UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ Annual Report Pursuant to Section 13 or 15(d)of the Securities
Exchange Act of 1934 For the Fiscal Year Ended December 31, 1997
or
/ / Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 For the transition period
from_______to______
GENESEE & WYOMING INC.
(Exact name of registrant as specified in its charter)
Delaware 06-0984624 -------------------------- ----------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 71 Lewis Street, Greenwich, Connecticut 06830 ---------------------------------------- ----------- (Address of principal executive offices) (Zip Code) (203) 629-3722 -------------- (Telephone No.) |
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on which Registered
------------------- -------------------
|
None
Securities registered pursuant to Section 12(g) of the Act:
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
[X] YES [ ] NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of the Regulations S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this form 10-K or any amendment to this Form 10-K. []
Aggregate market value of Class A Common Stock and Class B Common Stock held by non-affiliates based on closing price on March 25, 1998: $107,012,798.
Shares of common stock outstanding as of the close of business on March 25, 1998:
Class Number of Shares Outstanding ----- ---------------------------- Class A Common Stock 4,447,833 Class B Common Stock 845,539 |
Documents incorporated by reference and the Part of the Form 10-K into which they are incorporated are listed hereunder.
Part III, Items 10, 11, 12 and 13 Registrant's proxy statement to be issued in connection with the Annual Meeting of the Stockholders of the Registrant to be held on May 12, 1998.
The remainder of this page is intentionally left blank.
PART I
ITEM 1. BUSINESS
Genesee & Wyoming Inc. (the "Registrant" or the "Company") is a holding company whose subsidiaries own and operate short line and regional freight railroads and provide related rail services. The Company, through its industrial switching subsidiary, also provides railroad switching and related services to United States industries with extensive railroad facilities within their complexes. The Company's predecessor, Genesee and Wyoming Railroad Company, was founded in 1899 by E.L. Fuller and his partners. In 1977, when Mortimer B. Fuller, III purchased a controlling interest in the Company and became its Chief Executive Officer, the Company was dependent on a single commodity, salt, produced by a single customer. At that time, the Company generated $3.9 million in operating revenues over its 14 miles of track. In 1978, under the leadership of Mr. Fuller, the Company began a strategy of diversifying its sources of revenues, initially in the railcar leasing business and then through rail line acquisitions and the acquisition of Rail Link, Inc., which provides railroad switching and related services. In 1997, the Company's growth expanded beyond domestic operations to include the Australia Southern Railroad ("ASR") a new railroad operation which provides freight services in South Australia, and Genesee Rail-One Inc. ("GRO") a Canadian company in which the Company has 47.5% ownership interest. GRO owns and operates two short line railroads in Canada. As a result of the Company's acquisition and marketing strategies, the Company has become a diversified rail operation extending over approximately 2,400 miles of track, 1,500 miles of which are in the United States and 900 miles of which are in Australia. With the addition of the industrial switching subsidiary in 1996 and Australia Southern Railroad in 1997, the Company now serves over 300 customers in 15 states in the United States and 10 major customers in Australia.
INDUSTRY OVERVIEW
The railroad industry in the United States has undergone significant change since the passage of the Staggers Rail Act of 1980 (the "Staggers Rail Act"), which deregulated the pricing and types of services provided by railroads. Since 1980, Class I railroads in the United States and Canada have taken aggressive steps to improve profitability and recapture market share. In furtherance of that goal, these Class I railroads have focused their management and capital resources on their long-haul core systems, and certain of them have sold branch lines to smaller and more cost-efficient rail operators that are willing to commit the resources necessary to meet the needs of the shippers located on these lines. Divestment of branch lines enables Class I carriers to minimize incremental capital expenditures, concentrate traffic density, improve operating efficiency and avoid traffic losses associated with rail line abandon ment.
The commitment of Class I carriers to increase efficiency and profitability has also led to an increase in merger activity among long haul railroads, such as the mergers between Union Pacific Corporation and Chicago and North Western Holdings Corp., Burlington Northern Inc. and Santa Fe Pacific Corporation, Union Pacific Corporation and Southern Pacific Rail Corporation and, most recently, the acquisition of Consolidated Rail Corporation by Norfolk Southern Corp. and CSX Transportation, Inc. These consolidations present both risk and opportunity for the Company. For example, the split up of Conrail will impact the Company's New York and Pennsylvania railroads. Until the details of this split up reach greater clarity, the Company is unable to determine the impact on its operations, particularly in New York and Pennsylvania.
The Company believes that there will continue to be opportunities to acquire lines from Class I railroads in the United States and that there may be opportunities to make acquisitions among the over 500 existing short line and regional railroads. The Company believes there may be additional acquisition opportunities in Australia as the state and federal governments seek privatization of the railway system. The Company believes there may be acquisition opportunities in Canada and Mexico as well, although governmental regulations may limit acquisition opportunities in these countries. Both Canadian National Railway Company and Canadian Pacific Limited have divestment programs, and Mexico has begun a privatization program of the National Railroad of Mexico which includes the disposition of rail lines.
STRATEGY
The Company's strategy is to become the dominant provider of rail freight transportation in the markets it serves by (i) growing its business through acquisitions to establish new regions or increase its presence in existing regions, (ii) expanding its revenue base within each region through marketing efforts, and (iii) improving its operating efficiency through rationalization and consolidation of overhead expenses. The Company's growth to date has been the result of the acquisition of rail properties, which has expanded the Company's customer base and diversified its commodity mix, and its marketing efforts.
Acquisition of Rail Properties
The Company seeks to expand its business through the selective acquisition of rail properties, both in new regions and in regions in which it currently operates. The Company's fundamental acquisition strategy is to identify properties that have large industrial customers which will provide the Company with a stable revenue base and the potential to generate incremental revenues and additional customers upon implementation of a focused marketing plan. In new regions, the Company targets rail properties that have adequate size to establish a presence in the region, provide a basis for growth in the region and attract qualified management. When acquiring rail properties in its existing regions, in addition to seeking properties with large industrial customers, the Company targets rail properties where it believes the successful implementation of its operating strategy is likely to generate significant operating efficiencies.
In evaluating acquisition opportunities, the Company considers, among other matters, the size of the rail operations, opportunities for expansion, commodity and customer diversification, revenue stability, connecting carriers, track condition and maintenance requirements, and expected financial returns. The Company also considers acquisition opportunities that have the potential to enable its railroads to provide better or more cost-effective service to major shippers or to increase and diversify the overall customer base of its railroads. The Company develops acquisition prospects through its relationships with Class I carriers and its reputation in the industry. In addition, the Company uses consultants to assist in the identification and development of acquisition opportunities. The Company has successfully integrated twelve acquisitions of varying sizes and operating characteristics, of which four were existing short lines, six were Class I divestitures, one was a governmental privatization and one was an industrial switching company which also operates four wholly-owned subsidiary companies.
The Company acquires rail properties by purchase of assets, or is able to serve a market through lease or operating contract. Typically, the Company bids against other short line and regional operators for available properties. The structure of each transaction is determined based upon economic and
strategic considerations. In addition to the financial terms of the transaction, sellers consider more subjective criteria such as a prospective acquiror's operating experience, its reputation among shippers, and its ability to close a transaction and commence operations smoothly. The Company believes it has established an excellent record in each of these areas. In addition, by growing revenues on its acquired lines and providing improved service to shippers, the Company is able to provide increased revenue to the Class I carriers that connect with its lines. The Company sees this ability to provide increased revenue to Class I carriers as an advantage in bidding for properties.
Marketing
The Company's marketing strategy is to build each region on a base of major industrial customers, to grow that base business through marketing efforts directed at its major customers, and to generate incremental revenues outside the base of major customers by attracting smaller customers and providing ancillary services which generate non-freight revenues. The Company believes that over the long term, its strategy of building its regions around a core of major industrial customers provides a stable revenue base and allows the Company to focus its efforts on additional growth opportunities within a region. Of the 15 domestic customers that generated freight revenues in excess of $1 million in 1997, all but 3 depend exclusively on the Company for rail service to support their facilities, and the Company believes that each of these facilities is strategically important to the respective customers. While the other 3 customers are not dependent on the Company, the Company's railroads provide the best route for them to move their products by rail. Through implementation of its marketing strategy, the Company intends to increase further the number of major customers so that, over time, the Company's reliance on any one customer will be reduced.
Consistent with its decentralized management structure, the Company's sales and marketing activity is coordinated in each region by a marketing manager. The marketing manager works closely with personnel of each of the Company's railroads and with other department heads to develop marketing plans to inc rease shipments from existing customers and develop new business. The Company focuses on providing rail service to its customers that is easily accessible, reliable and cost-effective. The Company considers all of its employees to be customer service representatives and encourages them to initiate and maintain regular contact with shippers.
Because most of the traffic transported by the Company's railroads in the United States is interchanged with Class I carriers, the Company's marketing efforts are often aimed at enhancing its railroads' relationships with these Class I carriers as well as shippers. The Company provides related rail services such as railcar leasing, railcar repair, switching, storage, weighing and blocking and bulk transfer, which enable Class I carriers and customers to move freight more easily and cost-effectively. For example, the Company supplies cars to its customers or its railroads when, among other things, a customer has a need which cannot be filled by cars supplied by Class I railroads or the Company has an opportunity to provide cars on a cost basis that both meets customer needs and improves the economics of a freight move to the Company. The Company actively manages its railcar portfolio, buying and selling equipment to take advantage of changes in market value in conjunction with changes in its customers needs.
Operations
The Company's operating strategy is to increase efficiency and profitability in each region in which it operates. When acquiring new rail properties within an existing region, the Company capitalizes on operating efficiencies created by the presence of its other railroads within that region. For example, in connection with its Pittsburg & Shawmut acquisition, the Company plans to liquidate 42 miles of track and was able to sell a number of locomotives and railcars. In addition, consolidation of revenue and accounting functions often allows the Company to operate new railroads with fewer employees, as was the case with both its Illinois & Midland and Pittsburg & Shawmut acquisitions. The Company rationalizes its track, where appropriate, to make its operations more efficient. Rationalizations are planned on Buffalo & Pittsburgh, Louisiana & Delta and Pittsburg & Shawmut in 1998. The estimated salvage value of property to be rationalized exceeds its book value. The Company also seeks and grants trackage rights to improve regional rail infrastructure efficiency.
The Company intends to continue to improve the operating efficiency of its railroads by track rehabilitation, especially where maintenance has been deferred by the prior owner. Because of the importance of certain of the Company's shippers to the economic stability and/or development of the regions where they are located, and because of the importance of certain of the Company's railroads to the economic infrastructure of those regions, approximately $21.1 million in state and federal grants for track rehabilitation and service improvements has been invested in the Company's rail properties since 1987.
MANAGEMENT
The Company's Chief Executive Officer and Chief Financial Officer have responsibility for overall strategic and financial planning. The Chief Executive Officer has ultimate operating oversight over Australia and the Chief Operating Officer, a position created and filled in November, 1997, oversees operations in the United States. The Company believes that through its decentralized management structure it has developed a culture that encourages employees to take initiative and responsibility which is rewarded through performance-based profit sharing and bonus programs.
RAILROAD OPERATIONS - UNITED STATES
Domestic Customers
The Company's domestic railroads and switching operations currently serve over 300 customers. A large portion of the Company's domestic operating revenues is attributable to customers operating in the electric utility, forest products, petroleum and chemical industries. As the Company acquires new railroad operations, the base of customers and industries served continues to grow and diversify. The largest ten customers, which is a group that changes annually, accounted for approximately 37%, 49% and 50% of the Company's domestic revenues in 1997, 1996 and 1995, respectively. In 1997 and 1996, the Company's largest customer was Commonwealth Edison, an electric utility, which accounted for approximately 15% and 18% of the Company's revenues in 1997 and 1996, respectively. Through 1995, the Company's largest customer was Akzo Nobel Salt, Inc. ("Akzo"), which accounted for approximately 9% of operating revenue in 1995. Since 1994, revenues from Akzo have been negatively affected by the flooding of the Akzo mine. See Item 7. of this Report under the heading "Akzo Mine". The Company typically ships freight pursuant to transportation contracts among the Company, its connecting carriers and the shipper. These contracts are in accordance with industry norms and vary in duration from one to seven years.
Domestic Commodities
The Company's domestic railroads transport a wide variety of commoditie s for their customers. Some of the Company's railroads have a well-diversified commodity mix while others transport one or two principal commodities. In 1997, coal, coke and ores and petroleum products were the two largest commodity groups transported by the Company's railroads, constituting 31.7% and 12.3%, respectively, of total domestic freight revenues (see Item 7. of this Report under the heading "Results of Operations - Year Ended December 31, 1997 Compared to Year Ended December 31, 1996"), and 37.4% and 7.9%, respectively, of total domestic carloads. The following table summarizes the aggregate traffic volume of the Company's domestic railroads by commodity group:
DOMESTIC CARLOADS CARRIED BY COMMODITY GROUP
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
Commodity Group Carloads % of total Carloads % of total
--------------- ------------ ------------- ------------ -------------
Coal, Coke & Ores 82,269 37.4% 81,606 40.5%
Petroleum Products 17,456 7.9% 17,549 8.8%
Pulp & Paper 20,760 9.4% 19,480 9.7%
Lumber & Forest Products 18,171 8.3% 17,135 8.5%
Metals 21,268 9.7% 20,218 10.0%
Chemicals 10,496 4.8% 8,289 4.1%
Farm & Food Products 13,390 6.1% 11,402 5.7%
Autos & Auto Parts 6,496 3.0% 6,301 3.1%
Minerals & Stone 12,657 5.8% 9,066 4.5%
Other 16,743 7.6% 10,261 5.1%
------- ----- ------- -----
Total 219,706 100.0% 201,307 100.0%
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Coal, coke and ores consist primarily of shipments of coal to utilities and industrial customers.
Petroleum products consist primarily of fuel oil and crude oil.
Pulp and paper consist primarily of inbound shipments of pulp and outbound shipments of kraft and fine papers.
Lumber and forest products consist primarily of finished lumber used in construction, particleboard used in furniture manufacturing, and wood chips and pulpwood used in paper manufacturing.
Metals consist primarily of scrap metal and finished steel products shipped to and from two steel mills, and coated pipe.
Chemicals consist primarily of various chemicals used in manufacturing.
Farm and food products consist primarily of sugar, molasses, rice and other grains and fertilizer.
Autos and auto parts consist primarily of finished automobiles.
Minerals and stone consist primarily of gravel and stone used in construction.
Domestic Rail Traffic
Domestic rail traffic is classified as on-line or overhead traffic. On- line traffic is traffic that either originates or terminates with shippers located on a railroad and is interchanged with another rail carrier. On-line traffic that both originates and terminates on a railroad is referred to as local traffic. Overhead traffic neither originates nor terminates on a railroad, but rather passes over a railroad from one connecting carrier to another.
The Company believes that on-line shipments provide it with a stability of revenues because such traffic represents shipments to or from shippers loc ated along its lines which cannot easily be diverted to other rail carriers. While overhead traffic is more easily diverted, it is less costly to handle. To offset the potential for diversion of overhead traffic, the Company has sought long-term contracts on its significant overhead traffic. In 1997, 7.6% of domestic freight revenues was generated by overhead traffic compared to 8.9% in 1996.
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The following table summarizes domestic freight revenues by type of traffic carried by the Company's railroads.
DOMESTIC FREIGHT REVENUES BY TRAFFIC TYPE
(DOLLARS IN THOUSANDS)
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
TRAFFIC TYPE AMOUNT % OF TOTAL AMOUNT % OF TOTAL
------------ ------ ----------- ------ ----------
On-line
Originated $22,537 33.3% $19,796 31.8%
Terminated 33,435 49.4% 31,492 50.5%
Local 5,154 9.7% 5,507 8.8%
------- ----- ------- -----
Total On-line 61,126 92.4% 56,795 91.1%
Overhead 6,587 7.6% 5,521 8.9%
------- ----- ------- -----
Total Traffic $67,713 100.0% $62,316 100.0%
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Safety
GWI's safety program involves all employees and focuses on the prevention of accidents and injuries. The Senior Vice President of each region is accountable for the results of the program, and each has an officer responsible for day-to-day program administration. Line supervisors have direct responsibility for the safety and training of their personnel.
The Company maintains a corporate-wide safety policy facilitated by a full-time Safety Director. The Company's safety program also gives each railroad the flexibility to develop its own safety rules based on local requirements or practices. Each railroad complies fully with all federal, state and local government regulations. Operating personnel are trained and certified in train operations, hazardous materials handling, proper radio procedures and all other areas subject to governmental rules and regulations.
The Company also participates in governmental and industry sponsored safety programs. Members of the Company's management serve on the Board of Directors of Operation Lifesaver (the national grade crossing awareness program), the New Program Committee of Operation Lifesaver and the American Short Line and Regional Railroad Association Safety Committee. In addition, the Company has a working team consisting of the safety officers from each railroad. This team is charged with ongoing development and refinement of the Company's safety program and coordination with each railroad to insure compliance with and implementation of all safety rules and regulations.
Domestic Employees
As of December 31, 1997, the Company had 771 full-time employees. Of this total, 158 are members of national labor organizations. The Company has seven contracts with these national labor organizations which have expiration dates ranging from July 1998 to January 2000. The Company has also entered into collective bargaining agreements with an additional 69 employees who represent themselves, all of which expire in 1999.
RAILROAD OPERATIONS - AUSTRALIA
ASR commenced operations in November 1997. ASR acquired certain freight railroad assets of Australian National, a railroad company owned by the Commonwealth Government of Australia. Coincident with closing the purchase, the Company sold certain facilities and inventories to two third parties who are under long-term contracts with ASR to perform locomotive, rolling stock and track infrastructure maintenance and repairs. Approximately 900 miles of branchline track structure is owned and exclusively maintained by ASR through one of the two third parties. The land under the track structure is leased from the State of South Australia for a 50 year term. Some of these branchlines are isolated from other parts of the system. Also, different parts of the system have different track gauges, that is, narrow, standard and wide gauge, and ASR must provide discrete locomotives and rolling stock for each gauge. In some cases dual gauge track is in place. Under contract ASR also operates unit trains on a 153 mile branchline owned by a customer.
ASR operates unit trains for six major customers, hauling six types of commodities including grain, coal and gypsum. It provides switching, rail yard storage and other rail related facilities for hire to customers. ASR also acquired contracts to operate "hook and pull" trains for three customers. Unlike the United States, the Australian system guarantees open access to rail lines. ASR provides locomotive, fuel, train crews, and in some cases railcars, to freight fowarding companies. These freight fowarding companies, ASR's customers, contract for blocks of time within which their trains can be operated at certain designated speeds. They are responsible for track access charges and all other costs of operating these trains. ASR operates hook and pull trains for three customers over the 2,100 mile corridor between Melbourne and Perth. Certain of ASR's branchline trains operate over these main lines as well. ASR is not responsible for maintenance of these main lines.
As of December 31, 1997, ASR had about 150 employees, with about 125 operational staff being members of a union. The contract with the union expires in November, 2000.
INSURANCE
The Company has obtained for each of its railroads insurance coverage for losses arising from personal injury and for property damage in the event of derailments or other accidents or occurrences. The liability policies have self-insured retentions ranging from $100,000 to $250,000 per occurrence. In addition, the Company maintains an excess liability policy which provides supplemental coverage for losses in excess of primary policy limits. With respect to the transportation of hazardous commodities, the Company's liability policy covers sudden releases of hazardous materials, including expenses related to evacuation. Personal injuries associated with grade crossing accidents are also covered under the Company's liability policy. The Company also maintains all-risk property damage coverage, subject to a standard pollution exception and self-insured retentions ranging from $10,000 to $250,000.
Employees of the Company's United States railroads are covered by the Federal Employers' Liability Act ("FELA"), a fault-based system under which injuries and deaths of railroad employees are settled by negotiation or litigation based on the comparative negligence of the employee and the employer. FELA-related claims are covered under the Company's liability insurance policies.
ASR liability policies have self-insured retentions ranging from $70,000 per occurrence to a one-time deductible of $700,000 for rolling stock. Employees are covered for injury or death by public and private sector insurance arrangements. A levy is paid by ASR to the insurance provider based on the amount of wages and salaries paid by ASR.
The Company believes its insurance coverage is adequate in light of its experience and the experience of the rail industry. However, there can be no assurance as to the adequacy, availability or cost of insurance in the future.
COMPETITION
In acquiring rail properties, the Company competes with other short line and regional railroad operators, some of which are larger and have greater financial resources than the Company. Competition for rail properties
is based primarily upon price, operating history and financing capability. The Company believes its established reputation as a successful acquiror and operator of short line rail properties, in combination with its managerial and financial resources, effectively positions it to take advantage of acquisition opportunities.
Each of the Company's railroads is typically the only rail carrier directly serving its customers; however, the Company's railroads compete directly with other modes of transportation, principally motor carriers and, to a lesser extent, ship and barge operators. The extent of this competition varies significantly among the Company's railroads. Competition is based primarily upon the rate charged and the transit time required, as well as the quality and reliability of the service provided, for an origin-to-destination transportation package. To the extent other carriers are involved in transporting a shipment, the Company cannot control the cost and quality of such service. Cost reductions achieved by major rail carriers over the past several years have generally improved their ability to compete with alternate modes of transportation.
REGULATION
The Company's railroads are subject to regulation by the Surface Transportation Board ("STB"), the Federal Railroad Administration ("FRA"), state departments of transportation and some state and local regulatory agencies. The STB is the successor to certain regulatory functions previously administered by the Interstate Commerce Commission. Established by the ICC Termination Act of 1995 ("ICCTA"), the STB has jurisdiction over, among other things, service levels and compensation of carriers for use of their railcars by other carriers. It also must authorize extension or abandonment of rail lines, the acquisition of rail lines, and consolidation, merger or acquisition of control of rail common carriers; in limited circumstances, it may condition such authorization upon the payment of severance benefits to affected employees. The STB may review rail carrier pricing only in response to a complaint concerning rates charged for transportation where there is an absence of effective competition. The FRA has jurisdiction over safety and railroad equipment standards and also assists in coordinating projects for railroad route simplification.
In 1980, the Staggers Rail Act fundamentally changed federal regulatory policy by emphasizing the promotion of revenue adequacy (the opportunity to earn revenues sufficient to cover costs and attract capital) for the railroads and allowing competition to determine to a greater extent rail prices and route and service options. The ICCTA continues the trend towards limiting regulation of rail prices. As a result of these changes in legislative policy, the railroad industry's rate structure has evolved from a system of interrelated prices that applied over different routes between the same points to a combination of market based prices that are now subject to limited regulatory constraints. While federal regulation of rail prices has been significantly curtailed, federal regulation of services continues to affect profitability and competitiveness in the railroad industry.
ENVIRONMENTAL MATTERS
The Company's operations are subject to various federal, state and local laws and regulations relating to the protection of the environment, which have become increasingly stringent. These environmental laws and regulations, which are implemented principally by the Environmental Protection Agency and comparable state agencies, govern the management of hazardous wastes, the discharge of pollutants into the air and into surface and underground waters, and the manufacture and disposal of certain substances. There are no material environmental claims currently pending or, to the
Company's knowledge, threatened against the Company or any of its railroads. In addition, the Company believes that the operations of its railroads are in material compliance with current laws and regulations. The Company estimates that any expenses incurred in maintaining compliance with current laws and regulations will not have a material effect on the Company's earnings or capital expenditures. However, there can be no assurance that the current regulatory requirements will not change, or that currently unforeseen environmental incidents will not occur, or that past non-compliance with environmental laws will not be discovered on the Company's properties.
The Commonwealth of Australia has acknowledged that certain portions of the leasehold and freehold land acquired under the Sale and Purchase Agreement by ASR contains contamination arising from activities associated with previous operators. The Commonwealth has provided a release and indemnity to ASR from obligations, duty or liability arising from pre-existing contamination. The Commonwealth is required to remediate the relevant land to existing environmental standards and for the purpose for which the land was used at the date of the Sale and Purchase Agreement (or the date on which the land was last used).
FORWARD-LOOKING STATEMENTS
This Report and the documents incorporated herein by reference may contain forward-looking statements based on current expectations, estimates and projections about the Company's industry, management's beliefs and assumptions made by management. Words such as "anticipates," "intends," "plans," "believes ," "seeks," "estimates," variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are no guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to forecast. Therefore, actual results may differ materially from those expressed or forecast in any such forward-looking statements. Such risks and uncertainties include, in addition to those set forth in this Item 1 and in Item 7, hereof, those noted in the documents incorporated by reference. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
ITEM 2. PROPERTIES
The Company currently operates 16 railroads of which 15 are in the United States and one is in Australia. These rail properties typically consist of the track and the underlying land. Real estate adjacent to the railroad rights-of- way is generally retained by the seller, and the Company's holdings of such property are not material. Similarly, the seller typically retains mineral rights and rights to grant fiber optic and other easements in the properties acquired by the Company's railroads. The Company's railroad in Australia operates over approximately 900 miles of track structure which is owned by the Company. The land on which the track structure is built is leased from the State of South Australia for a term of 50 years with a conditional right of renewal for an additional 15 years.
The following table sets forth certain information as of December 31, 1997 with respect to the Company's domestic railroads:
CONNECTING
RAILROAD AND LOCATION TRACK MILES STRUCTURE CARRIERS (1)
--------------------- ----------- --------- --------
Allegheny & Eastern Railroad, Inc.
("ALY") Pennsylvania 153 (2) Owned BPRR, CR
Bradford Industrial Railroad, Inc. ("BR")
New York, Pennsylvania 4 (3) Owned BPRR, CR
ALY, BLE, BR, CN,
Buffalo & Pittsburgh Railroad, Inc. CP, CR, CSX, NS,
("BPRR") New York, Pennsylvania 279 (4) Owned/Leased PS, RSR, SB
The Dansville & Mount Morris Railroad
Company ("DMM") New York 8 Owned/Leased GNWR
Genesee and Wyoming Railroad Company
("GNWR") New York 26 (5) Owned (5) CP, CR, DMM, RSR
Pittsburg & Shawmut Railroad, Inc. ("PS")
Pennsylvania 224 (6) Owned BPRR, CR
Rochester & Southern Railroad, Inc. BPRR, CP, CR,
("RSR") New York 66 (7) Owned GNWR, NS
BNSF, CR, IAIS,
Illinois & Midland Railroad, Inc. ("IMR") IC, NS, PPU, TPW,
Illinois 97 (8) Owned UP
Portland & Western Railroad, Inc. BNSF, UP, WPRR,
("PNWR") Oregon 198 (9) Owned/Leased POTB
Willamette & Pacific Railroad, Inc.
("WPRR") Oregon 185 (10) Leased UP, PNWR
Louisiana & Delta Railroad, Inc. ("LDRR")
Louisiana 87 (11) Owned/Leased UP
Carolina Coastal Railway, Inc. ("CLNA")
North Carolina 17 (12) Leased NS
Commonwealth Railway, Inc. ("CWRY")
Virginia 17 (13) Owned/Leased NS
Talleyrand Terminal Railroad ("TTR")
Florida 10 (14) Leased NS, CSX
Corpus Christi Terminal Railroad, Inc.
("CCPN") Florida 26 (15) Leased UP, BNSF, TM
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Note: GWI Switching Services, L.P. is no longer included in this table as the operating agreement under which it provided switching services to a Dayton, Texas plastic pellet car storage yard was terminated in December, 1997.
(1) See Legend of Connecting Carriers following this table.
(2) In addition, ALY operates by trackage rights over 3 miles of CR.
(3) In addition, BR operates by trackage rights over 14 miles of BPRR.
(4) Includes 92 miles under perpetual leases and 9 miles under a lease expiring
in 2090. In addition, BPRR operates by trackage rights over 27 miles of CSX
under an agreement expiring in 2018, and 83 miles of CR under an agreement
expiring in 2027. The Company is seeking abandonment and rationalization of
approximately 58 miles of owned track that parallels track the BPRR
operated over under the CR trackage right agreement.
(5) Track has been conveyed to a county industrial development agency and
leased back to GNWR. The operations of the GNWR have been realigned with
those of RSR. See Item 7. of this report.
(6) In addition, PS operates over 13 miles pursuant to an operating contract.
The assets of PS were acquired on April 29, 1996.
(7) In addition, RSR has a haulage contract over 52 miles of CP.
(8) In addition, IMR operates by trackage rights over 15 miles of IC, 9 miles
of PPU and 5 miles of UP. The assets of IMR were acquired on February 8,
1996.
(9) Includes 53 miles under lease expiring in 2015 with a 10-year renewal
unless terminated by either party, 53 miles formerly under lease which was
purchased in November, 1997, and is operated under a rail service easement
and 92 miles which was purchased in July, 1997. In addition, PNWR operates
by trackage rights over 2 miles of UP and 4 miles of POTB.
(10) All under lease expiring in 2013, with renewal options subject to both
parties' consent. In addition, WPRR operates over 41 miles of UP under a
concurrent trackage rights agreement.
(11) Includes 14 miles under a lease expiring in 2011. In addition, LDRR
operates by trackage rights over 91 miles of UP under an agreement
terminable by either party after 1997 and has a haulage contract with M.A.
Patout & Sons over 4 miles of track.
(12) All leased on a month-to-month basis under a Lease and Option to Purchase
Agreement which commenced in 1989. The Company acquired CLNA on November 9,
1996.
(13) Includes 12.5 miles under lease expiring in 2009. The Company acquired CWRY
on November 9, 1996.
(14) All under lease expiring in 1999. The Company acquired TTR on November 9,
1996.
(15) All under lease expiring in 2002. The Company acquired CCPN on August 3,
1997.
LEGEND OF CONNECTING CARRIERS
BLE Bessemer and Lake Erie Railroad Company BNSF Burlington Northern Santa Fe Railway Company CN Canadian National CP Canadian Pacific Railway CR Consolidated Rail Corporation CSX CSX Transportation, Inc. IAIS Iowa Interstate Railroad, Ltd. IC Illinois Central Railroad Company NS Norfolk Southern Corp. POTB Port of Tillamook Bay Railroad PPU Peoria & Pekin Union Railway SB South Buffalo Railway Company TM The Texas Mexican Railway Company TPW Toledo, Peoria & Western Railway Corp. UP Union Pacific Railroad Company |
EQUIPMENT
As of December 31, 1997, rolling stock of the Company's domestic railroads consisted of 175 locomotives and 1,875 freight cars, some of which were owned and some of which were leased from others. The Company's rolling stock for its subsidiary in Australia consisted of approximately 80 locomotives and approximately 1,200 wagons (freight cars) owned and in service.
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant in certain lawsuits resulting from railroad and industrial switching operations, one of which includes the commencement of a criminal investigation. Management believes that the Company has adequate defenses to any criminal charge which may arise and that adequate provision has been made in the financial statements for any expected liabilities which may result from disposition of such lawsuits. While it is possible that some of the foregoing matters may be resolved at a cost greater than that provided for, it is the opinion of management that the ultimate liability, if any, will not be material to the Company's results of operations or financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
On June 24, 1996, the Company's Class A Common Stock began trading and is quoted on the Nasdaq National Market. Its trading symbol is GNWR. The tables below show the range of high and low actual trade prices for the Company's Class A Common Stock during each quarterly period of 1997 and 1996, since its initial public offering.
YEAR ENDED DECEMBER 31, 1997 HIGH LOW ----------------- ---- --- 1st Quarter $37.75 $29.00 2nd Quarter $31.75 $26.25 3rd Quarter $35.00 $24.00 4th Quarter $31.75 $22.50 YEAR ENDED DECEMBER 31, 1996 HIGH LOW ----------------- ---- --- 1st Quarter N/A N/A 2nd Quarter $21.00 $18.25 3rd Quarter $30.50 $18.50 4th Quarter $35.75 $25.25 |
The Company's Class B Common Stock is not publicly traded.
The Company did not pay cash dividends in 1997. Prior to the initial public offering on June 24, 1996, the Company paid dividends in the first quarter of 1996 aggregating $32,000. The Company does not intend to pay cash dividends for the foreseeable future and intends to retain earnings, if any, for future operation and expansion of the Company's business. Any determination to pay dividends in the future will be at the discretion of the Company's Board of Directors and will be dependent upon the Company's results of operations, financial condition, contractual restrictions and other factors deemed relevant by the Board of Directors.
On March 16, 1998 there were 109 holders of record of the Company's Class A Common Stock and 11 holders of record of the Company's Class B Common Stock.
During 1997 the Company issued the following securities which were not registered under the Securities Act of 1933, as amended (the "Act"). Each of such issuances was made by private offering in reliance on the exemption from the registration provisions of the Act provided by Section 4(2) of the Act:
(1) On July 25, 1997 the Company issued to one of its non-employee directors, for no additional consideration, options under the Genesee & Wyoming Inc. Stock Option Plan for Outside Directors to purchase an aggregate of 2,000 shares of Class A Common Stock at an exercise price of $26.00 per share. The shares issuable upon exercise of such options were the subject of
a Registration Statement on Form S-8 under the Act. These options were forfeited on October 27, 1997, when the non-employee director resigned his directorship to accept a senior management position with the Company.
(2) On October 27, 1997 the Company issued to one of its non-employee directors, for no additional consideration, options under the Genesee & Wyoming Inc. Stock Option Plan for Outside Directors to purchase an aggregate of 2,000 shares of Class A Common Stock at an exercise price of $28.50 per share. The shares issuable upon exercise of such options are the subject of a Registration Statement on Form S-8 under the Act.
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ITEM 6. SELECTED FINANCIAL DATA.
The following selected consolidated income statement data and selected consolidated balance sheet data of the Company for the years ended December 31, 1997, 1996, 1995, 1994 and 1993, have been derived from the Company's consolidated financial statements. All of the information should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. See also Item 7. of this Report.
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31,
INCOME STATEMENT DATA: 1997 1996 1995 1994 1993
Operating revenues $103,643 $ 77,795 $53,387 $55,419 $49,645
Operating expenses 87,200 63,801 46,815 47,381 43,501
Operating income 16,443 13,994 6,572 8,038 6,144
Interest expense (3,349) (4,720) (3,405) (3,212) (2,864)
Other income 345 651 456 192 165
Income before income taxes,
extraordinary item and cumulative
effect of accounting change 13,439 9,925 3,623 5,018 3,445
Income taxes (5,441) (4,020) (1,472) (2,007) (1,428)
Income before extraordinary item and
cumulative effect of accounting
change 7,998 5,905 2,151 3,011 2,017
Extraordinary item -- -- (494) -- --
Cumulative effect of accounting
change (1) -- -- -- -- (393)
Net income $ 7,998 $ 5,905 $ 1,657 $ 3,011 $ 1,624
Basic earnings per common share:
Income before extraordinary item and
cumulative effect of accounting
change $1.52 $ 1.54 $ 0.92 $ 1.31 $ 0.88
Extraordinary item -- -- (0.21) -- --
Cumulative effect of accounting
change (1) -- -- -- -- (0.18)
Net income $1.52 $ 1.54 $ 0.71 $ 1.31 $ 0.70
Dividends per common share (2) -- $ 0.01 $ 0.08 $ 0.03 $ 0.05
Weighted average number of shares of
common stock 5,250 3,829 2,348 2,304 2,304
BALANCE SHEET DATA AS OF PERIOD END:
Total assets $210,532 $145,339 $78,429 $69,888 $63,653
Total debt 74,144 18,731 39,941 32,640 35,095
Stockholders' equity 68,343 61,683 10,548 9,082 6,074
|
(1) Represents the adoption, as of January 1, 1993, of SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other than Pensions."
(2) Prior to the initial public offering on June 24, 1996, the Company paid dividends at the discretion of the Company's Board of Directors. The Company did not pay cash dividends after the initial public offering. The Company does not intend to pay cash dividends for the foreseeable future and intends to retain earnings, if any, for future operation and expansion of the Company's business.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the Consolidated Financial Statements and related notes included elsewhere in this Annual Report.
GENERAL
The Company is a holding company whose subsidiaries own and operate short line and regional freight railroads and provide related rail services. The Company, through its industrial switching subsidiary, also provides freight car switching and related services to United States industries with extensive railroad facilities within their complexes. The Company generates revenues primarily from the movement of freight over track owned or operated by its railroads. The Company also generates non-freight revenues primarily by providing freight car switching and related rail services such as railcar leasing, railcar repair and storage to industries with extensive railroad facilities within their complexes, to shippers along its lines, and to the Class I railroads that connect with its lines.
The Company's operating expenses include wages and benefits, equipment rents (including car hire), purchased services, depreciation and amortization, diesel fuel, casualties and insurance, materials and other expenses. Car hire is a charge paid by a railroad to the owners of railcars used by that railroad in moving freight. Other expenses generally include property and other non-income taxes, professional services, communication and data processing costs and general overhead expense.
When comparing the Company's results of operations from one reporting period to another, the following factors should be taken into consideration. The Company has historically experienced fluctuations in revenues and expenses such as one-time freight moves, customer plant expansions and shut-downs, railcar sales, accidents and derailments. In periods when these events occur, results of operations are not easily comparable to other periods. Also, much of the Company's growth to date has resulted from acquisitions. The Company completed two acquisitions during the first four months of 1996, one in November 1996, and another in November 1997. Because of variations in the structure, timing and size of these acquisitions and differences in economics among the Company's railroads resulting from differences in the rates and other material terms established through negotiation, the Company's results of operations in any reporting period may not be directly comparable to its results of operations in other reporting periods.
GENESEE & WYOMING AUSTRALIA PTY. LTD.
On August 28, 1997 the Company announced that its wholly owned subsidiary, Genesee & Wyoming Australia Pty. Ltd. ("GWIA"), had been awarded the contract to purchase certain selected assets of the railroad freight operation of SA Rail, a division of Australian National Railway which is controlled by the Commonwealth Government of Australia (see Note 2. to Consolidated Financial Statements). SA Rail provides intrastate freight services in South Australia, interstate haulage of contract freight, rolling stock rental and maintenance, and interstate track maintenance. GWIA bid as part of a consortium including EDI Clyde Engineering and Transfield Pty. Ltd. EDI Clyde is a major Australian provider of railway rolling stock and holds the Australian license for GM/EMD locom otives. Transfield is a major Australian engineering, construction and infrastructure maintenance provider. On November 8, 1997, GWIA closed on the purchase of the assets and commenced operation of railroad freight service under the name of Australia Southern Railroad Pty. Ltd. The assets were acquired for approximately $33.1 million, including related costs.
The assets consist primarily of road and track structure, railroad rolling stock and other equipment. The acquisition of assets was partially financed through two new debt agreements in the aggregate amount of $22.2 million (see Note 9. to Consolidated Financial Statements).
JOINT VENTURE - GENESEE RAIL-ONE INC.
The Company has formed a joint venture, Genesee Rail-One Inc. ("GRO") to acquire railroads in Canada. GRO is a joint venture with Rail-One Inc. ("Rail- One"), a subsidiary of The Cygnus Group which is an integrated transportation facilities, services and infrastructure provider in Canada. The Company's initial capital investment in GRO was approximately $4,913,000. On December 31, 1997, the Company's investment was $4,852,000 after adjustment for losses in equity of unconsolidated affiliates (see Note 3. to Consolidated Financial Statements). Based on GWI's ownership portion of 47.5%, the Company is reporting the results of operations of GRO under the equity method of accounting for investments. The results of operations of GRO are translated into U.S. dollars at a weighted average exchange rate for each period. In addition, the Company has loaned Rail-One, its joint venture partner in GRO, $4,613,000 through a promissory note denominated in Canadian currency (see Note 4. to Consolidated Financial Statements). During 1997, GRO acquired two railroads in Canada.
AKZO MINE
Prior to 1995, the Company's major customer was Akzo Nobel Salt, Inc. ("Akzo"), which operated a rock salt mine in Retsof, New York. In March 1994 a section of the mine's roof collapsed, causing flooding from an underground aquifer, and the mine closed in September 1995. Akzo actively pursued construction of a new mine throughout 1995, but in April 1996 it announced that it was abandoning the mine project and that the Retsof location would be converted to a rock salt distribution center. In August 1996 Akzo announced its intentions to sell all of its North American mining operations, with the exception of the Retsof mine, to Cargill, Incorporated ("Cargill"), effectively ending the plan for a distribution center. On February 11, 1997 an investment group announced a plan to acquire all rights of Akzo and build a new mine in the Retsof area. Development of this mine is contingent upon obtaining adequate financing and regulatory approvals and permits. As of February 1998, the investment group continues to pursue the regulatory approvals and permits necessary for this new mine.
There were no freight revenues attributable to Akzo in 1997. Freight revenues attributable to Akzo totaled $62,000 in 1996 and $1.9 million in 1995. The flooding and subsequent closure did not affect non-freight revenues, which consist primarily of income from railcar leases under long-term contracts, from Akzo and its successor, Cargill. Non-freight revenues from Cargill in 1997 were $3.2 million. Non-freight revenues from Akzo totaled $3.4 million and $2.9 million in 1996 and 1995, respectively.
