PROSPECTUS
INTERPOOL, INC.
OFFER TO EXCHANGE
6 5/8% NOTES DUE 2003
FOR ANY AND ALL OUTSTANDING
6 5/8% NOTES DUE 2003
[INTERPOOL LOGO]
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
THURSDAY, SEPTEMBER 10, 1998, UNLESS EXTENDED BY INTERPOOL, INC. As more fully
described herein under "The Exchange Offer--Expiration Date; Extensions;
Amendment," the time the Exchange Offer expires (including extensions, if any,
by the Company) is referred to as the "Expiration Date."
Interpool, Inc., a Delaware corporation ("Interpool" or the "Company"), is
hereby offering (the "Exchange Offer"), upon the terms and subject to the
conditions set forth in this prospectus (the "Prospectus") and the accompanying
letter of transmittal (the "Letter of Transmittal"), to exchange $1,000
principal amount of its 6 5/8% Notes due 2003 (the "Exchange Notes"), which
exchange has been registered under the Securities Act of 1933, as amended (the
"Securities Act") pursuant to a registration statement of which this Prospectus
is a part (the "Registration Statement"), for each $1,000 principal amount of
its outstanding 6 5/8% Notes due 2003 (the "Private Notes" and, collectively
with the Exchange Notes, the "Notes"), of which $100,000,000 aggregate principal
amount was issued and sold in a transaction exempt from registration under the
Securities Act and is outstanding on the date hereof.
The form and terms of the Exchange Notes are substantially identical in all
respects (including principal amount, interest rate, maturity and ranking) to
the form and terms of the Private Notes, except that (i) the Exchange Notes will
have been registered under the Securities Act and, therefore, will not bear
legends restricting the transfer thereof, (ii) the Exchange Notes will not
provide for payment of additional distributions thereon, and (iii) holders of
the Exchange Notes will not be entitled to certain rights of holders of the
Private Notes under the Registration Rights Agreements (as defined herein),
which rights will terminate upon consummation of the Exchange Offer. The
Exchange Notes will evidence the same indebtedness as the Private Notes and will
be issued pursuant to, and entitled to the benefits of, the Indenture (as
defined herein) governing the Private Notes. The Exchange Offer is being made to
satisfy the obligations of the Company under the Registration Rights Agreement
relating to the Private Notes. See "The Exchange Offer" and "Description of
Exchange Notes."
The Exchange Notes will bear interest at the rate of 6 5/8% per annum.
Interest on the Exchange Notes will be payable semiannually on September 1 and
March 1 of each year, commencing September 1, 1998. The Exchange Notes will bear
interest from and including the date of issuance of the Private Notes (February
24, 1998). The Exchange Notes will mature on March 1, 2003. The Exchange Notes
will be redeemable at any time at the option of the Company, in whole or from
time to time in part, at a redemption price equal to the sum of (i) the
principal amount of the Exchange Notes being redeemed plus accrued interest
thereon to the redemption date and (ii) the Make-Whole Amount (as defined
herein), if any. The Exchange Notes will be unsecured obligations of the Company
and will rank equally with all unsecured and unsubordinated indebtedness of the
Company. See "Description of Notes."
---------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 15 HEREOF FOR CERTAIN INFORMATION
RELEVANT TO AN INVESTMENT IN THE NOTES.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMIS-
SION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRE-
SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------------
The date of this Prospectus is July 30, 1998
The Private Notes were originally issued and sold in reliance upon the
exemption provided in Section 4(2) of the Securities Act and Rule 144A of the
Securities Act. Accordingly, the Private Notes may not be reoffered, resold or
otherwise pledged, hypothecated or transferred in the United States or to a U.S.
person unless registered under the Securities Act or unless an applicable
exemption from the registration requirements of the Securities Act is available.
Based on an interpretation by the staff of the Commission set forth in no-action
letters issued to third parties, the Company believes that the Exchange Notes
issued pursuant to the Exchange Offer in exchange for Private Notes may be
offered for resale, resold and otherwise transferred by a holder thereof (other
than (i) an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act, (ii) a broker-dealer who acquired Private Notes directly from
the Company to resell pursuant to Rule 144A or any other available exemption
under the Securities Act or (iii) a broker-dealer who acquired Private Notes as
a result of market making or other trading activities), without compliance with
the registration and prospectus delivery requirements of the Securities Act;
PROVIDED that the holder is acquiring Exchange Notes in the ordinary course of
its business and is not participating, and has no arrangement or understanding
with any person to participate, in the distribution of the Exchange Notes.
Holders of Private Notes wishing to accept the Exchange Offer must represent to
the Company, as required by the Registration Rights Agreement, that such
conditions have been met. The Company believes that none of the registered
holders of the Private Notes is an affiliate (as such term is defined in Rule
405 under the Securities Act) of the Company.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Private Notes must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of
Exchange Notes received in exchange for Private Notes, where such Private Notes
were acquired by such broker-dealer as a result of market-making or other
trading activities. The Company has agreed to make this Prospectus (as it may be
amended or supplemented) available to any broker-dealer, upon request, for use
in connection with any such resale, for a period of one year after the
Registration Statement is declared effective by the Commission or until such
earlier date on which all the Exchange Notes are freely tradeable. However, any
broker-dealer who acquired the Private Notes directly from the Company may not
fulfill its prospectus delivery requirements with this Prospectus, but must
comply with the registration and prospectus delivery requirements of the
Securities Act. See "The Exchange Offer--Resale of the Exchange Notes" and "Plan
of Distribution."
The Company will not receive any proceeds from, and has agreed to bear the
expenses of, the Exchange Offer. No underwriter is being used in connection with
the Exchange Offer. See "The Exchange Offer--Resale of the Exchange Notes."
Prior to the Exchange Offer, there has been no public market for the Notes.
The Exchange Notes will not be listed on any securities exchange. There can be
no assurance that an active market for the Notes will develop. To the extent
that a market for the Notes does develop the market value of the Notes will
depend on market conditions (such as yields on alternative investments), general
economic conditions, the Company's financial condition and certain other
factors. Such conditions might cause the Notes, to the extent they are traded,
to trade at a significant discount from face value. In addition, any Private
Notes not tendered and accepted in the Exchange Offer will remain outstanding.
To the extent that the Private Notes are tendered and accepted in the Exchange
Offer, a holder's ability to sell untendered, and tendered but unaccepted,
Private Notes could be adversely affected. Following consummation of the
Exchange Offer, the holders of Private Notes will continue to be subject to the
existing restrictions on transfer thereof and the Company will not have any
further obligation to such holders to provide for the registration under the
Securities Act of the Private Notes except under certain limited circumstances.
See "The Exchange Offer-- Termination of Certain Rights."
The Company will accept for exchange any and all validly tendered Private
Notes not withdrawn prior to 5:00 p.m., New York City time, on the Expiration
Date. Tenders of Private Notes may be withdrawn at any time prior to 5:00 p.m.,
New York City Time, on the Expiration Date. The Exchange Offer is not
conditioned on any minimum aggregate principal amount of Private Notes being
tendered or accepted for exchange; PROVIDED, HOWEVER, Private Notes may be
tendered only in integral multiples of $1,000. The Exchange Offer is subject to
certain customary conditions. See "The Exchange Offer--Conditions."
---------------------------
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF PRIVATE NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
NO PERSON IS AUTHORIZED IN CONNECTION WITH THE EXCHANGE OFFER TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THE INFORMATION CONTAINED HEREIN IS AS OF THE DATE HEREOF AND
SUBJECT TO CHANGE, COMPLETION OR AMENDMENT WITHOUT NOTICE. NEITHER THE DELIVERY
OF THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL AT ANY TIME NOR ANY
EXCHANGE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF.
IN MAKING AN INVESTMENT DECISION REGARDING THE SECURITIES OFFERED HEREBY,
PROSPECTIVE INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY AND THE
TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THE OFFERING IS
BEING MADE ON THE BASIS OF THIS PROSPECTUS. ANY DECISION TO EXCHANGE NOTES IN
THE EXCHANGE OFFER MUST BE BASED ON THE INFORMATION CONTAINED HEREIN.
Except as described herein, the Exchange Notes will be represented by
global Exchange Notes in fully registered form, deposited with a custodian for
and registered in the name of a nominee of The Depository Trust Company ("DTC").
Beneficial interests in such Exchange Notes will be shown on, and transfers
thereof will be effected through, records maintained by DTC and its
participants. Beneficial interests in such Exchange Notes will trade in DTC's
Same-Day Funds Settlement System and secondary market trading activity in such
interests will therefore settle in immediately available funds.
TABLE OF CONTENTS
PAGE
Available Information........................................................4
Incorporation Of Certain Documents By Reference..............................5
Forward Looking Statements...................................................5
Prospectus Summary...........................................................6
Risk Factors................................................................15
Ratio Of Earnings To Fixed Charges..........................................19
Use Of Proceeds.............................................................19
Capitalization..............................................................20
Business....................................................................21
The Exchange Offer..........................................................31
Description Of Exchange Notes...............................................39
Description Of Private Notes................................................48
Certain Federal Income Tax Considerations...................................48
ERISA Considerations........................................................49
Plan Of Distribution........................................................49
Legal Matters...............................................................50
Experts.....................................................................50
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company with the Commission can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's regional offices located at Seven World Trade Center, New York, New
York 10048, and Suite 1400, Northwestern Atrium Center, 500 West Madison Street,
Chicago, Illinois 60661. Copies of such materials can be obtained from the
Public Reference Section of the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Such materials can also be
inspected at the New York Stock Exchange, 20 Broad Street, New York, New York
10005. The Commission maintains an Internet web site that contains reports,
proxy and information statements and other information regarding Issuers who
file electronically with the Commission. The address of that site is
http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on Form
S-4 (together with all amendments, exhibits, annexes and schedules thereto, the
"Registration Statement") pursuant to the Securities Act, and the rules and
regulations promulgated thereunder, with respect to the securities being offered
hereby. This Prospectus does not contain all the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information with
respect to the Company and the securities offered hereby, reference is made to
the Registration Statement, including the exhibits filed as a part thereof and
otherwise incorporated therein. Statements made in this Prospectus as to the
contents of any contract, agreement or other document referred to are
necessarily summaries of the material elements of such contract, agreement or
document, and with respect to each contract, agreement or other document filed
as an exhibit to the Registration Statement, reference is made to such exhibit
for a more complete description of the matter involved. Each such statement
shall be deemed qualified in its entirety by such reference. Copies of the
Registration Statement and the exhibits may be inspected, without charge, at the
offices of the Commission, or obtained at prescribed rates from the Public
Reference Section of the Commission at the address set forth above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by the Company
pursuant to the Exchange Act are incorporated by reference in this Prospectus
and made a part hereof:
(a) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997;
(b) the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998;
(c) the Company's Current Report on Form 8-K dated February 24, 1998; and
(d) the Company's Proxy Statement dated April 20, 1998 in connection with
the Company's Annual Meeting of Stockholders in 1998.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the
termination of the Offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which is also incorporated or deemed to be
incorporated by reference herein modifies, supersedes or replaces such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to any person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any or all of the documents which have been incorporated by reference in this
Prospectus, other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference into the documents so incorporated. Any
such request should be directed to Interpool, Inc., 211 College Road East,
Princeton, New Jersey 08540, Attention: Investor Relations. Telephone requests
may be directed to (609) 452-8900.
FORWARD LOOKING STATEMENTS
This Prospectus, including certain information incorporated by reference
herein, contains certain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those contemplated in such forward-looking
statements, including in particular the risks and uncertainties described under
"Risk Factors." See also "The Company," "Summary Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" (incorporated by reference). Prospective investors are cautioned not
to place undue reliance on these forward-looking statements, which speak only as
of the date hereof. The Company undertakes no obligation to publicly release any
revisions to these forward-looking statements to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING
ELSEWHERE OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS. UNLESS THE CONTEXT
OTHERWISE REQUIRES, ALL REFERENCES HEREIN TO THE "COMPANY" OR "INTERPOOL"
INCLUDE INTERPOOL, INC. AND ITS SUBSIDIARIES.
THE COMPANY
Interpool is one of the world's leading lessors of intermodal dry freight
standard containers and is the second largest lessor of intermodal container
chassis in the United States. At March 31, 1998, the Company's container fleet
totaled approximately 435,000 twenty-foot equivalent units ("TEUs"), the
industry standard measure of dimension for containers used in international
trade, and its chassis fleet totaled approximately 65,000 chassis. The Company
leases its containers and chassis to over 200 customers, including nearly all of
the world's 20 largest international container shipping lines.
The Company focuses on leasing dry freight standard containers and
container chassis on a long-term basis in order to achieve high utilization of
its equipment and stable and predictable earnings. From 1991 through 1994, the
combined utilization rate of the Company's container and chassis fleets averaged
at least 90%. From 1995 through 1997, the combined utilization rate of the
Company's container and chassis fleets was approximately 97% and at March 31,
1998 such rate was approximately 98%. Substantially all of the Company's newly
acquired equipment is leased on a long-term basis, and at March 31, 1998
approximately 93% of its total equipment fleet is currently leased on this
basis. The remainder of the Company's equipment is leased under short-term
agreements to satisfy customers' peak or seasonal requirements, generally at
higher rates than under long-term leases. The Company concentrates on dry
freight standard containers and chassis because such equipment may be more
readily remarketed upon expiration of a lease than specialized equipment. In
financing its equipment acquisitions, the Company generally seeks to meet debt
service requirements from the leasing revenue generated by its equipment.
The Company conducts its container and chassis leasing business through two
subsidiaries, Interpool Limited and Trac Lease, Inc. ("Trac Lease"). Certain
other United States equipment leasing activities are conducted through Interpool
itself. The Company and its predecessors have been involved in the leasing of
containers and chassis since 1968.
The Company leases containers throughout the world, with particular
emphasis on the Pacific Rim. The Company leases chassis to customers for use in
the United States. The Company maintains contact with its customers through a
worldwide network of offices, agents and sales representatives. The Company
believes one of the key factors in its ability to compete effectively has been
the long-standing relationships management has established with most of the
world's large shipping lines. In addition, Interpool relies on its strong credit
rating and low financing costs to maintain its competitive position.
From time to time the Company considers possible acquisitions of
complementary businesses and asset portfolios. On April 30, 1998, the Company
acquired a 50% interest in Container Applications International, Inc. ("CAI"), a
container leasing company whose business is primarily in the short-term master
lease market. CAI would not be deemed a "significant subsidiary" of the Company
for purposes of the Securities and Exchange Commission accounting requirements.
On June 19, 1998, the Company joined with Apollo Management IV, L.P.
("Apollo") in entering into a definitive merger agreement providing for the
recapitalization of XTRA Corporation ("XTRA"), a leading lessor of freight
transportation equipment, including over-the-road trailers, marine containers,
intermodal trailers, chassis and domestic containers. In connection with the
merger and recapitalization, the Company (through its affiliate Atlas Capital
Partners LLC ("Atlas")) will be investing $73.1 million in new equity of XTRA,
representing a 22.5% interest in XTRA. It is expected that following the merger
and recapitalization, the Company (through Atlas) and Apollo will own
approximately 90% of XTRA and XTRA's existing shareholders will own the
remaining 10%. The merger, which is expected to be consummated later this year,
is subject to customary conditions, including the approval of XTRA stockholders,
the availability of contemplated financing and the expiration of
Hart-Scott-Rodino waiting periods. See "Business--Pending Transaction."
THE EXCHANGE OFFER
The Exchange Offer............... The Company is hereby offering to exchange
$1,000 principal amount of Exchange Notes for
each $1,000 principal amount of Private Notes
that are properly tendered and accepted.
Private Notes may be tendered for exchange in
multiples of $1,000. The Company will issue
Exchange Notes on or promptly after the
Expiration Date. As of the date hereof,
$100,000,000 aggregate principal amount of
Private Notes are outstanding. See "The
Exchange Offer--Purpose of the Exchange
Offer."
Based on an interpretation by the staff of
the Commission set forth in no-action letters
issued to third parties, the Company believes
that the Exchange Notes issued pursuant to
the Exchange Offer in exchange for Private
Notes may be offered for resale, resold and
otherwise transferred by a holder thereof
(other than (i) an "affiliate" of the Company
within the meaning of Rule 405 under the
Securities Act, (ii) a broker-dealer who
acquired Private Notes directly from the
Company to resell pursuant to Rule 144A or
any other available exemption under the
Securities Act or (iii) a broker-dealer who
acquired Private Notes as a result of market
making or other trading activities), without
compliance with the registration and
prospectus delivery requirements of the
Securities Act; PROVIDED that the holder is
acquiring Exchange Notes in the ordinary
course of its business and is not
participating, and has no arrangement or
understanding with any person to participate,
in the distribution of the Exchange Notes.
Holders of Private Notes wishing to accept
the Exchange Offer must represent to the
Company, as required by the Registration
Rights Agreement, that such conditions have
been met. The Company believes that none of
the registered holders of the Private Notes
is an affiliate (as such term is defined in
Rule 405 under the Securities Act) of the
Company.
Each broker-dealer that receives Exchange
Notes for its own account in exchange for
Private Notes must acknowledge that it will
deliver a prospectus in connection with any
resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging
and by delivering a prospectus, a
broker-dealer will not be deemed to admit
that it is an "underwriter" within the
meaning of the Securities Act. This
Prospectus, as it may be amended or
supplemented from time to time, may be used
by a broker-dealer in connection with resales
of Exchange Notes received in exchange for
Private Notes, where such Private Notes were
acquired by such broker-dealer as a result of
market-making or other trading activities.
The Company has agreed to make this
Prospectus (as it may be amended or
supplemented) available to any broker-dealer,
upon request, for use in connection with any
such resale, for a period of one year after
the Registration Statement is declared
effective by the Commission or until such
earlier date on which all the Exchange Notes
are freely tradeable. However, any
broker-dealer who acquired the Private Notes
directly from the Company other than as a
result of market-making activities or
ordinary trading activities may not fulfill
its prospectus delivery requirements with
this Prospectus, but must comply with the
registration and prospectus delivery
requirements of the Securities Act. See "The
Exchange Offer--Resale of the Exchange
Notes."
