by giving written notice to The Bank of New
York (the "Exchange Agent") and by timely public announcement communicated by no
later than 5:00 p.m. on the next business day following the Expiration Date,
unless otherwise required by applicable law or regulation, by making a release
to the Dow Jones News Service. During any extension of the Exchange Offer, all
Old Notes previously tendered pursuant to the Exchange Offer will remain subject
to the Exchange Offer.
The initial exchange date will be the first business day following the
Expiration Date (the "Exchange Date"). The Company expressly reserves the right
to (i) terminate the Exchange Offer and not accept for exchange any Old Notes
for any reason, including if any of the events set forth below under "Conditions
to the Exchange Offer" shall have occurred and shall not have been waived by the
Company and (ii) amend the terms of the Exchange Offer in any manner, whether
before or after any tender of the Old Notes. If any such termination or
amendment occurs, the Company will notify the Exchange Agent in writing and will
either issue a press release or give written notice to the holders of the Old
Notes as promptly as practicable. Unless the Company terminates the Exchange
Offer prior to 5:00 p.m., New York City time, on the Expiration Date, the
Company will exchange the Exchange Notes for Old Notes on the Exchange Date.
If the Company waives any material condition to the Exchange Offer, or
amends the Exchange Offer in any other material respect, and if at the time that
notice of such waiver or amendment is first published, sent or given to holders
of Old Notes in the manner specified above, the Exchange Offer is scheduled to
expire at any time earlier than the expiration of a period ending on the fifth
business day from, and including, the date that such notice is first so
published, sent or given, then the Exchange Offer will be extended until the
expiration of such period of five business days.
This Prospectus and the related Letter of Transmittal and other relevant
materials will be mailed by the Company to record holders of Old Notes and will
be furnished to brokers, banks and similar persons whose names, or the names of
whose nominees, appear on the lists of holders for subsequent transmittal to
beneficial owners of Old Notes.
HOW TO TENDER
The tender to the Company of Old Notes by a holder thereof pursuant to one
of the procedures set forth below will constitute an agreement between such
holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
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<PAGE>
GENERAL PROCEDURES
A holder of an Old Note may tender the same by (i) properly completing and
signing the Letter of Transmittal or a facsimile thereof (all references in this
Prospectus to the Letter of Transmittal shall be deemed to include a facsimile
thereof) and delivering the same, together with the certificate or certificates
representing the Old Notes being tendered and any required signature guarantees
(or a timely confirmation of a book-entry transfer (a "Book-Entry Confirmation")
pursuant to the procedure described below), to the Exchange Agent at its address
set forth on the back cover of this Prospectus on or prior to the Expiration
Date or (ii) complying with the guaranteed delivery procedures described below.
If tendered Old Notes are registered in the name of the signer of the Letter
of Transmittal and the Exchange Notes to be issued in exchange therefor are to
be issued (and any untendered Old Notes are to be reissued) in the name of the
registered holder, the signature of such signer need not be guaranteed. In any
other case, the tendered Old Notes must be endorsed or accompanied by written
instruments of transfer in form satisfactory to the Company and duly executed by
the registered holder and the signature on the endorsement or instrument of
transfer must be guaranteed by a bank, broker, dealer, credit union, savings
association, clearing agency or other institution (each an "Eligible
Institution") that is a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Exchange Act. If the
Exchange Notes and/or Old Notes not exchanged are to be delivered to an address
other than that of a registered holder appearing on the note register for the
Old Notes, the signature on the Letter of Transmittal must be guaranteed by an
Eligible Institution.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
Old Notes should contact such holder promptly and instruct such holder to tender
Old Notes on such beneficial owner's behalf. If such beneficial owner wishes to
tender such Old Notes himself, such beneficial owner must, prior to completing
and executing the Letter of Transmittal and delivering such Old Notes, either
make appropriate arrangements to register ownership of the Old Notes in such
beneficial owner's name or follow the procedures described in the immediately
preceding paragraph. The transfer of record ownership may take considerable
time.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at The Depository Trust Company (the "Book-Entry Transfer
Facility") for purposes of the Exchange Offer within two business days after
receipt of this Prospectus, and any financial institution that is a participant
in the Book-Entry Transfer Facility's systems may make book-entry delivery of
Old Notes by causing the Book-Entry Transfer Facility to transfer such Old Notes
into the Exchange Agent's account at the Book-Entry Transfer Facility in
accordance with the Book-Entry Transfer Facility's procedures for transfer.
However, although delivery of Old Notes may be effected through book-entry
transfer at the Book-Entry Transfer Facility, the Letter of Transmittal, with
any required signature guarantees and any other required documents, must, in any
case, be transmitted to and received by the Exchange Agent at the address
specified on the back cover of this Prospectus on or prior to the Expiration
Date or the guaranteed delivery procedures described below must be complied
with.
The method of delivery of Old Notes and all other documents is at the
election and risk of the holder. If sent by mail, it is recommended that
registered mail, return receipt requested, be used, proper insurance be
obtained, and the mailing be made sufficiently in advance of the Expiration Date
to permit delivery to the Exchange Agent on or before the Expiration Date.
Unless an exemption applies under the applicable law and regulations
concerning "backup withholding" of federal income tax, the Exchange Agent will
be required to withhold, and will withhold, 31% of the gross proceeds otherwise
payable to a holder pursuant to the Exchange Offer if the holder does
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<PAGE>
not provide his taxpayer identification number (social security number or
employer identification number, as applicable) and certify that such number is
correct. Each tendering holder should complete and sign the main signature form
and the Substitute Form W-9 included as part of the Letter of Transmittal, so as
to provide the information and certification necessary to avoid backup
withholding, unless an applicable exemption exists and is proved in a manner
satisfactory to the Company and the Exchange Agent.
GUARANTEED DELIVERY PROCEDURES
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Old Notes to reach the Exchange Agent before the
Expiration Date, a tender may be effected if the Exchange Agent has received at
its office listed on the Letter of Transmittal on or prior to the Expiration
Date a letter, telegram or facsimile transmission from an Eligible Institution
setting forth the name and address of the tendering holder, the principal amount
of the Old Notes being tendered, the names in which the Old Notes are registered
and, if possible, the certificate numbers of the Old Notes to be tendered, and
stating that the tender is being made thereby and guaranteeing that within three
New York Stock Exchange trading days after the date of execution of such letter,
telegram or facsimile transmission by the Eligible Institution, the Old Notes,
in proper form for transfer, will be delivered by such Eligible Institution
together with a properly completed and duly executed Letter of Transmittal (and
any other required documents). Unless Old Notes being tendered by the
above-described method (or a timely Book-Entry Confirmation) are deposited with
the Exchange Agent within the time period set forth above (accompanied or
preceded by a properly completed Letter of Transmittal and any other required
documents), the Company may, at its option, reject the tender. Copies of a
Notice of Guaranteed Delivery which may be used by Eligible Institutions for the
purposes described in this paragraph are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a timely Book-Entry Confirmation) is received
by the Exchange Agent. Issuances of Exchange Notes in exchange for Old Notes
tendered pursuant to a Notice of Guaranteed Delivery or letter, telegram or
facsimile transmission to similar effect (as provided above) by an Eligible
Institution will be made only against deposit of the Letter of Transmittal (and
any other required documents) and the tendered Old Notes (or a timely Book-Entry
Confirmation).
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Old Notes will be
determined by the Company, whose determination will be final and binding. The
Company reserves the absolute right to reject any or all tenders not in proper
form or the acceptances for exchange of which may, in the opinion of counsel to
the Company, be unlawful. The Company also reserves the absolute right to waive
any of the conditions of the Exchange Offer or any defect or irregularities in
tenders of any particular holder whether or not similar defects or
irregularities are waived in the case of other holders. Neither the Company, the
Exchange Agent nor any other person will be under any duty to give notification
of any defects or irregularities in tenders or shall incur any liability for
failure to give any such notification. The Company's interpretation of the terms
and conditions of the Exchange Offer (including the Letter of Transmittal and
the instructions thereto) will be final and binding.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Old Notes for exchange (the "Transferor") exchanges,
assigns and transfers the Old Notes to the Company and irrevocably constitutes
and appoints the Exchange Agent as the Transferor's agent and attorney-in-fact
to cause the Old Notes to be assigned, transferred and
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<PAGE>
exchanged. The Transferor represents and warrants that it has full power and
authority to tender, exchange, assign and transfer the Old Notes and to acquire
Exchange Notes issuable upon the exchange of such tendered Old Notes, and that,
when the same are accepted for exchange, the Company will acquire good and
unencumbered title to the tendered Old Notes, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim. The
Transferor also warrants that it will, upon request, execute and deliver any
additional documents deemed by the Company to be necessary or desirable to
complete the exchange, assignment and transfer of tendered Old Notes. The
Transferor further agrees that acceptance of any tendered Old Notes by the
Company and the issuance of Exchange Notes in exchange therefor shall constitute
performance in full by the Company of its obligations under the Registration
Rights Agreement and that the Company shall have no further obligations or
liabilities thereunder (except in certain limited circumstances). All authority
conferred by the Transferor will survive the death or incapacity of the
Transferor and every obligation of the Transferor shall be binding upon the
heirs, legal representatives, successors, assigns, executors and administrators
of such Transferor.
By tendering Old Notes and executing the Letter of Transmittal, the
Transferor certifies that (i) any Exchange Notes to be received by it will be
acquired in the ordinary course of its business, (ii) it has no arrangement with
any person to participate in the distribution of the Exchange Notes and (iii) it
is not an "affiliate," as defined in Rule 405 of the Securities Act, of the
Company, or if it is an affiliate of the Company, it will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable. In addition, if the Transferor is not a broker-dealer, it
will be required to represent that it is not engaged in, and does not intend to
engage in, the distribution of the Exchange Notes. If the holder is a
broker-dealer that will receive Exchange Notes for its own account in exchange
for Old Notes that were acquired as a result of market making activities or
other trading activities, it will be required to acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes.
WITHDRAWAL RIGHTS
Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date.
For a withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be timely received by the Exchange Agent at its address set
forth on the back cover of this Prospectus prior to the Expiration Date. Any
such notice of withdrawal must specify the person named in the Letter of
Transmittal as having tendered Old Notes to be withdrawn, the certificate
numbers of Old Notes to be withdrawn, the principal amount of Old Notes to be
withdrawn, a statement that such holder is withdrawing his election to have such
Old Notes exchanged, and the name of the registered holder of such Old Notes,
and must be signed by the holder in the same manner as the original signature on
the Letter of Transmittal (including any required signature guarantees) or be
accompanied by evidence satisfactory to the Company that the person withdrawing
the tender has succeeded to the beneficial ownership of the Old Notes being
withdrawn. The Exchange Agent will return the properly withdrawn Old Notes
promptly following receipt of notice of withdrawal. All questions as to the
validity of notices of withdrawals, including time of receipt, will be
determined by the Company, and such determination will be final and binding on
all parties.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Old Notes validly tendered and not withdrawn and the
issuance of the Exchange Notes will be made on the Exchange Date. For the
purposes of the Exchange Offer, the Company shall be deemed to have accepted for
exchange validly tendered Old Notes when, as and if the Company has given
written notice thereof to the Exchange Agent.
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The Exchange Agent will act as agent for the tendering holders of Old Notes
for the purposes of receiving Exchange Notes from the Company and causing the
Old Notes to be assigned, transferred and exchanged. Upon the terms and subject
to conditions of the Exchange Offer, delivery of Exchange Notes to be issued in
exchange for accepted Old Notes will be made by the Exchange Agent promptly
after acceptance of the tendered Old Notes. Old Notes not accepted for exchange
by the Company will be returned without expense to the tendering holders (or in
the case of Old Notes tendered by book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the procedures described
above, such non-exchanged Old Notes will be credited to an account maintained
with such Book-Entry Transfer Facility) promptly following the Expiration Date
or, if the Company terminates the Exchange Offer prior to the Expiration Date,
promptly after the Exchange Offer is so terminated.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Company will not be required to issue Exchange Notes
in respect of any properly tendered Old Notes not previously accepted and may
terminate the Exchange Offer (by oral or written notice to the Exchange Agent
and by timely public announcement communicated by no later than 5:00 p.m. on the
next business day following the Expiration Date, unless otherwise required by
applicable law or regulation, by making a release to the Dow Jones News Service)
or, at its option, modify or otherwise amend the Exchange Offer, if (a) there
shall be threatened, instituted or pending any action or proceeding before, or
any injunction, order or decree shall have been issued by, any court or
governmental agency or other governmental regulatory or administrative agency or
commission, (i) seeking to restrain or prohibit the making or consummation of
the Exchange Offer or any other transaction contemplated by the Exchange Offer,
(ii) assessing or seeking any damages as a result thereof or (iii) resulting in
a material delay in the ability of the Company to accept for exchange or
exchange some or all of the Old Notes pursuant to the Exchange Offer; (b) any
statute, rule, regulation, order or injunction shall be sought, proposed,
introduced, enacted, promulgated or deemed applicable to the Exchange Offer or
any of the transactions contemplated by the Exchange Offer by any government or
governmental authority, domestic or foreign, or any action shall have been
taken, proposed or threatened, by any government, governmental authority, agency
or court, domestic or foreign, that in the reasonable judgment of the Company
might directly or indirectly result in any of the consequences referred to in
clauses (a)(i) or (ii) above or, in the reasonable judgment of the Company,
might result in the holders of Exchange Notes having obligations with respect to
resales and transfers of Exchange Notes which are greater than those described
in the interpretations of the Staff referred to on the cover page of this
Prospectus, or would otherwise make it inadvisable to proceed with the Exchange
Offer; or (c) a material adverse change shall have occurred in the business,
condition (financial or otherwise), operations, or prospects of the Company.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by it with respect to all or any portion of the Exchange Offer
regardless of the circumstances (including any action or inaction by the
Company) giving rise to such condition or may be waived by the Company in whole
or in part at any time or from time to time in its sole discretion. The failure
by the Company at any time to exercise any of the foregoing rights will not be
deemed a waiver of any such right, and each right will be deemed an ongoing
right which may be asserted at any time or from time to time. In addition, the
Company has reserved the right, notwithstanding the satisfaction of each of the
foregoing conditions, to terminate or amend the Exchange Offer.
Any determination by the Company concerning the fulfillment or
nonfulfillment of any conditions will be final and binding upon all parties.
In addition, the Company will not accept for exchange any Old Notes tendered
and no Exchange Notes will be issued in exchange for any such Old Notes, if at
such time any stop order shall be
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threatened or in effect with respect to the Registration Statement of which this
Prospectus constitutes a part or qualification of the Indenture under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act").
EXCHANGE AGENT
The Bank of New York has been appointed as the Exchange Agent for the
Exchange Offer. Letters of Transmittal must be addressed to the Exchange Agent
at:
<TABLE>
<CAPTION>
BY HAND OR OVERNIGHT DELIVERY: BY REGISTERED OR CERTIFIED MAIL:
- ------------------------------------------------- -------------------------------------------------
<S> <C>
The Bank of New York The Bank of New York
101 Barclay Street, 7E 101 Barclay Street, 7E
Corporate Trust Services Window New York, New York 10286
Ground Level Attention: Reorganization Department
New York, New York 10286 Arwen Gibbons
Attention: Reorganization Department
Arwen Gibbons
</TABLE>
Confirm by Telephone
or for Information:
(212) 815-5920
Facsimile Transmissions:
(Eligible Institutions Only)
(212) 815-6339
Delivery to an address other than as set forth herein, or transmissions of
instructions via a facsimile or telex number other than the ones set forth
herein, will not constitute a valid delivery.
SOLICITATION OF TENDERS; EXPENSES
The Company has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of the Exchange Offer. The Company
will, however, pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for reasonable out-of-pocket expenses in
connection therewith. The Company will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding tenders for their customers. The expenses to be
incurred in connection with the Exchange Offer, including the fees and expenses
of the Exchange Agent and printing, accounting, legal fees and miscellaneous
expenses will be paid by the Company and are estimated to be approximately
$150,000.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Company. Neither the
delivery of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Old Notes in any jurisdiction in which
the making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. However, the Company may, at its
discretion, take such action as it may deem necessary to make the Exchange Offer
in any such jurisdiction and extend the Exchange Offer to holders of Old Notes
in such jurisdiction. In any jurisdiction the securities laws or blue sky laws
of which require the Exchange Offer to be made by a licensed broker or dealer,
the Exchange Offer is being made on
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behalf of the Company by one or more registered brokers or dealers that are
licensed under the laws of such jurisdiction.
APPRAISAL RIGHTS
HOLDERS OF OLD NOTES WILL NOT HAVE DISSENTERS' RIGHTS OR APPRAISAL RIGHTS IN
CONNECTION WITH THE EXCHANGE OFFER.
FEDERAL INCOME TAX CONSEQUENCES
The exchange of Old Notes for Exchange Notes by tendering holders will not
be a taxable exchange for federal income tax purposes, and such holders should
not recognize any taxable gain or loss or any interest income as a result of
such exchange. See "Certain United States Federal Income Tax Consequences."
OTHER
Participation in the Exchange Offer is voluntary and holders of Old Notes
should carefully consider whether to accept the terms and conditions thereof.
Holders of the Old Notes are urged to consult their financial and tax advisors
in making their own decisions on what action to take with respect to the
Exchange Offer.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Old Notes pursuant to the terms of this Exchange Offer, the
Company will have fulfilled a covenant contained in the terms of the Old Notes
and the Registration Rights Agreement. Holders of the Old Notes who do not
tender their Old Notes in the Exchange Offer will continue to hold such Old
Notes and will be entitled to all the rights, and limitations applicable
thereto, under the Indenture, except for any such rights under the Registration
Rights Agreement which by their terms terminate or cease to have further effect
as a result of the making of this Exchange Offer. See "Description of Exchange
Notes." All untendered Old Notes will continue to be subject to the restriction
on transfer set forth in the Indenture. To the extent that Old Notes are
tendered and accepted in the Exchange Offer, the trading market, if any, for any
remaining Old Notes could be adversely affected. See "Risk Factors--Consequences
of Failure to Exchange Old Notes."
The Company may in the future seek to acquire untendered Old Notes in open
market or privately negotiated transactions, through subsequent exchange offers
or otherwise. The Company has no present plan to acquire any Old Notes that are
not tendered in the Exchange Offer.
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CAPITALIZATION
The following table sets forth the unaudited cash position and
capitalization of the Company as of June 30, 1997 on an (i) actual basis and
(ii) as adjusted basis to give pro forma effect to the Old Notes Offering as if
the Old Notes Offering had been consummated on June 30, 1997. See "Use of
Proceeds." This table should be read in conjunction with the Company's financial
statements and the related notes thereto appearing elsewhere in this Prospectus:
<TABLE>
<CAPTION>
JUNE 30, 1997
-------------------------
ACTUAL AS ADJUSTED
----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents.............................................................. $ 17,311 $ 17,311
----------- ------------
----------- ------------
Long-term debt:
JAIX Leasing Loan Facility(a)........................................................ $ 29,750 $ 29,750
Capital lease obligations............................................................ 1,868 1,868
Industrial Revenue Bond.............................................................. 5,300 5,300
Senior Bank Facilities(b):
Revolving Facility................................................................. -- --
Term Loan Facility................................................................. 175,010 95,005
11 3/4% Senior Subordinated Notes due 2005........................................... 100,000 100,000
11 3/4% Series B and Series C Senior Subordinated Notes due 2005,
including unamortized premium of $3.6 million(c)..................................... -- 82,823(d)
----------- ------------
Total long-term debt............................................................... 311,928 314,746
Less current maturities.......................................................... (18,916) (3,330)
----------- ------------
Long-term debt, net of current maturities............................................ 293,012 311,416
Shareholders' equity:
Common stock......................................................................... 98 98
Paid-in capital...................................................................... 55,049 55,049
Retained earnings.................................................................... 6,015 3,978(e)
Employees' notes receivable related to purchase of stock............................. (30) (30)
----------- ------------
Shareholders' equity............................................................... 61,132 59,095
----------- ------------
Total capitalization............................................................. $ 354,144 $ 370,511
----------- ------------
----------- ------------
</TABLE>
- ------------------------
(a) JAIX Leasing is not a Guarantor Subsidiary. The indebtedness under the JAIX
Leasing Loan Facility is secured by underlying leases and assets of JAIX
Leasing and the creditors thereunder have no recourse against the Company.
(b) In connection with the Old Notes Offering, the maximum borrowings under the
Revolving Facility, which is subject to a borrowing base, was reduced from
$100 million to $75 million. As of June 30, 1997, $50.5 million was
available under the Revolving Facility after giving consideration of
outstanding letters of credit of $17.1 million. See "Description of Certain
Indebtedness--Senior Bank Facilities."
(c) See "Description of Exchange Notes."
(d) Reflects an approximately $0.8 million unamortized derivative option
settlement related to the issuance of the Old Notes.
(e) Reflects an approximately $3.4 million pre-tax non-cash extraordinary charge
($2.0 million net of tax) arising from the accelerated write-off of
unamortized debt issuance costs and cancellations of interest rate swap
instruments related to the Company prepaying a portion of its borrowings
under the Senior Bank Facilities. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--General."
34
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth selected consolidated financial data with
respect to the Company for the periods and at the dates indicated. The selected
consolidated income statement and balance sheet data of the Company for the
years ended and as of December 31, 1992, 1993, 1994, 1995 and 1996 are derived
from financial statements which have been audited by Arthur Andersen LLP,
independent public accountants. The selected consolidated financial data for the
six months ended and as of June 30, 1996 and 1997 are derived from unaudited
consolidated financial statements of the Company, but reflect, in the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of such data. Operating results for the six
month period ended June 30, 1997 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1997. This information
should be read in conjunction with the consolidated financial statements of the
Company and the notes thereto appearing elsewhere in this Prospectus and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------- --------------------
1992 1993(A) 1994 1995(B) 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenue............................... $ 204,500 $ 329,122 $ 468,525 $ 668,601 $ 559,972 $ 285,629 $ 273,962
Cost of goods sold.......................... 187,174 301,629 442,153 608,982 474,158 240,859 232,520
--------- --------- --------- --------- --------- --------- ---------
Gross profit.............................. 17,326 27,493 26,372 59,619 85,814 44,770 41,442
Selling, general and administrative......... 9,108 11,340 13,144 28,117 46,605 23,808 22,062
Amortization................................ 3,843 3,721 3,573 6,478 10,174 5,133 4,248
Gain on sale of leased freight cars......... -- -- -- -- (1,354) -- (587)
--------- --------- --------- --------- --------- --------- ---------
Operating income.......................... 4,375 12,432 9,655 25,024 30,389 15,829 15,719
Interest expense, net....................... 5,360 2,968 266 14,702 35,836 17,586 17,381
Provision (credit) for income taxes......... (254) 4,083 3,692 4,737 (76) 195 743
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before extraordinary
items..................................... (731) 5,381 5,697 5,585 (5,371) (1,952) (2,405)
Extraordinary items, net of taxes(c)........ -- (2,918) -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)......................... $ (731) $ 2,463 $ 5,697 $ 5,585 $ (5,371) $ (1,952) $ (2,405)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before extraordinary items per
share..................................... $ (0.13) $ 0.66 $ 0.58 $ 0.57 $ (0.55) $ (0.20) $ (0.25)
Extraordinary items per share(c)............ -- (0.36) -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) per share................. $ (0.13) $ 0.30 $ 0.58 $ 0.57 $ (0.55) $ (0.20) $ (0.25)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
OPERATING AND OTHER DATA:
EBITDA(d)................................... $ 10,256 $ 18,652 $ 16,041 $ 39,548 $ 56,306 $ 29,074 $ 28,385
EBITDA margin(e)............................ 5.02% 5.67% 3.42% 5.91% 10.0% 10.2% 10.4%
Depreciation and amortization............... $ 5,881 $ 6,220 $ 6,386 $ 15,891 $ 29,270 $ 14,820 $ 13,760
Cash interest expense(f).................... 5,243 2,932 259 7,718 31,487 14,771 16,465
Capital expenditures........................ 2,275 3,865 7,295 14,954 9,919 4,914 2,405
Ratio of EBITDA to cash interest
expense................................... 1.96x 6.36x 61.93x 5.30x 1.89x 2.07x 1.79x
Ratio of earnings to fixed charges(g)....... (g) 4.19x 36.30x 1.66x (g) (g) (g)
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents................... $ 675 $ 7,136 $ 1,754 $ 11,639 $ 24,535 $ 17,105 $ 17,311
Working capital (deficit)................... (2,313) 15,600 24,967 24,697 27,219 30,735 24,910
Property, plant, equipment and leasing
business assets, net...................... 27,472 28,838 38,162 164,425 147,114 161,699 158,452
Total assets................................ 95,570 107,966 143,354 578,825 555,283 575,514 570,640
Long-term debt, including current
maturities.................................. 34,847 -- 7,600 329,786 304,175 326,709 311,928
Shareholders' equity........................ 16,300 57,235 63,234 68,874 63,537 66,921 61,132
</TABLE>
See Notes to Selected Consolidated Financial Data.
35
<PAGE>
NOTES TO SELECTED CONSOLIDATED FINANCIAL DATA
(a) On July 23, 1993, the Company consummated an initial public offering whereby
the Company issued 3.0 million shares of its Common Stock.
(b) On January 13, 1995, the Company acquired Bostrom for a total purchase price
of approximately $32.6 million financed by borrowings under the Company's
previous borrowing facility. On August 23, 1995, the Company completed the
acquisition of TCI for a total purchase price of approximately $266.1
million financed by borrowings under the Senior Bank Facilities and the
proceeds of the issuance of the Original Notes. The acquisitions were
accounted for as a purchase, and the operating results were included in the
Company's operations from the date of acquisition. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and Note 3 to the Company's Consolidated Financial Statements contained
elsewhere in this Prospectus.
(c) The Company reported an extraordinary loss in connection with an early
extinguishment of its long-term debt which was retired with a portion of the
proceeds from its initial public offering in July 1993.
(d) EBITDA is defined as earnings before interest, taxes, depreciation,
amortization and extraordinary items and is presented because it is commonly
used by certain investors and analysts to analyze and compare on the basis
of operating performance and to determine a company's ability to service and
incur debt. EBITDA should not be considered in isolation from or as a
substitute for net income, cash flows from operating activities or other
consolidated income or cash flow statement data prepared in accordance with
generally accepted accounting principles or as a measure of profitability or
liquidity.
(e) EBITDA margin represents EBITDA as a percentage of total revenue. EBITDA
margin is presented because such data is used by certain investors and
analysts to analyze and compare on the basis of operating performance.
EBITDA margin should not be considered in isolation from or as a substitute
for net income, operating income or other consolidated income or cash flow
statement data prepared in accordance with generally accepted accounting
principles or as a measure of profitability or liquidity.
(f) Cash interest expense is defined as interest expense exclusive of
amortization of deferred financing costs.
(g) The ratio of earnings to fixed charges is expressed as the ratio of fixed
charges plus pretax earnings to fixed charges. Fixed charges include
interest on borrowings, amortization of deferred financing costs and the
interest portion of rent expense. Earnings were insufficient to cover fixed
charges for the years ended December 31, 1992 and 1996 by $1.0 million and
$5.5 million, respectively, and for the six month periods ended June 30,
1996 and 1997 by $1.8 million and $1.7 million, respectively. Adjusted to
give effect to the Old Notes Offering and the application of the estimated
net proceeds therefrom, the Company's earnings would have been insufficient
to cover the fixed charges in the amount of $7.0 million and $2.5 million
for the year ended December 31, 1996 and for the six months ended June 30,
1997, respectively.
36
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company conducts its business through three operating groups within the
transportation industry: truck components and assemblies operations, a leading
manufacturer of wheel-end components, seating, steerable drive axles and gear
boxes for the heavy-duty truck industry; iron castings operations, a major
producer of complex iron castings for a wide range of industries; and freight
car operations, a leading manufacturer and lessor of new and rebuilt freight
cars used for hauling coal, intermodal containers, highway trailers and
agricultural and mining products. During 1996, the Company's truck components
and assemblies, iron castings and freight car operations generated net sales of
$237.0 million, $125.1 million and $197.8 million, respectively. During the six
months ended June 30, 1997, the Company's truck components and assemblies, iron
castings and freight car operations generated net sales of $141.4 million, $69.0
million and $63.5 million, respectively. The Company reported net losses in the
year ended December 31, 1996 and the six months ended June 30, 1997. The
significant decline in demand experienced in 1996 and early 1997 by JAC produced
significant operating losses that, coupled with the Company's significant debt
service requirements, more than offset operating income generated by its truck
components and assemblies and iron castings operations. Although demand for
freight cars has improved slightly, the market remains subject to intense
pricing competitiveness in a freight car market characterized by depressed
demand and production overcapacity and, as a result, the Company expects to
report a net loss for the year ended December 31, 1997. Given the cyclicality of
the freight car and heavy-duty trucking industries and other market factors,
there can be no assurance that the Company will achieve or sustain profitability
in the future.
The Company completed the acquisition of TCI on August 23, 1995 and Bostrom
on January 13, 1995. Both acquisitions were accounted for under the purchase
method of accounting and, accordingly, their operating results were included in
the Company's reported results from their respective acquisition dates. Such
results have a significant impact on the comparative discussions below.
Additionally, the Company, through its wholly owned subsidiary, FCS, completed
the purchase of the Danville, Illinois facility which began operations in
October 1995. The Company formed its leasing subsidiary, JAIX Leasing, in
January 1995 and currently leases 1,526 freight cars to various lessees under
operating leases. Of these freight cars, 595 are owned by JAIX Leasing,
representing an investment of $37.7 million, and the remainder are leased.
The Company's sales are affected to a significant degree by the North
American Class 8 truck and freight car markets. Both the North American Class 8
truck and freight car markets are subject to significant fluctuations due to
economic conditions, changes in the alternative methods of transportation and
other factors. There can be no assurance that fluctuations in such markets will
not have a material adverse effect on the results of operations or financial
condition of the Company. Sales of the freight car operations are driven
principally by the number and type of new and rebuilt freight cars delivered in
any given period. Due to the large size of customer orders, the specific time
frame for delivery of freight cars ordered and variations in the mix of cars
ordered, the number and type of cars produced in any given quarter may fluctuate
greatly. As a result, the Company's revenues and results of operation and cash
flows from operations may fluctuate as well.
The Company's net income for 1997 is expected to include the effect of a
pre-tax non-cash extraordinary charge in the amount of $3.4 million ($2.0
million net of tax or $0.21 per share) that will be incurred as a result of the
accelerated write-off of unamortized debt issuance costs related to the Company
prepaying a portion of its borrowings under the Senior Bank Facilities. The
charge will be expensed in the period in which the Old Notes Offering was
consummated, the quarter ending September 30, 1997.
37
<PAGE>
The following table sets forth for the periods indicated certain historical
financial data of the Company expressed as a percentage of total revenue.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------- --------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Total revenue............................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Gross margin.............................................. 5.6 8.9 15.3 15.7 15.1
Selling, general and administrative....................... 2.8 4.2 8.3 8.3 8.1
Amortization.............................................. 0.8 1.0 1.8 1.8 1.6
Gain on sale of lease freight cars........................ -- -- 0.2 -- 0.2
--------- --------- --------- --------- ---------
Operating income........................................ 2.1% 3.7% 5.4% 5.5% 5.7%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
TOTAL REVENUE. Total revenue for the six months ended June 30, 1997
decreased 4.1% to $274.0 million from $285.6 million in 1996. The total revenue
decrease of $11.6 million was due to the decrease in freight car shipments and a
reduction in shipments of freight car kits and parts. The Company shipped 1,575
new and rebuilt freight cars in the first half of 1997, including 325 cars sold
to JAIX Leasing (which have been eliminated from consolidated sales), compared
to 1,632 new and rebuilt cars shipped in the first half of 1996. This decrease
in production coupled with a shift in product mix to cars with lower selling
values and weaker overall pricing resulted in a 36.2% reduction in freight car
revenue of $34.4 million, which has been partially offset by increased revenues
generated by the truck component and iron casting operations. Revenues for the
six months ended June 30, 1997 at truck component operations increased $17.2
million (13.9%), while iron casting revenues increased $4.5 million (7.0%) over
the same period in 1996. As of June 30, 1997, the Company's backlog of new and
rebuilt freight cars was 1,949 as compared to 1,376 new and rebuilt freight cars
on June 30, 1996.
COST OF SALES--MANUFACTURING AND GROSS PROFITS. Cost of
sales--manufacturing for the six months ended June 30, 1997 as a percentage of
manufacturing sales (excluding leasing operations) was 85.3%, compared to 84.7%
for the same period in 1996. Related gross margins were 14.7% and 15.3%,
respectively. The decrease in gross profits of $3.4 million resulted primarily
from lower gross profits in the freight car business due to reduced revenues and
lower gross margins as a percentage of sales.
SELLING, GENERAL, ADMINISTRATIVE AND AMORTIZATION. Selling, general, and
administrative expenses as a percentage of total revenue was 8.1% and 8.3% for
the six months ended 1997 and 1996, respectively. Actual selling, general and
administrative expenses declined $1.7 million from 1996 levels as a result of
cost reduction measures undertaken at the Company's freight car operations.
Amortization expense as a percentage of total revenue was 1.6% and 1.8% for the
six months ended June 30, 1997 and 1996, respectively.
OPERATING INCOME. Operating income remained relatively constant for the six
months ended June 30, 1997 compared to the same period in 1996, even though
total revenues declined by $11.6 million and gross profit declined by $3.3
million. Operating income was $15.7 million for the first six months of 1997,
compared to $15.8 million in the same period of 1996. The Company maintained its
operating income by a reduction in selling, general and administrative expenses
by $1.7 million, a reduction in amortization expenses of $0.9 million and the
gain on sale of leased freight cars of $0.6 million.
At June 30, 1997, the Company had 1,526 freight cars on lease and the
leasing business generated $3.1 million in revenue and $1.6 million in operating
income before a $0.6 million gain on the sale of
38
<PAGE>
leased freight cars for the first six months of 1997 compared with $2.0 million
revenue and $1.3 million operating income in the comparable prior period.
OTHER. Interest expense, net, was $17.4 million for the first six months of
1997 compared to $17.6 million in the same period of 1996. Interest expense in
1997 and 1996 resulted from borrowings under the Senior Bank Facilities and the
issuance of the Original Notes to finance the acquisition of TCI and the
refinancing of its debt in August 1995, as well as from the JAIX Leasing loans
which were used to finance the addition of freight cars to the lease fleet.
Net loss and loss per share for the first six months of 1997 were $2.4
million and $0.25, respectively, compared to net loss and loss per share of $2.0
million and $0.20, respectively for the same period of 1996.
YEARS ENDED DECEMBER 31, 1996 AND 1995
TOTAL REVENUE. Total revenue in 1996 decreased 16.2% to $560.0 million from
$668.6 million in 1995. The total revenue decrease of $108.6 million was
primarily due to the decrease in freight car sales of $294.7 million (3,470 new
and rebuilt cars in 1996 vs 9,157 new and rebuilt cars in 1995) and a $9.6
million decrease in truck-related sales volume at Bostrom. The decreases were
offset in part by the inclusion of TCI for all of 1996 versus inclusion for the
partial year of 1995, an increase of $195.7 million. As of December 31, 1996,
the Company's backlog of new and rebuilt freight cars was 774, compared with
1,204 new and rebuilt freight cars at December 31, 1995.
COST OF SALES--MANUFACTURING AND GROSS PROFIT. Cost of sales--manufacturing
for 1996 as a percent of manufacturing sales was 85.0%, compared with 91.3% in
1995. Related gross profits were 15.0% and 8.7%, respectively. The improvement
in gross profit resulted primarily from the acquisition of TCI in August 1995.
TCI has historically generated higher gross profits than the freight car
business. Partially mitigating this increase was the decrease of gross profit at
JAC. JAC's gross profit percentage for 1996 was down from the prior year
approximately 1 percentage point, and the aggregate dollar gross profit was down
due to the significant decrease in freight car revenues mentioned above.
SELLING, GENERAL, ADMINISTRATIVE AND AMORTIZATION EXPENSES. Selling,
general and administrative expense as a percentage of total revenue was 8.3% and
4.2% in 1996 and 1995, respectively. The increase in selling, general and
administrative expense is related to the acquisition and the integration of TCI
which has higher selling, general and administrative levels as a percent of
revenue compared to the freight car business, and to increased MIS and product
development costs at the freight car operations. Amortization expense as a
percentage of total revenue was 1.8% and 1.0% for the years ended 1996 and 1995,
respectively. The increase in amortization expense as a percentage of total
revenue is related to certain intangible assets of TCI and the excess cost over
net assets acquired in the acquisition.
OPERATING INCOME. Operating income was $30.4 million in 1996, compared with
$25.0 million in 1995. The increase was primarily due to including the operating
income of TCI for all of 1996 versus inclusion for the partial year of 1995 more
than offsetting the drop in operating income at JAC.
At December 31, 1996, the Company had 1,067 freight cars on lease and the
leasing business generated $4.5 million in revenue and $2.4 million in operating
income before a $1.4 million gain on the sale of leased freight cars for the
year 1996 compared with $2.6 million revenue and $1.9 million operating income
in the prior year.
OTHER. Interest expense, net was $35.8 million in 1996 compared with $14.7
million in 1995. Higher interest expense in 1996 resulted from borrowings under
the Senior Bank Facilities and the issuance of the Original Notes to finance the
acquisition of TCI, which were outstanding for all of 1996 versus 4 months in
1995. In addition, JAIX Leasing had increased debt levels to finance the
additional freight cars for the lease fleet.
39
<PAGE>
Net loss and loss per share for 1996 were $5.4 million and $0.55,
respectively, compared to net income and earnings per share of $5.6 million and
$0.57, respectively, for 1995.
YEARS ENDED DECEMBER 31, 1995 AND 1994
TOTAL REVENUE. Total revenue in 1995 increased 42.7% to $668.6 million from
$468.5 million in 1994. The total revenue increase of $200.1 million was
primarily related to the acquisition of TCI in August 1995 (58% of the
increase), and the acquisition of Bostrom in January 1995 (30% of the increase),
while revenue from JAC and FCS accounted for 12% of the increase, collectively.
This increase resulted from the start-up of operations of FCS and a change in
product mix at JAC to cars with higher selling values, offsetting lower
production (9,157 new and rebuilt freight cars in 1995 versus 10,707 new freight
cars in 1994). As of December 31, 1995, the Company's backlog of new freight
cars was 1,204 as compared with 7,180 on December 31, 1994.
At December 31, 1995 the Company had 600 freight cars on lease, and the
leasing business generated $2.6 million in revenue and $1.9 million in operating
income for the year ended 1995 compared with $0.5 million in revenue and $0.3
million in operating income in the prior year.
COST OF SALES--MANUFACTURING AND GROSS PROFIT. Cost of sales--manufacturing
for 1995 as a percent of manufacturing sales was 91.3%, compared to 94.4% in
1994. Related gross profits were 8.7% and 5.6%, respectively. The improvement in
gross profit resulted primarily from the acquisitions of Bostrom in January 1995
and TCI in August 1995, which historically have generated higher gross profits
than the freight car business. Gross profit percentages were slightly lower at
JAC in 1995 compared with 1994.
SELLING, GENERAL, ADMINISTRATIVE AND AMORTIZATION EXPENSES. Selling,
general and administrative expense as a percentage of total revenue was 4.2% and
2.8% in 1995 and 1994, respectively. The increase in selling, general, and
administrative expense is related to the acquisition and the integration of
Bostrom and TCI, which have higher selling, general and administrative levels as
a percent of revenue compared to JAC. The increase in amortization expense as a
percentage of total revenue is related to certain intangible assets of TCI and
Bostrom and the excess cost over net assets acquired in those acquisitions.
OPERATING INCOME. Operating income was $25.0 million in 1995, compared with
$9.7 million in 1994. The increase was primarily due to the acquisition of TCI
in August 1995, while operating income at JAC in 1995 remained approximately the
same as in 1994.
OTHER. Interest expense, net was $14.7 million in 1995 compared with $0.3
million in 1994. Interest expense in 1995 resulted from increased borrowings to
finance the acquisition of Bostrom in January 1995, from increased borrowings
under the Senior Bank Facilities and the issuance of the Original Notes to
finance the acquisition of TCI and the refinancing of its debt in August 1995,
as well as from JAIX Leasing debt which was used to finance the addition of
freight cars for the lease fleet.
Net income and earnings per share for 1995 were $5.6 million and $0.57,
respectively, compared with net income and earnings per share of $5.7 million
and $0.58, respectively, for 1994.
40
<PAGE>
QUARTERLY RESULTS
The following table sets forth summary unaudited quarterly financial
information for the last two quarters in 1995, each quarter in 1996 and the
first two quarters of 1997. In the opinion of management, such information has
been prepared on the same basis as the financial statements appearing elsewhere
in this Prospectus and reflects all necessary adjustments (consisting of only
normal recurring adjustments) for a fair presentation of such unaudited
quarterly results when read in conjunction with the financial statements and the
related notes thereto. The operating results for any quarter are not necessarily
indicative of results for any future period and there can be no assurance that
any trends reflected in such results will continue in the future.
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
----------- --------- ----------- --------- ----------- --------- ----------- ---------
<CAPTION>
1995 1996 1997
---------------------- ---------------------------------------------- ----------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenue..................... $ 166,881 $ 156,551 $ 152,339 $ 133,290 $ 140,845 $ 133,498 $ 115,722 $ 158,240
Gross profit...................... 14,077 20,269 23,211 21,482 20,533 20,588 19,015 22,426
Operating income.................. 4,972 7,834 8,438 7,391 7,124 7,437 6,424 9,295
Net income (loss)................. 198 (991) (728) (1,224) (1,563) (1,856) (1,892) (514)
Net income (loss) per share....... $ 0.02 $ (0.10) $ (0.07) $ (0.13) $ (0.16) $ (0.19) $ (0.19) $ (0.05)
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended June 30, 1997, the Company provided net cash from
operations of $5.9 million compared with providing net cash of $13.7 million for
the first six months of 1996. Due to increased business activities, accounts
receivable and inventories increased by $12.1 million and $4.8 million,
respectively, partially offset by increases in accounts payable of $8.7 million.
The Company used $20.6 million of cash in investing activities for the six
months ended June 30, 1997, which included net investments in the leasing fleet
of $18.2 million and capital expenditures of $2.4 million. Cash provided by
financing activities was $7.5 million for the first six months of 1997, which
included an increase in the JAIX Leasing debt of $16.2 million, to fund the
leasing fleet additions, offset in part by term loan principal payments of $8.4
million. The Company anticipates that capital expenditures for the balance of
1997 will be approximately $7.6 million.
For the year ended December 31, 1996, the Company provided cash from
operations of $36.4 million compared with $52.1 million for 1995. The Company
generated $3.5 million of net cash from investing activities during 1996
comprised principally of $18.1 million from the sale of leased freight cars
offset by $9.9 million used for capital expenditures, and $5.4 million used for
leasing business asset additions. Cash used for financing activities was $27.0
million for 1996 primarily related to scheduled payments on term debt of $16.8
million and net decreases on the JAIX Leasing debt of $8.8 million.
The Company's freight car sales are characterized by large order sizes,
specific customer delivery schedules, and related vendor receipts and payment
schedules, all of which can combine to create significant fluctuations in
working capital accounts when comparing end of period balances. Such
fluctuations tend to be of short duration, and the Company considers this to be
a normal part of its operating cycle which does not significantly impact its
financial flexibility and liquidity.
On August 23, 1995, in conjunction with the acquisition of TCI and the
refinancing of the existing debt of TCI and the Company, the Company and the
Guarantor Subsidiaries entered into the $300 million Senior Bank Facilities and
issued $100 million of the Original Notes. See Notes 6 and 7 of the Consolidated
Financial Statements for a description of the Senior Bank Facilities and the
Original Notes.
As of June 30, 1997, there was $175.0 million of term loans outstanding
under the Senior Bank Facilities, $100 million of the Original Notes
outstanding, and no borrowings under the $100 million revolving credit line
under the Senior Bank Facilities. Availability under the Revolving Loans, after
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consideration of outstanding letters of credit of $17.1 million, was $50.5
million after giving effect to the applicable borrowing base.
Interest payments on the Original Notes and interest and principal payments
under the Senior Bank Facilities represent significant cash requirements for the
Company. The Original Notes require semiannual interest payments of
approximately $5.9 million. Borrowings under the Senior Bank Facilities bear
interest at floating rates and require interest payments on varying dates
depending upon the interest rate option selected by the Company. Based on
current interest rates the Company expects that it will incur additional
interest expense of approximately $1.6 million annually as a result of
refinancing a portion of the outstanding term loans with the net proceeds of the
Old Notes Offering. The term loans under the Senior Bank Facilities require
periodic principal payments through their maturities. See Note 6 of the
Consolidated Financial Statements. In connection with the Old Notes Offering,
and as a result of each holder of the Tranche B Term Loans electing not to be
prepaid, the Company's principal payments for the remainder of 1997 and for
1998, 1999, 2000, 2001, 2002 and 2003 will be $1.7 million, $3.3 million, $3.3
million, $20.0 million, $23.3 million, $26.7 million and $16.7 million,
respectively.
In connection with the Old Notes Offering, the Company amended the Credit
Agreement to reset the financial covenants for the remaining term of the Credit
Agreement and to reduce the Revolving Facility from $100 million to $75 million.
The banks also have consented to the issuance of the Notes.
The Company formed a leasing business in 1994 to provide operating lease
financing for freight cars. This leasing division was formed into a wholly owned
subsidiary, JAIX Leasing, in January 1995 and currently leases 1,526 freight
cars to various lessees under operating leases. Of these freight cars, 595 are
owned by JAIX Leasing, representing an investment of $37.7 million, and the
remainder are leased. JAIX Leasing, which is not a Guarantor Subsidiary,
finances its freight car leasing activities through its own term loan facility.
This term loan facility was entered into in June 1996 by JAIX Leasing to finance
its freight car leasing activities and repay its existing credit facility. This
facility is secured by underlying leases and assets of JAIX Leasing and the
borrowings thereunder are non-recourse against the Company. See Note 3 of the
Condensed Consolidated Financial Statements for the six months ended June 30,
1997 for a description of this facility. As of June 30, 1997, there was $29.8
million outstanding under JAIX Leasing's term loan facility. In June 1997, JAIX
Leasing entered into an operating lease facility whereby JAIX Leasing will sell
freight cars to a lessor and then lease back the cars (on a non-recourse basis
to the Company) for periods of up to two years. JAIX Leasing will then lease the
freight cars to various sub-lessees.
The Company believes that the cash flow generated from its operations,
together with amounts available under the Revolving Loans, should be sufficient
to fund its debt service requirements, working capital needs, anticipated
capital expenditures and other operating expenses (including expenditures
required by applicable environmental laws and regulations). The Company's future
operating performance and ability to service or refinance the Original Notes and
the Notes and to extend or refinance the Senior Bank Facilities will be subject
to future economic conditions and to financial, business and other factors, many
of which are beyond the Company's control.
As of June 30, 1997, the Company's balance sheet included cash of $17.3
million.
ENVIRONMENTAL AND LEGAL MATTERS
The Company is subject to comprehensive and frequently changing federal,
state and local environmental laws and regulations, and will incur additional
capital and operating costs in the future to comply with currently existing laws
and regulations, new regulatory requirements arising from recently enacted
statutes and possible new statutory enactments. In addition to environmental
laws that regulate the Company's subsidiaries' ongoing operations, the
subsidiaries also are subject to environmental remediation liability. Under
CERCLA and analogous state laws, the Company's subsidiaries may be liable as a
result of the release or threatened release of hazardous substances into the
environment. The
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Company's subsidiaries are currently involved in several matters relating to the
investigation and/or remediation of locations where the subsidiaries had
arranged for the disposal of foundry and other wastes.
Such matters include five situations in which the Company, through its TCI
subsidiaries and their predecessors, have been named or are believed to be PRPs
in the contamination of the sites. Additionally, environmental remediation may
be required at two of the TCI facilities at which soil and ground water
contamination has been identified. With respect to claims involving Gunite, TCI
and Gunite in September 1997 entered into the Settlement with a prior owner of
Gunite, pursuant to which each of TCI and Gunite and the prior owner withdrew
their claims against the other. As a result of the Settlement, TCI and Gunite
will not be responsible for liabilities and costs related to certain alleged
contamination at Gunite's facilities and at certain off-site properties to the
extent arising out of operations of Gunite prior to the acquisition of Gunite by
TCI in September 1987. The Company believes that it has valid claims for
contractual indemnification against Brillion's prior owners for certain of the
investigatory and remedial costs at the Brillion sites. The Company has been
notified, however, by the Brillion contractual indemnitors that they will not
honor Brillion's claims for indemnification. Accordingly, the Company is
litigating indemnification claims against Brillion's prior owners (Beatrice
Company et al.) and is appealing an adverse lower court ruling against Brillion
and TCI. There is no assurance that even if successful in any such claims, any
judgments against the indemnitors will ultimately be recoverable. In addition,
the Company believes it is likely that it has incurred some liability at various
sites for activities and disposal following acquisition which would not in any
event be covered by indemnification by prior owners.
As of June 30, 1997, the Company had a $26.1 million environmental reserve.
As a result of the Settlement, the Company's environmental reserve was decreased
in September 1997 by $14.3 million to $11.8 million. This non-cash reserve is
based on current cost estimates and does not reduce estimated expenditures to
net present value. The Company currently anticipates spending approximately $0.4
million per year for the current year and the next two years and approximately
$0.5 million per year in the years 2000 and 2001 (reduced as a result of the
Settlement from $0.5 million per year for the current year and the next two
years and approximately $1 million per year in the years 2000 and 2001) for
monitoring the various environmental sites associated with the environmental
reserve, including attorney and consultant costs for strategic planning and
negotiations with regulators and other PRPs, and payment of remedial
investigation costs. The Company expects to fund such expenditures with the cash
flow generated from its operations and amounts available under its Revolving
Facility. These sites are generally in the early investigatory stages of the
remediation process and thus it is anticipated that significant cash payments
for remediation will not be incurred for at least several years. After the
evaluation and investigation period, the investigation and remediation costs
will likely increase because the actual remediation of the various environmental
sites associated with the environmental reserve will likely be under way. In
addition, it is possible that the timing of any necessary expenditures could be
accelerated. Any cash expenditures required by the Company or its subsidiaries
to comply with applicable environmental laws and/or to pay for any remediation
efforts will not be reduced or otherwise affected by the existence of the
environmental reserve. Due to the early stage of investigation of many of the
sites and potential remediations referred to above, there are significant
uncertainties as to waste quantities involved, the extent and timing of the
remediation which will be required, the range of acceptable solutions, costs of
remediation and the number of PRPs contributing to such costs. Based on all of
the information presently available to it, the Company believes that the
environmental reserve will be adequate to cover its future costs related to the
sites associated with the environmental reserve, and that any additional costs
will not have a material adverse effect on the financial condition or results of
operations of the Company. However, the discovery of additional sites, the
modification of existing laws or regulations, the imposition of joint and
several liability under CERCLA or the uncertainties referred to above could
result in such a material adverse effect.
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NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share" was issued in February 1997 and will be adopted by the Company effective
January 1, 1998. This new pronouncement establishes revised methods for
computing and reporting earnings per share. Adoption of this standard will not
materially impact previously reported earnings per share, including the per
share amount reported for the six months ended June 30, 1997.
SFAS No. 130, "Reporting Comprehensive Income" was issued in July 1997 and
will be adopted by the Company effective January 1, 1998. This new pronouncement
establishes standards for reporting and display of comprehensive income and its
components. Adoption of this standard will not impact the Company's financial
position or results of operations.
EFFECTS OF INFLATION
General price inflation has not had a material impact on the Company's
results of operations.
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BUSINESS
The Company, through its subsidiaries, designs and manufactures: components
and assemblies primarily for heavy- and medium-duty trucks; high quality,
complex iron castings for transportation-related and a variety of other markets;
and railroad freight cars. The Company's principal business operations are:
TRUCK COMPONENTS AND ASSEMBLIES. Gunite is the leading North American
supplier of wheel-end systems and components, such as brake drums, disc wheel
hubs, spoke wheels, rotors and slack adjusters to OEMs in the heavy-duty truck
industry. The Company believes Gunite's products are offered as standard
equipment on more heavy-duty truck manufacturers' vehicles than any of its
competitors' products. Management also believes Gunite's fully integrated
operations, which combine advanced product design, casting and machining
capabilities, provide it with significant competitive advantages, particularly
in the development of new, value-added products. Gunite is a market leader in
the production of wheel-end components for ABS, which have been mandated for all
new trucks beginning in March 1997 and all new trailers beginning in March 1998.
Gunite also has developed its new lightweight brake drum, Gunite-Lite-TM-, for
applications in the heavy-duty truck market where certain customers value
strong, lighter weight components. In addition to serving OEMs, Gunite has
significant sales to the less cyclical, higher margin aftermarket which, as a
percentage of Gunite's net sales, has increased since the acquisition of Gunite
by the Company in 1995 from approximately 26% in 1995 to approximately 35% for
the six months ended June 30, 1997. Further, Gunite's commitment to quality,
customer satisfaction and continuous improvement is evidenced by its ISO 9000
and QS 9000 certifications.
The Company's other truck components and assemblies operations include
Bostrom and Fabco. Bostrom is a leading manufacturer of air suspension and
static seating systems for the heavy- and medium-duty truck industry, supplying
almost 50% of the heavy-duty truck OEM market. Bostrom also has significant
sales to the aftermarket, which represent approximately 20% of Bostrom's net
sales. Bostrom's commitment to quality, customer satisfaction and continuous
improvement is evidenced by its ISO 9000 certification. Fabco is a leading
supplier of steerable drive axles, gear boxes and related parts for heavy on/off
highway trucks and utility vehicles.
The Company's truck components and assemblies subsidiaries reported net
sales of $275.8 million and $237.0 million in 1995 (including the period in 1995
prior to the acquisition of TCI) and 1996, respectively; and $124.2 million and
$141.4 million in the six months ended June 30, 1996 and 1997, respectively.
IRON CASTINGS. Brillion operates one of the nation's largest and most
versatile iron foundries and is focused on providing high quality, complex
castings to customers in a wide range of industries, including the truck,
industrial machinery, automotive and construction equipment markets. A leader in
ductile iron technology, Brillion specializes in the production of lightweight,
intricate thin wall castings. In addition to providing an important source of
high quality castings for Gunite (12.6% of Brillion's net foundry sales in
1996), Brillion has long-standing relationships with many of its over 225
customers. Generally, once a foundry begins production of a product, it will
continue to manufacture the item for the product's life cycle. Brillion also
manufactures and sells a line of farm equipment products. In 1996, over 95% of
Brillion's net foundry sales were from established customers. Brillion also
benefits from numerous quality certifications, including ISO 9000 and QS 9000,
and from achieving preferred supplier status with many of its customers.
Excluding intercompany sales, the Company's iron casting operations reported
net sales of $132.1 million and $125.1 million in 1995 (including the period in
1995 prior to the acquisition of TCI) and 1996, respectively; and $64.5 million
and $69.0 million in the six months ended June 30, 1996 and 1997, respectively.
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RAILROAD FREIGHT CARS. The Company, through its subsidiary, JAC, is a
leading manufacturer of railroad freight cars used principally for hauling coal.
JAC also offers aluminum covered hoppers for the grain hauling market and
intermodal freight cars, which it has manufactured in the past and has the
capability to produce in response to future market demand. JAC is the largest
North American manufacturer of coal freight cars. JAC is recognized for its
expertise in the development and manufacture of aluminum freight cars that
increase load capacity and consequently reduce carrier costs. JAC's BethGon
Coalporter-Registered Trademark- had an estimated average market share of 81% of
the aluminum coal gondola market during the five-year period from 1992 to 1996.
In addition to manufacturing its standard BethGon
Coalporter-Registered Trademark-, in 1996 JAC introduced a new lighter weight
BethGon which weighs approximately 3,500 pounds less than a standard BethGon,
thereby enabling the car to carry significantly more coal per trip. JAC also
successfully introduced in 1996 an aluminum rapid discharge coal car, the
AutoFlood II-TM-, to compete in the aluminum bottom dump segment of the coal
freight car market. The AutoFlood II-TM- provides 18 tons more capacity per load
than conventional steel automatic discharge freight cars. These products have
been well received in the marketplace and the Company believes that JAC should
be able to further penetrate the market for aluminum coal freight cars.
As part of its full service business strategy for the freight car market,
the Company formed two new subsidiaries in 1994 and 1995, JAIX Leasing and FCS.
JAIX Leasing was formed to provide operating lease alternatives for its
customers. FCS was formed to participate in the freight car rebuilding and
repair market as well as to provide new freight car manufacturing capability for
specialty markets.
The Company's freight car operations reported manufacturing net sales of
$490.4 million and $193.3 million in 1995 and 1996, respectively, and $94.9
million and $60.6 million in the six months ended June 30, 1996 and 1997,
respectively. JAIX Leasing reported leasing revenues of $2.6 million and $4.5
million in 1995 and 1996, respectively, and $2.0 million and $2.9 million in the
six months ended June 30, 1996 and 1997, respectively.
STRATEGY
The Company's strategy is to strengthen its financial position by reducing
its indebtedness, while continuing to build a diversified transportation
equipment manufacturing company with leading market positions in the markets it
serves. The acquisitions of Gunite, Brillion, Bostrom and Fabco have enabled the
Company to diversify its revenue base, with truck components and assemblies,
iron castings and freight car operations contributing approximately 42.3%, 22.3%
and 35.4% of the Company's 1996 revenues, respectively, and 51.6%, 25.2% and
23.2% of the Company's revenues for the six months ended June 30, 1997. The
primary elements of the Company's strategy are to: (i) expand its business by
capitalizing on its leading market positions; (ii) develop new products and
extend its product lines; (iii) aggressively pursue cost reductions and increase
operating efficiencies; and (iv) expand its aftermarket presence. Despite
significant softness in the freight car markets served by JAC since late 1995,
the Company believes that it has made significant progress toward implementing
its strategy.
MAINTAIN AND EXPAND LEADING MARKET POSITIONS. Management believes that the
Company has enhanced its competitive position in many of its markets. Gunite and
Bostrom have expanded their relationships with OEM customers by continuing to
provide high-quality products and reliable customer service, which should result
in additional business opportunities, as well as expanded their presence in the
aftermarket by capitalizing on the market leading positions of their products.
For example, Gunite's wheel-end products recently were selected as the standard
configuration by an additional leading North American heavy-duty truck OEM. To
expand its market position, Brillion has maintained its long-term relationships
as well as built new relationships by providing reliable customer service,
drawing on its technical expertise to reduce costs to customers and producing
highly complex castings. The Company's freight car operations enhanced its
leadership position in aluminum freight car design and manufacturing by recently
introducing two innovative coal cars: a lighter weight BethGon
Coalporter-Registered Trademark- and a new lightweight aluminum rapid discharge
hopper car, the AutoFlood II-TM-. Management of the
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Company believes that customer satisfaction is the key to maintaining and
expanding the Company's presence in the markets it serves, which requires high
quality manufacturing, timely product delivery and responsive customer service.
DEVELOP NEW PRODUCTS AND EXTEND PRODUCT LINES. The Company continually
invests in developing new products and extending its product lines, many times
at the suggestion of, or in conjunction with, an existing or a potential
customer. Gunite has successfully introduced its lightweight brake drum, Gunite-
Lite-TM-, which has generated substantial interest and orders in the
marketplace. In addition, Bostrom is working with its OEM customers to develop a
new generation of seating systems for heavy-duty trucks. The Company's freight
car operations continue to introduce new aluminum coal car products and FCS was
established to offer customers rebuilding and repair services as well as
specialty freight car manufacturing.
PURSUE COST REDUCTIONS AND INCREASE OPERATING EFFICIENCY. The Company has
improved operating efficiencies in many of its businesses. Gunite, Brillion and
Bostrom have each increased profitability and capacity with little capital
investment through improved operating efficiency. Gunite and Brillion strive to
improve their operations by continually refining their manufacturing processes.
Bostrom recently undertook a program to increase profitability by substantially
increasing productivity, reducing production costs and improving customer
service. At the same time, JAC has reduced its operating costs and increased its
operational flexibility to enhance its ability to operate profitably even at
reduced volume levels. Examples of production efficiency initiatives undertaken
at JAC in 1996 include reducing the number of freight car erection lines,
reducing change-over times and inventories and implementing cellular
manufacturing concepts. Management of the Company is committed to continuous
improvement in operating efficiency to enhance the Company's ability to achieve
significant profitability at higher volume levels and increase its ability to
operate profitably at lower volume levels.
EXPAND AFTERMARKET PRESENCE. The Company has significantly expanded its
presence in the less cyclical, higher margin aftermarket. A substantial
percentage of both Gunite's and Bostrom's revenues are attributable to
aftermarket sales. Gunite has increased its market penetration in the
aftermarket and as a result has increased the percentage of its revenues
attributable to aftermarket sales from 26% for the year ended December 31, 1995
to 35% for the six months ended June 30, 1997. The Company has also expanded its
presence in rebuilding and repairing freight cars through the start-up of FCS in
1995. At FCS, the Company successfully rehabilitated a closed facility and
brought on-line a profitable provider of repair and rebuilding services and a
manufacturer of specialty freight cars for a minimum capital investment.
Further, JAC has and will continue to expand its presence in the high margin
service parts businesses related to its products. Notwithstanding the Company's
progress to date, the Company intends to continue to increase its presence in
the aftermarket and the service parts market.
INDUSTRY OVERVIEW
HEAVY-DUTY TRUCK INDUSTRY. Demand for the products supplied by Gunite and
Bostrom closely follows the demand for North American Class 8 trucks (trucks
with a gross axle weight in excess of 33,000 pounds). The North American Class 8
truck build increased consistently from 1992 through 1995 reaching a record
truck build of 246,000 in 1995. The North American truck build decreased to
191,500 in 1996, which despite the decline, represented the third largest Class
8 truck build ever. The North American Class 8 truck build in the first two
quarters of 1997 was 103,600 and is projected to be approximately 212,500 units
in 1997, 204,000 units in 1998 and 195,000 units in 1999. Management continues
to believe that a number of factors will promote demand for new Class 8 trucks,
including (i) continued growth in the demand for trucking services due to the
continued strong United States economy, (ii) a trend toward consolidation in the
trucking industry, (iii) the truck replacement cycle, (iv) new, more fuel
efficient truck offerings and (v) increasingly stringent safety and emission
standards. Further, management of the Company believes that the aftermarket will
remain strong during the next
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few years because the record number of Class 8 trucks built in the past five
years will continue to require replacement parts.
IRON FOUNDRY INDUSTRY. In recent years the traditionally fragmented U.S.
iron foundry industry has continued to consolidate. Many smaller iron foundries
have closed due to the increasing cost of complying with environmental and other
governmental regulations and their inability to satisfy the increasing demand
for higher quality, more complex castings. At the same time, major automotive,
farm equipment and construction machinery manufacturers have continued to
outsource production of components in an effort to control inventory and labor
costs and address quality concerns. Stable, established, independent iron
foundries, including Brillion, have benefitted and, despite increased foundry
capacity brought on line by competitors during the past several years, will
continue to benefit from consolidation and outsourcing trends.
FREIGHT CAR INDUSTRY. The freight car market is cyclical in nature. From
1993 through 1995, new car deliveries totaled 35,239, 53,281 and 60,853,
respectively. In 1996, new car deliveries remained strong at 57,877 due to the
strong backlog in orders at the end of 1995. However, industrywide orders slowed
considerably in 1996 and industrywide year end backlog declined from 32,574 at
the end of 1995 to 17,508 at the end of 1996. New car orders declined more
dramatically since the end of 1995 for the primary markets served by JAC. For
example, the industrywide backlog for coal gondolas, JAC's most significant
market, declined from 1,784 at the end of 1995 to 320 at the end of 1996.
Industrywide deliveries of coal open hoppers declined from 6,214 in 1995 to
2,298 in 1996 and industrywide deliveries of intermodal cars declined from
10,536 in 1995 to 1,549 in 1996, with no backlog for intermodal cars at the end
of 1996. Management believes that this cyclical trough in demand for the types
of cars offered by JAC has begun to improve slightly. Industrywide backlog for
coal gondolas at the end of the second quarter of 1997 improved to 2,385 cars
from 320 at the end of 1996. The Company's backlog improved from 774 new and
rebuilt cars at the end of 1996 to 1,949 at the end of the second quarter of
1997. Management believes that while projected 1997 industrywide deliveries
(approximately 44,000) will be down significantly from 1996 (57,877) and while
industrywide backlog will likely remain consistent with the 17,508 backlog at
the end of 1996, the aluminum coal car markets will likely see continued gradual
improvement through the remainder of 1997 and through 1998. According to WEFA,
industrywide deliveries for new aluminum coal gondolas are expected to gradually
increase from 3,000 in 1997 to over 5,000 by 1999. In addition, the industry
forecast anticipates gradual improvement in the aluminum coal open hopper market
with estimated annual deliveries increasing from 4,000 in 1997 to 5,000 in 2001.
The Company is also being adversely affected by intense pricing pressures
currently present in a freight car market characterized by depressed demand and
production overcapacity. Although the freight car industry does not report
freight car rebuilding activity, management believes that a relatively stable
market for freight car rebuilding exists.
CORPORATE HISTORY OF THE COMPANY
The Company and JAC were formed in 1991 by an investor group led by Thomas
M. Begel, the Chairman, President and Chief Executive Officer of the Company, to
acquire substantially all of the assets of the Freight Car Division of
Bethlehem, a business started in 1901 in Johnstown, Pennsylvania. In July 1993,
the Company completed an initial public offering of its Common Stock. In January
1995, the Company acquired Bostrom for approximately $32 million. In 1995, the
Company, through FCS, acquired and refurbished a freight car rebuilding and
repair facility in Danville, Illinois for approximately $5 million, which
facility began operations in October 1995. In August 1995, the Company acquired
TCI, a holding company for Gunite, Brillion and Fabco, for approximately $266
million in cash, including the repayment of TCI's existing indebtedness.
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TRUCK COMPONENTS AND ASSEMBLIES OPERATIONS
GUNITE
Gunite is the leading North American supplier of wheel-end components, such
as brake drums, disc wheel hubs, spoke wheels and rotors to OEMs in the
heavy-duty truck industry. Gunite also supplies such products to the aftermarket
as well as the medium-duty truck and trailer markets.
OEMs have increasingly stressed product quality, engineering capability and
customer service, as well as price, in awarding business to suppliers. Gunite
has distinguished itself among wheel-end component manufacturers by providing
its customers with dependable design and testing support and reliable customer
service. Gunite works closely with its customers' product design, marketing and
purchasing departments, including vendor quality certification personnel. Gunite
has received top quality awards from all of its major customers. Obtaining
quality awards is a competitive advantage because a manufacturer must first go
through the OEM's quality certification process before it can become a qualified
supplier.
MARKETS
The truck components industry in which Gunite competes is composed of two
primary markets: (i) the OEM market; and (ii) the vehicle maintenance and repair
sector, also called the replacement market or aftermarket. The OEM market served
by Gunite includes truck manufacturers such as Navistar, Freightliner, PACCAR,
Ford, Volvo GM and Mack Trucks. For the twelve months ended December 31, 1996
and the six months ended June 30, 1997, approximately 66% and 65%, respectively,
of Gunite's total net sales were to OEMs and the remainder were to the
aftermarket.
OEMs use independent suppliers for the production of most parts and
components. The use of independent suppliers, also known as outsourcing, is
largely a result of the ability of independent suppliers to design, engineer and
manufacture production parts and components at a more competitive cost than the
OEMs. Outsourcing also enables the OEMs to be more responsive to changes in the
marketplace and in technology and to reduce their capital investment. In
general, OEMs increasingly have turned to suppliers to design products, engineer
prototypes and manufacture parts and components for the life of their vehicles.
The OEMs also have sought to minimize the size of their supplier base in order
to improve quality, efficiency and their ability to manage their supplier
network. The success of suppliers in obtaining and maintaining supply
relationships has been a function of four factors: (i) consistent product
quality; (ii) competitive pricing; (iii) technical expertise; and (iv)
responsiveness to changes in the marketplace. The net effect of these changes
has been to increase the opportunities for, as well as the competitive pressures
faced by, independent suppliers to the OEM market.
Sales of Gunite's products to OEMs are affected, to a large extent, by
heavy-duty truck production volume which, in turn, is dependent on general
economic conditions. Historically, heavy-duty truck sales have been cyclical. In
general, Gunite's sales tend to follow the North American Class 8 truck build.
Gunite seeks to increase sales to the OEM market through the
"standardization" process. In this process, Gunite sales representatives call on
OEM purchasers and Gunite's engineers work with OEM engineering departments to
attempt to have Gunite products selected for the OEMs product lines as standard
equipment. Once a product is chosen as standard on a line of trucks, any order
of a truck in that line will come with the standard part unless the end-use
customer specifies a different type of product. If a different product is
specified by an end-user, the end-user is generally required to pay an
additional fee to the OEM. Selection of a Gunite product as standard on a line
of trucks will generally create a steady demand for that product. Because such
demand is a derivative of the sales of the particular truck line, being standard
on certain lines may be more advantageous than being standard on others. Gunite
wheel-end components are currently standard on certain Navistar, Freightliner,
PACCAR, Ford and Mack Truck lines.
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Aftermarket customers include the service organizations of the OEMs, parts
manufacturers and distributors. Aftermarket sales principally consist of the
sale of brake drums. Sales of Gunite's products to the aftermarket historically
have been less adversely affected by general business conditions since vehicle
owners are more likely to repair vehicles than purchase new ones during
recessionary periods. Aftermarket sales, which are tied to the age of vehicles
in service and the need for replacement parts, have been increasing in recent
years due to Gunite's focus on the aftermarket and the fact that Gunite's
products are offered as standard on more trucks than any of its competitors'
products. Gunite's strategy is to increase sales to the aftermarket, where
margins are higher when compared to the OEM market, by capitalizing on its
reputation as a quality leader in the industry and continuing to focus on
customer service.
PRODUCTS
Gunite supplies the heavy- and medium-duty truck and trailer markets with a
full line of wheel-end components. These products are made by Gunite and
delivered to the customer either as component parts or in assemblies which have
been pre-balanced by Gunite. Gunite products are utilized in four basic systems:
(i) Disc Wheel Hub-and-Brake Drum; (ii) Spoke Wheel-and-Brake Drum; (iii) Spoke
Wheel-and-Brake Rotor; and (iv) Disc Wheel Hub-and-Brake Rotor. Generally, brake
drums and rotors are the braking devices that work with the vehicle's braking
system to stop the vehicle. Wheel hubs and spoke wheels are the connecting
pieces between the brake system and the axle and upon which the rim and tire are
mounted.
Gunite offers a full line of brake drums, rotors and slack adjusters for
Class 6, 7 and 8 trucks and trailers. The aftermarket opportunities in this
product line are substantial as all brake drums wear with use and eventually
need to be replaced. The timing of such replacement depends on the severity of
service.
Gunite manufactures a full line of spoke wheels and disc wheel hubs for
Class 6, 7 and 8 trucks and trailers. Truck builders have recently purchased a
greater percentage of disc wheel hubs in place of spoke wheels due to their
better performance characteristics and ease of maintenance. However, spoke
wheels are still popular for severe duty due to their higher strength.
Gunite's product line also includes finely-machined hubs and wheels for ABS,
which enhance vehicle safety and have been mandated for all new trucks with air
brakes, beginning in March 1997, and all new trailers with air brakes beginning
in March 1998. The production of ABS parts constitutes a value-added process,
and additional components and machining are required. As ABS becomes more
prevalent in the trucking industry, Gunite, through its production, engineering
and machining capabilities, is positioned to take advantage of increasing demand
for ABS.
In July 1994, Gunite introduced its new lightweight brake drum, the
Gunite-Lite-TM-, a product which Gunite did not previously produce. This product
has generated substantial customer interest because its reduced weight enables
carriers to increase load capacity for heavy-duty trucks where weight is a
critical issue. Commercial production of this product began in 1996.
In response to growing concerns by truck fleet operators over brake
adjustment, Gunite introduced its initial automatic slack adjuster product in
1984. Slack adjusters were mandated for all new trucks in October 1994. Gunite
believes it is presently the second largest supplier of automatic slack
adjusters to the heavy-duty trucking industry.
CUSTOMERS
Gunite markets its wheel-end component and assembly products to more than
400 customers, including most of the major North American heavy- and medium-duty
truck and trailer manufacturers, relying on three account managers to service
OEMs and nine regional sales managers and a nationwide network of approximately
300 independent distributors to sell to the aftermarket.
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<PAGE>
Gunite has established close relationships with many of its larger
customers, many of whom have purchased wheel-end systems and components from
Gunite for more than 25 years. Gunite's top five OEM customers in 1996
represented approximately 64% of Gunite's total net sales in 1996, with sales to
Navistar accounting for approximately 29% of Gunite's total net sales in 1996.
Many truck manufacturers require quality certification of their supplies,
and Gunite undergoes periodic quality surveys by all of its major customers.
Gunite's commitment to quality, customer satisfaction and continuous improvement
is evidenced by its ISO 9000 and QS 9000 certifications. In addition, Gunite has
received numerous quality awards from its customers, including Ford Motor
Company's "Q1," Freightliner's "Master of Quality" and ISO 9000 equivalent,
PACCAR's "Supplier Quality Certification" and Volvo GM's ISO 9000 equivalent.
Quality certification requirements tend to limit the number of suppliers which
can compete in the safety intensive product lines manufactured by Gunite and to
benefit high-quality suppliers such as Gunite.
MANUFACTURING
Gunite has a fully integrated manufacturing operation that combines
high-quality castings from its Rockford, Illinois foundry and from Brillion and
machining capabilities at its Elkhart, Indiana facilities. Most of the
components produced by Gunite are high-volume products that are critical to the
safe operation of the vehicle. As a result, Gunite must combine efficient
production with comprehensive product testing. Implementation of statistical
process controls ("SPC") insures strict control of the manufacturing process and
is important in ensuring consistent quality.
The manufacturing process involves melting purchased scrap iron and steel,
adding various alloys, and pouring the molten metal into molds made of sand.
After the molten metal is poured into the molds, the castings cool, solidify and
are removed. Once the rough castings have been cleaned, they are transferred to
the Elkhart, Indiana plant for machining through a variety of automated plant
techniques. Both the casting and machining operations are subject to statistical
sampling and charting techniques. Other manufacturing processes include
painting, welding and assembly.
BOSTROM
Bostrom designs, manufactures and markets a full line of air suspension and
static seating systems primarily for the heavy-duty truck market.
MARKETS AND PRODUCTS
Bostrom is a leading manufacturer of seating systems for the heavy-duty
truck industry. Bostrom's products are sold primarily to the OEM heavy-duty
truck market as well as to the aftermarket. Bostrom also supplies its line of
seating systems to the medium-duty truck markets. Bostrom's seats are offered as
standard or as an option by all major North American heavy-duty truck
manufacturers.
CUSTOMERS
Bostrom's customers include all of the major North American heavy-duty truck
manufacturers. Bostrom's top five customers accounted for approximately 83% of
Bostrom's 1996 net sales, with Navistar accounting for approximately 31% of such
sales. Effective October 1, 1997, Bostrom's seats will no longer be offered as
the standard seat system on Navistar trucks. Navistar's customers may, however,
select Bostrom's seats as an optional configuration. For each of the twelve
months ended December 31, 1996 and the six months ended June 30, 1997,
approximately 80% of Bostrom's total net sales were to OEMs and the remainder
were to the aftermarket.
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<PAGE>
MANUFACTURING
Bostrom's manufacturing facility is located in Piedmont, Alabama. For
several of its leading OEM customers, Bostrom ships its seats to line-setting
facilities which it has established near the OEMs' plants to provide
just-in-time inventory of seats to the assembly line in the order that the seats
will be used.
FABCO
Fabco designs, manufactures and markets steerable drive axles, gear boxes
and related parts for the North American on/off-road heavy- and medium-duty
truck markets.
MARKETS
Fabco's products are sold primarily to the OEM market for use in the
construction, military, mining and municipal service markets. Fabco's axles and
gear boxes are offered as standard or as an option by all major North American
heavy-duty truck manufacturers, and Fabco is a leading supplier of these items
in the North American heavy-duty truck market.
PRODUCTS
Fabco supplies a full line of steerable drive axles for the North American
on/off-road heavy- and medium-duty truck and specialty vehicle markets. Fabco's
drive axles are rated at capacities ranging from 12,000 to 23,000 pounds to
serve Class 6, 7 and 8 trucks. End users of Fabco's axles require ease of
steering and high speed driving for on-highway use while demanding
maneuverability and functionality for off-highway use. Fabco's axles are
designed to increase durability and maintenance accessibility. Fabco believes
that the ease of operating and servicing Fabco's products are competitive
advantages that lead to ongoing demand for steerable drive axles.
Fabco also manufactures a wide range of heavy- and medium-duty gear boxes,
including transfer cases, split shaft power take-offs and drop boxes. Gear boxes
are used by vehicles that operate auxiliary equipment in the construction, oil
and gas field services and utility industries, among others.
Fabco also sells its products in the aftermarket. It supplies replacement
parts for all of its products to OEMs and, in some cases, directly to end users.
Service parts are shipped directly from Fabco's plant in Oakland, California to
any domestic or international location directed by the customer. Fabco's quick
turnaround of parts orders minimizes the need for its customers to maintain
their own parts inventory.
CUSTOMERS
Fabco's customers include most of the major North American on/off road
heavy- and medium-duty truck and specialty vehicle manufacturers. The majority
of Fabco's sales are made to OEM customers with which it enjoys relationships of
over 25 years. Sales during 1996 to Fabco's five largest customers accounted for
approximately 85% of Fabco's total net sales, with Navistar accounting for
approximately 47% of such sales.
MANUFACTURING
Fabco has gained a positive reputation for its engineering capabilities in
designing and manufacturing its products for the on/off road heavy- and
medium-duty truck and specialty vehicle markets. The Company believes that Fabco
is the only manufacturer which has products that are standard or available as an
option on all major OEMs Class 6, 7 and 8 all-wheel drive truck models produced
for the commercial truck market, and that, as a result, Fabco's broad range of
adaptable products are considered the industry standard due to the variety of
their configurations and tolerances. Fabco believes that the technical
backgrounds of its sales and marketing employees contribute to the successful
marketing of Fabco's products to the heavy-duty vehicle manufacturers.
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<PAGE>
IRON CASTINGS OPERATIONS
BRILLION
Brillion operates one of the nation's largest job casting iron foundries,
producing a wide variety of high-quality, complex iron castings for
transportation-related and a wide variety of other markets. Sales to the heavy-
and medium-duty truck and trailer industries accounted for approximately 33% of
Brillion's sales (including sales to Gunite) in 1996, while sales to the
automotive industry accounted for approximately 11% of Brillion's sales in 1996.
Brillion also designs, manufactures and markets a range of farm equipment
products for the "behind-the-tractor" market. These pulverizers, seeders,
mulchers, deep tillers and cultivators are marketed nationally under the
Brillion trade name through a nationwide network of 1,050 farm implement dealers
and distributors.
MARKETS
Brillion markets its products on a job-by-job basis to the truck, automotive
and equipment industries. Brillion is one of the leaders in ductile iron
technology, such as complex, thin wall and near net shape castings, in the
markets it serves. In addition to being easily machinable and wear-resistant,
ductile iron has greater strength (an important factor for customers who desire
a lighter finished product) and elasticity than gray iron. As a result of these
superior properties, management expects the demand for ductile iron castings to
increase. This shift towards ductile iron products may replace other products
(such as lighter weight aluminum products) that gray iron products could not
replace. Gray iron, the oldest and most widely used cast iron, is readily formed
into intricate shapes which are easily machinable and wear-resistant. For the
year 1996, ductile iron castings represented approximately 60% of Brillion's
foundry's total tons sold, while gray iron represented the balance.
PRODUCTS
As illustrated in the table below, Brillion produces a broad range of gray
and ductile iron castings used in the manufacture of components for the
trucking, automotive and a variety of light and heavy equipment industries.
Currently, Brillion utilizes over 3,700 patterns to produce castings that range
in weight from one pound to nearly 350 pounds, with the majority below 100
pounds. Castings are made to the specific requirements of each customer. The
customer consults with Brillion to specify such important considerations as
physical properties, surface finish, dimensional accuracy and methods of
inspection for each casting.
FOUNDRY PRODUCTS
<TABLE>
<S> <C>
* Automotive and Truck Brackets * Hydraulic-Valve Bodies
* Bearing Caps * Manifolds
* Brake Calipers and Adapters * Pressure Plates
* Clutch Housings * Small Engine Camshafts and Crankshafts
* Farm Machinery Castings * Steering Housings
* Flywheel Housings * Transmission Cases
* Flywheels * Wheel Hubs
</TABLE>
Brillion markets its castings, directly and indirectly, to OEMs in various
industrial markets. The table below provides a list of representative end
products in which Brillion's castings are used.
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<PAGE>
END PRODUCTS IN WHICH BRILLION CASTINGS ARE USED
<TABLE>
<S> <C>
* Air-Cooled Engines * Industrial Lift Trucks
* Automobiles and Light Trucks * Lawn and Garden Equipment
* Construction Equipment * Locomotive Engines
* Diesel Engines * Marine Engines
* Farm Equipment * Heavy- and Medium-Duty Trucks
* Fluid Power Pumps and Motors * Oil and Gas Field Machinery and Equipment
* Hardware * Pumps and Pumping Equipment
* High-speed Drives and Gears * Small Tools
* Home Shop Tools
</TABLE>
CUSTOMERS
Over 95% of Brillion's net foundry sales in 1996 were to existing customers,
with the balance coming from new customers. Once production begins on a product,
the same foundry will generally manufacture that product for the product's life
cycle.
Brillion has over 225 foundry customers, a majority of which are located in
the Midwest, East and Southeast. Brillion's top five unaffiliated customers
accounted for approximately 20% of Brillion's 1996 total net sales. Brillion
also serves as an important source of castings for Gunite, with sales to Gunite
representing approximately 12.6% of Brillion's total net sales in 1996. Brillion
works closely with customers in order to insure that castings meet all required
specifications, including machinability, dimensional accuracy and overall
quality. Brillion's engineers work with customers from concept to market with
respect to new products. Brillion's strategy is to focus on the market for
higher margin castings, as well as for products requiring new, innovative
castings designs. Unlike Gunite, Brillion's products are primarily designed by
its customers, and thus the product designs are proprietary to the customers.
Brillion has enjoyed long-term, stable relationships with the majority of
its customers and is certified as a preferred supplier by most of its customers.
Brillion's quality system is certified to ISO 9000 and QS 9000 quality standards
and Brillion has received General Motors' "Targets for Excellence Award in
Quality, Management and Technology Disciplines," Caterpillar's "Certified
Supplier Status" and was approved by Ford's "Technical Service Capability
Survey." A quality certification is required by most sophisticated purchasers,
thereby enhancing the competitive advantage of suppliers like Brillion that have
achieved a quality certification.
MANUFACTURING
In general, Brillion's customers specify the properties of their castings,
such as hardness, strength and dimensions, and Brillion determines how best to
meet those specifications. Brillion engineers work with its customers to develop
an efficient manufacturing process. Brillion constantly tests and monitors the
manufacturing process in order to maintain the quality and consistency of its
castings. The manufacturing process involves melting iron (which has been
internally recycled), steel scrap and pig iron, adding various alloys and
pouring the molten metal into molds made primarily of sand. Most of the castings
manufactured by Brillion must meet strict dimensional control requirements
specified by its customers. As a result, Brillion uses SPC in every phase of the
production process, and all employees are given extensive SPC training. The
Company believes that Brillion has the most advanced core capabilities in the
industry, allowing for efficient and environmentally superior core processes
that are necessary for the production of quality, complex thin-wall and lighter
weight products. Production lines
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are designed to accommodate a wide variety of products and volumes. In addition,
Brillion's multiple production lines provide flexibility to move production from
line to line to meet customer scheduling changes and requirements.
FREIGHT CAR OPERATIONS
The Company, through its subsidiary JAC, is a leading manufacturer of
railroad freight cars used principally for hauling coal. JAC also offers
aluminum covered hoppers for the grain hauling market and intermodal freight
cars, which it has manufactured in the past and has the capability to produce in
response to future market demand. As part of its full-service business strategy,
the Company recently formed FCS and JAIX Leasing. FCS participates in the
freight car repair and rebuilding market and manufactures new freight cars for
specialty markets. JAIX Leasing offers its customers freight car leasing
alternatives.
The North American freight car market in the first half of the 1990's was
characterized by relatively strong demand. New car orders, however, slowed
considerably in 1996 and industrywide backlog at the end of 1996 declined
dramatically from previous year ends. New car orders declined even more
dramatically in JAC's primary market, coal gondolas. Although management
believes that its primary aluminum coal freight car market has begun to improve
slightly, no assurance can be given that such increased demand will continue.
The Company is also being adversely affected by intense pricing pressures
currently present in a freight car market characterized by depressed demand and
production overcapacity.
PRODUCTS AND SERVICES
The Company participates in the following freight car market segments: new
car manufacturing; rebuilds, repairs and modifications; sales of freight car
kits and parts; and freight car leasing.
NEW CAR MANUFACTURING. The Company's freight car operations offer a range
of car types in an effort to take advantage of industry trends and market
opportunities, particularly in the development of aluminum freight cars used in
the shipment of bulk commodities. The Company's freight car operations
manufacture the following types of freight cars:
GONDOLAS. The BethGon Coalporter-Registered Trademark- is a patented
twin tub car designed for the coal and utility industries. The BethGon was
designed to carry more coal with greater stability and remains the dominant
type of car for hauling coal, particularly for hauling low-sulfur coal from
the western United States. Although the BethGon is made in either steel or
aluminum, most of the BethGons delivered in the last few years have been
made of aluminum. In 1994, a new smooth-sided Aeroflo Aluminum BethGon was
introduced which offers carriers both fuel savings and added cubic carrying
capacity. In 1996, a new lighter weight BethGon was introduced which weighs
approximately 3,500 pounds less than a standard BethGon, thereby enabling
the car to carry significantly more coal per trip. This new car has been
well received in the marketplace.
OPEN HOPPERS. To expand its product line to service the entire coal
market, the Company's freight car operations began manufacturing aluminum
open hoppers in 1994. The Company's freight car operations have the
capability to produce both aluminum and steel open hoppers and recently
developed and introduced an aluminum rapid discharge coal car (the AutoFlood
II-TM-) that provides 18 tons more capacity per load than conventional steel
automatic discharge freight cars. The aluminum AutoFlood II-TM- coal car,
with its patented automatic discharge system providing a more efficient
method for the rapid discharge of coal, is being well received in the
marketplace. The Company's freight car operations have been manufacturing an
increasing quantity of open hopper cars, which has resulted in such cars
representing a larger share of its product mix, and the Company believes
that demand for such cars will continue to cause such cars to represent a
greater share of its product mix in the future.
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COVERED HOPPERS. Covered hopper cars are used to haul agricultural,
chemical and mineral products. In 1994, the Company's freight car operations
introduced the Grainporter 2000-TM-, the first aluminum covered hopper car
in its size range available in high volume production, that is designed
primarily for high volume transportation of grain. The Company's freight car
operations' first commercial production of the Grainporter 2000-TM- began in
1995.
