SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
May 10, 1999
(Date of earliest event reported)
Johnstown America Industries, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-21830 25-1672791
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
980 North Michigan Avenue, Suite 1000, Chicago, Illinois 60611
(Address of principal executive offices) (Zip Code)
312-280-8844
(Registrant's telephone number, including area code)
Item 5. Other Events.
The Company issued a press release on May 11, 1999, a copy of which
is filed herewith as Exhibit 99.1.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(c) Exhibits.
99.1 Press Release issued by Registrant on May 11, 1999.
99.2 Share Purchase Agreement, dated as of May 10, 1999, between
Registrant and Rabbit Hill Holdings, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Johnstown America Industries, Inc.
Date: May 12, 1999 By: /s/ Kenneth M. Tallering
------------------------------------
Kenneth M. Tallering
Vice President, Secretary and
General Counsel
EXHIBIT INDEX
Exhibit No. Exhibit Page
99.1 Press Release issued by Registrant 5
on May 11, 1999.
99.2 Share Purchase Agreement, dated as 8
of May 10, 1999, between Registrant
and Rabbit Hill Holdings, Inc.
EXHIBIT 99.1
JOHNSTOWN AMERICA INDUSTRIES INC.
TO SELL FREIGHT CAR OPERATIONS
Refocuses Company on Truck Components Business
Chicago, IL, May 11, 1999 - Johnstown America Industries, Inc. (NASDAQ:
JAII) announced today that it has signed a definitive agreement to sell its
freight car operations, including Johnstown America Corporation, Freight
Car Services, Inc. and JAIX Leasing Company, to a newly-formed company that
will operate under the Johnstown America Corporation (JAC) name.
The agreement provides that JAII will sell the stock of its three freight
car entities for approximately $100 million in cash, a contingent
additional purchase price payment of $20 million and a 20 percent equity
interest in the newly-formed Johnstown America Corporation. In addition,
the new company will assume all of the liabilities of the freight car
operations, including $5.3 million of Industrial Revenue Bond debt of
Freight Car Services, Inc.; $9.1 million of JAIX Leasing Company debt; and
employee-related liabilities including $10.8 million of retiree medical and
life insurance liabilities and the assumption of existing union contracts
together with related liabilities.
Anticipated after-tax cash proceeds of approximately $75 million will be
used to reduce JAII's senior bank debt. Together with the buyer's
assumption of $14.4 million of debt related to the freight car business,
this will result in a decrease in the company's debt-to-capitalization
ratio at March 31, 1999 from 70 percent, pro forma for the acquisition of
Imperial Group, to 58 percent, pro forma for both the freight car sale and
the acquisition of Imperial Group.
"Our improved capital structure, along with the divestiture of a business
in a highly cyclical industry, will provide JAII with the capability to
focus our resources on synergistically growing our expanding heavy-duty
truck components business," said Thomas M. Begel, chairman, president and
chief executive officer.
"This transaction will contribute positively to shareholder value by
improving JAII's capital structure and enabling us to focus all of our
resources and energies on the emerging opportunities in the more
predictable truck components business," Begel said. "Heavy-duty truck
manufacturers are increasing their reliance on outsourcing and reducing
their supplier lists, and we intend to be at the forefront of companies
that benefit from the resulting industry-wide consolidation."
Although dilutive to earnings per share in the short term, JAII
anticipates that selling its freight car operations will have a positive
impact on share valuation, Begel said. "Even though our heavy-duty truck
components operations are growing, highly respected and consistent profit
generators, many investors still view JAII primarily as a cyclical freight
car manufacturer. Shares of truck components manufacturers typically sell
at a significantly higher price/earnings multiple."
The heavy-duty truck components business offers attractive growth
opportunities and less exposure to market cyclicality than the freight car
business, Begel said. "Our heavy-duty truck components operations have
demonstrated consistently strong revenues and earnings since we acquired
them. We also see great potential for growth in the large, higher-margin
aftermarket for truck components, where we can leverage our strong OEM
presence to create brand preference."
JAII's Truck Components segment product lines include Gunite heavy-duty
wheel-end components, Brillion custom iron castings, Bostrom truck and bus
seating systems, and Fabco steerable drive axles and gearboxes. Segment
revenues and operating income (excluding nonrecurring items) were $433.6
million and $48.1 million, respectively, in 1998, and $117.3 million and
$14.0 million, respectively, in the first quarter of 1999.
On April 29, 1999, JAII completed the acquisition of Imperial Group, Inc.,
a manufacturer of body and chassis components for heavy-duty trucks and
transit buses. Imperial's 1998 revenues exceeded $80 million and are
projected to be approximately $100 million for 1999. JAII also recently
announced an agreement for its Gunite Corporation subsidiary to acquire EMI
Company, an iron foundry and machining company with a line of wheel-end
components for heavy-duty trucks and trailers. EMI has annual revenues of
about $55 million and will provide additional foundry capacity to produce
wheel-end components for Gunite.
JAII's growth strategy will continue to emphasize both internal growth and
acquisitions. "Imperial and EMI demonstrate our approach," Begel said. "EMI
strengthens our leading position in wheel-end components by adding products
to our line and by increasing our foundry capacity, which will enable us to
reduce costly overtime and outsourcing of castings, better service original
equipment manufacturers and expand our share of the higher-margin
aftermarket. Imperial Group, on the other hand, gives us a presence in a
new product category - body and chassis components - and provides a
platform for growth through additional acquisitions of companies with
complementary product lines, manufacturing capabilities and business
philosophies."
Ownership of JAC, in addition to JAII's 20 percent equity interest, will
include current management of the freight car operations; Camillo
Santomero, a director of JAII; and certain of the buyer's financing
sources.
The terms and conditions of the sale of the freight car operations are set
forth in the definitive Share Purchase Agreement, a copy of which is being
filed with the SEC as an exhibit to the Company's filing on Form 8-K.
The statements herein, which are not historical facts, including
statements about future expectations, are "forward-looking statements" that
involve certain risks and uncertainties that could cause actual future
results to differ materially from those stated. These risks are spelled out
more fully in the company's SEC filings. The company assumes no obligation
to update its forward-looking statements.
###
Contact:
Andrew M. Weller
Executive Vice President and
Chief Financial Officer
312/280-8844
EXHIBIT 99.2
===============================================================================
SHARE PURCHASE AGREEMENT
BETWEEN
JOHNSTOWN AMERICA INDUSTRIES, INC.
AND
RABBIT HILL HOLDINGS, INC
DATED
AS OF
MAY 10, 1999
===============================================================================
TABLE OF CONTENTS
Page
----
ARTICLE I
Purchase and Sale of Shares
Section 1.1 Purchase and Sale of Shares..........................1
Section 1.2 Purchase Price.......................................3
Section 1.3 Closing..............................................3
Section 1.4 Adjustment to Cash Purchase Price....................4
Section 1.5 Post-Closing Adjustments.............................5
Section 1.6 Contingent Additional Consideration..................7
ARTICLE II
Representations and Warranties of Seller
Section 2.1 Organization.........................................9
Section 2.2 Authorization.......................................10
Section 2.3 Capital Stock.......................................10
Section 2.4 Railcar Subsidiaries................................10
Section 2.5 Consents and Approvals; No Violations. .............11
Section 2.6 Financial Statements; Undisclosed Liabilities.......11
Section 2.7 Absence of Certain Changes..........................12
Section 2.8 Litigation..........................................13
Section 2.9 Compliance with Applicable Law......................13
Section 2.10 Employee Benefit Plans..............................14
Section 2.11 Taxes...............................................16
Section 2.12 Environmental Laws and Regulations..................18
Section 2.13 Certain Fees........................................19
Section 2.14 Title to Assets.....................................19
Section 2.15 All Assets Included.................................19
Section 2.16 Contracts...........................................19
Section 2.17 Patents, Trademarks, Licenses.......................20
Section 2.18 Customers and Suppliers.............................20
Section 2.19 Books and Records of the Company....................20
Section 2.20 Accounts Receivable.................................20
Section 2.21 Licenses and Permits................................20
Section 2.22 Improper Payments...................................21
Section 2.23 Bethlehem Steel Agreement...........................21
Section 2.24 Labor and Employee Matters..........................22
Section 2.25 Premises............................................22
Section 2.26 No Other Representations or Warranties..............22
ARTICLE III
Representations and Warranties of Buyer
Section 3.1 Organization, Existence and Authority of Buyer......23
Section 3.2 Financial Capability................................24
Section 3.3 Capital Structure. .................................24
Section 3.4 Certain Fees........................................24
Section 3.5 HSR.................................................24
Section 3.6 No Other Representations or Warranties..............24
ARTICLE IV
Covenants
Section 4.1 Consents............................................25
Section 4.2 Buyer's Access to Information and Records...........25
Section 4.3 Seller's Access to Books and Records................26
Section 4.4 Public Announcements................................27
Section 4.5 Replacement of Bank Letters of Credit...............27
Section 4.6 Replacement of Workers' Compensation Letters
of Credit...........................................27
Section 4.7 Certain Tax Matters.................................27
Section 4.8 Incremental Tax Resulting from the Elections........34
Section 4.9 Non-Competition.....................................35
Section 4.10 Discovery of Facts..................................35
Section 4.11 Conduct of the Business; Negative Covenants.........35
Section 4.12 Conduct of Business; Affirmative Covenants..........37
Section 4.13 Consummation of Financing...........................38
Section 4.14 Assertion of Indemnification Claims.................38
ARTICLE V
Employment and Benefit Matters
Section 5.1 No Shutdown or Severance of Employment..............38
Section 5.2 Employment of Railcar Subsidiaries'
Employees: Collective Bargaining Agreements:
Assumption of Employment, Employment-Related
and Benefits Obligations............................39
Section 5.3 Buyer's Benefit Plans...............................39
Section 5.4 Assumption of Certain Benefit Plans.................40
Section 5.5 Supplemental Retirement Window Benefit..............41
Section 5.6 Retiree Welfare Benefits............................41
Section 5.7 Vacation Pay........................................41
Section 5.8 Certain Executive Employment Agreements.............41
Section 5.9 Miscellaneous.......................................41
Section 5.10 No Alteration in Bethlehem Agreement................41
ARTICLE VI
Conditions to Obligations of The Parties
Section 6.1 Conditions to Each Party's Obligation...............42
Section 6.2 Conditions to Obligations of Seller.................42
Section 6.3 Conditions to Obligations of Buyer..................43
ARTICLE VII
Termination of Agreement
Section 7.1 Termination by Buyer or Seller......................43
Section 7.2 Effect of Termination; Right to Proceed.............44
ARTICLE VIII
Survival; Indemnification
Section 8.1 Survival of Representations and Warranties .........45
Section 8.2 Seller's Agreement to Indemnify.....................45
Section 8.3 Buyer's Agreement to Indemnify......................47
Section 8.4 Indemnification Procedures..........................48
Section 8.5 Computation of Damages Subject to Indemnification...49
Section 8.6 Indemnification as Sole Remedy and Waiver...........50
Section 8.7 Set-off Against Contingent Additional
Consideration as Sole Source of Indemnification.....50
ARTICLE IX
Miscellaneous
Section 9.1 Fees and Expenses...................................50
Section 9.2 Right to Provide Information........................51
Section 9.3 Obligation to Disclose Information..................51
Section 9.4 Notices.............................................51
Section 9.5 Severability........................................52
Section 9.6 Binding Effect; Assignment..........................52
Section 9.7 No Third-Party Beneficiaries........................53
Section 9.8 Headings............................................53
Section 9.9 Entire Agreement....................................53
Section 9.10 Governing Law.......................................53
Section 9.11 Arbitration.........................................53
Section 9.12 Counterparts........................................54
ARTICLE X
Definitions
Section 10.1 Certain Definitions.................................54
Section 10.2 Other Terms.........................................60
Section 10.3 Other Definitional Provisions.......................60
SCHEDULES
Schedule 1.4(b) Working Capital
Schedule 2.5 Consents and Approvals
Schedule 2.6(a) Financial Statements
Schedule 2.6(b) Undisclosed Liabilities
Schedule 2.7 Absence of Certain Changes
Schedule 2.8 Litigation
Schedule 2.10 Employee Benefit Plans
Schedule 2.11 Taxes
Schedule 2.12 Environmental Laws and Regulations
Schedule 2.14 Title to Assets
Schedule 2.16 Contracts
Schedule 2.17 Patents, Trademarks, Licenses
Schedule 2.18 Customers and Suppliers
Schedule 2.21 Licenses and Permits
Schedule 2.24 Labor and Employee Matters
Schedule 2.25 Premises
Schedule 3.3 Capital Structure
Schedule 3.4 Certain Fees
Schedule 4.6 Workers' Compensation Letters of Credit
Schedule 4.13 Consummation of Financing
EXHIBITS
Exhibit A Form of Certificate pursuant to Section 6.3(a)
Exhibit B Form of Seller Officer's Certificate
Exhibit C Form of SASM&F Opinion
Exhibit D Form of Proxy Letter
Exhibit E Form of Certificate pursuant to Section 6.2(a)
Exhibit F Form of Buyer Officer's Certificate
Exhibit G Form of White and Williams Opinion
Exhibit H Shareholders' Agreement Terms
Exhibit I Subordination Agreement Terms
Exhibit J Capital Structure of Buyer
SHARE PURCHASE AGREEMENT
SHARE PURCHASE AGREEMENT dated as of May 10, 1999 between
Johnstown America Industries, Inc., a Delaware corporation ("Seller") and
Rabbit Hill Holdings, Inc., a Delaware corporation ("Buyer").
RECITALS
WHEREAS, Seller through certain of its subsidiaries is engaged
in the business of manufacturing, rebuilding, repairing, selling and
leasing railroad freight cars (the "Railcar
Business");
WHEREAS, Seller owns, directly or indirectly, all of the issued
and outstanding capital stock of Johnstown America Corporation ("JAC"),
Freight Car Services, Inc. ("FCS") and JAIX Leasing Company ("JAIX"), which
entities, together with JAC Patent Company ("JAC Patent"), a wholly-owned
subsidiary of JAC, constitute all of the entities that comprise the Railcar
Business (each, a "Railcar Subsidiary" and collectively, the "Railcar
Subsidiaries");
WHEREAS, Buyer desires to purchase from Seller, and Seller
desires to sell to Buyer, the Railcar Business as a going concern through
the purchase and sale of the capital stock of each of the Railcar
Subsidiaries directly held by Seller; and
WHEREAS, Buyer intends to purchase indirectly all of the
capital stock of such Railcar Subsidiaries through newly-formed,
wholly-owned subsidiaries, and to merge each such subsidiary with and into
a Railcar Subsidiary immediately following such purchase of capital stock.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
Section 1.1. Purchase and Sale of Shares.
(a) At the Closing (as defined in Section 1.3), Seller shall
sell, convey, assign, transfer and deliver, or shall cause to be sold,
conveyed, assigned, transferred and delivered, to Buyer or one or more of
its subsidiaries designated by Buyer all right, title and interest in and
to the shares of capital stock owned by Seller in each of the Railcar
Subsidiaries set forth below:
(i) JAC (the "JAC Shares");
(ii) FCS (the "FCS Shares"); and
(iii) JAIX (the "JAIX Shares").
(b) The transfer of the JAC Shares, the FCS Shares and the JAIX
Shares (collectively, the "Shares") shall be effected in accordance with
the terms and conditions of this Agreement by Seller's delivery to Buyer of
certificates representing the Shares duly endorsed in blank, or accompanied
by duly executed stock powers endorsed in blank. Buyer shall bear the cost
of any transfer, documentary, sales and excise or other taxes (other than
federal, state, local and foreign income taxes payable by Seller) imposed
by reason of the consummation of the transactions contemplated by this
Agreement in accordance with Section 4.7(g) hereof.
(c) Pursuant to the transfer of Shares by Seller to Buyer,
Buyer shall indirectly acquire, and the Railcar Subsidiaries shall retain,
respectively, as the case may be:
(i) all of the assets of JAC, FCS and JAIX, whether
tangible or intangible, including, without limitation, all of the issued
and outstanding capital stock of JAC Patent, JAC's plants in Johnstown, PA
and FCS' plant in Danville, IL; provided, however, that immediately prior
to the Closing, the following assets of the Railcar Subsidiaries shall be
transferred to Seller: (A) all cash or cash equivalents of JAC, FCS and JAC
Patent and cash or cash equivalents of JAIX equal to the accrued federal
and state income taxes of JAIX through the Closing Date (as defined in
Section 1.3), which assets shall be transferred to Seller on the Closing
Date and (B) all prepaid insurance and similar prepaid corporate expenses
of JAC, FCS, JAIX and JAC Patent; and
(ii) the earnings of the Railcar Business before interest
(after interest allocable to JAIX), net of federal and state taxes (subject
to Section 1.1(c)(i)), for the period of 30 days immediately prior to the
Closing Date ("Interim Earnings"); and
(iii) except as otherwise expressly set forth in this
Agreement, all of the respective liabilities of JAC (and JAC Patent), FCS
and JAIX as of the Closing, whether known or unknown, accrued or
contingent, and whether or not on the balance sheet of any of such entities
including, without limitation, (A) all indebtedness of JAIX, (B) the $5.3
million of FCS IRB Debt, (C) all contracts of JAC (and JAC Patent), FCS and
JAIX, including, without limitation, the union contracts of JAC and FCS,
the railcar leases of JAIX and all other operating and capital leases and
all obligations and liabilities thereunder, (D) all environmental
liabilities, (E) all product liability and warranty liabilities, (F)
pension obligations and liabilities as provided in Article V hereof, (G)
all retiree obligations and liabilities as provided in Article V hereof,
(H) all lawsuits and claims, whether disclosed or undisclosed, including,
without limitation, the UP/Strato litigation and all workers compensation
claims, union grievances and similar claims and (I) shutdown or similar
liabilities as provided in Article V hereof.
Section 1.2. Purchase Price. At the Closing, in consideration
of the sale, transfer and delivery of the Shares, Buyer shall deliver or
cause to be delivered or pay or cause to be paid: (i) a demand note
executed jointly by JAC MergerSub, Inc., FCS MergerSub, Inc. and JAIX
MergerSub, Inc., each of which shall be wholly-owned subsidiaries of Buyer,
in an amount equal to $110 million, subject to adjustment pursuant to
Sections 1.4 and 1.5 hereof (the "Demand Note"), which shall be paid in
full in immediately available funds by wire transfer immediately following
delivery of the Shares (the "Cash Purchase Price") and (ii) 200 shares of
the common stock, par value $0.01 per share, of Buyer, which shall
represent an aggregate of 20% of the common stock of Buyer outstanding as
of the Closing Date. As additional consideration for the Shares, Seller
shall be entitled to Contingent Additional Consideration (as defined)
pursuant to Section 1.6. The sum of (x) the Cash Purchase Price, (y) the
200 shares of the common stock of Buyer and (z) the Contingent Additional
Consideration is referred to herein as the "Purchase Price."
Section 1.3. Closing.
(a) The consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place at a location agreed upon by the
parties on the second business day following the satisfaction or waiver of
the conditions set forth in Article VI hereof, or at such other time or
place as to which the parties shall agree. The date on which the Closing
occurs is sometimes referred to herein as the "Closing Date."
(b) On the Closing Date,
(i) Seller shall deliver, or shall cause to be delivered,
to Buyer (A) certificates representing the JAC Shares, the FCS Shares and
the JAIX Shares, respectively, duly endorsed or accompanied by stock powers
duly executed in blank (with any requisite transfer tax stamps affixed
thereto), (B) a good standing certificate for each Railcar Subsidiary
issued by the Secretary of State of the jurisdiction of its incorporation,
dated within 3 business days of the Closing Date, (C) the certificate
described in Section 6.3(a) substantially in the form of Exhibit A, (D) a
duly executed certificate of an authorized officer of Seller, dated the
Closing Date, substantially in the form of Exhibit B, (E) the opinion of
Skadden, Arps, Slate, Meagher & Flom LLP, dated the Closing Date, addressed
to Buyer, substantially in the form of Exhibit C, (F) the duly executed
resignations, dated as of the Closing Date, of each of the members of the
boards of directors of each of the Railcar Subsidiaries, and (G) a proxy
letter substantially in the form of Exhibit D.