YEAR 2000 COMPLIANCE
The Company is executing a plan to ensure its systems are compliant with the requirements to process transactions in the Year 2000. The Company's systems include internal financial systems and systems provided by third parties for the transportation operations and certain revenue and expense account processing related specifically to the rail industry. The Company believes that the costs necessary to make its internal financial systems Year 2000 compliant will be immaterial. The Company is communicating with its third party vendors to coordinate Year 2000 compliance. The Company's rail related systems require data provided through an industry association. Year 2000
compliance by the industry association is planned but is not in the Company's or its third party vendors' control. The Company believes that it will be able to achieve Year 2000 compliance; however, no assurance can be given that these efforts will be successful.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Operating Revenues
Operating revenues were $103.6 million in 1997 compared to $77.8 million in 1996, an increase of $25.8 million or 33.2%. This increase was attributable to a $11.7 million increase in freight revenues coupled with a $14.1 million increase in non-freight revenues.
Freight revenues were $74.0 million in 1997 compared to $62.3 million in 1996,
an increase of $11.7 million or 18.7%. Of this increase, $6.3 million or 10.1%
is freight revenue from a new subsidiary with operations in Australia (see Note
2. to Consolidated Financial Statements) and $5.4 million or 8.6% is from an
increase in domestic freight revenue. The following table compares domestic
freight revenues, carloads and average freight revenues per carload for 1997 and
1996:
DOMESTIC FREIGHT REVENUES AND CARLOADS COMPARISON BY COMMODITY GROUP
YEARS ENDED DECEMBER 31, 1997 AND 1996
(DOLLARS IN THOUSANDS)
(EXCEPT AVERAGE PER CARLOAD)
AVERAGE
FREIGHT
REVENUES
FREIGHT REVENUES CARLOADS PER CARLOAD
---------------- -------- -----------
% OF % OF % OF % OF
COMMODITY GROUP 1997 TOTAL 1996 TOTAL 1997 TOTAL 1996 TOTAL 1997 1996
--------------- ----- ----- ---- ----- ---- ----- ---- ----- ---- ----
COAL, COKE & ORES $21,452 31.7% $20,368 32.7% 82,269 37.4% 81,606 40.5% $ 260 $ 250
PETROLEUM PRODUCTS 8,349 12.3% 8,679 13.9% 17,456 7.9% 17,549 8.8% 478 495
PULP & PAPER 7,920 11.7% 7,223 11.6% 20,760 9.4% 19,480 9.7% 381 371
LUMBER & FOREST
PRODUCTS 6,093 9.0% 5,302 8.5% 18,171 8.3% 17,135 8.5% 335 309
CHEMICALS 5,761 8.5% 4,317 6.9% 10,496 4.8% 8,289 4.1% 548 521
METALS 5,188 7.7% 5,211 8.4% 21,268 9.7% 20,218 10.0% 243 258
FARM & FOOD PRODUCTS 3,865 5.7% 3,537 5.7% 13,390 6.1% 11,402 5.7% 288 310
AUTOS & AUTO PARTS 3,452 5.1% 3,316 5.3% 6,496 3.0% 6,301 3.1% 531 526
MINERALS & STONE 3,346 4.9% 2,572 4.1% 12,657 5.8% 9,066 4.5% 264 283
OTHER 2,287 3.4% 1,791 2.9% 16,743 7.6% 10,261 5.1% 136 175
------- ----- ------- ----- ------- ----- ------- ----- ----- -------
TOTAL $67,713 100.0% $62,316 100.0% 219,706 100.0% 201,307 100.0% $ 308 $ 310
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The increase in domestic freight revenues was largely attributable to having a full year of operations in 1997 on acquisitions made during 1996. These acquisitions generated freight revenues of $22.6 million during 1997 compared to $19.0 million during 1996, an increase of $3.6 million. Approximately $2.0 million of this increase resulted from the shipment of coal which was offset by a decrease of approximately $875,000 in the shipment of coal on existing operations, for a net increase in freight revenue from the shipment of coal of $1.1 million. Other significant increases in freight revenues were $1.4 million in chemicals and plastics, $791,000 in lumber and forest products,
$774,000 in minerals and stone, and $697,000 in pulp and paper. All remaining commoditie s had slight increases and decreases which when netted result in an increase of approximately $607,000.
Non-freight revenues were $29.6 million in 1997 compared to $15.5 million in 1996, an increase of $14.1 million or 91.3%. Revenues from switching and storage activities were $18.7 million in 1997 compared to $6.2 million in 1996, an increase of $12.5 million or 201.1%. The increase in switching and storage revenues was largely attributable to the full year of operations on acquisitions made during 1996, which generated switching and storage revenues of approximately $15.4 million during 1997 compared to $2.3 million in 1996 for an increase of $13.1 million. Revenues from car hire and car rentals were $6.3 million in 1997 compared to $4.5 million in 1996, an increase of $1.8 million or 39.1%. Approximately $750,000 of this increase in revenue from car hire and car rentals is from new operations in Australia (see Note 2. to Consolidated Financial Statements). The balance consists of $700,000 of increases on existing operations and $350,000 of increases on acquisitions made during 1996.
Operating Expenses
Operating expenses for domestic and foreign operations combined were $87.2 million in 1997 compared to $63.8 million for domestic operations only in 1996, an increase of $23.4 million or 36.7%. Expenses attributable to operations in Australia which began in November, 1997, represented $6.7 million or 28.7% of the change, increases in expenses associated with acquisitions made in 1996 represented approximately $17.2 million or 73.6% of the change, and expenses on existing operations decreased approximately $550,000 or 2.3% of the change.
The Company's operating ratio increased to 84.1% in 1997 from 82.0% in 1996.
The following table sets forth a comparison of the Company's operating expenses in 1997 and 1996:
OPERATING EXPENSE COMPARISON
YEARS ENDED DECEMBER 31, 1997 AND 1996
(DOLLARS IN THOUSANDS)
1997 1996
---- ----
% OF % OF
OPERATING OPERATING
$ REVENUE $ REVENUE
-- ------- -- -------
Labor and benefits $37,397 36.1% $25,197 32.4%
Equipment rents 8,938 8.6% 8,511 10.9%
Purchased services 6,411 6.2% 3,398 4.4%
Depreciation and amortization 6,999 6.8% 6,052 7.8%
Diesel fuel 6,147 5.9% 4,433 5.7%
Casualties and insurance 5,554 5.4% 4,626 5.9%
Materials 4,495 4.3% 3,486 4.5%
Other 11,260 10.8% 6,738 8.7%
Special charge 0 0.0% 1,360 1.7%
------- ---- ------- ----
Total $87,200 84.1% $63,801 82.0%
======= ==== ======= ====
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Labor and benefits expense was $37.4 million in 1997 compared to $25.2 million in 1996, an increase of $12.2 million or 48.4%. The increase was attributable to increases of $9.6 million from acquisitions made in 1996, $899,000 from operations in Australia which began in November, 1997, and $1.7 million from increases on existing operations. Labor costs increased as a percentage of revenues to 36.1% in 1997 compared to 32.4% in 1996. This increase is primarily due to the labor-intensive nature of Rail Link, Inc.'s industrial switching and other rail-related services operation.
Equipment rents were $8.9 million in 1997 compared to $8.5 million in 1996, an increase of $427,000 or 5.0%. The increase was attributable to increases of $333,000 from acquisitions made in 1996, $81,000 from operations in Australi a and $13,000 from increases on existing operations. However, equipment rents decreased to 8.6% of operating revenue in 1997, from 10.9% in 1996. This is mainly because the largest component of equipment rents, car hire expense, decreased to 4.7% of operating revenue in 1997 from 5.8% of operating revenue in 1996 due to a low car hire to revenue ratio for Rail Link, Inc. and no car hire for Australia Southern Railroad.
Purchased services were $6.4 million in 1997 compared to $3.4 million in 1996, an increase of $3.0 million or 88.6%. The increase was attributable to increases of $417,000 from acquisitions made in 1996, $2.3 million from operations in Australia and $298,000 from increases on existing operations.
Depreciation and amortization expense was $7.0 million in 1997 compared to $6.1 million in 1996, an increase of $947,000 or 15.6%. The increase is a net change and reflects increases in depreciation and amortization related to acquisitions made in 1996 of $1.2 million, depreciation attributable to operations in Australia of $246,000, and a decrease in depreciation on existing operations of $479,000.
Casualties and insurance expense, including claims brought under the Federal Employers' Liability Act, was $5.6 million in 1997 compared to $4.6 million in 1996, an increase of $928,000 or 20.0%. The increase was attributable to increases of $267,000 from acquisitions made in 1996, $347,000 from operations in Australia and $314,000 from increases on existing operations. The increases of $267,000 from acquisitions made in 1996 and $314,000 from existing operations were due to an increase in derailment expense of $628,000 less a net reduction in third party claims and insurance premiums of $47,000.
Materials expense was $4.5 million in 1997 compared to $3.5 million in 1996, an increase of $1.0 million or 28.9%. The increase was attributable to increases of $723,000 from acquisitions made in 1996, $134,000 from operations in Australia and $152,000 from increases on existing operations.
Special charge expense of $1.4 million in 1996 represents the impairment of assets of $1.1 million and employee severance and pension termination expense of $220,000 related to the Company's realignment of operations and decision to close certain supporting facilities of one of its subsidiaries resulting from the closure of the Akzo mine (see Note 5. to Consolidated Financial Statements and "Akzo Mine" above).
Interest Expense and Income Taxes
Interest expense was $3.3 million in 1997 compared to $4.7 million in 1996, a decrease of $1.4 million or 29.0%. The decrease reflects the repayment of $45.8 million of debt on June 28, 1996, from the proceeds of the initial public offering combined with other reductions to debt using cash generated from operations, offset in part by increased debt related to the financing of a new acquisition in Australia, an investment in a Canadian company that operates two railroads in Canada, and a new capital lease for equipment.
The Company's effective income tax rate was 40.5% in 1997 and 1996, respectively.
Net Income
The Company's net income in 1997 was $8.0 million compared to net income in 1996 of $5.9 million, an increase of $2.1 million or 35.4%.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Operating Revenues
Operating revenues were $77.8 million in 1996 compared to $53.4 million in 1995, an increase of $24.4 million or 45.7%. This increase was attributable to a $19.9 million increase in freight revenues coupled with a $4.5 million increase in non-freight revenues.
Freight revenues were $62.3 million in 1996 compared to $42.4 million in 1995, an increase of $19.9 million or 46.9%. The following table compares freight revenues, carloads and average freight revenues per carload for 1996 and 1995:
FREIGHT REVENUES AND CARLOADS COMPARISON BY COMMODITY GROUP
YEARS ENDED DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
(EXCEPT AVERAGE PER CARLOAD)
AVERAGE
FREIGHT
REVENUES
FREIGHT REVENUES CARLOADS PER CARLOAD
---------------- -------- -----------
% of % of % of % of
Commodity Group 1996 total 1995 total 1996 total 1995 total 1996 1995
--------------- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----
Coal, Coke & Ores $20,368 32.7% $ 2,656 6.3% 81,606 40.5% 12,398 10.5% $ 250 $ 214
Petroleum Products 8,679 13.9% 8,487 20.0% 17,549 8.8% 17,559 14.8% 495 483
Pulp & Paper 7,223 11.6% 6,797 16.1% 19,480 9.7% 18,667 15.7% 371 364
Lumber & Forest
Products 5,302 8.5% 4,496 10.6% 17,135 8.5% 14,022 11.8% 309 321
Metals 5,211 8.4% 4,458 10.5% 20,218 10.0% 17,014 14.3% 258 262
Chemicals 4,317 6.9% 3,321 7.9% 8,289 4.1% 6,641 5.6% 521 500
Farm & Food Products 3,537 5.7% 2,756 6.5% 11,402 5.7% 5,778 4.9% 310 477
Autos & Auto Parts 3,316 5.3% 3,490 8.2% 6,301 3.1% 6,381 5.4% 526 547
Minerals & Stone 2,185 3.5% 1,407 3.3% 6,766 3.4% 4,189 3.5% 323 336
Salt 387 0.6% 2,215 5.2% 2,300 1.1% 7,865 6.6% 168 282
Other 1,791 2.9% 2,268 5.4% 10,261 5.1% 8,159 6.9% 175 278
------- ----- ------- ----- ------- ----- ------- ----- ----- -----
Total $62,316 100.0% $42,352 100.0% 201,307 100.0% 118,673 100.0% $ 310 $ 357
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The increase in freight revenues was largely attributable to the operations on new acquisitions, which generated freight revenues of $19.0 million during 1996, $17.1 million of which were from the shipment of coal. Freight revenue from the shipment of coal on existing operations also increased by approximately $600,000. The Company realized $1.8 million in additional freight revenues in 1996 attributable to the acquisition in 1995 of a rail line in the Oregon region which generated freight revenues of $2.5 million in 1996 compared to $673,000 in 1995. The majority of this $1.8 million increase in the Oregon region is in lumber and forest products, farm and food products,
metals and other commodities. The overall increase in freight revenues was partially offset by a $1.8 million decrease in freight revenues from the shipment of salt to $387,000 in 1996 from $2.2 million in 1995. This decrease was attributable to the loss of shipments resulting from the closing of the Akzo mine at Retsof, New York. See Note 5. to Consolidated Financial Statements and "Akzo Mine " above.
Non-freight revenues were $15.5 million in 1996 compared to $11.0 million in 1995, an increase of $4.5 million or 40.9%. Revenues from car hire and car rentals was $4.5 million in 1996 compared to $3.2 million in 1995, an increase of $1.3 million or 40.6%. The increase in revenues from car hire and rentals was largely attributable to the operations on new acquisitions, which generated car hire and rental revenues of $817,000 during the period. Car hire and rental revenues on existing operations increased approximately $483,000, primarily from a gain on the sale of railcars of $593,000. Revenues from switching and storage activities were $6.2 million in 1996 compared to $3.6 million in 1995, an increase of $2.6 million or 72.2%. The increase in switching and stora ge revenues was largely attributable to the operations on new acquisitions, which generated switching and storage revenues of approximately $2.3 million during the period.
Operating Expenses
Operating expenses were $63.8 million in 1996 compared to $46.8 million in 1995, an increase of $17.0 million or 36.3%. Expenses associated with new acquisitions represented $12.8 million of the increase, expenses attributable to the acquisition in 1995 of a rail line in the Oregon region (which generated operating expense of $2.6 million in 1996 compared to $711,000 in 1995) represented $1.9 million of the increase, and expenses on existing operations represented approximately $1.6 million of the increase.
The Company's operating ratio improved to 82.0% in 1996 from 87.7% in 1995.
The following table sets forth a comparison of the Company's operating expenses in 1996 and 1995:
OPERATING EXPENSE COMPARISON
YEARS ENDED DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
1996 1995
---- ----
% OF % OF
OPERATING OPERATING
$ REVENUE $ REVENUE
-- ------- -- -------
Labor and benefits $25,197 32.4% $18,683 35.0%
Equipment rents 8,511 10.9% 7,434 13.9%
Purchased services 3,398 4.4% 2,530 4.7%
Depreciation and amortization 6,052 7.8% 3,887 7.3%
Diesel fuel 4,433 5.7% 3,249 6.1%
Casualties and insurance 4,626 5.9% 3,673 6.9%
Materials 3,486 4.5% 2,531 4.7%
Other 6,738 8.7% 4,828 9.1%
Special charge 1,360 1.7% 0 0.0%
------- ---- ------- ----
Total $63,801 82.0% $46,815 87.7%
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Labor and benefits expense was $25.2 million in 1996 compared to $18.7 million in 1995, an increase of $6.5 million or 34.8% primarily due to the commencement of operations on new acquisitions. Labor costs decreased as a percentage of revenues, however, to 32.4% in 1996 compared to 35.0% in 1995.
This decrease reflects the efficiency of the unit coal train operations on new acquisitions.
Equipment rents were $8.5 million in 1996 compared to $7.4 million in 1995, an increase of $1.1 million or 14.9%. However, equipment rents decreased to 10.9% of operating revenue in 1996, from 13.9% in 1995. This is mainly because the largest component of equipment rents, car hire expense, decreased from 7.9% of operating revenue in 1995 to 5.8% of operating revenue in 1996 due to the efficiency of new acquisitions. The reduction of equipment rents expense as a percentage of operating revenues also reflects the reduction in the amount of equipment under operating leases. In June 1995, the Company purchased railcars and locomotives, which it had previously used under operating leases, which reduced equipment rent under the terminated lease.
Depreciation expense was $6.1 million in 1996 compared to $3.9 million in 1995, an increase of $2.2 million or 56.4%. The increase primarily reflects depreciation and amortization related to new acquisitions.
Casualties and insurance expense, including claims brought under the Federal Employers' Liability Act, was $4.6 million in 1996 compared to $3.7 million in 1995, an increase of $954,000 or 25.8%. The majority of the increase in 1996 related to insurance premiums which increased $600,000 due primarily to new acquisitions, and derailment and property damages which increased $475,000. T his increase was partially offset by a decrease in additions to reserves for third party liability which decreased from $1.4 million in 1995 to $1.3 million in 1996, a decrease of $123,000.
Special charge expense of $1.4 million in 1996 represents the impairment of assets of $1.1 million and employee severance and pension termination expense of $220,000 related to the Company's realignment of operations and decision to close certain supporting facilities of one of its subsidiaries resulting from the closure of the Akzo mine (see Note 5. to Consolidated Financial Statements and "Akzo Mine" above.
Interest Expense and Income Taxes
Interest expense was $4.7 million in 1996 compared to $3.4 million in 1995, an increase of $1.3 million or 38.2%. The increase reflects the increased debt related to the financing of new acquisitions, offset in part by the repayment of $45.8 million of debt on June 28, 1996, from the proceeds of the initial public offering. The Company's effective income tax rate was 40.5% in 1996 compared to 40.6% in 1995.
Net Income
The Company's net income in 1996 was $5.9 million compared to net income of $1.7 million (or $2.2 million before an extraordinary expense of $494,000 in connection with the early extinguishment of debt) in 1995. Excluding the effect of this extraordinary expense, net income in 1996 increased $3.7 million or 168.2% compared to 1995.
LIQUIDITY AND CAPITAL RESOURCES
During 1997, the Company generated cash from operations of $1.8 million, generated cash from asset sales of $581,000, received $2.9 million in state grant funds for track rehabilitation, and had net new borrowings of $45.2
million. During the year the Company invested $16.3 million, including capital leases of $11.8 million, in equipment and rolling stock, and $9.4 million in track improvements and buildings. These expenditures were apart from the Company's investment in the Australia acquisition (see Note 2. to Consolidated Financial Statements) and its investment in GRO which operates two railroads in Canada (see Note 3. to Consolidated Financial Statements).
During 1996, the Company generated cash from operations of $30.4 million, which includes the effect of $12.5 million generated by an excess of trade payables over trade receivables as recorded by new acquisitions. In addition, the Company received $17.8 million in proceeds from the sale of equipment, of which $12.0 million was related to the sale leaseback of locomotives and $2.4 million was from the sale of assets acquired in the Pittsburg & Shawmut acquisition. The Company invested $8.2 million in track and other fixed assets apart from its investment in the Illinois & Midland, Pittsburg & Shawmut and Rail Link acquisitions (see Note 2. to Consolidated Financial Statements).
During 1995, the Company generated cash from operations of $2.6 million, generated cash from asset sales of $318,000, received $3.5 million in state grant funds for track rehabilitation, and had net new borrowings of $6.7 million. During the year the Company invested $8.6 million in equipment and rolling sto ck and $8.0 million in track improvements and buildings.
In October, 1997, the Company amended and restated its credit facilities agreement to provide for a $65.0 million revolving credit facility. The facility has a maturity date of October 31, 2002. The credit facilities accrue interest at prime or the Eurodollar rate, at the option of the Company, plus the applicable margin, which varies from 0.75% to 1.5% depending upon the Company's funded debt to EBITDA ratio, as defined in the agreement. Interest is payable in arrears based on certain elections of the Company, not to exceed three months outstanding. The Company pays a commitment fee which varies between 0.25% and 0.375% per annum on all unused portions of the revolving credit facility depending on the Company's funded debt to EBITDA ratio. The credit facilities agreement requires mandatory prepayments from the issuance of new equity or debt and annual sale of assets in excess of $6.5 million. These credit facilities are guaranteed by all domestic subsidiaries of the Company and contain a negative pledge of assets. The credit facilities agreement requires the maintenance of certain covenants, including, but not limited to, funded debt to EBITDA, cash flow coverage and EBITDA less defined capital expenditures to interest expense, all as defined in the agreement. The Company and its subsidiaries were in compliance with the provisions of these covenants as of December 31, 1997.
At December 31, 1997 the Company had long-term debt (including current portion) totaling $74.1 million, which comprised 52.0% of its total capitalization. This compares to long-term debt, including current portion, of $18.7 million at December 31, 1996, comprising 23.3% of total capitalization.
The Company's railroads have entered into a number of rehabilitation grants with state and federal agencies. The grant funds are used as a supplement to the Company's normal capital programs. In return for the grants, the railroads pledge to maintain various levels of service and maintenance on the rail lines that have been rehabilitated. The Company believes that the levels of service and maintenance required under the grants are not materially different from those that would be required without the grant obligation. While the Company has benefited in recent years from these grant funds, there can be no assurance that the funds will continue to be available.
The Company has budgeted approximately $12.0 million in capital expenditures in 1998, primarily for track rehabilitation, of which $1.5 million is expected to be used to fulfill an obligation to replace rail under the terms of a lease of one of the Company's railroads, and $2.5 million is expected to be used in Australia.
In connection with the Company's acquisition of assets in Australia (see Note
2. to Consolidated Financial Statements), the Company has committed to the
Commonwealth of Australia to spend approximately $34.1 million (AU $52.3
million) to rehabilitate track structures and equipment by December 31, 2002.
The Commonwealth Government may require the payment of any shortfall between the
actual expenditure incurred from the date of acquisition to December 31, 2002,
and the contracted commitment of approximately $34.1 million (AU $52.3 million).
This commitment may be renegotiated if there is a significant change in
operating conditions outside the control of the Company.
The Company has historically relied primarily on cash generated from operations to fund working capital and capital expenditures relating to ongoing operations, while relying on borrowed funds to finance acquisitions and equipment needs (primarily rolling stock) related to acquisitions. The Company believes that its cash flow from operations together with amounts available under the credit facilities will enable the Company to meet its liquidity and capital expenditure requirements relating to ongoing operations for at least the duration of the credit facilities.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Non-applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and supplementary financial data required by this item are listed at Part IV, Item 14 and are filed herewith immediately following the signature page hereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this Item is incorporated herein by reference to the Company's proxy statement to be issued in connection with the Annual Meeting of the Stockholders of the Company to be held on May 12, 1998 under "Election of Directors" and "Executive Officers", which proxy statement will be filed within 120 days after the end of the Company's fiscal year.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item is incorporated herein by reference to the Company's proxy statement to be issued in connection with the Annual Meeting of the Stockholders of the Company to be held on May 12, 1998 under "Executive Compensation", which proxy statement will be filed within 120 days after the end of the Company's fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item is incorporated herein by reference to the Company's proxy statement to be issued in connection with the Annual Meeting of the Stockholders of the Company to be held on May 12, 1998 under "Security Ownership of Certain Beneficial Owners and Management", which proxy statement will be filed within 120 days after the end of the Company's fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item is incorporated herein by reference to the Company's proxy statement to be issued in connection with the Annual Meeting of the Stockholders of the Company to be held on May 12, 1998 under "Related Transactions", which proxy statement will be filed within 120 days after the end of the Company's fiscal year.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(A) DOCUMENTS FILED AS PART OF THIS FORM 10-K.
Financial Statements:
Report of Independent Public Accountants
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statements of Income for the Years ended December 31, 1997, 1996 and 1995
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
Schedule II - Valuation and Qualifying Accounts
(B) REPORTS ON FORM 8-K
A report on Form 8-K dated November 7, 1997 was filed by the Registrant reporting on Item 2. Acquisition or Disposition of Assets. No financial statements were filed with such Form 8-K.
(C) EXHIBITS - SEE INDEX TO EXHIBITS.
The remainder of this page is intentionally left blank.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GENESEE & WYOMING INC.
By: /s/ Mortimer B. Fuller, III
---------------------------
Mortimer B. Fuller, III
Chairman of the Board and CEO
|
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons in the capacities and on the date indicated below.
Date Title Signature
---- ----- ---------
March 27, 1998 CEO and /s/ Mortimer B.
Director Fuller, III
-------------------
Mortimer B. Fuller, III
March 27, 1998 Senior Vice President /s/ Alan R. Harris
and Chief Accounting ------------------
Officer Alan R. Harris
March 27, 1998 Senior Vice /s/ Mark W. Hastings
President, --------------------
Chief Financial Mark W. Hastings
Officer
and Treasurer
March 27, 1998 Director /s/ James M. Fuller
--------------------
James M. Fuller
March 27, 1998 Director /s/ Louis S. Fuller
--------------------
Louis S. Fuller
March 27, 1998 Director /s/ Robert M. Melzer
--------------------
Robert M. Melzer
March 27, 1998 Director /s/ John M. Randolph
--------------------
John M. Randolph
March 27, 1998 Director /s/ Philip J. Ringo
--------------------
Philip J. Ringo
|
Report of Independent Public Accountants
To the Board of Directors and the Shareholders of Genesee & Wyoming Inc.:
We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements of Genesee & Wyoming Inc. and issued our report thereon dated February 12, 1998. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule of Valuation and Qualifying Accounts is presented for purposes of complying with the Securities and Exchange Commissions rules and are not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois
February 12, 1998
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Balance at Balance at
Description (in thousands) December 31, 1996 December 31, 1997
-------------------------- ----------------- -----------------
Accounts Receivable - Allowance for $76 $167
Doubtful Receivables
|
INDEX TO EXHIBITS
(2) Plan of acquisition, reorganization, arrangement, liquidation or succession
Not applicable.
(3) (i) Articles of Incorporation
The Form of Restated Certificate of Incorporation referenced under
(4)(a) hereof is incorporated herein by reference.
(ii) By-laws
The By-laws referenced under (4)(b) hereof are incorporated herein by reference.
(4) Instruments defining the rights of security holders, including indentures
(a) Form of Restated Certificate of Incorporation (Exhibit 3.2)/2/
(b) By-laws (Exhibit 3.3)/1/
(c) Specimen stock certificate representing shares of Class A Common Stock (Exhibit 4.1)/3/
(d) Form of Class B Stockholders' Agreement dated as of May 20, 1996, among the Registrant, its executive officers and its Class B stockholders (Exhibit 4.2)/2/
(e) Promissory Note dated October 7, 1991 of Buffalo & Pittsburgh Railroad, Inc. in favor of CSX Transportation, Inc. (Exhibit 4.6)/1/
*( 4.1) Second Amended and Restated Revolving Credit Agreement dated as of October 31, 1997 among the Registrant, its subsidiaries, BankBoston, N.A. and the Banks named therein. Upon written request, the Registrant will provide to security holders copies of any of the referenced omitted Exhibits and Schedules.
( 9) Voting Agreement and Stock Purchase Option dated March 21, 1980 among Mortimer B. Fuller, III, Mortimer B. Fuller, Jr. and Frances A. Fuller, and amendments thereto dated May 7, 1988 and March 29, 1996 (Exhibit 9.1)/1/
(10) MATERIAL CONTRACTS
The Exhibits referenced under (4)(d) and (4)(f) through (4)(l) hereof are incorporated herein by reference.
(a) Form of Genesee & Wyoming Inc. 1996 Stock Option Plan (Exhibit 10.1)/2/
(b) Form of Genesee & Wyoming Inc. Stock Option Plan for Outside Directors (Exhibit 10.2)/2/
(c) Form of Severance Agreement between the Registrant and each of its executive officers (Exhibit 10.3)/1/
(d) Form of Genesee & Wyoming Inc. Employee Stock Purchase Plan (Exhibit 10.4)/2/
(e) Asset Purchase Agreement dated February 8, 1996 between Illinois & Midland Railroad, Inc. and Stanford PRC Acquisition Corp. (Exhibit 10.61)/1/
(f) Guaranty dated as of February 8, 1996 of the Registrant in favor of Stanford PRC Acquisition Corp. (Exhibit 10.62)/1/
(g) Warrant Purchase Agreement dated as of February 8, 1996 between the Registrant and First National Bank of Boston. (Exhibit 10.64)/1/
(h) Agreement dated February 6, 1996 between Illinois & Midland Railroad, Inc. and the United Transportation Union. (Exhibit 10.65)/1/
(i) Asset Purchase Agreement dated April 19, 1996 among Pittsburg & Shawmut Railroad, Inc., the Registrant, The Pittsburg & Shawmut Railroad Company, Red Bank Railroad Company, Mountain Laurel
Railroad Company and Arthur T. Walker Estate Corporation, and Amendment No. 1 to Asset Purchase Agreement dated April 19, 1996. (Exhibit 10.70)/4/
(j) Amendment No. 1 to Warrant Purchase Agreement dated as of May 31, 1996 between the Registrant and FSC Corp. (Exhibit 10.71)/2/
(k) Stock Purchase Agreement dated as of November 8, 1996 between Brenco, Incorporated, Rail Link, Inc. and the Registrant (Exhibit 10.1)/5/
(l) Amendment No. 1 to the Genesee & Wyoming Inc. Stock Option Plan (Exhibit 10.1)/6/
(m) Share Sale Agreement dated 28 August 1997 between the Commonwealth of Australia, Genesee & Wyoming Australia Pty. Limited (now named Australia Southern Railroad Pty. Limited) and the Registrant, and Amendment Agreement dated 7 November 1997 with respect thereto. (Exhibit 2.1)/7/
*(10.1) Amendment No. 1 to Genesee & Wyoming Inc. Stock Option Plan for Outside Directors.
*(10.2) Memorandum of Lease between Minister for Transport and Urban Planning a Body Corporate Under the Administrative Arrangements Act 1994, the Lessor, and Australia Southern Railroad Pty Ltd A.C.N 079 444 296, the Lessee, dated 7 November 1997. Upon written request, the Registrant will provide to security holders copies of any of the referenced omitted Schedules.
*(11.1) Statement re computation of per share earnings
(12) Statement re computation of ratios
Not applicable.
(13) Annual report to security holders, Form 10-Q or quarterly report to security holders
Not applicable.
(16) Letter re change in certifying accountant
Not applicable.
(18) Letter re change in accounting principles
Not applicable.
*(21.1) Subsidiaries of the Registrant
(22) Published report regarding matters submitted to vote of security holders
Not applicable.
*(23.1) Consent of Arthur Andersen LLP
(24) Power of attorney
Not applicable.
*(27.1) Financial Data Schedule for Year Ended December 31, 1997 *(27.2) Restated FDS for Quarter ended September 30, 1997 *(27.3) Restated FDS for Quarter Ended June 30, 1997 *(27.4) Restated FDS for Quarter Ended March 31, 1997 *(27.5) Restated FDS for Quarter Ended December 31, 1996 *(27.6) Restated FDS for Quarter Ended September 30, 1996 *(27.7) Restated FDS for Quarter ended June 30, 1996
(99) Additional Exhibits
*Exhibit filed with this Report.
/1/Exhibit previously filed as part of, and incorporated herein by reference to, the Registrant's Registration Statement on Form S-1 (Registration No. 333-3972). The exhibit number contained in parenthesis refers to the exhibit number in such Registration Statement.
/2/Exhibit previously filed as part of, and incorporated herein by reference to, Amendment No. 1 to the Registrant's Registration Statement on Form S-1 (Registration No. 333-3972). The exhibit number contained in parenthesis refers to the exhibit number in such Amendment.
/3/Exhibit previously filed as part of, and incorporated herein by reference to, Amendment No. 2 to the Registrant's Registration Statement on Form S-1 (Registration No. 333-3972). The exhibit number contained in parenthesis refers to the exhibit number in such Amendment.
/4/Exhibit previously filed as part of, and incorporated herein by reference to, Amendment No. 5 to the Registrant's Registration Statement on Form S-1 (Registration No. 333-3972). The exhibit number contained in parenthesis refers to the exhibit number in such Amendment.
/5/Exhibit previously filed as part of, and incorporated herein by reference to, the Registrant's Report on Form 10-K for the fiscal year ended December 31, 1997. The exhibit number contained in parenthesis refers to the exhibit number in such Report.
/6/Exhibit previously filed as part of, and incorporated herein by reference to, the Registrant's Report on Form 10-Q for the quarter ended June 30, 1997. The exhibit number contained in parenthesis refers to the exhibit number in such Report.
/7/Exhibit previously filed as part of, and incorporated herein by reference to, the Registrant's Report on Form 8-K dated November 7, 1997. The exhibit number contained in parenthesis refers to the exhibit number in such Report.
The remainder of this page is intentionally left blank.
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Genesee & Wyoming Inc. and Subsidiaries:
Report of Independent Public Accountants.................................................... F-2
Consolidated Balance Sheets as of December 31, 1997 and 1996............................... F-3
Consolidated Statements of Income for the Years Ended
December 31, 1997, 1996 and 1995..................................................... F-4
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1997, 1996 and 1995......................................... F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995..................................................... F-6
Notes to Consolidated Financial Statements.................................................. F-7
|
To the Board of Directors and
the Shareholders of
Genesee & Wyoming Inc.:
We have audited the accompanying consolidated balance sheets of GENESEE & WYOMING INC. (a Delaware corporation) AND SUBSIDIARIES as of December 31, 1997 and 1996, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Genesee & Wyoming Inc. and Subsidiaries as of December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
February 12, 1998
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
December 31, December 31,
------------ -----------
ASSETS 1997 1996
------ ---- ----
CURRENTS ASSETS:
Cash and cash equivalents $11,434 $14,121
Accounts receivable, net 29,895 19,133
Note receivable - related party 4,499 ---
Materials and supplies 5,039 4,173
Prepaid expenses and other 3,145 1,771
Deferred income tax assets, net 2,523 1,632
------------------------------------
Total current assets 56,535 40,830
------------------------------------
PROPERTY AND EQUIPMENT, net 124,985 78,822
------------------------------------
SERVICE ASSURANCE AGREEMENT, net 13,563 14,312
------------------------------------
INVESTMENT IN UNCONSOLIDATED AFFILIATE 5,082 ---
------------------------------------
OTHER ASSETS, net 10,367 11,375
------------------------------------
Total assets $210,532 $145,339
====================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $1,157 $271
Accounts payable 30,025 33,583
Accrued expenses 6,796 6,122
-------------------------------------
Total current liabilities 37,978 39,976
-------------------------------------
LONG-TERM DEBT 72,987 18,460
-------------------------------------
OTHER LIABILITIES 3,237 2,699
-------------------------------------
DEFERRED INCOME TAX LIABILITIES, net 8,470 4,720
-------------------------------------
DEFERRED ITEMS--grants from governmental agencies 15,083 12,899
-------------------------------------
DEFERRED GAIN--sale leaseback 4,434 4,902
-------------------------------------
COMMITMENTS AND CONTINGENCIES (SEE NOTE 14)
STOCKHOLDERS' EQUITY:
Class A common stock, $0.01 par value, one vote per share;
12,000,000 shares authorized; 4,404,262 and 4,399,463 issued and
outstanding on December 31, 1997 and 1996, respectively 44 44
Class B common stock, $0.01 par value, 10 votes per share;
1,500,000 shares authorized; 846,556 issued and outstanding 8 8
Additional paid-in capital 46,205 46,102
Warrants outstanding 471 471
Retained earnings 23,056 15,058
Foreign currency translation adjustment (1,441) ---
-------------------------------------
Total stockholders' equity 68,343 61,683
-------------------------------------
Total liabilities and stockholders' equity $210,532 $145,339
=====================================
The accompanying notes are an integral part of these consolidated
financial statements.
|
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share amounts)
Years Ended December 31,
---------------------------------------
1997 1996 1995
---- ---- ----
OPERATING REVENUES $103,643 $77,795 $53,387
---------------------------------------
OPERATING EXPENSES:
Transportation 31,690 18,952 14,262
Maintenance of ways and structures 10,483 9,431 6,127
Maintenance of equipment 17,537 14,218 12,230
General and administrative 20,491 13,788 10,309
Depreciation and amortization 6,999 6,052 3,887
Special charge ---- 1,360 ----
---------------------------------------
Total operating expenses 87,200 63,801 46,815
---------------------------------------
Income from operations 16,443 13,994 6,572
INTEREST EXPENSE (3,349) (4,720) (3,405)
OTHER INCOME, net 345 651 456
---------------------------------------
Income before provision for income taxes and
extraordinary item 13,439 9,925 3,623
PROVISION FOR INCOME TAXES (5,441) (4,020) (1,472)
---------------------------------------
Income before extraordinary item 7,998 5,905 2,151
EXTRAORDINARY ITEM FROM EARLY EXTINGUISHMENT
OF DEBT, net of related income tax benefit of $357 ---- ---- (494)
---------------------------------------
NET INCOME $7,998 $5,905 $1,657
=======================================
Basic earnings per common share :
Income before extraordinary item $1.52 $1.54 $0.92
Extraordinary item ---- ---- (0.21)
---------------------------------------
Net Income $1.52 $1.54 $0.71
=======================================
Weighted average number of shares of common stock - basic 5,250 3,829 2,348
=======================================
Diluted earnings per common share :
Income before extraordinary item $1.47 $1.49 $0.92
Extraordinary item ---- ---- ($0.21)
---------------------------------------
Net Income $1.47 $1.49 $0.71
=======================================
Weighted average number of shares of common stock - diluted 5,447 3,966 2,348
=======================================
|
The accompanying notes are an integral part of these consolidated financial statements.
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
Class A Class B
Common Stock Common Stock
-------------------------------------------------------------
Shares $0.01 Shares $0.01 Additional
Issued and Par Issued and Par Paid-in
Outstanding Value Outstanding Value Capital
------------------------------------------------------------
BALANCE, December 31, 1994 1,502 $15 847 $8 $1,340
Net income --- --- --- --- ---
Cash dividends -- $0.08 per share --- --- --- --- ---
------------------------------------------------------------
BALANCE, December 31, 1995 1,502 15 847 8 1,340
Issuance of stock warrants --- --- --- --- ---
Proceeds from issuance of stock--initial public offering 2,898 29 --- --- 44,751
Proceeds from issuance of stock--employee purchase --- --- --- --- 11
Net income --- --- --- --- ---
Cash dividends -- $0.01 per share --- --- --- --- ---
------------------------------------------------------------
BALANCE, December 31, 1996 4,400 44 847 8 46,102
------------------------------------------------------------
Proceeds from issuance of stock--employee purchase 4 --- --- --- 103
Translation adjustments --- --- --- --- ---
Net income --- --- --- --- ---
------------------------------------------------------------
BALANCE, December 31, 1997 4,404 $44 847 $8 $46,205
============================================================
|
Foreign Stockholders'
Warrants Retained Currency Equity
Outstanding Earnings Adjustment Total
--------------------------------------------------------
BALANCE, December 31, 1994 --- $7,719 --- $9,082
Net income --- 1,657 --- 1,657
Cash dividends -- $0.08 per share --- (191) --- (191)
--------------------------------------------------------
BALANCE, December 31, 1995 --- 9,185 --- 10,548
Issuance of stock warrants $471 --- --- 471
Proceeds from issuance of stock--initial public offering --- --- --- 44,780
Proceeds from issuance of stock--employee purchase --- --- --- 11
Net income --- 5,905 --- 5,905
Cash dividends -- $0.01 per share --- (32) --- (32)
--------------------------------------------------------
BALANCE, December 31, 1996 471 15,058 --- 61,683
--------------------------------------------------------
Proceeds from issuance of stock--employee purchase --- --- --- 103
Translation adjustments --- --- ($1,441) (1,441)
Net income --- 7,998 --- 7,998
--------------------------------------------------------
BALANCE, December 31, 1997 $ 411 $23,056 ($1,441) $68,343
=======================================================
|
The accompanying notes are an integral part of these consolidated financial statements.