Registration Rights
Agreement................... The Private Notes were sold by the Company on
February 24, 1998 to Donaldson, Lufkin &
Jenrette Securities Corporation (the "Initial
Purchaser") pursuant to a Purchase Agreement,
dated February 19, 1998, by and between the
Company and the Initial Purchaser (the
"Purchase Agreement"). Pursuant to the
Purchase Agreement, the Company and the
Initial Purchaser entered into a Registration
Rights Agreement, dated as of February 24,
1998 (the "Registration Rights Agreement"),
which grants the holders of the Private Notes
certain exchange and registration rights. The
Exchange Offer is intended to satisfy such
rights, which will terminate upon the
consummation of the Exchange Offer except
under certain limited circumstances. See "The
Exchange Offer--Termination of Certain
Rights."
Holders of Private Notes who do not tender
their Private Notes in the Exchange Offer
will continue to hold such Private Notes and
will be entitled to all the rights and
limitations applicable thereto under the
Indenture. All untendered, and tendered but
not unaccepted Private Notes will continue to
be subject to the restrictions on transfer
provided for in the Private Notes and the
Indenture. To the extent that Private Notes
are tendered and accepted in the Exchange
Offer, the trading market, if any, for the
Private Notes could be adversely affected.
Expiration Date.................. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on Thursday, September
10, 1998, unless the Exchange Offer is
extended by the Company, in its sole
discretion, in which case the term
"Expiration Date" shall mean the latest date
and time to which the Exchange Offer is
extended. See "The Exchange Offer--
Expiration Date; Extensions; Amendments."
Accrued Interest on the
Exchange Notes and the
Private Notes.................. The Exchange Notes will bear interest from
and including the date of issuance of the
Private Notes (February 24, 1998). Holders
whose Private Notes are accepted for exchange
will be deemed to have waived the right to
receive any interest accrued on the Private
Notes. See "The Exchange Offer--Distributions
on Exchange Notes."
Conditions to the Exchange
Offer....................... The Exchange Offer is subject to certain
customary conditions that may be waived by
the Company. The Exchange Offer is not
conditioned upon any minimum principal amount
of Private Notes being tendered for exchange.
See "The Exchange Offer--Conditions."
Procedures for Tendering
Private Notes............... Each Holder of Private Notes wishing to
accept the Exchange Offer must complete, sign
and date the Letter of Transmittal, or a
facsimile thereof, in accordance with the
instructions contained herein and therein,
and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with
such Private Notes and any other required
documentation to United States Trust Company
of New York, as exchange agent (the "Exchange
Agent") at its address set forth herein. By
executing the Letter of Transmittal, the
holder will represent to and agree with the
Company that, among other things, (i) the
Exchange Notes to be acquired by such holder
of Private Notes in connection with the
Exchange Offer are being acquired by such
holder in the ordinary course of its
business, (ii) such holder is not currently
participating and has no arrangement or
understanding with any person to participate
in a distribution of the Exchange Notes,
(iii) if such holder is a broker-dealer
registered under the Exchange Act or is
participating in the Exchange Offer for the
purposes of distributing the Exchange Notes,
such holder will comply with the registration
and prospectus delivery requirements of the
Securities Act in connection with a secondary
resale transaction of the Exchange Notes
acquired by such person and cannot rely on
the position of the staff of the Commission
set forth in no-action letters (see "The
Exchange Offer--Resale of Exchange Notes"),
(iv) such holder understands that a secondary
resale transaction described in clause (iii)
above and any resales of Exchange Notes
obtained by such holder in exchange for
Private Notes acquired by such holder
directly from the Company should be covered
by an effective registration statement
containing the selling securityholder
information required by Item 507 of
Regulation S-K of the Commission and (v) such
holder is not an "affiliate," as defined in
Rule 405 under the Securities Act, of the
Company. If the holder is a broker-dealer
that will receive Exchange Notes for its own
account in exchange for Private Notes that
were acquired as a result of market-making
activities or other trading activities, such
holder will be required to acknowledge in the
Letter of Transmittal that such holder will
deliver a prospectus in connection with any
resale of such Exchange Notes; however, by so
acknowledging and by delivering a prospectus,
such holder will not be deemed to admit that
it is an "underwriter" within the meaning of
the Securities Act. See "The Exchange
Offer--Procedures for Tendering."
Special Procedures for
Beneficial Owners........... Any beneficial owner whose Private Notes are
registered in the name of a broker,
commercial bank, trust company or other
nominee and who wishes to tender such Private
Notes in the Exchange Offer should contact
such registered holder promptly and instruct
such registered holder to tender on such
beneficial owner's behalf. If such beneficial
owner wishes to tender on such owner's own
behalf, such owner must, prior to completing
and executing the Letter of Transmittal and
delivering such owner's Private Notes, either
make appropriate arrangements to register
ownership of the Private Notes in such
owner's name or obtain a properly completed
bond power from the registered holder. The
transfer of registered ownership may take
considerable time and may not be able to be
completed prior to the Expiration Date. See
"The Exchange Offer--Procedures for
Tendering."
Guaranteed Delivery
Procedures.................. Holders of Private Notes who wish to tender
their Private Notes and whose Private Notes
are not immediately available or who cannot
deliver their Private Notes, the Letter of
Transmittal or any other documentation
required by the Letter of Transmittal to the
Exchange Agent prior to the Expiration Date
must tender their Private Notes according to
the guaranteed delivery procedures set forth
under "The Exchange Offer--Guaranteed
Delivery Procedures."
Acceptance of the Private
Securities and Delivery
of the Exchange Capital
Securities.................. Subject to the satisfaction or waiver of the
conditions to the Exchange Offer, the Company
will accept for exchange any and all Private
Notes that are properly tendered in the
Exchange Offer prior to the Expiration Date.
The Exchange Notes issued pursuant to the
Exchange Offer will be delivered on the
earliest practicable date following the
Expiration Date. See "The Exchange
Offer--Terms of the Exchange Offer."
Withdrawal Rights................ Tenders of Private Notes may be withdrawn at
any time prior to the Expiration Date. See
"The Exchange Offer--Withdrawal of Tenders."
Certain Federal Income Tax
Considerations.............. For a discussion of certain material federal
income tax considerations relating to the
exchange of the Exchange Notes for the
Private Notes, see "Certain Federal Income
Tax Considerations."
Exchange Agent.................. United States Trust Company of New York is
serving as the Exchange Agent in connection
with the Exchange Offer.
Use of Proceeds.................. The Company will not receive any cash
proceeds from the issuance of the Exchange
Notes offered hereby. See "Use of Proceeds."
Risk Factors..................... Investors should carefully consider the risk
factors relating to the Company and the
Exchange Offer described on pages 15 through
18 of this Prospectus.
TERMS OF THE EXCHANGE NOTES
The Exchange Offer applies to $100,000,000 aggregate principal amount of
the Private Notes. The form and terms of the Exchange Notes are substantially
identical in all respects (including principal amount, interest rate, maturity
and ranking) to the form and terms of the Private Notes, except that (i) the
Exchange Notes will have been registered under the Securities Act and,
therefore, will not bear legends restricting the transfer thereof, (ii) the
Exchange Notes will not provide for payment of additional distributions thereon,
and (iii) holders of the Exchange Notes will not be entitled to certain rights
of holders of the Private Notes under the Registration Rights Agreement, which
rights will terminate upon consummation of the Exchange Offer. The Exchange
Notes will evidence the same obligations as the Private Notes and will be issued
pursuant to, and entitled to the benefits of, the Indenture governing the
Private Notes. The Exchange Offer is being made to satisfy the obligations of
the Company under the Registration Rights Agreement relating to the Private
Notes. For further information and for definitions of certain capitalized terms
used below, see "The Exchange Offer" and "Description of the Exchange Notes."
Securities Offered............... $100,000,000 of 6 5/8% Exchange Notes due
2003.
Interest ........................ The Exchange Notes will bear interest at the
rate of 6 5/8% per annum.
Interest Payment Dates........... Interest will be payable semi-annually on
March 1 and September 1, commencing September
1, 1998.
Maturity ........................ March 1, 2003 (5 years).
Optional Redemption.............. The Exchange Notes will be redeemable at any
time at the option of the Company, in whole
or from time to time in part, at a redemption
price equal to the sum of (i) the principal
amount of the Exchange Notes being redeemed
plus accrued interest thereon to the
redemption date and (ii) the Make-Whole
Amount, if any. See "Description of Exchange
Notes--Optional Redemption by the Company."
Mandatory Redemption............. The Company is not required to make any
mandatory redemption or annual sinking fund
payments.
Ranking ........................ The Exchange Notes will be general unsecured
obligations of the Company and will rank
equally with the Company's other unsecured
and unsubordinated indebtedness.
Certain Covenants................ The Company will not create, incur or assume
any Lien (as defined herein) on any assets of
the Company unless the Exchange Notes are
equally and ratably secured with the other
obligations secured by such Lien, so long as
such obligations shall be so secured;
PROVIDED, HOWEVER, that such restriction will
not apply if at the time of, and immediately
after giving PRO FORMA effect to, the
transaction giving rise to such lien, the
Consolidated Indebtedness-to-Stockholders'
Equity Ratio (as defined herein) does not
exceed 4.0 to 1.0. In addition, such
restriction will not apply to certain
categories of liens specified in the
Indenture. See "Description of Exchange
Notes--Certain Covenants--Limitation on
Liens."
Absence of Market for the
Exchange Notes.............. There is currently no market for the Exchange
Notes. Although the Initial Purchaser has
informed the Company that it currently
intends to make a market in the Exchange
Notes, the Initial Purchaser is not obligated
to do so, and any such market making may be
discontinued at any time without notice.
Accordingly, there can be no assurance as to
the development or liquidity of any market
for the Exchange Notes. The Company does not
intend to apply for listing of the Notes on
any securities exchange or for quotation
through the Nasdaq Stock Market. See "Plan of
Distribution."
Risk Factors..................... Investors should carefully consider the risk
factors affecting the Company and the
Exchange Offer described on pages 15 through
18 of this Prospectus.
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected historical consolidated financial
data for the Company, for the periods and at the dates indicated. The historical
financial data for each of the five years in the period ended December 31, 1997,
and at December 31, 1993, 1994, 1995, 1996 and 1997, have been derived from and
are qualified by reference to the historical consolidated financial statements
that have been audited and reported upon by Arthur Andersen LLP, independent
public accountants. The historical financial data for the three months ended and
at March 31, 1997 and 1998 have been derived from the unaudited financial
statements of the Company. The historical financial information for the three
months ended and at March 31, 1997 and 1998 reflects, in the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the results for the interim period. This information
should be read in conjunction with the historical consolidated financial
statements of the Company and the notes thereto and the other financial
information included elsewhere or incorporated by reference in this Prospectus.
The historical financial information for the three months ended March 31, 1998
is not necessarily indicative of results for the full year ending December 31,
1998.
THREE MONTH
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
1993 1994 1995 1996(1) 1997 1997 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Income Statement Data:
Revenues.............................. $79,526 $92,272 $127,925 $147,148 $161,425 $38,176 $42,832
Income before provision for income
taxes and extraordinary item 23,604 28,602 35,670 41,996 37,591 10,569 9,210
Provision for income
taxes(2).............................. 3,600 4,500 6,125 7,800 4,500 1,475 1,100
----- ----- ----- ----- ----- ------- -------
Income before extraordinary item...... 20,004 24,102 29,545 34,196 33,091 9,094 8,110
Extraordinary item - gain (loss)
on early retirement of debt, net
of taxes............................ --- --- 2,422 --- (5,428) (328) ---
----- ----- ----- ----- ----- ------- -------
Net income............................ $20,004 $24,102 $31,967 $34,196 $27,663 $8,766 $8,110
======= ======= ======= ======= ======= ======= ======
Income per share before
extraordinary items and premium
paid on redemption of preferred
stock in 1997(1)(3):
Basic........................... $ 0.86 $ 0.93 $ 1.09 $ 1.24 $ 1.17 $ .31 $ .29
Diluted......................... N/A $ 0.87 $ 1.02 $ 1.16 $ 1.13 $ .29 $ .28
Weighted average shares outstanding:
Basic........................... 23,180 25,953 25,953 25,953 27,552 26,326 27,552
Diluted......................... N/A 30,293 30,533 31,438 29,370 31,773 28,510
AT DECEMBER 31, AT MARCH 31,
1993 1994 1995 1996 1997 1997 1998
(DOLLARS IN THOUSANDS)
BALANCE SHEET DATA:
Cash and short-term investments..... $105,182 $ 69,112 $ 40,208 $ 45,333 $ 30,402 $ 52,697 $ 11,608
Marketable securities............... 19,392 38,286 30,453 24,722 12,574 11,027 13,453
Net investment in direct financing
leases............................ 47,657 123,158 202,576 264,955 363,366 278,575 377,493
Leasing equipment, net of accumulated
depreciation and amortization..... 239,021 397,202 523,620 541,371 608,362 531,427 618,289
Total assets........................ 435,984 664,792 851,600 939,418 1,114,456 942,974 1,130,944
Total long-term debt and capital
lease obligations(4)................ 226,799 385,247 499,998 521,873 669,397 524,688 672,603
Stockholders' equity................ 133,454 156,147 246,690 280,546 250,446 234,399 258,145
Total liabilities and stockholders'
equity............................ 435,984 664,792 851,600 939,418 1,114,456 942,974 1,130,944
THREE MONTH
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
1993 1994 1995 1996(1) 1997 1997 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
OTHER DATA:
Adjusted EBITDA (5)................. $ 56,613 $ 79,888 $127,293 $168,257 $ 182,257 $ 44,357 $ 50,855
Interest expense, net, on senior
debt.............................. 11,512 17,568 35,082 39,485 42,050 9,784 11,342
Interest expense on Capital
Securities........................ --- --- --- --- 6,833 1,278 1,852
Total interest expense, net..... 11,512 17,568 35,082 39,485 48,883 11,062 13,194
Ratio of Adjusted EBITDA to interest
expense on sennior debt(5)...... 4.92x 4.55x 3.63x 4.26x 4.34x 4.53x 4.48x
Ratio of Adjusted EBITDA to total
interest expense, net including
interest on 9 7/8% Capital
Securities........................ 4.92 4.55 3.63 4.26 3.74 4.01 3.85
7/8% Capital
Ratio of earnings to fixed
charges(6)........................ 2.36 2.17 1.85 1.91 1.66 1.81 1.57
Total capitalization(7)............. $360,253 $541,394 $746,688 $802,419 $994,843 $834,087 $1,005,748
Total long-term debt and capital
lease obligations as a % of total
capitalization.................... 62.96% 71.16% 66.96% 65.04% 67.29% 62.91% 66.88%
Capital expenditures................ $120,526 $277,726 $273,643 $166,602 $263,750 $ 27,939 $ 53,511
(FOOTNOTES ON FOLLOWING PAGE)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(1) The 1996 income statement data include a non-cash and non-recurring charge
of $2,392 representing cumulative unpaid dividends of the Company's
subsidiary Trac Lease which resulted from the acquisition of the
outstanding preferred stock of Trac Lease through the issuance of shares of
the Company's 5 3/4% Cumulative Convertible Preferred Stock (the "5 3/4%
Preferred Stock"). Such change had no impact on income per share because
unpaid dividends were included in the computation of income per share in
prior periods.
(2) In connection with its initial public offering in May 1993, the Company
ceased to be a Subchapter "S" corporation for federal income tax purposes
and thereafter became subject to federal income taxes. The Company's
financial statements for the year ended December 31, 1993 include a pro
forma provision for taxes as if the Company had been subject to federal
income taxes for such periods.
(3) Restated to give effect to a three-for-two stock split effective March 27,
1997.
(4) Debt at December 31, 1993 and 1994 included $60,000 and $67,600,
respectively, of the Company's 5 1/4% Convertible Exchangeable Subordinated
Notes due 2018. On July 29, 1997, the Company issued and sold $150,000
aggregate principal amount of its 7.35% Notes due 2007 (the "7.35% Notes").
On August 4, 1997, the Company issued and sold $75,000 aggregate principal
amount of its 7.20% Notes due 2007 (the "7.20% Notes"). Subsequent to
December 31, 1997, the Company issued and sold the Private Notes.
(5) "Adjusted EBITDA" is defined as earnings before net interest expense,
provision for income taxes, depreciation and amortization of leasing
equipment and return of principal from direct financing leases. Adjusted
EBITDA is presented because it is an indicator of funds available to
service debt, although it is not a measure of liquidity or financial
performance under United States generally accepted accounting principles
("GAAP"). The Company believes that Adjusted EBITDA, while providing useful
information, should not be considered in isolation or as an alternative to
net income and cash flows as determined under GAAP.
(6) For the purpose of calculating the ratio of earnings to fixed charges, (i)
earnings consist of income before provision for income taxes, extraordinary
items and fixed charges and (ii) fixed charges consist of interest expense
and 75% of rental payments under operating leases (an amount estimated by
management to be the interest component of such rentals).
(7) Total capitalization equals total long-term debt and capital lease
obligations, plus the sum of $75,000 of Company obligated mandatorily
redeemable preferred securities of grantor trusts (holding solely $77,300
aggregate principal amount of the Company's 9 7/8% Junior Subordinated
Deferrable Interest Debentures Due February 15, 2027 (the "Junior
Subordinated Debentures")) and stockholders' equity. See "Capitalization."
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CAREFULLY REVIEW THE INFORMATION CONTAINED
ELSEWHERE IN THIS PROSPECTUS AND SHOULD PARTICULARLY CONSIDER THE FOLLOWING
MATTERS IN CONNECTION WITH THE EXCHANGE OFFER AND EXCHANGE NOTES OFFERED HEREBY.
RISK FACTORS RELATING TO THE EXCHANGE NOTES
RANKING OF THE NOTES AND HOLDING COMPANY STRUCTURE
The Exchange Notes will be unsecured general obligations of the Company and
rank equally with the Company's other unsecured and unsubordinated indebtedness.
The Exchange Notes will be effectively subordinated to the secured debt of the
Company with respect to the assets pledged as collateral therefor and,
consequently, the rights of the holders of the Exchange Notes to receive
payments from the assets of the Company will be subject to the rights of the
secured creditors of the Company. As of March 31, 1998, the aggregate amount of
the Company's secured debt was $433 million. In addition, the Indenture and the
covenants thereunder will permit the Company to incur substantial secured
indebtedness in the future.