(ii) Buyer shall deliver, or shall cause to be delivered,
to Seller (A) the Demand Note, which shall have been paid in full on the
Closing Date in immediately available funds by wire transfer to a bank
account or bank accounts, which shall have been specified by Seller at
least two business days prior to the Closing, (B) certificates representing
the 200 shares of common stock of Buyer, duly issued to and registered in
the name of Seller or as directed by Seller, (C) the certificate described
in Section 6.2(a) substantially in the form of Exhibit E, (D) a duly
executed certificate of an authorized officer of Buyer, dated the Closing
Date, substantially in the form of Exhibit F and (E) the opinion of
White and Williams LLP, dated the Closing Date, addressed to Seller,
substantially in the form of Exhibit G.
(iii) Seller, Buyer and each of the other holders of
common stock of Buyer as of the Closing Date shall enter into a
shareholders' agreement, which shall contain the terms set forth on Exhibit
H (the "Shareholders' Agreement").
Section 1.4. Adjustment to Cash Purchase Price.
(a) At least three business days prior to Closing, Seller shall
deliver to Buyer an estimated schedule of Working Capital (as herein
defined) of JAC and FCS, with line items estimated in good faith as of the
close of business on the Closing Date (the "Closing Schedule"). The Closing
Schedule shall also include separate line items for good faith estimates of
Indebtedness ("Closing Indebtedness"), the Closing Retiree Benefit
Liability, the JAIX Taxes (the "Closing JAIX Taxes") and Interim Earnings
("Closing Interim Earnings"). The Closing Schedule shall be prepared in
accordance with the Accounting Principles (as defined in Section 2.6).
(b) For purposes of this Agreement, the term "Working Capital"
shall mean an amount equal to the sum of (x) the book value of Accounts
Receivable (net), Inventory, Prepaid Expenses and other Current Assets of
JAC and FCS, less (y) the book value of Accounts Payable, Accrued Payroll
and Employee Benefits, Accrued Vacations, Accrued Warranty, Workers'
Compensation and other Current Liabilities of JAC and FCS, as set forth as
line items on the Closing Schedule. For purposes of determining Working
Capital, accrued federal and state income taxes shall not be included to
the extent retained by Seller. Schedule 1.4(b) sets forth the same line
items as of March 31, 1999.
(c) If Working Capital as reflected on the Closing Schedule
("Closing Working Capital") shall be less than the sum of (x) $10 million
plus (y) Closing Interim Earnings, the Cash Purchase Price shall be
decreased at Closing, dollar-for-dollar, by the amount that the Closing
Working Capital is less than the sum of (x) $10 million plus (y) Closing
Interim Earnings. If Closing Working Capital shall be greater than the sum
of (x) $10 million plus (y) Closing Interim Earnings, the Cash Purchase
Price shall be increased at Closing, dollar-for-dollar, by the amount that
Closing Working Capital exceeds the sum of (x) $10 million plus (y) Closing
Interim Earnings.
(d) The Cash Purchase Price shall be decreased at Closing by an
amount equal to all Indebtedness of JAC, FCS and JAC Patent and by the
Indebtedness of JAIX to the extent it exceeds $9.1 million as of the
Closing Date. For purposes of this Section 1.4(d) and as a line item on the
Closing and Final Schedule as set forth in Section 1.5, "Indebtedness"
shall mean, to the extent retained by the Railcar Subsidiaries, or any of
them, as of the Closing Date, without duplication, (i) indebtedness for
borrowed money (including, but not limited to the FCS IRB Debt), (ii) any
indebtedness guaranteed by JAC, FCS or JAC Patent, (iii) any indebtedness
secured by a lien on the assets of JAC, FCS or JAC Patent and (iv) all
interest accruing on any indebtedness described in clauses (i) through
(iii) hereof.
(e) The Cash Purchase Price shall be decreased at Closing by an
amount equal to the aggregate accrued liability of the Railcar
Subsidiaries, attributable to the retiree welfare benefits due to employees
of the Railcar Business with 15 or more years of service, as of the Closing
Date ("Retiree Benefit Liability"), as reflected on the Closing Schedule
(the "Closing Retiree Benefit Liability"). The Retiree Benefit Liability
shall be calculated using an attribution period from each such employee's
date of hire to his/her date of expected retirement. As of January 1, 1999,
the amount of such accrued liability was $5,685,000.
Section 1.5. Post-Closing Adjustments.
(a) Within sixty days after the Closing, Seller shall deliver
to Buyer a schedule of Working Capital of JAC and FCS ("Final Working
Capital"), with the same line items as set forth on the Closing Schedule as
of the close of business on the Closing Date (the "Final Schedule"). The
Final Schedule shall also include line items for Indebtedness ("Final
Indebtedness"), the Retiree Benefit Liability ("Final Retiree Benefit
Liability"), the JAIX Taxes (the "Final JAIX Taxes"), Interim Earnings
("Final Interim Earnings") and JAIX Transfers (as hereinafter defined). The
Final Schedule shall be prepared in accordance with the Accounting
Principles. Arthur Andersen LLP (the "Auditor") shall audit the Final
Schedule and shall provide an opinion that the Final Schedule fairly
presents the line items set forth on such schedule as of the close of
business on the Closing Date in accordance with the Accounting Principles.
Seller and Buyer shall equally share the charges of the Auditor in
performing the audit. In connection with the delivery of the Final
Schedule, the Seller shall make available to the Buyer all books, records,
work papers, personnel and other materials and sources used by Seller and
Auditor to prepare the Final Schedule.
(b) Buyer may object to any of the information on the Final
Schedule which impacts the determination of Working Capital, Indebtedness,
Retiree Benefit Liability, JAIX Taxes, Interim Earnings or JAIX Transfers,
as each such item is reflected on the Final Schedule. Any such objection
must be made by delivery of a written statement of objections (stating the
basis of the objections with reasonable specificity) to Seller within
thirty days following delivery of the Final Schedule. If Buyer does not so
object within such thirty day period, the Final Schedule as delivered to
Buyer shall be binding upon the parties. In the event Buyer and Seller are
unable to resolve a dispute or disagreement set forth in a written
objection pursuant to this Section 1.5(b), either party may elect, by
written notice to the other party (given within fifteen days after Seller's
receipt of Buyer's objections), to have all such disputes or disagreements
resolved by an accounting firm of recognized national standing acceptable
to Buyer and Seller and not then employed by Buyer, Seller or any of their
affiliates (the "Selected Accounting Firm"). If Buyer and Seller cannot
agree upon the accounting firm to serve as the Selected Accounting Firm,
Buyer and Seller shall each promptly select a firm that would qualify as
the Selected Accounting firm and such firms shall together select the
Selected Accounting Firm. The Selected Accounting Firm shall issue a report
resolving such disputes, which report shall constitute a final and binding
resolution of the disputes or disagreements. The Selected Accounting Firm
shall be instructed to use every reasonable effort to perform its services
within fifteen days after receiving the Final Schedule and, in any case, as
soon as practicable after such receipt. The charges for the services of the
Selected Accounting Firm shall be shared equally by Buyer and Seller. At
such time that any objections relating to a line item on the Final Schedule
is resolved, whether by agreement of Buyer and Seller or by the Selected
Accounting Firm, the Final Schedule shall be modified and amended by
substituting, in the applicable line item, such amount, as resolved, for
the disputed amount.
(c) Post-Closing adjustments as determined pursuant to the
Final Schedule shall be made as set forth below:
(i) If Final Working Capital shall be less than Closing
Working Capital, then the Cash Purchase Price shall be decreased,
dollar-for-dollar, by the amount that Final Working Capital is less than
Closing Working Capital. If Final Working Capital shall be greater than
Closing Working Capital, then the Cash Purchase Price shall be increased,
dollar-for-dollar, by the amount that Final Working Capital exceeds Closing
Working Capital;
(ii) If the Final Indebtedness shall be less than Closing
Indebtedness, then Buyer shall pay to Seller an amount equal to the
difference between the Closing Indebtedness and the Final Indebtedness. If
the Final Indebtedness shall be greater than Closing Indebtedness, then
Seller shall pay Buyer an amount equal to the difference between the Final
Indebtedness and the Closing Indebtedness;
(iii) If the Final Retiree Benefit Liability shall be
less than Closing Retiree Benefit Liability, then the Buyer shall pay to
Seller an amount equal to the difference between the amount that Final
Retiree Benefit Liability is less than Closing Retiree Benefit Liability.
If Final Retiree Benefit Liability shall be greater than Closing Retiree
Benefit Liability, then Seller shall pay Buyer an amount equal to the
difference between the Final Retiree Benefit Liability and the Closing
Retiree Benefit Liability;
(iv) If the Final Interim Earnings shall be less than
Closing Interim Earnings, then Buyer shall pay to Seller an amount equal to
the difference between the Closing Interim Earnings and the Final Interim
Earnings. If the Final Interim Earnings shall be greater than Closing
Interim Earnings, then Seller shall pay Buyer an amount equal to the
difference between the Final Interim Earnings and the Closing Interim
Earnings.
(v) If the Final JAIX Taxes shall be less than the
Closing JAIX Taxes, then Seller shall pay to Buyer an amount equal to the
difference between the Closing JAIX Taxes and the Final JAIX Taxes. If the
Final JAIX Taxes shall be greater than Closing JAIX Taxes, then Buyer shall
pay Seller an amount equal to the difference between the Final JAIX Taxes
and the Closing JAIX Taxes.
(vi) Buyer shall indirectly acquire all assets (and JAIX
shall retain all liabilities) held or owed by JAIX as of December 31, 1998
(or thereafter acquired or arising), except for income tax- related assets
and liabilities as of December 31, 1998, together with all earnings of JAIX
(net of federal and state income taxes accruing on those earnings) from
December 31, 1998 through the Closing Date. To the extent that the Final
Schedule indicates that any such assets shall have been transferred from
JAIX to Seller or any affiliate thereof, whether by way of dividend,
distribution, payment of management fees, or otherwise, prior to the
Closing Date, except an amount equal to the federal and state income taxes
accruing on the earnings of JAIX after December 31, 1998 (the "JAIX
Taxes"), and except for income tax- related assets and liabilities as of
December 31, 1998 (the "JAIX Transfers"), the Cash Purchase Price shall be
decreased, dollar-for-dollar, by an amount equal to the JAIX Transfers as
reflected on the Final Schedule.
(d) The amount of any such adjustment to the Cash Purchase
Price or any payment shall be paid by Buyer or Seller, as the case may be,
by wire transfer in immediately available funds within five business days
following final determination of the adjustments set forth herein.
(e) Any adjustment paid pursuant to Section 1.5 shall bear
interest at an annual rate of 8% from and including the Closing Date to,
but excluding, the date of payment. Any such payment shall be treated for
all tax purposes as an adjustment to the Cash Purchase Price.
Section 1.6. Contingent Additional Consideration.
(a) Upon the occurrence of any Triggering Event (as defined
below), Buyer shall pay, or cause to be paid, to Seller additional
consideration for the Shares in an amount in cash equal to $20 million,
which shall accrete at a compound annual rate of 10% from and including the
Closing Date to, but excluding, the date of payment (the "Contingent
Additional Consideration").
(b) Payment of the Contingent Additional Consideration (as
fully accreted) shall be made, simultaneously with the closing of any
Triggering Event, in immediately available funds by wire transfer to a bank
account to be specified by Seller. Buyer shall not consummate any
transaction that would result in a Triggering Event unless such payment of
Contingent Additional Consideration is simultaneously made to Seller. The
Contingent Additional Consideration shall be subject to the Subordination
Agreement, which shall contain the terms set forth on Exhibit I, and to
Buyer's right of set-off pursuant to Section 8.7. The accretion specified
in subsection (a) shall not apply to any finally determined amount set-off
pursuant to Section 8.7 from and after the time of such final
determination.
(c) As used in this Agreement, the occurrence of any of the
following events shall constitute a "Triggering Event":
(i) the consummation of one or more public offerings of
any securities of Buyer, of any Railcar Subsidiary or of any other entity
that directly or indirectly holds the Shares or any assets of the Railcar
Subsidiaries, as the case may be, with the result that the aggregate net
cash proceeds received by Buyer or such other entity in such offerings plus
the amount of indebtedness (excluding working capital indebtedness and
excluding any indebtedness which merely refinances and replaces existing
indebtedness without increasing the amount thereof) incurred after the
Closing by Buyer or any Railcar Subsidiary exceeds the sum of (A) the
Senior Secured Debt, (B) the Senior Notes and (C) $20 million; provided,
however, that such $20 million shall be added to the sum of (A) and (B) (to
increase the threshold necessary to constitute a Triggering Event under
this subsection) only if each of the following conditions are satisfied:
(x) no secondary shares shall have been offered in the one or more public
offerings at issue, (y) the underwriters of such one or more public
offerings shall have confirmed in writing that the offering of the
additional securities required to provide the aggregate net proceeds to pay
the Contingent Additional Consideration would adversely affect such
offering and (z) no debt shall have been incurred after the Closing by
Buyer or any Railcar Subsidiary that is senior in right of payment to the
Contingent Additional Consideration (excluding working capital indebtedness
and excluding any indebtedness which merely refinances and replaces
existing indebtedness without increasing the amount thereof);
(ii) (A) the sale or transfer of at least 25% of the
common stock of any Railcar Subsidiary (other than JAIX, and other than
mergers effective on the Closing Date as contemplated by Section 1.2
hereof) or of any other entity that directly or indirectly holds the Shares
or any assets of the Railcar Subsidiaries, as the case may be, or (B) the
sale or transfer of at least 25% of the common stock of Buyer held by
holders other than Seller, Caravelle/CIBC or John Hancock as of the Closing
Date (other than transfers among stockholders of Buyer acquiring common
stock of Buyer on or before the Closing Date or transfers to family trusts
or family limited partnerships for estate planning purposes);
(iii) the sale, lease, transfer or other disposition of a
majority of the assets (by merger, liquidation or otherwise) of Buyer, of
the Railcar Subsidiaries (other than JAIX) or of any other entity that
directly or indirectly holds the Shares or any assets of the Railcar
Subsidiaries, as the case may be (other than the sale, lease, transfer or
other disposition among Buyer and the Railcar Subsidiaries);
(iv) the earlier to occur of (A) repayment in full of the
Senior Secured Debt and the Senior Notes, or any replacement thereof (other
than that effected by way of a refinancing which does not increase the then
existing amount of such term indebtedness, or the maximum amount of such
revolving or working capital indebtedness) (a "Permitted Refinancing") if,
in connection with such refinancing, the Buyer or the Railcar Subsidiaries,
or both, are able, after using commercially reasonable efforts, to finance
a sufficient amount to pay, in full, the Contingent Additional
Consideration, or (B) the lapse of twelve (12) months after the repayment
in full of the Senior Notes under any circumstances (other than by way of a
Permitted Refinancing), provided that in any such case the Railcar Business
has achieved an EBITDA of at least $30,000,000 for (x) the most recent
twelve (12) months, (y) the most recent fiscal year or (z) the average of
the last two (2) completed fiscal years; or
(v) the liquidation or dissolution of Buyer, or the
institution by Buyer of any proceedings relating to insolvency or the
institution against Buyer of any such proceedings, which have not been
withdrawn within 60 days.
(d) Until the Contingent Additional Consideration has been paid
to Seller, neither Buyer, any Railcar Subsidiary nor any other entity that
directly or indirectly holds the Shares or any assets of the Railcar
Subsidiaries, as the case may be, shall, without the prior written consent
of Seller, declare or pay any dividends or distributions (other than
dividends or distributions by the Railcar Subsidiaries to Buyer), or permit
such payment or declaration, on its capital stock, redeem or acquire its
capital stock or incur indebtedness in excess of an amount equal to the sum
of (x) the then outstanding amount of the term loan under the Senior
Secured Debt and the Senior Notes (not to exceed the respective amounts at
Closing) plus (y) the then amount committed under the revolving credit
facility for working capital borrowings under the Senior Secured Debt, or
any replacement thereof, as or may be increased in the ordinary course of
business.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
Section 2.1. Organization.
(a) Seller and each Railcar Subsidiary is a corporation duly
organized and validly existing under the law of its jurisdiction of
incorporation. Seller and each Railcar Subsidiary has all requisite
corporate power and authority to own, lease and operate its properties and
to carry on its business and operations as now being conducted, except
where any such failure to have such power and authority would not
individually or in the aggregate have a Material Adverse Effect (as defined
below). Seller and each Railcar Subsidiary is duly qualified or licensed to
do business in each jurisdiction in which the property owned, leased or
operated by Seller and each Railcar Subsidiary or the nature of the
business conducted by Seller and each Railcar Subsidiary makes such
qualification necessary, except in any such jurisdictions where the
failure, individually or in the aggregate, to be so duly qualified or
licensed would not have a Material Adverse Effect.
(b) As used in this Agreement, "Material Adverse Effect" shall
mean any material adverse change in, or effect on, the financial condition,
business or results of operations of the Railcar Business taken as a whole.
Section 2.2. Authorization. Seller has the corporate power and
authority to execute and deliver this Agreement and cause to be consummated
the transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the board of directors of Seller, with
no other corporate action on the part of Seller or its stockholders being
necessary. This Agreement has been duly executed and delivered by Seller
and when executed and delivered by Seller will constitute a valid and
legally binding obligation of Seller enforceable against Seller in
accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and that the availability of
equitable remedies may be limited by general principles of equity.
Section 2.3. Capital Stock. All of the shares in the capital
stock of each Railcar Subsidiary are validly issued, fully paid and
non-assessable. There are no outstanding securities convertible into,
exchangeable for, or carrying the right to acquire, equity securities of
the Railcar Subsidiaries or any of their subsidiaries, nor are there any
subscriptions, warrants, options, rights or other arrangements or
commitments (other than pursuant to this Agreement) which could obligate
Seller or any Railcar Subsidiaries or their respective subsidiaries to
issue or sell any shares of the capital stock of the Railcar Subsidiaries
or their respective subsidiaries. Except pursuant to this Agreement,
neither the Seller nor any Railcar Subsidiary (or their respective
subsidiaries) is a party to, or bound by, any arrangement, instrument or
order (a) relating to the transfer of any capital stock or equity
securities (including in respect of preemptive rights) of any of the
Railcar Subsidiaries, (b) relating to the dividend or voting rights of any
capital stock or equity securities of the Railcar Subsidiaries, or (c)
relating to rights to registration under the Securities Act of any capital
stock or other equity securities of any of the Railcar Subsidiaries
(including any shareholder's or similar agreement).
Section 2.4. Railcar Subsidiaries. Except with respect to JAC
Patent, Seller is the registered and beneficial owner of the Shares, which
comprise all of the issued and outstanding shares in all classes of capital
stock of the Railcar Subsidiaries. JAC is the registered and beneficial
owner of all issued and outstanding shares of capital stock of JAC Patent
(the "Patent Shares"). Except for the liens arising under the Senior Bank
Facility, which such liens shall be released on or prior to the Closing,
Seller has good title to the Shares, and JAC has good title to the Patent
Shares, free and clear of all Liens. Upon the transfer to Buyer or a
subsidiary of Buyer of the Shares, Seller will, subject to the payment of
any stamp duties or other similar taxes, have transferred to Buyer or a
subsidiary of Buyer good title to the Shares free and clear of all Liens,
other than Liens created by Buyer, and JAC will continue to own and have
good title to the Patent Shares, free and clear of all Liens, other than
Liens created by Buyer. As used herein, the term "Liens" shall mean any
pledge, mortgage, charge, claim, title imperfection, defect or objection,
security interest, conditional or instalment sales agreement, encumbrance,
easement, encroachment, third party right or restriction of any kind other
than (except with respect to the Shares) liens for current taxes not yet
due or taxes being contested in good faith by appropriate proceedings.