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
-------------------------------------
1997 1996 1995
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $7,998 $5,905 $1,657
Adjustments to reconcile net income to net cash provided
by operating activities-
Depreciation and amortization 6,999 6,052 3,887
Deferred income taxes 2,863 1,332 811
Gain on disposition of property (13) (633) (195)
Special charge ---- 1,360 ----
Changes in assets and liabilities, net of balances
assumed through acquisitions-
Receivables (14,347) (7,781) 1,257
Materials and supplies 477 (1,861) 38
Prepaid expenses and other (1,362) (239) (450)
Accounts payables and accrued expenses (2,015) 25,217 (4,751)
Other assets and liabilities, net 1,210 1,060 310
--------------------------------------
Net cash provided by operating activities 1,810 30,412 2,564
--------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (13,891) (8,174) (16,632)
Purchase of assets of Chicago & Illinois Midland Railway Company ---- (26,330) ----
Purchase of assets of Pittsburg & Shawmut Railroad Company,
Mountain Laurel Railroad Company and Red Bank Railroad Company ---- (11,966) ----
Purchase of common stock of Rail Link, Inc. ---- (12,122) ----
Purchase of assets of Australian National Railway (33,079) ---- ----
Investment in affiliate (4,913) ---- ----
Proceeds from disposition of property 581 17,790 318
--------------------------------------
Net cash used in investing activities (51,302) (40,802) (16,314)
--------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term borrowings, including capital leases (24,982) (73,400) (16,999)
Proceeds from issuance of long-term debt 70,885 51,437 24,300
Debt issuance costs (739) (1,642) (641)
Net proceeds on grants 2,903 771 3,512
Dividends paid ---- (32) (191)
Proceeds from issuance of stock--employee purchase 103 11 ----
Issuance of stock warrants ---- 471 ----
Proceeds from issuance of stock--initial public offering ---- 44,780 ----
--------------------------------------
Net cash provided by financing activities 48,170 22,396 9,981
--------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (1,365) ---- ----
--------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,687) 12,006 (3,769)
CASH AND CASH EQUIVALENTS, beginning of period 14,121 2,115 5,884
--------------------------------------
CASH AND CASH EQUIVALENTS, end of period $11,434 $14,121 $2,115
======================================
CASH PAID DURING PERIOD FOR:
Interest $2,474 $4,347 $3,204
Incomes taxes 5,056 2,138 1,022
======================================
SUPPLEMENTAL NON-CASH INVESTING ACTIVITIES:
Assumption of liabilities in connection with purchase of
assets of Chicago & Illinois Midland Railway Company ---- $1,394 ----
Assumption of deferred credits from governmental agencies in connection
with purchase of assets of Pittsburg & Shawmut Railroad Company,
Mountain Laurel Railroad Company and Red Bank Railroad Company ---- 3,194 ----
Capital lease obligation $11,761 ---- ----
======================================
|
The accompanying notes are an integral part of these consolidated financial statements.
Genesee & Wyoming Inc. and Subsidiaries (the "Company") operates 16 short line and regional railroads in New York, Pennsylvania, Louisiana, Oregon, Texas, Illinois, Florida, North Carolina, Virginia and, beginning in 1997, Australia (see Note 2.), through its various subsidiaries. The Company, through its leasing subsidiary, also buys, sells, leases and manages railroad transportation equipment. The Company, through its industrial switching subsidiary, also provides freight car switching and related services to industries in the United States with extensive railroad facilities within their complexes. The Company has an unconsolidated 47.5 percent equity interest in a Canadian company which owns and operates two railroads in Canada.
The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation.
Revenues are estimated and recognized as shipments initially move onto the Company's tracks, which, due to the relatively short length of haul, is not materially different from the recognition of revenues as shipments progress.
The Company considers all highly liquid instruments with a maturity of three months or less when purchased to be cash equivalents for purposes of classification in the consolidated balance sheets and consolidated statements of cash flows. Cash equivalents are stated at cost, which approximates fair market value.
Materials and supplies consist of items for improvement and maintenance of road property and equipment, and are stated at the lower of average cost or market.
Property and equipment are carried at historical cost. Acquired railroad property is recorded at the purchased cost. Major renewals or betterments are capitaliz ed while routine maintenance and repairs, which do not improve or extend asset lives, are charged to expense when incurred. Gains or losses on sales or other dispositions are credited or charged to other income. Gains of approximately $78,000 and $572,000 realized by the leasing subsidiary on the sale or disposition of transportation equipment during 1997 and 1996, respectively, are classified in operating revenues. Depreciation is provided on the straight-line method over the useful lives of the property which are as follows:
Road Properties...............................20-50 years Equipment......................................3-20 years
The Company continually evaluates whether events and circumstances have occurred that indicate the assets may not be recoverable. When factors indicate that the assets should be evaluated for possible impairment, the Company uses an estimate of the related undiscounted future cash flows over the remaining lives of the assets in measuring whether or not an impairment has occurred.
The service assurance agreement represents a commitment from the most significant customer of the Company, to one of the subsidiary railroads (see Note 2.), which grants the Company the exclusive right to serve indefinitely three of the customer's facilities. The service assurance agreement is amortized on a straight-line basis over the same period as the related track structure, which is 20 years. The service assurance agreement is stated at $13.6 million, net of accumulated amortization of $1.4 million and $14.3 million, net of accumulated amortization of $669,000 at December 31, 1997 and 1996, respectively.
Earnings per share are calculated under the guidelines of FASB Statement No. 128 wherein earnings per share are presented for basic and diluted shares on net income. Basic earnings per share are calculated on income available to common stockholders divided by the weighted-average number of common shares during the period. Diluted earnings per share are calculated using earnings available to each share of common stock outstanding during the period and to each share that would have been outstanding assuming the issuance of common shares for all potentially dilutive common shares outstanding during the reporting period. Unexercised stock options and warrants, calculated under the treasury stock method, are the only reconciling items between the Company's basic and diluted earnings per share. The number of options and warrants, included in the denominator, used to calculate diluted earnings per share are 409,822, 424,347 and 0 for 1997, 1996 and 1995, respectively. Options to purchase 39,000 shares of stock were outstanding during 1997 but were not included in the computation of diluted EPS because the options' exercise price was greater than the average market price of the common shares.
A large portion of the Company's operating revenues is attributable to customers operating in the electric utility, forest products, petroleum and chemical industries. As the Company acquires new railroad operations, the base of customers and industries served continues to grow and diversify. The largest ten customers, which is a group that changes annually, accounted for approximately 37%, 49% and 50% of the Company's revenues in 1997, 1996 and 1995, respectively. One customer in the electric utility industry accounted for approximately 15% and 18% of the Company's revenues in 1997 and 1996, respectively (see Note 2.). The Company regularly grants trade credit to all of its customers. In addition, the Company grants trade credit to other railroads through the routine interchange of traffic. Although the Company's accounts receivable include a diverse number of customers and railroads, the collection of these receivables is substantially dependent upon the economies of the regions in which the Company operates, the electric utility, forest products, petroleum and chemical industries, and the railroad sector of the economy in general.
The following methods and assumptions were used to estimate the fair value of each class of financial instrument held by the Company:
Current assets and current liabilities: The carrying value approximates fair value due to the short maturity of these items.
Long-term debt: The fair value of the Company's long-term debt is based on secondary market indicators. Since the Company's debt is not quoted, estimates are based on each obligation's characteristics, including remaining maturities, interest rate, credit rating, collateral, amortization schedule and liquidity. The carrying amount approximates fair value.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses during the reporting period. Actual results could differ from those estimates.
Certain 1996 balances have been reclassified to conform with the 1997 presentation.
The financial statements of the Company's foreign subsidiary were prepared in their respective local currency and translated into U.S. dollars based on the current exchange rate at the end of the period for the balance sheet and a weighted-average rate for the period on the statement of income. Translation adjustments are reflected as foreign currency translation adjustments in Shareholders' Equity and accordingly have no effect on net income. Translation adjustments for transactions denominated in foreign currency are included in other expense and were $114,000 in 1997.
On February 8, 1996, a newly-formed subsidiary, Illinois & Midland Railroad, Inc. ("Illinois & Midland"), purchased certain assets, primarily road and track structure, of Chicago & Illinois Midland Railway Company for approximately $27.7 million, including related costs and the assumption of certain liabilities. The purch ase price was allocated to purchased inventory ($750,000), assumed note receivable ($1.2 million), property ($10.8 million), and the service assurance agreement ($14.9 million). The purchase also included the assumption of $1.4 million of liabilities. This subsidiary operates approximately 126 miles of track in the State of Illinois. A significant portion of this subsidiary's operating revenue (74% in 1997, 76% in 1996 and 83% in 1995) is attributable to coal shipments for one customer which is an electric utility (see Note 1.). The acquisition was accounted for as a purchase.
On April 29, 1996, a newly formed subsidiary, Pittsburg & Shawmut Railroad, Inc. ("Pittsburg & Shawmut"), purchased certain assets, primarily road and track structure, of Pittsburg & Shawmut Railroad Company, Mountain Laurel Railroad Company, and Red Bank Railroad Company for approximately $15.2 million, including related costs. The purchase price was allocated to purchased inventory ($50,000), property ($14.8 million), and other assets ($264,000). The purchase also included the assumption of $3.2 million of deferred grants from the State of Pennsylvania. In addition, the purchase and sale agreement provides for additional contingency payments of up to $2.5 million. A portion of these payments are required (up to a maximum of $500,000 plus interest) if certain coal shipments during any calendar year from 1997-1999, as defined, exceed 290,000 tons. The remaining contingency payments (up to a maximum of $2.0 million) are
calculated as 25% of the gross revenues attributable to certain coal shipments that exceed 564,793 tons during any calendar year from 2000-2009, as defined. Upon resolution of the amount of the contingency payments, there will be an additional element of cost related to the transaction, which will be recorded as goodwill and amortized over the same period as the related track structure, which is 20 years. On December 31, 1997, the Company met certain contingency payment criteria and recorded $192,000 of goodwill. On June 28, 1996, a portion of the railcars acquired in the purchase were sold for $2.4 million, the purchase price allocation was adjusted, and no gain or loss was recognized. The acquisition was accounted for as a purchase.
On November 8, 1996, the Company completed its acquisition of all of the common stock of Rail Link, Inc. ("Rail Link") for approximately $12.1 million in cash of which $3.0 million are contingent payments based on performance. In 1996, the Company recorded the entire contingent payment as part of the purchase price. In 1997, the Company reversed $1.5 million of purchase price based on the probability of payment. At December 31, 1997, $1.5 million in future amounts payable remain contingent. The purchase price was allocated to purchased net working capital ($1.2 million), property ($5.0 million), goodwill ($4.1 million) and other assets ($275,000). The goodwill is being amortized on a straight-line basis over 20 years. The purchase also included the assumption of $474,000 of liabilities. Rail Link provides freight car switching and related services to United States industries with extensive railroad facilities within their complexes. Rail Link manages 23 switching operations, a railcar cleaning operation, two track maintenance operations and a locomotive leasing operation in 11 states. Rail Link operates four short line railroads located in Florida, North Carolina, Texas and Virginia. The acquisition was accounted for as a purchase.
Pro Forma for Acquisitions - Results for the operations of Illinois & Midland Railroad, Inc., Pittsburg & Shawmut Railroad, Inc. and Rail Link, Inc. are included within the consolidated financial statements commencing February 9, 1996, April 30, 1996, and November 9, 1996, respectively. Unaudited pro forma results assuming these acquisitions had been made as of January 1, 1995, are as follows (in thousands, except per share amounts):
Year Ended
------------------
12/31/96 12/31/95
-------- --------
(Unaudited)
Revenues....................................................$90,842 $82,397
Net income.................................................. 5,572 3,976
Net income per common share - basic......................... $1.46 $1.69
Net income per common share - diluted....................... $1.40 $1.69
|
Such pro forma information is not necessarily indicative of the results of future operations. Income per share information has been adjusted for the stock split (see Note 15.) as though it took place on January 1, 1995.
On August 28, 1997, the Company announced that its wholly owned subsidiary, Genesee & Wyoming Australia Pty. Ltd. ("GWIA"), had been awarded the contract to purchase certain selected assets of the railroad freight operation of SA Rail, a division of Australian National Railway which is controlled by the Commonwealth Government of Australia. SA Rail provides intrastate freight services in South
Australia, interstate haulage of contract freight, rolling stock rental and maintenance, and interstate track maintenance. GWIA bid as part of a consortium including EDI Clyde Engineering and Transfield Pty. Ltd. EDI Clyde is a major Australian provider of railway rolling stock and holds the Australian license for GM/EMD locomotives. Transfield is a major Australian engineering, construction and infrastructure maintenance provider. On November 8, 1997 GWIA closed on the purchase of the assets and commenced operation of railroad freight service under the name of Australia Southern Railroad Pty. Ltd. The assets were acquired for approximately $33.1 million, including related costs. The assets consist primarily of road and track structure, railroad rolling stock and other equipment.
The Company has formed a joint venture, Genesee Rail-One Inc. ("GRO") to acquire railroads in Canada. GRO is a joint venture with Rail-One Inc., a subsidiary of The Cygnus Group which is an integrated transportation facilities, services and infrastructure provider in Canada. The Company's initial capital investment in GRO was approximately $4,913,000.
On July 29, 1997, GRO commenced operations of the Huron Central Railway Inc. ("HCRY"), a 180-mile railroad located in Central Ontario. HCRY leases its rail line from the Canadian Pacific Railway for a 20 year term and is responsible for operation and maintenance of the leased line.
GRO commenced operations on November 11, 1997 of the Quebec Gatineau Railway Inc. ("QGRY"), a 354-mile railroad linking Quebec City, Montreal and Hull in Southeas tern Quebec. QGRY purchased and leased the assets for this railroad from St. Lawrence & Hudson Railway Company Limited which is a subsidiary of Canadian Pacific Railway Company.
Based on GWI's ownership portion of 47.5%, the Company is reporting the results of operations of GRO under the equity method of accounting for investments. The results of operations of GRO are translated into U.S. dollars at a weighted average exchange rate for each period and are included in other income, net.
The Company has loaned Rail-One, its joint venture partner in GRO, $4,613,000 through a promissory note denominated in Canadian currency. The note bears interest at 7.5 percent per annum, earns a Commitment Fee equal to 4 percent of the principal amount of the note and is secured by Rail-One's 47.5 percent ownership in GRO. The principal of the note, all accrued interest on the principal amount and the Commitment Fee are due and payable on November 10, 1998 (the "Maturity Date"). If Rail-One pays all accrued interest and the Commitment Fee on the Maturity Date, Rail-One shall have the option to extend the loan for an additional three months at 12.5 percent per annum. Interest income and Commitment Fee income reported in other income, net in the Company's financial results for 1997 were $49,000 and $31,000, respectively. On December 31, 1997, the Company's promissory note with Rail-One was valued at $4,499,000 after foreign currency exchange adjustments, resulting in a translation loss of $114,000 that is included in other income, net.
Two of the Company's subsidiaries have agreed through a Memorandum of Lease Agreement to enter into several one year operating leases with subsidiaries of GRO to provide rail cars and locomotives for service in Canada. On November 25, 1997, one of the Company's subsidiaries entered into a lease to provide 911 boxcars at a monthly rate of $185 per car. Equipment rental income of $197,000 resulting from this lease was included in 1997 operating revenue. The remaining
operating leases are dependent on asset availability and cost before lease rates can be determined and the leases can be finalized.
The Company has entered into an agreement with GRO to provide certain management, administrative and accounting services to GRO and its subsidiaries. Management fees of $65,000 earned in 1997 were reported as an offset to general and administrative expense in the Company's financial statements.
Since 1899, one of the Company's subsidiaries previously served a salt mine in Retsof, New York. This mine closed in 1995 and in 1996, the mining company announced it would not replace the mine or maintain a distribution center. The subsidiary has experienced a significant decline in traffic and in the fourth quarter of 1996 the Company realigned its operations and decided to close certain supporting facilities of that subsidiary. Thus, the Company has recorded a special charge representing the impairment of assets of $1,140,000 and employee severance and pension termination expense of $220,000. This special charge, which was recorded in the fourth quarter of 1996, is in the amount of $1,360,000 before tax and $809,000 after tax, or $0.20 per share.
On February 11, 1997, an investment group announced a plan to acquire all rights of the prior salt mining company and build a new mine in the Retsof area. According to the investment group, development of this new mine is contingent upon obtaining adequate financing and regulatory approvals and permits. Because of the nature of the proposed mine and the Company's realignment of operations, the supporting facilities which were the subject of this special charge will not be needed in any future rail operations. As of February, 1998, the investment group continues to pursue the regulatory approvals and permitting processes necessary to development of the new mine.
Major classifications of property and equipment are as follows (amounts in thousands)
1997 1996
--------- ---------
Road properties $ 83,093 $62,670
Equipment and other 66,341 34,017
-------- --------
149,434 96,687
Less- Accumulated depreciation and amortization
24,449 17,865
-------- --------
$124,985 $78,822
======== ========
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Major classifications of other assets are as follows (amounts in thousands):
1997 1996
--------- ---------
Goodwill $ 4,238 $ 5,629
Deferred financing costs 3,073 2,328
Assets held for sale or future use 2,023 2,023
Other 2,565 2,160
------- -------
11,899 12,140
Less- Accumulated amortization 1,532 765
------- -------
$10,367 $11,375
======= =======
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Goodwill is being amortized on a straight-line basis over 20 years (see Note
2.). Deferred financing costs are amortized over the periods covered by the
related revolving credit agreement and other applicable finance agreements using
the straight-line method, which is not materially different from the
amortization computed using the effective-interest method (see Note 9.). Assets
held for sale or future use relate to the shutdown of one of the Company's
subsidiaries (see Note 5.).
Several subsidiaries of the Company lease rolling stock to third parties and affiliated companies under agreements that are accounted for as operating leases. The property held for lease on December 31, 1997, totaled $14.8 million less accumulated depreciation of $4.6 million. The following is a schedule by years of minimum future rentals receivable on noncancelable operating leases (amounts in thousands):
1998.............................................$5,001
1999............................................. 1,397
2000............................................. 1,397
2001............................................. 918
2002............................................. 918
Thereafter....................................... 2,804
------
$12,435
=======
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The Company has entered into several leases for rolling stock, locomotives and other equipment. Operating lease expense for the years ended December 31, 1997, 1996 and 1995, was approximately $2,015,000, $1,256,000 and $2,173,000, respectively.
In December, 1997, a subsidiary of the Company entered into an agreement with a bank to lease 911 boxcars at an average monthly rate of $177 per car for a lease term of one year. The lease includes an option to automatically renew for four subsequent one year terms at a periodic rent equal to the rent applicable during the initial term. The lease also includes an option to purchase all of the cars,
subject to certain conditions, at the end of five one-year periods. The boxcars were simultaneously leased to an unconsolidated affiliate which is a subsidiary of GRO at a rate of $185 per car per month.
On December 27, 1996, the Company completed the sale of 53 of its locomotives to a leasing company for a net sale price of approximately $11,950,000. The proceeds were applied to debt on the Company's credit facilities (see Note 9). Simultaneously, a subsidiary of the Company entered into an agreement with the leasing company to lease the locomotives back. The sale resulted in a deferred gain of approximately $4,902,000 which is being amortized over the term of the lease as a non-cash offset to rent expense.
The following is a summary of future minimum payments under noncancelable leases (amounts in thousands):
1998.............................................$5,162
1999............................................. 2,166
2000............................................. 1,792
2001............................................. 1,739
2002............................................. 1,511
Thereafter....................................... 5,235
-----
Total minimum payments..........................$17,605
=======
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In 1992, a subsidiary of the Company entered into a lease agreement with a Class I carrier to operate 185 miles of track in Oregon. This subsidiary began operations in 1993. The subsidiary has assumed all operating and financial responsibilities including maintenance and regulatory compliance. Under the lease, no payments to the lessor are required as long as the subsidiary interchanges its freight traffic with only the lessor. Through December 31, 1997, no payments were required under this lease arrangement as all traffic has been interchanged with the lessor. The lease is subject to an initial 20 year term and shall be renewed for successive ten year renewal terms, unless either party elects not to renew the lease. If the lessor terminates the lease for any reason, the lessor must reimburse the subsidiary for its depreciated basis in the property.
In August, 1995, another subsidiary of the Company signed an agreement with the same Class I carrier to lease and operate 53 miles of track in Oregon. The lease is subject to an initial 20 year term and shall be renewed for an additional ten years, unless either party elects not to renew the lease. Under the lease, no payments to the lessor are required as long as the subsidiary maintains minimum levels of traffic and provided the subsidiary interchanges its freight traffic with only the lessor and certain permitted carriers. The maximum annual lease payment required if this subsidiary did not move any traffic would be $1.3 million. In October, 1995, this subsidiary signed an agreement with another Class I carrier to lease and operate an additional 53 miles of connecting track in Oregon. The lease is subject to an initial three year term and shall be renewed for successive three year intervals, unless either party elects not to renew the lease. Under the lease, no payments to the lessor are required as long as the subsidiary interchanges its freight traffic with only the lessor and certain permitted carriers. On November 19, 1997, this lease was replaced by the purchase of certain assets, rights and obligations including a rail service easement which is a permanent and exclusive easement over the rail corridors previously under lease. Under all of these arrangements, the Company has assumed all operating and financial responsibilities including maintenance and regulatory compliance. Through December 31, 1997, no payments were required under either lease arrangement.
Long-term debt consists of the following (amounts in thousands):
1997 1996
--------- ---------
Credit facilities with variable interest depending upon certain
financial ratios of the Company, as defined (7.0% at December
31, 1997), with the balance due in 2002, net of unamortized
discount of $290,000 ($384,000 in 1996) $27,410 $ 7,972
Promissory note payable with interest at 8% and principal
payments due annually of $1,188,000 if certain conditions, as
specified in the agreement, are met, with the balance due in
1999 8,922 9,022
Capital lease obligations with variable interest at LIBOR plus
1.5% 11,761 -
Variable rate loan with variable interest on 50% of the loan and
interest at 6.24% on the remaining 50%, payable in semi-annual
installments commencing in June, 1999 through November, 2002 14,991 -
Subordinated debt facility with interest at 6.16%, no
amortization requirements, with the balance due in 1999. 7,170 -
Other debt with interest rates up to 8% and maturing at various
dates between 1998 and 2006 3,890 1,737
---------------------------------------------------------- -------- --------
74,144 18,731
Less- Current portion 1,157 271
---------------------------------------------------------- -------- --------
Long-term debt, less current portion $72,987 $18,460
============================================================ ======= =======
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In October, 1997, the Company amended and restated its credit facilities agreement to provide for a $65 million revolving credit facility. The facility has a maturity date of October 31, 2002. The credit facilities accrue interest at prime or the Eurodollar rate, at the option of the Company, plus the applicable margin, which varies from 0.75% to 1.5% depending upon the Company's funded debt to EBITDA ratio, as defined in the agreement. Interest is payable in arrears based on certain elections of the Company, not to exceed three months outstanding. The Company pays a commitment fee which varies between 0.25% and 0.375% per annum on all unused portions of the revolving credit facility depending on the Company's funded debt to EBITDA ratio. The credit facilities agreement requires mandatory prepayments from the issuance of new equity or debt and annual sale of assets in excess of $6.5 million. These credit facilities are guaranteed by all domestic subsidiaries of the Company and contain a negative pledge of assets. The credit facilities agreement requires the maintenance of certain covenants, including, but not limited to, funded debt to EBITDA, cash flow coverage and EBITDA less defined capital expenditures to interest expense, all as defined in the agreement. The Company and its subsidiaries were in compliance with the provisions of these covenants as of December 31, 1997.
The promissory note payable with an outstanding balance of $8,922,000 at December 31, 1997, provides for annual principal payments of $1,188,000 by a subsidiary provided the subsidiary meets certain levels of revenue and cash flow. In accordance with these provisions, the subsidiary was not required to make any principal payments in 1997 or 1996. The subsidiary did, however, make principal payments of $100,000 and $100,000 in 1997 and 1996, respectively, due to additional requirements regarding the sale of assets, as defined in the agreement. The subsidiary does not expect that it will be required to make a principal payment in 1998. The annual debt maturity schedule has been adjusted accordingly.
In March, 1997, a subsidiary of the Company entered into a master lease agreement with a leasing company. The lease provides for the inclusion of up to $13.0 million in railroad rolling stock. As of December 31, 1997, the Company's subsidiary had $11.8 million of equipment under this lease. Lease payments until September 30, 1998, are interest only at LIBOR plus 1.5%. After that date, the equipment currently under lease will require monthly payments of $116,461 until March, 2017. The Company's subsidiary has the right to purchase the equipment at any time during the lease for fair market value.
In November, 1997, a subsidiary of the Company entered into a variable rate loan which calls for semi-annual payments commencing on June 30, 1999, with the final installment due in November, 2002. There is a fixed interest rate swap over 50% of the loan balance, effectively fixing the interest rate at 6.24% for 50% of the loan for the life of the loan. The loan is secured by a first ranking fixed and floating charge over all the present and future assets of the Australia Southern Railroad Pty. Ltd. and SA Rail Pty. Ltd. and control over all indebtedness of the Australia Southern Railroad Pty. Ltd. to Genesee & Wyoming Australia Pty. Ltd.
In November, 1997, a subsidiary of the Company entered into a subordinated debt facility repayable November, 1999. There is a fixed interest rate swap over 100% of the loan balance, effectively fixing the interest rate at 6.16% for the life of the loan. The loan is secured by a second ranking fixed and floating charge over all the present and future assets of the Australia Southern Railroad Pty. Ltd. and SA Rail Pty. Ltd. and control over all indebtedness of the Australia Southern Railroad Pty. Ltd. to Genesee & Wyoming Australia Pty. Ltd.
The following is a summary of the maturities of long-term debt as of December 31, 1997 (amounts in thousands):
1998.............................................$1,157
1999.............................................19,035
2000..............................................2,771
2001..............................................2,822
2002.............................................36,667
Thereafter.......................................11,692
------
$74,144
=======
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On June 2, 1995, the Company refinanced approximately $14.3 million of previously existing notes and purchased approximately $6 million of rolling stock previously under an operating lease by entering into a credit facilities agreement. In conjunction with this refinancing transaction, an extraordinary charge for prepayment penalties and other financing costs on the early extinguishment of debt for approximately $851,000 ($494,000 net of income taxes) was incurred. These amounts have been recorded in the accompanying consolidated income statement as an extraordinary item, net of income taxes.
The Company uses derivative financial instruments, specifically interest rate caps and interest rate swaps, to manage its variable interest rate risk on long- term debt.
The Company administers two noncontributory defined benefit plans, one of which is for the employees of a subsidiary who are members of a union and who meet minimum service requirements, the other of which is for non-union employees of another subsidiary. Benefits are determined based on a fixed amount per year of credited service. The Company's funding policy is to make contributions for pension benefits based on actuarial computations which reflect the long-term nature of the plans. The Company has met the minimum funding requirements according to the Employee Retirement Income Security Act.
Pension costs for the union pension plan for 1997, 1996 and 1995 were approximately $69,000, $105,000, and $14,000, respectively. The 1997 and 1996 pension cost includes the estimated expense of terminating the defined benefit plan due to the shut down of a subsidiary's operations (see Note 5.). The pension liability for the union pension plan recognized in the accompanying consolidated balance sheet at December 31, 1997 and 1996, was approximately $0 and $185,000, respectively. Subsequently, on January 31, 1998, the plan was terminated and the vested assets were distributed to the plan members.
Pension costs for the non-union pension plan for 1997 and 1996 were approximately $122,000 and $13,000, respectively. The pension liability for the non-union pension plan recognized in the accompanying consolidated balance sheet at December 31, 1997 and 1996, was approximately $385,000 and $263,000, respectively.
Historically, the Company has provided certain health care and life insurance benefits for certain retired employees. Eligible employees include union employees for one of its subsidiaries, and certain nonunion employees who have reached the age of 55 with 30 or more years of service. The Company funds the plan on a pay-as-you-go basis.
Total postretirement benefit costs for the years ended December 31, 1997, 1996 and 1995, were $33,000, $53,000 and $49,000, respectively. The funded status of the plan at December 31, 1997 and 1996, was as follows (amounts in thousands):
1997 1996
------- -------
Accumulated postretirement benefit obligation-
Fully eligible active participants $ 59 $ 58
Other active participants - 70
Retirees 433 420
---- ----
492 548
Plan assets at fair value - -
---- ----
Accumulated postretirement benefit obligation in excess of plan
assets 492 548
Unrecognized net gain resulting from change in actuarial 195
assumptions 151
---- ----
Accrued postretirement benefit cost $ 687 $ 699
==== ====
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For measurement purposes, an 8% annual rate of increase in the per capita cost of covered health care benefits was assumed for 1998. The rate was then assumed to gradually decrease to 5% by the year 2002, at which time the rate was assumed to remain level. To illustrate the effect of these assumptions, increasing the assumed health care cost trend by 1% each year would increase the accumulated postretirement benefit obligation as of December 31, 1998, by approximately $32,000 and the net periodic postretirement benefit cost for 1998 by approximately $4,000.
Relevant assumptions used in accounting for the postretirement benefit plan as of December 31 were as follows:
1997 1996
---- ----
Weighted average discount rate 7.25% 7.75%
==== ====
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The Company has performance-based bonus programs which include a majority of non union employees. Key employees are granted bonuses on a discretionary basis. Total compensation of approximately $1.0 million, $730,000 and $308,000 was awarded under the various bonus plans in 1997, 1996 and 1995, respectively.
On December 1, 1997, the Company terminated a defined contribution profit- sharing plan that it had maintained for two subsidiaries and distributed the vested assets to the plan members. There were no contributions to the plan in 1997, 1996 or 1995.
Effective January 1, 1997, the Company established a 401(k) plan covering
employees of the Company's industrial switching subsidiary who have met
specified length of service requirements. The 401(k) plan qualifies under
Section 401(k) of the Internal Revenue Code as a salary reduction plan.
Employees may elect to contribute a certain percentage of their salary on a
before-tax basis. The Company matches 100% of the participants contributions up
to 5% of the participants salary. The Company's contribution to the plan in
1997 was approximately $63,000.
Effective January 1, 1994, the Company established two 401(k) plans covering union and non union employees who have met specified length of service requirements. The 401(k) plans qualify under Section 401(k) of the Internal Revenue Code as salary reduction plans. Employees may elect to contribute a certain percentage of their salary on a before-tax basis. For non union employees, the Company matches the participants contributions up to 1-1/2% of the participants salary. The Company's contributions to the plans in 1997, 1996 and 1995 were approximately $163,000, $110,000 and $83,000, respectively.
The Company does not provide postemployment benefits to its employees.
The Company files consolidated U.S. federal income tax returns which include all of its subsidiaries. The components of the provision for income taxes on income before extraordinary item are as follows (amounts in thousands):
1997 1996 1995
------- ------- -------
Current-
Federal $ 2,095 $ 2,779 $ 550
State 670 1,014 111
Deferred 2,676 227 811
------ ------ ------
$ 5,441 $ 4,020 $ 1,472
====== ====== ======
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The provision for income taxes on income before extraordinary item in each period differs from that which would be computed by applying the statutory U.S. federal
income tax rate to the income before taxes. The following is a summary of the effective tax rate reconciliation:
1997 1996 1995
-------- ------- -------
Tax provision at statutory rate 34.0% 34.0% 34.0%
State income taxes, net of federal income tax
benefit 5.7% 5.6% 4.0%
Other, net 0.8% 0.9% 2.6%
------ ------ ------
40.5% 40.5% 40.6%
====== ====== ======
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The following summarizes the estimated tax effect of significant cumulative temporary differences that are included in the net deferred income tax liability (amounts in thousands):
1997 1996
-------------- ---------
Deferred tax assets-
Accruals and reserves not deducted for tax
purposes until paid $ 2,415 $ 1,828
Alternative minimum tax credits 1,837 1,752
Net operating losses 136 -
Postretirement benefits 233 259
Other (78) 154
------- -------
4,543 3,993
Deferred tax liability -- differences in
depreciation and amortization (10,490) (7,081)
------- -------
Net deferred tax liability ($5,947) ($3,088)
======= =======
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The Company's alternative minimum tax credits can be carried forward indefinitely; however, the Company must achieve future regular taxable income in order to realize this credit. Management does not believe that a valuation allowance is required for the deferred tax assets based on anticipated future profit levels and the reversal of current temporary differences.
During 1997, three subsidiaries of the Company received grants from the State of Pennsylvania of $2,500,000, $250,000 and $16,000, respectively, for rehabilitation of portions of their track. The agreements require the State of Pennsylvania to reimburse the subsidiaries for 75% of the total cost of specific projects. These projects were substantially complete as of December 31, 1997. Another subsidiary of the Company received a grant from the State of Virginia of $135,000 for rehabilitation of a portion of the subsidiary's track. This project was completed as of December 31, 1997.
In April, 1996, in connection with the purchase of assets of Pittsburg & Shawmut Railroad Company, Mountain Laurel Railroad Company and Red Bank Railroad Company (see Note 2.), the Company assumed a deferred grant of $3.2 million from the State of Pennsylvania.
During 1995, a subsidiary of the Company received a grant from the State of Pennsylvania of $3,500,000 for rehabilitation of a portion of the subsidiary's
track. The agreement requires the State of Pennsylvania to reimburse the subsidiary for 75% of the total costs of the project. This project was substantially complete as of December 31, 1996. Another subsidiary of the Company received a grant from the State of Louisiana of $300,000 for rehabilitation of a portion of the subsidiary's track. This project has been completed.
During a prior year, a subsidiary of the Company received a grant from the State of New York of $4,000,000 for the rehabilitation of a portion of the subsidiary's track. This subsidiary also received a grant of $900,000 from the Federal Railroad Administration for the same rehabilitation project. The State of New York is entitled to 63.8% of the net liquidation value of the rehabilitated track upon abandonment. The State of New York agreement also requires the subsidiary to pay a usage fee for 10 years beginning on April 1, 1994, for all loaded cars moved over the subsidiary's track. Cumulative fees are limited to $4,000,000. As an alternative to paying the usage fee, the subsidiary, at its discretion, may make capital improvements, proposed by March 1 of the following year, of equal or greater value to the usage fee accrued during the year. The Company believes that it has proposed and/or performed capital improvements of equal or greater value which eliminates any liability associated with the usage fee.
All of the aforementioned grants do not represent a future liability of the Company unless the Company abandons the rehabilitated track structure within a specifi ed period of time, as defined in the respective agreements. As the Company does not intend to abandon the track, the Company has recorded additions to road property and has deferred the amount of the grants as the rehabilitation expenditures have been incurred. The amortization of the deferred grant is a noncash offset to depreciation expense over the useful life of the related assets and is not included as taxable income. During the years ended December 31, 1997, 1996 and 1995, the Company recorded offsets to depreciation expense from grant amortization of $719,000, $638,000 and $415,000, respectively.
The Company has built its portfolio of railroad properties primarily through the purchase or lease of road and track structure and through operating agreements. These transactions have related only to the physical assets of the railroad property. Typically, the Company does not assume the operations or liabilities of the divesting railroads.
In connection with the Company's purchase of certain selected assets in Australia (see Note 2.), the Company has committed to the Commonwealth of Australia to spend approximately $34.1 million (AU $52.3 million) to rehabilitate track structures and equipment by December 31, 2002. The Commonwealth Government may require the payment of any shortfall between the actual expenditure incurred from the date of acquisition to December 31, 2002, and the contracted commitment of approximately $34.1 million (AU $52.3 million). This commitment may be renegotiated if there is a significant change in operating conditions outside the control of the Company.
The Company routinely interchanges traffic with certain Class I railroads that are currently undergoing consolidations. These consolidations present both risk and opportunity for the Company. The acquisition of Conrail may impact the Company's operations in New York and Pennsylvania. Until the details of these consolidations reaches greater clarity, the Company is unable to determine the impact on its operations.
In connection with the Company's lease of its 185-mile line in Oregon (see Note
8.), the Company has committed to the lessor to rehabilitate 25 miles of track
over five years, beginning February, 1993, at an estimated total cost of
approximately $5.0 million. As of December 31, 1997, the Company has completed approximately $3.5 million of this rehabilitation.
The Company is a defendant in certain lawsuits resulting from railroad and industrial switching operations, one of which includes the commencement of a criminal investigation. Management believes that the Company has adequate defenses to any criminal charge which may arise and that adequate provision has been made in the financial statements for any expected liabilities which may result from disposition of such lawsuits. While it is possible that some of the foregoing matters may be resolved at a cost greater than that provided for, it is the opinion of management that the ultimate liability, if any, will not be material to the Company's results of operations or financial position.
In conjunction with the 1996 amendment and restatement of the Company's credit facilities, detachable warrants were issued to a financial institution to purchase 41,847 shares of Class A Common Stock at an exercise price of $0.0005 per share. These warrants were exercised in January, 1998. Management has valued the warrants at approximately $471,000, the amount of which was recorded as a debt discount and recorded in long-term debt. The discount is being amortized over the period covered by the related credit facilities agreement using the straight-line method, which is not materially different from the amortization computed using the effective-interest method.
On June 28, 1996 the Company closed an underwritten initial public offering ("IPO") of 3,045,200 shares of Class A Common Stock (the "Common Stock Offering"), of which 2,897,200 shares were offered by the Company and 148,000 shares were offered by a selling stockholder. The gross proceeds to the Company of the Common Stock Offering of $49.2 million, net of underwriters' commission of $3.4 million, were used to pay down borrowings on the credit facilities. Other costs of the IPO of $1.0 million were paid by the Company.
In connection with the Common Stock Offering, the Company, effective June 10, 1996, changed the par value of its Class A and Class B Common Stock from $10 per share to $.01 per share and increased the shares authorized to 12 million and 1.5 million shares, respectively. The rights and privileges of Class B Common Stock changed to substantially the same as Class A Common Stock, except it carries 10 votes per share, is convertible into Class A Common Stock and has transfer restrictions. The Class A Common Stock also has a 10% dividend preference over Class B Common Stock, as and if dividends are declared by the Board of Directors. Also, the Company executed an 18.5 to 1 stock split and reclassified the Company's outstanding Class A Common Stock into Class A and Class B Common Stock, depending on the election of the shareholder.
All references in the consolidated financial statements of the Company to the number of shares authorized and outstanding of Class A and Class B Common Stock have been retroactively adjusted to reflect the reclassification of the capital stock and the stock split.
In 1996, the Company established an incentive and nonqualified stock option plan for key employees and a nonqualified stock option plan for nonemployee directors (collectively referred to hereafter as the "Stock Option Plans"). In addition, the Company established an employee stock purchase plan ("Stock Purchase Plan"). The Company accounts for these plans under APB Opinion No. 25, under which no
compensation cost has been recognized. Had compensation cost for these plans been determined consistent with FASB Statement No. 123, the Company's net income and earnings per share would have been reduced to the following pro forma amounts:
1997 1996
------ ------
Net Income: As reported $7,998 $5,905
Pro Forma 7,332 5,609
Basic EPS: As reported $ 1.52 $ 1.54
Pro Forma 1.40 1.49
Diluted EPS: As reported $ 1.47 $ 1.49
Pro Forma 1.34 1.43
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The Company may sell up to 450,000 shares of stock to its full-time employees under the Stock Purchase Plan. At December 31, 1997, 1,996 shares had been purchased under this plan. The Company sells shares at 100% of the stock's market price at date of purchase, therefore, no compensation cost exists for this plan.
In 1997, the Company increased the number of options it may grant under its Stock Option Plan for employees by 200,000. The Company may now grant an aggregate of 700,000 shares of Class A Common Stock under its Stock Option Plans. Under both Plans, the option price equals at least the stock's market price on the date of grant, except that grants of incentive stock options to employees with significant voting control must be at least the market price plus ten percent. The Stock Option Committee of the Company's Board of Directors has discretion to determine employee grantees, dates and amounts of grants, vesting and expiration dates. No option may be exercised after ten years from date of grant (or five years in the case of incentive stock options to employees with significant voting control), although the Stock Option Committee may establish a shorter option term. The following is a summary of stock option activity for 1997 and 1996:
Fiscal Year Ended Fiscal Year Ended
December 31, 1997 December 31, 1996
----------------- --------------------
Wtd. Wtd.
Average Average
Shares Exercise Shares Exercise
Price Price
Outstanding at beginning of the
year 421,500 $18.61 --- ---
Granted 4,000 27.25 421,500 $18.61
Exercised 3,275 17.00 --- ---
Forfeited 15,250 25.11 --- ---
Outstanding at end of year 406,975 18.46 421,500 $18.61
Exercisable at end of year 101,354 18.41 --- ---
Weighted average fair value of
options granted --- $17.51 --- $10.29
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The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions: risk-free interest rate of 6.5 percent; expected dividend yield of 0 percent; expected lives of 5 and 10 years; expected volatility of 54 percent. The weighted-average fair value of options was $17.51 and $10.29 in 1997 and 1996, respectively.