INTERMODAL CARS. Intermodal cars are primarily used for moving
intermodal containers and trailers. As a result of a substantial build-up of
intermodal cars in the early 1990s, the market for intermodal cars began
declining in 1995 and continued to decline in 1996. As a result, there were
no sales by JAC of intermodal cars in 1996 and no sales are expected in
1997. Moreover, the mix of intermodal freight cars expected to be delivered
by the freight car industry in the foreseeable future has predominantly
shifted towards deep well car designs that JAC does not manufacture. JAC has
retained the capability, however, to manufacture articulated intermodal cars
to meet any customer demand that may arise in the future.
SPECIALTY CARS. The Company's freight car operations manufacture other
cars for the special needs of a particular industry or customer, including a
mill gondola car, which is used to haul steel slabs, coils or scrap, an open
hopper or gondola wood chip car, which is used to haul wood chips, a waste
hauling car, which is used to haul municipal and industrial waste, and an
ore car, which is used by railroads to transport taconite pellets and iron
ore.
REBUILDS, MODIFICATIONS AND REPAIRS. Freight cars generally have a useful
life of 25 to 30 years and are typically rebuilt once between 15 and 20 years
after initial manufacture to extend their life. To pursue what it believes to be
growing opportunities to service the aging North American freight car fleet, and
further expand its presence in the generally fragmented market for freight car
rebuilding, maintenance and repair, FCS purchased a freight car repair and
rebuilding facility in Danville, Illinois in January 1995. Operations at this
new facility, which is strategically located in the Midwest, commenced in
October of 1995. FCS performs total rebuilds, modifications and repairs of used
freight cars and manufactures certain of the specialty cars described above.
CAR KITS AND PARTS. JAC sells kits containing the parts necessary to build
(or rebuild) a particular car to rebuilders, including FCS, and others such as
railroads with car building but not fabrication capability. JAC also markets a
variety of fabricated parts to freight car rebuilders who do not have
fabrication capabilities.
LEASING. To meet the needs of its customers, the Company entered the
freight car leasing business in 1994. Through JAIX Leasing, the Company provides
operating lease alternatives to customers on new and rebuilt cars. The leases
generally have terms ranging from three to five years, but may be shorter or
longer in certain cases, and may include various purchase and other termination
options. As of June 30, 1997, JAIX Leasing had a fleet of 1,526 leased freight
cars, substantially all of which were manufactured by JAC and FCS. Of these
leased freight cars, 595 are owned by JAIX Leasing, representing a total
investment of approximately $37.7 million, $29.8 million of which was provided
through borrowings by JAIX Leasing that are non-recourse to the Company, and the
remainder are leased. From time to time, JAIX Leasing purchases cars from its
affiliates, JAC and FCS, at a price estimated by management to be equivalent to
that payable on an arm's length basis. Any intercompany profits earned by such
affiliates are eliminated on consolidation and the amount paid by JAIX Leasing
is recorded as a leasing business asset addition.
MANUFACTURING
The Company's manufacturing operations are conducted primarily through two
JAC facilities located in Johnstown, Pennsylvania, and FCS's facility located in
Danville, Illinois. The Company has undertaken a number of initiatives at JAC's
facilities to reduce production costs and make production processes more
efficient. The Company has reduced the number of freight car erection lines at
JAC's
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<PAGE>
facilities during 1996 as demand for freight cars declined. In addition, the
Company has focused on making its JAC manufacturing facilities and processes
more flexible while at the same time reducing change-over times and inventories
and improving product quality. Many of these improvements were developed by
involving the participation of manufacturing employees, management and
customers. JAC has implemented cellular manufacturing concepts, whereby various
manufacturing steps are accomplished in one location within the facility, to
eliminate unnecessary movement of parts within the facility, improve production
rates and reduce inventories. These improvements are intended to provide JAC
with increased flexibility in scheduling the production of orders and to
minimize down-time resulting from car type change-overs, thereby increasing the
efficiency of its manufacturing operations. JAC's facilities are configured to
manufacture aluminum coal cars, aluminum covered hoppers and intermodal cars.
FCS rebuilds and repairs a variety of freight cars, as well as manufactures
various new specialty freight cars.
CUSTOMERS
The Company has maintained long-term relationships with major purchasers of
freight cars. Long-term customers are particularly important in the freight car
industry given the limited number of buyers and sellers of freight cars. Such
customers include railroads, utilities, grain shippers, leasing companies and
major construction and industrial companies.
The large average size of orders often results in a small number of
customers representing a significant portion of JAC's revenues in a given year.
In 1996, the top five customers accounted for approximately 52% of the Company's
revenues from its freight car operations.
GENERAL
COMPETITION
The Company operates in highly competitive markets. No single manufacturer
competes with respect to all products manufactured and sold by the Company in
the heavy-duty truck market, and the degree of competition varies with different
products. In this market the Company competes on the basis of price, its
manufacturing and distribution capabilities and product quality. Gunite's
primary competitors in the wheel-end component market for Class 6, 7 and 8
trucks and trailers are Dayton Walther Corporation and Webb Wheel Products.
Bostrom's principal competitors include National Seating, Sears Manufacturing
and Seats, Inc. as well as a number of smaller seating manufacturers. Fabco's
primary competitor in the steerable drive axle market for the on/off-road heavy-
and medium-duty truck and specialty vehicles is Rockwell Corporation.
Brillion's major competitors include 10 to 12 foundries operating in the
Midwest and Southern regions, including Waupaca Foundry, Inc., Grede Foundries,
Inc., Western Foundry, Neenah Foundry Company, Intermet Corporation and Citation
Corporation.
Competition in the freight car manufacturing business is based on type of
product, reputation for quality, price, reliability of delivery and customer
service and support. The Company's freight car operation's principal competitors
in this segment are Trinity Industries, Inc. ("Trinity"), Thrall Car
Manufacturing Co. and Gunderson Inc. Although there are presently seven freight
car manufacturers in North America, two of the seven manufacture only tank cars
and plastic pellet cars, market segments in which the Company does not currently
participate. Only Trinity competes in all of the Company's freight car market
segments. Although JAC is engaged in a lawsuit against Trinity for infringement
of its BethGon Coalporter-Registered Trademark- patent, Trinity has competed and
may continue to compete with JAC in the sale of coal gondolas. See "--Legal
Proceedings."
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<PAGE>
BACKLOG
Due to short production turnaround times from order to delivery resulting
from the just-in-time inventory systems utilized by many of its customers, the
Company's truck components and castings operations do not normally carry a
material amount of backlog orders. A number of the Company's sales contracts in
this segment are made pursuant to purchase orders and releases which are subject
to change or cancellation by the customer.
As of June 30, 1997, freight car operations had a backlog of firm orders for
1,949 new and rebuilt freight cars with an aggregate sales price of
approximately $98.5 million, as compared to a backlog of firm orders for 774 new
and rebuilt freight cars with an aggregate sales price of approximately $35
million as of December 31, 1996. Due to the large size of freight car orders and
variations in the mix of freight cars, the size of the Company's freight car
operation's backlog at the end of any given period may fluctuate significantly.
The increase in backlog from December 31, 1996 to June 30, 1997 reflects a
modest increase in industry orders for car types produced by the freight car
operations, such as coal cars. The Company had no sales of intermodal cars in
1996 and does not expect to make any sales of intermodal and other flat cars in
1997 and, as a result, has focused its product development and marketing efforts
on gondolas, open hopper cars and covered hopper cars.
SUPPLIERS AND RAW MATERIALS
The major raw material for the Company's Gunite and Brillion foundry
operations is steel scrap, which is purchased from various sources. The Company
has no long-term contractual commitments with any scrap suppliers, and does not
anticipate any difficulty in obtaining scrap because of the large number of
potential suppliers and its position as a major purchaser. Increases in steel
scrap prices are passed through to customers by means of a fluctuating
surcharge, which is calculated and adjusted on a monthly or quarterly basis.
Other major raw materials, such as silicon sand, binders, sand additives and
coated sand, are purchased from multiple sources. Electricity, coke and natural
gas, the primary energy sources for melting operations, are in adequate supply
and reasonably priced.
Bostrom purchases a variety of components, including seat cushion foam,
springs, shock absorbers, air valves and recliners, and raw materials, including
steel and fabric, from a number of suppliers. Fabco purchases a variety of
components, including bearings, gears, axles and castings, from several
suppliers. Although there is a limited number of suppliers for certain of
Bostrom's and Fabco's components, the Company believes that neither Bostrom nor
Fabco is dependent on any single supplier because adequate alternative sources
exist.
Between 70% and 80% of a freight car's costs relate to purchased specialty
components such as wheels, axles and brakes and raw materials such as aluminum
and steel. Costs for specialty components and raw materials generally are fixed
at the time a freight car order is accepted.
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PROPERTIES AND FACILITIES
The Company's headquarters are located in leased offices in Chicago,
Illinois. The following table provides a summary description of the Company's
other principal facilities.
<TABLE>
<CAPTION>
OWNED/ COVERED SPACE
FACILITIES BUSINESS FUNCTION LEASED SQ. FT.
- ----------------------- ------------------------------------------------------------- --------- ---------------
<S> <C> <C> <C>
GUNITE
Rockford, Illinois Administrative Offices: Specialty Foundry, Aftermarket Owned 619,000
Distribution Warehouse
Elkhart, Indiana (Plant Machining--Wheel-End Components Owned 258,000
1)
Elkhart, Indiana (Plant Machining and Assembling--Automatic Slack Adjusters Leased 115,000
2)
BOSTROM
Piedmont, Alabama Manufacturing; Administrative Offices Leased 196,000
Portland, Oregon Line-set Facility Leased 24,000
Charlotte, North Line-set Facility Leased 48,000
Carolina
Allentown, Pennsylvania Line-set Facility Leased 10,000
FABCO
Oakland, California Manufacturing; Warehouse; Administrative Offices Owned 65,000
BRILLION(1)
Plant I Melting; Molding; Administrative Offices Leased 180,000
Plant II Melting; Molding Leased 165,000
Plant III Farm Machinery Owned 150,000
Plant IV Finishing; Shipping Leased 85,000
</TABLE>
(1) All Brillion facilities are located in Brillion, Wisconsin.
<TABLE>
<S> <C> <C> <C>
JAC(2)
Shell Plant Freight car erection and fabrication Owned 153,000
Franklin Plant Freight car erection and fabrication Owned 619,000
Offices Administrative Offices Owned 87,000
</TABLE>
(2) All JAC facilities are located in Johnstown, Pennsylvania.
<TABLE>
<S> <C> <C> <C>
FCS
Danville, Illinois Freight car rebuild and repair Owned 297,000
</TABLE>
The Company believes that its facilities and equipment are in good condition
and, together with scheduled capital improvements, are adequate for its present
and immediately projected needs.
LABOR RELATIONS AND EMPLOYEES
At December 31, 1996, the Company had approximately 3,300 employees. Of
these, approximately 650 are salaried employees and the balance are paid on an
hourly basis. Approximately 2,260 or about 68% of all employees, are members of
unions. The Company has collective bargaining agreements with several unions
including the United Steelworkers of America, the United Autoworkers, the
Brotherhood of Teamsters, the United Paperworkers International Union, the
Patternmakers League of North America and the International Association of
Machinists. Each of the Company's unionized facilities has a separate contract
with the union which represents the workers employed at such facility. Such
contracts expire at various times over the next several years. While the Company
considers its relations with its employees to be good at each of the Company's
subsidiaries other than JAC and fair at JAC, there can be no assurance that the
Company will reach new agreements upon expiration of such union contracts or
that the failure to reach new agreements will not have a material adverse effect
on the financial condition or results of operations of the Company.
JAC's current three-year agreement with the United Steelworkers of America
is scheduled to expire on October 31, 1997. This agreement was negotiated in a
period characterized by strong demand for freight cars and significant
industrywide backlog. In light of current depressed market conditions and the
weak operating performance of JAC, the Company will seek a mutually satisfactory
agreement to enable
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JAC to improve its competitiveness and help it return to profitability. Although
the Company believes it will be able to reach a new agreement upon expiration of
JAC's current agreement, no assurance can be given that the Company will be able
to reach a satisfactory agreement on a timely basis. There can be no assurance
that the failure to reach such an agreement on a timely basis will not have a
material adverse effect on the Company's financial condition or results of
operations.
REGULATION
The Federal Railroad Administration ("FRA") administers and enforces federal
laws and regulations relating to railroad safety. These regulations govern
equipment and safety compliance standards for freight cars and other rail
equipment used in interstate commerce. The Association of American Railroads
("AAR") also promulgates a wide variety of rules and regulations governing
safety and design of equipment, relationships among railroads with respect to
freight cars in interchange and other matters. The AAR also certifies freight
car buildings and component manufacturers that provide equipment for use on
railroads in the United States. New products generally must undergo AAR testing
and approval processes. As a result of these regulations, the Company must
maintain certain certifications with the AAR as a freight car manufacturer, and
products sold by the Company must meet AAR and FRA standards.
PATENTS AND TRADEMARKS
The Company has numerous United States and foreign patents and pending
applications, registered trademarks and trade names. While the existence of a
patent is prima facie evidence of its validity, the Company cannot assure that
any of its patents will not be challenged nor can it predict the outcome of any
such challenge. The Company is presently involved in litigation concerning its
patent on the BethGon Coalporter-Registered Trademark-. See "Legal Proceedings"
below.
LEGAL PROCEEDINGS
The Company is involved in certain threatened and pending legal proceedings
including worker's compensation claims arising out of the conduct of its
businesses. In the opinion of management, the ultimate outcome of such legal
proceedings will not have a material adverse effect on the financial condition
or results of operations of the Company.
In December 1992, JAC commenced a patent infringement lawsuit against
Trinity alleging infringement of JAC's patent for its BethGon
Coalporter-Registered Trademark- freight car. The lawsuit was tried in 1996, and
the United States District Court for the Western District of Pennsylvania
entered an order upholding a jury verdict that the patent, though valid, was not
infringed by Trinity's Aluminator II freight car. In addition, JAC was not held
to be liable for any of the counterclaims alleged by Trinity. JAC thereafter
made motions to the trial court to set aside the verdict as not being consistent
with the facts or the law and enter judgment in favor of JAC or, alternatively,
to order a new trial, which motions were denied. JAC appealed the case to the
United States Court of Appeals for the Federal Circuit. Following oral argument,
the Court of Appeals for the Federal Circuit issued its opinion dated May 28,
1997 in which the Court held that Trinity's Aluminator II infringed JAC's
patent, reversed the 1996 trial court judgment of noninfringement and remanded
the case back to the trial court for a determination as to damages and for
consideration of JAC's contention that Trinity's infringement was willful.
Following receipt of such opinion, JAC made a motion to the trial court for a
permanent injunction to prohibit Trinity from making, selling or offering to
sell its infringing Aluminator II until JAC's patent expires in November 1999.
Trinity thereafter petitioned the Court of Appeals for a rehearing. The trial
court temporarily denied JAC's motion for a permanent injunction until the Court
of Appeals decides Trinity's petition for rehearing, at which time the trial
court will reconsider JAC's motion. The Court of Appeals issued its opinion
dated July 30, 1997 and Order dated August 11, 1997 denying Trinity's petition
for rehearing and Trinity's suggestion for a rehearing in banc. Trinity
thereafter made a motion to the Court of Appeals to stay the issuance of its
mandate pending Trinity filing a petition for certiorari to the United States
Supreme Court, which was denied by the
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Court of Appeals on September 2, 1997, at which time the Court of Appeals issued
its mandate. JAC expects the damages trial to occur in late 1997 or early 1998
and at this time cannot predict the amount of damages that may be awarded.
The Company may be subject to liability as a result of the disposal of
hazardous substances on and off the properties owned or operated by its
subsidiaries, including Brillion, Gunite and Fabco. TCI and Brillion filed suit
on May 25, 1994 against Beatrice and the Robins Group for certain causes of
action, including indemnification under purchase agreements. TCI added
Hunt-Wesson, Inc., a corporate successor to Beatrice that may be a successor to
Beatrice's liability in these matters, as a defendant on June 10, 1994. In
September 1997, TCI and Gunite entered into the Settlement which settled its
pending litigation against a prior owner of Gunite and pursuant to which TCI and
Gunite and the prior owner withdrew their claims against the other. As a result
of the Settlement, TCI and Gunite will not be responsible (through a contractual
undertaking by the former owner) for certain environmental liabilities and costs
resulting from Gunite's waste disposals prior to the acquisition of Gunite by
TCI in September 1987, including at the IPC, M.I.G./Dewane and Southeast
Rockford sites. See "Environmental Matters" below.
ENVIRONMENTAL MATTERS
COMPLIANCE MATTERS
The Company's subsidiaries are subject to comprehensive and frequently
changing federal, state and local environmental laws and regulations, including
those governing emissions of air pollutants, discharges of wastewater and storm
waters, and the disposal of non-hazardous and hazardous waste. Many of these
laws authorize the imposition of civil and criminal sanctions upon corporations
that fail to comply with the statutory or regulatory requirements. In 1994, 1995
and 1996, TCI's capital expenditures for compliance with environmental
requirements were approximately $1.4 million, $1.0 million and $0.4 million,
respectively. These figures do not include routine operational compliance costs,
such as the costs for the disposal of hazardous and non-hazardous solid waste,
which were approximately $3.1 million, $4.9 million and $4.1 million in 1994,
1995 and 1996, respectively. TCI's subsidiaries have budgeted $0.5 million for
environmentally related capital expenditures in 1997. The Company acquired its
Piedmont, Alabama and Danville, Illinois facilities in January 1995 and
therefore did not incur capital expenditures for compliance with environmental
requirements and for routine operational compliance costs, such as the costs for
the disposal of hazardous and non-hazardous solid waste, prior to 1995. The
Company's investigation of the Piedmont, Alabama and Danville, Illinois
facilities' historic capital expenditures and routine operational compliance
costs concluded that such expenditures and costs were not material. JAC's
capital expenditures for compliance with environmental requirements and for
routine operational compliance costs, such as the costs for the disposal of
hazardous and non-hazardous solid waste, for the facilities located in
Johnstown, Pennsylvania are not material. Other than for certain immaterial
expenditures, the Company's subsidiaries (other than TCI) have not budgeted
funds for capital expenditures in 1997 to comply with environmental laws.
Pursuant to a National Pollutant Discharge Elimination System ("NPDES")
permit, Gunite previously discharged noncontact cooling water from its Rockford
facility to a pond (the "Rockford Pond"), formerly owned by Gunite and by a
prior owner of Gunite that is adjacent to the Gunite plant. Gunite also
periodically had accidental, unpermitted discharges of process wastewater to the
Rockford Pond, which Gunite has reported to the Illinois Environmental
Protection Agency ("IEPA"). In addition, Gunite had not received express
authorization from the current or immediately preceding owner of the Rockford
Pond for any of the discharges. In order for Gunite to eliminate all discharges,
the City of Rockford obtained an easement to allow Gunite to construct a
conveyance that directs discharges of noncontact cooling water and storm water
from the Gunite facility to the Rock River, and the IEPA has issued a modified
NPDES permit to Gunite, substituting the Rock River as the outfall for Gunite's
discharge. The conveyance was
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completed in February 1995. The modified NPDES permit contains a stringent limit
for the discharge of total residual chlorine. Gunite estimates that the capital
cost for installing a treatment system allowing its discharges to comply with
this limit could exceed $0.2 million, although Gunite is exploring a less
expensive treatment system. Gunite has appealed to the Illinois Pollution
Control Board to remove or modify the chlorine limit from the permit (GUNITE
CORP. V. ILLINOIS ENVIRONMENTAL PROTECTION AGENCY, PCB 94-382, filed December
12, 1994). The cost to Gunite of constructing the conveyance to the river (not
including any environmental remediation costs that might be incurred in
connection with historical discharges to the Rockford Pond) was approximately
$0.3 million.
The Wisconsin Department of Natural Resources ("WDNR") has notified Brillion
that it is deemed to be in compliance with the Wisconsin air toxics program,
pending a review of a compliance plan submitted by Brillion in September 1993,
although Brillion is currently exceeding Wisconsin air emissions limits for
benzene and other air toxic compounds. Brillion's submittal included a plan for
compliance with the emission limitations for arsenic, barium, cadmium and
formaldehyde, and a request for a variance with respect to its emissions of
benzene. The Company believes that compliance with Wisconsin's air toxics
regulations is an industrywide problem, and WDNR is developing compliance
standards for the industry as a whole. Although a recent state inspection found
Brillion to be in compliance with all Wisconsin air regulations, it is likely
that as Brillion continues its review of its operations, it will find that
certain of its emission sources will require further air pollution controls. In
addition, further controls may be required under Federal Clean Air Act
regulations that are scheduled to be promulgated in the year 2000.
The Company's subsidiaries' manufacturing plants are large and complex
facilities. The environmental regulations to which these facilities are subject
are numerous, complicated, often ambiguous and constantly changing. It is
possible, therefore, that in addition to the instances of noncompliance
discussed above, there are other areas in which the facilities are not currently
in compliance with environmental laws and regulations. The Company does not
currently believe that any such noncompliance is likely to have a material
adverse effect on the Company's business or financial results. However, there
can be no guarantee that the Company will not be required to make substantial
additional expenditures to remain in or achieve compliance in the future.
REMEDIATION MATTERS
In addition to environmental laws that regulate the Company's subsidiaries'
ongoing operations, the subsidiaries also are subject to environmental
remediation liability. Under CERCLA and analogous state laws, certain persons
may be liable as a result of the release or threatened release of hazardous
substances into the environment. Such persons include the current owner or
operator of property where such release or threatened releases have occurred,
any persons who owned or operated such property during the time hazardous
substances were disposed of at such property, and persons who arranged for the
disposal of hazardous substances at such property. Liability under CERCLA is
strict and, in most cases, joint and several, meaning that any responsible party
could be held liable for all of the costs incurred or to be incurred in
investigating and remediating a release or threatened release of hazardous
substances, although liability at most CERCLA (and similar) sites is shared
among all of the solvent PRPs. The liability of PRPs is typically determined by
the cost of the investigation and remediation, the amount and toxicity of
hazardous substances contributed by each PRP and the number of solvent PRPs.
Under CERCLA, sites may be listed for priority cleanup by being placed on
the National Priorities List ("NPL"). NPL sites are sites at which the federal
government may spend monies from the "Superfund" for long-term remediation and
then seek reimbursement from liable parties. A much more extensive list compiled
pursuant to CERCLA, known as the Comprehensive Environmental Response,
Compensation, and Liability Act Information System ("CERCLIS"), includes sites
that have been, or are to be, evaluated and "scored" by the EPA for possible
future inclusion on the NPL.
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GUNITE. Gunite is a PRP at three NPL sites, the Interstate Pollution
Control ("IPC") site (which is adjacent to Gunite's Rockford facility), the
M.I.G./Dewane Landfill located in Boone County, Illinois, and the Southeast
Rockford Groundwater site located in Rockford, Illinois. Gunite's connection to
the IPC, M.I.G./Dewane and Southeast Rockford sites stem from activities that
took place prior to the acquisition of Gunite by TCI in 1987. Pursuant to the
Settlement, TCI and Gunite will not be responsible for liabilities and costs
related to these sites to the extent arising from Gunite's waste disposals prior
to the acquisition of Gunite by TCI in 1987.
As to the IPC site, the Company believes that the waste disposed of at the
IPC site was disposed of prior to the acquisition of Gunite by TCI in 1987 and,
as a result of the Settlement, TCI and Gunite will not be responsible for such
liabilities and costs.
As to the M.I.G./Dewane Landfill site, the Company believes that the waste
disposed of at the M.I.G./ Dewane Landfill site was disposed of prior to the
acquisition of Gunite by TCI in 1987 and, as a result of the Settlement, TCI and
Gunite will not be responsible for such liabilities and costs.
The EPA and the City of Rockford have reportedly incurred approximately $11
million in response costs to date in connection with the Southeast Rockford
Goundwater NPL Site, which is alleged to be down-gradient of the IPC site, but
which Gunite believes, based on data collected during the investigation of the
IPC site, is cross- or up-gradient. Although no formal demand has been made that
Gunite participate in the funding of the cleanup of this site, other than the
Ekberg Park area described below, it is possible that Gunite will be found to be
responsible for a portion of these costs, or be required to participate
financially in the cleanup through an industrial tax or other mechanism. In
1996, the City of Rockford demanded that Gunite pay $1 million in response costs
which the City allegedly has incurred at the site area 7, commonly known as the
Ekberg Park area, within the Southeast Rockford Groundwater NPL Site, based on
alleged trans-shipment of Gunite's waste to the Ekberg Park area. Gunite has
denied liability to the City. The Company believes that, to the extent any of
the alleged contamination at these sites is attributable to Gunite, such alleged
contamination would be attributable to operations of Gunite prior to the
acquisition of Gunite by TCI in 1987 and, as a result of the Settlement, TCI and
Gunite will not be responsible for such liabilities and costs.
Gunite also may be subject to liabilities at other NPL sites or other
locations as a result of its past disposal of hazardous substances.
As a result of historical operations at the Gunite plant in Rockford, there
are areas on-site that have been affected by the disposal or spillage of raw
materials or wastes. Gunite does not know at this time whether any cleanup or
remediation of such areas will be required by any state, local or federal
agency, although it is possible that such areas may be included in the IPC
remediation. The Company believes that, to the extent on-site remediation or
cleanup is required, most of the alleged contamination would be attributable to
operations of Gunite prior to the acquisition of Gunite by TCI in 1987 and, as a
result of the Settlement, TCI and Gunite will not be responsible for such
liabilities and costs.
BRILLION. Brillion is likely to incur investigation and/or remediation
costs in connection with two landfills that it used to dispose of foundry
wastes. These landfills are the Brillion Iron Works Landfill, where Brillion was
the operator and sole generator of waste from 1980 through 1989, and the
adjacent City of Brillion Landfill, where Brillion may be a significant
generator of waste. Brillion disposed of plant trash at the City landfill from
1970 to 1975 and also disposed of foundry wastes in this landfill from 1976 to
1980. Both of these landfills are on the CERCLIS and the Wisconsin Remedial
Response Site list, and both have been scored by the WDNR and both have been
listed on the State's Hazard Ranking List as being above the threshold for
potential State remedial action. Although it is not possible to predict the
exact timing or amount of the expenditures that will be made in future years to
remediate these sites, the Company expects that investigation and/or remediation
will be required and that such expenditures could be substantial.
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Brillion has also disposed of foundry wastes at many other sites in the
Brillion area, a few of which are on the CERCLIS and the Wisconsin Remedial
Response Site list. It is possible that Brillion will incur remedial response
costs at some or all of these sites, although at this date, Brillion is not
aware of any action by federal or state regulators or private parties to
investigate or remediate any of these other sites.
In 1992, Brillion excavated two underground diesel fuel storage tanks which
were discovered to have leaked diesel fuel into surrounding soil as a result of
a 1978 spill. Brillion has removed approximately 300 cubic yards of contaminated
fill in connection with this incident. Although the WDNR initially indicated
that a deed restriction would be sufficient for managing this issue, Brillion
has not at this date been able to reach a satisfactory arrangement with the
owners of the Brillion property. Accordingly, Brillion expects to undertake
additional soil and groundwater analysis in connection with this matter.
As the Brillion facility has been in operation for many years, it is
possible that there are areas at this facility, other than the underground
storage tanks, that have been adversely affected by the handling of foundry
process materials and wastes. Brillion does not know at this time whether any
remediation of any such areas will be required by any state, local or federal
agency.
Brillion was the Robins Group (consisting of the Robins Family Trust, Karl
F. Gabler and First City Securities) entity that acquired a Beatrice subsidiary
(also named Brillion) from Beatrice in 1984. That purchase and sale agreement
obligates Beatrice to indemnify Brillion for any and all claims, liabilities,
losses and expenses resulting from loss of life, bodily injury or property
damage which arise out of accidents or injury-causing incidents occurring prior
to December 31, 1984, for which Brillion may be liable, regardless of when the
claims alleging such liability may be filed, but excluding obligations arising
from the design, formulation, manufacture or sale of a product prior to December
31, 1984. The Company believes that it has valid claims for indemnification
against Beatrice with respect to most of its disposal sites to the extent that
liabilities arise from incidents occurring prior to December 31, 1984. Beatrice
has disputed this interpretation and notified Brillion that it will not honor
any claims for indemnification (apart from one claim for breach of
representation made within two years after the sale). Brillion has also been
notified by the Robins Group (which sold Brillion to TCI) that it will not honor
any claims for indemnification. On May 25, 1994, TCI and Brillion filed suit
against Beatrice and the Robins Group for recovery of costs expended and for
declaratory and injunctive relief with respect to various environmental matters
pursuant to the indemnification provisions of the respective stock purchase
agreements and other causes of action, including CERCLA (TRUCK COMPONENTS INC.,
ET AL. V. BEATRICE COMPANY, ET AL., Northern District of Illinois). On June 10,
1994, TCI and Brillion filed a first amended complaint in this lawsuit to add
Hunt-Wesson, Inc., a corporate successor of Beatrice that may be a successor to
Beatrice's liabilities in these matters. In 1996, the district court entered
judgment against Brillion, holding that Beatrice and the Robins Group did not
owe any indemnity for Brillion's expenses at the sites, and that Brillion owed
Karl F. Gabler $0.2 million pursuant to a 1987 indemnity contract. Brillion has
appealed this adverse judgment; the appellate court is expected to rule on
Brillion's appeal in late 1997. Given the adverse judgment and the pending
appeal therefrom, there can be no assurance concerning the amounts, if any, that
Brillion will be able to recover on its indemnity or other claims against
Beatrice or the Robins Group, nor any assurances as to the timing of any such
recoveries.
JAC. Pursuant to an indemnification agreement between JAC and Bethlehem,
Bethlehem conducted investigations and remediations at several areas of JAC's
plants in Johnstown, Pennsylvania. In addition, under the purchase agreement
with Bethlehem, Bethlehem has indemnified JAC against certain environmental
liabilities relating to periods prior to the acquisition in October 1991.
BOSTROM. Subsurface investigations at Bostrom's Piedmont, Alabama facility
detected low concentrations of certain contaminants in the soil in a limited
area around a formerly used waste water underground storage tank. The Alabama
Department of Environmental Management ("ADEM") requested that Bostrom install a
monitoring well to obtain monitoring results on a semi-annual basis for a two
year period. Bostrom installed the well in March 1995 and submitted semi-annual
monitoring results
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to ADEM through March 1997. It is not known what remediation, if any, ADEM will
require. In addition, Bostrom is a PRP at the Muskego Landfill site in Wisconsin
and the PRPs have signed an allocation agreement pursuant to which Bostrom's
allocated share of the costs are not material.
FREIGHT CAR SERVICES. FCS has reached an agreement in principle with its
adjacent property owner for each party to share in the costs of completing an
investigation and implementing a corrective action plan to remediate diesel fuel
contamination detected in the soil and groundwater on the affected properties
located in Danville, Illinois. The investigation and corrective action plan were
implemented on a voluntary basis and not pursuant to any regulatory requirement,
and FCS' share of the costs was not material.
POTENTIAL COSTS. As of June 30, 1997, based on all the information
currently available, the Company maintained its environmental reserve in the
amount of $26.1 million for estimated future costs related to potential
environmental investigation and remediation liabilities with respect to certain
currently known matters. As a result of the Settlement, the Company's
environmental reserve was decreased in September 1997 by $14.3 million to $11.8
million. The environmental reserve is principally related to potential
remediation liability at various off-site locations and, to a lesser degree, to
potential remediation liability at Gunite's, Rockford, Illinois, and Brillion's,
Brillion, Wisconsin manufacturing facilities. This non-cash reserve is based on
current cost estimates and does not reduce estimated expenditures to net present
value. Further, the estimated reserve takes into consideration the number of
other PRPs at each site, the alleged volume of waste contributed by other PRPs
at each site, and the identity and financial position of such parties in light
of the joint and several nature of the liability, but it does not take into
account possible insurance coverage or other similar indemnification or
reimbursement other than the Settlement. Based upon all currently available
information, no reserve has been established with respect to potential
environmental obligations of JAC or Bostrom and an immaterial reserve has been
established at FCS. Because many of the matters described above, however, are at
the early stages in their respective investigations, there can be no assurance
that the amounts ultimately expended to address all of these matters or to
address other matters not yet known to be in existence will not exceed the
amounts allocated in the environmental reserve. Accordingly, it may be necessary
to establish additional reserves for environmental liabilities in the future.
Any cash expenditures required by the Company to comply with applicable
environmental laws and/or to pay for any remediation efforts will not be reduced
or otherwise affected by the existence of the environmental reserve. Management
believes, based on its evaluation of the various matters described above,
including its experience with such matters to date, the time period over which
it believes costs for such matters are likely to be incurred by the Company, and
the existence of the various indemnifications described above, that any costs
the Company ultimately will incur for such matters are not reasonably likely to
have a material adverse effect on the Company's business or financial results.
However, given the early stage of many of the matters, there can be no assurance
that one or more of these matters (or matters which have not yet been
identified) will not have such an effect. The Company currently anticipates
spending approximately $0.4 million per year for the current year and the next
two years and $0.5 million per year in years 2000 and 2001 (reduced as a result
of the Settlement from $0.5 million per year for the current year and the next
two years and approximately $1 million per year in the years 2000 and 2001) for
monitoring the various environmental sites associated with the environmental
reserve, including attorney and consultant costs for strategic planning and
negotiations with regulators and other PRPs, and payment of remedial
investigation costs. The Company expects to fund such expenditures with the cash
flow generated from its operations and amounts available under its revolving
credit facility. These sites are generally in the early investigatory stages of
the remediation process and thus it is anticipated that significant cash
payments for remediation will not be incurred for at least several years. After
the evaluation and investigation period, the investigation and remediation costs
will likely increase because the actual remediation of the various environmental
sites associated with the environmental reserve will likely be under way. In
addition, it is possible that the timing of any necessary expenditures could be
accelerated.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Set forth below is certain information concerning the directors and
executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- --- ----------------------------------------------------------------------
<S> <C> <C>
Thomas M. Begel.................... 54 Chairman of the Board, President and Chief Executive Officer of the
Company
Andrew M. Weller................... 50 Executive Vice President and Chief Financial Officer and Director of
the Company
David W. Riesmeyer................. 40 Vice President and Treasurer of the Company
Kenneth M. Tallering............... 35 Vice President, General Counsel and Secretary of the Company
James D. Cirar..................... 50 President and Chief Executive Officer of Johnstown America Corporation
and Senior Vice President of the Company
Thomas W. Cook..................... 60 President and Chief Executive Officer of Truck Components Inc.,
President--Gunite Corporation and Senior Vice President of the Company
Timothy A. Masek................... 33 President of Bostrom Seating, Inc. and Vice President-- Corporate
Development of the Company
John D. McClain.................... 53 President--Brillion Iron Works, Inc.
Mark A. Niemela.................... 62 President--Fabco Automotive Corporation
Edward J. Whalen................... 48 President of Freight Car Services, Inc. and JAIX Leasing Company and
Vice President of the Company
Camillo Santomero.................. 39 Director
R. Philip Silver................... 54 Director
Francis A. Stroble................. 66 Director
</TABLE>
THOMAS M. BEGEL, has served as President since October 1991 and as Chairman
of the Board and Chief Executive Officer since May 1993. He is also President
of, and a partner in, TMB Industries ("TMB"), an investment firm which is a
partnership between himself and Mr. Weller. Mr. Begel has served as a director
of Silgan Holdings Inc. since March 1997 and was a director of Uniroyal Chemical
Corporation from 1990 to 1996.
ANDREW M. WELLER, has served as Executive Vice President, Chief Financial
Officer and a Director of the Company since September 1994 and as Secretary from
March 1995 to November 1995. From April 1988 to September 1994, he was Vice
President and Treasurer of Bethlehem Steel Corporation and prior thereto held
various other positions with Bethlehem. He has also been Executive Vice
President of, and a partner in TMB since September 1994.
DAVID W. RIESMEYER, has served as Vice President and Treasurer since
September 1995 and previously as Treasurer and Controller of the Company since
March 1995. Mr. Riesmeyer served as Director of Financial Reporting and Planning
from January 1994 through March 1995. From 1991 to 1993, Mr. Riesmeyer was Vice
President of Corporate Development at the Park Corporation and from 1988 to
August 1992, he was Vice President of Finance of the Park Corporation.
KENNETH M. TALLERING, has served as Vice President, General Counsel and
Secretary of the Company since November 1995. From September 1987 to October
1995, Mr. Tallering was an attorney with Skadden, Arps, Slate, Meagher & Flom.
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JAMES D. CIRAR, has served as President and Chief Executive Officer of
Johnstown America Corporation since September 1995 and Senior Vice President of
the Company since July 1997. Prior to September 1995, Mr. Cirar was the Plant
Manager of the Truck and Bus Assembly Group of General Motors Corporation in
Flint, Michigan.
THOMAS W. COOK, has been the President and Chief Executive Officer of Truck
Components Inc. since May 1994 and President of Gunite Corporation since 1991.
Mr. Cook has been Senior Vice President of the Company since July 1997. He was
President and Chief Executive Officer of Redlaw Industries, Inc. from 1986 to
1991. From 1967 to 1986, Mr. Cook was with ITT Grinnell Corporation where he
became President in 1983.
TIMOTHY A. MASEK, has served as President of Bostrom Seating, Inc. since
June 1996 and as Vice President--Corporate Development of the Company since
December 1995. From September 1992 to December 1995, Mr. Masek performed
marketing and corporate development functions for the Company. Prior to
September 1992, Mr. Masek was a Market Analyst for the Transportation Equipment
Group of Bombardier Corporation.
JOHN D. MCCLAIN, joined Brillion Iron Works, Inc. as Manager of
Manufacturing in 1988 and was appointed Vice President of Manufacturing in 1989.
Mr. McClain was promoted to his present position of President in 1994. Prior to
joining Brillion, Mr. McClain held metallurgical and foundry manager positions
at Owens-Illinois, Emerson Electric and Clow Valve Company.
MARK A. NIEMELA, joined Fabco Automotive Corporation in 1966 as Production
Control Manager. He held the positions of Material Manager and Plant Manager
before his appointment to the position of General Manger in 1975 and was
appointed President in 1986.
EDWARD J. WHALEN, has served as President of JAIX Leasing Company since its
inception in December 1994 and as President of Freight Car Services, Inc. since
March 1995. Mr. Whalen has served as Vice President of the Company since January
1997. Mr. Whalen also served as Secretary of the Company from October 1991 until
March 1995, as Treasurer of the Company from May 1993 until March 1995 and as
Vice President of the Company from October 1991 until October 1995. From 1989 to
1991, he was a financial and rail car industry consultant.
CAMILLO SANTOMERO, has served as a Director of the Company since October
1991. Mr. Santomero has been a private investor and a Senior Consultant to Chase
Capital Partners (formerly Chemical Venture Partners) from January 1992 to the
present. From October 1988 to January 1992, he was a General Partner of Chase
Capital Partners.
R. PHILIP SILVER, has served as a Director of the Company since December
1993. Mr. Silver is Chairman of the Board of Silgan Holdings Inc., and has been
either Chairman of the Board or President and a Director since 1988.
FRANCIS A. STROBLE, has served as a Director of the Company since December
1993. Mr. Stroble is a retired Senior Vice President and Chief Financial Officer
of Monsanto Company, a position he held from 1982 to 1994. He is also a Director
of Merchantile Bancorporation, Inc.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
THE ORIGINAL NOTES
In August 1995, the Company issued $100 million of 11 3/4% Senior
Subordinated Notes due 2005 with terms and conditions substantially identical to
the Notes.
SENIOR BANK FACILITIES
On August 23, 1995, the Company entered into the Senior Bank Facilities with
The Chase Manhattan Bank, as administrative agent and collateral agent, and the
lenders named therein. The net proceeds of the Old Notes Offering was used to
repay in full the outstanding indebtedness of the Tranche A Term Loans (as
defined below). Chase Securities Inc. has acted as advisor and arranger in
connection with the Senior Bank Facilities.
STRUCTURE. Prior to the Old Notes Offering, the Senior Bank Facilities
consisted of (a) a term loan facility with an initial aggregate principal amount
of $200 million (the "Term Loan Facility"), consisting of two tranches in equal
aggregate principal amounts (the "Tranche A Term Loans" and the "Tranche B Term
Loans") of which $80.0 million and $95.0 million were outstanding under the
Tranche A Term Loans and Tranche B Term Loans, respectively, (b) a revolving
credit facility providing for revolving loans (the "Revolving Loans") to the
Company and the issuance of U.S. dollar-denominated letters of credit for the
account of the Company in an aggregate principal amount (including the aggregate
stated amount of letters of credit and the aggregate reimbursement and other
obligations in respect thereof) at any time not to exceed the lesser of (i) $100
million and (ii) a borrowing base comprised of a percentage of eligible accounts
receivable and a percentage of eligible inventory of the Company and certain of
its subsidiaries (provided that not more than $35 million may be represented by
amounts in respect of letters of credit) (the "Revolving Facility") and (c) a
swingline facility under which the Company may make short-term borrowings of up
to $10 million (such borrowings to reduce availability under the Revolving
Facility).
In connection with the Old Notes Offering, the Tranche A Term Loans were
repaid in full and the Company amended the Credit Agreement to reduce the
Revolving Facility from $100.0 million to $75.0 million.
AVAILABILITY; PREPAYMENT. The availability of the Senior Bank Facilities is
subject to various conditions precedent typical of bank loans, including, among
other things, the absence of any material adverse change on the part of the
Company. The full amount of the Term Loan Facility was drawn in a single drawing
at the closing of the offering of the Original Notes and amounts repaid or
prepaid under the Term Loan Facility may not be reborrowed.
The Revolving Loans mature on March 31, 2002. The Tranche B Term Loans
mature on March 31, 2003. The loans under the Term Loan Facility amortize
quarterly. The Company must, substantially simultaneously with the receipt of
the Net Cash Proceeds (as defined in the Senior Bank Facilities) from the
issuance of the Notes, apply 100% of such Net Cash Proceeds to prepay
outstanding loans under the Term Loan Facility in accordance with the terms of
the Senior Bank Facilities.
The Company is required to make mandatory prepayments of the loans under the
Term Loan Facility at times and subject to exceptions agreed upon, in amounts
equal to (a) 75% of consolidated excess cash flow and (b) 100% of the net
proceeds of certain dispositions of assets or issuances of debt or equity of the
Company or any of its subsidiaries. In addition, the Company is required to
prepay loans under the Revolving Facility (and/or replace or cash collateralize
letters of credit thereunder) at any time that the aggregate amount of the loans
(including swingline loans) and letters of credit (including reimbursement
obligations) outstanding thereunder exceeds the then-current borrowing base. At
the Company's option, loans may be prepaid, and revolving credit commitments may
be permanently
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reduced, in whole or in part, at any time. Any prepayment of LIBOR loans other
than at the end of an interest period is subject to reimbursement of breakage
costs.
As a result of the Old Notes Offering, the Company's principal payments
under the Tranche B Term Loans for the remainder of 1997 and for 1998, 1999,
2000, 2001, 2002 and 2003 will be $1.7 million, $3.3 million, $3.3 million,
$20.0 million, $23.3 million, $26.7 million and $16.7 million, respectively. See
"Use of Proceeds."
SECURITY; GUARANTY. The obligations of the Company under the Senior Bank
Facilities are unconditionally and irrevocably guaranteed, jointly and
severally, by each existing and each subsequently acquired or created domestic
subsidiary of the Company (other than JAIX Leasing). In addition, the Senior
Bank Facilities and the guarantees thereunder are secured by security interests
in and pledges of or liens on substantially all the tangible and intangible
assets of the Company and the guarantors, including pledges of all the capital
stock of, or other equity interests in, each direct or indirect domestic
subsidiary of the Company and 65% of the capital stock of, or other equity
interests in, each foreign subsidiary of the Company or of any guarantor.
INTEREST. At the Company's election, the interest rates per annum
applicable to the loans under the Senior Bank Facilities are a fluctuating rate
of interest measured by reference to either (a) an adjusted London inter-bank
offered rate ("LIBOR") plus a borrowing margin or (b) an alternate base rate
("ABR") (equal to the highest of The Chase Manhattan Bank's published prime
rate, a certificate of deposit rate plus 1% and the Federal Funds effective rate
plus 1/2 of 1%) plus a borrowing margin. The borrowing margins applicable to
Revolving Loans range between 0.50% and 1.50% for ABR loans and between 1.50%
and 2.50% for LIBOR loans, fluctuating within each range in 0.25% increments if
the Company achieves or fails to achieve certain financial results. Amounts
under the Senior Bank Facilities not paid when due bear interest at a default
rate equal to 2.0% above the otherwise applicable rate.
The interest rate borrowing margins applicable to the Tranche B Term Loans
are currently 3.00% for LIBOR loans and 2.00% for ABR loans and are not subject
to increase or decrease based on the financial performance of the Company
FEES. The Company has agreed to pay certain fees with respect to the Senior
Bank Facilities, including (a) a per annum letter of credit fee on the aggregate
face amount of outstanding letters of credit equal to the interest rate spread
over adjusted LIBOR applicable to Revolving Loans from time to time, (b) a
fronting bank fee for the letter of credit issuing bank, (c) annual
administration fees and (iv) agent, arrangement and other similar fees. In
addition, the Company paid a fee in connection with the amendment of the Credit
Agreement and the reduction in the Revolving Facility from $100 million to $75
million.
COVENANTS. The Senior Bank Facilities contain a number of covenants that,
among other things, restrict the ability of the Company and its subsidiaries to
dispose of assets, incur additional indebtedness, incur guarantee obligations,
prepay other indebtedness or amend other debt instruments, pay dividends, create
liens on assets, enter into sale and leaseback transactions, make investments,
loans or advances, make acquisitions, engage in mergers or consolidations,
change the business conducted by the Company, make capital expenditures, or
engage in certain transactions with affiliates and otherwise restrict certain
corporate activities. In addition, under the Senior Bank Facilities the Company
is required to comply with specified financial ratios and tests, including
minimum interest coverage ratios, maximum leverage ratios, annual capital
expenditures limitations and net worth tests.
In connection with the Old Notes Offering, the Company amended the Credit
Agreement to reset the financial covenants for the remaining term of the Credit
Agreement. The banks also have consented to the issuance of the Notes. Covenant
modifications under the Credit Agreement include reductions of the minimum
consolidated net worth requirement and reductions of the minimum interest
coverage and the total debt ratios. The amended minimum consolidated net worth
covenant specifies minimum consolidated net worth for each quarter during the
remaining period of the loans of $53 million plus 50% of the
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cumulative amount of positive consolidated net income of the Company (excluding
JAIX Leasing). The amended interest coverage and total debt ratio covenants
specify minimum interest coverage and total debt ratios as set forth below:
<TABLE>
<CAPTION>
REVISED INTEREST REVISED TOTAL
PERIOD ENDED COVERAGE RATIO DEBT RATIO
- --------------------------------------- ----------------- -------------------
<S> <C> <C>
9/30/97 1.30x 5.75x
12/31/97 1.30x 5.50x
3/31/98-6/30/98 1.35x 5.25x
9/30/98 1.40x 5.00x
12/31/98 1.50x 5.00x
3/31/99-12/31/99 1.50x 5.00x
3/31/00-12/31/00 1.50x 4.75x
3/31/01-12/31/01 1.50x 4.25x
3/31/02 and thereafter 1.75x 3.75x
</TABLE>
The Senior Bank Facilities also contain provisions that prohibit any
modification of the Indentures in any manner adverse to the lenders under the
Senior Bank Facilities and that will limit the Company's ability to refinance
the Notes or the Original Notes without the consent of such lenders.
EVENTS OF DEFAULT. The Senior Bank Facilities contain customary events of
default including nonpayment of principal, interest or fees, violation of
covenants, inaccuracy of representations or warranties in any material respect,
cross default and cross acceleration to certain other indebtedness, bankruptcy,
material judgments and liabilities and change of control.
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DESCRIPTION OF EXCHANGE NOTES
GENERAL
Set forth below is a summary of certain provisions of the Exchange Notes and
the Old Notes (collectively referred to as, the "Notes"). The Exchange Notes
will be, and the Old Notes were, issued pursuant to an indenture (the
"Indenture") dated as of August 11, 1997 among the Company, each of the
Guarantor Subsidiaries and The Bank of New York, as trustee (the "Trustee"). The
following summary does not purport to be complete and is subject to, and is
qualified in its entirety by, reference to all of the provisions of the Notes
and the Indenture. The terms of the Exchange Notes are the same in all respects
(including principal amount, interest rate, maturity, security and ranking) as
the terms of the Old Notes for which they may be exchanged pursuant to the
Exchange Offer, except that the Exchange Notes (i) are freely transferable by
holders thereof (except as provided below) and (ii) are not entitled to certain
registration rights and certain liquidated damages which are applicable to the
Old Notes under the Registration Rights Agreement. The Exchange Notes will be
issued under the Indenture governing the Old Notes.
The terms of the Indenture are also governed by certain provisions contained
in the Trust Indenture Act. Capitalized terms used herein and not otherwise
defined shall have the meanings set forth in the section "Certain Definitions."
Wherever particular provisions of the Indenture are referred to in this summary,
such provisions are incorporated by reference as a part of the statements made
and such statements are qualified in their entirety by such reference.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Company in the Borough of Manhattan, The City of New York (which initially shall
be the corporate trust office of the Trustee, at 101 Barclay Street, New York,
New York 10286), except that, at the option of the Company, payment of interest
may be made by check mailed to the address of the Holders as such address
appears in the Note Register.
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple of $1,000. No service charge
shall be made for any registration of transfer or exchange of Notes, but the
Company may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith.
TERMS OF THE NOTES
The Notes are unsecured senior subordinated obligations of the Company,
limited to $80 million aggregate principal amount, and will mature on August 15,
2005. Each Note will bear interest at 11 3/4% per annum from August 11, 1997, or
from the most recent date to which interest has been paid or provided for,
payable semiannually to Holders of record at the close of business on the
February 1 or August 1 immediately preceding the interest payment date on
February 15 and August 15 of each year, commencing February 15, 1998.
OPTIONAL REDEMPTION
The Notes will be redeemable, at the Company's option, in whole or in part,
at any time on or after August 15, 2000, and prior to maturity, upon not less
than 30 nor more than 60 days prior notice mailed by first-class mail to each
Holder's registered address, at the following redemption prices (expressed in
percentages of principal amount), plus accrued interest to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment
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date), if redeemed during the 12-month period commencing on or after August 15
of the years set forth below:
<TABLE>
<CAPTION>
PERIOD REDEMPTION PRICE
- -------------------------------------------------------------------------- ------------------
<S> <C>
2000...................................................................... 105.875%
2001...................................................................... 103.917%
2002...................................................................... 101.958%
2003 and thereafter....................................................... 100.000%
</TABLE>
In addition, at any time and from time to time prior to August 15, 1998, the
Company may redeem in the aggregate up to 33 1/3% of the original aggregate
principal amount of Notes with the proceeds of one or more Public Equity
Offerings following which there is a Public Market, at a redemption price
(expressed as a percentage of principal amount) of 111.75% plus accrued interest
to the redemption date; provided, however, that at least 66 2/3% of the original
aggregate principal amount of the Notes must remain outstanding after each such
redemption.
Notwithstanding the preceding two paragraphs, the Company will not be
permitted to redeem the Original Notes unless, substantially concurrently with
such redemption, the Company redeems an aggregate principal amount of Notes
(rounded to the nearest integral multiple of $1,000) equal to the product of:
(1) a fraction, the numerator of which is the aggregate principal amount of
Original Notes to be so redeemed and the denominator of which is the aggregate
principal amount of Original Notes outstanding immediately prior to such
proposed redemption and (2) the aggregate principal amount of Notes outstanding
immediately prior to such proposed redemption. Similarly, the Company will not
be permitted to redeem the Notes unless, substantially concurrently with such
redemption, the Company redeems an aggregate principal amount of Original Notes
(rounded to the nearest integral multiple of $1,000) equal to the product of:
(1) a fraction, the numerator of which is the aggregate principal amount of
Notes to be so redeemed and the denominator of which is the aggregate principal
amount of Notes outstanding immediately prior to such proposed redemption and
(2) the aggregate principal amount of Original Notes outstanding immediately
prior to such proposed redemption.
SELECTION
In the case of any partial redemption, selection of the Notes for redemption
will be made by the Trustee on a pro rata basis, by lot or by such other method
as the Trustee in its sole discretion shall deem to be fair and appropriate,
although no Note of $1,000 in original principal amount or less shall be
redeemed in part. If any Note is to be redeemed in part only, the notice of
redemption relating to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note.
RANKING
The indebtedness evidenced by the Notes is Senior Subordinated Indebtedness
of the Company, subordinated in right of payment to all existing and future
Senior Indebtedness of the Company, ranks pari passu in right of payment with
all existing and future Senior Subordinated Indebtedness of the Company
(including the Original Notes) and is senior in right of payments to all
existing future Subordinated Obligations of the Company.
As of June 30, 1997, on a pro forma basis after giving effect to the Old
Notes Offering, the aggregate amount of the Company's (excluding its
consolidated subsidiaries) outstanding Senior Indebtedness would have been $95.0
million (excluding unused commitments and $17.1 million of outstanding letters
of credit), the liabilities of the Guarantor Subsidiaries (including trade
payables and deferred taxes but excluding the Subsidiary Guaranty and subsidiary
guarantees of the Senior Bank Facilities) would have
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totalled approximately $198.7 million, and the Company would have had $100
million of Senior Subordinated Indebtedness outstanding other than the Notes.
Although the Indenture contains limitations on the amount of additional
Indebtedness that the Company and its Restricted Subsidiaries may Incur, under
certain circumstances the amount of such Indebtedness could be substantial and,
in any case, such Indebtedness may be Senior Indebtedness. See "Certain
Covenants--Limitation on Indebtedness" below.
All of the Company's operations are currently conducted through its
Subsidiaries. The Notes are Guaranteed by each of the Company's existing and
future Restricted Subsidiaries on an unsecured, senior subordinated basis. See
"Subsidiary Guaranty" and "Certain Covenants--Future Guarantor Subsidiaries".
However, the Subsidiary Guarantee of each Guarantor Subsidiary is subordinated
in right of payment to all Senior Indebtedness of such Guarantor Subsidiary,
including each Guarantor Subsidiary's Guarantee of the Senior Bank Facilities.
"Senior Indebtedness" means all Indebtedness of the Company, including
interest and fees thereon, and including all Bank Indebtedness, whether
outstanding on the date of the Indenture or thereafter Incurred, unless in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding it is provided that such obligations are not superior in right of
payment to the Notes; provided, however, that Senior Indebtedness will not
include (1) any obligation of the Company to any Subsidiary (other than the
Leasing Support Agreement), (2) any liability for Federal, state, local or other
taxes owed or owing by the Company, (3) any accounts payable or other liability
to trade creditors arising in the ordinary course of business (including
Guarantees thereof or instruments evidencing such liabilities), (4) any
Indebtedness, Guarantee or obligation of the Company which is subordinate or
junior to any other Indebtedness, Guarantee or obligation of the Company, (5)
any obligations in respect of Capital Stock, or (6) any Indebtedness Incurred in
violation of the Indenture. If any Designated Senior Indebtedness is disallowed,
avoided or subordinated pursuant to the provisions of Section 548 of Title 11 of
the United States Code or any applicable state fraudulent conveyance law, such
Designated Senior Indebtedness nevertheless will constitute Senior Indebtedness.
"Senior Indebtedness" of any Guarantor Subsidiary has a correlative meaning.
Only Indebtedness of the Company or a Guarantor Subsidiary that is Senior
Indebtedness ranks senior to the Notes in accordance with the provisions of the
Indenture. The Notes rank PARI PASSU with all other Senior Subordinated
Indebtedness of the Company or a Guarantor Subsidiary (including the Original
Notes). However, in the event of an Asset Disposition, the Company will be
required to use the proceeds to repay certain debt, including Senior
Indebtedness and the Original Notes, before any proceeds remaining from the
Asset Disposition would be available to fund a required offer to purchase the
Notes. See "Certain Covenants--Limitation on Sales of Assets and Subsidiary
Stock." Each of the Company and the Guarantor Subsidiaries has agreed in the
Indenture that it will not Incur, directly or indirectly, any Indebtedness which
is subordinate or junior in ranking in any respect to Senior Indebtedness unless
such Indebtedness is Senior Subordinated Indebtedness (including the Original
Notes) or is expressly subordinated in right of payment to Senior Subordinated
Indebtedness. Unsecured Indebtedness is not deemed to be subordinate or junior
to Secured Indebtedness merely because it is unsecured.
The Company may not pay principal of, premium (if any) or interest on, the
Notes or make any deposit pursuant to the provisions described under
"Defeasance" below and may not otherwise purchase or retire any Notes
(collectively, "pay the Notes") if (i) any Senior Indebtedness is not paid when
due or (ii) any other default on Senior Indebtedness occurs and the maturity of
such Senior Indebtedness is accelerated in accordance with its terms unless, in
either case, the default has been cured or waived and any such acceleration has
been rescinded or such Senior Indebtedness has been paid in full. However, the
Company may pay the Notes without regard to the foregoing if the Company and the
Trustee receive written notice approving such payment from the Representative of
the Designated Senior Indebtedness with respect to which either of the events
set forth in clause (i) or (ii) of the
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immediately preceding sentence has occurred and is continuing. During the
continuance of any default (other than a default described in clause (i) or (ii)
of the second preceding sentence) with respect to any Designated Senior
Indebtedness pursuant to which the maturity thereof may be accelerated
immediately without further notice (except such notice as may be required to
effect such acceleration) or the expiration of any applicable grace periods, the
Company may not pay the Notes for a period (a "Payment Blockage Period")
commencing upon the receipt by the Company and the Trustee of written notice (a
"Blockage Notice") of such default from the Representative of such Designated
Senior Indebtedness specifying an election to effect a Payment Blockage Period
and ending 179 days
thereafter (or earlier if such Payment Blockage Period is terminated (i) by
written notice to the Trustee and the Company from the Person or Persons who
gave such Blockage Notice, (ii) because the default giving rise to such Blockage
Notice is no longer continuing or (iii) because such Designated Senior
Indebtedness has been repaid in full). Notwithstanding the provisions described
in the immediately preceding sentence, unless the holders of such Designated
Senior Indebtedness or the Representative of such holders have accelerated the
maturity of such Designated Senior Indebtedness, the Company may resume payments
on the Notes after the end of such Payment Blockage Period. Not more than one
Blockage Notice may be given in any consecutive 360-day period, irrespective of
the number of defaults with respect to Designated Senior Indebtedness during
such period. However, if any Blockage Notice within such 360-day period is given
by or on behalf of any holders of Designated Senior Indebtedness (other than the
Senior Bank Facilities), the Representative of the Senior Bank Facilities may
give another Blockage Notice within such period. In no event, however, may the
total number of days during which any Payment Blockage Period or Periods is in
effect exceed 179 days in the aggregate during any 360 consecutive day period.
Upon any payment or distribution of the assets of the Company upon a total
or partial liquidation or dissolution or reorganization of or similar proceeding
relating to the Company or its property, the holders of Senior Indebtedness will
be entitled to receive payment in full of the Senior Indebtedness before the
Noteholders are entitled to receive any payment and until the Senior
Indebtedness is paid in full, any payment or distribution to which Noteholders
would be entitled but for the subordination provisions of the Indenture will be
made to holders of the Senior Indebtedness as their interest may appear. If a
payment or distribution is made to Noteholders that, due to the subordination
provisions, should not have been made to them, such Noteholders are required to
hold such payment or distribution in trust for the benefit of the holders of the
Senior Indebtedness and pay it over to them as their interests may appear.
If payment of the Notes is accelerated because of an Event of Default, the
Company or the Trustee shall promptly notify the holders of the Designated
Senior Indebtedness or the Representative of such holders of the acceleration.
The Company may not pay the Notes until five Business Days after such holders or
the Representative of the Designated Senior Indebtedness receive notice of such
acceleration and, thereafter, may pay the Notes only if the subordination
provisions of the Indenture otherwise permit payment at that time.
By reason of such subordination provisions contained in the Indenture, in
the event of insolvency, creditors of the Company who are holders of Senior
Indebtedness may recover more, ratably, than the Noteholders, and creditors of
the Company who are not holders of Senior Indebtedness or of Senior Subordinated
Indebtedness (including the Notes) may recover less, ratably, than holders of
Senior Indebtedness and may recover more, ratably, than the holders of Senior
Subordinated Indebtedness.
SUBSIDIARY GUARANTY
Each of the Company's existing and future Restricted Subsidiaries, as
primary obligor and not merely as surety, will irrevocably and fully and
unconditionally Guarantee on an unsecured, senior subordinated basis the
performance and punctual payment when due, whether at Stated Maturity, by
acceleration or otherwise, of all obligations of the Company under the Indenture
and the Notes, whether for principal of or interest on the Notes, expenses,
indemnification or otherwise (all such obligations
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guaranteed by such Guarantor Subsidiaries being herein called the "Guaranteed
Obligations"). Such Guarantor Subsidiaries will agree to pay, in addition to the
amount stated above, any and all expenses (including reasonable counsel fees and
expenses) incurred by the Trustee or the Holders in enforcing any rights under
the Subsidiary Guaranty. Each Subsidiary Guaranty will be limited in amount to
an amount not to exceed the maximum amount that can be Guaranteed by the
applicable Guarantor Subsidiary without rendering the Subsidiary Guaranty, as it
relates to such Guarantor Subsidiary, voidable under applicable law relating to
fraudulent conveyance or fraudulent transfer or similar laws affecting the
rights of creditors generally. After the Issue Date, the Company will cause each
Restricted Subsidiary which Incurs Indebtedness, including each Restricted
Subsidiary which is a guarantor of Indebtedness Incurred pursuant to clause
(b)(1) of the covenant described under "Certain Covenants Limitation on
Indebtedness," to execute and deliver to the Trustee a Subsidiary Guaranty
pursuant to which such Restricted Subsidiary will Guarantee payment of the
Notes.
The Subsidiary Guaranty is a continuing Guarantee and shall (a) remain in
full force and effect until payment in full of all the Guaranteed Obligations,
(b) be binding upon such Guarantor Subsidiaries and (c) enure to the benefit of
and be enforceable by the Trustee, the Holders and their successors, transferees
and assigns.
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each Holder will have the right to require the Company to repurchase
all or any part of such Holder's Notes at a purchase price in cash equal to 101%
of the principal amount thereof plus accrued and unpaid interest, if any, to the
date of purchase (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date):
(i) any "Person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than one or more Permitted Holders, is or becomes
the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a Person shall be deemed to have "beneficial ownership" of
all shares that any such Person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the Voting Stock of the Company; provided
that the Permitted Holders beneficially own (as defined in Rules 13d-3 and
13d-5 under the Exchange Act), directly or indirectly, in the aggregate a
lesser percentage of the Voting Stock of the Company than such other Person
and do not have the right or ability by voting power, contract or otherwise
to elect or designate for election a majority of the Board of Directors of
the Company; or
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board of Directors
or whose nomination for election by the stockholders of the Company was
approved by a vote of a majority of the directors of the Company then still
in office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the Board of Directors of the Company
then in office.
In the event that at the time of such Change of Control the terms of the
Bank Indebtedness restrict or prohibit the repurchase of Notes pursuant to this
covenant, then prior to the mailing of the notice to Holders provided for in the
immediately following paragraph but in any event within 30 days following any
Change of Control, the Company shall: (i) repay in full all Bank Indebtedness or
offer to repay in full all Bank Indebtedness and repay the Bank Indebtedness due
to each lender who has accepted such offer; or (ii) obtain the requisite consent
under the agreements governing the Bank Indebtedness to permit the repurchase of
the Notes as provided for in the immediately following paragraph.
Within 30 days following any Change of Control, the Company shall mail a
notice to each Holder with a copy to the Trustee stating: (1) that a Change of
Control has occurred and that such Holder has
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the right to require the Company to purchase such Holder's Notes at a purchase
price in cash equal to 101% of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of purchase (subject to the right of
Holders of record on a record date to receive interest on the relevant interest
payment date); (2) the circumstances and relevant facts and financial
information regarding such Change of Control, including information with respect
to pro forma historical income, cash flow and capitalization after giving effect
to such Change of Control; (3) the repurchase date (which shall be no earlier
than 30 days nor later than 60 days from the date such notice is mailed); and
(4) the instructions determined by the Company, consistent with this covenant,
that a Holder must follow in order to have its Notes purchased.
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to this covenant. To the
extent that the provisions of any securities laws or regulations conflict with
provisions of this covenant, the Company will comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under this paragraph (c) by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
the Company and the Initial Purchaser. Management has no present intention to
engage in a transaction involving a Change of Control, although it is possible
that the Company would decide to do so in the future. Subject to the limitations
discussed below, the Company could, in the future, enter into certain
transactions, including acquisitions, refinancings or other recapitalizations,
that would not constitute a Change of Control under the Indenture, but that
could increase the amount of indebtedness outstanding at such time or otherwise
affect the Company's capital structure or credit ratings.
A Change of Control would also constitute a "Change of Control" as defined
in the Original Indenture, and would require a purchase offer to be made in
respect of the Original Notes at a purchase
price in cash equal to 101% of the principal amount thereof. In addition, the
occurrence of certain of the events which would constitute a Change of Control
would constitute a default under the Senior Bank Facilities. Future Senior
Indebtedness of the Company may contain prohibitions of certain events which
would constitute a Change of Control or require such Senior Indebtedness to be
repurchased upon a Change of Control. Moreover, the exercise by the Holders of
their right to require the Company to repurchase the Notes could cause a default
under such Senior Indebtedness, even if the Change of Control itself does not,
due to the financial effect of such repurchase on the Company. Finally, the
Company's ability to pay cash to the Holders upon a repurchase may be limited by
the Company's then existing financial resources. There can be no assurance that
sufficient funds will be available when necessary to make any required
repurchases.
CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
LIMITATION ON INDEBTEDNESS. (a) The Company shall not, and shall not permit
any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness;
provided, however, that the Company may Incur Indebtedness if on the date of the
Incurrence of such Indebtedness the Consolidated Coverage Ratio exceeds 2.25 to
1.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur the following Indebtedness: (1) Indebtedness
of the Company Incurred pursuant to the Term Loan Facility (as the same may be
amended from time to time, without increasing the committed amount outstanding,
except as otherwise permitted by this covenant) less the amount of any
repayments of principal made since the Original Issue Date, including any
repayments made with the proceeds from the offering of the Notes; (2)
Indebtedness of the Company Incurred pursuant to the Revolving Facility or under
other agreements in an amount not to exceed the greater of (A) amounts available
under the Revolving Facility (as the same may be amended from time to time,
without increasing the committed
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amount outstanding, except as otherwise permitted by this covenant) and (B)
amounts available under any other senior secured facility providing for
revolving loans to the Company, provided that the maximum aggregate principal
amount available under such other revolving facility shall not exceed the
Borrowing Base at the time such Indebtedness is Incurred; (3) Indebtedness (A)
of the Company owed to and held by a Wholly Owned Subsidiary or (B) of any
Restricted Subsidiary owed to and held by the Company or any other Wholly Owned
Subsidiary; provided, however, that any subsequent issuance or transfer of any
Capital Stock or other event which results in any such Wholly Owned Subsidiary
ceasing to be a Wholly Owned Subsidiary or any subsequent transfer of such
Indebtedness (other than to the Company or another Wholly Owned Subsidiary)
shall be deemed, in each case, to constitute the Incurrence of such Indebtedness
by the issuer thereof; (4) the Original Notes and the Notes; (5) Indebtedness
outstanding on the date of the Original Indenture (other than Indebtedness
described in clause (1), (2)(A), (4) or (11) of this paragraph) and Indebtedness
Incurred under Section 4.03(a) of the Original Indenture prior to the Issue
Date; (6) Refinancing Indebtedness in respect of Indebtedness Incurred pursuant
to paragraph (a) or pursuant to clause (1), (2), (3), (4), (5) or this clause
(6); (7) (A) Indebtedness in respect of performance bonds, bankers' acceptances,
letters of credit and surety or appeal bonds provided by the Company and the
Restricted Subsidiaries to their customers in the ordinary course of their
business, and (B) Hedging Obligations consisting of Interest Rate Agreements
with respect to Indebtedness permitted to be Incurred pursuant to the Indenture;
provided, however, that such Interest Rate Agreements do not increase the
Indebtedness outstanding at any time other than as a result of fluctuations in
interest rates or by reason of fees, indemnities and compensation payable
thereunder; (8) Purchase Money Indebtedness and Capital Lease Obligations which
do not exceed $10 million at any time outstanding; (9) Indebtedness represented
by the Subsidiary Guaranty and Guarantees of Indebtedness Incurred pursuant to
clause (1), (2) or (4) above; (10) Indebtedness (other than Indebtedness
permitted by clauses (1) through (9) above, clause (11) below or paragraph (a))
in an aggregate principal amount which, when added to (A) all other Indebtedness
Incurred pursuant to this clause (10) and then outstanding and (B) all other
Indebtedness Incurred pursuant to Section 4.03(b)(10) of the Original Indenture
and then outstanding, does not exceed $10 million at any time outstanding; and
(11) Indebtedness pursuant to the Leasing Support Agreement.
(c) Notwithstanding the foregoing, the Company shall not Incur any
Indebtedness pursuant to the foregoing paragraph (b) if the proceeds thereof are
used, directly or indirectly, to Refinance any Subordinated Obligations unless
such Indebtedness shall be subordinated to the Notes to at least the same extent
as such Subordinated Obligations. The Company shall not Incur any Indebtedness
pursuant to sections (a) or (b) of the covenant described under "--Limitation on
Indebtedness" if such Indebtedness is subordinate or junior in ranking in any
respect to any Senior Indebtedness unless such Indebtedness is Senior
Subordinated Indebtedness or is expressly subordinated in right of payment to
Senior Subordinated Indebtedness. In addition, the Company shall not Incur any
Secured Indebtedness which is not Senior Indebtedness unless contemporaneously
therewith effective provision is made to secure the Notes equally and ratably
with (or on a senior basis to, in the case of Indebtedness subordinated in right
of payment to the Notes) such Secured Indebtedness for so long as such Secured
Indebtedness is secured by a Lien.
LIMITATION ON RESTRICTED PAYMENTS. (a) The Company shall not, and shall not
permit any Restricted Subsidiary, directly or indirectly, to make a Restricted
Payment if at the time the Company or such Restricted Subsidiary makes such
Restricted Payment: (1) a Default shall have occurred and be continuing (or
would result therefrom); (2) the Company is not able to Incur an additional
$1.00 of Indebtedness pursuant to paragraph (a) of the covenant described under
"--Limitation on Indebtedness"; or (3) the aggregate amount of such Restricted
Payment and all other Restricted Payments since the Original Issue Date would
exceed the sum of: (A) 50% of the Consolidated Net Income accrued during the
period (treated as one accounting period) from July 1, 1995 to the end of the
most recent fiscal quarter ending at least 45 days prior to the date of such
Restricted Payment (or, in case such Consolidated Net Income shall be a deficit,
minus 100% of such deficit); (B) the aggregate Net Cash Proceeds received by the
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Company from the issuance or sale of its Capital Stock (other than Disqualified
Stock) subsequent to the Original Issue Date (other than an issuance or sale to
a Subsidiary of the Company and other than an issuance or sale to an employee
stock ownership plan or other trust established by the Company or any of its
Subsidiaries for the benefit of their employees to the extent the purchase by
such plan or trust is financed by Indebtedness of such plan or trust and for
which the Company is liable as Guarantor or otherwise); (C) the amount by which
Indebtedness of the Company is reduced on the Company's balance sheet upon the
conversion or exchange (other than by a Subsidiary of the Company) subsequent to
the Original Issue Date of any Indebtedness of the Company convertible or
exchangeable for Capital Stock (other than Disqualified Stock) of the Company
(less the amount of any cash, or other property, distributed by the Company upon
such conversion or exchange); and (D) an amount equal to the sum of (i) the net
reduction in Investments in Unrestricted Subsidiaries resulting from dividends,
repayments of loans or advances, or other transfers of assets, in each case to
the Company or any Restricted Subsidiary from Unrestricted Subsidiaries, and
(ii) the portion (proportionate to the Company's equity interest in such
Subsidiary) of the fair market value of the net assets of an Unrestricted
Subsidiary at the time such Unrestricted Subsidiary is designated a Restricted
Subsidiary; provided, however, that the foregoing sum shall not exceed, in the
case of any Unrestricted Subsidiary, the amount of Investments previously made
by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary,
which amount was treated as a Restricted Payment.
(b) The provisions of the foregoing paragraph (a) shall not prohibit: (i)
any purchase or redemption of Capital Stock or Subordinated Obligations of the
Company made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Capital Stock of the Company (other than Disqualified Stock
and other than Capital Stock of the Company issued or sold to a Subsidiary of
the Company or an employee stock ownership plan or similar trust established by
the Company or any of the Subsidiaries); provided, however, that (A) such
purchase or redemption shall be excluded in the calculation of the amount of
Restricted Payments and (B) both (x) the Net Cash Proceeds from such sale and
(y) any Net Cash Proceeds (as defined in the Original Indenture) excluded from
the calculation of amounts under Section 4.04(a)(3)(B) of the Original Indenture
pursuant to clause (B) of the proviso to Section 4.04(b)(i) of the Original
Indenture prior to the Issue Date shall be excluded from the calculation of
amounts under clause (3)(B) of paragraph (a) above; (ii) any purchase or
redemption of Subordinated Obligations made by exchange for, or out of the
proceeds of the substantially concurrent sale of, Indebtedness of the Company
which is permitted to be Incurred pursuant to the covenant described under
"--Limitation on Indebtedness"; provided, however, that such purchase or
redemption shall be excluded in the calculation of the amount of Restricted
Payments; (iii) any purchase or redemption of Subordinated Obligations from Net
Available Cash to the extent permitted by the covenant described under
"--Limitation on Sales of Assets and Subsidiary Stock;" provided, however, that
such purchase or redemption shall be excluded in the calculation of the amount
of Restricted Payments; (iv) the repurchase of shares of, or options to purchase
shares of, common stock of the Company or any of its Subsidiaries from
employees, former employees, directors or former directors of the Company or any
of its Subsidiaries (or permitted transferees of such employees, former
employees, directors or former directors), pursuant to the terms of the
agreements (including employment agreements) or plans (or amendments thereto)
approved by the Board of Directors under which such persons purchase or sell or
are granted the option to purchase or sell, shares of such common stock;
provided, however, that the aggregate amount of such repurchases shall not
exceed $1 million; provided further, however, that such repurchases shall be
included in the calculation of the amount of Restricted Payments; or (v)
dividends paid within 60 days after the date of declaration thereof if at such
date of declaration such dividend would have complied with paragraph (a) of this
covenant; provided, however, that at the time of payment of such dividend, no
other Default shall have occurred and be continuing (or result therefrom);
provided further, however, that such dividend shall be included in the
calculation of the amount of Restricted Payments.
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LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED
SUBSIDIARIES. The Company shall not, and shall not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or become effective
any consensual encumbrance or restriction on the ability of any Restricted
Subsidiary: (i) to pay dividends or make any other distributions on its Capital
Stock or pay any Indebtedness owed to the Company; (ii) to make any loans or
advances to the Company; or (iii) transfer any of its property or assets to the
Company, except: (1) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the Original Issue Date; (2) any encumbrance or
restriction with respect to a Restricted Subsidiary pursuant to an agreement
relating to any Indebtedness Incurred by such Restricted Subsidiary on or prior
to the date on which such Restricted Subsidiary was acquired by the Company
(other than Indebtedness Incurred as consideration in, or to provide all or any
portion of the funds or credit support utilized to consummate, the transaction
or series of related transactions pursuant to which such Restricted Subsidiary
became a Restricted Subsidiary or was acquired by the Company) and outstanding
on such date; (3) any encumbrance or restriction pursuant to an agreement
effecting the Incurrence of Refinancing Indebtedness pursuant to an agreement
referred to in clause (1) or (2) of this covenant or this clause (3) or
contained in any amendment to an agreement referred to in clause (1) or (2) of
this covenant or this clause (3); provided, however, that the encumbrances and
restrictions with respect to such Restricted Subsidiary contained in any such
Refinancing Indebtedness agreement or amendment are no less favorable to the
Noteholders than encumbrances and restrictions with respect to such Restricted
Subsidiary contained in such agreements; (4) in the case of clause (iii) above,
any such encumbrance or restriction consisting of customary nonassignment
provisions in leases governing leasehold interests to the extent such provisions
restrict the transfer, subletting or assignment of the lease or the property
leased thereunder; (5) in the case of clause (iii) above, restrictions contained
in security agreements or mortgages not otherwise prohibited by the Indenture
securing Indebtedness of a Restricted Subsidiary to the extent such restrictions
restrict the transfer of the property subject to such security agreements or
mortgages; (6) in the case of clause (iii) above, any encumbrance or restriction
by virtue of any transfer of, agreement to transfer, option or right with
respect to, or Lien on, any property or assets of the Company or any Restricted
Subsidiary not otherwise prohibited by the Indenture; and (7) any restriction
with respect to a Restricted Subsidiary imposed pursuant to an agreement entered
into for the sale or disposition of all or substantially all the Capital Stock
or assets of such Restricted Subsidiary pending the closing of such sale or
disposition.
LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK. (a) The Company shall
not, and shall not permit any Restricted Subsidiary to, make any Asset
Disposition unless (i) the Company or such Restricted Subsidiary receives
consideration (including by way of relief from, or by any other Person assuming
sole responsibility for, any liabilities, contingent or otherwise) at the time
of such Asset Disposition at least equal to the fair market value, as determined
in good faith by the Board of Directors (including as to the value of all
non-cash consideration), of the shares and assets subject to such Asset
Disposition, (ii) at least 80% of the consideration thereof received by the
Company or such Restricted Subsidiary is in the form of cash and (iii) an amount
equal to 100% of the Net Available Cash from such Asset Disposition is applied
by the Company (or such Restricted Subsidiary, as the case may be) (A) first, to
the extent the Company elects (or is required by the terms of any Senior
Indebtedness or Indebtedness (other than Preferred Stock) of a Wholly Owned
Subsidiary), to prepay, repay or purchase Senior Indebtedness or such
Indebtedness (in each case other than Indebtedness owed to the Company or an
Affiliate of the Company) within 180 days after the later of the date of such
Asset Disposition or the receipt of such Net Available Cash; (B) second, to the
extent of the balance of Net Available Cash after application in accordance with
clause (A), to the extent the Company or such Restricted Subsidiary elects, to
reinvest in Additional Assets (including by means of an Investment in Additional
Assets by a Restricted Subsidiary with Net Available Cash received by the
Company or another Restricted Subsidiary) within one year from the later of such
Asset Disposition or the receipt of such Net Available Cash; (C) third, to offer
to purchase the Original Notes to the extent required by the Original Indenture,
(D) fourth, to the extent of the balance of such Net Available Cash after
application in accordance with
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clauses (A), (B) and (C) exceeds $5 million, to make an Offer to purchase the
Notes pursuant to and subject to the conditions set forth in section (b) of this
covenant; and (E) fifth, to the extent of the balance of such Net Available Cash
after application in accordance with clauses (A), (B), (C) and (D), to (x)
acquire Additional Assets (other than Indebtedness and Capital Stock) or (y)
prepay, repay or purchase Indebtedness of the Company (other than Indebtedness
owed to an Affiliate of the Company and other than Disqualified Stock of the
Company) or Indebtedness of any Restricted Subsidiary (other than Indebtedness
owed to the Company or an Affiliate of the Company), in each case described in
this clause (E) within one year from the receipt of such Net Available Cash or,
if the Company has made an Offer pursuant to clause (C) or (D), six months from
the date such Offer is consummated; provided, however, that in connection with
any prepayment, repayment or purchase of Indebtedness pursuant to clause (A),
(C), (D) or (E) above, the Company or such Restricted Subsidiary will retire
such Indebtedness and will cause the related loan commitment (if any) to be
permanently reduced in an amount equal to the principal amount so prepaid,
repaid or purchased. The Company and the Restricted Subsidiaries will not be
required to apply any Net Available Cash in accordance with this covenant except
to the extent that the aggregate Net Available Cash from all Asset Dispositions
which are not applied in accordance with this covenant exceed $5 million.
Notwithstanding the foregoing, the Company may make $1 million of Asset
Dispositions each year which are not subject to the provisions of this covenant.
For the purposes of this covenant, the following will be deemed to be cash:
(x) the assumption of Indebtedness of the Company (other than Disqualified Stock
of the Company) or any Restricted Subsidiary and the release of the Company or
such Restricted Subsidiary from all liability on such Indebtedness in connection
with such Asset Disposition; and (y) securities received by the Company or any
Restricted Subsidiary from the transferee that are promptly converted by the
Company or such Restricted Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the purchase of Notes
pursuant to Section (a)(iii)(D) of this covenant, the Company will be required
to purchase Notes tendered pursuant to an offer, commenced prior to the
expiration of the one year period referred to in Section (a)(iii)(B) of this
covenant, by the Company for the Notes (the "Offer") at a purchase price of 100%
of their principal amount plus accrued interest to the Purchase Date in
accordance with the procedures (including prorationing in the event of
oversubscription) set forth in Section (c) of this covenant. If the aggregate
purchase price of Notes tendered pursuant to the Offer is less than the Net
Available Cash allotted to the purchase of the Notes, the Company shall apply
the remaining Net Available Cash in accordance with Section (a)(iii)(E) of this
covenant. The Company shall not be required to make an Offer for Notes pursuant
to this Section if the Net Available Cash available therefor (after application
of the proceeds as provided in clauses (A), (B) and (C) of Section (a)(iii) of
this covenant) is less than $5 million for any Asset Disposition (which lesser
amount shall be carried forward for purposes of determining whether an Offer is
required with respect to the Net Available Cash from any subsequent Asset
Disposition).
(c)(1) Promptly, and in any event within 10 days after the Company becomes
obligated to make an Offer, the Company shall be obligated to deliver to the
Trustee and send, by first-class mail to each Holder, a written notice stating
that the Holder may elect to have his Notes purchased by the Company either in
whole or in part (subject to prorationing as hereinafter described in the event
the Offer is oversubscribed) in integral multiples of $1,000 of principal
amount, at the applicable purchase price. The notice shall specify a purchase
date not less than 30 days nor more than 60 days after the date of such notice
(the "Purchase Date") and shall contain such information concerning the business
of the Company which the Company in good faith believes will enable such Holders
to make an informed decision (which at a minimum will include: (i) the most
recently filed Annual Report on Form 10-K (including audited consolidated
financial statements) of the Company, the most recent subsequently filed
Quarterly Report on Form 10-Q and any Current Report on Form 8-K of the Company
filed subsequent to such Quarterly Report, other than Current Reports describing
Asset Dispositions otherwise described in the offering materials (or
corresponding successor reports); (ii) a description of material developments in
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the Company's business subsequent to the date of the latest of such Reports; and
(iii) if material, appropriate pro forma financial information) and all
instructions and materials necessary to tender the Notes pursuant to the Offer,
together with the information contained in clause (3).
(2) Not later than the date upon which written notice of an Offer is
delivered to the Trustee as provided below, the Company shall deliver to the
Trustee an Officers' Certificate as to: (i) the amount of the Offer (the "Offer
Amount"); (ii) the allocation of the Net Available Cash from the Asset
Dispositions pursuant to which such Offer is being made; and (iii) the
compliance of such allocation with the provisions of Section (a) of this
covenant. On such date, the Company shall also irrevocably deposit with the
Trustee or with a paying agent (or, if the Company is acting as its own paying
agent, segregate and hold in trust) in Temporary Cash Investments an amount
equal to the Offer Amount to be held for payment in accordance with the
provisions of this Section. Upon the expiration of the period for which the
Offer remains open (the "Offer Period"), the Company shall deliver to the
Trustee for cancellation the Notes or portions thereof which have been properly
tendered to and are to be accepted by the Company. The Trustee shall, on the
Purchase Date, mail or deliver payment to each tendering Holder in the amount of
the purchase price. In the event that the aggregate purchase price of the Notes
delivered by the Company to the Trustee is less than the Offer Amount, the
Trustee shall deliver the excess to the Company immediately after the expiration
of the Offer Period for application in accordance with this Section.
(3) Holders electing to have a Note purchased pursuant to this covenant will
be required to surrender the Note with an appropriate form duly completed, to
the Company at the address specified in the notice at least three Business Days
prior to the Purchase Date. Holders will be entitled to withdraw their election
if the Trustee or the Company receives not later than one Business Day prior to
the Purchase Date, a facsimile transmission or letter setting forth the name of
the Holder, the principal amount of the Note which was delivered for purchase by
the Holder and a statement that such Holder is withdrawing his election to have
such Note purchased. If at the expiration of the Offer Period the aggregate
principal amount of Notes surrendered by Holders exceeds the Offer Amount, the
Company shall select the Notes to be purchased on a pro rata basis (with such
adjustments as may be deemed appropriate by the Company so that only Notes in
denominations of $1,000, or integral multiples thereof, shall be purchased).
Holders whose Notes are purchased only in part will be issued new Notes equal in
principal amount to the unpurchased portion of the Notes surrendered.
(4) At the time the Company delivers Notes to the Trustee which are to be
accepted for purchase, the Company will also deliver an Officers' Certificate
stating that such Notes are to be accepted by the Company pursuant to and in
accordance with the terms of this Section. A Note shall be deemed to have been
accepted for purchase at the time the Trustee, directly or through an agent,
mails or delivers payment therefor to the surrendering Holder.
(d) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
Section. To the extent that the provisions of any securities laws or regulations
conflict with provisions of this Section, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section by virtue thereof.
LIMITATION ON AFFILIATE TRANSACTIONS. (a) The Company shall not, and shall
not permit any Restricted Subsidiary to, enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property,
employee compensation arrangements or the rendering of any service) with any
Affiliate of the Company (an "Affiliate Transaction") unless the terms thereof
(1) are no less favorable to the Company or such Restricted Subsidiary, as the
case may be, than those which could be obtained at the time of such transaction
in arm's-length dealings with a Person who is not such an Affiliate and (2) if
such Affiliate Transaction involves an aggregate amount in excess of $1 million,
(i) are set forth in
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writing and (ii) have been approved by a majority of the members of the Board of
Directors having no personal stake in such Affiliate Transaction. In addition,
if such Affiliate Transaction involves an amount in excess of $5 million, a
fairness opinion must be provided by a nationally recognized independent
investment banking firm.
(b) The provisions of the foregoing paragraph (a) shall not prohibit: (i)
any Restricted Payment permitted to be paid pursuant to the covenant described
under "--Limitation on Restricted Payments"; (ii) any issuance of securities, or
other payments, awards or grants in cash, securities or otherwise pursuant to,
or the funding of, employment arrangements or bonuses (whether or not pursuant
to an employment contract), stock options and stock ownership plans approved by
the Board of Directors; (iii) the grant of stock options or similar rights to
employees and directors of the Company pursuant to plans approved by the Board
of Directors; (iv) loans or advances to employees in the ordinary course of
business in accordance with the past practices of the Company or its Restricted
Subsidiaries, but in any event not to exceed $1 million in the aggregate
outstanding at any one time; (v) the payment of reasonable fees to directors of
the Company and its Restricted Subsidiaries who are not employees of the Company
or its Restricted Subsidiaries; (vi) any Affiliate Transaction between the
Company and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries; and
(vii) any payment pursuant to the Tax Sharing Agreement.
LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES. The Company shall not sell any shares of Capital Stock of a
Restricted Subsidiary, and shall not permit any Restricted Subsidiary, directly
or indirectly, to issue or sell any shares of its Capital Stock except: (i) to
the Company or a Wholly Owned Subsidiary; (ii) if, immediately after giving
effect to such issuance or sale, such Restricted Subsidiary would no longer
constitute a Restricted Subsidiary; or (iii) in connection with labor agreements
applicable to employees of the issuing Restricted Subsidiary. Notwithstanding
the foregoing, the Company is permitted to sell all the Capital Stock of a
Subsidiary as long as the Company is in compliance with the terms of the
covenant described under "--Limitation on Sales of Assets and Subsidiary Stock".
LIMITATION ON LIENS. The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, create or permit to exist any
Lien on any of its property or assets (including Capital Stock), whether owned
on the Original Issue Date or thereafter acquired, securing any obligation other
than Permitted Liens unless contemporaneously therewith effective provision is
made to secure the Notes equally and ratably with (or on a senior basis to, in
the case of Indebtedness subordinated in right of payment to the Notes) such
obligation for so long as such obligation is so secured.
LIMITATION ON SALE/LEASEBACK TRANSACTIONS. The Company shall not, and shall
not permit any Restricted Subsidiary to, enter into any Sale/Leaseback
Transaction with respect to any property unless: (i) the Company or such
Subsidiary would be entitled to (A) Incur Indebtedness in an amount equal to the
Attributable Debt with respect to such Sale/Leaseback Transaction pursuant to
the covenant described under "--Limitation on Indebtedness" and (B) create a
Lien on such property securing such Attributable Debt without securing the Notes
equally and ratably or on a senior basis, as applicable, pursuant to the
covenant described under "--Limitation on Liens"; (ii) the net proceeds received
by the Company or any Restricted Subsidiary in connection with such
Sale/Leaseback Transaction are at least equal to the fair value (as determined
by the Board of Directors) of such property; and (iii) the transfer of such
property is permitted by, and the Company applies the proceeds of such
transaction in compliance with, the covenant described under "--Limitation on
Sale of Assets and Subsidiary Stock".
LIMITATION ON LINES OF BUSINESS. The Company and its Restricted
Subsidiaries will not engage in any material respect in any business, other than
those businesses in which the Company is engaged on the date of the Original
Indenture or any Related Business. Notwithstanding the foregoing, the Company
may acquire and operate any business which is primarily engaged in a Related
Business at the time of acquisition.
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FUTURE GUARANTOR SUBSIDIARIES. After the Issue Date, the Company will cause
each Restricted Subsidiary which Incurs Indebtedness, including each Restricted
Subsidiary which is a guarantor of Indebtedness Incurred pursuant to clause
(b)(i) or (b)(ii) of the covenant described under " --Limitation on
Indebtedness", to execute and deliver to the Trustee a Subsidiary Guaranty
pursuant to which such Restricted Subsidiary will Guarantee payment of the
Notes.
MERGER AND CONSOLIDATION. The Company shall not consolidate with or merge
with or into, or convey, transfer or lease all or substantially all its assets
to, any Person, unless: (i) the resulting, surviving or transferee Person (the
"Successor Company") shall be a Person organized and existing under the laws of
the United States of America, any State thereof or the District of Columbia and
the Successor Company (if not the Company) 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 Notes
and the Indenture; (ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor Company
or any Restricted Subsidiary as a result of such transaction as having been
Incurred by such Successor Company or such Restricted Subsidiary at the time of
such transaction), no Default shall have occurred and be continuing; (iii)
immediately after giving effect to such transaction, the Successor Company would
be able to Incur an additional $1.00 of Indebtedness pursuant to paragraph (a)
under "--Limitation on Indebtedness"; (iv) immediately after giving effect to
such transaction, the Successor Company shall have Consolidated Net Worth in an
amount which is not less than the Consolidated Net Worth of the Company
immediately prior to such transaction; and (v) the Company shall have delivered
to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger or transfer and such supplemental indenture (if
any) comply with the Indenture.
The Successor Company shall be the successor to the Company and shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture, but the predecessor Company in the case of a
conveyance, transfer or lease of all or substantially all its assets shall not
be released from the obligation to pay the principal of and interest on the
Notes.
Notwithstanding the foregoing clauses (ii), (iii) and (iv), any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of its
properties and assets to the Company or a Wholly Owned Subsidiary.
SEC REPORTS. Notwithstanding that the Company may not be required to remain
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company shall file with the Commission and provide the Trustee and
Noteholders with such annual reports and such information, documents and other
reports specified in Sections 13 and 15(d) of the Exchange Act.
DEFAULTS
An Event of Default is defined in the Indenture as: (i) a default in the
payment of interest on the Notes when due, continued for 30 days; (ii) a default
in the payment of principal of any Note when due at its Stated Maturity, upon
optional redemption, upon required repurchase, upon declaration or otherwise;
(iii) the failure by the Company or any Subsidiary to comply with its
obligations under "--Certain Covenants--Merger and Consolidation" above; (iv)
the failure by the Company or any Subsidiary to comply for 30 days after notice
with any of its obligations under the covenants described above under "--Change
of Control" or under the covenants described in "--Certain Covenants" (in each
case, other than a failure to purchase Notes); (v) the failure by the Company or
any Subsidiary to comply for 60 days after notice with its other agreements
contained in the Notes or the Indenture; (vi) Indebtedness of the Company or any
Significant Subsidiary is not paid within any applicable grace period after
final maturity or is accelerated by the holders thereof because of a default and
the total amount of such Indebtedness unpaid or accelerated exceeds $10 million
and such failure continues for 10 days after notice (the "cross acceleration
provision"); (vii) certain events of bankruptcy, insolvency or reorganization of
the Company
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or a Significant Subsidiary (the "bankruptcy provisions"); (viii) any judgment
or decree for the payment of money in excess of $10 million is rendered against
the Company or a Significant Subsidiary, remains outstanding for a period of 60
days following such judgment and is not discharged, waived or stayed within 10
days after notice (the "judgment default provision"); or (ix) any Subsidiary
Guaranty shall cease to be in full force and effect (except as contemplated by
the terms thereof) or any Guarantor Subsidiary shall deny or disaffirm its
obligations under the Indenture or any Subsidiary Guaranty and such Default
continues for 10 days.
The foregoing will constitute Events of Default whatever the reason for any
such Event of Default and whether it is voluntary or involuntary or is 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.
However, a default under clause (iv), (v), (vi) or (viii) will not
constitute an Event of Default until the Trustee or the Holders of at least 25%
in principal amount of the outstanding Notes notify the Company of the default
and the Company does not cure such default within the time specified after
receipt of such notice.
If an Event of Default (other than an Event of Default relating to certain
events of bankruptcy, insolvency or reorganization of the Company) occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the outstanding Notes may declare the principal of and accrued but unpaid
interest on all the Notes to be due and payable. Upon such a declaration, such
principal and interest shall be due and payable immediately. If an Event of
Default relating to certain events of bankruptcy, insolvency or reorganization
of the Company occurs and is continuing, the principal of and interest on all
the Notes will ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holders. Under
certain circumstances, the Holders of a majority in principal amount of the
outstanding Notes may rescind any such acceleration with respect to the Notes
and its consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders of the Notes unless
such Holders have offered to the Trustee reasonable indemnity or security
against any loss, liability or expense. Except to enforce the right to receive
payment of principal, premium (if any) or interest when due, no Holder may
pursue any remedy with respect to the Indenture or the Notes unless: (i) such
Holder has previously given the Trustee notice that an Event of Default is
continuing; (ii) Holders of at least 25% in principal amount of the outstanding
Notes have requested the Trustee to pursue the remedy; (iii) such Holders have
offered the Trustee reasonable security or indemnity against any loss, liability
or expense; (iv) the Trustee has not complied with such request within 60 days
after the receipt thereof and the offer of security or indemnity; and (v) the
Holders of a majority in principal amount of the outstanding Notes have not
given the Trustee a direction inconsistent with such request within such 60-day
period. Subject to certain restrictions, the Holders of a majority in principal
amount of the outstanding Notes are given the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or of exercising any trust or power conferred on the Trustee. The Trustee,
however, may refuse to follow any direction that conflicts with law or the
Indenture or that the Trustee determines is unduly prejudicial to the rights of
any other Holder or that would involve the Trustee in personal liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each Holder notice of the Default
within 90 days after it occurs. Except in the case of a Default in the payment
of principal of, premium (if any) or interest on any Note, the Trustee may
withhold notice if and so long as a committee of its trust officers determines
that withholding notice is not opposed to the interest of the Holders. In
addition, the Company is required to deliver to the Trustee, within 120 days
after the end of each fiscal year, a certificate indicating whether the signers
thereof know of any Default that occurred during the previous year. The Company
also is required to deliver to the
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Trustee, within 30 days after the occurrence thereof, written notice of any
event which would constitute certain Defaults, their status and what action the
Company is taking or proposes to take in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the consent
of the Holders of a majority in principal amount of the Notes then outstanding
(including consents obtained in connection with a tender offer or exchange for
the Notes) and any past default or compliance with any provisions may also be
waived with such a consent of the Holders of a majority in principal amount of
the Notes then outstanding. However, without the consent of each Holder of an
outstanding Note, no amendment may, among other things, (i) reduce the amount of
Notes whose Holders must consent to an amendment, (ii) reduce the rate of or
extend the time for payment of interest on any Note, (iii) reduce the principal
of or extend the Stated Maturity of any Note, (iv) reduce the premium payable
upon the redemption of any Note or change the time at which any Note may or
shall be redeemed as described under "--Optional Redemption" above, (v) make any
Note payable in money other than that stated in the Note, (vi) make any change
to the subordination provisions of the Indenture that adversely affects the
rights of any Holder, (vii) impair the right of any Holder to receive payment of
principal of and interest on such Holder's Notes on or after the due dates
therefor or to institute suit for the enforcement of any payment on or with
respect to such Holder's Notes or (viii) make any change in the amendment
provisions which require each Holder's consent or in the waiver provisions.
Without the consent of any Holder, the Company and Trustee may amend the
Indenture to cure any ambiguity, omission, defect or inconsistency, to provide
for the assumption by a successor corporation of the obligations of the Company
under the Indenture, to provide for uncertificated Notes in addition to or in
place of certificated Notes (provided that the uncertificated Notes are issued
in registered form for purposes of Section 163(f) of the Code, or in a manner
such that the uncertificated Notes are described in Section 163(f)(2)(B) of the
Code), to add further Guarantees with respect to the Notes, to secure the Notes,
to add to the covenants of the Company for the benefit of the Holders or to
surrender any right or power conferred upon the Company, to make any change that
does not adversely affect the rights of any Holder or to comply with any
requirement of the SEC in connection with the qualification of the Indenture
under the Trust Indenture Act.
The consent of the Holders is not necessary under the Indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to Holders a notice briefly describing such amendment. However,
the failure to give such notice to all Holders, or any defect therein, will not
impair or affect the validity of the amendment.
TRANSFER
A Noteholder may transfer or exchange Notes in accordance with the
Indenture. Upon any transfer or exchange, the registrar and the Trustee may
require a Noteholder, among other things, to furnish appropriate endorsements
and transfer documents and the Company may require a Noteholder to pay any taxes
required by law or permitted by the Indenture. The Company is not required to
transfer or exchange any Note selected for redemption or to transfer or exchange
any Note for a period of 15 days prior to the selection of Notes to be redeemed.
The Notes will be issued in registered form and the registered Holder of a Note
will be treated as the owner of such Note for all purposes.
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DEFEASANCE
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under the covenants
described under "--Certain Covenants" (other than the covenants described under
"--Merger and Consolidation"), the operation of the cross acceleration
provision, the bankruptcy provisions with respect to Significant Subsidiaries
and the judgment default provision described under "--Certain Covenants
Defaults" above and the limitations contained in clauses (iii) and (iv) under
"--Merger and Consolidation" above ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iv), (vi), (vii) (with respect only to
Significant Subsidiaries) or (viii) under "--Defaults" above or because of the
failure of the Company to comply with clause (iii) or (iv) under "--Certain
Covenants--Merger and Consolidation" above.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal, premium (if any) and
interest on the Notes to redemption or maturity, as the case may be, and must
comply with certain other conditions, including delivery to the Trustee of an
Opinion of Counsel to the effect that holders of the Notes will not recognize
income, gain or loss for Federal income tax purposes as a result of such deposit
and defeasance and will be subject to Federal income tax on the same amount and
in the same manner and at the same times as would have been in the case if such
deposit and defeasance had not occurred (and, in the case of legal defeasance
only, such Opinion of Counsel must be based on a ruling of the Internal Revenue
Service or other change in applicable Federal income tax law).
The Company will not be permitted to exercise either defeasance option
described above with respect to the Notes unless it defeases the Original Notes
equivalently and substantially simultaneously. Similarly, the Company will not
be permitted to defease the Original Notes unless it defeases the Notes
equivalently and substantially simultaneously.
CONCERNING THE TRUSTEE
The Bank of New York is to be the Trustee under the Indenture and has been
appointed by the Company as Registrar and Paying Agent with regard to the Notes.
It is anticipated that The Bank of New York may also be a lender under the
Senior Bank Facilities.
The Holders of a majority in principal amount of the outstanding Notes will
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee, subject to certain
exceptions. The Indenture provides that if an Event of Default occurs (and is
not cured), the Trustee will be required, in the exercise of its power, to use
the degree of case of a prudent man in the conduct of his own affairs. Subject
to such provisions, the Trustee will be under no obligation to exercise any of
its rights or powers under the Indenture at the request of any Holder, unless
such Holder shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense and then only to the
extent required by the terms of the Indenture.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
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CERTAIN DEFINITIONS
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business; (ii) the Capital Stock of
a Person that becomes a Restricted Subsidiary as a result of the acquisition of
such Capital Stock by the Company or another Restricted Subsidiary or (iii)
Capital Stock constituting a minority interest in any Person that at such time
is a Restricted Subsidiary; provided, however, that any such Restricted
Subsidiary described in clauses (ii) or (iii) above is primarily engaged in a
Related Business.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the provisions described under "--Certain Covenants-- Limitation on
Affiliate Transactions" and "--Certain Covenants--Limitations on Sales of Assets
and Subsidiary Stock" only, "Affiliate" shall also mean any beneficial owner of
shares representing 5% or more of the total voting power of the Voting Stock (on
a fully diluted basis) of the Company or of rights or warrants to purchase such
Voting Stock (whether or not currently exercisable) and any Person who would be
an Affiliate of any such beneficial owner pursuant to the first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other disposition of
shares of Capital Stock of a Restricted Subsidiary (other than directors'
qualifying shares), property or other assets (each referred to for the purposes
of this definition as a "disposition") by the Company or any of its Restricted
Subsidiaries (including any disposition by means of a merger, consolidation or
similar transaction) other than (i) a disposition by a Restricted Subsidiary to
the Company or by the Company or a Restricted Subsidiary to a Wholly Owned
Subsidiary, (ii) a disposition of inventory in the ordinary course of business
and (iii) for purposes of the covenant described under "--Certain
Covenants--Limitation on Sales of Assets and Subsidiary Stock" only, a
disposition that constitutes a Restricted Payment permitted by the covenant
described under "--Certain Covenants--Limitation on Restricted Payments".
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
borne by the Notes, compounded annually) of the total obligations of the lessee
for rental payments during the remaining term of the lease included in such
Sale/Leaseback Transaction (including any period for which such lease has been
extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of numbers of years from the date of determination to the dates
of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means any and all amounts payable under or in respect of
the Senior Bank Facilities and the other Senior Bank Documents, as amended,
refinanced or replaced from time to time, including principal, premium (if any),
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not a claim
for post-filing interest is allowed in such proceedings), fees, charges,
expenses, reimbursement obligations, guarantees and all other amounts payable
thereunder or in respect thereof.
"Board of Directors" means the Board of Directors of the Company or, unless
the context indicates otherwise, any committee thereof duly authorized to act on
behalf of such Board.
"Borrowing Base" means, as of any date, an amount equal to the sum of (i)
60% of the aggregate book value of inventory (adjusted to include any LIFO
reserves) and (ii) 85% of the aggregate book value
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of all accounts receivable (net of bad debt reserves) of the Company and its
Restricted Subsidiaries on a Consolidated basis, as determined in accordance
with GAAP consistently applied. To the extent that information is not available
as to the amount of inventory or accounts receivable as of a specific date, the
Company shall use the most recent available information for purposes of
calculating the Borrowing Base.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligation" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or interests
in (however designated) equity of such Person, including any Preferred Stock,
but excluding any debt securities convertible into such equity.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters ending at least 45 days prior to the date of
such determination to (ii) Consolidated Interest Expense for such four fiscal
quarters; provided, however, that (1) if the Company or any Restricted
Subsidiary has Incurred any Indebtedness since the beginning of such period that
remains outstanding on such date of determination or if the transaction giving
rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence
of Indebtedness, or both, EBITDA and Consolidated Interest Expense for such
period shall be calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on the first day of such
period and the discharge of any other Indebtedness repaid, repurchased, defeased
or otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period, (2) if since the
beginning of such period the Company or any Restricted Subsidiary shall have
made any Asset Disposition, the EBITDA for such period shall be reduced by an
amount equal to the EBITDA (if positive) directly attributable to the assets
which are the subject of such Asset Disposition for such period, or increased by
an amount equal to the EBITDA (if negative), directly attributable thereto for
such period and Consolidated Interest Expense for such period shall be reduced
by an amount equal to the Consolidated Interest Expense directly attributable to
any Indebtedness of the Company or any Restricted Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to the Company and
its continuing Restricted Subsidiaries in connection with such Asset Disposition
for such period (or, if the Capital Stock of any Restricted Subsidiary is sold,
the Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the Company and its
continuing Restricted Subsidiaries are no longer liable for such Indebtedness
after such sale), (3) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made an Investment in
any Restricted Subsidiary (or any person which becomes a Restricted Subsidiary)
or an acquisition of assets, including any acquisition of assets occurring in
connection with a transaction causing a calculation to be made hereunder, which
constitutes all or substantially all of an operating unit of a business, EBITDA
and Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto (including the Incurrence of any Indebtedness)
as if such Investment or acquisition occurred on the first day of such period
and (4) if since the beginning of such period any Person (that subsequently
became a Restricted Subsidiary or was merged with or into the Company or any
Restricted Subsidiary since the beginning of such period) shall have made any
Asset Disposition, any Investment or acquisition of assets that would have
required an adjustment pursuant to clause (2) or (3)
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above if made by the Company or a Restricted Subsidiary during such period,
EBITDA and Consolidated Interest Expense for such period shall be calculated
after giving pro forma effect thereto as if such Asset Disposition, Investment
or acquisition occurred on the first day of such period. For purposes of this
definition, whenever pro forma effect is to be given to an acquisition of
assets, the amount of income or earnings relating thereto, and the amount of
Consolidated Interest Expense associated with any Indebtedness Incurred in
connection therewith, the pro forma calculations shall be determined in good
faith by a responsible financial or accounting Officer of the Company. If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the Consolidated Interest Expense associated with any such Indebtedness
shall be calculated as if the rate in effect on the date of determination had
been the applicable rate for the entire period (giving effect to any Interest
Rate Agreement applicable to such Indebtedness for a period (not in excess of 12
months) corresponding to the remaining term of such Interest Rate Agreement as
of the date of determination).
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its Consolidated Restricted Subsidiaries, plus, to
the extent not included in such total interest expense, and to the extent
incurred by the Company or its Restricted Subsidiaries, (i) interest expense
attributable to capital leases, (ii) amortization of debt discount, (iii)
capitalized interest, (iv) non-cash interest expenses, (v) commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing, (vi) net costs associated with Hedging
Obligations (including amortization of fees), (vii) the product of (a) Preferred
Stock dividends in respect of all Preferred Stock of Subsidiaries of the Company
and Disqualified Stock of the Company held by Persons other than the Company or
a Wholly Owned Subsidiary multiplied by (b) a fraction, the numerator of which
is one and the denominator of which is one minus the then current combined
Federal, state and local statutory tax rate of the Company, expressed as a
decimal, in each case determined on a Consolidated basis in accordance with
GAAP, (viii) interest accruing on any Indebtedness of any other Person to the
extent such Indebtedness is Guaranteed by the Company or any Restricted
Subsidiary and (ix) the cash contributions to any employee stock ownership plan
or similar trust to the extent such contributions are used by such plan or trust
to pay interest or fees to any Person (other than the Company) in connection
with Indebtedness Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income (loss) of
the Company and its Consolidated Subsidiaries; provided, however, that there
shall not be included in such Consolidated Net Income: (i) any net income (loss)
of any Person if such Person is not a Restricted Subsidiary, except that (A)
subject to the limitations contained in clause (iv) below, the Company's equity
in the net income of any such Person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually distributed
by such Person during such period to the Company or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
distribution paid to a Restricted Subsidiary, to the limitations contained in
clause (iii) below) and (B) the Company's equity in a net loss of any such
Person (other than an Unrestricted Subsidiary) for such period shall be included
in determining such Consolidated Net Income; (ii) any net income (loss) of any
Person acquired by the Company or a Subsidiary in a pooling of interests
transaction for any period prior to the date of such acquisition; (iii) any net
income (loss) of any Restricted Subsidiary if such Restricted Subsidiary is
subject to restrictions, directly or indirectly, on the payment of dividends or
the making of distributions by such Restricted Subsidiary, directly or
indirectly, to the Company, except that (A) subject to the limitations contained
in clause (iv) below, the Company's equity in the net income of any such
Restricted Subsidiary for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash that could have been distributed by
such Restricted Subsidiary during such period to the Company or another
Restricted Subsidiary as a dividend or other distribution (subject, in the case
of a dividend or other distribution that could have been made to another
Restricted Subsidiary, to the limitation contained in this clause) and (B) the
Company's equity in a net loss of any such Restricted Subsidiary for such period
shall be included in determining such Consolidated Net Income; (iv) any gain
(but not loss) realized upon the sale or other disposition of any property,
plant, equipment or other asset
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of the Company or its consolidated Subsidiaries (including pursuant to any
Sale/Leaseback Transaction) which is not sold or otherwise disposed of in the
ordinary course of business and any gain (but not loss) realized upon the sale
or other disposition of any Capital Stock of any Person; (v) extraordinary gains
or losses; and (vi) the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purposes of the covenant described under
"Certain Covenants--Limitation on Restricted Payments" only, there shall be
excluded from Consolidated Net Income any dividends, repayments of loans or
advances or other transfers of assets from Unrestricted Subsidiaries to the
Company or a Restricted Subsidiary to the extent such dividends, repayments or
transfers increase the amount of Restricted Payments permitted under such
covenant pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the balance
sheet of the Company and the Restricted Subsidiaries, determined on a
Consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company ending at least 45 days prior to the taking of any
action for the purpose of which the determination is being made, as (i) the par
or stated value of all outstanding Capital Stock of the Company plus (ii)
paid-in capital or capital surplus relating to such Capital Stock plus (iii) any
retained earnings or earned surplus less (A) any accumulated deficit and (B) any
amounts attributable to Disqualified Stock.
"Consolidation" means the consolidation of the accounts of each of the
Restricted Subsidiaries with those of the Company in accordance with GAAP
consistently applied; provided, however, that "Consolidation" will not include
consolidation of the accounts of any Unrestricted Subsidiary, but the interest
of the Company or any Restricted Subsidiary in an Unrestricted Subsidiary will
be accounted for as an investment. The term "Consolidated" has a correlative
meaning.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) the Bank Indebtedness and (ii)
any other Senior Indebtedness which, at the date of determination, has an
aggregate principal amount outstanding of, or under which, at the date of
determination, the holders thereof, are committed to lend up to, at least $10
million and is specifically designated by the Company in the instrument
evidencing or governing such Senior Indebtedness as "Designated Senior
Indebtedness" for purposes of the Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable or exercisable) or upon the happening of any
event (i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to the first anniversary of the
Stated Maturity of the Notes.
"EBITDA" for any period means the Consolidated Net Income for such period,
plus the following to the extent deducted in calculating such Consolidated Net
Income: (i) all income tax expense of the Company, (ii) Consolidated Interest
Expense, (iii) depreciation expense and (iv) amortization expense, in each case
for such period. Notwithstanding the foregoing, the provision for taxes based on
the income or profits of, and the depreciation and amortization of, a Restricted
Subsidiary of the Company shall be added to Consolidated Net Income to compute
EBITDA only to the extent (and in the same proportion) that the net income of
such Subsidiary was included in calculating Consolidated Net Income and only if
a corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Restricted Subsidiary without prior approval
(that has not been obtained), pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to such Restricted Subsidiary or its
stockholders.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Foreign Subsidiary" shall mean a Subsidiary organized under the laws of any
jurisdiction other than the United States, any State thereof or the District of
Columbia; provided that no Foreign Subsidiary shall be formed by the Company or
any of its Subsidiaries unless such Foreign Subsidiary meets the qualifications
of and is designated as an Unrestricted Subsidiary hereunder.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Original Issue Date, including, without
limitation, those set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a significant segment
of the accounting profession. All ratios and computations based on GAAP
contained in the Indenture shall be computed in conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
other Person and any obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness or other obligation of such other Person
(whether arising by virtue of partnership arrangements, or by agreements to
keep-well, to purchase assets, goods, securities or services, to take-or-pay, or
to maintain financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner the obligee of such Indebtedness
or other obligation of the payment thereof or to protect such obligee against
loss in respect thereof (in whole or in part); provided, however, that the term
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning. The term "Guarantor" shall mean any Person Guaranteeing
any obligation.
"Guarantor Subsidiary" means any Subsidiary that has issued a Subsidiary
Guaranty.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is registered
on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of indebtedness of such Person for borrowed money; (ii) the principal
of and premium (if any) in respect of obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments; (iii) all obligations of
such Person in respect of letters of credit or other similar instruments
(including reimbursement obligations with respect thereto); (iv) all obligations
of such Person to pay the deferred and unpaid purchase price of property or
services (except Trade Payables), which purchase price is due more than six
months after the date of placing such property in service or taking delivery and
title thereto or the completion of such services; (v) all Capitalized Lease
Obligations of such Person and all Attributable Debt of such Person; (vi) the
amount of all obligations of such Person with respect to the redemption,
repayment or other repurchase of any Disqualified Stock or, with respect to any
Subsidiary of the Company, any Preferred Stock (but excluding, in each case, any
accrued dividends); (vii) all Indebtedness of other Persons secured by a Lien on
any asset of such Person, whether or not such Indebtedness is assumed by such
Person; provided, however, that the amount of Indebtedness of such Person shall
be the lesser of (A) the fair market value
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of such asset at such date of determination and (B) the amount of such
Indebtedness of such other Persons; (viii) all Indebtedness of other Persons to
the extent Guaranteed by such Person; and (ix) to the extent not otherwise
included in this definition, Hedging Obligations of such Person. The amount of
Indebtedness of any Person at any date shall be the outstanding balance at such
date of all unconditional obligations as described above and the maximum
liability, upon the occurrence of the contingency giving rise to the obligation,
of any contingent obligations at such date.
"Interest Rate Agreement" means with respect to any Person any interest rate
protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance, loan (other
than advances to customers in the ordinary course of business that are recorded
as accounts receivable on the balance sheet of such Person) or other extension
of credit (including by way of Guarantee or similar arrangement) or capital
contribution to (by means of any transfer of cash or other property to others or
any payment for property or services for the account or use of others), or any
purchase or acquisition of Capital Stock, Indebtedness or other similar
instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary", the definition of "Restricted Payment" and the
covenant described under "--Certain Covenants--Limitation on Restricted
Payments", (i) "Investment" shall include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of any Subsidiary of the Company at the time that such Subsidiary is
designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall
be deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary equal to an amount (if positive) equal to (x) the Company's
"Investment" in such Subsidiary at the time of such redesignation less (y) the
portion (proportionate to the Company's equity interest in such Subsidiary) of
the fair market value of the net assets of such Subsidiary at the time of such
redesignation; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors.
"Issue Date" means the date on which the Notes are originally issued.
"Leasing Subsidiary" means JAIX Leasing Company, a Delaware corporation.
"Leasing Support Agreement" means the Support and Guarantee Agreement dated
May 12, 1995 between the Company and The First National Bank of Chicago, as
Agent, or any other agreement containing substantially the same terms as such
agreement, in either case as amended, modified or replaced from time to time;
provided that the terms of such agreement, as amended, modified or replaced, are
no less favorable to the Company than the terms of the Leasing Support Agreement
as in effect on the Original Issue Date; provided further that the amount of the
Company's obligations thereunder, including any amounts paid or Investments made
thereunder on or subsequent to the Original Issue Date, may not exceed $4
million.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring person of Indebtedness or other obligations relating
to the properties or assets that are the subject of such Asset Disposition or
received in any other noncash form) therefrom, in each case net of (i) all
legal, title and recording tax expenses, commissions and other fees and expenses
incurred, and all Federal, state, provincial, foreign and local taxes required
to be accrued as a liability
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under GAAP, as a consequence of such Asset Disposition, (ii) all payments made
on any Indebtedness which is secured by any assets subject to such Asset
Disposition, in accordance with the terms of any Lien upon or other security
agreement of any kind with respect to such assets, or which must by its terms,
or in order to obtain a necessary consent to such Asset Disposition, or by
applicable law be repaid out of the proceeds from such Asset Disposition, (iii)
all distributions and other payments required to be made to minority interest
holders in Subsidiaries or joint ventures as a result of such Asset Disposition
and (iv) appropriate amounts to be provided by the seller as a reserve, in
accordance with GAAP, against any liabilities associated with the assets
disposed of in such Asset Disposition and retained by the Company or any
Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Officer" means the Chairman of the Board, the President, the Chief
Financial Officer, any Vice President, the Treasurer or the Secretary of the
Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
"Original Indenture" means the Indenture dated August 23, 1995, among the
Company, the Guarantor Subsidiaries and the Bank of New York, as trustee.
"Original Issue Date" means August 23, 1995.
"Original Notes" means the Company's 11 3/4% Senior Subordinated Notes due
2005 issued under the Original Indenture.
"Permitted Holders" means members, as of the Original Issue Date, of
executive management of the Company and their respective Affiliates.
"Permitted Investment" means an Investment by the Company or any Restricted
Subsidiary in (i) a Restricted Subsidiary or a Person which will, upon the
making of such Investment, become a Restricted Subsidiary; provided, however,
that the primary business of such Restricted Subsidiary is a Related Business;
(ii) another Person if as a result of such Investment such other Person is
merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Company or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Related Business;
(iii) Temporary Cash Investments; (iv) receivables owing to the Company or any
Restricted Subsidiary, if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms; provided,
however, that such trade terms may include such concessionary trade terms as the
Company or any such Restricted Subsidiary deems reasonable under the
circumstances; (v) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of business;
(vi) loans or advances to employees made in the ordinary course of business
consistent with past practices of the Company or such Restricted Subsidiary;
(vii) stock, obligations or securities received in settlement of debts created
in the ordinary course of business and owing to the Company or any Restricted
Subsidiary or in satisfaction of judgments; (viii) the Leasing Subsidiary,
provided that (except as permitted by clause (ix)) the aggregate amount of
Investments in the Leasing Subsidiary shall not exceed $3.5 million in any 12
month period; (ix) the Leasing Subsidiary pursuant to the Leasing Support
Agreement; and (x) Capital Stock of a joint venture or similar entity primarily
engaged in a Related Business, provided that such Investments shall not exceed
$10 million at any time.
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"Permitted Liens" means, with respect to any Person, (a) pledges or deposits
by such Person under workmen's compensation laws, unemployment insurance laws or
similar legislation, or good faith deposits in connection with bids, tenders,
contracts (other than for the payment of Indebtedness) or leases to which such
Person is a party, or deposits to secure public or statutory obligations of such
Person or deposits of cash or United States government bonds to secure surety or
appeal bonds to which such Person is a party, or deposits as security for
contested taxes or import duties or for the payment of rent, in each case
Incurred in the ordinary course of business; (b) Liens imposed by law, such as
carriers', warehousemen's and mechanics' Liens, in each case for sums not yet
due or being contested in good faith by appropriate proceedings or other Liens
arising out of judgments or awards against such Person with respect to which
such Person shall then be proceeding with an appeal or other proceedings for
review; (c) Liens for property taxes not yet due or payable or subject to
penalties for non-payment or which are being contested in good faith and by
appropriate proceedings; (d) Liens in favor of issuers of surety bonds or
letters of credit issued pursuant to the request of and for the account of such
Person in the ordinary course of its business; provided, however, that such
letters of credit do not constitute Indebtedness; (e) minor survey exceptions,
minor encumbrances, easements or reservations of, or rights of others for,
licenses, rights of way, sewers, electric lines, telegraph and telephone lines
and other similar purposes, or zoning or other restrictions as to the use of
real properties or Liens incidental to the conduct of the business of such
Person or to the ownership of its properties which were not Incurred in
connection with Indebtedness and which do not in the aggregate materially
adversely affect the value of said properties or materially impair their use in
the operation of the business of such Person; (f) Liens securing Indebtedness
Incurred to finance the construction, purchase or lease of, or repairs,
improvements or additions to, property of such Person; provided, however, that
(i) such Liens only cover such property and do not extend to any other property
owned by such Person or any of its Subsidiaries, (ii) the Indebtedness secured
by such Liens is not Incurred more than 180 days after the later of the
acquisition, completion of construction, repair, improvement, addition or
commencement of full operation of the property subject to such Liens, (iii) the
Indebtedness secured by such Liens is otherwise permitted to be Incurred under
the Indenture, (iv) the principal amount of any Indebtedness secured by any such
Lien does not exceed the cost of assets or property so acquired or constructed
and (v) the amount of Indebtedness secured by any such Lien is not subsequently
increased; (g) Liens to secure Indebtedness permitted under the provisions
described in clause (b)(1), (2) or (10) under " --Certain Covenants--Limitation
on Indebtedness" or Refinancing Indebtedness in respect thereof; (h) Liens
existing on the date of the Indenture; (i) Liens on property or shares of stock
of another Person at the time such other Person becomes a Subsidiary of such
Person; provided, however, that such Liens are not created, incurred or assumed
in connection with, or in contemplation of, such other Person becoming such a
Subsidiary; provided further, however, that such Lien may not extend to any
other property owned by such Person or any of its Subsidiaries; (j) Liens on
property at the time such Person or any of its Subsidiaries acquires the
property, including any acquisition by means of a merger or consolidation with
or into such Person or a Subsidiary of such Person; provided, however, that such
Liens are not created, incurred or assumed in connection with, or in
contemplation of, such acquisition; provided further, however, that the Liens
may not extend to any other property owned by such Person or any of its
Subsidiaries; (k) Liens securing Indebtedness or other obligations of a
Subsidiary of such Person owing to such Person or a wholly owned Subsidiary of
such Person; (l) Liens securing Hedging Obligations so long as the related
Indebtedness is, and is permitted to be under the Original Indenture and the
Indenture, secured by a Lien on the same property securing such Hedging
Obligations; and (m) Liens to secure any Refinancing (or successive
Refinancings) as a whole, or in part, of any Indebtedness secured by any Lien
referred to in the foregoing clauses (f), (h), (i) and (j); provided, however,
that (x) such new Lien shall be limited to all or part of the same property that
secured the original Lien (plus improvements on such property) and (y) the
Indebtedness secured by such Lien at such time is not increased to any amount
greater than the sum of (A) the outstanding principal amount or, if greater,
committed amount of the Indebtedness described under clauses (f), (h), (i) or
(j) at the time the original Lien became a Permitted Lien and (B) an amount
necessary to pay any fees and expenses, including premiums, related
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to such refinancing, refunding, extension, renewal or replacement.
Notwithstanding the foregoing, "Permitted Liens" will not include any Lien
described in clauses (f), (i) or (j) above if such Lien applies to any
Additional Assets acquired directly or indirectly from Net Available Cash
pursuant to the covenant described under "--Certain Covenants--Limitation on
Sale of Assets and Subsidiary Stock".
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
"principal" of a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the
relevant time.
"Public Equity Offering" means an underwritten primary public offering of
common stock of the Company pursuant to an effective registration statement
under the Securities Act.
"Public Market" means a public trading market existing at any time after (x)
a Public Equity Offering has been consummated and (y) at least 15% of the total
issued and outstanding common stock of the Company has been distributed by means
of an effective registration statement under the Securities Act.
"Purchase Money Indebtedness" means Indebtedness (i) consisting of the
deferred purchase price of property, conditional sale obligations, obligation
under any title retention agreement and other purchase money obligations, in
each case where the maturity of such Indebtedness does not exceed the
anticipated useful life of the asset being financed, and (ii) incurred to
finance the acquisition by the Company or a Restricted Subsidiary of such asset,
including additions and improvements; provided, however, that any Lien arising
in connection with any such Indebtedness shall be limited to the specified asset
being financed or, in the case of real property or fixtures, including additions
and improvements, the real property on which such asset is attached; and
provided further, that such Indebtedness is Incurred within 180 days after such
acquisition by the Company or Restricted Subsidiary of such asset.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the date of
the Original Indenture or Incurred in compliance with the Original Indenture and
the Indenture including Indebtedness that Refinances Refinancing Indebtedness;
provided, however, that (i) such Refinancing Indebtedness has a Stated Maturity
no earlier than the Stated Maturity of the Indebtedness being Refinanced, (ii)
such Refinancing Indebtedness has an Average Life at the time such Refinancing
Indebtedness is Incurred that is equal to or greater than the Average Life of
the Indebtedness being Refinanced and (iii) such Refinancing Indebtedness has an
aggregate principal amount (or if Incurred with original issue discount, an
aggregate issue price) that is equal to or less than the aggregate principal
amount (or if Incurred with original issue discount, the aggregate accreted
value) then outstanding or committed under the Indebtedness being Refinanced,
plus any accrued interest thereon, any premium required to be paid thereon and
the amount of reasonable and customary transaction expenses incurred in
connection therewith; provided further, however, that Refinancing Indebtedness
shall not include (x) Indebtedness of a Restricted Subsidiary that Refinances
Indebtedness of the Company or (y) Indebtedness of the Company or a Restricted
Subsidiary that Refinances Indebtedness of an Unrestricted Subsidiary.
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"Related Business" means any business related, ancillary or complementary to
the businesses of the Company and the Restricted Subsidiaries on the date of the
Original Indenture.
"Representative" means the trustee, agent or representative (if any) for an
issue of Senior Indebtedness.
"Restricted Payment" with respect to any Person means (i) the declaration or
payment of any dividends or any other distributions of any sort in respect of
its Capital Stock (including any payment in connection with any merger or
consolidation involving such Person) or similar payment to the direct or
indirect holders of its Capital Stock (other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) or rights to
acquire its Capital Stock (other than Disqualified Stock) and dividends or
distributions payable solely to the Company or a Restricted Subsidiary, and
other than pro rata dividends or other distributions made by a Subsidiary that
is not a Wholly Owned Subsidiary to minority stockholders (or owners of an
equivalent interest in the case of a Subsidiary that is an entity other than a
corporation)), (ii) the purchase, redemption or other acquisition or retirement
for value of any Capital Stock of the Company or of any Restricted Subsidiary
held by any Person (other than the Company or a Wholly Owned Subsidiary),
including the exercise of any option to exchange any Capital Stock (other than
into Capital Stock of the Company that is not Disqualified Stock), (iii) the
purchase, repurchase, redemption, defeasance or other acquisition or retirement
for value, prior to scheduled maturity, scheduled repayment or scheduled sinking
fund payment of any Subordinated Obligations (other than the purchase,
repurchase or other acquisition of Subordinated Obligations purchased in
anticipation of satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of acquisition) or
(iv) the making of any Investment, other than a Permitted Investment, in any
Unrestricted Subsidiary or any other Person other than a Wholly Owned Subsidiary
or a Person that will become a Wholly Owned Subsidiary as a result of any such
Investment.
"Restricted Subsidiary" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary.
"Revolving Facility" means the revolving credit facility provided to the
Company as a portion of the Senior Bank Facilities.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Restricted Subsidiary
leases it from such Person, other than leases between the Company and a Wholly
Owned Subsidiary or between Wholly Owned Subsidiaries.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien.
"Senior Bank Documents" means the collective reference to the Senior Bank
Facilities, the notes (if any) issued pursuant thereto and the Guarantees
thereof, the Security Documents and the other Loan Documents (each as defined in
the Senior Bank Facilities and as in effect on the Issue Date).
"Senior Bank Facilities" means the senior secured credit facilities dated as
of the Original Issue Date, as amended as of the Issue Date, among the Company,
the financial institutions party thereto and The Chase Manhattan Bank, as agent
for such financial institutions.
"Senior Subordinated Indebtedness" means the Notes, the Original Notes and
any other Indebtedness of the Company that specifically provides that such
Indebtedness is to rank pari passu with the Notes and is not subordinated by its
terms to any Indebtedness or other obligation of the Company which is not Senior
Indebtedness.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
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"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the final payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Original Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the Notes pursuant to a written
agreement to that effect.
"Subsidiary" means, in respect of any Person, any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (i) such Person, (ii) such
Person and one or more Subsidiaries of such Person or (iii) one or more
Subsidiaries of such Person.
"Subsidiary Guaranty" means, individually, any Guarantee of payment of the
Notes which may from time to time be executed and delivered by a Subsidiary of
the Company pursuant to the terms of the Indenture, and, collectively, all such
Guaranties. Each such Subsidiary Guaranty will be in the form prescribed in the
Indenture.
"Tax Sharing Agreement" means the Tax Sharing Agreement dated as of May 12,
1995 by and among the Company and the Leasing Subsidiary or any other agreement
containing substantially the same terms as such agreement.
"Temporary Cash Investments" means any of the following: (i) any investment
in direct obligations of the United States of America or any agency thereof or
obligations guaranteed by the United States of America or any agency thereof,
(ii) investments in time deposit accounts, bankers' acceptances, certificates of
deposit and money market deposits maturing within 180 days of the date of
acquisition thereof issued by a bank or trust company which is organized under
the laws of the United States of America, any state thereof or any foreign
country recognized by the United States, and which bank or trust company has
capital, surplus and undivided profits aggregating in excess of $250,000,000 (or
the foreign currency equivalent thereof) and has outstanding debt which is rated
"A" (or such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under the
Securities Act), (iii) repurchase obligations with a term of not more than 30
days for underlying securities of the types described in clause (i) above
entered into with a bank meeting the qualifications described in clause (ii)
above, (iv) investments in commercial paper, maturing not more than 270 days
after the date of acquisition, issued by a corporation (other than an Affiliate
of the Company) organized and in existence under the laws of the United States
of America or any foreign country recognized by the United States of America
with a rating at the time as of which any investment therein is made of "P-1"
(or higher) according to Moody's Investors Service, Inc. or "A-1" (or higher)
according to Standard and Poor's Corporation, and (v) investments in securities
with maturities of six months or less from the date of acquisition issued or
fully guaranteed by any state, commonwealth or territory of the United States of
America, or by any political subdivision or taxing authority thereof, and rated
at least "A" by Standard & Poor's Corporation or "A" by Moody's Investors
Service, Inc.
"Term Loan Facility" means the Tranche A Term Loans and the Tranche B Term
Loans under the Senior Bank Facilities.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
SectionSection77aaa-77bbbb) as in effect on the date of the Indenture.
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"Trade Payables" means, with respect to any Person, any accounts payable or
any indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by such Person arising in the ordinary course of business in
connection with the acquisition of goods or services.
"Trustee" means the party named as such in the Indenture until a successor
replaces it and, thereafter, means the successor.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below, (ii) any Subsidiary of an
Unrestricted Subsidiary and (iii) the Leasing Subsidiary. The Board of Directors
may designate any Subsidiary of the Company (including any newly acquired or
newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary
or any of its Subsidiaries owns any Capital Stock or Indebtedness of, or holds
any Lien on any property of, the Company or any other Subsidiary of the Company
that is not a Subsidiary of the Subsidiary to be so designated; provided,
however, that either (A) the Subsidiary to be so designated has total
consolidated assets of $1,000 or less or (B) if such Subsidiary has consolidated
assets greater than $1,000, such designation would be permitted under the
covenant entitled "--Certain Covenants--Limitation on Restricted Payments". The
Board of Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided, however, that immediately after giving effect to such
designation (x) the Company could Incur $1.00 of additional Indebtedness under
paragraph (a) of the covenant described under "--Limitation on Indebtedness" and
(y) no Default shall have occurred and be continuing. Any such designation by
the Board of Directors shall be evidenced to the Trustee by promptly filing with
the Trustee a copy of the board resolution giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of the Company all
the Capital Stock of which (other than directors' qualifying shares) is owned by
the Company or one or more Wholly Owned Subsidiaries.
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OLD NOTES REGISTRATION RIGHTS; LIQUIDATED DAMAGES
In connection with the sale of the Old Notes, the Company, the Guarantor
Subsidiaries and the Initial Purchaser entered into an exchange and registration
rights agreement dated August 11, 1997 (the "Registration Rights Agreement").
Pursuant to the Registration Rights Agreement, the Company and the Guarantor
Subsidiaries agreed to (i) file with the Commission on or prior to 30 days after
the date on which the Old Notes were issued (the "Issue Date") a registration
statement (the "Exchange Offer Registration Statement") relating to the Exchange
Offer for the Notes under the Securities Act and (ii) use their best efforts to
cause the Exchange Offer Registration Statement to be declared effective under
the Securities Act within 90 days after the Issue Date. As soon as practicable
after the effectiveness of the Exchange Offer Registration Statement, the
Company will offer to the holders of Transfer Restricted Securities (as defined
herein) who are not prohibited by any law or policy of the Commission from
participating in the Exchange Offer the opportunity to exchange their Transfer
Restricted Securities for the Exchange Notes. The Company and the Guarantor
Subsidiaries have agreed to keep the Exchange Offer open for not less than 30
days (or longer, if required by applicable law) after the date notice of the
Exchange Offer is mailed to the holders of the Notes. For each Old Note
surrendered to the Company, pursuant to such Exchange Offer, the holder of such
Old Notes will receive Exchange Notes having a principal amount at maturity
equal to that of the surrendered Old Note.
In the event that applicable interpretations of the Staff do not permit the
Company to effect the Exchange Offer or do not permit any holder of the Notes to
participate in the Exchange Offer or to receive fully transferable securities
from the Exchange Offer, the Company will file with the Commission a shelf
registration statement (the "Shelf Registration Statement") to cover resales of
Transfer Restricted Securities by such holders who satisfy certain conditions
relating to the provision of information in connection with the Shelf
Registration Statement. For purposes of the foregoing, "Transfer Restricted
Securities" means each Note until (i) the date on which such Note has been
exchanged for a freely transferable Exchange Note in the Exchange Offer, (ii)
the date on which such Note has been effectively registered under the Securities
Act and disposed of in accordance with the Shelf Registration Statement, or
(iii) the date on which such Note is distributed to the public pursuant to Rule
144 under the Securities Act or is saleable pursuant to Rule 144(k) under the
Securities Act.
The Company and the Guarantor Subsidiaries have agreed to use their best
efforts to have the Exchange Offer Registration Statement or, if applicable, the
Shelf Registration Statement (each, a "Registration Statement") declared
effective by the Commission as promptly as practicable after the filing thereof.
Unless the Exchange Offer would not be permitted by a policy of the Commission,
the Company and the Guarantor Subsidiaries have agreed to commence the Exchange
Offer and use their best efforts to consummate the Exchange Offer as promptly as
practicable, but in any event prior to 120 days after the Issue Date. The
Company and the Guarantor Subsidiaries have agreed, if applicable, to use their
best efforts to keep the Shelf Registration Statement effective for a period of
two years after the Issue Date. If (i) the applicable Registration Statement is
not filed with the Commission on or prior to 30 days after the Issue Date; (ii)
the Exchange Offer Registration Statement or, as the case may be, the Shelf
Registration Statement, is not declared effective within 90 days after the Issue
Date; (iii) the Exchange Offer is not consummated on or prior to 120 days after
the Issue Date; or (iv) the Shelf Registration Statement is filed and declared
effective within 90 days after the Issue Date but shall thereafter cease to be
effective (at any time that the Company is obligated to maintain the
effectiveness thereof) without being succeeded within 30 days by an additional
Registration Statement filed and declared effective (each such event referred to
in clauses (i) through (iv), a "Registration Default"), the Company and the
Guarantor Subsidiaries will pay liquidated damages to each holder of Transfer
Restricted Securities, during the period of Registration Default, in an amount
equal to $0.192 per week per $1,000 principal amount of the Notes constituting
Transfer Restricted Securities held by such holder until the applicable
Registration Statement is filed or declared effective, the Exchange Offer is
consummated or the Shelf Registration Statement again becomes effective, as the
case may be. All accrued liquidated damages
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shall be paid to holders in the same manner as interest payments on the Notes on
semi-annual payment dates which correspond to interest payment dates for the
Notes. Following the cure of all Registration Defaults, the accrual of
liquidated damages will cease.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary of federal income tax consequences has been prepared
by Winston & Strawn. The summary is based on current law and certain proposed
regulations and is for general information only. Forthcoming legislative,
regulatory, judicial or administrative changes or interpretations could affect
the federal income tax consequences to holders of Exchange Notes. The tax
treatment of a holder may vary depending upon whether the holder is a
cash-method or accrual-method taxpayer and upon the holder's particular status.
For example, certain holders, including insurance companies, tax-exempt
organizations, financial institutions, broker-dealers and foreign persons may be
subject to special rules not discussed below.
EXCHANGE OFFER
The exchange of Exchange Notes for Old Notes pursuant to the Exchange Offer
should not be treated as an "exchange" for federal income tax purposes because
the Exchange Notes should not be considered to differ materially in kind or
extent from the Old Notes. Rather, the Exchange Notes received by a holder will
be treated as a continuation of the Old Notes in the hands of such holder. As a
result, there should be no federal income tax consequences to holders exchanging
the Old Notes for the Exchange Notes pursuant to the Exchange Offer. The holder
should continue to include stated interest in income as if the exchange (and
waiver of accrued interest on the Old Notes from August 11, 1997 to the date of
issuance of the Exchange Notes) had not occurred. If, however, the exchange of
the Old Notes for the Exchange Notes were treated as an "exchange" for federal
income tax purposes, such exchange would constitute a recapitalization for
federal income tax purposes. Holders exchanging the Old Notes pursuant to such
recapitalization should not recognize any gain or loss upon the exchange.
DEBT CHARACTERIZATION AND INTEREST INCOME
The Company will agree to treat the Notes as indebtedness for federal income
tax purposes, and the following discussion assumes that such treatment is
correct. If the Notes were not respected as debt, they likely would be treated
as equity ownership interests in the Company. In such event, the Company would
not be entitled to claim a deduction for interest payable on the Notes. As a
result, the Company's after-tax cash flow and, consequently, its ability to make
payments with respect to the Notes could be reduced.
STATED INTEREST/ORIGINAL ISSUE DISCOUNT
The Company intends to take the position (which generally will be binding on
holders) that the Old Notes were not issued with original issue discount.
Accordingly, holders of Old Notes and New Notes should include stated interest
(subject to the amortization of any amortizable bond premium, as discussed
below) in gross income in accordance with their methods of accounting for
federal income tax purposes. The Company's position is based on the assumptions
made by the Company that an optional redemption of the Old Notes or New Notes
will not occur and that no liquidated damages will be paid pursuant to the
Registration Rights Agreement. The Internal Revenue Service may take a different
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position, which could affect the timing and character of income by holders.
Holders should consult their tax advisors as to the possible treatment of
liquidated damages.
AMORTIZABLE BOND PREMIUM
If a holder's purchase price for an Old Note (excluding amounts paid that
are attributable to accrued interest) was greater than the Old Note's face
amount, such holder will be considered to have purchased the New Note exchanged
for such Old Note with "amortizable bond premium" equal in amount to such
excess. A holder of an Old Note that has elected to amortize such amortizable
bond premium (to reduce the amount of stated interest income on the Old Note)
will continue to amortize such premium on the New Note (to reduce the amount of
stated interest income on the New Note) using the same constant yield method and
term as that determined for the Old Note. A holder of a New Note with
amortizable bond premium that did not elect to amortize such premium on the Old
Note may elect to amortize such premium (to reduce the amount of stated interest
income on the New Note), using a constant yield method, over the remaining term
of the New Note (beginning from the first taxable year of the holder for which
the holder makes such election, as described below) with reference to either the
amount payable on maturity or, if it results in a smaller premium attributable
to the period through an earlier call date, with reference to the amount payable
on such earlier call date. An election to amortize bond premium on the New Note
will apply to the New Note, as well as all taxable debt obligations owned by
such holder at the beginning of the holder's taxable year for which the holder
makes the election and thereafter acquired by the holder and may be revoked only
with the consent of the Internal Revenue Service.
The Internal Revenue Service has published proposed regulations concerning
amortizable bond premium, which if made final in their present form could affect
the accrual of amortizable bond premium by holders of Old Notes and New Notes.
Although such proposed regulations, by their terms, will not be effective until
at least 60 days after they are made final, in their present form, if a holder
of an Old Note or New Note elects to amortize bond premium for the taxable year
containing such effective date, the proposed regulations would apply to all the
holder's debt instruments held on or after the first day of that taxable year.
It cannot be predicted at this time whether the proposed regulations will become
effective or what, if any, modifications will be made to them prior to their
becoming effective. Holders of Old Notes and New Notes should consult their tax
advisors concerning the making of an election to amortize bond premium.
SALE OR OTHER DISPOSITION OF NEW NOTES
A holder of a New Note will have a tax basis in the New Note equal to the
holder's purchase price for the Old Note, increased by the amount of interest,
determined in accordance with the rules concerning amortizable bond premium
described above, and market discount that is included in the holder's gross
income and decreased by payments of such interest and market discount received
(in cash) by the holder.
A holder of a New Note will generally recognize gain or loss on the sale,
exchange, redemption or retirement of the New Note equal to the difference (if
any) between the amount realized from such sale, exchange, redemption or
retirement and the holder's basis in the New Note. Such gain or loss will
generally be long-term capital gain (except to the extent attributable to market
discount) or loss if the New Note has been held more than one year (including
the period that such holder held the Old Note prior to exchange).
TAX CONSEQUENCES TO FOREIGN HOLDERS
For purposes of this discussion, a "Foreign Holder" is a Holder who or which
is not for U.S. federal income tax purposes either (i) a citizen or resident of
the United States, (ii) a former U.S. citizen, whose income and gain on the
Notes will be subject to U.S. taxation, (iii) a corporation, partnership or
other
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entity created or organized in or under the laws of the United States or of any
political subdivision thereof, (iv) an estate, the income of which is subject to
U.S. federal income taxable regardless of its source, or (v) generally a trust
for which (a) a court within the United States is able to exercise primary
supervision over the administration of the trust and (b) one or more U.S.
trustees have the authority to control all substantial decisions of the trust.
In April 1996, proposed regulations (the "1996 Proposed Regulations") were
issued which, if adopted in their present form, could affect the U.S. taxation
of Foreign Holders. The 1996 Proposed Regulations are generally proposed to be
effective for payments after December 31, 1997, regardless of the issue date of
the Note with respect to which such payments are made, subject to certain
transition rules. It cannot be predicted at this time whether the 1996 Proposed
Regulations will become effective as proposed or what, if any, modifications may
be made to them. The discussion under this heading and under "Information
Reporting and Backup Withholding" below, is not intended to be a complete
discussion of the provisions of the 1996 Proposed Regulations, and prospective
Foreign Holders of Notes are urged to consult their tax advisors with respect to
the effect that the 1996 Proposed Regulations may have if adopted.
A Foreign Holder generally will not be subject to United States federal
withholding tax on interest paid on the Notes so long as the Foreign Holder (i)
is not actually or constructively a "10 percent shareholder" of the Company or a
"controlled foreign corporation" with respect to which the Company is a "related
person" within the meaning of the Code, and (ii) provides an appropriate
statement, signed under penalties of perjury, certifying that the beneficial
owner of the Note is a foreign person and providing that foreign person's name
and address. If the information provided in this statement changes, the foreign
person must so inform the Company within 30 days of such change. The statement
generally must be provided in the year a payment occurs or in either of the two
preceding years. If the foregoing conditions are not satisfied, then interest
paid on the Notes will be subject to United States withholding tax at a rate of
30 percent, unless such rate is reduced or eliminated pursuant to an applicable
tax treaty.
Any capital gain a Foreign Holder realizes on the sale, redemption,
retirement or other taxable disposition of a Note will be exempt from United
States federal income and withholding tax, provided that (i) the gain is not
effectively connected with the Foreign Holder's conduct of a trade or business
in the United States, and (ii) in the case of a Foreign Holder that is an
individual, the Foreign Holder is not present in the United States for 183 days
or more in the taxable year.
If the interest, gain or other income a Foreign Holder recognizes on a Note
is effectively connected with the Foreign Holder's conduct of a trade or
business in the United States, the Foreign Holder (although exempt from the
withholding tax previously discussed if an appropriate statement is furnished)
generally will be subject to United States federal income tax on the interest,
gain or other income at regular federal income tax rates. In addition, if the
Foreign Holder is a foreign corporation, it may be subject to a branch profits
tax equal to 30 percent of its "effectively connected earnings and profits," as
adjusted for certain items, unless it qualifies for a lower rate under an
applicable tax treaty.
The Notes will not be includible in the estate of a Foreign Holder unless
the decedent was a direct or indirect 10% or greater shareholder of the Company
or, at the time of such decedent's death, payments in respect of the Notes would
have been effectively connected with the conduct by such decedent of a trade or
business in the United States.
INFORMATION REPORTING AND BACKUP WITHHOLDING
BACKUP WITHHOLDING
A noncorporate holder of New Notes that either (a) is (i) a citizen or
resident of the United States, (ii) a partnership, corporation or generally
another entity created or organized in or under the laws of the United States or
of any political subdivision thereof, (iii) an estate, the income of which is
subject to
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United States federal income taxation regardless of its source, or (iv)
generally a trust if (x) a court within the United States is able to exercise
primary supervision over the administration of the trust and (y) one or more
fiduciaries, which are United States persons, have the authority to control all
substantial decisions of the trust or (b) is not described in the preceding
clause (a), but whose income from interest (including amortizable bond premium)
with respect to the New Notes or proceeds from the disposition of the New Notes
is effectively connected with such holder's conduct of the United States trade
or business, and that receives interest with respect to the New Notes or
proceeds from the disposition of the New Notes will generally not be subject to
backup withholding on such payments or distributions if it certifies, under
penalty of perjury, that it has furnished a correct Taxpayer Identification
Number ("TIN") and it is not subject to backup withholding either because it has
not been notified by the Internal Revenue Service that it is subject to backup
withholding or because the Internal Revenue Service has notified it that it is
no longer subject to backup withholding. Such certification may be made on an
Internal Revenue Service Form W-9 or substantially similar form. However, backup
withholding will apply to such a holder if the holder (i) fails to furnish its
TIN, (ii) furnishes an incorrect TIN, (iii) is notified by the Internal Revenue
Service that it has failed to properly report such payments of interest or
dividends or (iv) under certain circumstances, fails to make such certification.
The Company will withhold (at a rate of 31%) all amounts required by law to
be withheld from reportable payments made with respect to the New Notes. Any
amounts withheld from a payment to a holder under the backup withholding rules
will be allowed as a credit against such holder's United States federal income
tax liability and may entitle such holder to a refund, provided that the
required information is furnished to the Internal Revenue Service.
Holders of the New Notes should consult their tax advisors regarding the
application of backup withholding in their particular situations, the
availability of an exemption therefrom, and the procedure for obtaining such an
exemption, if available.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR
GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH HOLDER OF NEW
NOTES SHOULD CONSULT ITS OWN TAX ADVISOR AS TO PARTICULAR TAX CONSEQUENCES OF
HOLDING, EXCHANGING OR SELLING THE NEW NOTES INCLUDING THE APPLICATION AND
EFFECT OF ANY FEDERAL, STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY CHANGES IN
APPLICABLE TAX LAWS.
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OLD NOTES TRANSFER RESTRICTIONS
Each holder of Old Notes has been deemed to have acknowledged, represented
to and agreed with the Company and the Initial Purchaser as follows:
1. It understands and acknowledges that the Old Notes have not been
registered under the Securities Act or any other applicable securities law, and
that the Old Notes are being offered for resale in transactions not requiring
registration under the Securities Act or any other securities laws, including
sales pursuant to Rule 144A, and, unless so registered, may not be offered, sold
or otherwise transferred except in compliance with the registration requirements
of the Securities Act or any other applicable securities laws, pursuant to an
exemption therefrom or in a transaction not subject thereto and in each case in
compliance with the conditions for transfer set forth in paragraph (4) below.
2. It is a "Qualified Institutional Buyer", as defined in Rule 144A (a
"QIB"), and is aware that any sale of the Old Notes to it will be made in
reliance on Rule 144A and such acquisition will be for its own account or for
the account of another QIB.
3. It acknowledges that neither the Company, the Guarantor Subsidiaries, the
Initial Purchaser nor any person representing the Company or the Initial
Purchaser has made any representation to it with respect to the Company, the
Guarantor Subsidiaries or the Old Notes Offering, other than the information
contained in the Offering Memorandum relating thereto, which has been delivered
to it and upon which it is relying in making its investment decision with
respect to the Old Notes. It has had access to such financial and other
information concerning the Company and the Old Notes as it has deemed necessary
in connection with its decision to purchase the Old Notes, including an
opportunity to ask questions of and request information from the Company, the
Guarantor Subsidiaries and the Initial Purchaser.
4. It is purchasing the Old Notes for its own account, or for one or more
investor accounts for which it is acting as a fiduciary or agent, in each case
not with a view to, or for offer or sale in connection with, any distribution
thereof in violation of the Securities Act, subject to any requirement of law
that the disposition of its property or the property of such investor account or
accounts be at all times within its or their control and subject to its or their
ability to resell such Old Notes pursuant to Rule 144A or any exemption from
registration available under the Securities Act. It agrees on its own behalf and
on behalf of any investor account for which it is purchasing the Old Notes, and
each subsequent holder of the Old Notes by its acceptance thereof will agree, to
offer, sell or otherwise transfer such Old Notes prior to the date which is two
years after the later of the date of original issue and the last date that the
Company or any affiliate of the Company was the owner of such Old Notes (or any
predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the
Company, (b) pursuant to a registration statement that has been declared
effective under the Securities Act, (c) for so long as the Old Notes are
eligible for resale pursuant to Rule 144A, to a person it reasonably believes is
a QIB that purchases for its own account or for the account of a QIB to whom
notice is given that the transfer is being made in reliance on Rule 144A, (d)
pursuant to offers and sales that occur outside the United States within the
meaning of Regulation S under the Securities Act, (e) to an "Institutional
Accredited Investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under
the Securities Act (an "Institutional Accredited Investor") that is purchasing
for its own account or for the account of such an Institutional Accredited
Investor, in each case in a minimum principal amount of the Old Notes of
$250,000 or (f) pursuant to any other available exemption from the registration
requirements of the Securities Act, subject in each of the foregoing cases to
any requirement of law that the disposition of its property or the property of
such investor account or accounts be at all times within its or their control.
The foregoing restrictions on resale will not apply subsequent to the Resale
Restriction Termination Date. If any resale or other transfer of the Old Notes
is proposed to be made pursuant to clause (e) above prior to the Resale
Restriction Termination Date, the transferor shall deliver a letter from the
transferee substantially in the form of Annex A hereto the Company and the
Trustee, which shall provide, among other things, that the transferee is an
Institutional
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Accredited Investor that is acquiring such Old Notes not for distribution in
violation of the Securities Act. Each purchaser acknowledges that the Company
and the Trustee reserve the right prior to any offer, sale or other transfer
prior to the Resale Restriction Termination Date of the Old Notes pursuant to
clause (d), (e) or (f) above to require the delivery of an opinion of counsel,
certifications and/or each information satisfactory to the Company and the
Trustee. Each purchaser acknowledges that each Old Note will contain a legend
substantially to the following effect:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY 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 HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL
OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION
TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY
WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A)
TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, 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) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE
UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E)
TO AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a)(1),
(2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS
OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN
EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, 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 (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF
AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO
EACH OF THEM, AND IN THE CASE OF THE FOREGOING CLAUSE (E), A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED
AND DELIVERED BY THE TRANSFEROR TO THE COMPANY AND THE TRUSTEE. THIS LEGEND WILL
BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.
5. Each purchaser, by its purchase of the Old Notes, shall be deemed to have
represented that (i) if it is an insurance company, the funds to be used to
purchase the Old Notes by it constitute (x) assets of an insurance company
general account maintained by it and the acquisition of each such Old Note by
such account satisfies the requirements of United States Department of Labor
Prohibited Transaction Class Exemption ("PTCE") 95-60 or (y) assets of an
insurance company pooled separate account satisfying the conditions of PTCE
90-1, and (ii) if it is not an insurance company, either (x) no part of the
funds to be used to purchase the Old Notes to be purchased by it constitute
assets allocated to any trust which contains the assets of any employee benefit
plan such that the use of such assets constitutes a non-exempt prohibited
transaction under ERISA or the Code or (y) such purchase is made on behalf of a
plan by (A) an investment advisor registered under the Investment Advisers Act
of 1940 that had as of the
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last day of its most recent fiscal year total assets under its management and
control in excess of $50 million and had stockholders' or partners' equity in
excess of $0.75 million, as shown in its most recent balance sheet prepared in
accordance with generally accepted accounting principles, or (B) a bank as
defined in Section 202(a)(2) of the Investment Advisors Act of 1940 with equity
capital in excess of $1 million as of the last day of its most recent fiscal
year, or (C) an insurance company which is qualified under the laws of more than
one state to manage, acquire or dispose of any assets of a plan, which insurance
company had, as of its most recent fiscal year, net worth in excess of $1
million and which is subject to supervision and examination by state authorities
having supervision over insurance companies and, in any case, such investment
advisor, bank or insurance company is otherwise a qualified professional asset
manager, as such term is used in PTCE 84-14, and the assets of such plan when
combined with the assets of other plans established or maintained by the same
employer (or affiliate thereof) or employee organization and managed by such
investment advisor, bank or insurance company do not represent more than 20% of
the total client assets managed by such investment advisor, bank or insurance
company, and the conditions of Section 1 of such exemption are otherwise
satisfied. The representation is made in reliance upon the list furnished to the
purchaser by the Company and the Guarantor Subsidiaries of the employee benefit
plans with respect to which the Company or a Guarantor Subsidiary is a party in
interest or a disqualified person and is based upon the purchaser's
determination that a statutory or administrative exemption is applicable or that
the Company and its Affiliates are not parties in interest with respect to such
employee benefit plan. As used in this paragraph, the terms "employee benefit
plan" and "party in interest" shall have the meaning assigned to such term in
Section 3 of ERISA, the term "Affiliate" shall have the meaning assigned to such
terms in Section 407(d)(7) of ERISA and the term "disqualified person" shall
have the meaning assigned to such term in Section 4975 of the Code.
6. It acknowledges that the Company, the Guarantor Subsidiaries, the Initial
Purchaser and others will rely upon the truth and accuracy of the foregoing
acknowledgments, representations and agreements and agrees that, if any of the
acknowledgments, representations or warranties deemed to have been made by it by
its purchase of Old Notes are no longer accurate, it shall promptly notify the
Company, the Guarantor Subsidiaries and the Initial Purchaser. If it is
acquiring any Old Notes as a fiduciary or agent for one or more investor
accounts, it represents that it has sole investment discretion with respect to
each such account and that is has full power to make the foregoing
acknowledgments, representations and agreements on behalf of each such account.
BOOK ENTRY; DELIVERY AND FORM
Except as set forth below, the Exchange Notes will initially be issued in
the form of one or more registered Notes in global form without coupons (each a
"Global Note"). Each Global Note will be deposited on the date of the acceptance
for exchange of the Old Notes and the issuance of the Exchange Notes (the
"Closing Date") with, or on behalf of, DTC and registered in the name of Cede &
Co., as nominee of DTC, or will remain in the custody of the Trustee pursuant to
the FAST Balance Certificate Agreement between DTC and the Trustee.
DTC has advised the Company that it is (i) a limited purpose trust company
organized under the laws of the State of New York, (ii) a member of the Federal
Reserve system, (iii) a "clearing corporation" within the meaning of the Uniform
Commercial Code, as amended, and (iv) a "Clearing Agency" registered pursuant to
Section 17A of the Exchange Act. DTC was created to hold securities for its
participants (collectively, the "Participants") and facilitates the clearance
and settlement of securities transactions between Participants through
electronic book-entry changes to the accounts of its Participants, thereby
eliminating the need for physical transfer and delivery of certificates. DTC's
Participants include securities brokers and dealers (including the Initial
Purchaser), banks and trust companies, clearing corporations and certain other
organizations. Access to DTC's system is also available to other entities such
as banks, brokers, dealers and trust companies (collectively, the "Indirect
Participants")
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that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly. Holders who are not Participants may beneficially
own securities held by or on behalf of the Depository only through Participants
or Indirect Participants.
The Company expects that pursuant to procedures established by DTC (i) upon
deposit of the Global Notes, DTC will credit the accounts of Participants
designated by the Initial Purchaser with an interest in the Global Notes and
(ii) ownership of the Exchange Notes will be shown on, and the transfer of
ownership thereof will be effected only through, records maintained by DTC (with
respect to the interest of Participants), the Participants and the Indirect
Participants. The laws of some states require that certain persons take physical
delivery in definitive form of securities that they own and that security
interests in negotiable instruments can only be perfected by delivery of
certificates representing the instruments. Consequently, the ability to transfer
Exchange Notes or to pledge the Exchange Notes as collateral will be limited to
such extent.
So long as DTC or its nominee is the registered owner of a Global Note, DTC
or such nominee, as the case may be, will be considered the sole owner or holder
of the Exchange Notes represented by such Global Note for all purposes under the
Indenture. Except as provided below, owners of beneficial interests in a Global
Note will not be entitled to have Exchange Notes represented by such Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of certificated securities (the "Certificated Securities"), and will
not be considered the owners or holders thereof under the Indenture for any
purpose, including with respect to the giving of any direction, instruction or
approval to the Trustee thereunder. As a result, the ability of a person having
a beneficial interest in Exchange Notes represented by a Global Note to pledge
or transfer such interest to persons or entities that do not participate in
DTC's system or to otherwise take action with respect to such interest, may be
effected by the lack of a physical certificate evidencing such interest.
Accordingly, each holder owning a beneficial interest in a Global Note must
rely on the procedures of DTC and, if such holder is not a Participant or an
Indirect Participant, on the procedures of the Participant through which such
holder owns its interest, to exercise any rights of a holder of Exchange Notes
under the Indenture or such Global Note. The Company understands that under
existing industry practice, in the event the Company requests any action of
holders of Exchange Notes or a holder that is an owner of a beneficial interest
in a Global Note desires to take any action that DTC, as the holder of such
Global Note, is entitled to take, DTC would authorize the Participants to take
such action and the Participants would authorize holders owning through such
Participants to take such action or would otherwise act upon the instruction of
such holders. Neither the Company nor the Trustee will have any responsibility
or liability for any aspect of the records relating to or payments made on
account of Exchange Notes by DTC, or for maintaining, supervision or reviewing
any records of DTC relating to such Exchange Notes.
Payments with respect to the principal of, premium, if any, and interest on,
any Exchange Notes represented by a Global Note registered in the name of DTC or
its nominee on the applicable record date will be payable by the Trustee to or
at the direction of DTC or its nominee in its capacity as the registered holder
of the Global Note representing such notes under the Indenture. Under the terms
of the Indenture, the Company and the Trustee may treat the persons in whose
names the Exchange Notes, including the Global Notes, are registered as the
owners thereof for the purpose of receiving such payment and for any and all
other purposes whatsoever. Consequently, neither the Company nor the Trustee has
or will have any responsibility or liability for the payment of such amounts to
beneficial owner of interest in a Global Note (including principal, premium, if
any, and interest), or to immediately credit the accounts of the relevant
Participants with such payment, in amounts proportionate to their respective
holdings in principal amount of beneficial interest in such Global Note as shown
on the records of DTC. Payments by the Participants and the Indirect
Participants to the beneficial owners of interest in a Global Note will be
governed by standing instruction and customary practice and will be the
responsibility of the Participants or the Indirect Participants and DTC.
107
<PAGE>
CERTIFICATED SECURITIES
If (i) the Company notifies the Trustee in writing that DTC is no longer
willing or able to act as a depository or DTC ceases to be a registrant as a
clearing agency under the Exchange Act and the Company is unable to locate a
qualified successor within 90 days (ii) the issuer, at its option, notifies the
Trustee in writing that it elects to cause the issuance of Exchange Notes in
definitive form under the indenture or (iii) upon the occurrence of certain
other events, then, upon surrender by DTC of the Global Notes, Certificated
Securities will be issued to each person that DTC identifies as the beneficial
owner of the Exchange Notes represented by the Global Notes. Upon any such
issuance, the Trustee is required to register such Certificated Securities in
the name of such person or persons (or the nominees of any thereof), and cause
the same to be delivered thereto.
Neither the Company nor the Trustee shall be liable for any delay by DTC or
any Participant or Indirect Participant in identifying the beneficial owners of
the related Exchange Notes and each such person may conclusively rely on, and
shall be protected in relying on, instructions from DTC for all purposes
(including with respect to the registration and delivery, and the respective
principal amounts, of the Exchange Notes to be issued).
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of Exchange Notes received in exchange for Old Notes
where such Old Notes were acquired as a result of market-making activities or
other trading activities. The Company has agreed that, for a period of 180 days
after the Expiration Date, it will make this prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale. In addition, until , 199 , all dealers effecting transactions in
the Exchange Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the Exchange Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such Exchange Notes. Any broker-dealer
that resells Exchange Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale of Exchange
Notes and any commission or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that, by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
Holders of the Old Notes) other than commissions or concessions of any
broker-dealers and will indemnify the Holders of the Old Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
108
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the validity of the Notes will be
passed upon for the Company by Winston & Strawn, Chicago, Illinois.
EXPERTS
The consolidated financial statements of the Company as of December 31, 1995
and 1996 and for the years ended December 31, 1994, 1995 and 1996, included in
or incorporated by reference into this Prospectus and elsewhere in the
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
included or incorporated herein in reliance upon the authority of said firm as
experts in giving said reports.
109
<PAGE>
GLOSSARY OF CERTAIN TERMS
The following industry terms have the meanings set forth below for purposes
of this Prospectus.
<TABLE>
<S> <C>
ABS: Anti-lock brake system.
AUTO-FLOOD-TM-: The Company's product name for an aluminum, rapid discharge
open hopper car that offers more capacity than conventional
steel automatic discharge cars.
AUTOMATIC SLACK ADJUSTER: A mechanism that reacts to, and adjusts for, variations in
brake shoe-to-drum clearance, maintains the proper amount of
space between the shoe and drum and thereby eliminates the need
for manual adjustment.
BRAKE DRUM: A metal cylinder to which pressure is applied by a braking
mechanism in order to arrest rotation of the wheel to which the
cylinder is attached.
BRAKE ROTOR: Device which works with a vehicle's braking system to stop the
vehicle.
COVERED HOPPER CAR: A totally contained freight car used to haul agricultural,
chemical and mineral products.
GONDOLA CAR: Open-top freight car principally used for hauling coal which
discharges through a rotary dump mechanism. Gondolas are also
used to haul products such as ore, scrap metal and other items.
INTERMODAL CAR: Freight car used primarily for moving containers and trailers
that can be placed on trucks and ships as well as freight cars.
OEM: Original equipment manufacturer.
OPEN HOPPER CAR: Freight car which discharges its load from the bottom of the
car.
QUAD HOPPER CAR: A type of open hopper car which discharges through four doors
on the bottom of the freight car.
SPOKE WHEELS: Along with the wheel hub, it is the connecting piece between
the brake system and the axle upon which the rim and tire are
mounted.
WHEEL HUBS: Along with the spoke wheel, it is the connecting piece between
the brake system and the axle upon which the rim and tire are
mounted.
</TABLE>
110
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
JOHNSTOWN AMERICA INDUSTRIES, INC. CONSOLIDATED FINANCIAL STATEMENTS
Audited Consolidated Financial Statements
Report of Independent Public Accountants................................................................. F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996............................................. F-3
Consolidated Statements of Income for the years ended December 31, 1994,
1995 and 1996.......................................................................................... F-4
Consolidated Statements of Cash Flows for the years ended December 31, 1994,
1995 and 1996.......................................................................................... F-5
Notes to Consolidated Financial Statements............................................................... F-6
Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of December 31, 1996 and June 30, 1997.......................... F-31
Condensed Consolidated Statements of Income for the six months ended June 30,
1996 and 1997.......................................................................................... F-32
Condensed Consolidated Statements of Cash Flows for the six months ended June 30,
1996 and 1997.......................................................................................... F-33
Notes to Condensed Consolidated Financial Statements..................................................... F-34
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
of Johnstown America Industries, Inc.:
We have audited the accompanying consolidated balance sheets of Johnstown
America Industries, Inc. (a Delaware corporation) and Subsidiaries as of
December 31, 1996 and 1995, and the related consolidated statements of income
and cash flows for each of the three years in the period ended December 31,
1996. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Johnstown
America Industries, 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
Chicago, Illinois
January 27, 1997
F-2
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------
1995 1996
----------- -----------
<S> <C> <C>
ASSETS:
Cash and cash equivalents............................................................. $ 11,639 $ 24,535
Accounts receivable, net.............................................................. 59,959 49,346
Inventories........................................................................... 43,900 49,589
Deferred income tax assets............................................................ 14,157 16,143
Prepaid expenses and other current assets............................................. 8,778 3,217
----------- -----------
Total current assets.................................................................... 138,433 142,830
Property, plant and equipment, net.................................................... 128,770 123,859
Leasing business assets, net.......................................................... 35,655 23,255
Restricted cash....................................................................... 1,364 578
Deferred financing costs, net......................................................... 15,110 13,099
Intangible assets, net................................................................ 259,493 251,662
----------- -----------
Total assets............................................................................ $ 578,825 $ 555,283
----------- -----------
----------- -----------
LIABILITIES:
Accounts payable...................................................................... $ 39,647 $ 43,325
Accrued payroll and employee benefits................................................. 26,101 20,220
Other current liabilities............................................................. 31,175 34,830
Current maturities of long-term debt and capital lease................................ 16,813 17,236
----------- -----------
Total current liabilities............................................................... 113,736 115,611
Long-term debt and capital lease, less current maturities............................. 212,973 186,939
Senior subordinated notes............................................................. 100,000 100,000
Deferred income tax liabilities....................................................... 28,136 29,214
Other long-term liabilities........................................................... 55,106 59,982
----------- -----------
Total liabilities....................................................................... 509,951 491,746
----------- -----------
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par, 20,000 shares authorized, none
outstanding......................................................................... -- --
Common stock, $.01 par, 201,000 shares authorized, 9,731
and 9,754 issued and outstanding as of December 31, 1995 and
1996, respectively.................................................................. 98 98
Paid-in capital....................................................................... 55,015 55,049
Retained earnings..................................................................... 13,791 8,420
Employee receivables for stock purchase............................................... (30) (30)
----------- -----------
Total shareholders' equity.............................................................. 68,874 63,537
----------- -----------
Total liabilities and shareholders' equity.............................................. $ 578,825 $ 555,283
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to the consolidated financial statements.
F-3
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net manufacturing sales.................................................... $ 468,070 $ 666,028 $ 555,510
Leasing revenue............................................................ 455 2,573 4,462
----------- ----------- -----------
Total revenue.......................................................... 468,525 668,601 559,972
Cost of sales--manufacturing............................................... 442,020 608,328 472,054
Cost of leasing............................................................ 133 654 2,104
----------- ----------- -----------
Gross profit........................................................... 26,372 59,619 85,814
Selling, general and administrative expenses............................... 13,144 28,117 46,605
Amortization expense....................................................... 3,573 6,478 10,174
Gain on sale of leased freight cars........................................ -- -- (1,354)
----------- ----------- -----------
Operating income....................................................... 9,655 25,024 30,389
Interest expense, net...................................................... 266 13,782 33,015
Interest expense--leasing.................................................. -- 920 2,821
----------- ----------- -----------
Income (loss) before income taxes...................................... 9,389 10,322 (5,447)
Provision (benefit) for income taxes....................................... 3,692 4,737 (76)
----------- ----------- -----------
Net income (loss)...................................................... $ 5,697 $ 5,585 $ (5,371)
----------- ----------- -----------
----------- ----------- -----------
Income (loss) per common share............................................. $ .58 $ .57 $ (.55)
----------- ----------- -----------
----------- ----------- -----------
Weighted average common and common equivalent shares outstanding........... 9,844 9,799 9,794
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
F-4
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1994 1995 1996
---------- ------------ ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss).......................................................... $ 5,697 $ 5,585 $ (5,371)
Adjustments to reconcile net income (loss) to net cash provided by (used
for) operating activities:
Depreciation........................................................... 2,813 7,656 14,772
Amortization........................................................... 3,532 8,235 14,498
Deferred income tax expense (benefit).................................. (40) 2,563 58
Provision for postretirement benefits.................................. 1,580 1,987 1,671
Gain on sale of leased freight cars.................................... -- -- (1,354)
---------- ------------ ----------
13,582 26,026 24,274
Change in operating assets and liabilities, net of effect of
acquired businesses:
Accounts receivable.................................................... (5,612) 26,689 10,613
Inventories............................................................ (30,112) 34,101 (5,689)
Prepaid expenses and other current assets.............................. 787 4,481 14,091
Accounts payable....................................................... 15,872 (29,447) 3,677
Accrued payroll and employee benefits.................................. 333 18,066 (5,177)
Other assets and liabilities........................................... 4,004 (27,784) (5,411)
---------- ------------ ----------
Net cash provided by (used for) operating activities....................... (1,146) 52,132 36,378
INVESTING ACTIVITIES:
Capital expenditures................................................... (7,295) (14,954) (9,919)
Leasing business asset additions....................................... (4,842) (31,377) (5,438)
Proceeds from sale of leased freight cars.............................. -- -- 18,113
Acquisition of TCI, less cash acquired................................. -- (266,081) --
Acquisition of Bostrom, less cash acquired............................. -- (32,444) --
Change in restricted cash/other........................................ 201 (1,354) 786
---------- ------------ ----------
Net cash provided by (used for) investing activities....................... (11,936) (346,210) 3,542
FINANCING ACTIVITIES:
Payments of term loans and capital lease............................... -- (46) (16,812)
Net (payments) borrowings of JAIX Leasing debt......................... -- 22,381 (8,799)
Net (payments) borrowings under revolving loans........................ 7,600 (7,600) --
Issuance of long-term debt............................................. -- 305,300 --
Proceeds from the issuance of common stock, net........................ 100 45 35
Payment of deferred financing costs.................................... -- (16,117) (1,448)
---------- ------------ ----------
Net cash provided by (used for) financing activities....................... 7,700 303,963 (27,024)
---------- ------------ ----------
Net increase (decrease) in cash and cash equivalents....................... (5,382) 9,885 12,896
Cash and cash equivalents, beginning of year............................... 7,136 1,754 11,639
---------- ------------ ----------
Cash and cash equivalents, end of year..................................... $ 1,754 $ 11,639 $ 24,535
---------- ------------ ----------
---------- ------------ ----------
</TABLE>
See accompanying notes to the consolidated financial statements.
F-5
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
Johnstown America Industries, Inc. (JAII) has three operating groups within
the transportation industry: truck components and assemblies operations, a
leading manufacturer of wheel end components, seating, steerable drive axles and
gear boxes for the heavy-duty truck industry; iron castings operations, a major
producer of complex iron castings for a wide range of industries; and freight
car operations, a leading manufacturer and lessor of new and rebuilt freight
cars used for hauling coal, intermodal containers, highway trailers,
agricultural and mining products.
On October 28, 1991, Johnstown America Corporation (JAC), wholly owned by
Johnstown America Industries, Inc., a Delaware corporation, consummated the
purchase of the former Freight Car Division of Bethlehem Steel Corporation.
JAII completed the acquisition of Truck Components Inc. (TCI) and its
subsidiaries (Gunite Corporation, Brillion Iron Works, Inc. and Fabco Automotive
Corporation) on August 23, 1995, and Bostrom Seating, Inc. (Bostrom) on January
13, 1995. Both acquisitions were accounted for under the purchase method of
accounting and accordingly, the operating results of these acquired businesses
are included herein from their respective acquisition dates. Operations
commenced on October 2, 1995, at the Freight Car Services, Inc. facility.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements reflect the application
of the following significant accounting policies:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of JAII and its
wholly owned subsidiaries. All significant intercompany transactions and
accounts have been eliminated in the accompanying consolidated financial
statements.
CASH EQUIVALENTS
The Company considers all short-term investments with original maturities of
three months or less when acquired to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market. The cost of 47% and
53% of the Company's inventories as of December 31, 1995 and 1996, respectively,
was determined on the first-in, first-out (FIFO) method, with the cost of the
remaining inventories, representing certain inventories at TCI and Bostrom,
determined on the last-in, last-out method. Had all inventories been determined
on the FIFO method at December 31, 1995 and 1996, the reported value of such
inventories would have been increased by $.1 million and $1.0 million,
respectively.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost less accumulated
depreciation. The cost of property, plant and equipment acquired as part of a
business acquisition represents the fair market value of such
F-6
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
assets at the acquisition date typically as determined by independent appraisal.
Depreciation is provided using the straight-line method by making periodic
charges to income over the estimated useful lives of the assets, which are as
follows:
<TABLE>
<S> <C>
Buildings and improvements..................................... 10-40 years
Machinery and equipment........................................ 3-12 years
</TABLE>
Property, plant and equipment under capital leases are amortized over the
shorter of the estimated useful life of the asset or the term of the lease.
Maintenance and repairs are charged to expense as incurred, while major
replacements and improvements are capitalized. The cost and accumulated
depreciation of items sold or retired are removed from the property accounts and
any gain or loss is recorded currently in the consolidated statements of income.
RESEARCH AND DEVELOPMENT
Costs associated with research and development are expensed as incurred.
LEASING BUSINESS ASSETS
Leasing business assets, which primarily consist of freight cars, are stated
at cost, which is the fully absorbed cost for those assets self-constructed by
the Company, less accumulated depreciation. Freight cars are being depreciated
using the straight-line method over the estimated useful life of 20-30 years.
INTANGIBLE ASSETS
The excess of purchase costs over amounts allocated to identifiable assets
and liabilities of businesses acquired (goodwill) is amortized on the
straight-line method over 40 years. Should events or circumstances occur
subsequent to the acquisition of a business which bring into question the
realizable value or impairment of the related goodwill, the Company will
evaluate the remaining useful life and balance of goodwill and make appropriate
adjustments. The Company's principle considerations in determining impairment
include the strategic benefit to the Company of the particular business as
measured by undiscounted current and expected future operating cash flows of
that particular business.