Section 2.5. Consents and Approvals; No Violations. Except as
set forth on Schedule 2.5, neither the execution, delivery or performance
of this Agreement by Seller nor the consummation by Seller of the
transactions contemplated hereby nor compliance by Seller with any of the
provisions hereof will (a) conflict with or result in any breach of any
provision of the certificate of incorporation or by-laws of Seller or any
Railcar Subsidiary, (b) require any filing with, or permit, authorization,
consent or approval of, any Governmental Authority (except where the
failure to obtain such permits, authorizations, consents or approvals or to
make such filings would not have a Material Adverse Effect), (c) result in
a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, lease,
contract, agreement or other instrument or obligation to which Seller or
any Railcar Subsidiary is a party or by which any of the properties or
assets of the Railcar Business may be bound, (d) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Seller or any
Railcar Subsidiary or any of the properties or assets of the Railcar
Business or (e) result in the creation or imposition of any lien, claim,
charge, restriction, equity or encumbrance of any kind whatsoever upon, or
give to any person other than Buyer any interest or right (including any
right of termination or cancellation) in, or with respect to, any of the
Shares or the assets of any Railcar Subsidiary, except in the case of (c),
(d) and (e) for violations, breaches, defaults, liens, claims, charges,
restrictions, equities or encumbrances which would not have a Material
Adverse Effect.
Section 2.6. Financial Statements; Undisclosed Liabilities.
(a) Attached as Schedule 2.6(a) are the audited combined
balance sheets of the Railcar Business as of December 31, 1998 and 1997 and
the related audited combined statements of income and cash flows for each
of the three years ended December 31, 1998 (the "Financial Statements").
The Financial Statements have been prepared in accordance with generally
accepted accounting principles, except as otherwise noted therein. The
Financial Statements fairly present, in all material respects, the
financial position of the Railcar Business as of December 31, 1998 and 1997
and the related results of operations and cash flows for each of the three
years in the period ended December 31, 1998. As used in this Agreement,
"Accounting Principles" shall mean the accounting principles, practices and
methods used in the preparation of the Financial Statements.
(b) Except as set forth on Schedule 2.6(b), none of the Railcar
Subsidiaries has any liabilities or obligations (absolute, accrued,
contingent or otherwise) other than (i) liabilities which are reflected and
reserved against on the Financial Statements, (ii) liabilities incurred
since January 1, 1999 in the ordinary course of business and consistent
with the Railcar Subsidiaries' practice during the past two years, (iii)
liabilities arising under any contract, (iv) liabilities disclosed in this
Agreement or in any schedule thereof, and (v) liabilities which would not
result in a Material Adverse Effect.
Section 2.7. Absence of Certain Changes.
Except as set forth on Schedule 2.7, with respect to the Railcar
Subsidiaries, since December 31, 1998 there has not been and, as of the
Closing Date, there will not have been:
(a) any material damage, destruction, or loss, whether or not
covered by insurance, adversely affecting the Railcar Subsidiaries, or
their properties, assets, business or financial position;
(b) any cancellation of any material debts or any waiver of any
material rights of value to the Railcar Subsidiaries, except in the
ordinary course of business;
(c) any transfer of any rights in the Railcar Subsidiaries'
patents, trademarks, trade names or copyrights;
(d) any material increase in the compensation payable or to
become payable by the Railcar Subsidiaries to any of their officers or
employees (except usual and customary increases in salary) or any material
change or amendment to any bonus plan for the benefit of any officers or
employees to materially increase the amount of the bonus payments
thereunder;
(e) any action which has materially increased the costs of the
Railcar Subsidiaries in funding or maintaining any employee pension or
retirement plans or other employee benefit plans;
(f) Other than scheduled capital expenditures set forth in the
1999 Budget contained in the Business Plan that has been delivered to
Buyer, any single capital expenditure or commitment for capital expenditure
in excess of $200,000 for additions to the Railcar Subsidiaries' property,
plant, equipment or intangible capital assets or any aggregate capital
expenditures and commitments in excess of $400,000 for additions to the
Railcar Subsidiaries' property, plant, equipment or intangible capital
assets for which the Railcar Subsidiaries' will be liable at the Closing
Date;
(g) any sale, assignment or transfer of any assets of the
Railcar Subsidiaries having a net book value, as of December 31, 1998, in
excess of $100,000, other than sales of inventory in the ordinary course
of business;
(h) the entering into, creation or allowance of any new
mortgages, liens or encumbrances on any assets of the Railcar Subsidiaries
other than the liens and encumbrances arising in the ordinary course of
business and liens and encumbrances to be removed by the Closing Date;
(i) any lease or sublease of real property or the exercise of
any purchase options or rights of first refusal contained in any lease or
sublease, or the termination, surrender, cancellation or assignment of any
of the properties demised under any leases, or any part thereof other than
in the ordinary course of business;
(j) except for indebtedness (other than payables arising in the
ordinary course) arising under the Senior Bank Facility, the incurring of
any indebtedness for borrowed money, the entering into of any commitment to
borrow money, or making of any loans in respect to borrowed money to third
parties, or the agreement to guaranty any obligations of third parties
(other than in connection with the negotiation and collection of negotiable
instruments in the ordinary course of business);
(k) the writing up or writing down of the value on its
financial statements of any of the Railcar Subsidiaries' assets in excess
of $100,000;
(l) the issuance of, or the commitment by any of the Railcar
Subsidiaries to issue, any shares of capital stock or other equity
securities or securities convertible into or exchangeable for shares of
capital stock or other equity securities of the Railcar Subsidiaries.
Section 2.8. Litigation.
(a) Except as it relates to any audit or examination of any
foreign, federal, state or local Tax Returns filed by Seller on behalf of
the Railcar Subsidiaries, Schedule 2.8 sets forth all (i) suits, claims,
actions or proceedings pending and all court or governmental orders
outstanding, or, to Seller's Knowledge, threatened, and (ii) to Seller's
Knowledge, any investigation pending or threatened, against Seller or any
Railcar Subsidiary or any of their respective properties, assets and
business operations by or before any court or Governmental Authority or by
any third party relating to the Railcar Business, where the amount sought
in damages exceeds $100,000 or the relief sought is a court order for
equitable relief, other than those suits, claims, actions or proceedings
relating to worker's compensation, union grievances, discrimination claims
to the extent arising out of union grievances, and similar claims arising
in the ordinary course of business.
(b) As used in this Agreement, "Knowledge of Seller" or
"Seller's Knowledge" shall mean the actual knowledge of any of the
following individuals: Thomas Begel, Andrew Weller and Kenneth Tallering.
Section 2.9. Compliance with Applicable Law. Except as it
relates to any Benefit Plan, Taxes or Environmental Law (as each such term
is defined in Sections 2.10, 2.11 and 2.12, respectively), Seller and each
Railcar Subsidiary is in material compliance with applicable laws,
ordinances, orders, rules and regulations of any Governmental Authority
applicable to the Railroad Business except for non-compliance that would
not have a Material Adverse Effect.
Section 2.10. Employee Benefit Plans.
(a) Schedule 2.10(a) lists each "employee benefit plan" (within
the meaning of section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), maintained by Seller and relating to the
Railcar Business or by the Railcar Subsidiaries, including, without
limitation, multiemployer plans within the meaning of ERISA section 3(37),
and pension, retirement, excess benefit, profit sharing, salary
continuation, termination, health, life, disability, group insurance,
vacation, stock purchase, stock option, severance, employment,
change-in-control, fringe benefit, collective bargaining, bonus, incentive,
deferred compensation and all other employee benefit plans, agreements,
programs, policies or other arrangements, whether or not subject to ERISA,
under which any employee or former employee of any Railcar Subsidiary has
any present or future right to benefits or under which any Railcar
Subsidiary has any present or future liability. All such plans, agreements,
programs, policies and arrangements shall be collectively referred to as
the "Benefit Plans".
(b) As used in this Agreement, "Pension Plan" shall mean each
employee pension plan as defined in Section 3(2) of ERISA maintained by
Seller and relating to the Railcar Business or by the Railcar Subsidiaries
for its employees and in which such employees participate, and "Welfare
Plan" shall mean each employee welfare plan as defined in Section 3(1) of
ERISA maintained by Seller and relating to the Railcar Business or by the
Railcar Subsidiaries for its employees in which such employees participate.
Schedule 2.10 lists each Pension Plan and Welfare Plan maintained by Seller
and relating to the Railcar Business or by the Railcar Subsidiaries under
which any employee or former employee of any Railcar Subsidiary has any
present or future right to benefits or under which any Railcar Subsidiary
has any present or future liability.
(c) Each Benefit Plan and Welfare Plan has been established and
administered in accordance with its terms and in compliance with the
applicable provisions of ERISA, the Internal Revenue Code of 1986, as
amended (the "Code"), and other applicable laws, rules and regulations,
except for any non-compliance which would not result in a Material Adverse
Effect.
(d) As applicable with respect to each Benefit Plan and Welfare
Plan, the Seller has delivered to the Buyer true and complete copies of (i)
each Benefit Plan, including all amendments thereto, and in the case of an
unwritten Benefit Plan, a written description thereof, (ii) all trust
documents, investment management contracts, custodial agreements and
insurance contracts relating thereto, (iii) the current summary plan
description and each summary of material modifications thereof, (iv) the
three most recent annual reports (Form 5500 and all schedules thereto)
filed with the Internal Revenue Service, (v) the most recent Internal
Revenue Service determination letter and each currently pending application
to the Internal Revenue Service for a determination letter, (vi) the three
most recent summary annual reports, actuarial reports, financial statements
and trustee reports, and (vii) all records, notices and filings concerning
(x) Internal Revenue Service or Department of Labor audits or
investigations, (y) "prohibited transactions" within the meaning of Section
406 of ERISA or Section 4975 of the Code and (z) "reportable events" within
the meaning of Section 4043 of ERISA. To Seller's Knowledge, the Benefit
Plans are and have been maintained and administered in compliance with the
requirements of ERISA and, where applicable, Section 401 of the Code. There
are no accumulated funding deficiencies as defined in Section 302 of ERISA
or Section 412 of the Code, whether or not waived, with respect to the
Benefit Plans. There is not now, nor has there been any prohibited
transaction (as defined in Section 406 of ERISA or Sections 503 or 4975 of
the Code) involving the Benefit Plans. Except as otherwise disclosed on
Schedule 2.10(d), there are no pending or, to the knowledge of Seller,
threatened investigations or audits by governmental agencies or any claims
by or on behalf of the Benefit Plans or by any employee of the Seller or
the Railcar Subsidiaries alleging a breach or breaches of such plans, or
fiduciary duties thereunder, or violations of other applicable federal or
state law with respect to the Benefit Plans, which could result in a
monetary liability, or any material non-monetary liability, on the part of
the Seller or any Railcar Subsidiary under ERISA or any other law, nor, to
the knowledge of Seller, is there any basis for such a claim. Neither the
Seller nor any Railcar Subsidiary has any liability, withdrawal or
otherwise, actual or contingent, to any "multi-employer pension plan."
(e) Except as otherwise disclosed on Schedule 2.10(e):
(i) The Pension Plans now meet, and at all times since
their inception have met, or can timely be amended to meet, the
requirements for qualification under Section 401(a) of the Code, and the
related trusts are now, and at all times since their inception have been,
exempt from taxation under Section 501(a) of the Code;
(ii) All Pension Plans have received determination
letters from the Internal Revenue Service to the effect that such Pension
Plans are qualified and the related trusts are exempt from federal income
taxes and no determination letter with respect to any Pension Plan has been
revoked nor, to the knowledge of the Seller, is there any reason for such
revocation, nor has any Pension Plan been amended since the date of its
most recent determination letter in any respect which would adversely
affect its qualification;
(iii) No Benefit Plan is now or at any time has been
subject to Part 3, Subtitle B of Title I of ERISA or Title IV of ERISA. To
Seller's Knowledge, all contributions to, and payments from, any Benefit
Plan which may have been required in accordance with the terms of such
Benefit Plan or any related document have been timely made. All such
contributions to, and payments from, any Benefit Plan, except those to be
made from a trust, qualified under Section 401(a) of the Code, for any
period ending before the Closing Date that are not yet, but will be,
required, shall be paid on or before the Closing Date;
(iv) Neither the Seller, nor to the knowledge of Seller,
any fiduciary, trustee or administrator of any Benefit Plan, has engaged in
or, in connection with the transactions contemplated by this Agreement,
will engage in any transaction with respect to any Benefit Plan which would
subject any such Benefit Plan, the Seller, the Railcar Subsidiaries or the
Buyer to a tax, penalty or liability for a "prohibited transaction" under
Section 406 of ERISA or Section 4975 of the Code. None of the assets of any
Benefit Plan is invested in any property constituting "employer real
property" or an "employer security" within the meaning of Section 407 of
ERISA;
(v) With respect to each Benefit Plan that is a "group
health plan" within the meaning of Section 607 of ERISA and that is subject
to Section 4980B of the Code, the Seller and the Railcar Subsidiaries
comply in all respects with the continuation coverage requirements of the
Code and ERISA;
(vi) No Benefit Plan provides benefits, including,
without limitation, death or medical benefits, beyond termination of
service or retirement other than (A) coverage mandated by law or (B) death
or retirement benefits under a Benefit Plan qualified under Section 401(a)
of the Code. Neither the Seller nor any Railcar Subsidiary, nor any
predecessor thereof, has made a written or oral representation to any
current or former employee promising or guaranteeing any employer paid
continuation of medical, dental, life or disability coverage for any period
of time beyond retirement or termination of employment; and
(vii) No Benefit Plan provides for the payment of "excess
parachute payments" by reason of the consummation of the sale of the Shares
pursuant to this Agreement within the meaning of Section 280G of the Code.
Section 2.11. Taxes.
(a) Except to the extent that the inaccuracy of any of the
following (or the circumstances giving rise to such inaccuracy),
individually or in the aggregate, would not have a Material Adverse Effect:
(i) Seller (with respect to the Railcar Business) and each of the Railcar
Subsidiaries, and any consolidated, combined, unitary or aggregate group
for tax purposes of which Seller or any of the Railcar Subsidiaries is or
has been a member, have timely filed (giving effect to any applicable
extensions) all Tax Returns required to be filed by them in the manner
provided by law, which Tax Returns are true, complete and correct in all
material respects and have been prepared in accordance with applicable
laws, have timely paid all Taxes shown thereon to be due and, with respect
to the Railcar Business and the Railcar Subsidiaries, have provided
adequate reserves in their financial statements according to GAAP for any
Taxes for taxable periods (or portions thereof) ending on or prior to the
Closing Date that have not been paid, whether or not shown as being due on
any Tax Returns and (ii) no material claim for unpaid Taxes has become a
lien or encumbrance of any kind against the assets of any Railcar
Subsidiary or is being asserted against Seller (in respect of the Railcar
Business) or any Railcar Subsidiary except for statutory liens for Taxes
not yet due.
(b) Except as set forth in Schedule 2.11, no adjustment
relating to the Tax Returns described in paragraph (a) above has been
proposed, asserted, or assessed in writing by any Tax Authority (insofar as
either relates to the activities or income of the Railcar Subsidiaries or
could result in liability of the Railcar Subsidiaries on the basis of joint
and/or several liabilities).
(c) Except as set forth in Schedule 2.11, no audit or
examination of any foreign, federal, state or local income Tax Returns or
other Tax Returns filed by the Seller (with respect to the Railcar
Subsidiaries) or the Railcar Subsidiaries is in progress; to Seller's
Knowledge there are no pending actions or proceedings for the assessment or
collection of Taxes against Seller (with respect to the Railcar Business)
or the Railcar Subsidiaries.
(d) Except as set forth on Schedule 2.11, no written waiver of
any statute of limitations relating to Seller (with respect to the Railcar
Business), or relating to the Railcar Subsidiaries has been given in
writing and is in effect. Neither the Seller (with respect to the Railcar
Business) nor the Railcar Subsidiaries has ever (i) filed any consent
agreement under Section 341(f) of the Code, (ii) been the subject of a
private letter ruling that has continuing effect, or (iii) been the subject
of a closing agreement with any Tax Authority that has continuing effect.
(e) Except as set forth on Schedule 2.11, the Railcar
Subsidiaries are not a party to any Tax Sharing Agreement.
(f) Except as set forth on Schedule 2.11, none of the Railcar
Subsidiaries has any liability for the Taxes of any person other than the
Railcar Subsidiaries (i) under Treasury Regulation ss.1.1502-6 (or any
similar provision of state, local or foreign law), (ii) as a transferee or
successor or (iii) by contract.
(g) Neither Seller nor any of the Railcar Subsidiaries is a
"foreign person" within the meaning of Section 1445 of the Code and the
regulations promulgated thereunder.
(h) Except as set forth on Schedule 2.11, neither Seller nor
any of the Railcar Subsidiaries has received written notice from any Tax
Authority claiming that any of the Railcar Subsidiaries was doing business
or engaged in a trade or business in any jurisdiction in which it has not
filed any applicable income or franchise Tax Returns.
(i) As used in this Agreement:
(i) "Taxes" shall mean any and all federal, state, local,
foreign and other taxes of any kind, including but not limited to those on
or measured by or referred to as income, gross receipts, capital, sales,
use, ad valorem, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, social security, workers'
compensation, unemployment compensation, net worth, transfer, occupation,
premium, value added, real or personal property or windfall profits taxes,
customs, duties or similar fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax
or additional amounts imposed by any Governmental Authority.
(ii) "Tax Return" shall mean any return, report or
statement required to be filed with any Governmental Authority with respect
to Taxes.
Section 2.12. Environmental Laws and Regulations.
(a) To Seller's Knowledge, neither the Seller nor any Railcar
Subsidiary has received any written notice of any pending or threatened
action, claim or proceeding under Environmental Laws arising out of the
condition of the Premises (as defined in Section 2.25(a)) or the conduct of
the Railcar Business. With respect to the Premises, or the conduct of the
Railcar Business, to Seller's Knowledge, neither the Seller nor any Railcar
Subsidiary has been served with any citation or received any notice of
noncompliance by the Seller or any Railcar Subsidiary with any
Environmental Laws.
(b) To Seller's Knowledge, based solely on the Phase 1 report
dated April 23, 1999 relating to the property at Johnstown and the 1995
Phase I report and the updating letter dated April 23, 1999 relating to the
property at Danville, in each case, prepared by First Environment, Inc.,
neither the Premises, nor to Seller's Knowledge, any properties formerly
owned, operated or leased by the Railcar Subsidiaries since October 28,
1991 is listed or proposed for listing on any list maintained by any
governmental agency of sites requiring remediation.
(c) To Seller's Knowledge, based solely on the Phase 1 report
dated April 23, 1999 relating to the property at Johnstown and the 1995
Phase I report and the updating letter dated April 23, 1999, relating to
the property at Danville, in each case, prepared by First Environment,
Inc., there are no underground storage tanks, above-ground storage tanks,
asbestos-containing materials or poly-chlorinated biphenyl-containing
equipment located at, on or under the Premises, or to Seller's Knowledge,
at any property formerly owned, operated or leased by the Railcar
Subsidiaries since October 28, 1991.
(d) To Seller's Knowledge, none of the Railcar Subsidiaries has
retained or assumed by contract any liability or responsibility of third
parties (excluding any liability arising under or relating to operating
leases) for any environmental claims or conditions.