The Company operates in two business segments: Railroad Operations, which includes operating short line and regional railroads, and buying, selling, leasing and managing railroad transportation equipment; and Industrial Switching, which includes providing freight car switching and related services to United States industries with extensive railroad facilities within their complexes. During 1997, the Company expanded its railroad operations geographically to include a new subsidiary operating in Australia. During 1996, the Company expanded its business to include industrial switching and related services through the acquisition of all of the common stock of Rail Link, Inc. The following tables present sales and other financial information for each geographic region for 1997 and for each business segment for the years 1997 and 1996:
17. GEOGRAPHIC REGION (AMOUNTS IN THOUSANDS) ---------------------------------------- --------------- -------------- ------------- 1997 U.S. Australia Total ---------------------------------------- --------------- -------------- ------------- Sales to unaffiliated customers $ 96,212 $ 7,431 $103,643 Operating income 15,738 705 16,443 Identifiable assets 169,969 40,563 210,532 Depreciation and amortization 6,753 246 6,999 Capital expenditures 13,871 20 13,891 |
Business Segment
(amounts in thousands)
Railroad Industrial
1997 Operations Switching Total
---------------------------------------- ---------- ---------- ----------
Sales to unaffiliated customers $ 88,791 $14,852 $103,643
Operating income (loss) 16,672 (229) 16,443
Identifiable assets 198,296 12,236 210,532
Depreciation and amortization 6,169 830 6,999
Capital expenditures 13,146 745 13,891
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Business Segment
(amounts in thousands)
Railroad Industrial -------------
1996 Operations Switching Total
----------------------------------------- -------------- -------------- -------------
Sales to unaffiliated customers $ 75,998 $ 1,797 $ 77,795
Operating income 13,865 129 13,994
Identifiable assets 131,693 13,646 145,339
Depreciation and amortization 5,930 122 6,052
Capital expenditures 8,138 36 8,174
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Quarterly Results (Unaudited)
First Second Third Fourth
(in thousands, except per share data) Quarter Quarter Quarter Quarter
-----------------------------------------------------------------------------------------------------------------
1997
Operating revenues........................ $24,092 $23,479 $23,670 $32,402
Income from operations..................... 4,035 4,171 3,901 4,336
Net income................................. 2,134 2,157 2,127 1,580
Basic earnings per share 0.41 0.40 0.41 0.30
-----------------------------------------------------------------------------------------------------------------
1996
Operating revenues........................ $16,608 $19,009 $19,022 $23,156
Income from operations..................... 2,814 4,173 3,609 3,398
Net income................................ 965 1,559 1,763 1,619
Basic earnings per share 0.41 0.64 0.34 0.30
-----------------------------------------------------------------------------------------------------------------
1995
Operating revenues........................ $13,391 $13,243 $13,600 $13,154
Income from operations..................... 1,526 1,427 1,982 1,638
Income before extraordinary item.......... 502 404 654 1,638
Net income (loss)......................... 502 (90) 654 591
Income per share before extraordinary item. 0.21 0.17 0.28 0.25
Extraordinary item........................ - (0.21) - -
Basic earnings (loss) per share............ 0.21 (0.04) 0.28 0.25
-----------------------------------------------------------------------------------------------------------------
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The fourth quarter of 1996 includes a $1,360,000 nonrecurring charge to record certain shutdown costs associated with the closing of a subsidiary (see Note 5.).
The second quarter of 1995 includes a $494,000 extraordinary item, net of related income tax benefit of $357,000, resulting from the early extinguishment of debt (see Note 9.).
EXHIBIT 4.1
Dated as of October 31, 1997
among
GENESEE & WYOMING INC.,
AS BORROWER
THE SUBSIDIARIES OF GENESEE & WYOMING INC. LISTED ON
SCHEDULE I HERETO,
AS GUARANTORS
BANKBOSTON, N.A. AND
THE OTHER LENDING INSTITUTIONS LISTED
ON SCHEDULE II HERETO,
AS BANKS
LASALLE NATIONAL BANK AND
THE FIRST NATIONAL BANK OF CHICAGO,
AS CO-AGENTS
and
BANKBOSTON, N.A., AS ISSUING BANK AND AGENT
with
BANCBOSTON SECURITIES, INC.
AS ARRANGER
TABLE OF CONTENTS
1. DEFINITIONS AND RULES OF INTERPRETATION.................................. 2
1.1. Definitions....................................................... 2
1.2. Rules of Interpretation........................................... 18
2. THE REVOLVING CREDIT FACILITY............................................ 19
2.1. Commitment to Lend................................................ 19
2.2. Commitment Fees................................................... 19
2.3. Reduction of Total Commitment..................................... 19
2.4. The Revolving Credit Notes........................................ 20
2.5. Interest on Loans................................................. 20
2.6. Requests for Loans................................................ 20
2.7. Conversion Options................................................ 21
2.7.1. Conversion to Different Type of Loan....................... 21
2.7.2. Continuation of Type of Loan............................... 21
2.7.3. Eurodollar Rate Loans...................................... 22
2.8. Funds for Loans................................................... 22
2.8.1. Funding Procedures......................................... 22
2.8.2. Advances by Agent.......................................... 22
3. MANDATORY PREPAYMENT OF LOANS............................................ 23
3.1. Maturity of Loans................................................. 23
3.2. Mandatory Payments of Loans....................................... 23
3.2.1. Mandatory Repayments of Loans.............................. 23
3.2.2. Mandatory Prepayments from Asset Sales..................... 23
3.2.3. Mandatory Prepayments from New Equity...................... 23
3.2.4. Mandatory Prepayments from Debt Offerings.................. 24
3.2.5. Application of Proceeds.................................... 24
3.3. Optional Prepayments of Loans..................................... 24
4. LETTERS OF CREDIT........................................................ 25
4.1. Letter of Credit Commitments...................................... 25
4.1.1. Commitment to Issue Letters of Credit...................... 25
4.1.2. Letter of Credit Applications.............................. 25
4.1.3. Terms of Letters of Credit................................. 25
4.1.4. Reimbursement Obligations of Banks......................... 26
4.1.5. Participations of Banks.................................... 26
4.2. Reimbursement Obligation of the Borrower.......................... 26
4.3. Letter of Credit Payments......................................... 27
4.4. Obligations Absolute.............................................. 28
4.5. Reliance by Issuer................................................ 28
4.6. Letter of Credit Fee.............................................. 29
5. CERTAIN GENERAL PROVISIONS............................................... 29
5.1. Agent's Fees...................................................... 29
5.2. Funds for Payments................................................ 29
5.2.1. Payments to Agent.......................................... 29
5.2.2. No Offset, etc............................................. 30
5.2.3. Currency Matters........................................... 30
5.2.3.1........................................................ 30
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5.2.3.1. Currency of Account................................. 30
5.2.3.2. Currency Fluctuations............................... 31
5.3. Computations...................................................... 32
5.4. Inability to Determine Eurodollar Rate............................ 32
5.5. Illegality........................................................ 32
5.6. Additional Costs, etc............................................. 33
5.7. Capital Adequacy.................................................. 34
5.8. Certificate....................................................... 35
5.9. Indemnity......................................................... 35
5.10. Interest After Default........................................... 35
5.10.1. Overdue Amounts........................................... 35
5.10.2. Amounts Not Overdue....................................... 35
6. GUARANTY................................................................. 35
6.1. Guaranty of Payment and Performance............................... 36
6.2. Guarantors' Agreement to Pay Enforcement Costs, etc............... 36
6.3. Waivers by Guarantors; Banks' Freedom to Act...................... 36
6.4. Unenforceability of Obligations Against Borrower.................. 37
6.5. Subrogation; Subordination........................................ 38
6.5.1. Waiver of Rights Against Borrower.......................... 38
6.5.2. Subordination.............................................. 38
6.5.3. Provisions Supplemental.................................... 39
6.6. Security; Setoff.................................................. 39
6.7. Further Assurances................................................ 39
6.8. Termination; Reinstatement........................................ 39
6.9. Successors and Assigns............................................ 40
7. REPRESENTATIONS AND WARRANTIES........................................... 40
7.1. Corporate Authority............................................... 40
7.1.1. Incorporation; Good Standing............................... 40
7.1.2. Authorization.............................................. 40
7.1.3. Enforceability............................................. 41
7.2. Governmental Approvals............................................ 41
7.3. Title to Properties; Leases....................................... 41
7.4. Financial Statements and Projections.............................. 41
7.4.1. Financial Statements....................................... 41
7.4.2. Projections................................................ 42
7.5. No Material Changes, etc.; Solvency............................... 42
7.5.1. Changes.................................................... 42
7.5.2. Solvency................................................... 42
7.6. Franchises, Patents, Copyrights, etc.............................. 42
7.7. Litigation........................................................ 43
7.8. No Materially Adverse Contracts, etc.............................. 43
7.9. Compliance with Other Instruments, Laws, etc...................... 43
7.10. Tax Status....................................................... 43
7.11. No Event of Default.............................................. 43
7.12. Holding Company and Investment Company Acts...................... 44
7.13. Absence of Financing Statements, etc............................. 44
7.14. Certain Transactions............................................. 44
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7.15. Employee Benefit Plans........................................... 44
7.15.1. In General................................................ 44
7.15.2. Terminability of Welfare Plans............................ 44
7.15.3. Guaranteed Pension Plans.................................. 45
7.15.4. Multiemployer Plans....................................... 45
7.16. Use of Proceeds; Regulations U and X............................. 45
7.17. Environmental Compliance......................................... 46
7.18. Subsidiaries, etc................................................ 47
7.19. Capitalization................................................... 48
7.20. Fiscal Year...................................................... 48
7.21. Operation of Railroads........................................... 48
7.22. Disclosure....................................................... 48
8. AFFIRMATIVE COVENANTS OF THE BORROWER.................................... 49
8.1. Punctual Payment.................................................. 49
8.2. Maintenance of Office............................................. 49
8.3. Records and Accounts.............................................. 49
8.4. Financial Statements, Certificates and Information................ 49
8.5. Notices........................................................... 51
8.5.1. Defaults................................................... 51
8.5.2. Environmental Events....................................... 51
8.5.3. Notice of Litigation and Judgments......................... 51
8.5.4. Notification of Derailments................................ 51
8.6. Corporate Existence; Maintenance of Properties.................... 52
8.7. Insurance......................................................... 52
8.8. Taxes............................................................. 52
8.9. Inspection of Properties and Books, etc........................... 53
8.9.1. General.................................................... 53
8.9.2. Communications with Accountants............................ 53
8.10. Compliance with Laws, Contracts, Licenses, and Permits........... 53
8.11. Employee Benefit Plans........................................... 54
8.12. Use of Proceeds.................................................. 54
8.13. Further Assurances............................................... 54
8.14. Additional Restricted Subsidiaries............................... 54
9. CERTAIN NEGATIVE COVENANTS OF THE BORROWER............................... 54
9.1. Restrictions on Indebtedness...................................... 55
9.2. Restrictions on Liens............................................. 56
9.3. Restrictions on Investments....................................... 58
9.4. Distributions and Restricted Payments............................. 61
9.5. Merger, Acquisitions and Disposition of Assets.................... 61
9.5.1. Mergers and Acquisitions................................... 61
9.5.2. Disposition of Assets...................................... 61
9.6. Sale and Leaseback................................................ 62
9.7. Compliance with Environmental Laws................................ 62
9.8. CSX Remaining Debt................................................ 62
9.9. Employee Benefit Plans............................................ 63
9.10. Business Activities.............................................. 63
9.11. Capitalization................................................... 63
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9.12. Fiscal Year...................................................... 63
9.13. Negative Pledges................................................. 64
9.14. Transactions with Affiliates..................................... 64
10. FINANCIAL COVENANTS OF THE BORROWER..................................... 64
10.1. Funded Debt to EBITDA............................................ 64
10.2. Cash Flow Coverage............................................... 64
10.3. EBITDA less Capital Expenditures to Interest Ratio............... 65
10.4. Calculation of Financial Covenants............................... 65
11. CLOSING CONDITIONS...................................................... 65
11.1. Loan Documents................................................... 65
11.2. Certified Copies of Charter and Partnership Documents............ 65
11.3. Corporate or Other Action........................................ 66
11.4. Incumbency Certificate........................................... 66
11.5. Opinion of Counsel............................................... 66
11.6. Delivery of Agreements........................................... 66
11.7. Payment of Fees.................................................. 66
11.8. Certain Assignments.............................................. 66
11.9. Disbursement Instructions........................................ 67
12. CONDITIONS TO ALL BORROWINGS............................................ 67
12.1. Representations True; No Event of Default........................ 67
12.2. No Legal Impediment.............................................. 67
12.3. Governmental Regulation.......................................... 67
12.4. Proceedings and Documents........................................ 67
13. EVENTS OF DEFAULT; ACCELERATION; ETC.................................... 68
13.1. Events of Default and Acceleration............................... 68
13.2. Termination of Commitments....................................... 71
13.3. Remedies......................................................... 71
14. SETOFF.................................................................. 72
15. THE AGENT............................................................... 73
15.1. Authorization.................................................... 73
15.2. Employees and Agents............................................. 73
15.3. No Liability..................................................... 73
15.4. No Representations............................................... 74
15.4.1. General................................................... 74
15.4.2. Closing Documentation, etc................................ 74
15.5. Payments......................................................... 75
15.5.1. Payments to Agent......................................... 75
15.5.2. Distribution by Agent..................................... 75
15.5.3. Delinquent Banks.......................................... 75
15.6. Holders of Revolving Credit Notes................................ 76
15.7. Indemnity........................................................ 76
15.8. Agent as Bank.................................................... 76
15.9. Resignation...................................................... 76
15.10. Notification of Defaults and Events of Default.................. 77
15.11. Duties of Co-Agents............................................. 77
16. EXPENSES................................................................ 77
17. INDEMNIFICATION......................................................... 78
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18. SURVIVAL OF COVENANTS, ETC.............................................. 79
19. ASSIGNMENT AND PARTICIPATION............................................ 79
19.1. Conditions to Assignment by Bank................................. 79
19.2. Certain Representations and Warranties; Limitations; Covenants... 80
19.3. Register......................................................... 81
19.4. New Revolving Credit Notes....................................... 82
19.5. Participations................................................... 82
19.6. Disclosure....................................................... 82
19.7. Assignee or Participant Affiliated with the Borrower............. 83
19.8. Miscellaneous Assignment Provisions.............................. 83
19.9. Assignment by Borrower........................................... 84
20. NOTICES, ETC............................................................ 84
21. GOVERNING LAW........................................................... 84
22. HEADINGS................................................................ 85
23. COUNTERPARTS............................................................ 85
24. ENTIRE AGREEMENT, ETC................................................... 85
25. WAIVER OF JURY TRIAL, ETC............................................... 85
26. CONSENTS, AMENDMENTS, WAIVERS, ETC...................................... 86
27. SEVERABILITY............................................................ 86
28. TRANSITIONAL ARRANGEMENTS............................................... 86
28.1. Prior Credit Agreement Superseded................................. 86
28.2. Return and Cancellation of Notes; Release of Collateral.......... 87
28.3. Interest and Fees under Superseded Agreement..................... 87
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*Exhibit A Form of Revolving Credit Note *Exhibit B Form of Loan Request *Exhibit C Form of Compliance Certificate *Exhibit D Form of Instrument of Adherence (Guaranty) *Exhibit E Form of Assignment and Acceptance
*Schedule I Guarantors
*Schedule II Banks and Commitments
*Schedule 7.3 Titles to Properties; Leases
*Schedule 7.7 Litigation
*Schedule 7.17 Environmental Compliance
*Schedule 7.18 Subsidiaries; Joint Ventures
*Schedule 7.21 Operating Locations
*Schedule 8.7 Insurance
*Schedule 9.1 Existing Indebtedness
*Schedule 9.2 Existing Liens
*Schedule 9.3 Existing Investments
*OMITTED EXHIBITS AND SCHEDULES
UPON WRITTEN REQUEST, THE REGISTRANT WILL PROVIDE COPIES OF ANY OF THE REFERENCED OMITTED EXHIBITS AND SCHEDULES.
WHEREAS, pursuant to that certain Amended and Restated Revolving Credit and Term Loan Agreement dated as of February 8, 1996 (as heretofore amended, the "Prior Credit Agreement"), certain Banks which are party to this Credit Agreement and certain other lenders have made loans to the Borrower and its Subsidiaries for the purposes described therein; and
WHEREAS, the Prior Credit Agreement amended and restated in their entirety each of that certain Revolving Credit Agreement dated as of June 2, 1995 among the Borrower, its Subsidiaries, certain of the Banks and the Agent (as heretofore amended, the "Original Credit Agreement") and that certain Revolving Credit Agreement dated as of April 10, 1991 between Chicago & Illinois Midland Railway Company and BKB (the "CIMR Credit Agreement"); and
WHEREAS, GWI has requested the Banks and the Agent amend and restate the Prior Credit Agreement in its entirety to, among other things,
(a) increase the Commitments of the Banks from $32,000,000 to $65,000,000;
(b) convert the loans under the Prior Credit Agreement into Loans hereunder;
(c) make GWI the sole Borrower hereunder and certain of its Subsidiaries Guarantors hereunder;
(d) release the security interests granted in accordance with the Prior Credit Agreement; and
(e) make certain other changes to the terms and provisions of the Prior Credit Agreement;
NOW THEREFORE, the Borrower, all of the Banks, the Co-Agents, the Issuing Bank and the Agent hereby agree that the Prior Credit Agreement (including all the schedules and exhibits thereto) is hereby amended and restated in its entirety and remains in force and effect only as set forth herein (including the schedules and exhibits attached hereto) and the Loans and Letters of Credit (each as defined in the Prior Credit Agreement) shall constitute Loans and Letters of Credit hereunder.
The following terms shall have the meanings set forth in this (S)1 or elsewhere in the provisions of this Credit Agreement referred to below:
Base Eurodollar Letter of Credit Commitment
Rate Rate Applicable Fee
Funded Debt to EBITDA Applicable Applicable Margin Applicable
Level Ratio Margin Margin ----------------- Margin
----------- ------------------------------------------- ----------- ----------- -----------
-----------------------------------------------------------------------------------------------------------------
I Greater than or equal to 3.00 to 1.00 0% 1.50% 1.50% 0.375%
-----------------------------------------------------------------------------------------------------------------
II 0% 1.25% 1.25% 0.375%
Less than 3.00 to 1.00 but greater than or
equal to 2.50 to 1.00
-----------------------------------------------------------------------------------------------------------------
III 0% 1.00% 1.00% 0.300%
Less than 2.50 to 1.00 but greater than or
equal to 1.50 to 1.00
-----------------------------------------------------------------------------------------------------------------
IV 0% 0.75% 0.75% 0.250%
Less than 1.50 to 1.00
-----------------------------------------------------------------------------------------------------------------
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Notwithstanding the foregoing, (a) for Loans outstanding and commitment fees incurred during the period commencing on the Closing Date through April 1, 1998, the Applicable Margin shall be the Applicable Margin set forth as Level III above, (b) if the Borrower fails to deliver any Compliance Certificate pursuant to (S)8.4(c) hereof by the next occurring Adjustment Date then, for the period commencing on the next Adjustment Date to occur subsequent to such failure through the date immediately following the date on which such Compliance Certificate is delivered, the Applicable Margin shall be the highest Applicable Margin set forth above.
borrowing of money or the obtaining of credit (which the parties hereto agree for the purposes of this definition does not include Indebtedness permitted under (S)(S)9.1(b), (c), (d), (e), (g), (j) and (l) hereof) whether absolute or contingent, including, to the extent not included in such Indebtedness, all Capitalized Leases, the net present value (using a discount rate of 8% per annum) of all operating leases with a non-cancellable term of longer than one year and all Indebtedness guaranteed by the Borrower or its Restricted Subsidiaries.
state line south to BPR's mile post 221.0 near Punxsutawney, Pennsylvania and securing the CSX Remaining Debt.
"Eurocurrency Liabilities" (as that term is used in Regulation D), if such liabilities were outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on and as of the effective date of any change in the Eurocurrency Reserve Rate.
guaranties to the Banks and the Agent the payment and performance of the Obligations.
(a) if any Interest Period with respect to a Eurodollar Rate Loan would otherwise end on a day that is not a Eurodollar Business Day, that Interest Period shall be extended to the next succeeding Eurodollar Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Eurodollar Business Day;
(b) if any Interest Period with respect to a Base Rate Loan would end on a day that is not a Business Day, that Interest Period shall end on the next succeeding Business Day;
(c) if the Borrower shall fail to give notice as provided in (S)2.7, the Borrower shall be deemed to have requested a conversion of the affected Eurodollar Rate Loan to a Base Rate Loan and the continuance of all Base Rate Loans as Base Rate Loans on the last day of the then current Interest Period with respect thereto;
(d) any Interest Period relating to any Eurodollar Rate Loan that begins on the last Eurodollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Eurodollar Business Day of a calendar month; and
(e) any Interest Period relating to any Eurodollar Rate Loan that would otherwise extend beyond the Maturity Date shall end on the Maturity Date.
(i) all Indebtedness (whether under this Credit Agreement or otherwise) and any other balance sheet adjustments incurred or made in connection with the Permitted Acquisition shall be deemed to have been incurred or made on the first day of the Test Period, and all Indebtedness of the Person acquired or to be acquired in such Permitted Acquisition which was or will have been repaid in connection with the consummation of the Permitted Acquisition shall be deemed to have been repaid concurrently with the incurrence of the Indebtedness incurred in connection with the Permitted Acquisition;
(ii) all Indebtedness assumed to have been incurred pursuant to the preceding clause (i) shall be deemed to have borne interest at the sum of (a) the arithmetic mean of (x) the Eurodollar Rate for Eurodollar Rate Loans having an Interest Period of one month in effect on the first day of the Test Period and (y) the Eurodollar Rate for Eurodollar Rate Loans having an Interest Period of one month in effect
(iii) other reasonable cost savings, expenses and other income statement or operating statement adjustments which are attributable to the change in ownership and/or management resulting from such Permitted Acquisition as may be approved by the Agent in writing (which approval shall not be unreasonably withheld) shall be deemed to have been realized on the first day of the Test Period.
Unrestricted Subsidiary to a Restricted Subsidiary unless such Unrestricted Subsidiary becomes a Guarantor hereunder.
(a) A reference to any document or agreement shall include such document or agreement as amended, modified or supplemented from time to time in accordance with its terms and the terms of this Credit Agreement.
(b) The singular includes the plural and the plural includes the singular.
(c) A reference to any law includes any amendment or modification to such law.
(d) A reference to any Person includes its permitted successors and permitted assigns.
(e) Accounting terms not otherwise defined herein have the meanings assigned to them by generally accepted accounting principles applied on a consistent basis by the accounting entity to which they refer.
(f) The words "include", "includes" and "including" are not limiting.
(g) All terms not specifically defined herein or by generally accepted accounting principles, which terms are defined in the Uniform Commercial Code as in effect in the Commonwealth of Massachusetts, have the meanings assigned to them therein, with the term "instrument" being that defined under Article 9 of the Uniform Commercial Code.
(h) Reference to a particular "(S)" refers to that section of this Credit Agreement unless otherwise indicated.
(i) The words "herein", "hereof", "hereunder" and words of like import shall refer to this Credit Agreement as a whole and not to any particular section or subdivision of this Credit Agreement.
Borrower shall pay to the Agent for the respective accounts of the Banks the full amount of any commitment fee then accrued on the amount of the reduction. No reduction or termination of the Commitments may be reinstated.
(b) Each Eurodollar Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto at a rate per annum equal to the Eurodollar Rate determined for such Interest Period plus the Applicable Margin with respect to Eurodollar Rate Loans as in effect from time to time.
(c) The Borrower promises to pay interest on each Loan in arrears on each Interest Payment Date with respect thereto.
such notice shall specify (A) the principal amount of the Loan requested, (B) the proposed Drawdown Date of such Loan, (C) the Interest Period for such Loan and (D) the Type of such Loan. Promptly upon receipt of any such notice, the Agent shall notify each of the Banks thereof. Each Loan Request shall be irrevocable and binding on the Borrower and shall obligate the Borrower to accept the Loan requested from the Banks on the proposed Drawdown Date. Each Loan Request shall be in a minimum aggregate amount of $500,000 or an integral multiple thereof.
the first Interest Period relating thereto. The Agent shall notify the Banks promptly when any such automatic conversion contemplated by this ss.2.7 is scheduled to occur.
denominator of which is 360. A statement of the Agent submitted to such Bank with respect to any amounts owing under this paragraph shall be prima facie evidence of the amount due and owing to the Agent by such Bank. If the amount of such Bank's Commitment Percentage of such Loans is not made available to the Agent by such Bank within three (3) Business Days following such Drawdown Date, the Agent shall be entitled to recover such amount from the Borrower on demand, with interest thereon at the rate per annum applicable to the Loans made on such Drawdown Date.
stock of the Borrower) or warrants for the purchase of its stock or other equity or equity instruments, then as soon as practicable and in any event within thirty (30) days after the sale of such new equity, the Borrower shall prepay the Loans in an amount equal to one hundred percent (100%) of the Net Cash Proceeds to the Borrower of such sale or issuance of new equity.
Revolving Credit Note, with adjustments to the extent practicable to equalize any prior repayments not exactly in proportion.
accordance with the terms thereof and when accompanied by the documents described therein, (ii) subject to clause (iii) hereof, shall have a term of not more than one (1) year from the date of issuance, extension or renewal thereof and (iii) have an expiry date no later than the date which is fourteen (14) days (or, if the Letter of Credit is confirmed by a confirmer or otherwise provides for one or more nominated persons, forty-five (45) days) prior to the Maturity Date. Each Letter of Credit so issued, extended or renewed shall be subject to the Uniform Customs.
(a) except as otherwise expressly provided in ss.4.2(b) and
(c), on each date that any draft presented under such Letter of
Credit is honored by the Agent, or the Agent otherwise makes a
payment with respect thereto, (i) the Dollar Equivalent of the amount
paid by the Agent under
or with respect to such Letter of Credit, and (ii) the Dollar Equivalent of the amount of any taxes, fees, charges or other costs and expenses whatsoever incurred by the Agent or any Bank in connection with any payment made by the Agent or any Bank under, or with respect to, such Letter of Credit,
(b) upon the reduction (but not termination) of the Total Commitment to an amount less than the Dollar Equivalent of the Maximum Drawing Amount, an amount equal to such difference, which amount shall be held by the Agent for the benefit of the Banks and the Issuing Bank as cash collateral for all Reimbursement Obligations, and
(c) upon the termination of the Total Commitment, or the acceleration of the Reimbursement Obligations with respect to all Letters of Credit in accordance with ss.13, an amount equal to the Dollar Equivalent of the then Maximum Drawing Amount on all Letters of Credit, which amount shall be held by the Agent for the benefit of the Banks and the Agent as cash collateral for all Reimbursement Obligations.
Each such payment shall be made to the Agent at the Agent's Head Office in Dollars in immediately available funds. Interest on any and all amounts remaining unpaid by the Borrower under this ss.4.2 at any time from the date such amounts become due and payable (whether as stated in this ss.4.2, by acceleration or otherwise) until payment in full (whether before or after judgment) shall be payable to the Agent on demand at the rate specified in ss.5.10 for overdue principal on the Loans.
numerator of which is the number of days that elapse from and including the date the Issuing Bank paid the draft presented for honor or otherwise made payment to the date on which such Bank's Commitment Percentage of such Unpaid Reimbursement Obligation shall become immediately available to the Agent, and the denominator of which is 360. The responsibility of the Issuing Bank to the Borrower and the Banks shall be only to determine that the documents (including each draft) delivered under each Letter of Credit in connection with such presentment shall be in conformity in all material respects with such Letter of Credit. From and after such purchase of the applicable Letter of Credit Participations, such Unpaid Reimbursement Obligations shall be deemed to have been converted into Base Rate Loans made by the Banks, and all amounts from time to time accruing, and all amounts from time to time payable, on account of such Unpaid Reimbursement Obligations shall be payable in Dollars as if such Letter of Credit had originally been issued in Dollars.
acting, under this Agreement in accordance with a request of the Majority Banks, and such request and any action taken or failure to act pursuant thereto shall be binding upon the Banks and all future holders of the Revolving Credit Notes or of a Letter of Credit Participation.
the Agent, for the respective accounts of the Banks, the Issuing Bank and the Agent, at the Agent's Head Office or at such other location in the Boston, Massachusetts, area that the Agent may from time to time designate, in each case in immediately available funds.
(i) each payment in respect of costs, expenses and indemnities shall be made in the currency in which the same were incurred; and
(ii) any amount expressed to be payable in a currency other than Dollars shall be paid in that other currency.
(b) No payment to the Agent, the Issuing Bank or any Bank (whether under any judgment or court order or otherwise) shall discharge the obligation or liability in respect of which it was made unless and until the Agent, the Issuing Bank or such Bank shall have received payment in full in the currency in which such obligation or liability was incurred, and to the extent that the amount of any such payment shall, on actual conversion into such currency, fall short of such obligation or liability actual or contingent expressed in that currency, the Borrower
shall
indemnify and hold harmless the Agent, the Issuing Bank or such Bank, as the case may be, with respect to the amount of the shortfall.
(b) If, on any Reset Date and on the Maturity
Date, the aggregate outstanding amount (expressed in
Dollars) of all Loans and Letter of Credit Obligations
exceeds the Total Commitment by more than $100,000, then
(i) the Agent shall give notice thereof to the Borrower and
the Banks and (ii) within two (2) Business Days thereafter,
the Borrower shall repay or prepay the Loans in accordance
with this Agreement in an aggregate principal amount such
that, after giving effect thereto, the aggregate
outstanding amount (expressed in Dollars) of all Loans and
Letter of Credit Obligations no longer exceeds the Total
Commitment (expressed in Dollars).
(c) Without limiting subsection ss.5.2.3.2(b),
if, on any day prior to the Maturity Date, the aggregate
outstanding amount (expressed in Dollars) of all Loans and
Letter of Obligations exceeds the Total Commitment by five
percent (5%) or more, then (i) the Agent shall give notice
thereof to the Borrower and the Banks and (ii) within two
(2) Business Days thereafter, the Borrower shall repay or
prepay the Loans in accordance with this Agreement in an
aggregate principal amount such that, after giving effect
thereto, the aggregate outstanding amount (expressed in
Dollars) of all Loans and Letter of Credit Obligations no
longer exceeds the Total Commitment (expressed in Dollars).
Nothing set forth in this ss.5.2.3.2 shall be construed to
require the Agent to calculate daily compliance under this
ss.5.2.3.2 unless expressly requested to do so by a Bank.
(d) If on any Reset Date, the aggregate outstanding Letter of Credit Obligations (expressed in Dollars) exceeds the Letter of Credit sublimit set forth in ss.4.1 (expressed in Dollars) by more than five percent (5%), then the Borrower shall immediately upon demand provide cash collateral to the Agent such that, after giving effect thereto, the aggregate outstanding Letter of Credit
Obligations (expressed in Dollars) no longer exceed the
Letter of Credit sublimit set forth in ss.4.1.
Bank, any additional amounts necessary to compensate such Bank for any costs incurred by such Bank in making any conversion in accordance with this ss.5.5, including any interest or fees payable by such Bank to lenders of funds obtained by it in order to make or maintain its Eurodollar Rate Loans hereunder.
(a) subject any Bank, the Issuing Bank or the Agent to any tax, levy, impost, duty, charge, fee, deduction or withholding of any nature with respect to this Credit Agreement, the other Loan Documents, any Letters of Credit, such Bank's Commitment or the Loans (other than taxes based upon or measured by the income or profits of such Bank, the Issuing Bank or the Agent), or
(b) materially change the basis of taxation (except for changes in taxes on income or profits) of payments to any Bank of the principal of or the interest on any Loans or any other amounts payable to any Bank, the Issuing Bank or the Agent under this Credit Agreement or any of the other Loan Documents, or
(c) impose or increase or render applicable (other than to the extent specifically provided for elsewhere in this Credit Agreement) any special deposit, reserve, assessment, liquidity, capital adequacy or other similar requirements (whether or not having the force of law) against assets held by, or deposits in or for the account of, or loans by, or letters of credit issued by, or commitments of an office of any Bank, or the Issuing Bank or
(d) impose on any Bank, the Issuing Bank or the Agent any other conditions or requirements with respect to this Credit Agreement, the other Loan Documents, any Letters of Credit, the Loans, such Bank's Commitment, or any class of loans, letters of credit or commitments of which any of the Loans or such Bank's Commitment forms a part, and the result of any of the foregoing is
(i) to increase the cost to any Bank, or the Issuing Bank of making, funding, issuing, renewing, extending or maintaining any of the Loans or such Bank's Commitment or any Letter of Credit, or
(ii) to reduce the amount of principal, interest, Reimbursement Obligation or other amount payable to such Bank, the Issuing Bank or the Agent hereunder on account of such Bank's Commitment, any Letter of Credit or any of the Loans, or
(iii) to require such Bank, the Issuing Bank or the Agent to make any payment or to forego any interest or Reimbursement Obligation or other sum payable hereunder, the amount of which payment or foregone interest or Reimbursement Obligation or other sum is calculated by reference to the gross amount of any sum receivable or deemed received by such Bank, the Issuing Bank or the Agent from the Borrower hereunder,
then, and in each such case, the Borrower will, upon demand made by such Bank, the Issuing Bank or (as the case may be) the Agent at any time and from time to time and as often as the occasion therefor may arise, pay to such Bank, the Issuing Bank or the Agent such additional amounts as will be sufficient to compensate such Bank, the Issuing Bank or the Agent for such additional cost, reduction, payment or foregone interest or Reimbursement Obligation or other sum.
compensation. Each Bank shall allocate such cost increases among its customers in good faith and on an equitable basis.
credit to the Borrower by the Banks pursuant to this Credit Agreement (which benefits are hereby acknowledged), (iii) it is a condition precedent to the Banks making any Loans or otherwise extending credit to the Borrower under this Agreement that each Guarantor execute and deliver to the Banks, the Issuing Bank, and the Agent a guaranty substantially in the form of this ss.6 and (iv) each Guarantor wishes to guaranty the Borrower's obligations to the Banks, the Issuing Bank and the Agent under or in respect of the Credit Agreement, each Guarantor hereby agrees with the Banks, the Issuing Bank and the Agent as follows:
Each of the Guarantors waives promptness, diligences, presentment, demand, protest, notice of acceptance, notice of any Obligations incurred and all other notices of any kind, all defenses which may be available by virtue of any valuation, stay, moratorium law or other similar law now or hereafter in effect, any right to require the marshalling of assets of the Borrower, any of the Guarantors or any other entity or other person primarily or secondarily liable with respect to any of the Obligations, and all suretyship defenses generally. Without limiting the generality of the foregoing, each of the Guarantors agrees to the provisions of any instrument evidencing, securing or otherwise executed in connection with any Obligation and agrees that the obligations of such Guarantor hereunder shall not be released or discharged, in whole or in part, or otherwise affected by (i) the failure of the Agent, the Issuing Bank or any Bank to assert any claim or demand or to enforce any right or remedy against the Borrower or any other entity or other person primarily or secondarily liable with respect to any of the Obligations; (ii) any extensions, compromise, refinancing, consolidation or renewals of any Obligation; (iii) any change in the time, place or manner of payment of any of the Obligations or any rescissions, waivers, compromise, refinancing, consolidation, amendments or modifications of any of the terms or provisions of this Credit Agreement, the Revolving Credit Notes, the other Loan Documents or any other agreement evidencing, securing or otherwise executed in connection with any of the Obligations; (iv) the addition, substitution or release of any entity or other person primarily or secondarily liable for any Obligation; (v) the adequacy of any rights which the Agent, the Issuing Bank or any Bank may have against any collateral security or other means of obtaining repayment of any of the Obligations; (vi) the impairment of any collateral securing any of the Obligations, including without limitation the failure to perfect or preserve any rights which the Agent, the Issuing Bank or any Bank might have in such collateral security or the substitution, exchange, surrender, release, loss or destruction of any such collateral security; or (vii) any other act or omission which might in any manner or to any extent vary the risk of such Guarantor or otherwise operate as a release or discharge of such Guarantor, all of which may be done without notice to such Guarantor. To the fullest extent permitted by law, each of the Guarantors hereby expressly waives any and all rights or defenses arising by reason of (A) any "one action" or "anti-deficiency" law which would otherwise prevent the Agent, the Issuing Bank or any Bank from bringing any action, including any claim for a deficiency, or exercising any other right or remedy (including any right of set-off), against such Guarantor before or after the Agent's, the Issuing Bank's or such Bank's commencement or completion of any foreclosure action, whether judicially, by exercise of power of sale or otherwise, or (B) any other law which in any other way would otherwise require any election of remedies by the Agent, the Issuing Bank or any Bank.
Guarantor by reason of the Borrower's or such other Guarantor's insolvency, bankruptcy or reorganization or by other operation of law or for any other reason, this Guaranty shall nevertheless be binding on each of the Guarantors not affected thereby to the same extent as if such Guarantor at all times had been the principal obligor on all such Obligations. In the event that acceleration of the time for payment of any of the Obligations is stayed upon the insolvency, bankruptcy or reorganization of the Borrower, or for any other reason, all such amounts otherwise subject to acceleration under the terms of this Credit Agreement, the Revolving Credit Notes, the other Loan Documents or any other agreement evidencing, securing or otherwise executed in connection with any Obligation shall be immediately due and payable by the Guarantors.
Agent on account of the Obligations without affecting in any manner the liability of such Guarantor under the other provisions of this Guaranty.
the insolvency, bankruptcy or reorganization of the Borrower, or otherwise, all as though such payment had not been made or value received.
The Borrower represents and warrants to the Banks, the Issuing Bank and the Agent as follows:
agreement of, or any agreement or other instrument binding upon the Borrower or any of its Restricted Subsidiaries.
the
Borrower or an ERISA Affiliate, as appropriate, may terminate each such Plan at any time (or at any time subsequent to the expiration of any applicable bargaining agreement) in the discretion of the Borrower or such ERISA Affiliate without liability to any Person.
(c) except as set forth on Schedule 7.17 attached hereto:
(i) to the best of the Borrower's knowledge, no portion of the Real
Estate has been used for the handling, processing, storage or
disposal of Hazardous
Substances which would have a material adverse effect on the value of the Real Estate which in turn would have a material adverse effect on the business, assets or financial condition of the Borrower or any of its Restricted Subsidiaries except in accordance with applicable Environmental Laws; and no underground tank or other underground storage receptacle for Hazardous Substances which would have a material adverse effect on the value of the Real Estate which in turn would have a material adverse effect on the business, assets or financial condition of the Borrower or any of its Restricted Subsidiaries is located on any portion of the Real Estate except in accordance with applicable Environmental Laws; (ii) in the course of any activities conducted by the Borrower, its Restricted Subsidiaries or operators of its properties, no Hazardous Substances have been generated or are being used on the Real Estate except in accordance with applicable Environmental Laws; (iii) to the best of the Borrower's knowledge, there have been no releases (i.e. any past or present releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, disposing or dumping) or threatened releases of Hazardous Substances on, upon, into or from the properties of the Borrower or its Restricted Subsidiaries, which releases would have a material adverse effect on the value of any of the Real Estate or adjacent properties or the environment; (iv) to the best of the Borrower's knowledge, there have been no releases on, upon, from or into any real property in the vicinity of any of the Real Estate which, through soil or groundwater contamination, may have come to be located on, and which would have a material adverse effect on the value of, the Real Estate; and (v) in addition, to the best of the Borrower's knowledge, any Hazardous Substances that have been generated on any of the Real Estate after the effective date of RCRA and applicable regulations have been transported offsite only by carriers having an identification number issued by the EPA, treated or disposed of only by treatment or disposal facilities maintaining valid permits as required under applicable Environmental Laws, which transporters and facilities have been and are, to the best of the Borrower's knowledge, operating in compliance with such permits and applicable Environmental Laws; and
Borrower has any other Subsidiaries except as set forth on Schedule 7.18 hereto. Neither the Borrower nor any of its Restricted Subsidiaries is engaged in any joint venture or partnership with any other Person, except that Dayton is the sole general partner and Investors is the sole limited partner in Switching.