Other intangible assets are amortized on the straight-line method over their
estimated useful lives, which are as follows:
<TABLE>
<S> <C>
Trademarks..................................................... 40 years
Technologies................................................... 13-40 years
Patents........................................................ 8 years
Noncompete agreement........................................... 5 years
Organization costs............................................. 5 years
</TABLE>
ENVIRONMENTAL RESERVES
The Company is subject to comprehensive and frequently changing federal,
state and local environmental laws and regulations, and will incur additional
capital and operating costs in the future to comply
F-7
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
with currently existing laws and regulations, new regulatory requirements
arising from recently enacted statutes and possible new statutory enactments. In
addition to environmental laws that regulate the Company's ongoing operations,
the Company is also subject to environmental remediation liability. It is the
Company's policy to provide and accrue for the estimated cost of environmental
matters, on a non-discounted basis, when it is probable that a liability has
been incurred and the amount of the liability can be reasonably estimated. Such
provisions and accruals exclude claims for recoveries from insurance carriers or
other third parties.
Statement of Position (SOP) 96-1, "Environmental Remediation Liabilities"
was issued in October 1996 and will be adopted by the Company in 1997. This new
SOP provides authoritative guidance on specific accounting issues that are
present in the recognition, measurement and disclosure of environmental
remediation liabilities. Management does not believe that the impact, if any, of
adopting this SOP will have a material effect on the Company's financial
position or results of operations.
INCOME TAXES
The Company provides for deferred income taxes on differences that arise
when items are reported for financial statement purposes in years different from
those for income tax reporting purposes in conformance with Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes."
REVENUE RECOGNITION
Revenues on new and rebuilt freight cars are recognized when individual cars
are completed and accepted by the customer's inspector. Revenue from leasing is
recognized ratably during the lease term. All other revenue is recognized when
the products are shipped.
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.
NEW ACCOUNTING PRONOUNCEMENTS
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," was issued in March 1995 and was adopted
by the Company in 1996. This new pronouncement establishes standards on when to
review long-lived assets and certain identifiable intangible assets for
impairment and how to measure that impairment. The adoption of this standard had
an immaterial effect on the Company's financial position and results of
operations. SFAS No. 123, "Accounting for Stock-Based Compensation," was issued
in October 1995. This new pronouncement establishes financial accounting and
reporting standards for stock-based employee compensation plans and requires a
fair value based method to determine the compensation cost of such plans. As
allowed by the standard, the Company has provided supplemental pro forma
disclosure of the effect of such adoption in Note 10.
F-8
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECLASSIFICATIONS
Certain reclassifications have been made to prior year amounts to conform to
the current year presentation.
NOTE 3. ACQUISITIONS
BOSTROM SEATING INC.
On January 13, 1995, the Company acquired Bostrom. The total purchase price
was approximately $32.4 million and was funded by the Company's previous
borrowing facility.
FREIGHT CAR SERVICES, INC.--DANVILLE FACILITY
On January 27, 1995, the Company purchased a freight car rebuilding and
repair facility in Danville, Illinois for $2.5 million and spent additional
capital of $2.6 million through 1996 for refurbishment. The Company started
operations at this facility in October 1995.
TRUCK COMPONENTS, INC.
On August 23, 1995, the Company completed the acquisition of TCI, whereby
the Company acquired all outstanding shares of common stock of TCI (including
shares subject to options) for a cash purchase price of approximately $166
million. The Company also made a tender offer for $82 million of TCI's
outstanding senior notes and purchased such notes for $94 million. The
acquisition and tender offer, as well as the repayment of the Company's and
TCI's existing bank debt (excluding the JAIX Leasing facility) and the payment
of various transaction fees and expenses were financed by borrowings under the
Senior Bank Facilities and the proceeds of the issuance of the Notes (see Notes
6 and 7). Certain transactions related to the acquisition resulted in
significant income tax refunds for TCI which were reflected as prepaid expenses
and other assets in the accompanying balance sheet as of December 31, 1995 and
were collected in 1996.
The Bostrom and TCI acquisitions were accounted for as purchases for
financial reporting purposes. Accordingly, certain assets and liabilities of the
acquired companies were recorded at estimated fair values as of the acquisition
date, based on management's best judgment and available information at the time.
Changes to the original estimates, some of which were made in 1996, were not
material.
The operating results of the acquired companies have been included in the
Company's reported results of operations from their respective acquisition
dates.
The Company's pro forma unaudited consolidated results of operations for the
years ended December 31, 1994 and 1995 were prepared as though the acquisitions
of Bostrom and TCI and the related financing transactions occurred on January 1,
of the applicable year. Pro forma data is as follows:
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
Total revenues...................................................... $ 837,983 $ 900,924
Gross profit........................................................ 102,138 108,976
Net income.......................................................... 7,617 10,068
Net income per share................................................ $ 0.77 $ 1.03
----------- -----------
----------- -----------
</TABLE>
F-9
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The pro forma operating results include each acquiree's pre-acquisition
results of operations for the indicated years with adjustments to reflect
amortization of excess cost over net assets acquired and other identified
intangible assets, additional depreciation on the increase to fair market value
of fixed assets, interest expense on the acquisition borrowings and the effect
of income taxes thereon. The pro forma information given above does not purport
to be indicative of the results that actually would have been obtained if the
operations were combined during the periods presented and is not intended to be
a projection of future results or trends.
NOTE 4. DETAIL OF CERTAIN ASSETS AND LIABILITIES
ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Balance at beginning of year............................................. $ -- $ 1,690
Provision for doubtful accounts........................................ 60 538
Net write-offs......................................................... -- (345)
Allowances for doubtful accounts from acquired businesses.............. 1,630 --
--------- ---------
Balance at end of year................................................... $ 1,690 $ 1,883
--------- ---------
--------- ---------
</TABLE>
INVENTORIES
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Raw materials and purchased components............................... $ 14,287 $ 10,289
Work in progress and finished goods.................................. 29,613 39,300
--------- ---------
Inventories............................................................ $ 43,900 $ 49,589
--------- ---------
--------- ---------
</TABLE>
PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------
1995 1996
----------- -----------
<S> <C> <C>
(IN THOUSANDS)
Land.............................................................. $ 4,144 $ 4,466
Buildings and improvements........................................ 24,665 26,310
Machinery and equipment........................................... 108,953 114,820
Construction in progress.......................................... 4,176 4,722
----------- -----------
141,938 150,318
Accumulated depreciation.......................................... 13,168 26,459
----------- -----------
Property, plant and equipment, net.................................. $ 128,770 $ 123,859
----------- -----------
----------- -----------
</TABLE>
F-10
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. DETAIL OF CERTAIN ASSETS AND LIABILITIES (CONTINUED)
LEASING BUSINESS ASSETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Leasing business assets.............................................. $ 36,080 $ 23,884
Accumulated depreciation............................................. 425 629
--------- ---------
Leasing business assets, net........................................... $ 35,655 $ 23,255
--------- ---------
--------- ---------
</TABLE>
INTANGIBLE ASSETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------------------------------
NET BALANCE
ACCUMULATED ------------------------
ORIGINAL COST AMORTIZATION 1995 1996
------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Excess cost over net assets acquired................... $ 204,520 $ 7,955 $ 199,470 $ 196,565
Trademarks............................................. 26,988 931 26,755 26,057
Technologies........................................... 20,722 1,094 20,448 19,628
Patents................................................ 17,278 8,217 10,891 9,061
Noncompete agreement................................... 8,625 8,625 1,437 --
Organization costs..................................... 742 391 492 351
------------- ------------- ----------- -----------
Intangible assets........................................ $ 278,875 $ 27,213 $ 259,493 $ 251,662
------------- ------------- ----------- -----------
------------- ------------- ----------- -----------
</TABLE>
OTHER CURRENT LIABILITIES
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Accrued interest..................................................... $ 6,212 $ 7,039
Accrued workers' compensation........................................ 5,875 5,456
Current portion of postretirement and pension benefit reserves....... 4,576 3,536
Accrued warranty..................................................... 3,810 4,090
Other................................................................ 10,702 14,709
--------- ---------
Other current liabilities.............................................. $ 31,175 $ 34,830
--------- ---------
--------- ---------
</TABLE>
OTHER LONG-TERM LIABILITIES
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Postretirement and pension benefit reserves.......................... $ 28,676 $ 29,414
Environmental reserves............................................... 24,290 25,568
Other................................................................ 2,140 5,000
--------- ---------
Other long-term liabilities............................................ $ 55,106 $ 59,982
--------- ---------
--------- ---------
</TABLE>
F-11
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5. SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON PAID-IN WARRANTS RETAINED EMPLOYEE
STOCK CAPITAL OUTSTANDING EARNINGS RECEIVABLES TOTAL
------------- --------- ------------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Balance-December 31, 1993...................... $ 93 $ 53,986 $ 938 $ 2,509 $ (291) $ 57,235
Collection of employee receivables........... -- -- -- -- 201 201
Options exercised............................ 1 97 -- -- -- 98
Warrants exercised........................... 4 937 (938) -- -- 3
Net income for year.......................... -- -- -- 5,697 -- 5,697
--- --------- ------ ----------- ------ ---------
Balance-December 31, 1994...................... 98 55,020 -- 8,206 (90) 63,234
Collection of employee receivables........... -- -- -- -- 10 10
Options exercised............................ -- 45 -- -- -- 45
Stock subscription cancellation.............. -- (50) -- -- 50 --
Net income for year.......................... -- -- -- 5,585 -- 5,585
--- --------- ------ ----------- ------ ---------
Balance-December 31, 1995...................... 98 55,015 -- 13,791 (30) 68,874
Options exercised............................ -- 34 -- -- -- 34
Net loss for year............................ -- -- -- (5,371) -- (5,371)
--- --------- ------ ----------- ------ ---------
Balance-December 31, 1996...................... $ 98 $ 55,049 $ -- $ 8,420 $ (30) $ 63,537
--- --------- ------ ----------- ------ ---------
--- --------- ------ ----------- ------ ---------
</TABLE>
COMMON AND PREFERRED STOCK
The Company has authorized 200,000,000 shares of Common Stock (voting),
1,000,000 shares of Class B Common Stock (non-voting) and 20,000,000 shares of
preferred stock. No Class B Common Stock or preferred stock has been issued.
In October 1995, the Board of Directors of the Company adopted a Shareholder
Rights Plan and declared a dividend of one right ("Right") for each outstanding
share of the Company's common stock held by shareholders of record on October
16, 1995. When exercisable, each Right entitles shareholders of record to
purchase from the Company one one-thousandth of a share of Series A Junior
Participating Preferred Stock at an exercise price of $32.00, subject to certain
adjustments. The Company authorized 20,000 shares of such stock pursuant to this
plan. The Rights will become exercisable, and will trade separately from the
common stock, only if a person or group acquires 15% or more of the Company's
outstanding common stock or commences a tender or exchange offer that would
result in that person or group owning 15% or more of the Company's outstanding
common stock. Subsequently, upon the occurrence of certain events, holders of
Rights will be entitled to purchase common stock of the Company or a third-party
acquiror at an amount equal to twice the Right's exercise price. Until the
Rights become exercisable, they may be redeemed at the Company's option at a
price of one cent per Right. The Rights expire on October 4, 2005.
F-12
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
1995 1996
----------- -----------
<S> <C> <C>
(IN THOUSANDS)
Revolving Loan...................................................... $ -- $ --
Tranche A Term Loan................................................. 100,000 86,670
Tranche B Term Loan................................................. 100,000 96,670
----------- -----------
Total Senior Bank Facilities........................................ 200,000 183,340
Industrial Revenue Bond........................................... 5,300 5,300
Capital lease..................................................... 2,105 1,953
JAIX Leasing debt................................................. 22,381 13,582
----------- -----------
Total debt.......................................................... 229,786 204,175
Current maturities................................................ (16,813) (17,236)
----------- -----------
Long-Term debt...................................................... $ 212,973 $ 186,939
----------- -----------
----------- -----------
</TABLE>
Maturities of long-term debt as of December 31, 1996 are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
1997.......................................................................... $ 17,236
1998.......................................................................... 20,623
1999.......................................................................... 27,347
2000.......................................................................... 34,087
2001.......................................................................... 34,012
Thereafter.................................................................... $ 70,870
</TABLE>
SENIOR BANK FACILITIES
The Company entered into a credit facility (the Senior Bank Facilities) on
August 23, 1995, in conjunction with the acquisition of TCI and the related
transactions described in Note 3. The Revolving Loans portion of the Senior Bank
Facilities provides for up to $100 million of outstanding borrowings and letters
of credit, limited by the level of eligible accounts receivable and inventories.
As of December 31, 1996, availability under the Revolving Loans, after
consideration of outstanding letters of credit of $17.6 million, was $44.9
million. At the Company's election, interest rates per annum for the Revolving
Loans and Tranche A Term Loan are fluctuating rates of interest measured by
reference to either (a) an adjusted London inter-bank offered rate (LIBOR) plus
a borrowing margin or (b) an alternate base rate (ABR) plus a borrowing margin.
Such borrowing margins shall range between 1.50% and 2.50% for LIBOR loans and
between .50% and 1.50% for ABR loans, fluctuating within each range in 0.25%
increments based on the Company achieving certain financial results. Interest
rates per annum applicable to the Tranche B Term Loans are either (a) LIBOR plus
a margin of 3.00% or (b) ABR plus 2.00%. Additionally, various fees related to
unused commitments, letters of credit and administration of the facility are
incurred by the Company. As of December 31, 1995 and 1996, the weighted average
interest rate of all outstanding loans under the Senior Bank Facilities was
9.40% and 9.21%, respectively. Borrowings under the Senior Bank Facilities are
guaranteed by each of the Company's subsidiaries other than JAIX Leasing (the
Guarantor Subsidiaries) and are secured by the assets and stock of the Company
and its Guarantor Subsidiaries.
F-13
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6. LONG-TERM DEBT (CONTINUED)
The term loans under the Senior Bank Facilities began amortizing quarterly
on March 31, 1996. The Tranche A Term Loan and the Revolving Loans mature on
March 31, 2002 and the Tranche B Term Loan matures on March 31, 2003.
The Senior Bank Facilities contain various financial covenants including
capital expenditure limitations, minimum leverage and interest coverage ratios,
and minimum net worth, and also restrict the Company from paying dividends,
repurchasing common stock and making other distributions in certain
circumstances.
INDUSTRIAL REVENUE BOND
The Company, through its wholly owned subsidiary, Freight Car Services,
Inc., issued an Industrial Revenue Bond for $5.3 million which bears interest at
a variable rate (4.5% as of December 31, 1996) and can be redeemed by the
Company at any time. The bonds are secured by a letter of credit issued by
Johnstown America Industries, Inc. The bonds have no amortization and mature on
December 1, 2010. The bonds are also subject to a weekly "put" provision by the
holders of the bonds. In the event that any or all of the bonds are put to the
Company under the provision, the Company would effectively refinance such bonds
with additional borrowings under the Revolving Loans portion of the Senior Bank
Facilities.
In connection with the Industrial Revenue Bond, the Company has restricted
cash at December 31, 1996 of $.6 million from the initial proceeds of $5.3
million. The restricted cash is held in trust and will be used for additional
improvements and expansion of the Freight Car Services Inc., Danville facility.
JAIX LEASING DEBT
On May 12, 1995, JAIX Leasing entered into a three-year term loan agreement.
On June 14, 1996, JAIX Leasing refinanced this debt with a $27.7 million (as
amended) ten-year term loan which bears interest at an average interest rate of
9.32%. At December 31, 1996, the balance of this debt after scheduled and other
prepayments was $13.6 million. This debt is secured by the JAIX Leasing
underlying leases and assets and contains various covenants.
OTHER
During 1995 and 1996, the Company entered into various interest rate
contracts to fix a portion of the cost of its variable rate Senior Bank
Facilities. These contracts limit the effect of market fluctuations on the
interest cost of floating rate debt. The notional principal amounts outstanding
covering the current period on the interest rate contracts was $165 million and
$140 million as of December 31, 1995 and 1996, respectively. The fixed rates of
interest on these contracts ranged from 5.98% to 6.32% (plus the applicable
borrowing margin) as of December 31, 1995 and 1996, respectively. The maturities
on these contracts range from May 1997, through August 1998. The impact of fixed
versus variable interest rates is recorded as incurred, as a component of
interest expense. Costs associated with obtaining the Senior Bank Facilities,
the Senior Subordinated Notes described in Note 7 and other indebtedness
aggregate to $17.2 million. Such costs are amortized over the term of the
related debt. Previously deferred financing costs, which were not material, were
written off when proceeds from the Senior Bank Facilities were used to retire
the related debt. Amortization of deferred financing costs amounted to $.9
million and $3.2 million for the years ended December 31, 1995 and 1996,
respectively. Such amortization was not
F-14
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6. LONG-TERM DEBT (CONTINUED)
material in 1994. As of December 31, 1995 and 1996, accumulated amortization of
such costs was $.9 million and $4.1 million, respectively.
NOTE 7. SENIOR SUBORDINATED NOTES
In conjunction with the acquisition of TCI, the Company issued $100 million
of Senior Subordinated Notes (the Notes) which are due August 15, 2005. These
Notes have an interest rate of 11.75% per annum and are guaranteed on an
unsecured, senior subordinated joint and several basis by each of the Guarantor
Subsidiaries. Pursuant to the settlement of an interest rate contract in effect
when the Notes were issued, the Company realized a $2.6 million gain upon such
issuance. The gain is being amortized as an offset to interest expense over the
term of the Notes. The Notes have customary restrictive covenants including
restrictions on incurrence of additional indebtedness, payment of dividends and
redemption of capital stock. The Notes are subordinated to all indebtedness
under the Senior Bank Facilities and cross-default provisions do exist. Except
in certain limited circumstances, the Notes are not subject to optional
redemption by the Company prior to August 15, 2000, and thereafter are subject
to optional redemption by the Company at declining redemption premiums. Upon the
occurrence of a change in control (as defined), the Company is required to offer
to repurchase the Notes at a price equal to 101% of the principal amount thereof
plus accrued interest.
The Company's future operating performance and ability to service or
refinance the Notes and to extend or refinance the Senior Bank Facilities will
be subject to future economic conditions and to financial, business and other
factors, many of which are beyond the Company's control.
NOTE 8. EMPLOYEE BENEFIT PLANS
PENSION BENEFITS
Certain of the Company's subsidiaries have qualified, defined benefit plans
covering substantially all of their employees. Company contributions to the
plans were made based upon the minimum amounts required under the Employee
Retirement Income Security Act (ERISA). The plans' assets are held by
independent trustees and consist primarily of equity and fixed income
securities.
In conjunction with the purchase of the freight car business, the accrued
pension benefits for employees of the freight car business for service up to the
acquisition date remain the responsibility of Bethlehem Steel. The Company
initiated new pension plans for service subsequent to the acquisition date which
essentially provide benefits similar to the former plans. Following the
acquisition of TCI, certain TCI plans were frozen and were replaced with a
defined contribution plan.
F-15
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8. EMPLOYEE BENEFIT PLANS (CONTINUED)
The following table summarizes total pension expense:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Current service cost......................................... $ 1,487 $ 1,681 $ 2,189
Interest cost on projected benefit obligation................ 789 1,714 2,173
Expected return on assets.................................... (375) (1,896) (2,143)
Amortization of unrecognized gains and losses................ 140 1,571 1,208
--------- --------- ---------
Net pension cost............................................... $ 2,041 $ 3,070 $ 3,427
--------- --------- ---------
--------- --------- ---------
</TABLE>
The following table sets forth the plans' funded status:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------
1995 1996
----------- -----------
<S> <C> <C>
(IN THOUSANDS)
Vested benefits................................................... $ 17,658 $ 20,508
Nonvested benefits................................................ 5,006 3,380
----------- -----------
Accumulated benefits obligation..................................... 22,664 23,888
Effect of projected future compensation levels.................... 11,071 8,256
----------- -----------
Projected benefits obligation....................................... 33,735 32,144
Plan assets at fair value......................................... 14,177 20,311
----------- -----------
Projected benefits obligation in excess of plan assets.............. 19,558 11,833
Unrecognized net (loss) gain...................................... (3,739) 2,569
Unrecognized prior service cost................................... (5,673) (5,298)
----------- -----------
Net pension reserves recorded in the accompanying balance
sheets.......................................................... $ 10,146 $ 9,104
----------- -----------
----------- -----------
Actuarial assumptions used in developing the above data were:
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Discount rate..................................................... 7.50% 7.75%
Rate of expected return on plan assets............................ 9.00% 9.00%
Rate of increased in compensation................................. 4.00-6.00% 3.00-4.00%
</TABLE>
DEFINED CONTRIBUTION PLANS
Certain of the Company's subsidiaries also maintain qualified, defined
contribution plans which provide benefits to their employees based on employee
contributions, years of service, employee earnings or certain subsidiary
earnings, with discretionary contributions allowed. Expenses relating to these
plans were $1.6 million, $2.4 million and $3.1 million for the years ended
December 31, 1994, 1995 and 1996, respectively.
F-16
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8. EMPLOYEE BENEFIT PLANS (CONTINUED)
POSTRETIREMENT BENEFITS
The Company provides health care benefits for certain salaried and hourly
retired employees. Employees may become eligible for health care benefits if
they retire after attaining specified age and service requirements. These
benefits are subject to deductibles, co-payment provisions and other
limitations.
In connection with the purchase of the freight car business, the expected
cost of postretirement benefits of employees over age 43 at the purchase date
remained the responsibility of Bethlehem Steel. Costs of benefits relating to
current service are expensed currently.
The following table summarizes postretirement benefits expense:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Current service cost............................................................. $ 998 $ 1,043 $ 854
Interest cost on accumulated benefit obligation.................................. 582 1,001 1,340
Amortization of unrecognized gains............................................... -- (57) (183)
--------- --------- ---------
Net postretirement benefits costs.................................................. $ 1,580 $ 1,987 $ 2,011
--------- --------- ---------
--------- --------- ---------
</TABLE>
The following table sets forth the plans funded status:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Retirees................................................................................. $ 6,329 $ 6,308
Other fully eligible plan participants................................................... 3,208 4,828
Other active plan participants........................................................... 11,650 7,712
--------- ---------
Accumulated benefits obligation............................................................ 21,187 18,848
Unrecognized net gain.................................................................... 1,919 4,998
--------- ---------
Net postretirement benefits reserve recorded in the accompanying balance sheets............ $ 23,106 $ 23,846
--------- ---------
--------- ---------
</TABLE>
The discount rates used in developing the above data was 9.00% in 1994, and
ranged from 7.25% to 7.75% in 1995 and from 7.50% to 8.00% in 1996.
Medical trend rate assumptions were 10.25% in 1994, 8.00% to 9.50% for 1995
and 5.25% to 9.00% for 1996, incrementally decreasing to and remaining at 5.00%
for 2001 and later. Were the assumed medical trend rates to be increased by 1%
for each future year, the effect of this change would be to increase the
accumulated postretirement benefit by $4.4 million and $4.0 million at December
31, 1995 and 1996, respectively, and the aggregate service and interest cost
components by $.6 million, $.7 million and $.6 million for the years ended
December 31, 1994, 1995 and 1996, respectively.
The Company does not offer any other significant post-employment benefits.
F-17
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9. INCOME TAXES
The provision (benefit) for income taxes includes current and deferred
components as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Current taxes:
Federal....................................................... $ 2,929 $ 1,853 $ --
State......................................................... 803 321 (134)
--------- --------- ---------
3,732 2,174 (134)
--------- --------- ---------
Deferred taxes:
Federal....................................................... (54) 2,227 (444)
State......................................................... 14 336 502
--------- --------- ---------
(40) 2,563 58
--------- --------- ---------
Provision (benefit) for income taxes............................ $ 3,692 $ 4,737 $ (76)
--------- --------- ---------
--------- --------- ---------
</TABLE>
The provision (benefit) for income taxes differs from the amounts computed
by applying the federal statutory rate as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Income taxes at federal statutory rate................................ 34.0% 34.0% (34.0%)
State income taxes, net of federal benefit............................ 4.3 4.2 (0.1)
Nondeductible amortization expense.................................... 0.7 7.2 32.7
Other, net............................................................ 0.3 0.5 --
--- --- ---------
Effective income tax rate............................................. 39.3% 45.9% (1.4)%
--- --- ---------
--- --- ---------
</TABLE>
Components of deferred tax benefits (obligations) consist of the following:
<TABLE>
<CAPTION>
1995 1996
---------------------- ----------------------
DESCRIPTION BENEFITS OBLIGATIONS BENEFITS OBLIGATIONS
- --------------------------------------------------------------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Postretirement and pension benefit reserves.................... $ 13,495 $ -- $ 13,257 $ --
Environmental reserve.......................................... 9,801 -- 10,299 --
Deferred employee compensation................................. 5,684 -- 3,787 --
Accrued workers' compensation reserve.......................... 2,201 -- 2,128 --
Warranty reserve............................................... 1,486 -- 1,595 --
Alternative minimum tax credit carry forward................... 1,116 -- 4,042 --
Property, plant and equipment.................................. -- (28,297) -- (28,104)
Trademarks and technologies.................................... -- (20,526) -- (19,776)
Inventories.................................................... -- (3,381) -- (2,973)
Other.......................................................... 5,325 (883) 4,182 (1,508)
--------- ----------- --------- -----------
Deferred tax benefits (obligations).......................... $ 39,108 $ (53,087) $ 39,290 $ (52,361)
--------- ----------- --------- -----------
--------- ----------- --------- -----------
</TABLE>
F-18
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9. INCOME TAXES (CONTINUED)
In the consolidated balance sheets, these deferred benefits and deferred
obligations are classified as deferred income tax assets or deferred income tax
liabilities, based on the classification of the related asset or liability for
financial reporting. A deferred tax liability or asset that is not related to an
asset or liability for financial reporting, including deferred tax assets
related to carry forwards, are classified according to the expected reversal
date of the temporary difference as of the end of the year. Credit carry
forwards primarily consist of alternative minimum taxes, which can be carried
forward indefinitely, and certain state tax net operating losses subject to
various limitations which expire, if unused, primarily in 1998 and 1999 under
the current tax laws.
A valuation allowance of $.3 million and $2.1 million as of December 31,
1995 and 1996, has been recorded to offset these state tax credit carry
forwards. As of December 31, 1995 and 1996, no other valuation allowances are
deemed necessary as management expects to realize all other deferred benefits as
future tax deductions.
NOTE 10. STOCK OPTION PLANS
The Company maintains a Stock Option Plan (the Option Plan) for management
and non-affiliated directors of the Company and has reserved 989,000 shares of
common stock for issuance under such plan. Options are granted to management at
the discretion of the Company's directors and pursuant to an option program for
non-affiliated Company directors. Options granted under the Option Plan
generally have an exercise price equal to the closing market value of the
Company's common stock as of the date of grant, and become exercisable under
various vesting periods of up to three years.
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
---------------------------- ----------------------------
WTD. AVG. EXER. WTD. AVG. EXER.
SHARES PRICE SHARES PRICE
----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT WEIGHTED AVERAGE PRICES)
December 31, 1993....................... 178 $ 3.72 178 $ 3.72
Issued.............................. 109 20.07
Exercised........................... (60) 2.50
--- ------- --- -------
December 31, 1994....................... 227 11.89 210 4.31
Issued.............................. 399 10.88
Exercised........................... (18) 2.50
Cancelled........................... (25) 4.90
--- ------- --- -------
December 31, 1995....................... 583 11.79 277 11.18
Issued.............................. 178 4.82
Exercised........................... (14) 2.50
Cancelled........................... (74) 12.17
--- ------- --- -------
December 31, 1996....................... 673 $ 10.10 472 $ 10.82
--- ------- --- -------
--- ------- --- -------
</TABLE>
F-19
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10. STOCK OPTION PLANS (CONTINUED)
<TABLE>
<CAPTION>
RANGE OF EXERCISE WTD. AVG. WTD. AVG. EXER. WTD. AVG. EXER.
PRICES SHARES REMAINING YRS. PRICE SHARES PRICE
- ----------------------- ----------- ----------------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
EXERCISABLE--
OUTSTANDING--DECEMBER 31, 1996 DECEMBER 31, 1996
----------------------------------------------- ----------------------------
<CAPTION>
(IN THOUSANDS, EXCEPT LIVES AND PRICES)
<S> <C> <C> <C> <C> <C>
$2.50 - $12.00......... 434 8.67 $ 6.08 301 $ 6.42
$12.00 - $25.63........ 239 7.80 17.42 171 18.57
--- --- ------- --- -------
--- --- ------- --- -------
</TABLE>
The Company measures compensation cost under the intrinsic value-based
method. Had compensation cost been determined on the fair market value-based
accounting method for options granted in 1995 and 1996, pro forma net income and
earnings per share for 1995 would have been $5.1 million and $.52, respectively,
and pro forma net loss and loss per share for 1996 would have been $6.1 million
and $.62, respectively. The weighted average fair value of options granted in
1995 and 1996 was $8.44 and $2.34 for December 31, 1995 and 1996, respectively.
The fair value of each option is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions: weighted
average risk-free interest rate of 6.9% and 7.1%; weighted average volatility of
60.6% and 56.6%; expected lives of 10 years and zero dividend yield for 1995 and
1996, respectively.
NOTE 11. ENVIRONMENTAL MATTERS
The Company is subject to comprehensive and frequently changing federal,
state and local environmental laws and regulations, and will incur additional
capital and operating costs in the future to comply with currently existing laws
and regulations, new regulatory requirements arising from recently enacted
statutes and possible new statutory enactments. In addition to environmental
laws that regulate the Company's subsidiaries' ongoing operations, the
subsidiaries also are subject to environmental remediation liability. Under the
federal Comprehensive Environmental Response, Compensation and Liability Act
(CERCLA) and analogous state laws, the Company's subsidiaries may be liable as a
result of the release or threatened release of hazardous substances into the
environment. The Company's subsidiaries are currently involved in several
matters relating to the investigation and/or remediation of locations where the
subsidiaries had arranged for the disposal of foundry and other wastes.
Such matters include five situations in which the Company, through its TCI
subsidiaries and their predecessors, have been named or are believed to be
potentially responsible parties (PRPs) in the contamination of the sites.
Additionally, environmental remediation may be required at two of the TCI
facilities at which soil and ground water contamination has been identified.
The Company believes that it has valid claims for contractual
indemnification against prior owners for certain of the investigatory and
remedial costs at each of the above mentioned sites. The Company has been
notified, however, by all contractual indemnitors that they will not honor
future claims for indemnification. Accordingly, the Company is litigating
indemnification claims and there is no assurance that even if successful in any
such claims, any judgments against the indemnitors will ultimately be
recoverable. In addition, the Company believes it is likely that it has incurred
some liability at various sites for activities and disposal following
acquisition which would not in any event be covered by indemnification by prior
owners.
As of December 31, 1996, the Company has a $26.4 million environmental
reserve. This reserve is based on current cost estimates and does not reduce
estimated expenditures to net present value. The Company currently anticipates
spending approximately $500,000 per year for the next three years and
F-20
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11. ENVIRONMENTAL MATTERS (CONTINUED)
approximately $1 million per year in years 2000 and 2001 for monitoring the
various environmental sites associated with the environmental reserve, including
attorney and consultant costs for strategic planning and negotiations with
regulators and other PRPs, and payment of remedial investigation costs. The
Company expects to fund such expenditures with the cash flow generated from its
operations and amounts available under its Revolving Loans. These sites are
generally in the early investigatory stages of the remediation process and thus
it is anticipated that significant cash payments for remediation will not be
incurred for at least several years. After the evaluation and investigation
period, the investigation and remediation costs will likely increase because the
actual remediation of the various environmental sites associated with the
environmental reserve will likely be under way. Any cash expenditures required
by the Company or its subsidiaries to comply with applicable environmental laws
and/or to pay for any remediation efforts will not be reduced or otherwise
affected by the existence of the environmental reserve. Due to the early stage
of investigation of many of the sites and potential remediations referred to
above, there are significant uncertainties as to waste quantities involved, the
extent and timing of the remediation which will be required, the range of
acceptable solutions, costs of remediation and the number of PRPs contributing
to such costs. Based on all of the information presently available to it, the
Company believes that the environmental reserve will be adequate to cover its
future costs related to the sites associated with the environmental reserve, and
that any additional costs will not have a material adverse effect on the
financial condition or results of operations of the Company. However, the
discovery of additional sites, the modification of existing laws or regulations,
the imposition of joint and several liability under CERCLA or the uncertainties
referred to above could result in such a material adverse effect.
NOTE 12. CONTINGENCIES
The Company is involved in certain threatened and pending legal proceedings
including workers' compensation claims arising out of the conduct of its
businesses. In the opinion of management, the ultimate outcome of such legal
proceedings will not have a material adverse effect on the financial position or
results of operations of the Company.
The patent infringement lawsuit commenced by Johnstown America Corporation
(JAC) in December 1992 against Trinity Industries, Inc. (Trinity) alleging
infringement of JAC's patent for its BethGon Coalporter-Registered Trademark-
freight car was tried in 1996 with the trial court entering an order upholding a
jury verdict that the patent, though valid, was not infringed by Trinity's
Aluminator II freight car. In addition, JAC was not held to be liable for any of
the counterclaims alleged by Trinity. JAC thereafter made motions to the trial
court to set aside the verdict as not being consistent with the facts or the law
and enter judgment in favor of JAC or, alternatively, to order a new trial,
which motions were denied. JAC has appealed the case to the United States Court
of Appeals for the Federal Circuit. JAC expects the appeal to be decided in mid
to late 1997. Although the chances of success of the appeal cannot be predicted,
the Company continues to believe that the order entered by the trial court
upholding the jury's verdict and several prior orders are not consistent with
the facts or the law and that the trial court erred in applying the law in this
case. In any event, although neither the outcome of the action nor the effect of
such outcome can be predicted with certainty, in the opinion of management of
the Company, the outcome of the action will not have a material adverse effect
on the financial condition or results of operations of the Company.
F-21
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12. CONTINGENCIES (CONTINUED)
Additionally, the Company is involved in various warranty and repair claims
with its customers as a normal course of business. In the opinion of management,
accrued warranty costs relating to these obligations are adequate.
NOTE 13. COMMITMENTS
The Company leases certain real property and equipment under long-term
leases expiring at various dates through 2032. The leases generally contain
specific renewal or purchase options at the then fair market value.
Future minimum lease payments at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
CAPITAL LEASE OPERATING LEASE
-------------- ----------------
<S> <C> <C>
(IN THOUSANDS)
1997........................................................ $ 395 $ 3,484
1998........................................................ 395 3,135
1999........................................................ 395 2,850
2000........................................................ 395 2,653
2001........................................................ 395 2,130
Thereafter.................................................. 2,408 25,384
------- --------
------- --------
Total minimum lease payments............................ $ 4,383 $ 39,636
Less: Amount representing interest.......................... 2,430
-------
Present value of minimum lease payments................. 1,953
Less: Current portion of obligation under capital lease..... 170
-------
Noncurrent obligation under capital lease................... $ 1,783
-------
-------
</TABLE>
While the Company is liable for maintenance, insurance and similar costs
under most of its leases, such costs are not included in the future minimum
lease payments.
The Company assumed the capital lease in its acquisition of TCI. The related
asset balance of $1.9 million is included as a component of buildings and
improvements. Accumulated depreciation of this asset was $.1 million and $.2
million as of December 31, 1995 and 1996, respectively.
Total rental expense for the years ended December 31, 1995 and 1996 amounted
to $2.0 million and $3.7 million, respectively. Rental expense for the year
ended December 31, 1994 was not material.
NOTE 14. MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT
In each of 1994, 1995 and 1996, a different customer accounted for 31%, 17%
and 13% of the Company's total revenue.
A small number of customers often represent a significant portion of JAC's
revenues, in a given year, due to the large average size of orders from the
freight car business. With the acquisition of TCI and Bostrom, the Company's
revenue base is less concentrated.
F-22
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 15. UNAUDITED QUARTERLY INFORMATION
<TABLE>
<CAPTION>
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1995
- ----------------------------
Total revenue............... $ 178,438 $ 166,731 $ 166,881 $ 156,551
Gross profit................ 11,327 13,946 14,077 20,269
Net income (loss)........... 3,022 3,356 198 (991)
------------- ---------------- ------------- ---------------
Net income (loss) per
share................. $ 0.31 $ 0.34 $ 0.02 $ (0.10)
------------- ---------------- ------------- ---------------
------------- ---------------- ------------- ---------------
1996
- ----------------------------
Total revenue............... $ 152,339 $ 133,290 $ 140,845 $ 133,498
Gross profit................ 23,211 21,482 20,533 20,588
Net income (loss)........... (728) (1,224) (1,563) (1,856)
------------- ---------------- ------------- ---------------
Net income (loss) per
share................. $ (0.07) $ (0.13) $ (0.16) $ (0.19)
------------- ---------------- ------------- ---------------
------------- ---------------- ------------- ---------------
</TABLE>
F-23
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 16. GUARANTOR SUBSIDIARIES
The Notes and the obligations under the Senior Bank Facilities are fully and
unconditionally guaranteed on an unsecured, senior subordinated, joint and
several basis by each of the Guarantor Subsidiaries. The following condensed
consolidating financial data illustrates the composition of the Parent Company,
Guarantor Subsidiaries and JAIX Leasing as of and for the years ended December
31, 1995 and 1996. Separate complete financial statements of the respective
Guarantors Subsidiaries would not provide additional information which would be
useful in assessing the financial composition of the Guarantor Subsidiaries and
thus, are not presented.
Investments in subsidiaries are accounted for by the Parent Company on the
equity method for purposes of the supplemental consolidating presentation.
Earnings of subsidiaries are, therefore, reflected in the Parent Company's
investment accounts and earnings. The principle elimination entries eliminate
the Parent Company's investment in subsidiaries and intercompany balances and
transactions.
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
PARENT GUARANTOR JAIX
COMPANY SUBSIDIARIES LEASING ELIMINATIONS CONSOLIDATED
---------- ------------ --------- ------------ -------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Total revenue................................. $ 80 $ 666,695 $ 1,826 $ -- $ 668,601
Cost of sales................................. (7) 608,491 498 -- 608,982
---------- ------------ --------- ------------ -------------
Gross profit................................ 87 58,204 1,328 -- 59,619
Selling, general, administrative and
amortization expenses....................... 4,181 30,414 -- -- 34,595
---------- ------------ --------- ------------ -------------
Operating income (loss)..................... (4,094) 27,790 1,328 -- 25,024
Interest expense, net......................... 2,186 11,615 901 -- 14,702
Equity (earnings) of subsidiaries............. (10,062) -- -- 10,062 --
Provision (benefit) for income taxes.......... (1,803) 6,376 164 -- 4,737
---------- ------------ --------- ------------ -------------
Net income (loss)............................. $ 5,585 $ 9,799 $ 263 $ (10,062) $ 5,585
---------- ------------ --------- ------------ -------------
---------- ------------ --------- ------------ -------------
</TABLE>
F-24
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 16. GUARANTOR SUBSIDIARIES (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
PARENT GUARANTOR JAIX
COMPANY SUBSIDIARIES LEASING ELIMINATIONS CONSOLIDATED
----------- ------------ --------- ------------ -------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Cash and cash equivalents................... $ 16,896 $ (6,156) $ 899 $ -- $ 11,639
Accounts receivable, net.................... -- 59,814 145 -- 59,959
Inventories................................. -- 43,900 -- -- 43,900
Prepaid expenses and other.................. 5,320 17,218 437 (40) 22,935
----------- ------------ --------- ------------ -------------
Total current assets...................... 22,216 114,776 1,481 (40) 138,433
Property, plant and equipment, net.......... 2,446 128,275 33,993 (289) 164,425
Other assets................................ 112,988 257,538 226 (94,785) 275,967
----------- ------------ --------- ------------ -------------
Total assets................................ $ 137,650 $ 500,589 $ 35,700 $ (95,114) $ 578,825
----------- ------------ --------- ------------ -------------
----------- ------------ --------- ------------ -------------
Accounts payable............................ $ 1,836 $ 37,807 $ 4 $ -- $ 39,647
Other current liabilities................... 22,973 51,169 92 (145) 74,089
----------- ------------ --------- ------------ -------------
Total current liabilities................... 24,809 88,976 96 (145) 113,736
Noncurrent liabilities...................... -- 82,326 916 -- 83,242
Long-term debt, less current maturities and
intercompany advances (receivables)....... 43,967 242,042 26,964 -- 312,973
Total shareholders equity................... 68,874 87,245 7,724 (94,969) 68,874
----------- ------------ --------- ------------ -------------
Total liabilities and shareholders'
equity.................................... $ 137,650 $ 500,589 $ 35,700 $ (95,114) $ 578,825
----------- ------------ --------- ------------ -------------
----------- ------------ --------- ------------ -------------
</TABLE>
F-25
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 16. GUARANTOR SUBSIDIARIES (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
PARENT GUARANTOR JAIX
COMPANY SUBSIDIARIES LEASING ELIMINATIONS CONSOLIDATED
---------- ------------ --------- ------------ -------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Cash Flows provided by Operating
Activities................................. $ 1,571 $ 49,372 $ 1,189 $ -- $ 52,132
---------- ------------ --------- ------------ -------------
Cash Flows from Investing Activities:
Capital expenditures......................... (42) (14,912) -- -- (14,954)
Leased assets................................ (1,951) (4,573) (33,999) -- (31,377)
Acquisition of TCI, less cash acquired....... -- (266,081) -- -- (266,081)
Acquisition of Bostrom, less cash acquired... -- (32,444) -- -- (32,444)
Increase in restricted cash/other............ 10 (1,364) -- -- (1,354)
---------- ------------ --------- ------------ -------------
Cash (used for) investing activities......... (1,983) (310,228) (33,999) (346,210)
---------- ------------ --------- ------------ -------------
Cash Flows from Financing Activities:
Revolving loan, net.......................... (7,600) -- -- -- (7,600)
Issuance of long-term debt................... 300,000 5,300 -- -- 305,300
Issuance of JAIX Leasing debt................ -- -- 22,381 -- 22,381
Intercompany advances........................ (259,393) 247,773 11,620 -- --
Deferred financing costs paid/other.......... (15,658) (168) (292) -- (16,118)
---------- ------------ --------- ------------ -------------
Cash provided by financing activities........ 17,349 252,905 33,709 -- 303,963
Net increase (decrease) in cash and cash
equivalents................................ 16,937 (7,951) 899 -- 9,885
---------- ------------ --------- ------------ -------------
Cash and Cash Equivalents, beginning of
year....................................... (41) 1,795 -- -- 1,754
---------- ------------ --------- ------------ -------------
Cash and Cash Equivalents, end of year....... $ 16,896 $ (6,156) $ 899 $ -- $ 11,639
---------- ------------ --------- ------------ -------------
---------- ------------ --------- ------------ -------------
</TABLE>
F-26
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 16. GUARANTOR SUBSIDIARIES (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
GUARANTOR
PARENT COMPANY SUBSIDIARIES JAIX LEASING ELIMINATIONS CONSOLIDATED
---------------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Total revenue...................... $ 114 $ 555,509 $ 4,349 $ -- $ 559,972
Cost of sales...................... 42 472,053 2,063 -- 474,158
------- ------------ ------------- ------------ -------------
Gross profit....................... 72 83,456 2,286 -- 85,814
Selling, general, administrative
and amortization expenses........ 1,202 55,577 -- -- 56,779
Gain on sale of leased freight
cars............................. -- -- (1,354) -- (1,354)
------- ------------ ------------- ------------ -------------
Operating income (loss)............ (1,030) 27,879 3,640 -- 30,389
Interest expense, net.............. 11,421 21,697 2,718 -- 35,836
Equity (earnings) of
subsidiaries..................... (1,947) -- -- 1,947 --
Provision (benefit) for income
taxes............................ (5,233) 4,789 368 -- (76)
------- ------------ ------------- ------------ -------------
Net income (loss).................. $ (5,371) $ 1,393 $ 554 $ (1,947) $ (5,371)
------- ------------ ------------- ------------ -------------
------- ------------ ------------- ------------ -------------
</TABLE>
F-27
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 16. GUARANTOR SUBSIDIARIES (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
GUARANTOR
PARENT COMPANY SUBSIDIARIES JAIX LEASING ELIMINATIONS CONSOLIDATED
---------------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Cash and cash equivalents.......... $ 18,060 $ 1,483 $ 4,992 $ -- $ 24,535
Accounts receivable, net........... 28 49,162 156 -- 49,346
Inventories........................ -- 49,589 -- -- 49,589
Prepaid expenses and other......... 2,979 16,008 373 -- 19,360
---------------- ------------ ------------- ------------ -------------
Total current assets............... 21,067 116,242 5,521 -- 142,830
Property, plant and equipment,
net.............................. 7,577 123,128 16,960 (551) 147,114
Other assets....................... 108,822 255,913 401 (99,797) 265,339
---------------- ------------ ------------- ------------ -------------
Total assets....................... $ 137,466 $ 495,283 $ 22,882 $ (100,348) $ 555,283
---------------- ------------ ------------- ------------ -------------
---------------- ------------ ------------- ------------ -------------
Accounts payable................... $ 201 $ 42,993 $ 131 $ -- $ 43,325
Other current liabilities.......... 18,390 55,835 (1,728) (211) 72,286
---------------- ------------ ------------- ------------ -------------
Total current liabilities.......... 18,591 98,828 (1,597) (211) 115,611
Noncurrent liabilities............. -- 85,716 3,480 -- 89,196
Long-term debt, less current
maturities and intercompany
advances (receivables)........... 55,338 218,425 13,176 -- 286,939
Total shareholders' equity......... 63,537 92,314 7,823 (100,137) 63,537
---------------- ------------ ------------- ------------ -------------
Total liabilities and shareholders
equity........................... $ 137,466 $ 495,283 $ 22,882 $ (100,348) $ 555,283
---------------- ------------ ------------- ------------ -------------
---------------- ------------ ------------- ------------ -------------
</TABLE>
F-28
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 16. GUARANTOR SUBSIDIARIES (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
GUARANTOR
PARENT COMPANY SUBSIDIARIES JAIX LEASING ELIMINATIONS CONSOLIDATED
---------------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Cash Flows provided by Operating
Activities....................... $ (4,989) $ 40,087 $ 1,280 $ -- $ 36,378
-------- ------------ ------------- ------------ -------------
Cash Flows from Investing
Activities:
Capital expenditures............... (206) (9,713) -- -- (9,919)
Leased assets...................... (4,905) 279 (812) -- (5,438)
Cash from sale of leased assets.... -- -- 18,113 -- 18,113
Changes in restricted cash......... -- 786 -- -- 786
-------- ------------ ------------- ------------ -------------
Cash provided by (used for)
investing activities............. (5,111) (8,648) 17,301 -- 3,542
-------- ------------ ------------- ------------ -------------
Cash Flows from Financing
Activities:
Net payments under term loans...... (16,660) (152) -- -- (16,812)
Issuance (payment) JAIX Leasing
debt, net........................ -- -- (8,799) -- (8,799)
Change in intercompany advances.... 27,071 (23,634) (3,437) -- --
Dividends received (paid).......... 1,600 -- (1,600) -- --
Deferred financing costs paid...... (782) (14) (652) -- (1,448)
Other.............................. 35 -- -- -- 35
-------- ------------ ------------- ------------ -------------
Cash provided by (used for)
financing activities............. 11,264 (23,800) (14,488) -- (27,024)
Net increase (decrease) in cash and
cash equivalents................. 1,164 7,639 4,093 -- 12,896
-------- ------------ ------------- ------------ -------------
Cash and Cash Equivalents,
beginning of year................ 16,896 (6,156) 899 -- 11,639
-------- ------------ ------------- ------------ -------------
Cash and Cash Equivalents, end of
year............................. $ 18,060 $ 1,483 $ 4,992 $ -- $ 24,535
-------- ------------ ------------- ------------ -------------
-------- ------------ ------------- ------------ -------------
</TABLE>
F-29
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 17. FAIR VALUE OF FINANCIAL INSTRUMENTS
Based on borrowing rates currently available to the Company for borrowings
with similar terms and maturities, the fair value of the Company's debt was
approximately $320 million and $297 million as of December 31, 1995 and 1996,
respectively. No quoted market value is available except for the $100 million
Notes which had a market value of approximately $90 million and $97.5 million as
of December 31, 1995 and 1996. Outstanding interest rate contracts, based on
current market pricing models, have an estimated discounted fair market value of
negative $3.4 million and negative $.6 million as of December 31, 1995 and 1996,
respectively. All other financial instruments of the Company have fair market
values which approximate carrying value as of December 31, 1995 and 1996.
NOTE 18. SUPPLEMENTAL CASH FLOWS AND NON-CASH TRANSACTIONS DISCLOSURE
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1994 1995 1996
--------- ----------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Cash paid for:
Interest............................................... $ 259 $ 7,718 $ 31,487
Income taxes........................................... 2,380 6,011 1,382
--------- ----------- ---------
Business acquisitions:
Cash paid.............................................. $ -- $ 300,624 $ --
Assets received........................................ -- 412,634 --
--------- ----------- ---------
Liabilities assumed.................................... $ -- $ 112,010 $ --
--------- ----------- ---------
--------- ----------- ---------
</TABLE>
NOTE 19. SUBSEQUENT EVENT (UNAUDITED)
In September 1997, TCI and Gunite Corporation ("Gunite") settled two pending
environmental lawsuits. As a result of the settlement, the Company's reserve for
environmental matters was decreased by $14.3 million.
F-30
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
-------------- -----------
<S> <C> <C>
ASSETS:
Cash and cash equivalents.......................................................... $ 24,535 $ 17,311
Accounts receivable, net........................................................... 49,346 61,444
Inventories........................................................................ 49,589 54,435
Prepaid expenses and other......................................................... 19,360 18,730
-------------- -----------
Total current assets............................................................. 142,830 151,920
Property, plant and equipment, net................................................. 123,859 118,922
Leasing business assets, net....................................................... 23,255 39,530
Restricted cash.................................................................... 578 578
Deferred financing costs, net...................................................... 13,450 12,268
Intangible assets, net............................................................. 251,311 247,422
-------------- -----------
Total assets..................................................................... $ 555,283 $ 570,640
-------------- -----------
-------------- -----------
LIABILITIES:
Accounts payable................................................................... $ 43,325 $ 52,028
Accrued expenses and other payables................................................ 55,050 56,066
Current maturities of long-term debt, capital lease and JAIX Leasing debt.......... 17,236 18,916
-------------- -----------
Total current liabilities........................................................ 115,611 127,010
Long-term debt and capital lease, less current maturities............................ 173,763 163,668
JAIX Leasing debt, less current maturities........................................... 13,176 29,344
Other long-term liabilities.......................................................... 59,982 60,895
Senior subordinated notes............................................................ 100,000 100,000
Deferred income taxes................................................................ 29,214 28,591
SHAREHOLDERS' EQUITY:
Preferred stock, par $.01, 20,000 shares authorized, none outstanding.............. -- --
Common stock, par $.01, 201,000 shares authorized, 9,754 and 9,755 issued and
outstanding as of December 31, 1996 and June 30, 1997, respectively.............. 98 98
Paid-in capital.................................................................... 55,049 55,049
Retained earnings.................................................................. 8,420 6,015
Employee receivables for stock purchases........................................... (30) (30)
-------------- -----------
Total shareholders' equity....................................................... 63,537 61,132
-------------- -----------
Total liabilities and shareholders' equity....................................... $ 555,283 $ 570,640
-------------- -----------
-------------- -----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-31
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
30,
------------------------
<S> <C> <C>
1996 1997
----------- -----------
Net manufacturing sales............................................................ $ 283,626 $ 270,860
Leasing revenue.................................................................... 2,003 3,102
----------- -----------
Total revenue.................................................................. 285,629 273,962
Cost of sales--manufacturing....................................................... 240,180 231,031
Cost of leasing.................................................................... 679 1,489
----------- -----------
Gross profit................................................................... 44,770 41,442
Selling, general and administrative expenses....................................... 23,808 22,062
Amortization expense............................................................... 5,133 4,248
Gain on sale of leased freight cars................................................ -- (587)
----------- -----------
Operating income............................................................... 15,829 15,719
Interest expense, net.............................................................. 16,323 16,335
Interest expense--leasing.......................................................... 1,263 1,046
----------- -----------
Income (loss) before income taxes.............................................. (1,757) (1,662)
Provision (benefit)for income taxes................................................ 195 743
----------- -----------
Net income (loss).............................................................. $ (1,952) $ (2,405)
----------- -----------
----------- -----------
Net income (loss) per common and common equivalent shares
outstanding...................................................................... $ (0.20) $ (0.25)
----------- -----------
----------- -----------
Weighted average common and common equivalent shares............................... 9,757 9,805
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-32
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
1996 1997
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)................................................................. $ (1,952) $ (2,405)
Adjustments for items not affecting cash from operating activities:
Depreciation.................................................................. 7,655 7,807
Amortization--other........................................................... 5,590 4,859
Amortization--deferred financing costs........................................ 1,575 1,094
Gain on sale of leased freight cars........................................... -- (587)
Deferred tax expense (benefit)................................................ 786 (623)
Postretirement benefits....................................................... 1,273 1,080
--------- ---------
14,927 11,225
Changes in operating assets and liabilities:
Accounts receivable, net...................................................... (2,927) (12,098)
Inventories................................................................... (710) (4,846)
Accounts payable.............................................................. 386 8,702
Other assets and liabilities.................................................. 1,988 2,886
--------- ---------
Net cash provided by operating activities..................................... 13,664 5,869
--------- ---------
INVESTING ACTIVITIES:
Capital expenditures.......................................................... (4,914) (2,405)
Leasing business asset additions.............................................. (15) (25,682)
Proceeds from sales of leased freight cars.................................... -- 7,487
Other......................................................................... 663 13
--------- ---------
Net cash used for investing activities........................................ (4,266) (20,587)
--------- ---------
FINANCING ACTIVITIES:
Payments of term loans and capital lease...................................... (8,406) (8,415)
Net borrowings under JAIX Leasing loans....................................... 5,329 16,168
Payment of deferred financing costs........................................... (855) (259)
--------- ---------
Net cash provided by (used for) financing activities.......................... (3,932) 7,494
--------- ---------
Net increase (decrease) in cash and cash equivalents.......................... 5,466 (7,224)
Cash and cash equivalents, beginning of period................................ 11,639 24,535
--------- ---------
Cash and cash equivalents, end of period...................................... $ 17,105 $ 17,311
--------- ---------
--------- ---------
SUPPLEMENTAL CASH FLOWS DISCLOSURE
Cash paid for interest--other................................................. $ 14,733 $ 15,219
Cash paid for interest--JAIX Leasing.......................................... 1,263 1,037
Cash paid for income taxes.................................................... 587 508
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-33
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The financial statements presented herein and these notes are unaudited.
Certain information and footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. Although the registrant believes that all
adjustments (which include only normal recurring adjustments) necessary for a
fair presentation have been made, interim periods are not necessarily indicative
of the results of operations for a full year. As such, these financial
statements should be read in conjunction with the financial statements and notes
thereto incorporated by reference in the registrant's Form 10-K for the year
ended December 31, 1996.
The consolidated financial statements include the accounts of Johnstown
America Industries, Inc. and its wholly owned subsidiaries (the "Company"). All
significant intercompany transactions and accounts have been eliminated in the
accompanying consolidated financial statements.
NOTE 2. INVENTORIES
Inventories of the Company consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
-------------- ---------
<S> <C> <C>
Raw materials and purchased components...................................... $ 10,289 $ 7,408
Work-in-progress and finished goods......................................... 39,300 47,027
-------------- ---------
$ 49,589 $ 54,435
-------------- ---------
-------------- ---------
</TABLE>
NOTE 3. DEBT
Long-term debt of the Company (excluding JAIX Leasing) consisted of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
-------------- -----------
<S> <C> <C>
(IN THOUSANDS)
Revolving Loans............................................................ $ -- $ --
Tranche A Term Loans....................................................... 86,670 80,005
Tranche B Term Loans....................................................... 96,670 95,005
-------------- -----------
Total Senior Bank Facilities........................................... 183,340 175,010
Industrial Revenue Bonds................................................... 5,300 5,300
Capital lease.............................................................. 1,953 1,868
-------------- -----------
Total debt............................................................. 190,593 182,178
Less: Current maturities............................................. (16,830) (18,510)
-------------- -----------
Long-term debt......................................................... $ 173,763 $ 163,668
-------------- -----------
-------------- -----------
Long term debt of JAIX Leasing:
JAIX Leasing debt...................................................... $ 13,582 $ 29,750
Less: Current maturities............................................. (406) (406)
-------------- -----------
Long-term debt......................................................... $ 13,176 $ 29,344
-------------- -----------
-------------- -----------
</TABLE>
F-34
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. DEBT (CONTINUED)
SENIOR BANK FACILITIES
The Company entered into a credit facility ("Senior Bank Facilities") on
August 23, 1995, in conjunction with the acquisition of Truck Components Inc.
("TCI") and the related transactions. The Revolving Loans portion of the Senior
Bank Facilities provides for up to $100 million of outstanding borrowings and
letters of credit, limited by the level of eligible accounts receivable and
inventories. As of June 30, 1997, availability under the Revolving Loans, after
consideration of outstanding letters of credit of $17.1 million, was $50.5
million.
At the Company's election, interest rates per annum applicable to the
Revolving Loans and Tranche A Term Loans will be a fluctuating rate of interest
measured by reference to either (a) an adjusted London inter-bank offered rate
("LIBOR") plus a borrowing margin or (b) an alternate base rate ("ABR") plus a
borrowing margin. Such borrowing margins range between 1.50% and 2.50% for LIBOR
loans and between .50% and 1.50% for ABR loans, fluctuating within each range in
0.25% increments based on the Company achieving certain financial results.
Interest rates per annum applicable to Tranche B Term Loans are either (a) LIBOR
plus a margin of 3.00% or (b) ABR plus 2.00%. Additionally, various fees related
to unused commitments, letters of credit and administration of the facility are
incurred by the Company.
The term loans under the Senior Bank Facilities amortize quarterly, which
commenced on March 31, 1996. The Tranche A Term Loans and the Revolving Loans
mature on March 31, 2002 and the Tranche B Term Loans mature on March 31, 2003.
The Senior Bank Facilities contain various financial covenants including
capital expenditure limitations, leverage and interest coverage ratios and
minimum net worth, and also restrict the Company from paying dividends,
repurchasing common stock and making other distributions in certain
circumstances. At June 30, 1997, the Company was in compliance with these and
all other debt covenants.
JAIX LEASING DEBT
On June 14, 1996, JAIX Leasing entered into a ten-year term loan facility
which bears interest at an average interest rate of 8.78%. At June 30, 1997 the
facility had debt outstanding of $29.8 million. The facility, which is non
recourse to the Company, is secured by the underlying leases and assets and
contains various covenants.
INDUSTRIAL REVENUE BONDS
The Company, through its wholly owned subsidiary, Freight Car Services,
Inc., issued the Industrial Revenue Bonds for $5.3 million which bear interest
at a variable rate (4.25% as of June 30, 1997) and can be redeemed by the
Company at any time. The bonds are secured by a letter of credit issued by
Johnstown America Industries, Inc. The bonds have no amortization and mature on
December 1, 2010. The bonds are also subject to a weekly "put" provision by the
holders of the bonds. In the event that any or all of the bonds are put to the
Company under this provision, the Company would effectively refinance such bonds
with additional borrowings under the Revolving Loans portion of the Senior Bank
Facilities.
In connection with the Industrial Revenue Bonds, the Company has restricted
cash at June 30, 1997 of $0.6 million from the initial proceeds of $5.3 million.
The restricted cash is held in trust and will be used for additional
improvements and expansion of the Freight Car Services' Danville facility.
F-35
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. DEBT (CONTINUED)
INTEREST RATE CONTRACTS
The Company has entered into various interest rate contracts to fix the cost
of its variable rate Senior Bank Facilities. These contracts limit the effect of
market fluctuations on the interest cost of floating rate debt. The notional
principal amounts outstanding on the interest rate contracts covering the
current period is $125 million and the fixed rates of interest on these
contracts range from 5.98% to 6.32% plus the applicable borrowing margin. The
maturities on all contracts range from August 1997 through August 1998.
NOTE 4. SENIOR SUBORDINATED DEBT
In conjunction with the acquisition of TCI, the Company issued $100 million
of Senior Subordinated Notes (the "Notes") which are due August 15, 2005 and
have an interest rate of 11.75% per annum and are guaranteed on a unsecured,
senior subordinated joint and several basis by the Guarantor Subsidiaries. The
Notes have customary restrictive covenants including restrictions on incurrence
of additional indebtedness, and payment of dividends and redemption of capital
stock. The Notes are subordinated to all indebtedness under the Senior Bank
Facilities and cross-default provisions do exist. Except in certain limited
circumstances, the Notes are not subject to optional redemption by the Company
prior to August 15, 2000, and thereafter are subject to optional redemption by
the Company at declining redemption premiums. Upon the occurrence of a change in
control (as defined), the Company is required to offer to repurchase the Notes
at a price equal to 101% of the principal amount thereof plus accrued interest.
The Company anticipates issuing $80 million of additional 11.75% senior
subordinated debt at a premium in August 1997 (the "New Notes"). The New Notes
will have the same terms and conditions as the original senior subordinated
debt. The proceeds will be used to pay down debt outstanding under the Senior
Bank Facilities. At the time of the issuance the Company expects to write off
about $3.4 million (pretax) $2.0 million (after tax) of deferred financing
costs. Based on current interest rates the Company expects that it will incur
additional interest expense of approximately $1.6 million, annually. Pursuant to
the terms of the Senior Bank Facilities, the Tranche B holders have elected not
to be prepaid. The annual future term loan payments after the prepayment of the
Senior Bank Facilities will be as follows: 1997 $1.7 million, 1998 $3.3 million,
1999 $3.3 million, 2000 $20.0 million, 2001 $23.3 million, 2002 $26.7 million
and 2003 $16.7 million.
Effective December 31, 1995 and 1996, the Company entered agreements with
the banks participating in the Senior Bank Facilities to reset certain of the
financial covenants for the following year. As a result of the most recent
agreement, the Company is in compliance with the covenants and restrictions
contained in the Senior Bank Facilities. In connection with the offering of the
New Notes, the Company amended the credit agreement to reset the financial
covenants for the remaining term of the agreement and to reduce the Revolving
Facility from $100 million to $75 million. The banks also have consented to the
issuance of the New Notes.
NOTE 5. ENVIRONMENTAL MATTERS
The Company's subsidiaries are currently involved in several matters
relating to the investigation and/or remediation of locations where the
subsidiaries have arranged for the disposal of foundry and other wastes. As of
June 30, 1997, based on all of the information currently available to the
Company, the
F-36
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5. ENVIRONMENTAL MATTERS (CONTINUED)
Company has an environmental reserve which management believes is adequate to
cover future expenditures. This reserve is based on current cost estimates and
does not reduce estimated expenditures to net present value, although the
Company's subsidiaries are not likely to incur costs for most of the reserved
matters until several years in the future. Any cash expenditures required by the
Company or its subsidiaries to comply with applicable environmental laws and/or
to pay for any remediation efforts will not be reduced or otherwise affected by
the existence of the environmental reserve. Due to the early stage of
investigation of many of the sites and potential remediations referred to above,
there are significant uncertainties as to waste quantities involved, the extent
and timing of the remediation which will be required, the range of acceptable
solutions, costs of remediation and the number of potentially responsible
parties contributing to such costs. Based on all of the information presently
available to it, the Company believes that the environmental reserve will be
adequate to cover its future costs related to the sites associated with the
environmental reserve, and that any additional costs will not have a material
adverse effect on the financial condition or results of operations of the
Company. However, the discovery of additional sites, the modification of
existing laws or regulations, the imposition of joint and several liability or
the uncertainties referred to above could result in such a material adverse
effect.
NOTE 6. NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standard ("SFAS") No. 128, "Earnings Per
Share" was issued in February, 1997 and will be adopted by the Company effective
January 1, 1998. This new pronouncement establishes revised methods for
computing and reporting earnings per share. Adoption of this standard will not
materially impact previously reported earnings per share, including the per
share amount reported for the six months ended June 30, 1997.
SFAS No. 130, "Reporting Comprehensive Income" was issued in July 1997 and
will be adopted by the Company effective January 1, 1998. This new pronouncement
establishes standards for reporting and display of comprehensive income and its
components. Adoption of this standard will not impact the Company's financial
position or results of operations.
NOTE 7. GUARANTOR SUBSIDIARIES
The Notes and the obligations under the Senior Bank Facilities are fully and
unconditionally guaranteed on an unsecured, senior subordinated, joint and
several basis by each of the Guarantor Subsidiaries. The following condensed
consolidating financial data illustrates the composition of the Parent Company,
the Guarantor Subsidiaries, and JAIX Leasing as of and for certain dates and
periods. Separate complete financial statements of the respective Guarantor
Subsidiaries would not provide additional information which would be useful in
assessing the financial composition of the Guarantor Subsidiaries and thus, are
not presented.
Investments in subsidiaries are accounted for by the Parent Company on the
equity method for purposes of the supplemental consolidating presentation.
Earnings of subsidiaries are therefore reflected in the Parent Company's
investment accounts and earnings. The principle elimination entries eliminate
the Parent Company's investment in subsidiaries and intercompany balances and
transactions.
F-37
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. GUARANTOR SUBSIDIARIES (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
PARENT GUARANTOR
COMPANY SUBSIDIARIES JAIX LEASING ELIMINATIONS CONSOLIDATED
----------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Cash and cash equivalents................ $ 18,060 $ 1,484 $ 4,991 $ -- $ 24,535
Accounts receivable, net................. 28 49,161 157 -- 49,346
Inventories.............................. -- 49,589 -- -- 49,589
Prepaid expenses and other............... 2,979 16,008 373 -- 19,360
----------- ------------ ------------- ------------ -------------
Total current assets................. 21,067 116,242 5,521 -- 142,830
Property, plant and equipment, net....... 7,577 123,128 16,960 (551) 147,114
Other assets............................. 108,822 255,913 401 (99,797) 265,339
----------- ------------ ------------- ------------ -------------
Total assets......................... $ 137,466 $ 495,283 $ 22,882 $ (100,348) $ 555,283
----------- ------------ ------------- ------------ -------------
----------- ------------ ------------- ------------ -------------
Accounts payable......................... $ 201 $ 42,993 $ 131 $ -- $ 43,325
Other current liabilities................ 18,390 55,835 (1,728) (211) 72,286
----------- ------------ ------------- ------------ -------------
Total current liabilities............ 18,591 98,828 (1,597) (211) 115,611
Noncurrent liabilities................... -- 85,716 3,480 -- 89,196
Long-term debt, less current maturities
and intercompany advances
(receivables).......................... 55,338 218,425 13,176 -- 286,939
Total shareholders' equity........... 63,537 92,314 7,823 (100,137) 63,537
----------- ------------ ------------- ------------ -------------
Total liabilities and shareholders'
equity............................. $ 137,466 $ 495,283 $ 22,882 $ (100,348) $ 555,283
----------- ------------ ------------- ------------ -------------
----------- ------------ ------------- ------------ -------------
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
PARENT GUARANTOR
COMPANY SUBSIDIARIES JAIX LEASING ELIMINATIONS CONSOLIDATED
----------- ------------ --------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Total revenue........................... $ 20 $ 283,626 $ 1,983 $ -- $ 285,629
Cost of sales........................... (5) 240,180 684 -- 240,859
----------- ------------ ------- ------------ -------------
Gross profit........................ 25 43,446 1,299 -- 44,770
Selling, general, administrative and
amortization expenses................. (3) 28,944 -- -- 28,941
----------- ------------ ------- ------------ -------------
Operating income.................... 28 14,502 1,299 -- 15,829
Interest expense, net................... 5,550 10,816 1,220 17,586
Equity (earnings) of subsidiaries....... (2,343) -- -- 2,343 --
Provision (benefit) for income taxes.... (1,227) 1,389 33 -- 195
----------- ------------ ------- ------------ -------------
Net income (loss)................... $ (1,952) $ 2,297 $ 46 $ (2,343) $ (1,952)
----------- ------------ ------- ------------ -------------
----------- ------------ ------- ------------ -------------
</TABLE>
F-38
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. GUARANTOR SUBSIDIARIES (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
PARENT GUARANTOR
COMPANY SUBSIDIARIES JAIX LEASING ELIMINATIONS CONSOLIDATED
----------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES...... $ (6,902) $ 19,643 $ 923 $ -- $ 13,664
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................. (204) (4,710) -- -- (4,914)
Leased assets and investments......... -- -- (15) -- (15)
Changes in restricted cash............ -- 663 -- -- 663
----------- ------------ ------------- ------------ -------------
Cash provided by (used for) investing
activities.............................. (204) (4,047) (15) -- (4,266)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments under term loans......... (8,330) (76) -- -- (8,406)
Loan facility of leasing business..... -- -- 5,329 -- 5,329
Change in intercompany advances....... 14,038 (10,601) (3,437) -- --
Dividends received/ (paid)............ 500 -- (500) -- --
Deferred financing costs paid......... (421) (14) (420) -- (855)
----------- ------------ ------------- ------------ -------------
Cash provided by (used for) financing
activities.............................. 5,787 (10,691) 972 -- (3,932)
Net increase (decrease) in cash and cash
equivalents............................. (1,319) 4,905 1,880 -- 5,466
CASH AND CASH EQUIVALENTS, beginning of
period.................................. 16,896 (6,156) 899 -- 11,639
----------- ------------ ------------- ------------ -------------
CASH AND CASH EQUIVALENTS, end of
period.................................. $ 15,577 $ (1,251) $ 2,779 $ -- $ 17,105
----------- ------------ ------------- ------------ -------------
----------- ------------ ------------- ------------ -------------
</TABLE>
F-39
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. GUARANTOR SUBSIDIARIES (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
PARENT GUARANTOR
COMPANY SUBSIDIARIES JAIX LEASING ELIMINATIONS CONSOLIDATED
----------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Cash and cash equivalents................ $ 16,371 $ (1,645) $ 2,585 $ -- $ 17,311
Accounts receivable, net................. 33 61,281 130 -- 61,444
Inventories.............................. -- 54,435 -- -- 54,435
Prepaid expenses and other............... 2,465 17,756 (1,491) -- 18,730
----------- ------------ ------------- ------------ -------------
Total current assets................. 18,869 131,827 1,224 -- 151,920
Property, plant and equipment, net....... 2,641 118,139 38,014 (342) 158,452
Other assets............................. 108,826 248,088 625 (97,271) 260,268
----------- ------------ ------------- ------------ -------------
Total assets......................... $ 130,336 $ 498,054 $ 39,863 $ (97,613) $ 570,640
----------- ------------ ------------- ------------ -------------
----------- ------------ ------------- ------------ -------------
Accounts payable......................... $ -- $ 52,028 $ -- $ -- $ 52,028
Other current liabilities................ 17,942 58,231 (1,162) (29) 74,982
----------- ------------ ------------- ------------ -------------
Total current liabilities............ 17,942 110,259 (1,162) (29) 127,010
Noncurrent liabilities................... -- 86,006 3,480 -- 89,486
Long-term debt and intercompany advances,
less current maturities................ 51,262 212,406 29,344 -- 293,012
Total shareholders' equity............... 61,132 89,383 8,201 (97,584) 61,132
----------- ------------ ------------- ------------ -------------
Total liabilities and shareholders'
equity............................. $ 130,336 $ 498,054 $ 39,863 $ (97,613) $ 570,640
----------- ------------ ------------- ------------ -------------
----------- ------------ ------------- ------------ -------------
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
PARENT GUARANTOR
COMPANY SUBSIDIARIES JAIX LEASING ELIMINATIONS CONSOLIDATED
----------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Total revenue............................. $ 220 $ 270,860 $ 2,882 $ -- $ 273,962
Cost of sales............................. 40 231,032 1,448 -- 232,520
----------- ------------ ------------- ------------ -------------
Gross profit.............................. 180 39,828 1,434 -- 41,442
Selling, general, administrative and
amortization expenses................... (193) 26,062 (146) -- 25,723
Operating income...................... 373 13,766 1,580 -- 15,719
Interest expense, net..................... 6,001 10,429 951 -- 17,381
Equity (earnings) of subsidiaries......... (1,047) -- -- 1,047 --
Provision (benefit) for income taxes...... (2,176) 2,668 251 -- 743
----------- ------------ ------------- ------------ -------------
Net income (loss)......................... $ (2,405) $ 669 $ 378 $ (1,047) $ (2,405)
----------- ------------ ------------- ------------ -------------
----------- ------------ ------------- ------------ -------------
</TABLE>
F-40
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. GUARANTOR SUBSIDIARIES (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
PARENT GUARANTOR
COMPANY SUBSIDIARIES JAIX LEASING ELIMINATIONS CONSOLIDATED
----------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES...... $ (2,210) $ 5,187 $ 2,892 $ -- $ 5,869
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................. (98) (2,307) -- -- (2,405)
Leasing business assets and
investments......................... 13 -- (25,682) -- (25,669)
Proceeds from sale of leased freight
cars................................ 3,024 -- 4,463 -- 7,487
----------- ------------ ------------- ------------- -------------
Cash provided by (used for) investing
activities.......................... 2,939 (2,307) (21,219) -- (20,587)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of term loans and capital
lease............................... (8,330) (85) -- -- (8,415)
Loan facility of leasing business..... -- -- 16,168 -- 16,168
Intercompany advances................. 5,923 (5,923) -- -- --
Deferred financing costs paid......... (11) -- (248) -- (259)
----------- ------------ ------------- ------------- -------------
Cash provided by (used for) financing
activities.............................. (2,418) (6,008) 15,920 -- 7,494
Net increase (decrease) in cash and cash
equivalents............................. (1,689) (3,128) (2,407) -- (7,224)
CASH AND CASH EQUIVALENTS, beginning of
period.................................. 18,060 1,483 4,992 -- 24,535
----------- ------------ ------------- ------------- -------------
CASH AND CASH EQUIVALENTS, end of
period.................................. $ 16,371 $ (1,645) $ 2,585 $ -- $ 17,311
----------- ------------ ------------- ------------- -------------
----------- ------------ ------------- ------------- -------------
</TABLE>
NOTE 8. SUBSEQUENT EVENT
In September 1997, TCI and Gunite Corporation ("Gunite") settled two pending
environmental lawsuits. As a result of the settlement, the Company's reserve for
environmental matters was decreased by $14.3 million.
F-41
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE EXCHANGE OFFER MADE BY
THIS PROSPECTUS TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR GUARANTOR SUBSIDIARIES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR THE SOLICITATION OF AN OFFER TO BUY, THE EXCHANGE NOTES IN ANY CIRCUMSTANCES
IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR
THE GUARANTOR SUBSIDIARIES SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 3
Incorporation of Certain Documents by Reference........................... 3
Prospectus Summary........................................................ 4
Risk Factors.............................................................. 16
Use of Proceeds........................................................... 24
The Exchange Offer........................................................ 25
Capitalization............................................................ 34
Selected Consolidated Financial Data...................................... 35
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 37
Business.................................................................. 45
Management................................................................ 66
Description of Certain Indebtedness....................................... 68
Description of Exchange Notes............................................. 71
Old Notes Registration Rights; Liquidated Damages......................... 99
Certain United States Federal Income Tax Consequences..................... 100
Old Notes Transfer Restrictions........................................... 104
Book Entry; Delivery and Form............................................. 106
Plan of Distribution...................................................... 108
Legal Matters............................................................. 109
Experts................................................................... 109
Glossary of Certain Terms................................................. 110
Index to Financial Statements............................................. F-1
</TABLE>
[LOGO]
OFFER TO EXCHANGE $1,000
PRINCIPAL AMOUNT OF ITS
11 3/4% SERIES C SENIOR SUBORDINATED NOTES DUE 2005
WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT
FOR EACH $1,000 PRINCIPAL AMOUNT
OF ITS OUTSTANDING
11 3/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2005
---------------------
PROSPECTUS
---------------------
THE EXCHANGE AGENT
FOR THE EXCHANGE OFFER IS:
THE BANK OF NEW YORK
BY FACSIMILE:
(ELIGIBLE INSTITUTIONS ONLY)
(212) 815-6339
CONFIRMATION BY TELEPHONE
OR FOR INFORMATION:
(212) 815-5920
BY HAND OR OVERNIGHT DELIVERY:
THE BANK OF NEW YORK
101 BARCLAY STREET, 7E
CORPORATE TRUST SERVICES WINDOW
GROUND LEVEL
NEW YORK, NEW YORK 10286
ATTENTION: REORGANIZATION DEPARTMENT
ARWEN GIBBONS
BY REGISTERED OR CERTIFIED MAIL:
THE BANK OF NEW YORK
101 BARCLAY STREET, 7E
NEW YORK, NEW YORK 10286
ATTENTION: REORGANIZATION DEPARTMENT
ARWEN GIBBONS
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Each Registrant is a Delaware corporation. Reference is made to Section 145
of the Delaware General Corporation Law, as amended (the "GCL"), which provides
that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of such corporation), by reason of the fact that
such person is or was a director, officer, employee or agent of the corporation,
or is or was serving at its request in such capacity of another corporation or
business organization against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding if such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interest of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that such
person's conduct was unlawful. A Delaware corporation may indemnify officers and
directors in an action by or in the right of a corporation under the same
conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the corporation.
Where an officer or director is successful on the merits or otherwise in the
defense of any action referred to above, the corporation must indemnify him
against the expenses that such officer or director actually and reasonably
incurred.
Reference is also made to Section 102(b)(7) of the GCL, which permits a
corporation to provide in its certificate of incorporation that a director of
the corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the GCL or (iv) for any transaction from which the director
derived an improper personal benefit.
The certificates of incorporation of the Registrants provide for the
elimination of personal liability of a director for breach of fiduciary duty as
permitted by Section 102(b)(7) of the GCL and the By-laws of the Registrants
provide that the Registrants shall indemnify their directors and officers to the
full extent permitted by Section 145 of the GCL.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) A list of exhibits included as part of this Registration Statement
is set forth in the Exhibit Index which immediately precedes such exhibits
and is incorporated herein by reference.
(b) Financial Statement Schedules
None.
All other schedules are omitted because the required information is not
present or is not present in amounts sufficient to require submission of the
schedule or because the information required is included in the financial
statements or notes thereto.
ITEM 22. UNDERTAKINGS
1. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of
II-1
<PAGE>
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by them is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
2. The undersigned Registrants hereby undertake that:
(a) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrants pursuant to Rules 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(b) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein and this offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(c) For the purpose of determining any liability under the Securities
Act of 1933, each filing of the Registrants' annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that
is incorporated by reference in this registration statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago, State of
Illinois, on the 10th day of September, 1997.
JOHNSTOWN AMERICA INDUSTRIES, INC.
BY: /S/ ANDREW M. WELLER
-----------------------------------------
Andrew M. Weller
EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL
OFFICER
AND DIRECTOR
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below hereby constitutes and appoints Andrew M. Weller, David W. Riesmeyer and
Kenneth M. Tallering, or either of them, his true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as he might or would do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof. This Power of
Attorney may be signed in several counterparts.
IN WITNESS WHEREOF each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
Chairman of the Board,
/s/ THOMAS M. BEGEL President and Chief
- ------------------------------ Executive Officer September 10, 1997
Thomas M. Begel (Principal Executive
Officer)
Executive Vice President,
Chief Financial Officer
/s/ ANDREW M. WELLER and Director (Principal
- ------------------------------ Financial Officer and September 10, 1997
Andrew M. Weller Principal Accounting
Officer)
/s/ CAMILLO SANTOMERO
- ------------------------------ Director September 10, 1997
Camillo Santomero
/s/ R. PHILIP SILVER
- ------------------------------ Director September 10, 1997
R. Philip Silver
/s/ FRANCIS S. STROBLE
- ------------------------------ Director September 10, 1997
Francis S. Stroble
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago, State of
Illinois, on the 10th day of September, 1997.
JOHNSTOWN AMERICA CORPORATION
BY: /S/ JAMES D. CIRAR
-----------------------------------------
James D. Cirar
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
DIRECTOR
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below hereby constitutes and appoints David W. Riesmeyer and Kenneth M.
Tallering, or either of them, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or would do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent or their substitute or substitutes may
lawfully do or cause to be done by virtue hereof. This Power of Attorney may be
signed in several counterparts.
IN WITNESS WHEREOF each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
President, Chief Executive
/s/ JAMES D. CIRAR Officer and Director
- ------------------------------ (Principal Executive September 10, 1997
James D. Cirar Officer)
Vice President--Finance,
Treasurer and Assistant
/s/ W. JOHN PLUNKARD Secretary (Principal
- ------------------------------ Financial Officer and September 10, 1997
W. John Plunkard Principal Accounting
Officer)
/s/ THOMAS M. BEGEL
- ------------------------------ Chairman of the Board September 10, 1997
Thomas M. Begel
/s/ ED GHEARING
- ------------------------------ Director September 10, 1997
Ed Ghearing
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago, State of
Illinois, on the 10th day of September, 1997.
BOSTROM SEATING, INC.
BY: /S/ TIMOTHY A. MASEK
-----------------------------------------
Timothy A. Masek
PRESIDENT AND DIRECTOR
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below hereby constitutes and appoints David W. Riesmeyer and Kenneth M.
Tallering, or either of them, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or would do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent or their substitute or substitutes may
lawfully do or cause to be done by virtue hereof. This Power of Attorney may be
signed in several counterparts.
IN WITNESS WHEREOF each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ TIMOTHY A. MASEK President and Director
- ------------------------------ (Principal Executive September 10, 1997
Timothy A. Masek Officer)
Treasurer and Assistant
/s/ DAVID W. RIESMEYER Secretary (Principal
- ------------------------------ Financial Officer and September 10, 1997
David W. Riesmeyer Principal Accounting
Officer)
/s/ THOMAS M. BEGEL
- ------------------------------ Chairman of the Board September 10, 1997
Thomas M. Begel
/s/ ANDREW M. WELLER
- ------------------------------ Director September 10, 1997
Andrew M. Weller
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago, State of
Illinois, on the 10th day of September, 1997.
BOSTROM HOLDINGS, INC.
BY: /S/ THOMAS M. BEGEL
-----------------------------------------
Thomas M. Begel
PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below hereby constitutes and appoints David W. Riesmeyer and Kenneth M.
Tallering, or either of them, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or would do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent or their substitute or substitutes may
lawfully do or cause to be done by virtue hereof. This Power of Attorney may be
signed in several counterparts.
IN WITNESS WHEREOF each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ THOMAS M. BEGEL
- ------------------------------ President (Principal September 10, 1997
Thomas M. Begel Executive Officer)
Vice President, Treasurer
/s/ DAVID W. RIESMEYER and Assistant Secretary
- ------------------------------ (Principal Financial September 10, 1997
David W. Riesmeyer Officer and Principal
Accounting Officer)
/s/ ANDREW M. WELLER
- ------------------------------ Director September 10, 1997
Andrew M. Weller
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago, State of
Illinois, on the 10th day of September, 1997.
FREIGHT CAR SERVICES, INC.
BY: /S/ EDWARD J. WHALEN
-----------------------------------------
Edward J. Whalen
PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below hereby constitutes and appoints David W. Riesmeyer and Kenneth M.
Tallering, or either of them, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or would do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent or their substitute or substitutes may
lawfully do or cause to be done by virtue hereof. This Power of Attorney may be
signed in several counterparts.
IN WITNESS WHEREOF each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ EDWARD J. WHALEN
- ------------------------------ President (Principal September 10, 1997
Edward J. Whalen Executive Officer)
Treasurer and Assistant
/s/ DAVID W. RIESMEYER Secretary (Principal
- ------------------------------ Financial Officer and September 10, 1997
David W. Riesmeyer Principal Accounting
Officer)
/s/ THOMAS M. BEGEL
- ------------------------------ Chairman of the Board September 10, 1997
Thomas M. Begel
/s/ ANDREW M. WELLER
- ------------------------------ Director September 10, 1997
Andrew M. Weller
/s/ JAMES D. CIRAR
- ------------------------------ Director September 10, 1997
James D. Cirar
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago, State of
Illinois, on the 10th day of September, 1997.
JAC PATENT CORPORATION
BY: /S/ ANDREW M. WELLER
-----------------------------------------
Andrew M. Weller
PRESIDENT AND DIRECTOR
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below hereby constitutes and appoints David W. Riesmeyer and Kenneth M.
Tallering, or either of them, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or would do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent or their substitute or substitutes may
lawfully do or cause to be done by virtue hereof. This Power of Attorney may be
signed in several counterparts.
IN WITNESS WHEREOF each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ ANDREW M. WELLER President and Director
- ------------------------------ (Principal Executive September 10, 1997
Andrew M. Weller Officer)
Treasurer and Assistant
/s/ DAVID W. RIESMEYER Secretary (Principal
- ------------------------------ Financial Officer and September 10, 1997
David W. Riesmeyer Principal Accounting
Officer)
/s/ THOMAS M. BEGEL
- ------------------------------ Director September 10, 1997
Thomas M. Begel
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago, State of
Illinois, on the 10th day of September, 1997.
TRUCK COMPONENTS INC.
BY: /S/ THOMAS W. COOK
-----------------------------------------
Thomas W. Cook
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
DIRECTOR
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below hereby constitutes and appoints David W. Riesmeyer and Kenneth M.
Tallering, or either of them, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or would do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent or their substitute or substitutes may
lawfully do or cause to be done by virtue hereof. This Power of Attorney may be
signed in several counterparts.
IN WITNESS WHEREOF each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
President, Chief Executive
/s/ THOMAS W. COOK Officer and Director
- ------------------------------ (Principal Executive September 10, 1997
Thomas W. Cook Officer)
Vice President-Finance,
Chief Financial Officer
/s/ ANDREW M. WELLER and Director (Principal
- ------------------------------ Financial Officer and September 10, 1997
Andrew M. Weller Principal Accounting
Officer)
/s/ THOMAS M. BEGEL
- ------------------------------ Director September 10, 1997
Thomas M. Begel
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago, State of
Illinois, on the 10th day of September, 1997.
BRILLION IRON WORKS, INC.
BY: /S/ JOHN D. MCCLAIN
-----------------------------------------
John D. McClain
PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below hereby constitutes and appoints David W. Riesmeyer and Kenneth M.
Tallering, or either of them, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or would do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent or their substitute or substitutes may
lawfully do or cause to be done by virtue hereof. This Power of Attorney may be
signed in several counterparts.
IN WITNESS WHEREOF each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ JOHN D. MCCLAIN President (Principal
- ------------------------------ Executive Officer) John September 10, 1997
John D. McClain D. McClain
Vice President--Finance and
/s/ DENNIS GRAVEN Treasurer (Principal
- ------------------------------ Financial Officer and September 10, 1997
Dennis Graven Principal Accounting
Officer)
/s/ THOMAS M. BEGEL Director
- ------------------------------ September 10, 1997
Thomas M. Begel
/s/ ANDREW M. WELLER Director
- ------------------------------ September 10, 1997
Andrew M. Weller
/s/ THOMAS W. COOK Director
- ------------------------------ September 10, 1997
Thomas W. Cook
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago, State of
Illinois, on the 10th day of September, 1997.
FABCO AUTOMOTIVE CORPORATION
BY: /S/ MARK A. NIEMELA
-----------------------------------------
Mark A. Niemela
PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below hereby constitutes and appoints David W. Riesmeyer and Kenneth M.
Tallering, or either of them, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or would do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent or their substitute or substitutes may
lawfully do or cause to be done by virtue hereof. This Power of Attorney may be
signed in several counterparts.