(e) Except as set forth on Schedule 2.12, Seller (as it relates
to the Railcar Business) and each of the Railcar Subsidiaries is in
material compliance with all applicable laws and regulations relating to
protection of the environment (collectively, "Environmental Laws"), except
for any non-compliance which would not result in a Material Adverse Effect.
Section 2.13. Certain Fees. None of Seller or any of its
affiliates has employed any financial advisor or finder or incurred any
liability for any financial advisory or finders' fees in connection with
this Agreement or the transactions contemplated hereby that could be the
responsibility of Buyer.
Section 2.14. Title to Assets. Except as set forth on Schedule
2.14, each Railcar Subsidiary has good and marketable title to all its
assets (including, but not limited to, those set forth on the Financial
Statements), except for those assets which are leased, and for which the
respective Railcar Subsidiary has a valid leasehold interest. The assets of
each Railcar Subsidiary are free and clear of all Liens, except for (a)
those referred to in Schedule 2.14, (b) liens for current taxes not yet due
and payable or being contested in good faith by appropriate proceedings,
and where appropriate reserves have been established and (c) with respect
to any real property, such imperfections of title, easements and
encumbrances as do not materially detract from the value of the properties
subject thereto or affected thereby or otherwise do not materially
interfere with their present or future use in a manner consistent with
present practices or impair the operation of the Railcar Business.
Section 2.15. All Assets Included. All non-cash assets
constituting, used principally in connection with, and necessary to the
conduct of, the Railcar Business are owned or leased by the Railcar
Subsidiaries. None of the Railcar Subsidiaries' tangible personal property
is subject to any contract for its sale to any party other than in the
ordinary course of business. None of the Railcar Subsidiaries' tangible
personal property is subject to any contract for its use by any other
party.
Section 2.16. Contracts. Schedule 2.16 contains a list of all
written agreements of the Railcar Subsidiaries: (a) for the purchase and
sale of railcars in the backlog as of March 31, 1999, (b) for the purchase
and sale of goods (other than agreements to purchase materials under those
agreements within (a) hereof directly related to those agreements within
(a) hereof) which exceed $500,000, (c) for loans, repurchases, credit
accommodations, or the guarantee of the obligations of any party which
exceed $100,000, excluding those to be discharged on or in connection with
the Closing, or (d) restricting or purporting to restrict the Railcar
Subsidiaries or any of them from entering into, or competing in, any line
of business. True and correct copies of all written agreements set forth on
Schedule 2.16 (except for those agreements within (a) hereof) have been
delivered to Buyer. Neither Seller nor any Railcar Subsidiary has received
any written notice of the existence or alleged existence of any oral
agreements which, if in writing, would be included in the preceding
sentence. Except as set forth on Schedule 2.16, none of the agreements
described within (a) through (d) hereof require consent from or notice to
another party before or upon the consummation of the transactions
contemplated by this Agreement. With respect to all such agreements
described in this Section 2.16, neither Seller nor any Railcar Subsidiary
has received any written notice, nor has Seller or any Railcar Subsidiary
given written notice, that it or any other party to any such agreement is
in material default thereunder.
Section 2.17. Patents, Trademarks, Licenses. Schedule 2.17
contains a complete list of all trademarks, service marks, tradenames,
domain names, fictitious names, symbols, logos, trade dress, copyrights and
patents (the "Intellectual Property") used by the Railcar Subsidiaries in
connection with the Railcar Business, and, except as set forth on Schedule
2.17, all of which are owned by the Railcar Subsidiaries, free and clear of
all Liens. To Seller's Knowledge, to the extent such Intellectual Property
is not owned by the Railcar Subsidiaries, the Railcar Subsidiaries have
adequate and sufficient rights, registered or unregistered, to use such
Intellectual Property as currently used in the Railcar Business, free and
clear of any Lien or competing rights or interests of others which would
preclude or otherwise impair such use by the Railcar Subsidiaries. To the
Knowledge of Seller, based on written notice, the operations of the Railcar
Business as currently conducted do not infringe any trademark, trade name,
copyright or patent of any third party. Neither the Seller nor the Railcar
Subsidiaries have received any written claim of infringement of any
trademark, trade name, copyright, patent application or patent of any third
party relating to the Railcar Business.
Section 2.18. Customers and Suppliers. Except as set forth on
Schedule 2.18, since January 1, 1999, there has been no adverse change in
the business relationship of the Railcar Subsidiaries with any customer or
supplier representing sales or purchases of 10% or more of the Railcar
Subsidiaries' sales or purchases, as the case may be, for the year ended
December 31, 1998, which would have a Material Adverse Effect.
Section 2.19. Books and Records of the Company. To Seller's
Knowledge, the minute books and stock books of each of the Railcar
Subsidiaries are complete and accurate, and contain all resolutions adopted
by the Board of Directors of each of the Railcar Subsidiaries, and each
committee of the Board of Directors of each of the Railcar Subsidiaries,
and of the shareholders of each of the Railcar Subsidiaries, from the
formation date of the respective Railcar Subsidiary through the date of
this Agreement.
Section 2.20. Accounts Receivable. The accounts receivable
reflected in the Financial Statements arose from valid transactions in the
ordinary course of business with unrelated third parties and represent bona
fide claims against debtors for sales, services performed or other charges
arising on or before the Closing Date.
Section 2.21. Licenses and Permits.
(a) Except as set forth on Schedule 2.21, to Seller's
Knowledge, (i) the Railcar Business owns and holds the permits, licenses,
and Governmental Authorizations (collectively, "Licenses") which constitute
all of the material Licenses required for and utilized in the ownership and
operation of the Railcar Business as it is currently being conducted, which
such Licenses are listed on Schedule 2.21; (ii) all material Licenses are
in full force and effect and good standing; (iii) neither the Seller nor
any Railcar Subsidiary has received any notice to the effect additional
Licenses which would be material to the Railcar Business as it is currently
being conducted are required by the Railcar Subsidiaries; (iv) no consent,
waiver, approval, license or authorization of or designation, declaration
or filing with any Governmental Authority, or any third party, is required
with respect to any material Licence in connection with the execution and
delivery of this Agreement or any instrument contemplated hereby or the
consummation of the transactions contemplated hereby; (v) no modification,
suspension or cancellation of any material License, or any proceeding
relating thereto, is pending or, to the knowledge of the Seller, threatened
with respect to any such License; and (vi) the Railcar Subsidiaries have
complied in all material respects with, and each is currently in compliance
in all material respects with, all statutes, laws, ordinances, rules,
regulations, judgments, decrees and orders, of any court or Governmental or
quasi-Governmental Authority, to which any of them is subject or by which
any of them is bound or which affect any material Licenses.
(b) The execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby, will not result in a
revocation or suspension of, or require the amendment of, any material
License.
Section 2.22. Improper Payments. Except for non-cash gifts or
transfers made in the ordinary course of business and not involving goods,
services or items with a value of more than $1,000, to Seller's Knowledge,
neither Seller nor any Railcar Subsidiary, nor any officer, director,
employee or agent of Seller or any Railcar Subsidiary, has at any time made
gifts, gratuities, or payments in any other form, whether in cash, goods or
services, to any persons or entities whatsoever, in payment for, or
intended to encourage, or which resulted in or may have resulted in or had
the effect of obtaining, encouraging or continuing the referral of persons
or entities as customers of the Railcar Business, or obtaining, encouraging
or extending any contractual relationship, written or oral, for any of the
same; nor has the Seller or any Railcar Subsidiary or any officer,
director, employee or agent of Seller or any Railcar Subsidiary, to
Seller's Knowledge, (i) entered into any arrangement, written or oral,
under or pursuant to which bribes, kickbacks, rebates, payoffs or other
forms of illegal or improper payments or remuneration have been or will be
made, provided for or suffered, either directly, or indirectly through
agents, brokers, distributors, dealers or other intermediaries, to any
person or entity or (ii) made any illegal or improper contribution of
monies, services or property to any political party, candidate or elected
official for any purpose.
Section 2.23. Bethlehem Steel Agreement. The Agreement of
Purchase and Sale between Bethlehem Steel Corporation and JAC, dated May 3,
1991, as first amended August 13, 1991 as second amended September 27, 1991
and as third amended October 28, 1991 ("Bethlehem Steel Agreement"), and
the Supplemental Agreement between JAC and Bethlehem Steel Corporation,
dated December 7, 1995 remains in full force and effect pursuant to its
terms and, except for the amendments described in this Section, has not
been amended or modified, nor has the Seller or any Railcar Subsidiary
waived, modified or amended any material provision thereof.
Section 2.24. Labor and Employee Matters.
(a) Except as set forth on Schedule 2.24, there are no written
contracts of employment that require an annual payment or a termination
payment of an amount in excess of $100,000 between any of the Railcar
Subsidiaries and any of their respective employees or which govern any such
employee's employment with any Railcar Subsidiary.
(b) Except as set forth on Schedule 2.24, to Seller's
Knowledge, neither the Railcar Subsidiaries nor any agent, representative
or employee of the Railcar Subsidiaries has received any written notice of
any unfair labor practice on the part of the Railcar Subsidiaries as
defined in the National Labor Relations Act of 1947, as amended, and there
is not now pending or threatened any charge or complaint against the
Railcar Subsidiaries by the National Labor Relations Board or any
representative thereof which would have a Material Adverse Effect.
(c) Except as set forth on Schedule 2.24(c), the Railcar
Subsidiaries are not a party to or bound by any agreement with any labor
organization, including any collective bargaining or similar agreement.
Section 2.25. Premises.
(a) Schedule 2.25 sets forth a complete list of all of the
Railcar Subsidiaries' owned or leased real property (the "Premises").
(b) Schedule 2.25 contains copies of all title insurance
policies currently held by the Railcar Subsidiaries, which such policies,
to Seller's Knowledge, remain in full force and effect.
Section 2.26. No Other Representations or Warranties. Except
for the representations and warranties contained in this Article II, Seller
makes no express or implied representation or warranty.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
Section 3.1. Organization, Existence and Authority of Buyer.
(a) Buyer is a corporation duly organized, validly existing and
in good standing under the laws of Delaware. Buyer has all requisite
corporate power and authority and full legal right to enter into, execute
and deliver this Agreement and perform its obligations hereunder. The
execution, delivery and performance by the Buyer of this Agreement and the
transactions contemplated hereby have been duly and validly authorized by
the board of directors of Buyer (including approval by the stockholders),
and no other corporate action on the part of Buyer or its stockholders is
necessary to authorize the consummation of this Agreement or the
transactions contemplated hereby.
(b) The execution, delivery and performance by Buyer of this
Agreement do not and the consummation of the transactions herein and
therein contemplated will not:
(i) conflict with, or result in the breach of, any
provision of the certificate of incorporation or by-laws of Buyer;
(ii) conflict with, result in the breach of, or
constitute a default under, or result in the termination, cancellation or
acceleration (whether after the giving of notice or the lapse of time or
both) of any right or obligation of Buyer under any mortgage, deed of
trust, contract, agreement, lease, indenture, order, arbitration award,
judgment or decree or other instrument to which Buyer is a party; or
(iii) violate or result in a breach of or constitute a
default under any law to which Buyer is subject, including any Governmental
Authorization, other than in the cases of clauses (ii) and (iii), any
conflict, breach, termination, default, cancellation, acceleration, loss or
violation which, individually or in the aggregate, would not be material.
(c) Except as required by the HSR Act, no consent, approval,
waiver or authorization is required to be obtained by Buyer from, and no
notice or filing is required to be given by Buyer to or made by Buyer with
any Governmental Authority or other Person in connection with the
execution, delivery and performance by Buyer of this Agreement.
(d) This Agreement constitutes, and when executed and delivered
at the Closing by Buyer will constitute, a valid and legally binding
obligation of Buyer, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and that
the availability of equitable remedies may be limited by general principles
of equity.
Section 3.2. Financial Capability. Buyer has delivered in a
form satisfactory to Seller fully executed and paid for commitment letters
issued by Fleet Capital Corporation in the amount of $110 million, by
Caravelle/CIBC in the amount of $12.5 million and John Hancock in the
amount of $12.5 million, evidencing Buyer's ability to pay the Purchase
Price and to consummate the transactions contemplated hereby.
Section 3.3. Capital Structure.
(a) At Closing, Buyer will have the number of shares of capital
stock authorized, the number of shares outstanding, and the amount and
nature of debt set forth in Exhibit J.
(b) Except as set forth on Schedule 3.3, there are no options,
calls, warrants or other rights, agreements, arrangements or commitments of
any character relating to the issued or unissued capital stock of Buyer or
any of its subsidiaries to which Buyer or any of its subsidiaries is a
party. All certificates representing the common stock of Buyer to be
delivered to Seller pursuant to Section 1.3(b)(ii) shall be duly
authorized, validly issued, fully paid and non-assessable and free of
preemptive (or similar) rights. Except as set forth in Schedule 3.3, there
are no outstanding contractual obligations of Buyer or any of its
subsidiaries to provide funds to or make any investment (in the form of a
loan, capital contribution or otherwise) in any subsidiary of Buyer or any
other entity which would be material to Buyer or such subsidiary, as the
case may be.
Section 3.4. Certain Fees. Except as set forth on Schedule 3.4,
neither Buyer nor any of its affiliates has employed any financial advisor
or finder or incurred any liability for any financial advisory or finders'
fees in connection with this Agreement or the transactions contemplated
hereby that will result in any liability to Seller or any Railcar
Subsidiary.
Section 3.5. HSR. Buyer hereby represents and warrants that (x)
it is a newly-formed company without a regularly prepared balance sheet,
(y) it is not controlled by any other person (as the term "control" is
defined in the HSR Act and the rules thereunder) and (z) at Closing, will
not have assets of $10 million or more, other than the cash that will be
used in connection with its performance under this Agreement and the
transactions contemplated thereby, and to pay for all expenses incidental
to its performance under this Agreement and the transactions contemplated
thereby.
Section 3.6. No Other Representations or Warranties. Except
for the representations and warranties contained in this Article III, Buyer
makes no express or implied representation or warranty.
ARTICLE IV
COVENANTS
Section 4.1. Consents.
(a) Each of Seller and Buyer shall cooperate, and use its best
efforts, to give all notices and make all filings necessary to consummate
the transactions contemplated hereby and to obtain any required approvals
of third parties. In furtherance of the foregoing, Buyer agrees to provide
to third parties such assurances as to financial capability, resources and
creditworthiness as may be reasonably requested by any third party whose
consent or approval is sought hereunder. Notwithstanding the foregoing,
nothing herein shall obligate or be construed to obligate either of Seller
or Buyer to make any payment to any third party in order to obtain the
consent or approval of such third party or to transfer any contract,
license or permit in violation of its terms.
(b) Seller will use reasonable efforts to obtain in writing
prior to the Closing the consents, authorizations, orders or approvals
required of third parties (including Governmental Authorities) in
connection with the rights, contracts or Licenses which, to the extent
assignable, are to be assigned pursuant to this Agreement and which are not
assignable without such consent; provided, however, that the failure or
inability of Seller to obtain any such consents or approvals shall not
affect the obligation of Buyer to consummate the transactions contemplated
by this Agreement, nor shall there be any adjustment in the Purchase Price.
If such consent is not obtained, Seller shall use its commercially
reasonable efforts, and Seller and Buyer shall cooperate in any reasonable
arrangements designed to provide Buyer with the economic and other benefits
thereunder, including assigning to Buyer the right to receive such economic
or other benefits and enforcing for the benefit of Buyer any and all rights
of Seller against such third party arising out of the cancellation by such
third party or otherwise. Notwithstanding the foregoing, the obligations of
Seller under this Section 4.1 shall not include any obligation to make any
material payment or to incur any material out-of-pocket economic burden.
Section 4.2. Buyer's Access to Information and Records.
(a) Buyer shall have the right to make, or cause to be made,
prior to the Closing Date, during regular business hours and upon
reasonable advance notice to, and subject to reasonable rules and
regulations of, Seller, such investigation of the business and properties
of the Railcar Subsidiaries and of their financial condition as Buyer
reasonably deems necessary to familiarize itself with such matters. Such
investigation shall include telephone calls and/or meetings with the
Railcar Subsidiaries' customers, subcontractors, lessors and suppliers for,
among other things, the purpose of verifying that the business
relationships currently maintained by the Railcar Subsidiaries with such
entities are on a sound commercial basis. Seller shall, and shall cause the
Railcar Subsidiaries to, assist Buyer in speaking with or meeting with the
Railcar Subsidiaries' customers and suppliers, and, at Buyer's request,
will participate in such meetings or calls. Buyer will have access to the
Railcar Subsidiaries' non-executive employees, with the understanding that,
at the election of Seller, a representative of Seller will be present at
all on-site meeting with the Railcar Subsidiaries' non-executive employees.
Such investigation shall be conducted by Buyer so as not to interfere with
the Railcar Subsidiaries' normal operation of the Railcar Business and
shall be so undertaken in accordance with such other procedures as may be
established by Seller. In addition, Seller shall permit Buyer and its
authorized representatives, including legal counsel and independent
accountants, upon reasonable notice, to have full access during regular
business hours to the properties, inventories, facilities, records,
contracts and documents of the Railcar Subsidiaries, including, but not
limited to, notes and related loan documentation, mortgages, and other
security instruments, stock certificates, and all employment, stock option,
bonus, severance or similar agreements, whether existing or proposed, with
the Railcar Subsidiaries' employees. Seller and the Railcar Subsidiaries
and its officers will make available to Buyer complete and current copies
of such of the documents and records referred to above as Buyer may from
time to time reasonably request and such financial and operating data and
other information on the properties of the Railcar Subsidiaries as Buyer
shall from time to time reasonably request.
(b) The access granted under Section 4.2(a) shall also extend
to any financing institution providing debt or equity financing to Buyer in
connection with the transactions contemplated herein, provided that such
financing institution shall have executed a confidentiality agreement
containing, in substance, the terms set forth in Section 4.2(c) below.
(c) In the event of the termination of this Agreement, Buyer
shall deliver to Seller all documents, work papers and other materials
obtained from Seller, the Railcar Subsidiaries or their respective agents,
employees and representatives which remain in Buyer's possession or the
possession of third parties to whom they were delivered by or on behalf of
Buyer relating to the Railcar Business or the transactions contemplated
hereby, whether so obtained before or after the execution hereof. Buyer
shall not use any information so obtained and shall not disclose any such
information to any third party, except that such restrictions shall not
apply to any information which is in or comes into the public domain other
than by the act or omission of Buyer, its agents, employees, or
representatives, or which is required to be disclosed by court order,
subpoena or other similar judicial or administrative process.
Section 4.3. Seller's Access to Books and Records. The Buyer
shall retain any books and records delivered to it by Seller for a period
of not less than 5 years after the Closing (or such longer period as Seller
may reasonably request) and throughout such period shall make the same
available upon reasonable request (which includes a reasonable purpose) at
all reasonable hours to Seller and its employees, agents and
representatives for inspection and copying at Seller's expense.
Section 4.4. Public Announcements. Except as may be required by
law (including any requirements of the NASDAQ) , no announcement of this
Agreement or the transactions contemplated hereby (including, without
limitation, the Purchase Price) shall be made publicly unless agreed upon
by Seller and Buyer, which such agreement shall not be unreasonably
withheld. The text of any announcement shall be prepared by Seller and
Buyer shall have the right to review and comment prior to its release.
Section 4.5. Replacement of Bank Letters of Credit. As soon as
commercially practicable after the Closing, but in no event later than 10
days after the date thereof, in the event that Buyer elects to maintain the
FCS IRB Debt in place, Buyer shall replace any letters of credit with
respect to the Railcar Subsidiaries provided by Seller's senior bank in the
amount outstanding as of the Closing Date.