Most of the Company's business activities and assets are operated or held
by subsidiaries. As a holding company, the Company's ability to meet its
financial obligations, including its obligations under the Exchange Notes, and
its ability to pay dividends is dependent primarily upon the receipt of cash
dividends, advances and other payments from its subsidiaries, principally Trac
Lease and Interpool Limited. In addition, the Exchange Notes are effectively
subordinated to all existing and future liabilities, including trade payables,
of the Company's subsidiaries. Any right of the Company to participate in any
distribution of the assets of any of the Company's subsidiaries upon the
liquidation, reorganization or insolvency of such subsidiary (and the consequent
right of the holders of the Notes to participate in such distributions) will be
subject to the claims of the creditors (including trade creditors) and preferred
shareholders of such subsidiaries. As of March 31, 1998, liabilities (excluding
intercompany payables) of the subsidiaries of the Company, to which the Exchange
Notes would have been effectively subordinated, aggregated approximately $293.5
million. See "Description of Exchange Notes."
CONSEQUENCES OF A FAILURE TO EXCHANGE PRIVATE NOTES
The Private Notes have not been registered under the Securities Act or any
state securities laws and therefore may not be offered, sold or otherwise
transferred except in compliance with the registration requirements of the
Securities Act and any other applicable securities laws, or pursuant to an
exemption therefrom or in a transaction not subject thereto, and in each case in
compliance with certain other conditions and restrictions. Private Notes which
remain outstanding after consummation of the Exchange Offer will continue to
bear a legend reflecting such restrictions on transfer. In addition, upon
consummation of the Exchange Offer, holders of Private Notes which remain
outstanding will not be entitled to any rights to have such Private Notes
registered under the Securities Act or to any similar rights under the
Registration Rights Agreement (subject to certain limited exceptions). The
Company does not intend to register under the Securities Act any Private Notes
which remain outstanding after consummation of the Exchange Offer (subject to
such limited exceptions, if applicable). To the extent that Private Notes are
tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered Private Notes could be adversely affected.
The Exchange Notes and any Private Notes which remain outstanding after
consummation of the Exchange Offer will vote together as a single class for
purposes of determining whether holders of the requisite percentage in
outstanding principal amount thereof have taken certain actions or exercised
certain rights under the Indenture. See "Description of Exchange Notes-- Voting
Rights; Amendment of the Indenture."
The Private Notes provide, among other things, that, if a registration
statement relating to the Exchange Offer has not been declared effective by July
24, 1998, additional distributions will be payable on the Private Notes at a
rate of 0.25% per annum until the Exchange Offer is consummated. Upon
consummation of the Exchange Offer, holders of Private Notes will not be
entitled to any additional distributions thereon or any further registration
rights under the Registration Rights Agreement, except under limited
circumstances. See "Description of Private Notes."
ABSENCE OF PUBLIC MARKET
The Private Notes were issued to, and the Company believes such securities
are currently owned by, a relatively small number of beneficial owners. The
Private Notes have not been registered under the Securities Act and will be
subject to restrictions on transferability if they are not exchanged for the
Exchange Notes. Although the Exchange Notes may be resold or otherwise
transferred by the holders (who are not affiliates of the Company) without
compliance with the registration requirements under the Securities Act, they
will constitute a new issue of securities with no established trading market.
Exchange Notes may be transferred by the holders thereof in blocks having a
principal amount of $1,000 (one Exchange Note) or integral multiples thereof.
The Company has been advised by the Initial Purchaser that the Initial Purchaser
presently intends to make a market in the Exchange Notes. However, the Initial
Purchaser is not obligated to do so and any market-making activity with respect
to the Exchange Notes may be discontinued at any time without notice. In
addition, such market-making activity will be subject to the limits imposed by
the Securities Act and the Exchange Act and may be limited during the Exchange
Offer. Accordingly, no assurance can be given that an active public or other
market will develop for the Exchange Notes or the Private Notes. If an active
public market does not develop, the market price and liquidity of the Exchange
Notes may be adversely affected.
If a public trading market develops for the Exchange Notes, future trading
prices will depend on many factors, including, among other things, prevailing
interest rates, the Company's results and the market for similar securities.
Depending on prevailing interest rates, the market for similar securities and
other factors, including the financial condition of the Company, the Exchange
Notes may trade at a discount.
Notwithstanding the registration of the Exchange Notes in the Exchange
Offer, holders who are "affiliates" (as defined under Rule 405 of the Securities
Act) of the Company may publicly offer for sale or resell the Exchange Notes
only in compliance with the provisions of Rule 144 under the Securities Act.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Private Notes, where such Private Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution."
EXCHANGE OFFER PROCEDURE
Issuance of the Exchange Notes in exchange for Private Notes pursuant to
the Exchange Offer will be made only after a timely receipt by the Company of
such Private Notes, a properly completed and duly executed Letter of Transmittal
and all other required documents. Therefore, holders of the Private Notes
desiring to tender such Private Notes in exchange for Exchange Notes should
allow sufficient time to ensure timely delivery. The Company is not under any
duty to give notification of defects or irregularities with respect to the
tenders of Private Notes for exchange.
RISK FACTORS RELATING TO THE COMPANY
CYCLICALITY OF WORLD TRADE
The demand for the Company's containers and chassis primarily depends upon
levels of world trade of finished goods and component parts. Recessionary
business cycles, as well as political conditions, the status of trade agreements
and international conflicts, can have an impact on the operating results of the
Company. The demand for leased chassis also depends upon domestic economic
conditions and import-export volumes. In addition, operating costs such as
storage and repair and maintenance costs increase as utilization decreases. When
the volume of world trade decreases, the Company's business of leasing
containers and chassis may be adversely affected as the demand for such
equipment is reduced. Suppliers of leased containers and chassis, such as the
Company, are dependent upon decisions by shipping lines and other transportation
companies to lease rather than buy their equipment. Most of these factors are
outside the control of the Company. A substantial decline in world trade may
also adversely affect the Company's customers, leading to possible defaults and
the return of equipment prior to the end of a lease term. The Company expects
that the maritime container industry would be adversely affected during an
economic downturn.
DEPENDENCE ON SHIPPING TRAFFIC IN ASIA
Certain of the shipping lines to which the Company leases containers are
entities domiciled in several Asian countries. In addition, many of the
Company's customers are substantially dependent upon shipments of goods exported
from Asia. Economic disruption, political instability or military disturbances
in these areas of the world could adversely affect these customers and thereby
lead to a reduced demand for leasing of the Company's containers or otherwise
adversely affect the Company. Although the Company has not experienced any
material adverse impact on its business as a result of the recent financial
conditions in certain Asian markets, there can be no assurance that financial
turmoil in one or more of the Asian markets would not adversely affect the
Company's business.
COMPETITION
The transportation equipment leasing industry is highly competitive. The
Company competes with numerous domestic and foreign leasing companies, some of
which are much larger than the Company, or are divisions of much larger
companies, and have larger equipment fleets and greater financial resources than
the Company. In addition, if the available supply of intermodal transportation
equipment were to increase significantly as a result of, among other factors,
new companies entering the business of leasing and selling such equipment, the
Company's competitive position could be adversely affected.
ELIGIBILITY FOR TAX BENEFITS UNDER U.S.-BARBADOS TAX TREATY
The Company currently receives certain tax benefits under an income tax
convention (the "Tax Convention") between the United States and Barbados, the
jurisdiction in which the Company's subsidiary Interpool Limited is
incorporated. There can be no assurance that at some future date the Tax
Convention will not be modified in a manner adverse to the Company or repealed
in its entirety, nor can there be any assurance that the Company will continue
to be eligible for such tax benefits.
RISK OF MANUFACTURING IN CHINA
China is currently the largest container producing nation in the world and
the Company currently purchases a substantial majority of its containers from
manufacturers in China. In the event that it were to become more expensive for
the Company to procure containers in China or to transport these containers at a
low cost from China to the locations where needed by customers, either because
of increased tariffs imposed by the United States or other governments or for
any other reason, the Company would have to seek alternative sources of supply.
Although the Company believes it has strong relationships with many
manufacturers throughout the world, there can be no assurance that upon the
occurrence of such an event the Company would be able to make alternative
arrangements quickly to meet its equipment needs, nor can there be any assurance
that such alternative arrangements would not increase the costs to the Company.
VOLATILITY OF RESIDUAL VALUE OF EQUIPMENT
Although the Company's operating results primarily depend upon equipment
leasing, the Company's profitability is also affected by the residual values
(either for sale or continued operation) of its containers and chassis upon
expiration of its leases. These values, which can vary substantially, depend
upon, among other factors, the maintenance standards observed by lessees, the
need for refurbishment, the ability of the Company to remarket equipment, the
cost of comparable new equipment, the availability of used equipment, rates of
inflation, market conditions, the costs of materials and labor and the
obsolescence of the equipment. Most of these factors are outside the control of
the Company.
CONTROL OF THE COMPANY
Currently, approximately 72% of the Company's common stock is beneficially
owned, directly or indirectly, in the aggregate by Warren L. Serenbetz, Martin
Tuchman, Raoul J. Witteveen and Arthur L. Burns, each of whom is a director of
and/or either an executive officer of or a consultant to the Company, and
certain members of their immediate families. Such individuals, either directly
or indirectly, have the ability to elect all of the members of the Board of
Directors of the Company and to control the outcome of all matters submitted to
a vote of the Company's stockholders. Messrs. Serenbetz, Tuchman, Witteveen and
Burns, as well as certain family members and affiliated entities, are parties to
a Stockholders Agreement that imposes certain restrictions on their ability to
dispose of their shares of the Company's common stock and requires them to vote
for the re-election of Messrs. Serenbetz, Tuchman, Witteveen and Burns as
directors of the Company. In addition, the Company's Restated Certificate of
Incorporation and Restated Bylaws contain provisions that may discourage
acquisition bids for the Company.
DEPENDENCE UPON MANAGEMENT
The Company's growth and continued profitability are dependent upon, among
other things, the abilities, experience and continued service of certain members
of its senior management, particularly Martin Tuchman, its Chairman and Chief
Executive Officer, and Raoul J. Witteveen, its President, Chief Operating
Officer and Chief Financial Officer. Each of Messrs. Tuchman and Witteveen
holds, either directly or indirectly, a substantial equity interest in the
Company and also is a director of the Company. There can be no assurance,
however, that the Company will be able to retain the services of either of
Messrs. Tuchman or Witteveen. The loss of either such individual could adversely
affect the Company's business and prospects.
POTENTIAL TAX CONSEQUENCES OF PERSONAL HOLDING COMPANY STATUS
Based upon current management projections, Interpool will likely be
considered a personal holding company for federal income tax purposes in 1998
(and possibly for subsequent years). If Interpool or any of its subsidiaries
were to be classified as a personal holding company for federal income tax
purposes, in addition to its regular federal income tax liability, Interpool's
or such subsidiary's undistributed personal holding company income (generally,
taxable income with certain adjustments, including a deduction for federal
income taxes and dividends paid) would be subject to a personal holding company
tax of 39.6%. Management anticipates that in 1998 Interpool's current level of
dividends would be sufficient to avoid having any undistributed personal holding
company income, and thus does not anticipate that there will be any personal
holding company tax imposed in 1998. There can be no assurance, however, that
the Company will not at some point in the future become liable for such personal
holding company tax. Furthermore, the Company may at a future date elect to
increase the dividend rate on its common stock in order to avoid such tax.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the Company for the periods indicated.
Three Months
Years Ended December 31, Ended March 31,
1993 1994 1995 1996 1997 1997 1998
Ratio of Earnings to Fixed
Charges 2.36x 2.17x 1.85x 1.91x 1.66x 1.81x 1.57x
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. In consideration for issuing the Exchange Notes
in exchange for Private Notes as described in this Prospectus, the Company will
receive Private Notes in like principal amount. The Private Notes surrendered in
exchange for the Exchange Notes will be retired and canceled.
The proceeds to the Company (without giving effect to expenses of the
offering payable by the Company) from the offering of the Private Notes was
$99,272,000. The Company used $83.0 million of the proceeds from the sale of the
Private Notes to repay all outstanding borrowings under the Company's revolving
credit agreement. The remaining net proceeds of approximately $16.3 million were
invested in interest bearing accounts and other investments and used for general
corporate purposes.
CAPITALIZATION
The following table sets forth the cash and short-term investments,
marketable securities, short-term debt and consolidated capitalization of the
Company at March 31, 1998. The table should be read in conjunction with the
Company's consolidated financial statements and notes thereto included in the
documents incorporated by reference herein. See "Incorporation of Certain
Documents by Reference."
AT MARCH 31, 1998
(DOLLARS IN THOUSANDS
Cash and short-term investments................................................... $ 11,608
============
Marketable securities............................................................. $ 13,453
============
Other Assets...................................................................... $ 41,021
============
Short-term debt (including current portion of
long-term debt and capital lease obligations)................................... $ 85,417
============
Long-term debt:
Revolving credit debt........................................................... $ 26,000
Other existing senior debt and capital lease
obligations (less current portion)............................................ 546,603
6 5/8% Notes due 2003........................................................... 100,000
Total long-term debt and capital lease obligations............................ 672,603
-------
Company obligated mandatory redeemable preferred
securities of subsidiary grantor trust (holding
solely junior subordinated deferrable interest
debentures of the Company) (75,000 shares 9 7/8%
Capital Securities outstanding and as adjusted,
liquidation preference $75,000)(1).............................................. 75,000
Stockholders' equity:
Preferred stock, par value $0.001 per share,
1,000,000 shares authorized; none issued...................................... ---
Common stock, par value $0.001 per share, 100,000,000
shares authorized; 27,551,728 shares issued and
outstanding................................................................... 28
Additional paid-in capital...................................................... 124,046
Retained earnings............................................................... 132,734
Net unrealized gain on marketable securities.................................... 1,337
----------
Total stockholders' equity....................................................... 258,145
--------
Total capitalization............................................................. $1,005,748
==========
- -------------------
(1) The sole asset of this trust is $77.3 million aggregate principal
amount of the Company's Junior Subordinated Debentures.
BUSINESS
Interpool is one of the world's leading lessors of intermodal dry freight
standard containers and is the second largest lessor of intermodal container
chassis in the United States. At March 31, 1998, the Company's container fleet
totaled approximately 435,000 twenty foot equivalent units ("TEUs"), the
industry standard measure of dimension for containers used in international
trade, and its chassis fleet totaled approximately 65,000 chassis. The Company
leases its containers and chassis to over 200 customers, including nearly all of
the world's 20 largest international container shipping lines.
The efficiencies and cost savings inherent in intermodal transportation of
containerized cargo have facilitated the dramatic growth of international trade.
Intermodal transportation permits movement of cargo in a standard steel
container by means of a combination of ship, rail and truck without unpacking
and repacking of the contents during transit. The world's dry freight standard
container fleet has grown from fewer than 0.4 million TEUs in 1970 to
approximately 9.6 million TEUs by mid-1997. During the twelve month period
ending in mid-1997 approximately 1.2 million TEUs were produced, of which 0.3
million have been estimated as replacements of older containers. Concurrently
with this growth of the world's container fleet, the domestic chassis fleet has
grown to accommodate the increased container traffic. Leasing companies have
played a significant role in the growth of intermodal transportation, supplying
approximately half of the world's container and chassis requirements.
The Company focuses on leasing dry freight standard containers and
container chassis on a long-term basis in order to achieve high utilization of
its equipment and stable and predictable earnings. From 1991 through 1994, the
combined utilization rate of the Company's container and chassis fleets averaged
at least 90%. From 1995 through 1997, the combined utilization rate of the
Company's container and chassis fleets was approximately 97% and at March 31,
1998 such rate was approximately 98%. Substantially all of the Company's newly
acquired equipment is leased on a long-term basis, and at March 31, 1998
approximately 93% of its total equipment fleet is currently leased on this
basis. The remainder of the Company's equipment is leased under short-term
agreements to satisfy customers' peak or seasonal requirements, generally at
higher rates than under long-term leases. The Company concentrates on dry
freight standard containers and chassis because such equipment may be more
readily remarketed upon expiration of a lease than specialized equipment. In
financing its equipment acquisitions, Interpool generally seeks to meet debt
service requirements from the leasing revenue generated by its equipment.
The Company conducts its container and chassis leasing business through its
two subsidiaries, Interpool Limited and Trac Lease, respectively. Certain other
United States equipment leasing activities are conducted through Interpool
itself.
The Company and its predecessors have been involved in the leasing of
containers and chassis since 1968. The Company leases containers throughout the
world, with particular emphasis on the Pacific Rim. The Company leases chassis
to customers for use in the United States. The Company maintains contact with
its customers through a worldwide network of offices, agents and sales
representatives. The Company believes one of the key factors in its ability to
compete effectively has been the long-standing relationships management has
established with most of the world's large shipping lines. In addition, the
Company relies on its strong credit rating and low financing costs to maintain
its competitive position.
From time to time the Company considers possible acquisitions of
complementary business and asset portfolios. On April 30, 1998, the Company
acquired a 50% interest in Container Applications International, Inc. ("CAI"), a
container leasing company whose business is primarily in the short-term master
lease market. CAI would not be deemed a "significant subsidiary" of the Company
for purposes of the Securities and Exchange Commission accounting requirements.
Recently, on June 19, 1998, the Company joined with Apollo Management IV,
L.P. ("Apollo") in entering into a definitive merger agreement providing for the
recapitalization of XTRA Corporation ("XTRA"), a leading lessor of freight
transportation equipment, including over-the-road trailers, marine containers,
intermodal trailers, chassis and domestic containers. See "--Pending
Transaction."
The Company is a Delaware corporation formed in February 1988 with its
principal executive offices located at 211 College Road East, Princeton, New
Jersey 08540. Its telephone number is (609) 452-8900.
COMPANY HISTORY
The Company is the successor to a line of container and chassis leasing
businesses that traces its beginning to the 1960s. Interpool Limited, a
container and chassis leasing business, was formed in 1968 by Warren L.
Serenbetz, a director of the Company and executive consultant until January
1995, Martin Tuchman, currently Chairman of the Board, Chief Executive Officer
and director of the Company, and two other individuals. In 1978, Interpool
Limited was sold to Thyssen-Bornemisza, N.V. ("Thyssen"). As part of Thyssen,
Interpool Limited continued to be managed by Messrs. Serenbetz and Tuchman. In
1986, Messrs. Serenbetz and Tuchman, along with Mr. Raoul J. Witteveen and two
other senior executives, formed and became the stockholders of Trac Lease. In
1988, the Company was formed by Messrs. Serenbetz, Tuchman and Witteveen and
acquired Interpool Limited from Thyssen. In 1993, Trac Lease was combined with
the Company such that the Company then owned 87.5% of Trac Lease (the "Trac
Lease Acquisition"). In the first quarter of 1996 pursuant to an Agreement of
Merger between Trac Lease and Trac Lease Merger Corp., a newly formed subsidiary
(the "Trac Merger"), the Company acquired the minority interests in Trac Lease
and Trac Lease became a wholly owned subsidiary.