IN WITNESS WHEREOF each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ MARK A. NIEMELA
- ------------------------------ President (Principal September 10, 1997
Mark A. Niemela Executive Officer)
Vice President--Finance and
/s/ LOU KEANE Treasurer (Principal
- ------------------------------ Financial Officer and September 10, 1997
Lou Keane Principal Accounting
Officer)
/s/ THOMAS M. BEGEL
- ------------------------------ Director September 10, 1997
Thomas M. Begel
/s/ ANDREW M. WELLER
- ------------------------------ Director September 10, 1997
Andrew M. Weller
/s/ THOMAS W. COOK
- ------------------------------ Director September 10, 1997
Thomas W. Cook
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago, State of
Illinois, on the 10th day of September, 1997.
GUNITE CORPORATION
BY: /S/ THOMAS W. COOK
-----------------------------------------
Thomas W. Cook
PRESIDENT AND DIRECTOR
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below hereby constitutes and appoints David W. Riesmeyer and Kenneth M.
Tallering, or either of them, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or would do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent or their substitute or substitutes may
lawfully do or cause to be done by virtue hereof. This Power of Attorney may be
signed in several counterparts.
IN WITNESS WHEREOF each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ THOMAS W. COOK President and Director
- ------------------------------ (Principal Executive September 10, 1997
Thomas W. Cook Officer)
Vice President--Finance and
/s/ DWIGHT M. MORROW Treasurer (Principal
- ------------------------------ Financial Officer and September 10, 1997
Dwight M. Morrow Principal Accounting
Officer)
/s/ THOMAS M. BEGEL
- ------------------------------ Director September 10, 1997
Thomas M. Begel
/s/ ANDREW M. WELLER
- ------------------------------ Director September 10, 1997
Andrew M. Weller
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago, State of
Illinois, on the 10th day of September, 1997.
JAII MANAGEMENT COMPANY
BY: /S/ ANDREW M. WELLER
-----------------------------------------
Andrew M. Weller
PRESIDENT AND DIRECTOR
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below hereby constitutes and appoints David W. Riesmeyer and Kenneth M.
Tallering, or either of them, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or would do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent or their substitute or substitutes may
lawfully do or cause to be done by virtue hereof. This Power of Attorney may be
signed in several counterparts.
IN WITNESS WHEREOF each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ ANDREW M. WELLER President and Director
- ------------------------------ (Principal Executive September 10, 1997
Andrew M. Weller Officer)
Vice President and
/s/ DAVID W. RIESMEYER Treasurer (Principal
- ------------------------------ Financial Officer and September 10, 1997
David W. Riesmeyer Principal Accounting
Officer)
/s/ THOMAS M. BEGEL
- ------------------------------ Director September 10, 1997
Thomas M. Begel
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 10, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
EXHIBITS
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
JOHNSTOWN AMERICA INDUSTRIES, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NO. EXHIBIT NUMBERED PAGE
- ------------- -------------------------------------------------------------------------------- -----------------------
<C> <S> <C>
3.1 Certificate of Incorporation of the Company (incorporated by reference to
Exhibit 3.3 to the Company's Registration Statement on Form S-1, File No.
33-63132)
3.2 Certificate of Incorporation of Johnstown America Corporation (incorporated by
reference to Exhibit 3.2 to the Company's Registration Statement on Form S-3,
File No. 33-04152)
3.3 Certificate of Incorporation of Bostrom Seating, Inc. (incorporated by reference
to Exhibit 3.4 to the Company's Registration Statement on Form S-3, File No.
33-04152)
3.4 Certificate of Incorporation of Bostrom Holdings, Inc.
3.5 Certificate of Incorporation of Freight Car Services, Inc. (incorporated by
reference to Exhibit 3.6 to the Company's Registration Statement on Form S-3,
File No. 33-04152)
3.6 Certificate of Incorporation of JAC Patent Corporation (incorporated by
reference to Exhibit 3.7 to the Company's Registration Statement on Form S-3,
File No. 33-04152)
3.7 Certificate of Incorporation of Truck Components Inc. (incorporated by reference
to Exhibit 3.8 to the Company's Registration Statement on Form S-3, File No.
33-04152)
3.8 Certificate of Incorporation of Brillion Iron Works, Inc. (incorporated by
reference to Exhibit 3.9 to the Company's Registration Statement on Form S-3,
File No. 33-04152)
3.9 Certificate of Incorporation of Fabco Automotive Corporation (incorporated by
reference to Exhibit 3.10 to the Company's Registration Statement on Form S-3,
File No. 33-04152)
3.10 Certificate of Incorporation of Gunite Corporation (incorporated by reference to
Exhibit 3.11 to the Company's Registration Statement on Form S-3, File No.
33-04152)
3.11 Certificate of Incorporation of JAII Management Company
3.12 Bylaws of the Company (incorporated by reference to Exhibit 3.4 to the Company's
Registration Statement on Form S-1, File No. 33-63132)
3.13 Bylaws of Johnstown America Corporation (incorporated by reference to Exhibit
3.13 to the Company's Registration Statement on Form S-3, File No. 33-04152)
3.14 Bylaws of Bostrom Seating Inc. (incorporated by reference to Exhibit 3.15 to the
Company's Registration Statement on Form S-3, File No. 33-04152)
3.15 Bylaws of Bostrom Holdings, Inc.
3.16 Bylaws of Freight Car Services, Inc. (incorporated by reference to Exhibit 3.17
to the Company's Registration Statement on Form S-3, File No. 33-04152)
3.17 Bylaws of JAC Patent Corporation (incorporated by reference to Exhibit 3.18 to
the Company's Registration Statement on Form S-3, File No. 33-04152)
3.18 Bylaws of Truck Components Inc. (incorporated by reference to Exhibit 3.19 to
the Company's Registration Statement on Form S-3, File No. 33-04152)
</TABLE>
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3.19 Bylaws of Brillion Iron Works, Inc. (incorporated by reference to Exhibit 3.20
to the Company's Registration Statement on Form S-3, File No. 33-04152)
3.20 Bylaws of Fabco Automotive Corporation (incorporated by reference to Exhibit
3.21 to the Company's Registration Statement on Form S-3, File No. 33-04152)
3.21 Bylaws of Gunite Corporation (incorporated by reference to Exhibit 3.22 to the
Company's Registration Statement on Form S-3, File No. 33-04152)
3.22 Bylaws of JAII Management Company
4.1 Form of the Company's Series B 11 3/4% Senior Subordinated Note due 2005 issued
on August 11, 1997 in the aggregate principal amount of $80,000,000
4.2 Indenture dated as of August 11, 1997 among the Company, the Guarantor
Subsidiaries and The Bank of New York, as Trustee governing $80,000,000
aggregate principal amount of the Company's 11 3/4% Senior Subordinated Notes
due 2005
4.3 Exchange and Registration Rights Agreement dated August 11, 1997 among the
Company, the Guarantor Subsidiaries and Chase Securities Inc., as Initial
Purchaser
4.4 Credit Agreement, dated as of August 23, 1995, among the Company, the financial
institutions named therein, Chemical Bank, as Administrative Agent, Collateral
Agent and Swingline Lender, Chemical Bank Delaware, as Issuing Bank, and The
First National Bank of Boston and The First National Bank of Chicago, as Co-
Agents (incorporated by reference to Exhibit 99.1 to the Company's Current
Report on Form 8-K dated August 30, 1995)
4.5 Amendment to Credit Agreement, dated as of December 31, 1995, among the Company,
the financial institutions named therein, Chemical Bank, as Administrative
Agent, Collateral Agent and Swingline Lender, Chemical Bank Delaware, as
Issuing Bank, and The First National Bank of Boston and The First National
Bank of Chicago, as Co-Agents (incorporated by reference to Exhibit 10.6 to
the Company's Form 10-K for the fiscal year ended December 31, 1995)
4.6 Second Amendment to Credit Agreement, dated as of December 31, 1996 among the
Company, the financial institutions named therein, Chemical Bank, as
Administrative Agent, Collateral Agent and Swingline Lender, Chemical Bank
Delaware, as Issuing Bank, and The First National Bank of Boston and The First
National Bank of Chicago, as Co-Agents (incorporated by reference to Exhibit
10.9 to the Company's Form 10-K for the fiscal year ended December 31, 1996)
4.7 Amendment No. 3, Consent and Waiver dated as of August 4, 1997 to Credit
Agreement, among the Company, The Chase Manhattan Bank, as Administrative
Agent, Collateral Agent and Swingline Lender, The First National Bank of
Boston and The First National Bank of Chicago, as co-agents, and The Chase
Manhattan Bank Delaware, as Issuing Bank.
</TABLE>
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4.8 Term Loan Agreement, dated as of June 14, 1996, between JAIX Leasing Company and
NationsBanc Leasing Corporation of North Carolina (incorporated by reference
to Exhibit 10.1 to the Company's Form 10-Q for the Quarter ended June 30,
1996)
4.9 Loan Agreement, dated as of December 1, 1995, between Freight Car Services, Inc.
and the City of Danville, Vermillion County, Illinois relating to $5.3 million
of City of Danville, Illinois Variable Rate Demand Industrial Revenue Bonds
(Freight Car Services, Inc. Project), Series 1995 (incorporated by reference
to Exhibit 10.7 to the Company's Form 10-K for the fiscal year ended December
31, 1995)
5.1 Opinion of Winston & Strawn
10.1 Agreement of Purchase and Sale, dated as of May 3, 1991, as amended, between
Bethlehem Steel Corporation and the Company (incorporated by reference to
Exhibit 2.1 to the Company's Registration Statement on Form S-1, File No.
33-63132)
10.2 Agreement and Plan of Merger, dated as of June 13, 1995, among the Company, JTN
Acquisition Corp. and Truck Components Inc. (incorporated by reference to
Exhibit 2.1 to the Company's Current Report on Form 8-K dated June 13, 1995)
10.3 Stockholders Agreement, dated as of June 13, 1995, among the Company, JTN
Acquisition Corp. and the stockholders party thereto (incorporated by
reference to Exhibit 2.2 to the Company's Current Report on Form 8-K dated
June 13, 1995), and Amendment No. 1 to Stockholders Agreement, dated as of
June 23, 1995, among Johnstown America Industries, Inc., JTN Acquisition
Corp., and the stockholders party thereto (incorporated by reference to
Exhibit 2.3 to Amendment No. 1 to the Company's Current Report on Form 8-K
dated June 13, 1995)
10.4 Stock Purchase Agreement, dated as of December 21, 1994, and the First Amendment
thereto, dated as of January 13, 1995, each among the sellers, Bostrom
Seating, Inc. and the Company (incorporated by reference to Exhibit 2 to the
Company's Current Report on Form 8-K dated January 24, 1995)
10.5 1993 Stock Option Plan (incorporated by reference to Exhibit 10.8 to the
Company's Registration Statement on Form S-1, File No. 33-63132)
10.6 Johnstown America Corporation Salaried Pension Plan (incorporated by reference
to Exhibit 10.11 to the Company's Registration Statement on Form S-1, File No.
33-63132)
10.7 Amended and Restated Stockholder and Warrantholder Agreement (incorporated by
reference to Exhibit 10.14 to the Company's Registration Statement on Form
S-1, File No. 33-63132)
10.8 Employment Agreement of Thomas M. Begel (incorporated by reference to Exhibit
10.11 to the Company's Form 10-K for the fiscal year ended December 31, 1995)
10.9 Employment Agreement of Andrew M. Weller (incorporated by reference to Exhibit
10.12 to the Company's Form 10-K for the fiscal year ended December 31, 1995)
</TABLE>
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10.10 Employment Agreement of Thomas W. Cook (incorporated by reference to Exhibit
10.13 to the Company's Form 10-K for the fiscal year ended December 31, 1995)
10.11 Emplyment Agreement of James D. Cirar (incorporated by reference to Exhibit
10.14 to the Company's Form 10-K for the fiscal year ended December 31, 1995)
10.12 Form of Employment Agreement (incorporated by reference to Exhibit 10.17 to the
Company's Form 10-K for the fiscal year ended December 31, 1996)
10.13 Form of Severance Agreement (incorporated by reference to Exhibit 10.15 to the
Company's Form 10-K for the fiscal year ended December 31, 1996)
10.14 Form of Stay Bonus Agreement (incorporated by reference to Exhibit 10.16 to the
Company's Form 10-K for the fiscal year ended December 31, 1995)
10.15 Form of Stock Option Agreement (incorporated by reference to Exhibit 10.17 to
the Company's Form 10-K for the fiscal year ended December 31, 1995)
10.16 Form of Supplemental Life Insurance Agreement (incorporated by reference to
Exhibit 10.21 to the Company's Form 10-K for the fiscal year ended December
31, 1996)
10.17 Gunite Corporation Salaried Employees Retirement Plan (incorporated by reference
to Exhibit 10.18 to the Company's Form 10-K for the fiscal year ended December
31, 1995)
10.18 Gunite Corporation Profit Sharing Plan (incorporated by reference to Exhibit
10.19 to the Company's Form 10-K for the fiscal year ended December 31, 1995)
12.1 Statement regarding computation of ratios
21.1 List of Subsidiaries
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Winston & Strawn (included in its opinion filed as Exhibit 5.1)
24.1 Powers of Attorney (included on signature pages hereto)
25.1 Statement of Eligibility and Qualification of Trustee on Form T-1
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Letter to Securities Dealers, Commercial Banks, Trust Companies and
Other Nominees
99.4 Form of Letter to Clients
99.5 Guidelines for Certification of Taxpayer Identification Number on Form W-9
</TABLE>
<PAGE>
CERTIFICATE OF INCORPORATION
BOSTROM HOLDINGS, INC.
1. The name of the corporation is Bostrom Holdings, Inc.
2. The address of its registered offce in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
4. The total number of shares of stock which the corporation shall have
authority to issue is 1,000 shares of common stock with no par value.
5. The board of directors is authorized to make, alter or repeal the
by-laws of the corporation. Election of directors need not be by written
ballot.
6. The name and mailing address of the sole incorpoator is:
Susan F. Lifvendahl
Ross & Hardies
150 North Michigan Ave.
Suite 2500
Chicago, Illinois 60601
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 26th day of December, 1996.
/s/Susan F. Lifvendahl
-----------------------
Sole Incorporator
<PAGE>
CERTIFICATE OF INCORPORATION
OF
JAII MANAGEMENT COMPANY
FIRST: The name of the Corporation is JAII Management Company
(hereinafter the "Corporation").
SECOND: The address of the registered office of the Corporation in
the State of Delaware is 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at that address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful
act or activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code (the "GCL").
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is 1,000 shares of Common Stock, each having a par
value of one penny ($.01).
FIFTH: The name and mailing address of the Sole Incorporator is as
follows:
Deborah M. Reusch
P.O. Box 636
Wilmington, DE 19899
SIXTH: The following provisions are inserted for the management of
the business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(1) The business and affairs of the Corporation shall be managed
by or under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the
stockholders to make, alter, amend, change, add to or repeal the By-Laws
of the corporation.
(3) The number of directors of the Corporation shall be as from
time to time fixed by, or in the manner provided in, the By-Laws of
the Corporation. Election of directors need not be by written ballot
unless the By-Laws so provide.
<PAGE>
(4) No director shall be personally liable to the Corporation or
any of its stockholders for monetary damage for breach of fiduciary
duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant
to Section 174 of the Delaware General Corporation Law or (iv) for any
transaction from which the director derived an improper personal
benefit. Any repeal or modification of this Article SIXTH by the
stockholders of the Corporation shall not adversely affect any right
or protection of a director of the Corporation existing at the time of
such repeal or modification with respect to acts or omissions
occurring prior to such repeal or modification.
(5) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation, subject, nevertheless,
to the provisions of the GCL, this Certificate of Incorporation, and
any By-Laws adopted by the stockholders; provided, however, that no
By-Laws hereafter adopted by the stockholders shall invalidate any
prior act of the directors which would have been valid if such By-Laws
had not been adopted.
SEVENTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the GCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation.
EIGHTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
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<PAGE>
I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore named,
for the purpose of forming a corporation pursuant to the GCL, do make this
Certificate, hereby declaring and certifying that this is my act and deed and
the facts herein stated are true, and accordingly have hereunto set my hand this
24th day of January, 1996.
/s/ Deborah M. Reusch
----------------------
Deborah M. Reusch
Sole Incorporator
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BOSTROM HOLDINGS, INC.
* * * * *
B Y - L A W S
* * * * *
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places
both within and without the State of Delaware as the Board of Directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held in the City of Chicago, State of Illinois, at such place
as may be fixed from time to time by the Board of Directors, or at such other
place either within or without the State of Delaware as shall be designated from
time to time by the Board of Directors and stated in the notice of the meeting.
Meetings of stockholders for any other purpose may be held at such time and
place, within or without the State of Delaware, as shall be stated in the notice
of the meeting or in a duly executed waiver of notice thereof.
<PAGE>
Section 2. Annual meetings of stockholders, commencing with the year
1997, shall be held on such date and time as shall be designated from time to
time by the Board of Directors and stated in the notice of the meeting, at which
they shall elect by a plurality vote a Board of Directors, and transact such
other business as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten nor more than sixty days before the date of the
meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in
the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time
and place of the meeting during the whole time thereof, and may be inspected
by any stockholder who is present.
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<PAGE>
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the board of
directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 6. Written notice of a special meeting stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called, shall be given not less than ten nor more than sixty days before the
date of the meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a
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<PAGE>
quorum shall be present or represented. At such adjourned meeting at which
a quorum shall be present or represented any business may be transacted which
might have been transacted at the meeting as originally notified. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the Certificate of Incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the Certificate of
Incorporation each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by sch stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the Certificate of
Incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such
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<PAGE>
stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
board shall be one (1). The directors shall be elected at the annual meeting
of the stockholders, except as provided in Section 2 of this Article, and
each director elected shall hold office until his successor is elected and
qualified. Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the manner
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<PAGE>
provided by statute. If, at the time of filling any vacancy or any newly
created directorship, the directors then in office shall constitute less than
a majority of the whole board (as constituted immediately prior to any such
increase), the Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent of the total number of the shares
at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors
then in office.
Section 3. The business of the corporation shall be managed by or under
the direction of its Board of Directors which may exercise all such powers of
the corporation and do all such lawful acts and things as are not by statute or
by the certificate of incorporation or by these by-laws directed or required to
be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected board of directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall
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<PAGE>
be present. In the event of the failure of the stockholders to fix the time
or place of such first meeting of the newly elected Board of Directors, or in
the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of
the Board of Directors, or as shall be specified in a written waiver signed
by all of the directors.
Section 6. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 7. Special meetings of the board may be called by the president
on five days' notice to each director, either personally or by mail or by
telegram; special meetings shall be called by the president or secretary in like
manner and on like notice on the written request of two directors unless the
board consists of only one director; in which case special meetings shall be
called by the president or secretary in like manner and on like notice on the
written request of the sole director.
Section 8. At all meetings of the board two directors shall constitute
a quorum for the transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors, except as may be otherwise specifically provided by
statute or by the certificate of incorporation. If a quorum shall not be
present at any meeting of the Board of Directors the directors present
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<PAGE>
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the Certificate of
Incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the Certificate of
Incorporation or these by-laws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
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<PAGE>
Any such committee, to the extent provided in the resolution of the Board
of Directors, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the Certificate of Incorporation, adopting an
agreement of merger or consolidations recommending to stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the by-laws of the corporation; and,
unless the resolution or the Certificate of Incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the Board of Directors.
Section 12. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the Certificate of
Incorporation or these by-laws, the Board of Directors shall have the authority
to fix the compensation of directors. The
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<PAGE>
directors may be paid their expenses, if any, of attendance at each meeting
of the Board of Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the Certificate of
Incorporation or by law, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
Certificate of Incorporation or of these by-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
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<PAGE>
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the Board
of Directors and shall be a president, a vice-president, a secretary and a
treasurer. The Board of Directors may also choose additional vice-presidents,
and one or more assistant secretaries and assistant treasurers. Any number of
offices may be held by the same person, unless the Certificate of Incorporation
or these by-laws otherwise provide.
Section 2. The Board of Directors at its first meeting after each
annual meeting of stockholders shall choose a president, one or more
vice-presidents, a secretary and a treasurer.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
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Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by
the Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
THE PRESIDENT
Section 6. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the stockholders and the Board of
Directors, shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the corporation.
THE VICE-PRESIDENTS
Section 8. In the absence of the president or in the event of his
inability or refusal to act, the vice-president (or in the event there be more
than one vice-president, the vice-presidents in the order designated by the
directors, or in the absence of any
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designation, then in the order of their election) shall perform the duties of
the president, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the president. The vice-presidents
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 9. The secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such assistant
secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
signature.
Section 10. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the
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Board of Directors (or if there be no such determination, then in the order
of their election) shall, in the absence of the secretary or in the event of
his inability or refusal to act, perform the duties and exercise the powers
of the secretary and shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors.
Section 12. He shall disburse the funds of the corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 13. If required by the Board of Directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or
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removal from office, of all books, papers, vouchers, money and other property
of whatever kind in his possession or under his control belonging to the
corporation.
Section 14. The assistant treasurer, or if there shall be more than one,
the assistant treasurers in the order determined by the Board of Directors (or
if there be no such determination, then in the order of their election), shall,
in the absence of the treasurer or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the treasurer and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
ARTICLE VI
CERTIFICATE OF STOCK
Section 1. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the corporation
by, the chairman or vice-chairman of the Board of Directors, or the president
or a vice-president and the treasurer or an assistant treasurer, or the
secretary or an assistant secretary of the corporation, certifying the number
of shares owned by him in the corporation.
Section 2. Any of or all the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by
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the corporation with the same effect as if he were such officer, transfer
agent or registrar at the date of issue.
LOST CERTIFICATE
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
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thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or to express consent to corporate action in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of
the meeting; provided, however, that the Board of Directors may fix new
record date for the adjourned meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to,
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recognize any equitable or other claim to or interest in such share or shares
on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject
to the provisions of the Certificate of Incorporation, if any, may be declared
by the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the Certificate of Incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
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ANNUAL STATEMENT
Section 3. The Board of Directors shall present at each annual meeting,
and at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
CHECKS
Section 4. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such. other person or persons as
the Board of Directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
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INDEMNIFICATION
Section 7. The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he or she is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, whether the basis of such proceeding
is alleged action in an official capacity as a director, officer, employee or
agent or in another capacity while serving as a director, officer, employee or
agent of the Corporation or, at the request of the Corporation, as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him or her in connection with such action, suit or proceeding if he or she
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the
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person did not act in good faith and in a manner which he or she reasonably
believed to be in or not opposed to the best interests of the Corporation
and, with respect to any criminal action or proceeding, had no reasonable
cause to believe that his or her conduct was unlawful.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he or she is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees) actually and reasonably incurred by him or her in connection with the
defense or settlement of such action or suit if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to
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indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to hereinabove, or in defense of any claim,
issue or matter therein, he or she shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him or her in
connection therewith.
Any indemnification under this Article VII (unless ordered by a court)
shall be made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because he or she has met the applicable standard
of conduct set forth in this Article VII. Such determination shall be made: (1)
by the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding; or (2) if such a quorum
is not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion; or (3) by the
stockholders.
Expenses (including attorneys' fees) incurred by an officer or director in
defending any civil, criminal, administrative, or investigative action, suit or
proceeding shall be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf
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of such director or officer to repay such amount if it shall ultimately be
determined that he or she is not entitled to be indemnified by the
Corporation as authorized in this Article VII Such expenses (including
attorneys' fees) incurred by other employees and agents shall be so paid upon
such terms and conditions, if any, as the Board of Directors deems
appropriate.
The indemnification and advancement of expenses provided by, or granted
pursuant to, the other sections of this Article VII shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding such
office.
The Corporation may purchase and maintain, at its expense, insurance on
behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted
against him or her and incurred by him or her in any such capacity, or
arising out of his or her status as such, whether or not the Corporation
would have the power to indemnify him or her against such liability under the
provisions of this Article VII.
For purposes of this Article VII references to "the corporation" shall
include, in addition to the resulting
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corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or
was a director, officer, employee or agent of such constituent corporation,
or is or was serving at the request of such constituent corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position
under the provisions of this Article VII with respect to the resulting or
surviving corporation as he or she would have with respect to such
constituent corporation if its separate existence had continued.
For purposes of this Article VII, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he or she
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed
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to the best interests of the Corporation" as referred to in this Article.
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article VII shall, unless otherwise provided when authorized
or ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for any breach of fiduciary
duty by such a director as a director of the Corporation. Notwithstanding the
foregoing sentence, a director shall be liable to the extent provided by
applicable law (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the GCL, or (iv) for any transaction from which such
director derived an improper personal benefit.
If the GCL shall be amended to authorize corporate action further
eliminating or limiting the personal liability of directors, officers, employees
or agents, then the liability of any such person shall be eliminated or limited
to the fullest extent permitted by the GCL, as so amended.
This Article VII is intended to confer indemnification and contractual
rights on the directors, officers, employees, and
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agents described hereinbefore to the fullest extent permitted by Section 145
of the GCL, as amended from time to time. In the case of any such amendment,
however, this Article VII shall be deemed amended only to the extent that
such amendment permits the Corporation to provide broader indemnification
rights than such law permitted the Corporation to provide prior to such
amendment. No amendment to or repeal of this Article VII shall adversely
affect any right or protection of any director, officer, employee or agent of
the Corporation existing at the time of such amendment or repeal for or with
respect to any acts or omissions of such director, officer, employee or agent
occurring prior to such amendment or repeal. Any repeal or modification of
this paragraph by the stockholders of the Corporation shall not adversely
affect any right or protection of a director, officer, employee or agent
existing at the time of such repeal or modification.
Any amendment which limits the indemnification rights or protections of a
director, officer, employee or agent under this Article VII existing at the
time of such amendment shall be effective only by the unanimous written
consent of the stockholders and the Board of Directors of the Corporation.
ARTICLE VIII
AMENDMENTS
Section 1. Except as otherwise provided in Article VII of these
by-laws, these by-laws may be altered, amended or repealed or new by-laws may
be adopted by the stockholders or by the Board of
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Directors, when such power is conferred upon the Board of Directors by the
Certificate of Incorporation, at any regular meeting of the stockholders or
of the Board of Directors or at any special meeting of the stockholders or of
the Board of Directors if notice of such alteration, amendment, repeal or
adoption of new by-laws be contained in the notice of such special meeting.
If the power to adopt, amend or repeal by-laws is conferred upon the Board of
Directors by the Certificate of Incorporation it shall not divest or limit
the power of the stockholders to adopt, amend or repeal by-laws.
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BY-LAWS
OF
JAII MANAGEMENT COMPANY
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the
Corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
SECTION 2. OTHER OFFICES. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
SECTION 2. ANNUAL MEETINGS. The Annual Meetings of Stockholders
shall be held on such date and at such time as shall be designated from time to
time by the Board of Directors and stated in the notice of the meeting, at which
meetings the stockholders shall elect by a plurality vote a Board of Directors,
<PAGE>
and transact such other business as may properly be brought before the meeting.
Written notice of the Annual Meeting stating the place, date and hour of the
meeting shall be given to each stockholder entitled to vote at such meeting not
less than ten nor more than sixty days before the date of the meeting.
SECTION 3. SPECIAL MEETINGS. Unless otherwise prescribed by law or
by the Certificate of Incorporation, Special Meetings of Stockholders, for any
purpose or purposes, may be called by either (i) the Chairman if there be one,
or (ii) the President, (iii) any Vice President, if there be one, (iv) the
Secretary or (v) any Assistant Secretary, if there be one, and shall be called
by any such officer at the request in writing of a majority of the Board of
Directors or at the request in writing of stockholders owning a majority of the
capital stock of the Corporation issued and outstanding and entitled to vote.
Such request shall state the purpose or purposes of the proposed meeting.
Written notice of a Special Meeting stating the place, date and hour of the
meeting and the purpose or purposes for which the meeting is called shall be
given not less than ten nor more than sixty days before the date of the meeting
to each stockholder entitled to vote at such meeting.
SECTION 4. QUORUM. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the
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transaction of business. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a forum shall be present or represented. At such
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. If the adjournment is for more than thirty days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder entitled
to vote at the meeting.
SECTION 5. VOTING. Unless otherwise required by law, the Certificate
of Incorporation or these By-Laws, any question brought before any meeting of
stockholders shall be decided by the vote of the holders of a majority of the
stock represented and entitled to vote thereat. Each stockholder represented at
a meeting of stockholders shall be entitled to cast one vote for each share of
the capital stock entitled to vote thereat held by such stockholder. Such votes
may be cast in person or by proxy, but no proxy shall be voted on or after three
years from its date, unless such proxy provides for a longer period. The Board
of Directors, in its discretion, or the officer of the Corporation presiding at
a meeting of stockholders, in his discretion, may require that any votes cast at
such meeting shall be cast by written ballot.
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SECTION 6. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Unless
otherwise provided in the Certificate of Incorporation, any action required or
permitted to be taken at any Annual or Special Meeting of Stockholders of the
Corporation, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing.
SECTION 7. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also
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be produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder of the Corporation who
is present.
SECTION 8. STOCK LEDGER. The stock ledger of the Corporation shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 7 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND ELECTION OF DIRECTORS. The Board of Directors
shall consist of not less than one nor more than fifteen members, the exact
number of which shall initially be fixed by the Incorporator and thereafter from
time to time by the Board of Directors. Except as provided in Section 2 of this
Article, directors shall be elected by a plurality of the votes cast at Annual
Meetings of Stockholders, and each director so elected shall hold office until
the next Annual Meeting and until his successor is duly elected and qualified,
or until his earlier resignation or removal. Any director may resign at any
time upon notice to the Corporation. Directors need not be stockholders.
SECTION 2. VACANCIES. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director,
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and the directors so chosen shall hold office until the next annual election
and until their successors are duly elected and qualified, or until their
earlier resignation or removal.
SECTION 3. DUTIES AND POWERS. The business of the Corporation shall
be managed by or under the direction of the Board of Directors which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
By-Laws directed or required to be exercised or done by the stockholders.
SECTION 4. MEETINGS. The Board of Directors of the Corporation may
hold meetings, both regular and special, either within or without the State
of Delaware. Regular meetings of the Board of Directors may be held without
notice at such time and at such place as may from time to time be determined
by the Board of Directors. Special meetings of the Board of Directors may be
called by the Chairman, if there be one, the President, or any directors.
Notice thereof stating the place, date and hour of the meeting shall be given
to each director either by mail not less than forty-eight (48) hours before
the date of the meeting, by telephone or telegram on twenty-four (24) hours'
notice, or on such shorter notice as the person or persons calling such
meeting may deem necessary or appropriate in the circumstances.
SECTION 5. QUORUM. Except as may be otherwise specifically provided
by law, the Certificate of Incorporation or these By-Laws, at all meetings of
the Board of Directors, a majority of the entire Board of Directors shall
constitute a quorum
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for the transaction of business and the act of a majority of the directors
present at any meeting at which there is a quorum shall be the act of the
Board of Directors. If a quorum shall not be present at any meeting of the
Board of Directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting,
until a quorum shall be present.
SECTION 6. ACTIONS OF BOARD. Unless otherwise provided by the
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all the members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 7. MEETINGS BY MEANS OF CONFERENCE TELEPHONE. Unless
otherwise provided by the Certificate of Incorporation or these By-Laws, members
of the Board of Directors of the Corporation, or any committee designated by the
Board of Directors, may participate in a meeting of the Board of Directors or
such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this Section 7 shall
constitute presence in person at such meeting.
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SECTION 8. COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the entire Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of any such committee. In the absence or disqualification
of a member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any absent or disqualified member. Any committee, to the extent allowed by law
and provided in the resolution establishing such committee, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation. Each committee shall
keep regular minutes and report to the Board of Directors when required.
SECTION 9. COMPENSATION. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation
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therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
SECTION 10. INTERESTED DIRECTORS. No contract or transaction
between the Corporation and one or more of its directors or officers, or
between the Corporation and any other corporation, partnership, association,
or other organization in which one or more of its directors or officers are
directors or officers, or have a financial interest, shall be void or
voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or
committee thereof which authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose if (i) the material
facts as to his or their relationship or interest and as to the contract or
transaction are disclosed or are known to the Board of Directors or the
committee, and the Board of Directors or committee in good faith authorizes
the contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than
a quorum; or (ii) the material facts as to his or their relationship or
interest and as to the contract or transaction are disclosed or are known to
the stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (iii) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved or ratified, by the Board of Directors, a committee
thereof or the stockholders. Common or
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interested directors may be counted in determining the presence of a quorum
at a meeting of the Board of Directors or of a committee which authorizes the
contract or transaction.
ARTICLE IV
OFFICERS
SECTION 1. GENERAL. The officers of the Corporation shall be
chosen by the Board of Directors and shall be a President, a Secretary and a
Treasurer. The Board of Directors, in its discretion, may also choose a
Chairman of the Board of Directors (who must be a director) and one or more
Vice Presidents, Assistant Secretaries, Assistant Treasurers and other
officers. Any number of offices may be held by the same person, unless
otherwise prohibited by law, the Certificate of Incorporation or these
By-Laws. The officers of the Corporation need not be stockholders of the
Corporation nor, except in the case of the Chairman of the Board of
Directors, need such officers be directors of the Corporation.
SECTION 2. ELECTION. The Board of Directors at its first meeting
held after each Annual Meeting of Stockholders shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors; and all officers of the Corporation shall hold office until
their successors are chosen and qualified, or until their earlier resignation or
removal. Any officer elected by the Board of Directors may be removed at any
time by the affirmative vote of
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a majority of the Board of Directors. Any vacancy occurring in any office of
the Corporation shall be filled by the Board of Directors. The salaries of
all officers of the Corporation shall be fixed by the Board of Directors.
SECTION 3. VOTING SECURITIES OWNED BY THE CORPORATION. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the President or any Vice President and any
such officer may, in the name of and on behalf of the Corporation, take all such
action as any such officer may deem advisable to vote in person or by proxy at
any meeting of security holders of any corporation in which the Corporation may
own securities and at any such meeting shall possess and may exercise any and
all rights and power incident to the ownership of such securities and which, as
the owner thereof, the Corporation might have exercised and possessed if
present. The Board of Directors may, by resolution, from time to time confer
like powers upon any other person or persons.
SECTION 4. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the
Board of Directors, if there be one, shall preside at all meetings of the
stockholders and of the Board of Directors. He shall be the Chief Executive
Officer of the Corporation, and except where by law the signature of the
President is required, the Chairman of the Board of Directors shall possess the
same power as the President to sign all contracts, certificates and other
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instruments of the Corporation which may be authorized by the Board of
Directors. During the absence or disability of the President, the Chairman of
the Board of Directors shall exercise all the powers and discharge all the
duties of the President. The Chairman of the Board of Directors shall also
perform such other duties and may exercise such other powers as from time to
time may be assigned to him by these By-Laws or by the Board of Directors.
SECTION 5. PRESIDENT. The President shall, subject to the control of
the Board of Directors and, if there be one, the Chairman of the Board of
Directors, have general supervision of the business of the Corporation and shall
see that all orders and resolutions of the Board of Directors are carried into
effect. He shall execute all bonds, mortgages, contracts and other instruments
of the Corporation requiring a seal, under the seal of the Corporation, except
where required or permitted by law to be otherwise signed and executed and
except that the other officers of the Corporation may sign and execute documents
when so authorized by these By-Laws, the Board of Directors or the President.
In the absence or disability of the Chairman of the Board of Directors, or if
there be none, the President shall preside at all meetings of the stockholders
and the Board of Directors. If there be no Chairman of the Board of Directors,
the President shall be the Chief Executive Officer of the Corporation. The
President shall also perform such other duties and may exercise such other
powers as from time to time may be assigned to him by these By-Laws or by the
Board of Directors.
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SECTION 6. VICE PRESIDENTS. At the request of the President or in
his absence or in the event of his inability or refusal to act (and if there be
no Chairman of the Board of Directors), the Vice President or the Vice
Presidents if there is more than one (in the order designated by the Board of
Directors) shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. Each Vice President shall perform such other duties and have such
other powers as the Board of Directors from time to time may prescribe. If
there be no Chairman of the Board of Directors and no Vice President, the Board
of Directors shall designate the officer of the Corporation who, in the absence
of the President or in the event of the inability or refusal of the President to
act, shall perform the duties of the President, and when so acting, shall have
all the powers of and be subject to all the restrictions upon the President.
SECTION 7. SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors, and
shall perform such other duties as may be prescribed by the Board of Directors
or President, under whose supervision he shall be. If the Secretary shall be
unable or shall refuse to cause to be given
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notice of all meetings of the stockholders and special meetings of the Board
of Directors, and if there be no Assistant Secretary, then either the Board
of Directors or the President may choose another officer to cause such notice
to be given. The Secretary shall have custody of the seal of the Corporation
and the Secretary or any Assistant Secretary, if there be one, shall have
authority to affix the same to any instrument requiring it and when so
affixed, it may be attested by the signature of the Secretary or by the
signature of any such Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the Corporation
and to attest the affixing by his signature. The Secretary shall see that all
books, reports, statements, certificates and other documents and records
required by law to be kept or filed are properly kept or filed, as the case
may be.
SECTION 8. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his
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transactions as Treasurer and of the financial condition of the Corporation.
If required by the Board of Directors, the Treasurer shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of
his death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in his possession
or under his control belonging to the Corporation.
SECTION 9. ASSISTANT SECRETARIES. Except as may be otherwise
provided in these By-Laws, Assistant Secretaries, if there be any, shall perform
such duties and have such powers as from time to time may be assigned to them by
the Board of Directors, the President, any Vice President, if there be one, or
the Secretary, and in the absence of the Secretary or in the event of his
disability or refusal to act, shall perform the duties of the Secretary, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the Secretary.
SECTION 10. ASSISTANT TREASURERS. Assistant Treasurers, if there be
any, shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Vice President,
if there be one, or the Treasurer, and in the absence of the Treasurer or in the
event of his disability or refusal to act, shall perform the duties of the
Treasurer, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Treasurer. If required
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by the Board of Directors, an Assistant Treasurer shall give the Corporation
a bond in such sum and with such surety or sureties as shall be satisfactory
to the Board of Directors for the faithful performance of the duties of his
office and for the restoration to the Corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or
under his control belonging to the Corporation.
SECTION 11. OTHER OFFICERS. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from time
to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
ARTICLE V
STOCK
SECTION 1. FORM OF CERTIFICATES. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chairman of the Board of Directors, the President or a
Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation, certifying the number of
shares owned by him in the Corporation.
SECTION 2. SIGNATURES. Any or all of the signatures on a certificate
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has
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been placed upon a certificate shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer, transfer agent
or registrar at the date of issue.
SECTION 3. LOST CERTIFICATES. The Board of Directors may direct a
new certificate to be issued in place of any certificate theretofore issued
by the Corporation alleged to have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming the certificate of
stock to be lost, stolen or destroyed. When authorizing such issue of a new
certificate, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate, or his legal representative, to advertise the same in
such manner as the Board of Directors shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any
claim that may be made against the Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
SECTION 4. TRANSFERS. Stock of the Corporation shall be transferable
in the manner prescribed by law and in these By-Laws. Transfers of stock shall
be made on the books of the Corporation only by the person named in the
certificate or by his attorney lawfully constituted in writing and upon the
surrender of the certificate therefor, which shall be cancelled before a new
certificate shall be issued.
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SECTION 5. RECORD DATE. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or entitled to express consent to corporate action
in writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than sixty days nor less than ten days
before the date of such meeting, nor more than sixty days prior to any other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
SECTION 6. BENEFICIAL OWNERS. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
law.
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ARTICLE VI
NOTICES
SECTION 1. NOTICES. Whenever written notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at his address
as it appears on the records of the Corporation, with postage thereon prepaid,
and such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Written notice may also be given
personally or by telegram, telex or cable.
SECTION 2. WAIVERS OF NOTICE. Whenever any notice is required by law,
the Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, a waiver thereof in writing, signed, by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, in property, or in shares of the capital
stock. Before payment of any dividend, there may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the Board
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of Directors from time to time, in its absolute discretion, deems proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the Corporation, or for any
proper purpose, and the Board of Directors may modify or abolish any such
reserve.
SECTION 2. DISBURSEMENTS. All checks or demands for money and notes
of the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
SECTION 3. FISCAL YEAR. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
SECTION 4. CORPORATE SEAL. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
SECTION 1. POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS OTHER
THAN THOSE BY OR IN THE RIGHT OF THE CORPORATION. Subject to Section 3 of this
Article VIII, the Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director or officer of
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the Corporation, or is or was a director or officer of the Corporation
serving at the request of the Corporation as a director or officer, employee
or agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceeding, had reasonable cause to believe that
his conduct was unlawful.
SECTION 2. POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS BY OR
IN THE RIGHT OF THE CORPORATION. Subject to Section 3 of this Article VIII, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director or officer of the Corporation, or is or was a
director or officer of the Corporation
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serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
SECTION 3. AUTHORIZATION OF INDEMNIFICATION. Any indemnification under
this Article VIII (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the circumstances
because he has met the applicable standard of conduct set forth in Section 1 or
Section 2 of this Article VIII, as the case may be. Such determination shall be
made (i) by a majority vote of the directors who are not parties to such action,
suit or proceeding, even though less than a quorum, or (ii) if there are no such
directors, or if such directors so
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direct, by independent legal counsel in a written opinion, or (iii) by the
stockholders. To the extent, however, that a director or officer of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding described above, or in defense of any claim, issue
or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith, without the necessity of authorization in the specific case.
SECTION 4. GOOD FAITH DEFINED. For purposes of any determination
under Section 3 of this Article VIII, a person shall be deemed to have acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was unlawful,
if his action is based on the records or books of account of the Corporation or
another enterprise, or on information supplied to him by the officers of the
Corporation or another enterprise in the course of their duties, or on the
advice of legal counsel for the Corporation or another enterprise or on
information or records given or reports made to the Corporation or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Corporation or another
enterprise. The term "another enterprise" as used in this Section 4 shall mean
any other corporation or any partnership, joint venture, trust, employee benefit
plan or other enterprise of which such person is or was serving at the request
of
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the Corporation as a director, officer, employee or agent. The provisions of
this Section 4 shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
standard of conduct set forth in Sections 1 or 2 of this Article VIII, as the
case may be.
SECTION 5. INDEMNIFICATION BY A COURT. Notwithstanding any
contrary determination in the specific case under Section 3 of this Article
VIII, and notwithstanding the absence of any determination thereunder, any
director or officer may apply to any court of competent jurisdiction in the
State of Delaware for indemnification to the extent otherwise permissible
under Sections 1 and 2 of this Article VIII. The basis of such
indemnification by a court shall be a determination by such court that
indemnification of the director or officer is proper in the circumstances
because he has met the applicable standards of conduct set forth in Sections
1 or 2 of this Article VIII, as the case may be. Neither a contrary
determination in the specific case under Section 3 of this Article VIII nor
the absence of any determination thereunder shall be a defense to such
application or create a presumption that the director or officer seeking
indemnification has not met any applicable standard of conduct. Notice of any
application for indemnification pursuant to this Section 5 shall be given to
the Corporation promptly upon the filing of such application. If successful,
in whole or in part, the director or officer seeking indemnification shall
also be entitled to be paid the expense of prosecuting such application.
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SECTION 6. EXPENSES PAYABLE IN ADVANCE. Expenses incurred by a
director or officer in defending or investigating a threatened or pending
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Corporation as authorized in this Article VIII.
SECTION 7. NONEXCLUSIVITY OF INDEMNIFICATION AND ADVANCEMENT OF
EXPENSES. The indemnification and advancement of expenses provided by or
granted pursuant to this Article VIII shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of
expenses may be entitled under any By-Law, agreement, contract, vote of
stockholders or disinterested directors or pursuant to the direction
(howsoever embodied) of any court of competent jurisdiction or otherwise,
both as to action in his official capacity and as to action in another
capacity while holding such office, it being the policy of the Corporation
that indemnification of the persons specified in Sections 1 and 2 of this
Article VIII shall be made to the fullest extent permitted by law. The
provisions of this Article VIII shall not be deemed to preclude the
indemnification of any person who is not specified in Sections 1 or 2 of this
Article VIII but whom the Corporation has the power or obligation to
indemnify under the provisions of the General Corporation Law of the State of
Delaware, or otherwise.
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SECTION 8. INSURANCE. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power or the obligation to indemnify him against such
liability under the provisions of this Article VIII.
SECTION 9. CERTAIN DEFINITIONS. For purposes of this Article VIII,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors or officers, so that any person who is or was a director or officer of
such constituent corporation, or is or was a director or officer of such
constituent corporation serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, shall stand in
the same position under the provisions of this Article VIII with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence
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had continued. For purposes of this Article VIII, references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves services by, such director
or officer with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to
in this Article VIII.
SECTION 10. SURVIVAL OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES.
The indemnification and advancement of expenses provided by, or granted pursuant
to, this Article VIII shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director or officer and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
SECTION 11. LIMITATION ON INDEMNIFICATION. Notwithstanding anything
contained in this Article VIII to the contrary, except for proceedings to
enforce rights to indemnification (which shall be governed by Section 5 hereof),
the Corporation shall not be obligated to indemnify any director or officer in
connection with a proceeding (or part thereof) initiated by such person unless
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such proceeding (or part thereof) was authorized or consented to by the Board of
Directors of the Corporation.
SECTION 12. INDEMNIFICATION OF EMPLOYEES AND AGENTS. The Corporation
may, to the extent authorized from time to time by the Board of Directors,
provide rights to indemnification and to the advancement of expenses to
employees and agents of the Corporation similar to those conferred in this
Article VIII to directors and officers of the Corporation.
ARTICLE IX
AMENDMENTS
SECTION 1. AMENDMENTS. These By-Laws may be altered, amended or
repealed, in whole or in part, or new By-Laws may be adopted by the stockholders
or by the Board of Directors, provided, however, that notice of such alteration,
amendment, repeal or adoption of new By-Laws be contained in the notice of such
meeting of stockholders or Board of Directors as the case may be. All such
amendments must be approved by either the holders of a majority of the
outstanding capital stock entitled to vote thereon or by a majority of the
entire Board of Directors then in office.
SECTION 2. ENTIRE BOARD OF DIRECTORS. As used in this Article IX and
in these By-Laws generally, the term "entire Board of Directors" means the total
number of directors which the Corporation would have if there were no vacancies.
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[FORM OF FACE OF SECURITY]
JOHNSTOWN AMERICA INDUSTRIES, INC.
11 3/4% Senior Subordinated Note Due, 2005
No. CUSIP No. 479477-AA-9
Johnstown America industries, Inc., a Delaware corporation, promises to pay
to , or registered assigns, the principal sum of Dollars
on August 15, 2005.
Interest Payment Dates: February 15 and August 25, commencing
February 15, 1996.
Record Dates: February 1 and August 1, commencing February 1, 1996
(whether or not a business day).
Additional provisions of this Security are set forth on the other side
of this Security.
JOHNSTOWN AMERICA INDUSTRIES, INC.,
by
_______________________
Chief Executive Officer
_______________________
Secretary
Dated: August 23, 1995
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE BANK OF NEW YORK,
as Trustee, certifies
[Seal] that this is one of
the Securities referred
to in the Indenture.
by
______________________________
Authorized Signatory
<PAGE>
2
FORM OF REVERSE SIDE OF SECURITY
11 3/4% Senior Subordinated Note Due 2005
1. INTEREST
Johnstown America Industries., a Delaware corporation (such corporation,
and its successors and assigns under the Indenture hereinafter referred to,
being herein called the "Company"), promises to pay interest on the principal
amount of this Security at the rate per annum shown above. The Company will
pay interest semiannually on February 15 and August 15 of each year.
Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from August 23,
1995. Interest will be computed on the basis of a 360-day year of twelve
30-day months. The Company shall pay interest on overdue principal at the
rate borne by the Securities plus 1% per annum, and it shall pay interest on
overdue installments of interest at the same rate to the extent lawful.
2. METHOD OF PAYMENT
The Company will pay Interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the
close of business on the February 1 or August 1 next preceding the interest
payment date even if Securities are canceled after the record date and on or
before the interest payment date. Holders must surrender Securities to a
Paying Agent to collect principal payments. The Company will pay principal
and interest in money of the United States that at the time of payment is
legal tender for payment of public and private debts. However, the Company
may pay principal and interest by check payable in such money. It may mail
an interest check to a Holder's registered address.
3. PAYING AGENT AND REQISTRAR
Initially, The Bank of New York, a New York banking corporation
("Trustee"), will act as Paying Agent and Registrar. The Company may appoint
and change any Paying Agent, Registrar or co-registrar without notice. The
<PAGE>
3
Company or any of its domestically incorporated Wholly Owned Subsidiaries may
act as Paying Agent, Registrar or coregistrar.
4. INDENTURE
The Company issued the Securities under an Indenture dated as of
August 23, 1995 ("Indenture"), among the Company, Johnstown America Corporaticn,
JTN Acquisition Corp., Bostrom Seating, Inc., Bostrom Distribution Center, Inc.,
Freight Car Services, Inc., JAC Patent Corporation, Truck Components, Inc.,
Gunite Corporation, Brillion Iron Works Inc., and Fabco Automotive
Corporation (collectively, the "Guarantor Subsidiaries"); and the Trustee.
The terms of the Securities include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the Indenture
(the "Act"). Terms defined in the Indenture and not defined herein have the
meanings ascribed thereto in the Indenture. The Securities are subject to
all such terms, and Securityholders are referred to the Indenture and the Act
for a statements of those terms.
The Securities are general unsecured obligations of the Company limited
to $100,000,000 aggregate principal amount (subject to Section 2.07 of the
Indenture). The Indenture imposes certain limitations on the Incurrence of
Indebtedness by the Company and certain of its Subsidiaries, the existence of
liens, the payment of dividends on, and redemption of, the Capital Stock of
the Company and its Subsidiaries and the redemption of certain subordinated
obligations of the Company and its subsidiaries, restricted payments, the
sale or transfer of assets and Subsidiary stock, the issuance or sale of
Capital Stock of Restricted Subsidiaries, sale and leaseback transactions,
the business activities and investments of the Company and certain of its
Subsidiaries; consolidations, mergers and transfers of all or substantially
all the Company's assets, and transactions with Affiliates. In addition, the
Indenture limits the ability of the Company and certain of its Subsidiaries
to restrict distributions and dividends from Subsidiaries.
To secure the due and punctual payment of the principal and liquidated
damages and interest, if any, on the Securities and all other amounts payable
by the Company under the Indenture and the Securities when and as the same
<PAGE>
4
shall be due and payable, whether at maturity, by acceleration or otherwise,
according to the terms of the Securities and the Indenture, the Guarantlor
Subsidiaries have unconditionally guaranteed the Obligations on a senior
subordinated basis pursuant to the terms of the Indenture.
5. OPTIONAL REDEMPTION
Except as set forth in the next paragraph, the Securities may not be
redeemed prior to August 15, 2000. On and after that date, the Company may
redeem the Securities in whole at any time or in part from time to time at
the following redemption prices (expressed in percentages of principal
amount), plus accrued interest to the redemption date (subject to the right
of Holders of record on the relevant record date to receive interest due on
the related interest payment date), if redeemed during the 12-month period
commencing on August 15 of the years set forth below:
PERIOD PERCENTAGES
2000 105.875%
2001 103.917%
2002 101.958%
2003 and thereafter 100.000%
In addition, at any time prior to August 15, 1998, the Company may
redeem up to 33 1/3% of the original aggregate principal amount of Securities
with the proceeds of a Public Equity Offering following which there is a
Public Market, at any time or from time to time, at a redemption price
(expressed as a percentage of principal amount) of 111.75% plus accrued
interest to the redemption date (subject to the right of Holders of record on
the relevant record date to receive interest due on the related interest
payment date); PROVIDED, HOWEVER, that at least 66 2/3% of the original
aggregate principal amount of the Securities must remain outstanding after
each such redemption.
6. NOTICE OF REDEMPTION
Notice of redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each Holder of Securities to be
redeemed at his registered address. Securities in denominations larger than
$1,000 may be redeemed in part but only in whole multiples of $1,000.
<PAGE>
5
If money sufficient to pay the redemption price of and accrued interest on
all Securities (or portions thereof) to be redeemed on the redemption date is
deposited with the Paying Agent on or before the redemption date and certain
other conditions are satisfied, on and after such date interest ceases to
accrue on such Securities (or such portions thereof) called for redemption.
7. PUT PROVISIONS
Upon a Change of Control, any Holder of Securities will have the right,
subject to certain conditions, to cause the Company to repurchase all or any
part of the Securities of such Holder at a repurchase price equal to 101% of
the principal amount of the Securities to be repurchased plus accrued
interest to the date of repurchase (subject to the right of holders of record
on the relevant record date to receive interest due on the related interest
payment date) as provided in, and subject to the terms of, the Indenture.
8. SUBORDINATION
The Securities are subordinated to Senior Indebtedness, as defined in
the Indenture. To the extent provided in the Indenture, Senior Indebtedness
must be paid before the Securities may be paid. The Company and each
Guarantor Subsidiary agrees, and each Securityholder by accepting a Security
agrees, to the subordination provisions contained in the Indenture and
authorizes the Trustee to give it effect and appoints the Trustee as
attorney-in-fact for such purpose.
9. DENOMINATIONS; TRANSFER; EXCHANGE
The Securities are in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange any
Securities selected for redemption (except, in the case of a Security to be
redeemed in part, the portion of the Security not to be redeemed) or any
Securities for a period of 15 days before a selection of Securities to be
redeemed or 15 days before an interest payment date.
<PAGE>
6
10. PERSONS DEEMED OWNERS
The registered Holder of this Security may be treated as the owner of it
for all purposes.
11. UNCLAIMED MONEY
If money for the payment of principal or interest remains unclaimed for
two years, the Trustee or Paying Agent shall pay the money back to the
Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must
look only to the Company and not to the Trustee for payment.
12. DISCHARGE AND DEFEASANCE
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Securities and the Indenture if the
Company deposits with the Trustee money or U.S. Government Obligations for
the payment of principal and interest on the Securities to redemption or
maturity, as the case may be.
13. AMENDMENT, WAIVER
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the
Securities and (ii) any default or noncompliance with any provision may be
waived with the written consent of the Holders of a majority in principal
amount outstanding of the Securities. Subject to certain exceptions set
forth in the Indenture, without the consent of any Securityholder, the
Company, the Guarantor Subsidiaries and the Trustee may amend the Indenture
or the Securities to cure any ambiguity, omission, defect or inconsistency,
or to comply with Article 5 of the Indenture, or to provide for
uncertificated Securities in addition to or in place of certificated
Securities, or to add guarantees with respect to the Securities or to secure
the Securities, or to add additional covenants or surrender rights and powers
conferred on the Company, or to comply with any request of the SEC in
connection with qualifying the Indenture under the Act, or to make certain
changes in the subordination provisions, or to make any change that does not
adversely affect the rights of any Securityholder.
<PAGE>
7
14. DEFAULTS AND REMEDIES
Under the Indenture, Events of Default include (i) default for 30 days
in payment of interest on the Securities; (ii) default, in payment of
principal on the Securities at maturity, upon redemption pursuant to
paragraph 5 of the Securities, upon acceleration or otherwise, or failure by
the Company to redeem or purchase Securities when required; (iii) failure by
the Company to comply with other agreements in the Indenture or the
Securities, in certain cases subject to notice and lapse of time;
(iv) certain accelerations (including failure to pay within any grace period
after final maturity) of other Indebtedness of the Company if the amount
accelerated (or so unpaid) exceeds $10,000,000; (v) certain events of
bankruptcy or insolvency with respect to the Company and the Significant
Subsidiaries; (vi) certain judgments or decrees for the payment of money in
excess of $10,000,000; and (vii) certain failures of a Subsidiary Guaranty to
remain in full force and effect and certain denials or disaffirmations of
obligations under the Indenture of a Subsidiary Guaranty by a Guarantor
Subsidiary. If an Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in principal amount of the Securities may declare
all the Securities to be due and payable immediately. Certain events of
bankruptcy or insolvency are Events of Default which will result in the
Securities being due and payable immediately upon the occurrence of such
Events of Default.
Securityholders may not enforce the Indenture or the Securities except
as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Securities unless it receives reasonable indemnity or
security. Subject to certain limitations, Holders of a majority in principal
amount of the Securities may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Securityholders notice of any
continuing Default (except a Default in payment of principal or interest) if
it determines that withholding notice is in the interest of the Holders.
15. TRUSTEE DEALINGS WITH THE COMPANY
Subject to certain limitations imposed by the Act, the Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations
owed to it by the Company or its Affiliates and may otherwise deal with the
Company or its Affiliates with the same rights it would have if it were not
Trustee.
<PAGE>
8
16. NO RECOURSE AGAINST OTHERS
A director, officer, employee or stockholder, as such, of the Company,
any Guarantor Subsidiary or the Trustee shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
cl.aim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder waives and releases
all such liability. The waiver and release are part of the consideration for
the issue of the Securities.
17. GOVERNING LAW.
The Securities shall be governed by, and construed in accordance with,
the laws of the State of New York but without giving effect to applicable
principles of conflicts of law to the extent that the application of the laws
of another jurisdiction would be required thereby.
18. AUTHENTICATION
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
19. ABBREVIATIONS
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
20. CUSIP NUMBERS
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers
in notices of redemption as a convenience to Securityholders. No
representation is made as to the accuracy of such numbers either as printed
on the Securities or as contained in any notice of redemption and reliance
may
<PAGE>
9
be placed only on the other identification numbers placed thereon.
The Company will furnish to any Securityholder upon written request and
without charge to the Securityholder a copy of the Indenture which has in it
the text of this Security in larger type. Requests may be made to:
Johnstown America Industries, Inc.
980 North Michigan Avenue, Suite, 1000
Chicago, Illinois 60611
Attention: Secretary
<PAGE>
10
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this
Security on the books of the Company. The agent may substitute another to
act for him.
____________________________________________________________________________
Date: ______________ Your Signature: _______________________
____________________________________________________________________________
Sign exactly as your name appears on the other side of this Security.
Signature Guarantee: ______________________________________
<PAGE>
11
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company pursuant
to Section 4.06 or 4.08 of the Indenture, check the box:
/ /
If you want to elect to have only part of this Security purchased by the
Company pursuant to Section 4.06 or 4.08 of the Indenture, state the amount:
$
Date: _________________Your Signature:____________________________________
(Sign exactly as your name appears
on the other side of the Security)
Signature Guarantee:________________________________________
<PAGE>
EXECUTION COPY
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
JOHNSTOWN AMERICA INDUSTRIES, INC.
11-3/4% Series B Senior Subordinated Notes Due 2005
___________________
INDENTURE
Dated as of August 11, 1997
_____________________
THE BANK OF NEW YORK,
Trustee
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Other Definitions. . . . . . . . . . . . . . . . . . . . . 25
SECTION 1.03. Incorporation by Reference of Trust Indenture Act. . . . . 26
SECTION 1.04. Rules of Construction. . . . . . . . . . . . . . . . . . . 26
ARTICLE II
THE SECURITIES
SECTION 2.01. Form and Dating. . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.02. Execution and Authentication . . . . . . . . . . . . . . . 29
SECTION 2.03. Registrar and Paying Agent . . . . . . . . . . . . . . . . 30
SECTION 2.04. Paying Agent To Hold Money in Trust . . . . . . . . . . . 31
SECTION 2.05. Securityholder Lists . . . . . . . . . . . . . . . . . . . 31
SECTION 2.06. Transfer and Exchange. . . . . . . . . . . . . . . . . . . 32
SECTION 2.07. Replacement Securities . . . . . . . . . . . . . . . . . . 33
SECTION 2.08. Outstanding Securities . . . . . . . . . . . . . . . . . . 33
SECTION 2.09. Temporary Securities . . . . . . . . . . . . . . . . . . . 34
SECTION 2.10. Cancelation. . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 2.11. Defaulted Interest . . . . . . . . . . . . . . . . . . . . 34
SECTION 2.12. CUSIP Numbers. . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.13. Book-Entry Provisions for U.S. Global Security . . . . . . . 35
SECTION 2.14. Special Transfer Provisions. . . . . . . . . . . . . . . . 37
ARTICLE III
REDEMPTION
SECTION 3.01. Notices to Trustee . . . . . . . . . . . . . . . . . . . . 43
SECTION 3.02. Selection of Securities To Be Redeemed . . . . . . . . . . 43
SECTION 3.03. Notice of Redemption . . . . . . . . . . . . . . . . . . . 43
SECTION 3.04. Effect of Notice of Redemption . . . . . . . . . . . . . . 44
SECTION 3.05. Deposit of Redemption Price. . . . . . . . . . . . . . . . 44
<PAGE>
Contents, p. 2
Page
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SECTION 3.06. Securities Redeemed in Part. . . . . . . . . . . . . . . . 45
SECTION 3.07. Optional Redemption. . . . . . . . . . . . . . . . . . . . 45
ARTICLE IV
COVENANTS
SECTION 4.01. Payment of Securities. . . . . . . . . . . . . . . . . . . 46
SECTION 4.02. SEC Reports. . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 4.03. Limitation on Indebtedness . . . . . . . . . . . . . . . . 47
SECTION 4.04. Limitation on Restricted Payments. . . . . . . . . . . . . 50
SECTION 4.05. Limitation on Restrictions on Distributions from
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock . . . . 54
SECTION 4.07. Limitation on Transactions with Affiliates . . . . . . . . 58
SECTION 4.08. Change of Control. . . . . . . . . . . . . . . . . . . . . 59
SECTION 4.09. Compliance Certificate . . . . . . . . . . . . . . . . . . 60
SECTION 4.10. Further Instruments and Acts . . . . . . . . . . . . . . . 61
SECTION 4.11. Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries. . . . . . . . . . . . . . . . . 61
SECTION 4.12. Limitation on Liens. . . . . . . . . . . . . . . . . . . . 61
SECTION 4.13. Limitation on Sale/Leaseback Transactions. . . . . . . . . 61
SECTION 4.14. Limitation on Lines of Business. . . . . . . . . . . . . . 62
SECTION 4.15. Future Guarantor Subsidiaries. . . . . . . . . . . . . . . 62
ARTICLE V
SUCCESSOR COMPANY
SECTION 5.01. When Company May Merge or Transfer Assets. . . . . . . . . . 62
ARTICLE VI
<PAGE>
Contents, p. 3
Page
----
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default. . . . . . . . . . . . . . . . . . . . . 63
SECTION 6.02. Acceleration . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 6.03. Other Remedies . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 6.04. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . 67
SECTION 6.05. Control by Majority. . . . . . . . . . . . . . . . . . . . 67
SECTION 6.06. Limitation on Suits. . . . . . . . . . . . . . . . . . . . 67
SECTION 6.07. Rights of Holders to Receive Payment . . . . . . . . . . . 68
SECTION 6.08. Collection Suit by Trustee . . . . . . . . . . . . . . . . 68
SECTION 6.09. Trustee May File Proofs of Claim . . . . . . . . . . . . . 68
SECTION 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 6.11. Undertaking for Costs. . . . . . . . . . . . . . . . . . . 69
SECTION 6.12. Waiver of Stay or Extension Laws . . . . . . . . . . . . . 69
ARTICLE VII
TRUSTEE
SECTION 7.01. Duties of Trustee. . . . . . . . . . . . . . . . . . . . . 70
SECTION 7.02. Rights of Trustee. . . . . . . . . . . . . . . . . . . . . 71
SECTION 7.03. Individual Rights of Trustee . . . . . . . . . . . . . . . 72
SECTION 7.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . 72
SECTION 7.05. Notice of Defaults . . . . . . . . . . . . . . . . . . . . 72
SECTION 7.06. Reports by Trustee to Holders 72
SECTION 7.07. Compensation and Indemnity . . . . . . . . . . . . . . . . 72
SECTION 7.08. Replacement of Trustee . . . . . . . . . . . . . . . . . . 73
SECTION 7.09. Successor Trustee by Merger. . . . . . . . . . . . . . . . 74
SECTION 7.10. Eligibility; Disqualification. . . . . . . . . . . . . . . 75
SECTION 7.11. Preferential Collection of Claims Against Company. . . . . 75
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Discharge of Liability on Securities; Defeasance . . . . . 75
SECTION 8.02. Conditions to Defeasance . . . . . . . . . . . . . . . . . 76
<PAGE>
Contents, p. 4
Page
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SECTION 8.03. Application of Trust Money . . . . . . . . . . . . . . . . 78
SECTION 8.04. Repayment to Company . . . . . . . . . . . . . . . . . . . 78
SECTION 8.05. Indemnity for Government Obligations . . . . . . . . . . . 78
SECTION 8.06. Reinstatement. . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 8.07. Concurrent Defeasance of Securities and Original
Securities . . . . . . . . . . . . . . . . . . . . . . . 79
ARTICLE IX
AMENDMENTS
SECTION 9.01. Without Consent of Holders . . . . . . . . . . . . . . . . 79
SECTION 9.02. With Consent of Holders. . . . . . . . . . . . . . . . . . 80
SECTION 9.03. Compliance with Trust Indenture Act. . . . . . . . . . . . 82
SECTION 9.04. Revocation and Effect of Consents and Waivers. . . . . . . 82
SECTION 9.05. Notation on or Exchange of Securities. . . . . . . . . . . 82
SECTION 9.06. Trustee To Sign Amendments . . . . . . . . . . . . . . . . 82
SECTION 9.07. Payment for Consent. . . . . . . . . . . . . . . . . . . . 83
ARTICLE X
SUBORDINATION
SECTION 10.01. Agreement To Subordinate . . . . . . . . . . . . . . . . . 83
SECTION 10.02. Liquidation, Dissolution, Bankruptcy . . . . . . . . . . . 84
SECTION 10.03. Default on Senior Indebtedness . . . . . . . . . . . . . . 84
SECTION 10.04. Acceleration of Payment of Securities. . . . . . . . . . . 84
SECTION 10.05. When Payment or Distribution Must Be Paid Over . . . . . . 86
SECTION 10.06. Subrogation. . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 10.07. Relative Rights. . . . . . . . . . . . . . . . . . . . . . 86
SECTION 10.08. Subordination May Not Be Impaired by Company or any
Guarantor Subsidiary . . . . . . . . . . . . . . . . . . 86
<PAGE>
Contents, p. 5
Page
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SECTION 10.09. Rights of Trustee and Paying Agent . . . . . . . . . . . . 87
SECTION 10.10. Distribution or Notice to Representative . . . . . . . . . 87
SECTION 10.11. Article X Not To Prevent Events of Default or Limit Right
To Accelerate. . . . . . . . . . . . . . . . . . . . . . 87
SECTION 10.12. Trust Moneys Not Subordinated. . . . . . . . . . . . . . . 88
SECTION 10.13. Trustee Entitled To Rely . . . . . . . . . . . . . . . . . 88
SECTION 10.14. Trustee To Effectuate Subordination. . . . . . . . . . . . 88
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Indebtedness . 89
SECTION 10.16. Reliance by Holders of Senior Indebtedness on
Subordination Provisions . . . . . . . . . . . . . . . . 89
ARTICLE XI
SUBSIDIARY GUARANTEES
SECTION 11.01. Subsidiary Guarantees. . . . . . . . . . . . . . . . . . . 89
SECTION 11.02. Limitation on Liability. . . . . . . . . . . . . . . . . . 92
SECTION 11.03. Successors and Assigns . . . . . . . . . . . . . . . . . . 92
SECTION 11.04. No Waiver. . . . . . . . . . . . . . . . . . . . . . . . . 92
SECTION 11.05. Modification . . . . . . . . . . . . . . . . . . . . . . . 93
SECTION 11.06. Execution of Supplemental Indenture for Future Guarantor
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 93
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. Trust Indenture Act Controls . . . . . . . . . . . . . . . 93
SECTION 12.02. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 94
SECTION 12.03. Communication by Holders with Other Holders. . . . . . . . 94
SECTION 12.04. Certificate and Opinion as to Conditions Precedent. . . . 94
SECTION 12.05. Statements Required in Certificate or Opinion. . . . . . . 95
<PAGE>
Contents, p. 6
Page
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SECTION 12.06. When Securities Disregarded. . . . . . . . . . . . . . . . 95
SECTION 12.07. Rules by Trustee, Paying Agent and Registrar . . . . . . . 96
SECTION 12.08. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 12.09. Governing Law. . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 12.10. No Recourse Against Others . . . . . . . . . . . . . . . . 96
SECTION 12.11. Successors . . . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 12.12. Multiple Originals . . . . . . . . . . . . . . . . . . . . 96
SECTION 12.13. Table of Contents; Headings. . . . . . . . . . . . . . . . 96
Exhibit A - Form of Face of Initial Security
Exhibit B - Form of Face of Exchange Security
Exhibit C - Form of Transferee Letter of Representation
Exhibit D - Form of Supplemental Indenture
Exhibit E - Form of Certificate to be delivered upon Termination of
Restricted Period
Exhibit F - Form of Certificate to be Delivered in Connection with Transfers
Pursuant to Rule 144A
Exhibit G - Form of Certificate to be Delivered in Connection with Transfers
pursuant to Regulation S
<PAGE>
INDENTURE dated as of August 11, 1997, among JOHNSTOWN AMERICA
INDUSTRIES, INC., a Delaware corporation (the "Company"); JOHNSTOWN AMERICA
CORPORATION, a Delaware corporation, BOSTROM SEATING, INC., a Delaware
corporation, BOSTROM HOLDINGS, INC., a Delaware corporation, FREIGHT CAR
SERVICES, INC., a Delaware corporation, JAC PATENT CORPORATION, a Delaware
corporation, TRUCK COMPONENTS, INC., a Delaware corporation, GUNITE
CORPORATION, a Delaware corporation, BRILLION IRON WORKS, INC., a Delaware
corporation, FABCO AUTOMOTIVE CORPORATION, a Delaware corporation, JAII
MANAGEMENT COMPANY, a Delaware corporation (each, a "Guarantor Subsidiary"
and collectively, the "Guarantor Subsidiaries"); and THE BANK OF NEW YORK,
a New York banking corporation (the "Trustee").
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders of the Company's 11 3/4% Series
B Senior Subordinated Notes Due 2005 (the "Initial Securities") and, when and
if issued pursuant to a registered exchange for Initial Securities, the
Company's 11 3/4% Series C Senior Subordinated Notes due 2005 (the "Exchange
Securities"):
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) to be used by the Company or a Restricted
Subsidiary in a Related Business, (ii) the Capital Stock of a Person that
becomes a Restricted Subsidiary as a result of the acquisition of such
Capital Stock by the Company or another Restricted Subsidiary or (iii)
Capital Stock constituting a minority interest in any Person that at such
time is a Restricted Subsidiary; PROVIDED, HOWEVER, that, in the case of
clauses (ii) and (iii), such Restricted Subsidiary is primarily engaged in a
Related Business.
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"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the
foregoing. For purposes of Sections 4.06 and 4.07 only, "Affiliate" shall
also mean any beneficial owner of shares representing 5% or more of the total
voting power of the Voting Stock (on a fully diluted basis) of the Company or
of rights or warrants to purchase such Voting Stock (whether or not currently
exercisable) and any Person who would be an Affiliate of any such beneficial
owner pursuant to the first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other disposition
of shares of Capital Stock of a Restricted Subsidiary (other than directors'
qualifying shares), property or other assets (each referred to for the
purposes of this definition as a "disposition") by the Company or any of its
Restricted Subsidiaries (including any disposition by means of a merger,
consolidation or similar transaction) other than (i) a disposition by a
Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Wholly Owned Subsidiary, (ii) a disposition of inventory in
the ordinary course of business and (iii) for purposes of Section 4.06 only,
a disposition subject to Section 4.04.
"Attributable Debt" in respect of a Sale/ Leaseback Transaction means,
as at the time of determination, the present value (discounted at the
interest rate borne by the Securities, compounded annually) of the total
obligations of the lessee for rental payments during the remaining term of
the lease included in such Sale/Leaseback Transaction (including any period
for which such lease has been extended).
"Average Life" means, as of the date of determination, with respect to
any Indebtedness or Preferred Stock, the quotient obtained by dividing (i)
the sum of the products of the numbers of years from the date of
determination to the dates of each successive scheduled principal payment of
such Indebtedness or redemption or
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3
similar payment with respect to such Preferred Stock multiplied by the amount
of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means any and all amounts payable under or in
respect of the Senior Bank Facilities and the other Senior Bank Documents, as
amended, refinanced or replaced from time to time, including principal,
premium (if any), interest (including interest accruing on or after the
filing of any petition in bankruptcy or for reorganization relating to the
Company whether or not a claim for postfiling interest is allowed in such
proceedings), fees, charges, expenses, reimbursement obligations, guarantees
and all other amounts payable thereunder or in respect thereof.
"Board of Directors" means the Board of Directors of the Company or,
unless the context indicates otherwise, any committee thereof duly authorized
to act on behalf of such Board.
"Borrowing Base" means, as of any date, an amount equal to the sum of
(i) 60% of the aggregate book value of inventory (adjusted to include any
LIFO reserves) and (ii) 85% of the aggregate book value of all accounts
receivable (net of bad debt reserves) of the Company and its Restricted
Subsidiaries on a Consolidated basis, as determined in accordance with GAAP
consistently applied. To the extent that information is not available as to
the amount of inventory or accounts receivable as of a specified date, the
Company shall use the most recent available information for purposes of
calculating the Borrowing Base.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligation" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented
by such obligation shall be the capitalized amount of such obligation
determined in accordance with GAAP; and the Stated Maturity thereof shall be
the date of the last payment of rent or any other amount due under such lease
prior to the first date upon which such lease may be terminated by the lessee
without payment of a penalty.
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4
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of
or interests in (however designated) equity of such Person, including any
Preferred Stock, but excluding any debt securities convertible into such
equity.
"Change of Control" means the occurrence of any of the following events:
(i) any "Person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than one or more Permitted Holders, is or
becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that a Person shall be deemed to have
"beneficial ownership" of all shares that any such Person has the right
to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 35% of the
Voting Stock of the Company; PROVIDED that the Permitted Holders
beneficially own (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act), directly or indirectly, in the aggregate a lesser percentage of
the Voting Stock of the Company than such other Person and do not have
the right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors of the
Company; or
(ii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors of the
Company (together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of the
Company was approved by a vote of a majority of the directors of the
Company then still in office who were either directors at the beginning
of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of
the Board of Directors of the Company then in office.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means the party named as such in this Indenture until a
successor replaces it and, thereafter,
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5
means the successor and, for purposes of any provision contained herein and
required by the TIA, each other obligor on the indenture securities.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters ending at least 45 days prior to the date of
such determination to (ii) Consolidated Interest Expense for such four fiscal
quarters; PROVIDED, HOWEVER, that (1) if the Company or any Restricted
Subsidiary has Incurred any Indebtedness since the beginning of such period
that remains outstanding on such date of determination or if the transaction
giving rise to the need to calculate the Consolidated Coverage Ratio is an
Incurrence of Indebtedness, or both, EBITDA and Consolidated Interest Expense
for such period shall be calculated after giving effect on a pro forma basis
to such Indebtedness as if such Indebtedness had been Incurred on the first
day of such period and the discharge of any other Indebtedness repaid,
repurchased, defeased or otherwise discharged with the proceeds of such new
Indebtedness as if such discharge had occurred on the first day of such
period, (2) if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset Disposition, the EBITDA for
such period shall be reduced by an amount equal to the EBITDA (if positive)
directly attributable to the assets which are the subject of such Asset
Disposition for such period or increased by an amount equal to the EBITDA (if
negative) directly attributable thereto for such period and Consolidated
Interest Expense for such period shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Indebtedness of
the Company or any Restricted Subsidiary repaid, repurchased, defeased or
otherwise discharged with respect to the Company and its continuing
Restricted Subsidiaries in connection with such Asset Disposition for such
period (or, if the Capital Stock of any Restricted Subsidiary is sold, the
Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the Company and its
continuing Restricted Subsidiaries are no longer liable for such Indebtedness
after such sale), (3) if since the beginning of such period the Company or
any Restricted Subsidiary (by merger or otherwise) shall have made an
Investment in any Restricted Subsidiary (or any Person which becomes a
Restricted Subsidiary) or an acquisition of assets,
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6
including any acquisition of assets occurring in connection with a
transaction causing a calculation to be made hereunder, which constitutes all
or substantially all of an operating unit of a business, EBITDA and
Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto (including the Incurrence of any
Indebtedness) as if such Investment or acquisition occurred on the first day
of such period and (4) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into the
Company or any Restricted Subsidiary since the beginning of such period)
shall have made any Asset Disposition or any Investment or acquisition of
assets that would have required an adjustment pursuant to clause (2) or (3)
above if made by the Company or a Restricted Subsidiary during such period,
EBITDA and Consolidated Interest Expense for such period shall be calculated
after giving pro forma effect thereto as if such Asset Disposition,
Investment or acquisition occurred on the first day of such period. For
purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto and
the amount of Consolidated Interest Expense associated with any Indebtedness
Incurred in connection therewith, the pro forma calculations shall be
determined in good faith by a responsible financial or accounting Officer of
the Company. If any Indebtedness bears a floating rate of interest and is
being given pro forma effect, the Consolidated Interest Expense associated
with any such Indebtedness shall be calculated as if the rate in effect on
the date of determination had been the applicable rate for the entire period
(giving effect to any Interest Rate Agreement applicable to such Indebtedness
for a period (not in excess of 12 months) corresponding to the remaining term
of such Interest Rate Agreement as of the date of determination).
"Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its consolidated Restricted Subsidiaries,
plus, to the extent not included in such total interest expense, and to the
extent incurred by the Company or its Restricted Subsidiaries, (i) interest
expense attributable to capital leases, (ii) amortization of debt discount,
(iii) capitalized interest, (iv) noncash interest expense, (v) commissions,
discounts and other fees and charges owed with respect to letters of credit
and bankers' acceptance financing, (vi) net costs associated with Hedging
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Obligations (including amortization of fees), (vii) the product of (a)
Preferred Stock dividends in respect of all Preferred Stock of Subsidiaries
of the Company and Disqualified Stock of the Company held by Persons other
than the Company or a Wholly Owned Subsidiary multiplied by (b) a fraction,
the numerator of which is one and the denominator of which is one minus the
then current combined Federal, state and local statutory tax rate of the
Company, expressed as a decimal, in each case determined on a consolidated
basis in accordance with GAAP, (viii) interest accruing on any Indebtedness
of any other Person to the extent such Indebtedness is Guaranteed by the
Company or any Restricted Subsidiary and (ix) the cash contributions to any
employee stock ownership plan or similar trust to the extent such
contributions are used by such plan or trust to pay interest or fees to any
Person (other than the Company) in connection with Indebtedness incurred by
such plan or trust.
"Consolidated Net Income" means, for any period, the net income (loss)
of the Company and its Consolidated Subsidiaries; PROVIDED, HOWEVER, that
there shall not be included in such Consolidated Net Income:
(i) any net income (loss) of any Person if such Person is not a
Restricted Subsidiary, except that (A) subject to the limitations
contained in clause (iv) below, the Company's equity in the net income
of any such Person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Person during such period to the Company or a
Restricted Subsidiary as a dividend or other distribution (subject, in
the case of a dividend or other distribution to a Restricted Subsidiary,
to the limitations contained in clause (iii) below) and (B) the
Company's equity in a net loss of any such Person (other than an
Unrestricted Subsidiary) for such period shall be included in
determining such Consolidated Net Income;
(ii) any net income (loss) of any Person acquired by the Company
or a Subsidiary in a pooling of interests transaction for any period
prior to the date of such acquisition;
(iii) any net income (loss) of any Restricted Subsidiary if such
Restricted Subsidiary is subject to restrictions, directly or
indirectly, on the payment of
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8
dividends or the making of distributions by such Restricted Subsidiary,
directly or indirectly, to the Company, except that (A) subject to the
limitations contained in clause (iv) below, the Company's equity in the
net income of any such Restricted Subsidiary for such period shall be
included in such Consolidated Net Income up to the aggregate amount of
cash that could have been distributed by such Restricted Subsidiary
during such period to the Company or another Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or
other distribution that could have been made to another Restricted
Subsidiary, to the limitation contained in this clause) and (B) the
Company's equity in a net loss of any such Restricted Subsidiary for
such period shall be included in determining such Consolidated Net
Income;
(iv) any gain (but not loss) realized upon the sale or other
disposition of any property, plant, equipment or other asset of the
Company or its consolidated Subsidiaries (including pursuant to any
Sale/Leaseback Transaction) which is not sold or otherwise disposed of
in the ordinary course of business and any gain (but not loss) realized
upon the sale or other disposition of any Capital Stock of any Person;
(v) any extraordinary gain or loss; and
(vi) the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purposes of Section 4.04 only, there
shall be excluded from Consolidated Net Income any dividends, repayments of
loans or advances or other transfers of assets from Unrestricted Subsidiaries
to the Company or a Restricted Subsidiary to the extent such dividends,
repayments or transfers increase the amount of Restricted Payments permitted
under such Section pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and the Restricted Subsidiaries, determined on a
Consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company ending at least 45 days prior to the taking of
any action for the purpose of which
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9
the determination is being made, as (i) the par or stated value of all
outstanding Capital Stock of the Company plus (ii) paid-in capital or capital
surplus relating to such Capital Stock plus (iii) any retained earnings or
earned surplus less (A) any accumulated deficit and (B) any amounts
attributable to Disqualified Stock.
"Consolidation" means the consolidation of the accounts of each of the
Restricted Subsidiaries with those of the Company in accordance with GAAP
consistently applied; PROVIDED, HOWEVER, that "Consolidation" will not
include consolidation of the accounts of any Unrestricted Subsidiary, but the
interest of the Company or any Restricted Subsidiary in an Unrestricted
Subsidiary will be accounted for as an investment. The term "Consolidated"
has a correlative meaning.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Definitive Securities" means Securities that are in the form of Exhibit
A or Exhibit B attached hereto that do not include the information called for
by footnote 1 thereof.
"Depositary" means, with respect to the Securities issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 as the
Depositary with respect to the Securities, until a successor shall have been
appointed and becomes such pursuant to the applicable provisions of this
Indenture, and thereafter, "Depositary" shall mean or include such successor.
"Designated Senior Indebtedness" means (i) the Bank Indebtedness and
(ii) any other Senior Indebtedness which, at the date of determination, has
an aggregate principal amount outstanding of, or under which, at the date of
determination, the holders thereof, are committed to lend up to, at least $10
million and is specifically designated by the Company in the instrument
evidencing or governing
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10
such Senior Indebtedness as "Designated Senior Indebtedness" for purposes of
this Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable or exercisable) or upon the
happening of any event (i) matures or is mandatorily redeemable pursuant to a
sinking fund obligation or otherwise, (ii) is convertible or exchangeable for
Indebtedness or Disqualified Stock or (iii) is redeemable at the option of
the holder thereof, in whole or in part, in each case on or prior to the
first anniversary of the Stated Maturity of the Securities.
"EBITDA" for any period means the Consolidated Net Income for such
period, plus the following to the extent deducted in calculating such
Consolidated Net Income: (i) all income tax expense of the Company, (ii)
Consolidated Interest Expense, (iii) depreciation expense and (iv)
amortization expense, in each case for such period. Notwithstanding the
foregoing, the provision for taxes based on the income or profits of, and the
depreciation and amortization of, a Restricted Subsidiary of the Company
shall be added to Consolidated Net Income to compute EBITDA only to the
extent (and in the same proportion) that the Net Income of such Restricted
Subsidiary was included in calculating Consolidated Net Income and only if a
corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Subsidiary without prior approval (that has
not been obtained), pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to such Restricted Subsidiary or its stockholders.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange and Registration Rights Agreement" means the Exchange and
Registration Rights Agreement dated as of the Issue Date by and among the
Initial Purchaser, the Company and the Guarantor Subsidiaries, as such
agreement may be amended, modified, or supplemented from time to time in
accordance with the terms thereof.
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11
"Exchange Offer" shall have the meaning set forth in the Exchange and
Registration Rights Agreement.
"Exchange Offer Registration Statement" shall have the meaning set forth
in the Exchange and Registration Rights Agreement.
"Foreign Subsidiary" shall mean a Subsidiary organized under the laws of
any jurisdiction other than the United States, any State thereof or the
District of Columbia; PROVIDED that no Foreign Subsidiary shall be formed by
the Company or any of its Subsidiaries unless such Foreign Subsidiary meets
the qualifications of and is designated as an Unrestricted Subsidiary
hereunder.
"Global Security" means a Security that is in the form of Exhibit A or
Exhibit B hereto that includes the information called for by footnote 1
thereof.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Original Issue Date, including those
set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or
in such other statements by such other entity as approved by a significant
segment of the accounting profession. All ratios and computations based on
GAAP contained in this Indenture shall be computed in conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of
any other Person and any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness or other obligation of such
other Person (whether arising by virtue of partnership arrangements, or by
agreement to keepwell, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or
(ii) entered into for purposes of assuring in any other manner the obligee of
such Indebtedness or other obligation of the payment thereof or to protect
such obligee against loss in respect thereof (in whole or in part); PROVIDED,
HOWEVER, that the term "Guarantee" shall not include endorsements for
collection or deposit in the
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12
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning. The term "Guarantor" shall mean any Person
Guaranteeing any obligation.
"Guarantor Subsidiary" means any Subsidiary that has issued a Subsidiary
Guarantee.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Securityholder" means the Person in whose name a Security
is registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; PROVIDED, HOWEVER, that any Indebtedness or Capital Stock of a Person
existing at the time such person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by
such Subsidiary at the time it becomes a Subsidiary. The term "Incurrence",
when used as a noun shall have a correlative meaning.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(i) the principal of and premium (if any) in respect of
Indebtedness of such Person for borrowed money,
(ii) the principal of and premium (if any) in respect of
obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments,
(iii) all obligations of such Person in respect of letters of
credit or other similar instruments (including reimbursement obligations
with respect thereto),
(iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services (except Trade Payables), which
purchase price is due more than six months after the date of placing
such property in service or taking delivery and title thereto or the
completion of such services,
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13
(v) all Capitalized Lease Obligations of such Person and all
Attributable Debt of such Person,
(vi) the amount of all obligations of such Person with respect to
the redemption, repayment or other repurchase of any Disqualified Stock
or, with respect to any Subsidiary of the Company, any Preferred Stock
(but excluding, in each case, any accrued dividends),
(vii) all Indebtedness of other Persons secured by a Lien on any
asset of such Person, whether or not such Indebtedness is assumed by
such Person; PROVIDED, HOWEVER, that the amount of Indebtedness of such
Person shall be the lesser of (A) the fair market value of such asset at
such date of determination and (B) the amount of such Indebtedness of
such other Persons,
(viii) all Indebtedness of other Persons to the extent Guaranteed
by such Person; and
(ix) to the extent not otherwise included in this definition,
Hedging Obligations of such Person.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and
the maximum liability, upon the occurrence of the contingency giving rise to
the obligation, of any contingent obligations at such date.
"Indenture" means this Indenture as amended or supplemented from time to
time.
"Initial Purchaser" means Chase Securities Inc.