Section 4.6. Replacement of Workers' Compensation Letters of
Credit. As soon as commercially practicable after the Closing, but in no
event later than 10 days after the date thereof, Buyer shall replace the
workers' compensation letters of credit now provided by Seller's senior
bank and the surety bonds now provided by surety companies on behalf of
Seller, which such letters of credit and surety bonds (and the respective
amounts thereof) are set forth on Schedule 4.6.
Section 4.7. Certain Tax Matters.
(a) Allocation of Taxes. (i) Except as provided in Section
4.7(g), Seller shall be responsible for, and shall indemnify and hold Buyer
and the Railcar Subsidiaries harmless against any liability for Taxes
imposed on any of the Railcar Subsidiaries for any taxable period ending on
or before the Closing Date, and for the portion of any Straddle Period (as
defined below) ending on the Closing Date (a "Pre-Closing Tax Period"), any
taxes resulting from any valid, timely and effective election described in
Section 338(h)(10) of the Code (the "Elections") and any comparable
elections under the provisions of state and local tax law (subject to any
reimbursement set forth in Section 4.8), any Taxes imposed on any member of
any affiliated group with which any of the Railcar Subsidiaries files or
has filed a Tax Return on a consolidated or combined basis for any taxable
period of such affiliated group that includes the Closing Date; and any
Taxes imposed on Buyer or any Railcar Subsidiary as a result of any
material breach of warranty or misrepresentation under Section 2.11 (the
"Pre-Closing Taxes"); provided, however, that the amount of any such
indemnification provided hereunder shall be net of any accruals and related
reserves reflected on the Final Schedule. Except as provided in Section
4.7(g), Buyer shall be responsible for, and shall hold Seller harmless
against, any Taxes imposed on the Railcar Subsidiaries for all taxable
periods ending after the Closing Date (except with respect to a Straddle
Period, in which case Buyer's indemnity will cover only that portion of any
Taxes that do not relate to a Pre-Closing Tax Period), and any liability
for Taxes attributable to a breach by Buyer of its obligations solely under
this Section 4.7 (the "Post-Closing Taxes").
(ii) In the case of any taxable period that includes but does
not end on the Closing Date (a "Straddle Period"), Taxes of the Railcar
Subsidiaries for the Straddle Period shall be computed as if the Railcar
Subsidiaries had not been included in a consolidated, combined or unitary
Tax Return with Seller or any other corporation, but rather, as if the
Railcar Subsidiaries had filed a consolidated, combined or unitary Tax
Return as a separate affiliated group to the extent that filing in such
manner would have been allowed by the applicable taxing authority if Seller
had not owned any of the stock of the relevant Railcar Subsidiary or, to
the extent that filing in such manner would not have been allowed by the
applicable taxing authority, on an entity-by-entity basis, and otherwise
consistent with past practice and shall be allocated to the Pre-Closing Tax
Period using an interim-closing-of-the-books method assuming that such
taxable period ended at the close of the Closing Date, except that (A)
exemptions, allowances or deductions that are allowed on an annual basis
shall be apportioned on a per-diem basis and (B) real property, personal
property, intangibles and other similar taxes shall be allocated in
accordance with the principles of Section 164(d) of the Code.
(iii) Notwithstanding anything in this Agreement to the
contrary, Seller shall have no liability under this Agreement in respect of
Taxes of the Railcar Subsidiaries which are attributable to any action of
Buyer or any of its affiliates (including, without limitation, the Railcar
Subsidiaries) that occurs after the Closing on the Closing Date (other than
actions contemplated by this Agreement including the making of the
Elections and comparable elections under the provisions of state and local
tax law).
(iv) To the extent that an indemnification obligation of one
party pursuant to Section 4.7(a) may overlap with another indemnification
obligation of such party pursuant to this Section 4.7(a), the party
entitled to such indemnification shall be limited to only one of such
indemnification payments.
(v) Whenever in accordance with this Section 4.7 Buyer shall be
required to pay Seller an amount in respect of Post-Closing Taxes or Seller
shall be required to pay Buyer an amount in respect of Pre-Closing Taxes,
such payments shall be made the later of 10 days after requested or 10 days
before the requesting party is required to pay the related Tax liability.
(b) Procedures Relating to Tax Indemnification. If a claim for
Taxes, including, without limitation, notice of a pending audit, shall be
made by any taxing authority in writing (a "Tax Claim"), which, if
successful, might result in an indemnity payment pursuant to Section 4.7(a)
hereof, the party seeking indemnification (the "Tax Indemnified Party")
shall notify the other party (the "Tax Indemnifying Party") in writing of
the Tax Claim within fifteen business days of receipt of such Tax Claim. If
notice of a Tax Claim (a "Tax Notice") is not given to the Tax Indemnifying
Party within such period or in detail sufficient to apprize the Tax
Indemnifying Party of the nature of the Tax Claim, the Tax Indemnifying
Party shall not be liable to the Tax Indemnified Party to the extent that
the Tax Indemnifying Party's position would be prejudiced as a result
thereof.
With respect to any Tax Claim which might result in an
indemnity payment to a Buyer Indemnified Party pursuant to Section 4.7(a)
hereof (other than a Tax Claim for a Straddle Period or a Conveyance Tax
which is allocated between Seller and Buyer pursuant to Section 4.7(g)
hereof or any other proceeding involving Taxes for which Buyer has an
indemnification obligation pursuant to Section 4.7(a)), Seller shall
control all proceedings taken in connection with such Tax Claim (including,
without limitation, selection of counsel) and, without limiting the
foregoing, may in its sole discretion and at its sole expense pursue or
forego any and all administrative appeals, proceedings, hearings and
conferences with any Tax Authority with respect thereto, and may, in its
sole discretion, either pay the Tax Claim and sue for a refund where
applicable law permits such refund suits or contest such Tax Claim in any
permissible manner. In no case shall any of the Buyer Tax Indemnified
Parties settle or otherwise compromise any Tax Claim referred to in the
preceding sentence without Seller's prior written consent. Seller shall
keep Buyer informed in respect of all material aspects of such Tax Claims
and Buyer may also participate in such proceedings at its own expense. If
Seller determines that it will not contest such a Tax Claim, Seller shall
so notify Buyer in timely fashion and expressly affirm its obligation to
indemnify Buyer in respect of such Tax Claim. Failing such notification,
Buyer shall be entitled, but shall not be required, to take actions that it
reasonably deems appropriate to protect its interests. Buyer, the Railcar
Subsidiaries, their affiliates and any successors thereto shall reasonably
cooperate with Seller in contesting such Tax Claim, which cooperation shall
include, without limitation, the retention for the period described in
Section 4.7(c)(iii) and (upon Seller's request) providing reasonable access
to Seller and its representatives of records and information for
Pre-Closing Tax Periods and Straddle Periods which are relevant to such Tax
Claim and making employees available at reasonable times and without undue
interference with the employer's business operations to provide additional
information or explanation of any material provided hereunder or to testify
at proceedings relating to such Tax Claim. With respect to Tax Claims in
states or localities in which the Elections were not given effect (or any
comparable elections under the provisions of state and local tax law were
not made), in the event that issues relating to a liability for Taxes for a
Pre-Closing Tax Period are required to be dealt with in the same proceeding
as separate issues relating to a liability for Taxes for a Post-Closing Tax
Period, Buyer shall have the right, at its expense, to control the
proceeding with respect to such Post-Closing Tax Period items. Seller and
Buyer shall jointly control the resolution of any Tax Claim relating to a
Straddle Period or to any Conveyance Tax the liability of which is
allocated between Seller and Buyer pursuant to Section 4.7(g) hereof, and,
to the extent that the parties cannot agree on the resolution of any such
Tax Claim, such disagreement shall be resolved pursuant to the Tax Dispute
Resolution Mechanism.
With respect to Tax Claims relating to Pre-Closing Taxes in
states or localities in which the Elections were not given effect (or any
comparable elections under the provisions of state and local tax law were
not made), neither the Buyer, the Railcar Subsidiaries nor the Seller shall
enter into any compromise or agree to settle any Tax Claim pursuant to any
proceeding which would materially increase the other party's liability for
Taxes for such year or a subsequent year without the written consent of the
other party, which consent may not be unreasonably withheld. The Buyer, the
Railcar Subsidiaries and the Seller agree to cooperate in the defense
against or compromise of any claim in any such Tax Claim proceeding.
(c) Tax Returns. (i) Seller shall prepare or cause to be
prepared and timely file or cause to be filed all required Tax Returns
relating to the Railcar Subsidiaries for any taxable period which ends on
or before the Closing Date. Buyer shall prepare or cause to be prepared and
timely file or cause to be filed all required Tax Returns relating to the
Railcar Subsidiaries for taxable periods ending after the Closing Date and
all required Tax Returns for subsequent taxable periods. All such returns
shall be prepared and all elections with respect to such returns shall be
made, to the extent permitted by law, in a manner consistent with prior
practice. Before filing any Tax Return with respect to any Straddle Period,
Buyer shall provide Seller with a copy of such Tax Return at least twenty
days prior to the last date for timely filing such Tax Return (giving
effect to any valid extensions thereof) accompanied by a statement
calculating in reasonable detail Seller's indemnification obligation
pursuant to Section 4.7(a) hereof. Notwithstanding anything in this
Agreement to the contrary, Seller shall have no indemnification obligation
pursuant to Section 4.7(a) hereof with respect to any Taxes covered by such
Tax Return until Seller has received such Tax Return and such statement. If
for any reason Seller does not agree with Buyer's calculation of its
indemnification obligation, Seller shall notify Buyer of its disagreement
within ten days of receiving a copy of the Tax Return and Buyer's
calculation, and such dispute shall be resolved pursuant to the Tax Dispute
Resolution Mechanism. If Seller agrees with Buyer's calculation of its
indemnification obligation, Seller shall pay to Buyer the amount of
Seller's indemnification at the time specified in Section 4.7(a)(v).
(ii) The Seller shall pay or cause to be paid when due
and payable all Taxes with respect to the Railcar Subsidiaries for any
taxable period ending on or before the Closing Date to the extent such
Taxes exceed the amount, if any, accrued or reserved for such Taxes on the
Final Schedule, and the Buyer shall so pay or cause to be paid Taxes for
any taxable period ending after the Closing Date (subject to its right of
indemnification from the Seller by the date set forth in Section 4.7(a)(v)
for Taxes attributable to the portion of any Tax period that includes the
Closing Date pursuant to Section 4.7(a).
(iii) Seller, the Railcar Subsidiaries and Buyer shall
reasonably cooperate, and shall cause their respective affiliates,
officers, employees, agents, auditors and representatives reasonably to
cooperate, in preparing and filing all Tax Returns, including maintaining
and making available to each other all records necessary in connection with
Taxes and in resolving all disputes and audits with respect to all taxable
periods relating to Taxes. Buyer and Seller recognize that Seller
Indemnified Parties will need access, from time to time, after the Closing
Date, to certain accounting and Tax records and information held by the
Railcar Subsidiaries to the extent such records and information pertain to
events occurring prior to the Closing Date; therefore, Buyer and Seller
agree that from and after the Closing Date, Seller, Buyer and the Railcar
Subsidiaries (including their affiliates and successors) shall (A) retain
and maintain all such records including (but not limited to) all Tax
Returns, schedules and work papers, records and other documents in its
possession relating to Tax matters of the Railcar Subsidiaries for each
taxable period first ending after the Closing Date and for all prior
taxable periods until the later of (i) the expiration of the statute of
limitations of the taxable periods to which such Tax returns and other
documents relate, without regard to extensions except to the extent
notified by the other party in writing of such extensions for the
respective Tax periods, or (ii) six years following the due date (without
extension) for such Tax Returns, and (B) allow Seller and Buyer and their
agents and representatives (and agents or representatives of any of their
affiliates), upon reasonable notice and at mutually convenient times to
inspect, review and make copies of such records (at the expense of the
party requesting the records) as Seller and Buyer may deem reasonably
necessary or appropriate from time to time. Any information obtained under
this Section 4.7 (c)(iii) shall be kept confidential except as may be
otherwise necessary in connection with the filing of Tax Returns or claims
for refund or in conducting an audit or other proceeding.
(iv) Any refunds or credits of Taxes of the Railcar
Subsidiaries plus any interest received with respect thereto from the
applicable Tax Authority for any taxable period ending on or before the
Closing Date (including, without limitation, refunds or credits
arising by reason of amended Tax Returns filed after the Closing Date but
excluding any refund or credit included on the Final Schedule, which shall
be the property of the Buyer, and if paid to the Seller, shall be promptly
paid over to the Buyer) shall be for the account of Seller and shall be
paid by Buyer to Seller within 10 business days after Buyer receives such
refund or after the relevant Tax Return is filed in which the credit is
applied against any of the Buyer Indemnified Party's liability for Taxes.
Any refunds or credits of Taxes of the Railcar Subsidiaries plus any
interest received with respect thereto from the applicable taxing authority
for any taxable period beginning after the Closing Date shall be for the
account of Buyer. Any refunds or credits of Taxes of the Railcar
Subsidiaries for any Straddle Period shall be apportioned between Seller
and Buyer in the same manner as the liability for such Taxes is apportioned
pursuant to Section 4.7(a).
At Seller's request, Buyer shall cause the Railcar Subsidiaries
and any of their successors to file for and obtain any refunds or credits
to which Seller is entitled under this Section 4.7. In connection
therewith, (A) Buyer shall permit Seller to control the prosecution of any
such refund claim that relates to refunds or credits to which Seller is
entitled under this Section 4.7 and, where deemed appropriate by Seller,
shall cause the Railcar Subsidiaries and any of their successors to
authorize by appropriate powers of attorney such persons as Seller shall
designate to represent the Railcar Subsidiaries or any of their successors
with respect to such refund claim and (B) Buyer shall cause the Railcar
Subsidiaries or any of their successors to forward to Seller any such
refund within 10 days after the refund is received (or reimburse Seller for
any such credit within 10 Business Days after the relevant Tax Return is
filed in which the credit is applied against any of the Railcar
Subsidiaries' or any of their successors' liability for Taxes.
(d) Section 338(h)(10) Elections. With respect to the sale and
acquisition of each of the Railcar Subsidiaries pursuant to this Agreement,
(i) at least 10 days prior to the Closing Date, Seller and Buyer shall
agree based on information then available on the form and content of the
IRS Forms 8023 (the "Forms 8023") on which the Elections shall be made;
(ii) at or prior to the Closing, Buyer shall deliver to Seller properly
executed Forms 8023 containing information then available, which Seller
shall file with the Internal Revenue Service not later than five days
following the Closing Date; (iii) Seller and Buyer shall jointly and timely
make any elections under state or local tax law comparable to the Elections
with respect to the Railcar Subsidiaries; (iv) Seller and Buyer shall, as
promptly as practicable following the Closing Date, cooperate with each
other to take all other actions necessary and appropriate (including filing
such forms, returns, elections, schedules and other documents as may be
required) otherwise to effect, perfect and preserve timely Elections in
accordance with the provisions of Treasury Regulation Section
1.338(h)(10)-l (or any comparable provisions of state or local tax law) or
any successor provisions; and (v) Seller and Buyer shall report the sale
and acquisition, respectively, of the stock of the Railcar Subsidiaries
pursuant to this Agreement consistent with the Elections (and any
comparable elections under state or local tax laws) and shall take no
position to the contrary thereto in any Tax Return, or in any proceeding
before any Tax Authority or otherwise.
To the extent permissible by or required by law, Seller and
Buyer shall cooperate in the preparation and timely filing of (i) any
corrections, amendments or supplements to the Forms 8023 and (ii) any state
or local forms or reports that are necessary or appropriate for purposes of
complying with the requirements for making any state or local election that
is comparable to the Elections. To the extent necessary for the valid
filing of any such corrections, amendments, supplements, forms or reports,
Seller and Buyer shall cooperate in the timely execution thereof. Any
dispute between the parties with respect to any documents to be filed under
this Section 4.7(d) shall be resolved pursuant to the Tax Dispute
Resolution Mechanism.
Neither Seller nor Buyer shall, or shall permit any of their
affiliates (including, without limitation, the Railcar Subsidiaries) to,
take any action to modify any of the forms or reports (including any
corrections, amendments or supplements thereto) that are required for the
making of the Elections or any comparable elections under state or local
tax law after their execution or to modify or revoke any of the Elections
following the filing of the Forms 8023 by Seller without the written
consent of Seller and Buyer, as the case may be.
In connection with the Elections, on or prior to the last day
of the seventh month beginning after the month that includes the Closing
Date, (i) Seller shall provide to Buyer a proposed determination of the
"Modified Aggregate Deemed Sales Price" and the "Adjusted Grossed Up Basis"
(each, as defined under applicable Treasury Regulations) with respect to
each of the Railcar Subsidiaries, (ii) Buyer shall provide to Seller a
proposed allocation of each such Modified Aggregate Deemed Sales Price and
Adjusted Grossed Up Basis among the assets of the Railcar Subsidiaries,
which allocations shall be made in accordance with Section 338(b) of the
Code and any applicable Treasury Regulations. Within 10 days following such
provision, Buyer and Seller, respectively, shall have the right to object
to any such proposed determination or proposed allocation. If a party so
objects to any such determination or allocation, the parties shall resolve
their dispute pursuant to the Tax Dispute Resolution Mechanism described in
Section 4.7(e) hereof; provided, however, that, notwithstanding anything to
the contrary in this Agreement, the parties hereto agree that for all Tax
purposes the "Modified Aggregate Deemed Sales Price" and "Adjusted Grossed
Up Basis" shall not include all or any portion of the Contingent Additional
Consideration until the occurrence of a Triggering Event. Seller and Buyer
(i) shall be bound by the determinations and the allocations determined
pursuant to this paragraph consistently therewith for purposes of
determining any Taxes; (ii) shall prepare and file all Tax Returns to be
filed with any Tax Authority in a manner consistent with such allocations;
and (iii) shall take no position inconsistent with such allocations in any
Tax Return, any proceeding before any Tax Authority or otherwise. In the
event that any such allocation is disputed by any Tax Authority, the party
receiving notice of such dispute shall promptly notify and consult with the
other party hereto concerning resolution of such dispute.
(e) Tax Dispute Resolution Mechanism. Wherever in this Section
4.7 it is provided that a dispute shall be resolved pursuant to the "Tax
Dispute Resolution Mechanism," the parties shall cooperate in good faith to
resolve such dispute between them; but if the parties are unable to resolve
such dispute such dispute shall be resolved as follows: The parties shall
submit the dispute to a jointly selected "Big Five" accounting firm (the
"Settlement Accountants") for resolution, which resolution shall be final,
conclusive and binding on the parties. If Buyer and Seller cannot jointly
agree on the Settlement Accountants, Buyer and Seller shall each submit to
their respective accountants the name of an accounting firm that does not
at the time and that has not in the prior two years provided services to
Seller or Buyer or any of their respective affiliates, and the Settlement
Accountants shall be selected by lot from these two firms by the respective
accountants of the two parties. Notwithstanding anything in this Agreement
to the contrary, the fees and expenses of the Settlement Accountants in
resolving a dispute relating to a proposed determination of the Modified
Aggregate Deemed Sales Price and Adjusted Grossed Up Basis under Sections
4.7(d) and 4.7(g) shall be borne equally by Seller and Buyer, and the fees
and expenses relating to any other dispute as to the amount of Taxes owed
by either of the parties shall be paid by Buyer and Seller in proportion to
each party's respective liability for the portion of the Taxes in dispute,
as determined by the Settlement Accountants.
(f) Survival of Tax Provisions. Any claim to be made pursuant
to Section 4.7 hereof must be made before the expiration (giving effect to
any valid extensions, waivers and tolling periods) of the applicable
statutes of limitations relating to the Taxes at issue.