INTERMODAL TRANSPORTATION
The fundamental component of intermodal transportation is the container.
Containers provide a secure and cost-effective method of transporting finished
goods and component parts because they are generally freely inter-changeable
between different modes of transport, making it possible to move cargo from a
point of origin to a final destination without the repeated unpacking and
repacking of the goods required by traditional shipping methods. The same
container may be carried successively on a ship, rail car and truck and across
international borders with minimal customs formalities. Containerization is more
efficient, more economical and safer in the transportation of cargo than "break
bulk transport" in which the goods are unpacked and repacked at various
intermediate points enroute to their final destination. By eliminating manual
repacking operations when differing modes of transportation are used,
containerization reduces freight and labor costs. In addition, automated
handling of containers permits faster loading and unloading and more efficient
utilization of transportation equipment, thereby reducing transit time. The
protection provided by sealed containers also reduces damage to goods and loss
and theft of goods during shipment. Containers may also be picked up, dropped
off, stored and repaired at independent common user depots located throughout
the world.
The adoption of uniform standards for containers in 1968 by the
International Standards Organization (the "ISO") precipitated a rapid growth of
the container industry, as shipping companies recognized the advantages of
containerization over traditional break bulk transportation of cargo. This
growth resulted in substantial investments in containers, container ships, port
facilities, chassis, specialized rail cars and handling equipment.
Most containers are constructed of steel in accordance with recommendations
of the ISO. The basic container type is the general purpose dry freight standard
container (accounting for approximately 87% of the world's container fleet),
which measures 20 or 40 feet long, 8 feet wide and 8 1/2 or 9 1/2 feet high. In
general, 20-foot containers are used to carry heavy, dense cargo loads (such as
industrial parts and certain food products) and in areas where transport
facilities are less developed, while 40-foot containers are used for lighter
weight finished goods (such as apparel, electronic appliances and other consumer
goods) in areas with better developed transport facilities. Standards adopted by
the International Convention for Safe Containers and the Institute of
International Container Lessors govern the operation and maintenance of
containers.
The demand for containers is influenced primarily by the volume of
international and domestic trade. In recent years, however, the rate of growth
in the container industry has exceeded that of world trade as a whole due to
several factors, including the existence of geographical trade imbalances, the
expansion of shipping lines, and changes in manufacturing practices, such as
growing reliance on "just-in-time" delivery methods and increased exports by
certain technologically advanced countries of component parts for assembly in
other countries and the subsequent re-importation of finished products.
When a container vessel arrives in port, each container is loaded onto a
chassis or rail car. A chassis is a rectangular, wheeled steel frame, generally
20 or 40 feet in length, built specifically for the purpose of transporting a
container. Once mounted, the container and chassis are the functional equivalent
of a trailer. When mounted on a chassis, the container may be trucked either to
its final destination or to a railroad terminal for loading onto a rail car.
Similarly, a container shipped by rail may be transferred to a chassis to travel
over the road to its final destination. As the use of containers has become a
predominant factor in the intermodal movement of cargo, the chassis has become a
prerequisite for the domestic segment of the journey. A chassis seldom travels
permanently with a single container, but instead serves as a transport vehicle
for containers that are loaded or unloaded at ports or railroad terminals.
Because of differing international road regulations and the lack of
international standards for chassis, chassis used in the United States are
seldom used in other countries.
The Company's management believes that over the recent years, domestic
railroads and trucking lines have begun actively marketing intermodal use of
services for the domestic transportation of freight. In 1992, container loadings
represented, for the first time, a majority of total domestic rail loadings of
intermodal transportation equipment. Management further believes that this trend
should serve to accelerate the growth of intermodal transportation, and hence
result in increased container and chassis demand.
As a result of the advantages of intermodal containerization and the
increased globalization of the world economy, the use of containers for domestic
intermodal transportation has also grown over the last few years. Greater use of
containers on cargo ships led railroad and trucking companies to develop the
capacity to transport containers domestically by chassis and rail car. In
addition, shipping companies began soliciting domestic cargo in order to
mitigate the cost of moving empty containers back to the port areas for use
again in international trade. The introduction in the mid-1980's of the double
stack railroad car, specially designed to carry containers stacked one on top of
another, accelerated the growth of domestic intermodal transportation by
reducing shipping costs still further. Due to these trends, an increasing
portion of domestic cargo is now being shipped by container instead of by a
conventional highway trailer. The Company has acquired over 7,000 units of
equipment, including domestic trailers, domestic chassis and domestic containers
in order to increase its participation in the growing domestic intermodal
market.
THE LEASING MARKET AND THE COMPANY'S STRATEGY
BENEFITS OF LEASING
Leasing companies own approximately half of the world's container fleet and
half of the domestic chassis fleet, with the balance owned predominantly by
shipping lines. Leasing companies have maintained this market position because
container shipping lines receive both financial and operational benefits by
leasing a portion of their equipment. The principal benefits to shipping lines
of leasing are:
* to provide shipping lines with an alternative source of financing in a
traditionally capital-intensive industry;
* to enable shipping lines to expand their routes and market shares at a
relatively inexpensive cost without making a permanent commitment to
support their new structure;
* to enable shipping lines to benefit from leasing companies'
anticipatory buying and volume purchases, thereby offering them
attractive pricing and prompt delivery schedules;
* to enable shipping lines to accommodate seasonal and/or directional
trade route demand, thereby limiting their capital investment and
storage costs; and
* to enable shipping lines at all times to maintain the optimal mix of
equipment types in their fleets.
Because of these benefits, container shipping lines generally obtain a
significant portion of their container fleets from leasing companies, either on
short-term or long-term leases. Short-term leases provide a considerable degree
of operational flexibility in allowing a customer to pick up and drop off
containers at various locations worldwide at any time. However, customers pay
for this flexibility in the form of substantially higher lease rates for
short-term leases and drop-off charges for the privilege of returning equipment
to certain locations. Most short-term leases are "master leases," under which a
customer reserves the right to lease a certain number of containers as needed
under a general agreement between the lessor and the lessee. Long-term leases
provide the lessee with advantageous pricing structures, but usually contain an
early termination provision allowing the lessee to return equipment prior to
expiration of the lease only upon payment of an early termination fee. Since
1991, the Company has experienced minimal early returns under its long-term
leases, primarily because of the penalties involved and because customers must
return all containers covered by the particular long-term lease being
terminated, generally totaling several hundred units, and bear substantial costs
related to their repositioning and repair. Frequently, a lessee will retain
long-term leased equipment well beyond the initial lease term. In these cases,
long-term leases will be renewed at the then prevailing market rate, either for
additional one year periods or as part of a short-term agreement. In some cases,
the customer has the right to purchase the equipment at the end of a long-term
lease. The Company's long-term leases generally have five to eight year terms.
The Company often enters into long-term "direct finance" leases. Under a
direct finance lease, the customer owns the container at the expiration of the
lease term. Although customers pay a higher per diem rate under a direct finance
lease than under a long-term operating lease, a direct finance lease enables the
Company to provide customers with access to financing on terms generally
comparable to those available from financial institutions which provide this
type of financing. The percentage of the Company's revenues provided by direct
finance leases has increased from 11% in 1991 to 21% in 1997.
Shipping lines generally spread their business over a number of leasing
companies in order to avoid dependence on a single supplier.
Unlike the business of container leasing, which is global in scale, the
Company's chassis leasing business is almost exclusively a domestic business.
Many of the customers for the Company's chassis, however, are United States
subsidiaries or branches of international shipping lines.
COMPANY STRATEGY
The Company emphasizes long-term leases in order to minimize the impact of
economic cycles on the Company's revenues and so as to achieve high utilization
and stable and predictable earnings. The lower rate of turnover provided by
long-term leases enables the Company to concentrate on the expansion of its
asset base through the purchase and lease of new equipment, rather than on the
repeated re-marketing of its existing fleet.
The result of this strategy has been to establish the Company as one of the
world's leading lessors of dry freight standard containers. The Company intends
to continue its emphasis on acquiring and leasing dry freight standard
containers, rather than investing significantly in special purpose equipment
such as refrigerated or tank containers. Management believes that the Company
currently has one of the youngest container fleets of the world's ten largest
container lessors.
Trac Lease, with a fleet of approximately 65,000 chassis, is currently the
second largest chassis lessor in the United States, with the largest lessor
having a fleet approximately 100,000 chassis. The Company's chassis leasing
strategy includes an emphasis on long-term leasing of new or re-manufactured
chassis which allows the Company to offer equipment packages to its customers at
the most attractive cost to the Company.
In order to redeploy chassis that are coming off long-term leases, the
Company operates "chassis pools" for most of the major port authorities and
terminal operators on the Eastern seaboard and the Gulf coast. A chassis pool is
an inventory of chassis available for short-term leasing to customers of the
port or terminal. The principal ports in the United States where the Company
supplies chassis pools are Boston, Baltimore, Norfolk, Charleston, Savannah, New
Orleans and Houston.
Like most leasing companies, the Company depends on high utilization of its
equipment in order to run its operations profitably. Because the Company has
most of its container and chassis fleets under long-term leases, the Company
believes that it has generally experienced better utilization in periods of weak
demand than other leasing companies having a smaller proportion of their fleets
under long-term leases. From 1991 through 1994, the annual utilization of the
Company's container fleet and Trac Lease's chassis fleet has averaged at least
90%. From 1995 through 1997, the combined utilization rate of the Company's
container and chassis fleets was approximately 97% and at March 31, 1998 such
rate was approximately 98%.
OPERATIONS
LEASE TERMS
Lease rentals are typically calculated on a per diem basis, regardless of
the term of the lease. The Company's leases generally provide for monthly or
quarterly billing and require payment by the lessee within 30 to 60 days after
presentation of an invoice. Generally, the lessee is responsible for payment of
all taxes and other charges arising out of use of the equipment and must carry
specified amounts of insurance to cover physical damage to and loss of
equipment, as well as bodily injury and property damage to third parties. In
addition, the Company's leases usually require lessees to repair any damage to
the containers and chassis, although in certain circumstances the Company
relieves lessees of the responsibility of paying repair costs in return for
higher lease payments. Lessees are also required to indemnify the Company
against losses to the Company arising from accidents or similar occurrences
involving the leased equipment. The Company's leases generally provide for
pick-up, drop-off and other charges and set forth a list of locations where
lessees may pick up or return equipment. The Company's long-term leases
generally have five to eight year terms.
EQUIPMENT TRACKING AND BILLING
The Company uses a computer system with proprietary software for equipment
tracking and billing to provide a central operating data base showing the
Company's container and chassis leasing activities. The system processes
information received electronically from the Company's regional offices. The
system records the movement and status of each container and chassis and links
that information with the complex data comprising the specific lease terms in
order to generate billings to lessees. More than 10,000 movement transactions
per month are routinely processed through the system, which is capable of
tracking revenue on the basis of individual containers and chassis. The system
also generates a wide range of management reports containing information on all
aspects of the Company's leasing activities.
SOURCES OF SUPPLY
Because of the rising demand for containers and the availability of
relatively inexpensive labor in the Pacific Rim, approximately 70% of world
container production now occurs in China. Containers are also produced in other
countries, such as South Korea, India, Indonesia, Malaysia, Taiwan, Turkey,
South Africa, and, to a lesser extent, in other parts of the world. Most chassis
used in the United States are manufactured domestically due to the high cost of
transportation to the United States of chassis manufactured abroad.
Manufacturers of chassis frequently produce over-the-road trailers as well and
can convert some production capability to chassis as needed.
Upon completion of manufacture, new containers and chassis are inspected to
insure that they conform to applicable standards of the ISO and other
international self-regulatory bodies.
MAINTENANCE, REPAIRS AND REFURBISHMENT
Maintenance for new containers and chassis has generally been minor in
nature. However, as containers and chassis age, the need for maintenance
increases, and they may eventually require extensive maintenance.
The Company's customers are generally responsible for maintenance and
repairs of equipment other than normal wear and tear. When normal wear and tear
to equipment is extensive, the equipment may have to be refurbished or
remanufactured. Refurbishing and remanufacturing involve substantial cost,
although chassis can be remanufactured for substantially less than the cost of
purchasing a new chassis. Because facilities for this purpose are not available
at all depots or branches, equipment requiring refurbishment or remanufacture
may have to be repositioned, at additional expense, to the nearest suitable
facility. Alternatively, the Company may elect to sell equipment requiring
refurbishment.
DEPOTS
The Company operates out of approximately 50 depots throughout the world.
Depots are facilities owned by third parties at which containers and other items
of transportation equipment are stored, maintained and repaired. The Company
retains independent agents at these depots to handle and inspect equipment
delivered to or returned by lessees, store equipment that is not leased and
handle maintenance and repairs of containers and chassis. Some agents are paid a
fixed monthly retainer to defray recurring operating expenses and some are
guaranteed a minimum level of commission income. In addition, the Company
generally reimburses its agents for incidental expenses.
REPOSITIONING AND RELATED EXPENSES
If lessees in large numbers return equipment to a location which has a
larger supply than demand, the Company may incur expenses in repositioning the
equipment to a better location. Such repositioning expenses generally range
between $50 and $500 per month per item of equipment, depending on geographic
location, distance and other factors, and may not be fully covered by the
drop-off charge collected from the lessee. In connection with necessary
repositioning, the Company may also incur storage costs, which generally range
between $.20 and $2.50 per TEU per day. In addition, the Company bears certain
operating expenses associated with its containers and chassis, such as the costs
of maintenance and repairs not performed by lessees, agent fees, depot expenses
for handling, inspection and storage and any insurance coverage in excess of
that maintained by lessee. The Company's insurance coverage provides protection
against various risks but generally excludes war-related and other political
risks.
DISPOSITION OF CONTAINERS AND CHASSIS AND RESIDUAL VALUES
From time to time, the Company sells equipment that was previously leased.
The decision whether to sell depends on the equipment's condition, remaining
useful life and suitability for continued leasing or for other uses, as well as
prevailing local market resale prices and an assessment of the economic benefits
of repairing and continuing to lease the equipment compared to the benefits of
selling. Containers are usually sold to shipping or transportation companies for
continued use in the intermodal transportation industry or to secondary market
buyers, such as wholesalers, depot operators, mini storage operators,
construction companies and others, for use as storage sheds and similar
structures. Because old chassis are more easily remanufactured than old
containers, chassis are less likely to be sold than containers.
At the time of sale, the residual value of a container or chassis will
depend, among other factors, upon mechanical or economic obsolescence, as well
as its physical condition. While there have been no major technological advances
in the short history of containerization that have made active equipment
obsolete, several changes in standards have decreased the demand for older
equipment, such as the increase in the standard height of containers from 8 feet
to 8 1/2 feet in the early 1970's.
MARKETING AND CUSTOMERS
The Company leases its containers and chassis to over 200 shipping and
transportation companies throughout the world, including nearly all of the
world's 20 largest international container shipping lines. With a network of
offices and agents covering all major ports in the United States, Europe and the
Far East, the Company has been able to supply containers in nearly all locations
requested by its customers. In 1997, the Company's top 25 customers represented
approximately 64% of its consolidated revenues, with no single customer
accounting for more than 7%.
The customers for the Company's chassis are a large number of domestic
companies, many of which are domestic subsidiaries or branches of international
shipping lines to which the Company also leases containers.
The Company maintains close relationships with a larger customer base on
which detailed credit records are kept. The Company's credit policy sets maximum
exposure limits for various customers. Credit criteria may include, but are not
limited to, customer trade route, country, social and political climate,
assessments of net worth, asset ownership, bank and trade credit references,
credit bureau reports, and operational history. During the years 1990 through
1997, the Company's losses from defaults by customers have averaged less than 1%
of consolidated revenues.
The Company seeks to reduce credit risk by maintaining insurance coverage
against defaults and equipment losses. Although there can be no assurance that
such coverage will be available in the future, the Company currently maintains
contingent physical damage, recovery/repatriation and loss of revenue insurance
which provides coverage in the event of a customer's default. The policy covers
the cost of recovering the Company's equipment from the customer, including
repositioning costs, the cost of repairing the equipment and the value of
equipment which cannot be located or is uneconomical to recover. It also covers
a portion of the lease revenues the Company may lose as a result of the
customer's default (i.e., six months of lease payments following default). The
Company has the option to renew the current policy through December 2001,
subject to premium adjustment.
COMPETITION
There are many companies leasing intermodal transportation equipment with
which the Company competes. Some of the Company's competitors have greater
financial resources than the Company or are subsidiaries or divisions of much
larger companies. Management believes that the Company is currently one of the
world's largest dry freight standard container leasing companies and the second
largest container chassis leasing company in the United States.
In addition, the containerized shipping industry which the Company
services, competes with providers of alternative methods of transporting goods,
such as by air, truck and rail. The Company believes that in most instances such
alternative methods are not as cost-effective as shipping of containerized
cargo.
Because rental rates for containers and chassis are not subject to
regulation by any government authority but are determined principally by the
demand for and supply of equipment in each geographical area, price is one of
the principal methods by which the Company competes. In times of low demand and
excess supply, leasing companies tend to grant price concessions, such as free
days or pick-up credits, in order to keep their equipment on lease and to avoid
storage charges. The Company attempts to design lease packages tailored to the
requirements of individual customers and considers its long-term relationships
with customers to be important to its ability to compete effectively. The
Company also competes on the basis of its ability to deliver equipment in a
timely manner in accordance with customer requirements.
OTHER BUSINESS OPERATIONS
In addition to its container and chassis leasing operations through
Interpool Limited and Trac Lease, the Company also receives revenues from other
activities. The Company leases approximately 500 freight rail cars to railroad
companies through its Chicago based Railpool division. Microtech Leasing
Corporation, a 75.5% owned subsidiary of the Company, leases microcomputers and
related equipment. The Company also leases intermodal trailers which are
designed to be carried on rail flatcars and pulled by tractor over the highway.
The Company received, in the aggregate, approximately 10% of its consolidated
revenues for the year ended December 31, 1997 from these other business
operations. These operations have been consistently profitable since the
Company's formation.