The Borrower covenants and agrees that, so long as any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Revolving Credit Note is outstanding or any Bank has any obligation to make any Loans or the Issuing Bank has any obligation to issue, extend or renew any Letters of Credit:
(a) as soon as practicable, but in any event not later than ninety (90) days after the end of each fiscal year of the Borrower, the consolidated balance sheet of the Borrower and its Restricted Subsidiaries, as at the end of such year, and the related consolidated statement of income and consolidated statement of cash flow, each setting forth in comparative form the figures for the previous fiscal year, and the partial consolidating (in accordance with past practices) balance sheet of the Borrower and its Restricted Subsidiaries, as at the end of such year, and the consolidating statement of income and consolidating statement of cash flow for such year, and all such consolidated and consolidating statements to be in reasonable detail and prepared in accordance with generally accepted accounting principles, and all such consolidated statements to be certified without qualification by Arthur Andersen L.L.P. or by other independent certified public accountants satisfactory to the Agent, together with a written statement from such accountants to
the effect that they have read a copy of this Credit Agreement, and that, in making the examination necessary to said certification, they have obtained no knowledge of any Default or Event of Default, or, if such accountants shall have obtained knowledge of any then existing Default or Event of Default they shall disclose in such statement any such Default or Event of Default; provided that such accountants shall not be liable to the Banks for failure to obtain knowledge of any Default or Event of Default;
(b) as soon as practicable, but in any event not later than forty-five (45) days after the end of each of the first three fiscal quarters of the Borrower and not later than sixty (60) days after the end of the fourth fiscal quarter of the Borrower, copies of the unaudited consolidated balance sheet of the Borrower and its Restricted Subsidiaries as at the end of such quarter, and the related consolidated statement of income and consolidated statement of cash flow for the portion of the Borrower's fiscal year then elapsed, all in reasonable detail and prepared in accordance with generally accepted accounting principles, together with a certification by the principal financial or accounting officer of the Borrower that the information contained in such financial statements fairly presents the financial position of the Borrower and its Restricted Subsidiaries on the date thereof (subject to year-end adjustments);
(c) simultaneously with the delivery of the financial statements referred to in subsection (a) above and the delivery of the financial statements referred to in subsection (b) above with respect to the first three fiscal quarters of the Borrower, a statement certified by the principal financial or accounting officer of the Borrower in substantially the form of Exhibit C hereto (a "Compliance Certificate") and setting forth in reasonable detail computations evidencing compliance with ss.3.2.2 and the covenants contained in ss.10 and, in each case, (if applicable) reconciliations to reflect changes in generally accepted accounting principles since the Balance Sheet Date;
(d) contemporaneously with the filing or mailing thereof, copies of all material of a financial nature filed with the Securities and Exchange Commission or sent to the stockholders of the Borrower;
(e) no later than January 31 of each fiscal year of the Borrower, the annual budgets of the Borrower and its Restricted Subsidiaries, including a projected consolidated and consolidating balance sheet for the end of such fiscal year, and consolidated and consolidating statements of income and statements of cash flow for such fiscal year; and
(f) from time to time such other financial data and information (including accountants' management letters) as the Agent or any Bank may reasonably request.
could result) in the incurrence of costs by the Borrower and its Restricted Subsidiaries reasonably estimated to be or exceed $1,000,000 and which could reasonably be expected to have a material adverse effect on the operations of the Borrower or any of its Restricted Subsidiaries. The Borrower shall deliver to the Agent and each of the Banks all reports filed with the FRA regarding any occurrence referred to in this ss.8.5.4.
assessment, charge, levy or claim need not be paid if the validity or amount thereof shall currently be contested in good faith by appropriate proceedings and if the Borrower or such Restricted Subsidiary shall have set aside on its books adequate reserves with respect thereto; and provided further that the Borrower and each Restricted Subsidiary of the Borrower will pay all such taxes, assessments, charges, levies or claims forthwith upon the commencement of proceedings to foreclose any lien that may have attached as security therefor.
The Borrower covenants and agrees that, so long as any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Revolving Credit Note is
outstanding or any Bank has any obligation to make any Loans or the Issuing Bank has any obligations to issue, extend or renew any Letters of Credit:
(a) Indebtedness to the Banks, the Issuing Bank and the Agent arising under any of the Loan Documents;
(b) current liabilities of the Borrower or such Restricted Subsidiary incurred in the ordinary course of business not incurred through (i) the borrowing of money, or (ii) the obtaining of credit except for credit on an open account basis customarily extended and in fact extended in connection with normal purchases of goods and services;
(c) Indebtedness in respect of taxes, assessments, governmental charges or levies and claims for labor, materials and supplies to the extent that payment therefor shall not at the time be required to be made in accordance with the provisions of ss.8.8;
(d) Indebtedness in respect of judgments or awards that have been in force for less than the applicable period for taking an appeal so long as execution is not levied thereunder or in respect of which the Borrower or such Restricted Subsidiary shall at the time in good faith be prosecuting an appeal or proceedings for review and in respect of which a stay of execution shall have been obtained pending such appeal or review;
(e) endorsements for collection, deposit or negotiation and warranties of products or services, in each case incurred in the ordinary course of business;
(f) Indebtedness in respect of the CSX Remaining Debt, provided that the aggregate principal amount of such Indebtedness shall not exceed $8,922,105;
(g) Indebtedness of the Borrower or any of its Restricted Subsidiaries to the Borrower or any of the other Restricted Subsidiaries consisting of rights of reimbursement, contribution, subrogation and the like in connection with the joint and several obligations of the Restricted Subsidiaries under the Loan Documents;
Subsidiaries shall not exceed the aggregate amount of $15,000,000 at any one time;
(i) Indebtedness existing on the date hereof and listed and described on Schedule 9.1 hereto;
(j) Indebtedness of the Borrower to any of the Guarantors or any of the Guarantors to the Borrower or any of the other Guarantors;
(k) Indebtedness of the Borrower to any of the Banks with respect to interest rate protection arrangements;
(l) Indebtedness in respect of performance, surety, statutory, insurance, appeal or similar bonds obtained in the ordinary course of business;
(m) Indebtedness of the Borrower and its Restricted Subsidiaries in respect of operating leases;
(n) Indebtedness in respect of the Bridge Rehabilitation Project, provided that the aggregate principal amount of such Indebtedness shall not exceed $900,000;
(o) Indebtedness under the Willamette Valley Note not to exceed $400,000 in principal amount outstanding at any time;
(p) Indebtedness of the Borrower, IMR and WPR in respect of their guaranty of the obligations outstanding on or before September 30, 1998 of Leasing under the Apus Railcar Lease;
(q) Indebtedness of the Borrower or any of its Restricted Subsidiaries in respect of guaranties of obligations in connection with Permitted Acquisitions and other Investments permitted by ss.9.3(i), (j) and (m) or the operation of any of its Restricted Subsidiaries (in each case, to the extent the underlying Indebtedness with respect thereto is otherwise permitted under this ss.9.1), not to exceed $10,000,000 in aggregate amount at any time; and
(r) other Indebtedness not included in the foregoing provisions of this ss.9.1 not to exceed $1,000,000 in the aggregate at any time outstanding.
profits therefrom for the purpose of subjecting the same to the payment of Indebtedness or performance of any other obligation in priority to payment of its general creditors; (iii) acquire, or agree or have an option to acquire, any property or assets upon conditional sale or other title retention or purchase money security agreement, device or arrangement; (iv) suffer to exist for a period of more than thirty (30) days after the same shall have been incurred any Indebtedness or claim or demand against it that if unpaid might by law or upon bankruptcy or insolvency, or otherwise, be given any priority whatsoever over its general creditors; or (v) sell, assign, pledge or otherwise transfer any accounts, contract rights, general intangibles, chattel paper or instruments, with or without recourse; provided that the Borrower and any Restricted Subsidiary may create or incur or suffer to be created or incurred or to exist:
(a) liens in favor of the Borrower on all or part of the assets of Subsidiaries of the Borrower securing Indebtedness owing by Subsidiaries of the Borrower to the Borrower;
(b) liens to secure taxes, assessments and other government charges in respect of obligations not overdue or liens on properties to secure claims for labor, material or supplies in respect of obligations not overdue;
(c) deposits or pledges made in connection with, or to secure payment of, workmen's compensation, unemployment insurance, old age pensions or other social security obligations;
(d) liens on properties in respect of judgments or awards, the Indebtedness with respect to which is permitted by ss.9.1(d);
(e) liens of carriers, warehousemen, mechanics and materialmen, and other like liens on properties, in existence less than 120 days from the date of creation thereof in respect of obligations not overdue;
(f) encumbrances on Real Estate consisting of easements, rights of way, zoning restrictions, restrictions on the use of real property and defects and irregularities in the title thereto, landlord's or lessor's liens under leases to which the Borrower or any of its Restricted Subsidiaries is a party, and other minor liens or encumbrances none of which in the opinion of the Borrower interferes materially with the use of the property affected in the ordinary conduct of the business of the Borrower and its Restricted Subsidiaries, which defects do not individually or in the aggregate have a materially adverse effect on the business of the Borrower individually or of the Borrower and its Restricted Subsidiaries on a consolidated basis;
(g) liens existing on the date hereof and listed on Schedule 9.2 hereto;
(h) purchase money security interests in or purchase money mortgages on real or personal property acquired after the date hereof to secure purchase money Indebtedness of the type and amount permitted by ss.9.1(h), incurred or assumed in connection with the acquisition of such property, which security interests or mortgages cover only the real or personal property so acquired;
(i) the CSX Mortgages and the CSX Security Agreements solely to the extent that the CSX Remaining Debt is permitted under ss.9.1(f);
(j) liens consisting of deposits to secure Indebtedness permitted by ss.9.1(l) hereof;
(k) liens to secure Indebtedness permitted by ss.9.1(n) hereof;
(l) liens on the rights of WPR under Section 14.05 of its lease with Southern Pacific Transportation Company dated as of 12/30/92 to secure Indebtedness permitted by ss.9.1(o) hereof; and
(m) (i) liens on the equipment, fixtures and improvements of the Borrower and its Restricted Subsidiaries placed in or upon the premises leased pursuant to the Corpus Christi Lease, provided that the Borrower or any Restricted Subsidiary shall not make expenditures with respect to such equipment, fixtures and improvements with respect to such premises in excess of $300,000 and (ii) liens of the Port of Corpus Christi Authority of Nueces County, Texas on the two locomotives owned by Rail Link, Inc. and numbered as RLIX 547 and RLIX 475.
(a) marketable direct or guaranteed obligations of the United States of America that mature within one (1) year from the date of purchase by a Borrower;
(b) demand deposits, certificates of deposit, bankers acceptances and time deposits of United States banks having total assets in excess of $1,000,000,000;
(c) securities commonly known as "commercial paper" issued by a corporation organized and existing under the laws of the United States of America or any state thereof that at the time of purchase have been rated and the ratings for which are not less than "P 1" if rated by Moody's Investors Services, Inc., and not less than "A 1" if rated by Standard and Poor's;
(e) Investments with respect to Indebtedness permitted by ss.9.1(j) so long as such entities remain Restricted Subsidiaries of the Borrower;
(f) Investments by the Borrower in any of the Guarantors;
(g) Investments consisting of loans and advances to employees for moving, entertainment, travel and other similar expenses in the ordinary course of business not to exceed $250,000 in the aggregate at any time outstanding;
(h) Investments by the Borrower or any of its Restricted Subsidiaries in the Borrower or any of the other Restricted Subsidiaries consisting of rights of reimbursement, contribution, subrogation and the like in connection with the joint and several obligations of the Restricted Subsidiaries under the Loan Documents;
(i) Investments by the Borrower and its Restricted Subsidiaries in GWIA in an aggregate amount not to exceed $14,000,000 at any time;
(j) Investments by the Borrower and its Restricted Subsidiaries in GRO in an aggregate amount not to exceed $5,000,000 at any time; and
(i) the aggregate Purchase Price for (A) any one Permitted Acquisition (or group of related acquisitions) shall not exceed $25,000,000 and (B) all such Permitted Acquisitions shall not exceed $50,000,000 in any period of twelve consecutive months;
(ii) the Borrower shall have demonstrated to the reasonable satisfaction of the Agent (based on, among other things, operating and financial projections and pro forma financial statements delivered to the Agent and certified by the chief financial officer of the Borrower) that, after giving pro-forma effect to the Permitted Acquisition and the incurrence of any Indebtedness in connection therewith, all covenants (including all covenants contained in ss.10) contained herein (1) would have been satisfied on a Pro Forma Basis as at the end of and for the most recent fiscal quarter, and
(2) will be satisfied on a Pro Forma Basis for the next four fiscal quarters ending after the date of such Investment;
(iii) with respect to any such Permitted Acquisition:
(A) the Borrower shall have delivered to the Agent and the Banks reasonable (and, in any event, fifteen (15) days) prior written notice of such acquisition, which notice shall provide the Agent with a reasonably detailed description of the proposed acquisition, and shall include true and complete copies of (to the extent available at such time but in any event prior to the closing of any such Permitted Acquisition) all instruments and agreements executed or delivered or to be executed or delivered by the Borrower or any of its Restricted Subsidiaries in connection with such acquisition, all of which shall be reasonably satisfactory in form and substance to the Agent;
(B) the business and assets so acquired shall be acquired by the Borrower or any of its Restricted Subsidiaries free and clear of all Liens (other than Permitted Liens) and Indebtedness (other than Indebtedness permitted by ss.9.1 or otherwise consented to in writing by the Majority Banks) and the business so acquired shall be substantially the same line of business as that presently conducted by the Borrower and its Restricted Subsidiaries or lines of business reasonably related thereto;
(C) no contingent obligations or liabilities will be incurred or assumed in connection with such acquisition which could reasonably be expected to have a material adverse effect on the business or financial condition of the Borrower and its Restricted Subsidiaries, taken as a whole;
(D) in the case of any acquisition of capital stock, the acquired Person shall become a Restricted Subsidiary of the Borrower (or of any Restricted Subsidiary of the Borrower) or shall be merged with and into the Borrower or any Restricted Subsidiary; and the Borrower or the applicable Restricted Subsidiary and such acquired Person shall have complied with all the applicable provisions of ss.8.14;
(v) all computations required to satisfy the conditions specified in subparagraphs (i), (ii) and (iv) above shall be reasonably satisfactory to the Agent; and
(vi) with respect to any Permitted Acquisition, any debt instruments or preferred stock evidencing, governing or issued in connection with such Investment shall be reasonably satisfactory to the Agent and shall be permitted by this Credit Agreement;
(l) Investments consisting of deposits made in connection with a Permitted Acquisition; or
(m) Investments not otherwise permitted by this ss.9.3 in an aggregate amount not to exceed $10,000,000 at any time.
foregoing, if no Default or Event of Default exists or will occur as a result of such disposition, (i) Leasing may exchange railcars with Apus Rail One, Inc. pursuant to the Exchange Agreement and (ii) the Borrower and its Restricted Subsidiaries may lease, sell or otherwise dispose of, for cash, assets provided that the aggregate net book value (at the time of disposition thereof and after giving effect to the contemplated disposition) of all such assets shall not exceed $5,000,000 during any period of twelve consecutive months.
(a) engage in any "prohibited transaction" within the meaning of ss.406 of ERISA or ss.4975 of the Code which could result in a material liability for the Borrower or any of its Restricted Subsidiaries; or
(b) permit any Guaranteed Pension Plan to incur an "accumulated funding deficiency", as such term is defined in ss.302 of ERISA, whether or not such deficiency is or may be waived; or
(c) fail to contribute to any Guaranteed Pension Plan to an extent which, or terminate any Guaranteed Pension Plan in a manner which, could result in the imposition of a lien or encumbrance on the assets of the Borrower or any of its Restricted Subsidiaries pursuant to ss.302(f) or ss.4068 of ERISA; or
(d) permit or take any action which would result in the aggregate benefit liabilities (with the meaning of ss.4001 of ERISA) of all Guaranteed Pension Plans exceeding the value of the aggregate assets of such Plans, disregarding for this purpose the benefit liabilities and assets of any such Plan with assets in excess of benefit liabilities, by more than $200,000.
The Borrower covenants and agrees that, so long as any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Revolving Credit Note is outstanding or any Bank has any obligation to make any Loans or the Issuing Bank has any obligation to issue, extend or renew any Letters of Credit:
Period Ratio
------ -----
Closing Date - December 30, 1999 3.50:1.00
December 31, 1999 - December 30, 2000 3.00:1.00
December 31, 2000 - December 30, 2001 2.75:1.00
December 31, 2001 and thereafter 2.25:1.00
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Debt on terms satisfactory to the Agent and the Majority Banks) to be less than 1.25:1.00.
Period Ratio
------ -----
Closing Date - December 30, 1999 2.00:1.00
December 31, 1999 - December 30, 2001 2.25:1.00
December 31, 2001 and thereafter 2.50:1.00
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From and after the Closing Date, all of the obligations of the Borrower and its Subsidiaries under or in respect of the Prior Credit Agreement shall be evidenced solely by the terms of this Credit Agreement and the other Loan Documents. The obligations of the Banks to convert their claims against the Borrower and its Subsidiaries with respect to the Prior Credit Agreement into Obligations under this Credit Agreement, to amend and restate the Prior Credit Agreement and to make the initial Loans and the Issuing Bank to convert any existing letters of credit into Letters of Credit under this Credit Agreement and issue any initial Letters of Credit shall be subject to the satisfaction of the following conditions precedent on or prior to the Closing Date.
authorized officer of such Person stating that no amendments, modification, revisions or other changes have been made since the most recent delivery of such documents to the Agent under the Prior Credit Agreement and that such documents are in full force and effect as of the Closing Date.
(a) Harter, Secrest & Emery, counsel to the Borrower and its Restricted Subsidiaries; and
(b) local counsel to certain Restricted Subsidiaries in the state of Virginia.
The obligations of the Banks to convert their claims against the Borrower and its Restricted Subsidiaries with respect to the Prior Credit Agreement into Obligations under this Credit Agreement and to make any Loan, and the Issuing Bank to convert any existing letters of credit into Letters of Credit under this Credit Agreement or to issue, extend or renew any Letter of Credit, in each case whether on or after the Closing Date, shall also be subject to the satisfaction of the following conditions precedent:
(a) the Borrower shall fail to pay any principal of the Loans or any Reimbursement Obligation when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment;
(b) the Borrower or any of its Restricted Subsidiaries shall fail to pay any interest on the Loans, the commitment fee, any Letter of Credit Fee, the Agent's Fees, or other sums due hereunder or under any of the other Loan Documents, when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment, and such failure shall continue for three (3) days;
(c) the Borrower or any of its Restricted Subsidiaries shall fail to comply with any of the covenants contained in ss.ss.8, 9 or 10;
(d) the Borrower or any of its Restricted Subsidiaries shall fail to perform any term, covenant or agreement contained herein or in any of the other Loan Documents (other than those specified elsewhere in this ss.13.1) for fifteen (15) days after written notice of such failure has been given to the Borrower by the Agent;
(e) any representation or warranty of the Borrower or any of its Restricted Subsidiaries in this Credit Agreement or any of the other Loan Documents or in any other document or instrument delivered pursuant to or in connection with this Credit Agreement shall prove to have been false in any material respect upon the date when made or deemed to have been made or repeated;
(f) the Borrower or any of its Restricted Subsidiaries shall fail to pay at maturity, or within any applicable period of grace, any obligation for borrowed money or credit received (including the CSX Remaining Debt) or in respect of any Capitalized Leases, or fail to observe or perform any material term, covenant or agreement contained in any agreement by which it is bound, evidencing or securing borrowed money or credit received (including without limitation, the CSX Remaining Debt) or in respect of any Capitalized Leases for such period of time as would permit (assuming the giving of appropriate notice if required) the holder or holders thereof or of any obligations issued thereunder to accelerate the maturity thereof;
(g) the Borrower or any of its Restricted Subsidiaries shall make an assignment for the benefit of creditors, or admit in writing its inability to pay or generally fail to pay its debts as they mature or become due, or shall petition or apply for the appointment of a trustee or other custodian, liquidator or receiver of the Borrower or any of its Restricted Subsidiaries or of any substantial part of the assets of the Borrower or any of its Restricted Subsidiaries or shall commence any case or other proceeding relating to the Borrower or any of its Restricted Subsidiaries under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, or shall take any action to authorize or in furtherance of any of the foregoing, or if any such petition or application shall be filed or any such case or other proceeding shall be commenced against the Borrower or any of its Restricted Subsidiaries and the Borrower or any of its Restricted Subsidiaries shall indicate its approval thereof, consent thereto or acquiescence therein or such petition or application shall not have been dismissed within forty-five (45) days following the filing thereof;
(h) a decree or order is entered appointing any such trustee, custodian, liquidator or receiver or adjudicating the Borrower or any of its Restricted Subsidiaries bankrupt or insolvent, or approving a petition in any such case or other proceeding, or a decree or order for relief is entered in respect of any of the Borrower or any Restricted Subsidiary of the Borrower in an involuntary case under federal bankruptcy laws as now or hereafter constituted;
(i) there shall remain in force, undischarged, unsatisfied and unstayed, for more than thirty days, whether or not consecutive, any final judgment against the Borrower or any of its Restricted Subsidiaries that, with other outstanding final judgments, undischarged, against the Borrower or any of its Restricted Subsidiaries exceeds in the aggregate $500,000;
(j) if any of the Loan Documents shall be cancelled, terminated, revoked or rescinded otherwise than in accordance with the terms thereof or with the express prior written agreement, consent or approval of the Banks, or any action at law, suit or in equity or other legal proceeding to cancel, revoke or rescind any of the Loan Documents shall be commenced by or on behalf of the Borrower or any of its Restricted Subsidiaries party thereto or any of their respective stockholders, or any court or any other governmental or regulatory authority or agency of competent jurisdiction shall make a determination that, or issue a judgment, order, decree or ruling to the effect that, any one or more of the Loan Documents is illegal, invalid or unenforceable in accordance with the terms thereof;
(k) with respect to any Guaranteed Pension Plan, an ERISA Reportable Event shall have occurred and the Majority Banks shall
have
determined in their reasonable discretion that such event reasonably could be expected to result in liability of the Borrower or any of its Restricted Subsidiaries to the PBGC or such Guaranteed Pension Plan in an aggregate amount exceeding $500,000 and such event in the circumstances occurring reasonably could constitute grounds for the termination of such Guaranteed Pension Plan by the PBGC or for the appointment by the appropriate United States District Court of a trustee to administer such Guaranteed Pension Plan; or a trustee shall have been appointed by the United States District Court to administer such Plan; or the PBGC shall have instituted proceedings to terminate such Guaranteed Pension Plan;
(l) the Borrower or any of its Restricted Subsidiaries shall be enjoined, restrained or in any way prevented by the order of any court or any administrative or regulatory agency from conducting any material part of its business and such order shall continue in effect for more than thirty (30) days;
(m) there shall occur any strike, lockout, labor dispute, embargo, condemnation, act of God or public enemy, or other casualty, which in any such case causes, for more than fifteen (15) consecutive days, the cessation or substantial curtailment of revenue producing activities at any facility of the Borrower or any of its Restricted Subsidiaries if such event or circumstance is not covered by business interruption insurance and would have a material adverse effect on the business or financial condition of the Borrower and its Restricted Subsidiaries taken as a whole;
(n) there shall occur the loss, suspension or revocation of, or failure to renew, any license or permit now held or hereafter acquired by the Borrower or any of its Restricted Subsidiaries if such loss, suspension, revocation or failure to renew would have a material adverse effect on the business or financial condition of the Borrower and its Restricted Subsidiaries taken as a whole;
(o) the Borrower or any of its Restricted Subsidiaries shall be indicted for a state or federal crime, or any civil or criminal action shall otherwise have been brought against the Borrower or any of its Restricted Subsidiaries, a punishment for which in any such case could include the forfeiture of any assets of such Borrower or such Restricted Subsidiary having a fair market value in excess of $500,000; or
(p) (i) the Fuller Immediate Family shall, at any time,
cease to maintain beneficial ownership and control of at least
twenty-five percent (25%) of the voting interests of the Borrower,
(ii) any person or group of persons (within the meaning of Section 13
or 14 of the Securities Exchange Act of 1934, as amended) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3
promulgated by the
Securities and Exchange Commission under said Act) of more than twenty-five percent (25%) of the outstanding shares of the common stock of the Borrower, (iii) during any prior of twelve consecutive calendar months, individuals who were directors of the Borrower on the first day of such period shall cease to constitute a majority of the board of directors of the Borrower, or (iv) the Borrower shall at any time own directly or indirectly less than 100% of the shares of the capital stock or partnership interests, as the case may be, of each of the Restricted Subsidiaries, as adjusted pursuant to any stock split, stock dividend or recapitalization or reclassification of the capital of such Person except that the Borrower may own only 454 shares of the 458 shares of the issued and outstanding capital stock of Dansville;
the consent of the Majority Banks but not otherwise, proceed to protect and enforce its rights by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Credit Agreement and the other Loan Documents or any instrument pursuant to which the Obligations to such Bank are evidenced, including as permitted by applicable law the obtaining of the ex parte appointment of a receiver, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right of such Bank. No remedy herein conferred upon any Bank or the Agent or the holder of any Revolving Credit Note or purchaser of any Letter of Credit Participation is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of law.
rescinded and the amount restored to the extent of such recovery, but without interest.
(a) The Agent is authorized to take such action on behalf of each of the Banks and to exercise all such powers as are hereunder and under any of the other Loan Documents and any related documents delegated to the Agent, together with such powers as are reasonably incident thereto, provided that no duties or responsibilities not expressly assumed herein or therein shall be implied to have been assumed by the Agent.
(b) The relationship between the Agent and each of the Banks is that of an independent contractor. The use of the term "Agent" is for convenience only and is used to describe, as a form of convention, the independent contractual relationship between the Agent and each of the Banks. Nothing contained in this Credit Agreement nor the other Loan Documents shall be construed to create an agency, trust or other fiduciary relationship between the Agent and any of the Banks.
(c) As an independent contractor empowered by the Banks to exercise certain rights and perform certain duties and responsibilities hereunder and under the other Loan Documents, the Agent is nevertheless a "representative" of the Banks, as that term is defined in Article 1 of the Uniform Commercial Code, for purposes of actions for the benefit of the Banks and the Agent with respect to all collateral security and guaranties contemplated by the Loan Documents. Such actions include the designation of the Agent as "secured party", "mortgagee" or the like on all financing statements and other documents and instruments, whether recorded or otherwise, relating to the attachment, perfection, priority or enforcement of any security interests, mortgages or deeds of trust in collateral security intended to secure the payment or performance of any of the Obligations, all for the benefit of the Banks and the Agent.
taken, in good faith by it or them hereunder or under any of the other Loan Documents, or in connection herewith or therewith, or be responsible for the consequences of any oversight or error of judgment whatsoever, except that the Agent or such other Person, as the case may be, shall be liable for losses due to its willful misconduct or gross negligence.
have been withdrawn by notice to the Agent or BancBoston Securities Inc. to such effect on or prior to the Closing Date.
any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation, the provisions of this Credit Agreement and the other Loan Documents shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent.
The Borrower agrees to pay (i) any taxes (including any interest and
penalties in respect thereto) payable by the Agent, the Issuing Bank, BancBoston
Securities Inc. or any of the Banks (other than taxes based upon or measured by
the Agent's or any Bank's income or profits) on or with respect to the
transactions contemplated by this Credit Agreement (the Borrower hereby agreeing
to indemnify the Agent, the Issuing Bank, BancBoston Securities Inc. and each
Bank with respect thereto), (ii) the reasonable fees, expenses and disbursements
of the Agent's Special Counsel and any local counsel to the Agent incurred in
connection with the preparation, syndication, administration or interpretation
of the Loan Documents and other instruments mentioned herein, each closing
hereunder, and amendments, modifications, approvals, consents or waivers hereto
or hereunder, provided that such counsel shall provide the Borrower with
invoices reflecting the expenses incurred in connection with the foregoing,
(iii) all reasonable out-of-pocket expenses (including without limitation
reasonable attorneys' fees and costs, which attorneys may be employees of any
Bank, the Issuing Bank or the Agent, and reasonable consulting, accounting,
appraisal, investment banking and similar professional fees and charges)
incurred by any Bank or the Agent in connection with (A) the enforcement of or
preservation of rights under any of the Loan Documents against the Borrower or
any of its Restricted Subsidiaries or the administration thereof after the
occurrence of a Default or Event of Default and (B) any litigation, proceeding
or dispute whether arising hereunder or otherwise, in any way related to any
Bank's, the Issuing Bank's or the Agent's relationship with the Borrower or any
of its Restricted Subsidiaries except in connection with a claim that the
Borrower has against any of the Banks, the Issuing Bank and the Agent and in
which claim the Borrower is the prevailing party after entry of a final
non-appealable judgment or order, (iv) all reasonable fees, expenses and
disbursements of any Bank or the Agent incurred in connection with UCC searches, STB searches, UCC filings or STB filings, if any, and (v) all reasonable costs of conducting commercial finance examinations of the Borrower's properties, including the applicable daily time charges of the Agent's commercial finance examiners, agents, consultants and representatives engaged in such examinations and appraisals as in effect from time to time, and reasonable out-of-pocket travel and other related expenses provided that so long as no Default or Event of Default has occurred and is continuing, the costs of such commercial finance examinations shall be limited to a maximum of (A) $15,000 for the first such examination and (B) $10,000 for each subsequent commercial finance examination. The covenants of this ss.16 shall survive payment or satisfaction of all other Obligations.
The Borrower agrees to indemnify and hold harmless the Agent, the
Issuing Bank, BancBoston Securities Inc. and the Banks from and against any and
all claims, actions and suits whether groundless or otherwise, and from and
against any and all liabilities, losses, damages and expenses of every nature
and character arising out of this Credit Agreement or any of the other Loan
Documents or the transactions contemplated hereby including, without limitation,
(i) any actual or proposed use by the Borrower or any of its Restricted
Subsidiaries of the proceeds of any of the Loans or Letters of Credit, (ii) any
actual or alleged infringement of any patent, copyright, trademark, service mark
or similar right of the Borrower or any of its Restricted Subsidiaries comprised
in the Collateral, (iii) the Borrower or any of its Restricted Subsidiaries
entering into or performing this Credit Agreement or any of the other Loan
Documents or (iv) with respect to the Borrower and its Restricted Subsidiaries
and their respective properties and assets, the violation of any Environmental
Law, the presence, disposal, escape, seepage, leakage, spillage, discharge,
emission, release or threatened release of any Hazardous Substances or any
action, suit, proceeding or investigation brought or threatened with respect to
any Hazardous Substances (including, but not limited to, claims with respect to
wrongful death, personal injury or damage to property), in each case including,
without limitation, the reasonable fees and disbursements of counsel and
allocated costs of internal counsel incurred in connection with any such
investigation, litigation or other proceeding other than as a result of the
gross negligence or willful misconduct of the Agent, the Issuing Bank,
BancBoston Securities Inc. or any Bank. In the event that any claim is made
against the Agent, the Issuing Bank, BancBoston Securities Inc. or any Bank for
which indemnity is provided under this ss.17, the Agent, the Issuing Bank,
BancBoston Securities Inc. or such Bank shall provide prompt notice to the
Borrower of any such claim not otherwise known to the Borrower, but the failure
of the Agent, the Issuing Bank, BancBoston Securities Inc. or any Bank to
provide such notice shall not impair the liability of the Borrower with respect
to its indemnification for such claim except to the extent that the Borrower has
been actually prejudiced by such failure. In litigation, or the preparation
therefor, the Banks, the Issuing Bank, BancBoston Securities Inc. and the Agent
shall be entitled to select their own counsel and to participate in the defense and the investigation of such claim, action or proceeding and, in addition to the foregoing indemnity, the Borrower agrees to pay promptly the reasonable fees and expenses of such counsel if (i) in the written opinion of counsel to the Agent, the Issuing Bank, BancBoston Securities Inc. or any of the Banks, use of counsel of the Borrower' choice could reasonably be expected to give rise to a conflict of interest, (ii) the Borrower shall not have employed counsel reasonably satisfactory to the Agent, the Issuing Bank, BancBoston Securities Inc. and the Banks to represent the Agent and the Banks within a reasonable time after notice of the institution of any such litigation or proceeding, (iii) the Borrower authorizes the Agent, the Issuing Bank, BancBoston Securities Inc. and the Banks to employ separate counsel at the Borrower's expense, or (iv) an Event of Default has occurred and is continuing. If, and to the extent that the obligations of the Borrower under this ss.17 are unenforceable for any reason, the Borrower hereby agree to make the maximum contribution to the payment in satisfaction of such obligations which is permissible under applicable law. The covenants contained in this ss.17 shall survive payment or satisfaction in full of all other Obligations.
All covenants, agreements, representations and warranties made herein, in the Revolving Credit Notes, in any of the other Loan Documents or in any documents or other papers delivered by or on behalf of the Borrower or any of its Restricted Subsidiaries pursuant hereto shall be deemed to have been relied upon by the Banks, the Issuing Bank and the Agent, notwithstanding any investigation heretofore or hereafter made by any of them, and shall survive the making by the Banks of any of the Loans and the issuance, extension or renewal of any Letters of Credit, as herein contemplated, and shall continue in full force and effect so long as any Letter of Credit or any amount due under this Credit Agreement or the Revolving Credit Notes or any of the other Loan Documents remains outstanding or any Bank has any obligation to make any Loans or the Agent has any obligation to issue, extend or renew any Letter of Credit, and for such further time as may be otherwise expressly specified in this Credit Agreement. All statements contained in any certificate or other paper delivered to any Bank, the Issuing Bank or the Agent at any time by or on behalf of the Borrower or any of its Restricted Subsidiaries pursuant hereto or in connection with the transactions contemplated hereby shall constitute representations and warranties by the Borrower or such Restricted Subsidiary hereunder.
(a) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim, the assigning Bank makes no representation or warranty, express or implied, and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Credit Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or the attachment, perfection or priority of any security interest or mortgage,
(b) the assigning Bank makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower and its Restricted Subsidiaries or any other Person primarily or secondarily liable in respect of any of the Obligations, or the performance
or observance by the Borrower and its Restricted Subsidiaries or any other Person primarily or secondarily liable in respect of any of the Obligations of any of their obligations under this Credit Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto;
(c) such assignee confirms that it has received a copy of this Credit Agreement, together with copies of the most recent financial statements referred to in ss.7.4 and ss.8.4 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance;
(d) such assignee will, independently and without reliance upon the assigning Bank, the Agent or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Credit Agreement;
(e) such assignee represents and warrants that it is an Eligible Assignee;
(f) such assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Credit Agreement and the other Loan Documents as are delegated to the Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto;
(g) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Credit Agreement are required to be performed by it as a Bank;
(h) such assignee represents and warrants that it is legally authorized to enter into such Assignment and Acceptance; and
reasonable time and from time to time upon reasonable prior notice. Upon each such recordation, the assigning Bank agrees to pay to the Agent a registration fee in the sum of $3,500.
Agreement to assignees or participants and potential assignees or participants
hereunder; provided that such assignees or participants or potential assignees
or participants shall agree (i) to treat in confidence such information unless
such information otherwise becomes public knowledge, (ii) not to disclose such
information to a third party, except as required by law or legal process and
(iii) not to make use of such information for purposes of transactions unrelated
to such contemplated assignment or participation.
pledgor Bank from its obligations hereunder or under any of the other Loan Documents.
Except as otherwise expressly provided in this Credit Agreement, all notices and other communications made or required to be given pursuant to this Credit Agreement or the Revolving Credit Notes or any Letter of Credit Applications shall be in writing and shall be delivered in hand, mailed by United States registered or certified first class mail, postage prepaid, sent by overnight courier, or sent by telegraph, telecopy, facsimile or telex and confirmed by delivery via courier or postal service, addressed as follows:
(a) if to the Borrower or any Guarantor, at Genesee & Wyoming Inc., 71 Lewis Street, Greenwich, CT, Attention: Mark W. Hastings, Treasurer and Chief Financial Officer, or at such other address for notice as the Borrower shall last have furnished in writing to the Person giving the notice;
(b) if to the Agent, at 100 Federal Street, Transportation Division, Boston, Massachusetts 02110, USA, Attention: Dexter Freeman, Director, or such other address for notice as the Agent shall last have furnished in writing to the Person giving the notice; and
(c) if to any Bank, at such Bank's address set forth on Schedule II hereto, or such other address for notice as such Bank shall have last furnished in writing to the Person giving the notice.
Any such notice or demand shall be deemed to have been duly given or
made and to have become effective (i) if delivered by hand, overnight courier or
facsimile to a responsible officer of the party to which it is directed, at the
time of the receipt thereof by such officer or the sending of such facsimile and
(ii) if sent by registered or certified first-class mail, postage prepaid, on
the third Business Day following the mailing thereof.
THIS CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF
LAW). THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN ss.20.
The captions in this Credit Agreement are for convenience of reference only and shall not define or limit the provisions hereof.
This Credit Agreement and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when executed and delivered shall be an original, and all of which together shall constitute one instrument. In proving this Credit Agreement it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought.
The Loan Documents and any other documents executed in connection herewith or therewith express the entire understanding of the parties with respect to the transactions contemplated hereby. Neither this Credit Agreement nor any term hereof may be changed, waived, discharged or terminated, except as provided in ss.26.
The Borrower hereby waives its right to a jury trial with respect to any action or claim arising out of any dispute in connection with this Credit Agreement, the Revolving Credit Notes or any of the other Loan Documents, any rights or obligations hereunder or thereunder or the performance of which rights and obligations. Except as prohibited by law, the Borrower hereby waives any right it may have to claim or recover in any litigation referred to in the preceding sentence any special, exemplary or punitive damages or any damages other than, or in addition to, actual damages and waives all suretyship defenses generally. The Borrower (i) certifies that no representative, agent or attorney of any Bank or the Agent has represented, expressly or otherwise, that such Bank or the Agent would not, in the event of litigation, seek to enforce the foregoing waivers and (ii) acknowledges that the Agent and the Banks have been induced to enter into this Credit Agreement, the other Loan Documents to which it is a party by, among other things, the waivers and certifications contained herein.
Any consent or approval required or permitted by this Credit Agreement to be given by all of the Banks may be given, and any term of this Credit Agreement, the other Loan Documents or any other instrument related hereto or mentioned herein may be amended, and the performance or observance by the Borrower or any of its Restricted Subsidiaries of any terms of this Credit Agreement, the other Loan Documents or such other instrument or the continuance of any Default or Event of Default may be waived (either generally or in a particular instance and either retroactively or prospectively) with, but only with, the written consent of the Borrower and the written consent of the Majority Banks. Notwithstanding the foregoing, the rates of interest on the Revolving Credit Notes (other than interest accruing pursuant to ss.5.10.2 following the effective date of any waiver by the Majority Banks of the Default or Event of Default relating thereto), the term of the Revolving Credit Notes, the amount of the Commitments of the Banks, the timing of payment of any principal, interest, fees and Reimbursement Obligations, and the amount of commitment fee or Letter of Credit Fees hereunder may not be changed and principal may not be forgiven without the written consent of the Borrower and the written consent of each Bank affected thereby; the release of any Guarantor shall not be permitted without the consent of the Majority Banks, provided that the release of any Guarantor having total assets in excess of ten percent (10%) of the consolidated total assets of GWI and its Restricted Subsidiaries shall not be permitted without the consent of all of the Banks; the definition of Majority Banks and this ss.26 may not be amended and the Maturity Date may not be postponed without the written consent of all of the Banks; and the amount of the Agent's Fees, any Letter of Credit Fees, or any other fees payable for the Agent's account and ss.15 may not be amended without the written consent of the Agent. No waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or delay or omission on the part of the Agent or any Bank in exercising any right shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice to or demand upon the Borrower shall entitle the Borrower to other or further notice or demand in similar or other circumstances.
except as provided in this ss.28. On the Closing Date, the rights and obligations of the parties evidenced by the Prior Credit Agreement shall be evidenced by the Credit Agreement and the other Loan Documents, the "Loans" as defined in each of the Prior Credit Agreement shall be converted to Loans as defined herein and all outstanding letters of credit issued by the Agent for the account of the Borrower or any of its Subsidiaries prior to the Closing Date shall, for the purposes of this Credit Agreement, be Letters of Credit.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the undersigned have duly executed this Credit Agreement as a sealed instrument as of the date first set forth above.
GENESEE & WYOMING INC.
By: /s/ Mark W. Hastings
________________________________________________________
Mark W. Hastings, Treasurer
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BANKBOSTON, N.A. (f/k/a The First National Bank of Boston), individually, as Agent and as Issuing Bank
By: /s/ Barbara W. Wilson
________________________________________________________
Name: Barbara W. Wilson
Title: Managing Director
|
LASALLE NATIONAL BANK, individually and as Co-Agent
By: /s/ Terri A. Maurer
________________________________________________________
Name: Terri A. Maurer
Title: VP
|
THE FIRST NATIONAL BANK OF CHICAGO, individually and as Co- Agent
By: /s/ Gregory J. Sjullie
--------------------------------------------------------
Name: Gregory J. Sjullie
Title: Vice President
|
KEYBANK N.A.
By: /s/ Timothy R. Beers
------------------------------------------------------
Name: Timothy R. Beers
Title: Vice President
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FLEET BANK, N.A.
(f/k/a NatWest Bank, N.A.)
By: /s/ Andrea H. Lee
____________________________________________________
Name: Andrea H. Lee
Title: VP
|
CORESTATES BANK, N.A.
By: /s/ Theresa Marie Smith
____________________________________________________
Name: Theresa Marie Smith
Title: V.P.
|
GUARANTORS: ROCHESTER & SOUTHERN
RAILROAD, INC.
LOUISIANA & DELTA RAILROAD,
INC.
GENESEE AND WYOMING
RAILROAD COMPANY
BUFFALO & PITTSBURGH
RAILROAD, INC.
ALLEGHENY & EASTERN
RAILROAD, INC.
WILLAMETTE & PACIFIC
RAILROAD, INC.
GWI LEASING CORPORATION
GWI DAYTON, INC.
