UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended March 31, 2008
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 0-16704
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PROVIDENCE AND WORCESTER RAILROAD COMPANY
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(Exact name of registrant as specified in its charter)
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Rhode Island 05-0344399
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(State or other jurisdiction of I.R.S. Employer Identification No.
incorporation or organization)
75 Hammond Street, Worcester, Massachusetts 01610
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(Address of principal executive offices) (Zip Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO ___
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Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act (check one)
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer X Smaller reporting company
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of May 1, 2008, the registrant has 4,794,952 shares of common stock, par
value $.50 per share, outstanding.
PROVIDENCE AND WORCESTER RAILROAD COMPANY
Index
Part I - Financial Information
Item 1 - Financial Statements:
Balance Sheets - March 31, 2008
(Unaudited) and December 31, 2007............................3
Statements of Operations (Unaudited) -
Three Months Ended March 31, 2008 and 2007...................4
Statements of Cash Flows (Unaudited) -
Three Months Ended March 31, 2008 and 2007...................5
Notes to Financial Statements (Unaudited)..................6-8
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations............9-11
Item 3 - Quantitative and Qualitative Disclosures About Market Risk..12
Item 4 - Controls and Procedures.....................................12
Part II - Other Information:
Item 2 - Unregistered Sales of Equity Securities
and Use of Proceeds.........................................12
Item 5 - Reports on Form 8-K.........................................12
Item 6 - Exhibits.................................................12-13
Signatures.............................................................14
2
Part I - Financial Information
------------------------------
Item 1. Financial Statements
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PROVIDENCE AND WORCESTER RAILROAD COMPANY
BALANCE SHEETS
(Dollars in Thousands Except Per Share Amounts)
ASSETS
MARCH 31, DECEMBER 31,
2008 2007
(Unaudited)
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Current Assets:
Cash and cash equivalents ........................... $ 2,961 $ 181
Accounts receivable, net of allowance for
doubtful accounts of $150 in 2008 and 2007 ......... 2,930 2,726
Materials and supplies .............................. 761 914
Prepaid expenses and other current assets ........... 117 90
Deferred income taxes ............................... 330 325
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Total Current Assets ............................... 7,099 4,236
Property and Equipment, net .......................... 78,585 78,964
Land Held for Development ............................ 11,958 11,958
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Total Assets ......................................... $97,642 $95,158
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Borrowings under line of credit ..................... $ -- $ 900
Accounts payable .................................... 2,312 2,809
Accrued expenses .................................... 1,406 1,511
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Total Current Liabilities .......................... 3,718 5,220
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Deferred Income Taxes ................................ 11,524 11,969
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Deferred Grant Income ................................ 8,247 8,294
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Commitments and Contingent Liabilities (Note 6).......
Shareholders' Equity:
Preferred stock, 10% noncumulative, $50 par
value; authorized, issued and outstanding
640 shares in 2008 and 2007 ........................ 32 32
Common stock, $.50 par value; authorized
15,000,000 shares; issued and outstanding
4,794,952 shares in 2008 and 4,552,557
shares in 2007 ..................................... 2,398 2,276
Additional paid-in capital .......................... 36,577 31,104
Retained earnings ................................... 35,146 36,263
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Total Shareholders' Equity ......................... 74,153 69,675
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Total Liabilities and Shareholders' Equity ........... $97,642 $95,158
======= =======
The accompanying notes are an integral part of the financial statements.
3
PROVIDENCE AND WORCESTER RAILROAD COMPANY
STATEMENTS OF OPERATIONS (Unaudited)
(Dollars in Thousands Except Per Share Amounts)
Three Months Ended March 31,
2008 2007
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Revenues:
Operating Revenues .................................. $ 5,996 $ 5,185
Other Income ........................................ 119 115
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Total Revenues .................................... 6,115 5,300
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Operating Expenses:
Maintenance of way and structures ................... 1,374 1,344
Maintenance of equipment ............................ 842 840
Transportation ...................................... 2,251 1,954
General and administrative .......................... 1,327 1,328
Depreciation ........................................ 719 707
Taxes, other than income taxes ...................... 616 591
Car hire, net ....................................... 202 183
Employee retirement plans ........................... 58 59
Track usage fees .................................... 98 95
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Total Operating Expenses .......................... 7,487 7,101
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Loss before Income Tax Benefit ....................... (1,372) (1,801)
Income Tax Benefit ................................... (450) (640)
======= =======
Net Loss ............................................. (922) (1,161)
Preferred Stock Dividends ............................ 3 3
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Net Loss Attributable to Common Shareholders ......... $ (925) $(1,164)
======= =======
Basic and Diluted Loss Per Common Share .............. $ (.19) $ (.26)
======= =======
The accompanying notes are an integral part of the financial statements.
4
PROVIDENCE AND WORCESTER RAILROAD COMPANY
STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in Thousands)
Three Months Ended March 31,
2008 2007
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Cash Flows from Operating Activities:
Net loss ............................................. $ (922) $(1,161)
Adjustments to reconcile net loss to net cash
flows from (used in) operating activities:
Depreciation ........................................ 719 707
Amortization of deferred grant income ............... (63) (60)
Gains from sale and disposal of property,
equipment and easements, net ....................... -- (6)
Deferred income taxes ............................... (450) (640)
Share-based compensation ............................ 68 66
Increase (decrease) in cash from:
Accounts receivable ................................ (354) 509
Materials and supplies ............................. 153 (93)
Prepaid expenses and other current assets .......... (27) (16)
Accounts payable and accrued expenses .............. (388) 1,223
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Net cash flows (used in) from operating
activities .......................................... (1,264) 529
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Cash flows from Investing Activities:
Purchase of property and equipment ................... (554) (1,146)
Proceeds from sale of property, equipment and
easements ........................................... -- 6
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Net cash flows used in investing activities .......... (554) (1,140)
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Cash Flows from Financing Activities:
Dividends paid ....................................... (195) (185)
Payments of borrowings under line of credit .......... (900) --
Issuance of common shares to GATX Corporation ........ 5,509
Issuance of common shares for stock options
exercised and employee stock purchases .............. 18 18
Proceeds from deferred grant income .................. 166 --
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Net cash flows from (used in) financing
activities .......................................... 4,598 (167)
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Increase (Decrease) in Cash and Cash
Equivalents ......................................... 2,780 (778)
Cash and Cash Equivalents, Beginning of
Period .............................................. 181 1,253
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Cash and Cash Equivalents, End of Period ............. $ 2,961 $ 475
======= =======
Supplemental Disclosures:
Cash paid during the three months for
interest ........................................... $ 5 $ --
======= =======
The accompanying notes are an integral part of the financial statements.
5
PROVIDENCE AND WORCESTER RAILROAD COMPANY
NOTES TO FINANCIAL STATEMENTS (Unaudited)
THREE MONTHS ENDED MARCH 31, 2008 AND 2007
(Dollars in Thousands Except Per Share Amounts)
1. In the opinion of management, the accompanying interim financial statements
of the Providence and Worcester Railroad Company (the "Company") contain
all adjustments (consisting solely of normal recurring adjustments)
necessary to present fairly the financial position as of March 31, 2008 and
the results of operations and cash flows for the three months ended March
31, 2008 and 2007. Results for interim periods may not be necessarily
indicative of the results to be expected for the year. These interim
financial statements should be read in conjunction with the Company's
Annual Report on Form 10-K for the year ended December 31, 2007 filed with
the Securities and Exchange Commission.
2. Changes in Shareholders' Equity:
Total
Additional Share
Preferred Common Paid-in Retained holders'
Stock Stock Capital Earnings Equity
------- ------- ------- ------- -------
Balance December 31,2007..$ 32 $ 2,276 $31,104 $36,263 $69,675
Issuance of 239,523
shares to GATX
Corporation ............. 120 5,389 5,509
Issuance of 2,872
common shares for
employee stock
purchases, stock
options exercised and
employee stock awards ... 2 49 51
Share-based
compensation,
options granted ......... 35 35
Dividends:
Preferred stock,
$5.00 per share ......... (3) (3)
Common stock, $.04
per share ............... (192) (192)
Net loss for the
period .................. (922) (922)
------- ------- ------- ------- -------
Balance March 31,2008 ....$ 32 $ 2,398 $36,577 $35,146 $74,153
======= ======= ======= ======= =======
On January 10, 2008 the Company entered into an agreement with GATX
Corporation ("GATX") whereby GATX acquired 239,523 (approximately 4.99%)
newly issued shares of the Company's common stock for $5,509 to be utilized
for capital improvements to enhance the Company's railroad lines. The
parties also entered into an Exclusive Railcar Supply Agreement whereby
GATX has the exclusive right to supply the Company with railcars for
certain rail traffic on market- competitive terms to be determined by the
two parties. In addition the Company exchanged 72 of its mill gondolas for
137 open-top hoppers owned by GATX. The Company agreed to lease the 72 mill
gondolas from GATX under operating leases for a period of up to 7 years at
an annual rental of $248.
6
3. Other Income:
2008 2007
---- ----
Gains from sale and disposal of
property, equipment and easements,
net .............................. $ -- $ 6
Rentals ........................... 104 99
Interest .......................... 15 10
---- ----
$119 $115
==== ====
4. Loss per Common Share:
Basic loss per common share is computed using the weighted-average number
of common shares outstanding during the period. Diluted loss per common
share reflects the effect of the Company's outstanding convertible
preferred stock and stock options except where such items would be
anti-dilutive.
A reconciliation of weighted-average shares used for the basic computation
and that used for the diluted computation is as follows:
2008 2007
--------- ---------
Weighted-average shares for basic ...... 4,769,462 4,534,518
Dilutive effect of convertible preferred
stock and stock options ............... -- --
--------- ---------
Weighted-average shares for diluted .... 4,769,462 4,534,518
========= =========
Preferred Stock convertible into 64,000 shares of Common Stock at the rate
of 100 shares of Common Stock for each one share of Preferred Stock was
outstanding during the quarters ended March 31, 2008 and 2007. In addition,
options to purchase 48,833 and 48,732 shares of common stock were
outstanding during the quarters ended March 31, 2008 and 2007,
respectively. These Common Stock equivalents were not included in the
computation of the diluted loss per share in either of the quarters because
their effect would be anti-dilutive.
5. Commitments and Contingent Liabilities:
The Company is a defendant in certain lawsuits relating to casualty losses,
many of which are covered by insurance subject to a deductible. The Company
believes that adequate provision has been made in the financial statements
for any expected liabilities which may result from disposition of such
lawsuits.
On January 29, 2002, the Company received a "Notice of Potential Liability"
from the United States Environmental Protection Agency ("EPA") regarding an
existing Superfund Site that includes the J.M. Mills Landfill in
Cumberland, Rhode Island. EPA sends these "Notice" letters to potentially
responsible parties ("PRPs") under the Comprehensive Environmental
Response, Compensation, and Liability Act ("CERCLA"). EPA identified the
Company as a PRP based on its status as an owner and/or operator because
its railroad property traverses the Site. Via these Notice letters, EPA
makes a demand for payment of past costs (identified in the letter as $762)
and future costs associated with the response actions taken to address the
contamination at the Site, and requests PRPs to indicate their willingness
to participate and resolve their potential liability at the Site. The
Company has responded to EPA by stating that it does not believe it has any
liability for this Site, but that it is interested in cooperating with EPA
to address issues concerning liability at the Site. At this point, two
other parties have already committed via a consent order with EPA to pay
for the Remedial Investigation/Feasibility Study ("RI/FS") phase of the
7
clean- up at the Site, which will take approximately two or more years to
complete. After that, EPA will likely seek to negotiate the cost of the
Remedial Design and implementation of the remedy at the Site with the PRPs
it has identified via these Notice Letters (which presently includes over
sixty parties, and is likely to increase after EPA completes its
investigation of the identity of PRPs). On December 15, 2003, the EPA
issued a second "Notice of Potential Liability" letter to the Company
regarding the Site. EPA again identified the Company as a PRP, this time
because EPA "believes that [the Company] accepted hazardous substance for
transport to disposal or treatment facilities and selected the site for
disposal." The Company responded again to EPA stating that it is interested
in cooperating with EPA but that it does not believe it has engaged in any
activities that caused contamination at the Site. The Company believes that
none of its activities caused contamination at the Site, and will contest
this claim by EPA and therefore no liability has been accrued for this
matter.
In connection with the EPA claim described above, the two parties who have
committed to conduct the RI/FS at the Site filed a complaint in the U.S.
District Court of Rhode Island against the Company, in an action entitled
CCL Custom Manufacturing, Inc. v. Arkwright Incorporated, et al
(consolidated with Unilever Bestfoods v. American Steel & Aluminum Corp. et
al), C.A. No. 01-496/L, on December 18, 2002. The Company was one of about
sixty parties named by Plaintiffs, in this suit, to recover response costs
incurred in investigating and responding to the releases of hazardous
substances at the Site. Plaintiffs alleged that the Company is liable under
42 U.S.C. Section 961(a)(3) of CERCLA as an "arranger" or "generator" of
waste that ended up at the Site. The Company entered into a Generator
Cooperation Agreement with other defendants to allocate costs in responding
to this suit, and to share technical costs and information in evaluating
the Plaintiffs' claims. Although the Company does not believe it generated
any waste that ended up at this Site, or that its activities caused
contamination at the Site, the Company paid $45 to settle this suit in
March 2006.