GRAND ALLIANCE CHASSIS POOL CONTRACT
During 1997, Trac Lease was awarded a contract by the Grand Alliance
Chassis Pool, an association of four of the world's largest steamship lines, to
administer through the Company's proprietary "Poolstat" computer software
program the movement and utilization by the members of Grand Alliance of a fleet
of up to 42,000 marine shipping container chassis. The contract also provides
for Trac Lease to administer numerous pool locations throughout the United
States where the chassis are based. This arrangement will make Trac Lease one of
the largest administrators of chassis in the world.
PENDING TRANSACTION
On June 19, 1998, the Company joined with Apollo in entering into a
definitive merger agreement providing for the recapitalization of XTRA, a
leading lessor of freight transportation equipment. The recapitalization will be
effected by a merger of XTRA with a newly formed limited liability company that
is wholly owned by the Company, through its affiliate Atlas Capital Partners LLC
("Atlas"), and Apollo. Under the terms of the merger agreement, at the effective
time of the merger, each outstanding share of XTRA common stock may, at the
election of its holder, be exchanged for either $65.00 in cash or a retained
interest in XTRA equal to one share for every share elected, subject to
proration, so that no more than 500,000 shares of common stock of XTRA are
retained by existing shareholders of XTRA.
In connection with the merger and recapitalization, the Company (through
Atlas) will acquire a 22.5% interest in XTRA for $73.1 million. Apollo will
acquire a 67.5% interest in XTRA for $219.4 million. The existing shareholders
of XTRA will retain a 10% interest in XTRA. Chase Manhattan Corporation and
Credit Suisse First Boston have signed commitment letters to provide the debt
financing necessary for the recapitalization. The debt to be incurred by XTRA
will not be guaranteed by the Company, Atlas or Apollo.
It is expected that following the merger and recapitalization, the Company
(through Atlas) and Apollo will own approximately 90% of XTRA and XTRA's
existing shareholders will own the remaining 10%. The merger, which is expected
to be consummated later this year, is subject to customary conditions, including
the approval of XTRA stockholders, the availability of contemplated financing
and the expiration of Hart-Scott-Rodino waiting periods.
XTRA is a leading lessor, primarily on an operating basis, of freight
transportation equipment, including over-the- road trailers, marine containers,
intermodal trailers, chassis and domestic containers. XTRA leases over-the-road
and intermodal equipment throughout North America, predominantly within the
United States, to contract and common carriers, railroads and private fleet
owners. In addition, XTRA leases marine containers worldwide to steamship lines
and is a major lessor of intermodal containers and chassis.
MANAGEMENT
The following table sets forth certain information with respect to the
executive officers and directors of the Company:
NAME AGE POSITIONS AND OFFICERS
Martin Tuchman 57 Chairman of the Board of Directors
and Chief Executive Officer
Raoul J. Witteveen 43 President, Chief Operating
Officer, Chief Financial Officer and Director
Warren L. Serenbetz 74 Director
Arthur L. Burns 53 Secretary and Director
Peter D. Halstead 56 Director
Joseph J. Whalen 66 Director
Mitchell I. Gordon 53 Director
Ernst Baenziger 61 Senior Vice President and Director of
Interpool Limited
William Geoghan 47 Senior Vice President of Finance and
Controller
Sheldon Landy 67 Vice President, President Railpool Division
Martin Tuchman, Chairman of the Board of Directors and Chief Executive
Officer of the Company since February 1988, is also Chairman of the Board of
Directors, Chief Executive Officer and a director of Interpool Limited, which he
cofounded in 1968. He also has served as a director of Trac Lease since June
1987, President of Trac Lease for the period including June 1987 through January
1994 and currently serves as its Chairman and Chief Executive Officer. He has
also been Chairman of the Board of Directors of Princeton International
Properties, Inc., a family-owned real estate company, which owns and has
interests in properties located in Princeton, New Jersey. Mr. Tuchman was
previously a member of the Society of Automotive Engineers as well as the
American National Standards Institute. Currently, Mr. Tuchman is a member of the
United Nations Business Council, a Council comprised of leading international
executives organized to promote understanding and cooperation between business
and government and a member of the Board of Trustees of the New Jersey Institute
of Technology. In 1995, Mr. Tuchman was honored as General Services Entrepreneur
Of The Year in an awards program founded by Ernst & Young LLP and in 1996 was
named Alumni of the Year by the New Jersey Institute of Technology. During 1997,
Mr. Tuchman was appointed to serve on the Board of Directors of Almedica
International, Inc., a clinical trials materials company which provides services
to the pharmaceutical industry, and on the Board of Governors of The National
Parkinson's Foundation. Mr. Tuchman holds a bachelor's degree in mechanical
engineering from the New Jersey Institute of Technology (Newark College of
Engineering) and a master's degree in business administration from Seton Hall
University.
Raoul J. Witteveen has been President, Chief Operating Officer, Chief
Financial Officer and a director of the Company since March 1993 and has been
President, Chief Operating Officer, Chief Financial Officer and a director of
Interpool Limited since April 1988. He is a co-founder of Trac Lease and has
been Chief Financial Officer, Vice President and a director of Trac Lease since
June 1987. From 1982 to 1986, Mr. Witteveen served in a variety of management
capacities at Thyssen-Bornemisza N.V., the former parent of Interpool Limited.
In 1997, Mr. Witteveen was appointed to serve on the Board of Directors of
Almedica International, Inc., a clinical trials materials company which provides
services to the pharmaceutical industry. Mr. Witteveen holds a bachelor's degree
in economics and business administration and a master's degree in economics from
the Erasmus University in Rotterdam, The Netherlands.
Warren L. Serenbetz has been a director of the Company since February 1988
and served as Executive Consultant through January 1995. He has also been a
director of Trac Lease, a subsidiary of the Company, since its founding in
November 1986. After co-founding Interpool Limited, a subsidiary of the Company,
in 1968, Mr. Serenbetz served as Interpool Limited's president and chief
executive officer and as a director until 1975, after which he was director,
chairman of the Executive Committee and chief executive officer until his
retirement in 1986. Mr. Serenbetz rejoined the Board of Directors of Interpool
Limited in 1988. Mr. Serenbetz is currently president of Radcliff Group, Inc. He
has been active in industry affairs, serving as an officer, director and member
of various world trade and shipping associations. Mr. Serenbetz holds a
bachelor's degree in engineering from Columbia University and a master's degree
in industrial engineering from Columbia University.
Arthur L. Burns, General Counsel, Secretary and a director of the Company
since January 1990, was Senior Vice President of Law and Administration and
Secretary of Interpool Limited from 1986 until June 1996. Since June 1996, Mr.
Burns has acted as the Company's independent General Counsel. Prior to joining
Interpool Limited, Mr. Burns served as assistant general counsel to GATX Leasing
Corp. between 1975 and 1980, and as an associate attorney at the New York law
firm of Cahill, Gordon & Reindel from 1969 to 1975. Mr. Burns holds a bachelor's
degree in economics from Holy Cross College and a law degree from Fordham
University School of Law.
Peter D. Halstead, a director of the Company since June 1994, has been with
Summit Bank since 1971 and is now an Executive Vice President. Mr. Halstead
serves as a trustee for numerous associations including McCarter Theater and
Cancer Care of New Jersey. Mr. Halstead holds a bachelor's degree from Colgate
University and a master's degree in business administration from Fairleigh
Dickinson University.
Joseph J. Whalen, a director of the Company since April 1996, originally
joined the accounting firm of Arthur Andersen LLP in 1957 and served as an audit
partner in Andersen's New York and New Jersey office for more than ten years
prior to his retirement in 1994. Mr. Whalen is a member of the American
Institute of Certified Public Accounts and the New Jersey State Society of
Certified Public Accountants where he previously served on the Cooperation with
Credit Grantors Committee and the Technical Standards Section of the
Professional Conduct Committee. Mr. Whalen is a certified public accountant in
New Jersey and New York and holds a bachelor's degree from St. Peter's College.
Mitchell I. Gordon, a director of the Company since May 1998, has been
President of Atlas Capital Partners, a private equity investment fund, since
February 1998. Prior thereto, he was a Managing Director of Salomon Smith Barney
and co-head of its Transportation Investment Banking Group from July 1993 to
January 1998. From 1988 to 1993, Mr. Gordon was Senior Vice President of Furman
Selz Inc., where he ran the firm's Transportation and Automotive Investment
Banking groups. From 1984 to 1988, he was Vice President of Needham & Company
Inc. From 1981 to 1984, he held various executive positions at American
Broadcasting Companies, Inc. Mr. Gordon holds a BSBA degree from Washington
University and a master's degree in business administration from Harvard
Business School.
Ernst Baenziger has been an employee since 1977, serving as Senior Vice
President and a director of Interpool Limited since 1991. Mr. Baenziger is
responsible for Europe, Far East, Australia and New Zealand operations. He is
also Managing Director of Interpool Limited's Basel, Switzerland branch,
handling sales and operations, and serves as the managing director of CTC
Equipment A.G. Mr. Baenziger holds a bachelor's degree in economics and business
administration from Handelshochschule, St. Gallen.
William Geoghan, Senior Vice President of Finance and Controller of the
Company since May 1998, is responsible for investor and lender relations. Mr.
Geoghan was Controller of the Company since April 1992 and Vice President and
Controller of Interpool Limited since January 1989. He joined Interpool Limited
in 1981 and served as assistant controller for Interpool Limited 1985 to 1989.
Mr. Geoghan is a certified public accountant and holds a bachelor's degree in
commerce from Rider University.
Sheldon Landy, Vice President of the Company since March 1993, has been
President of the Company's Railpool division since 1979. Mr. Landy is a member
of the Transportation Research Board, a part of the National Research Council
and serves as a committee member studying the intermodal transportation
industry. Mr. Landy holds a bachelor's degree in liberal arts from the
University of Chicago and master's degree in business administration from
Northwestern University.
EMPLOYEES
As of March 31, 1998, the Company had approximately 124 employees,
approximately 104 of whom are based in the United States. None of the Company's
employees is covered by a collective bargaining agreement. The Company believes
its relations with its employees are good.
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Private Notes were sold by the Company on February 24, 1998 (the "Issue
Date") to the Initial Purchaser pursuant to the Purchase Agreement. The Initial
Purchaser subsequently sold the Private Notes to (i) "qualified institutional
buyers" ("QIBs"), as defined in Rule 144A under the Securities Act ("Rule
144A"), in reliance on Rule 144A and (ii) to institutional "accredited
investors" within the meaning of subparagraph (a)(1), (2) (3) or (7) of Rule 501
under the Securities Act. As a condition to the sale of the Private Notes, the
Company and the Initial Purchaser entered into the Registration Rights Agreement
on February 24, 1998. Pursuant to the Registration Rights Agreement the Company
agreed that, unless the Exchange Offer is not permitted by applicable law or
Commission policy, it would (i) file with the Commission a Registration
Statement under the Securities Act with respect to the Exchange Notes within 120
days after the Issue Date, (ii) use its best efforts to cause such Registration
Statement to become effective under the Securities Act within 150 days after the
Issue Date and (iii) use its best efforts to consummate the Exchange Offer
within 30 days after the Registration Statement has become effective. A copy of
the Registration Rights Agreement has been filed as an exhibit to the
Registration Statement. The Registration Statement is intended to satisfy
certain of the Company's obligations under the Registration Rights Agreement and
the Purchase Agreement.
RESALE OF THE EXCHANGE NOTES
With respect to the Exchange Notes, based upon an interpretation by the
staff of the Commission set forth in certain no-action letters issued to third
parties, the Company believes that a holder (other than (i) a broker-dealer who
purchased such Exchange Notes directly from the Company to resell pursuant to
Rule 144A or any other available exemption under the Securities Act, (ii) any
such holder that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act or (iii) a broker-dealer who acquired Private Notes as
a result of market making or other trading activities) who exchanges Private
Notes for Exchange Notes in the ordinary course of business and who is not
participating, does not intend to participate, and has no arrangement with any
person to participate, in a distribution of the Exchange Notes, will be allowed
to resell Exchange Notes to the public without further registration under the
Securities Act and without delivering to the purchasers of the Exchange Notes a
prospectus that satisfies the requirements of Section 10 of the Securities Act.
However, if any holder acquires Exchange Notes in the Exchange Offer for the
purpose of distributing or participating in the distribution of the Exchange
Notes or is a broker-dealer, such holder cannot rely on the position of the
staff of the Commission enumerated in certain no-action letters issued to third
parties and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction,
unless an exemption from registration is otherwise available. Each broker-dealer
that receives Exchange Notes for its own account in exchange for Private Notes,
where such Private Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Notes received in exchange for Private
Notes where such Private Notes were acquired by such broker-dealer as a result
of market-making or other trading activities. Pursuant to the Registration
Rights Agreement, the Company has agreed to make this Prospectus, as it may be
amended or supplemented from time to time, available to broker-dealers for use
in connection with any resale for a period of one year after the Registration
Statement is declared effective or until such earlier date on which the Exchange
Notes are freely tradable. See "Plan of Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Private
Notes validly tendered and not withdrawn prior to the Expiration Date. The
Company will issue $1,000 principal amount of Exchange Notes in exchange for
each $1,000 principal amount of outstanding Private Notes surrendered pursuant
to the Exchange Offer. Private Notes may be tendered in whole or in part in a
principal amount of not less than $1,000 or any integral multiple of $1,000
principal amount in excess thereof.
The form and terms of the Exchange Notes are the same as the form and terms
of the Private Notes except that (i) the exchange will be registered under the
Securities Act and, therefore, the Exchange Notes will not bear legends
restricting the transfer thereof, (ii) the Exchange Notes will not contain the
$100,000 minimum principal amount transfer restriction, (iii) the Exchange Notes
will not provide for payment of additional distributions thereon, and (iv)
holders of the Exchange Notes will not be entitled to any of the rights of
holders of Private Notes under the Registration Rights Agreement, which rights
will terminate upon the consummation of the Exchange Offer except under certain
limited circumstances. See "--Termination of Certain Rights." The Exchange Notes
will evidence the same obligations as the Private Notes (which they replace) and
will be issued under, and be entitled to the benefits of, the Indenture, which
also authorized the issuance of the Private Notes, such that both series of
Securities will be treated as a single class of securities under the Indenture.
As of the date of this Prospectus, $100,000,000 in aggregate principal
amount of the Private Notes are outstanding, all of which are registered in the
name of Cede & Co., as nominee for DTC. Only a registered holder of the Private
Notes (or such holder's legal representative or attorney-in-fact) as reflected
on the records of the Trustee (as defined herein) under the Indenture may
participate in the Exchange Offer. There will be no fixed record date for
determining registered holders of the Private Notes entitled to participate in
the Exchange Offer.
Holders of the Private Notes do not have any appraisal or dissenters'
rights under the Indenture in connection with the Exchange Offer. The Company
intends to conduct the Exchange Offer in accordance with the provisions of the
Registration Rights Agreement and the applicable requirements of the Securities
Act, the Exchange Act and the rules and regulations of the Commission
thereunder.
The Company shall be deemed to have accepted validly tendered Private Notes
when, as and if the Company had given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of Private Notes for the purposes of receiving the Exchange Notes from the
Company.
Holders who tender Private Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Private
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time on
Thursday, September 10, 1998, unless the Company, in its sole discretion,
extends the Exchange Offer, in which case the term "Expiration Date" shall mean
the latest date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will (i) notify the
Exchange Agent of any extension by oral or written notice, (ii) mail to the
registered holders an announcement thereof and (iii) issue a press release or
other public announcement, which shall include disclosure of the approximate
number of Private Notes deposited to date, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date. Without limiting the manner in which the Company may choose to make a
public announcement of any delay, extension, amendment or termination of the
Exchange Offer, the Company shall have no obligation to publish, advertise, or
otherwise communicate any such public announcement, other than by making a
timely release to an appropriate news agency.
The Company reserves the right, in its reasonable discretion, (i) to delay
accepting any Private Notes, (ii) to extend the Exchange Offer or (iii) if any
conditions set forth below under "--Conditions" shall not have been satisfied,
to terminate the Exchange Offer by giving oral or written notice of such delay,
extension or termination to the Exchange Agent. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as practicable
by oral or written notice thereof to the registered holders. If the Exchange
Offer is amended in a manner determined by the Company to constitute a material
change, the Company will promptly disclose such amendment by means of a
prospectus supplement that will be distributed to the registered holders, and
the Company will extend the Exchange Offer for a period of five to ten business
days, depending upon the significance of the amendment and the manner of
disclosure to the registered holders, if the Exchange Offer would otherwise
expire during such five to ten business day period.
DISTRIBUTIONS ON EXCHANGE NOTES
Holders of Private Notes whose Private Notes are accepted for exchange will
not receive Distributions on such Private Notes and will be deemed to have
waived the right to receive any Distributions on such Private Notes accumulated
from and after the Closing Date. Accordingly, holders of Exchange Notes as of
the record date for payment of distributions on September 1, 1998 will be
entitled to receive Distributions accumulated from and after the Closing Date.
PROCEDURES FOR TENDERING
Only a registered holder of Private Notes may tender such Private Notes in
the Exchange Offer. To tender in the Exchange Offer, a holder of Private Notes
must complete, sign and date the Letter of Transmittal, or a facsimile thereof,
have the signatures thereon guaranteed if required by the Letter of Transmittal,
and mail or otherwise deliver such Letter of Transmittal or such facsimile to
the Exchange Agent at the address set forth below under "--Exchange Agent" for
receipt prior to the Expiration Date. In addition, either (i) certificates for
such Private Notes must be received by the Exchange Agent along with the Letter
of Transmittal, (ii) a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Private Notes, if such procedure is
available, into the Exchange Agent's account at the Depositary pursuant to the
procedure for book-entry transfer described below, must be received by the
Exchange Agent prior to the Expiration Date or (iii) the holder must comply with
the guaranteed delivery procedures described below.
THE TENDER BY A HOLDER THAT IS NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE
WILL CONSTITUTE AN AGREEMENT BETWEEN SUCH HOLDER AND THE COMPANY IN ACCORDANCE
WITH THE TERMS AND SUBJECT TO THE CONDITIONS SET FORTH HEREIN AND IN THE LETTER
OF TRANSMITTAL.