GWI RAIL MANAGEMENT
CORPORATION
GENESEE & WYOMING INVESTORS,
INC.
ILLINOIS & MIDLAND RAILROAD,
INC.
GWI CANADA, INC.
PORTLAND & WESTERN
RAILROAD, INC.
By: /s/ Mark W. Hastings
--------------------------------
Mark W. Hastings, Treasurer
|
THE DANSVILLE AND MOUNT
MORRIS RAILROAD COMPANY
BRADFORD INDUSTRIAL
RAIL, INC.
GENESEE & WYOMING RAILROAD
SERVICES, INC. (f/k/a Railroad
Services, Inc.)
By: /s/ Alan R. Harris
-------------------------
Alan R. Harris, Treasurer
|
GWI SWITCHING SERVICES, L.P.
By: GWI Dayton, Inc.
Its General Partner
By: /s/ Mark W. Hastings
----------------------------
Mark W. Hastings, Treasurer
|
PITTSBURG & SHAWMUT
RAILROAD, INC.
By: /s/ David J. Collins
----------------------------
David J. Collins, President
|
RAIL LINK, INC.
CAROLINA COASTAL RAILWAY, INC.
COMMONWEALTH RAILWAY, INC.
TALLEYRAND TERMINAL RAILROAD
COMPANY, INC.
By: /s/ James W. Benz
______________________________
James W. Benz, President
|
CORPUS CHRISTI TERMINAL
RAILROAD, INC.
By: /s/ James W. Benz
----------------------------
Title: President
|
EXHIBIT 10.1
AMENDMENT NO. 1
TO THE
GENESEE & WYOMING INC.
STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
EFFECTIVE JULY 25, 1997
WHEREAS, Genesee & Wyoming Inc., a Delaware corporation (the "Company"), has established the Genesee & Wyoming Inc. Stock Option Plan for Outside Directors (the "Plan"); and
WHEREAS, deeming it appropriate and advisable so to do, and pursuant to
Section 14 of the Plan, the Board of Directors of the Company has authorized,
approved and adopted the amendment to the Plan set forth herein;
NOW, THEREFORE, the Plan is hereby amended, effective July 25, 1997, as set forth below:
1. The last sentence of Section "4(a) GRANT DATES; NUMBER OF SHARES." of the Plan is hereby amended to provide in its entirety as follows (with the remainder of said Sec tion 4(a) being unchanged and unaffected by this Amendment and continuing in full force and effect):
"On the first anniversary and the second anniversary of the date he first became a Participating Director (each, a `Grant Date'), each New Director in office on such date shall automatically be granted an Option to purchase 1,000 Shares; provided, however that no Option shall be granted on any such Grant Date unless the Company's net income, after taxes, for the then most recently completed fiscal year, as shown on the Company's audited financial statements for that fiscal year, exceeds by at least 10 percent the Company's net income, after taxes, for the immediately preceding fiscal year."
2. Except as amended hereby, the Plan shall remain in full force and effect in accordance with its terms.
THIS AMENDMENT NO. 1 TO THE GENESEE & WYOMING INC. STOCK OPTION PLAN FOR OUT SIDE DIRECTORS WAS AUTHORIZED, APPROVED AND ADOPTED BY THE BOARD OF DIRECTORS OF THE COMPANY ON JULY 25, 1997.
/S/ JAMES B. GRAY, JR. ---------------------- JAMES B. GRAY, JR., SECRETARY |
EXHIBIT 10.2
MEMORANDUM OF LEASE
BETWEEN
MINISTER FOR TRANSPORT AND URBAN PLANNING A BODY CORPORATE
UNDER THE ADMINISTRATIVE ARRANGEMENTS ACT 1994
THE LESSOR
-AND-
AUSTRALIA SOUTHERN RAILROAD PTY LTD
A.C.N. 079 444 296
THE LESSEE
CROWN SOLICITOR
Level 5, 45 Pirie Street, Adelaide SA 5000
Railcor6
7 November 1997
CONTENTS
Clause PAGE 1. DEFINITIONS AND INTERPRETATION................................................................... 1 1.1 Definitions..................................................................................... 1 1.2 Interpretation.................................................................................. 7 1.3 Business Day.................................................................................... 8 2. LEASE, RESERVATIONS AND ANCILLARY RIGHTS........................................................ 8 2.1 Grant of Lease.................................................................................. 8 2.2 Term of Lease................................................................................... 8 2.3 Holding over.................................................................................... 8 2.4 Right of Renewal................................................................................ 8 2.5 Ancillary Rights................................................................................ 10 2.6 Reservation..................................................................................... 10 2.7 Ancillary Rights over SACBH Land................................................................ 10 2.8 Agreement between SACBH and Lessee.............................................................. 10 2.9 Variation if Lessor is not a State Agency....................................................... 11 3. RENT, AND OUTGOINGS.............................................................................. 11 3.1 Rail Corridor Rent.............................................................................. 11 3.2 Balance of the Land Rent........................................................................ 12 3.3 Payment of Rent................................................................................. 12 3.4 Payment of Outgoings............................................................................ 12 3.5 Commercial Rent................................................................................. 12 4. LAND AREA SUBJECT TO VARIATION................................................................... 13 4.1 Variations...................................................................................... 13 4.2 Surrender of land not used for Railway Operations............................................... 13 ---------------------------------------------------------------------------------------------------------- |
NOTE:- Every annexed page shall be signed by the parties to the dealing, or where the party is a corporate body, be signed by the persons who have attested the affixing of the seal of that body to the dealing.
4.3 Process (Surrender and Acquisition of Track Infrastructure)..................................... 16 4.4 Disputed Valuation.............................................................................. 17 4.5 Process (Hazard Removal Obligations)............................................................ 17 4.6 Surrender of the Lease and Consequential Matters................................................ 18 4.7 Adjustments to Rail Corridors................................................................... 19 4.8 Use of Track Infrastructure..................................................................... 19 5. LESSOR'S RIGHTS AND OBLIGATIONS.................................................................. 20 5.1 Quiet enjoyment................................................................................. 20 5.2 Reservations.................................................................................... 20 5.3 Permit use of existing rights................................................................... 20 5.4 Lessor's right to enter Land.................................................................... 21 5.5 Dedication or easement.......................................................................... 21 5.6 Lessor may perform Lessee's obligations......................................................... 21 5.7 Lessor's consent................................................................................. 21 5.8 Property Records................................................................................. 22 5.9 No compensation for buildings and improvements................................................... 22 5.10 Title to Land................................................................................... 22 5.11 Lodgement of Documents.......................................................................... 22 5.12 The Existing Leases............................................................................. 23 5.13 Creation of Easements........................................................................... 23 5.14 Native Title.................................................................................... 24 6. LESSEE'S OBLIGATIONS.............................................................................. 25 6.1 General obligations.............................................................................. 25 6.2 Use.............................................................................................. 26 6.3 Maintenance of Land.............................................................................. 28 ---------------------------------------------------------------------------------------------------------- |
NOTE:- Every annexed page shall be signed by the parties to the dealing, or where the party is a corporate body, be signed by the persons who have attested the affixing of the seal of that body to the dealing.
6.4 Notification of damage............................................................................ 28 6.5 Lessor's interest in Land......................................................................... 29 6.6 Cost and risk of Lessee's obligations............................................................. 29 6.7 Access to Records................................................................................. 29 6.8 National Estate Significance...................................................................... 29 7. INSURANCE, RISK AND INDEMNITIES.................................................................... 30 7.1 Public liability.................................................................................. 30 7.2 Workers' compensation............................................................................. 31 7.3 Industrial Special Risks.......................................................................... 31 7.4 Proceeds of Insurance............................................................................. 31 7.5 Policies.......................................................................................... 32 7.6 Maintain insurance................................................................................ 32 7.7 Disclaimer........................................................................................ 33 7.8 Lessor's Rights to Insure......................................................................... 33 7.9 Lessee's risk..................................................................................... 33 7.10 Release of Lessor................................................................................ 33 7.11 Indemnity........................................................................................ 34 7.12 Continuing indemnity............................................................................. 34 8. ASSIGNMENT, SUBLEASE AND MORTGAGE.................................................................. 34 8.1 Assignment........................................................................................ 34 8.2 Sublease and Licensing............................................................................ 35 8.3 Permitted Dealing................................................................................. 35 8.4 Mortgage.......................................................................................... 35 8.5 Dealing with Track Infrastructure................................................................. 37 9. TERMINATION........................................................................................ 37 ---------------------------------------------------------------------------------------------------------- |
NOTE:- Every annexed page shall be signed by the parties to the dealing, or where the party is a corporate body, be signed by the persons who have attested the affixing of the seal of that body to the dealing.
9.1 Events of default................................................................................. 37 9.2 Process (Termination)............................................................................. 40 9.3 Appointment of attorney........................................................................... 40 9.4 Indemnity for breach.............................................................................. 40 9.5 Interest on overdue money......................................................................... 41 9.6 Other Remedies.................................................................................... 41 10. CONSEQUENCES OF TERMINATION OR EXPIRY............................................................. 41 10.1 Right to acquire Track Infrastructure............................................................ 41 10.2 Useable Track Infrastructure..................................................................... 41 10.3 Unacquired Track Infrastructure.................................................................. 41 10.4 Removal of Hazards............................................................................... 42 10.5 Process (Acquisition of Track Infrastructure).................................................... 42 10.6 Disputed Valuation............................................................................... 43 10.7 Surrender of the Lease and Consequential Matters................................................. 43 11. HAZARD REMOVAL.................................................................................... 44 11.1 Application...................................................................................... 44 11.2 Meanings......................................................................................... 44 11.3 Exclusion of Obligation.......................................................................... 45 11.4 Attachment of Obligation......................................................................... 45 11.5 Discharge of Obligation.......................................................................... 45 12. FORCE MAJEURE..................................................................................... 46 12.1 Definition....................................................................................... 46 12.2 Specific Circumstances........................................................................... 46 12.3 Expenditure...................................................................................... 47 12.4 Effect........................................................................................... 47 ---------------------------------------------------------------------------------------------------------- |
NOTE:- Every annexed page shall be signed by the parties to the dealing, or where the party is a corporate body, be signed by the persons who have attested the affixing of the seal of that body to the dealing.
12.5 Obligation to Work Around........................................................................ 47 12.6 Notification..................................................................................... 47 12.7 Abatement of Rent................................................................................ 47 13. GENERAL........................................................................................... 47 13.1 Notices.......................................................................................... 47 13.2 Compliance with Law.............................................................................. 48 13.3 Governing law.................................................................................... 48 13.4 Waiver........................................................................................... 48 13.5 Severability..................................................................................... 49 13.6 Counterparts..................................................................................... 49 13.7 Further assurance................................................................................ 49 13.8 Entire agreement................................................................................. 49 13.9 Costs and expenses............................................................................... 49 13.10 Exclusion of statutory provisions............................................................... 50 13.11 Mitigation...................................................................................... 50 13.12 Payment after notice............................................................................ 50 13.13 Disputes Provision............................................................................... 50 13.14 Confirmation of Compliance with Lease............................................................ 52 13.15 Lessee's warranty................................................................................ 53 13.16 No merger........................................................................................ 53 13.17 Exclusion of moratorium.......................................................................... 53 14. CONTAMINATION...................................................................................... 53 14.1 Definitions....................................................................................... 53 14.2 Existing Contamination and Commonwealth Remediation............................................... 54 14.3 Compliance with Environmental Notices............................................................. 54 ---------------------------------------------------------------------------------------------------------- |
NOTE:- Every annexed page shall be signed by the parties to the dealing, or where the party is a corporate body, be signed by the persons who have attested the affixing of the seal of that body to the dealing.
14.4 Indemnity......................................................................................... 54 15. EXCLUSION OF COVENANTS IMPLIED BY STATUTE.......................................................... 55 15.1 Real Property Act................................................................................. 55 15.2 Landlord and Tenant Act........................................................................... 55 16. FURTHER ASSURANCES................................................................................. 55 17. ACKNOWLEDGEMENT THAT THIS LEASE IS NOT A "MISCELLANEOUS LEASE"..................................... 55 ---------------------------------------------------------------------------------------------------------- |
NOTE:- Every annexed page shall be signed by the parties to the dealing, or where the party is a corporate body, be signed by the persons who have attested the affixing of the seal of that body to the dealing.
The Lessor hereby leases to the Lessee the land described in Schedule 1 and further described in the plans exhibited to this Memorandum of Lease ("the Land") for the term of 50 years commencing on the Commencing Date specified in this Lease (subject to the right of renewal granted in this Lease) and at the rent and on the other provisions contained in this Lease subject to and reserving to the Lessor and other persons as described in this Lease, the rights, powers or entitlements specified in Schedule 1.
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
In this Lease unless the contrary intention appears:
1.1.1 AGREEMENT TO LEASE means the Deed of Agreement to Lease and
Charge made between the Lessor, SA Rail Pty Ltd, ACN 077 946
340 and the Lessee dated the 7th day of November 1997.
1.1.2 AUTHORITY includes any government, semi or local government,
statutory or other authority or body, but does not include the
Lessor in its capacity either as lessor, pursuant to this
Lease or as the holder of an estate in freehold in any portion
of the Land.
1.1.3 BALANCE OF THE LAND means all the Land other than the Rail
Corridor.
1.1.4 BULK HANDLING FACILITIES means bins, silos, elevators,
conveyor belts and other accommodation, plant and equipment
for the reception, storage, handling and delivery of grain in
bulk.
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1.1.5 BUSINESS DAY means a day on which banks are open for general
banking business in Adelaide excluding Saturdays, Sundays and
Public Holidays.
1.1.6 COMMENCING DATE means 7 November 1997.
1.1.7 COMMERCIAL RENT means rent calculated in accordance with
clause 3.5.
1.1.8 COMMISSION means the Australian Heritage Commission.
1.1.9 CONTAMINATION means in the respect of Land:
1.1.9.1 affectation or degradation by the presence of any
chemical substance (including without limitation any
dangerous good, hazardous material, asbestos or any
waste), where having regard to the use of the Land or
of any other land in its vicinity, the chemical
substance creates or may create a risk of harm to the
environment.
1.1.10 DISPUTES PROVISION means clause 13.13.
1.1.11 DORMANT CONDITION in respect of a line or part of a line means
that;
1.1.11.1 the line is closed to rail traffic;
1.1.12.1 road crossings are not operated; and
1.1.13.1 Track Infrastructure is maintained only to a level in
which it is reasonably practicable to reopen the line
for rail traffic of a similar volume and nature as was
operated on the line before it was closed to rail
traffic, within a period of two weeks.
1.1.12 EVENT OF DEFAULT means an event referred to in clause 9.1.
1.1.13 EXISTING LEASE means a lease over any part of the Land granted
by a predecessor in title to the Lessor which is current as at
the Commencement Date and which is binding on the Lessor by
virtue of Section 6 of the Non-metropolitan Railways (Transfer)
Act 1997.
1.1.14 EXCLUDED LAND means the Land defined in item 2 of Schedule 1.
1.1.15 HAZARD REMOVAL WORK has the meaning attributed in clause 11.
1.1.16 LEASE means this Lease and any equitable Lease or common law
tenancy evidenced by this Lease.
1.1.17 LESSEE means Australia Southern Railroad Pty Limited (ACN079
444 296)
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1.1.18 LESSEE'S AGENTS means every agent, employee, licensee,
contractor and invitee of the Lessee.
1.1.19 LESSEE'S PROPERTY means all the Lessee's fixtures, fittings,
equipment, furnishings and other property of the Lessee on the
Land (including the Track Infrastructure);
1.1.20 LESSOR means the Minister for Transport a body corporate
pursuant to the Administrative Arrangements Act, 1994 (SA).
1.1.21 LINEAR CONTINUITY means, in respect of a line,
1.1.22.1 the state of being either physically open to rail
traffic along its whole length, or maintained in a
Dormant Condition, and
1.1.21.1 the state of being maintained in the possession of the
Lessee.
1.1.22 LINE means a part of the Rail Corridor that lies between two
specified locations and includes the associated yards, sidings,
terminals, stations and other Track Infrastructure needed to
allow and facilitate the operation of rolling stock between
those two locations;
1.1.23 MARKET VALUE with respect to any Track Infrastructure means the
fair market value of the Track Infrastructure assessed on the
basis of continued railways usage, without deduction of
replacement value of tunnels, bridges or formations reverting to
the Lessor.
1.1.24 MINIMUM SERVICE REQUIREMENTS means the services specified in
Schedule 4.
1.1.25 NATIONAL ESTATE LAND means:
1.1.25.1 that part of the Land which is at the Commencing Date
entered in the Register of the National Estate
maintained by the Commission including the land
described in Schedule 6 to this Lease; and
1.1.25.2 any part of the Land which at any time during the
Term, is entered in the Register of the National
Estate maintained by the Commissioner.
1.1.26 NON OPERATIONAL LINES means the lines:
1.1.26.1 from Wolseley to Mount Gambier,
1.1.26.2 from Millicent to Mount Gambier,
1.1.26.3 from Victorian border to Mount Gambier,
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1.1.26.4 from Wallaroo to Snowtown.
1.1.27 OUTGOINGS means all amounts payable or incurred by the Lessor or
the Lessee during the Term in respect of the Land or the
control, management or maintenance of the Land including, but
not limited to, the following:
1.1.27.1 (RATES AND LEVIES) all rates, rents, levies and other
charges payable to any Authority;
1.1.27.2 (TAXES) all imposts, duties, fees, deductions,
compulsory loans or withholdings and taxes (including
but subject to the operation of Section 9 of the Non-
metropolitan Railway (Transfer) Act 1997 and Section
16 of the Railways (Operation and Access) Act 1977,
land tax in respect of the Balance of the Land but
excluding income tax and capital gains tax) payable to
any Authority;
1.1.27.3 (INSURANCE) any insurance premium and other expense
relating to any insurance policy of any kind required
to be obtained under this Lease, whether in respect of
the Land, its use, the Lessee's Property or the
Lessee's business including, but not limited to,
insurance in respect of, public liability and
consequential loss; and
1.1.27.4 (SERVICES) the cost of all services supplied to the
Land including, but not limited to, lighting, power,
heating, water, air-conditioning, security and
emergency services, and all associated maintenance,
repair, replacement and servicing costs, and
1.1.27.5 compensation for which the Lessee is responsible under
clause 5.14.2.3.2.;
but excluding:
1.27.6 amounts paid or incurred by the Lessor which the
Lessor is under no legal obligation to pay, or which
arise out of a legal obligation voluntarily assumed by
the Lessor,
1.27.7 any amount paid or incurred by the Lessor pursuant to
an obligation assumed by the Lessor in respect of
which the Lessor is entitled to exemption,
1.1.27.8 and compensation for which the Lessor is responsible
under clause 5.14.2.3.1.
1.1.28 RAIL CORRIDOR means that part of the Land described in
Schedule 3.
1.1.29 RAILWAY OPERATIONS means services provided by or in association
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with:
1.1.29.1 the provision, maintenance, movement, shunting,
storage, fuelling, unfuelling, loading and unloading
of Rolling Stock to transport freight by rail; and
1.1.29.2 the provision, maintenance, storage, building,
rebuilding, servicing, replacing and repairing of
Track Infrastructure and Rolling Stock; and
1.1.29.3 the conduct of the business of handling, storing and
transporting freight and passengers, or either, by
rail (and incidentally by road); and
1.1.29.4 the maintenance and operation of signalling and
communication equipment; and
1.1.29.5 includes a Railway Integrated Business.
1.1.30 RAILWAY INTEGRATED BUSINESS means a business:
1.1.30.1 which is conducted in an integrated fashion with the
rail network;
1.1.30.2 which is conducted in premises where the Lessee has
the capacity to deliver and recover freight by rail;
1.1.30.3 which is conducted in premises where there is a rail
spur specific to the business; and
1.1.30.4 in respect of which the Lessee in practice conducts
delivery of supplies and recovery of production by
rail.
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1.1.31 RELATED PARTY of the Lessee means either of the following:
1.1.31.1 a "related party" of the Lessee for the purposes of
Section 243F of the Corporations Law;
1.1.31.2 a "related body corporate" of the Lessee for the
purposes of Section 50 of the Corporations Law.
1.1.32 RENT PAYMENT DATES means the day after the fifth anniversary of
the Commencing Date, and thereafter the 1st day of March, June,
September and December in each year for the remainder of the
Term.
1.1.33 ROLLING STOCK means a vehicle (whether or not self-propelled)
that operates on or uses a railway line.
1.1.34 SACBH means South Australian Co-Operative Bulk Handling Limited,
a Corporations Law entity limited by guarantee without a share
capital (A.C.N. 007 556 256) and includes any person who
operates Bulk Handling Facilities wholly or partially in place
of SACBH.
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1.1.35 SAICORP means South Australian Government Captive Insurance
Corporation a body corporate established pursuant to the Public
Corporations Act, 1993.
1.1.36 SIGNIFICANT PUBLIC HAZARD has the meaning attributed in
clause 11.
1.1.37 STATE AGENCY means the Crown in right of the State of South
Australia an agency or instrumentality of the Crown in right of
the State of South Australia a "Minister" within the meaning of
the Administrative Arrangements Act 1994 or a public corporation
within the meaning of the Public Corporations Act 1993.
1.1.38 SURRENDER NOTICE means a notice given by the Lessor to the
Lessee or by the Lessee to the Lessor in terms of clause 4.3.
1.1.39 TRACK INFRASTRUCTURE means the following improvements to the
Land, whether or not constituting fixtures at law:
1.1.39.1 track work including without limitation, rail lines,
crossing loops, level crossings, sleepers, ballast,
fastenings, points, poles, pylons, pipes, drains,
structures, supports, overhead lines, buffer stops,
posts and signs;
1.1.39.2 earthworks and formations including cuttings,
embankments, tunnels (including any tunnel lighting
and ventilation), ditches and retaining walls;
1.1.39.3 bridges, culverts, overpasses, under bridge, viaducts,
jetties and wharves;
1.1.39.4 signalling and train control and communications
systems (including signal boxes, huts and telegraph
and transmission lines and instruments) which are
necessary for the safe and proper movement of trains;
1.1.39.5 access roads, approaches, footpaths, gates, cattle
stops, and fences; and
1.1.39.6 buildings and other structures including platforms,
railway stations, passenger terminals, freight sheds,
freight terminals, roundhouses, workshops and
associated buildings.
1.1.39.7 anything coming within the definition from time to
time of "fixed railway infrastructure" within the
meaning of the Railways (Operations and Access) Act
1997; and
1.1.39.8 anything placed or installed on the Land by or on
behalf of the Lessee or a person claiming through the
Lessee in substitution for
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or in addition to anything fixed, installed or situated on the Land as at the Commencing Date;
but does not include Bulk Handling Facilities paid for or operated by or on behalf of SACBH. as at or prior to the Commencing Date;
1.1.40 Term means the term of this Lease commencing on the Commencing
Date and terminating on the Terminating Date.
1.1.41 Terminating Date means 7 November 2047.
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1.2 INTERPRETATION
In this Lease, headings and underlining are for convenience only and do not affect interpretation, and unless the context otherwise requires:
1.2.1 words importing the singular include the plural and vice versa;
1.2.2 a covenant or agreement on the part of two or more persons binds
them jointly and severally;
1.2.3 a reference to any thing (including any right or any period of
time) includes a part of that thing;
1.2.4 a reference to an individual or person includes a corporation,
partnership, joint venture, association, authority, trust, state
or government and vice versa;
1.2.5 a reference to any gender includes all genders;
1.2.6 a reference to a recital, clause, schedule, annexure or exhibit
is to a recital, clause, schedule, annexure or exhibit of or to
this Lease;
1.2.7 a recital, schedule, annexure, exhibit or a description of the
parties forms part of this Lease;
1.2.8 a reference to any agreement or document is to that agreement or
document (and, where applicable, any of its provisions) as
amended, novated, supplemented or replaced from time to time;
1.2.9 a reference to any Act or statutory instrument or particular
provision of an Act or such statutory instrument is taken to
include:
1.2.9.1 all regulations, orders or instruments issued under
the legislation or provision;
1.2.9.2 any modification, consolidation, amendment, re-
enactment, replacement or codification of such
legislation or provision; and
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1.2.9.3 any substituted legislation or substituted provision.
1.2.9.4 a reference to any party to this Lease or any other
document or arrangement includes that party's
executors, administrators, substitutes, successors and
permitted assigns;
1.2.9.5 where an expression is defined, another part of speech
or grammatical form of that expression has a
corresponding meaning; and
1.2.9.6 a reference to a month is to a calendar month.
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1.3 BUSINESS DAY
If the day on or by which any thing is to be done under this Lease is not a Business Day, that thing must be done:
1.3.1 if it involves a payment other than a payment which is
due on demand, on the preceding Business Day; and
1.3.2 in all other cases, no later than the next Business Day.
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2. LEASE, RESERVATIONS AND ANCILLARY RIGHTS
2.1 GRANT OF LEASE
The Lessor leases to the Lessee and the Lessee takes a lease of the Land on the terms and conditions set out in this Lease.
2.2 TERM OF LEASE
This Lease begins on the Commencing Date and ends on the Terminating Date.
2.3 HOLDING OVER
2.3.1 If the Lessee continues to occupy the Land with the Lessor's
consent after the Terminating Date, the Lessee is a quarterly
tenant.
2.3.2 Subject to this clause 2.3, the quarterly tenancy is on the same
terms as this Lease, but including any other changes necessary
to make the terms appropriate for a quarterly tenancy.
2.3.3 Either party may terminate the quarterly tenancy by giving three
months' written notice to the other which notice may expire at
any time.
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2.4 RIGHT OF RENEWAL
2.4.1 If the Lessee, at any time after the expiry of 40 years and before the expiry of 45 years after the Commencing Date:
2.4.1.1 gives the Lessor a notice of intention to renew under
this clause at any time;
2.4.1.2 provides the Lessor with an investment plan which in
the Lessor's reasonable opinion represents a reasonable
commitment to maintain and enhance Railway Operations
to the extent that is commercially realistic in the
prevailing circumstances, and includes, to the extent
practicable, the following:
2.4.1.2.1 A Business Plan for Railway Operations on
the Land, including:
(i) a statement of Corporate intent;
(ii) a description of the proposed rail
network;
(iii) a business plan including financial
projections with and without the
implementation of specific investment
proposals;
(iv) a capital works programme, being a
summary of the investment proposals
more fully described below;
(v) a statement of borrowing requirements;
(vi) a statement of investment strategy;
2.4.1.2.2 An Investment Plan for the Land, including:
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(i) a description of proposed projects
dealing separately with maintenance
of existing assets, replacement of
existing assets and the creation of
new assets;
(ii) a cash flow statement of
expenditure and expected income in
respect of each project and in
total is to be included, showing
the payback period;
(iii) any program of asset disposal or
arrangements for the reuse of
assets for other purposes is to be
provided;
(iv) a statement showing the source of
funds whether by borrowings, equity
contribution or the like is to be
included;
(v) The information is to be provided
for each year and include to the
extent practicable, a description
of each proposed project, the
nature of the project, its
location, its commencement, project
period and expected realisation;
("the Renewal Investment Plan"); and
2.4.1.3 undertakes to carry out the Renewal Investment Plan;
then provided there is no existing breach of this Lease, the
Lessor must grant the Lessee an extension of the Lease of the
Land for a further term of 15 years at an annual rental
determined in accordance with clause 3 on the same terms and
conditions as this Lease excluding the right of renewal
conferred in this clause.
2.4.2 If the Lessor does not approve an investment plan submitted
under this clause, the Lessor must give its reasons and the
Lessee may submit a further plan or plans subject to this
clause.
2.4.3 Upon grant of the extension referred to in clause 2.4.1, the
Lessee must commence and continue implementation of the Renewal
Investment Plan unless it is prevented from doing so by some
exigency which makes its implementation commercially unfeasible.
2.4.4 If the Lessee does not commence or ceases to implement the
Renewal Investment Plan in accordance with the this clause the
Lessor may terminate this Lease on or after the Terminating
Date, subject to clause 10.
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2.5 ANCILLARY RIGHTS
This Lease is granted together with [Ancillary Rights to be granted commensurate with Vested Rights in accordance with Agreement to Lease; subject to identification of Vested Rights].
2.6 RESERVATION
This Lease is subject to rights reserved to the Lessor including rights reserved for the benefit of Land leased by the Lessor to SACBH adjoining the Land ("SACBH Land") as follows [to be identified in accordance with the Agreement to Lease].
2.7 ANCILLARY RIGHTS OVER SACBH LAND
Subject to the following subclause, this Lease is granted together with rights reserved by the Lessor for the benefit of the Land over the SACBH Land as follows: [to be identified in accordance with the Agreement to Lease].
2.8 AGREEMENT BETWEEN SACBH AND LESSEE
The Lessee must enter into with SACBH, and the Lessor must require SACBH to enter into with the Lessee, an agreement substantially in the form of Schedule 5 ("the SACBH Agreement").
Until the SACBH Agreement is entered into by the Lessee, the Lessee is not entitled to exercise the rights referred to in sub-clause 2.7.
The Lessor must ensure that under the SACBH Lease, SACBH is not entitled to exercise the rights referred to in clause 2.6 until it has entered into the SACBH Agreement.
2.9 VARIATION IF LESSOR IS NOT A STATE AGENCY
2.9.1 If the Lessor's interest in the Land is assigned or vested in
an entity that is not a State Agency, this lease must be read
subject to the following amendments operable from the date of
such assignment or vesting:
2.9.1.1 delete from the definition of Market Value the words
"assessed on the basis of continued railway usage";
2.9.1.2 clause 5.2(a) shall only operate if the party becoming
the Lessor under the Lease is also the holder of the
estate in fee simple of the land occupied by SACBH;
2.9.1.3 notwithstanding anything contained in the Lease when
the Lessor's consent is required for anything under
the Lease that consent:
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2.9.1.3.1 may not be withheld or made subject to conditions
unreasonably; and
2.9.1.3.2 if withheld or made subject to conditions the
Lessor must give written notice of the reasons
for withholding approval or attaching the
conditions;
2.9.1.4 The Lessor must, if the Lessee requires, take such steps
as are required to register this Lease, at the cost of the
Lessee.
2.9.2 If the Lessor contemplates an assignment or vesting of land
occupied by SACBH separately from the Land, the Lessor and
Lessee must create easements and rights equivalent to the
reservations and ancillary rights in respect of the SACBH
Land so as to enable the continued usage of the Land and the
SACBH Land under this Lease and the SACBH Lease.
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3. RENT, AND OUTGOINGS
3.1 RAIL CORRIDOR RENT
Rent for the Rail Corridor is:
3.1.1 $1.00 per annum; and
3.1.2 after the expiry of 5 years after the Commencing Date, in
respect of any portion of the Rail Corridor which is
sublet, Commercial Rent.
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3.2 BALANCE OF THE LAND RENT
Rent for the Balance of the Land is:
3.2.1 for the first five years of the Term $1.00 per annum; and
3.3.2 for the balance of the Term, Commercial Rent.
3.3 PAYMENT OF RENT
3.3.1 The Lessee must pay the Rent for the Rail Corridor to the
Lessor annually in advance on the Commencing Date and on
each subsequent anniversary of the Commencing Date (if
demanded).
3.3.2 The Lessee must pay the Rent for the Balance of the Land to
the Lessor
3.3.2.1 annually in advance on the Commencing Date and on
each subsequent anniversary of the Commencing Date
for the first five (5) years of the Term (if
demanded), and
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3.3.2.2 thereafter in advance on each Rent Payment Date by
instalments, each instalment to be equal to one
quarter of the annual rent due for the relevant 12
month period.
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3.3.3. The rent payable for the Balance of the Land after the first five years of the Term shall be payable without demand, free of exchange and without set-off or counterclaim.
3.4 PAYMENT OF OUTGOINGS
3.4.1 The Lessee must;
3.4.1.1 promptly pay the Outgoings for the Land as and when
those Outgoings fall due for payment, or
3.4.1.2 The Lessor may pay any of the Outgoings which have not
been paid by the Lessee when due . Any such sum or sums
paid by the Lessor may be recovered from the Lessee
together with interest pursuant to clause 9.6
(calculated from the date when any such Outgoings was
due) as if the same were rent in arrears.
3.4.1.3 if any Outgoings are in fact paid by the Lessor under
this clause, promptly reimburse the Lessor for the
amount so paid by the Lessor upon receipt of evidence
that the amount has been so paid.
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3.5 COMMERCIAL RENT
3.5.1 Commercial Rent in respect of any portion of the Land is an
annual rent comprising the sum of eight percent (8%) of the Site
Value of the portion of the Land.
3.5.2 In this clause:
Site Value is, as at any anniversary of the Commencing Date, the
then current site value of the relevant portion of the Land
determined by the Valuer General in accordance with the
Valuation of Land Act 1971.
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4.1 LAND AREA SUBJECT TO VARIATION
4.1 VARIATIONS
4.1.1 The area of the Land may be increased or reduced from
time to time in accordance with the provisions of this
Clause 4.
4.1.2 The Lessee agrees to surrender and the Lessor agrees to
accept a surrender of this Lease in respect of any Land
removed from the scope of this Lease in
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accordance with clause 4.2 or 4.3 when that Land is
identified and recorded in accordance with this
Clause 4.
4.1.3 If land leased to or used by SACBH is surrendered by
SACBH and
4.1.3.1 the land is owned by the Lessor;
4.1.3.2 the land is reasonably required to perform
Railway operations carried on or intended to
be carried on by the Lessee; and
4.1.3.3 the Lessor does not require the land for any
other purpose,
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the Lessee may require the Lessor to enter into a lease of that additional land on the terms and conditions contained in this Lease for the balance of the Term.
4.2 SURRENDER OF LAND NOT USED FOR RAILWAY OPERATIONS
4.2.1 If immediately prior to the issue of a Surrender Notice Railway
Operations have not been conducted on a portion of the Land, for
a continuous period of eighteen months during the Term and have
not been recommenced (save for a grace period in respect of the
Non Operational Lines of two years from the Commencing Date)
then
4.2.2 the Lessee may surrender the Lease in respect of that portion of
the Land and the Lessor must accept such surrender; and
4.2.3 the Lessor may require the Lessee to surrender the Lease in
respect of that portion of the Land.
4.2.4 the parties acknowledge that the rights conferred by the
preceding sub clause are not in the nature of a remedy for
breach, but a means of adjusting the extent of the Land subject
to this Lease, in accordance with the following principles;
4.2.4.1 if Land is not genuinely required for use for Railway
Operations, it is properly regarded as non-operational
or surplus land which the State may recover for its
own purposes;
4.2.4.2 if Land is used or is genuinely intended for use (as
contemplated in clause 4.2.5.4) for Railway
Operations, it should be retained for use by the
Lessee;
4.2.4.3 if the Lessee maintains a line or part of a line in a
Dormant Condition, that constitutes use for the
purposes of this clause, but does not preclude the
Lessee from surrendering the relevant part of the
Land;
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4.2.4.4 if the Lessee has a genuine intention to use or to
explore the feasibility of use of a part of the Land
for Railway Operations, and notifies the Lessor
accordingly, then for six months following such notice
(unless the Lessee notifies to the contrary) the Lessee
is taken to be using the Land for Railway Operations,
and on the expiry of the six month period:
4.2.4.4.1 if the Lessee provides to the Lessor a bona
fide business plan for use of the relevant
part of the Land for Railway Operations, and
for so long as the Lessee implements or
develops the plan with due expedition, the
Lessee is taken to be using the Land for
Railway Operations; and
4.2.4.4.2 if the Lessee does not provide, develop or
implement such a business plan, the Lessee is
taken not to be using the relevant part of
the Land.
4.2.5 If Minimum Service Requirements are not met with respect to a
portion of the Land for a continuous period of 6 months during
the first five years of the Term, the Lessor may require the
Lessee to surrender the Lease in respect of that portion of the
Land.
4.2.6 If the Lessor requires the Lessee to surrender, or the Lessee
elects to surrender a portion of the Land under this clause, the
Lessor may at its election acquire all or any part of the Track
Infrastructure located on that portion of the Land as at the
Surrender Notice Date:
4.2.6.1 if before the expiry of the first five years after the
Commencing Date, without being liable to make any
payment, and
4.2.6.2 if after the expiry of five years after the Commencing
Date, upon payment to the Lessee of the Market Value
of the Track Infrastructure.
4.2.7 The Lessor may not exercise its right to acquire less than all
the Track Infrastructure located on the portion of the Land under
the preceding subclause unless the Track Infrastructure selected
comprises, (so far as is practicable in light of the size and
location of the land) an integrated package of infrastructure
capable of use for Railway Operations.
4.2.8 With respect to any Track Infrastructure which the Lessor elects
not to acquire ("the Unacquired Track Infrastructure):
4.2.8.1 the Lessee may remove all or any part of the Unacquired
Track Infrastructure either before the Lessee is
required to deliver a partial Surrender of the Lease
with respect to the part of the Land where the
Unacquired Track Infrastructure is located, or within a
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reasonable time not exceeding six months after the
delivery of partial Surrender of the Lease notified by
the Lessee by written notice to the Lessor;
4.2.8.2 if it removes all or any part of the Unacquired Track
Infrastructure, the Lessee must ensure that the
portion of the Land from which it is removed is not by
reason of such removal left unsafe at the Lessee's
cost and to the Lessor's reasonable satisfaction; and
4.2.8.3 if the Lessee does not remove the Unacquired Track
Infrastructure within the time required in this
clause, then title to that part of the Track
Infrastructure passes to the Lessor.
4.2.9 If the Lessor requires the Lessee to surrender, or the Lessee
elects to surrender a portion of the Land under this clause, the
Lessee is only obliged to restore or repair any Track
Infrastructure;
4.2.9.1 to the extent necessary to comply with the Lessee's
maintenance obligations under this Lease , and
4.2.9.2 to the extent necessary to repair any damage caused by
negligence or wilful act of the Lessee or any person
for whom the Lessee is legally responsible.
4.2.10 The Lessee must comply with the Hazard Removal Obligation in
respect of the part of the Land in respect of which the Lessee
is required to deliver a partial Surrender of the Lease.
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4.3 PROCESS (SURRENDER AND ACQUISITION OF TRACK INFRASTRUCTURE)
4.3.1 In order to exercise the Lessor's right to require the Lessee to
surrender a portion of the Land under clause 4.3, the Lessor
must give the Lessee a Surrender Warning Notice (which may be
given before the right of the Lessor to require the surrender
arises, in respect of circumstances which the Lessor believes
will give rise to such a right, if continued) and, at the time
the right arises or 60 days after the service of the Surrender
Warning Notice (whichever is later), a Surrender Notice.
4.3.2 In order to exercise the Lessee's right to surrender a portion
of the Land under clause 4., the Lessee must give the Lessor a
Surrender Notice.
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4.3.3 A Surrender Warning Notice must:
4.3.3.1 state that it is a Surrender Warning Notice;
4.3.3.2 be dated;
4.3.3.3 adequately identify the portion of the Land to which
it relates; and
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4.3.3.4 set out the facts on the basis of which the Lessor believes the right to require a Surrender has arisen or will arise.
4.3.4 A Surrender Notice must:
4.3.4.1 state that it is a notice under this clause;
4.3.4.2 be dated,
4.3.4.3 adequately identify the portion of the Land in respect of
which a partial surrender is required or intended,
4.3.4.4 set out the facts which give rise to the application of this
clause.
4.3.5 If the party receiving a Surrender Warning Notice or a Surrender Notice
(the "receiving party") wishes to dispute that the other party (the
"notifying party") is entitled to give the Notice, the receiving party
must so notify the notifying party not later than one month after the
date of the Surrender Notice, and must state the matters of fact and any
other matter specified in the Notice with which the receiving party
takes issue. The receiving party must also provide the notifying party
with such evidence as practicable in support of the receiving party's
position within 45 days of the Notice.
4.3.6 No later than 90 days after a Surrender Notice which is not disputed
under the preceding subclause is given by either party, or not later
than 90 days after any dispute as to the Surrender Notice is resolved
(if resolved in favour of the validity of the Surrender Notice) the
Lessee must give the Lessor written notice ("Notice of Value and
Condition ") in respect of the relevant portion of the Land:
4.3.6.1 referring to the relevant Surrender Notice and the portion of
the Land to which it relates;
4.3.6.2 if the Lessee would be entitled to require payment for the
Track Infrastructure, the Lessee's estimate of the Market Value
of the Track Infrastructure, itemised insofar as practicable
with respect to the various categories of the Track
Infrastructure; and
4.3.6.3 a description of any Significant Public Hazard on or in the
relevant portion of the Land.