6. Dividends:
On April 30, 2008, the Company declared a dividend of $.04 per share on its
outstanding Common Stock payable May 27, 2008 to shareholders of record May
12, 2008.
8
PROVIDENCE AND WORCESTER RAILROAD COMPANY
ITEM 2-MANAGEMENT'S DISCUSSION AND ANALYSIS OF
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FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
The statements contained in Management's Discussion and Analysis of Financial
Condition and Results of Operations ("MDA") which are not historical are
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. These forward-looking statements represent the Company's present
expectations or beliefs concerning future events. The Company cautions, however,
that actual results could differ materially from those indicated in MDA.
Critical Accounting Policies
- ----------------------------
The Securities and Exchange Commission ("SEC") defines critical accounting
policies as those that require application of management's most difficult,
subjective or complex judgments, often as a result of the need to make estimates
about the effect of matters that are inherently uncertain and may change in
subsequent periods.
The Company's significant accounting policies are described in Note 1 of the
Notes to Financial Statements in its Annual Report on Form 10-K. Not all of
these significant accounting policies require management to make difficult,
subjective or complex judgments or estimates. Management believes that the
Company's policy for the evaluation of long-lived asset impairment meets the SEC
definition of critical.
The Company evaluates long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. When factors indicate that 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
the carrying amounts of the assets are recoverable.
Results of Operations
- ---------------------
The following table sets forth the Company's operating revenues by category in
dollars and as a percentage of operating revenues:
Three Months Ended March 31,
-----------------------------------
2008 2007
-----------------------------------
(In thousands, except percentages)
Freight Revenues:
Conventional carloads ....... $5,279 88.0% $4,181 80.6%
Containers .................. 369 6.2 772 14.9
Other freight related ....... 235 3.9 150 2.9
Other operating revenues ...... 113 1.9 82 1.6
------ ----- ------ -----
Total .................... $5,996 100.0% $5,185 100.0%
====== ===== ====== =====
9
The following table sets forth a comparison of the Company's operating expenses
expressed in dollars and as a percentage of operating revenues:
Three Months Ended March 31,
-----------------------------------
2008 2007
-----------------------------------
(In thousands, except percentages)
Salaries, wages, payroll taxes
and employee benefits ........ $3,937 65.7% $3,750 72.3%
Casualties and insurance ...... 225 3.8 233 4.5
Depreciation .................. 719 12.0 707 13.6
Diesel fuel ................... 705 11.7 464 9.0
Car hire, net ................. 202 3.4 183 3.5
Purchased services, including
legal and professional fees .. 508 8.5 468 9.0
Repair and maintenance of
equipment .................... 308 5.1 417 8.1
Track and signal materials .... 274 4.6 416 8.0
Track usage fees .............. 98 1.6 95 1.8
Other materials and supplies .. 297 4.9 334 6.5
Other ......................... 476 7.9 505 9.7
------ ----- ------ -----
Total ....................... 7,749 129.2 7,572 146.0
Less capitalized and
recovered costs ............ 262 4.3 471 9.1
------ ----- ------ -----
Total .................... $7,487 124.9% $7,101 136.9%
====== ===== ====== =====
Operating Revenues:
Operating revenues increased $811,000, or 15.6%, to $6.0 million in the first
quarter of 2008 from $5.2 million in the first quarter of 2007. This increase is
the net result of a $1.1 million (26.3%) increase in conventional freight
revenues, an $85,000 (56.7%) increase in other freight related revenues, and a
$31,000 (37.8%) increase in other operating revenues, partially offset by a
$403,000 (52.2%) decrease in container freight revenues.
The increase in conventional freight revenues is attributable to a 24.8%
increase in traffic volume and a small (1.2%) increase in the average revenue
received per conventional carloading. The Company's conventional carloadings
increased by 1,165 to 5,863 in the first quarter of 2008 from 4,698 in the first
quarter of 2007.
Shipments of ethanol, coal, automobiles and steel ingots accounted for most of
the increase in traffic volume. Ethanol and automobiles are commodities which
the Company began hauling during the second half of 2007. These increases were
somewhat offset by declines in shipments of construction aggregate, chemicals,
building products and other commodities during the first quarter. These
decreases largely relate to the economic slow-down which the United States
economy is currently undergoing. The small increase in the average revenue
received per conventional carloading is mostly attributable to a change in the
mix of commodities hauled.
The decrease in container freight revenues is the result of a 55.3% decline in
traffic volume partially offset by a 6.8% increase in the average revenue
received per container. Container traffic volume decreased by 7,331 containers
to 5,934 in the first quarter of 2008 from 13,265 in the first quarter of 2007.
During the second quarter of 2007 the Company began to experience a steady
decrease in the volume of its container traffic which has continued into 2008.
Among other factors, rate increases imposed by western rail carriers in the
United States has resulted in steamship lines using "all water" routings to the
10
East Coast for an increasingly larger portion of container traffic thereby
significantly reducing the volume of such traffic shipped cross-country by rail.
While the reduced level of traffic seems to have stabilized, the Company is
unable to predict if and when container traffic volume may significantly
increase. The increase in the average revenue received per container is
attributable to contractual rate adjustments based upon railroad industry cost
indices and to a change in the mix of containers handled.
The increase in other freight related revenues results from increased billings
for demurrage and secondary switching services. This is directly attributable to
the significant increase in conventional traffic volume during the quarter.
The increase in other operating revenues reflects more maintenance department
billings for services rendered to freight customers and other outside parties.
Other Income:
Other income, principally rentals and interest on temporally invested cash was
virtually unchanged between quarters.
Operating Expenses:
Operating expenses for the first quarter of 2008 increased by $386,000, or 5.4%,
to $7.5 million from $7.1 million in the first quarter of 2007. More than sixty
percent of this net increase is attributable to diesel fuel expense, which
increased by $241,000 during the quarter. This is primarily the result of the
significant price increases for petroleum products which have recently occurred.
Income Tax Benefit:
The income tax benefit for the first quarter of 2008 is approximately 33% of the
pre tax-loss. This is the effective federal income tax rate which the Company
expects to realize for 2008 before giving effect to any track maintenance
credits to which it may be entitled.
Liquidity and Capital Resources
- -------------------------------
In January 2008 the Company, pursuant to an agreement with GATX Corporation
("GATX") received $5.5 million in cash in exchange for 239,523 newly-issued
shares of its common stock which it sold to GATX. This infusion of capital is to
be used for future capital improvements to enhance the Company's railroad lines.
During the first quarter of 2008 the Company's operations consumed $1.3 million
of cash. Total cash and cash equivalents, however, increased by $2.8 during the
quarter. The principal utilization of cash during the quarter, other than for
operations, was to pay off its outstanding borrowings under its bank
line-of-credit and for capital expenditures and the payment of dividends.
In management's opinion cash generated from operations during the remainder of
2008 will be sufficient to enable the Company to meet its operating expenses,
routine capital expenditures and dividend requirements.
Seasonality
- -----------
Historically, the Company's operating revenues are lowest for the first quarter
due to the absence of construction aggregate shipments during a portion of this
period and to winter weather conditions.
11
Item 3. Quantitative and Qualitative Disclosures About Market Risk
- ------------------------------------------------------------------
Cash and Equivalents
As of March 31, 2008, the Company is exposed to market risks which primarily
include changes in U.S. interest rates.
The Company invests cash balances in excess of operating requirements in
short-term securities, generally with maturities of 90 days or less. In
addition, the Company's revolving line of credit agreement provides for
borrowings which bear interest at variable rates based on either prime rate or
one and one half percent over either the one or three month London Interbank
Offered Rates. The Company had no borrowings outstanding pursuant to the
revolving line of credit agreement at March 31, 2008. The Company believes that
the effect, if any, of reasonably possible near-term changes in interest rates
on the Company's financial position, results of operations, and cash flows
should not be material.
Item 4. Controls and Procedures
- -------------------------------
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the Company carried out an evaluation of the effectiveness
of the design and operation of the Company's disclosure controls and procedures
as of the end of the period covered by this report. This evaluation was carried
out under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and the Company's
Treasurer. Based upon that evaluation, the Chief Executive Officer and the
Treasurer concluded that the Company's disclosure controls and procedures are
effective to ensure that information required to be disclosed by the Company in
reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission rules and forms.
There was no significant change in the Company's internal control over financial
reporting that occurred during the Company's most recent fiscal quarter that has
materially affected, or is reasonably likely to affect, the Company's internal
control over financial reporting.
PART II - Other Information
---------------------------
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
-----------------------------------------------------------
The information called for in this item is included in Form 8-K which
was filed with the Commission on January 16, 2008, which form is
incorporated herein by reference.
Item 5. Reports on Form 8-K
-------------------
A report on Form 8-K was filed on January 16, 2008 in which the
Company reported that it had concluded a Stock Purchase Agreement, an
Exclusive Railcar Supply Agreement and a Registration Rights Agreement
with GATX Corporation effective January 10, 2008.
Item 6. Exhibits
--------
(10.1) Common Stock Purchase Agreement dated January 10, 2008 between
the Registrant and GATX Corporation.
(10.2) Exclusive Railcar Supply Agreement dated January 10, 2008
between the Registrant and GATX Corporation.
12
(10.3) Registration Rights Agreement dated January 10, 2008 between
the Registrant and GATX Corporation.
(31.1) Rule 13a-14(a) Certification of Chairman of the Board and Chief
Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
(31.2) Rule 13a-14(a) Certification of Treasurer and Principal
Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
(32) Certifications of Chairman of the Board and Chief Executive
Officer and Treasurer and Principal Financial Officer pursuant to
18 U.S.C Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
13
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PROVIDENCE AND WORCESTER
RAILROAD COMPANY
By: /s/ Robert H. Eder
----------------------------
Robert H. Eder,
Chairman of the Board
And Chief Executive Officer
By: /s/ Robert J. Easton
----------------------------
Robert J. Easton
Treasurer and Principal
Financial Officer
DATED: May 14, 2008
14
EXHIBIT 10.1
COMMON STOCK PURCHASE AGREEMENT
This Common Stock Purchase Agreement (the "Agreement") is made as of
January 10, 2008, by and between Providence and Worcester Railroad Company (the
"Company"), a Rhode Island corporation with its principal offices at 75 Hammond
Street, Worcester, MA 01610, and GATX Corporation ("Purchaser"), a New York
corporation with its principal offices at 500 West Monroe Street, Chicago, IL
60661.
WHEREAS, the parties have entered into an Exclusive Railcar Supply
Agreement (the "ERSA") of even date herewith; and
WHEREAS, it is a condition to the ERSA that Purchaser purchase shares of
the common stock of the Company as further described herein and it is condition
to the purchase of such shares that the Company and GATX have entered into and
delivered the ERSA and the Registration Rights Agreement in substantially the
form attached hereto as Exhibit A (the "Rights Agreement") granting the
Purchaser registration and other rights in connection with the shares of common
stock of the Company to be purchased hereunder.
NOW THEREFORE, for good and valuable consideration as described herein, the
parties hereto agree as follows.
SECTION I
AUTHORIZATION AND SALE OF COMMON STOCK
1.1 Authorization. The Company has authorized the sale and issuance of
shares of its common stock, par value $ 0.50 per share (the "Common Stock")
pursuant to this Agreement.
1.2 Sale of Common Stock. Subject to the terms and conditions of this
Agreement, the Company agrees to issue and sell to the Purchaser and the
Purchaser agrees to purchase from the Company 239,523 shares of Common Stock
(the "Shares") for the purchase price of $5,509,029 (or $ 23.00 per share).
SECTION 2
CLOSING DATE; DELIVERY
2.1 Closing Date. The closing of the purchase and sale of the Shares (the
"Closing") shall be held at 10:00 a.m. at the offices of the Company as soon as
practicable following satisfaction (or waiver, if permissible) of all other
closing conditions set forth in Sections 5 and 6 of this Agreement, but in any
event no later than January 15, 2008, or at such other time and place upon which
the Company and the Purchaser shall agree. The date of the Closing is
hereinafter referred to as the "Closing Date".
2.2 Delivery. At the Closing, the Company will deliver to the Purchaser a
certificate or certificates, registered in the Purchaser's name, representing
the Shares to be purchased by the Purchaser. Such delivery shall be against
payment of the purchase price therefor as set forth in Section 1.2 by wire
transfer to the Company to the account or accounts specified in writing
1
(including bank name(s) and routing number(s) and any other necessary wire
transfer instructions) by the Company at least two business days prior to the
Closing.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as expressly limited in this Section 3, the Company represents and
warrants to the Purchaser as of the date of this Agreement as follows:
3.1 Organization and Standing. The Company is a corporation duly organized
and validly existing under, and by virtue of, the laws of the State of Rhode
Island and is in good standing as a domestic corporation under the laws of said
state. The Company is duly qualified as a foreign corporation and is in good
standing in each jurisdiction in which the ownership of its property or the
nature of its business requires such qualification except where the failure to
qualify would not have a material adverse effect on the business of the Company.