THE METHOD OF DELIVERY OF PRIVATE NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR PRIVATE NOTES SHOULD BE
SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
Any beneficial owner(s) of the Private Notes whose Private Notes are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee and who wishes to tender should contact the registered holder
promptly and instruct such registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to tender on such owner's own
behalf, such owner must, prior to completing and executing the Letter of
Transmittal and delivering such owner's Private Notes, either make appropriate
arrangements to register ownership of the Private Notes in such owner's name or
obtain a properly completed bond power from the registered holder. The transfer
of registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "--Withdrawal of Tenders"), as the case may be, must be guaranteed by
an Eligible Institution (as defined) unless the Private Notes tendered pursuant
thereto are tendered (i) by a registered holder who has not completed the box
titled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for
the account of an Eligible Institution. In the event that signatures on a Letter
of Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantee must be made by a member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Exchange Act which is a member of one of
the recognized signature guarantee programs identified in the Letter of
Transmittal (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Private Notes listed therein, such Private Notes must
be endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Private
Notes.
If the Letter of Transmittal or any Private Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Private Notes will be determined
by the Company in its reasonable discretion, which determination will be final
and binding. The Company reserve the absolute right to reject any and all
Private Notes not properly tendered or any Private Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Private Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Private Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Private Notes, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Private Notes will not be deemed
to have been made until such defects or irregularities have been cured or
waived.
While the Company has no present plan to acquire any Private Notes that are
not tendered in the Exchange Offer or to file a registration statement to permit
resales of any Private Notes that are not tendered pursuant to the Exchange
Offer, the Company reserves the right in its sole discretion to purchase or make
offers for any Private Notes that remain outstanding subsequent to the
Expiration Date or, as set forth below under "--Conditions," to terminate the
Exchange Offer and, to the extent permitted by applicable law, purchase Private
Notes in the open market, in privately negotiated transactions or otherwise. The
terms of any such purchases or offers could differ from the terms of the
Exchange Offer.
By tendering, each holder of Private Notes will represent to the Company
that, among other things, (i) Exchange Notes to be acquired by such holder of
Private Notes in connection with the Exchange Offer are being acquired by such
holder in the ordinary course of business of such holder, (ii) such holder has
no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, (iii) such holder acknowledges and agrees
that any person who is a broker-dealer registered under the Exchange Act or is
participating in the Exchange Offer for the purposes of distributing the
Exchange Notes must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction of the Exchange Notes, acquired by such person and cannot rely on
the position of the staff of the Commission set forth in certain no-action
letters, (iv) such holder understands that a secondary resale transaction
described in clause (iii) above and any resales of Exchange Notes obtained by
such holder in exchange for Private Notes acquired by such holder directly from
the Company should be covered by an effective registration statement containing
the selling securityholder information required by Item 507 of the Commission
and (v) such holder is not an "affiliate," as defined in Rule 405 under the
Securities Act, of the Company. If the holder is a broker-dealer that will
receive Exchange Notes for such holder's own account in exchange for Private
Notes that were acquired as a result of market-making activities or other
trading activities, such holder will be required to acknowledge in the Letter of
Transmittal that such holder will deliver a copy of this Prospectus (as it may
be supplemented or amended) in connection with any resale of such Exchange
Notes; however, by so acknowledging and by delivering a prospectus, such holder
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
RETURN OF PRIVATE NOTES; ATOP
If any tendered Private Notes are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer or if Private Notes are withdrawn
or are submitted for a greater principal amount than the holders desire to
exchange, such unaccepted, withdrawn or non-exchanged Private Notes will be
returned without expense to the tendering holder thereof (or, in the case of
Private Notes tendered by book-entry transfer into the Exchange Agent's account
at the Depositary pursuant to the book-entry transfer procedures described
below, such Private Notes will be credited to an account maintained with the
Depositary) as promptly as practicable.
The Exchange Agent and DTC have confirmed that the Exchange Offer is
eligible for the Book-Entry Facility Automated Tender Offer Program ("ATOP").
Accordingly, DTC participants listed on an official DTC proxy may electronically
transmit their acceptance of the Exchange Offer by causing DTC to transfer Notes
to the Exchange Agent in accordance with DTC's ATOP procedures for transfer. DTC
will then send an Agent's Message to the Exchange Agent.
The term "Agent's Message" means a message transmitted by DTC, received by
the Exchange Agent and forming part of the confirmation of a book-entry
transfer, which states that DTC has received an express acknowledgment from the
participant in DTC tendering Notes which are the subject of such book-entry
confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that the Issuer may enforce such
agreement against the participant. In the case of an Agent's Message relating to
guaranteed delivery, the term means a message transmitted by DTC and received by
the Exchange Agent which states that DTC has received an express acknowledgment
from the participant in DTC tendering Notes that such participant has received
and agrees to be bound by the Notice of Guaranteed Delivery.
Each DTC participant transmitting an acceptance of the Exchange Offer
through the ATOP procedures will be deemed to have agreed to be bound by the
terms of the Letter of Transmittal. Nevertheless, in order for such acceptance
to constitute a valid tender of the DTC participant's Notes, such participant
must complete and sign a Letter of Transmittal and deliver it to the Exchange
Agent before the Expiration Date.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Private Notes at DTC for purposes of the Exchange Offer within two
business days after the date of this Prospectus, and any financial institution
that is a participant in the Depositary's systems may make book-entry delivery
of Private Notes by causing DTC to transfer such Private Notes into the Exchange
Agent's account at DTC in accordance with DTC's procedures for transfer.
However, although delivery of Private Notes may be effected through book-entry
transfer at DTC, the Letter of Transmittal or facsimile thereof, with any
required signature guarantees and any other required documents, must, in any
case, be transmitted to and received by the Exchange Agent at the address set
forth below under "--Exchange Agent" on or prior to the Expiration Date or
pursuant to the guaranteed delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Private Notes and (i) whose Private Notes
are not immediately available or (ii) who cannot deliver their Private Notes,
the Letter of Transmittal or any other required documents to the Exchange Agent
prior to the Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Company (by
facsimile transmission, mail or hand delivery) setting forth the name and
address of the holder, the certificate number(s) of such Private Notes and
the principal amount of Private Notes tendered, stating that the tender is
being made thereby and guaranteeing that, within five New York Stock
Exchange trading days after the Expiration Date, the Letter of Transmittal
(or a facsimile thereof), together with the certificate(s) representing the
Private Notes in proper form for transfer or a Book-Entry Confirmation, as
the case may be, and any other documents required by the Letter of
Transmittal, will be deposited by the Eligible Institution with the
Exchange Agent; and
(c) Such properly executed Letter of Transmittal (or facsimile
thereof), as well as the certificate(s) representing all tendered Private
Notes in proper form for transfer and all other documents required by the
Letter of Transmittal are received by the Exchange Agent within five New
York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Private Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Private Notes may be
withdrawn at any time prior to the Expiration Date.
To withdraw a tender of Private Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date. Any such
notice of withdrawal must (i) specify the name of the person having deposited
the Private Notes to be withdrawn (the "Depositor"), (ii) identify the Private
Notes to be withdrawn (including the certificate number or numbers and principal
amount of such Private Notes) and (iii) be signed by the holder in the same
manner as the original signature on the Letter of Transmittal by which such
Private Notes were tendered (including any required signature guarantees). All
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by the Company, in its sole discretion, whose
determination shall be final and binding on all parties. Any Private Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no Exchange Notes will be issued with respect thereto unless
the Private Notes so withdrawn are validly retendered. Properly withdrawn
Private Notes may be retendered by following one of the procedures described
above under "The Exchange Offer--Procedures for Tendering" at any time prior to
the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange the Exchange Notes for, any
Private Notes, and may terminate the Exchange Offer as provided herein before
the acceptance of such Private Notes, if the Exchange Offer violates applicable
law, rules or regulations or an applicable interpretation of the staff of the
Commission.
If the Company determines in its reasonable discretion that any of these
conditions are not satisfied, the Company may (i) refuse to accept any Private
Notes and return all tendered Private Notes to the tendering holders, (ii)
extend the Exchange Offer and retain all Private Notes tendered prior to the
expiration of the Exchange Offer, subject, however, to the rights of holders to
withdraw such Private Notes (see "--Withdrawal of Tenders") or (iii) waive such
unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Private Notes that have not been withdrawn. If such waiver
constitutes a material change to the Exchange Offer, the Company will promptly
disclose such waiver by means of a prospectus supplement that will be
distributed to the registered holders of the Private Notes, and the Company will
extend the Exchange Offer for a period of five to ten business days, depending
upon the significance of the waiver and the manner of disclosure to the
registered holders, if the Exchange Offer would otherwise expire during such
five to ten business day period.
TERMINATION OF CERTAIN RIGHTS
All rights under the Registration Rights Agreement (including registration
rights) of holders of the Private Notes eligible to participate in the Exchange
Offer will terminate upon consummation of the Exchange Offer except with respect
to the Company's continuing obligations (i) to indemnify such holders (including
any broker-dealers) and certain parties related to such holders against certain
liabilities (including liabilities under the Securities Act), (ii) to provide,
upon the request of any holder of a transfer-restricted Private Note, the
information required by Rule 144A(d)(4) under the Securities Act in order to
permit resales of such Private Notes pursuant to Rule 144A, (iii) to use its
best efforts to keep the Registration Statement effective to the extent
necessary to ensure that it is available for resales of Exchange Notes by
broker-dealers for a period of up to one year from the date the Registration
Statement is declared effective or until such earlier date on which the Exchange
Notes are freely tradeable and to provide copies of the latest version of the
Prospectus to such broker-dealers upon their request during such period and (iv)
to file a shelf registration statement as required by the Registration Rights
Agreement if any holder of transfer-restricted Notes notifies the Company within
20 business days of the consummation of the Exchange Offer that (A) such holder
is prohibited by applicable law or Commission policy from participating in the
Exchange Offer, or (B) such holder may not resell the Exchange Notes acquired by
it in the Exchange Offer to the public without delivering a prospectus and that
this Prospectus is not appropriate or available for such resales by such holder,
or (C) that such holder is a broker-dealer and holds Private Notes acquired
directly from the Company as one of its affiliate (see "--Liquidated Damages").
LIQUIDATED DAMAGES
The Registration Rights Agreement provides that (i) the Company will file
the Registration Statement with the Commission on or prior to 120 days after the
issue date of the Private Notes (February 24, 1998), (ii) the Company will use
its best efforts to have the Registration Statement declared effective by the
Commission on or prior to 150 days after the Issue Date, (iii) unless the
Exchange Offer would not be permitted by applicable law or Commission policy,
the Company will commence the Exchange Offer and use its best efforts to issue,
on or prior to 30 days after the date on which the Registration Statement is
declared effective by the Commission, Exchange Notes in exchange for all Private
Notes tendered prior thereto in the Exchange Offer and (iv) if obligated to file
a shelf registration statement pursuant to the terms of the Registration Rights
Agreement (the "Shelf Registration Statement" and, collectively with the
Registration Statement, the "Registration Statements"), the Company will use its
best efforts to file such Shelf Registration Statement with the Commission.
If the Company fails to comply with the Registration Rights Agreement or if
the Exchange Offer Registration Statement or the Shelf Registration Statement
fails to become effective, then an additional amount ("Liquidated Damages")
shall become payable in respect of the Private Notes as provided in the
Registration Rights Agreement.
Holders of Private Notes will be required to make certain representations
to the Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information to
be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Private Notes
included in the Shelf Registration Statement and benefit from the provisions
regarding Liquidated Damages set forth above.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$200,000. Such expenses include registration fees, fees and expenses of the
Exchange Agent and the Trustee, accounting and legal fees and printing costs,
among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Private Notes pursuant to the Exchange Offer. If, however, a transfer tax is
imposed for any reason other than the exchange of the Private Notes pursuant to
the Exchange Offer, then the amount of any such transfer taxes (whether imposed
on the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering holder.
CONSEQUENCE OF FAILURE TO EXCHANGE
Participation in the Exchange Offer is voluntary. Holders of the Private
Notes are urged to consult their financial and tax advisors in making their own
decisions on what action to take.
The Private Notes that are not exchanged for the Exchange Notes pursuant to
the Exchange Offer will remain restricted securities. Accordingly, such Private
Notes may be resold only (i) to a person whom the seller reasonably believes is
a QIB in a transaction meeting the requirements of Rule 144A, (ii) in a
transaction meeting the requirements of Rule 144 under the Securities Act, (iii)
outside the United States to a foreign person in a transaction meeting the
requirements of Rule 904 under the Securities Act, (iv) in accordance with
another exemption from the registration requirements of the Securities Act (and
based upon an opinion of counsel if the Company so requests), (v) to the Company
or (vi) pursuant to an effective registration statement and, in each case, in
accordance with any applicable securities laws of any state of the United States
or any other applicable jurisdiction.
ACCOUNTING TREATMENT
For accounting purposes, the Company will recognize no gain or loss as a
result of the Exchange Offer. The expenses of the Exchange Offer will be
amortized over the term of the Exchange Notes.
EXCHANGE AGENT
United States Trust Company of New York has been appointed Exchange Agent
for the Exchange Offer. Delivery of the Letters of Transmittal and any other
required documents, questions, requests for assistance and requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent as follows:
BY REGISTERED OR BY HAND: BY OVERNIGHT COURIER:
CERTIFIED MAIL:
United States Trust United States Trust
United States Trust Company Company
Company of New York of New York
of New York 111 Broadway 770 Broadway, 13th
P.O. Box 844 Lower Level Floor
Attn: Corporate Trust Attn: Corporate Trust New York, New York
Services Services 10003
Cooper Station New York, New York Attn: Corporate Trust
New York, New York 10006 Services
10276-0844
CONFIRM BY TELEPHONE:
1-800-548-6565
FACSIMILE TRANSMISSIONS:
(ELIGIBLE INSTITUTIONS ONLY)
United States Trust Company of New York
(212) 420-6152
Attn: Corporate Trust Services
Delivery to other than the above addresses or facsimile number will not
constitute a valid delivery.
DESCRIPTION OF EXCHANGE NOTES
The following description of the terms of the Exchange Notes sets forth
certain general terms and provisions of the Exchange Notes. The Exchange Notes
were issued under an indenture dated as of February 24, 1998 (the "Indenture"),
between the Company and United States Trust Company of New York, as Trustee (the
"Trustee"). The terms of the Exchange Notes include those stated in the
Indenture.
The following description of the Exchange Notes and the Indenture are
summaries of the provisions thereof, and does not purport to be complete and is
qualified in its entirety by reference to the Indenture. Certain capitalized
terms used below but not defined herein have the meanings ascribed to them in
the applicable Indenture.
GENERAL
The Notes (including the Private Notes and the Exchange Notes) will be
limited to $100,000,000 in aggregate principal amount and will mature on March
1, 2003 (the "Maturity Date"). The Exchange Notes will bear interest from
February 24, 1998 at the rate of 6 5/8% per annum. The Exchange Notes will be
issued in denominations of $1,000 and integral multiples of $1,000. Interest
will be payable semi-annually in arrears on March 1 and September 1 of each
year, commencing September 1, 1998 (each, an "Interest Payment Date"), to the
persons in whose names the Exchange Notes are registered at the close of
business on the preceding February 15 or August 15, respectively, regardless of
whether such day is a Business Day. If any Interest Payment Date or the Maturity
Date falls on a day that is not a Business Day, the required payment shall be
made on the next Business Day as if it were made on the date such payment was
due and no interest shall accrue on the amount so payable for the period from
and after such Interest Payment Date or the Maturity Date, as the case may be.
"Business Day" means any day, other than a Saturday or Sunday, on which banking
institutions in the city of New York, New York are open for business.
The Exchange Notes will be direct, unsecured obligations of the Company and
will rank equally with all other unsecured and unsubordinated indebtedness of
the Company from time to time. The Exchange Notes will be effectively
subordinated to any secured indebtedness of the Company to the extent of the
value of the assets securing such indebtedness. The Indenture will permit the
Company to incur additional secured and unsecured indebtedness. See "--Certain
Covenants" below.
The Exchange Notes will not be subject to any mandatory redemption or
annual sinking fund payments.
Reference is made to the section entitled "--Certain Covenants" herein for
a description of certain covenants applicable to the Exchange Notes. Compliance
with such covenants with respect to the Exchange Notes generally may not be
waived by the Trustee unless the holders of at least a majority in principal
amount of all outstanding Exchange Notes consent to such waiver.
Except as described herein under "--Certain Covenants" and under
"--Consolidation, Merger, Sale or Conveyance," the Indenture does not contain
any other provisions that would limit the ability of the Company to incur
indebtedness or that would afford holders of the Exchange Notes protection in
the event of (i) a highly leveraged or similar transaction involving the
Company, (ii) a change of control, or (iii) a reorganization, restructuring,
merger or similar transaction involving the Company that may adversely affect
the holders of the Exchange Notes. In addition, subject to the limitations set
forth under "--Consolidation, Merger, Sale or Conveyance," the Company may, in
the future, enter into certain transactions such as the sale of all or
substantially all of its assets or the merger or consolidation of the Company
that would increase the amount of the Company's indebtedness or substantially
reduce or eliminate the Company's assets, which may have an adverse effect on
the Company's ability to service its indebtedness, including the Exchange Notes.
The Company and its management have no present intention of engaging in a highly
leveraged or similar transaction involving the Company.
The Company conducts certain of its operations through its subsidiaries.
The rights of the Company and its creditors, including the holders of the
Exchange Notes, to participate in the assets of any subsidiary upon the latter's
liquidation or reorganization will be subject to the prior claims of the
subsidiary's creditors except to the extent that the Company may itself be a
creditor with recognized claims against the subsidiary.
OPTIONAL REDEMPTION BY THE COMPANY
The Company may redeem the Exchange Notes, at any time, in whole or from
time to time in part, at the election of the Company, at a redemption price
equal to the sum of (i) the principal amount of the Exchange Notes being
redeemed plus accrued interest thereon to the redemption date and (ii) the
Make-Whole Amount (as defined below), if any, with respect to such Exchange
Notes (the "Redemption Price").
From and after notice has been given as provided in the Indenture, if funds
for the redemption of any Exchange Notes called for redemption shall have been
made available on such redemption date, such Exchange Notes will cease to bear
interest on the date fixed for such redemption specified in such notice and the
only right of the holders of the Exchange Notes will be to receive payment of
the Redemption Price.
Notice of any optional redemption of any Exchange Notes will be given to
holders at their addresses, as shown in the Note register, not more than 60 nor
less than 30 days prior to the date fixed for redemption. The notice of
redemption will specify, among other items, the Redemption Price and the
principal amount of the Exchange Notes held by such holder to be redeemed.