(g) Conveyance Taxes. Notwithstanding any other provision of
this Agreement to the contrary, all transfer, documentary, sales, use,
stamp, registration and other such Taxes incurred in connection with the
transactions contemplated by this Agreement (collectively, "Conveyance
Taxes") shall be paid by Seller. Seller shall, at its own expense, file all
necessary Tax Returns with respect to all such Conveyance Taxes, and, to
the extent required by applicable law, Buyer shall, and shall cause its
affiliates to, join in the execution of any such Tax Returns. Prior to the
filing of such Tax Returns, Seller and Buyer shall agree upon the portion
of the Modified Aggregate Deemed Sales Price to be allocated to the assets
that are the subject of such Tax Returns, which allocation shall be binding
for purposes of Section 4.7(d) hereof. If the parties are unable to agree
on such allocation, the dispute shall be resolved pursuant to the Tax
Dispute Resolution Mechanism. Seller shall use reasonable efforts to
provide Buyer with copies of such Tax Returns at least twenty days prior to
the last date for timely filing of such Tax Returns (giving effect to any
valid extensions thereof) but in no event shall such Tax Returns be
provided to Buyer less than five Business Days prior to such date. Buyer
shall, within ten days of a written request therefor (which shall include
evidence that such Conveyance Taxes were paid) reimburse Seller for all
such Conveyance Taxes and Seller's out-of-pocket expenses. Seller shall
return any amount reimbursed by Buyer to the extent that Seller receives
any refunds of any such Conveyance Taxes.
(h) Exclusivity. Section 4.7 hereof shall govern the retention
of records of the Railcar Subsidiaries and the procedures for all
indemnification claims, in each case with respect to Taxes.
(i) Tax Sharing Agreements. Any and all existing agreements
relating to the allocation or sharing of Taxes (the "Tax Sharing
Agreements") between any of the Railcar Subsidiaries and any member of the
affiliated group, within the meaning of Section 1504(a) of the Code, of
which Seller is a member (the "Seller Affiliated Group") shall be
terminated as of the Closing Date. After the Closing Date, none of the
Railcar Subsidiaries or any member of Seller Affiliated Group shall have
any further rights or obligations under any such Tax Sharing Agreement.
(j) Characterization of Indemnification Payments. Any payments
made pursuant to Section 4.7 or Section 4.8 hereof shall be treated for all
Tax purposes as adjustments to the Purchase Price and allocated to the
relevant Railcar Subsidiary or Subsidiaries.
Section 4.8. Incremental Tax Resulting from the Elections.
Buyer shall reimburse Seller as provided in this Section 4.8 for any
incremental Taxes payable by Seller resulting from making the Elections
(and any comparable elections under the provisions of state and local tax
law) (the "Incremental Taxes") with respect to the taxable year that
includes (i) the Closing Date and (ii) if applicable, Seller's receipt of
the Contingent Additional Consideration, in each case, "grossed up" to
reflect the taxability to Seller of the receipt of any payments pursuant to
this Section 4.8. Seller shall provide to Buyer a statement (accompanied by
appropriate supporting documentation) calculating in reasonable detail
Buyer's reimbursement obligation pursuant to this Section 4.8. Buyer shall
have no reimbursement obligation pursuant to this Section 4.8 until Buyer
has received such statement and such supporting documentation. If for any
reason Buyer does not agree with Seller's calculation of Buyer's
reimbursement obligation pursuant to this Section 4.8, Buyer shall notify
Seller of its disagreement within ten days of receiving a copy of such
statement and such supporting documentation, and such dispute shall be
resolved pursuant to the Tax Dispute Resolution Mechanism. If Buyer agrees
with Seller's calculation of Buyer's reimbursement obligation, Buyer shall
pay to Seller the amount of Buyer's reimbursement obligation at the time
specified in Section 4.7(a)(v). Seller shall return to Buyer any amount
reimbursed by Buyer pursuant to this Section 4.8 to the extent that Seller
receives any refunds of any such Incremental Taxes.
Section 4.9. Non-Competition.
(a) Seller hereby covenants and agrees that for a period of 5
years from the Closing Date, Seller shall not engage directly or indirectly
anywhere in North America in the business of manufacturing, rebuilding,
selling or leasing railroad freight cars and freight car kits and parts
("Competing Activities"); provided, however, that Seller may (a) invest
(without otherwise participating in such business) in the stock, bonds or
other securities of any business organization that is engaged in Competing
Activities if (i) such stock, bonds or other securities are listed on a
national or regional securities exchange or registered under Section 12(g)
of the Securities Exchange Act of 1934, as amended, and (ii) such
investment in any class of such securities does not exceed 5% of the issued
and outstanding shares of such class or 5% of the aggregate principal
amount of such class outstanding, as the case may be, and (b) merge with
any Person which has an interest in an entity conducting Competing
Activities; provided, further, that if Seller is the surviving corporation
in any such merger, Seller shall divest the portion of the merging entity
conducting Competing Activities within one year of such merger. If any
court finds that the restrictions set forth in this Section 4.9 are
unreasonable, this Section 4.9 shall be interpreted to include the
restrictions contained herein to the extent such restrictions are
permissible under law, giving effect to this Agreement and the intent of
the parties that the restrictions contained herein shall be effective to
the fullest extent permissible.
(b) Seller acknowledges that the restrictions contained in
Section 4.9(a), in view of the nature of the business activities conducted
by the Railcar Subsidiaries, and in view of the transactions described
herein (including the payment of the Purchase Price) are reasonable and
necessary in order to protect the legitimate interests of Buyer, and that
any violation thereof could result in irreparable injuries to Buyer and the
Railcar Subsidiaries. Seller therefore acknowledges that in the event of a
breach or threatened breach by it of the provisions of Section 4.9(a),
Buyer shall be entitled to obtain from any court of competent jurisdiction
appropriate injunctive relief restraining Seller from any violation of the
restrictive covenant contained in Section 4.9(a).
Section 4.10. Discovery of Facts. If, prior to the Closing,
Camillo M. Santomero, III, John Carroll, James Cirar, John Plunkard, Robert
Frisch or Edward Thomas acquires actual knowledge of any information, fact
or circumstance which would be required to be disclosed by Seller to avoid
breach of its warranties or representations contained in this Agreement,
then such person shall disclose such fact or circumstance to Seller.
Section 4.11. Conduct of the Business; Negative Covenants.
(a) Between the date of execution of this Agreement and the
Closing Date (the "Interim Period"), neither Seller nor any Railcar
Subsidiary will, except as otherwise provided herein, do or permit to be
done any of the following with respect to the Railcar Business, without the
prior written consent of Buyer:
(i) conduct the Railcar Business otherwise than in the
regular and ordinary course in accordance with the same business practices
previously followed by the Railcar Subsidiaries;
(ii) increase the amount of compensation currently being
paid to any employee or agent, or enter into or provide for any new bonus
arrangements with any employee or agent (except for usual and customary
salary increases effected in accordance with past practice);
(iii) make or commit to make any expenditure for fixed
assets exceeding $200,000, unless such expenditure is reflected in the 1999
Budget contained in the Business Plan that has been delivered to Buyer;
(iv) make any contract, commitment, or liability
extending beyond thirty (30) days or enter into any other transaction, in
either case other than in the ordinary course of business;
(v) transfer any of the Railcar Subsidiaries' assets
except the sale of inventory in the ordinary course of business;
(vi) violate the terms of any material lease or contract
of any Railcar Subsidiary;
(vii) incur any indebtedness for borrowed money, and
assume, guaranty, endorse or otherwise become responsible for obligations
to any other person or make loans or advances to any other person, other
than consistent with past practice;
(viii) issue any shares of the capital stock of any
Railcar Subsidiary, or any other securities or any securities convertible
into shares of their capital stock or any other securities of any Railcar
Subsidiary;
(ix) pay, or incur any obligation to pay, any dividend on
any Railcar Subsidiary's capital stock or make or incur any obligation to
make any distribution or redemption with respect to any Railcar
Subsidiary's capital stock, except for dividends or distributions in the
ordinary course of business;
(x) make any change to the articles of incorporation or
by-laws of any of the Railcar Subsidiaries;
(xi) mortgage, pledge or otherwise encumber any of the
Railcar Subsidiaries' assets;
(xii) release or assign any indebtedness owed to the
Railcar Subsidiaries or any material claims held by the Railcar
Subsidiaries, except in the ordinary course of business;
(xiii) make any investments by purchase of capital stock
or long-term debt securities or contributions to capital, or by the
purchase of substantially all of the assets of any other person or entity;
(xiv) terminate any contract prior to the expiration
thereof, or enter into any amendment of any contract other than in the
ordinary course of business;
(xv) amend any benefit plan to increase the fringe
benefits of any employee of any Railcar Subsidiary;
(xvi) enter into any employment agreement, or become
liable for any bonus, pension, profit-sharing or incentive payment to any
of its officers, directors or employees, except pursuant to presently
existing plans, arrangements or agreements disclosed herein or any schedule
hereto, and except in the ordinary course of business; or
(xvii) act with the intention of causing any
representation or warranty of Seller in this Agreement to be or become
untrue in any material respect.
(b) Notwithstanding anything in this Agreement to the contrary,
no provision herein shall restrict Seller from amending its Senior Bank
Facility or entering into a new senior credit facility throughout the
Interim Period, as long as any such senior credit facility, as of the
Closing Date, and after giving effect to the transactions contemplated
herein, shall not constitute a lien upon any assets of the Railcar
Subsidiaries, or create any indebtedness affecting the Railcar
Subsidiaries.
Section 4.12. Conduct of Business; Affirmative Covenants.
During the Interim Period, Seller will:
(a) use its best efforts to preserve the Railcar Subsidiaries'
assets and business organization intact, and except as may otherwise be
requested by Buyer, keep available to Buyer the services of the Railcar
Subsidiaries' present employees;
(b) pay or provide for all social security, withholding, sales
and unemployment insurance taxes owed by the Railcar Subsidiaries to all
applicable local, state and federal governments;
(c) pay wages and all other amounts, if any, to become due
during the Interim Period on account of health and welfare insurance,
accrued vacation and holiday pay and other fringe benefits consistent with
past practice, which such practice includes the periodic accrual of such
liabilities;
(d) maintain the present insurance coverage of the Railcar
Subsidiaries' business in effect consistent with past practice, which such
practice includes the periodic accrual of such liabilities;
(e) duly withhold and collect all taxes and other assessments
and liens which the Railcar Subsidiaries are required by law to withhold or
to collect for periods ending prior to the Closing Date and either pay over
such amounts to the proper Governmental Authorities or hold such amounts in
segregated accounts pending payment;
(f) in cooperation with Buyer as required, commence all
commercially reasonable action required hereunder (i) to obtain all
applicable permits, licenses, certificates and other Governmental
Authorizations or approvals necessary for Buyer to carry on the operations
as presently conducted, and (ii) to obtain all applicable consents,
approvals and agreements of, and to give all notices and make all filing
with, any third parties (including, but not limited to, the Railcar
Subsidiaries' vendors and suppliers) as may be necessary to consummate the
transactions contemplated hereby, by a date early enough to allow the
transactions to be consummated by the Closing Date; provided, however, that
neither Buyer nor Seller shall be required to agree to any unfavorable
modification of any existing contract or agreement or to pay material
amounts in order to obtain such consent; and
(g) maintain the Railcar Subsidiaries' books and records
consistent with prior practice.
Section 4.13. Consummation of Financing. Buyer shall use its
best efforts to consummate the financing substantially on the terms set
forth in Schedule 4.13.
Section 4.14. Assertion of Indemnification Claims. Buyer shall
assert any claim for indemnification against any third party which may be
liable in respect of such claim, including, without limitation, any party
whose liability may arise under the Bethlehem Steel Agreement prior to
asserting any such claim for indemnification against Seller.
ARTICLE V
EMPLOYMENT AND BENEFIT MATTERS
Section 5.1. No Shutdown or Severance of Employment. The
parties intend that the sale shall be of Railcar Subsidiaries as an ongoing
business and therefore shall not constitute a permanent shutdown of Railcar
Subsidiaries' operations for purposes of entitling any of Railcar
Subsidiaries' employees or former employees to payment of pension or
severance pay benefits or any other shutdown-related benefits arising on
account of a shutdown under the Collective Bargaining Agreements, Pension
Plans or Welfare Plans. It is understood that, as between the parties
hereto, Buyer shall be responsible for and shall retain all liabilities and
obligations, if any (the recitation herein of such possibility not being
intended as an acknowledgment that any such liabilities or obligations do,
in fact, exist or will arise), for (i) all benefits (including, without
limitation, salary and benefit continuation or severance benefits) that may
be payable under the Collective Bargaining Agreements, Pension Plans (with
the exception of the Assumed Plans (as defined in Section 5.4(a))), or
Welfare Plans to any present or former Railcar Subsidiaries' employee as a
result of such employee's termination of employment arising on or prior to
the Closing Date, and (ii) all notices, payments, fines or assessments due
to any such employee pursuant to any applicable federal, state or local law
or common law, statute, rule or regulation with respect to any such
termination (or constructive termination) of employment with Railcar
Subsidiaries on or prior to the Closing Date. The parties further intend
that the sale shall not entitle present or former Railcar Subsidiaries
employees who continue to be employed by the respective Railcar Subsidiary
to receive a benefit from the Pension Plans or otherwise from Seller while
employed by the respective Railcar Subsidiary, unless specifically
permitted under the terms of the Assumed Plans.
Section 5.2. Employment of Railcar Subsidiaries' Employees:
Collective Bargaining Agreements: Assumption of Employment,
Employment-Related and Benefits Obligations. Buyer acknowledges that all
employees, represented and non-represented, of Railcar Subsidiaries will
remain employees of the respective Railcar Subsidiary, and no employment
rights of any kind will be extinguished. As between the parties hereto,
Buyer agrees to assume all current collective bargaining agreements along
with all other employment obligations, written or oral, of Railcar
Subsidiaries which exist prior to, on or after Closing. Further, Buyer
acknowledges that upon Closing, it shall assume and be responsible for all
employment, employment related and benefit obligations (except as otherwise
provided in this Article V) owing to employees, former employees, or
retirees of any Railcar Subsidiary as a result of employment at any time
with such entity, regardless of whether such obligations arose before, on
or after the Closing. Buyer shall indemnify, defend and hold Seller and any
related entity harmless from any and all assertions, claims, suits,
demands, or lawsuits by any individual relating to his or her benefits,
employment, or former employment with a Railcar Subsidiary.
Section 5.3. Buyer's Benefit Plans. Buyer shall establish
defined benefit pension plans for the Railcar Subsidiaries' employees who
participated in such plans sponsored by Railcar Subsidiaries immediately
prior to the Closing Date. The defined benefit and defined contribution
plans established and maintained by Buyer for the Railcar Subsidiaries'
employees, as well as Buyer's other benefit plans or policies which use
length of service as criteria, shall provide credit to employees for
service with Railcar Subsidiaries prior to the Closing Date, and to the
extent Railcar Subsidiaries are required to do so, Bethlehem Steel
Corporation, for all purposes; provided, however, that benefits payable
under any defined benefit pension plan so established or maintained by
Buyer shall be offset or reduced by any pension benefits received, or which
a person upon application would be eligible to receive, under the terms of
Bethlehem's and Railcar Subsidiaries' defined benefit plans.
Section 5.4. Assumption of Certain Benefit Plans.
(a) Defined Benefit Plans. Seller agrees that effective
immediately prior to the Closing Date, it shall assume sponsorship of the
Johnstown America Corporation Bargaining Unit Pension Plan, the Johnstown
America Corporation USWA Office & Technical Salaried Pension Plan and the
Johnstown America Corporation Salaried Pension Plan (hereinafter the
"Assumed Plans"), and all assets and liabilities attributable to the
Assumed Plans as of the Closing Date. Buyer agrees to cooperate fully in
assigning plan sponsorship and such assets and liabilities to Seller as
plan sponsor. Seller shall take the necessary actions to provide that
service with the Buyer will be recognized under the Assumed Plans for any
person who is a participant in the Assumed Plans and employed by Buyer on
the Closing Date, only for purposes of vesting and for purposes of
eligibility for certain immediate voluntary pensions (i.e., normal
retirement 65/5, 62/15 retirement, 30 year retirement, or 60/15
retirement), deferred vested pension, and surviving spouse benefit. Service
and earnings with Buyer will not be recognized under the Assumed Plans for
benefit accrual purposes. Further, service and earnings with Buyer will not
be recognized under the Assumed Plans for purposes of eligibility or
calculation of permanent incapacity requirements or plant shut-down
benefits (i.e., Rule-of-65 retirement and 70/80 retirement), and the
Assumed Plans will be frozen in all respects except as expressly provided
in this Section 5.4. After the Closing Date, the Assumed Plans shall have
no obligation of any kind to pay shut down benefits (Rule-of-65 retirement
and 70/80 retirement), and no obligation of any kind to pay permanent
incapacity benefits, unless the individual seeking permanent incapacity
benefits suffered a permanent incapacity prior to the Closing Date.
Calculation of benefits under the Assumed Plans will include an offset for
all pension benefits received, or which a person upon application could
receive, under Bethlehem Steel Corporation's defined benefit plans.
(b) Salaried Defined Contribution Plan. Prior to the Closing
Date, Seller shall assume sponsorship of the Savings Plan for salaried
employees of Johnstown America Corporation (the "Johnstown Savings Plan").
Immediately after assuming sponsorship, Seller will spinoff from the
Johnstown Savings Plan a new plan (the "New Johnstown Savings Plan") which
will contain the account balances of all Railcar Subsidiaries employees who
are participants in the Johnstown Savings Plan on the date of the spinoff.
The New Johnstown Savings Plan will be identical to the Johnstown Savings
Plan except that investments in JAII Stock will not be allowed, and
contributions will not be made to the New Johnstown Savings Plan in JAII
Stock. Accordingly, over an agreed-upon transition period following spinoff
of the New Johnstown Savings Plan, participants' accounts which are
currently invested in JAII Stock shall be liquidated and participants given
the option to invest the proceeds of such accounts in other investment
options available under the New Johnstown Savings Plan. Immediately prior
to Closing, Buyer shall assume sponsorship of the New Johnstown Savings
Plan. Seller and Buyer agree to cooperate fully in assumptions of plan
sponsorship and spinoff, and in performing all acts necessary to accomplish
such assumptions and spinoff in an equitable manner.
Section 5.5. Supplemental Retirement Window Benefit. The
Assumed Plans shall have no liability to pay the four hundred dollar ($400)
special retirement window supplemental benefit payable to certain
individuals eligible for such supplement who retire after the Closing Date.
All obligations for such payment shall be borne by the Buyers' defined
benefit plans.
Section 5.6. Retiree Welfare Benefits. Buyer and the Railcar
Subsidiaries retain all liability for retiree welfare benefits of Railcar
Subsidiaries arising prior to and after the Closing Date.
Section 5.7. Vacation Pay. Buyer and the Railcar Subsidiaries
retain all liability for vacation pay with respect to employees of Railcar
Subsidiaries.
Section 5.8. Certain Executive Employment Agreements. Buyer
agrees that, as between the parties hereto, it will assume the existing
employment agreement between John Carroll and JAC and FCS, including all
rights and obligations of Seller and/or JAC under and in connection with
such employment agreement. Further, Buyer agrees that, as between the
parties hereto, it will assume the existing employment agreements between
Edward J. Whalen and Seller, including all rights and obligations of Seller
under and in connection with such agreements. True and correct copies of
the Carroll and Whalen employment agreements have been made available to
Buyer.
Section 5.9. Miscellaneous. After Closing, Buyer and Seller
shall each, in a timely manner, provide the other on a continuing basis at
no cost to the other such information regarding former Railcar
Subsidiaries' employees who are employed by Buyer as the other shall
reasonably request in order to permit administration of benefit plans
applicable to such employees.