"Interest Rate Agreement" means with respect to any Person any interest
rate protection agreement, interest rate future agreement, interest rate
option agreement, interest rate swap agreement, interest rate cap agreement,
interest rate collar agreement, interest rate hedge agreement or other
similar agreement or arrangement as to which such Person is party or a
beneficiary.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of such Person) or other
extension of credit (including by way of Guarantee or
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14
similar arrangement) or capital contribution to (by means of any transfer of
cash or other property to others or any payment for property or services for
the account or use of others), or any purchase or acquisition of Capital
Stock, Indebtedness or other similar instruments issued by such Person. For
purposes of the definition of "Unrestricted Subsidiary", the definition of
"Restricted Payment" and Section 4.04, (i) "Investment" shall include the
portion (proportionate to the Company's equity interest in such Subsidiary)
of the fair market value of the net assets of any Subsidiary of the Company
at the time that such Subsidiary is designated an Unrestricted Subsidiary;
PROVIDED, HOWEVER, that upon a redesignation of such Subsidiary as a
Restricted Subsidiary, the Company shall be deemed to continue to have a
permanent "Investment" in an Unrestricted Subsidiary in an amount (if
positive) equal to (x) the Company's "Investment" in such Subsidiary at the
time of such redesignation less (y) the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of such Subsidiary at the time of such redesignation; and (ii) any
property transferred to or from an Unrestricted Subsidiary shall be valued at
its fair market value at the time of such transfer, in each case as
determined in good faith by the Board of Directors.
"Issue Date" means the date on which the Securities are originally
issued.
"Leasing Subsidiary" means JAIX Leasing Company, a Delaware corporation.
"Leasing Support Agreement" means the Support and Guarantee Agreement
dated May 12, 1995 between the Company and The First National Bank of
Chicago, as Agent, or any other agreement containing substantially the same
terms as such agreement, in either case as amended, modified or replaced from
time to time; PROVIDED that the terms of such agreement, as amended, modified
or replaced, are no less favorable to the Company than the terms of the
Leasing Support Agreement as in effect on the Original Issue Date; PROVIDED
FURTHER that the amount of the Company's obligations thereunder, including
any amounts paid or Investments made thereunder on or subsequent to the
Original Issue Date, may not exceed $4 million.
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"Lien" means any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only
as and when received, but excluding any other consideration received in the
form of assumption by the acquiring person of Indebtedness or other
obligations relating to the properties or assets that are the subject of such
Asset Disposition or received in any other noncash form) therefrom, in each
case net of (i) all legal, title and recording tax expenses, commissions and
other fees and expenses incurred, and all Federal, state, provincial foreign
and local taxes required to be accrued as a liability under GAAP, as a
consequence of such Asset Disposition, (ii) all payments made on any
Indebtedness which is secured by any assets subject to such Asset
Disposition, in accordance with the terms of any Lien upon or other security
agreement of any kind with respects to such assets, or which must by its
terms, or in order to obtain a necessary consent to such Asset Disposition,
or by applicable law be repaid out of the proceeds from such Asset
Disposition, (iii) all distributions and other payments required to be made
to minority interest holders in Subsidiaries or joint ventures as a result of
such Asset Disposition and (iv) appropriate amounts to be provided by the
seller as a reserve, in accordance with GAAP, against any liabilities
associated with the assets disposed of in such Asset Disposition and retained
by the Company or any Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds", with respect to any issuance or sale of Capital
Stock, means the proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Officer" means the Chairman of the Board, the President, the Chief
Financial Officer, any Vice President, the Treasurer or the Secretary of the
Company.
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"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to
the Company or the Trustee.
"Original Indenture" means the Indenture dated August 23, 1995, among
the Company, the Guarantor Subsidiaries and The Bank of New York, as trustee.
"Original Issue Date" means August 23, 1995.
"Original Securities" means the Company's 11 3/4% Senior Subordinated
Notes due 2005 issued under the Original Indenture.
"Permitted Holders" means members, as of the Original Issue Date, of
executive management of the Company and their respective Affiliates.
"Permitted Investment" means an Investment by the Company or any
Restricted Subsidiary in (i) a Restricted Subsidiary or a Person which will,
upon the making of such Investment, become a Restricted Subsidiary; PROVIDED,
HOWEVER, that the primary business of such Restricted Subsidiary is a Related
Business; (ii) another Person if as a result of such Investment such other
Person is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Company or a Restricted Subsidiary;
PROVIDED, HOWEVER, that such Person's primary business is a Related Business;
(iii) Temporary Cash Investments; (iv) receivables owing to the Company or
any Restricted Subsidiary, if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade
terms; PROVIDED, HOWEVER, that such trade terms may include such
concessionary trade terms as the Company or any such Restricted Subsidiary
deems reasonable under the circumstances; (v) payroll, travel and similar
advances to cover matters that are expected at the time of such advances
ultimately to be treated as expenses for accounting purposes and that are
made in the ordinary course of business; (vi) loans or advances to employees
made in the ordinary course of business consistent with past practices of the
Company or such Restricted Subsidiary; (vii) stock, obligations or securities
received in
<PAGE>
17
settlement of debts created in the ordinary course of business and owing to
the Company or any Restricted Subsidiary or in satisfaction of judgments;
(viii) the Leasing Subsidiary; PROVIDED that (except as permitted by clause
(ix)) the aggregate amount of Investments in the Leasing Subsidiary shall not
exceed $3,500,000 in any 12 month period; (ix) the Leasing Subsidiary
pursuant to the Leasing Support Agreement; and (x) Capital Stock of a joint
venture or similar entity engaged primarily in a Related Business; PROVIDED
that such Investments shall not exceed $10 million at any time.
"Permitted Liens" means, with respect to any Person, (a) pledges or
deposits by such Person under workmen's compensation laws, unemployment
insurance laws or similar legislation, or good faith deposits in connection
with bids, tenders, contracts (other than for the payment of Indebtedness) or
leases to which such Person is a party, or deposits to secure public or
statutory obligations of such Person or deposits of cash or United States
government bonds to secure surety or appeal bonds to which such Person is a
party, or deposits as security for contested taxes or import duties or for
the payment of rent, in each case Incurred in the ordinary course of
business; (b) Liens imposed by law, such as carriers', warehousemen's and
mechanics' Liens, in each case for sums not yet due or being contested in
good faith by appropriate proceedings or other Liens arising out of judgments
or awards against such Person with respect to which such Person shall then be
proceeding with an appeal or other proceedings for review; (c) Liens for
property taxes not yet due or payable or subject to penalties for nonpayment
or which are being contested in good faith and by appropriate proceedings;
(d) Liens in favor of issuers of surety bonds or letters of credit issued
pursuant to the request of and for the account of such Person in the ordinary
course of its business; PROVIDED, HOWEVER, that such letters of credit do not
constitute Indebtedness; (e) minor survey exceptions, minor encumbrances,
easements or reservations of, or rights of others for, licenses, rights of
way, sewers, electric lines, telegraph and telephone lines and other similar
purposes, or zoning or other restrictions as to the use of real properties or
Liens incidental to the conduct of the business of such Person or to the
ownership of its properties which were not Incurred in connection with
Indebtedness and which do not in the aggregate materially adversely affect
the value of said properties or materially impair their use in the operation
<PAGE>
18
of the business of such Person; (f) Liens securing Indebtedness Incurred to
finance the construction, purchase or lease of, or repairs, improvements or
additions to, property of such Person; PROVIDED, HOWEVER, that (i) such Liens
only cover such property and do not extend to any other property owned by
such Person or any of its Subsidiaries, (ii) the Indebtedness secured by such
Liens is not Incurred more than 180 days after the later of the acquisition,
completion of construction, repair, improvement, addition or commencement of
full operation of the property subject to such Liens, (iii) the Indebtedness
secured by such Liens is otherwise permitted to be Incurred under the
Indenture, (iv) the principal amount of any Indebtedness secured by any such
Lien does not exceed the cost of assets or property so acquired or
constructed and (v) the amount of Indebtedness secured by any such Lien is
not subsequently increased; (g) Liens to secure Indebtedness permitted under
Sections 4.03(b)(i), (ii) or (x) or Refinancing Indebtedness in respect
thereof; (h) Liens existing on the date of the Indenture; (i) Liens on
property or shares of stock of another Person at the time such other Person
becomes a Subsidiary of such Person; PROVIDED, HOWEVER, that such Liens are
not created, incurred or assumed in connection with, or in contemplation of,
such other Person becoming such a Subsidiary; PROVIDED FURTHER, HOWEVER, that
such Lien may not extend to any other property owned by such Person or any of
its Subsidiaries; (j) Liens on property at the time such Person or any of its
Subsidiaries acquires the property, including any acquisition by means of a
merger or consolidation with or into such Person or a Subsidiary of such
Person; PROVIDED, HOWEVER, that such Liens are not created, incurred or
assumed in connection with, or in contemplation of, such acquisition;
PROVIDED FURTHER, HOWEVER, that the Liens may not extend to any other
property owned by such Person or any of its Subsidiaries; (k) Liens securing
Indebtedness or other obligations of a Subsidiary of such Person owing to
such Person or a wholly owned Subsidiary of such Person; (l) Liens securing
Hedging Obligations so long as the related Indebtedness is, and is permitted
to be under the Original Indenture and the Indenture, secured by a Lien on
the same property securing such Hedging Obligations; and (m) Liens to secure
any Refinancing (or successive Refinancings) as a whole, or in part, of any
Indebtedness secured by any Lien referred to in the foregoing clauses (f),
(h), (i) and (j); PROVIDED, HOWEVER, that (x) such new Lien shall be limited
to all or part of the
<PAGE>
19
same property that secured the original Lien (plus improvements on such
property) and (y) the Indebtedness secured by such Lien at such time is not
increased to any amount greater than the sum of (A) the outstanding principal
amount or, if greater, committed amount of the Indebtedness described under
clauses (f), (h), (i) or (j) at the time the original Lien became a Permitted
Lien and (B) an amount necessary to pay any fees and expenses, including
premiums, related to such refinancing, refunding, extension, renewal or
replacement. Notwithstanding the foregoing, "Permitted Liens" will not
include any Lien described in clauses (f), (i) or (j) above if such Lien
applies to any Additional Assets acquired directly or indirectly from Net
Available Cash pursuant to Section 4.06.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"principal" of a Security means the principal of the Security plus the
premium, if any, payable on the Security which is due or overdue or is to
become due at the relevant time.
"Private Placement Legend" means the legend set forth under such caption
in the form of Initial Security in Exhibit A hereto.
"Public Equity Offering" means an underwritten primary public offering
of common stock of the Company pursuant to an effective registration
statement under the Securities Act.
"Public Market" means any time after (x) a Public Equity Offering has
been consummated and (y) at least 15% of the total issued and outstanding
common stock of the
<PAGE>
20
Company has been distributed by means of an effective registration statement
under the Securities Act.
"Purchase Agreement" means the Purchase Agreement dated August 6, 1997
among the Company, the Guarantor Subsidiaries and the Initial Purchaser.
"Purchase Money Indebtedness" means Indebtedness (i) consisting of the
deferred purchase price of property, conditional sale obligations, obligation
under any title retention agreement and other purchase money obligations, in
each case where the maturity of such Indebtedness does not exceed the
anticipated useful life of the asset being financed, and (ii) incurred to
finance the acquisition by the Company or a Restricted Subsidiary of such
asset, including additions and improvements; PROVIDED, HOWEVER, that any Lien
arising in connection with any such Indebtedness shall be limited to the
specified asset being financed or, in the case of real property or fixtures,
including additions and improvements, the real property on which such asset
is attached; and PROVIDED FURTHER that such Indebtedness is Incurred within
180 days after such acquisition by the Company or Restricted Subsidiary of
such asset.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such Indebtedness. "Refinanced"
and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the date
of the Original Indenture or Incurred in compliance with the Original
Indenture and this Indenture including Indebtedness that Refinances
Refinancing Indebtedness; PROVIDED, HOWEVER, that (i) such Refinancing
Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the
Indebtedness being Refinanced, (ii) such Refinancing Indebtedness has an
Average Life at the time such Refinancing Indebtedness is Incurred that is
equal to or greater than the Average Life of the Indebtedness being
Refinanced and (iii) such Refinancing Indebtedness has an aggregate principal
<PAGE>
21
amount (or if Incurred with original issue discount, an aggregate issue
price) that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed under the Indebtedness being Refinanced, plus any
accrued interest thereon, any premium required to be paid thereon and the
amount of reasonable and customary transaction expenses incurred in
connection therewith; PROVIDED FURTHER, HOWEVER, that Refinancing
Indebtedness shall not include (x) Indebtedness of a Restricted Subsidiary
that Refinances Indebtedness of the Company or (y) Indebtedness of the
Company or a Restricted Subsidiary that Refinances Indebtedness of an
Unrestricted Subsidiary.
"Registered Exchange Offer" shall have the meaning set forth in the
Exchange and Registration Rights Agreement.
"Related Business" means any business related, ancillary or
complementary to the businesses of the Company and the Restricted
Subsidiaries on the date of the Original Indenture.
"Representative" means the trustee, agent or representative (if any) for
an issue of Senior Indebtedness.
"Restricted Payment" with respect to any Person means (i) the
declaration or payment of any dividends or any other distributions of any
sort in respect of its Capital Stock (including any payment in connection
with any merger or consolidation involving such Person) or similar payment to
the direct or indirect holders of its Capital Stock (other than dividends or
distributions payable solely in its Capital Stock (other than Disqualified
Stock) or rights to acquire its Capital Stock (other than Disqualified Stock)
and dividends or distributions payable solely to the Company or a Restricted
Subsidiary, and other than pro rata dividends or other distributions made by
a Subsidiary that is not a Wholly Owned Subsidiary to minority stockholders
(or owners of an equivalent interest in the case of a Subsidiary that is an
entity other than a corporation)), (ii) the purchase, redemption or other
acquisition or retirement for value of any Capital Stock of the Company or of
any Restricted Subsidiary held by any Person (other than the Company or a
Wholly Owned Subsidiary), including the exercise of any option to exchange
any Capital Stock (other than into Capital Stock of the Company that is not
Disqualified Stock), (iii) the purchase, repurchase, redemption, defeasance
or other acquisition or retirement for value, prior to scheduled maturity,
scheduled repayment
<PAGE>
22
or scheduled sinking fund payment of any Subordinated Obligations (other than
the purchase, repurchase or other acquisition of Subordinated Obligations
purchased in anticipation of satisfying a sinking fund obligation, principal
installment or final maturity, in each case due within one year of the date
of acquisition) or (iv) the making of any Investment, other than a Permitted
Investment, in any Unrestricted Subsidiary or any other Person other than a
Wholly Owned Subsidiary or a Person that will become a Wholly Owned
Subsidiary as a result of any such Investment.
"Restricted Subsidiary" means any Subsidiary of the Company other than
an Unrestricted Subsidiary.
"Revolving Facility" means the revolving credit facility provided to the
Company as a portion of the Senior Bank Facilities.
"Sale/Leaseback Transaction" means an arrangement relating to property
now owned or hereafter acquired whereby the Company or a Restricted
Subsidiary transfers such property to a Person and the Company or a
Restricted Subsidiary leases it from such Person, other than leases between
the Company and a Wholly Owned Subsidiary or between Wholly Owned
Subsidiaries.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured by
a Lien.
"Securities" means the Securities issued under this Indenture.
"Senior Bank Documents" means the collective reference to the Senior
Bank Facilities, the notes (if any) issued pursuant thereto and the
Guarantees thereof, the Security Documents and the other Loan Documents (each
as defined in the Senior Bank Facilities and in effect on the Issue Date).
"Senior Bank Facilities" means the senior secured credit facilities
dated as of the Original Issue Date, as amended as of the Issue Date, among
the Company, the
<PAGE>
23
financial institutions party thereto and The Chase Manhattan Bank, as agent
for such financial institutions.
"Senior Indebtedness" means all Indebtedness of the Company, including
interest and fees thereon, and including all Bank Indebtedness, whether
outstanding on the Issue Date or thereafter Incurred, unless in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding it is provided that such obligations are not superior in right of
payment to the Securities; PROVIDED, HOWEVER, that Senior Indebtedness shall
not include (1) any obligation of the Company to any Subsidiary (other than
the Leasing Support Agreement), (2) any liability for Federal, state, local
or other taxes owed or owing by the Company, (3) any accounts payable or
other liability to trade creditors arising in the ordinary course of business
(including Guarantees thereof or instruments evidencing such liabilities),
(4) any Indebtedness, Guarantee or obligation of the Company which is
subordinate or junior to any other Indebtedness, Guarantee or other
obligation of the Company, (5) any obligations in respect of Capital Stock,
or (6) any Indebtedness Incurred in violation of this Indenture. If any
Designated Senior Indebtedness is disallowed, avoided or subordinated
pursuant to the provisions of Section 548 of Title 11 of the United States
Code or any applicable state fraudulent conveyance law, such Designated
Senior Indebtedness nevertheless will constitute Senior Indebtedness.
"Senior Indebtedness" of any Guarantor Subsidiary has a correlative meaning.
"Senior Subordinated Indebtedness" means the Securities, the Original
Securities and any other Indebtedness of the Company that specifically
provides that such Indebtedness is to rank PARI PASSU with the Securities and
is not subordinated by its terms to any Indebtedness or other obligation of
the Company which is not Senior Indebtedness.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant
<PAGE>
24
to any mandatory redemption provision (but excluding any provision providing
for the repurchase of such security at the option of the holder thereof upon
the happening of any contingency beyond the control of the issuer unless such
contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Original Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the Securities pursuant to a
written agreement to that effect.
"Subsidiary" of any Person means any corporation, association,
partnership or other business entity of which more than 50% of the total
voting power of shares of Capital Stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by (i)
such Person, (ii) such Person and one or more Subsidiaries of such Person or
(iii) one or more Subsidiaries of such Person.
"Subsidiary Guarantee" means, individually, any Guarantee of payment of
the Securities which may from time to time be executed and delivered by a
Subsidiary of the Company pursuant to the terms of this Indenture, and,
collectively, all such Guarantees. Each such Subsidiary Guarantee will be in
the form prescribed in this Indenture.
"Tax Sharing Agreement" means the Tax Sharing Agreement dated as of May
12, 1995 by and among the Company and the Leasing Subsidiary or any other
agreement containing substantially the same terms as such agreement.
"Temporary Cash Investments" means any of the following: (i) any
investment in direct obligations of the United States of America or any
agency thereof or obligations guaranteed by the United States of America or
any agency thereof, (ii) investments in time deposit accounts, bankers'
acceptances, certificates of deposit and money market deposits maturing
within 180 days of the date of acquisition thereof issued by a bank or trust
company which is organized under the laws of the United States of America,
any state thereof or any foreign country recognized by the United States, and
which bank or trust company has capital, surplus and undivided profits
aggregating in excess
<PAGE>
25
of $250 million (or the foreign currency equivalent thereof) and has
outstanding debt which is rated "A" (or such similar equivalent rating) or
higher by at least one nationally recognized statistical rating organization
(as defined in Rule 436 under the Securities Act), (iii) repurchase
obligations with a term of not more than 30 days for underlying securities of
the types described in clause (i) above entered into with a bank meeting the
qualifications described in clause (ii) above, (iv) investments in commercial
paper, maturing not more than 270 days after the date of acquisition, issued
by a corporation (other than an Affiliate of the Company) organized and in
existence under the laws of the United States of America or any foreign
country recognized by the United States of America with a rating at the time
as of which any investment therein is made of "P-1" (or higher) according to
Moody's Investors Service, Inc. or "A-1" (or higher) according to Standard
and Poor's Corporation, and (v) investments in securities with maturities of
six months or less from the date of acquisition issued or fully guaranteed by
any state, commonwealth or territory of the United States of America, or by
any political subdivision or taxing authority thereof, and rated at least "A"
by Standard & Poor's Corporation or "A" by Moody's Investors Service, Inc.
"Term Loan Facility" means the Tranche A Term Loan and the Tranche B
Term Loan under the Senior Bank Facilities.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date of this Indenture, except as provided
in Section 9.03 hereof.
"Trade Payables" means, with respect to any Person, any accounts payable
or any indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person arising in the ordinary course of
business in connection with the acquisition of goods or services.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, any vice chairman, the
President, any vice president, any assistant vice president, the secretary,
any assistant secretary, any treasurer, any assistant treasurer or any
<PAGE>
26
other officer or assistant officer of the Trustee customarily performing
functions similar to those performed by any of the above-mentioned officers
and/or assigned by the Trustee to administer its corporate trust matters.
"Uniform Commercial Code" means the New York Uniform Commercial Code as
in effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that
at the time of determination shall be designated an Unrestricted Subsidiary
by the Board of Directors in the manner provided below, (ii) any Subsidiary
of an Unrestricted Subsidiary and (iii) the Leasing Subsidiary. The Board of
Directors may designate any Subsidiary of the Company (including any newly
acquired or newly formed Subsidiary of the Company) to be an Unrestricted
Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital
Stock or Indebtedness of, or holds any Lien on any property of, the Company
or any other Subsidiary of the Company that is not a Subsidiary of the
Subsidiary to be so designated; PROVIDED, HOWEVER, that either (A) the
Subsidiary to be so designated has total consolidated assets of $1,000 or
less or (B) if such Subsidiary has consolidated assets greater than $1,000,
such designation would be permitted under Section 4.04. The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; PROVIDED, HOWEVER, that immediately after giving effect to such
designation (x) the Company could Incur $1.00 of additional Indebtedness
under Section 4.03(a) and (y) no Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall be
evidenced to the Trustee by promptly filing with the Trustee a copy of the
resolution of the Board of Directors giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States
of America (including any agency or instrumentality thereof) for the payment
of which the full faith and credit of the United States of America is pledged
and which are not callable at the issuer's option.
<PAGE>
27
"Voting Stock" of a corporation means all classes of Capital Stock of
such corporation then outstanding and normally entitled to vote in the
election of directors.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of the Company
all the Capital Stock of which (other than directors, qualifying shares) is
owned by the Company or one or more Wholly Owned Subsidiaries.
SECTION 1.02. OTHER DEFINITIONS.
Defined in
Term Section
---- -----------
"Affiliate Transaction" . . . . . . . . . . . . . . . . 4.07
"Agent Members" . . . . . . . . . . . . . . . . . . . . 2.13(a)
"Bankruptcy Law". . . . . . . . . . . . . . . . . . . . 6.01
"Blockage Notice" . . . . . . . . . . . . . . . . . . . 10.03
"covenant defeasance option". . . . . . . . . . . . . . 8.01(b)
"cross acceleration provision". . . . . . . . . . . . . 6.01
"Custodian" . . . . . . . . . . . . . . . . . . . . . . 6.01
"Event of Default". . . . . . . . . . . . . . . . . . . 6.01
"IAI" . . . . . . . . . . . . . . . . . . . . . . . . . 2.01(b)
"IAI Global Note" . . . . . . . . . . . . . . . . . . . 2.01(b)
"judgment default provision". . . . . . . . . . . . . . 6.01
"legal defeasance option" . . . . . . . . . . . . . . . 8.01(b)
"Legal Holiday" . . . . . . . . . . . . . . . . . . . . 12.08
"Offer" . . . . . . . . . . . . . . . . . . . . . . . . 4.06
"Offer Amount". . . . . . . . . . . . . . . . . . . . . 4.06
"Offer Period". . . . . . . . . . . . . . . . . . . . . 4.06
"Offshore Securities Exchange Date" . . . . . . . . . . 2.01(c)
"Permanant Offshore Physical Securities". . . . . . . . 2.01(c)
"pay the Securities". . . . . . . . . . . . . . . . . . 10.03
"Paying Agent". . . . . . . . . . . . . . . . . . . . . 2.03
"Payment Blockage Period" . . . . . . . . . . . . . . . 10.03
"Physical Securities" . . . . . . . . . . . . . . . . . 2.01(e)
"Purchase Date" . . . . . . . . . . . . . . . . . . . . 4.06
"QIB's" . . . . . . . . . . . . . . . . . . . . . . . . 2.01(b)
"Rule 144A. . . . . . . . . . . . . . . . . . . . . . . 2.01(b)
"Registrar" . . . . . . . . . . . . . . . . . . . . . . 2.03
"Successor Company" . . . . . . . . . . . . . . . . . . 5.01
"Temporary Offshore Physical Securities . . . . . . . . 2.01(c)
"U.S. Global Security . . . . . . . . . . . . . . . . . 2.01(b)
"U.S. Physical Securities . . . . . . . . . . . . . . . 2.01(b)-
<PAGE>
28
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
This Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The
following TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have
the meanings assigned to them by such definitions.
SECTION 1.04. RULES OF CONSTRUCTION. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular;
(6) unsecured Indebtedness shall not be deemed to be subordinate or
junior to Secured Indebtedness merely by virtue of its nature as unsecured
Indebtedness;
<PAGE>
29
(7) the principal amount of any noninterest bearing or other discount
security at any date shall be the principal amount thereof that would be
shown on a balance sheet of the issuer dated such date prepared in
accordance with GAAP and accretion of principal on such security shall be
deemed to be the Incurrence of Indebtedness; and
(8) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
Preferred Stock, whichever is greater.
ARTICLE II
THE SECURITIES
SECTION 2.01. FORM AND DATING. (a) The Initial Securities and the
Trustee's certificate of authentication shall be substantially in the form of
Exhibit A, which is hereby incorporated in and expressly made a part of this
Indenture, and as otherwise provided in this Article II. Any Exchange
Securities and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit B, which is incorporated in and
expressly made a part of this Indenture, and as otherwise provided in this
Article II. The Securities may have notations, legends or endorsements
required by law, stock exchange rule, agreements to which the Company or any
Guarantor Subsidiary is subject, if any, or usage (PROVIDED that any such
notation, legend or endorsement is in a form acceptable to the Company).
Each Security shall be dated the date of its authentication. The terms of
the Securities set forth in Exhibit A and B are part of the terms of this
Indenture. The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and integral multiples thereof.
(b) The Initial Securities are being offered and sold by the
Company pursuant to the Purchase Agreement. Initial Securities offered and
sold to "qualified institutional buyers" (as defined in Rule 144A under the
Securities Act ("Rule 144A")) ("QIBs") in accordance with Rule 144A as
provided in the Purchase Agreement, shall be issued on the Issue Date
initially in the form of a
<PAGE>
30
permanent Global Security substantially in the form set forth in Exhibit A
(the "QIB Global Security"). On the Issue Date, a similar Global security
(the "IAI Global Security", and with the DIB Global Security each a "U.S.
Global Security") will also be issued to accomodate transfers of Securities
from QIBs to institutional "Accredited Investors" (within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act) ("IAIs"). On the Issue
Date, each U.S. Global Security will be deposited with the Trustee, as
custodian for the Depositary, duly executed by the Company and authenticated
by the Trustee as hereinafter provided. The aggregate principal amount of
each U.S. Global Security may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for the
Depositary or its nominee, as hereinafter provided. Transfers of Initial
Securities from QIBs to IAIs, and from IAIs to QIBs, will be represented by
appropriate increases and decreases to the respective amounts of the
appropriate U.S. Global Securities, as more fully provided in Section 2.13.
(c) Initial Securities offered and sold in reliance on Regulation
S, if any, shall be issued initially in the form of temporary certificated
Securities in registered form substantially in the form set forth in Exhibit
A (the "Temporary Offshore Physical Securities"). The Temporary Offshore
Physical Securities will be registered in the name of, and held by, a
temporary certificate holder designated by the Initial Purchaser until the
later of the completion of the distribution of the Initial Securities and the
termination of the "restricted period" (as defined in Regulation S) with
respect to the offer and sale of the Initial Securities (the "Offshore
Securities Exchange Date"). The Company shall promptly notify the Trustee in
writing of the occurrence of the Offshore Securities Exchange Date and, at
any time following the Offshore Securities Exchange Date, upon receipt by the
Trustee and the Company of a certificate substantially in the form set forth
in Exhibit E, the Company shall execute, and the Trustee shall authenticate
and make available for delivery, one or more permanent certificated
Securities in registered form substantially in the form set forth in Exhibit
A (the "Permanent Offshore Physical Securities") in exchange for the
Temporary Offshore Physical Securities of like tenor and amount.
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31
(d) Initial Securities offered and sold other than as described in
the preceding two paragraphs, if any, shall be issued in the form of
permanent certificated Securities in registered form in substantially the
form set forth in Exhibit A (the "U.S. Physical Securities").
(e) The Temporary Offshore Physical Securities, Permanent Offshore
Physical Securities and U.S. Physical Securities are sometimes collectively
herein referred to as the "Physical Securities".
SECTION 2.02. EXECUTION AND AUTHENTICATION. One or more Officers
shall sign the Securities for the Company by manual or facsimile signature.
The Company's seal shall be impressed, affixed, imprinted or reproduced on
the Securities and may be in facsimile form.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall
be valid nevertheless.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security.
The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee shall authenticate and make available for delivery (1)
Initial Securities for original issue in an aggregate principal amount of
$80,000,000 and (2) Exchange Securities for issue only in a Registered
Exchange Offer, pursuant to the Exchange and Registration Rights Agreement,
for Initial Securities for a like principal amount of Initial Securities
exchanged pursuant thereto, in each case upon a written order of the Company
signed by two Officers or by an Officer and either an Assistant Treasurer or
an Assistant Secretary of the Company. Such order shall specify the amount
of the Securities to be authenticated, the date on which the original issue
of Securities is to be authenticated and whether the Securities are to be
Initial Securities or Exchange Securities. The aggregate principal amount of
Securities outstanding at any time may not exceed $75,000,000 except as
provided in Section 2.07.
The Trustee may appoint an authenticating agent reasonably acceptable
to the Company to authenticate the
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32
Securities. Any such appointment shall be evidenced by an instrument signed
by an authorized officer of the Trustee, a copy of which shall be furnished
to the Company. Unless limited by the terms of such appointment, an
authenticating agent may authenticate Securities whenever the Trustee may do
so. Each reference in this Indenture to authentication by the Trustee
includes authentication by such agent. An authenticating agent has the same
rights as any Registrar, Paying Agent or agent for service of notices and
demands.
SECTION 2.03. REGISTRAR AND PAYING AGENT. The Company shall
maintain an office or agency where Securities may be presented for
registration of transfer or for exchange (the "Registrar") and an office or
agency where Securities may be presented for payment (the "Paying Agent").
The Registrar shall keep a register of the Securities and of their transfer
and exchange. The Company may have one or more co-registrars and one or more
additional paying agents. The term "Paying Agent" includes any additional
paying agent.
The Company shall enter into an appropriate agency agreement with
any Registrar, Paying Agent or co-registrar not a party to this Indenture,
which shall incorporate the terms of the TIA. The agreement shall implement
the provisions of this Indenture that relate to such agent. The Company
shall notify the Trustee of the name and address of any such agent. If the
Company fails to maintain a Registrar or Paying Agent, the Trustee shall act
as such and shall be entitled to appropriate compensation therefor pursuant
to Section 7.07. The Company or any of its domestically incorporated Wholly
Owned Subsidiaries may act as Paying Agent, Registrar, co-registrar or
transfer agent.
The Company initially appoints the Trustee as Registrar and Paying
Agent in connection with the Securities.
The Company initially appoints The Depository Trust Company to act as
Depositary with respect to the Global Securities.
The Company may remove any Registrar or Paying Agent upon written
notice to such Registrar or Paying Agent and to the Trustee; provided that no
such removal shall become effective until (1) acceptance of an appointment by
a successor as evidenced by an appropriate agreement entered
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33
into by the Company and such successor Registrar or Paying Agent, as the case
may be, and delivered to the Trustee or (2) notification to the Trustee that
the Trustee shall serve as Registrar or Paying Agent until the appointment of
a successor in accordance with clause (1) above. The Registrar or Paying
Agent may resign at any time upon written notice; PROVIDED, HOWEVER, that the
Trustee may resign as Paying Agent or Registrar only if the Trustee also
resigns as Trustee in accordance with Section 7.08.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. Prior to each
due date of the principal and interest on any Security, the Company shall
deposit with the Paying Agent (or if the Company or a Subsidiary is acting as
Paying Agent, segregate and hold in trust for the benefit of the Persons
entitled thereto) a sum sufficient to pay such principal and interest when so
becoming due. The Company shall require each Paying Agent (other than the
Trustee) to agree in writing that the Paying Agent shall hold in trust for
the benefit of Securityholders or the Trustee all money held by the Paying
Agent for the payment of principal of or interest on the Securities and shall
notify the Trustee of any default by the Company in making any such payment.
If the Company or a Subsidiary acts as Paying Agent, it shall segregate the
money held by it as Paying Agent and hold it as a separate trust fund. The
Company at any time may require a Paying Agent to pay all money held by it to
the Trustee and to account for any funds disbursed by the Paying Agent. Upon
complying with this Section, the Paying Agent shall have no further liability
for the money delivered to the Trustee.
Any money deposited with any Paying Agent, or then held by the
Company or a Subsidiary in trust for the payment of principal or interest on
any Security and remaining unclaimed for two years after such principal and
interest has become due and payable shall be paid to the Company at its
request, or, if then held by the Company or a Subsidiary, shall be discharged
from such trust; and the Securityholders shall thereafter, as unsecured
general creditors, look only to the Company for payment thereof, and all
liability of the Paying Agent with respect to such money, and all liability
of the Company or such Subsidiary as trustee thereof, shall thereupon cease.
SECTION 2.05. SECURITYHOLDER LISTS. The Trustee shall preserve in
as current a form as is reasonably prac-
<PAGE>
34
ticable the most recent list available to it of the names and addresses of
Securityholders. If the Trustee is not the Registrar, the Company shall
furnish, or cause the Registrar to furnish, to the Trustee, in writing at
least five Business Days before each interest payment date and at such other
times as the Trustee may request in writing, a list in such form and as of
such date as the Trustee may reasonably require of the names and addresses of
Securityholders.
SECTION 2.06. TRANSFER AND EXCHANGE. The Securities shall be
issued in registered form and shall be transferable only upon the surrender
of a Security for registration of transfer. When a Security is presented to
the Registrar or a co-registrar with a request to register a transfer, the
Registrar shall register the transfer as requested if the requirements of
Section 8-401(l) of the Uniform Commercial Code are met. When Securities are
presented to the Registrar or a co-registrar with a request to exchange them
for an equal principal amount of Securities of other denominations, the
Registrar shall make the exchange as requested if the same requirements are
met. To permit registration of transfers and exchanges, the Company shall
execute and the Trustee shall authenticate Securities at the Registrar's or
co-registrar's request. The Company may require payment of a sum sufficient
to pay all taxes, assessments or other governmental charges in connection
with any transfer or exchange pursuant to this Section. The Company shall
not be required to make and the Registrar need not register transfers or
exchanges of Securities selected for redemption (except, in the case of
Securities to be redeemed in part, the portion thereof not to be redeemed) or
any Securities for a period of 15 days before a selection of Securities to be
redeemed.
Prior to the due presentation for registration of transfer of any
Security, the Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar may deem and treat the Person in whose name a Security is
registered as the absolute owner of such Security for the purpose of
receiving payment of principal of and interest, if any, on such Security and
for all other purposes whatsoever, whether or not such Security is overdue,
and none of the Company, the Trustee, the Paying Agent, the Registrar or any
coregistrar shall be affected by notice to the contrary.
Any Holder of a U.S. Global Security shall, by acceptance of such
Global Security, agree that transfers of
<PAGE>
35
beneficial interest in such Global Security may be effected only through a
book-entry system maintained by the Holder of such Global Security(or its
agent), and that ownership of a beneficial interest in such Global Security
shall be required to be reflected in a book entry.
All Securities issued upon any transfer or exchange pursuant to this
Section 2.06 will evidence the same debt and will be entitled to the same
benefits under this Indenture as the Securities surrendered upon such
transfer or exchange.
SECTION 2.07. REPLACEMENT SECURITIES. If a mutilated Security is
surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall
issue and the Trustee shall authenticate a replacement Security if the
requirements of Section 8-405 of the Uniform Commercial Code are met, such
that the Holder (i) satisfies the Company or the Trustee within a reasonable
time after he has notice of such loss, destruction or wrongful taking and the
Registrar does not register a transfer prior to receiving such notification,
(ii) makes such request to the Company or the Trustee prior to the Security
being acquired by a bona fide purchaser and (iii) satisfies any other
reasonable requirements of the Trustee. If required by the Trustee or the
Company, such Holder shall furnish an indemnity bond sufficient in the
judgment of the Trustee to protect the Company, the Trustee, the Paying
Agent, the Registrar and any co-registrar from any loss that any of them may
suffer if a Security is replaced. The Company and the Trustee may charge the
Holder for their expenses in replacing a Security. In the event any such
mutilated, lost, destroyed or wrongfully taken Security has become or is
about to become due and payable, the Company in its discretion may pay such
Security instead of issuing a new Security in replacement thereof.
Every replacement Security is an additional obligation of the Company.
The provisions of this Section 2.07 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, lost, destroyed or wrongfully taken
Securities.
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36
SECTION 2.08. OUTSTANDING SECURITIES. Securities outstanding at
any time are all Securities authenticated by the Trustee except for those
canceled by it, those delivered to it for cancelation and those described in
this Section as not outstanding. A Security does not cease to be outstanding
because the Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance
with this Indenture, on a redemption date or maturity date money sufficient
to pay all principal and interest payable on that date with respect to the
Securities (or portions thereof) to be redeemed or maturing, as the case may
be, and the Paying Agent is not prohibited from paying such money to the
Securityholders on that date pursuant to the terms of this Indenture, then on
and after that date such Securities (or portions thereof) cease to be
outstanding and interest on them ceases to accrue.
In determining whether the Holders of the required principal amount
of Securities have concurred in any direction, waiver or consent, Securities
owned by the Company or any of its Affiliates shall be disregarded, except
that, for the purposes of determining whether the Trustee shall be protected
in relying on any such direction, waiver or consent, only Securities which
the Trustee knows or has reason to know are so owned shall be disregarded.
SECTION 2.09. TEMPORARY SECURITIES. Until Definitive Securities
and Global Securities are ready for delivery, the Company may prepare and the
Trustee shall authenticate temporary Securities. Temporary Securities shall
be substantially in the form of Definitive Securities but may have variations
that the Company considers appropriate for temporary Securities. Without
unreasonable delay, the Company shall prepare and the Trustee shall
authenticate Definitive Securities and deliver them in exchange for temporary
Securities upon surrender of such temporary Securities at the office or
agency of the Company, without charge to the Holder.
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37
SECTION 2.10. CANCELATION. The Company at any time may deliver
Securities to the Trustee for cancelation. The Registrar and the Paying
Agent shall forward to the Trustee any Securities surrendered to them for
registration of transfer, exchange or payment. The Trustee and no one else
shall cancel all Securities surrendered for registration of transfer,
exchange, payment or cancelation and deliver canceled Securities to the
Company pursuant to written direction by an Officer of the Company. The
Company may not issue new Securities to replace Securities it has redeemed,
paid or delivered to the Trustee for cancelation. The Trustee shall not
authenticate Securities in place of canceled Securities other than pursuant
to the terms of this Indenture.
SECTION 2.11. DEFAULTED INTEREST. If the Company defaults in a
payment of interest on the Securities, the Company shall pay the defaulted
interest (plus interest on such defaulted interest to the extent lawful) in
any lawful manner. The Company may pay the defaulted interest to the persons
who are Securityholders on a subsequent special record date. The Company
shall fix or cause to be fixed any such special record date and payment date
to the reasonable satisfaction of the Trustee and shall promptly mail or
cause to be mailed to each Securityholder a notice that states the special
record date, the payment date and the amount of defaulted interest to be paid.
The Company may make payment of any defaulted interest in any other
lawful manner not inconsistent with the requirements (if applicable) of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this paragraph,
such manner of payment shall be deemed practicable by the Trustee.
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
Holders; PROVIDED, HOWEVER, 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
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38
the Securities, and any such redemption shall not be affected by any defect
in or omission of such numbers.
SECTION 2.13. BOOK-ENTRY PROVISIONS FOR U.S. GLOBAL SECURITY.
(a) Each U.S. Global Security initially shall (i) be registered in
the name of the Depositary for such U.S. Global Security or the nominee of
such Depositary and (ii) be delivered to the Trustee as custodian for such
Depositary.
Members of, or participants in, the Depositary ("Agent Members")
shall have no rights under this Indenture with respect to any U.S. Global
Security held on their behalf by the Depositary, or the Trustee as its
custodian, or under such U.S. Global Security, and the Depositary may be
treated by the Company, the Trustee and any agent of the Company or the
Trustee as the absolute owner of such U.S. Global Security for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Company, the Trustee or any agent of the Company or the Trustee from giving
effect to any written certification, proxy or other authorization furnished
by the Depositary or shall impair, as between the Depositary and its Agent
Members, the operation of customary practices governing the exercise of the
rights of a Holder of any Security.
(b) Transfers of a U.S. Global Security shall be limited to
transfers of such U.S. Global Security in whole, but not in part, to the
Depositary, its successors or their respective nominees. Interests of
beneficial owners in a U.S. Global Security may be transferred in accordance
with the rules and procedures of the Depositary and the provisions of Section
2.14. If required to do so pursuant to any applicable law or regulation,
beneficial owners may obtain U.S. Physical Securities in exchange for their
beneficial interests in a U.S. Global Security upon written request in
accordance with the Depositary's and the Registrar's procedures. In
addition, U.S. Physical Securities shall be transferred to all beneficial
owners in exchange for their beneficial interests in a U.S. Global Security
if (i) the Depositary notifies the Company that it is unwilling or unable to
continue as Depositary for such U.S. Global Security or the Depositary ceases
to be a clearing agency registered under the Exchange Act, at a time when the
Depositary is required to be so registered in order
<PAGE>
39
to act as Depositary, and in each case a successor depositary is not
appointed by the Company within 90 days of such notice or, (ii) the Company
executes and delivers to the Trustee and Security Registrar an Officers'
Certificate stating that such U.S. Global Security shall be so exchangeable
or (iii) an Event of Default has occurred and is continuing and the Registrar
has received a request from the Depositary.
(c) In connection with any transfer of a portion of the beneficial
interest in a U.S. Global Security pursuant to subsection (b) of this Section
to beneficial owners who are required to hold U.S. Physical Securities, the
Registrar shall reflect on its books and records the date and a decrease in
the principal amount of such U.S. Global Security in an amount equal to the
principal amount of the beneficial interest in the U.S. Global Security to
be transferred, and the Company shall execute, and the Trustee shall
authenticate and deliver, one or more U.S. Physical Securities of like tenor
and amount.
(d) In connection with the transfer of an entire U.S. Global
Security to beneficial owners pursuant to subsection (b) of this Section,
such U.S. Global Security shall be deemed to be surrendered to the Trustee
for cancelation, and the Company shall execute, and the Trustee shall
authenticate and deliver, to each beneficial owner identified by the
Depositary in exchange for its beneficial interest in such U.S. Global
Security, an equal aggregate principal amount of U.S. Physical Securities of
authorized denominations.
(e) Any U.S. Physical Security delivered in exchange for an
interest in a U.S. Global Security pursuant to subsection (c) or subsection
(d) of this Section shall, except as otherwise provided by paragraph (f) of
Section 2.14, bear the Private Placement Legend.
(f) The registered holder of a U.S. Global Security may grant
proxies and otherwise authorize any person, including Agent Members and
persons that may hold interests through Agent Members, to take any action
which a Holder is entitled to take under this Indenture or the Securities.
<PAGE>
40
SECTION 2.14. SPECIAL TRANSFER PROVISIONS.
Unless and until an Initial Security is transferred or exchanged
under an effective registration statement under the Securities Act, the
following provisions shall apply:
(a) TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS. The
following provisions shall apply with respect to the registration of any
proposed transfer of an Initial Security to any IAI which is not a QIB
(excluding Non-U.S. Persons) that is consistent with the Private Placement
Legend:
(i) The Registrar shall register the transfer of such Initial
Security if (x) the requested transfer is after the date that is two years
after the later of the Issue Date and the last date on which the Company or
any of its Affiliates was the owner of such Initial Security (such later
date, the "Resale Restriction Termination Date") or (y) the proposed
transferee has delivered to the Registrar a certificate substantially in
the form set forth in Exhibit C.
(ii) If the proposed transferee is an Agent Member, and the Initial
Security to be transferred consists of U.S. Physical Securities or an
interest in the QIB Global Security, upon receipt by the Registrar of
(x) the document, if any, required by paragraph (i) and (y) instructions
given in accordance with the Depositary's and the Registrar's procedures
therefor, the Registrar shall reflect on its books and records the date and
an increase in the principal amount of the IAI Global Security in an amount
equal to (x) the principal amount of the U.S. Physical Securities to be
transferred, and the Trustee shall cancel the U.S. Physical Security so
transferred or (y) the amount of the beneficial interest in the QIB Global
Security to be so transferred (in which case the Registrar shall reflect on
its books and records the date and an appropriate decrease in the principal
amount of the QIB Global Security).
(iii) If the proposed transferee is entitled to receive a U.S. Physical
Security as provided in Section 2.13 and the proposed transferor is an Agent
Member holding a beneficial interest in a U.S. Global
<PAGE>
41
Security, upon receipt by the Registrar of (x) the documents, if any,
required by paragraph (i) and (y) instructions given in accordance with the
Depositary's and the Registrar's procedures therefor, the Registrar shall
reflect on its books and records the date and a decrease in the principal
amount of such U.S. Global Security in an amount equal to the principal
amount of the beneficial interest in such U.S. Global Security to be
transferred, and the Company shall execute, and the Trustee shall
authenticate and deliver, one or more U.S. Physical Securities of like tenor
and amount.
(iv) If the Initial Security to be transferred consists of U.S.
Physical Securities and the proposed transferee is entitled to receive a
U.S. Physical Security as provided in Section 2.13, upon receipt by the
Registrar of the document, if any, required by paragraph (i), the Registrar
shall register such transfer and the Company shall execute, and the Trustee
shall authenticate and deliver, one or more U.S. Physical Securities of
like tenor and amount.
(b) TRANSFERS TO QIBS. The following provisions shall apply with
respect to the registration of any proposed transfer of an Initial Security
to a QIB (excluding Non-U.S. Persons):
(i) If the Security to be transferred consists of U.S. Physical
Securities, Temporary Offshore Physical Securities, Permanent Offshore
Physical Securities or an interest in the IAI Global Security, the
Registrar shall register the transfer if such transfer is being made by a
proposed transferor who has provided the Registrar with a certificate
substantially in the form set forth in Exhibit F hereto.
(ii) If the proposed transferee is an Agent Member, and the Initial
Security to be transferred consists of U.S. Physical Securities, Temporary
Offshore Physical Securities, Permanent Offshore Physical Securities or an
interest in the IAI Global Security, upon receipt by the Registrar of
(x) the document, if any, required by paragraph (i) and (y) instructions
given in accordance with the Depositary's and the Registrar's procedures
therefor, the Registrar shall reflect on its books and records the date and
an
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42
increase in the principal amount of the QIB Global Security in an amount
equal to (x) the principal amount of the U.S. Physical Securities,
Temporary Offshore Physical Securities or Permanent Offshore Physical
Securities, as the case may be, to be transferred, and the Trustee shall
cancel the Physical Security so transferred or (y) the amount of the
beneficial interest in the IAI Global Security to be so transferred (in
which case the Registrar shall reflect on its books and records the date
and an appropriate decrease in the principal amount of the IAI Global
Security).
(iii) If the proposed transferee is entitled to receive a U.S. Physical
Security as provided in Section 2.13 and the proposed transferor is an Agent
Member holding a beneficial interest in a U.S. Global Security, upon receipt
by the Registrar of (x) the documents, if any, required by paragraph (i) and
(y) instructions given in accordance with the Depositary's and the
Registrar's procedures therefor, the Registrar shall reflect on its books
and records the date and a decrease in the principal amount of such U.S.
Global Security in an amount equal to the principal amount of the beneficial
interest in such U.S. Global Security to be transferred, and the Company
shall execute, and the Trustee shall authenticate and deliver, one or more
U.S. Physical Securities of like tenor and amount.
(iv) If the Initial Security to be transferred consists of U.S.
Physical Securities, Temporary Offshore Physical Securities or Permanent
Offshore Physical Securities and the proposed transferee is entitled to
receive a U.S. Physical Security as provided in Section 2.13, upon receipt
by the Registrar of the document, if any, required by paragraph (i), the
Registrar shall register such transfer and the Company shall execute, and
the Trustee shall authenticate and deliver, one or more U.S. Physical
Securities of like tenor and amount.
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43
(c) TRANSFERS BY NON-U.S. PERSONS PRIOR TO September 20, 1997. The
following provisions shall apply with respect to registration of any proposed
transfer of an Initial Security by a Non-U.S. Person prior to September 20,
1997.
(i) The Registrar shall register the transfer of any Initial Security
(x) if the proposed transferee is a Non-U.S. Person and the proposed
transferor has provided the Registrar with a certificate substantially in
the form set forth in Exhibit G hereto or (y) if the proposed transferee is
a QIB and the proposed transferor has provided the Registrar with a
certificate substantially in the form set forth in Exhibit F hereto.
Unless clause (ii) below is applicable, the Company shall execute, and the
Trustee shall authenticate and deliver, one or more Temporary Offshore
Physical Securities of like tenor and amount.
(ii) If the proposed transferee is an Agent Member in connection with
a proposed transfer of an Initial Security to a QIB, upon receipt by the
Registrar of (x) the document, if any, required by paragraph (i) and
(y) instructions given in accordance with the Depositary's and the
Registrar's procedures therefor, the Registrar shall reflect on its books
and records the date and an increase in the principal amount of the
QIB Global Security in an amount equal to the principal amount of the
Temporary Offshore Physical Security to be transferred, and the Registrar
shall cancel the Temporary Offshore Physical Securities so transferred.
(d) TRANSFERS BY NON-U.S. PERSONS ON OR AFTER September 20, 1997.
The following provisions shall apply with respect to any transfer of an
Initial Security by a Non-U.S. Person on or after September 20, 1997:
(i) (x) If the Initial Security to be transferred is a Permanent
Offshore Physical Note, the Registrar shall register such transfer, (y) if
the Initial Security to be transferred is a Temporary Offshore Physical
Note, upon receipt of a certificate substantially in the form set forth in
Exhibit E from the proposed transferor, the Registrar shall register such
transfer and (z) in the case of either clause (x) or (y), unless
clause (ii) below is applicable, the Company shall execute, and the Trustee
shall
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44
authenticate and deliver, one or more Permanent Offshore Physical
Securities of like tenor and amount.
(ii) If the proposed transferee is an Agent Member in connection with
a proposed transfer of an Initial Security to a QIB, upon receipt by the
Registrar of instructions given in accordance with the Depositary's and the
Registrar's procedures therefor, the Registrar shall reflect on its books
and records the date and an increase in the principal amount of the
QIB Global Security in an amount equal to the principal amount of the
Temporary Offshore Physical Security or of the Permanent Offshore Physical
Security to be transferred, and the Trustee shall cancel the Physical
Security so transferred.
(e) TRANSFERS TO NON-U.S. PERSONS AT ANY TIME. The following
provisions shall apply with respect to any transfer of an Initial Security to
a Non-U.S. Person:
(i) Prior to September 20, 1997, the Registrar shall register any
proposed transfer of an Initial Security to a Non-U.S. Person upon receipt
of a certificate substantially in the form set forth in Exhibit G from the
proposed transferor and the Company shall execute, and the Trustee shall
authenticate and make available for delivery, one or more Temporary
Offshore Physical Securities.
(ii) On and after September 20, 1997, the Registrar shall register
any proposed transfer to any Non-U.S. Person (w) if the Initial Security to
be transferred is a Permanent Offshore Physical Security, (x) if the
Initial Security to be transferred is a Temporary Offshore Physical
Security, upon receipt of a certificate substantially in the form set forth
in Exhibit E from the proposed transferor, (y) if the Initial Security to
be transferred is a U.S. Physical Security or an interest in a U.S. Global
Security, upon receipt of a certificate substantially in the form set forth
in Exhibit E from the proposed transferor and (z) in the case of either
clause (w), (x) or (y), the Company shall execute, and the Trustee shall
authenticate and deliver, one or more Permanent Offshore Physical
Securities of like tenor and amount.
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45
(iii) If the proposed transferor is an Agent Member holding a
beneficial interest in a U.S. Global Security, upon receipt by the
Registrar of (x) the document, if any, required by paragraph (i), and
(y) instructions in accordance with the Depositary's and the Registrar's
procedures therefor, the Registrar shall reflect on its books and records
the date and a decrease in the principal amount of such U.S. Global
Security in an amount equal to the principal amount of the beneficial
interest in the U.S. Global Security to be transferred and the Company
shall execute, and the Trustee shall authenticate and deliver, one or more
Permanent Offshore Physical Securities of like tenor and amount.
(f) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Registrar shall deliver only Securities that
bear the Private Placement Legend unless either (i) such transfer, exchange
or replacement of such Securities occurs after the Resale Restriction
Termination Date or (ii) there is delivered to the Registrar an Opinion of
Counsel reasonably satisfactory to the Company and the Trustee to the effect
that neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of the
Securities Act.
(g) GENERAL. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such a Security acknowledges the
restrictions on transfer of such Security set forth in this Indenture and in
the Private Placement Legend and agrees that it will transfer such Security
only as provided in this Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.13 or this Section
2.14. The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon
the giving of reasonable written notice to the Registrar.
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46
Interest payable on the Securities shall be computed on the basis of
a 360-day year comprised of 30-day months.
ARTICLE III
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE. If the Company elects to redeem
Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee in writing of the redemption date, the principal amount of Securities
to be redeemed.
The Company shall give each notice to the Trustee provided for in
this Section at least 60 days before the redemption date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an
Officers' Certificate and an Opinion of Counsel from the Company to the
effect that such redemption will comply with the conditions herein.
SECTION 3.02. SELECTION OF SECURITIES TO BE REDEEMED. If fewer
than all the Securities are to be redeemed, the Trustee shall select the
Securities to be redeemed pro rata or by lot or by a method that complies
with applicable legal and securities exchange requirements, if any, and that
the Trustee in its sole discretion considers fair and appropriate and in
accordance with methods generally used at the time of selection by
fiduciaries in similar circumstances. The Trustee shall make the selection
from outstanding Securities not previously called for redemption. The
Trustee may select for redemption portions of the principal of Securities
that have denominations larger than $1,000. Securities and portions of them
the Trustee selects shall be in amounts of $1,000 or a whole multiple of
$1,000. Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption. The
Trustee shall notify the Company promptly of the Securities or portions of
Securities to be redeemed.
SECTION 3.03. NOTICE OF REDEMPTION. At least 30 days but not more
than 60 days before a date for redemption of Securities, the Company shall mail
a notice of
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47
redemption by first-class mail to each Holder of Securities to be redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to be redeemed,
the identification and principal amounts of the particular Securities to be
redeemed;
(6) that, unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment pursuant
to the terms of this Indenture, interest on Securities (or portion thereof)
called for redemption ceases to accrue on and after the redemption date;
(7) the CUSIP numbers, if any, printed on the Securities being
redeemed; and
(8) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such
event, the Company shall provide the Trustee with the information required by
this Section.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION. Once notice of
redemption is mailed, Securities called for redemption become due and payable
on the redemption date and at the redemption price stated in the notice.
Upon surrender to the Paying Agent, such Securities shall be paid at the
redemption price stated in the notice, plus accrued interest to the
redemption date. Failure to give notice or
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48
any defect in the notice to any Holder shall not affect the validity of the
notice to any other Holder.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE. Prior to the redemption
date, the Company shall deposit with the Paying Agent (or, if the Company or
a Subsidiary is the Paying Agent, shall segregate and hold in trust) money
sufficient to pay the redemption price of and accrued interest on all
Securities to be redeemed on that date other than Securities or portions of
Securities called for redemption which have been delivered by the Company to
the Trustee for cancelation.
SECTION 3.06. SECURITIES REDEEMED IN PART. Upon surrender of a
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
equal in principal amount to the unredeemed portion of the Security
surrendered.
SECTION 3.07. OPTIONAL REDEMPTION. (a) Except as set forth in the
next two paragraphs, the Securities may not be redeemed prior to August 15,
2000. On and after that date, the Company may redeem the Securities in whole
or in part, at any time at the following redemption prices (expressed in
percentages of principal amount), plus accrued and unpaid interest, if any,
to the redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date that is on or prior to the date of redemption), if redeemed during the
12-month period beginning on or after August 15 of the years set forth below:
Redemption
Period Price
- ------ ----------
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.875%
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.917%
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.958%
2003 and thereafter . . . . . . . . . . . . . . . . . . . . 100.000%
(b) Notwithstanding the foregoing, at any time and from time to time
on or prior to August 15, 1998, the Company may redeem in the aggregate up to
33-1/3% of the original aggregate principal amount of Securities with the
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49
proceeds of one or more Public Equity Offerings following which there is a
Public Market, at a redemption price (expressed as a percentage of principal
amount thereof) of 111.75% plus accrued and unpaid interest, if any, to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date
that is on or prior to the date of redemption); PROVIDED, HOWEVER, that at
least 66-2/3% of the original aggregate principal amount of the Securities
must remain outstanding after each such redemption.
(c) Notwithstanding paragraphs (a) and (b) above, the Company shall
not redeem the Original Securities unless, substantially concurrently with
such redemption, the Company redeems an aggregate principal amount of
Securities (rounded to the nearest integral multiple of $1,000) equal to the
product of: (1) a fraction, the numerator of which is the aggregate principal
amount of Original Securities to be so redeemed and the denominator of which
is the aggregate principal amount of Original Securities outstanding
immediately prior to such proposed redemption, and (2) the aggregate
principal amount of Securities outstanding immediately prior to such proposed
redemption. The Company shall not redeem the Securities unless,
substantially concurrently with such redemption, the Company redeems an
aggregate principal amount of Original Securities (rounded to the nearest
integral multiple of $1,000) equal to the product of: (1) a fraction, the
numerator of which is the aggregate principal amount of Securities to be so
redeemed and the denominator of which is the aggregate principal amount of
Securities outstanding immediately prior to such proposed redemption, and (2)
the aggregate principal amount of Original Securities outstanding immediately
prior to such proposed redemption.
ARTICLE IV
COVENANTS
SECTION 4.01. PAYMENT OF SECURITIES. The Company shall promptly
pay the principal of and interest on the Securities on the dates and in the
manner provided in the Securities and in this Indenture. Principal and
interest shall be considered paid on the date due if on such date the Trustee
or the Paying Agent holds in accordance with this
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50
Indenture money sufficient to pay all principal and interest then due and the
Trustee or the Paying Agent, as the case may be, is not prohibited from
paying such money to the Securityholders on that date pursuant to the terms
of this Indenture.
The Company shall pay interest on overdue principal at the rate
specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.02. SEC REPORTS. The Company shall file with the Trustee
and provide Securityholders, within 15 days after it files them with the SEC,
copies of its annual report and the information, documents and other reports
which the Company is required to file with the SEC pursuant to Section 13 or
15(d) of the Exchange Act. Notwithstanding that the Company may not be
required to remain subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act, the Company shall, to the extent permitted by
applicable law, continue to file with the SEC and shall provide the Trustee
and Securityholders with the annual reports and the information, documents
and other reports which are specified in Sections 13 and 15(d) of the
Exchange Act. The Company also shall comply with the other provisions of TIA
Section 314(a).
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.
SECTION 4.03. LIMITATION ON INDEBTEDNESS. (a) The Company shall
not, and shall not permit any Restricted Subsidiary to, Incur, directly or
indirectly, any Indebtedness; PROVIDED, HOWEVER, that the Company may Incur
indebtedness if on the date of the Incurrence of such Indebtedness the
Consolidated Coverage Ratio exceeds 2.25:1.00.
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51
(b) Notwithstanding Section 4.03(a), the Company and its Restricted
Subsidiaries may incur the following Indebtedness:
(i) Indebtedness of the Company Incurred pursuant to the Term Loan
Facility (as the same may be amended from time to time, without increasing
the committed amount outstanding, except as otherwise permitted by this
Section 4.03) less the amount of any repayments of principal made since the
Original Issue Date, including any repayments made with the proceeds from
the offering of the Securities;
(ii) Indebtedness of the Company Incurred pursuant to the Revolving
Facility (as the same may be amended from time to time, without increasing
the committed amount outstanding, except as otherwise permitted by this
Section 4.03) or under other agreements in an amount not to exceed the
greater of (A) amounts available under the Revolving Facility and
(B) amounts available under any other senior secured facility providing for
revolving loans to the Company, PROVIDED that the maximum aggregate
principal amount available under such other revolving facility shall not
exceed the Borrowing Base at the time such Indebtedness is Incurred;
(iii) Indebtedness (A) of the Company owing to and held by any Wholly
Owned Subsidiary or (B) of any Restricted Subsidiary owing to and held by
the Company or any other Wholly Owned Subsidiary; PROVIDED, HOWEVER, that
any subsequent issuance or transfer of any Capital Stock or any other event
which results in any such Wholly Owned Subsidiary ceasing to be a Wholly
Owned Subsidiary or any subsequent transfer of any such Indebtedness (other
than to the Company or another Wholly Owned Subsidiary) shall be deemed, in
each case, to constitute the Incurrence of such Indebtedness by the issuer
thereof;
(iv) Indebtedness represented by the Original Securities and the
Securities;
(v) any Indebtedness outstanding on the date of the Original Indenture
(other than Indebtedness described in clauses (i), (ii)(A), (iv) or (xi) of
this Section 4.03(b)) and Indebtedness Incurred under
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52
Section 4.03(a) of the Original Indenture prior to the Issue Date;
(vi) any Refinancing Indebtedness Incurred in respect of any
Indebtedness Incurred pursuant to clause (i), (ii), (iii), (iv) or (v)
above, this clause (vi) or Section 4.03(a);
(vii) (A) Indebtedness in respect of performance bonds, bankers'
acceptances, letters of credit and surety or appeal bonds provided by the
Company and the Restricted Subsidiaries to their customers in the ordinary
course of their business, and (B) Hedging Obligations consisting of
Interest Rate Agreements with respect to Indebtedness permitted to be
Incurred pursuant to this Indenture; PROVIDED, HOWEVER, that such Interest
Rate Agreements do not increase the Indebtedness of the Company outstanding
at any time other than as a result of fluctuations in interest rates or by
reason of fees, indemnities and compensation payable thereunder;
(viii) Purchase Money Indebtedness and Capital Lease Obligations which
do not exceed $10 million at any time outstanding;
(ix) Indebtedness represented by the Subsidiary Guarantees and
Guarantees of Indebtedness Incurred pursuant to clause (i), (ii) or (iv)
above;
(x) Indebtedness (other than Indebtedness permitted to be Incurred
pursuant to Section 4.03(a) or any other clause of this Section 4.03(b)) in
an aggregate principal amount which, when added to (A) all other
Indebtedness Incurred pursuant to this clause (x) and then outstanding and
(B) all other Indebtedness Incurred pursuant to Section 4.03(b)(x) of the
Original Indenture and then outstanding, shall not exceed $10 million at
any time outstanding; and
(xi) Indebtedness pursuant to the Leasing Support Agreement.
(c) Notwithstanding the foregoing, the Company shall not Incur any
Indebtedness pursuant to Section 4.03(b) if the proceeds thereof are used,
directly or indirectly, to Refinance any Subordinated Obligations unless such
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53
Indebtedness shall be subordinated to the Securities to at least the same
extent as such Subordinated Obligations. The Company shall not Incur any
Indebtedness pursuant to Section 4.03(a) or 4.03(b) if such Indebtedness is
subordinate or junior in ranking in any respect to any Senior Indebtedness
unless such Indebtedness is Senior Subordinated Indebtedness or is expressly
subordinated in right of payment to Senior Subordinated Indebtedness. In
addition, the Company shall not Incur any Secured Indebtedness which is not
Senior Indebtedness unless contemporaneously therewith effective provision is
made to secure the Securities equally and ratably with (or on a senior basis
to, in the case of Indebtedness subordinated in right of payment to the
Securities) such Secured Indebtedness for so long as such Secured
Indebtedness is secured by a Lien.
(d) For purposes of determining the outstanding principal amount of
any particular Indebtedness Incurred pursuant to this Section 4.03, (1)
Indebtedness Incurred pursuant to the Term Loan Facility prior to or on the
date of this Indenture shall be treated as Incurred pursuant to Section
4.03(b)(i), (2) Indebtedness Incurred pursuant to the Revolving Facility
shall be treated as Incurred pursuant to Section 4.03(b)(ii), (3)
Indebtedness permitted by this Section 4.03 need not be permitted solely by
reference to one provision permitting such Indebtedness but may be permitted
in part by one such provision and in part by one or more other provisions of
this Section permitting such Indebtedness and (4) in the event that
Indebtedness or any portion thereof meets the criteria of more than one of
the types of Indebtedness described in this Section, the Company, in its sole
discretion, shall classify such Indebtedness and only be required to include
the amount of such Indebtedness in one of such clauses.
SECTION 4.04. LIMITATION ON RESTRICTED PAYMENTS. (a) The Company
shall not, and shall not permit any Restricted Subsidiary, directly or
indirectly, to make a Restricted Payment, if at the time the Company or such
Restricted Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or would result
therefrom);
(2) the Company could not Incur at least $1.00 of additional
Indebtedness under Section 4.03(a); or
<PAGE>
54
(3) the aggregate amount of such Restricted Payment and all
other Restricted Payments (the amount so expended, if other than in cash, to
be determined in good faith by the Board of Directors, whose determination
shall be conclusive and evidenced by a resolution of the Board of Directors)
declared or made subsequent to the Original Issue Date would exceed the sum
of:
(A) 50% of the Consolidated Net Income accrued during the
period (treated as one accounting period) from July 1, 1995 to the end
of the most recent fiscal quarter ending at least 45 days prior to the
date of such Restricted Payment (or, in case such Consolidated Net
Income shall be a deficit, minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds received by the Company
from the issuance or sale of its Capital Stock (other than
Disqualified Stock) subsequent to the Original Issue Date (other than
an issuance or sale to a Subsidiary of the Company and other than an
issuance or sale to an employee stock ownership plan or other trust
established by the Company or any of its Subsidiaries for the benefit
of their employees to the extent the purchase by such plan or trust
is financed by Indebtedness of such plan or trust and for which the
Company is liable as Guarantor or otherwise);
(C) the amount by which Indebtedness of the Company is
reduced on the Company's balance sheet upon the conversion or exchange
(other than by a Subsidiary of the Company) subsequent to the Original
Issue Date of any Indebtedness of the Company convertible or
exchangeable for Capital Stock (other than Disqualified Stock) of the
Company (less the amount of any cash or other property distributed by
the Company upon such conversion or exchange); and
(D) an amount equal to the sum of (i) the net reduction in
Investments in Unrestricted Subsidiaries resulting from dividends,
repayments of loans or advances, or other transfers of assets, in
each case to the Company or any Restricted Subsidiary from
Unrestricted
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55
Subsidiaries, and (ii) the portion (proportionate to the Company's
equity interest in such Subsidiary) of the fair market value of the
net assets of an Unrestricted Subsidiary at the time such Unrestricted
Subsidiary is designated a Restricted Subsidiary; PROVIDED, HOWEVER,
that the foregoing sum shall not exceed, in the case of any
Unrestricted Subsidiary, the amount of Investments previously made by
the Company or any Restricted Subsidiary in such Unrestricted
Subsidiary, which amount was treated as a Restricted Payment.
(b) The provisions of Section 4.04(a) shall not prohibit:
(i) any purchase or redemption of Capital Stock of the Company or
Subordinated Obligations of the Company made by exchange for, or out of the
proceeds of the substantially concurrent sale of, Capital Stock of the
Company (other than Disqualified Stock and other than Capital Stock issued
or sold to a Subsidiary of the Company or an employee stock ownership plan
or similar trust established by the Company or any of the Subsidiaries);
PROVIDED, HOWEVER, that (A) such purchase or redemption shall be excluded
in the calculation of the amount of Restricted Payments and (B) both (x)
the Net Cash Proceeds from such sale and (y) any Net Cash Proceeds (as
defined in the Original Indenture) excluded from the calculation of amounts
under Section 4.04(a)(3)(B) of the Original Indenture pursuant to clause
(B) of the proviso to Section 4.04(b)(i) of the Original Indenture prior to
the Issue Date shall be excluded from the calculation of amounts under
Section 4.04(a)(3)(B);
(ii) any purchase or redemption of Subordinated Obligations made
by exchange for, or out of the proceeds of the substantially concurrent
sale of, Indebtedness of the Company which is permitted to be Incurred
pursuant to Section 4.03; PROVIDED, HOWEVER, that such purchase or
redemption shall be excluded in the calculation of the amount of
Restricted Payments;
(iii) any purchase or redemption of Subordinated Obligations from
Net Available Cash to the extent permitted by Section 4.06; PROVIDED,
HOWEVER, that such
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56
purchase or redemption shall be excluded in the calculation of
the amount of Restricted Payments;
(iv) the repurchase of shares of, or options to purchase shares
of, common stock of the Company or any of its Subsidiaries from employees,
former employees, directors or former directors of the Company or any of
its Subsidiaries (or permitted transferees of such employees, former
employees, directors or former directors), pursuant to the terms of the
agreements (including employment agreements) or plans (or amendments
thereto) approved by the Board of Directors under which such persons
purchase or sell or are granted the option to purchase or sell, shares of
such common stock; PROVIDED, HOWEVER, that the aggregate amount of such
repurchases shall not exceed $1 million; PROVIDED FURTHER, HOWEVER, that
such repurchases shall be included in the calculation of the amount of
Restricted Payments; or
(v) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with Section 4.04(a); PROVIDED, HOWEVER, that at the time of payment of
such dividend, no other Default shall have occurred and be continuing (or
result therefrom); PROVIDED FURTHER, HOWEVER, that such dividend shall be
included in the calculation of the amount of Restricted Payments.
SECTION 4.05. LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM
SUBSIDIARIES. The Company shall not, and shall not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to (i) pay dividends or make any other distributions on
its Capital Stock or pay any Indebtedness owed to the Company, (ii) make any
loans or advances to the Company or (iii) transfer any of its property or
assets to the Company, except:
(1) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the Original Issue Date;
(2) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred
by such
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57
Restricted Subsidiary on or prior to the date on which such Restricted
Subsidiary was acquired by the Company (other than Indebtedness Incurred as
consideration in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a
Restricted Subsidiary or was acquired by the Company) and outstanding on
such date;
(3) any encumbrance or restriction pursuant to an agreement
effecting the Incurrence of Refinancing Indebtedness pursuant to an
agreement referred to in clause (1) or (2) of this Section or this clause
(3) or contained in any amendment to an agreement referred to in clause (1)
or (2) of this Section or this clause (3); PROVIDED, HOWEVER, that the
encumbrances and restrictions with respect to such Restricted Subsidiary
contained in any such Refinancing Indebtedness agreement or amendment are
no less favorable to the Securityholders than encumbrances and restrictions
with respect to such Restricted Subsidiary contained in such agreements;
(4) in the case of clause (iii), any encumbrance or restriction
(A) that restricts in a customary manner the subletting, assignment, or
transfer of any property or asset that is subject to a lease, license or
similar contract, (B) by virtue of any transfer of, agreement to transfer,
option or right with respect to, or Lien on, any property or assets of the
Company or any Restricted Subsidiary not otherwise prohibited by this
Indenture or (C) contained in security agreements or mortgages not
otherwise prohibited by this Indenture securing Indebtedness of a
Restricted Subsidiary to the extent such encumbrance or restrictions
restrict the transfer of the property subject to such security agreements
or mortgages; and
(5) any restriction with respect to a Restricted Subsidiary
imposed pursuant to an agreement entered into for the sale or disposition
of all or substantially all the Capital Stock or assets of such Restricted
Subsidiary pending the closing of such sale or disposition.
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58
SECTION 4.06. LIMITATION ON SALES OF ASSETS AND SUBSIDIARY
STOCK. (a) The Company shall not, and shall not permit any Restricted
Subsidiary to, make any Asset Disposition unless (i) the Company or such
Restricted Subsidiary receives consideration (including by way of relief
from, or by any other Person assuming sole responsibility for, any
liabilities, contingent or otherwise) at the time of such Asset Disposition
at least equal to the fair market value, as determined in good faith by the
Board of Directors (including as to the value of all non-cash consideration),
of the shares and assets subject to such Asset Disposition, (ii) at least 80%
of the consideration thereof received by the Company or such Restricted
Subsidiary is in the form of cash and (iii) an amount equal to 100% of the
Net Available Cash from such Asset Disposition is applied by the Company (or
such Restricted Subsidiary, as the case may be) (A) FIRST, to the extent the
Company elects (or is required by the terms of any Senior Indebtedness or
Indebtedness (other than Preferred Stock) of a Wholly Owned Subsidiary), to
prepay, repay or purchase Senior Indebtedness or such Indebtedness (in each
case other than Indebtedness owed to the Company or an Affiliate of the
Company) within 180 days after the later of the date of such Asset
Disposition or the receipt of such Net Available Cash; (B) SECOND, to the
extent of the balance of Net Available Cash after application in accordance
with clause (A), to the extent the Company or such Restricted Subsidiary
elects, to reinvest in Additional Assets (including by means of an Investment
in Additional Assets by a Restricted Subsidiary with Net Available Cash
received by the Company or another Restricted Subsidiary) within one year
from the later of such Asset Disposition or the receipt of such Net Available
Cash; (C) THIRD, to offer to purchase the Original Notes to the extent
required by the Original Indenture, (D) FOURTH, to the extent of the balance
of such Net Available Cash after application in accordance with clauses (A),
(B) and (C) exceeds $5 million, to make an Offer to purchase Securities
pursuant to and subject to the conditions of Section 4.06(b), and (E) FIFTH
to the extent of the balance of such Net Available Cash after application in
accordance with clauses (A), (B), (C) and (D), to (x) acquire Additional
Assets (other than Indebtedness and Capital Stock) or (y) prepay, repay or
purchase Indebtedness of the Company (other than Indebtedness owed to an
Affiliate of the Company and other than Disqualified Stock of the Company) or
Indebtedness of any Restricted Subsidiary (other than Indebtedness owed to
the Company or an Affiliate of the
<PAGE>
59
Company), in each case described in this clause (E) within one year from the
receipt of such Net Available Cash or, if the Company has made an Offer
pursuant to clause (C) or (D), six months from the date such Offer is
consummated; PROVIDED, HOWEVER, that in connection with any prepayment,
repayment or purchase of Indebtedness pursuant to clause (A), (C), (D) or (E)
above, the Company or such Restricted Subsidiary shall retire such
Indebtedness and shall cause the related loan commitment (if any) to be
permanently reduced in an amount equal to the principal amount so prepaid,
repaid or purchased. The Company and the Restricted Subsidiaries shall not
be required to apply any Net Available Cash in accordance with this Section
except to the extent that the aggregate Net Available Cash from all Asset
Dispositions which are not applied in accordance with this Section exceed $5
million. Notwithstanding the foregoing, the Company may make up to $1
million of Asset Dispositions each year which are not subject to the
provisions of this Section.
For the purposes of this Section, the following are deemed to be
cash: (x) the assumption of Indebtedness of the Company (other than
Disqualified Stock of the Company) or any Restricted Subsidiary and the
release of the Company or such Restricted Subsidiary from all liability on
such Indebtedness in connection with such Asset Disposition and (y)
securities received by the Company or any Restricted Subsidiary from the
transferee that are promptly converted by the Company or such Restricted
Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the purchase
of Securities pursuant to Section 4.06(a)(iii)(D), the Company shall be
required to purchase Securities tendered pursuant to an offer, commenced
prior to the expiration of the one year period referred to in Section
4.06(a)(iii)(B), by the Company for the Securities (the "Offer") at a
purchase price of 100% of their principal amount plus accrued interest to the
Purchase Date in accordance with the procedures (including prorationing in
the event of oversubscription) set forth in Section 4.06(c). If the
aggregate purchase price of Securities tendered pursuant to the Offer is less
than the Net Available Cash allotted to the purchase of the Securities, the
Company shall apply the remaining Net Available Cash in accordance with
Section 4.06(a)(iii)(E). The Company shall not be required to make an Offer
for Securities pursuant to this Section if the Net Available
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60
Cash available therefor (after application of the proceeds as provided in
clauses (A), (B) and (C) of Section 4.06(a)(iii)) is less than $5 million for
any particular Asset Disposition (which lesser amount shall be carried
forward for purposes of determining whether an Offer is required with respect
to the Net Available Cash from any subsequent Asset Disposition).
(c) (1) Promptly, and in any event within 10 days after the Company
becomes obligated to make an Offer, the Company shall be obligated to deliver
to the Trustee and send, by first-class mail to each Holder, a written notice
stating that the Holder may elect to have his Securities purchased by the
Company either in whole or in part (subject to prorationing as hereinafter
described in the event the Offer is oversubscribed) in integral multiples of
$1,000 of principal amount, at the applicable purchase price. The notice
shall specify a purchase date not less than 30 days nor more than 60 days
after the date of such notice (the "Purchase Date") and shall contain such
information concerning the business of the Company which the Company in good
faith believes shall enable such Holders to make an informed decision (which
at a minimum shall include (i) the most recently filed Annual Report on Form
10-K (including audited consolidated financial statements) of the Company,
the most recent subsequently filed Quarterly Report on Form 10-Q and any
Current Report on Form 8-K of the Company filed subsequent to such Quarterly
Report, other than Current Reports describing Asset Dispositions otherwise
described in the offering materials (or corresponding successor reports),
(ii) a description of material developments in the Company's business
subsequent to the date of the latest of such Reports, and (iii) if material,
appropriate pro forma financial information) and all instructions and
materials necessary to tender Securities pursuant to the Offer, together with
the information contained in clause (3).
(2) Not later than the date upon which written notice of an Offer
is delivered to the Trustee as provided below, the Company shall deliver to
the Trustee an Officers' Certificate as to (i) the amount of the Offer (the
"Offer Amount"), (ii) the allocation of the Net Available Cash from the Asset
Dispositions pursuant to which such Offer is being made and (iii) the
compliance of such allocation with the provisions of Section 4.06(a). On
such date, the Company shall also irrevocably deposit with the Trustee or
with a
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paying agent (or, if the Company is acting as its own paying agent, segregate
and hold in trust) in Temporary Cash Investments an amount equal to the Offer
Amount to be held for payment in accordance with the provisions of this
Section. Upon the expiration of the period for which the Offer remains open
(the "Offer Period"), the Company shall deliver to the Trustee for
cancelation the Securities or portions thereof which have been properly
tendered to and are to be accepted by the Company. The Trustee shall, on the
Purchase Date, mail or deliver payment to each tendering Holder in the amount
of the purchase price. In the event that the aggregate purchase price of the
Securities delivered by the Company to the Trustee is less than the Offer
Amount, the Trustee shall deliver the excess to the Company immediately after
the expiration of the Offer Period for application in accordance with this
Section.
(3) Holders electing to have a Security purchased pursuant to this
Section 4.06 shall be required to surrender the Security, with an appropriate
form duly completed, to the Company at the address specified in the notice at
least three Business Days prior to the Purchase Date. Holders shall be
entitled to withdraw their election if the Trustee or the Company receives
not later than one Business Day prior to the Purchase Date, a facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Security which was delivered for purchase by the Holder and a
statement that such Holder is withdrawing his election to have such Security
purchased. If at the expiration of the Offer Period the aggregate principal
amount of Securities surrendered by Holders exceeds the Offer Amount, the
Company shall select the Securities to be purchased on a pro rata basis (with
such adjustments as may be deemed appropriate by the Company so that only
Securities in denominations of $1,000, or integral multiples thereof, shall
be purchased). Holders whose Securities are purchased only in part shall be
issued new Securities equal in principal amount to the unpurchased portion of
the Securities surrendered.
(4) At the time the Company delivers Securities to the Trustee
which are to be accepted for purchase, the Company shall also deliver an
Officers' Certificate stating that such Securities are to be accepted by the
Company pursuant to and in accordance with the terms of this Section. A
Security shall be deemed to have been accepted for purchase at the time the
Trustee, directly or through an
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agent, mails or delivers payment therefor to the surrendering Holder.
(d) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities pursuant
to this Section. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section by virtue thereof.
SECTION 4.07. LIMITATION ON TRANSACTIONS WITH AFFILIATES. (a) The
Company shall not, and shall not permit any Restricted Subsidiary to, enter
into, conduct or permit to exist any transaction (including the purchase,
sale, lease or exchange of any property, employee compensation arrangements,
or the rendering of any service) with any Affiliate of the Company (an
"Affiliate Transaction") unless the terms thereof (1) are no less favorable
to the Company or such Restricted Subsidiary, as the case may be, than those
which could be obtained at the time of such transaction in arm's-length
dealings with a Person who is not such an Affiliate and (2) if such Affiliate
Transaction involves an aggregate amount in excess of $1,000,000, (i) are set
forth in writing and (ii) have been approved by a majority of the members of
the Board of Directors having no personal stake in such Affiliate
Transaction. In addition, if such Affiliate Transaction involves an amount
in excess of $5 million, a fairness opinion must be provided by a nationally
recognized investment banking firm.
(b) The provisions of Section 4.07(a) shall not prohibit (i) any
Restricted Payment permitted to be paid pursuant to Section 4.04; (ii) any
issuance of securities, or other payments, awards or grants in cash,
securities or otherwise pursuant to, or the funding of, employment
arrangements or bonuses (whether or not pursuant to an employment contract),
stock options and stock ownership plans approved by the Board of Directors;
(iii) the grant of stock options or similar rights to employees and directors
of the Company pursuant to plans approved by the Board of Directors; (iv)
loans or advances to employees in the ordinary course of business in
accordance with the past
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practices of the Company or its Restricted Subsidiaries, but in any event not
to exceed $1 million in the aggregate outstanding at any one time; (v) the
payment of reasonable fees to directors of the Company and its Restricted
Subsidiaries who are not employees of the Company or its Restricted
Subsidiaries; (vi) any Affiliate Transaction between the Company and a Wholly
Owned Subsidiary or between Wholly Owned Subsidiaries; and (vii) any payment
pursuant to the Tax Sharing Agreement.
SECTION 4.08. CHANGE OF CONTROL. (a) Upon a Change of Control,
each Holder shall have the right to require the Company to repurchase all or
any part of such Holder's Securities at a purchase price in cash equal to
101% of the principal amount thereof plus accrued and unpaid interest, if
any, to the date of purchase (subject to the right of Holders of record on
the relevant record date to receive interest on the relevant interest payment
date), in accordance with the terms contemplated in Section 4.08(b). In the
event that at the time of such Change of Control the terms of the Bank
Indebtedness restrict or prohibit the repurchase of Securities pursuant to
this Section, then prior to the mailing of the notice to Holders provided for
in Section 4.08(b) below but in any event within 30 days following any Change
of Control, the Company shall: (i) repay in full all Bank Indebtedness or
offer to repay in full all Bank Indebtedness and repay the Bank Indebtedness
due to each lender who has accepted such offer; or (ii) obtain the requisite
consent under the agreements governing the Bank Indebtedness to permit the
repurchase of the Securities as provided for in Section 4.08(b).
(b) Within 30 days following any Change of Control, the Company
shall mail a notice to each Holder with a copy to the Trustee stating:
(1) that a Change of Control has occurred and that such Holder
has the right to require the Company to purchase such Holder's Securities
at a purchase price in cash equal to 101% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date of purchase (subject
to the right of Holders of record on a record date to receive interest on
the relevant interest payment date);
(2) the circumstances and relevant facts and financial
information regarding such Change of Control,
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including information with respect to pro forma historical income, cash
flow and capitalization after giving effect to such Change of Control;
(3) the repurchase date (which shall be no earlier than 30 days
nor later than 60 days from the date such notice is mailed); and
(4) the instructions determined by the Company, consistent with
this Section, that a Holder must follow in order to have its Securities
purchased.
(c) Holders electing to have a Security purchased will be required
to surrender the Security, with an appropriate form duly completed, to the
Company at the address specified in the notice at least three Business Days
prior to the purchase date. Holders will be entitled to withdraw their
election if the Trustee or the Company receives, not later than one Business
Day prior to the purchase date, a facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Security which was
delivered for purchase by the Holder and a statement that such Holder is
withdrawing his election to have such Security purchased.
(d) On the purchase date, all Securities purchased by the Company
under this Section shall be delivered by the Trustee for cancelation, and the
Company shall pay the purchase price plus accrued and unpaid interest, if
any, to the Holders entitled thereto.
(e) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities pursuant
to this Section. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section by virtue thereof.
SECTION 4.09. COMPLIANCE CERTIFICATE. The Company shall deliver to
the Trustee, within 120 days after the end of each fiscal year of the
Company, beginning with the fiscal year ending December 31, 1997, an
Officers' Certificate one of the signers of which shall be the
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principal executing officer, principal financial officer or principal
accounting officer of the Company, 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 and whether or not the signers
know of any Default that occurred during such period. If they do, the
certificate shall describe the Default, its status and what action the
Company is taking or proposes to take with respect thereto. The Company also
shall comply with TIA Section 314(a)(4).
SECTION 4.10. FURTHER INSTRUMENTS AND ACTS. Upon request of the
Trustee, the Company shall execute and deliver such further instruments and
do such further acts as may be reasonably necessary or proper to carry out
more effectively the purpose of this Indenture.
SECTION 4.11. LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK
OF RESTRICTED SUBSIDIARIES. The Company shall not sell any shares of Capital
Stock of a Restricted Subsidiary, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell any shares of its
Capital Stock except: (i) to the Company or a Wholly Owned Subsidiary; (ii)
if, immediately after giving effect to such issuance or sale, such Restricted
Subsidiary would no longer constitute a Restricted Subsidiary; or (iii) in
connection with labor agreements applicable to employees of the issuing
Restricted Subsidiary. Notwithstanding the foregoing, the Company is
permitted to sell all the Capital Stock of a Subsidiary as long as the
Company is in compliance with Section 4.06.
SECTION 4.12. LIMITATION ON LIENS. The Company shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly, create
or permit to exist any Lien on any of its property or assets (including
Capital Stock), whether owned on the Original Issue Date or thereafter
acquired, securing any obligation other than Permitted Liens unless
contemporaneously therewith effective provision is made to secure the
Securities equally and ratably with (or on a senior basis to, in the case of
Indebtedness subordinated in right of payment to the Securities) such
obligation for so long as such obligation is so secured.
SECTION 4.13. LIMITATION ON SALE/LEASEBACK TRANSACTIONS. The
Company shall not, and shall not permit
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any Restricted Subsidiary to, enter into any Sale/Leaseback Transaction with
respect to any property unless (i) the Company or such Subsidiary would be
entitled to (A) Incur Indebtedness in an amount equal to the Attributable
Debt with respect to such Sale/leaseback Transaction pursuant to Section 4.03
and (B) create a Lien on such property securing such Attributable Debt
without securing the Securities equally and ratably or on a senior basis, as
applicable, pursuant to Section 4.12, (ii) the net proceeds received by the
Company or any Restricted Subsidiary in connection with such Sale/Leaseback
Transaction are at least equal to the fair value (as determined by the Board
of Directors) of such property and (iii) the transfer of such property is
permitted by, and the Company applies the proceeds of such transaction in
compliance with, Section 4.06.