The Company will notify the Trustee at least 45 days prior to the
redemption date (or such shorter period as satisfactory to the Trustee) of the
aggregate principal amount of Exchange Notes to be redeemed and the redemption
date. If less than all the Exchange Notes are to be redeemed at the option of
the Company, the Trustee shall select, pro rata or by lot or by any other method
that the Trustee considers fair and appropriate under the circumstances,
Exchange Notes of such series to be redeemed in whole or in part. Exchange Notes
may be redeemed in part in the minimum authorized denomination for Exchange
Notes or in any integral multiple thereof.
As used herein,
"Make-Whole Amount" means, in connection with any optional redemption of
any Exchange Note, the excess, if any of (i) the aggregate present value as of
the date of such redemption of each dollar of principal being redeemed and the
amount of interest (exclusive of any interest accrued to the date of redemption)
that would have been payable in respect of such dollar if such redemption had
not been made, determined by discounting, on a semi-annual basis, such principal
and interest at the Reinvestment Rate (as defined below) (determined on the
third Business Day preceding the date such notice of redemption is given) from
the respective dates on which such principal and interest would have been
payable if such redemption had not been made, over (ii) the aggregate principal
amount of the Exchange Notes being redeemed.
"Reinvestment Rate" means 0.25% plus the arithmetic mean of the yields
under the respective headings "This Week" and "Last Week" published in the most
recent Statistical Release (as defined below) under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity, as of the payment date of the
principal being redeemed or paid. If no maturity exactly corresponds to such
maturity, yields for the two published maturities most closely corresponding to
such maturity shall be calculated pursuant to the immediately preceding sentence
and the Reinvestment Rate shall be interpolated or extrapolated from such yields
on a straight-line basis, rounding in each of such relevant periods to the
nearest month. For the purposes of calculating the Reinvestment Rate, the most
recent Statistical Release published prior to the date of determination of the
Make-Whole Amount shall be used.
"Statistical Release" means the statistical release designated "H.15(519)"
or any successor publication which is published weekly by the Federal Reserve
System and which establishes yields on actively traded United States government
securities adjusted to constant maturities, or, if such statistical release is
not published at the time of any determination under the Indenture, then such
other reasonably comparable index which shall be designated by the Company.
CERTAIN COVENANTS
LIMITATION ON LIENS
The Indenture will provide that the Company will not, directly or
indirectly, create, incur or assume any mortgage, pledge, deed of trust,
financing lease (as lessee) or security interest ("Liens") on any of its
properties whether now or hereafter acquired, or any income or profits
therefrom, or assign or convey any right to receive income therefrom (any such
Lien, an "Initial Lien"), unless prior to or simultaneously with the inception
of such Initial Lien, the Company shall have delivered to the Trustee a security
agreement or security agreements and such other documents as the Trustee may
reasonably request, each in form and substance satisfactory to the Trustee,
granting to the Trustee an equal and ratable security interest in such property
subject to such Initial Lien, such security interest to be for the equal and
ratable benefit of the Holders. Any such security interest created in favor of
the Exchange Notes will be automatically and unconditionally released and
discharged upon the release and discharge of the Initial Lien to which it
relates. Notwithstanding the foregoing, the restrictions set forth in this
paragraph shall not apply if at the time of, and immediately after giving PRO
FORMA effect to, the transaction giving rise to such Initial Lien, the
Consolidated Indebtedness-to-Stockholders' Equity Ratio does not exceed 4.0 to
1.0.
The foregoing restrictions shall not apply to:
(i) Liens securing obligations outstanding from time to time under any
revolving credit agreement to which the Company is a party;
(ii) Liens on assets existing at the time of acquisition thereof by
the Company, provided that such Liens were in existence prior to such
acquisition and were not created in contemplation of such acquisition;
(iii) Liens on assets of another Person existing at the time such
Person is merged into or consolidated with the Company, provided that such
Liens were in existence prior to such merger or consolidation and were not
created in contemplation of such merger or consolidation and do not extend
to any assets of the Company other than those previously owned by the
Person merged into or consolidated with the Company;
(iv) Liens securing Purchase Money Indebtedness, but only on assets in
respect to the purchase of which such Purchase Money Indebtedness shall
have been incurred;
(v) Liens on real property;
(vi) Liens in favor of any subsidiary of the Company;
(vii) Liens incurred or deposits made in the ordinary course of
business (1) in connection with workers' compensation, unemployment
insurance, social security or other like laws, (2) to secure the
performance of letters of credit, bids, tenders, trade contracts (other
than for borrowed money), sales contracts, leases, statutory obligations,
surety, appeal and performance bonds and other similar obligations, (3) in
connection with the opening of commercial letters of credit naming the
Company or any of its subsidiaries as an account party or (4) for the
benefit of any governmental agency or body created or approved by law or
governmental regulation as a condition to the transaction of business or
the exercise of any privilege, franchise or license;
(viii) Liens securing Lease Obligations; PROVIDED, HOWEVER, that no
such Lease Obligations shall arise out of the Sale and Leaseback of
Transportation Equipment unless the Sale and Leaseback in question is
entered into prior to, at the time of or within 180 days of the acquisition
of the Transportation Equipment being sold and leased back; and PROVIDED,
FURTHER, that the leasing of Transportation Equipment which has been
remanufactured so that it is the substantial equivalent of new equipment
shall be considered the leasing of new equipment and not of the used
equipment which was remanufactured and subsequently sold and leased back;
(ix) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings, provided that any reserve or other appropriate
provision as shall be required in conformity with generally accepted
accounting principles shall have been made therefor;
(x) Liens imposed by law, including but not limited to carriers',
seamen's, stevedores', wharfinger's, warehousemen's, mechanics',
suppliers', materialmen's, repairman's or other like Liens, in each case
for sums not yet due or being contested in good faith by appropriate
proceedings, or other Liens arising out of judgments or awards against the
Company or any of its subsidiaries with respect to which the Company or
such subsidiary shall then be proceeding with an appeal or other proceeding
for review;
(xi) Leases, lease agreements and other contracts entered into in the
ordinary course of business providing for the leasing, sale or exchange of
Transportation Equipment owned by the Company;
(xii) Liens securing hedging obligations;
(xiii) Liens (x) existing on the date of the Indenture or (y) to
secure any Refinancing (or successive Refinancings), in whole or in part,
of any Indebtedness (or commitment for Indebtedness) existing on the date
of the Indenture, provided, however, that the Indebtedness secured by such
Lien is not, solely by virtue of such Refinancing, increased to an amount
greater than the greater of (A) the outstanding principal amount of such
Indebtedness existing on the date of the Indenture that is secured by such
Lien, or (B) if such Lien secures Indebtedness under a line of credit, the
commitment amount of such line of credit existing on the date of the
Indenture; and
(xiv) Liens incurred in the ordinary course of business of the Company
with respect to obligations that do not exceed $1.0 million at any one time
outstanding and that (x) are not incurred in connection with the borrowing
of money or the obtaining of advances or credit (other than trade credit in
the ordinary course of business) and (y) do not in the aggregate materially
detract from the value of the assets subject to such Lien or materially
impair the use thereof in the operation of business by the Company.
"CONSOLIDATED INDEBTEDNESS-TO-STOCKHOLDERS' EQUITY RATIO" means at any date
of determination (the "Determination Date"), the ratio of (i) the aggregate Debt
of the Company and its Subsidiaries on a consolidated basis as at the
Determination Date to (ii) the sum of (w) the stockholders' equity of the
Company and its Subsidiaries on a consolidated basis calculated in accordance
with generally accepted accounting principles as at the Determination Date, (x)
the amount set forth on the consolidated balance sheet of the Company and its
Subsidiaries under the caption "Company-obligated mandatorily redeemable
preferred securities in subsidiary grantor trusts" or a similar caption, (y) to
the extent not included in clause (w), the aggregate amount of preferred stock
of the Company (as reflected on the consolidated balance sheet of the Company
calculated in accordance with generally accepted accounting principles) which is
not subject to mandatory redemption prior to the maturity date of the Exchange
Notes and (z) the Subordinated Indebtedness of the Company as to which no
principal payments are due until after the maturity date of the Notes (to the
extent such Subordinated Indebtedness was included in the calculation of Debt in
clause (i) above).
"DEBT" means (a) the principal of all indebtedness (i) for borrowed money
or (ii) for the deferred purchase price of property unless the price thereof was
payable in full within 12 months from the date on which the obligation was
created or (iii) evidenced by notes, bonds or other instruments, and (b) all
Lease Obligations; PROVIDED, HOWEVER, that, except for purposes of the
definition of Consolidated Indebtedness-to-Stockholders' Equity Ratio, Debt
shall not include Subordinated Indebtedness as to which no principal payments
are due until after the maturity date of the Exchange Notes.
"LEASE OBLIGATION" of a Person means all rental obligations under leases of
property (other than electronic data processing and computer equipment and
leases of office space by such Person or its subsidiaries) either (a) which are
Capitalized Leases, or (b) if not Capitalized Leases, which are leases of
equipment which had an initial term of more than three years (including any
renewal term at the option of the lessor). The amount of Lease Obligations shall
be equal to the aggregate value of rentals payable (other than rentals
consisting of taxes, indemnities, maintenance items, replacements and other
similar charges which are in addition to the basic financial rent for the use of
the property) by the lessee thereof during the remaining term thereof, including
periods of renewal at the option of the lessor, discounted to present value
using the lessee's "incremental borrowing rate at the inception of the lease" in
accordance with Financial Accounting Standards No. 13 of the Financial Standards
Board from time to time in effect.
"PURCHASE MONEY INDEBTEDNESS" of a Person means all Debt (excluding all
Lease Obligations) of such Person which is Secured Indebtedness incurred to
finance the purchase of assets if such Debt (a) shall have been incurred within
180 days of the acquisition of such assets by the Person whose Purchase Money
Indebtedness is being determined and (b) does not exceed in principal amount the
initial cost of such assets and shall include all extensions, renewals and
refinancings of such Debt not in excess of the principal amount thereof
outstanding immediately prior to such extension, renewal or refinancing. The
initial cost of assets may include, in addition to the purchase price thereof
and the purchase price of all accessories and equipment installed thereon, all
freight, delivery and handling charges, excise, sales and use taxes and all
other amounts which may be capitalized and included in the cost of the assets
under generally accepted accounting principles.
"SALE AND LEASEBACK," with respect to a Person, means any transaction with
a bank, company, lender or investor providing for the leasing by such Person of
any property which has been or is to be sold or transferred by such Person to
such bank, company, lender or investor, or of any Person to whom funds have been
or are to be advanced by such bank, company, lender or investor on the security
of such property.
"SECURED INDEBTEDNESS" means with respect to a Person all Debt which is
secured by any security interest, mortgage, charge, pledge, deed of trust, or
other similar lien on assets by the owner thereof and includes all Lease
Obligations. Transportation Equipment which is subject to a lease or contract
which is included as a Lease Obligation is deemed to secure the Debt evidenced
thereby.
"SUBORDINATED INDEBTEDNESS" means Debt of the Company which is expressly
subordinated and subject in right of payment to the prior payment, in bankruptcy
or in the event of a payment default on the Exchange Notes, in full in money or
money's worth in accordance with their terms, of all principal of, premium, if
any, and interest on the Notes.
"SUBSIDIARY" of a Person means (i) any corporation more than 50% the
outstanding voting power of which is owned or controlled, directly or
indirectly, by such Person or by one or more other subsidiaries of such Person,
or by such Person and one or more other subsidiaries thereof, or (ii) any
limited partnership of which such Person or any subsidiary of such Person is a
general partner, or (iii) any other Person (other than a corporation or limited
partnership) in which such Person and one or more subsidiaries thereof, directly
or indirectly, has more than 60% of the outstanding partnership or similar
interests or has the power, by contract or otherwise, to direct or cause the
direction of the policies, management and affairs thereof.
"TRANSPORTATION EQUIPMENT" means domestic and marine containers, trucks,
tractors, trailers, chassis, cranes, portable ramps, lifting equipment, railroad
locomotives, railroad rolling stock, modular office units, mobile office and
storage trailers and all other transportation equipment, and includes all
accessories and attachments thereto.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
The Indenture provides that the Company may merge or consolidate with, or
sell or convey all or substantially all of its assets to, any other corporation,
provided that (i) either the Company shall be the continuing entity, or the
successor entity (if other than the Company) shall be any entity organized and
existing under the laws of the United States or a state thereof or the District
of Columbia and such entity shall expressly assume by supplemental indenture all
of the obligations of the Company under the Notes and the Indenture, (ii)
immediately after giving effect to such transactions no Default or Event of
Default shall have occurred and be continuing, and (iii) the Company shall have
delivered to the Trustee an Officer's Certificate and opinion of counsel,
stating that the transaction and supplemental indenture comply with the
Indenture.
MODIFICATION OF THE INDENTURE
Under the Indenture, with certain exceptions, the rights and obligations of
the Company with respect to the Exchange Notes and the rights of holders of the
Exchange Notes may only be modified by the Company and the Trustee with the
consent of the holders of at least a majority in principal amount of the
outstanding Exchange Notes. However, without the consent of each holder of
Exchange Notes affected, an amendment, waiver or supplement may not (i) reduce
the principal of, or rate of interest on, any Exchange Notes; (ii) change the
stated maturity date of the principal of, or any installment of interest on, any
Exchange Notes; (iii) waive a default in the payment of the principal amount of,
or the interest on, or any premium payable on redemption of, any Exchange Notes;
(iv) change the currency for payment of the principal of, or premium or interest
on, any Exchange Notes; (v) impair the right to institute suit for the
enforcement of any such payment when due; (vi) reduce the amount of outstanding
Exchange Notes necessary to consent to an amendment, supplement or waiver
provided for in the Indenture; or (vii) modify any provisions of the Indenture
relating to the modification and amendment of the Indenture or waivers of past
defaults, except as otherwise specified.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Company is permitted under the Indenture to discharge certain
obligations to holders of the Exchange Notes issued thereunder that have not
already been delivered to the Trustee for cancellation and that either have
become due and payable or will become due and payable within one year (or
scheduled for redemption within one year) by irrevocably depositing with the
Trustee, in trust, funds in such currency in which the Exchange Notes are
payable in an amount sufficient to pay the entire indebtedness on the Exchange
Notes in respect of principal (and premium, if any) and interest to the date of
such deposit (if the Exchange Notes have become due and payable) or to the
stated maturity and redemption date, as the case may be.
The Indenture provides that the Company may elect either (a) to defease and
be discharged from any and all obligations with respect to the Exchange Notes
(except for the obligation to pay additional amounts, if any, upon the
occurrence of certain events of tax, assessment or governmental charge with
respect to payments on such Exchange Notes and the obligations to register the
transfer or exchange of such Exchange Notes, to replace temporary or mutilated,
destroyed, lost or stolen Exchange Notes, to maintain an office or agency in
respect of such Exchange Notes and to hold moneys for payment in trust)
("defeasance"), or (b) to be released from its obligations with respect to such
Exchange Notes under the restrictions described under "--Certain Covenants" or
its obligations with respect to any other covenant, and any omission to comply
with such obligations will not constitute an Event of Default with respect to
such Exchange Notes ("covenant defeasance"), in either case upon the irrevocable
deposit by the Company with the Trustee, in trust, of an amount, in cash in
United States dollars, or Government Obligations, or both, applicable to such
Exchange Notes which through the scheduled payment of principal and interest in
accordance with their terms will provide money in an amount sufficient to pay
the principal of (and premium, if any) and interest on such Exchange Notes on
the scheduled due dates therefor.
Such a trust will only be permitted to be established if, among other
things, the Company has delivered to the Trustee an opinion of counsel to the
effect that the holders of such Exchange Notes will not recognize income, gain
or loss for U.S. federal income tax purposes as a result of such defeasance or
covenant defeasance and will be subject to U.S. federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such defeasance or covenant defeasance had not occurred, and such opinion of
counsel, in the case of defeasance, will be required to refer to and be based
upon a ruling of the Internal Revenue Service or a change in applicable United
States federal income tax law occurring after the date of the Indenture.
If the Company effects covenant defeasance with respect to the Exchange
Notes and such Exchange Notes are declared due and payable because of an Event
of Default, the amount in cash in United States dollars and Government
Obligations on deposit with the Trustee, will be sufficient to pay amounts due
on such Exchange Notes at the time of their stated maturity but may not be
sufficient to pay amounts due on such Exchange Notes at the time of the
acceleration resulting from such Event of Default. However, the Company would
remain liable to make payment of such amounts due at the time of acceleration.
"GOVERNMENT OBLIGATIONS" means securities which are (a) direct obligations
of the United States of America, for the payment of which its full faith and
credit is pledged, or (b) obligations of a person controlled or supervised by
and acting as an agency or instrumentality of the United States of America, the
payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America which are not callable or redeemable
at the option of the issuer thereof, and will also include a depository receipt
issued by a bank or trust as custodian with respect to any such Government
Obligation or a specific payment of interest on or principal of any such
Government Obligation held by such custodian for the account of the holder of a
depositary receipt, provided that (except as required by law) such custodian is
not authorized to make any deduction from the amount payable to the holder of
such depository receipt from any amount received by the custodian in respect of
the Government Obligation or the specific payment of interest on or principal of
the Government Obligation evidenced by such depository receipt.
EVENTS OF DEFAULT, NOTICE AND WAIVER
The following are Events of Default under the Indenture: (i) default in the
payment of interest on the Exchange Notes when due and payable, which continues
for 30 days; (ii) default in the payment of principal of the Exchange Notes when
due and payable at maturity; (iii) failure to perform any other covenant of the
Company contained in the Indenture or the Exchange Notes which continues for 60
days after written notice as provided in the Indenture; (iv) default under any
bond, debenture or other Indebtedness of the Company or any subsidiary if (a)
either (x) such event of default results from the failure to pay any such
Indebtedness at maturity or (y) as a result of such event of default, the
maturity of such Indebtedness has been accelerated prior to its expressed
maturity and such acceleration shall not be rescinded or annulled or the
accelerated amount paid within 10 days after notice to the Company of such
acceleration, or such Indebtedness having been discharged, and (b) the principal
amount of such Indebtedness, together with the principal amount of any other
such Indebtedness in default for failure to pay principal or interest thereon,
or the maturity of which has been so accelerated, aggregates $10,000,000 or
more; and (v) certain events of bankruptcy, insolvency or reorganization
relating to the Company.
If an Event of Default occurs and is continuing with respect to the
Exchange Notes, either the Trustee or the holders of a majority in aggregate
principal amount of the outstanding Exchange Notes may declare the Exchange
Notes due and payable immediately.