Section 5.10. No Alteration in Bethlehem Agreement. The parties
intend that the provisions of this Article V shall relate only to the
rights and obligations of the Seller, the Railcar Subsidiaries and Buyer
among themselves. Nothing contained herein shall, or shall be deemed to,
alter, amend, modify, supplement, waive, release or discharge any rights,
benefits or obligations which JAC may have, possess or be entitled to under
the Bethlehem Steel Agreement or the Supplemental Agreement between JAC and
Bethlehem Steel Corporation, dated December 7, 1995. In addition, Buyer
shall not, without the express prior written consent of Seller, alter,
amend, modify, supplement, waive, release or discharge any rights, benefits
or obligations which JAC may have, possess or be entitled to under the
Bethlehem Steel Agreement.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF THE PARTIES
Section 6.1. Conditions to Each Party's Obligation. The
respective obligation of each party to consummate the transactions
contemplated herein is subject to the satisfaction at or prior to the
Closing of the following conditions:
(a) No statute, rule or regulation shall have been enacted,
entered, promulgated or enforced by any court or Governmental Authority
which prohibits or restricts the consummation of the transactions
contemplated hereby;
(b) There shall not be in effect any judgment, order,
injunction or decree of any court of competent jurisdiction enjoining the
consummation of the transactions contemplated hereby; and
(c) The applicable waiting period under the HSR Act shall have
expired or been terminated and all Governmental Authorizations required in
connection with the transactions contemplated by this Agreement shall have
been obtained or given and shall be in full force and effect (except for
any such authorization or approval the failure of which to obtain would not
in the aggregate have a Material Adverse Effect).
Section 6.2. Conditions to Obligations of Seller. The
obligations of Seller to consummate the transactions contemplated hereby
are further subject to the satisfaction (or waiver) at or prior to the
Closing of the following conditions:
(a) The representations and warranties of Buyer contained in
Article III of this Agreement shall be true and correct in all material
respects as of the Closing as if made at and as of such time, except for
changes specifically permitted or contemplated hereby and except for
representations which are as of a specific date, and Seller shall have
received a certificate to such effect dated the Closing Date and executed
by a duly authorized officer of Buyer in the form attached as Exhibit E.
For purposes of this Section 6.2(a), all qualifications in such
representations and warranties relating to materiality shall be
disregarded;
(b) Buyer shall have performed in all material respects its
obligations under this Agreement required to be performed by it at or prior
to the Closing pursuant to the terms hereof; and
(c) Seller shall have received any required consents under its
Senior Bank Facility within 30 days from the date hereof.
Section 6.3. Conditions to Obligations of Buyer. The
obligations of Buyer to consummate the transactions contemplated hereby are
further subject to the satisfaction (or waiver) at or prior to the Closing
of the following conditions:
(a) The representations and warranties of Seller contained in
Article II of this Agreement shall be true and correct as of the Closing as
if made at and as of such time, except for changes specifically permitted
or contemplated hereby, except for representations which are as of a
specific date and except for such failures to be true and correct which, in
each case or in the aggregate, have not had and are not reasonably expected
to have a Material Adverse Effect, and Buyer shall have received a
certificate to such effect dated the Closing Date and executed by a duly
authorized officer of Seller in the form attached as Exhibit A. For
purposes of this Section 6.3(a), all qualifications in such representations
and warranties relating to materiality (including all Material Adverse
Effect qualifications) shall be disregarded; and
(b) Seller shall have performed in all material respects its
obligations under this Agreement required to be performed by it at or prior
to the Closing pursuant to the terms hereof.
ARTICLE VII
TERMINATION OF AGREEMENT
Section 7.1. Termination by Buyer or Seller. This Agreement
and the transactions contemplated hereby may be terminated at any time
prior to the Closing:
(a) by mutual written consent of Seller and Buyer;
(b) by Seller or Buyer by giving written notice of such
termination to the other party if any condition of such party's obligations
hereunder has not been satisfied or waived and the Closing shall not have
occurred on or before June 30, 1999, or such other date, if any, as Seller
and Buyer shall agree in writing; provided, however, that the terminating
party is not in material breach of its obligations under this Agreement;
(c) by Buyer if Seller has breached any representation or
warranty to the extent reasonably likely to have a Material Adverse Effect,
or materially breached any covenant or agreement contained in this
Agreement and such breach is either not capable of being cured prior to the
Closing or if such breach is capable of being cured, is not so cured prior
to the Closing;
(d) by Seller if Buyer has materially breached any
representation, warranty, covenant or agreement contained in this Agreement
and such breach is either not capable of being cured prior to the Closing
or if such breach is capable of being cured, is not so cured prior to the
Closing;
(e) by either Buyer, on the one hand, or Seller, on the other
hand, if there shall be in effect any Law or regulation that prohibits the
consummation of the Closing or if consummation of the Closing would violate
any non-appealable final order, decree or judgment of any court or
Governmental Authority having competent jurisdiction;
(f) by Seller, within thirty days of the date hereof, if Seller
shall not have received any required consents under its Senior Bank
Facility; or
(g) by Seller if Seller receives an Acquisition Proposal (as
defined below) from any person or group within 45 days from the date of
this Agreement that the Board of Directors of Seller (or any special
committee thereof) determines in its good faith judgment is more favorable
to Seller's shareholders than the transaction contemplated by this
Agreement.
As used in this Agreement, "Acquisition Proposal" shall mean
any proposal or offer to acquire all or any substantial part of the Seller
or the Railcar Business whether by merger, purchase of stock or assets,
tender offer or otherwise.
Section 7.2. Effect of Termination; Right to Proceed. Except as
set forth in Sections 4.2(c) and 9.1, in the event this Agreement is
terminated pursuant to this Article VII, all further obligations of Seller
to Buyer, and of Buyer to Seller, under this Agreement shall terminate
without further liability hereunder except that nothing herein will relieve
any party from liability for any breach of this Agreement prior to such
termination, including the breach giving rise to such termination.
ARTICLE VIII
SURVIVAL; INDEMNIFICATION
Section 8.1. Survival of Representations and Warranties . The
representations and warranties of Seller and Buyer made in this Agreement
shall survive the Closing for one year from the Closing Date, except that
the representation and warranty set forth in Section 2.12 shall survive the
Closing for two years and except that the representations and warranties
set forth in Sections 2.10 and 2.11 shall survive the Closing for the
applicable statute of limitation period ("Indemnity Period"), but, except
as provided in Section 7.2 hereof, shall not survive any termination of
this Agreement. The parties intend to shorten the statute of limitations
(and any other applicable limitation period) and agree that no claims or
causes of action may be brought against Seller, Buyer or any of their
directors, officers, employees, affiliates, controlling persons, agents or
representatives based upon, directly or indirectly, any of the
representations and warranties contained in this Agreement after the
Indemnity Period or any termination of this Agreement.
Section 8.2. Seller's Agreement to Indemnify.
(a) Subject to the terms and conditions set forth herein, from
and after the Closing, Seller shall indemnify and hold harmless Buyer and
the Railcar Subsidiaries and their respective directors, officers,
employees, affiliates, controlling persons, agents and representatives and
their successors and assigns (collectively, the "Buyer Indemnified
Parties") from and against all liability, demands, claims, actions or
causes of action, assessments, losses, damages, costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses)
(collectively but without duplication, "Buyer Damages") asserted against or
incurred by any of the Buyer Indemnified Parties as a result of, relating
to or arising out of (i) a breach of any representation or warranty made by
Seller contained in this Agreement or (ii) a breach of any agreement or
covenant of Seller contained in this Agreement. Notwithstanding anything to
the contrary contained herein, for purposes of this Article VIII, if a
representation or warranty contained in Article II hereof (except Section
2.7) which contains the term Material Adverse Effect is breached without
giving effect to such term (in other words, in order to determine whether a
breach of such representation or warranty has occurred for purposes of
obtaining indemnification under this Article, the term Material Adverse
Effect shall be deemed deleted from such representation or warranty), Buyer
Damages for such a breach shall be determined without giving effect to any
Material Adverse Effect standard contained therein.
(b) Seller's obligations to indemnify the Buyer Indemnified
Parties pursuant to Section 8.2(a) hereof are subject to the following
limitations:
(i) no indemnification shall be made by Seller with
respect to any claim under Section 8.2(a)(i), unless (A) the amount of such
claim (or the aggregate amount of related claims) exceeds $50,000 and (B)
the aggregate amount of Buyer Damages under all claims exceeds an amount
equal to $750,000 and, in such event, indemnification shall be made
by Seller only to the extent Buyer Damages exceed in the aggregate an
amount equal to $750,000, it being understood that such amount shall be a
"deductible" for Seller;
(ii) in no event shall Seller's aggregate obligation to
indemnify Buyer Indemnified Parties under this Agreement exceed an amount
equal to $10 million; provided, however, that such maximum aggregate
obligation to indemnify Buyer Indemnified Parties shall be increased to an
amount equal to $15 million, to the extent that, and only if, claims
asserted for breach of the representation and warranty contained in Section
2.12 cause the aggregate amount of Buyer Damages to exceed $10 million.
Section 8.2(b)(i) shall apply to, and in conjunction with, this Section
8.2(b)(ii);
(iii) the amount of any Buyer Damages shall be reduced by
any amount received by a Buyer Indemnified Party with respect thereto from
any other party responsible therefor. Buyer Indemnified Parties shall use
commercially reasonable efforts to collect any amounts available from such
other party alleged to have responsibility; provided, that Buyer
Indemnified Parties shall not be required to take any actions they would
not take in the absence of Seller's indemnification obligation as
determined in good faith by Buyer. If a Buyer Indemnified Party receives an
amount from such other party with respect to Buyer Damages at any time
subsequent to any indemnification provided by Seller pursuant to this
Section 8.2, then such Buyer Indemnified Party shall promptly reimburse
Seller for any payment made or expense incurred by Seller in connection
with providing such indemnification up to the indemnification amount
received by Buyer Indemnified Party, but net of any expenses incurred by
such Buyer Indemnified Party in collecting such amount and net of any
amounts for which the Buyer Indemnified Party was not indemnified pursuant
to Section 8.2;
(iv) Seller shall be obligated to indemnify Buyer
Indemnified Parties only for those claims giving rise to Buyer Damages as
to which Buyer Indemnified Parties have given Seller written notice thereof
prior to the end of the Indemnity Period in the event that the Indemnity
Period applies to such Buyer Damages. Any written notice delivered by a
Buyer Indemnified Party to Seller with respect to Buyer Damages shall set
forth with as much specificity as is reasonably practicable the basis of
the claim for Buyer Damages and, to the extent reasonably practicable, a
reasonable estimate of the amount thereof; and
(v) neither Seller nor any of its directors, officers,
employees or agents shall be liable to Buyer or to any agent, employee,
affiliate or representative of Buyer for loss of profit, loss of operating
time, loss of use of, or reduction in use of, the assets or operations of
the Railcar Business or existing or future facilities associated therewith,
or any portion thereof, increased expense of operation or maintenance, or
any other special, indirect, incidental or consequential losses or damages
directly or indirectly arising in any manner from or concerned with such
assets, operations or facilities, Collective Bargaining Agreements, Pension
Plans, Welfare Plans, this Agreement or any of the documents, instruments,
agreements and writings delivered by Seller to Buyer in connection with the
transactions contemplated by this Agreement.
Section 8.3. Buyer's Agreement to Indemnify.
(a) Subject to the terms and conditions set forth herein, from
and after the Closing, Buyer and the Railcar Subsidiaries shall indemnify
and hold harmless Seller and its directors, officers, employees,
affiliates, controlling persons, agents and representatives and their
successors and assigns (collectively, the "Seller Indemnified Parties")
from and against all liability, demands, claims, actions or causes of
action, assessments, losses, damages, costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses) (collectively
but without duplication, "Seller Damages") asserted against or incurred by
any Seller Indemnified Party as a result of or arising out of (i) a breach
of any representation or warranty made by Buyer contained in this
Agreement, or (ii) a breach of any agreement or covenant of Buyer in this
Agreement.
(b) Buyer's obligations to indemnify the Seller Indemnified
Parties pursuant to Section 8.3(a) hereof are subject to the following
limitations:
(i) No indemnification shall be made by Buyer with
respect to any claim under Section 8.3(a)(i), unless (a) the amount of such
claim (or the aggregate amount of related claims) exceeds $50,000 and (b)
the aggregate amount of Seller Damages under all claims exceeds an amount
equal to $750,000 and, in such event, indemnification shall be made by
Seller only to the extent Seller Damages exceed in the aggregate an amount
equal to $750,000, it being understood that such amount shall be a
"deductible" for Buyer;
(ii) In no event shall Buyer's obligation to indemnify
Seller Indemnified Parties under this Agreement exceed an amount equal to
$10 million; provided, however, that the limitations set forth in Section
8.3(b)(i) and (ii) hereof shall not apply to any claim arising under
Section 3.3;
(iii) The amount of any Seller Damages shall be reduced
by any amount received by a Seller Indemnified Party with respect thereto
from any other party responsible therefor. Seller Indemnified Parties shall
use commercially reasonable efforts to collect any amounts available from
such other party alleged to have responsibility; provided, that Seller
Indemnified Parties shall not be required to take any actions they would
not take in the absence of Buyer's indemnification obligation as determined
in good faith by Seller. If a Seller Indemnified Party receives an amount
from such other party with respect to Seller Damages at any time subsequent
to any indemnification provided by Buyer pursuant to this Section 8.3, then
such Seller Indemnified Party shall promptly reimburse Buyer, as the case
may be, for any payment made or expense incurred by Buyer in connection
with providing such indemnification up to the indemnified amount received
by the Seller Indemnified Party, but net of any expenses incurred by such
Seller Indemnified Party in collecting such amount and net of any amounts
for which the Seller Indemnified Party was not indemnified pursuant to
Section 8.3(b)(i) or (ii); and
(iv) Buyer shall be obligated to indemnify the Seller
Indemnified Parties only for those claims giving rise to Seller Damages as
to which the Seller Indemnified Parties have given Buyer written notice
thereof prior to the end of the Indemnity Period in the event that the
Indemnity Period applies to such Seller Damages. Any written notice
delivered by a Seller Indemnified Party to Buyer with respect to Seller
Damages shall set forth with as much specificity as is reasonably
practicable the basis of the claim for Seller Damages and, to the extent
reasonably practicable, a reasonable estimate of the amount thereof.
(v) Notwithstanding anything herein to the contrary, the
limitations on Buyer's obligation to indemnify the Seller Indemnified
Parties provided under this Section 8.3(b) shall not apply to any
liabilities arising out of, or relating to, those liabilities acquired or
retained by Buyer or the Railcar Subsidiaries pursuant to Section
1.1(c)(iii).
Section 8.4. Indemnification Procedures.
(a) With respect to third party claims, all claims for
indemnification by either a Seller Indemnified Party or a Buyer Indemnified
Party (an "Indemnified Party") shall be asserted and resolved as set forth
in this Section 8.4(a) and (b) (and, to the extent applicable, (c)). In the
event that any written claim or demand for which an indemnifying party, the
Seller or the Buyer, as the case may be (an "Indemnifying Party"), may be
liable to any Indemnified Party hereunder, is asserted against or sought to
be collected from any Indemnified Party by a third party, such Indemnified
Party shall promptly, but in no event more than 30 days following such
Indemnified Party's receipt of such claim or demand, notify the
Indemnifying Party of such claim or demand (which estimate shall not be
conclusive of the final amount of such claim or demand) (the "Claim
Notice"); provided, however, that the Indemnified Party's failure to
provide such notice in not more than 30 days shall not preclude the
Indemnified Party from being indemnified for such claim or demand, except
to the extent that the failure to give timely notice results in the
forfeiture of substantive defenses by and to the Indemnifying Party.
(b) The Indemnifying Party shall have 30 days from the personal
delivery or mailing of the Claim Notice (the "Notice Period") to notify the
Indemnified Party: (i) whether or not the Indemnifying Party disputes the
liability of the Indemnifying Party to the Indemnified Party hereunder with
respect to such claim or demand; and (ii) whether or not it desires to
defend the Indemnified Party against such claim or demand, it being
understood that the parties anticipate that the Indemnifying Party shall
promptly undertake defense of such claim or demand. All costs and expenses
incurred by the Indemnified Party in defending such claim or demand shall
be a liability of, and shall be paid promptly upon demand by, the
Indemnifying Party; provided, however, that the amount of such costs and
expenses that shall be a liability of the Indemnifying Party hereunder
shall be subject to the limitations set forth in this Article VIII. Except
as hereinafter provided, in the event that the Indemnifying Party notifies
the Indemnified Party within the Notice Period that it desires to defend
the Indemnified Party against such claim or demand, the Indemnifying Party
shall have the right to defend the Indemnified Party by appropriate
proceedings and shall have the sole power to direct and control such
defense. If any Indemnified Party desires to participate in any such
defense it may do so at its sole cost and expense. The Indemnified Party
shall not settle a claim or demand for which it is indemnified by the
Indemnifying Party without the written consent of the Indemnifying Party
(which shall not be unreasonably withheld) unless such settlement is at its
sole cost or expense. The Indemnifying Party shall not, without the prior
written consent of the Indemnified Party, settle, compromise or offer to
settle or compromise any such claim or demand on a basis which would result
in the imposition of a consent order, injunction or decree or which
requires the payment of money by the Indemnified Party, impairs the
Indemnified Party's ability to defend future claims, requires the admission
of guilt of the Indemnified Party or would otherwise restrict the future
activity or conduct of the Indemnified Party. If the Indemnifying Party
breaches its obligation to defend the Indemnified Party against such claim
or demand, whether by failing to give the Indemnified Party timely notice
as provided above or otherwise, then the amount of any such claim or
demand, or, if the same be contested by the Indemnified Party, then that
portion thereof as to which such defense is unsuccessful (including the
reasonable costs and expenses pertaining to such defense) shall be the
liability of the Indemnifying Party hereunder, subject to the limitations
set forth in this Article VIII. To the extent the Indemnifying Party shall
direct, control or participate in the defense or settlement of any third
party claim or demand, the Indemnified Party will provide the Indemnifying
Party and its counsel access, during normal business hours, to relevant
business records and other documents, and shall permit them to consult with
the employees and counsel of the Indemnified Party. The Indemnifying Party
shall use its best efforts to defend all such claims.
(c) Any claim by an Indemnified Party for Buyer Damages or
Seller Damages, as the case may be ("Damages") on account of Damages which
do not result from a third party claim shall be asserted by giving the
Indemnifying Party prompt written notice upon discovery thereof and the
Indemnifying Party shall have 60 days from receipt of such direct claim to
respond to such claim. The failure to provide such notice shall not
preclude the Indemnified Party from being indemnified for such claim or
demand.
(d) Characterization of Indemnification Payments. Any and all
amounts of indemnification provided by the Seller or Buyer under this
Article VIII (including any amounts provided by Seller pursuant to Section
8.7 hereof) shall be treated for all Tax purposes as adjustments to the
Purchase Price.
Section 8.5. Computation of Damages Subject to Indemnification.
The amount of any Damages for which indemnification is provided under this
Article VIII or otherwise in this Agreement shall be computed (w) net of
any insurance proceeds actually received by the Indemnified Party pursuant
to an insurance policy relating to such Damages, (x) net of any Tax Benefit
to the Indemnified Party relating to such Damages, (y) net of any reserves
reflected on the Financial Statements relating to such Damages, and (z) net
of any indemnification actually received by the Indemnified Party from a
third party (aside from the Indemnifying Party) relating to such Damages.
Section 8.6. Indemnification as Sole Remedy and Waiver. The
indemnity provided herein shall be the sole and exclusive remedy of the
Seller or Buyer with respect to any and all claims for Damages sustained,
incurred or suffered directly or indirectly relating to or arising out of
this Agreement and the transactions contemplated hereby. The Buyer and the
Seller, on their own behalf, and on behalf of their successors and assigns,
waive any and all rights, legal or equitable, to pursue any other remedies,
including, without limitation, all rights under CERCLA and any comparable
state law.