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4.3.7 Within 90 days of receiving a notice of Terms of Surrender, the Lessor must advise the Lessee by notice in writing:
4.3.7.1 whether the Lessor elects to acquire all or any of the relevant
Track Infrastructure and identifying that category or part of
the Track Infrastructure to be acquired ("the Nominated Track
Infrastructure");
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4.3.7.2 (if the Lessee is entitled to payment for the Nominated Track
Infrastructure), whether the Lessor accepts or disputes the
Lessee's assessment of its Market Value and if disputed, the
Lessor's assessment of its Market Value.
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4.4 DISPUTED VALUATION
4.4.1 If the parties do not, within one hundred and twenty days of the
Notice of Value and Condition, agree on either the Market Value
of Nominated Track Infrastructure for which the Lessor is liable
to pay, then a party may refer the matter to an independent
Expert for determination.
4.4.2 In the case of a dispute as to the Market Value of Nominated
Track Infrastructure, the independent expert must certify the
Market Value of the relevant Track Infrastructure and within
thirty days of receipt of this determination the Lessor must
either confirm or revoke its election to acquire the Nominated
Track Infrastructure or part of it.
4.4.3 If the Lessor revokes its election to acquire any Track
Infrastructure after an Expert Determination of its Market Value
which exceeds the Lessor's assessment of its Market Value, then
the Lessor must pay the whole of the costs of the Expert
Determination.
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4.5 PROCESS (HAZARD REMOVAL OBLIGATIONS)
4.5.1 Not later than 60 days after;
4.5.1.1 receiving a Notice of Value and Condition in respect
of a part of the Land on which there is no Track
Infrastructure; or
4.5.1.2 electing not to acquire any Nominated Track
Infrastructure, or
4.5.1.3 agreeing the Market Value of Nominated Track
Infrastructure; or
4.5.1.4 receiving an Expert Determination of Nominated Track
Infrastructure;
the Lessor must give the Lessee a Hazard Removal Notice.
4.5.2 A Hazard Removal Notice must identify any Significant Public
Hazard described in the Notice of Value and Condition or
otherwise known to the Lessor to which the Lessor attaches a
Hazard Removal Obligation in accordance with clause 11.
4.5.3 If the Lessee wishes to dispute any matter in the Hazard Removal
Notice, the Lessee must notify the Lessor of the matter in
dispute and, to the extent practicable, any matters of fact
relevant to the dispute not later than 30 days after receipt of
the Hazard Removal Notice.
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4.5.4 If the parties do not within 90 days of the Hazard Removal
Notice agree the Hazard Removal Obligation, a party may refer
the matter for Expert Determination.
4.5.5 The Expert must determine what the Hazard Removal Obligation
under clause 11 is.
4.5.6 The Lessee must comply with its Hazard
Removal Obligation with respect to a part of the Land not later
than six months after;
4.5.6.1 the Hazard Removal Notice in respect of that part of the
Land; or
4.5.6.2 if the Hazard Removal Notice is disputed in accordance
with this clause, the date of the Expert Determination
as to the Hazard Removal Obligation.
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4.6 SURRENDER OF THE LEASE AND CONSEQUENTIAL MATTERS
4.6.1 Where a valid Surrender Notice has been given by one party to
the other under clause 4.4
4.6.2 the Lessee must:
4.6.2.1 execute and deliver a partial surrender of the lease in
respect of the relevant portion of the Land, not later
than six months after the date of the Surrender Notice
or six months after the determination by an independent
expert of any dispute as to the Hazard Removal Work,
whichever is the later ("the Surrender Date"), and
4.6.2.2 relinquish possession of the portion of the Land to the
Lessor upon demand by the Lessor at any time after the
Surrender Date.
4.6.3 The costs of the preparation execution and registration of the
surrender of lease under this clause must be borne:
4.6.3.1 if the surrender is given at the election of the
Lessee, or pursuant to a Surrender Notice by the Lessor
made under clause 4.4(a)(ii) or 4.4(a)(iii), by the
Lessee;
4.6.3.2 in any other case, by the Lessor.
4.6.4 The Lessor must acquire Nominated Track Infrastructure with
respect to which the election to acquire has not been revoked
under clause 4.6.2. Title in Nominated Track Infrastructure
passes to the Lessor on payment of its Market Value, or if the
Lessor is not obliged to pay for it, on nomination by the
Lessor.
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4.7 ADJUSTMENTS TO RAIL CORRIDORS
If the Lessee wishes to realign or make changes to the boundaries of the Land then the parties will co-operate to the intent that:
4.7.1 any land to be added to the Land must be acquired at the cost of
the Lessee in the name of the Lessor and be made subject to the
provisions of this Lease;
4.7.2 with the approval of the Lessor any part of the Land which would
be made surplus by the proposed boundary changes may be dealt
with by exchanging it for additional land.
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4.8 USE OF TRACK INFRASTRUCTURE
If within twelve months after a surrender under this clause, the Lessor:
4.8.1 commences to make use of the Track Infrastructure or a part of
the Track Infrastructure which the Lessor elected not to acquire
pursuant to this clause ("Unacquired Track Infrastructure") for
Railway Operations; or
4.8.2 makes the Unacquired Track Infrastructure available to another
person (a "Railway Licensee") for use in Railway Operations; or
4.8.3 commences a process of calling for bids or tenders or other
process designed to lead to a contract under which it is
proposed that a Railway Licensee will acquire or have the use of
the Unacquired Track Infrastructure for use in Railway
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Operations:
then the Lessor will be liable to pay to the Lessee the Market Value of so much of the Unacquired Track Infrastructure as the Lessor or the Railway Licensee uses or acquires.
5. LESSOR'S RIGHTS AND OBLIGATIONS
5.1 QUIET ENJOYMENT
Subject to the Lessor's rights under this Lease, the Lessee may peaceably possess and enjoy the Land for the Term without interruption by the Lessor or any person lawfully claiming from or under the Lessor except as expressly provided in this Lease.
5.2 RESERVATIONS
Notwithstanding anything contained in this Lease the Lessor RESERVES to itself and excludes from the grant contained in this Lease the following interests:
5.2.1.1 the rights of SACBH, subject to the reasonable
direction and control of the Lessee, (to the extent
that SACBH occupies or is a Lessee from the Lessor of
land adjacent to the Rail Corridors) to
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take access to and encroach upon Rail Corridors for the purpose of permitting access across tracks for grain handling, shunting wagons on sidings, crossing rail lines, obtaining access to encroachments and facilitating the outloading of grain from silos and otherwise facilitating the ordinary undertaking by SACBH of its business activities on land adjacent to Rail Corridors; and
5.2.1.2 the areas of land and interests described in Item 2 of Schedule 1.
5.3 PERMIT USE OF EXISTING RIGHTS
5.3.1 During the Term the Lessor must permit the Lessee to continue to
use all existing drains, waterways, easements and services
pertaining to any of the Land which are under the control of the
Lessor and which adjoin or neighbour the Land and where any of
such land is sold, subdivided or leased, ensure that the Lessee
continues to have those rights or provide alternative facilities
for the Lessee.
5.3.2 If any of the Track Infrastructure is situated on Land which is
both excised from the description of the Land prior to the grant
of this Lease and is adjacent to the Land, the Lessor will
ensure that rights of the Lessee to access and use the Track
Infrastructure for the purpose of Railway Operations are
preserved for the benefit of the Lessee.
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5.4 LESSOR'S RIGHT TO ENTER LAND
5.4.1 Subject to paragraph 5.4.2, the Lessor may enter the Land
together with all necessary workmen and equipment at all
reasonable times for the following purposes, if it gives the
Lessee reasonable prior notice:
5.4.1.1 to determine the condition of the Land or whether the
Lessee is complying with this Lease;
5.4.1.2 to exercise its rights under clause 5.6;
5.4.1.3 to carry out any work to the Land made necessary by any
failure by the Lessee to satisfy the terms and
conditions of this Lease, or to carry out work on any
adjacent property of the Lessor; and
5.4.1.4 to enable it to comply with any law or any notice from
any Authority affecting the Land.
5.4.2 When exercising its rights under paragraph 5.4.1:
5.4.2.1 the Lessor must take reasonable steps to minimise any
disruption to the Lessee; and
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5.4.2.2 is not required to give reasonable prior notice or
enter at a reasonable time in the case of an emergency,
but will give notice to the Lessee promptly thereafter.
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5.5 DEDICATION OR EASEMENT
The Lessor may dedicate any part of the Land or grant an easement in respect of any part of the Land, but only if such dedication or grant does not;
5.5.1.1 materially affect the Lessee's rights under this Lease; or
5.5.1.2 materially impair the Lessee's ability to carry on its business on the Land including, without limitation, the continued conduct of Railway Operations.
5.6 LESSOR MAY PERFORM LESSEE'S OBLIGATIONS
The Lessor may, at the Lessee's cost, do anything which the Lessee is obliged to do under this Lease but has failed to do. The Lessor agrees that it will not exercise its rights under this clause unless it has given notice to the Lessee specifying the matter which has not been done and giving the Lessee a reasonable period to take corrective action (such period to be not less than 30 days).
5.7 LESSOR'S CONSENT
If the Lessor's consent is required for anything under this Lease, that consent:
5.7.1 must be in writing; and
5.7.2 may be given, either conditionally or unconditionally, or
withheld, in the Lessor's absolute discretion,
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unless this Lease states otherwise.
5.8 PROPERTY RECORDS
For the purposes of clarification it is recorded that ownership of all property information, plans and records relating to the Land at the Commencing Date and made available to the Lessee remains at all times with the Lessor. The Lessor must permit the Lessee, at the Lessee's cost, to have access to such information plans and records in business hours and on reasonable notice, and must permit the Lessee to take copies of such information at the Lessee's expense.
5.9 NO COMPENSATION FOR BUILDINGS AND IMPROVEMENTS
5.9.1 Subject to Clause 4 and clause 10, upon the expiration or
earlier determination of the Term in respect of the Land or any
part all buildings and other improvements remaining on such Land
are deemed to have
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become and to be the sole and exclusive property of the Lessor
without the Lessor being required to pay any compensation
whatsoever to the Lessee.
5.9.2 Notwithstanding any thing else in this Lease, title to any
tunnel, bridge or formation on any part of the Land will vest in
the Lessor without any obligation to make payment to the Lessee
on surrender of that part of the Land or termination or expiry
of this Lease.
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5.10 TITLE TO LAND
5.10.1 The parties believe that the Lessor has the necessary rights of
ownership, occupation or usage over the Land to enable it to
grant this Lease, but the Lessor gives no warranties as to title
and will have no liability for any defect in title or right of
occupation or usage that may exist, now or in the future.
5.10.2 To the extent that the Lessee requires any action to be taken in
the name of the Lessor in order to remedy any defects referred
to in this clause, or requires administrative assistance in
obtaining access to records which are available only from the
Lessor, the Lessor, at its own expense, will provide all
reasonable assistance to the Lessee.
5.10.3 Despite any other provision in this Lease, the Lessee
acknowledges that this Lease is granted subject to any other
interests, rights, licences, easements or other agreements
binding upon the Lessor, or by statute, affecting the Land.
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5.11 LODGEMENT OF DOCUMENTS
If:
5.11.1 an alteration or addition to the Track Infrastructure ("Works")
is permitted by this Lease;
5.11.2 any documents are required by an Authority to be signed and
lodged by the Lessor as the proprietor of the Land before the
Works are approved by the Authority or performed by the Lessee;
and
5.11.3 the Lessee has prepared and submitted the documents to the
Lessor,
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then the Lessor must sign and permit the lodgement of the documents.
5.12 THE EXISTING LEASES
The Lessor and the Lessee covenant and acknowledge as follows in respect of the Existing Leases:
5.12.1 The Lessor shall deliver to the Lessee, on or before the
execution of this Lease, copies of all documents in her
possession constituting the grant of an Existing Lease or
containing covenants or other contractual provisions applicable
to an Existing Lease.
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5.12.2 On and from the Commencement Date and until the expiration or
earlier termination of the Existing Leases:
5.12.2.1 the Lessee shall be entitled to all the rights of a
concurrent lessee of the Lessor in respect of the
Land, including, without limitation, the right to
receive rent and any other moneys payable pursuant to
an Existing Lease on and after the Commencement Date
and to enforce the rights of the Lessor pursuant to an
Existing Lease on and after the Commencement Date; and
5.12.2.2 the Lessee must comply with all obligations of the
Lessor under the Existing Leases.
5.12.3 On and from the date of the execution of this Lease, the Lessor
shall not vary or amend an Existing Lease, accept the surrender
of an Existing Lease or release or discharge a Lessee under an
Existing Lease from performance of any obligations pursuant to
that Existing Lease without the prior written consent of the
Lessee.
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5.13 CREATION OF EASEMENTS
5.13.1 Subject to subclause 5.13.3, the Lessor shall, if requested by
the Lessee, and at the cost and expense of the Lessee in all
things grant an easement for:
5.13.1.1 public or private access to and egress from the Land;
5.13.1.2 support of existing or future structures erected on or
from adjoining land (subject to any applicable building
and planning laws);
5.13.1.3 or services of whatever nature to the Land; where the
requested easement is reasonably necessary for the
purposes of undertaking Railway Operations on the Land.
5.13.2 This Lease is deemed to be subject to any easement created or
granted pursuant to this clause.
5.13.3 If the Lessor is of the view that either the creation or
amendment of or the nature or extent of the rights requested to
be agreed, granted or created in respect of any easement
requested by the Lessee is not reasonably necessary for the
purpose of Railway operations then the Lessor may refer the
matter to a relevant Expert under clause 13.13 who shall provide
an opinion as to whether the request is reasonably necessary for
the relevant purpose.
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5.14 NATIVE TITLE
5.14.1 The Lessor agrees to notify the Lessee in writing of:
5.14.1.1 any native title claims which are lodged over any of
the Land after commencement of the Lease, within one
month of the Lessor receiving notice of such claim
pursuant to Section 66(2) of the Native Title Act
(Cth) 1993;
5.14.1.2 the progress of any native title claims which in any
way affects the Lessee's rights and obligations under
this Lease;
5.14.1.3 any Determination which in any way affects the Land,
within seven days of the Lessor being notified of
such Determination;
5.14.1.4 any agreement that has been entered into by the
Lessor with the Commonwealth or any Aboriginal group
concerning native title rights or Aboriginal Items
which in any way affects the Lessee's rights under
this Lease, within seven days of entering into such
agreement; and
5.14.1.5 any claim of the existence of any Aboriginal Item
which in any way affects the Land or the Lessee's
rights under this Lease, as soon as it becomes aware
of any such claim in its capacity as owner of the
Land.
5.14.2 Determination
5.14.2.1 The parties do not acknowledge that any native title
exists in any of the Land.
5.14.2.2 The following clause will apply in the event that
either;
5.14.2.2.1 native title is found to exist in any of
the Land under the NTA or any other law;
or
5.14.2.2.1 any Aboriginal Item is located on the
Land.
5.14.2.3 As between the Lessor and the Lessee:
5.14.2.3.1 the Lessor, and not the Lessee, will be
responsible for the payment of
compensation and any other moneys (if
any) payable to the native title holders
of any of the Land, the owners of any
Aboriginal Item and any other person
payable as a result of the grant of the
right of exclusive possession conferred
by this Lease; and
5.14.2.3.2 if the obligation to pay such
compensation or other moneys arises as a
result of the use to which the Lessee or
anyone claiming through or under the
Lessee puts the Land, and does not fall
within the
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scope of clause 5.14.2.3.1, the Lessee will be responsible for payment.
5.14.3 Associated Definitions
5.14.3.1. ABORIGINAL HERITAGE LAW means a law regulating or
otherwise relating to the protection of matters of
Aboriginal cultural heritage significance including,
without limitation, the Aboriginal and Torres Strait
Islander Protection Act 1984 (Cth), the Aboriginal
Heritage Act 1988 (SA) and the Aboriginal Relics Act
1975 (Tas);
5.14.3.2 ABORIGINAL ITEM means any object or site which is of
Aboriginal cultural heritage significance to any
Aboriginal Group;
5.14.3.3 DETERMINATION means any notice, order, judgement or
declaration issued or made by any government or
governmental authority, judicial or quasi-judicial
body, or tribunal that native title exists;
5.14.3.4 NTA means the Native Title Act (Cth) 1993 and
complementary South Australian legislation.
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6. LESSEE'S OBLIGATIONS
6.1 GENERAL OBLIGATIONS
The Lessee must:
6.1.1 (COMPLIANCE) at its cost obtain all consents required
from any Authority to carry on Railway Operations on the
Land and comply in all relevant respects with all laws
affecting the Land, the Lessee's Property and the
conduct of Railway Operations on the Land;
6.1.2 (SERVICES) PAY WHEN DUE ALL SANITARY CHARGES AND ALL
CHARGES FOR GAS, electricity, telephone and any water
consumption charge, garbage removal and all charges for
the provision of any services relating to the Lessee's
use of the Land;
6.1.3 (NOTIFICATION) promptly notify the Lessor, as soon as
the Lessee becomes aware, of any statutory notice from
any Authority with respect to infectious disease or
pests on the Land;
6.1.4 (ACCIDENT, DANGER) promptly provide to the Lessor any
information reasonably required by the Lessor with
respect to:
6.1.4.1 any accident occurring on the Land or as a
result of use of the Track Infrastructure;
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6.1.4.2 any specific material defect or want of repair
in any improvements on the Land; and
6.1.4.3 any specific circumstance which the Lessor
considers is reasonably likely to cause any
significant danger, risk or hazard to the Land
or to any person on the Land or to the public
or adjoining buildings in the immediate
vicinity of the Land;
upon receipt from the Lessor of a notice specifying the
accident, defect, want of repair or circumstance, its
location (so far as known to the Lessor) and in the case
of accident, the time at which it occurred or is
believed to have occurred.
6.1.5 (FIRE PREVENTION) comply with all requirements of any
Authority or insurer in respect of the prevention or
control of fires in the buildings and the Lessee's
Property on the Land or on the Land itself; and
6.1.6 (payment to Lessor) make every payment to the Lessor
under this Lease without any set-off, counterclaim,
withholding or deduction.
6.2 USE
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The Lessee has the exclusive right to use, occupy and enjoy the Land during the Term but subject to the terms of this Lease and to the following:
6.2.1 during the five (5) years following the Commencing Date the
Lessee must carry on Railway Operations on and from the land in
accordance with the Minimum Service Requirements set out in
Schedule 3, and thereafter the Lessee must continue to use the
land for Railways Operations.
6.2.2 unless otherwise provided for in this Lease, the Lessee must not
use the Land throughout the Term for any purpose other than
Railway Operations except where such land is required for future
Railway Operations by the Lessee;
6.2.3 the Lessee must not take any action or knowingly allow any
action to be taken during the Term which will interrupt the
linear continuity of any Rail Corridor;
6.2.4 the Lessee must allow any other party holding from the Lessor at
the Commencing Date or holding as permitted by this Lease in
respect of the Land, such rights of occupation, access, passage,
easement, charge, use or any rights or benefits whatever as
exist at the Commencing Date including but not limited to the
rights described in Section 2 of the Schedule, the full and
unimpeded use of such rights or benefits according to and
subject to the terms upon which such rights or benefits were
conferred, and must:
6.2.4.1 not knowingly do or allow to be done anything on or in
respect of the Land or any adjoining land which the
Lessee owns or occupies
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or otherwise has control over, which would interfere
with such rights or benefits otherwise than to
exercise a right under a term upon which such rights
or benefits were conferred; and
6.2.4.2 to the extent that the Lessee is aware of any such
obligations, rights or benefits, carry out the
obligations of and protect the Lessor in respect of
such rights or benefits;
6.2.5 the Lessee will be entitled to all revenues from the Land and
from the carrying on of any business on the Land and must pay
and discharge all Outgoings in accordance with Clause 3.2;
6.2.6 the Lessee must not remove any item of Track Infrastructure from
the Land other than pursuant to an order issued by an Authority
or in compliance with the Lessee's repair, maintenance and
replacement obligations under this Lease, or with the prior
written consent of the Lessor, which must not be unreasonably
withheld; it is acknowledged that it is not unreasonable for the
Lessor to withhold consent or to impose conditions if the Lessor
reasonably believes that removal would:
6.2.6.1 have a significantly adverse effect on continuation of
Railway Operations; or
6.2.6.2 have a significantly adverse effect on regional
economic or employment conditions.
The Lessor must provide written reasons if the Lessor withholds
consent or imposes conditions as to the basis of that decision.
6.2.7 the Lessee must not affix or construct any permanent improvement
to or on the Land other than with the prior written consent of
the Lessor, which must not be unreasonably withheld or as
permitted by the terms of this Lease; it is acknowledged that it
is not unreasonable for the Lessor to withhold consent or impose
conditions if in the Lessor's reasonable opinion the proposed
improvement:
6.2.7.1 is not intended for use for Railway Operations;
6.2.7.2 would adversely affect the viability of Railway
Operations;
6.2.7.3 would have a significantly adverse affect on the value
of the Lessor's reversionary right in the Land.
The Lessor must provide written reasons if the Lessor withholds
consent or imposes conditions as to the basis of that decision.
6.2.8 the Lessee must exercise reasonable care in its use and
maintenance of the Land to avoid reasonably foreseeable injury
to persons or property.
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6.3 MAINTENANCE OF LAND
The Lessee must, to the extend necessary to avoid nuisance to neighboring properties, to safeguard public safety and to maintain the Lessee' ability to conduct Railway Operations:
6.3.1 (LAND) keep the Land (including fences) in good condition and
free of fire hazards and vermin in all respects (including,
without limiting the preceding requirements, grass cutting and
weed control and repairing and maintaining as required any
damage caused by fire, flood, lightning, storm, war or any act
of God);
6.3.2 (LESSEE'S PROPERTY) keep the Lessee's Property clean and in good
repair and condition;
6.3.3 (REMOVE REFUSE) remove all refuse from the Land regularly;
6.3.4 (CLEANING) keep any buildings on the Land clean and in good
condition; and
6.3.5 (DAMAGE) as soon as practicable repair any damage to the
Lessee's Property or the buildings on the Land.
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6.4 NOTIFICATION OF DAMAGE
The Lessee must notify the Lessor as soon as practicable after the Lessee becomes aware of any material damage to or defect in the Land, the Lessee's Property or any building on the Land of which the cost of repair or rectification is reasonably estimated to exceed $100,000.
6.5 LESSOR'S INTEREST IN LAND
6.5.1 The Lessee must not do anything which could prejudice the
Lessor's interest in the Land.
6.5.2 This clause is not intended to preclude the Lessee from doing
anything expressly permitted by this Lease.
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6.6 COST AND RISK OF LESSEE'S OBLIGATIONS
If the Lessee is obliged to do anything under this Lease, it must do so at its cost and at its risk.
6.7 ACCESS TO RECORDS
The Lessee must:
6.7.1 permit the Lessor access at all reasonable times to all
information held by the Lessee in any form relating to the Land,
the Track Infrastructure and the Lessee's compliance with the
terms of this Lease and the Lessee must make
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no charge for access to records and plans but is entitled to
charge a reasonable fee to cover costs involved in supplying any
other information; and
6.7.2 store and maintain such information, records and plans to a
reasonable standard.
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6.8 NATIONAL ESTATE SIGNIFICANCE
The parties agree and acknowledge:
6.8.1 the Lessee must conserve the significance of the National Estate
Land in the manner required by the South Australian Heritage Act
1993;
6.8.2 the Lessee must give to the Commission such assistance in the
carrying out of its functions as is reasonably practicable and
must comply with all reasonable requests for information made by
the Commission in the performance of its functions.
6.8.3 the Lessee must not take any action which is likely to affect
the National Estate Land to a significant extent unless:
6.8.3.1 it has notified the Lessor and the Commission and
afforded the Commission a reasonable opportunity to
comment upon the proposed action; and
6.8.3.2 the Lessee has obtained the consent of the Lessor
in writing to the action, such consent not to be
unreasonably withheld;
6.8.4 for the purposes of this clause 6.8, "significant extent" when
used in paragraph (c) in relation to National Estate Land
includes (without limitation) the following:
6.8.4.1 restoration of any building or improvements on any part
of the National Estate Land;
6.8.4.2 altering the fabric of any improvements on the National
Estate Land or replacing such fabric with another
material;
6.8.4.3 adding to or constructing nearby to existing
structures;
6.8.4.4 redesign and reconstruction of any improvements;
6.8.4.5 painting unpainted or original or early painted
surfaces;
6.8.4.6 altering the use of any improvements or the intensity
of the existing use;
6.8.4.7 cleaning the fabric of any improvement;
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6.8.4.8 removing paint by mechanical chemical or blasting
methods;
6.8.4.9 applying masonry preservatives;
6.8.4.10 demolishing or removing parts of an existing
structure;
6.8.4.11 excavating or removing old soil or footings;
6.8.4.12 earthworks or landscaping;
6.8.4.13 removing or planting vegetation;
6.8.4.14 removing, changing or replacing machinery plumbing
sewerage or drains;
6.8.4.15 removing the contents of any improvements;
6.8.4.16 installing or upgrading any services;
6.8.4.17 road or path making;
6.8.4.18 discontinuing repairs or maintenance; and
6.8.4.19 the affixing of external signs.
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7. INSURANCE, RISK AND INDEMNITIES
7.1 PUBLIC LIABILITY
The Lessee must take out and maintain a public liability insurance policy in respect of the Land and the business and activities conducted on the Land:
7.1.1 under which the maximum amount payable for a single claim
is at least $100,000,000, or any other amount from time to
time reasonably required by the Lessor and which a
reasonably prudent operator of railway operations for
carriage of freight would effect;
7.1.2 which contains all provisions that are normally contained
in public liability policies and any other provisions
reasonably required by the Lessor and available at
reasonable cost in the insurance market;
7.1.3 which, without limiting the rest of this clause 7, covers
death and injury to any person and damage to property of
any person sustained when that person is using or entering
the Land or resulting from any thing originating from the
Land; and
7.1.4 which expressly refers to and covers all of the Lessee's
obligations under this Lease, including the obligation to
indemnify the Lessor.
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7.2 WORKERS' COMPENSATION
The Lessee must ensure that it is registered as an employer or an exempt employer under the Workers Rehabilitation and Compensation Act 1986 (SA) and that it pays all monthly and other levies due under the Act in respect of its employees engaged for the purpose of Railway Operations on the Land.
7.3 INDUSTRIAL SPECIAL RISKS
The Lessee must take out and maintain a policy covering the Lessee's Property for their full insurable value on a full replacement and reinstatement basis against loss or damage by fire, explosion, lightning, storm and tempest, earthquake, aircraft, impact by vehicles or vessels, riots, strikes, malicious damage, all water perils including flood, spontaneous combustion and such other risks (if any) as the Lessor may from time to time reasonably direct including extra costs of reinstatement, cost of removal of debris and all professional fees incurred in replacing and/or reinstating the Lessee's Property.
7.4 PROCEEDS OF INSURANCE
If any loss or damage occurs which is covered by any insurance the Lessee is required to maintain under this Lease the Lessee must:
7.4.1.1 apply for the insurance proceeds immediately; and
7.4.1.2 apply the proceeds:
7.4.1.2.1 subject to the terms of the relevant insurance
policy first to such repairs, replacement,
reinstatement or other works on the Land as are
required to ensure that the Track Infrastructure
and other improvements on the Land are no less
capable of supporting the Railway Operations which
are conducted on the Land than they were
immediately before the event of loss or damage in
respect of which the insurance proceeds were paid;
and
7.4.1.2.2 secondly, to capital investment in equipment,
rolling stock or improvements for use in Railway
Operations.
7.4.2 If the parties do not agree on the application of any
insurance proceeds under this clause, the matter may be
referred by either party to expert determination.
7.5 POLICIES
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The Lessee must do the following in respect of each policy that it is required to maintain under this Lease:
7.5.1 take it out with an insurance company approved by the Lessor,
whose approval must not be unreasonably withheld and if
withheld, the reasons for withholding must be disclosed in
writing to the Lessee;
7.5.2 if requested by the Lessor, give the Lessor a copy of the policy
and a certificate of currency for the policy; and
7.5.3 ensure that the policy notes the interest of the Lessor and
contains a requirement that the insurer will not cancel or
change the insurance without first giving the Lessor 30 days
prior written notice.
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7.6 MAINTAIN INSURANCE
7.6.1 The Lessee must notify the Lessor of any new use of the Land or
change in the character of activities conducted on the Land that
would:
7.6.1.1 increase the premium payable on any insurance policy
taken out by the Lessor; or
7.6.1.2 affect the Lessor's rights under insurance policy or
make the policy invalid or able to be cancelled; or
7.6.1.3 increase the risk of the Lessor or the exposure of
Lessor under any self insurance regime operated by the
Lessor or SAICORP on behalf of the Lessor.
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7.7 DISCLAIMER
7.7.1 The Lessor, in specifying levels of insurance in this Lease,
accepts no liability for the completeness of their listing, the
adequacy of the sum insured, limit of liability, scope of
coverage, conditions or exclusions of those insurances in
respect to how they may or may not respond to any loss, damage
or liability.
7.7.2 The Lessee acknowledges and agrees that it is the Lessee's
responsibility to assess and consider the risks and scope of
insurances required for its activities pursuant to this Lease.
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7.8 LESSOR'S RIGHTS TO INSURE
Notwithstanding any other provision of this Lease, if:
7.8.1 the Lessee fails to take out or keep in force an insurance
policy required pursuant to this Lease or to pay the appropriate
premiums when due; or
7.8.2 the Lessor determines that the insurer under a policy may not be
capable of meeting a claim;
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the Lessor may do anything which is advisable or necessary to take out or keep in force that policy or to take out a new policy complying with this clause at the cost of the Lessee and in the name of the Lessee and the Lessor. The Lessor is not obliged to do anything under this clause.
If the Lessee fails or refuses to:
7.8.3 obtain or maintain any insurances required under this clause; or
7.8.4 provide the Lessor with copies of policies or certificates of
currency in relation to them in accordance with this clause;
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then the Lessor may, but is not obliged to, effect and maintain the relevant insurance policy or pay the premiums in respect thereof. The cost of the Lessor doing so will be a debt due by the Lessee to the Lessor payable forthwith by the Lessee receiving written demand from the Lessor requiring payment accompanied with copies of any receipts in respect of the payment of such premiums.
7.9 LESSEE'S RISK
The Lessee occupies the Land at its own risk.
7.10 RELEASE OF LESSOR
To the extent permitted by law, the Lessee releases the Lessor from any
claim, action, damage, loss, liability, cost or expense which the Lessor
incurs or is liable for in connection with any damage, loss, injury or
death to or of any person or property on the Land except to the extent
(if any) that such damage, loss, injury or death is caused or
contributed to by the Lessor, or the Lessor's employees or agents.
7.11 INDEMNITY
The Lessee indemnifies the Lessor against any claim, action, damage,
loss, liability, cost or expense which the Lessor incurs or is liable
for in connection with:
7.11.1 any damage, loss, injury or death, either to person or property
except to the extent (if any) that such damage, loss, injury or
death is caused or contributed to by the Lessor, or the Lessor's
employees or agents;
7.11.2 any Event of Default;
7.11.3 the use and occupation of the Land by the Lessee or the Lessee's
Agents;
7.11.4 any service or the misuse of any service provided to the Land;
7.11.5 the escape of any matter or thing whatsoever from the Land;
7.11.6 the conduct of Railway Operations on the Land; and
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7.11.7 the failure of the Lessee to comply with any of its obligations
under any Existing Lease, any grant, easement or other right of
use or occupation of the Land made pursuant to any agreement
entered into prior to the Commencing Date, made as permitted
under the terms of this Lease or entered into pursuant to any
statute or regulation,
except, in each case, to the extent that any such claim, action, damage,
loss, liability, cost or expense is caused or contributed to by the
wilful misconduct, fraud, or negligence of the Lessor.
7.12 CONTINUING INDEMNITY
Each indemnity of the Lessee contained in this Lease is:
7.12.1 in respect of an act, breach or omission which occurs before the
termination of this Lease, a continuing obligation of the Lessee
and remains in full force and effect after the termination of
this Lease; and
7.12.2 a separate and independent obligation of the Lessee.
8. ASSIGNMENT, SUBLEASE AND MORTGAGE
8.1 ASSIGNMENT
The Lessee must not assign or purport to assign this Lease
without the Lessor's prior written consent, which may be
withheld, or given subject to conditions, at the Lessor's entire
discretion. If the Lessor refuses consent to a proposed
assignment, or attaches conditions, the Lessor must give the
Lessee written notice of the reasons for refusal or for the
conditions.
8.2 SUBLEASE AND LICENSING
The Lessee must not grant a sublease or licence with respect to
any part of the Land without the Lessor's prior written consent,
unless the sublease or licence is a Permitted Dealing within the
meaning of the following subclause.
8.3 PERMITTED DEALING
Each of the following is a Permitted Dealing:
8.3.1 a licence over or use of the Rail Corridor for the
purposes of a legislative access regime, or any other
access regime established or recognised under Part 111A
of the Trade Practices Act;
8.3.2 a licence to a sub-lessee under a Permitted Dealing
which performs Railway Operations, for the purpose of
performing Railway Operations;
8.3.3 a licence with respect to traversing or using a part of
the Land to an adjoining landowner for purposes which do
not prevent use of the Land for
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Railway Operations provided that any payment to the Lessee for
such licence does not exceed the Lessee's costs of administering
the arrangement and maintenance of the relevant portion of the
Land necessitated by the licensee's use of the portion of the
Land;
8.3.4 a sublease of any part of the Balance of the Land or of the Rail
Corridor excluding the railway track, provided that;
8.3.4.1 in respect of that part of the Land the Lessee must,
after the fifth anniversary of the Commencing Date,
pay Commercial Rent to the Lessee; and
8.3.4.2 that part of the Land continues to be used for
Railways Operations.
8.4 MORTGAGE
8.4.1 The Lessee must not grant an Encumbrance over this Lease without
the Lessor's prior written consent, which must not be withheld
except for sufficient cause, provided the following conditions
are met:
8.4.1.1 the Lessee has granted the Lessor a charge over the
Track Infrastructure to secure its option to purchase,
and constraint on the removal at the Track
Infrastructure under this Lease;
8.4.1.2 any financier holding security over any assets of the
Lessee's undertaking must enter into an agreement with
the Lessor of the nature contemplated in S.26 of the
Operations and Access Act on terms acceptable to the
Lessor and has entered into agreement as to an agreed
form of priority as between the financier's security
and the charge referred to in clause 8.4.1.1.
8.4.2 If the Lessor consents to the granting of an Encumbrance, and
subject to compliance with conditions required by the Lessor,
the Lessor will enter into a facilitation agreement with the
Encumbrance which incorporates terms to be agreed between the
Lessor, the Lessee and the Encumbrancee including:
8.4.2.1 the Lessor giving notice to the Encumbrancee of any
default by the Lessee under the terms of the Lease;
8.4.2.2 the Encumbrancee having the right to remedy any default
by the lessee of the terms of the Lease;
8.4.2.3 the Encumbrancee being entitled to appoint a
receiver/manager or the like and the same not being a
breach of the Lease so long as the receiver/manager or
the like conducts Railways Operations and continues to
perform the obligations of the Lessee under the Lease;
and
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8.4.2.4 the Encumbrancee or a receiver/manager of the Lessee
have a reasonable period of time in which to sell the
Lessee's interest in the Land or the Lessee's Property
to a third party in order to realise its security.
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In this clause:
8.4.3 "ENCUMBRANCE" means any of the following encumbrances of the
Lessee's interest in this Lease or the Land or the Lessee's
Property granted by the Lessee by way of security for the
payment or repayment of any Financial Accommodation provided or
any other form of indebtedness incurred by the Lessee in
performing its functions under this Lease;
8.4.3.1 a mortgage, charge, encumbrance, lease, licence,
instalment or conditional purchase agreement, pre-
emptive right, right of first refusal, agreement to
purchase on deferred terms, title retention agreement,
preferential right, trust arrangement by way of
security, conditional agreement or any other security,
interest or power", or
8.4.3.2 an agreement to grant or create any of the foregoing.
8.4.4 "ENCUMBRANCEE" means a person to whom the Lessee has granted or
in whose favour the Lessee has created an Encumbrance.
8.5 DEALING WITH TRACK INFRASTRUCTURE
8.5.1 The Lessee must not transfer or purport to transfer
title to the Track Infrastructure or any material part
of the Track Infrastructure to another person except:
8.5.1.1 with the prior written consent of the Lessor,
or
8.5.1.2 if the relevant part of the Track
Infrastructure has been removed from the Land
in accordance with the terms of this Lease.
If the Lessee purports to transfer title to Track Infrastructure
or any part of it in breach of the preceding subclause, title to
the Track Infrastructure or that part of the Track
Infrastructure is vested in the Lessor forthwith.
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9 TERMINATION
9.1 EVENTS OF DEFAULT
9.1.1 The Lessor may terminate this lease forthwith and re-
enter and take possession of the Land or, subject to
paragraph (b), convert this Lease to a monthly tenancy
if any of the following events occurs, is not remedied
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and is not waived by the Lessor:
9.1.1.1 (NON-PAYMENT) after the fifth anniversary of
the Commencing Date, the Lessee does not pay
the Rent (as referred to in paragraph (b) of
the definition of Rent) or any other money due
to the Lessor under this Lease within 30 days
after written demand has been served by the
Lessor on the Lessee;
9.1.1.2 (BREACH) the Lessee:
9.1.1.2.1 removes any Track Infrastructure
(except as permitted by this
Lease) without the Lessor's
consent and does not reinstate
that Track Infrastructure within
30 days of being required to do so
by the Lessor;
9.1.1.2.2 purports to assign or mortgage
this Lease or grant a sublease
(except as permitted by this
Lease) without the Lessor's
consent;
9.1.1.2.3 fails to establish its head office
in the Adelaide area within six
months of the Commencing Date, and
maintain it in the Adelaide area
until the expiry of 5 years from
the Commencing Date;
9.1.1.2.4 fails to maintain in operations at
the Dry Creek and Port Augusta
workshops until the expiry of 5
years after the Commencing Date;
9.1.1.3 (REPEAT OR SUBSTANTIAL BREACH)
The Lessee breaches any one of the following
obligations on four occasions during a twelve
month period (whether the breach is remedied
or not), or commits a substantial breach of
any of the following obligations and does not
remedy that breach as soon as reasonably
practicable and in any event within 90 days of
being served with notice from the Lessor
requiring the breach to be remedied;
9.1.1.3.1 the obligation to permit the
exercise of rights of third
parties over the Land;
9.1.1.3.2 the obligation to permit the
Lessor entry under clause 5.4;
9.1.1.3.3 the general obligations under
clause 6.1;
9.1.1.3.4 the obligation not to use the Land
for other than Railways
Operations;
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9.1.1.3.5 the obligation to maintain the Land under
clause 6.3;
9.1.1.3.6 the obligation to comply with laws;
9.1.1.3.7 the obligation to comply with any
Environmental Notice under clause 14.
9.1.1.4 (COMPANY) any of the following occurs :
9.1.1.4.1 an Administrator is appointed under section 436A,
436B or 436C of the Corporations Law or any action is
taken to make such appointment over the Lessee;
9.1.1.4.2 an application is made to a court under section 459A
of the Corporations Law for an order or an order is
made that the Lessee be wound up;
9.1.1.4.3 except to reconstruct or amalgamate while solvent, on
terms approved by the Lessor (which approval must not
be unreasonably withheld), the Lessee enters into, or
resolves to enter into, a scheme of arrangement or
composition with, or assignment for the benefit of
all or any class of its creditors, or it proposes a
re-organisation, moratorium or other administration
involving any of them;
9.1.1.4.4 except to reconstruct or amalgamate while solvent on
terms approved by the Lessor (which approval must not
be unreasonably withheld), the entity resolves to
wind itself up, or otherwise dissolve itself, or
gives notice of intention to do so, or is otherwise
wound up or dissolved; or
9.1.1.4.5 the Lessee is or states that it is unable to pay its
debts when they become due and payable.
9.1.1.4.6 if the Lessee or a Related Party of the Lessee causes
or permits a change in the control of:
9.1.1.4.6.1 the composition of the Lessee's board of
directors;
9.1.1.4.6.2 more than half of the voting power of
the Lessee's board of directors;
9.1.1.4.6.3 more than half of the voting power of
the Lessee's issued share capital; or
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9.1.1.4.6.4 more than half of the Lessee's used
share capital (excluding any part
which carries no right to
participate beyond a specified
amount in the distribution of
either profit or capital.
9.1.1.5 (FAILS TO PROVIDE MINIMUM SERVICES) during the first
five years of the Term, the Lessee fails;
9.1.1.5.1 to comply with the Minimum Service
Requirements for a continuous period of six
(6) months, and
9.1.1.5.2 to recommence the provision of those
Minimum Service Requirements within 30 days
of written notice from the Lessor
requesting that such services be provided.
9.1.1.6 (RAILWAY CEASES) the Lessee ceases to conduct Railway
Operations on the entire Rail Corridor for a
continuous period of eighteen (18) months.