The Company will not declare or pay any dividends or make any distribution
to holders of its capital stock (other than dividends or distributions payable
in capital stock of the Company) if at the time of any of the aforementioned
actions an Event of Default has occurred and is continuing or would exist
immediately after giving effect to such action, except for the payment of any
dividend within 60 days after the date of declaration when the payment would
have complied with the foregoing provisions on the date of declaration.
The Indenture provides that the Trustee will, within 90 days after the
occurrence of any Default or Event of Default with respect to the Notes, give to
the holders of the Exchange Notes notice of all uncured Defaults and Events of
Default known to it, but the Trustee will be protected in withholding such
notice if it in good faith determines that the withholding of such notice is in
the interest of such holders, except in the case of a default in the payment of
the principal of (or premium, if any) or interest on any of the Notes.
The Indenture provides that the holders of a majority in aggregate
principal amount of the Exchange Notes then outstanding may direct the time,
method and place of conducting any proceedings for any remedy available to the
Trustee or exercising any trust or power conferred on the Trustee with respect
to the Exchange Notes. The right of a holder to institute a proceeding with
respect to the Indenture is subject to certain conditions precedent including
notice and indemnity to the Trustee, but the holder has an absolute right to
receipt of principal of (and premium, if any) and interest on such holder's
Exchange Notes on or after the respective due dates expressed in the Exchange
Notes, and to institute suit for the enforcement of any such payments.
The holders of a majority in principal amount of the Exchange Notes then
outstanding may on behalf of the holders of all Exchange Notes waive certain
past defaults, except a default in payment of the principal of (or premium, if
any) or interest on any Exchange Notes or in respect of certain provisions of
the Indenture which cannot be modified or amended without the consent of the
holder of each Exchange Note affected thereby.
The Company will be required to furnish to the Trustee annually a statement
of certain officers of the Company stating whether or not they know of any
Default or Events of Default and, if they have knowledge of a Default or Event
of Default, a description of the efforts to remedy the same.
GOVERNING LAW
The Exchange Notes and the Indenture will be governed by and construed in
accordance with the laws of the State of New York, without giving effect to its
conflicts of law rules.
FORM, DENOMINATION, BOOK-ENTRY PROCEDURES AND TRANSFER
The Exchange Notes initially will be represented by one or more Notes in
registered, global form (collectively, the "Global Exchange Notes"). The Global
Exchange Notes will be deposited upon issuance with the Trustee as custodian for
DTC in New York, New York, and registered in the name of DTC or its nominee, in
each case for credit to an account of a direct or indirect participant in DTC as
described below.
Except as set forth below, the Global Exchange Notes may be transferred, in
whole and not in part, only to another nominee of DTC or to a successor of DTC
or its nominee. Beneficial interests in the Global Exchange Notes may not be
exchanged for Exchange Notes in certificated form except in the limited
circumstances described under "--Exchange of Book-Entry Exchange Notes for
Certificated Exchange Notes" below.
Other Exchange Notes will be issued only in registered, certificated (I.E.,
non-global) form. Other Exchange Notes may not be exchanged for beneficial
interests in any Global Exchange Notes except in the limited circumstances
described below. See "--Exchange of Certificated Exchange Notes for Book-Entry
Exchange Notes."
DEPOSITARY PROCEDURES
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic
book-entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the Initial Purchaser), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interest and transfer of ownership interest of each
actual purchaser of each security held by or on behalf of DTC are recorded on
the records of the Participants and Indirect Participants.
DTC has also advised the Company that, pursuant to procedures established
by it, (i) upon deposit of the Global Exchange Notes, DTC will credit the
accounts of Participants designated by the Initial Purchaser with portions of
the principal amount of the Global Exchange Notes and (ii) ownership of such
interests in the Global Exchange Notes will be shown on, and the transfer of
ownership thereof will be effected only through, records maintained by DTC (with
respect to the Participants) or by the Participants and the Indirect
Participants (with respect to other owners of beneficial interests in the Global
Exchange Notes).
Investors in the Global Exchange Notes may hold their interests therein
directly through DTC if they are Participants in such system or indirectly
through organizations which are Participants in such system. All interests in a
Global Exchange Note will be subject to the procedures and requirements of DTC.
The laws of some states require that certain persons take physical delivery in
certificated form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Exchange Note to such persons will be
limited to that extent. Because DTC can act only on behalf of Participants,
which in turn act on behalf of Indirect Participants and certain banks, the
ability of a person having beneficial interests in a Global Exchange Note to
pledge such interests to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such interests, may be affected
by the lack of a physical certificate evidencing such interests. For certain
other restrictions on the transferability of the Notes, see "--Exchange of
Book-Entry Notes for Certificated Notes" and "--Exchange of Certificated Notes
for Book-Entry Notes" below.
Except as described below, owners of interests in the Global Exchange Notes
will not have Notes registered in their name, will not receive physical delivery
of Notes in certificated form and will not be considered the registered owners
or holders thereof under the Indenture for any purpose.
Payments in respect of the Global Exchange Note registered in the name of
DTC or its nominee will be payable by the Trustee to DTC in its capacity as the
registered holder under the Indenture. Under the terms of the Indenture, the
Trustee will treat the persons in whose names the Notes, including the Global
Exchange Notes, are registered as the owners thereof for the purpose of
receiving such payments and for any and all other purposes whatsoever.
Consequently, neither the Trustee nor any agent thereof has or will have any
responsibility or liability for (i) any aspect of DTC's records or any
Participant's or Indirect Participant's records relating to or payments made on
account of beneficial ownership interests in the Global Exchange Notes, or for
maintaining, supervising or reviewing any of DTC's records or any Participant's
or Indirect Participant's records relating to the beneficial ownership interests
in the Global Exchange Notes or (ii) any other matter relating to the actions
and practices of DTC or any of its Participants or Indirect Participants. DTC
has advised the Company that its current practice, upon receipt of any payment
in respect of securities such as the Notes, is to credit the accounts of the
relevant Participants with the payment on the payment date, in amounts
proportionate to their respective holdings in principal amount of beneficial
interests in the relevant security as shown on the records of DTC unless DTC has
reason to believe it will not receive payment on such payment date. Payments by
the Participants and the Indirect Participants to the beneficial owners of Notes
will be governed by standing instructions and customary practices and will be
the responsibility of the Participants or the Indirect Participants and will not
be the responsibility of DTC, the Trustee or the Company. Neither the Company
nor the Trustee will be liable for any delay by DTC or any of its Participants
in identifying the beneficial owners of the Notes, and the Company and the
Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
Interests in the Global Exchange Notes will trade in DTC's Same-Day Funds
Settlement System and secondary market trading activity in such interests will
therefore settle in immediately available funds, subject in all cases to the
rules and procedures of DTC and its Participants and Indirect Participants.
Transfers among Participants and Indirect Participants in DTC will be effected
in accordance with DTC's procedures, and will be settled in same-day funds.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes only at the direction of one or more Participants to
whose account with DTC interests in the Global Exchange Notes are credited and
only in respect of such portion of the principal amount of the Notes as to which
such Participant or Participants has or have given such direction. However, if
there is an Event of Default under the Indenture, DTC reserves the right to
exchange the Global Exchange Notes for legended Notes in certificated form and
to distribute such Notes to its Participants.
The information in this section concerning DTC and its book-entry system
has been obtained from sources that the Company believe to be reliable, but the
Company does not take responsibility for the accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interest in the Global Exchange Notes among Participants in DTC, it is under
no obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Company nor the Trustee
will have any responsibility for the performance by DTC or its Participants or
Indirect Participants of their respective obligations under the rules and
procedures governing DTC's operations.
EXCHANGE OF BOOK-ENTRY EXCHANGE NOTES FOR CERTIFICATED EXCHANGE NOTES
A Global Exchange Note is exchangeable for Notes in registered certificated
form if (i) DTC (x) notifies the Company that it is unwilling or unable to
continue as Depositary for the Global Exchange Note and the Company thereupon
fails to appoint a successor Depositary within 90 days or (y) has ceased to be a
clearing agency registered under the Exchange Act, (ii) the Company in its sole
discretion elects to cause the issuance of the Notes in certificated form or
(iii) there shall have occurred and be continuing an Event of Default or any
event which after notice or lapse of time or both would be an Event of Default
under the Indenture. In addition, beneficial interests in a Global Exchange Note
may be exchanged for certificated Notes upon request but only upon at least 20
days prior written notice given to the Trustee by or on behalf of DTC in
accordance with customary procedures. In all cases, certificated Notes delivered
in exchange for any Global Exchange Note or beneficial interests therein will be
registered in the names, and issued in any approved denominations, requested by
or on behalf of the Depositary (in accordance with its customary procedures) and
will bear the legend referred to in "Notice to Investors," unless the Trustee
determines otherwise in compliance with applicable law.
EXCHANGE OF CERTIFICATED NOTES FOR BOOK-ENTRY NOTES
Other Notes, which will be issued in certificated form, may not be
exchanged for beneficial interests in any Global Exchange Note unless such
exchange occurs in connection with a transfer of such Other Notes and the
transferor first delivers to the Trustee a written certificate (in the form
provided in the Indenture) to the effect that such transfer will comply with the
appropriate transfer restrictions applicable to such Notes.
PAYMENT AND PAYING AGENT
Payments in respect of the Global Notes held in global form shall be made
to the Depositary, which shall credit the relevant accounts at the Depositary on
the applicable payment dates. In respect of the Notes that are not held by the
Depositary, such payments shall be made by check mailed to the address of the
holder entitled thereto as such address shall appear on the register. The paying
agent (the "Paying Agent") shall initially be the Trustee and any co-paying
agent chosen by the Trustee and acceptable to the Company. The Paying Agent
shall be permitted to resign as Paying Agent upon 30 days' written notice to the
Trustee and the Company. In the event that the Trustee shall no longer be the
Paying Agent, the Company shall appoint a successor (which shall be a bank or
trust company) to act as Paying Agent.
Any moneys deposited with the Trustee or any Paying Agent, or then held by
the Company in trust, for the payment of the principal of (and premium, if any)
or interest on any Exchange Notes and remaining unclaimed for two years after
such principal or interest has become due and payable shall, at the request of
the Company, be repaid to the Company and the holder of such Exchange Notes
shall thereafter look, as a general unsecured creditor, only to the Company for
payment thereof.
INFORMATION CONCERNING THE TRUSTEE
The Trustee under the Indenture is United States Trust Company of New York.
The Trustee will act as registrar and transfer agent for the Exchange
Notes. Registration of transfers of the Exchange Notes will be effected without
charge by or on behalf of the Company, but upon payment of any tax or other
governmental charges that may be imposed in connections with any transfer or
exchange.
The Trustee is subject to all the duties and responsibilities specified
with respect to an indenture trustee under the Trust Indenture Act. Subject to
such provisions, the Trustee is under no obligation to exercise any of the
powers vested in it by the Indenture at the request of any holder of Exchange
Notes, unless offered reasonable indemnity by such holder against the costs,
expenses and liabilities which might be incurred thereby. The Trustee is not
required to expend or risk its own funds or otherwise incur personal financial
liability in the performance of its duties if the Trustee reasonably believes
that repayment or adequate indemnity is not reasonably assured to it.
DESCRIPTION OF PRIVATE NOTES
The terms of the Private Notes are identical in all material respects to
the Exchange Notes, except that (i) the Private Notes have not been registered
under the Securities Act, are subject to certain restrictions on transfer and
are entitled to certain rights under the applicable Registration Rights
Agreement (which rights will terminate upon consummation of the Exchange Offer,
except under limited circumstances), (ii) the Exchange Notes will not contain
certain other restrictions on transfer applicable to Private Notes, and (iii)
the Exchange Notes will not provide for payment of additional distributions
thereon. The Private Notes provide that, in the event that the Exchange Offer is
not consummated within 30 days after the date notice of the Exchange Offer has
been mailed to holders of the Private Notes or, in certain limited
circumstances, in the event a shelf registration statement (the "Shelf
Registration Statement") with respect to the resale of the Private Notes is not
declared effective within 150 days of February 24, 1998, then liquidated damages
will accrue (in addition to the stated interest rate on the Private Notes) at
the rate of 0.25% per annum on the principal amount of the Private Notes and
additional Distributions will accrue (in addition to the stated Distribution
rate on the Private Notes) at the rate of 0.25% per annum on the principal
amount of the Private Notes, for the period from the occurrence of such event
until such time as such required Exchange Offer is consummated or any required
Shelf Registration Statement is effective. The Exchange Notes are not, and upon
consummation of the Exchange Offer the Private Notes will not be, entitled to
any such liquidated damages or additional Distributions. Accordingly, holders of
Private Notes should review the information set forth under "Risk
Factors--Certain Consequences of a Failure to Exchange Private Notes" and
"Description of Exchange Notes."
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The exchange of the Private Notes for Exchange Notes should not be a
taxable event to holders of Notes for United States federal income tax purposes.
The exchange of Private Notes for Exchange Notes pursuant to the Exchange Offer
should not be treated as an "exchange" for United States federal income tax
purposes because the Exchange Notes should not be considered to differ
materially in kind or extent from the Private Notes and because the exchange
will occur by operation of the terms of the Private Notes. If, however, the
exchange of the Private Notes for the Exchange Notes were treated as an exchange
for United States federal income tax purposes, such exchange should constitute a
non-taxable recapitalization for United States federal income tax purposes.
Accordingly, the Exchange Notes should have the same issue price as the Private
Notes, and a holder should have the same adjusted tax basis and holding period
in the Exchange Notes as the holder had in the Private Notes immediately before
the exchange.
ERISA CONSIDERATIONS
Each of the Company and its affiliates and the Trustee may be considered a
"party in interest" (within the meaning of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) or a "disqualified person" (within
the meaning of Section 4975 of the Internal Revenue Code of 1986, as amended
(the "Code")) with respect to many employee benefit plans ("Plans") that are
subject to ERISA. Any purchaser proposing to acquire Exchange Notes with assets
of any Plan should consult with its counsel. The purchase and/or holding of
Exchange Notes by a Plan that is subject to the fiduciary responsibility
provisions of ERISA or the prohibited transaction provisions of Section 4975 of
the Code (including individual retirement arrangements and other plans described
in Section 4975(e)(1) of the Code) and with respect to which the Company, the
Trustee or any affiliate is a service provider (or otherwise is a party in
interest or a disqualified person) may constitute or result in a prohibited
transaction under ERISA or Section 4975 of the Code, unless such Exchange Notes
are acquired pursuant to and in accordance with an applicable exemption, such as
Prohibited Transaction Class Exemption ("PTCE") 84-14 (an exemption for certain
transactions determined by an independent qualified professional asset manager),
PTCE 91-38 (an exemption for certain transactions involving bank collective
investment funds), PTCE 90-1 (an exemption for certain transactions involving
insurance company pooled separate accounts), PTCE 95-60 (an exemption for
transactions involving certain insurance company general accounts), or PTCE
95-23 (an exemption for certain transactions determined by an in-house asset
manager).
PLAN OF DISTRIBUTION
Based on an interpretation by the staff of the Commission set forth in
no-action letters issued to third parties, the Company believes that the
Exchange Notes issued pursuant to the Exchange Offer in exchange for Private
Notes may be offered for resale, resold and otherwise transferred by a holder
thereof (other than (i) an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act, (ii) a broker-dealer who acquired Private Notes
directly from the Company to resell pursuant to Rule 144A or any other available
exemption under the Securities Act or (iii) a broker-dealer who acquired Private
Notes as a result of market making or other trading activities), without
compliance with the registration and prospectus delivery requirements of the
Securities Act; PROVIDED that the holder is acquiring Exchange Notes in the
ordinary course of its business and is not participating, and has no arrangement
or understanding with any person to participate, in the distribution of the
Exchange Notes. Holders of Private Notes wishing to accept the Exchange Offer
must represent to the Company, as required by the Registration Rights Agreement,
that such conditions have been met. The Company believes that none of the
registered holders of the Private Notes is an affiliate (as such term is defined
in Rule 405 under the Securities Act) of the Company.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Private Notes must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of
Exchange Notes received in exchange for Private Notes, where such Private Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities. The Company has agreed to make this Prospectus (as it
may be amended or supplemented) available to any broker-dealer, upon request,
for use in connection with any such resale, for a period of one year after the
Registration Statement is declared effective by the Commission or until such
earlier date on which all the Exchange Notes are freely tradeable. However, any
broker-dealer who acquired the Notes directly from the Company may not fulfill
its prospectus delivery requirements with this Prospectus, but must comply with
the registration and prospectus delivery requirements of the Securities Act.
The Company will not receive any proceeds from any sale of the Exchange
Notes by broker-dealers or any other persons. Exchange Notes received by
broker-dealers for their own accounts pursuant to the Exchange Offer may be sold
for time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange Notes or
a combination of such methods of resale, at market prices prevailing at the time
of such resale, at prices related to such prevailing market prices or at
negotiated prices. Any such resale may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer and/or purchasers of any
such Exchange Notes. Any broker-dealer that resells Exchange Notes that were
received by it for its own account pursuant to the Exchange Offer and any broker
or dealer that participates in the distribution of such Exchange Notes may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of Exchange Notes and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
By acceptance of this Exchange Offer, each broker-dealer that receives
Exchange Notes pursuant to the Exchange Offer agrees that, upon receipt of
notice from the Company of the happening of any event which makes any statement
in the Prospectus untrue in any material respect or which requires the making of
any changes in the Prospectus in order to make the statements therein not
misleading (which notice the Company agrees to deliver promptly to such
broker-dealer), such broker-dealer will suspend use of the Prospectus until the
Company has amended or supplemented the Prospectus to correct such misstatement
or omission and has furnished copies of the amended or supplemented Prospectus
to such broker-dealer. If the Company shall give any such notice to suspend the
use of the Prospectus, it shall extend the one-year period referred to above by
the number of days during the period from and including the date of the giving
of such notice to and including the date when the broker-dealers shall have
received copies of the supplemented or amended Prospectus necessary to permit
resales of the Exchange Notes.
The Company has agreed to pay all expenses incident to the Company's
performance of, or compliance with, the Registration Rights Agreement and will
indemnify the holders (including any broker-dealers) and certain parties related
to the holders against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The legality of the Exchange Notes will be passed upon on behalf of the
Company by Stroock & Stroock & Lavan LLP, New York, New York.
EXPERTS
The consolidated financial statements of the Company included in the
Company's Annual Report on Form 10-K incorporated by reference into this
Prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
incorporated herein by reference in reliance upon the authority of said firm as
experts in giving said reports.