Section 8.7. Set-off Against Contingent Additional
Consideration as Sole Source of Indemnification. Except for claims arising
under Sections 1.5, 4.7 and 5.4, notwithstanding anything in this Agreement
to the contrary, the sole and exclusive source of indemnification for Buyer
Damages provided herein shall be the right of Buyer to set-off against the
Contingent Additional Consideration an amount equal to that amount of Buyer
Damages as agreed to by the parties or as finally determined pursuant to
Section 9.11 hereof.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Fees and Expenses. Whether or not the transactions
contemplated herein are consummated pursuant hereto, except as otherwise
provided herein, each of Seller, on the one hand, and Buyer, on the other
hand, shall pay all fees and expenses incurred by, or on behalf of, such
party (including, in the case of Seller, any out-of-pocket fees and
expenses of the Railcar Subsidiaries) in connection with, or in
anticipation of, this Agreement and the consummation of the transactions
contemplated hereby; provided, however, that in the event that Seller
terminates this Agreement pursuant to Section 7.1(g), Seller shall pay (or
reimburse) Buyer all out-of-pocket fees, costs and expenses paid or payable
to third parties (including amounts owing to, and fees and expenses of,
Buyer's sources of financing as described on Schedule 4.13, and all
accountants, attorneys and other advisors) incurred by Buyer in connection
with this Agreement and the transactions contemplated hereby not to exceed
$2.5 million if such termination occurs within 20 business days of the date
hereof and $3.0 million thereafter. Seller shall make such payment or
reimbursement within 30 days of such termination. In no event shall any
such out-of-pocket fees, costs and expenses be paid, directly or
indirectly, to any officer or director of Seller or any Railcar Subsidiary.
Section 9.2. Right to Provide Information. For a period of up
to 45 days following the date of this Agreement, Seller hereby reserves the
right to provide any information to and engage in discussions with any
person or group that the Board of Directors of Seller (or any special
committee thereof) in good faith believes may make an Acquisition Proposal
which is or may be more favorable to Seller's shareholders than the
transaction contemplated by this Agreement.
Section 9.3. Obligation to Disclose Information. At any time
prior to Closing, upon the request of Seller, Buyer shall disclose to
Seller any and all information relating to (i) all directors and officers
of Buyer, including all arrangements or understandings with such directors
and officers, (ii) all financing arrangements and terms, including senior
debt, subordinated debt and equity in connection with the transactions
contemplated by this Agreement and (iii) all fees, costs and expenses
incurred by Buyer in connection with this Agreement and the transactions
contemplated hereby.
Section 9.4. Notices. All notices, requests, demands, waivers
and other communications required or permitted to be given under this
Agreement shall be in writing and may be given by any of the following
methods: (i) personal delivery; (ii) facsimile transmission; (iii)
registered or certified mail, postage prepaid, return receipt requested; or
(iv) overnight delivery service. Notices shall be sent to the appropriate
party at its address or facsimile number given below (or at such other
address or facsimile number for such party as shall be specified by notice
given hereunder):
If to Buyer, to:
Rabbit Hill Holdings, Inc.
Sarles Street
Mount Kisco, NY 10549
Attention: Camillo M. Santomero, III
(fax) (914) 666-8378
with copies to:
White and Williams LLP
1800 One Liberty Place
Philadelphia, PA 19103-7395
Attention: George J. Hartnett, Esq.
(fax) (215) 864-7123
If to Seller, to:
Johnstown America Industries, Inc.
980 North Michigan Avenue
Suite 1000
Chicago, Illinois 60611
Attention: Kenneth Tallering, Esq.
(fax) (312) 2809-4820
with copies to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022-9931
Attention: Joseph A. Coco, Esq.
(fax) (212) 735-2000
All such notices, requests, demands, waivers and communications shall be
deemed received (i) in the case of personal delivery, upon actual receipt
thereof by the addressee, (ii) in the case of overnight delivery, upon
receipt, (iii) in the case of mail, upon receipt of the return receipt, or
(iv) in the case of a facsimile transmission, upon transmission thereof by
the sender and issuance by the transmitting machine of a confirmation slip
that the number of pages constituting the notice have been transmitted
without error. In the case of notices sent by facsimile transmission, the
sender shall contemporaneously mail or deliver a copy of the notice to the
addressee at the address provided for above. However, such mailing or
delivery shall in no way alter the time at which the facsimile notice is
deemed received.
Section 9.5. Severability. Should any provision of this
Agreement for any reason be declared invalid or unenforceable, such
decision shall not affect the validity or enforceability of any of the
other provisions of this Agreement, which remaining provisions shall remain
in full force and effect, and the application of such invalid or
unenforceable provision to persons or circumstances other than those as to
which it is held invalid or unenforceable shall be valid and enforced to
the fullest extent permitted by law.
Section 9.6. Binding Effect; Assignment. This Agreement and all
of the provisions hereof shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned, directly or indirectly, including,
without limitation, by operation of law, by any party hereto without the
prior written consent of the other parties hereto; provided, however, that
Buyer may assign its rights and obligations hereunder to any wholly-owned
subsidiary or subsidiaries of Buyer, and provided further that Buyer may
grant a collateral assignment of its rights hereunder to Fleet Capital
Corporation, as agent for certain lenders, or any other commercial lender
which is Buyer's primary financial institution, to which collateral
assignment Seller shall, if requested, consent.
Section 9.7. No Third-Party Beneficiaries. This Agreement is
solely for the benefit of Seller, and its successors and permitted assigns,
with respect to the obligations of Buyer under this Agreement, and for the
benefit of Buyer, and its successors and permitted assigns, with respect to
the obligations of Seller under this Agreement, and this Agreement shall
not be deemed to confer upon or give to any other third party any remedy,
claim, liability, reimbursement, cause of action or other right.
Section 9.8. Headings. The article and section headings
contained in this Agreement are solely for the purpose of reference, are
not part of the agreement of the parties and shall not in any way affect
the meaning or interpretation of this Agreement.
Section 9.9. Entire Agreement. This Agreement, the Schedules,
and the Exhibits and other documents referred to herein or delivered
pursuant hereto which form a part hereof constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede
all oral and all other prior written agreements and understandings between
the parties with respect to the subject matter hereof. No waiver or any
term or condition of this Agreement shall be effective unless set forth in
a written instrument duly executed by or an behalf of the party waiving
such term or condition. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of each
party hereto. Any disclosure set forth in any Schedule hereto shall be
deemed disclosed for any and all such other Schedules in respect of which
such disclosure may be deemed relevant.
Section 9.10. Governing Law. This Agreement shall be governed
by and construed in accordance with the internal laws of Delaware
applicable to contracts made herein.
Section 9.11. ArbitratiExcept as provided in Sections 1.5(b),
4.7(e) and 4.9(b) hereof, any dispute, controversy or claim arising out of
or relating to this Agreement, including, without limitation, any claim for
indemnification under Article VIII hereof ("Dispute"), shall be finally
settled by arbitration in accordance with the then-prevailing Commercial
Arbitration Rules of the American Arbitration Association, as modified
herein (the "Rules"). The place of arbitration shall be Chicago, Illinois.
There shall be three arbitrators. Each of Seller and Buyer shall appoint
one arbitrator. The two arbitrators so appointed shall select the chairman
of the tribunal within thirty days of the appointment of the second
arbitrator. If any arbitrator is not appointed within the time limits
provided herein or in the Rules, such arbitrator shall be appointed by the
American Arbitration Association. The arbitral tribunal is not empowered to
award damages in excess of compensatory damages, and each party hereby
irrevocably waives any right to recover punitive, exemplary or similar
damages with respect to any Dispute. Any arbitration proceedings, decision
or award rendered hereunder and the validity, effect and interpretation of
this arbitration agreement shall be governed by the Federal Arbitration
Act, 9 U.S.C. ss.ss. 1-16, and judgment upon any award may be entered in
any court of competent jurisdiction.
Section 9.12. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
ARTICLE X
DEFINITIONS
Section 10.1. Certain Definitions. As used in this Agreement,
the following terms shall have the meanings set forth or as referenced
below:
"Accounting Principles" shall have the meaning set forth in Section 2.6.
"Acquisition Proposal" shall have the meaning set forth in Section 7.1(g).
"Adjusted Grossed Up Basis" shall have the meaning set forth in Section
4.7(d).
"affiliates" shall mean, with respect to any Person, any Persons directly
or indirectly controlling, controlled by or under common control with, such
other Person as of the date on which, or at any time during the period for
which, the determination of affiliation is being made.
"Agreement" shall mean this Agreement, as the same may be amended or
supplemented from time to time in accordance with the terms hereof.
"Assumed Plans" shall have the meaning set forth in Section 5.4(a).
"Auditor" shall have the meaning set forth in Section 1.5(a).
"Benefit Plans" shall have the meaning set forth in Section 2.10(a)
"Bethlehem Steel Agreement" shall have the meaning set forth in Section 2.23.
"Buyer" shall have the meaning set forth in the preamble hereto.
"Buyer Damages" shall have the meaning set forth in Section 8.2(a)
"Buyer Indemnified Parties" shall have the meaning set forth in Section
8.2(a).
"Caravelle/CIBC" shall mean Caravelle Investment Fund L.L.C.
"Cash Purchase Price" shall have the meaning set forth in Section 1.2.
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation
and Liability Act of 1989, as amended.
"Claim Notice" shall have the meaning set forth in Section 8.4(a).
"Closing" shall have the meaning set forth in Section 1.3(a).
"Closing Date" shall have the meaning set forth in Section 1.3(a).
"Closing Indebtedness" shall have the meaning set forth in Section 1.4(a).
"Closing Interim Earnings" shall have the meaning set forth in Section 1.4(a).
"Closing JAIX Taxes" shall have the meaning set forth in Section 1.4(a).
"Closing Retiree Benefit Liability" shall have the meaning set forth in
Section 1.4(e).
"Closing Schedule" shall have the meaning as set forth in Section 1.4(a).
"Closing Working Capital" shall have the meaning set forth in Section 1.4(c).
"Code" shall have the meaning set forth in Section 2.10(c).
"Collective Bargaining Agreements" shall mean the contract with United
Steelworkers of America and the contract with United Autoworkers.
"Competing Activities" shall have the meaning set forth in Section 4.9(a).
"Contingent Additional Consideration" shall have the meaning set forth in
Section 1.6.
"Conveyance Taxes" shall have the meaning set forth in Section 4.7(g).
"Damages" shall have the meaning set forth in Section 8.4(c).
"deductible" shall have the meaning set forth in Section 8.2(b)(i).
"Demand Note" shall have the meaning set forth in Section 1.2.
"Dispute" shall have the meaning set forth in Section 9.11.
"EBITDA" shall mean earnings before interest, tax, depreciation and
amortization.
"Elections" shall have the meaning set forth in Section 4.7(a)(i).
"employee(s)" shall mean any employee of a Railcar Subsidiary.
"Environmental Laws" shall have the meaning set forth in Section 2.12(e).
"ERISA" shall have the meaning set forth in Section 2.10(a).
"FCS" shall have the meaning set forth in the recitals hereto.
"FCS IRB Debt" shall mean the Loan Agreement, dated December 1, 1995,
between Freight Car Services, Inc. and the City of Danville, Vermillion
County, Illinois relating to City of Danville, Illinois Variable Rate
Demand Industrial Revenue Bonds.
"FCS Shares" shall have the meaning set forth in Section 1.1(a)(ii).
"Final Indebtedness" shall have the meaning set forth in Section 1.5(a).
"Final Interim Earnings" shall have the meaning set forth in Section 1.5(a).
"Final JAIX Taxes" shall have the meaning set forth in Section 1.5(a).
"Final Retiree Benefit Liability" shall have the meaning set forth in
Section 1.5(a).
"Final Schedule" shall have the meaning set forth in Section 1.5(a).
"Final Working Capital" shall have the meaning set forth in Section 1.5(a).
"Financial Statements" shall have the meaning set forth in Section 2.6(a).
"foreign person" shall have the meaning set forth in Section 2.11 (g).
"Forms 8023" shall have the meaning set forth in Section 4.7(d).
"GAAP" shall mean United States generally accepted accounting principles as
in effect on the date hereof consistently applied.
"Governmental Authority" shall mean any domestic or foreign national,
state, provincial, municipal or other local judicial, legislative,
executive, administrative or regulatory authority or any governmental or
private body exercising any regulatory or tax authority.
"Governmental Authorization" shall mean all permits, approvals, licenses
and authorizations required to carry on the Railcar Business as currently
conducted under the applicable laws, ordinances or regulations of any
Governmental Authority.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Incremental Taxes" shall have the meaning set forth in Section 4.8.
"Indebtedness" shall have the meaning set forth in Section 1.4(d).
"Indemnified Party" shall have the meaning set forth in Section 8.4(a).
"Indemnifying Party" shall have the meaning set forth in Section 8.4(a).
"Indemnity Period" shall have the meaning set forth in Section 8.1.
"Intellectual Property" shall have the meaning set forth in Section 2.17.
"Interim Earnings" shall have the meaning set forth in Section 1.1(c)(ii).
"Interim Period" shall have the meaning set forth in Section 4.11(a).
"JAC" shall have the meaning set forth in the recitals hereto.
"JAC Shares" shall have the meaning set forth in Section 1.1(a)(i).
"JAC Patent" shall have the meaning set forth in the recitals hereto.
"JAII Stock" shall mean the common stock of Johnstown America Industries,
Inc.
"JAIX" shall have the meaning set forth in the recitals hereto.
"JAIX Shares" shall have the meaning set forth in Section 1.1(a)(iii).
"JAIX Taxes" shall have the meaning set forth in Section 1.5(c)(vi).
"JAIX Transfers" shall have the meaning set forth in Section 1.5(c)(vi).
"John Hancock" shall mean Hancock Mezzanine Investments LLC.
"Johnstown Savings Plan" shall have the meaning set forth in Section 5.4(b).
"Knowledge of Seller" shall have the meaning set forth in Section 2.8(b).
"Law(s)" shall mean any law, statute, ordinance, rule, regulation, order,
writ, judgment, injunction or decree of any Governmental Authority.
"Licenses" shall have the meaning set forth in Section 2.21(a).
"Liens" shall have the meaning set forth in Section 2.4.
"Material Adverse Effect" shall have the meaning set forth in Section 2.1(b).
"Modified Aggregate Deemed Sales Price" shall have the meaning set forth in
Section 4.7(d).
"NASDAQ" shall mean the National Association of Securities Dealers
Association.
"New Johnstown Savings Plan" shall have the meaning set forth in Section
5.4(b).
"Notice Period" shall have the meaning set forth in Section 8.4(b).
"Patent Shares" shall have the meaning set forth in Section 2.4.
"Pension Plan" shall have the meaning set forth in Section 2.10(b).
"Permitted Refinancing" shall have the meaning set forth in Section
1.6(c)(iv).
"Person" shall mean and include any individual, a corporation, a limited
liability company, a partnership, an association, a trust or other entity
or organization.
"Post-Closing Taxes" shall have the meaning set forth in Section 4.7(a)(i).
"Pre-Closing Tax Period" shall have the meaning set forth in Section
4.7(a)(i).
"Pre-Closing Taxes" shall have the meaning set forth in Section 4.7(a)(i).
"Premises" shall have the meaning set forth in Section 2.25(a).
"Purchase Price" shall have the meaning set forth in Section 1.2.
"Railcar Business" shall have the meaning set forth in the recitals hereto.
"Railcar Subsidiaries" shall have the meaning set forth in the recitals
hereto.
"Railcar Subsidiary" shall have the meaning set forth in the recitals hereto.
"Retiree Benefit Liability" shall have the meaning set forth in Section
1.4(e).
"Rules" shall have the meaning set forth in Section 9.11.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Selected Accounting Firm" shall have the meaning set forth in Section 1.5(b).
"Seller" shall have the meaning set forth in the preamble hereto.
"Seller Affiliated Group" shall have the meaning set forth in Section 4.7(i).
"Seller Damages" shall have the meaning set forth in Section 8.3(a).
"Seller Indemnified Parties" shall have the meaning set forth in Section
8.3(a).
"Seller's Knowledge" shall have the meaning set forth in Section 2.8(b).
"Senior Bank Facility" shall mean the Credit Agreement for $175,000,000,
dated as of April 29,
1999, between Johnston America Industries, Inc. and Chase Manhattan Bank.
"Senior Notes" shall mean the Senior Notes to be purchased by
Caravelle/CIBC and by John Hancock as described in the commitment letters
set forth on Schedule 4.13 in the aggregate amount existing as of the
Closing Date, plus any Senior Notes issued thereunder as pay-in-kind
interest payments.
"Senior Secured Debt" shall mean the credit facility provided by Fleet
Capital Corporation, as agent for certain lenders, as described in the
commitment letter set forth on Schedule 4.13 in the amount committed as of
the Closing Date.
"Settlement Accountants" shall have the meaning set forth in Section 4.7(e).
"Shares" shall have the meaning set forth in Section 1.1(b).
"Shareholders' Agreement" shall have the meaning set forth in Section
1.3(b)(iii).
"Straddle Period" shall have the meaning set forth in Section 4.7(a)(ii).
"subsidiary" shall mean a Person as to which a designated Person owns
directly or indirectly 50% or more of the voting equity or otherwise holds
the ability to direct the management and control of the entity.
"Subordination Agreement" shall mean the subordination agreement among
Seller, Fleet Capital Corporation, Caravelle/CIBC and John Hancock entered
into in connection with the Closing.
"Tax Authority" shall mean any competent Governmental Authority responsible
for the determination, assessment or collection of Taxes.
"Tax Benefit" shall mean any losses, deductions, credits or other Tax
benefit.
"Tax Claim" shall have the meaning set forth in Section 4.7(b).
"Tax Dispute Resolution Mechanism" shall have the meaning set forth in
Section 4.7(e).
"Tax Indemnified Party" shall have the meaning set forth in Section 4.7(b).
"Tax Indemnifying Party" shall have the meaning set forth in Section 4.7(b).
"Tax Notice" shall have the meaning set forth in Section 4.7(b).
"Tax Return" shall have the meaning set forth in Section 2.11(i)(ii).
"Tax Sharing Agreements" shall have the meaning set forth in Section 4.7(i).
"Taxes" shall have the meaning set forth in Section 2.11(i)(i).
"Triggering Event" shall have the meaning set forth in Section 1.6(c).
"UP/Strato litigation" shall mean the litigation relating to the January
1996 derailment of a train manufactured by JAC in a matter titled Union
Pacific v. Strato, JAC, et al.
"Welfare Plan" shall have the meaning set forth in Section 2.10(b).
"Working Capital" shall have the meaning set forth in Section 1.4(b).
Section 10.2. Other Terms. Other terms may be defined elsewhere
in the text of this Agreement and, unless otherwise indicated, shall have
such meaning throughout this Agreement.
Section 10.3. Other Definitional Provisions.
(a) The words "hereof", "herein", "hereto" and "hereunder" and
words of similar import, when used in this Agreement, shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
(b) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) The term "control" shall mean, as applied to any Person,
the possession directly or indirectly of the power to direct or cause the
direction of the management of such Person through the ownership of voting
securities or otherwise and the terms "controlling" and "controlled" have
the correlative meanings.
(d) Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation" unless the context requires otherwise.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
JOHNSTOWN AMERICA INDUSTRIES, INC.
By: /s/ Andrew M. Weller
________________________________
Name: Andrew M. Weller
Title: Executive Vice President
and Chief Financial Officer
RABBIT HILL HOLDINGS, INC.
By: /s/ Camillo Santomero, III
________________________________
Name: Camillo Santomero, III
Title: President