SECTION 4.14. LIMITATION ON LINES OF BUSINESS. The Company and its
Restricted Subsidiaries shall not engage in any material respect in any
business, other than those businesses in which the Company is engaged on the
date of the Original Indenture or any Related Business. Notwithstanding the
foregoing, the Company may acquire and operate any business which is
primarily engaged in a Related Business at the time of acquisition.
SECTION 4.15. FUTURE GUARANTOR SUBSIDIARIES. After the date of
this Indenture, the Company shall cause each Restricted Subsidiary which
Incurs Indebtedness, including each Restricted Subsidiary which is a
guarantor of Indebtedness Incurred pursuant to Section 4.03(b)(i) or
4.03(b)(ii), to execute and deliver to the Trustee a supplemental indenture
in the form of Exhibit B hereto, pursuant to which such Restricted Subsidiary
shall Guarantee payment of the Securities, as provided in Section 11.06.
ARTICLE V
SUCCESSOR COMPANY
SECTION 5.01. WHEN COMPANY MAY MERGE OR TRANSFER ASSETS. The
Company shall not consolidate with or merge with or into, or convey, transfer
or lease all or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor
Company") shall be a Person organized
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and existing under the laws of the United States of America, any
State thereof or the District of Columbia and the Successor Company
(if not the Company) 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 Securities and this Indenture;
(ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Company or any Restricted Subsidiary as a result of such transaction
as having been Incurred by the Successor Company or such Restricted
Subsidiary at the time of such transaction), no Default shall have
occurred and be continuing;
(iii) immediately after giving effect to such transaction, the
Successor Company would be able to incur an additional $1.00 of
Indebtedness pursuant to Section 4.03(a);
(iv) immediately after giving effect to such transaction, the
Successor Company shall have Consolidated Net Worth in an amount which
is not less than the Consolidated Net Worth of the Company immediately
prior to such transaction; and
(v) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if
any) comply with this Indenture.
The Successor Company shall be the successor to the Company and
shall succeed to, and be substituted for and may exercise every right and
power of, the Company under this Indenture, but the predecessor Company in
the case of a conveyance, transfer or lease of all or substantially all its
assets shall not be released from the obligation to pay the principal of and
interest on the Securities.
Notwithstanding the foregoing clauses (ii), (iii) and (iv), any
Restricted Subsidiary may consolidate with, merge into or transfer all or
part of its properties and assets to the Company or a Wholly Owned Subsidiary.
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ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT. An "Event of Default"
occurs if:
(1) the Company defaults in any payment of interest on any
Security when the same becomes due and payable, whether or not such payment
shall be prohibited by Article X and such default continues for a period
of 30 days;
(2) the Company (i) defaults in the payment of the principal of
any Security when the same becomes due and payable at its Stated Maturity,
upon optional redemption, upon declaration or otherwise, whether or not
such payment shall be prohibited by Article X, or (ii) fails to redeem or
purchase Securities when required pursuant to this Indenture or the
Securities, whether or not such redemption or purchase shall be prohibited
by Article X;
(3) the Company fails to comply with Section 5.01;
(4) the Company fails to comply with Section 4.02,
4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.11, 4.12, 4.13, 4.14 or 4.15 (other
than a failure to purchase Securities when required under Section 4.06 or
4.08) and such failure continues for 30 days after the notice specified
below;
(5) the Company or any Guarantor Subsidiary fails to comply with
any of its agreements in the Securities or this Indenture (other than those
referred to in (1), (2), (3) or (4) above) and such failure continues for
60 days after the notice specified below;
(6) Indebtedness of the Company or any Significant Subsidiary is
not paid within any applicable grace period after final maturity or is
accelerated by the holders thereof because of a default and the total
amount of such Indebtedness unpaid or accelerated exceeds $10 million or
its foreign currency equivalent at the time and such failure continues for
10 days after the notice specified below;
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(7) the Company or any Significant Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it
in an involuntary case;
(C) consents to the appointment of a Custodian of it or for
any substantial part of its property; or
(D) makes a general assignment for the benefit of its
creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(8) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company or any Significant
Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any Significant
Subsidiary or for any substantial part of its property; or
(C) orders the winding up or liquidation of the Company or
any Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order
or decree remains unstayed and in effect for 60 days;
(9) any judgment or decree for the payment of money in excess of
$10 million or its foreign currency equivalent at the time is entered
against the Company or any Significant Subsidiary and there is a period of
60 days following the entry of such judgment or decree during which such
judgment or decree is not discharged, waived or stayed within 10 days after
the notice specified below; or
(10) any Subsidiary Guaranty shall cease to be in full force and
effect (except as contemplated by the
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terms thereof) or any Guarantor Subsidiary shall deny or disaffirm its
obligations under this Indenture or any Subsidiary Guaranty and such
Default continues for 10 days.
The foregoing shall constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or
is 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.
The term "Bankruptcy Law" means Title 11, UNITED STATES CODE, or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar
official under any Bankruptcy Law.
A Default under clause (4), (5), (6) or (9) is not an Event of
Default until the Trustee or the Holders of at least 25% in principal amount
of the outstanding Securities notify the Company of the Default and the
Company does not cure such Default within the time specified after receipt of
such notice. Such notice must specify the Default, demand that it be remedied
and state that such notice is a "Notice of Default".
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default under clause (3), (6) or (7), and any event which with
the giving of notice or the lapse of time would become an Event of Default
under clause (4), (5), (8), (9) or (10), its status and what action the
Company is taking or proposes to take with respect thereto.
SECTION 6.02. ACCELERATION. If an Event of Default (other than an
Event of Default specified in Section 6.01(7) or 6.01(8) with respect to the
Company) occurs and is continuing, the Trustee by notice to the Company, or
the Holders of at least 25% in principal amount of the outstanding
Securities by notice to the Company and the Trustee, may declare the
principal of and accrued but unpaid interest on all the Securities to be due
and payable. Upon such a declaration, such principal and interest shall be
due and payable immediately. If an Event of Default specified in Section
6.01(7) or 6.01(8) with respect to the
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Company occurs and is continuing, the principal of and interest on all the
Securities shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any
Securityholders. The Holders of a majority in principal amount of the
outstanding Securities by notice to the Trustee may rescind an acceleration
and its consequences if the rescission would not conflict with any judgment
or decree and if all existing Events of Default have been cured or waived
except nonpayment of principal or interest that has become due solely because
of acceleration. No such rescission shall affect any subsequent Default or
impair any right consequent thereto.
SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Securityholder in exercising any
right or remedy accruing upon an Event of Default shall not impair the right
or remedy or constitute a waiver of or acquiescence in the Event of Default.
No remedy is exclusive of any other remedy. All available remedies are
cumulative.
SECTION 6.04. WAIVER OF PAST DEFAULTS. The Holders of a majority
in principal amount of the outstanding Securities by notice to the Trustee
may waive an existing Default and its consequences except (i) a Default, in
the payment of the principal of or interest on a Security or (ii) a Default
in respect of a provision that under Section 9.02 cannot be amended without
the consent of each Securityholder affected. When a Default is waived, it is
deemed cured, but no such waiver shall extend to any subsequent or other
Default or impair any consequent right.
SECTION 6.05. CONTROL BY MAJORITY. The Holders of a majority in
principal amount outstanding Securities may direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee
may refuse to follow any direction that conflicts with law or this Indenture
or, subject to
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Section 7.01, that the Trustee determines is unduly prejudicial to the rights
of other Securityholders or would involve the Trustee in personal liability;
PROVIDED, HOWEVER, that the Trustee may take any other action deemed proper
by the Trustee that is not inconsistent with such direction. Prior to taking
any action hereunder, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses
caused by taking or not taking such action.
SECTION 6.06. LIMITATION ON SUITS. Security-holder may not pursue
any remedy respect to this Indenture or the Securities unless:
(1) such Holder gives to the Trustee written notice stating that
an Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the
outstanding Securities make a written request to the Trustee to pursue
the remedy;
(3) such Holder or Holders offer to the Trustee reasonable
security or indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority in principal amount of the
outstanding Securities do not give the Trustee a direction inconsistent
with the request during such 60 day period.
A Securityholder may not use this Indenture to prejudice the rights
of another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder to receive payment of principal of and interest on the Securities held
by such Holder, on or after the respective due dates expressed in the
Securities, or to bring suit for the enforcement of any such payment on or
after such respective dates, shall not be impaired or affected without the
consent of such Holder.
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SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default
specified in Section 6.01(1) or 6.01(2) occurs and is continuing, the Trustee
may recover judgment in its own name and as trustee of an express trust
against the Company for the whole amount then due and owing (together with
interest on any unpaid interest to the extent lawful) and the amounts
provided for in Section 7.07.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee may
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 and the
Securityholders allowed in any judicial proceedings relative to the Company,
its creditors or its property and, unless prohibited by law or applicable
regulations, may vote on behalf of the Holders in any election of a trustee
in bankruptcy or other Person performing similar functions, and any custodian
in any such judicial proceeding is hereby authorized by each Holder to make
payments to the Trustee and, in the event that the Trustee shall consent to
the making of such payments directly to the Holders, to pay to the Trustee
any amount due it for the reasonable compensation, expenses, disbursements
and advances of the of the Trustee, its agents and its counsel, and any other
amounts due the Trustee under Section 7.07.
SECTION 6.10. PRIORITIES. If the Trustee collects any money or
property pursuant to this Article VI, it shall pay out the money or property
in the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to holders of Senior Indebtedness to the extent required
by Article X;
THIRD: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and
FOURTH: to the Company.
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The Trustee may fix a record date and payment date for any payment
to Securityholders pursuant to this Section. At least 15 days before such
record date, the Company shall mail to each Securityholder and the Trustee a
notice that states the record date, the payment date and amount to be paid.
SECTION 6.11. UNDERTAKING FOR COSTS. 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, a court
in its discretion may require the filing by any party litigant in the suit of
an undertaking to pay the costs of the suit, and the court in its discretion
may assess reasonable costs, including reasonable attorneys' fees, against
any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section
does not apply to a suit by the Trustee, a suit by a Holder pursuant to
Section 6.07 or a suit by Holders of more than 10% in principal amount of the
Securities.
SECTION 6.12. WAIVER OF STAY OR EXTENSION LAWS. The Company (to
the extent it may lawfully do so) shall not at any time insist upon, or
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, which may affect the covenants or the performance of this Indenture;
and the Company (to the extent that it may lawfully do so) hereby expressly
waives all benefit or advantage of any such law, and shall not hinder, delay
or impede the execution of every such power herein granted to the Trustee,
but shall suffer and permit the execution of every such power as though no
such law had been enacted.
ARTICLE VII
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE. (a) If an Event of Default has
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the
circumstances in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default:
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(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
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 (but need not
confirm or investigate the accuracy of mathematical calculations or other
facts stated therein).
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure, to act or its own wilful
misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (b) of
this Section;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money
received by it, except as the Trustee may agree in writing with the Company.
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(f) Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that
repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
SECTION 7.02. RIGHTS OF TRUSTEE. (a) The Trustee may rely on any
document believed by it to be genuine and to have been signed or presented by
the proper person. The Trustee need not investigate any fact or matter
stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
the Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; PROVIDED, HOWEVER, that the Trustee's conduct does not
constitute wilful misconduct or negligence.
(e) The Trustee may consult with counsel of its selection, and the
advice or opinion of counsel with respect to legal matters relating to this
Indenture and the Securities shall be full and complete authorization and
protection from liability in respect to any action taken, omitted or suffered
by it hereunder in good faith and in accordance with the advice or opinion of
such counsel.
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SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its
individual or any other capacity may become the owner or pledgee of
Securities and may otherwise deal with the Company or its Affiliates with the
same rights it would have if it were not Trustee. Any Paying Agent,
Registrar, co-registrar or co-paying agent may do the same with like rights.
However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the
Company's use of the proceeds from the Securities, and it shall not be
responsible for any statement of the Company in the Indenture or in any
document issued in connection with the sale of the Securities or in the
Securities other than the Trustee's certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS. If a Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall mail to each
Securityholder notice of the Default within 90 days after it occurs. Except
in the case of a Default in payment of principal of, premium (if any) or
interest on any Security, the Trustee may withhold the notice if and so long
as a committee of its Trust Officers in good faith determines that
withholding the notice is in the interests of Securityholders.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS. Within 60 days after
each May 15, beginning with the May 15 following the date of this Indenture,
the Trustee shall mail to each Securityholder a brief report dated as of such
date that complies with TIA Section 323(a). The Trustee also shall comply
with TIA Section 313(b).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and each stock exchange (if any) on which the
Securities are listed. The Company agrees to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any
delisting thereof.
SECTION 7.07. COMPENSATION AND INDEMNITY. The Company shall pay to
the Trustee from time to time such compensation for its services as the
Company and the Trustee shall agree in writing. The Trustee's compensation
shall
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not be limited by any law on compensation of a trustee of an express trust.
The Company shall reimburse the Trustee upon request for all reasonable
out-of-pocket expenses incurred or made by it, including costs of collection,
in addition to the compensation for its services. Such expenses shall
include the reasonable compensation and expenses, disbursements and advances
of the Trustee's agents, counsel, accountants and experts. The Company shall
indemnify each of the Trustee and any predecessor Trustees against any and
all loss, liability, damage, claim or expense (including attorneys' fees and
expenses), including taxes (other than taxes based on the income of the
Trustee), incurred by it in connection with the acceptance or administration
of this trust and the performance of its duties hereunder. The Trustee shall
notify the Company promptly of any claim for which it may seek indemnity.
Failure by the Trustee to so notify the Company shall not relieve the Company
of its obligations hereunder. The Company shall defend the claim and the
Trustee may have separate counsel and the Company shall pay the fees and
expenses of such counsel. The Company need not reimburse any expense or
indemnify against any loss, liability or expense incurred by the Trustee
through the Trustee's own wilful misconduct, negligence or bad faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property
held or collected by the Trustee other than money or property held in trust
to play principal of and interest on particular Securities.
The Company's payment obligations pursuant, to this Section shall
survive the discharge of this Indenture. When the Trustee incurs expenses
after the occurrence of a Default specified in Section 6.01(7) or 6.01(8)
with respect to the Company, the expenses are intended to constitute expenses
of administration under the Bankruptcy Law.
SECTION 7.08. REPLACEMENT OF TRUSTEE. The Trustee may resign at
any time by so notifying the Company. The Holders of a majority in principal
amount of the Securities may remove the Trustee by so notifying the Trustee
and may appoint a successor Trustee. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
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(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by the Holders
of a majority in principal amount of the Securities and such Holders of a
majority in principal amount of the Securities and such Holders do not
reasonably promptly appoint a successor Trustee, or if a vacancy exists in
the office of Trustee for any reason (the Trustee in such event being
referred to herein as the retiring Trustee), the Company shall promptly
appoint a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and
the successor Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. The successor Trustee shall mail a notice of
its succession to Securityholders. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, subject
to the lien provided for in Section 7.07.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders
of 10% in principal amount of the Securities may petition any court of
competent jurisdiction for the appointment of successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust busi-
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ness or assets to, another corporation or banking association, the
resulting, surviving or transferee corporation without any further act shall
be the successor Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts
created by this Indenture any of the Securities shall have been authenticated
but not delivered, any such successor to the Trustee may adopt the
certificate of authentication of any predecessor trustee, and make available
for delivery such Securities so authenticated; and in case at that time any
of the Securities shall not have been authenticated, any successor to the
Trustee may authenticate such Securities either in the name of any
predecessor hereunder or in the name of the successor to the Trustee; and in
all such cases such certificates shall have the full force which it is
anywhere in the Securities or in this Indenture provided that the certificate
of the Trustee shall have.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. The Trustee shall at
all times satisfy the requirements of TIA Section 310(a). The Trustee shall
have a combined capital and surplus of at least $50 million as set forth in
its most recent published annual report of condition. The Trustee shall
comply with TIA Section 310(b); PROVIDED, HOWEVER, that there shall be
excluded from the operation of TIA Section 310(b)(1) any indenture or
indentures under which other securities or certificates of interest or
participation in other securities of the Company are outstanding if the
requirements for such exclusion set forth in TIA Section 310(b)(1) are met.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or
been removed shall be subject to TIA Section 311(a) to the extent indicated.
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. DISCHARGE OF LIABILITY ON SECURITIES; DEFEASANCE. (a)
When (i) the Company delivers
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to the Trustee all outstanding Securities (other than Securities replaced
pursuant to Section 2.07) for cancelation or (ii) all outstanding Securities
have become due and payable, whether at maturity or as a result of the
mailing of a notice of redemption pursuant to Article III hereof and the
Company irrevocably deposits with the Trustee funds sufficient to pay at
maturity or upon redemption all outstanding Securities, including interest
thereon to maturity or such redemption date (other than Securities replaced
pursuant to Section 2.07), and if in either case the Company pays all other
sums payable hereunder by the Company, then this Indenture shall, subject to
Sections 8.01(c), cease to be of further effect. The Trustee shall
acknowledge satisfaction and discharge of this Indenture on demand of the
Company accompanied by an Officers' Certificate and an Opinion of Counsel and
at the cost and expense of the Company.
(b) Subject to Sections 8.01(c) and 8.02, the Company at any time
may terminate (i) all its obligations under the Securities and this Indenture
("legal defeasance option") or (ii) its obligations under Sections 4.02,
4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14 and
4.15 and the operation of Sections 6.01(4), 6.01(6), 6.01(7) (but only with
respect to Significant Subsidiary), 6.01(8) (but only with respect to a
Significant Subsidiary) and 6.01(9) ("covenant defeasance option"). The
Company may exercise its legal defeasance option notwithstanding its prior
exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If the
Company exercises its covenant defeasance option, payment of the Securities
may not be accelerated because of an Event of Default specified in Section
6.03(4), 6.01(6), 6.01(7) (but only with respect to a Significant
Subsidiary), 6.01(8) (but only with respect to a Significant Subsidiary) or
6.01(9) or because of the failure of the Company to comply with clause (iii)
or (iv) of Section 5.01.
Upon satisfaction of the conditions set forth herein and upon
request of the Company, the Trustee shall acknowledge in writing the
discharge of those obligations that the Company terminates.
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(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 7.07, 7.08, 8.04, 8.05
and 8.06 shall survive until the Securities have been paid in full.
Thereafter, the Company's obligations in Sections 7.07, 8.04 and 8.05 shall
survive.
SECTION 8.02. CONDITIONS TO DEFEASANCE. The Company may exercise
its legal defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits in trust with the Trustee
money or U.S. Government Obligations for the payment of principal of and
interest on the Securities to maturity or redemption, as the case may be;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and without
reinvestment on the deposited U.S. Government Obligations plus any
deposited money without investment will provide cash at such times and in
such amounts as will be sufficient to pay principal and interest when due
on all the Securities to maturity or redemption, as the case may be;
(3) 123 days pass after the deposit is made and during the
123-day period no Default specified in Section 6.01(7) or (8) with
respect to the Company occurs which is continuing at the end of the period;
(4) the deposit does not constitute a default under any other
agreement binding on the Company;
(5) the Company delivers to the Trustee an Opinion of Counsel to
the effect that the trust resulting from the deposit does not constitute,
or is qualified as, a regulated investment company under the Investment
Company Act of 1940;
(6) in the case of the legal defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (i) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (ii) since the date of this Indenture there
has been a change in the
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applicable Federal income tax law, in either case to the effect that,
and based thereon such Opinion of Counsel shall confirm that, the
Securityholders will not recognize income, gain or loss for Federal income
tax purposes as a result of such defeasance and will be subject to Federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such defeasance had not occurred;
(7) in the case of the covenant defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Securityholders will not recognize income, gain or loss for
Federal income tax purposes as a result of such covenant defeasance and
will be subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such covenant
defeasance had not occurred; and
(8) the Company delivers to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent to
the defeasance and discharge of the Securities as contemplated by this
Article VIII have been complied with.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date
in accordance with Article III.
SECTION 8.03. APPLICATION OF TRUST MONEY. The Trustee shall hold
in trust money or U.S. Government Obligations deposited with it pursuant to
this Article VIII. It shall apply the deposited money and the money from
U.S. Government Obligations through the Paying Agent and in accordance with
this Indenture to the payment of principal of and interest on the Securities.
Money and Securities so held in trust are not subject to Article X.
SECTION 8.04. REPAYMENT TO COMPANY. The Trustee and the Paying
Agent shall promptly turn over to the Company upon written request any excess
money or securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and
the Paying Agent shall pay to the Company upon written request any money held
by them for the payment
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of principal or interest that remains unclaimed for two years, and,
thereafter, Securityholders entitled to the money must look to the Company
for payment as general creditors.
SECTION 8.05. INDEMNITY FOR GOVERNMENT OBLIGATIONS. The Company
shall pay and indemnify the Trustee against any tax, fee imposed on or
assessed against deposited U.S. Government Obligations or the principal and
interest received on such U.S. Government Obligations.
SECTION 8.06. REINSTATEMENT. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with
this Article VIII by reason of any legal proceeding or by reason of any order
or judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article VIII until such time as the
Trustee or Paying Agent is permitted to apply all such money or U.S.
Government Obligations in accordance with this Article VIII; PROVIDED,
HOWEVER, that, if the Company has made any payment of interest on or
principal of any Securities because of the reinstatement of its obligations,
the Company shall be subrogated to the rights of the Holders of such
Securities to receive such payment from the money or U.S. Government
Obligations held by the Trustee or Paying Agent.
SECTION 8.07. CONCURRENT DEFEASANCE OF SECURITIES AND ORIGINAL
SECURITIES. The Company shall not exercise either of the defeasance options
described in this Article with respect to the Securities unless it defeases
the Original Securities equivalently and substantially simultaneously.
Similarly, the Company shall not defease the Original Securities unless it
defeases the Securities equivalently and substantially simultaneously.
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ARTICLE IX
AMENDMENTS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS. The Company, the
Guarantor Subsidiaries and the Trustee may amend this Indenture or the
Securities without notice to or consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article V;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities; PROVIDED, HOWEVER, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(4) to make any change in Article X that would limit or terminate
the benefits available to any holder of Senior Indebtedness (or
Representatives therefor) under Article X;
(5) to add Guarantees with respect to the Secur-ities or to
secure the Securities;
(6) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company;
(7) to comply with any requirements of the SEC in connection with
qualifying this Indenture under the TIA; or
(8) to make any change that does not adversely affect the rights
of any Securityholder.
An amendment under this Section may not make any change that
adversely affects the rights under Article X of any holder of Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness
(or any group or representative thereof authorized to give a consent) consent
to such change.
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86
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment.
The failure to give such notice to all Securityholders, or any defect,
therein, shall not impair or affect the validity of an amendment under this
Section.
SECTION 9.02. WITH CONSENT OF HOLDERS. The Company and the Trustee
may amend this Indenture or the Securities without notice to any
Securityholder but with the written consent of the Holders of at least a
majority in principal amount of the Securities then outstanding (including
consents obtained in connection with a tender offer or exchange for the
Securities) and any past default or compliance with any provisions may also
be waived with such a consent of the Holders of a majority in principal
amount of the Securities then outstanding. However, without the consent of
each Securityholder affected, an amendment may not:
(1) reduce the amount of Securities whose Holders must consent to
an amendment;
(2) reduce the rate of or extend the time for payment of interest
on any Security;
(3) reduce the principal of or extend the Stated Maturity of any
Security;
(4) reduce the premium payable upon the redemption of any
Security or change the time at which any Security may or shall be redeemed
in accordance with Article III;
(5) make any Security payable in money other than that stated in
the Security; or
(6) make any change in Article X that adversely affects the
rights of any Securityholder under Article X;
(7) modify or affect in any manner adverse to the Holders the
terms and conditions of the obligation of any Guarantor Subsidiary for the
due and punctual payment of the principal of or any liquidated damages or
interest on Securities; or
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(8) make any change in Section 6.04 or 6.07 or the second
sentence of this Section.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Persons entitled to consent to any
indenture supplemental hereto. If a record date is fixed, the Holders on
such record date, or their duly designated proxies, and only such Persons,
shall be entitled to consent to such supplemental indenture, whether or not
such Holders remain Holders after such record date; provided, that unless
such consent shall have become effective by virtue of the requisite
percentage having been obtained prior to the date which is 90 days after such
record date, any such consent previously given shall automatically and
without further action by any Holder be canceled and of no further effect.
An amendment under this Section may not make any change that
adversely affects the rights under Article X of any holder of Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness
(or any group or representative thereof authorized to give a consent) consent
to such change.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment.
The failure to give such notice to all Securityholders, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment
to this Indenture or the Securities shall comply with the TIA as then in
effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS AND WAIVERS. A
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the
Security that evidences the same debt as the consenting Holder's Security,
even if notation of the consent or waiver is not made on the Security.
However, any such Holder or subse-
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quent Holder may revoke the consent or waiver as to such Holder's Security or
portion of the Security if the Trustee receives the notice of revocation
before the date the amendment or waiver becomes effective. After an
amendment or waiver becomes effective, it shall bind every Security-holder.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Securityholders entitled to give their
consent or take any other action described above or required or permitted to
be taken pursuant to this Indenture. If a record date is fixed, then
notwithstanding the immediately preceding paragraph, those Persons who were
Securityholders at such record date (or their duly designated proxies), and
only those Persons, shall be entitled to give such consent or to revoke any
consent previously given or to take any such action, whether or not such
Persons continue to be Holders after such record date. No such consent shall
be valid or effective for more than 120 days after such record date.
SECTION 9.05. NOTATION ON OR EXCHANGE OF SECURITIES. If an
amendment changes the terms of a Security, the Trustee may require the Holder
of the Security to deliver it to the Trustee. The Trustee may place an
appropriate notation on the Security regarding the changed terms and return
it to the Holder. Alternatively, if the Company or the Trustee so
determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.
Failure to make the appropriate notation or to issue a new Security shall not
affect the validity of such amendment.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS. The Trustee shall sign
any amendment authorized pursuant to this Article IX if the amendment does
not adversely affect the rights, duties, liabilities or immunities of the
Trustee. If it does, the Trustee may but need not sign it. In signing such
amendment the Trustee shall be entitled to receive indemnity reasonably
satisfactory to it and to receive, and (subject to Section 7.01) shall be
fully protected in relying upon, an Officers' Certificate and an opinion of
Counsel stating that such amendment is authorized or permitted by this
Indenture.
SECTION 9.07. PAYMENT FOR CONSENT. Neither the Company nor any
Affiliate of the Company shall, directly
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or indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Securities unless such consideration is offered to be paid
to all Holders that so consent, waive or agree to amend in the time frame set
forth in solicitation documents relating to such consent, waiver or agreement.
ARTICLE X
SUBORDINATION
SECTION 10.01. AGREEMENT TO SUBORDINATE. The Company and each
Guarantor Subsidiary agrees, and each Securityholder by accepting a Security
agrees, that the Indebtedness evidenced by the Securities is subordinated in
right of payment, to the extent and in the manner provided in this Article X,
to the prior payment of all existing and future Senior Indebtedness and that
the subordination is for the benefit of and enforceable by the holders of
Senior Indebtedness. The Securities shall in all respects rank PARI PASSU
with all existing and future Senior Subordinated Indebtedness of the Company
(including the Original Securities), the Subsidiary Guarantees shall in all
respects rank PARI PASSU with all existing and future Senior Subordinated
Indebtedness of the Guarantor Subsidiaries and only Indebtedness of the
Company and the Guarantor Subsidiaries which is Senior Indebtedness shall
rank senior to the Securities and Subsidiary Guarantees in accordance with
the provisions set forth herein. All provisions of this Article X shall be
subject to Section 10.12. All guarantees by each Guarantor Subsidiary of
Senior Indebtedness of the Company shall be deemed Senior Indebtedness of
each such Guarantor Subsidiary.
SECTION 10.02. LIQUIDATION, DISSOLUTION, BANKRUPTCY. Upon any
payment or distribution of the assets of the Company or any Guarantor
Subsidiary to creditors upon a total or partial liquidation or a total or
partial dissolution of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar
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proceeding relating to the Company or any Guarantor Subsidiary and their
respective properties:
(1) holders of Senior Indebtedness shall be entitled to receive
payment in full of the Senior Indebtedness before securityholders shall be
entitled to receive any payment of principal of or interest on the
Securities; and
(2) until the Senior Indebtedness is paid in full, any
distribution to which Securityholders would be entitled but for this
Article X shall be made to holders of Senior Indebtedness as their
interests may appear, except that Securityholders may receive shares of
stock and any debt securities that are subordinated to Senior Indebtedness
to at least the same extent as the Securities.
SECTION 10.03. DEFAULT ON SENIOR INDEBTEDNESS. Neither the
Company nor any Guarantor Subsidiary may pay the principal of, premium (if
any) or interest on the Securities or make any deposit pursuant to Section
8.01 and may not repurchase, redeem or otherwise retire any Securities
(collectively, "pay the Securities") if (i) any Senior Indebtedness is not
paid when due or (ii) any other default on Senior Indebtedness occurs and the
maturity of such Senior Indebtedness is accelerated in accordance with its
terms unless, in either case, (x) the default has been cured or waived and
any such acceleration has been rescinded or (y) such Senior Indebtedness has
been paid in full; PROVIDED, HOWEVER, that the Company or any Guarantor
Subsidiary may pay the Securities without regard to the foregoing if the
Company and the Trustee receive written notice approving such payment from
the Representative of the Designated Senior Indebtedness with respect to
which either of the events set forth in clause (i) or (ii) has occurred and
is continuing. During the continuance of any default (other than a default
described in clause (i) or (ii) of the preceding sentence) with respect to
any Designated Senior Indebtedness pursuant to which the maturity thereof may
be accelerated immediately without further notice (except such notice as may
be required to effect such acceleration) or the expiration of any applicable
grace periods, neither the Company nor any Guarantor Subsidiary may pay the
Securities for a period (a "Payment Blockage Period") commencing upon the
receipt by the Company and the Trustee of written notice (a "Blockage
Notice") of such default from the Represen-
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tative of such Designated Senior Indebtedness specifying an election to
effect a Payment Blockage Period and ending 179 days thereafter (or earlier
if such Payment Blockage Period is terminated (i) by written notice to the
Trustee and the Company from the Person or Persons who gave such Blockage
Notice, (ii) by repayment in full of such Designated Senior Indebtedness or
(iii) because the default giving rise to such Blockage Notice is no longer
continuing). Notwithstanding the provisions described in the immediately
preceding sentence (but subject to the provisions contained in the first
sentence of this Section), unless the holders of such Designated Senior
Indebtedness or the Representative of such holders shall have accelerated the
maturity of such Designated Senior Indebtedness, the Company may resume
payments on the Securities after such Payment Blockage Period. Not more than
one Blockage Notice may be given in any consecutive 360-day period,
irrespective of the number of defaults with respect to Designated Senior
Indebtedness during such period; PROVIDED, HOWEVER, that if any Blockage
Notice within such 360-day period is given by or on behalf of any holders of
Designated Senior Indebtedness (other than the Bank Indebtedness), the
Representative of the Bank Indebtedness may give another Blockage Notice
within such period; PROVIDED FURTHER, HOWEVER, that in no event may the total
number of days during which any Payment Blockage Period or Periods is in
effect exceed 179 days in the aggregate during any 360 consecutive day
period. For purposes of this Section, no default or event of default which
existed or was continuing on the date of the commencement of any Payment
Blockage Period with respect to the Designated Senior Indebtedness initiating
such Payment Blockage Period shall be, or be made, the basis of the
commencement of a subsequent Payment Blockage Period by the Representative of
such Designated Senior Indebtedness, whether or not within a period of 360
consecutive days, unless such default or event, of default shall have been
cured or waived for a period of not less than 90 consecutive days.
SECTION 10.04. ACCELERATION OF PAYMENT OF SECURITIES. If payment
of the Securities is accelerated because of an Event of Default, the Company
or the Trustee shall promptly notify the holders of the Designated Senior
Indebtedness (or their Representative) of the acceleration. If any
Designated Senior Indebtedness is outstanding, neither the Company nor any
Guarantor Subsidiary may pay the Securities until five Business Days after
such holders or
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92
the Representative of the Designated Senior Indebtedness receive notice of
such acceleration and, thereafter, may pay the Securities only if this
Article X otherwise permits payments at that time.
SECTION 10.05. WHEN PAYMENT OR DISTRIBUTION MUST BE PAID OVER. If
a payment or distribution is made to Securityholders that because of this
Article X should not have been made to them, the Securityholders who receive
the payment or distribution shall hold it in trust for holders of Senior
Indebtedness and pay it over to them as their interests may appear.
SECTION 10.06. SUBROGATION. After all Senior Indebtedness is paid
in full and until the Securities are paid in full, Securityholders shall be
subrogated to the rights of holders of Senior Indebtedness to receive
distributions applicable to Senior Indebtedness. A distribution made under
this Article X to holders of Senior Indebtedness which otherwise would have
been made to Securityholders is not, as between the Company and
Securityholders, a payment by the Company on Senior Indebtedness, or, as
between any Guarantor Subsidiary and the Securityholders, a payment by such
Guarantor Subsidiary on Senior Indebtedness.
SECTION 10.07. RELATIVE RIGHTS. This Article X defines the
relative rights of Securityholders and holders of Senior Indebtedness.
Nothing in this Indenture shall:
(1) impair, as between the Company or any Guarantor Subsidiary, as
the case may be, and Securityholders, the obligation of the Company or any
Guarantor Subsidiary, as the case may be, which is absolute and
unconditional, to pay principal of and interest on the Securities in
accordance with their terms; or
(2) prevent the Trustee or any Securityholder from exercising its
available remedies upon a Default, subject to the rights of holders of
Senior Indebtedness to receive distributions otherwise payable to
Security-holders.
SECTION 10.08. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY OR ANY
GUARANTOR SUBSIDIARY. No right of any
<PAGE>
93
holder of Senior Indebtedness to enforce the subordination of the
Indebtedness evidenced by the Securities shall be impaired by any act or
failure to act by the Company or any Guarantor Subsidiary by the failure of
any of them to comply with this Indenture.
SECTION 10.09. RIGHTS OF TRUSTEE AND PAYING AGENT. The Company
shall give prompt written notice to the Trustee of any fact known to the
Company which would prohibit the making of any payment to or by the Trustee
in respect of the Securities. Failure to give such notice shall not affect
the subordination of the Securities to Senior Indebtedness. Notwithstanding
Section 10.03, the Trustee or Paying Agent may continue to make payments on
the Securities and shall not be charged with knowledge of the existence of
facts that would prohibit the making of any such payments unless, not less
than two Business Days prior to the date of such payment, a Trust Officer of
the Trustee receives notice satisfactory to it that payments may not be made
under this Article X. The Company, the Registrar or co-registrar, the Paying
Agent, a Representative or a holder of Senior Indebtedness may give the
notice; PROVIDED, HOWEVER, that, if an issue of Senior Indebtedness has a
Representative, only the Representative may give the notice.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee. The
Registrar and coregistrar and the Paying Agent may do the same with like
rights. The Trustee shall be entitled to all the rights set forth in this
Article X with respect to any Senior Indebtedness which may at any time be
held by it, to the same extent as any other holder of Senior Indebtedness;
and nothing in Article VII shall deprive the Trustee of any of its rights as
such holder. Nothing in this Article X shall apply to claims of, or payments
to, the Trustee under or pursuant to Section 7.07.
SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever
a distribution is to be made or a notice given to holders of Senior
Indebtedness, the distribution may be made and the notice given to their
Representative (if any).
SECTION 10.11. ARTICLE X NOT TO PREVENT EVENTS OF DEFAULT OR LIMIT
RIGHT TO ACCELERATE. The failure to
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94
make a payment pursuant to the Securities by reason of any provision in this
Article X shall not be construed as preventing the occurrence of a Default.
Nothing in this Article X shall have any effect on the right of the
Securityholders or the Trustee to accelerate the maturity of the Securities.
SECTION 10.12. TRUST MONEYS NOT SUBORDINATED. Notwithstanding
anything contained herein to the contrary, payments from money or the
proceeds of U.S. Government Obligations held in trust under Article VIII by
the Trustee for the payment of principal of and interest on the Securities
shall not be subordinated to the prior payment of any Senior Indebtedness or
subject to the restrictions set forth in this Article X, and none of the
Securityholders shall be obligated to pay over any such amount to the Company
or any holder of Senior Indebtedness of the Company or any other creditor of
the Company.
SECTION 10.13. TRUSTEE ENTITLED TO RELY. Upon any payment or
distribution pursuant to this Article X, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of
competent jurisdiction in which any proceedings of the nature referred to in
Section 10.02 are pending, (ii) upon a certificate of the liquidating trustee
or agent or other Person making such payment or distribution to the Trustee
or to the Securityholders or (iii) upon the Representatives for the holders
of Senior Indebtedness for the purpose of ascertaining the Persons entitled
to participate in such payment or distribution, the holders of the Senior
Indebtedness and other Indebtedness of the Company or any Guarantor
Subsidiary, 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 X. In the event that the Trustee determines, in
good faith, that evidence is required with respect to the right of any Person
as a holder of Senior Indebtedness to participate in any payment or
distribution pursuant to this Article X, the Trustee may request such person
to furnish evidence to the reasonable satisfaction of the Trustee as to the
amount of Senior Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and other
facts pertinent to the rights of such Person under this Article X, and, if
such evidence is not furnished, the Trustee may defer any payment to such
Person pending judicial determination as to the
<PAGE>
95
right of such Person to receive such payment. The provisions of Sections
7.01 and 7.02 shall be applicable to all actions or omissions of actions by
the Trustee pursuant to this Article X.
SECTION 10.14. TRUSTEE TO EFFECTUATE SUBORDINATION. Each
Securityholder by accepting a Security authorizes and directs the Trustee on
his behalf to take such action as may be necessary or appropriate to
acknowledge or effectuate the subordination between the Securityholders and
the holders of Senior Indebtedness as provided in this Article X and appoints
the Trustee as attorney-in-fact for any and all such purposes.
SECTION 10.15. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR
INDEBTEDNESS. The Trustee shall not be deemed to owe any fiduciary duty to
the holders of Senior Indebtedness and shall not be liable to any such
holders if it shall mistakenly pay over or distribute to Securityholders or
the Company or any other Person, money or assets to which any holders of
Senior Indebtedness shall be entitled by virtue of this Article X or
otherwise. With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants or obligations
as are specifically set forth in this Article X and no implied covenants or
obligations with respect to holders of Senior Indebtedness shall be read into
this Indenture against the Trustee.
SECTION 10.16. RELIANCE BY HOLDERS OF SENIOR INDEBTEDNESS ON
SUBORDINATION PROVISIONS. Each Securityholder by accepting a Security
acknowledges and agrees that the foregoing subordination provisions are, and
are intended to be, an inducement and a consideration to each holder of any
Senior Indebtedness, whether such Senior Indebtedness was created or acquired
before or after the issuance of the Securities, to acquire and continue to
hold, or to continue to hold, such Senior Indebtedness and such holder of
Senior Indebtedness shall be deemed conclusively to have relied on such
subordination provisions in acquiring and continuing to hold, or in
continuing to hold, such Senior Indebtedness.
<PAGE>
96
ARTICLE XI
SUBSIDIARY GUARANTEES
SECTION 11.01. SUBSIDIARY GUARANTEES. Each Guarantor Subsidiary
hereby jointly and severally unconditionally and irrevocably guarantees on an
unsecured senior subordinated basis to each Holder and to the Trustee and its
successors and assigns (a) the full and punctual payment of principal of and
interest on the Securities when due, whether at Stated Maturity, by
acceleration, by redemption or otherwise, and all other monetary obligations
of the Company under this Indenture (including obligations to the Trustee)
and the Securities and (b) the full and punctual performance within
applicable grace periods of all other obligations of the Company under this
Indenture and the Securities (all the foregoing being hereinafter
collectively called the "Obligations"). Each Guarantor Subsidiary further
agrees that the Obligations may be extended or renewed, in whole or in part,
without notice or further assent from each such Guarantor Subsidiary, and
that each such Guarantor Subsidiary shall remain bound under this Article XI
notwithstanding any extension or renewal of any Obligation.
Each Guarantor Subsidiary waives presentation to, demand of, payment
from and protest to the Company of any of the Obligations and also waives
notice of protest for nonpayment. Each Guarantor Subsidiary waives notice of
any default under the Securities or the Obligations. The obligations of each
Guarantor Subsidiary hereunder shall not be affected by (a) the failure of
any Holder or the Trustee to assert any claim or demand or to enforce any
right or remedy against the Company or any other Person under this Indenture,
the Securities or any other agreement or otherwise; (b) any extension or
renewal of any thereof; (c) any rescission, waiver, amendment or modification
of any of the terms or provisions of this Indenture, the Securities or any
other agreement; (d) the release of any security held by any Holder or the
Trustee for the Obligations or any of them; (e) the failure of any Holder or
Trustee to exercise any right or remedy against any other guarantor of the
Obligations; or (f) any change in the ownership of such Guarantor Subsidiary,
except as provided in Section 11.02(b).
<PAGE>
97
Each Guarantor Subsidiary further agrees that its Subsidiary
Guaranty herein constitutes a guarantee of payment, performance and
compliance when due (and not a guarantee of collection) and waives any right
to require that any resort be had by any Holder or the Trustee to any
security held for payment of the obligations.
The Subsidiary Guaranty of each Guarantor Subsidiary is, to the
extent and in the manner set forth in Article X, subordinated and subject in
right of payment to the prior payment in full of the principal of and
premium, if any, and interest on all Senior Indebtedness of such Guarantor
Subsidiary and this Subsidiary Guaranty is made subject to such provisions of
this Indenture.
The obligations of each Guarantor Subsidiary hereunder shall not be
subject to any reduction, limitation, impairment or termination for any
reason, including any claim of waiver, release, surrender, alteration or
compromise, and shall not be subject to any defense of setoff, counterclaim,
recoupment or termination whatsoever or by reason of the invalidity,
illegality or unenforceability of the Obligations or otherwise. Without
limiting the generality of the foregoing, the obligations of each Guarantor
Subsidiary herein shall not be discharged or impaired or otherwise affected
by the failure of any Holder or the Trustee to assert any claim or demand or
to enforce any remedy under this Indenture, the Securities or any other
agreement, by any waiver or modification of any thereof, by any default,
failure or delay, wilful or otherwise, in the performance of the obligations,
or by any other act or thing or omission or delay to do any other act or
thing which may or might in any manner or to any extent vary the risk of any
Guarantor Subsidiary or would otherwise operate as a discharge of any
Guarantor Subsidiary as a matter of law or equity.
Each Guarantor Subsidiary further agrees that its Subsidiary
Guaranty herein shall continue to be effective or be reinstated, as the case
may be, if at any time payment, or any part thereof, of principal of or
interest on any Obligation is rescinded or must otherwise be restored by any
Holder or the Trustee upon the bankruptcy or reorganization of the Company or
otherwise.
In furtherance of the foregoing and not in limitation of any other
right which any Holder or the
<PAGE>
98
Trustee has at law or in equity against any Guarantor Subsidiary by virtue
hereof, upon the failure of the Company to pay the principal of or interest
on any Obligation when and as the same shall become due, whether at maturity,
by acceleration, by redemption or otherwise, or to perform or comply with any
other Obligation, each Guarantor Subsidiary hereby promises to and shall,
upon receipt of written demand by the Trustee, forthwith pay, or cause to be
paid, in cash, to the Holders or the Trustee an amount equal to the sum of
(i) the unpaid principal amount of such Obligations, (ii) accrued and unpaid
interest on such Obligations (but only to the extent not prohibited by law)
and (iii) all other monetary Obligations of the Company to the Holders and
the Trustee.
Each Guarantor Subsidiary agrees that it shall not be entitled to
any right of subrogation in relation to the Holders in respect of any
Obligations guaranteed hereby until payment in full of all Obligations. Each
Guarantor Subsidiary further agrees that, as between it, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
Obligations guaranteed hereby may be accelerated as provided in Article VI
for the purposes of any Subsidiary's Subsidiary Guaranty herein,
notwithstand-ing any stay, injunction or other prohibition preventing such
acceleration in respect of the Obligations guaranteed hereby, and (y) in the
event of any declaration of acceleration of such Obligations as provided in
Article VI, such Obligations (whether or not due and payable) shall forthwith
become due and payable by such Guarantor Subsidiary for the purposes of this
Section.
Each Guarantor Subsidiary also agrees to pay any and all costs and
expenses (including reasonable attorneys' fees and expenses) incurred by the
Trustee or any Holder in enforcing any rights under this Section.
SECTION 11.02. LIMITATION ON LIABILITY. (a) Any term or provision
of this Indenture to the contrary notwithstanding, the maximum, aggregate
amount of the obligations guaranteed hereunder by any Guarantor Subsidiary
shall not exceed the maximum amount that can be hereby guaranteed without
rendering this Indenture, as it relates to any Guarantor Subsidiary, voidable
under applicable law relating to fraudulent conveyance or fraudulent transfer.
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99
(b) This Subsidiary Guaranty as to any Guarantor Subsidiary shall
terminate and be of no further force or effect upon the sale or other
transfer (i) by such Guarantor Subsidiary of all or substantially all of its
assets or (ii) by the Company of all of its stock or other equity interests
in such Guarantor Subsidiary, to a Person that is not an Affiliate of the
Company; PROVIDED, HOWEVER, that such sale or transfer shall be deemed to
constitute an Asset Disposition and the Company shall comply with its
obligations under Section 4.06.
SECTION 11.03. SUCCESSORS AND ASSIGNS. Article XI shall be binding
upon each Guarantor Subsidiary and its successors and assigns and shall enure
to the benefit of the successors and of Trustee and the Holders and, in the
event of any transfer or assignment of rights by any Holder or the Trustee,
the rights and privileges conferred upon that party in this Indenture and in
the Securities shall automatically extend to and be vested in such transferee
or assignee, all subject to the terms and conditions of this Indenture.
SECTION 11.04. NO WAIVER. Neither a failure nor a delay on the
part of either the Trustee or the Holders in exercising any right, power or
privilege under this Article XI shall operate as a waiver thereof, nor shall
a single or partial exercise thereof preclude any other or further exercise
of any right, power or privilege. The rights, remedies and benefits of the
Trustee and the Holders herein expressly specified are cumulative and not
exclusive of any other rights, remedies or benefits which either may have
under this Article XI at law, in equity, by statute or otherwise.
SECTION 11.05. MODIFICATION. No modification, amendment or waiver
of any provision of this Article XI, nor the consent to any departure by any
Guarantor Subsidiary therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Trustee, and then such waiver or
consent shall be effective only in the specific instance and for the purpose
for which given. No notice to or demand on any Guarantor Subsidiary in any
case shall entitle such Guarantor Subsidiary to any other or further notice
or demand in the same, similar or other circumstances.
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100
SECTION 11.06. EXECUTION OF SUPPLEMENTAL INDEN-TURE FOR FUTURE
GUARANTOR SUBSIDIARIES. Each Subsidiary which is required to become a
Guarantor Subsidiary pursuant to Section 4.15 shall promptly execute and
deliver to the Trustee a supplemental indenture in the form of Exhibit B
hereto pursuant to which such Subsidiary shall become a Guarantor Subsidiary
under this Article XI and shall guarantee the Obligations. Concurrently with
the execution and delivery of such supplemental indenture, the Company shall
deliver to the Trustee an Opinion of Counsel to the effect that such
supplemental indenture has been duly authorized, executed and delivered by
Subsidiary and that, subject to the application of bankruptcy, insolvency,
moratorium, fraudulent conveyance or transfer and other similar laws relating
to creditors' rights generally and to the principals of equity, whether
considered in a proceeding at law or in equity, the Subsidiary Guaranty of
such Guarantor Subsidiary is a legal, valid and binding obligation of such
Guarantor Subsidiary, enforceable against such Guarantor Subsidiary in
accordance with its terms.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. TRUST INDENTURE ACT CONTROLS. If any provision of
this Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provi-sion
shall control.
SECTION 12.02. NOTICES. Any notice or communication shall be in
writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Company or any Guarantor Subsidiary:
Johnstown America Industries, Inc.
980 North Michigan Avenue, Suite 1000
Chicago, Illinois 60611
Attention of: Chief Financial Officer
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101
if to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York l0286
Attention of Corporate Trust Trustee
Administration
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Securityholder shall be
mailed to the Securityholder at Securityholder's address as it appears on the
registration books of the Registrar and shall be sufficiently given if so
mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner
provided above, it is duly given, whether or not the addressee receives it.
SECTION 12.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall
have the protection of TIA Section 312(c).
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take or
refrain from taking any action under this Indenture, the Company shall
furnish to the Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee 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
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in
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102
the opinion of such counsel, all such conditions precedent have been
complied with.
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each
certificate or opinion with respect to compliance with a covenant or
condition provided for in this Indenture shall include:
(1) a statement that the individual 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 individual, he had
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
individual, such covenant or condition has been complied with.
SECTION 12.06. WHEN SECURITIES DISREGARDED. In determining whether
the Holders of the required principal amount of Securities have concurred in
any direction, waiver or consent, Securities owned by the Company or by any
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with the Company shall be disregarded and deemed not
to be outstanding, except that, for the purpose of determining whether the
Trustee shall be protected in relying on any such direction, waiver or
consent, only Securities which the Trustee actually knows are so owned shall
be so disregarded. Also, subject to the foregoing, only Securities
outstanding at the time shall be considered in any such determination.
SECTION 12.07. RULES BY TRUSTEE, PAYING AGENT AND REGISTRAR. The
Trustee may make reasonable rules for action by or a meeting of
Securityholders. The Registrar and the Paying Agent may make reasonable rules
for their functions.
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103
SECTION 12.08. LEGAL HOLIDAYS. A "Legal Holiday" is a Saturday, a
Sunday or a day on which banking institu-tions are not required to be open in
the State of New York. If a payment date is a Legal Holiday, payment shall
be made on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period. If a regular record date
is a Legal Holiday, the record date shall not be affected.
SECTION 12.09. GOVERNING LAW. This Indenture and the Securities
shall be governed by, and construed in accordance with, the laws of the State
of New York but without giving effect to applicable principles of conflicts
of law to the extent that the application of the laws of another jurisdiction
would be required thereby.
SECTION 12.10. NO RECOURSE AGAINST OTHERS. A director, officer,
employee or stockholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Securities or this Indenture or
for any claim based on, in respect of or by reason of such obligations or
their creation. By accepting a Security, each Securityholder shall waive and
release all such liability. The waiver and release shall be part of the
consideration for the issue of the Securities.
SECTION 12.11. SUCCESSORS. All agreements of the Company in this
Indenture and the Securities shall bind its successors. All agreements of
the Trustee in this Indenture shall bind its successors.
SECTION 12.12. MULTIPLE ORIGINALS. The parties may sign any number
of copies of this Indenture. Each signed copy shall be an original, but all
of them together represent the same agreement. One signed copy is enough to
prove this Indenture.
SECTION 12.13. TABLE OF CONTENTS; HEADINGS. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not
intended to be considered a part hereof and shall not modify or restrict any
of the terms or provisions hereof.
<PAGE>
104
IN WITNESS WHEREOF, the parties have caused this Indenture to be
duly executed as of the date first written above.
JOHNSTOWN AMERICA INDUSTRIES, INC.,
by /s/ Thomas M. Begel
------------------------------
Name: Thomas M. Begel
Title: Chairman, Chief
Executive Officer
and President
JOHNSTOWN AMERICA CORPORATION,
by /s/ Kenneth M. Tallering
-----------------------------
Name: Kenneth M. Tallering
Title: Secretary and Assistant
Treasurer
BOSTROM SEATING, INC.,
by /s/ Kenneth M. Tallering
-----------------------------
Name: Kenneth M. Tallering
Title: Secretary and Assistant
Treasurer
BOSTROM HOLDINGS, INC.,
by /s/ Kenneth M. Tallering
-----------------------------
Name: Kenneth M. Tallering
Title: Vice President, Secretary
and Assistant Treasurer
FREIGHT CAR SERVICES, INC.,
by /s/ Kenneth M. Tallering
-----------------------------
Name: Kenneth M. Tallering
Title: Secretary and Assistant
Treasurer
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105
JAC PATENT CORPORATION,
by /s/ Kenneth M. Tallering
-----------------------------
Name: Kenneth M. Tallering
Title: Secretary and Assistant
Treasurer
TRUCK COMPONENTS, INC.,
by /s/ Kenneth M. Tallering
-----------------------------
Name: Kenneth M. Tallering
Title: Secretary
GUNITE CORPORATION,
by /s/ Kenneth M. Tallering
-----------------------------
Name: Kenneth M. Tallering
Title: Secretary
BRILLION IRON WORKS, INC.,
by /s/ Kenneth M. Tallering
-----------------------------
Name: Kenneth M. Tallering
Title: Secretary
FABCO AUTOMOTIVE CORPORATION,
by /s/ Kenneth M. Tallering
-----------------------------
Name: Kenneth M. Tallering
Title: Secretary
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106
JAII MANAGEMENT COMPANY
by /s/ Kenneth M. Tallering
-----------------------------
Name: Kenneth M. Tallering
Title: Vice President and
Secretary
THE BANK OF NEW YORK,
as Trustee
by /s/ Mary LaGumina
-----------------------------
Name: Mary LaGumina
Title: Assistant Vice President
<PAGE>
EXHIBIT A
[FORM OF FACE OF SECURITY]
JOHNSTOWN AMERICA INDUSTRIES, INC.
11 3/4% Senior Subordinated Note Due, 2005
No. CUSIP No. 479477-AA-9
Johnstown America industries, Inc., a Delaware corporation, promises to pay
to , or registered assigns, the principal sum of Dollars
on August 15, 2005.
Interest Payment Dates: February 15 and August 25, commencing
February 15, 1996.
Record Dates: February 1 and August 1, commencing February 1, 1996
(whether or not a business day).
Additional provisions of this Security are set forth on the other side
of this Security.
JOHNSTOWN AMERICA INDUSTRIES, INC.,
by
_______________________
Chief Executive Officer
_______________________
Secretary
Dated: August 23, 1995
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE BANK OF NEW YORK,
as Trustee, certifies
[Seal] that this is one of
the Securities referred
to in the Indenture.
by
______________________________
Authorized Signatory
<PAGE>
2
FORM OF REVERSE SIDE OF SECURITY
11 3/4% Senior Subordinated Note Due 2005
1. INTEREST
Johnstown America Industries., a Delaware corporation (such corporation,
and its successors and assigns under the Indenture hereinafter referred to,
being herein called the "Company"), promises to pay interest on the principal
amount of this Security at the rate per annum shown above. The Company will
pay interest semiannually on February 15 and August 15 of each year.
Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from August 23,
1995. Interest will be computed on the basis of a 360-day year of twelve
30-day months. The Company shall pay interest on overdue principal at the
rate borne by the Securities plus 1% per annum, and it shall pay interest on
overdue installments of interest at the same rate to the extent lawful.
2. METHOD OF PAYMENT
The Company will pay Interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the
close of business on the February 1 or August 1 next preceding the interest
payment date even if Securities are canceled after the record date and on or
before the interest payment date. Holders must surrender Securities to a
Paying Agent to collect principal payments. The Company will pay principal
and interest in money of the United States that at the time of payment is
legal tender for payment of public and private debts. However, the Company
may pay principal and interest by check payable in such money. It may mail
an interest check to a Holder's registered address.
3. PAYING AGENT AND REQISTRAR
Initially, The Bank of New York, a New York banking corporation
("Trustee"), will act as Paying Agent and Registrar. The Company may appoint
and change any Paying Agent, Registrar or co-registrar without notice. The
<PAGE>
3
Company or any of its domestically incorporated Wholly Owned Subsidiaries may
act as Paying Agent, Registrar or coregistrar.
4. INDENTURE
The Company issued the Securities under an Indenture dated as of
August 23, 1995 ("Indenture"), among the Company, Johnstown America Corporaticn,
JTN Acquisition Corp., Bostrom Seating, Inc., Bostrom Distribution Center, Inc.,
Freight Car Services, Inc., JAC Patent Corporation, Truck Components, Inc.,
Gunite Corporation, Brillion Iron Works Inc., and Fabco Automotive
Corporation (collectively, the "Guarantor Subsidiaries"); and the Trustee.
The terms of the Securities include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the Indenture
(the "Act"). Terms defined in the Indenture and not defined herein have the
meanings ascribed thereto in the Indenture. The Securities are subject to
all such terms, and Securityholders are referred to the Indenture and the Act
for a statements of those terms.
The Securities are general unsecured obligations of the Company limited
to $100,000,000 aggregate principal amount (subject to Section 2.07 of the
Indenture). The Indenture imposes certain limitations on the Incurrence of
Indebtedness by the Company and certain of its Subsidiaries, the existence of
liens, the payment of dividends on, and redemption of, the Capital Stock of
the Company and its Subsidiaries and the redemption of certain subordinated
obligations of the Company and its subsidiaries, restricted payments, the
sale or transfer of assets and Subsidiary stock, the issuance or sale of
Capital Stock of Restricted Subsidiaries, sale and leaseback transactions,
the business activities and investments of the Company and certain of its
Subsidiaries; consolidations, mergers and transfers of all or substantially
all the Company's assets, and transactions with Affiliates. In addition, the
Indenture limits the ability of the Company and certain of its Subsidiaries
to restrict distributions and dividends from Subsidiaries.
To secure the due and punctual payment of the principal and liquidated
damages and interest, if any, on the Securities and all other amounts payable
by the Company under the Indenture and the Securities when and as the same
<PAGE>
4
shall be due and payable, whether at maturity, by acceleration or otherwise,
according to the terms of the Securities and the Indenture, the Guarantlor
Subsidiaries have unconditionally guaranteed the Obligations on a senior
subordinated basis pursuant to the terms of the Indenture.
5. OPTIONAL REDEMPTION
Except as set forth in the next paragraph, the Securities may not be
redeemed prior to August 15, 2000. On and after that date, the Company may
redeem the Securities in whole at any time or in part from time to time at
the following redemption prices (expressed in percentages of principal
amount), plus accrued interest to the redemption date (subject to the right
of Holders of record on the relevant record date to receive interest due on
the related interest payment date), if redeemed during the 12-month period
commencing on August 15 of the years set forth below:
PERIOD PERCENTAGES
2000 105.875%
2001 103.917%
2002 101.958%
2003 and thereafter 100.000%
In addition, at any time prior to August 15, 1998, the Company may
redeem up to 33 1/3% of the original aggregate principal amount of Securities
with the proceeds of a Public Equity Offering following which there is a
Public Market, at any time or from time to time, at a redemption price
(expressed as a percentage of principal amount) of 111.75% plus accrued
interest to the redemption date (subject to the right of Holders of record on
the relevant record date to receive interest due on the related interest
payment date); PROVIDED, HOWEVER, that at least 66 2/3% of the original
aggregate principal amount of the Securities must remain outstanding after
each such redemption.
6. NOTICE OF REDEMPTION
Notice of redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each Holder of Securities to be
redeemed at his registered address. Securities in denominations larger than
$1,000 may be redeemed in part but only in whole multiples of $1,000.
<PAGE>
5
If money sufficient to pay the redemption price of and accrued interest on
all Securities (or portions thereof) to be redeemed on the redemption date is
deposited with the Paying Agent on or before the redemption date and certain
other conditions are satisfied, on and after such date interest ceases to
accrue on such Securities (or such portions thereof) called for redemption.
7. PUT PROVISIONS
Upon a Change of Control, any Holder of Securities will have the right,
subject to certain conditions, to cause the Company to repurchase all or any
part of the Securities of such Holder at a repurchase price equal to 101% of
the principal amount of the Securities to be repurchased plus accrued
interest to the date of repurchase (subject to the right of holders of record
on the relevant record date to receive interest due on the related interest
payment date) as provided in, and subject to the terms of, the Indenture.
8. SUBORDINATION
The Securities are subordinated to Senior Indebtedness, as defined in
the Indenture. To the extent provided in the Indenture, Senior Indebtedness
must be paid before the Securities may be paid. The Company and each
Guarantor Subsidiary agrees, and each Securityholder by accepting a Security
agrees, to the subordination provisions contained in the Indenture and
authorizes the Trustee to give it effect and appoints the Trustee as
attorney-in-fact for such purpose.
9. DENOMINATIONS; TRANSFER; EXCHANGE
The Securities are in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange any
Securities selected for redemption (except, in the case of a Security to be
redeemed in part, the portion of the Security not to be redeemed) or any
Securities for a period of 15 days before a selection of Securities to be
redeemed or 15 days before an interest payment date.
<PAGE>
6
10. PERSONS DEEMED OWNERS
The registered Holder of this Security may be treated as the owner of it
for all purposes.
11. UNCLAIMED MONGY
If money for the payment of principal or interest remains unclaimed for
two years, the Trustee or Paying Agent shall pay the money back to the
Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must
look only to the Company and not to the Trustee for payment.
12. DISCHARAE AND DEFEASANCE
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Securities and the Indenture if the
Company deposits with the Trustee money or U.S. Government Obligations for
the payment of principal and interest on the Securities to redemption or
maturity, as the case may be.
13. AMENDMENT, WAIVER
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the
Securities and (ii) any default or noncompliance with any provision may be
waived with the written consent of the Holders of a majority in principal
amount outstanding of the Securities. Subject to certain exceptions set
forth in the Indenture, without the consent of any Securityholder, the
Company, the Guarantor Subsidiaries and the Trustee may amend the Indenture
or the Securities to cure any ambiguity, omission, defect or inconsistency,
or to comply with Article 5 of the Indenture, or to provide for
uncertificated Securities in addition to or in place of certificated
Securities, or to add guarantees with respect to the Securities or to secure
the Securities, or to add additional covenants or surrender rights and powers
conferred on the Company, or to comply with any request of the SEC in
connection with qualifying the Indenture under the Act, or to make certain
changes in the subordination provisions, or to make any change that does not
adversely affect the rights of any Securityholder.
<PAGE>
7
14. DEFAULTS AND REMEDIES
Under the Indenture, Events of Default include (i) default for 30 days
in payment of interest on the Securities; (ii) default, in payment of
principal on the Securities at maturity, upon redemption pursuant to
paragraph 5 of the Securities, upon acceleration or otherwise, or failure by
the Company to redeem or purchase Securities when required; (iii) failure by
the Company to comply with other agreements in the Indenture or the
Securities, in certain cases subject to notice and lapse of time;
(iv) certain accelerations (including failure to pay within any grace period
after final maturity) of other Indebtedness of the Company if the amount
accelerated (or so unpaid) exceeds $10,000,000; (v) certain events of
bankruptcy or insolvency with respect to the Company and the Significant
Subsidiaries; (vi) certain judgments or decrees for the payment of money in
excess of $10,000,000; and (vii) certain failures of a Subsidiary Guaranty to
remain in full force and effect and certain denials or disaffirmations of
obligations under the Indenture of a Subsidiary Guaranty by a Guarantor
Subsidiary. If an Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in principal amount of the Securities may declare
all the Securities to be due and payable immediately. Certain events of
bankruptcy or insolvency are Events of Default which will result in the
Securities being due and payable immediately upon the occurrence of such
Events of Default.
Securityholders may not enforce the Indenture or the Securities except
as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Securities unless it receives reasonable indemnity or
security. Subject to certain limitations, Holders of a majority in principal
amount of the Securities may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Securityholders notice of any
continuing Default (except a Default in payment of principal or interest) if
it determines that withholding notice is in the interest of the Holders.
15. TRUSTEE DEALINGS WITH THE COMPANY
Subject to certain limitations imposed by the Act, the Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations
owed to it by the Company or its Affiliates and may otherwise deal with the
Company or its Affiliates with the same rights it would have if it were not
Trustee.
<PAGE>
8
16. NO RECOURSE AGAINST OTHERS
A director, officer, employee or stockholder, as such, of the Company,
any Guarantor Subsidiary or the Trustee shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
cl.aim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder waives and releases
all such liability. The waiver and release are part of the consideration for
the issue of the Securities.
17. GOVERNING LAW.
The Securities shall be governed by, and construed in accordance with,
the laws of the State of New York but without giving effect to applicable
principles of conflicts of law to the extent that the application of the laws
of another jurisdiction would be required thereby.
18. AUTHENTICATION
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
19. ABBREVIATIONS
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uni-forni Gift to Minors
Act).
20. CUSIP NUMBERS
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers
in notices of redemption as a convenience to Securityholders. No
representation is made as to the accuracy of such numbers either as printed
on the Securities or as contained in any notice of redemption and reliance
may
<PAGE>
9
be placed only on the other identification numbers placed thereon.
The Company will furnish to any Securityholder upon written request and
without charge to the Securityholder a copy of the Indenture which has in it
the text of this Security in larger type. Requests may be made to:
Johnstown America Industries, Inc.
980 North Michigan Avenue, Suite, 1000
Chicago, Illinois 60611
Attention: Secretary
<PAGE>
10
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this
Security on the books of the Company. The agent may substitute another to
act for him.
____________________________________________________________________________
Date: ______________ Your Signature: _______________________
____________________________________________________________________________
Sign exactly as your name appears on the other side of this Security.
Signature Guarantee: ______________________________________
<PAGE>
11
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company pursuant
to Section 4.06 or 4.08 of the Indenture. check the box:
/ /
If you want to elect to have only part of this Security purchased by the
Company pursuant to Section 4.06 or 4.08 of the Indenture, state the amount:
$
Date: _________________Your Signature:____________________________________
(Sign exactly as your name appears
on the other side of the Security)
Signature Guarantee:________________________________________
<PAGE>
EXECUTION COPY
JOHNSTOWN AMERICA
INDUSTRIES, INC.
$80,000,000
11 3/4% Series B Senior Subordinated Notes due 2005
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
-------------------------------------------
August 11, 1997
CHASE SECURITIES INC.
270 Park Avenue, 4th floor
New York, New York 10017
Ladies and Gentlemen:
Johnstown America Industries, Inc., a Delaware corporation (the
"COMPANY"), proposes to issue and sell to Chase Securities Inc., (the "INITIAL
PURCHASER"), upon the terms and subject to the conditions set forth in a
purchase agreement dated August 6, 1997 between the Company and the Initial
Purchaser (the "PURCHASE AGREEMENT"), $80,000,000 aggregate principal amount of
its 11 3/4% Series B Senior Subordinated Notes due 2005 (the "SECURITIES") to be
fully and unconditionally guaranteed (the "Guarantees") on an unsecured, senior
subordinated basis by certain subsidiaries of the Company signatory hereto
(collectively, the "Guarantor Subsidiaries"). Capitalized terms used but not
defined herein shall have the meanings given to such terms in the Purchase
Agreement.
As an inducement to the Initial Purchaser to enter into the Purchase
Agreement and in satisfaction of a condition to the obligations of the Initial
Purchaser thereunder, the Company and the Guarantor Subsidiaries agree with the
Initial Purchaser, for the benefit of the holders (including the Initial
Purchaser) of the Securities, the Exchange Securities (as defined herein) and
the Private Exchange Securities (as defined herein) (collectively, the
"HOLDERS"), as follows:
1. REGISTERED EXCHANGE OFFER. The Company shall (i) prepare and, not
later than 30 days following the date of original issuance of the Securities
(the "ISSUE DATE"), file with the Commission a registration statement (the
"EXCHANGE OFFER REGISTRATION STATEMENT") on an appropriate form under the
Securities Act with respect to a proposed offer to the Holders of the Securities
(the "REGISTERED EXCHANGE OFFER") to issue and deliver to such Holders, in
exchange for the Securities, a like aggregate principal amount of debt
securities of the Company (the "EXCHANGE SECURITIES") that are identical in all
material respects to the Securities, except for the transfer restrictions and
the registration rights and liquidated damages provisions relating to the
Securities, (ii) use its reasonable best efforts to cause the Exchange Offer
Registration Statement to become
<PAGE>
2
effective under the Securities Act no later than 90 days after the Issue Date
and the Registered Exchange Offer to be consummated no later than 120 days after
the Issue Date and (iii) keep the Exchange Offer Registration Statement
effective for not less than 30 days (or longer, if required by applicable law)
after the date on which notice of the Registered Exchange Offer is mailed to the
Holders (such period being called the "EXCHANGE OFFER REGISTRATION PERIOD").
The Exchange Securities will be issued under the Indenture or an indenture (the
"EXCHANGE SECURITIES INDENTURE") between the Company and the Trustee or such
other bank or trust company that is reasonably satisfactory to the Initial
Purchaser, as trustee (the "EXCHANGE SECURITIES TRUSTEE"), such indenture to be
identical in all material respects to the Indenture, except for the transfer
restrictions and the registration rights and liquidated damages provisions
relating to the Securities (as described above).
Upon the effectiveness of the Exchange Offer Registration Statement,
the Company shall promptly commence the Registered Exchange Offer, it being the
objective of such Registered Exchange Offer to enable each Holder electing to
exchange Securities for Exchange Securities (assuming that such Holder (a) is
not an affiliate of the Company or an Exchanging Dealer (as defined herein) not
complying with the requirements of the next sentence, (b) is not the Initial
Purchaser and holding Securities that have, or that are reasonably likely to
have, the status of an unsold allotment in an initial distribution, (c) acquires
the Exchange Securities in the ordinary course of such Holder's business and (d)
has no arrangements or understandings with any person to participate in the
distribution of the Exchange Securities) and to trade such Exchange Securities
from and after their receipt without any limitations or restrictions under the
Securities Act and without material restrictions under the securities laws of
the several states of the United States. The Company, the Initial Purchaser and
each Exchanging Dealer acknowledge that, pursuant to current interpretations by
the Commission's staff of Section 5 of the Securities Act, each Holder that is a
broker-dealer electing to exchange Securities, acquired for its own account as a
result of market-making activities or other trading activities, for Exchange
Securities (an "EXCHANGING DEALER"), is required to deliver a prospectus
containing substantially the information set forth in Annex A hereto on the
cover, in Annex B hereto in the "Exchange Offer Procedures" section and the
"Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of
Distribution" section of such prospectus in connection with a sale of any such
Exchange Securities received by such Exchanging Dealer pursuant to the
Registered Exchange Offer.
If, prior to the consummation of the Registered Exchange Offer, any
Holder holds any Securities acquired by it that have, or that are reasonably
likely to be determined to have, the status of an unsold allotment in an initial
distribution, or any Holder is not entitled to participate in the Registered
Exchange Offer, the Company shall, upon the request of any such Holder,
simultaneously with the delivery of the Exchange Securities in the Registered
Exchange Offer, issue and deliver to any such Holder, in exchange for the
Securities held by such Holder (the "PRIVATE EXCHANGE"), a like aggregate
principal amount of debt securities of the Company (the "PRIVATE EXCHANGE
SECURITIES") that are identical in all material respects to the Exchange
Securities, except for the transfer restrictions relating to such Private
Exchange Securities. The Private Exchange Securities will be issued under the
same indenture as the Exchange Securities, and the Company shall use its
reasonable best efforts to cause the Private Exchange Securities to bear the
same CUSIP number as the Exchange Securities.
<PAGE>
3
In connection with the Registered Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter of
transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30 days (or
longer, if required by applicable law) after the date on which notice of the
Registered Exchange Offer is mailed to the Holders;
(c) utilize the services of a depositary for the Registered Exchange Offer
with an address in the Borough of Manhattan, The City of New York;
(d) permit Holders to withdraw tendered Securities at any time prior to
the close of business, New York City time, on the last business day on which the
Registered Exchange Offer shall remain open; and
(e) otherwise comply in all respects with all laws that are applicable to
the Registered Exchange Offer.
As soon as practicable after the close of the Registered Exchange
Offer and any Private Exchange, as the case may be, the Company shall:
(a) accept for exchange all Securities tendered and not validly
withdrawn pursuant to the Registered Exchange Offer and the Private Exchange;
(b) deliver to the Trustee for cancelation all Securities so accepted
for exchange; and
(c) cause the Trustee or the Exchange Securities Trustee, as the case
may be, promptly to authenticate and deliver to each Holder, Exchange Securities
or Private Exchange Securities, as the case may be, equal in principal amount to
the Securities of such Holder so accepted for exchange.
The Company and the Guarantor Subsidiaries shall use their reasonable
best efforts to keep the Exchange Offer Registration Statement effective and to
amend and supplement the prospectus contained therein in order to permit such
prospectus to be used by all persons subject to the prospectus delivery
requirements of the Securities Act for such period of time as such persons must
comply with such requirements in order to resell the Exchange Securities;
PROVIDED that (i) in the case where such prospectus and any amendment or
supplement thereto must be delivered by an Exchanging Dealer, such period shall
be the lesser of 180 days and the date on which all Exchanging Dealers have sold
all Exchange Securities held by them and (ii) the Company shall make such
prospectus and any amendment or supplement thereto available to any broker-
dealer for use in connection with any resale of any Exchange Securities for a
period of not less than 180 days after the consummation of the Registered
Exchange Offer.
<PAGE>
4
The Indenture or the Exchange Securities Indenture, as the case may
be, shall provide that the Securities, the Exchange Securities and the Private
Exchange Securities shall vote and consent together on all matters as one class
and that none of the Securities, the Exchange Securities or the Private Exchange
Securities will have the right to vote or consent as a separate class on any
matter.
Interest on each Exchange Security and Private Exchange Security
issued pursuant to the Registered Exchange Offer and in the Private Exchange
will accrue from the last interest payment date on which interest was paid on
the Securities surrendered in exchange therefor or, if no interest has been paid
on the Securities, from the Issue Date.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Securities received by such Holder
will be acquired in the ordinary course of business, (ii) such Holder will have
no arrangements or understanding with any person to participate in the
distribution of the Securities or the Exchange Securities within the meaning of
the Securities Act and (iii) such Holder is not an affiliate of the Company
within the meaning of Rule 405 of the Securities Act or, if it is such an
affiliate, such Holder will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable.
Notwithstanding any other provisions hereof, the Company and the
Guarantor Subsidiaries will ensure that (i) any Exchange Offer Registration
Statement and any amendment thereto and any prospectus forming part thereof and
any supplement thereto complies in all material respects with the Securities Act
and the rules and regulations of the Commission thereunder, (ii) any Exchange
Offer Registration Statement and any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading and (iii) any prospectus forming part of any Exchange
Offer Registration Statement, and any supplement to such prospectus, does not,
as of the consummation of the Registered Exchange Offer, include an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
2. SHELF REGISTRATION. If (i) because of any change in law or
applicable interpretations thereof by the Commission's staff (A) the Company is
not permitted to effect the Registered Exchange Offer as contemplated by Section
1 hereof, (B) any Holder is not permitted to participate in the Registered
Exchange Offer, (C) any Holder that participates in the Registered Exchange
Offer does not receive freely transferable Exchange Securities in exchange for
tendered Securities, (ii) any Securities validly tendered pursuant to the
Registered Exchange Offer are not exchanged for Exchange Securities within 120
days after the Issue Date, or (iii) the Company so elects, then the following
provisions shall apply:
(a) The Company and the Guarantor Subsidiaries shall use their
reasonable best efforts to file as promptly as practicable (but in no event more
than 30 days after so required or requested pursuant to this Section 2) with the
Commission, and thereafter shall use its reasonable
<PAGE>
5
best efforts to cause to be declared effective, a shelf registration statement
on an appropriate form under the Securities Act relating to the offer and sale
of the Transfer Restricted Securities (as defined below) by the Holders thereof
from time to time in accordance with the methods of distribution set forth in
such registration statement (hereafter, a "SHELF REGISTRATION STATEMENT" and,
together with any Exchange Offer Registration Statement, a "REGISTRATION
STATEMENT").
(b) The Company and the Guarantor Subsidiaries shall use their
reasonable best efforts to keep the Shelf Registration Statement continuously
effective in order to permit the prospectus forming part thereof to be used by
Holders of Transfer Restricted Securities for a period ending on the earlier of
(i) two years from the Issue Date or such shorter period that will terminate
when all the Transfer Restricted Securities covered by the Shelf Registration
Statement have been sold pursuant thereto and (ii) the date on which the
Securities become eligible for resale without volume restrictions pursuant to
Rule 144 under the Securities Act (in any such case, such period being called
the "SHELF REGISTRATION PERIOD"). The Company and the Guarantor Subsidiaries
shall be deemed not to have used their reasonable best efforts to keep the Shelf
Registration Statement effective during the requisite period if the Company or
the Guarantor Subsidiaries voluntarily take any action that would result in
Holders of Transfer Restricted Securities covered thereby not being able to
offer and sell such Transfer Restricted Securities during that period, unless
such action is required by applicable law.
(c) Notwithstanding any other provisions hereof, the Company and the
Guarantor Subsidiaries will ensure that (i) any Shelf Registration Statement and
any amendment thereto and any prospectus forming part thereof and any supplement
thereto complies in all material respects with the Securities Act and the rules
and regulations of the Commission thereunder, (ii) any Shelf Registration
Statement and any amendment thereto (in either case, other than with respect to
information included therein in reliance upon or in conformity with written
information furnished to the Company by or on behalf of any Holder specifically
for use therein (the "HOLDERS' INFORMATION")) does not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) any prospectus forming part of any Shelf Registration Statement, and any
supplement to such prospectus (in either case, other than with respect to
Holders' Information), does not include an untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
3. LIQUIDATED DAMAGES. (a) The parties hereto agree that the Holders
of Transfer Restricted Securities will suffer damages if the Company and the
Guarantor Subsidiaries fail to fulfill their obligations under Section 1 or
Section 2, as applicable, and that it would not be feasible to ascertain the
extent of such damages. Accordingly, if (i) the applicable Registration
Statement is not filed with the Commission on or prior to 30 days after the
Issue Date, (ii) the Exchange Offer Registration Statement or the Shelf
Registration Statement, as the case may be, is not declared effective within
90 days after the Issue Date (or in the case of a Shelf Registration
Statement required to be filed in response to a change in law or the
applicable interpretations of Commission's staff, if later, within 30 days
after publication of the change in law or interpretation), (iii) the
Registered Exchange Offer is not consummated on or prior to 120 days after
the Issue Date, or (iv)
<PAGE>
6
the Shelf Registration Statement is filed and declared effective within 90 days
after the Issue Date (or in the case of a Shelf Registration Statement required
to be filed in response to a change in law or the applicable interpretations of
Commission's staff, if later, within 30 days after publication of the change in
law or interpretation) but shall thereafter cease to be effective (at any time
that the Company is obligated to maintain the effectiveness thereof) without
being succeeded within 30 days by an additional Registration Statement filed and
declared effective (each such event referred to in clauses (i) through (iv), a
"REGISTRATION DEFAULT"), the Company and the Guarantor Subsidiaries will be
jointly and severally obligated to pay liquidated damages to each Holder of
Transfer Restricted Securities, during the period of one or more such
Registration Defaults, in an amount equal to $ 0.192 per week per
$1,000 principal amount of Transfer Restricted Securities held by such Holder
until (i) the applicable Registration Statement is filed, (ii) the Exchange
Offer Registration Statement is declared effective and the Registered
Exchange Offer is consummated, (iii) the Shelf Registration Statement is
declared effective or (iv) the Shelf Registration Statement again becomes
effective, as the case may be. Following the cure of all Registration
Defaults, the accrual of liquidated damages will cease. As used herein, the
term "TRANSFER RESTRICTED SECURITIES" means (i) each Security until the date
on which such Security has been exchanged for a freely transferable Exchange
Security in the Registered Exchange Offer, (ii) each Security or Private
Exchange Security until the date on which it has been effectively registered
under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iii) each Security or Private Exchange Security
until the date on which it is distributed to the public pursuant to Rule 144
under the Securities Act or is saleable pursuant to Rule 144(k) under the
Securities Act. Notwithstanding anything to the contrary in this Section
3(a), the Company and the Guarantor Subsidiaries shall not be required to pay
liquidated damages to a Holder of Transfer Restricted Securities if such
Holder failed to comply with its obligations to make the representations set
forth in the second to last paragraph of Section 1 or failed to provide the
information required to be provided by it, if any, pursuant to Section 4(n).
(b) The Company shall notify the Trustee and the Paying Agent under
the Indenture immediately upon the happening of each and every Registration
Default. The Company and the Guarantor Subsidiaries shall pay the liquidated
damages due on the Transfer Restricted Securities by depositing with the Paying
Agent (which may not be the Company or any Guarantor Subsidiary for these
purposes), in trust, for the benefit of the Holders thereof, prior to 10:00
a.m., New York City time, on the next interest payment date specified by the
Indenture and the Securities, sums sufficient to pay the liquidated damages then
due. The liquidated damages due shall be payable on each interest payment date
specified by the Indenture and the Securities to the record holder entitled to
receive the interest payment to be made on such date. Each obligation to pay
liquidated damages shall be deemed to accrue from and including the date of the
applicable Registration Default.
(c) The parties hereto agree that the liquidated damages provided for
in this Section 3 constitute a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by Holders of Transfer
Restricted Securities by reason of the failure of (i) the Shelf Registration
Statement or the Exchange Offer Registration Statement to be filed, (ii) the
Shelf Registration Statement to remain effective or (iii) the Exchange Offer
Registration Statement to be declared effective and the Registered Exchange
Offer to be consummated, in each case to the extent required by this Agreement.
<PAGE>
7
4. REGISTRATION PROCEDURES. In connection with any Registration
Statement, the following provisions shall apply:
(a) The Company shall (i) furnish to the Initial Purchaser, prior to
the filing thereof with the Commission, a copy of the Registration Statement and
each amendment thereof and each supplement, if any, to the prospectus included
therein and shall use its reasonable best efforts to reflect in each such
document, when so filed with the Commission, such comments as the Initial
Purchaser may reasonably propose; (ii) include the information set forth in
Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer
Procedures" section and the "Purpose of the Exchange Offer" section and in
Annex C hereto in the "Plan of Distribution" section of the prospectus
forming a part of the Exchange Offer Registration Statement, and include the
information set forth in Annex D hereto in the Letter of Transmittal
delivered pursuant to the Registered Exchange Offer; and (iii) if requested
by the Initial Purchaser, include the information required by Items 507 or
508 of Regulation S-K, as applicable, in the prospectus forming a part of the
Exchange Offer Registration Statement.
(b) The Company shall advise the Initial Purchaser and the Holders
(if applicable) and, if requested by any such person, confirm such advice in
writing (which advice pursuant to clauses (ii)-(v) hereof shall be accompanied
by an instruction to suspend the use of the prospectus until the requisite
changes have been made):
(i) when any Registration Statement and any amendment thereto has
been filed with the Commission and when such Registration Statement or any
post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or
supplements to any Registration Statement or the prospectus included
therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of any Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Securities, the
Exchange Securities or the Private Exchange Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; and
(v) of the happening of any event that requires the making of any
changes in any Registration Statement or the prospectus included therein in
order that the statements therein are not misleading and do not omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading.
(c) The Company will make every reasonable effort to obtain the
withdrawal at the earliest possible time of any order suspending the
effectiveness of any Registration Statement.
<PAGE>
8
(d) The Company will furnish to each Holder of Transfer Restricted
Securities included within the coverage of any Shelf Registration Statement,
without charge, at least one conformed copy of such Shelf Registration Statement
and any post-effective amendment thereto, including financial statements and
schedules and, if any such Holder so requests in writing, all exhibits thereto
(including those, if any, incorporated by reference).
(e) The Company will, during the Shelf Registration Period, promptly
deliver to each Holder of Transfer Restricted Securities included within the
coverage of any Shelf Registration Statement, without charge, as many copies of
the prospectus (including each preliminary prospectus) included in such Shelf
Registration Statement and any amendment or supplement thereto as such Holder
may reasonably request; and the Company consents to the use of such prospectus
or any amendment or supplement thereto by each of the selling Holders of
Transfer Restricted Securities in connection with the offer and sale of the
Transfer Restricted Securities covered by such prospectus or any amendment or
supplement thereto.
(f) The Company will furnish to the Initial Purchaser and each
Exchanging Dealer, and to any other Holder who so requests, without charge, at
least one conformed copy of the Exchange Offer Registration Statement and any
post-effective amendment thereto, including financial statements and schedules
and, if the Initial Purchaser or any Exchanging Dealer or any such Holder so
requests in writing, all exhibits thereto (including those, if any, incorporated
by reference).
(g) The Company will, during the Exchange Offer Registration Period
or the Shelf Registration Period, as applicable, promptly deliver to the Initial
Purchaser, each Exchanging Dealer and such other persons that are required to
deliver a prospectus following the Registered Exchange Offer, without charge, as
many copies of the final prospectus included in the Exchange Offer Registration
Statement or the Shelf Registration Statement and any amendment or supplement
thereto as the Initial Purchaser, such Exchanging Dealer or other persons may
reasonably request; and the Company consents to the use of such prospectus or
any amendment or supplement thereto by any such Initial Purchaser, Exchanging
Dealer or other persons, as applicable, as aforesaid.
(h) Prior to the effective date of any Registration Statement, the
Company will use its reasonable best efforts to register or qualify, or
cooperate with the Holders of Securities, Exchange Securities or Private
Exchange Securities included therein and their respective counsel in
connection with the registration or qualification of, such Securities,
Exchange Securities or Private Exchange Securities for offer and sale under
the securities or blue sky laws of such jurisdictions as any such Holder
reasonably requests in writing and do any and all other acts or things
necessary or advisable to enable the offer and sale in such jurisdictions of
the Securities, Exchange Securities or Private Exchange Securities covered by
such Registration Statement; PROVIDED that the Company will not be required
to qualify generally to do business in any jurisdiction where it is not then
so qualified or to take any action which would subject it to general service
of process or to taxation in any such jurisdiction where it is not then so
subject.
<PAGE>
9
(i) The Company will cooperate with the Holders of Securities,
Exchange Securities or Private Exchange Securities to facilitate the timely
preparation and delivery of certificates representing Securities, Exchange
Securities or Private Exchange Securities to be sold pursuant to any Registra-
tion Statement free of any restrictive legends and in such denominations and
registered in such names as the Holders thereof may request in writing prior to
sales of Securities, Exchange Securities or Private Exchange Securities pursuant
to such Registration Statement.
(j) If any event contemplated by Section 4(b)(ii) through (v) occurs
during the period for which the Company is required to maintain an effective
Registration Statement, the Company will promptly prepare and file with the
Commission a post-effective amendment to the Registration Statement or a
supplement to the related prospectus or file any other required document so
that, as thereafter delivered to purchasers of the Securities, Exchange Securi-
ties or Private Exchange Securities from a Holder, the prospectus will not
include an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the circum-
stances under which they were made, not misleading.
(k) Not later than the effective date of the applicable Registration
Statement, the Company will provide a CUSIP number for the Securities, the
Exchange Securities and the Private Exchange Securities, as the case may be, and
provide the applicable trustee with printed certificates for the Securities, the
Exchange Securities or the Private Exchange Securities, as the case may be, in a
form eligible for deposit with The Depository Trust Company.
(l) The Company will comply with all applicable rules and regulations
of the Commission and will make generally available to its security holders as
soon as practicable after the effective date of the applicable Registration
Statement an earning statement satisfying the provisions of Section 11(a) of the
Securities Act; PROVIDED that in no event shall such earning statement be
delivered later than 45 days after the end of a 12-month period (or 90 days, if
such period is a fiscal year) beginning with the first month of the Company's
first fiscal quarter commencing after the effective date of the applicable
Registration Statement, which statement shall cover such 12-month period.
(m) The Company will cause the Indenture or the Exchange Securities
Indenture, as the case may be, to be qualified under the Trust Indenture Act as
required by applicable law in a timely manner.