Except as set forth on Schedule 3.1, the Company has no subsidiaries or
affiliated companies and does not otherwise have any direct or indirect equity
interest in or loans to any partnership, corporation, limited liability company,
joint venture, business association or other entity (other than up to 3% of any
class of publicly traded securities). The Company has delivered to Purchaser
complete and correct copies of the Articles of Incorporation and Bylaws of the
Company as amended to the date hereof.
3.2 Corporate Power; Authorization. The Company has all requisite legal and
corporate power and authority and has taken all requisite corporate action,
including without limitation, authorization by the Company's Board of Directors
and the Audit Committee thereof, to execute and deliver this Agreement and the
Rights Agreement, to sell and issue the Shares and to carry out and perform all
of its obligations under this Agreement and under the Rights Agreement. This
Agreement and the Rights Agreement constitute the legal, valid and binding
obligations of the Company, enforceable in accordance with their terms, except
(i) as limited by applicable bankruptcy, insolvency, reorganization or similar
laws relating to or affecting the enforcement of creditors' rights generally and
(ii) as limited by equitable principles generally. Except as set forth on
Schedule 3.2, the execution and delivery of this Agreement and the Rights
Agreement does not, and the performance of this Agreement and the Rights
Agreement and the compliance with the provisions hereof and thereof and the
issuance, sale and delivery of the Shares by the Company will not, conflict
with, or result in a breach or violation of the terms, conditions or provisions
of, or constitute a default under, or result in the creation or imposition of
any lien pursuant to the terms of, the Articles of Incorporation, Bylaws or Code
of Ethics of the Company or materially conflict with or result in a material
violation of the terms, conditions or provisions of, or constitute a material
default under, or result in the creation or imposition of any material lien
pursuant to the terms of any statute, law, rule or regulation or any order,
judgment, decree or any indenture, mortgage, license, lease or other material
agreement or instrument to which the Company or any of its properties is
subject.
3.3 Issuance and Delivery of the Shares. The Shares, when issued in
compliance with the provisions of this Agreement, will be validly issued, fully
paid and nonassessable. The issuance and delivery of the Shares is not subject
2
to preemptive rights, rights of first refusal or any other similar rights of any
other person pursuant to any agreement between the Company and any such person
or pursuant to the Company's Articles of Incorporation or Bylaws. At the
Closing, the Purchaser will receive good and marketable title to the Shares free
of any liens, encumbrances or restrictions (unless created by the Purchaser),
other than restrictions expressly set forth in this Agreement or the Rights
Agreement or restrictions on transferability under applicable securities laws.
3.4 SEC Documents; Financial Statements. Each report or proxy statement
delivered to the Purchaser is a true and complete copy of such document as filed
by the Company with the Securities and Exchange Commission (the "SEC"). The
Company has delivered to the Purchaser its Annual Report on Form 10-K for the
year ended December 31, 2006 (the "2006 10-K") its Proxy Statement for the 2006
Annual Meeting of Stockholders and its Quarterly Reports on Form 10-Q for the
quarters ended March 31, 2007, June 30, 2007 and September 30, 2007
(collectively, the "2007 10-Qs"). The Company has filed in a timely manner all
documents that the Company was required to file with the SEC under Sections 13,
14(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), since January 1, 2002. As of their respective filing dates, all
documents filed by the Company with the SEC (the "SEC Documents") complied in
all material respects with the requirements of the Exchange Act or the
Securities Act of 1933, as amended (the "Securities Act"), as applicable. None
of the SEC Documents as of their respective dates contained any untrue statement
of material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents (the "Financial
Statements") comply as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto. The Financial Statements have been prepared in accordance
with generally accepted accounting principles consistently applied and fairly
present in all material respects the consolidated financial position of the
Company and any subsidiaries at the dates thereof and the consolidated results
of their operations and consolidated cash flows for the periods then ended
(except the unaudited statements do not have footnotes and are subject to
normal, recurring adjustments). Except as reflected or reserved against in the
consolidated financial statements of the Company at September 30, 2007, the
Company has no liabilities that are required to be reported in the consolidated
balance sheet of the Company under GAAP except for liabilities incurred in the
ordinary course of business since September 30, 2007 and liabilities which would
not, individually or in the aggregate, have a material adverse effect on the
Company's properties or assets or the business of the Company as presently
conducted or proposed to be conducted.
3.5 Governmental Consents. No consent, approval, order or authorization of,
or registration, qualification, designation, declaration or filing with, any
federal, state, or local governmental authority or, to the Company's knowledge,
with any international governmental authority, on the part of the Company is
required in connection with the execution of this Agreement.
3.6 No Material Adverse Change. Since September 30, 2007, there have not
been any changes in the assets, liabilities, financial condition, business,
business prospects or results of operations of the Company from that reflected
in the Financial Statements except changes in the ordinary course of business
which have not been, either individually or in the aggregate, materially
adverse.
3
3.7 Authorized Capital Stock. As of January 7, 2008, the authorized capital
stock of the Company consisted of (i) 15,000,000 shares of Common Stock, of
which, as of 4,552,557, shares were outstanding, and (ii) 640 shares of
Preferred Stock, of which as of such date 640 shares were outstanding. As of
such date, the Company had reserved for issuance shares of Common Stock in
connection with the following options, convertible securities, and plans: (i)
227,628 shares of Common Stock reserved for issuance pursuant to the Company's
Nonqualified Stock Option Plan of which, at January 7, 2008, options to purchase
48,902 shares of Common Stock were outstanding, (ii) 64,000 shares of Common
Stock reserved for issuance upon conversion of the Preferred Stock and (iii)
113,014 shares of Common Stock reserved for issuance under the Company's
Employee Stock Purchase Plan. Except as set forth on Schedule 3.7, there are no
other options, warrants, conversion privileges or other contractual rights
presently outstanding or in existence to purchase or otherwise acquire any
authorized but unissued shares of capital stock or other securities of the
Company.
3.8 Litigation. Except as disclosed in the 2006 10-K and the 2007 10-Qs,
there are no material actions, suits, proceedings or investigations pending or,
to the best of the Company's knowledge, threatened against the Company or any of
its properties before or by any court or arbitrator or any governmental body,
agency or official which are required to be disclosed in the SEC Documents.
3.9 Anti-Takeover Law. The board of directors of the Company (the "Board")
has taken all action necessary or required to render inapplicable to this
Agreement and the transactions contemplated hereby (a) any State Takeover Law
that may purport to be applicable to this Agreement or the transactions
contemplated hereby (b) any takeover provisions in the Company's organizational
documents or any Company contract and no such State Takeover Law shall or other
such takeover provisions shall in any manner restrict, impair or delay the
ability of the Purchaser to engage in any transaction with the Company or to
vote or otherwise exercise all rights as a holder of Common Stock of the
Company. "State Takeover Law" means any "fair price," "moratorium," control
share acquisition " or other anti-takeover statute or regulation of any
governmental body that would impose any procedural, voting, approval, fairness
or other restriction on the timely consummation of the transactions contemplated
by this Agreement or restrict, impair or delay the ability of Purchaser to
engage in any transaction with the Company or to vote or otherwise exercise all
rights as a stockholder of the Company, including without limitation, Section
7-5.2-4 of the Rhode Island Business Corporation Act.
3.10 No Shareholder Vote. The execution, delivery and performance of this
Agreement or the Rights Agreement is not required to be submitted for a vote or
other approval of the shareholders of the Company.
3.11 Securities Act. Subject to the accuracy of the Purchaser's
representations in Section 4 hereof, the offer, sale and issuance of the Shares
in conformity with the terms of this Agreement constitute transactions exempt
from the registration requirements of Section 5 of the Securities Act.
4
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Except as expressly limited in this Section 4, the Purchaser hereby
represents and warrants to the Company as of the date of this Agreement as
follows:
4.1 Authorization. Purchaser has all requisite legal and corporate power
and authority and has taken all requisite corporate or other action, including,
without limitation, authorization by Purchaser's Board of Directors, to execute
and deliver this Agreement, to purchase the Shares and to carry out and perform
all of its obligations under this Agreement and the Rights Agreement. This
Agreement and the Rights Agreement constitute the legal, valid and binding
obligations of the Purchaser, enforceable in accordance with their terms, except
(i) as limited by applicable bankruptcy, insolvency, reorganization, or similar
laws relating to or affecting the enforcement of creditor's rights generally and
(ii) as limited by equitable principles generally.
4.2 Investment Experience. Purchaser is an "accredited investor" as defined
in Rule 501(a) under the Securities Act. Purchaser believes that it has had
access to and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Shares. Purchaser has such
business and financial experience as is required to give it the capacity to
protect its own interests in connection with the purchase of the Shares.
4.3 Investment Intent. Purchaser is purchasing the Shares for its own
account as principal, for investment purposes only, and not with a present view
to, or for, resale, distribution or fractionalization thereof, in whole or in
part, within the meaning of the Securities Act. Purchaser understands that its
acquisition of the Shares has not been registered under the Securities Act or
registered or qualified under any state securities law in reliance on specific
exemptions therefrom, which exemptions may depend upon, among other things, the
bona fide nature of Purchaser's investment intent as expressed herein.
4.4 Registration or Exemption Requirements. Purchaser further acknowledges
and understands that the Shares may not be resold or otherwise transferred
except in a transaction registered under the Securities Act or unless an
exemption from such registration is available.
4.5 Legends. To the extent applicable, each certificate or other document
evidencing any of the Shares shall be endorsed with the legends set forth below:
(a) "THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
PLEDGED, OR HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT OR PURSUANT TO AN EXEMPTION THEREFROM. THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR
RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS."
5
(b) "THE SHARES REPRESENTED HEREBY ARE SUBJECT TO THE RESTRICTIONS ON
TRANSFER CONTAINED IN A COMMON STOCK PURCHASE AGREEMENT AND A REGISTRATION
RIGHTS AGREEMENT, AS AMENDED FROM TIME TO TIME. THE COMPANY WILL UPON
WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENTS TO THE HOLDER HEREOF
WITHOUT CHARGE."
SECTION 5
CONDITIONS TO CLOSING OF PURCHASER
The Purchaser's obligation to purchase the Shares at the Closing is subject
to the fulfillment or waiver as of the Closing of the following conditions:
5.1 Representations and Warranties. The representations and warranties of
the Company contained in Section 3 and in the Rights Agreement shall be true and
correct as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of the Closing Date.
5.2 Performance. The Company shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
5.3 Qualifications. All authorizations, approvals, or permits, if any, of
any governmental authority or regulatory body of the United States or of any
state that are required as of the Closing in connection with the lawful issuance
and sale of the Shares pursuant to this Agreement shall have been duly obtained
and shall be effective as of the Closing.
5.4 No Prohibition. There shall not then be in effect any order enjoining
or restraining the transactions contemplated by this Agreement or the Rights
Agreement. There shall not be in effect any law, rule or regulation prohibiting
or restricting the purchase and sale of the Shares or requiring any consent or
approval of any person in connection with the purchase and sale of the Shares,
which consent or approval shall not have been obtained.
5.5 ERSA and the Rights Agreement. The Company shall have executed and
delivered to the Purchaser the Rights Agreement, the ERSA and all other
agreements required under the ERSA to be executed and delivered to Purchaser.
5.6 Compliance Certificates; Secretary's Certificate. The Company shall
have delivered to the Purchaser (i) a certificate or certificates executed by
the Chief Financial Officer or the Chief Executive Officer of the Company, dated
the Closing Date, and certifying the fulfillment of the conditions specified in
Section 5.1 through 5.5 and (ii) a certificate executed by the Secretary of the
Company attaching a copy of the authorizing resolutions of the Company's Board
of Directors and Audit Committee required by Section 3.2 and including the
customary certifications with regard thereto.
6
SECTION 6
CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to sell and issue the Shares at the Closing is
subject to the fulfillment or waiver as of the Closing of the following
conditions:
6.1 Representations and Warranties. The representations and warranties of
the Purchaser contained in Section 4 and in the Rights Agreement shall be true
and correct as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of the Closing Date.
6.2 Performance. The Purchaser shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by the Purchaser on or before the
Closing.
6.3 Qualifications. All authorizations, approvals, or permits, if any, of
any governmental authority or regulatory body of the United States or of any
state that are required as of the Closing in connection with the lawful issuance
and sale of the Shares pursuant to this Agreement shall have been duly obtained
and shall be effective as of the Closing.
6.4 ERSA. The Purchaser shall have executed and delivered the Rights
Agreement, the ERSA and all documents required under the ERSA to be executed and
delivered to Company.
6.5 No Prohibition. There shall not then be in effect any order enjoining
or restraining the transactions contemplated by this Agreement or the Rights
Agreement. There shall not be in effect any law, rule or regulation prohibiting
or restricting the purchase and sale of the Shares or requiring any consent or
approval of any person in connection with the purchase and sale of the Shares,
which consent or approval shall not have been obtained.