9.1.2 If the Lessor converts this Lease to a monthly tenancy under
subclause 9.1.1, such monthly tenancy shall be on the same terms
as this Lease, and either party may terminate the monthly
tenancy by giving one week's written notice to the other.
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9.2 PROCESS (TERMINATION)
9.2.1 In order to exercise the Lessor's right to require the Lessee to
terminate, the Lessor must give the Lessee a Termination Warning
Notice (which may be given before the right of the Lessor to
terminate arises, in respect of circumstances which the Lessor
believes will give rise to such a right, if continued) and at
the time the right arises or 60 days after the service of the
Termination Warning Notice (whichever is later), a Termination
Notice.
9.2.2 A Termination Warning Notice and a Termination Notice must:
9.2.2.1 be identified as a Termination Warning Notice or a
Termination Notice;
9.2.2.2 be dated; and
9.2.2.3 set out the facts on the basis of which the Lessor
believes the right to terminate has arisen or will
arise.
9.2.3 If the Lessee receives a Termination Warning Notice and wishes
to dispute that the Lessor is or will be entitled to terminate,
the Lessee must so notify the Lessor not later than one month
after the receipt of the Notice, stating the matters of fact and
any other matter contained in the Notice with which the
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Lessee takes issue. The Lessee must also provide the Lessor with such evidence as practicable in support of the Lessee's position within 45 days of receipt of the Termination Warning Notice.
9.3 APPOINTMENT OF ATTORNEY
The Lessee irrevocably appoints the Lessor its attorney. The Lessor may, in his or her name or in the name of the Lessee, do any of the following after an Event of Default occurs, is not remedied and is not waived by the Lessor:
9.3.1 any thing which ought to be done by the Lessee under this Lease;
9.3.2 exercise any right, power, authority, discretion or remedy of
the Lessee under this Lease; and
9.3.3 execute a transfer or surrender of this Lease.
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9.4 INDEMNITY FOR BREACH
Subject to any obligation of the Lessor to mitigate its loss, the Lessee indemnifies the Lessor against any claim, action, loss, damage, cost, liability, expense or payment suffered or incurred by the Lessor in connection with the Lessor's termination of this Lease under clause 9.
9.5 INTEREST ON OVERDUE MONEY
If the Lessee does not pay any money payable by it under this Lease by the due date, it must pay interest on that amount on demand by the Lessor. Interest is:
9.5.1 payable from the due date until payment is made by the Lessee
before and, as an additional and independent obligation, after
any judgment or other thing into which the liability to pay the
money payable becomes merged; and
9.5.2 calculated on daily balances at the rate of 1% per annum above
the rate for 90 day bills published in the Australian Financial
Review on, or as near as possible to, the due date; and
9.5.3 capitalised monthly.
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9.6 OTHER REMEDIES
Nothing in this clause affects any other rights or remedies otherwise available to either party in respect of any breach of this Lease, including without limitation, the right to claim damages, or to apply for an injunctive or declaratory relief or specific performance.
10. CONSEQUENCES OF TERMINATION OR EXPIRY
10.1 RIGHT TO ACQUIRE TRACK INFRASTRUCTURE
Upon termination or expiry of this Lease the Lessor may at its election acquire all or any part of the Track Infrastructure located on the Land as at the date of termination or expiry:
10.1.1 if termination occurs before the expiry of five years
from the Commencing Date, at no cost to the Lessor; and
10.1.2. in any other case, upon payment to the Lessee of the
Market Value of the Track Infrastructure.
10.2 USEABLE TRACK INFRASTRUCTURE
The Lessor may not exercise its right to acquire less than all the Track
Infrastructure located on the Land under the preceding subclause unless
the Track Infrastructure selected comprises an integrated package or
packages of infrastructure capable of use for Railway Operations.
10.3 UNACQUIRED TRACK INFRASTRUCTURE
With respect to any Track Infrastructure which the Lessor elects not to
acquire:
10.3.1 the Lessee may remove that part of the Track Infrastructure;
10.3.2 if it removes that part of the Track Infrastructure, the Lessee
must ensure that the portion of the Land from which it is
removed is not by reason of such removal left unsafe at the
Lessee's cost and to the Lessor's reasonable satisfaction; and
10.3.3 if the Lessee does not remove that part of the Track
Infrastructure before the expiry of the Term or within six
months after the termination of the Lease, then title to that
part of the Track Infrastructure passes to the Lessor.
10.3.4 If within twelve months after the expiry or termination of the
Lease, the Lessor:
10.3.4.1 commences to make use of the Track Infrastructure or
a part of the Track Infrastructure which the Lessor
elected not to acquire pursuant to this clause
("Unacquired Track Infrastructure") for Railway
Operations; or
10.3.4.2 makes the Unacquired Track Infrastructure available
to another person (a "Railway Licensee") for use in
Railway Operations; or
10.3.4.3 commences a process of calling for bids or tenders or
other process designed to lead to a contract under
which it is proposed that a Railway Licensee will
acquire or have the use of the Unacquired Track
Infrastructure for use in Railway Operations;
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then the Lessor will be liable to pay to the Lessee the
Market Value of so much of the Unacquired Track
Infrastructure as the Lessor or the Railway Licensee
uses or acquires.
10.4 REMOVAL OF HAZARDS
The Lessee must comply with the Hazard Removal Obligation attaching to
any Significant Public Hazard on the Land or a part of the Land at the
time when;
10.4.1 the Lessee elects to or is required to Surrender the part of the
Land; or
10.4.2 the Lease expires or is terminated.
10.5 PROCESS (ACQUISITION OF TRACK INFRASTRUCTURE)
Within ninety days of termination of this Lease, or (if the parties have
not agreed to a renewal of this Lease) six months prior to the expiry of
the Term of this Lease the Lessee must give the Lessor written notice
("a Notice of Value and Condition "):
10.5.1 (if the Lessee would be entitled to payment for Track
Infrastructure) stating the Lessee's estimate of the Market
Value of the Track Infrastructure, itemised with respect to the
various components of the Track Infrastructure; and
10.5.2 describing any Significant Public Hazard on or in the Land.
10.5.3 Within 90 days of receiving a Finalisation Proposal, the Lessor
must advise the Lessee by notice in writing:
10.5.3.1 whether the Lessor elects to acquire any or all of
the Track Infrastructure ("Nominated Track
Infrastructure");
10.5.3.2 whether the Lessor accepts or disputes the Lessee's
assessment of its Market Value, and if it is
disputed, the Lessor's assessment of its Market
Value.
10.6 DISPUTED VALUATION
10.6.1 If the parties do not, within one hundred and twenty days of the
Notice of Value and Condition , agree on the Market Value of
Track Infrastructure which Lessor elects to acquire, then a
party may refer the matter to an independent Expert for
determination.
10.6.2 The independent expert must certify the Market Value of the
Nominated Track Infrastructure and within thirty days of receipt
of this determination the Lessor must either confirm or revoke
its election to acquire the Nominated Track Infrastructure or
part of it.
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10.6.3 If the Lessor revokes its election to acquire any Track
Infrastructure after an Expert Determination of its Market Value
which exceeds the Lessor's assessment of its Market Value, then
the Lessor must pay the whole of the costs of the Expert
Determination.
10.7 SURRENDER OF THE LEASE AND CONSEQUENTIAL MATTERS
10.7.1 If the Lease is terminated, the Lessee must promptly execute and
deliver a surrender of the Lease.
10.7.2 If the Lease has been terminated or has expired, the Lessee must
promptly give vacant possession of the Land in the condition and
state of repair required under this Lease upon demand by the
Lessor, and the Lessor must promptly make any payment due to the
Lessee in respect of acquisition of the Nominated Track
Infrastructure.
10.7.3 If the Lessee has relinquished possession of the Land prior to
the expiry of a period of six months after termination of the
Lease, then until that date the Lessor will grant to the Lessee
a licence to come onto the Land to the extent reasonably
required and for the purpose of removing any Significant Public
Hazard or removing Track Infrastructure which has not been
acquired by the Lessor.
10.7.4 After the completion of the Hazard Removal Work in accordance
with clause 10.3, the Lessee will be taken to have made the Land
free from any Significant Public Hazard.
10.7.5 Must immediately remedy any damage caused to the Land in the
course of removal of the Lessee's Property and/or the Track
Infrastructure.
10.7.6 If the Lessee does not remedy any damage under clause, the
Lessor may do so at the Lessee's cost.
10.7.7 If the Lessee does not remove any Lessee's Property which it is
required to remove from the Land or from any place where it is
stored by the Lessor within seven days of being asked to do so
by the Lessor, that Lessee's Property (if the Lessor so elects)
becomes the property of the Lessor at no cost to the Lessor.
11. HAZARD REMOVAL
11.1 APPLICATION
This clause sets out the Hazard Removal Obligation that may
arise in circumstances set out in clause 4 or clause 10.
11.2 MEANINGS
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11.2.1 Hazard Removal Obligation is the obligation of the
Lessee to remove or make safe any Significant Public
Hazard, by carrying out Hazard Removal Work;
11.2.2 A Significant Public Hazard is:
11.2.2.1 a tunnel, underpass, building bridge or other
structure which is unfit for use for its
intended purpose,
11.2.2.2 Contamination, other than Existing
Contamination as defined in clause 14,
11.2.2.3 an excavation, or
11.2.2.4 any inherently dangerous substance or thing,
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located on the Land at the time of expiry or termination of this Lease or located on a part of the Land surrendered under clause 4.
11.2.3 Hazard Removal Work is:
11.2.3.1 with respect to a tunnel, underpass,
building, bridge or other structure,
demolition, removal of debris and levelling
of the site, or, at the Lessee's option,
permanently precluding physical access to, or
making good to the extent that the building
bridge or other structure is not unsafe for
any member of the public in, on or in its
vicinity;
11.2.3.2 with respect to Contamination, removal or
making harmless;
11.2.3.3 with respect to an excavation, filling in and
compacting;
11.2.3.4 with respect to an inherently dangerous
substance or thing, removal;
carried out safely, to a good workmanlike standard, and
without causing any unnecessary danger or damage to the
Land, to Track Infrastructure or to any persons.
11.3 EXCLUSION OF OBLIGATION
No Hazard Removal Obligation will attach to a Significant Public Hazard;
11.3.1 if it is also Track Infrastructure (other than tunnels and
bridges) acquired by the Lessor under clause 4 or clause 10; or
11.3.2 if it existed at the Commencing Date and is located on a part of
the Land on which a Non-Operational Line is located.
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11.4 ATTACHMENT OF OBLIGATION
Subject to the preceding subclause, a Hazard Removal Obligation attaches to:
11.4.1 any Significant Public Hazard with respect to which the
Lessor gives a Hazard Removal Notice under clause 4 or
clause 10; and
11.4.2 any Significant Public Hazard which is not identified by
the Lessee in a Notice of Value and Condition.
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11.5 DISCHARGE OF OBLIGATION
A Hazard Removal Obligation is discharged:
11.5.1 when the Lessee has carried out the Hazard Removal Work;
or
11.5.2 in respect of a Significant Public Hazard not identified
by the Lessee in a Notice of Value and Condition, upon
the expiry of two years after the surrender of the part
of the Land on which the Significant Public Hazard is
located, if the Lessor has not within that time given
the Lessee a notice identifying that Significant Public
Hazard and requiring Hazard Removal Work to be carried
out on that Significant Public Hazard.
12. FORCE MAJEURE
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12.1 DEFINITION
A "Force Majeure" circumstance is an event or circumstance which, or the consequences of which, the party affected cannot:
12.1.1 (in the case of the Lessee) control or influence to the
extent necessary to permit the conduct of Railway
Operations or Minimum Service Requirements; or
12.1.2 avoid through prudent management processes, policies and
precautions, including (without limitation) through the
use of alternate resources and work around plans (in the
case of the Lessee, consistent with best railway
industry practices).
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12.2 SPECIFIC CIRCUMSTANCES
Subject to clause 12.1, a Force Majeure Circumstance may include:
12.2.1 fire, flood, earthquake, elements of nature of acts of
god, malicious damage, explosion, sabotage, toxic or
dangerous chemical contamination (other than as a result
of the Lessee's non-performance) riot, civil disorder,
rebellion or revolution in Australia;
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12.2.2 any failure by the Lessor or the Lessee to perform its
obligations in accordance with the Lease;
12.2.3 Existing Contamination on the Land as defined in
clause 14;
12.2.4 any change in the law which changes the manner in
which the Lessee can lawfully perform Railway
Operations;
12.2.5 anything done by SACBH or another party purporting to
exercise any reservation under clauses 5.2, 5.4, 5.5,
5.12 or 6.2(c) if and to the extent that the rights so
reserved are exceeded;
12.2.6 the cessation of any activity in order to avoid an
obligation to pay significant compensation in respect
of a native title claim in respect of a part of the
Land, to the extent that, if paid, the use of that
part of the Land may become uneconomic.
12.2.7 a refusal of consent by the Lessor to the Lessee under
clause 6.2.6 or clause 6.2.7, if the Lessor's refusal
would be unreasonable were it not for the provisions
in these clauses by which refusal on the grounds of an
opinion concerning regional economic or employment
conditions is taken to be reasonable.
12.2.8 the absence of legislation or statutory instrument
exempting the Initial Track Infrastructure from the
requirements of planning legislation.
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12.3 EXPENDITURE
The expenditure of money by a party is not a Force Majeure Circumstance.
12.4 EFFECT
The obligations of a party under this Lease and any corresponding entitlement of the other party arising out of a failure to satisfy such obligations will be suspended to the extent and for so long as the performance of the first-mentioned party's obligations are prevented or delayed by a Force Majeure Circumstance.
12.5 OBLIGATION TO WORK AROUND
The party affected by a Force Majeure Circumstance must use its best endeavours to work around or overcome the effect of the Force Majeure Circumstance.
12.6 NOTIFICATION
The claiming to be affected by a Force Majeure Circumstance must notify the other party of a Force Majeure Circumstance as soon as the affected party becomes aware that such a circumstance is preventing it from complying with its obligations and in any event promptly upon being notified by the other party of a breach or failure in respect of which the affected party claims to rely on the Force Majeure Circumstance.
12.7 ABATEMENT OF RENT
Notwithstanding the preceding subclause, the Lessee's obligation to pay rent will not be suspended by reason of a Force Majeure Circumstance, but if and to the extent that;
12.7.1 any part of the Land is rendered unusable for its
accustomed purposes; and
12.7.2 the Lessee has notified the Lessor of the part of the
Land rendered unusable and the reasons why it is
unusable;
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Commercial Rent otherwise payable in respect of that part of the Land will be reduced by a proportion equivalent to the proportion of a year during which the part of the Land remains unusable for the purpose of Railway Operations.
13. GENERAL
13.1 NOTICES
13.1.1 For the purpose of this clause notice means a notice,
consent, approval or other communication under this
Lease.
13.1.2 A notice must be signed by or on behalf of the person
giving it, addressed to the person to whom it is to be
given and:
13.1.2.1 delivered to that person's address;
13.1.2.2 sent by pre-paid mail to that person's
address; or
13.1.2.3 transmitted by facsimile to that person's
address.
13.1.3 A notice given to a person in accordance with this
clause is treated as having been given and received:
13.1.3.1 if delivered, on the day of delivery if
delivered before 5.00 pm on a Business Day,
otherwise on the next Business Day;
13.1.3.2 if sent by pre-paid mail, on the third
Business Day after posting; or
13.1.3.3 if transmitted by facsimile and a correct and
complete transmission report is received, on
the day of transmission if the report states
that transmission was completed before 5.00 pm
on a Business Day, otherwise on the next
Business Day.
13.1.4 For the purpose of this clause the address and facsimile
number of a person are those set out below that person's
name in the relevant Item in Schedule 2 or another
address of which that person may from time to time give
notice to each other person.
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13.2 COMPLIANCE WITH LAW
The Lessee must comply with all applicable Laws in the conduct of Railway Operations and any other activity on the Land.
13.3 GOVERNING LAW
This Lease is governed by the law in force in South Australia and the parties submit to the non-exclusive jurisdiction of the courts of South Australia and any courts which may hear appeals from those courts in respect of any proceedings in connection with this Lease.
13.4 WAIVER
13.4.1 The non-exercise of or delay in exercising any power or
right of a party does not operate as a waiver of that
power or right, nor does any single exercise of a power
or right preclude any other or further exercise of it or
the exercise of any other power or right. A power or
right may only be waived in writing, signed by the party
to be bound by the waiver.
13.4.2 The Lessor's acceptance of Rent or other money under
this Lease does not operate as a waiver of the Lessor's
rights under this Lease.
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13.5 SEVERABILITY
Any provision in this Lease which is invalid or unenforceable in any jurisdiction:
13.5.1 is to be read down for the purposes of that
jurisdiction, if possible, so as to be valid and
enforceable; or
13.5.2 if the provision cannot be read down under paragraph
(a), shall be severed if it is capable of being severed
to the extent of the invalidity or unenforceability,
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without affecting the remaining provisions of this Lease or affecting the validity or enforceability of that provision in any other jurisdiction.
13.6 COUNTERPARTS
This Lease may be executed in any number of counterparts and all of those counterparts taken together constitute one and the same instrument.
13.7 FURTHER ASSURANCE
Each party must do, sign, execute and deliver and must procure that each of its employees and agents does, signs, executes and delivers, all deeds, documents, instruments and acts reasonably required of it or them by notice from another party to carry out and give full effect to this Lease and the rights and obligations of the parties under it.
13.8 ENTIRE AGREEMENT
Subject to any agreement under clause 8.4 and to the Agreement to Lease:
13.8.1 this Lease is the entire agreement of the parties on the
subject matter;
13.8.2 the only enforceable obligations and liabilities of the
parties in relation to the subject matter are those that
arise out of the provisions contained in this Lease;
13.8.3 all representations, communications and prior agreements
in relation to the subject matter are merged in and
superseded by this Lease; and
13.8.4 any subsequent variation of this Lease must be in
writing in appropriate form and executed by both the
Lessor and the Lessee.
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13.9 COSTS AND EXPENSES
The Lessee must pay all reasonable costs and expenses of the Lessor in relation to:
13.9.1 the negotiation, preparation, execution, delivery,
stamping, registration, completion, renewal, extension,
variation, termination and surrender of this Lease;
13.9.2 the enforcement, protection or waiver, or attempted
enforcement or protection of any right under this Lease;
13.9.3 the consideration or giving of any consent by the Lessor
under this Lease;
13.9.4 any necessary survey of the Land whether for the purpose
of enabling this Lease to be registered or otherwise;
and
13.9.5 all stamp duty assessed in respect of this Lease and any
fees payable if this Lease is to be registered pursuant
to the Real Property Act, 1886,
including, but not limited to, any reasonable legal costs and
expenses and any reasonable professional consultant's fees for
any of the above on a full indemnity basis.
13.10 EXCLUSION OF STATUTORY PROVISIONS
The covenants, powers and provisions implied in Leases by the
Real Property Act, 1886 do not apply to this Lease.
13.11 MITIGATION
Each party must take all reasonable steps to minimise any loss
or damage resulting from a breach of this Lease by the other
party.
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13.12 PAYMENT AFTER NOTICE
13.12.1 If either party gives a notice terminating this Lease,
or the Lessor gives a notice demanding immediate
possession of the Land, the Lessor's acceptance of, or
demand for, Rent or any other money:
13.12.1.1 is not evidence of a new Lease for the
Land; and
13.12.1.2 does not alter the legal effect of the
notice.
13.12.2 If the Lessee continues to occupy the Land unlawfully
after termination of this Lease the Lessee must pay an
amount equal to the Rent (by weekly instalments) as
compensation for its occupation of the Land.
13.13 DISPUTES PROVISION
13.13.1 The parties must act reasonably and promptly and
endeavour in good faith to resolve any dispute between
them.
13.13.2 Informal Resolution
13.12.2.1 The parties agree that if any dispute arises
between them, and prior to any party
commencing legal proceedings (other than
legal proceedings seeking immediate
interlocutory or interim relief), or expert
determination that party is entitled to give
notice of such matter and the parties must
for a period of twenty (20) Business Days
following such notice thereafter ("INFORMAL
RESOLUTION PERIOD") attempt to resolve the
disputed matter informally in a timely
manner and in accordance with the procedures
set forth in this sub-clause.
13.13.2.2 The parties must with a view to resolving
the disputed matter, procure a meeting,
within the Informal Resolution Period, of
senior executives of the parties together
with such other advisers and experts who may
be able to facilitate a resolution of the
disputed matter.
13.13.2.3 Any meeting must be convened at a convenient
location in South Australia and must be
conducted in good faith such that each of
the parties approaches the disputed matter
in the spirit of mutual understanding and
collaboration.
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13.13.3 ISSUES FOR EXPERT DETERMINATION
If a matter or dispute arises which is required by this lease to be referred to an expert determination and it has not been resolved by, or in accordance with the informal process contained in this clause, the parties must jointly
appoint an independent expert ("Expert") to resolve the matter
in accordance with the following provisions of this clause.
13.13.4 If the parties cannot agree on the Expert within forty
(40) Business Days of the notice referred to in
subclause 12.13(b), they shall exchange written lists,
each identifying five (5) individuals whom the party
would accept as the Expert to determine the matter. In
the absence of an individual common to each list or if
more than one individual is common to each list, the
appointment shall be referred to the President for the
time being of the law Society of South Australia for the
selection of an Expert from one of the lists in the
former instance and to determine which of the commonly
acceptable individuals shall be appointed in the latter
instance.
13.13.5 The Expert appointed in accordance with this clause must
be required to provide a report to each party as soon as
practicable after being appointed and must otherwise
regulate the receipt of submissions and his or her
process of determination in such manner as the Expert
shall see fit.
13.13.6 The costs of the Expert appointed in accordance with
this sub-clause must be borne in accordance with a
determination by the Expert having regard to the nature
of the dispute, the respective positions of the parties
and the submissions made by them and must be otherwise,
in the opinion of the Expert, fair and equitable in all
the circumstances.
13.13.7 the determination of an Expert under the provisions of
this Lease in the absence of a manifest error of fact or
miscalculation in the reasons for the determination is
binding upon the parties.
13.14 CONFIRMATION OF COMPLIANCE WITH LEASE
13.14.1 A party (the "Requesting Party) may, in order to
ascertain its or a third party's right, entitlements or
obligations, request the other party ("the Responding
Party") to confirm in writing either that the Responding
Party agrees that a particular act, matter or thing does
or a proposed act, matter or thing would, if done,
constitute an act, matter or thing carried out in
accordance with or otherwise satisfy, in a specified
respect, the terms of this Lease (a "Positive Response")
or that the Responding party does not so agree (a
"Negative Response"). The Requesting Party shall provide
sufficient information as is reasonably necessary for
the Responding Party to make a proper assessment of the
matter.
13.14.2 On receipt of a request by a Requesting Party under this
clause or upon the receipt of the information requested
by the Responding Party pursuant to paragraph (c) of
this subclause, the Responding Party must as soon as
reasonably possible;
13.14.2.1 provide a Positive Response;
|
13.14.2.2 provide a Negative Response; or
13.14.2.3 request any additional information that the
Responding Party reasonably requires in
order to make a proper assessment of the
matter.
13.14.3 If a Responding Party gives a Negative Response then the
Responding Party shall provide sufficient details of its
reasons for reaching that response to enable the
Requesting Party to determine what acts, matters or
things the Requesting Party would have to do in order to
comply with or satisfy the provisions of this Lease.
13.14.4 If the Responding Party provides a Positive Response
then the Positive Response is binding on the Requesting
Party and the Responding Party in relation to the
application of the provisions of this Lease as to the
relevant act, matter or thing as disclosed by the
Requesting Party to the Responding Party in the notice
specified in subclause 13.14.1 only on the basis of and
by reference to the information provided to the
Responding Party by the Requesting Party pursuant to
this clause.
13.14.5 If the Responding Party provides a Positive Response and
any information provided to the Responding Party for the
purpose of making an assessment is false, misleading,
inaccurate or incomplete in a material respect, then the
Positive Response shall not be binding on the Requesting
Party and the Responding Party in relation to the
application of the provisions of this Lease as to the
relevant act, matter or thing, and the Requesting Party
is liable for any expense, loss or damage caused as a
result of reliance on the information so provided.
13.15 LESSEE'S WARRANTY
The Lessee warrants that it has not been induced to enter into
this Lease by any express or implied statement, warranty or
representation:
13.15.1 whether oral, written or otherwise;
13.15.2 made by or on behalf of the Lessor in respect of the
Land or anything relating to, or which could have an
effect on, the Land including but not limited to:
13.15.2.1 the fitness or suitability of the Land for
any purpose;
13.15.2.2 any fixtures, facilities or amenities on the
Land; or
13.15.2.3 the conduct of any other business in the
buildings located on the Land.
13.16 NO MERGER
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The provisions of this Lease do not merge on termination.
13.17 EXCLUSION OF MORATORIUM
To the extent permitted by law, any legislation which:
13.17.1 lessens or otherwise varies or affects any obligation
under this Lease to the detriment of the Lessor; or
13.17.2 stays, postpones or otherwise prejudicially affects
the Lessor's exercise of any right, power, remedy or
discretion under this Lease,
|
is excluded from this Lease.
14. CONTAMINATION
14.1 DEFINITIONS
ENVIRONMENTAL LAW means any statute or common law relating to the storage, handling or transportation of waste, dangerous goods or hazardous material, relating to occupational health and safety or which has as one of its purposes or effects the protection of the environment.
ENVIRONMENTAL NOTICE means any direction, order, demand or other requirements to take any action or refrain from taking any action in respect of the Land or its use from any Authority, whether written or otherwise and in connection with any Environmental Law.
14.2 EXISTING CONTAMINATION AND COMMONWEALTH REMEDIATION
14.2.1 The Lessee acknowledges that it is aware of, and the
Lessor is not liable to the Lessee in respect of,
Contamination on the Land as at the Commencing Date
("EXISTING CONTAMINATION");
14.2.2 The parties acknowledge that the Commonwealth has agreed
with the Lessee to conduct Remediation Works on the Land
to remove or make harmless the Existing Contamination.
14.2.3 The Lessee must license the Commonwealth by its
servants, agents and contractors, to enter on the Land
for the purpose of the Remediation Works, on terms and
conditions reasonably agreed for that purpose and the
Lessor consents to the Lessee giving the Commonwealth
such licence.
|
14.3 COMPLIANCE WITH ENVIRONMENTAL NOTICES
14.3.1 The Lessee must, at its cost, promptly comply with any
Environmental Notice issued after the Commencing Date,
but only if and to the extent that the Contamination of
the Land has been caused or contributed to after the
Commencing Date.
|
14.3.2 The Lessee must give the following to the Lessor, within
7 days of receipt:
14.3.2.1 a copy of any Environmental Notice;
14.3.2.2 copies of all reports, invoices and other
documents relating to the Lessee's compliance
(if any) with an Environmental Notice; and
14.3.2.3 any other information relating to an
Environmental Notice or the Lessee's
compliance (if any) with it.
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14.4 INDEMNITY
The Lessee indemnifies the Lessor against any loss, claim, liability, cost or expense suffered or incurred by the Lessor in respect of:
14.4.1 any Contamination of the Land caused or contributed to
by the Lessee, to the extent that the Lessee caused or
contributed to it;
14.4.2 any pollution from or to the Land after the Commencing
Date; and
14.4.3 any Environmental Notice made after the Commencing Date
except to the extent that it applies to Existing
Contamination; and
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including legal costs on a full indemnity basis.
15. EXCLUSION OF COVENANTS IMPLIED BY STATUTE
15.1 REAL PROPERTY ACT
Pursuant to section 262 of the Real Property Act, 1886, the operation of sub section 125(1) and 125(2) of the Real Property Act, 1886 is expressly negatived and shall not be implied as a power of the Lessor in respect of this Lease.
15.2 LANDLORD AND TENANT ACT
The operation of subsection 4(1) of the Landlord and Tenant Act, 1936 is expressly negatived and shall not be implied as a power of the Lessor in respect of this Lease.
16. FURTHER ASSURANCES
The parties shall do all acts, matters and things and sign all documents and shall cause to be done all acts necessary to give full effect to the terms of this Lease.
17. ACKNOWLEDGEMENT THAT THIS LEASE IS NOT A "MISCELLANEOUS LEASE"
The Lessor and the Lessee acknowledge and agree that this Lease is not and shall not be construed as being a miscellaneous lease for the purposes of the Crown Lands Act, 1929.
*SCHEDULE 1 LAND
*SCHEDULE 2 ADDRESSES FOR NOTICES
*SCHEDULE 3 RAIL CORRIDORS
*SCHEDULE 4 MINIMUM SERVICES TO BE PROVIDED BY THE LESSEE
*SCHEDULE 5 SACBH AGREEMENT
*SCHEDULE 6 PART A: NATIONAL ESTATE LAND
PART B: STATE HERITAGE
*OMITTED SCHEDULES
UPON WRITTEN REQUEST, THE REGISTRANT WILL PROVIDE COPIES OF ANY OF THE REFERENCED OMITTED SCHEDULES.
SIGNED SEALED AND DELIVERED ) for and on behalf of THE CROWN IN ) THE RIGHT OF THE STATE OF ) SOUTH AUSTRALIA by ) being a duly authorised person in the presence of: ..................................... |
...........................
THE COMMON SEAL of [name of Lessee] )
was affixed in the presence of, and )
the sealing is witnessed by: )
......................................
Secretary
...........................
Name (printed):) Director
|
Name (printed):
SIGNED SEALED AND DELIVERED )
by [name of Guarantor] in the presence of: )
)
|
......................................
Witness
......................... Name (printed):
attested the affixing of the seal of that body to the dealing.
EXHIBIT 11.1
GENESEE & WYOMING INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(in thousands, except per share amounts)
FOR THE YEARS ENDED
DECEMBER 31,
1997 1996
---- ----
BASIC EARNINGS PER SHARE CALCULATION:
-------------------------------------
Net Income $7,998 $5,905
Weighted average number of shares
of common stock 5,250 3,829
===== =====
Earnings per share - basic $1.52 $1.54
====== ======
DILUTED EARNINGS PER SHARE CALCULATION:
---------------------------------------
Net Income $7,998 $5,905
Weighted average number of shares of common stock
and common stock equivalents outstanding:
Weighted average number of shares
of common stock 5,250 3,829
Common stock equivalents applicable to warrants 42 38
Common stock equivalents issuable under stock
option plans 155 99
Weighted average number of shares of common stock
and common stock equivalents - diluted 5,447 3,966
====== ======
Earnings per share - diluted $ 1.47 $ 1.49
====== ======
|
EXHIBIT 21.1
SUBSIDIARIES OF REGISTRANT
SUBSIDIARY STATE OF FORMATION
---------- ------------------
CORPORATIONS:
-------------
Allegheny & Eastern Railroad, Inc. Delaware
Bradford Industrial Rail, Inc. Delaware
Buffalo & Pittsburgh Railroad, Inc. Delaware
Carolina Coastal Railway, Inc.* Virginia
Commonwealth Railway, Inc.* Virginia
Corpus Christi Terminal Railroad, Inc. Delaware
The Dansville & Mt. Morris Railroad Company New York
Australia Southern Railroad Pty Limited Australia
Genesee & Wyoming Investors, Inc. Delaware
Genesee and Wyoming Railroad Company New York
Genesee & Wyoming Railroad Services, Inc. Delaware
(f/k/a Railroad Services, Inc.)
GWI Canada, Inc. Delaware
GWI Dayton, Inc. Delaware
GWI Leasing Corporation Delaware
GWI Rail Management Corporation Delaware
Illinois & Midland Railroad, Inc. Delaware
Louisiana & Delta Railroad, Inc. Delaware
Pittsburg & Shawmut Railroad, Inc. Delaware
Portland & Western Railroad, Inc. New York
Rail Link, Inc. Virginia
Talleyrand Terminal Railroad Company, Inc.* Virginia
Rochester & Southern Railroad, Inc. New York
Willamette & Pacific Railroad, Inc. New York
LIMITED PARTNERSHIP:
--------------------
GWI Switching Services, L.P. Texas
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*Subsidiary of Rail Link, Inc.
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our report included in this Form 10-K, into Genesee & Wyoming Inc.'s previously filed Registration Statement on Form S-8 (Registration No. 333-09165).
/s/ Arthur Andersen LLP
Chicago, Illinois
March 27, 1998
|
| ARTICLE 5 |
| THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE SHEET AND INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO STOCK FINANCIAL STATEMENTS. |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | YEAR |
| FISCAL YEAR END | DEC 31 1997 |
| PERIOD START | DEC 31 1997 |
| PERIOD END | JAN 01 1997 |
| CASH | 11,434 |
| SECURITIES | 0 |
| RECEIVABLES | 29,895 |
| ALLOWANCES | 0 |
| INVENTORY | 5,039 |
| CURRENT ASSETS | 56,535 |
| PP&E | 149,434 |
| DEPRECIATION | 24,449 |
| TOTAL ASSETS | 210,532 |
| CURRENT LIABILITIES | 37,978 |
| BONDS | 72,978 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 52 |
| OTHER SE | 68,291 |
| TOTAL LIABILITY AND EQUITY | 210,532 |
| SALES | 103,643 |
| TOTAL REVENUES | 103,643 |
| CGS | 87,200 |
| TOTAL COSTS | 87,200 |
| OTHER EXPENSES | 0 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 3,004 |
| INCOME PRETAX | 13,439 |
| INCOME TAX | 5,441 |
| INCOME CONTINUING | 7,998 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 7,998 |
| EPS PRIMARY | 1.52 |
| EPS DILUTED | 1.47 |
| ARTICLE 5 |
| RESTATED: |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | 9 MOS |
| FISCAL YEAR END | DEC 31 1997 |
| PERIOD START | JUN 01 1997 |
| PERIOD END | SEP 30 1997 |
| CASH | 11,911 |
| SECURITIES | 0 |
| RECEIVABLES | 16,900 |
| ALLOWANCES | 0 |
| INVENTORY | 4,424 |
| CURRENT ASSETS | 42,339 |
| PP&E | 110,440 |
| DEPRECIATION | 22,495 |
| TOTAL ASSETS | 155,455 |
| CURRENT LIABILITIES | 27,765 |
| BONDS | 30,341 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 52 |
| OTHER SE | 68,128 |
| TOTAL LIABILITY AND EQUITY | 155,455 |
| SALES | 71,241 |
| TOTAL REVENUES | 71,241 |
| CGS | 59,134 |
| TOTAL COSTS | 59,134 |
| OTHER EXPENSES | 0 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 1,850 |
| INCOME PRETAX | 10,760 |
| INCOME TAX | 4,342 |
| INCOME CONTINUING | 6,418 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 6,418 |
| EPS PRIMARY | 1.22 |
| EPS DILUTED | 1.17 |
| ARTICLE 5 |
| THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE SHEET AND INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. |
| RESTATED: |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | 6 MOS |
| FISCAL YEAR END | DEC 31 1997 |
| PERIOD START | JAN 01 1997 |
| PERIOD END | JUN 30 1997 |
| CASH | 12,392 |
| SECURITIES | 0 |
| RECEIVABLES | 17,922 |
| ALLOWANCES | 0 |
| INVENTORY | 4,162 |
| CURRENT ASSETS | 37,738 |
| PP&E | 105,582 |
| DEPRECIATION | 20,853 |
| TOTAL ASSETS | 147,580 |
| CURRENT LIABILITIES | 32,204 |
| BONDS | 22,119 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 52 |
| OTHER SE | 65,949 |
| TOTAL LIABILITY AND EQUITY | 147,580 |
| SALES | 47,571 |
| TOTAL REVENUES | 47,571 |
| CGS | 39,365 |
| TOTAL COSTS | 39,365 |
| OTHER EXPENSES | 0 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 990 |
| INCOME PRETAX | 7,216 |
| INCOME TAX | 2,925 |
| INCOME CONTINUING | 4,291 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 4,291 |
| EPS PRIMARY | 0.82 |
| EPS DILUTED | 0.79 |
| ARTICLE 5 |
| THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE SHEET & INCOME STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. |
| RESTATED: |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | 3 MOS |
| FISCAL YEAR END | DEC 31 1997 |
| PERIOD START | JAN 01 1997 |
| PERIOD END | MAR 31 1997 |
| CASH | 17,699 |
| SECURITIES | 0 |
| RECEIVABLES | 20,727 |
| ALLOWANCES | 0 |
| INVENTORY | 4,177 |
| CURRENT ASSETS | 46,366 |
| PP&E | 103,354 |
| DEPRECIATION | 19,261 |
| TOTAL ASSETS | 156,014 |
| CURRENT LIABILITIES | 41,163 |
| BONDS | 24,833 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 52 |
| OTHER SE | 63,780 |
| TOTAL LIABILITY AND EQUITY | 156,014 |
| SALES | 24,092 |
| TOTAL REVENUES | 24,092 |
| CGS | 20,057 |
| TOTAL COSTS | 20,057 |
| OTHER EXPENSES | 0 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 443 |
| INCOME PRETAX | 3,592 |
| INCOME TAX | 1,458 |
| INCOME CONTINUING | 2,134 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 2,134 |
| EPS PRIMARY | 0.41 |
| EPS DILUTED | 0.39 |
| ARTICLE 5 |
| THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE SHEET AND INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. |
| RESTATED: |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | YEAR |
| FISCAL YEAR END | DEC 31 1996 |
| PERIOD START | JAN 01 1996 |
| PERIOD END | DEC 31 1996 |
| CASH | 14,121 |
| SECURITIES | 0 |
| RECEIVABLES | 19,134 |
| ALLOWANCES | 0 |
| INVENTORY | 4,172 |
| CURRENT ASSETS | 41,176 |
| PP&E | 96,687 |
| DEPRECIATION | 17,865 |
| TOTAL ASSETS | 145,685 |
| CURRENT LIABILITIES | 38,871 |
| BONDS | 18,460 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 52 |
| OTHER SE | 61,631 |
| TOTAL LIABILITY AND EQUITY | 145,685 |
| SALES | 77,795 |
| TOTAL REVENUES | 77,795 |
| CGS | 63,800 |
| TOTAL COSTS | 63,800 |
| OTHER EXPENSES | 0 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 4,720 |
| INCOME PRETAX | 9,924 |
| INCOME TAX | 4,019 |
| INCOME CONTINUING | 5,905 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 5,905 |
| EPS PRIMARY | 1.54 |
| EPS DILUTED | 1.49 |
| ARTICLE 5 |
| THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE SHEET & INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. |
| RESTATED: |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | 9 MOS |
| FISCAL YEAR END | DEC 31 1996 |
| PERIOD START | JAN 01 1996 |
| PERIOD END | SEP 30 1996 |
| CASH | 5,613 |
| SECURITIES | 0 |
| RECEIVABLES | 14,622 |
| ALLOWANCES | 0 |
| INVENTORY | 4,405 |
| CURRENT ASSETS | 27,488 |
| PP&E | 104,017 |
| DEPRECIATION | 21,997 |
| TOTAL ASSETS | 127,663 |
| CURRENT LIABILITIES | 19,691 |
| BONDS | 26,798 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 52 |
| OTHER SE | 60,001 |
| TOTAL LIABILITY AND EQUITY | 127,663 |
| SALES | 54,640 |
| TOTAL REVENUES | 54,640 |
| CGS | 44,044 |
| TOTAL COSTS | 44,044 |
| OTHER EXPENSES | 0 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 3,803 |
| INCOME PRETAX | 7,204 |
| INCOME TAX | 2,918 |
| INCOME CONTINUING | 4,286 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 4,286 |
| EPS PRIMARY | 1.28 |
| EPS DILUTED | 1.24 |
| ARTICLE 5 |
| THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1996, AND CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. |
| RESTATED: |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | 6 MOS |
| FISCAL YEAR END | DEC 31 1996 |
| PERIOD START | JAN 01 1996 |
| PERIOD END | JUN 30 1996 |
| CASH | 5,765 |
| SECURITIES | 0 |
| RECEIVABLES | 13,963 |
| ALLOWANCES | 0 |
| INVENTORY | 4,412 |
| CURRENT ASSETS | 26,474 |
| PP&E | 103,005 |
| DEPRECIATION | 20,450 |
| TOTAL ASSETS | 127,676 |
| CURRENT LIABILITIES | 25,744 |
| BONDS | 23,879 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 52 |
| OTHER SE | 58,238 |
| TOTAL LIABILITY AND EQUITY | 127,676 |
| SALES | 0 |
| TOTAL REVENUES | 33,618 |
| CGS | 0 |
| TOTAL COSTS | 28,631 |
| OTHER EXPENSES | 0 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 3,007 |
| INCOME PRETAX | 4,241 |
| INCOME TAX | 1,718 |
| INCOME CONTINUING | 2,523 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 2,523 |
| EPS PRIMARY | 1.05 |
| EPS DILUTED | 1.05 |