(n) The Company may require each Holder of Transfer Restricted
Securities to be registered pursuant to any Shelf Registration Statement to
furnish to the Company such information concerning the Holder and the distribu-
tion of such Transfer Restricted Securities as the Company may from time to time
reasonably require for inclusion in such Shelf Registration Statement, and the
Company may exclude from such registration the Transfer Restricted Securities of
any Holder that fails to furnish such information within a reasonable time after
receiving such request.
(o) In the case of a Shelf Registration Statement, each Holder of
Transfer Restricted Securities to be registered pursuant thereto agrees by
acquisition of such Transfer Restricted
<PAGE>
10
Securities that, upon receipt of any notice from the Company pursuant to Section
4(b)(ii) through (v), such Holder will discontinue disposition of such Transfer
Restricted Securities until such Holder's receipt of copies of the supplemental
or amended prospectus contemplated by Section 4(j) or until advised in writing
(the "ADVICE") by the Company that the use of the applicable prospectus may be
resumed. If the Company shall give any notice under Section 4(b)(ii) through
(v) during the period that the Company is required to maintain an effective
Registration Statement (the "EFFECTIVENESS PERIOD"), such Effectiveness Period
shall be extended by the number of days during such period from and including
the date of the giving of such notice to and including the date when each seller
of Transfer Restricted Securities covered by such Registration Statement shall
have received (x) the copies of the supplemental or amended prospectus
contemplated by Section 4(j) (if an amended or supplemental prospectus is
required) or (y) the Advice (if no amended or supplemental prospectus is
required).
(p) In the case of a Shelf Registration Statement, the Company shall
enter into such customary agreements (including, if requested, an underwriting
agreement in customary form) and take all such other action, if any, as Holders
of a majority in aggregate principal amount of the Securities, Exchange Securi-
ties and Private Exchange Securities being sold or the managing underwriters (if
any) shall reasonably request in order to facilitate any disposition of Securi-
ties, Exchange Securities or Private Exchange Securities pursuant to such Shelf
Registration Statement.
(q) In the case of a Shelf Registration Statement, the Company shall
(i) make reasonably available for inspection by a representative of, and Special
Counsel (as defined below) acting for, Holders of a majority in aggregate
principal amount of the Securities, Exchange Securities and Private Exchange
Securities being sold and any underwriter participating in any disposition of
Securities, Exchange Securities or Private Exchange Securities pursuant to such
Shelf Registration Statement, all relevant financial and other records, perti-
nent corporate documents and properties of the Company and its subsidiaries and
(ii) use its reasonable best efforts to have its officers, directors, employees,
accountants and counsel supply all relevant information reasonably requested by
such representative, Special Counsel or any such underwriter (an "INSPECTOR") in
connection with such Shelf Registration Statement.
(r) In the case of a Shelf Registration Statement, the Company shall,
if requested by Holders of a majority in aggregate principal amount of the
Securities, Exchange Securities and Private Exchange Securities being sold,
their Special Counsel or the managing underwriters (if any) in connection with
such Shelf Registration Statement, use its reasonable best efforts to cause (i)
its counsel to deliver an opinion relating to the Shelf Registration Statement
and the Securities, Exchange Securities or Private Exchange Securities, as
applicable, in customary form, (ii) its officers to execute and deliver all
customary documents and certificates requested by Holders of a majority in
aggregate principal amount of the Securities, Exchange Securities and Private
Exchange Securities being sold, their Special Counsel or the managing underwrit-
ers (if any) and (iii) its independent public accountants to provide a comfort
letter or letters in customary form, subject to receipt of appropriate documen-
tation as contemplated, and only if permitted, by Statement of Auditing Stan-
dards No. 72.
<PAGE>
11
5. REGISTRATION EXPENSES. The Company and the Guarantor Subsidiaries
will bear all expenses incurred in connection with the performance of its
obligations under Sections 1, 2, 3 and 4 and the Company and the Guarantor
Subsidiaries will reimburse the Initial Purchaser and the Holders for the
reasonable fees and disbursements of one firm of attorneys (in addition to any
local counsel) chosen by the Holders of a majority in aggregate principal amount
of the Securities, the Exchange Securities and the Private Exchange Securities
to be sold pursuant to each Registration Statement (the "SPECIAL COUNSEL")
acting for the Initial Purchaser or Holders in connection therewith.
6. INDEMNIFICATION. (a) In the event of a Shelf Registration
Statement or in connection with any prospectus delivery pursuant to an Exchange
Offer Registration Statement by an Initial Purchaser or Exchanging Dealer, as
applicable, the Company and each of the Guarantor Subsidiaries shall indemnify
and hold harmless each Holder (including, without limitation, any Initial
Purchaser or Exchanging Dealer), its affiliates, their respective officers,
directors, employees, representatives and agents, and each person, if any, who
controls such Holder within the meaning of the Securities Act or the Exchange
Act (collectively referred to for purposes of this Section 6 and Section 7 as a
Holder) from and against any loss, claim, damage or liability, joint or several,
or any action in respect thereof (including, without limitation, any loss,
claim, damage, liability or action relating to purchases and sales of
Securities, Exchange Securities or Private Exchange Securities), to which that
Holder may become subject, whether commenced or threatened, under the Securities
Act, the Exchange Act, any other federal or state statutory law or regulation,
at common law or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in any such Registration Statement
or any prospectus forming part thereof or in any amendment or supplement thereto
or (ii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and shall reimburse each Holder promptly upon demand for any legal
or other expenses reasonably incurred by that Holder in connection with
investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; PROVIDED, HOWEVER, that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability or action arises out of, or is based upon, an untrue statement
or alleged untrue statement in or omission or alleged omission from any of such
documents in reliance upon and in conformity with any Holders' Information; and
PROVIDED, FURTHER, that with respect to any such untrue statement in or omission
from any related preliminary prospectus, the indemnity agreement contained in
this Section 6(a) shall not inure to the benefit of any Holder from whom the
person asserting any such loss, claim, damage, liability or action received
Securities, Exchange Securities or Private Exchange Securities to the extent
that such loss, claim, damage, liability or action of or with respect to such
Holder results from the fact that both (A) a copy of the final prospectus was
not sent or given to such person at or prior to the written confirmation of the
sale of such Securities, Exchange Securities or Private Exchange Securities to
such person and (B) the untrue statement in or omission from the related
preliminary prospectus was corrected in the final prospectus unless, in either
case, such failure to deliver the final prospectus was a result of non-
compliance by the Company with Section 4(d), 4(e), 4(f) or 4(g).
<PAGE>
12
(b) In the event of a Shelf Registration Statement, each Holder shall
indemnify and hold harmless the Company, its affiliates, their respective
officers, directors, employees, representatives and agents, and each person, if
any, who controls the Company within the meaning of the Securities Act or the
Exchange Act (collectively referred to for purposes of this Section 6(b) and
Section 7 as the Company), from and against any loss, claim, damage or liabili-
ty, joint or several, or any action in respect thereof, to which the Company may
become subject, whether commenced or threatened, under the Securities Act, the
Exchange Act, any other federal or state statutory law or regulation, at common
law or otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged untrue
statement of a material fact contained in any such Registration Statement or any
prospectus forming part thereof or in any amendment or supplement thereto or
(ii) the omission or alleged omission to state therein a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading, but
in each case only to the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with any Holders' Information furnished to the Company by such
Holder, and shall reimburse the Company for any legal or other expenses reason-
ably incurred by the Company in connection with investigating or defending or
preparing to defend against or appearing as a third party witness in connection
with any such loss, claim, damage, liability or action as such expenses are
incurred; PROVIDED, HOWEVER, that no such Holder shall be liable for any
indemnity claims hereunder in excess of the amount of net proceeds received by
such Holder from the sale of Securities, Exchange Securities or Private Exchange
Securities pursuant to such Shelf Registration Statement.
(c) Promptly after receipt by an indemnified party under this Section
6 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the indemnify-
ing party pursuant to Section 6(a) or 6(b), notify the indemnifying party in
writing of the claim or the commencement of that action; PROVIDED, HOWEVER, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 6 except to the extent that it
has been materially prejudiced (through the forfeiture of substantive rights or
defenses) by such failure; and PROVIDED, FURTHER, that the failure to notify the
indemnifying party shall not relieve it from any liability which it may have to
an indemnified party otherwise than under this Section 6. If any such claim or
action shall be brought against an indemnified party, and it shall notify the
indemnifying party thereof, the indemnifying party shall be entitled to partici-
pate therein and, to the extent that it wishes, jointly with any other similarly
notified indemnifying party, to assume the defense thereof with counsel reason-
ably satisfactory to the indemnified party. After notice from the indemnifying
party to the indemnified party of its election to assume the defense of such
claim or action, the indemnifying party shall not be liable to the indemnified
party under this Section 6 for any legal or other expenses subsequently incurred
by the indemnified party in connection with the defense thereof other than the
reasonable costs of investigation; PROVIDED, HOWEVER, that an indemnified party
shall have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel for the indemnified party will be at
the expense of such indemnified party unless (1) the employment of counsel by
the indemnified party has been authorized in writing by the indemnifying party,
(2) the
<PAGE>
13
indemnified party has reasonably concluded (based upon advice of counsel to the
indemnified party) that there may be legal defenses available to it or other
indemnified parties that are different from or in addition to those available to
the indemnifying party, (3) a conflict or potential conflict exists (based upon
advice of counsel to the indemnified party) between the indemnified party and
the indemnifying party (in which case the indemnifying party will not have the
right to direct the defense of such action on behalf of the indemnified party)
or (4) the indemnifying party has not in fact employed counsel reasonably
satisfactory to the indemnified party to assume the defense of such action
within a reasonable time after receiving notice of the commencement of the
action, in each of which cases the reasonable fees, disbursements and other
charges of counsel will be at the expense of the indemnifying party or parties.
It is understood that the indemnifying party or parties shall not, in connection
with any proceeding or related proceedings in the same jurisdiction, be liable
for the reasonable fees, disbursements and other charges of more than one
separate firm of attorneys (in addition to any local counsel) at any one time
for all such indemnified party or parties. Each indemnified party, as a
condition of the indemnity agreements contained in Sections 6(a) and 6(b), shall
use all reasonable efforts to cooperate with the indemnifying party in the
defense of any such action or claim. No indemnifying party shall be liable for
any settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with its written
consent or if there be a final judgment for the plaintiff in any such action,
the indemnifying party agrees to indemnify and hold harmless any indemnified
party from and against any loss or liability by reason of such settlement or
judgment. No indemnifying party shall, without the prior written consent of the
indemnified party (which consent shall not be unreasonably withheld), effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
7. CONTRIBUTION. If the indemnification provided for in Section 6 is
unavailable or insufficient to hold harmless an indemnified party under Section
6(a) or 6(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Company and the Guarantor Subsidiaries from the
offering and sale of the Securities, on the one hand, and a Holder with respect
to the sale by such Holder of Securities, Exchange Securities or Private
Exchange Securities, on the other, or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company and the Guarantor Subsidiaries
on the one hand and such Holder on the other with respect to the statements or
omissions that resulted in such loss, claim, damage or liability, or action in
respect thereof, as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Guarantor Subsidiaries on the
one hand and a Holder on the other with respect to such offering and such sale
shall be deemed to be in the same proportion as the total net proceeds from the
offering of the Securities (before deducting expenses) received by or on behalf
of the Company as set forth in the "Use of Proceeds" section in the Offering
Memorandum, on the one hand, bear to the total proceeds received by such Holder
with respect to its sale of Securities,
<PAGE>
14
Exchange Securities or Private Exchange Securities, on the other. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to the Company and the Guarantor
Subsidiaries or information supplied by the Company and the Guarantor
Subsidiaries on the one hand or to any Holders' Information supplied by such
Holder on the other, the intent of the parties and their relative knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The parties hereto agree that it would not be just and
equitable if contributions pursuant to this Section 7 were to be determined by
PRO RATA allocation or by any other method of allocation that does not take into
account the equitable considerations referred to herein. The amount paid or
payable by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this Section 7
shall be deemed to include, for purposes of this Section 7, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending or preparing to defend any such action or claim.
Notwithstanding the provisions of this Section 7, an indemnifying party that is
a Holder of Securities, Exchange Securities or Private Exchange Securities shall
not be required to contribute any amount in excess of the amount by which the
total price at which the Securities, Exchange Securities or Private Exchange
Securities sold by such indemnifying party to any purchaser exceeds the amount
of any damages which such indemnifying party has otherwise paid or become liable
to pay by reason of any untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
8. RULES 144 AND 144A. The Company shall use its reasonable best
efforts to file the reports required to be filed by it under the Securities Act
and the Exchange Act in a timely manner and, if at any time the Company is not
required to file such reports, it will, upon the written request of any Holder
of Transfer Restricted Securities, make publicly available other information so
long as necessary to permit sales of such Holder's securities pursuant to Rules
144 and 144A. The Company covenants that it will take such further action as
any Holder of Transfer Restricted Securities may reasonably request, all to the
extent required from time to time to enable such Holder to sell Transfer
Restricted Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rules 144 and 144A (including, without
limitation, the requirements of Rule 144A(d)(4)). Upon the written request of
any Holder of Transfer Restricted Securities, the Company shall deliver to such
Holder a written statement as to whether it has complied with such requirements.
Notwithstanding the foregoing, nothing in this Section 8 shall be deemed to
require the Company to register any of its securities pursuant to the Exchange
Act.
9. UNDERWRITTEN REGISTRATIONS. If any of the Transfer Restricted
Securities covered by any Shelf Registration Statement are to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will administer the offering will be selected by the Holders of
a majority in aggregate principal amount of such Transfer Restricted Securities
included in such offering, subject to the consent of the Company (which shall
not be unreasonably withheld or delayed), and such Holders shall be responsible
for all underwriting commissions and discounts in connection therewith.
<PAGE>
15
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
10. MISCELLANEOUS. (a) AMENDMENTS AND WAIVERS. The provisions of
this Agreement may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the
Company has obtained the written consent of Holders of a majority in aggregate
principal amount of the Securities, the Exchange Securities and the Private
Exchange Securities, taken as a single class. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of Holders whose Securities, Exchange
Securities or Private Exchange Securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other Holders may be given by Holders of a majority in aggregate
principal amount of the Securities, the Exchange Securities and the Private
Exchange Securities being sold by such Holders pursuant to such Registration
Statement.
(b) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telecopier or air courier guaranteeing next-day delivery:
(1) if to a Holder, at the most current address given by such
Holder to the Company in accordance with the provisions of this
Section 10(b), which address initially is, with respect to each
Holder, the address of such Holder maintained by the Registrar under
the Indenture, with a copy in like manner to CSI;
(2) if to the Initial Purchaser, initially at its address set
forth in the Purchase Agreement; and
(3) if to the Company, initially at the address of the Company
set forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; one business day after
being delivered to a next-day air courier; five business days after being
deposited in the mail; and when receipt is acknowledged by the recipient's
telecopier machine, if sent by telecopier.
(c) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Company and its successors and assigns.
(d) COUNTERPARTS. This Agreement may be executed in any number of
counterparts (which may be delivered in original form or by telecopier) and by
the parties hereto in separate
<PAGE>
16
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
(e) DEFINITION OF TERMS. For purposes of this Agreement, (a) the
term "business day" means any day on which the New York Stock Exchange, Inc. is
open for trading, (b) the term "subsidiary" has the meaning set forth in
Rule 405 under the Securities Act and (c) except where otherwise expressly
provided, the term "affiliate" has the meaning set forth in Rule 405 under the
Securities Act.
(f) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(G) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(h) REMEDIES. In the event of a breach by the Company or by any
Holder of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law, including recovery of damages (other than the recovery of
damages for a breach by the Company of its obligations under Sections 1 or 2
hereof for which liquidated damages have been paid pursuant to Section 3
hereof), will be entitled to specific performance of its rights under this
Agreement. The Company and each Holder agree that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of any
of the provisions of this Agreement and hereby further agree that, in the event
of any action for specific performance in respect of such breach, it shall waive
the defense that a remedy at law would be adequate.
(i) NO INCONSISTENT AGREEMENTS. The Company and each of the Guaran-
tor Subsidiaries represent, warrant and agree that (i) they have not entered
into and shall not, on or after the date of this Agreement, enter into any
agreement that is inconsistent with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof, (ii) they have not
previously entered into any agreement which remains in effect granting any
registration rights with respect to any of its debt securities to any person and
(iii) without limiting the generality of the foregoing, without the written
consent of the Holders of a majority in aggregate principal amount of the then
outstanding Transfer Restricted Securities, they shall not grant to any person
the right to request the Company to register any debt securities of the Company
or any of the Guarantor Subsidiaries under the Securities Act unless the rights
so granted are not in conflict or inconsistent with the provisions of this
Agreement.
(j) NO PIGGYBACK ON REGISTRATIONS. Neither the Company nor any of
its security holders (other than the Holders of Transfer Restricted Securities
in such capacity) shall have the right to include any securities of the Company
in any Shelf Registration or Registered Exchange Offer other than Transfer
Restricted Securities.
<PAGE>
17
(k) SEVERABILITY. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable best efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
<PAGE>
18
Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Guarantor Subsidiaries and the Initial Purchaser.
Very truly yours,
JOHNSTOWN AMERICA INDUSTRIES, INC.
By /s/ Thomas M. Begel
------------------------------------
Name: Thomas M. Begel
Title: Chairman, Chief Executive Officer
and President
JOHNSTOWN AMERICA CORPORATION
By /s/ Kenneth M. Tallering
-----------------------------------
Name: Kenneth M. Tallering
Title: Secretary and Assistant Treasurer
JAC PATENT CORPORATION
By /s/ Kenneth M. Tallering
-----------------------------------
Name: Kenneth M. Tallering
Title: Secretary and Assistant Treasurer
FREIGHT CAR SERVICES, INC.
By /s/ Kenneth M. Tallering
-----------------------------------
Name: Kenneth M. Tallering
Title: Secretary and Assistant Treasurer
BOSTROM HOLDINGS, INC.
By /s/ Kenneth M. Tallering
------------------------------------
Name: Kenneth M. Tallering
Title: Vice President, Secretary and
Assistant Treasurer
<PAGE>
19
BOSTROM SEATING, INC.
By /s/ Kenneth M. Tallering
------------------------------------
Name: Kenneth M. Tallering
Title: Secretary and Assistant Treasurer
TRUCK COMPONENTS, INC.
By /s/ Kenneth M. Tallering
------------------------------------
Name: Kenneth M. Tallering
Title: Secretary
GUNITE CORPORATION
By /s/ Kenneth M. Tallering
------------------------------------
Name: Kenneth M. Tallering
Title: Secretary
BRILLION IRON WORKS, INC.
By /s/ Kenneth M. Tallering
------------------------------------
Name: Kenneth M. Tallering
Title: Secretary
FABCO AUTOMOTIVE CORPORATION
By /s/ Kenneth M. Tallering
------------------------------------
Name: Kenneth M. Tallering
Title: Secretary
JAII MANAGEMENT COMPANY.
By /s/ Kenneth M. Tallering
------------------------------------
Name: Kenneth M. Tallering
Title: Vice President and Secretary
<PAGE>
20
Accepted:
CHASE SECURITIES INC.
By /s/ Gerard J. Murray
---------------------------------
Authorized Signatory
ANNEX A
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Securities received in exchange for
Securities where such Securities were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date (as defined herein), it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution"
<PAGE>
21
ANNEX B
Each broker-dealer that receives Exchange Securities for its own
account in exchange for Securities, where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution".
<PAGE>
22
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Securities
received in exchange for Securities where such Securities were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that, for a period of 180 days after the Expiration Date, it will make
this prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until _______________,
199_, all dealers effecting transactions in the Exchange Securities may be
required to deliver a prospectus.
The Company will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers
for their own account pursuant to the Registered Exchange Offer may be sold from
time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange
Securities or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer or the
purchasers of any such Exchange Securities. Any broker-dealer that resells
Exchange Securities that were received by it for its own account pursuant to the
Registered Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Securities may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such resale of
Exchange Securities and any commission or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that, by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Registered Exchange Offer (including the expenses of one counsel
for the Holders of the Securities) other than
<PAGE>
23
commissions or concessions of any broker-dealers and will indemnify the Holders
of the Securities (including any broker-dealers) against certain liabilities,
including liabilities under the Securities Act.
<PAGE>
23
ANNEX D
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
<PAGE>
Exhibit 4.7
AMENDMENT NO 3, CONSENT AND WAIVER dated as of August 4,
1997 (this "Amendment"), to the Credit Agreement dated as of
August 23, 1995, as amended by Amendment No. 1 thereto dated as
of December 31, 1995, and Amendment No. 2 thereto dated as of
December 31, 1996 (the "Credit Agreement"), among JOHNSTOWN
AMERICA INDUSTRIES INC., a Delaware corporation (the "Borrower"),
the Lenders (as defined in the Credit Agreement), THE CHASE
MANHATTAN BANK, a New York banking corporation formerly known as
Chemical Bank, as swingline lender (in such capacity, the
"Swingline Lender"), as administrative agent (in such capacity,
the "Administrative Agent") and as collateral agent (in such
capacity, the "Collateral Agent") for the Lenders, THE FIRST
NATIONAL. BANK OF BOSTON and THE FIRST NATIONAL BANK OF CHICAGO,
as co-agents (in such capacity, the "Co-Agents"), and THE CHASE
MANHATTAN BANK DELAWARE, a Delaware banking corporation formerly
known as Chemical Bank Delaware, as Issuing Bank (as defined in
the Credit Agreement).
A. Pursuant to the Credit Agreement, the Lenders and the Issuing
Bank have extended and agreed to extend credit to the Borrower, in each case
pursuant to the terms and subject to the conditions set forth therein.
B. The Borrower has informed the Administrative Agent that it
proposes (i) to issue up to $100,000,000 aggregate principal amount of its
11-3/4% Series B Senior Subordinated Notes due 2005 (the "Additional
Subordinated Notes") having covenants, events of default and other terms and
provisions (including with respect to the subordination thereof)
substantially identical to the Borrower's existing Subordinated Notes and
(ii) concurrently with the issuance of the Additional Subordinated Notes and
conditioned thereupon, to permanently reduce the Total Revolving Credit
Commitment from $100,000,000 to $75,000,000 (the "Commitment Reduction").
C. The Borrower has requested that the Required Lenders (i) consent
to the issuance by the Borrower of the Additional Subordinated Notes, (ii) waive
compliance by the Borrower with the provisions of Section 6.01 of the Credit
Agreement to the extent necessary to allow the issuance of the Additional
Subordinated Note, (iii) waive the irrevocable notice required by Section
2.09(b) of the Credit Agreement in connection with the Commitment Reduction,
(iv) waive any prepayment of Term Loans that would otherwise be required in
respect of the year ending December 31, 1997, under Section 2.13(e) (Excess Cash
Flow) of the Credit Agreement and (v) agree to amend certain provisions of the
Credit Agreement as set forth herein.
D. The Required Lenders are willing so to amend the Credit Agreement
and to grant such consent and waivers pursuant to the terms and subject to the
conditions set forth herein.
E. Capitalized terms used and not otherwise defined herein shall
have the meanings assigned to them in the Credit Agreement.
<PAGE>
Accordingly, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. CONSENT AND WAIVERS. (a) The Required Lenders
hereby consent to the issuance by the Borrower of the Additional
Subordinated Notes, PROVIDED that the Net Cash Proceeds thereof are used to
prepay the Term Loans pursuant to and in accordance with Section 2.13 of
the Credit Agreement.
(b) The Required Lenders hereby waive (i) compliance by the Borrower
with the provisions of Section 6.01 of the Credit Agreement to the extent,
and only to the extent, necessary to permit the issuance by the Borrower of
the Additional Subordinated Notes, (ii) the three Business Days' prior
irrevocable notice required by Section 2.09(h) of the Credit Agreement with
respect to the Commitment Reduction and (iii) compliance by the Borrower
with Section 2.13(e) of the Credit Agreement with respect to the year
ending December 31, 1997.
SECTION 2. AGREEMENT. The Borrower hereby agrees to apply
100% of the Net Cash Proceeds of the Additional Subordinated Notes to
prepay outstanding Term Loans in accordance with Section 2.13 of the Credit
Agreement. In connection therewith, the Borrower hereby elects, pursuant
to Section 2.13(h) of the Credit Agreement, to apply such Net Cash Proceeds
initially to the scheduled installments of principal of the Term Loans
coming due on September 30, 1997, and December 31, 1997.
SECTION 3. AMENDMENT TO SECTION 6.10 OF THE CREDIT AGREEMENT.
Section 6.10 to the Credit Agreement is hereby amended and restated in its
entirety to read as follows:
SECTION 6.10 TOTAL DEBT RATIO. Permit the ratio of (i) Total
Debt as of the last day of any fiscal quarter ending on any date or during
any period set forth below to (ii) Consolidated EBITDA for the period of
four consecutive fiscal quarters ending on such date, to be in excess of
the ratio set forth below opposite such date or period:
Date or Period Ratio
-------------- -----
June 30, 1997 through and
including September 30, 1997 5.75 to 1
December 3l, 1997 5.50 to 1
March 31, 1998 through
and including June 30, 1998 5.25 to 1
-2-
<PAGE>
September 30, 1998 through
and including December 31, 1999 5.00 to 1
March 31, 2000 through
and including December 31, 2000 4.75 to 1
March 31, 2001 through
and including December 31, 2001 4.25 to 1
March 31, 2002 and thereafter 3.75 to 1
SECTION 4. AMENDMENT TO SECTION 6.11 OF THE CREDIT AGREEMENT
Section 6.11 of the Credit Agreement is hereby amended and restated in its
entirety to read as follows:
"SECTION 6.11. INTEREST COVERAGE RATIO. Permit the ratio of
(i) Consolidated EBITDA minus Consolidated Capital Expenditures to
(ii) Consolidated Interest Expense for any period of four consecutive
fiscal quarters ending on any date or during any period set forth below to
be less than the ratio set forth below opposite such date or period:
Date or Period Ratio
--------------- -----
June 30, 1997 through
and including December 31, 1997 1.30 to 1
March 31, 1998 through and
including June 30, 1998 1.35 to 1
September 30, 1998 1.40 to 1
December 31, 1998 through
and including December 31, 2001 1.50 to 1"
March 31, 2002 and thereafter 1.75 to 1
SECTION 5. AMENDMENT TO SECTION 6.12 OF THE CREDIT AGREEMENT.
Section 6.12 of the Credit Agreement is hereby amended and restated in its
entirety to read as follows:
"SECTION 6.12 NET WORTH. Permit Consolidated Net Worth on
(a) June 30, 1997, to be less than $53,000,000, or (b) on the last day of
any fiscal quarter ending after June 30, 1997, to be less than the sum of
(i) $53,000,000 plus (ii) 50% of the cumulative amount of positive
Consolidated Net Income for each fiscal quarter after June 30, 1997."
-3-
<PAGE>
SECTION 6. REPRESENTATIONS AND WARRANTIES. To induce the other
parties hereto to enter into this Amendment, the Borrower represents and
warrants to each other party hereto that, after giving effect to this Amendment,
(a) the representations and warranties set forth in Article III of the Credit
Agreement will be true and correct in all material respects on and as of the
date hereof, except to the extent such representations and warranties expressly
relate to an earlier date, and (b) no Default or Event of Default will have
occurred and be continuing.
SECTION 7. AMENDMENT FEE. The Borrower hereby agrees to pay to
the Administrative Agent, for the account of each Lender that delivers to the
Administrative Agent on or prior to August 4, 1997, a validly executed
counterpart hereof, an amendment fee (the "Amendment Fee") equal to 0.10% of the
aggregate outstanding amount of the sum of the Loans (other than Swingline
Loans), L/C Exposure, Swingline Exposure and unused Revolving Credit Commitments
of such Lender. The Amendment Fee will be payable by wire transfer of
immediately available funds concurrently with the prepayment of Term Loans
contemplated by Section 2 hereof, and shall be calculated after giving effect to
the Commitment Reduction and such prepayment of Term Loans. Once paid, no
portion of the Amendment Fee shall be refundable.
SECTION 8. EFFECTIVENESS; COMMITMENT REDUCTION. (a) This
Amendment shall become effective at such time as the Administrative Agent shall
have received counterparts hereof which, when taken together, bear the
signatures of the Borrower and the Required Lenders.
(b) The consent and waivers contained in Section 1 hereof and the
agreement and amendments contained in Sections 2, 3 and 4 hereof shall cease to
be effective if Additional Subordinated Notes in an aggregate principal amount
of not less than $50,000,000 shall not have been issued on or prior to September
30, 1997.
(c) Upon the issuance of the Additional Subordinated Notes on or
prior to September 30, 1997, the Total Revolving Credit Commitment shall be
reduced from $100,000,000 to $7,000,000.
SECTION 9. EFFECT OF AMENDMENT. Except as expressly set forth
herein, this Amendment shall not by implication or otherwise limit, impair,
constitute a waiver of, or otherwise affect, the rights and remedies of the
Lenders or the Administrative Agent under the Credit Agreement or any other Loan
Document, and shall not alter, modify, amend or in any way affect any of the
terms, conditions, obligations, covenants or agreements contained in the Credit
Agreement or any other Loan Document, all of which are ratified and affirmed in
all respects and shall continue in full force and effect. Nothing herein shall
be deemed to entitle the Borrower to a consent to, or a waiver, amendment,
modification or other change of, any of the terms, conditions, obligations,
covenants or agreements contained in the Credit Agreement or any other Loan
Document in similar or different circumstances. This Amendment shall apply and
be effective only with respect to the provisions of the Credit Agreement
specifically referred to herein and shall constitute a "Loan Document" for all
purposes of the Credit Agreement and the other Loan Documents.
-4-
<PAGE>
SECTION 10. EXPENSES. The Borrower agrees to pay the reasonable
out-of-pocket costs and expenses incurred by the Administrative Agent in
connection with the preparation of this Amendment.
SECTION 11. COUNTERPARTS. This Amendment may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each of which when so executed and delivered shall be deemed an original, but
all of which together shall constitute a single instrument. Delivery of an
executed counterpart of a signature page of this Amendment by facsimile
transmission shall be as effective as delivery of a manually executed
counterpart hereof.
SECTION 12. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 13. HEADINGS. The headings of this Amendment are for
purposes of reference only and shall not limit or otherwise affect the meaning
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their duly authorized officers, all as of the date and year
first above written.
JOHNSTOWN AMERICA INDUSTRIES, INC.,
by
/s/ David W. Riesmeyer
--------------------------------------------
Name: David W. Riesmeyer
Title: Vice President & Treasurer
THE CHASE MANHATTAN BANK, individually and as
Administrative Agent, Collateral Agent and
Swingline Lender,
by
/s/ Julie S. Long
--------------------------------------------
Name: Julie S. Long
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON,
individually and as Co-Agent
by
/s/ Dexter Freeman
--------------------------------------------
Name: Dexter Freeman
Title: Director
-5-
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO,
individually and as Co-Agent
by
/s/ Karen F. Kizer
--------------------------------------------
Name: Karen F. Kizer
Title: Senior Vice President
THE BANK OF NEW YORK
by
/s/ John C. Lambert
--------------------------------------------
Name: John C. Lambert
Title: Vice President
THE BANK OF NOVA SCOTIA,
by
/s/ F.C.H. Ashby
--------------------------------------------
Name: F.C.H. Ashby
Title: Senior Manager Loan Operations
CANADIAN IMPERIAL BANK OF COMMERCE, ATLANTA
AGENCY,
by
/s/ William J. Koslo, Jr.
--------------------------------------------
Name: William J. Koslo, Jr.
Title: Director
CAISSE NATIONALE DE CREDIT AGRICOLE
by
/s/ Katherine L. Abbott
--------------------------------------------
Name: Katherine L. Abbott
Title: First Vice President
CREDIT LYONNAIS CHICAGO BRANCH,
by
/s/ Matthew Kirst
--------------------------------------------
Name: Matthew Kirst
Title: Vice President
-6-
<PAGE>
CREDITANSTALT CORPORATE FINANCE, INC.,
by
/s/ Christina T. Schoen
--------------------------------------------
Name: Christina T. Schoen
Title: Vice President
by
/s/ Richard P. Buckanavage
--------------------------------------------
Name: Richard P. Buckanavage
Title: Vice President
FIRST SOURCE FINANCIAL LLP,
by FIRST SOURCE FINANCIAL, INC., its
Agent/Manager
by
/s/ James W. Wilson
--------------------------------------------
Name: James W. Wilson
Title: Senior Vice President
THE FUJI BANK LIMITED, CHICAGO BRANCH,
by
/s/ Peter L. Chinnici
--------------------------------------------
Name: Peter L. Chinnici
Title: Joint General Manager
JOHNSTOWN BANK & TRUST COMPANY,
by
/s/ Roger D. Landers
--------------------------------------------
Name: Roger D. Landers
Title: Vice President
-7-
<PAGE>
MERRILL LYNCH SENIOR FLOATING RATE FUND,
INC.,
by
/s/ Gilles Marchand, CFA
--------------------------------------------
Name: Gilles Marchand, CFA
Title: Authorized Signatory
THE MITSUBISHI TRUST AND BANKING CORPORATION,
by
/s/ Genichiro Chiba
--------------------------------------------
Name: Genichiro Chiba
Title: Deputy General Manager
NATIONAL BANK OF CANADA,
by
/s/ C.F. "Boot" Martin, Jr.
--------------------------------------------
Name: C.F. "Boot" Martin, Jr.
Title: Vice President & Branch Mgr.
by
/s/ William W. Mucker
--------------------------------------------
Name: William W. Mucker
Title: Assistant Vice President
NBD BANK,
by
/s/ Karen F. Kizer
--------------------------------------------
Name: Karen F. Kizer
Title: Senior Vice President
THE NORTHERN TRUST COMPANY,
by
/s/ David Sullivan
--------------------------------------------
Name: David Sullivan
Title: Officer
-8-
<PAGE>
THE SUMITOMO TRUST AND BANKING CO., LTD.,
by
/s/ Suraj P. Bhatia
--------------------------------------------
Name: Suraj P. Bhatia
Title: Senior Vice President & Manager,
Corporate Finance Dept.
UNION BANK OF CALIFORNIA, N.A., successor in
interest to Union Bank, a California Bank,
by
/s/ Richard P. Degrey
--------------------------------------------
Name: Richard P. Degrey
Title: Vice President
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME
TRUST,
by
/s/ Jeffrey W. Maillet
--------------------------------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President & Director
THE YASUDA TRUST & BANKING COMPANY, LTD.,
CHICAGO BRANCH,
by
/s/ Joseph C. Meek
--------------------------------------------
Name: Joseph C. Meek
Title: Deputy General Manager
STRATA FUNDING LTD.,
by
/s/ John H. Cullinane
--------------------------------------------
Name: John H. Cullinane
Title: Director
-9-
<PAGE>
MERRILL LYNCH PRIME RATE PORTFOLIO,
by MERRILL LYNCH PRIME ASSET MANAGEMENT,
L.P., as Investment Advisor
by
/s/ Gilles Marchand
--------------------------------------------
Name: Gilles Marchand, CFA
Title: Authorized Signatory
CERES FINANCE LTD.,
by
/s/ John H. Cullinane
--------------------------------------------
Name: John H. Cullinane
Title: Director
KEYPORT LIFE INSURANCE COMPANY,
by CHANCELLOR L.G.T. SENIOR SECURED
MANAGEMENT, INC. AS PORTFOLIO ADVISOR
by
/s/ Gregory L. Smith
--------------------------------------------
Name: Gregory L. Smith
Title: Vice President
AERIES FINANCE LTD.,
by
/s/ Andrew Ian Wignall
--------------------------------------------
Name: Andrew Ian Wignall
Title: Director
LEHMAN COMMERCIAL PAPER, INC.,
by
/s/ Michele Swanson
--------------------------------------------
Name: Michele Swanson
Title: Authorized Signatory
-10-
<PAGE>
SBS SWAPS,
by
/s/ J. Gregg Whittaker
--------------------------------------------
Name: J. Gregg Whittaker
Title: Authorized Signatory
SPS TRADES,
by
/s/ William J. Bokos
--------------------------------------------
Name: William J. Bokos
Title: Authorized Signatory
-11-
<PAGE>
[Letterhead of Winston & Strawn]
September 10, 1997
Johnstown America Industries, Inc.
980 North Michigan Avenue
Suite 1000
Chicago, Illinois 60611
Re: Registration Statement on Form S-4
of Johnstown America Industries, Inc. and the
Guarantors (as defined below)
Ladies and Gentlemen:
We have acted as special counsel to Johnstown America Industries,
Inc., a Delaware corporation (the "Company"), and certain of its subsidiaries
(the "Guarantors") in connection with the preparation of the Registration
Statement on Form S-4 (the "Registration Statement") filed on behalf of the
Company and the Guarantors with the Securities and Exchange Commission (the
"Commission") relating to the registration of $80,000,000 aggregate principal
amount of the Company's 11-3/4% Series C Senior Subordinated Notes due 2005
(the "New Notes") and the Guarantees (as hereinafter defined) thereof by the
Guarantors, which are to be offered in exchange for an equivalent principal
amount of the Company's currently outstanding 11-3/4% Series B Senior
Subordinated Notes due 2005 (the "Old Notes"), all as more fully described in
the Registration Statement. The New Notes will be issued under the Company's
Indenture dated as of August 11, 1997 (the "Indenture") between the Company,
the Guarantors and The Bank of New York, as trustee. Capitalized terms used
herein and not otherwise defined shall have the meanings assigned to such
terms in the prospectus (the "Prospectus") contained in the Registration
Statement.
<PAGE>
September 10, 1997
Page 2
This opinion letter is delivered in accordance with the requirements
of Item 601(b)(5) of Regulation S-K under the Securities Act of 1933, as
amended (the "Securities Act").
In connection with this opinion, we have examined and are familiar
with originals or copies, certified or otherwise identified to our
satisfaction, of (i) the Registration Statement, in the form filed with the
Commission and as amended through the date hereof; (ii) the Certificates of
Incorporation of the Company and each of the Guarantors, as currently in
effect; (iii) the By-laws of the Company and each of the Guarantors, as
currently in effect; (iv) the Indenture; (v) the form of the New Notes; and
(vi) resolutions of the Boards of Directors of the Company and each of the
Guarantors relating to, among other things, the issuance and exchange of the
New Notes for the Old Notes, the issuance of the Guarantees and the filing of
the Registration Statement. We also have examined such other documents as we
have deemed necessary or appropriate as a basis for the opinions set forth
below.
In our examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents
of all documents submitted to us as certified or photostatic copies, and the
authenticity of the originals of such latter documents. As to certain facts
material to this opinion, we have relied without independent verification
upon oral or written statements and representations of officers and other
representatives of the Company, the Guarantors and others.
Based upon and subject to the foregoing, we are of the opinion that:
1. The issuance and exchange of the New Notes for the Old Notes
and the issuance of the Guarantees have been duly authorized by requisite
corporate action on the part of the Company and the Guarantors, respectively.
2. The New Notes and the Guarantees will be valid and binding
obligations of the Company and the Guarantors, respectively, entitled to the
benefits of the Indenture and enforceable against the Company and the
Guarantors, respectively, in accordance with their terms, except to the
extent that the enforceability thereof may be limited by (x) bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (y) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity) when (i)
the Registration Statement, as finally amended (including all necessary
post-effective amendments), shall have become effective under the
<PAGE>
September 10, 1997
Page 3
Securities Act; (ii) the New Notes are duly executed and authenticated in
accordance with the provisions of the Indenture; and (iii) the New Notes
shall have been issued and delivered in exchange for the Old Notes pursuant
to the terms set forth in the Prospectus.
The foregoing opinions are limited to the laws of the United States,
the State of New York and the General Corporation Law of the State of
Delaware. We express no opinion as to the application of the securities or
blue sky laws of the various states to the issuance or exchange of the New
Notes.
We hereby consent to the reference to our firm under the heading
"Legal Matters" in the Prospectus and to the filing of this opinion with the
Commission as an exhibit to the Registration Statement. In giving such
consent, we do not concede that we are experts within the meaning of the
Securities Act or the rules and regulations thereunder or that this consent
is required by Section 7 of the Securities Act.
Very truly yours,
/s/ WINSTON & STRAWN
<PAGE>
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
----------------------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEMS ($984) $9,464 $9,389 $10,322 ($5,447) (1,757) (1,662)
ADD FIXED CHARGES:
Interest expense on borrowings and amortization
of deferred financing costs 5,360 2,968 266 14,950 36,460 17,994 17,563
Interest portion of rent expense -- -- -- 667 1,233 617 672
----- ------ ------- ------- ------- ------- --------
Total fixed charges 5,360 2,968 266 15,617 37,693 18,611 18,235
----- ------ ------- ------- ------- ------- --------
ADJUSTED EARNINGS $4,376 $12,432 $9,655 $25,939 $32,246 $16,854 $16,573
----- ------ ------- ------- ------- ------- --------
----- ------ ------- ------- ------- ------- --------
RATIO OF EARNINGS TO FIXED CHARGES -- (a) 4.19 x 36.30 x 1.66 x -- (a) -- (a) -- (a)
----- ------ ------- ------- ------- ------- --------
----- ------ ------- ------- ------- ------- --------
- -----------------------
</TABLE>
(a) Earnings were insufficient to cover fixed charges for the years ended
December 31, 1992 and 1996 and for the six months ended June 30, 1996 and 1997
by $1.0 million, $5.5 million, $1.8 million and $1.7 million, respectively.
<PAGE>
SUBSIDIARIES OF THE COMPANY
Johnstown America Corporation
Bostrom Seating, Inc.
Bostrom Holdings, Inc.
Freight Car Services, Inc.
JAC Patent Corporation
Truck Components Inc.
Gunite Corporation
Brillion Iron Works, Inc.
Fabco Automotive Corporation
JAII Management Company
JAIX Leasing Company
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports included in or made a part of this registration statement and to the
incorporation by reference in this registration statement of our reports
dated January 27, 1997 included in Johnstown America Industries, Inc.'s Annual
Report on Form 10-KA for the year ended December 31, 1996 and to all
references to our Firm included in this registration statement.
ARTHUR ANDERSEN LLP
Chicago, Illinois
September 9, 1997
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) /__/
- ------------------------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
- ------------------------------------------
JOHNSTOWN AMERICA INDUSTRIES, INC.
(Exact name of obligor as specified in its charter)
Delaware 25-1672791
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
and Subsidiary Guarantors
Delaware Johnstown America Corporation 36-3769515
Delaware Bostrom Seating, Inc. 39-1507179
Delaware Bostrom Holdings, Inc. 36-4129282
Delaware Freight Car Services, Inc. 36-3990959
Delaware JAC Patent Corporation 51-0345050
Delaware Truck Components Inc. 36-3535407
Delaware Gunite Corporation 13-3369803
Delaware Brillion Iron Works, Inc. 39-1506942
Delaware Fabco Automotive Corporation 13-3369802
Delaware JAII Management Company Applied For
(Exact name of registrants as specifed in their charters)
980 North Michigan Avenue
Suite 1000
Chicago, Illinois 60611
(Address of principal executive offices) (Zip code)
------------------
11 3/4% Series C Senior Subordinated Notes due 2005
(Title of the indenture securities)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
1. General information. Furnish the following information as to the
Trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
- ---------------------------------------------------------------
Name Address
- ---------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany,
N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission,
are incorporated herein by reference as an exhibit hereto, pursuant
to Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17
C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration Statement
No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with
Registration Statement No. 33-21672 and Exhibit 1 to Form T-1
filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of
New York, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in The City of
New York, and State of New York, on the 20th day of August, 1997.
THE BANK OF NEW YORK
By: /s/ WALTER N. GITLIN
---------------------
Name: WALTER N. GITLIN
Title: VICE PRESIDENT
<PAGE>
- -------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business March 31,
1997, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Thousands
- ------ --------------
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 8,249,820
Interest-bearing balances .......... 1,031,026
Securities:
Held-to-maturity securities ........ 1,118,463
Available-for-sale securities ...... 3,005,838
Federal funds sold and Securities pur-
chased under agreements to resell...... 3,100,281
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................32,895,077
LESS: Allowance for loan and
lease losses ..............633,877
LESS: Allocated transfer risk
reserve........................429
Loans and leases, net of unearned
income, allowance, and reserve 32,260,771
Assets held in trading accounts ...... 1,715,214
Premises and fixed assets (including
capitalized leases) ................ 684,704
Other real estate owned .............. 21,738
Investments in unconsolidated
subsidiaries and associated
companies .......................... 195,761
Customers' liability to this bank on
acceptances outstanding ............ 1,152,899
Intangible assets .................... 683,503
Other assets ......................... 1,526,113
-----------
Total assets ......................... $54,746,131
-----------
-----------
LIABILITIES
Deposits:
In domestic offices ................ $25,614,961
Noninterest-bearing ......10,564,652
Interest-bearing .........15,050,309
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 15,103,615
Noninterest-bearing .........560,944
Interest-bearing .........14,542,671
Federal funds purchased and Securities
<PAGE>
sold under agreements to repurchase. 2,093,286
Demand notes issued to the U.S.
Treasury ........................... 239,354
Trading liabilities .................. 1,399,064
Other borrowed money:
With remaining maturity of one year
or less .......................... 2,075,092
With remaining maturity of more than
one year ......................... 20,679
Bank's liability on acceptances exe-
cuted and outstanding .............. 1,160,012
Subordinated notes and debentures .... 1,014,400
Other liabilities .................... 1,840,245
----------
Total liabilities .................... 50,560,708
----------
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 731,319
Undivided profits and capital
reserves .......................... 2,544,303
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ ( 19,449)
Cumulative foreign currency transla-
tion adjustments .................. ( 13,034)
------------
Total equity capital ................ 4,185,423
---------
Total liabilities and equity
capital ........................... $54,746,131
-----------
-----------
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has
been prepared in conformance with the instructions issued by the Board
of Governors of the Federal Reserve System and is true to the best of
my knowledge and belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this
Report of Condition and declare that it has been examined by us and to
the best of our knowledge and belief has been prepared in conformance
with the instructions issued by the Board of Governors of the Federal
Reserve System and is true and correct.
Alan R. Griffith
J. Carter Bacot
Thomas A. Renyi Directors
- -------------------------------------------------------------------------------
<PAGE>
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, , UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE
WITHDRAWN PRIOR TO 5:00 P.M., EASTERN STANDARD TIME, ON THE EXPIRATION DATE.
JOHNSTOWN AMERICA INDUSTRIES, INC.
980 North Michigan Avenue
Suite 1000
Chicago, Illinois 60611
LETTER OF TRANSMITTAL
TO EXCHANGE 11 3/4% SERIES C SENIOR SUBORDINATED NOTES DUE 2005
FOR
11 3/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2005
Exchange Agent:
THE BANK OF NEW YORK
To: The Bank of New York
FACSIMILE TRANSMISSIONS:
(Eligible Institutions Only)
(212) 815-6339
CONFIRM BY TELEPHONE OR
FOR INFORMATION CALL:
(212) 815-5920
<TABLE>
<S> <C>
BY HAND OR OVERNIGHT DELIVERY: BY REGISTERED OR CERTIFIED MAIL:
The Bank of New York The Bank of New York
101 Barclay Street, 7E 101 Barclay Street, 7E
Corporate Trust Services Window New York, New York 10286
Ground Level Attention: Reorganization
New York, New York 10286 Department
Attention: Reorganization Arwen Gibbons
Department
Arwen Gibbons
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY.
<PAGE>
The undersigned acknowledges receipt of the Prospectus dated ,
, (as the same may be amended or supplemented from time to time, the
"Prospectus") of Johnstown America Industries, Inc., a Delaware corporation (the
"Issuer"), and this Letter of Transmittal which may be amended from time to time
(this "Letter"), which together constitute the Issuer's offer (the "Exchange
Offer") to exchange $1,000 principal amount of its 11 3/4% Series C Senior
Subordinated Notes due 2005 which have been registered under the Securities Act
of 1933, as amended (the "Exchange Notes"), for each $1,000 in principal amount
of its outstanding 11 3/4% Series B Senior Subordinated Notes due 2005 (the "Old
Notes") that were issued and sold in a transaction (the "Initial Offering")
exempt from registration under the Securities Act of 1933, as amended (the
"Securities Act").
The undersigned has completed, executed and delivered this Letter to
indicate the action he or she desires to take with respect to the Exchange
Offer.
All holders of Old Notes who wish to tender their Old Notes must, prior to
the Expiration Date: (1) complete, sign, date and deliver this Letter, or a
facsimile thereof, to the Exchange Agent, in person or to the address set forth
above; and (2) tender his or her Old Notes or, if a tender of Old Notes is to be
made by book-entry transfer to the account maintained by the Exchange Agent at
The Depository Trust Company (the "Book-Entry Transfer Facility"), confirm such
book-entry transfer (a "Book-Entry Confirmation"), in each case in accordance
with the procedures for tendering described in the Instructions to this Letter.
Holders of Old Notes whose certificates are not immediately available, or who
are unable to deliver their certificates or Book-Entry Confirmation and all
other documents required by this Letter to be delivered to the Exchange Agent on
or prior to the Expiration Date, must tender their Old Notes according to the
guaranteed delivery procedures set forth under the caption "The Exchange Offer
- -- How to Tender" in the Prospectus. (See Instruction 1).
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Old Notes validly tendered and not withdrawn and the
issuance of the Exchange Notes will be made on the Exchange Date. For the
purposes of the Exchange Offer, the Issuer shall be deemed to have accepted for
exchange validly tendered Old Notes when, as and if the Issuer has given written
notice thereof to the Exchange Agent.
The Instructions included with this Letter must be followed in their
entirety. Questions and requests for assistance or for additional copies of the
Prospectus or this Letter may be directed to the Exchange Agent, at the address
listed above, or Kenneth M. Tallering, Vice President, General Counsel and
Secretary of the Issuer, at (312) 280-8844, 980 North Michigan Avenue, Suite
1000, Chicago, Illinois 60611.
<PAGE>
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL, INCLUDING
THE INSTRUCTIONS TO THIS LETTER, CAREFULLY
BEFORE CHECKING ANY BOX BELOW
Capitalized terms used in this Letter and not defined herein shall have the
respective meanings ascribed to them in the Prospectus.
List in Box 1 below the Old Notes of which you are the holder. If the space
provided in Box 1 is inadequate, list the certificate numbers and principal
amount of Old Notes on a separate signed schedule and affix that schedule to
this Letter.
BOX 1
TO BE COMPLETED BY ALL TENDERING HOLDERS
<TABLE>
<S> <C> <C> <C>
PRINCIPAL
PRINCIPAL AMOUNT OF
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE AMOUNT OF OLD OLD NOTES
(PLEASE FILL IN IF BLANK) NUMBER(S) (1) NOTES TENDERED (2)
Totals:
</TABLE>
(1) Need not be completed if Old Notes are being tendered by book-entry
transfer.
(2) Unless otherwise indicated, the entire principal amount of Old Notes
represented by a certificate or Book-Entry Confirmation delivered to the
Exchange Agent will be deemed to have been tendered.
<PAGE>
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned tenders to the Issuer the principal amount of Old Notes indicated
above. Subject to, and effective upon, the acceptance for exchange of the Old
Notes tendered with this Letter, the undersigned exchanges, assigns and
transfers to, or upon the order of, the Issuer all right, title and interest in
and to the Old Notes tendered.
The undersigned constitutes and appoints the Exchange Agent as his or her
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Issuer) with respect to the tendered Old Notes, with
full power of substitution, to: (a) deliver certificates for such Old Notes; (b)
deliver Old Notes and all accompanying evidence of transfer and authenticity to
or upon the order of the Issuer upon receipt by the Exchange Agent, as the
undersigned's agent, of the Exchange Notes to which the undersigned is entitled
upon the acceptance by the Issuer of the Old Notes tendered under the Exchange
Offer; (c) presentation of Old Notes for transfer on the register for such Old
Notes; and (d) receive all benefits and otherwise exercise all rights of
beneficial ownership of the Old Notes, all in accordance with the terms of the
Exchange Offer. The power of attorney granted in this paragraph shall be deemed
irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has full power
and authority to tender, exchange, assign and transfer the Old Notes tendered
hereby and that the Issuer will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim. The undersigned will, upon request, execute and
deliver any additional documents deemed by the Issuer to be necessary or
desirable to complete the assignment and transfer of the Old Notes tendered.
By tendering Old Notes, the undersigned certifies (a) that it is not an
affiliate (as defined in Rule 501 of the Securities Act, an "Affiliate") of the
Issuer, that it is not a broker-dealer that owns Old Notes acquired directly
from the Issuer or an Affiliate of the Issuer, that it is acquiring the Exchange
Notes offered hereby in the ordinary course of the undersigned's business and
that the undersigned has no arrangement with any person to participate in the
distribution of such Exchange Notes; (b) that it is an Affiliate of the Issuer
or of the Initial Purchasers (as defined in the Prospectus) of the Old Notes in
the Initial Offering and that it will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable
to it; or (c) that it is a Participating Broker-Dealer (as defined in the
Prospectus) and that it will deliver a prospectus in connection with any resale
of the Exchange Notes.
The undersigned acknowledges that, if it is a broker-dealer that will
receive Exchange Notes for its own account, it will deliver a prospectus in
connection with any resale of such Exchange Notes. By so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
The undersigned understands that the Issuer may accept the undersigned's
tender by delivering written notice of acceptance to the Exchange Agent, at
which time the undersigned's right to withdraw such tender will terminate.
All authority conferred or agreed to be conferred by this Letter shall
survive the death or incapacity of the undersigned, and every obligation of the
undersigned under this Letter shall be binding upon the undersigned's heirs,
personal representatives, successors and assigns. Tenders may be withdrawn only
in accordance with the procedures set forth in the Instructions contained in
this Letter.
Unless otherwise indicated under "Special Delivery Instructions" below, the
Exchange Agent will deliver Exchange Notes (and, if applicable, a certificate
for any Old Notes not tendered but represented by a certificate also
encompassing Old Notes which are tendered) to the undersigned at the address set
forth in Box 1.
The undersigned acknowledges that the Exchange Offer is subject to the more
detailed terms set forth in the Prospectus and, in case of any conflict between
the terms of the terms of the Prospectus and this Letter, the Prospectus shall
prevail.
<PAGE>
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: __________________________________________
Account Number: _________________________________________________________
Transaction Code Number: ________________________________________________
- --------------------------------------------------------------------------------
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Owner(s): _________________________________________
Date of Execution of Notice of Guaranteed Delivery: _____________________
Window Ticket Number (if available): ____________________________________
Name of Institution which Guaranteed Delivery: __________________________
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
BOX 2
PLEASE SIGN HERE
WHETHER OR NOT OLD NOTES ARE BEING
PHYSICALLY TENDERED HEREBY
This box must be signed by registered holder(s) of Old Notes as
their name(s) appear(s) on certificate(s) for Old Notes, or by
person(s) authorized to become registered holder(s) by endorsement
and documents transmitted with this Letter. If signature is by a
trustee, executor, administrator, guardian, officer or other
person acting in a fiduciary or representative capacity, such
person must set forth his or her full title below. (See
Instruction 3)
X ______________________________________________________________________________
X ______________________________________________________________________________
Signature(s) of Owner(s) or Authorized Signatory
Date: ___________, 1997
Name(s): _______________________________________________________________________
(Please Print)
Capacity: ______________________________________________________________________
Address: _______________________________________________________________________
(Include Zip Code)
Area Code and Telephone No.: ___________________________________________________
PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN
SIGNATURE GUARANTEE (SEE INSTRUCTIONS 4 BELOW)
CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION
________________________________________________________________________________
(Name of Eligible Institution Guaranteeing Signatures)
________________________________________________________________________________
(Address (including zip code) and Telephone Number (including area code) of
Firm)
________________________________________________________________________________
(Authorized Signature)
________________________________________________________________________________
(Title)
________________________________________________________________________________
(Printed Name)
Date: ___________, 1997
<PAGE>
BOX 3
TO BE COMPLETED BY ALL TENDERING HOLDERS
PAYOR'S NAME: The Bank of New York
<TABLE>
<S> <C> <C>
Part 1 Social Security Number
PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND or Employer
CERTIFY BY SIGNING AND DATING BELOW. Identification Number
SUBSTITUTE Part 2 / /
Form W-9 Check the box if you are NOT subject to back-up withholding under the
Department of the provisions of Section 2406(a)(1)(C) of the Internal Revenue Code because
Treasury, Internal (1) you have not been notified that you are subject to back-up
Revenue Service withholding as a result of failure to report all interest or dividends or
(2) the Internal Revenue Service has notified you that you are no longer
subject to back-up withholding.
Payor's Request Part 3 / /
for Taxpayer Check if
Identification Awaiting TIN
Number (TIN)
CERTIFICATION UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT THE
INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT AND COMPLETE.
Signature Date , 1997
Name: (Please Print)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
BOX 4 BOX 5
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3 and 4) (See Instructions 3 and 4)
To be completed ONLY if certificates for Old To be completed ONLY if certificates for Old
Notes in a principal amount not exchanged, or Notes in a principal amount not exchanged, or
Exchange Notes, are to be issued in the name Exchange Notes, are to be sent to someone
of someone other than the person whose other than the person whose signature appears
signature appears in Box 2, or if Old Notes in Box 2 or to an address other than that
delivered by book-entry transfer which are shown in Box 1.
not accepted for exchange are to be returned Deliver:
by credit to an account maintained at the (check appropriate boxes)
Book-Entry Transfer Facility other than the / / Old Notes not tendered
account indicated above. / / Exchange Notes, to:
Issue and deliver: (Please Print)
(check appropriate boxes) Name:
/ / Old Notes not tendered Address:
/ / Exchange Notes, to:
(Please Print)
Name:
Address: Please complete the Substitute Form W-9 at
Box 3
Tax I.D. or Social Security Number:
Please complete the Substitute Form W-9 at
Box 3
Tax I.D. or Social Security Number:
</TABLE>
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER AND CERTIFICATES. Certificates for Old Notes or
a Book-Entry Confirmation, as the case may be, as well as a properly completed
and duly executed copy of this Letter and any other documents required by this
Letter, must be received by the Exchange Agent at one of its addresses set forth
herein on or before the Expiration Date. The method of delivery of this Letter,
certificates for Old Notes or a Book-Entry Confirmation, as the case may be, and
any other required documents is at the election and risk of the tendering
holder, but except as otherwise provided below, the delivery will be deemed made
when actually received by the Exchange Agent. If delivery is by mail, the use of
registered mail with return receipt requested, properly insured, is suggested.
If tendered Old Notes are registered in the name of the signer of the Letter
of Transmittal and the Exchange Notes to be issued in exchange therefor are to
be issued (and any untendered Old Notes are to be reissued) in the name of the
registered holder, the signature of such signer need not be guaranteed. In any
other case, the tendered Old Notes must be endorsed or accompanied by written
instruments of transfer in form satisfactory to the Issuer and duly executed by
the registered holder and the signature on the endorsement or instrument of
transfer must be guaranteed by a bank, broker, dealer, credit union, savings
association, clearing agency or other institution (each an "Eligible
Institution") that is a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Exchange Act of 1934, as
amended. If the Exchange Notes and/or Old Notes not exchanged are to be
delivered to an address other than that of the registered holder appearing on
the note register for the Old Notes, the signature on the Letter of Transmittal
must be guaranteed by an Eligible Institution.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
Old Notes should contact such holder promptly and instruct such holder to tender
Old Notes on such beneficial owner's behalf. If such beneficial owner wishes to
tender such Old Notes himself, such beneficial owner must, prior to completing
and executing the Letter of Transmittal and delivering such Old Notes, either
make appropriate arrangements to register ownership of the Old Notes in such
beneficial owner's name or follow the procedures described in the immediately
preceding paragraph. The transfer of record ownership may take considerable
time.
Holders whose Old Notes are not immediately available or who cannot deliver
their Old Notes or a Book-Entry Confirmation, as the case may be, and all other
required documents to the Exchange Agent on or before the Expiration Date may
tender their Old Notes pursuant to the guaranteed delivery procedures set forth
in the Prospectus. Pursuant to such procedure: (i) tender must be made by or
through an Eligible Institution; (ii) prior to the Expiration Date, the Exchange
Agent must have received from the Eligible Institution a properly completed and
duly executed Notice of Guaranteed Delivery (by telegram, telex, facsimile
transmission, mail or hand delivery) (x) setting forth the name and address of
the holder, the description of the Old Notes and the principal amount of Old
Notes tendered, (y) stating that the tender is being made thereby and (z)
guaranteeing that, within three New York Stock Exchange trading days after the
date of execution of such Notice of Guaranteed Delivery, this Letter together
with the certificates representing the Old Notes or a Book-Entry Confirmation,
as the case may be, and any other documents required by this Letter will be
deposited by the Eligible Institution with the Exchange Agent; and (iii) the
certificates for all tendered Old Notes or a Book-Entry Confirmation, as the
case may be, as well as all other documents required by this Letter, must be
received by the Exchange Agent within five New York Stock Exchange trading days
after the date of execution of such Notice of Guaranteed Delivery, all as
provided in the Prospectus under the caption "The Exchange Offer -- How to
Tender."
The method of delivery of Old Notes and all other documents is at the
election and risk of the holder. If sent by mail, it is recommended that
registered mail, return receipt requested, be used, proper insurance be
obtained, and the mailing be made sufficiently in advance of the Expiration Date
to permit delivery to the Exchange Agent on or before the Expiration Date.
<PAGE>
Unless an exemption applies under the applicable law and regulations
concerning "backup withholding" of federal income tax, the Exchange Agent will
be required to withhold, and will withhold, 31% of the gross proceeds otherwise
payable to a holder pursuant to the Exchange Offer if the holder does not
provide his or her taxpayer identification number (social security number or
employer identification number) and certify that such number is correct. Each
tendering holder should complete and sign the main signature form and the
Substitute Form W-9 included as part of the Letter of Transmittal, so as to
provide the information and certification necessary to avoid backup withholding,
unless an applicable exemption exists and is proved in a manner satisfactory to
the Issuer and the Exchange Agent.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Old Notes to reach the Exchange Agent before the
Expiration Date, a tender may be effected if the Exchange Agent has received at
its office listed on the back cover hereof on or prior to the Expiration Date a
letter, telegram or facsimile transmission from an Eligible Institution setting
forth the name and address of the tendering holder, the principal amount of the
Old Notes being tendered, the names in which the Old Notes are registered and,
if possible, the certificate numbers of the Old Notes to be tendered, and
stating that the tender is being made thereby and guaranteeing that within three
New York Stock Exchange trading days after the date of execution of such letter,
telegram or facsimile transmission by the Eligible Institution, the Old Notes,
in proper form for transfer, will be delivered by such Eligible Institution
together with a properly completed and duly executed Letter of Transmittal (and
any other required documents). Unless Old Notes being tendered by the
above-described method (or a timely Book-Entry Confirmation) are deposited with
the Exchange Agent within the time period set forth above (accompanied or
preceded by a properly completed Letter of Transmittal and any other required
documents), the Issuer may, at its option, reject the tender. Copies of a Notice
of Guaranteed Delivery which may be used by Eligible Institutions for the
purposes described in this paragraph are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a timely Book-Entry Confirmation) is received
by the Exchange Agent. Issuances of Exchange Notes in exchange for Old Notes
tendered pursuant to a Notice of Guaranteed Delivery or letter, telegram or
facsimile transmission to similar effect (as provided above) by an Eligible
Institution will be made only against deposit of the Letter of Transmittal (and
any other required documents) and the tendered Old Notes (or a timely Book-Entry
Confirmation).
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Issuer, whose determination will be final and binding. The Issuer reserves
the absolute right to reject any or all tenders that are not in proper form or
the acceptance of which, in the opinion of the Issuer's counsel, would be
unlawful. The Issuer also reserves the right to waive any irregularities or
conditions of tender as to particular Old Notes. All tendering holders, by
execution of this Letter, waive any right to receive notice of acceptance of
their Old Notes. The Issuer's interpretation of the terms and conditions of the
Exchange Offer (including the Letter of Transmittal and the instructions
thereto) will be final and binding.
Neither the Issuer, the Exchange Agent nor any other person shall be
obligated to give notice of defects or irregularities in any tender, nor shall
any of them incur any liability for failure to give any such notice.
2. PARTIAL TENDERS; WITHDRAWALS. If less than the entire principal amount
of any Old Note evidenced by a submitted certificate or by a Book-Entry
Confirmation is tendered, the tendering holder must fill in the principal amount
tendered in the fourth column of Box 1 above. All of the Old Notes represented
by a certificate or by a Book-Entry Confirmation delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated. A certificate
for Old Notes not tendered will be sent to the holder, unless otherwise provided
in Box 5, as soon as practicable after the Expiration Date, in the event that
less than the entire principal amount of Old Notes represented by a submitted
certificate is tendered (or, in the case of Old Notes tendered by book-entry
transfer, such non-exchanged Old Notes will be credited to an account maintained
by the holder with the Book-Entry Transfer Facility).
<PAGE>
If not yet accepted, a tender pursuant to the Exchange Offer may be
withdrawn prior to the Expiration Date. For a withdrawal to be effective, a
written or facsimile transmission notice of withdrawal must be timely received
by the Exchange Agent at its address set forth on the back cover of the
Prospectus prior to the Expiration Date. Any such notice of withdrawal must
specify the person named in the Letter of Transmittal as having tendered Old
Notes to be withdrawn, the certificate numbers of Old Notes to be withdrawn, the
principal amount of Old Notes to be withdrawn, a statement that such holder is
withdrawing his election to have such Old Notes exchanged, and the name of the
registered holder of such Old Notes, and must be signed by the holder in the
same manner as the original signature on the Letter of Transmittal (including
any required signature guarantees) or be accompanied by evidence satisfactory to
the Issuer that the person withdrawing the tender has succeeded to the
beneficial ownership of the Old Notes being withdrawn. The Exchange Agent will
return the properly withdrawn Old Notes promptly following receipt of notice of
withdrawal. All questions as to the validity of notices of withdrawals,
including time of receipt, will be determined by the Issuer, and such
determination will be final and binding on all parties.
3. SIGNATURES ON THIS LETTER; ASSIGNMENTS: GUARANTEE OF SIGNATURES. If
this Letter is signed by the holder(s) of Old Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of the
certificate(s) for such Old Notes, without alteration, enlargement or any change
whatsoever.
If any of the Old Notes tendered hereby are owned by two or more joint
owners, all owners must sign this Letter. If any tendered Old Notes are held in
different names on several certificates, it will be necessary to complete, sign
and submit as many separate copies of this Letter as there are names in which
certificates are held.
If this Letter is signed by the holder of record and (i) the entire
principal amount of the holder's Old Notes are tendered; and/or (ii) untendered
Old Notes, if any, are to be issued to the holder of record, then the holder of
record need not endorse any certificates for tendered Old Notes, nor provide a
separate bond power. In any other case, the holder of record must transmit a
separate bond power with this Letter.
If this Letter or any certificate or assignment is signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and proper evidence satisfactory to the
Issuer of their authority to so act must be submitted, unless waived by the
Issuer.
Signatures on this Letter must be guaranteed by an Eligible Institution,
unless Old Notes are tendered: (i) by a holder who has not completed the Box
entitled "Special Issuance Instructions" or "Special Delivery Instructions" on
this Letter; or (ii) for the account of an Eligible Institution. In the event
that the signatures in this Letter or a notice of withdrawal, as the case may
be, are required to be guaranteed, such guarantees must be by an eligible
guarantor institution which is a member of The Securities Transfer Agents
Medallion Program (STAMP), The New York Stock Exchanges Medallion Signature
Program (MSP) or The Stock Exchanges Medallion Program (SEMP). If Old Notes are
registered in the name of a person other than the signer of this Letter, the Old
Notes surrendered for exchange must be endorsed by, or be accompanied by a
written instrument or instruments of transfer or exchange, in satisfactory form
as determined by the Issuer, in its sole discretion, duly executed by the
registered holder with the signature thereon guaranteed by an Eligible
Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in Box 4 or 5, as applicable, the name and address to which the
Exchange Notes or certificates for Old Notes not exchanged are to be issued or
sent, if different from the name and address of the person signing this Letter.
In the case of issuance in a different name, the tax identification number of
the person named must also be indicated. Holders tendering Old Notes by
book-entry transfer may request that Old Notes not exchanged be credited to such
account maintained at the Book-Entry Transfer Facility as such holder may
designate.
5. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a
holder whose tendered Old Notes are accepted for exchange must provide the
Exchange Agent (as payor) with his or her correct taxpayer identification number
("TIN"), which, in the case of a holder who is an individual, is his or her
social security number. If the Exchange Agent is not provided with the correct
TIN, the holder may be
<PAGE>
subject to a $50 penalty imposed by the Internal Revenue Service. In addition,
delivery to the holder of the Exchange Notes pursuant to the Exchange Offer may
be subject to back-up withholding. (If withholding results in overpayment of
taxes, a refund may be obtained.) Exempt holders (including, among others, all
corporations and certain foreign individuals) are not subject to these back-up
withholding and reporting requirements. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
Under federal income tax laws, payments that may be made by the Issuer on
account of Exchange Notes issued pursuant to the Exchange Offer may be subject
to back-up withholding at a rate of 31%. In order to prevent back-up
withholding, each tendering holder must provide his or her correct TIN by
completing the "Substitute Form W-9" referred to above, certifying that the TIN
provided is correct (or that the holder is awaiting a TIN) and that: (i) the
holder has not been notified by the Internal Revenue Service that he or she is
subject to back-up withholding as a result of failure to report all interest or
dividends; (ii) the Internal Revenue Service has notified the holder that he or
she is no longer subject to back-up withholding; or (iii) in accordance with the
Guidelines, such holder is exempt from back-up withholding. If the Old Notes are
in more than one name or are not in the name of the actual owner, consult the
enclosed Guidelines for information on which TIN to report.
6. TRANSFER TAXES. The Issuer will pay all transfer taxes, if any,
applicable to the transfer of Old Notes to it or its order pursuant to the
Exchange Offer. If, however, the Exchange Notes or certificates for Old Notes
not exchanged are to be delivered to, or are to be issued in the name of, any
person other than the record holder, or if tendered certificates are recorded in
the name of any person other than the person signing this Letter, or if a
transfer tax is imposed by any reason other than the transfer of Old Notes to
the Issuer or its order pursuant to the Exchange Offer, then the amount of such
transfer taxes (whether imposed on the record holder or any other person) will
be payable by the tendering holder. If satisfactory evidence of payment of taxes
or exemption from taxes is not submitted with this Letter, the amount of
transfer taxes will be billed directly to the tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter.
7. WAIVER OF CONDITIONS. The Issuer reserves the absolute right to amend
or waive any of the specified conditions in the Exchange Offer in the case of
any Old Notes tendered.
8. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Any holder whose
certificates for Old Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated above, for further
instructions.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the
procedure for tendering, as well as requests for additional copies of the
Prospectus or this Letter, may be directed to the Exchange Agent.
IMPORTANT: THIS LETTER (TOGETHER WITH CERTIFICATES REPRESENTING TENDERED OLD
NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS) MUST BE
RECEIVED BY THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE.
<PAGE>
NOTICE OF GUARANTEED DELIVERY FOR
JOHNSTOWN AMERICA INDUSTRIES, INC.
As set forth in the Prospectus dated (as the same may be
amended or supplemented from time to time, the "Prospectus") of Johnstown
America Industries, Inc. (the "Issuer") under "The Exchange Offer -- How to
Tender" and in the accompanying Letter of Transmittal, this form or one
substantially equivalent hereto must be used to accept the Exchange Offer (as
defined below) of the Issuer if: (i) certificates for the above-referenced Notes
(the "Old Notes") are not immediately available, (ii) time will not permit all
required documents to reach the Exchange Agent (as defined below) on or prior to
the Expiration Date (as defined in the Prospectus) or (iii) the procedures for
book-entry transfer cannot be completed on or prior to the Expiration Date. Such
form may be delivered by hand or transmitted by telegram, telex, facsimile
transmission or letter to the Exchange Agent.
TO: THE BANK OF NEW YORK
(the "Exchange Agent")
FACSIMILE TRANSMISSIONS:
(Eligible Institutions Only)
(212) 815-6339
CONFIRM BY TELEPHONE OR
FOR INFORMATION CALL:
(212) 815-5920
<TABLE>
<S> <C>
BY HAND OR OVERNIGHT DELIVERY: BY REGISTERED OR CERTIFIED MAIL:
The Bank of New York The Bank of New York
101 Barclay Street, 7E 101 Barclay Street, 7E
Corporate Trust Services Window New York, New York 10286
Ground Level Attention: Reorganization Department
New York, New York 10286 Arwen Gibbons
Attention: Reorganization Department
Arwen Gibbons
</TABLE>
Delivery of this instrument to an address other than
as set forth above or transmittal of this instrument to
a facsimile or telex number other then as set forth
above does not constitute a valid delivery.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Issuer, upon the terms and conditions
set forth in the Prospectus and the Letter of Transmittal (which together
constitute the "Exchange Offer"), receipt of which are hereby acknowledged, the
principal amount of Old Notes set forth below pursuant to the guaranteed
delivery procedures described in the Prospectus and the Letter of Transmittal.
The undersigned understands and acknowledges that the Exchange Offer will
expire at 5:00 p.m., New York City time, on , unless extended by
the Issuer. With respect to the Exchange Offer, "Expiration Date" means such
time and date, or if the Exchange Offer is extended, the latest time and date to
which the Exchange Offer is so extended by the Issuer.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned and
every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
<TABLE>
<C> <S>
SIGNATURES Principal amount of Old Notes
Exchanged: $
Signature of Owner Certificate Nos. of Old Notes (if available)
Signature of Owner (if more than one)
Dated: , 1997 Total $
Name(s): IF OLD NOTES WILL BE DELIVERED BY BOOK-ENTRY
TRANSFER, PROVIDE THE DEPOSITORY TRUST COMPANY
(Please Print) ("DTC") ACCOUNT NO.:
Address: Account No.
(Include Zip Code)
Area Code and
Telephone No.:
Capacity (full title), if signing in a
representative
capacity:
Taxpayer Identification or Social Security No.:
</TABLE>
<PAGE>
<TABLE>
<S> <C>
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of a recognized signature guarantee medallion program within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), hereby guarantees (a) that the above-named person(s) own(s) the
above-described securities tendered hereby within the meaning of Rule 10b-4 under the
Exchange Act, (b) that such tender of the above-described securities complies with Rule
10b-4 under the Exchange Act, and (c) that delivery to the Exchange Agent of
certificates tendered hereby, in proper form for transfer, or delivery of such
certificates pursuant to the procedure for book-entry transfer, in either case with
delivery of a properly completed and duly executed Letter of Transmittal (or facsimile
thereof) and any other required documents, is being made within three New York Stock
Exchange trading days after the date of execution of a Notice of Guaranteed Delivery of
the above-named person.
Name of Firm:
(Authorized Signature)
Title:
Number and Street or P.O. Box
Date:
City State Zip Code
Tel. No.
Fax No.:
</TABLE>
NOTE: DO NOT SEND CERTIFICATES REPRESENTING OLD NOTES WITH THIS NOTICE. OLD
NOTES SHOULD BE SENT TO THE EXCHANGE AGENT TOGETHER WITH A PROPERLY
COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL.
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC.
OFFER TO EXCHANGE
$1,000 IN PRINCIPAL AMOUNT OF
11 3/4% SERIES C SENIOR SUBORDINATED NOTES DUE 2005
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
FOR
EACH $1,000 IN PRINCIPAL AMOUNT OF
OUTSTANDING 11 3/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2005
THAT WERE ISSUED AND SOLD IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED
To Securities Dealers, Commercial Banks
Trust Companies and Other Nominees:
Enclosed for your consideration is a Prospectus dated (as
the same may be amended or supplemented from time to time, the "Prospectus") and
a form of Letter of Transmittal (the "Letter of Transmittal") relating to the
offer (the "Exchange Offer") by Johnstown America Industries, Inc. (the
"Issuer") to exchange up to $80,000,000 in aggregate principal amount of its
11 3/4% Series C Senior Subordinated Notes due 2005 (the "Exchange Notes") for
up to $80,000,000 in aggregate principal amount of its outstanding 11 3/4%
Series B Senior Subordinated Notes due 2005 that were issued and sold in a
transaction exempt from registration under the Securities Act of 1933, as
amended (the "Old Notes").
We are asking you to contact your clients for whom you hold Old Notes
registered in your name or in the name of your nominee. In addition, we ask you
to contact your clients who, to your knowledge, hold Old Notes registered in
their own name. The Issuer will not pay any fees or commissions to any broker,
dealer or other person in connection with the solicitation of tenders pursuant
to the Exchange Offer. You will, however, be reimbursed by the Issuer for
customary mailing and handling expenses incurred by you in forwarding any of the
enclosed materials to your clients. The Issuer will pay all transfer taxes, if
any, applicable to the tender of Old Notes to it or its order, except as
otherwise provided in the Prospectus and the Letter of Transmittal.
Enclosed are copies of the following documents:
1. The Prospectus;
2. A Letter of Transmittal for your use in connection with the exchange
of Old Notes and for the information of your clients (facsimile copies of
the Letter of Transmittal may be used to exchange Old Notes);
3. A form of letter that may be sent to your clients for whose accounts
you hold Old Notes registered in your name or the name of your nominee, with
space provided for obtaining the clients' instructions with regard to the
Exchange Offer;
4. A Notice of Guaranteed Delivery;
5. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9; and
6. A return envelope addressed to The Bank of New York, the Exchange
Agent.
Your prompt action is requested. The Exchange offer will expire at 5:00
p.m., New York City time, on , , unless extended (the
"Expiration Date"). Old Notes tendered pursuant to the Exchange Offer may be
withdrawn, subject to the procedures described in the Prospectus, at any time
prior to the Expiration Date.
To tender Old Notes, certificates for Old Notes or a Book-Entry Confirmation
(as defined in the Prospectus), a duly executed and properly completed Letter of
Transmittal or a facsimile thereof, and any other required documents, must be
received by the Exchange Agent as provided in the Prospectus and the Letter of
Transmittal.
<PAGE>
Questions and requests for assistance with respect to the Exchange Offer or
for additional copies of the enclosed material may be directed to the Exchange
Agent at its address set forth in the Prospectus or at (212) 815-5920.
Very truly yours,
JOHNSTOWN AMERICA INDUSTRIES, INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY PERSON AS AN AGENT OF THE ISSUER OR THE EXCHANGE AGENT, OR ANY AFFILIATE
THEREOF, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS OR USE ANY
DOCUMENT ON BEHALF OF ANY OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR
THE ENCLOSED DOCUMENTS AND THE STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS AND
THE LETTER OF TRANSMITTAL.
2
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC.
OFFER TO EXCHANGE
$1,000 IN PRINCIPAL AMOUNT OF
11 3/4% SERIES C SENIOR SUBORDINATED NOTES DUE 2005
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
FOR
EACH $1,000 IN PRINCIPAL AMOUNT OF
OUTSTANDING 11 3/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2005
THAT WERE ISSUED AND SOLD IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED
To Our Clients:
Enclosed for your consideration is a Prospectus dated , (as
the same may be amended or supplemented from time to time, the "Prospectus") and
a form of Letter of Transmittal (the "Letter of Transmittal") relating to the
offer (the "Exchange Offer") by Johnstown America Industries, Inc. (the
"Issuer") to exchange up to $80,000,000 in aggregate principal amount of its
11 3/4% Series C Senior Subordinated Notes due 2005 (the "Exchange Notes") for
up to $80,000,000 in aggregate principal amount of its outstanding 11 3/4%
Series B Senior Subordinated Notes due 2005 that were issued and sold in a
transaction exempt from registration under the Securities Act of 1933, as
amended (the "Old Notes").
The material is being forwarded to you as the beneficial owner of Old Notes
carried by us for your account or benefit but not registered in your name. A
tender of any Old Notes may be made only by us as the registered holder and
pursuant to your instructions. Therefore, the Issuer urges beneficial owners of
Old Notes registered in the name of a broker, dealer, commercial bank, trust
company or other nominee to contact such registered holder promptly if they wish
to tender Old Notes in the Exchange Offer.
Accordingly, we request instructions as to whether you wish us to tender any
or all of the Old Notes held by us for your account, pursuant to the terms and
conditions set forth in the Prospectus and Letter of Transmittal. We urge you to
read carefully the Prospectus and Letter of Transmittal before instructing us to
tender your Old Notes.
Your instructions to us should be forwarded as promptly as possible in order
to permit us to tender Old Notes on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , , 1997, unless extended (the
"Expiration Date"). Old Notes tendered pursuant to the Exchange Offer may be
withdrawn, subject to the procedures described in the Prospectus, at any time
prior to the Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for the exchange of $1,000 principal amount at
maturity of the Exchange Notes for each $1,000 principal amount at maturity
of the Old Notes, of which $80,000,000 aggregate principal amount of the Old
Notes was outstanding as of , . The terms of the Exchange
Notes are substantially identical (including principal amount, interest
rate, maturity, security and ranking) to the terms of the Old Notes, except
that the Exchange Notes (i) are freely transferable by holders thereof
(except as provided in the Prospectus) and (ii) are not entitled to certain
registration rights and certain additional interest provisions which are
applicable to the Old Notes under an exchange and registration rights
agreement dated as of August 11, 1997 (the "Registration Rights Agreement")
among the Company, the Guarantor Subsidiaries and Chase Securities Inc. as
the initial purchaser.
2. THE EXCHANGE OFFER IS SUBJECT TO CERTAIN CONDITIONS, SEE "THE
EXCHANGE OFFER -- CONDITIONS TO THE EXCHANGE OFFER" IN THE PROSPECTUS.
3. The Exchange Offer and withdrawal rights will expire at 5:00 p.m.,
New York City time, on , unless extended.
<PAGE>
4. The Issuer has agreed to pay the expenses of the Exchange Offer
except as provided in the Prospectus and the Letter of Transmittal.
5. Any transfer taxes incident to the transfer of Old Notes from the
tendering Holder to the Issuer will be paid by the Issuer, except as
provided in the Prospectus and the Letter of Transmittal.
The Exchange Offer is not being made to nor will exchange be accepted from
or on behalf of holders of Old Notes in any jurisdiction in which the making of
the Exchange Offer or the acceptance thereof would not be in compliance with the
laws of such jurisdiction.
If you wish to have us tender any or all of your Old Notes held by us for
your account or benefit, please so instruct us by completing, executing and
returning to us the instruction form that appears below. The accompanying Letter
of Transmittal is furnished to you for informational purposes only and may not
be used by you to tender Old Notes held by us and registered in our name for
your account or benefit.
INSTRUCTIONS
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer of Johnstown America
Industries, Inc., including the Prospectus and the Letter of Transmittal.
This form will instruct you to exchange the aggregate principal amount of
Old Notes indicated below (or, if no aggregate principal amount is indicated
below, all Old Notes) held by you for the account or benefit of the undersigned,
pursuant to the terms and conditions set forth in the Prospectus and Letter of
Transmittal.
<TABLE>
<S> <C>
Aggregate Principal Amount of Old Notes to be exchanged
$ *
* I (we) understand that if I (we) sign
these instruction forms without indicating
an aggregate principal amount of Old Notes Signature(s)
in the space above, all Old Notes held by
you for my (our) account will be exchanged.
(Please print name(s) and address above)
Dated: , 1997
(Area Code & Telephone Number)
(Taxpayer Identification or
Social Security Number)
</TABLE>
2
<PAGE>
EXHIBIT 99.5
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.
Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
------------------------------------------------------
GIVE THE SOCIAL
SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
------------------------------------------------------
<S> <C> <C>
1. Individual The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, the first
individual on the
account (2)
3. Custodian account of a The minor (4)
minor (Uniform Gift to
Minors Act)
4. a. The usual revocable The grantor-trustee (2)
savings trust (grantor
is also trustee)
b. So-called trust The actual owner (2)
account that is not a
legal or valid trust
under State law
5. Sole proprietorship The owner (1)
<CAPTION>
------------------------------------------------------
GIVE THE EMPLOYER
IDENTIFICATION NUMBER
FOR THIS TYPE OF ACCOUNT: OF--
------------------------------------------------------
<S> <C> <C>
6. Sole proprietorship The owner (1)
7. A valid trust, estate, Legal entity (3)
or pension trust
8. Corporate The corporation
9. Association, club, The organization
religious, charitable,
educational or other
tax-exempt organization
10. Partnership The partnership
11. A broker or registered The broker or nominee
nominee
12. Account with the The public entity
Department of
Agriculture in the name
of a public entity
(such as a State or
local government,
school district, or
prison) that receives
agricultural program
payments
</TABLE>
- --------------------------------------------------------------------------------
(1) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your SSN or EIN.
(2) List first and circle the name of the person whose number you furnish.
(3) List first and circle the name of the legal trust, estate, or pension trust.
(Do not furnish the identifying number of the personal representative or
trustee unless the legal entity itself is not designated in the account
title.)
(4) Circle the minor's name and furnish the minor's social security number.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
The following is a list of payees exempt from backup withholding and for which
no information reporting is required. For interest and dividends, all listed
payees are exempt except item (9). For broker transactions, payees listed in
items (1) through (13) and a person registered under the Investment Advisers Act
of 1940 U.C. who regularly acts as a broker are exempt. Payments subject to
reporting under sections 6041 and 6041A are generally exempt from backup
withholding only if made to payees described in items (1) through (7), except a
corporation that provides medical and health care services or bills and collects
payments for such services is not exempt from backup withholding or information
reporting. Only payees described in items (2) through (6) are exempt from backup
withholding for barter exchange transactions, patronage dividends and payments
by certain fishing boat operators.
(1) A corporation.
(2) An organization exempt from tax under
section 501(a), or an individual retirement plan or custodial account
under section 403(b)(7).
(3) The United States or any agency or instrumentality
thereof.
(4) A State, the District of Columbia, a possession of the
United States, or any subdivision or instrumentality thereof.
(5) A foreign government, a political subdivision of a
foreign government, or an agency or instrumentality thereof.
(6) An international organization or any agency or
instrumentality thereof.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to
register in the U.S. or a possession of the U.S.
(9) A futures commission merchant registered with the
Commodity Futures Trading Commission.
(10)A real estate investment trust.
(11)An entity registered at all times under the Investment
Company Act of 1940.
(12)A common trust fund operated by a bank under
section 584(a).
(13)A financial institution.
(14)A middleman known in the investment community as
a nominee or listed in the most recent publication of the American
Society of Corporate Secretaries, Inc. Nominee List.
(15)An exempt charitable remainder trust, or a non-
exempt trust described in section 4947.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding
under section 1441.
- Payments to partnerships not engaged in a trade or
business in the U.S. and which have at least one nonresident partner.
- Payments of patronage dividends not paid in money.
- Payments made by certain foreign organizations.
NOTE: You may be subject to backup withholding if this interest is $600 or more
and is paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-
interest dividends under section 852).
- Payments described in section 6049(b)(5) to nonresident
aliens.
- Payments on tax-free covenant bonds under
section 1451.
- Payments made by certain foreign organizations.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, royalties, and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE. Section 6109 requires most recipients of dividend, interest,
or other payments to give taxpayer identification numbers to payers who must
report the payments to IRS. IRS uses the numbers for identification purposes.
Payers must be given the numbers whether or not recipients are required to file
tax returns. Payers must generally withhold 31% of taxable interest, dividend,
and certain other payments to a payee who does not furnish a taxpayer
identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTIES FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
under-payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you make
a false statement with no reasonable basis which results in no imposition of
backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