6.6 Compliance Certificate. The Purchaser shall have delivered to the
Company (i) a certificate executed by an authorized officer of the Purchaser,
dated the Closing Date, and certifying the fulfillment of the conditions
specified in Section 6.1 through 6.5 and (ii) a certificate executed by the
Secretary of the Company certifying to the approval of the transactions
contemplated by this Agreement by the Purchaser 's Board of Directors as
required by Section 4.1.
SECTION 7
POST CLOSING COVENANTS
7.1 Use of Funds. The Company shall use the proceeds from the sale of the
Shares to Purchaser for capital improvements that will enhance the value of the
Company's railroad lines, including but not limited to, clearance improvements,
track upgrades and other infrastructure projects. Purchaser acknowledges that
the Company shall have no obligation to provide a separate accounting to
Purchaser with respect to the use of the proceeds.
7
7.2 Purchaser Designee on Board of Directors. At the first Annual Meeting
of the shareholders of the Company that follows the Closing Date, and at each
Annual Meeting thereafter for so long as (a) Purchaser has not sold or otherwise
transferred to any non-affiliate of Purchaser any of the Shares, and (b) the
ERSA then remains in full force and effect, the Company shall nominate and
support for election to the Board the individual designated in writing by
Purchaser (the "Purchaser Designee"), provided that (i) such Purchaser Designee
is eligible to serve as a director of the Company, (ii) such designation is made
on or before January 15t of the year of such meeting and (iii) Purchaser
provides to the Company on a timely basis a completed Director and Officer
Questionnaire on a form provided by the Company and any other information
relating to such Purchaser Designee that is required to be disclosed in
solicitations of proxies with respect to nominees for election as directors,
pursuant to proxy regulations promulgated under the Securities Act. If Purchaser
fails to designate a new Purchaser Designee by January 15th of any year,
Purchaser shall be deemed to have designated the individual previously
designated by Purchaser who is then serving as a member of the Board. Upon the
election of the Purchaser Designee to the Board, the Purchaser Designee shall be
included in all Board meetings in which all other non- executive members of the
Board are invited to attend in person or by telephone and shall be provided with
all copies of materials, whether in paper, electronic or other format, that are
provided to all other non-executive members of the Board. Purchaser shall have
the right to designate any replacement for a Purchaser Designee upon the death,
resignation, retirement, disqualification or removal from office for other cause
of the Purchaser Designee who has been elected to the Board at the next annual
meeting of the shareholders of the Company. Until such time as the Purchaser
Designee is elected to the Board, the Purchaser Designee or one other
representative of Purchaser shall have the right to attend meetings of the Board
as an observer.
SECTION 8
MAINTENANCE RELATED INVESTMENT
Under the letter to the Purchaser from the Company dated October 25, 2007, and
subject to the terms and conditions thereof, Purchaser and Company have entered
into negotiations with respect to a possible Maintenance Related Investment (as
defined in such letter) by Purchaser in the Company through the purchase of
additional shares of the Company's Common Stock.
SECTION 9
MISCELLANEOUS
9.1 Waivers and Amendments. The terms of this Agreement may be waived or
amended only with the written consent of the Company and the Purchaser.
9.2 No Brokers. Each of the parties hereto hereby represents that, on the
basis of any actions and agreements by it, there are no brokers or finders
entitled to compensation in connection with the sale of the Shares to the
Purchaser.
9.3 Governing Law. This Agreement shall be governed in all respects by and
construed in accordance with the laws of the State of New York without any
regard to conflicts of laws principles.
8
9.5 Survival. The representations, warranties, covenants and agreements
made in this Agreement shall survive any investigation made by the Company or
the Purchaser and the Closing.
9.6 Successors and Assigns. The provisions hereof shall inure to the
benefit of, and be binding upon, the successors and permitted assigns of the
parties to this Agreement. Notwithstanding the foregoing, neither party shall
assign this Agreement without the prior written consent of the other party,
except that Purchaser may assign this Agreement to any direct or indirect
wholly-owned domestic (i.e., incorporated in a state of the U.S.) affiliate of
Purchaser; provided, however, that no such assignment shall relieve or limit
Purchaser's obligations hereunder.
9.7 Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof.
9.8 Notices, etc. All notices and other communications required or
permitted under this Agreement shall be in writing and may be delivered in
person, by facsimile, overnight commercial carrier, addressed to the Company or
the Purchaser, as the case may be, at their respective addresses set forth
below, or at such other address as the Company or the Purchaser shall have
furnished to the other party in writing:
If to the Company: Providence and Worcester
Railroad Company
75 Hammond Street
Worcester, MA 01610
Attn: President
Copy to: Providence and Worcester
Railroad Company
75 Hammond Street
Worcester, MA 01610
Attn: General Counsel
and
Hinckley Allen &
Snyder LLP 50 Kennedy
Plaza, Suite 1500
Providence, Rhode
Island 02903 Attn:
Stephen J. Carlotti
If to the Purchaser: GATX Corporation
500 West Monroe Street
Chicago, IL 60657
Attn: Executive Vice President/Chief
Operating Officer
Copy to: GATX Corporation
500 West Monroe
Street Chicago,
IL 60657 Attn:
General Counsel
9
All notices and other communications shall be effective upon actual receipt
thereof by the person to whom notice is directed.
9.9 Severability of this Agreement. If any provision of this Agreement
shall be judicially determined to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
9.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
9.11 Expenses. The Company and the Purchaser each shall bear its own
expenses incurred on its behalf with respect to this Agreement and the
transactions contemplated hereby, including fees of legal counsel.
9.12 Currency. All references to "dollars" or "$" in this Agreement shall
be deemed to refer to United States dollars.
9.13 No Third Party Rights. Except where expressly provided to the
contrary, nothing in this Agreement shall create or be deemed to create any
rights in any person or entity not a party to this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
10
The foregoing agreement is hereby executed as of the date first above written.
PROVIDENCE AND WORCESTER RAILROAD COMPANY
By: /s/ P. Scott Conti
----------------------------
Title: President
----------------------------
GATX CORPORATION
By: /s/ Paul Titterton
----------------------------
Title: Vice President Strategic Growth
----------------------------
11
EXHIBIT 10.2
EXCLUSIVE RAILCAR SUPPLY AGREEMENT
----------------------------------
THIS AGREEMENT is made and entered into as of the 10th day of January,
2008, by and between GATX Corporation, a New York Corporation ("GATX"), and
Providence and Worcester Railroad Company, a Rhode Island Corporation ("P&W").
W I T N E S S E T H
WHEREAS, P&W and GATX contemplate entering into various transactions to
provide P&W with long term access to railcars and capital for improvement of
P&W's plant and maintenance capability, and at the same time, provide GATX with
profitable growth of its railcar fleet and access to maintenance and storage
facilities; and
WHEREAS, P&W wishes to align its fleet with the needs of its current
customers and traffic by exchanging seventy-two (72) mill gondolas it owns, for
one hundred thirty-seven (137) open-top hoppers owned by GATX; and
WHEREAS, GATX wishes to acquire a substantial part of P&W's fleet of
railcars comprised of mill gondolas used in revenue service, subject to the
terms hereof; and
WHEREAS, P&W wishes to acquire from GATX certain open-top hoppers for coal
service, subject to the terms hereof; and
WHEREAS, P&W shall lease from GATX certain bi-level Automobile Carrying
Railcars for sponsorship by P&W in the North American Reload Pool; and
WHEREAS, GATX and P&W desire to enter into this Exclusive Railcar Supply
Agreement ("Agreement"), pursuant to which GATX shall, subject to the terms and
conditions hereof, be the exclusive supplier of new and used railcars; and
WHEREAS, the parties have entered into a Stock Purchase Agreement dated of
even date herewith for the purchase by GATX of a specified equity ownership
percentage in P&W and the corresponding appointment of a GATX designee to the
P&W Board.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties hereby agree as follows:
1. Definitions.
"Acquired Line(s)" shall mean all rail lines for which ownership or
operating rights are acquired by P&W, its affiliates and subsidiaries, after the
Effective Date hereof
"Automobile Carrying Railcar" shall mean a flat car with an attached
autorack or a fully-integrated autorack and car utilized for the purposes of
carrying automobiles on rail lines.
1
"Car(s)" shall mean railcars other than the "Railcar(s)".
"Existing Leases" shall mean the full-service and net master leases
executed by and between GATX and P&W on or before the Effective Date of this
Agreement and all riders, supplements, and amendments thereto, attached hereto
or otherwise identified in Exhibit A, as the same may be amended or superseded
from time to time by mutual agreement of the parties.
"Existing Traffic" shall mean rail traffic moving to, from or via P&W Lines
as of the Effective Date of this Agreement or, in the case of Acquired Line(s),
as of the date of the acquisition thereof.
"Independent Review" shall mean a review of a GATX lease offer vis-a-vis a
bona fide third-party lease offer, to be performed by a mutually agreed upon
appraiser, or if the parties cannot mutually agree, then by RailSolutions, Inc.,
in order to determine whether GATX's offer of lease prices for a particular
Lease Transaction constitutes "Market Competitive Lease Terms".
"Lease Transaction(s)" shall mean leases of Railcars by GATX to P&W
pursuant to the terms of this Agreement, which are identified in and subject to
a rider, supplement or amendment attached to the Existing Leases, including,
without limitation, Structured Utilization Lease Rider(s), fixed rate term
lease(s) and any other arrangement with respect to the lease of Railcars by GATX
to P&W which the parties may mutually agree upon from time to time.
"Market-Competitive Lease Terms" shall mean lease pricing terms offered for
comparable equipment on comparable terms and under comparable circumstances,
taking into account the lease type, terms, duration, credit quality,
configuration and expected mileage of the Cars in the context of the
then-current supply of, and demand for, such Cars. The lease terms contained in
the Existing Leases, other than pricing terms, are presumptively agreed upon by
the parties to be Market-Competitive Lease Terms.
"North American Reload Pool" shall mean that certain pool of Automobile
Carrying Railcars and Autoracks formed through the participation of the United
States Class I railroads, TTX Company, and certain other railroads, in which TTX
and various of the aforesaid railroads contribute Automobile Carrying Railcars,
autoracks and flatcars, for common usage throughout North America by all such
participating railroads.
"On-Line Traffic" shall mean P&W Traffic which originates on P&W Lines, in
which the loaded Railcars spend the majority (more than fifty percent (50%)) of
their time in each calendar year on P&W Lines.
"Originated Interchange Traffic" shall mean P&W Traffic which originates on
P&W Lines and terminates on another carrier, in which the loaded Railcars spend
the majority (more than fifty percent (50%)) of their time in each calendar year
off of P&W Lines, except for Pool Traffic.
"P&W Lines" shall mean all rail lines owned and/or operated by P&W, its
affiliates and subsidiaries, as of the Effective Date of this Agreement together
with all Acquired Lines.
2
"P&W Traffic" shall mean all rail shipments originating and/or terminating
on P&W Lines excluding only (a) Existing Traffic for which customer(s) supply
private Cars as of the Effective Date of this Agreement, (b) incremental
private-car traffic for which P&W cannot reasonably influence the shipper's
choice of Cars including, without limitation, (1) traffic by shippers with large
pre-existing private fleets who do not need to obtain incremental System
Railcars for incremental traffic, and (2) traffic by shippers who refuse to
lease Railcars, (c) non- revenue maintenance-of-way traffic utilizing P&W-owned
equipment which spends at least half of each calendar year in non-revenue
service and (d) Terminated Interchange Traffic. The term P&W Traffic shall also
include all rail shipments originating and/or terminating on Acquired Lines
excluding only (a) Existing Traffic for which customers(s) supply private Cars
as of the closing date of the Acquired Line acquisition, (b) incremental
private-car traffic for which P&W cannot reasonably influence the shipper's
choice of Cars including, without limitation, (1) traffic by shippers with large
pre-existing private fleets who do not need to obtain incremental System
Railcars for incremental traffic, and (2) traffic by shippers who refuse to
lease Railcars, (c) non- revenue maintenance-of-way traffic utilizing equipment
to which P&W has acquired rights in connection with Acquired Line(s) and which
spends at least half of each calendar year in non-revenue service, and (d)
Terminated Interchange Traffic.
"Pool Traffic" shall mean P&W Traffic interchanged with P&W's connections,
such as intermodal or automotive, in which PW may handle both inbound and
outbound loads and for which PW and its interchange partners may both supply
equipment.
"Railcar(s)" shall mean the railcars supplied by GATX to P&W pursuant to
this Agreement, which shall be either new or used, as mutually agreed by GATX
and P&W from time to time; provided, however, it is understood and agreed by the
parties that the supply of a new car by GATX will not be necessary for any
particular shipper's traffic, where supply of a used car would reasonably meet
that shipper's car supply needs.
"Structured Utilization Lease Rider" shall mean the lease rider form
attached hereto as Exhibit B, in which GATX's primary form of repayment for
Railcars subject to such arrangement shall be derived from the hourly, mileage
and appurtenance earnings of such Railcars in interchange service. In a Lease
Transaction pursuant to a Structured Utilization Lease Rider, P&W marks (or
other railroad marks as may be mutually agreed by P&W and GATX) shall be applied
to the Railcars subject to the Structured Utilization Lease Rider, and P&W shall
be responsible for all car- hire accounting for the Railcars. The Railcars shall
not be free on P&W Lines but shall earn their default rates as if they were
foreign Cars, subject to P&W's rights of reclaim pursuant to the Code of Car
Hire Rules as they may be amended from time to time ("Car Hire Rules") published
by the Association of American Railroads ("AAR").
"System Railcars" shall mean P&W-supplied Railcars bearing P&W marks.
"Terminated Interchange Traffic" shall mean P&W Traffic which originates on
another carrier and terminates on P&W Lines (except for Pool Traffic).
3
2. Exclusive Railcar Supply.
(a) GATX shall have the exclusive right to supply Railcars to P&W as System
Railcars with respect to On-Line Traffic, Originated Interchange Traffic and
Pool Traffic, provided that GATX is capable of supplying to P&W reasonably
suitable Railcars in a timeframe that reasonably permits P&W to meet its
customers' needs, and provided, further, that GATX and P&W have determined, in
good faith, Market-Competitive Lease Terms for such Railcars. Nothing in this
Agreement shall be construed as enabling GATX to require P&W to utilize Railcars
in circumstances where P&W's insistence that a particular shipper utilize System
Railcars would not be commercially reasonable.
(b) Except as otherwise provided herein, P&W shall require of its customers
that P&W Traffic be moved in System Railcars. With respect to On-Line and
Originated Interchange Traffic, in the event that P&W and GATX mutually agree
that private (customer- supplied) Cars be used for a particular movement in lieu
of System Railcars, P&W and its customer may then use private Cars for that
movement; provided, however, that P&W shall inform such customer of the
availability of GATX-provided Cars for the customer. In the event such customer
and GATX reach agreement for GATX to supply private Cars, P&W shall then provide
OT-5 approval for the GATX private Cars, and no Lessor-Lessee relationship shall
be construed to exist between GATX and P&W with respect to such Cars.
(c) Notwithstanding anything to the contrary herein, this Agreement shall
not encompass an exclusive right to supply Railcars with respect to Terminated
Interchange Traffic, except under special circumstances in which P&W may have
the opportunity to supply such Railcars, as mutually agreed by P&W and GATX.
(d) P&W and GATX shall jointly review P&W's Existing Traffic to determine,
with respect to particular traffic movements, where P&W could reasonably replace
non-GATX Cars with GATX Railcars without threatening disruption or reduction of
P&W's existing business. Upon identification of any such replacement
opportunity, P&W and GATX shall proceed to place Railcars into service for
movement of the specified traffic as soon as practicable under the terms of this
Agreement.
(e) In the event GATX does not elect to exercise its exclusive right of
supply with respect to a particular movement of P&W Traffic, P&W shall be
entitled to obtain the necessary Cars from other suppliers.
(f) All Lease Transactions for Railcars shall be structured to match the
expected term of the applicable movement of P&W Traffic, provided, however, for
traffic which is anticipated to continue indefinitely, the lease term shall be
no less than three (3) years, and longer if the parties mutually agree. In the
event that P&W's traffic levels significantly fluctuate during the term of a
particular Lease Transaction, such that P&W's need for the specific Railcars
covered by that Lease Transaction materially increases or decreases by thirty
percent (30%), determined quarter over quarter, e.g. Q-2 2007 over Q-2 2006
("Variance Threshold"), upon written notice by P&W to GATX of P&W's desire to
increase or decrease the supply of Railcars leased pursuant to a particular
Lease Transaction, GATX shall use commercially reasonable efforts to redeploy
the applicable Railcars to or from other GATX customers in order to reconcile
4
the number of cars covered by the Lease Transaction with the P&W traffic levels
applicable to that Lease Transaction, subject to the contractual and commercial
limitations of GATX's other customer relationships and market conditions.
Provided that the Variance Threshold has been met with respect to the applicable
P&W Traffic and in those limited circumstances where GATX and P&W agree that it
is commercially necessary for a particular movement of P&W Traffic, GATX shall
provide P&W with unilateral early lease termination rights, provided, however,
that such rights shall carry a set fee or liquidated damages amount which
reasonably compensates GATX for the increased risk and cost of early lease
termination. In the event that, notwithstanding such early termination, GATX is
able to rapidly obtain an economically comparable deployment of the Railcars, so
that GATX is able to mitigate all or any of the resulting economic harm, the fee
or liquidated damages shall be waived or reduced, as appropriate.
(g) P&W may use the one hundred thirty-seven (137) open-top hoppers
acquired from GATX pursuant to Section 6(b) as System Railcars. Except as
otherwise provided herein, P&W shall not purchase or lease Cars from third
parties for use as System Railcars.
3. Implementation of Railcar Supply.
(a) Immediately upon P&W learning that a supply of Cars may be necessary
for the movement of P&W Traffic, P&W shall advise GATX of all pertinent
information associated with the P&W Traffic movement, including, but not limited
to, the anticipated duration of the P&W Traffic movement, the commodity to be
moved, and the shippers and receivers involved in the movement, and shall
specify the parameters of the proposed Lease Transaction with respect to the
approximate number of Cars needed, reasonably suitable Car types, and the
proposed lease term (subject to Section 2(f)).
(b) Upon receipt of the requisite Car supply information from P&W, GATX
shall promptly submit a Railcar supply proposal to P&W for the lease of the
applicable Railcars on Market- Competitive Lease Terms or, alternatively, GATX
may decline to submit a Railcar supply proposal (in which case P&W would be
released from this Agreement for the P&W Traffic at issue). Upon request from
P&W, GATX will provide a list of all transactions, if any (with customer names
and other confidential information deleted), involving similar Cars in GATX's
fleet over the twelve (12) months preceding P&W's request for a Railcar supply
offer, in order to facilitate P&W's evaluation of whether GATX's proposed lease
offer contains Market-Competitive Lease Terms. If P&W reasonably demonstrates to
GATX that materially better bona fide lease offers are available to P&W from
third parties for comparable Cars on comparable terms and under comparable
circumstances, GATX shall have the option to either:
(i) Present a revised Railcar supply proposal to P&W in which case
P&W's evaluation process outlined in this Section 3(b) would
recommence;
5
(ii) Initiate an Independent Review of the GATX offer vis-a-vis the
third-party offer, at the parties' joint cost, for the purpose of
evaluating the market- competitiveness of GATX's lease pricing terms;
or
(iii) Advise P&W that it is released from this Agreement for the P&W
Traffic at issue.
Notwithstanding anything to the contrary herein, P&W and GATX understand and
agree that GATX is not required, pursuant to this Agreement, to offer the best
rates and lease terms for a particular lease, but rather market-competitive
rates and terms.
If the Independent Review is initiated pursuant to Section 3(b)(ii), and the
Independent Review establishes lease prices which are unacceptable to GATX,
GATX, in its sole discretion, may either lease the applicable Railcars to P&W
for the P&W Traffic at issue pursuant to the prices established by the
Independent Review or, alternatively, GATX may release P&W from this Agreement
for the P&W Traffic at issue.
(c) In the event GATX and P&W have not yet agreed upon lease terms for the
supply of Cars for a particular movement of P&W Traffic by the time it becomes
necessary for P&W to supply Cars to its customer, if GATX Cars are available for
the applicable movement, and GATX has not released P&W from the exclusive supply
obligations of this Agreement, then P&W shall lease GATX-supplied Railcars for
the applicable movement pursuant to the then-current GATX offer of
Market-Competitive Lease Terms. P&W, at its option, may initiate an Independent
Review of the GATX offer, at the parties' joint cost. If the GATX lease pricing
is determined not to constitute Market-Competitive Lease Terms, then the lease
prices for the Lease Transaction at issue shall be reduced or adjusted,
retroactively, as provided by the Independent Review decision.
4. Applicable Lease Terms.
(a) All Railcars supplied by GATX pursuant to this Agreement shall be
subject to the terms of the Existing Leases, except to the extent that those
terms may be amended or superseded, in writing, by mutual agreement of the
parties. Lease Transactions agreed upon pursuant to this Agreement shall be in
the form of riders to the Existing Leases. In the event of a conflict between
the terms of the Existing Leases and/or a Lease Transaction rider, supplement,
or amendment, on the one hand, and the terms of this Agreement, on the other
hand, the terms of the Existing Leases and the applicable Lease Transaction
rider, supplement or amendment shall govern, provided, however, notwithstanding
any provisions in the Existing Leases which purport to terminate the Existing
Leases if no active Riders are then currently in effect with respect thereto, so
long as an Existing Lease, as amended, has not been superseded, it shall remain
in effect until the termination of this Agreement or the termination of all
Riders to said Existing Lease, whichever is later.
(b) Railcars for On-Line Traffic shall be supplied pursuant to fixed-rate
term leases. Railcars for Originated Interchange Traffic, or for Pool Traffic,
6
shall be supplied under fixed-rate term leases, or at the option of either GATX
or P&W, under a Structured Utilization Lease Rider. In the event such Railcars
are supplied pursuant to a Structured Utilization Lease Rider, P&W and GATX
shall undertake a joint analysis of the projected car-hire earnings of the
Railcars encompassed within such Rider. In the event that, based on the
analysis, GATX determines that GATX should not reasonably expect to earn an
acceptable risk- adjusted return (utilizing GATX's normal risk-adjusted return
criteria) from the projected car-hire earnings for the Railcars encompassed
within such Rider, P&W shall guarantee payment of the projected shortfall in
earnings up to the amount required for GATX to earn an acceptable risk-adjusted
return, measured on an annual basis. Such amounts shall be payable within thirty
(30) days after the end of each calendar quarter.
For example, if GATX and P&W enter into a Structured Utilization Lease
Rider for a Railcar for which GATX requires an average payment of $6,700 (the
"Required Payment") per car per year to earn an acceptable risk-adjusted return,
and the projected car-hire earnings are $5,700 (the "Projected Earnings") per
car per year, then P&W shall guarantee payment of an annual shortfall amount of
$1,000 (the "Guaranteed Amount") per car per year, such that the sum of GATX's
actual car-hire earnings and P&W's payment is equal to $6,700 per car per year.
In the event the analysis establishes that GATX should reasonably expect to earn
a return (using GATX's normal risk-adjusted return criteria) equal to or
exceeding its Required Payment, no guarantee by P&W shall be required. To the
extent that, for a particular movement, P&W guarantees a portion of the
earnings, if the actual earnings exceed the Required Payment, P&W shall be
entitled to 100% of annual car-hire earnings which exceed the Required Payment
until P&W has received an amount equal to the Guaranteed Amount. If the actual
car-hire earnings exceed the sum of the Required Payment and the Guaranteed
Amount, then P&W and GATX shall equally share any additional earnings.
(c) Notwithstanding the foregoing, the parties may mutually agree upon alternate
lease arrangements for particular movements of P&W Traffic including fixed
term-fixed price, fixed term- variable price, per diem rate, and other
comparable lease term arrangements.
(d) With respect to payments due and owing under Structured Utilization Lease
Riders, in the event that the reclaim payments due and owing from GATX to P&W in
a particular calendar month exceed the car hire payments due and owing from P&W
to GATX during that same month, the reclaim payments shall be netted against the
car hire payments, and no car hire shall be due and owing from P&W to GATX
during such month. Any excess reclaim payments owed by GATX shall be netted
against car hire payments owed by P&W to GATX in the subsequent calendar month.
5. Term.
(a) This Agreement shall be effective on the date first above written
("Effective Date"), and shall extend for an initial term of five (5) years
("Initial Term"), and shall automatically renew for successive twelve (12) month
periods thereafter ("Renewal Terms"), unless either party has provided written
notice of termination to the other party at least four (4) months prior to the
end of the Initial Term or any Renewal Term. Notwithstanding the foregoing,
7
during any Renewal Term, if either party determines that the provisions of this
Agreement are no longer economical, such party may, by written notice, request a
renegotiation of the provisions of this Agreement. If such negotiations do not
result in a mutually agreeable revised agreement within sixty (60) days of the
date of such notice, either party shall have the right to terminate this
Agreement at any time during the then-current Renewal Term upon thirty (30) days
written notice to the other party.
(b) Notwithstanding anything to the contrary herein, if a material default
has occurred with respect to this Agreement and has not been cured by the
defaulting party within thirty (30) days of receipt of written notice that the
default has occurred (unless cure cannot be completed within such period and
cure has been undertaken, in which event the defaulting party may cure within
sixty (60) days of receipt of written notice of default) the non-defaulting
party shall have the right to terminate this Agreement immediately, without
further notice; provided, however, if a party has initiated the Dispute
resolution procedures pursuant to Section 12 hereof, such termination shall not
become effective until after the Dispute resolution procedure has been completed
and the termination has been ratified pursuant thereto.
(c) Notwithstanding termination of this Agreement pursuant to Sections
5(a)-(b), any Lease Transactions entered into by the parties prior to the
termination of this Agreement shall remain in full force and effect for the
remainder of the term set forth in said Lease Transaction(s), or if no specific
term is identified therein, then for a period of twelve (12) months following
termination of this Agreement.
6. Exchange of Railcars. The parties agree to exchange ownership interests in
order to complete a like-kind exchange of certain equipment pursuant to Section
1031 of the Internal Revenue Code of 1986, as amended, as follows:
(a) Simultaneous with the execution of this Agreement, the parties shall
enter into a Purchase Agreement in the form attached hereto as Exhibit C,
pursuant to which GATX shall acquire from P&W seventy-two (72) mill gondolas.
The consideration for said mill gondolas shall be an exchange of the open-top
hoppers identified in Section 6(b).
(b) Simultaneous with the execution of this Agreement, the parties shall
enter into a Purchase Agreement in the form attached hereto as Exhibit D,
pursuant to which P&W shall acquire from GATX one hundred twenty-three (123)
open-top hoppers currently leased by P&W pursuant to Lease Rider Nos. 1 and 2 to
Car Net Lease Contract No. 8322, and fourteen (14) additional open-top hoppers.
The consideration for said open-top hoppers shall be an exchange of the mill
gondolas identified in Section 6(a).
(c) The aforesaid exchange of mill gondolas and open-top hoppers shall be
conducted through a tax-free exchange pursuant to Section 1031 of the Internal
Revenue Code (26 U.S.C. section 1031). Each party shall pay its own expenses
with respect to the Cars which it is acquiring. Each party makes no warranty and
assumes no liability vis-a-vis the other party in the event the Internal Revenue
Service determines that said exchange is not a tax-free exchange pursuant to
Internal Revenue Code Regulations.
8
7. Lease.
Simultaneous with the execution of this Agreement, the parties shall enter
into a Lease Transaction in the form attached hereto as Exhibit E with respect
to those mill gondolas identified in such Exhibit, or such other equipment as
the parties may mutually agree to substitute therefor, from time to time.
8. Automobile Carrying Railcar Sponsorship.
At such time as GATX shall request, P&W shall sponsor at least two hundred
(200) new GATX-owned bi-level Automobile Carrying Railcars in the North American
Reload Pool, and P&W and GATX shall enter into a lease agreement for those
Automobile Carrying Railcars in the form attached hereto as Exhibit F. The lease
shall be structured as a Structured Utilization Lease Rider and all such
Railcars shall be considered Pool Traffic.
9. Representations and Warranties.
(a) P&W represents and warrants that (i) P&W is a duly organized, validly
existing corporation in good standing under the laws of the state of its
incorporation and is duly qualified to do business in all jurisdictions in which
qualification is required in order for it to carry out the transactions
contemplated by this Agreement; (ii) P&W has full corporate power, authority and
legal right to execute, deliver and perform this Agreement, and the execution,
delivery and performance hereof has been duly authorized by all necessary
corporate action of P&W, including without limitation by its Board of Directors
and the Audit Committee thereof, and the execution and delivery of this
Agreement does not and the performance of this Agreement will not conflict with
or violate the terms or conditions of the Articles of Incorporation or By-laws
of P&W or its codes and policies, including without limitation its Business
Conduct Policy; and (iii) to the knowledge of P&W, there is no action, suit,
proceeding or investigation by or before any court, arbitrator, administrative
agency or other governmental authority pending or to the knowledge of P&W
threatened against P&W which involves the Railcars currently leased pursuant to
the Existing Leases or the transactions contemplated by this Agreement.
(b) GATX represents and warrants that (i) GATX is a duly organized, validly
existing corporation in good standing under the laws of the state of its
incorporation and is duly qualified to do business in all jurisdictions in which
qualification is required in order for it to carry out the transactions
contemplated by this Agreement; (ii) GATX has full corporate power, authority
and legal right to execute, deliver and perform this Agreement, and the
execution, delivery and performance hereof has been duly authorized by all
necessary corporate action of GATX; and (iii) to the knowledge of GATX, there is
no action, suit, proceeding or investigation by or before any court, arbitrator,
administrative agency or other governmental authority pending or to the
knowledge of GATX threatened against GATX which involves the Railcars currently
leased pursuant to the Existing Leases or the transactions contemplated by this
Agreement.
9
10. Equity Participation.
Simultaneous with the execution of this Agreement, the parties shall enter
into a Stock Purchase Agreement, in the form attached hereto as Exhibit G, for
GATX's purchase of a specified number of shares of P&W stock.
11. Compliance with Regulations.
Except as otherwise provided in the Existing Leases and the riders thereto,
P&W shall, at its own expense and for the benefit of GATX, comply, and cause the
Railcars leased pursuant to the Lease Transactions to comply, with all
governmental laws, regulations and requirements, with the Interchange Rules
published by the AAR and with the rules and regulations of AAR and the Federal
Railroad Administration with respect to the use, maintenance, and operation of
the Railcars leased pursuant to the Lease Transactions, and in the event that
such laws or rules require any alteration of any Railcars leased pursuant to the
Lease Transactions, or in the event that any equipment or appliance on any such
Railcars leased pursuant to the Lease Transactions shall be required to be
changed or replaced, or in the event that any additional or other equipment or
appliance is required to be installed on any such Railcars leased pursuant to
the Lease Transactions in order to comply with such laws or rules, P&W will make
such alterations, changes, replacements and additions at its own expense. Except
as otherwise provided in the Existing Leases and the riders thereto, P&W shall
be responsible for obtaining all necessary railroad permissions, approvals and
consents for use and interchange of the Railcars leased pursuant to the Lease
Transactions and shall bear all risk of failure to obtain such permissions,
approvals and consents, or of cancellation thereof. P&W may, at its own expense
and in good faith, contest the validity or application of any such law or rule
in any reasonable manner which does not, in the reasonable opinion of GATX,
materially adversely affect the property or rights of GATX under this Agreement.
12. Dispute Resolution.
(a) Negotiation between Senior Executives
1. The parties shall attempt in good faith to resolve any controversy,
claim or dispute arising out of or relating to this Agreement or the
construction, interpretation, performance, breach, termination, enforceability
or validity thereof (a "Dispute"), promptly by negotiation between executives
who have authority to settle the Dispute ("Senior Party Representatives").
2. Either party may give the other party written notice (a "Dispute
Notice") of any Dispute which has not been resolved in the normal course of
business. The Senior Party Representatives of both parties shall meet at a
mutually acceptable time and place (including meeting by telephone conference
call), and thereafter as often as they reasonably deem necessary, to attempt to
resolve the Dispute. All reasonable requests for information made by one party
to the other will be honored.
3. If the Dispute has not been resolved within sixty (60) days after
delivery of the Dispute Notice, or if the parties fail to meet within thirty
(30) days after delivery of the Dispute Notice as hereinabove provided
(including meeting by telephone conference call), either party may initiate
arbitration of the Dispute as hereinafter provided.
4. All negotiations pursuant to this Section 12(a) shall be treated as
compromise and settlement negotiations. Nothing said or disclosed, nor any
document produced, in the course of such negotiations which is not otherwise
independently discoverable, shall be offered or received as evidence or used for
impeachment or for any other purpose in any current or future arbitration.
(b) Arbitration
1. If the Dispute has not been resolved by negotiation as provided in
Section 12(a), then the Dispute shall be determined by binding arbitration in
Chicago, Illinois in accordance with the American Arbitration Association
("AAA") Commercial Arbitration Rules ("Rules").
2. If the parties involved in such Dispute are able to agree upon a single
arbitrator experienced in matters of the character in dispute within (30) days
after the party requesting arbitration shall notify in writing the other party
of such Dispute, the Dispute shall be submitted to such single arbitrator.
10
3. If a single arbitrator cannot be agreed upon before the expiration of
such period of thirty (30) days, either party may request the AAA to make the
appointment according to the Rules.
4. The arbitrator shall, as soon as practicable after his or her selection,
hear the Dispute or Disputes submitted and shall give to each of the parties
reasonable notice of the time and place of such hearing. The hearing shall be
conducted at the time and place designated as aforesaid, and, after hearing both
parties and taking such testimony or making such investigation as he or she may
deem necessary. The arbitration award shall be in writing, shall give reasons
for the decisions reached and shall be signed and dated by the arbitrator, and a
copy of the award shall be delivered to each of the parties. The party against
whom an award assesses a monetary obligation or enters an injunctive or
mandatory order shall pay that obligation or comply with that order on or before
the 30th calendar day following the receipt of the award or by such other date
as the award may provide. The award shall be final and binding on the parties
and may be confirmed in, and judgment upon the award entered by, any court
having jurisdiction over the parties.
5. The arbitration shall be governed by the substantive laws of the State
of Illinois applicable to contracts made and to be performed therein, without
regard to conflicts of law rules, and by the arbitration law of the Federal
Arbitration Act (Title 9, U.S. Code), and judgment upon the award rendered by
the arbitrator(s) may be entered in any court having jurisdiction thereof. The
parties shall be entitled to seek, before the arbitrator, all lawful remedies,
including but not limited to, contract damages, termination of this Agreement,
and injunctive relief.
11
6. Upon the presentation of such decision, each party shall immediately
make such changes in the conduct of its business or such payments or
restitution, as the case may be, as by such decision is required of it.
7. Each party to the arbitration shall pay one half of the compensation,
costs and expenses of the arbitrator and all fees and expenses of its own
witnesses, exhibits and counsels.
8. Until a decision is made upon any Dispute submitted to arbitration, the
business, settlements and payments to be transacted and made under this
Agreement shall continue to be transacted and made in the manner and form
existing prior to the rise of such Dispute.
13. Governing Law.
The terms of this Agreement and all rights and obligations hereunder shall
be governed by the internal laws (as compared to conflicts of law provisions) of
the State of Illinois. This Agreement contains all of the terms and conditions
agreed to between the parties, and no other prior agreements, oral or otherwise,
concerning the subject matter of this Agreement, shall be deemed to exist or
bind either party hereto. The terms of this Agreement and the rights and
obligations of the parties may be changed only by a writing executed by both
parties.
14. Severability.
Any provisions of this Agreement found upon judicial interpretation or
construction to be prohibited by law shall be ineffective to the extent of such
prohibition, without invalidating the remaining provisions hereof. All words
used shall be understood and construed to be of such number and gender as the
circumstances may require. The headings are for reference purposes only and
shall not determine the meaning or interpretation of this Agreement.
15. Successors and Assigns.
This Agreement may not be assigned by either party except with the express
written consent of the other party, which consent may be withheld for any reason
or no reason; provided, however, no such consent shall be required in connection
with an assignment of this Agreement to a Purchaser of all, or substantially
all, of the assets of one of the parties hereto. Subject to the foregoing, this
Agreement shall be binding on and inure to the benefit of any successors or
assigns of the parties to this Agreement.
12
16. Waiver.
The failure of either party to this Agreement to object or to take
affirmative action with respect to any non-performance, breach or other conduct
in violation of the terms of this Agreement or the waiver by either party of any
such non- performance, breach or violation of the other party shall not be
construed as a waiver of any other non-performance, breach or violation (whether
similar or dissimilar).
17. Notices.
Any notice or other communication required or permitted by this Agreement
shall be in writing and shall be delivered personally, or sent by overnight
commercial carrier or by telefacsimile, addressed as follows or to another
address specified by notice by a party:
If to GATX: GATX Corporation
Attn: Customer Service and Contract
Administration Department 500 West Monroe
Street
Chicago, IL 60661
Facsimile: (312) 621-6504
And a copy to: GATX Corporation
Attn: General
Counsel 500 West
Monroe Street
Chicago, IL 60661
Facsimile: (312)
621-6647
If to P&W: Providence and Worcester
Railroad Company Attn:
President
75 Hammond Street
Worcester, MA
01610 Facsimile:
(508) 795-0748
And copies to: Providence and Worcester
Railroad Company Attn: General
Counsel 75 Hammond Street
Worcester, MA 01610 Facsimile:
(508) 795-0748
Providence and Worcester
Railroad Company Attn:
Marketing Department 75 Hammond
Street
Worcester, MA
01610 Facsimile:
(508) 795-0748
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18. Inspection of Business Records.
The parties will permit authorized representatives to inspect all books and
records related to this Agreement and performance thereunder, and to make copies
and extracts therefrom, at such times as may be requested following not less
than forty-eight (48) hours' written notice thereof.
19. Confidentiality.
The parties acknowledge that, as a result of their relationship with each
other, they may develop, obtain or learn about certain confidential information
or trade secrets which are the property of each other. The parties hereby
covenant and agree to use their best efforts and the utmost diligence to guard
and protect such confidential information and trade secrets, and will not,
without prior written consent of the other party, during the terms of this
Agreement or at any time after the termination of this Agreement, whether for
cause or otherwise, use for themselves, or disclose or permit to be disclosed to
any third party by any method whatsoever, any confidential information or trade
secrets of the other party. For the purposes of this Section, "confidential
information or trade secrets" shall include, but not be limited to, any and all
records, notes, memoranda, data, ideas, processes, methods, systems, writings,
personnel information, customer information, financial information, plans or any
information of whatever nature in the possession or control of the parties which
has not or have not been published or disclosed to the general public or which
gives to the parties an opportunity to obtain an advantage over competitors who
do not know of or use it. The parties further agree that if this Agreement is
terminated for any reason, they will not take originals or copies of any
materials of any nature which contain confidential information or trade secrets
of either party.
20. Independent Contractor.
It is understood by the parties that the relationship between them is not
one of employer-employee or principal-agent but rather that of independent
contractors acting on their own behalf, and nothing herein shall be construed as
creating a relationship other than that of independent contractors. Neither
party shall have the authority to contract in the name of or to bind the other
party in any manner whatsoever. Each party shall be responsible for the actions,
wages and taxes of its respective employees, and no employees of one party shall
be construed to be employees of the other party.
21. Counterparts.
This Agreement may be executed in two or more counterparts, all of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
14
22. Entire Agreement.
This Agreement contains the entire agreement of the parties with respect to
P&W's lease of Railcars with the exception of the Existing Leases, and
supersedes all prior agreements, representations, negotiations and undertakings
not set forth or incorporated herein including, without limitation, all car
leases or contracts (including any and all amendments thereof and addenda or
riders thereto) entered into heretofore by and between GATX (or any predecessor
thereto) and P&W, all of which are terminated, excluding only the Existing
Leases. Any and all obligations for amounts payable under any terminated leases
or contracts, or any other obligations accruing prior to the termination
thereof, shall remain applicable in accordance with their terms and nothing
contained herein shall operate, or be deemed to operate, as a waiver of such
obligations.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
GATX CORPORATION PROVIDENCE AND WORCESTER
A New York Corporation RAILROAD COMPANY
A Rhode Island Corporation
By: /s/ Paul Titterton By: /s/ P. Scott Conti
-------------------- --------------------
Name: Paul Titterton Name: P. Scott Conti
-------------------- --------------------
Title: Vice President
Strategic Growth Title: President
-------------------- --------------------
15
EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (this "Agreement") is made as of January
10, 2008, by and between Providence and Worcester Railroad Company, a Rhode
Island corporation (the "Company"), and GATX Corporation, a New York corporation
("Purchaser").
RECITALS
WHEREAS, the Company and Purchaser are parties to a certain Stock Purchase
Agreement dated as of January 10, 2008 (the "Purchase Agreement"), pursuant to
which, among other things, Purchaser is acquiring as of the date hereof certain
shares (the "Shares") of the Company's Common Stock, par value $.50 per share;
and
WHEREAS, the Company is granting to Purchaser certain registration rights in
connection with Purchaser's purchase of the Shares pursuant to the terms and
conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties hereto agree as follows:
1. Certain Definitions. Capitalized terms used in this Agreement and not defined
herein shall have the meaning given to them in the Purchase Agreement. As used
in this Agreement, the following terms shall have the following respective
meanings:
"Affiliate" shall mean, with respect to any person, each of such person's
officers, directors, employees and agents, and each other person controlling
such person within the meaning of the Securities Act.
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Register", "registered" and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of the effectiveness of such
registration statement.
"Registrable Securities" shall mean the Shares and any shares of Common
Stock of the Company issued or issuable in respect of the Shares upon any stock
split, stock dividend, recapitalization, or similar event and held by Purchaser
until such time as (i) a registration statement covering such securities has
been declared effective by the Commission and such securities have been disposed
of pursuant to such effective registration statement, or (ii) such securities
have been transferred and may be sold by the transferee without registration
under the Securities Act, after which such securities shall no longer be
Registrable Securities.
1
"Registration Expenses" shall mean all expenses incurred by the Company in
complying with Section 2 hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses and the
expense of any special audits incident to or required by any such compliance
(but excluding the compensation of regular employees of the Company which shall
be paid in any event by the Company).
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the Registrable Securities
registered by Purchaser and all fees and disbursements of counsel for Purchaser.
2. Requested Registration.
a. Request for Registration. In case the Company shall receive from
Purchaser at any time following 180 days after the date hereof a written request
that the Company effect any registration with respect to any of the Registrable
Securities, the Company shall, as soon as practicable, use all commercially
reasonable efforts to effect such registration (including, without limitation,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act and any other governmental requirements or regulations) on Form
S-3 or, if Form S-3 is not available, then on Form S-1 (or any successor forms
of registration statements to such Forms S-3 or S-1 or other available
registration statements) and as would permit or facilitate the sale and
distribution of the Registrable Securities for which registration is requested.
Such registration statement shall contain such required information pursuant to
the rules and regulations promulgated under the Securities Act and such
additional information as deemed necessary by the managing underwriter or, if
there is no managing underwriter, as deemed necessary by mutual agreement of
Purchaser and the Company. Subject to compliance with Section 2 (c), Purchaser
may make two requests for demand registration pursuant to this Section 2,
provided, however, that a demand registration pursuant hereto will not count for
purposes of this Section 2 unless (i) at least ninety percent (90%) of all
Registrable Securities requested to be registered in such demand registration
are, in fact, registered and sold in such registration or (ii) in the case of
any request for registration that is withdrawn by Purchaser prior to the
effectiveness of a registration statement with the Commission, Purchaser
reimburses the Company for all Registration Expenses incurred by the Company in
connection with such demand registration; provided, however, that Purchaser
shall not be required to reimburse the Company for such Registration Expenses,
and the demand registration shall not count for purposes of this Section 2, if
Purchaser elects to withdraw such registration request due to, or in response
to, a material adverse effect or a similar event related to the business,
properties, conditions, or operations of the Company, or other material facts,
not known by Purchaser at the time its request was made.
b. Distributions of Registrable Securities by Purchaser pursuant to this
Section 2 shall be by means of an underwritten public offering. Accordingly,
following the receipt of a registration request from Purchaser, the Company and
2
Purchaser shall enter into an underwriting agreement with an investment banking
firm or firms containing representations, warranties, indemnities and agreements
then customarily included by an issuer and selling shareholders in underwriting
agreements with respect to secondary distributions. Notwithstanding the
foregoing, the underwriting agreement or any other documents reasonably required
under such agreement in connection with the registration and underwriting shall
be reasonably acceptable to Purchaser and (i) Purchaser shall not be required to
make any representation or warranty with respect to, or on behalf of, the
Company or any other shareholder of the Company and (ii) the liability of
Purchaser shall be limited as provided in Section 5(b) hereof. If Purchaser
disapproves of any terms of such underwriting, Purchaser may elect to withdraw
therefrom by written notice to the Company and the underwriter, delivered at
least five (5) days prior to the effective date of the registration statement.
Any Registrable Securities excluded or withdrawn from such underwriting will be
excluded and withdrawn from the registration. The Company shall not cause the
registration under the Securities Act of any other shares of its Common Stock to
become effective (other than the registration of an employee stock plan, or
registration in connection with any Rule 145 or similar transaction) during the
effectiveness of a registration requested hereunder for an underwritten public
offering.
c. Notwithstanding the foregoing, the Company shall not be obligated to
file a registration statement to effect any such registration pursuant to this
Section 2 unless the amount of Registrable Securities for which registration is
requested is at least forty percent (40%) of the Shares (as adjusted for any
stock split, stock dividend, recapitalization or similar event); provided,
however, that if the aggregate offering price of Registrable Securities held by
Purchaser is less than $2,000,000, then Purchaser may request registration under
this Section 2 as to all but not less than all of such Registrable Securities as
may then be held by Purchaser.
d. The Company shall not be obligated to file and cause to become effective
more than one registration statement in any twelve (12) month period.
e. The Company shall not be obligated to keep effective at any time more
than one registration statement on Form S-1 or S-3 with respect to Registrable
Securities requested to be registered in accordance with this Section 2, and if
the Company is requested to effect the registration of Registrable Securities on
Form S-1 or Form S-3 at a time when it is keeping such a registration statement
effective, it may delay effecting such requested registration until it is no
longer required to keep effective the then effective registration statement on
Form S-1 or Form S-3.
f. The Company may delay the filing or effectiveness of any registration
statement for a period of up to 60 days after the date of a request for
registration pursuant to Section 2 if at the time of such request: (i) the
Company is engaged, or has fixed plans to engage within 30 days of the time of
such request, in a primary offering of its own shares in which Purchaser will be
permitted to include all the Registrable Securities so requested to be
registered pursuant to Section 2 or (ii) the Board of Directors of the Company
reasonably determines that such registration and offering would interfere with
any material transaction involving the Company; provided, however, that the
Company shall only be entitled to invoke its rights under this subsection (f)
once in any twelve (12) month period during the duration of this Agreement.
3
g. Except as otherwise provided herein, all Registration Expenses incurred
in connection with a registration pursuant to Section 2 on Form S-3 shall be
borne by the Company. If Form S-3 is not available, all Registration Expenses
incurred in connection with the first registration pursuant to Section 2 on Form
S-1 (or any successor form of registration statement to such Form S-1), shall be
borne by the Company, and all Registration Expenses incurred in connection with
the second registration pursuant to Section 2 of Form S-1 (or any successor form
of registration statement to such Form S-1), shall be borne by Purchaser. All
Selling Expenses relating to the Registrable Securities which are registered
shall be borne by Purchaser.
3. Piggyback Rights.
a. If at any time or from time to time, the Company shall determine to
register, in an underwritten public offering, any shares of Common Stock in a
primary offering for its own account or in a secondary offering for the account
of any third party (other than Purchaser), the Company will: (i) promptly give
to Purchaser written notice thereof; and (ii) include in such registration (and
any related qualification under blue sky laws or other compliance) and
underwriting, all the Registrable Securities (subject to cutback as set forth in
Section 3(b) and 3(c)) specified in a written request or requests made by
Purchaser within twenty (20) days after receipt of such written notice from the
Company by Purchaser.
b. The right of Purchaser to registration pursuant to this Section 3 shall
be conditioned upon Purchaser's participation in such underwriting and the
inclusion of Registrable Securities in the underwriting to the extent provided
herein. If Purchaser proposes to distribute its securities through such
underwriting, Purchaser shall (together with the Company and any other holders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by the Company. Notwithstanding the foregoing, with
respect to the underwriting agreement or any other documents reasonably required
under such agreement (i) Purchaser shall not be required to make any
representation or warranty with respect to, or on behalf of, the Company or any
other shareholder of the Company and (ii) the liability of Purchaser shall be
limited as provided in Section 5(b) hereof. If Purchaser disapproves of any
terms of such underwriting, Purchaser may elect to withdraw therefrom by written
notice to the Company and the underwriter, delivered at least five (5) days
prior to the effective date of the registration statement. Any Registrable
Securities excluded or withdrawn from such underwriting will be excluded and
withdrawn from the registration. Notwithstanding any other provision of this
Section 3, if the managing underwriter determines that the inclusion of all
Registrable Shares requested to be included in such registration would
substantially interfere with the successful marketing (including pricing) of the
shares of Common Stock proposed to be registered and offered by the Company,
then the managing underwriter may limit the Registrable Securities to be
included in such registration.
c. Notwithstanding any other provision of this Section 3, the Purchaser's
right to register Registrable Securities in any secondary offering for the
account of a third party (the "Initiating Holder") which offering is not
underwritten will be restricted so that the number of Registrable Securities
included in any such registration does not exceed the number of shares included
in the registration by the Initiating Holder.
4
d. All Registration Expenses incurred in connection with a registration
pursuant to Section 3 shall be borne by the Company. All Selling Expenses
relating to the Registrable Securities which are registered shall be borne by
Purchaser.
4. Registration Procedures. In the case of each registration effected by the
Company pursuant to this Agreement, the Company will keep Purchaser advised in
writing, if Purchaser is participating in such registration, as to the
initiation of each registration and as to the completion thereof. At its
expense, the Company will:
a. prepare and file with the Commission a registration statement with
respect to such securities and use all commercially reasonable efforts to cause
such registration statement to become and remain effective until the
distribution described in the registration statement has been completed;
b. furnish to Purchaser such reasonable number of copies of the
registration statement, preliminary prospectus, final prospectus and such other
documents as Purchaser may reasonably request, including correspondence with the
Commission and any exchanges on which Registrable Securities are listed;
c. notify Purchaser of any updates or amendments to the prospectus and
furnish to Purchaser any such updated and/or amended prospectuses;
d. prepare and file with the Commission from time to time such amendments
to the registration statement and supplements to the prospectus forming a part
thereof as shall be necessary so that (i) the registration statement does not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements contained
therein not misleading and (ii) the prospectus does not include an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading;
e. notify Purchaser of the issuance by the Commission of any stop order
relating to the registration statement or the initiation of any proceedings for
that purpose, and take such action as may be necessary to prevent the issuance
thereof or the prompt withdrawal thereof;
f. prior to filing the registration statement, the related prospectus or
any amendment or supplement thereto with the Commission, to furnish Purchaser
with drafts of the proposed filing and afford Purchaser a reasonable opportunity
to review and comment thereon;
g. enter into and perform its obligations under an underwriting agreement,
in usual and customary fo1ni, with the managing underwriter(s) of such offering;
h. furnish, at the request of Purchaser, on the date that such Registrable
Securities are delivered to the underwriters for sale, (i) an opinion, dated as
of such date, of the counsel representing the Company for purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
Purchaser and (ii) a "comfort" letter dated as of such date, from the
independent registered public accounting firm of Company, in form and substance
as is customarily given by independent registered public accounting fines to
5
underwriters in an underwritten public offering, addressed to the underwriters,
if any and to Purchaser;
i. cause all Registrable Securities registered pursuant hereto to be listed
on each securities exchange on which similar securities issued by the Company
are then listed; and
j. make available for inspection by Purchaser, an underwriter participating
in any disposition pursuant to such registration statement, and any attorney,
accountant or other agent retained by Purchaser or any underwriter, all
financial and other records, pertinent corporate documents and properties of the
Company, and cause the Company's officers, directors, employees and independent
registered public accounting firm to supply all information reasonably requested
by Purchaser or any such underwriter, attorney, accountant or agent in
connection with such registration statement, provided, however, to the extent
that such information is confidential, that such individual agrees to enter into
an appropriate and reasonable agreement regarding the confidentiality of such
information.
k. make senior executives of the Company reasonably available to assist the
underwriters with respect to, and accompany the underwriters on the so-called
"road show", in connection with the marketing efforts for, and the distribution
and sale of, Registrable Securities pursuant to a registration statement;
provided, however, that maximum amount of time the Company shall be required to
make any particular senior executive available for a road show shall not exceed
five business days.
5. Indemnification.
a. The Company will indemnify Purchaser and each of its Affiliates with
respect to any registration, qualification or compliance which has been effected
pursuant to this Agreement, and each underwriter, if any, and each person who
controls any underwriter within the meaning of the Securities Act (the
"Underwriters"), against all expenses, claims, losses, damages or liabilities
(or actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation commenced or threatened arising out of or based on
any untrue statement (or alleged untrue statement) of a material fact contained
in any registration statement, prospectus, or other document, or any amendment
or supplement thereto, incident to any such registration, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or any violation by the
Company of the Securities Act or any state securities law, or any rule or
regulation promulgated thereunder, applicable to the Company in connection with
any such registration, and the Company will reimburse Purchaser, such Affiliates
and the Underwriters for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action; provided, however, that the Company will not be
liable in any such case to the extent that any such expense, claim, loss, damage
or liability arises out of or is based on any untrue statement or omission, or
alleged untrue statement or omission, made in reliance upon and in conformity
with written information furnished to the Company by Purchaser specifically for
use therein.
6
b. Purchaser will, if Registrable Securities are included in a registration
being effected, indemnify the Company and each of its Affiliates and the
Underwriters, if any, of the Company's securities covered by such a registration
against all expenses, claims, losses, damages and liabilities (or actions in
respect thereof), including any of the foregoing incurred in settlement of any
litigation commenced or threatened arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, or other document, or any amendment or
supplement thereto, incident to any such registration, or based on any omission
(or alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, and Purchaser will
reimburse the Company, such Affiliates and the Underwriters for any legal and
any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to the
extent that such untrue statement or omission, or alleged untrue statement or
omission, is made in such registration statement, prospectus, or other document
incident to any such registration in reliance upon and in conformity with
written information furnished to the Company by Purchaser specifically for use
therein. Notwithstanding the foregoing, the liability of Purchaser under this
subsection (b) shall be limited in an amount equal to the public offering price
of the Shares sold by Purchaser.
c. Each party entitled to indemnification under this Section 5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and the
Indemnifying Party shall have the option to assume the defense of any such claim
or any litigation resulting therefrom; provided, however, that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld); and provided, further, that the Indemnified Party may
participate in such defense at such party's own expense. The failure of an
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement unless the failure to
give such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action. The Indemnifying Party shall not assume such defense for
matters as to which there is a conflict of interest or separate and different
defenses. In the event of a conflict of interest or separate or different
defenses, as determined in the reasonable opinion of counsel to the Indemnified
Party, the Indemnifying Party will pay the reasonable legal fees and expenses of
one counsel to the Indemnified Party. No claim may be settled without the
consent of the Indemnifying Party (which consent shall not be unreasonably
withheld). No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
d. In the event that the indemnity provided in paragraph (a) or (b) of this
Section 5 is unavailable to or insufficient to hold harmless an Indemnified
Party for any reason, each Indemnifying Party agrees to contribute to the
losses, claims, damages and liabilities ("Losses") to which the Indemnified
7
Party may be subject in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party, on the one hand, and such Indemnified
Party, on the other hand, in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations; provided, however, that in no case shall Purchaser be
responsible for any amount in excess of the amount by which the aggregate public
offering price of the Shares sold by Purchaser exceeds the amount of any damages
that Purchaser has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. Relative fault shall
be determined by reference to, among other things, whether any untrue or any
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information provided by the Company on the
one hand or relates to information supplied by Purchaser, on the other, the
intent of the parties and their relative knowledge, information and opportunity
to correct or prevent such untrue statement or omission. The parties agree that
it would not be just and equitable if contribution pursuant to this paragraph
(d) were determined by pro rata allocation or any other method of allocation
that does not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (d), no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
6. Information from Purchaser. Purchaser shall furnish to the Company such
information regarding Registrable Securities being included in any registration
and the distribution proposed by Purchaser as the Company may request in writing
and as shall be required in connection with any registration referred to in this
Agreement.
7. Rule 144 Reporting. With a view to making available the benefits of certain
rules and regulations of the Commission which may at any time permit the sale of
Registrable Securities to the public without registration, the Company agrees to
use its best efforts to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144 (or any successor or similar rule)
promulgated by the Securities and Exchange Commission under the Securities Act;
b. file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
c. so long as Purchaser owns any Registrable Securities, promptly furnish
to Purchaser upon request (i) a statement by the Company as to its compliance
with the reporting requirements of Rule 144 (or any successor or similar rule)
of the Securities Act and the Exchange Act, (ii) a copy of the most recent
annual or quarterly report of the Company, and such other publicly filed reports
and documents of the Company, and (iii) such other information in the possession
of the Company as Purchaser may reasonably request in availing itself of any
rule or regulation of the Commission allowing Purchaser to sell any Shares
without registration.
8. No Inconsistent Agreements. The Company has not entered, and will not
hereafter enter, into any agreement with respect to its securities which is
inconsistent with the rights granted to Purchaser in this Agreement. To the
extent that the Company, on or after the date hereof, grants any such superior
or more favorable rights or terms relating to the subject matter of this
agreement to any person than those provided to Purchaser as set forth herein,
any such superior or more favorable rights or terms shall also be deemed to have
been granted simultaneously to Purchaser. The Company will not, without the
consent of Purchaser, hereafter grant to any person or entity the right to
8
request the Company to register any equity securities of the Company, or any
securities convertible or exchangeable into or exercisable for such securities,
or to participate in any registration, which right conflicts or interferes with
any of the rights granted hereunder or to the extent such participation rights
provide for the inclusion of securities prior to the inclusion of Registrable
Securities.
9. Transfer of Registration Rights. The rights to cause the Company to register
securities granted to Purchaser under Sections 2 and 3 (and any other associated
rights or benefits described herein in connection with the right to register
securities) may be transferred or assigned in connection with any transfer or
assignment of Registrable Securities by Purchaser, other than in a sale under
Rule 144 (or any successor or similar rule) or a registration effected pursuant
to Section 2 or Section 3 of this Agreement, provided that the transferee or
assignee agrees in writing to be bound by the provisions hereof; provided,
however, that with respect to any such transfer or assignment, the registration
rights granted to Purchaser hereunder may be transferred or assigned only if the
person or entity to whom such Registrable Securities are transferred or assigned
acquires at least forty percent (40%) of the Shares (as adjusted for any stock
split, stock dividend, recapitalization or similar event); and provided,
further, that the limitations imposed by Sections 2 and 3 shall apply to
Purchaser and any transferees on an aggregated basis so that the total number of
registrations that may be requested pursuant to Section 2 by Purchaser and any
transferees, in the aggregate, shall not exceed two (2) and all Registrable
Securities that Purchaser and any transferees request be included in a secondary
offering pursuant to Section 3 shall be aggregated for purposes of applying the
limitation on Registrable Securities included in such registration contained in
Section 3(c).
10. Amendment. Any provision of this Agreement may be amended or the observance
thereof may be waived (either generally or in particular instance and either
retroactively or prospectively) only with the written consent of both parties.
11. Termination of Registration Rights. The rights granted to Purchaser pursuant
to this Agreement shall terminate at such time as Purchaser can sell all of its
remaining Registrable Securities within a single six-month period in compliance
with the volume limitations and other provisions of Rule 144 (excluding
paragraph (k) thereof) under the Securities Act (or any successor or similar
rule).
12. Governing Law. This Agreement and the legal relations between the parties
arising hereunder shall be governed by and interpreted in accordance with the
laws of the State of New York without regard to its conflict of laws principles.
13. Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties regarding rights to
registration. Except as otherwise expressly provided herein, the provisions
hereof shall inure to the benefit of, and be binding upon the successors,
assigns, heirs, executors and administrators of the parties hereto.
14. Notices and Dates. Any notice and other communication given under this
Agreement shall be in writing and delivered by hand, by messenger or by courier,
or transmitted by facsimile, to a party at its address set forth below (or at
9
such other address as shall be designated for such purpose by such party in a
written notice to the other in accordance with the provisions hereof):
if to the Company: Providence and Worcester
Railroad Company 75 Hammond
Street Worcester, MA 01610
Attn: President
Copy to: Providence and Worcester
Railroad Company 75 Hammond
Street Worcester, MA 01610
Attn: General Counsel
and
Hinckley Allen &
Snyder LLP 50 Kennedy
Plaza, Suite 1500
Providence, Rhode
Island 02903 Attn:
Stephen J. Carlotti
if to Purchaser: GATX Corporation
500 West Monroe
Street Chicago, IL
60661 Attention:
General Counsel
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered, if
delivered personally, by messenger or by courier, or upon confirmation of
receipt if sent by facsimile.
15. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument.
16. Further Assurances. The parties hereto shall do and perform or cause to be
done and performed all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments or documents as any
other party may reasonably request from time to time in order to carry out the
intent and purposes of this Agreement and the consummation of the transactions
contemplated thereby. Neither the Company nor Purchaser shall voluntarily
undertake any course of action inconsistent with satisfaction of the
requirements applicable to them set forth in this Agreement, and each shall
promptly do all such acts and take all such measures as may be appropriate to
enable them to perform as early as practicable the obligations herein and
therein required to be performed by them.
17. Severability. If any provision of this Agreement is determined to be
unenforceable for any reason, it shall be adjusted rather than voided, if
possible, to achieve the intent of the parties. In any event, all other
10
provisions shall be deemed valid and enforceable to the greatest possible
extent.
18. Interpretation. When a reference is made in this Agreement to Sections, such
references shall be to a Section to this Agreement unless otherwise indicated.
The words "include," "includes" and "including" when used herein shall be deemed
in each case to be followed by the words "without limitation." Use of any gender
herein to refer to any person shall be deemed to comprehend masculine, feminine,
and neuter unless the context clearly requires otherwise.
[signatures on the following page]
11
IN WITNESS WHEREOF, the undersigned have executed this Registration Rights
Agreement as of the date set forth above.
PROVIDENCE AND WORCESTER RAILROAD COMPANY
/s/ P. Scott Conti
By: ----------------------------
P. Scott Conti
Name: ----------------------------
President
Title:----------------------------
GATX CORPORATION
/s/ Paul Titterton
By: ----------------------------
Paul Titterton
Name: ----------------------------
Vice President Strategic Growth
Title:----------------------------
12
EXHIBIT 31.1
Providence and Worcester Railroad Company
Certification Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, ROBERT H. EDER, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Providence and
Worcester Railroad Company;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15 (e)) for the registrant and we have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report, based on our evaluation; and
c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of
directors:
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
DATE: May 14, 2008
By: /s/ Robert H. Eder
----------------------------
Robert H. Eder
Chairman of the Board
and Chief Executive Officer
EXHIBIT 31.2
Providence and Worcester Railroad Company
Certification Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, ROBERT J. EASTON certify that:
1. I have reviewed this quarterly report on Form 10-Q of Providence and
Worcester Railroad Company;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15 (e)) for the registrant and we have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report, based on our evaluation; and
c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of
directors:
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
DATE: May 14, 2008
By: /s/ Robert J. Easton
----------------------------
Robert J. Easton
Treasurer and Principal
Financial Officer
EXHIBIT 32
PROVIDENCE AND WORCESTER RAILROAD COMPANY
CERTIFICATIONS PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Providence and Worcester Railroad
Company (the Company) on form 10-Q for the quarterly period ended March 31,
2008, as filed with the Securities and Exchange Commission on the date hereof
(the Report), I, Robert H. Eder, Chief Executive Officer of the Company,
certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
/s/ Robert H. Eder
-----------------------------
Robert H. Eder,
Chairman of the Board And Chief
Executive Officer
May 14, 2008
In connection with the Quarterly Report of Providence and Worcester Railroad
Company (the Company) on form 10-Q for the quarterly period ended March 31,
2008, as filed with the Securities and Exchange Commission on the date hereof
(the Report), I, Robert J. Easton, Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
/s/ Robert J. Easton
-----------------------------
Robert J. Easton,
Treasurer and Chief Financial Officer
May 14, 2008